Jurisdiction - Hong Kong
Reports and Analysis
Hong Kong – Reasons Given In An Arbitral Award Need Not Be Elaborate Or Lengthy, Provided They Could Be Understood In Their Proper Context.

6 December, 2012


Legal News & Analysis – Asia Pacific – Hong Kong – Dispute Resolution


R v F, HCCT 32/2011, Au J, 3 August 2012


This was the Plaintiff’s application, pursuant to Article 34(2) of the UNCITRAL Model Law (“the Model Law“), to set aside an arbitral award (“the Award“) made in an international arbitration, administered by the Hong Kong International Arbitration Centre (“HKIAC“), under the old Arbitration Ordinance (Cap 341).


The arbitration concerned a dispute arising under an agreement (“the Agreement”) whereby the Defendant purchased the Plaintiff’s business. The Plaintiff commenced the arbitration to claim the balance of purchase price (X) and the Defendant counterclaimed for various breaches of warranties under the Agreement.


Although the Plaintiff succeeded in its claim for X, the Defendant also succeeded in some of its counterclaims, including “Counterclaim 5”, concerning the quality of the Plaintiff’s goods. After setting off the Plaintiff’s claim against the successful parts of the Defendant’s counterclaims, the Plaintiff was held liable to pay the Defendant a sum of Y.


In this application to set aside the Award, the Plaintiff’s only complaint, was the Tribunal’s ruling on the quantum of Counterclaim 5, namely that the Tribunal had conducted the arbitration and made the Award, without any adjudication and/or findings of fact and/or evidence as to the alleged quantum of Counterclaim 5 losses.


The Court did not accept the Plaintiff’s argument that the Tribunal’s conclusion on Counterclaim 5’s quantum was without reasons. An arbitral award, it said, must be read and understood in its proper context, in particular, against the context as to how the relevant issues had been argued before the Tribunal. This was particularly so, as arbitration is a private and confidential dispute resolution process, based on party autonomy. An arbitration award is intended to be read by the parties (who would be familiar with the background and how the issues had been argued) and, unlike a court judgment, not to be made public.


Further, the Court said that the reasons expected to be given in an arbitral award for a particular issue should be proportional to the complexities of how that issue was contended (or not contended) before the arbitral tribunal and the reasons do not necessarily need to be elaborate or lengthy, provided they could be understood in their proper context. An arbitration award is, the Court said, the result of a private consensual process, intended and expected to be cost effective, and shorn of complexities and technicalities. Therefore, the Award in relation to quantum under Counterclaim 5 must also be read and understood in the context of how that issue was laid before the Tribunal.


The Court concluded that, reading the relevant part of the Award objectively and properly in the context of how the issue of quantum under Counterclaim 5 was dealt with by the parties, the reason behind the ruling on the quantum of Counterclaim 5 must have been obvious to the parties. Accordingly, the application was dismissed, with costs to the Defendant on an indemnity basis.



For further information, please contact:
Cheung Kwok Kit, Partner, Deacons

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