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China – Court Examines Approach In Respect Of Applications To Set Aside Arbitration Awards.

27 April, 2013

 

Legal News & Analysis – Asia Pacific – China – Dispute Resolution

 

In the Hong Kong case of Pang Wai Hak & Anor v Hua Yunjian & Anor, the Applicants (who had been the Respondents in the arbitration) applied under Article 34(2) of the Model Law to set aside an arbitration award made in Hong Kong, on the grounds that the Applicant had been unable to present his case.

 

PRC law was the governing law under the arbitration agreement and the Applicants had contended for the first time, in their opening submissions during the arbitration hearing, that the Respondents' claim was time-barred under PRC law. There had been no examination in chief, cross examination or re-examination of factual witnesses or experts on the limitation issue. The Arbitrator gave his award and upheld the Respondents' claim to the extent of RMB$3.55 million and dismissed the Applicants' counterclaim. The two reasons given for rejecting the limitation defence were that: (i) it had not been pleaded; and (ii) the factual witnesses had not given any concrete evidence in respect of contentions that the claim or counterclaim were time-barred.

 

The Applicants' complaint now was that the reasons given by the Arbitrator for rejecting the limitation defence had not been raised by either party or by the Arbitrator with the parties at the arbitration hearing, but were points taken by the Arbitrator himself. They argued that had the points been raised by the Arbitrator, they could have easily been dealt with.

 

As in the Grand Pacific case above, the court held that in determining whether to set aside an arbitral award on the ground that a party had been unable to present his case, the court was not concerned with the substantive merits of the dispute, or correctness or otherwise of the award, because it was not hearing an appeal from the decision of the arbitral tribunal.

 

The court said that to justify setting aside an arbitral award on this ground, the court had to be satisfied that a party had been denied due process and, for this purpose, the conduct complained of must be serious or even egregious.

 

The court said that whether there had been a denial of due process depended on the court's evaluation of the relevant facts and circumstances of each individual case. One particular instance in which a party could justifiably complain was where the tribunal carried out its own investigation or inquiry on primary facts, or decided a case based on a wholly new point of law or fact without giving the parties a fair opportunity to consider and respond to such point. Ultimately, in considering whether a party was unable to present his case, the question was, the court said, one of fairness in the arbitral process.

 

It was not necessary, the court said, for the party seeking to set aside the award, to show any form of dishonesty or reprehensible conduct by the arbitral tribunal or the other side. The "unable to present his case" ground was not limited, the court said, to situations where a party is prevented from presenting legal arguments or dealing with evidence, but may extend to a situation where a party is prevented from presenting his case on a procedural issue which is taken by the arbitral tribunal against him of the tribunal's own volition.

 

In respect of the first reason given by the Arbitrator for rejecting the limitation defence i.e. because it was not pleaded, the court said that the Arbitrator ought to have given the parties an opportunity to address the point before dismissing the limitation defence. The court said that had the pleading point been the only reason given by the Arbitrator for rejecting the limitation defence, it would have set aside the award. However, the court said that it was apparent from the Award that the Arbitrator was fully aware of the parties' respective contentions on whether the Respondents' claim was time-barred. It therefore considered that although the Applicants had made out their complaint in respect of the "pleading" point", it had not made out its case in respect of the "lack of concrete evidence point". The court said that as the two reasons given by the Arbitrator to reject the limitation defence were independent reasons, it seemed clear that the Arbitrator would have reached the same conclusion even if he had ignored the pleading point.

 

The court has, it said, a discretion not to set aside an arbitral award even if a violation of Article 34 has been established, if it is satisfied that the outcome could not have been any different, which was the case here.

 

 

For further information, please contact:

 

Karen Dicks, Deacons

karen.dicks@deacons.com.hk
 

 

 

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