The Hong Kong Court of First Instance has refused an application to set aside an award made in an ICC arbitration seated in Hong Kong, on public policy grounds, rejecting an argument that it should be set aside because the subject matter was res judicata.

The dispute in Shanghai Fusheng Soya-Food Co Ltd v Pulmuone Holdings Co. Ltd arose under a joint venture agreement, which was governed by the law of the PRC with arbitration to be seated in Hong Kong. The applicant initially commenced proceedings in the Shanghai No. 2 Intermediate People’s Court alleging that the respondent had misappropriated funds from the JV company.

The respondent then commenced the arbitration proceedings alleging that the applicant had repudiated the JV agreement. The tribunal concluded receipt of evidence in June 2011.

In May 2012 the Shanghai court handed down a judgment, which was partially in favour of the applicant. The applicant wrote to the tribunal providing them with a copy of the judgment for their reference “to avoid any inconsistency”. The chairman responded to this letter, observing that the arbitration was closed. The applicant made no further submission. The tribunal proceeded to render an award ruling that the applicant had repudiated the JV agreement and awarded damages to the respondent.

The respondent argued that the award was contrary to the earlier judgment and that it was therefore contrary to public policy.

In her judgment handed down on 25 April 2014, Hon Mimmie Chan J refused the application. She observed that the authorities are clear that “contrary to public policy” should be narrowly construed. She observed that an application to set aside should not be used as an opportunity to re-argue the case or be treated as an appeal against the tribunal’s orders. On the question ofres judicata the court analysed the substance of the issues in the two proceedings. She concluded that the applicant had exaggerated the impact of the judgment and that even if the tribunal had considered the judgment it would not have affected the award. In light of this the court considered that the award should not be set aside on the grounds of public policy.

For further information, please contact:

Timothy Hill, Partner, Hogan Lovells

[email protected]

Hogan Lovells Dispute Resolution Practice Profile in Hong Kong