Reed Smith Client Alerts

On 2 February 2023, the Court of First Instance (CFI) in COG v. ES [2023] HKCFI 294 dismissed an application to set aside leave for enforcement of an arbitral award on the grounds of due process and public policy. CFI clarified that under Hong Kong law, a party to an arbitration only has a reasonable opportunity, as opposed to a full opportunity, to present its case, and that Hong Kong courts are slow to interfere with case management decisions by arbitral tribunals.

The Award

COG and ES (Parties) entered into a sales contract (Contract) whereby COG agreed to sell to ES certain products (Products). ES failed to pay the purchase price upon delivery of the Products by COG. Pursuant to the arbitration clause in the Contract, COG commenced arbitration proceedings against ES pursuant to the rules of the China International and Economic Trade Arbitration Commission (CIETAC) (Arbitration). The arbitral tribunal (Tribunal) eventually issued an award in favour of COG (Award).

The Enforcement Order and cross-applications made before the Hong Kong court

COG applied to the CFI for and was granted leave to enforce the Award (Enforcement Order). ES applied to the CFI to set aside the Enforcement Order (Setting Aside Application) on the grounds that (i) ES was unable to present its case in the Arbitration, and (ii) enforcement of the Award would be contrary to public policy. In particular, ES asserted that:

(a) The Contract was one of 64 contracts between the Parties, under which the Parties agreed that prices payable under the contracts would be offset against future payments. Further, ES had overpaid COG under the other contracts. Therefore, ES had a set-off (Set Off Defence) or counterclaim against COG (Counterclaim).