Applicable legal principles

The Hong Kong court set out the following legal principles applicable to the determination of the issues before it:

1. A tribunal’s failure to consider an issue would normally be a matter going to the substantive decision, which could amount only to an error of law.
2. However, such failure could constitute a failure to follow the parties’ agreed arbitral procedure and/or contravene the public policy of Hong Kong, which depended on, among other things, whether the tribunal failed to deal with or decide an issue, what the issue was, and whether the tribunal failed to give reasons for its decision on an issue that was essential to the determination of the dispute submitted to the tribunal.
3. For example, in A v. B [2015] 3 HKLRD 586, the tribunal’s failure to deal with the time-bar defence, which was a key and critical issue, was considered to be not just an error of law, but a denial of due process, as the parties were entitled to expect the limitation defence to be addressed by the tribunal and seen to have been considered in the wording of the final award.
4. In considering whether a tribunal had dealt with an issue, the award should be read in a “reasonable and commercial way expecting, as is usually the case, that there will be no substantial fault that can be found with it” (Zermalt Holdings SA v. Nu-Life Upholstery Repairs Ltd [1985] 2 EGLR 14 at p14F per Bingham J).
5. It would be sufficient for the tribunal to clearly state its determination and reasons. The reasons need not be elaborate or lengthy, as the award must be read against the context in which the issues were argued before the tribunal, and an award is the result of a private consensual process.
6. The tribunal was not bound to structure its decision and its reasons in accordance with the issues put to and argued before the tribunal or the submissions made by the parties.
7. In deciding whether the tribunal had adequately dealt with an issue or sufficiently explained its decision, the court must be circumspect in its consideration of the award to avoid any attempt to review the correctness of the award, in law or on the facts.
8. Any inference that the tribunal had failed to consider an important issue must be shown to be clear and the failure to be all but inexcusable. If the facts were consistent with the tribunal having been mistaken as to the law, or having misunderstood the evidence, or otherwise consistent with the tribunal choosing not to deal with a point because it thought it unnecessary, then even if such view might have been formed on the basis of a misunderstanding of the case, no inference can be drawn that the arbitrator had failed to apply his mind to the issue.
9. Parties to an arbitration were not entitled to have all their arguments addressed by the tribunal. The court would be extremely slow to interfere with the tribunal’s decision as to which issues were essential and necessary to be addressed in the award. So long as the tribunal set out its decision on the dispute and gave sufficient reasons, the parties should be bound by that decision. Any error in an award could not by itself counterbalance the public policy bias towards enforcement of awards (A v. R (Arbitration: Enforcement) [2009] 3 HKLRD 389).

Decision

Reading the Award in light of the above legal principles, the court held that the lack of expressed findings made by the Tribunal in the Award in respect of the issues complained of by LY was due to the Tribunal’s decision not to deal with the relevant aspects of the submissions made on behalf of LY, as the Tribunal considered it unnecessary to do so by reason of other issues it had dealt with and decided. The Tribunal’s omission to consider or deal with the issues or aspects of the submissions made on behalf of LY was a matter going to the substantive decision of the Tribunal, which might amount to an error of law, but it was not a ground for setting aside the Award. As the court concluded that there was no valid ground for setting aside the Award, LY’s application was accordingly dismissed with indemnity costs.

Conclusion

This decision provides important clarification as to how an award should be read and considered by the court in the context of a setting aside application. In line with the policy of minimal curial intervention, the court held that the court should not “comb an award to assign blame or to find fault in the process”; rather, an award must be read generously and in a reasonable and commercial way. Parties to arbitration should not be entitled to challenge a clear and sufficiently reasoned award. This decision highlights the Hong Kong court’s pro-arbitration and pro-enforcement approach and reinforces the object and principles of the Hong Kong Arbitration Ordinance, which are to facilitate the fair and speedy resolution of disputes by arbitration without unnecessary expense and in accordance with the policy of minimal curial intervention in the arbitral process.

Client Alert 2022-203