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).
(b) ES did not have sufficient time to prepare for the hearing of the Arbitration (Hearing).
(c) ES had applied to the Tribunal for a second oral hearing to deal with the supplemental submissions and materials filed by the Parties (Further Hearing), which application was rejected by the Tribunal without any justification or reason given. ES contended that there was a serious irregularity for the Tribunal to deal with the supplemental submissions and materials on paper without holding the Further Hearing.
(d) ES further argued that the Tribunal had failed to adequately explain the reason of its decision not to hold the Further Hearing. The reason given by the Tribunal was that it “had considered the actual circumstances of the case” and the opinion expressed by both Parties and did not agree that the Further Hearing was necessary. Such failure, as ES argued, undermined due process and was contrary to the basic notions of justice and fairness, hence entitling the Hong Kong court to refuse enforcement of the Award.
Alternatively, ES applied for an order that enforcement of the Award be stayed pending resolution of a new arbitration to be commenced by ES in mainland China (Stay Application).
COG applied for the dismissal of the Setting Aside Application and for the immediate enforcement of the Award. Alternatively, COG applied for security should the CFI order an adjournment of the enforcement proceedings (Security Application).
The decision of the Hong Kong court
Hon Mimmie Chan J (Judge) dismissed the Setting Aside Application and the Stay Application made by ES and granted leave to COG for the immediate enforcement of the Award.
The Judge dealt with each of the arguments put forward by ES as follows:
(1) The Judge noted that no counterclaim was filed by ES in the arbitration. ES therefore was not entitled to resist enforcement on the basis of a counterclaim.
(2) The Tribunal duly considered and rejected the Set Off Defence. The Tribunal found that the Contract provided for payments to be made upon delivery. There was no basis or evidence for ES to contend that the Parties had agreed, or that there was a practice, that the price under the Contract would be offset against the price under future or other contracts between the Parties.
(3) ES never applied to the Tribunal for an adjournment of the Hearing. ES was therefore not permitted to claim that it did not have sufficient time to prepare for the Hearing.
(4) As to the Tribunal’s decision to deal with supplemental submissions and materials on paper without ordering the Further Hearing, the Tribunal was fully entitled and empowered under the CIETAC Rules to decide not to hold the Further Hearing for the examination of the supplementary evidence because the Parties had agreed during the Hearing that further evidence would be examined in writing. No injustice or surprise could arise from the Tribunal following such agreed procedure.
(5) Applying R v. F  5 HKLRD 278, the Judge emphasised that the Award was intended to be read by the Parties, who would be familiar with the background and how the issues had been argued. The reasons given in the Award for a particular issue should be proportional to the complexity of how such issue was contended before the Tribunal, which need not be elaborate or lengthy provided that such reasons could be understood in their proper context. The Judge considered that the reasons given by the Tribunal were proportionately adequate and sufficient to enable ES to understand why the Tribunal had rejected its application. The Judge also held that the Tribunal’s decision not to conduct the Further Hearing was a case management decision and one which the Hong Kong court should not lightly interfere with in the absence of serious denial of natural justice.
(6) The Judge also pointed out that the Arbitration Ordinance (Cap. 609) (Ordinance) only required an arbitral tribunal to give the parties a “reasonable opportunity” to present their cases and to deal with the cases of their opponents, as opposed to a “full opportunity” (as used in Article 18 of the UNCITRAL Model Law). The Judge emphasised that each party’s right to a reasonable opportunity to present its case was limited in scope and breadth and did not entitle the party to make unreasonable demands without regard to the aim for efficiency and speedy resolution of the dispute. The Judge held that ES had been given a reasonable opportunity to present its case in the Arbitration.
This case helpfully clarifies that under the Ordinance a party is only entitled to a reasonable opportunity, as opposed to a full opportunity, to present its case. A party to arbitration therefore should not expect to be given unlimited opportunities to present its case, given it is an aim of the Ordinance to ensure the efficient and speedy resolution of disputes by arbitration. Whether a party has been given a reasonable opportunity to present its case is a question that would be assessed by the Hong Kong court on a case by case basis, having regard to the particular circumstances of each case. This case also confirms that the Hong Kong court will be slow to interfere with an arbitral tribunal’s case management decisions absent any serious denial of justice. This will help alleviate any “due process paranoia” in the minds of the arbitrators.
Client Alert 2023-059