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Arbitration continues to be a pro-business method of dispute resolution but understanding what is on offer in key seats is crucial for success

HONG KONG

PHILIPPINES

SINGAPORE

Hong Kong shining as beacon of international arbitration

Hong Kong has long stood as a beacon of international arbitration, and its role has only grown more significant in the past year. This city, known for its vibrant business environment, has once again proven its resilience and prominence in international dispute resolution.

In this article, the authors explore Hong Kong’s recent achievements in arbitration, notable case law trends, and updates to local arbitration rules.

Institutional achievements

Hong Kong’s status as a premier hub for arbitration is evident through the activities and achievements of its local arbitral institutions.

In 2023, the Hong Kong International Arbitration Centre (HKIAC) handled 500 matters, including 281 arbitration filings, marking its third-busiest year since 2017.

These cases involved 771 parties from 45 jurisdictions, highlighting Hong Kong’s global appeal. Notably, 75.1% of these arbitrations were international, with nearly 10% involving no Asian parties.

Financially, the total amount in dispute reached HKD92.8 billion (about USD12.5 billion), with an average dispute amount of HKD467.6 million.

The HKIAC also advanced its collaboration with mainland Chinese courts under the Hong Kong-Mainland China Arrangement on interim measures, processing 19 applications to preserve RMB3.5 billion (about USD491 million) in assets, with RMB544 million successfully preserved.

During the year, Hong Kong parties were also active in arbitrations by other prestigious bodies including: the International Chamber of Commerce, with 25% of all parties from Asia-Pacific and notable representation from China and Hong Kong; and the Singapore International Arbitration Centre, where Hong Kong was the top foreign user with 1,436 parties.

Hong Kong’s reputation was further solidified by hosting the ICCA Congress in May 2024, attracting more than 1,000 global arbitration professionals.

At the same time, the China International Economic and Trade Arbitration Commission (CIETAC) Hong Kong Arbitration Centre reported a median duration of just seven-and-a-half months to obtain an award; and the South China International Arbitration Centre (Hong Kong) joined a list of venue providers that can issue a “letter of proof” for eligible individuals to participate in arbitral proceedings in Hong Kong without needing an employment visa.

The Asian-African Legal Consultative Organisation’s Hong Kong Regional Arbitration Centre is meanwhile expanding its arbitrator panel, while this year’s launch of the Greater Bay Area Online Collaborative Platform by eBRAM International Online Dispute Resolution Centre further integrates legal services across the GBA.

Underscoring the city’s strategic importance as a gateway for mainland arbitration institutions to global markets, the Shanghai International Arbitration Centre (SHIAC) also opened its first offshore branch in Hong Kong,

Landmark rulings

In recent years, the interplay between winding-up cases and exclusive forum clauses has become a hot topic in Hong Kong’s arbitration community.

Traditionally, Hong Kong courts granted winding-up petitions if the debtor failed to pay a debt and lacked a credible defence, regardless of the existence of an exclusive jurisdiction clause and/or arbitration agreements in the contract forming the basis of the debt.

However, the landmark ruling in the case of [2023] has shifted this dynamic. The Court of Final Appeal held that exclusive jurisdiction clauses should generally be respected, thereby holding parties to their contractual forum for dispute resolution. This decision underscores the importance of upholding contractual agreements as a matter of public policy.

Consequently, creditors may face challenges in having the Hong Kong court hear a winding-up petition if an exclusive jurisdiction clause exists, unless there are “strong reasons” to do so. However, the court retains the discretion to grant a winding-up order if the defence is deemed frivolous or an abuse of process.

Additionally, in the case of [2024], the Court of Appeal confirmed that the Guy Lam case approach should apply where there is an arbitration clause.

In contrast, the UK Privy Council’s subsequent decision in [2024] presented a differing position, stating that winding-up petitions should not be delayed by arbitration when there is no genuine dispute about the debt.

This approach potentially conflicts with the Guy Lam case ruling, leaving an open question in Hong Kong on whether courts will prioritise the contractual choice of forum or the existence of genuinely disputed debts in future cases. Despite this, the Guy Lam ruling remains binding law in Hong Kong.

