Hong Kong Court of Appeal confirms that pre-arbitration conditions are not matters of jurisdiction

16 June 2022 Reed Smith Client Alerts

Home Perspectives Hong Kong Court of Appeal confirms that pre-arbitration conditions are not matters of jurisdiction

In our previous alert on C v. D [2021] HKCFI 1474 , the Court of First Instance ruled that non-compliance with pre-conditions to arbitration in multi-tiered dispute resolution clauses would only affect the admissibility of a claim but not the arbitral tribunal’s jurisdiction. The ruling was upheld by the Court of Appeal (CA) in C v. D [2022] HKCA 729.

Authors: Lianjun Li Min Li Donald Sham Susanna Chiu

Grounds of appeal

The appellant argued on appeal, among other things, that the distinction between admissibility and jurisdiction should not be adopted, as the relevant statutory provisions did not draw such a distinction. Alternatively, its challenge regarding the non-compliance with pre-conditions to arbitration was jurisdictional in nature and therefore subject to the court’s review.

Decision of the Court of Appeal

CA dismissed the appeal and upheld the first instance decision.

CA relied on extensive case law and academic writings to highlight the important distinction between objections to admissibility and objections to jurisdiction. While arguments as to the existence, scope and validity of the arbitration agreement were jurisdictional in nature, issues regarding the claim, including compliance with pre-arbitration conditions, were issues of admissibility.

CA considered that the real issue was whether the parties intended that the question of fulfilment of the condition precedent should be determined by the arbitral tribunal. Applying Fiona Trust, CA held that the parties did so intend, as rational businessmen would likely have intended any dispute arising out of their relationship (including compliance with pre-arbitration conditions) to be decided by the same tribunal. Such interpretation was also in line with the object of the Arbitration Ordinance to facilitate the fair and speedy resolution of disputes without unnecessary expenses.

CA therefore ruled that fulfilment of the pre-arbitration condition was an issue of admissibility, rather than jurisdiction, and should be regarded as a dispute falling within the terms of the submission to arbitration.

Concluding remarks

The Court of Appeal decision reflects the growing judicial tendency to minimise interference with arbitral proceedings and to give commercial interpretation to arbitration agreements. Rational businessmen are likely to have intended any dispute arising out of their relationship to be decided by the same tribunal. If parties truly intend to exclude certain disputes from the arbitration agreement, such exclusion should be expressly stipulated in the agreement in the clearest language possible.

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