Second, the award creditor submitted that the first instance judge failed to consider the high threshold required for alleging fraud in relying on the “dubious features” of the underlying transaction in dismissing the winding up petition. The CA held that such a complaint had no substance, as the first instance judge was not tasked with making any findings of fraud or collusion. He was only required to determine whether there was a bona fide dispute on the award debt.

Third, the award creditor contended that the award debtor should be required to take steps to set aside the award in mainland China, pending which the winding up petition should be stood over but not dismissed. Apart from the fact that the award debtor was deadlocked and therefore could not take such steps, the CA held that the award creditor’s request was inconsistent with the “choice of remedies” principle. Such a principle allows a party to resist the enforcement of an arbitral award in Hong Kong without first having challenged the award in the supervisory jurisdiction. The CA held that the award debtor should not be compelled to choose an active remedy over a passive one.

Conclusion

The CA provided important clarifications as to the threshold test for determining a winding up petition based on an award debt. The CA also reinforced the application of the “choice of remedies” principle in Hong Kong, and in doing so, it applied the decision of the Court of Final Appeal in Astro Nusantara International BV v. PT Ayunda Prima Mitra (2018) 21 HKCFAR 118. It remains to be seen whether the award in this particular case will be enforced in Hong Kong once the arguments are fully ventilated in the substantive enforcement and setting aside proceedings before the Hong Kong court.

About Reed Smith’s international arbitration practice

Reed Smith is strongly positioned to provide the highest level of service in dispute resolution to our clients. With offices in the world’s leading arbitration centres, including London, Paris, New York, Singapore, Hong Kong, Dubai, Miami and Houston, we have one of the largest and most diverse international arbitration practices in the world, with the ability to represent clients in every significant arbitral centre and seat around the globe.

We are a recognised leader in international arbitration, and are ranked in the elite GAR 30, Global Arbitration Review’s ranking of the world’s leading international arbitration practices. We have substantial experience representing both claimants and respondents, and a strong track record of obtaining successful results. Our deep knowledge of industry sectors including energy, natural resources, life sciences, transportation, telecoms, insurance and banking enables us to understand the industry-specific factors and environments affecting our clients’ disputes. This combination of deep arbitration experience, our lawyers’ advocacy skills, and industry knowledge gives us a competitive advantage when representing our clients.

Updates on the go

Listen to our international arbitration updates on the go and at your convenience through our podcast channel, Arbitral Insights. Presented by our international arbitration lawyers from across the Reed Smith global platform, the series explores trends, developments, challenges and topics of interest in the field. Access our episodes on reedsmith.com.