Case law trends

Hong Kong courts have issued nearly 60 decisions related to arbitration since October 2023, reflecting the jurisdiction’s dynamic nature and the judiciary’s active engagement in arbitration issues.

One notable case was [2023], where the Court of First Instance reinforced the principle that arbitrators have immunity from being compelled to give evidence about their decisions. This decision aligns the protection of arbitrators with that of judges, ensuring they can operate without fear of litigation against their decision-making processes, thus bolstering confidence in arbitration as a dispute resolution mechanism.

Another significant case was the related HKCFI 2540 decision in the same case, where the Court of First Instance further found that one of the arbitrators had not properly participated in the hearing – frequently disconnecting and appearing distracted. This undermined the fairness and impartiality of the proceedings, justifying refusal to enforce the award. This decision highlights the courts’ commitment to ensuring procedural integrity in arbitration.

Issues related to arbitrator impartiality and public policy were also scrutinised in [2024], where the Court of First Instance emphasised that for a claim of arbitrator bias to succeed, there must be a clear and rational connection between the arbitrator’s associations and the potential influence on their impartiality.

Similarly, in [2024], the Court of First Instance granted leave to appeal, providing an opportunity to consider the interplay between the public policy issue of illegality and the Hong Kong court’s pro-arbitration approach of minimal intervention.

The case of [2024] exemplified the complexities of enforcing mainland Chinese arbitral awards in Hong Kong. This case highlighted the Hong Kong courts’ approach to managing parallel proceedings and conflicting arbitral awards, reflecting Hong Kong’s robust legal framework supporting cross-border arbitration issues.

Jurisdictional challenges were addressed in [2024], where the Court of First Instance set aside an arbitral tribunal’s decision on jurisdiction. The tribunal incorrectly assumed jurisdiction over disputes related to a Promissory Note despite conflicting arbitration clauses in related contracts. The court emphasised the necessity of clear invocation of arbitration provisions specific to each contract.

Further, [2024] delved into the jurisdiction of an arbitrator to resolve disputes, stressing the foundational requirements for arbitration, including the existence of an actual dispute.

In the case of [2024], the Court of First Instance examined exclusive jurisdiction clauses and their enforceability, particularly in international commercial disputes involving cryptocurrency transactions.

New HKIAC rules

The HKIAC recently introduced its new Administered Arbitration Rules In June 2024 to enhance efficiency, integrity, diversity, environmental sustainability and information security in arbitration proceedings.

These changes, announced at the 2024 ICCA Congress, signify a substantial step forward for the HKIAC. The new rules grant tribunals significant powers and take necessary measures to preserve the arbitration’s efficiency and integrity. They can also suspend or cease to administer arbitration if costs are not paid in full before the tribunal’s constitution.

Diversity and inclusion have been given prominence, including when appointing arbitrators. Environmental impacts and information security are now critical factors, reflecting a modern and responsible approach to dispute resolution.

Efficiency enhancements include confirming the tribunal’s power to determine preliminary issues, bifurcate proceedings, and set a fixed time limit for declaring proceedings closed. The new rules also confirm the emergency arbitrator’s power to make interim-interim orders pending emergency decision, and provide the HKIAC with new powers to review and adjust tribunal fees and expenses.

These new rules apply to all relevant arbitrations commenced on or after 1 June 2024, ensuring uniform application and addressing concerns around efficiency, cost-effectiveness and guerrilla tactics. They reflect the HKIAC’s commitment to maintaining confidence in arbitration in a rapidly changing global environment.

Takeaway

In conclusion, Hong Kong thrives as a global arbitration hub, bolstered by its robust legal framework, experienced judiciary and innovative rule updates. As the landscape of international arbitration evolves, Hong Kong remains at the forefront, providing a dynamic and reliable environment for resolving complex disputes.

STEVENSON WONG & CO.
In association with AllBright Law (Hong Kong) Offices
39/F, Gloucester Tower, The Landmark,
15 Queen’s Road Central, Central, Hong Kong
Tel: +852 2526 6311
Email: info@sw-hk.com

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Dynamic arbitration advancements in the Philippines

The Philippine Supreme Court’s recent decisions continue to uphold fundamental principles in arbitration, while at the same time shoring up the statutory jurisdiction and authority of the Construction Industry Arbitration Commission (CIAC) over construction disputes.

