Reed Smith Client Alerts

Key takeaways

  • In AAB v BBA and BBC [2024] HKCFI 699, the Hong Kong Court of First Instance refused to set aside an award for lack of reasoning and lack of due process, but remitted it for failing to deal with an issue.
  • Only wholly unreasoned awards (as opposed to awards with skeletal reasoning) are capable of being set aside. Courts also will not lightly interfere with a tribunal’s case management decisions, absent any egregious errors that unfairly prevented a party from putting forward important evidence or mounting a material argument.
  • In certain cases of where an issue put to the tribunal was not dealt with (either expressly or in composition with other issues), resulting in substantial injustice, the court may choose to remit an award back to the tribunal instead of setting it aside.


The underlying arbitration, which is still ongoing, concerns disputes between shareholders of a joint venture company (the “JV”) arising from the exploration of a mining concession.

AAB and BBA respectively held majority and minority shares in the JV. Pursuant to a sale and purchase agreement (the “SPA”), BBC as part of the group of companies of BBA transferred majority shares in the JV to AAB. By a shareholders agreement (the “SHA”), AAB was to make a performance-related payment to BBC, in return for AAB implementing “extensive exploration” of the mining concession and assessing its potential.

BBA and BBC contended that AAB was in breach of its obligations under the SPA and SHA by not implementing an “extensive exploration” of the concession in accordance with “good industry practice”.

Arbitration proceedings were commenced, and in June 2023, the tribunal issued a partial final award in favour of BBA and BBC (the “June 2023 Award”).

AAB sought to set aside the June 2023 Award under Article 81 of the Arbitration Ordinance (the “AO”) which gives effect to Article 34(4) of the UNCITRAL Model Law. AAB advanced three grounds, namely: (1) the award lacked reasoning, (2) there was a lack of due process in conducting the arbitration, and (3) the tribunal failed to address an issue which, if considered, would have led to the award being in AAB’s favour.


Lack of reasoning ground

In considering the first ground for setting aside for lack of reasoning, Anselmo Reyes SC (the “Judge”) reiterated the principle that, an application under section 81 of the AO is not an appeal on the merits or on law. The court is not concerned with the substantive correctness of an award, but only with the structural integrity of the arbitral process and it is only when there is a serious or egregious denial of due process that the court can interfere.

In the present case, at the end of the day, AAB was essentially protesting not that the June 2023 Award was unreasoned, but rather that it dealt only superficially with AAB’s case. In other words it was saying that, because the June 2023 Award did not specifically comment on numerous points raised by AAB, the June 2023 Award must be set aside as “arbitrary”.

However, as the Judge continued, the tribunal is not bound to deal with every argument raised by a party. The authorities carefully distinguish between (1) wholly unreasoned awards and (2) awards with skeletal reasons. The case law only characterises the former type of award as “arbitrary” and thus capable of being set aside.

The Judge pointed to the “range and diversity of arbitrators in the market” with some choosing to dispose of every argument raised by the parties, while others deal only with the gist of a losing party’s key arguments on an issue. The parties are free to appoint whom they wish. However, if the court becomes embroiled in determining whether a tribunal’s reasons are superficial or insufficient, the court will be impermissibly reviewing the rights and wrongs of the award.

As for AAB’s specific complaints, the Judge held that mere succinctness was insufficient to ground criticism on the tribunal’s reasoning on certain points, its preference for the testimony of one side’s expert over another, and its findings that AAB had failed to conduct extensive exploration. Even where not expressly stated, the tribunal’s reasoning was apparent by implication in view of the conclusions in the June 2023 Award.