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The Applicant counter-argued that enforcement of an ICC award made in Beijing under the New York Convention (in the Ningbo case) goes against the reciprocity reservation made by China when signing the New York Convention as the award in Ningbo was not made by another signatory nation. The Arrangement on Mutual Enforcement of Arbitration Awards between the Mainland and HKSAR was made precisely because Hong Kong and China are not different contracting nations under the New York Convention. The Applicant pointed out that there is no system of binding precedent under mainland law, and that the Ningbo case is not only problematic, but has no binding effect on the mainland courts.
Judgment of the Court
The Court noted that there was a dispute between the parties as to whether the arbitration clauses meant the arbitration should take place in mainland China or in Hong Kong. On the other hand, it was not in dispute that the parties had agreed the arbitration was to be governed by the ICC Rules. In these circumstances, the Court found that the ICC Court was entitled under Article 14(1) ICC Rules to determine the place of arbitration.
The Applicant argued that the sole arbitrator had mistakenly construed the meaning of “China” as used in the Agreements. The Court recognised that on the question of the construction of contracts, as an established principle, the judge should put himself in the place of the reasonable man having all the background knowledge “which would reasonably have been available to the parties in the situation in which they were at the time of the contract”. Apart from the factual background, “background knowledge” can also include the state of the law, that is to say that the courts generally conclude, “when considering the parties’ intentions, that the parties intended to produce a result that is legal, rather than illegal”.
As to the factual background, the Court held that as reasonable, rational businessmen, the parties must have been aware that Hong Kong is part of China when they entered into these Agreements in 2007. The Court opined that it would be “artificial” to conclude that the parties intended the relevant arbitration clauses to mean either “China excluding Hong Kong” or “China including Hong Kong”. As such, in the Court’s view, the ICC Court was entitled to decide that the arbitration should be held in Hong Kong, which is part of China.
The Court went on to discuss the state of the law. In the face of conflicting expert evidence, the Court concluded there is a risk that an ICC award made in mainland China may not be enforceable in mainland China. By contrast, the experts were in agreement that an ICC award made in Hong Kong would be enforceable both in Hong Kong and mainland China, as well as in other countries which are party to the New York Convention. Given that “the object of an arbitration agreement must be to have the dispute resolved by a process which would result in a final, binding and enforceable award”, the Court preferred the construction that the arbitration is to take place in Hong Kong, and held that the arbitrator had jurisdiction over the dispute.
The Court ordered the Applicant to pay the costs of this application on an indemnity basis, in line with the principle in Pacific China Holdings Ltd v Grand Pacific Holdings Ltd, that the Hong Kong courts will order indemnity costs against the applicant in an unsuccessful set aside application. The Court also took the opportunity to remind parties of the need to draft arbitration agreements clearly and precisely.
Full text
ZvA
30 January 2015
Court of First Instance
CFI
Construction and Arbitration Proceedings No 8 of 2013 HCCT 8/2013
Citations:
Presiding Judges: Counsel in the Case:
[2015] HKEC 289 English Judgment Mimmie Chan J in Chambers
Mr Victor Dawes, instructed by Squire Patton Boggs, for the applicantMr Charles Manzoni SC, instructed by Boughton Peterson Yang Anderson, for 1st to 4th Respondents
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