These jurisprudential developments have enriched arbitration practice in the Philippines, contributing to development of the jurisdiction as a dynamic and competitive hub for alternative dispute resolution (ADR).

Upholding agreed terms

In Public Estates Authority v Sy Jr (2023), the Supreme Court held that where the language of an arbitration clause is permissive, the parties cannot be compelled to resort to arbitration or prevented from pursuing ordinary court action. This case involved development of a reclamation project over which the Public Estates Authority (PEA) and Shoemart (SM) entered into several agreements, including a Joint Venture Agreement (JVA).

SM’s rights under the JVA were eventually assigned to Henry Sy Jr and a dispute arose between the PEA and Sy concerning the appraisal value of project property Sy sought to be conveyed in his favour as repayment for advances made by SM under the JVA.

The PEA insisted the issue on appraisal should be resolved by the Philippine Commission on Audit (COA). Eventually, Sy filed an action for specific performance, which was resolved in his favour and affirmed on appeal.

The PEA eventually went to the Supreme Court, partly arguing that the dispute was covered by the arbitration clause of the JVA, since it concerned the interpretation and execution of a clause in the JVA. Notably, the subject arbitration clause stated that disputes arising from the JVA “may be submitted for arbitration at the choice of either party”.

The Supreme Court found that the language of the arbitration clause was permissive and that the referral of the parties’ dispute to arbitration was neither obligatory nor a condition precedent to filing a case in court.

The Supreme Court further noted that the PEA failed to raise its jurisdictional argument before the trial and appellate courts, or even in its initial petition before the Supreme Court.

Instead of invoking the arbitration clause at the outset, the PEA attempted to submit the issue of appraisal to the COA for resolution. The Supreme Court considered the PEA’s invocation of the arbitration clause as a mere afterthought or last resort to salvage its flawed petition.

While the Supreme Court has historically upheld the Philippines’ pro-arbitration state policy and encouraged the use of various modes of ADR, its ruling in this case underscores the fundamentally contractual nature of arbitration.

In short, the language of the arbitration clause – coupled with the acts and conduct of the parties – may ultimately affect their ability to resort to arbitration.

Exclusive CIAC jurisdiction

In Republic of the Philippines v Pascual (2023), the Supreme Court emphasised the statutory nature of the jurisdiction of the Construction Industry Arbitration Commission (CIAC) over construction arbitrations in the Philippines.

This case involved contracts awarded by the Department of Public Works and Highways (DPWH) to Sergio Pascual for the construction and upgrading of public roads. A dispute arose when the DPWH terminated the contracts and refused to pay Pascual’s unpaid billings due to Pascual’s refusal to undertake certain rectification works.

When Pascual commenced CIAC arbitration against the DPWH to seek payment, the DPWH challenged the CIAC’s jurisdiction, arguing that: (1) the parties were not bound by any arbitration agreement; and (2) the COA has primary jurisdiction over monetary claims against the government.

Ultimately, the CIAC upheld its jurisdiction over the dispute and ruled in favour of Pascual in its final award. After a failed appeal (pursued under the old CIAC Revised Rules of Procedure), the DPWH went to the Supreme Court.

But the Supreme Court upheld the CIAC’s jurisdiction and ruled that the parties were bound by arbitration agreements, since their construction contracts expressly incorporated by reference the general template conditions under the Government Procurement Reform Act (GPRA), which expressly provides for resort to CIAC arbitration in case of dispute.

The Supreme Court also noted that the arbitration clause in the general conditions of contract mirrored relevant provisions in implementing rules of the GPRA, underscoring that such arbitration process should be deemed incorporated into the parties’ contract by operation of law, without further action by the parties.

The Supreme Court further held that while the COA has general and primary jurisdiction over liquidated monetary claims against the government under law, such jurisdiction must give way to the original and exclusive jurisdiction of the CIAC over construction disputes that may involve government contracts, provided that the parties agree to submit the dispute to arbitration.

The jurisdiction of the CIAC, once properly invoked, therefore divests the COA of its general and primary jurisdiction relative to liquidated monetary claims in construction disputes involving government agencies.

