Summary
In Song v Lee [2023] HKCFI 2540, the Court of First Instance of the High Court refused to grant permission for the applicant to enforce an arbitral award made by a tribunal in an arbitration by the Chengdu Arbitration Commission ("the award"). The court held that the failure of one of the tribunal members to pay attention and focus on the parties’ arguments at one of the arbitral hearings was a serious irregularity such that enforcement of the award should be refused pursuant to section 95(3)(b) of the Arbitration Ordinance (Cap. 609 – "the Ordinance") – namely, that it would be contrary to public policy to enforce the award.
Background and Recap
The background to the case is set out in a previous Industry Insights ("Arbitrator Competent but not Compellable", September 2023). On 24 August 2023, the court heard the respondent’s application to set aside enforcement of the award, having previously held that as a matter of Hong Kong common law an arbitrator had immunity (absent fraud or bad faith) and, therefore, could not be compelled to give evidence regarding their conduct at an arbitration hearing.
The most serious and decisive complaint made in support of the respondent’s application was that the conduct of one of the tribunal members had deprived him of an opportunity to present his case and have a fair hearing (contrary to public policy).
While two of the tribunal members had attended the arbitral hearing in person, the third had attended by video conferencing facilities. The court summarised the respondent’s complaint (at paragraph 38 of its decision):
"In gist, Lee’s complaint is that Q [the tribunal member] had not meaningfully participated in the 2nd Hearing of the Arbitration. For at least the second half of the hearing, Q was moving from one location to another, indoors and outdoors, and had eventually left his premises, and travelled in a car, without giving his undivided attention to the hearing. He was off-line for periods of time from the second half, and obviously could not hear what was being said by the parties’ lawyers or by the other members of the tribunal."
Decision
Having carefully reviewed the entire video transcript of the arbitral hearing in question (which lasted some 2 hours, 17 minutes), the court concluded that the tribunal member’s failure to hear and focus on the parties’ arguments – particularly, at a time when evidence was being challenged – in effect, contravened the respondent’s right to be heard. The court held that the arbitral hearing in question had lacked due process and fallen short of the high standards expected for a fair and impartial hearing pursuant to Hong Kong common law. Therefore, enforcement of the award should be refused. A key part of the court’s decision reads as follows (at paragraph 50):
"It is the duty of an arbitrator to decide the dispute submitted to him, after giving to the parties the reasonable opportunity to present their case, and after hearing the parties. In fact, it can be said that the first role of the judge and the arbitrator is to preside and hear the case."
Some Points to Note
- The court’s decision is a useful review of leading common law appellate court cases on the general principles regarding due process, a party’s right to be heard and recognised rules of natural justice; together with how these principles apply in the context of a challenge to enforcement of an arbitral award based on public policy grounds.
- The court’s decision and the general principles considered should be of interest to all arbitration stakeholders (in particular, arbitrators who perform a quasi-judicial role) and members of any decision-making tribunal or body. With immunities come responsibilities. The court’s decision refers to an example of a tribunal member who might not be paying attention because they had fallen asleep and how this could result in a hearing being found to be unfair on a challenge before the courts (Stansbury v Datapulse Plc [2003] EWCA Civ 1951).
- The court’s decision is a robust defence of the Hong Kong courts’ role in determining what is "contrary to public policy" according to local common law. In accordance with the "choice of remedies" principle, the fact that a Mainland court (exercising a supervisory jurisdiction over the arbitration) had ruled that the award was valid and dismissed the respondent’s application to set aside was not determinative of the issue of public policy before the Hong Kong courts.
- The fact that one tribunal member had attended the arbitral hearing via a video conferencing facility was not (of itself) objectionable – rather, the respondent’s objection related to the manner of the tribunal member’s attendance and participation. Whether an arbitral hearing is held remotely or in person or in a hybrid format is a matter for the tribunal (exercising their case management powers in accordance with the applicable arbitration rules) and will often be the subject of prior communications between the parties’ legal representatives (for example, see Sky Power Construction Engineering Ltd v Iraero Airlines JSC [2023] 3 HKLRD 654).
- An interesting passage in the court’s decision (paragraphs 54-56) considers the applicant’s argument that the respondent’s legal representative had waived the respondent’s right to challenge any irregularities arising out of the arbitral hearing by failing to raise an objection at the time. This appears to have received short shrift from the court – finding that the respondent’s legal representative could not be stated to have fully waived the respondent’s rights in the context of such a serious irregularity and, in any event, the court could still find enforcement of the award to be contrary to public policy in Hong Kong. That stated, generally in such circumstances, a party’s legal representatives should consider whether to make an express and contemporaneous reservation of their client’s rights with respect to procedural irregularities (for example, see Radisson Hotels v Hayat Otel [2023] EWHC 892; and Article 4 of UNCITRAL Model Law ("Waiver of right to object")). In Song v Lee the arbitrator’s immunity and the respondent’s legal representative’s confirmation at the end of the arbitral hearing that he had no procedural objection were not fatal to the application to set aside enforcement of the award.
– Peter Kwon, Partner, RPC