CIAC rules

In DHY Realty & Development Corporation v Court of Appeals (2023), and Playinn Inc v Prudential Guarantee and Assurance Inc (2023), the Supreme Court reiterated the basic principle that technical rules of procedure do not apply to construction arbitrations before the CIAC.

In the first case, Wing-An Construction Development Corporation and DHY Realty & Development Corporation were parties to a construction contract with an arbitration clause.

Dispute subsequently arose over Wing-An’s claim for payment for additional works, resulting in Wing-An’s filing of a request and complaint against DHY and its president before the CIAC, which indicated that they may be served with papers at DHY’s principal office address.

The CIAC informed DHY and its president of the arbitration and invited them to participate through notices served at DHY’s principal office address. While they never responded to such notices, at least one notice was not returned to sender by the courier.

Upon directive of the CIAC, Wing-An submitted the government filings of DHY to prove that the indicated address was indeed DHY’s official principal office address. Eventually, the arbitration proceeded and terminated without DHY’s participation, with the resulting final award adjudging DHY liable to Wing-An for part of its principal claims and costs.

After a failed appeal by DHY, execution of the final award followed, with DHY’s monies correspondingly garnished. It was only at this point that DHY made formal submissions before the CIAC, seeking to quash the writ of execution and lift the garnishment. Upon the CIAC’s denial, DHY went to the Supreme Court.

In the second case, Playinn Inc entered into a contract with Furacon Builders Inc for the construction of a hotel. In accordance with the contract, Furacon obtained performance and surety bonds from Prudential Guarantee and Assurance Inc to secure performance of its obligations.

By reason of Furacon’s delay in the project, Playinn commenced arbitration proceedings against Furacon and Prudential before the CIAC.

Prudential moved for dismissal, arguing that: (1) it was not a party to the construction contract and never consented to arbitration; and (2) the CIAC failed to acquire jurisdiction over its person by reason of the improper service of its first notice, which was only served on its bonds department, instead of specific officers required under the Rules of Court.

Prudential nevertheless participated in the arbitration, without prejudice to its jurisdictional arguments.

The resulting final award favoured Playinn and upheld the tribunal’s jurisdiction over Prudential, which was found to be solidarily liable with Furacon. Prudential obtained a reversal on appeal, and Playinn went to the Supreme Court.

Robust judgment

In both cases, the Supreme Court similarly held that the rule on service of summons under the Rules of Court does not apply to CIAC arbitrations, which are specifically governed by the CIAC rules. It suffices that a notice was properly delivered and received in the party’s last known address.

In DHY’s case, the Supreme Court found that the CIAC did not even have to require Wing-An to present proof of DHY’s correct address, considering that DHY appeared to receive at least one notice from the CIAC.

On the other hand, in Prudential’s case, the Supreme Court found that Prudential never denied receiving any of the notices of the arbitral tribunal, or submissions of the parties.

These recent developments confirm that arbitration in the Philippines remains robust and aligned with fundamental principles in regional and international practice.

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Singapore courts adopt robust approach to validating awards

Singapore’s courts are at the forefront of developing robust arbitration-related jurisprudence, keeping in line with the principle of minimal curial intervention and parties’ intention to arbitrate, while balancing other considerations such as public policy and comity. The Singapore International Arbitration Centre (SIAC), in its 2023 annual report released in April 2024, has also seen the second-highest caseload, with 663 new cases filed in 2023 by parties in 66 jurisdictions.

Recognition and enforcement

Singapore’s courts adopt a robust approach in upholding the validity of awards by rejecting unmeritorious attempts to resist enforcement. In Government of the Lao People’s Democratic Republic v Lao Holdings NV [2024], the Singapore International Commercial Court (SICC) held that the non-disclosure of a conditional fee arrangement between the arbitrating party and its counsel did not satisfy the high threshold required for setting aside an ICSID award.

The court considered it an abuse of process when a party who fails to raise the argument against the fee arrangement at a prior instance seeks to raise it again in the setting aside application. Further, the SICC held there was no obligation on the arbitrating party to disclose a fee arrangement when claiming an amount that was equal to or lower than the amount payable by the client.

The robust approach to enforcement can also be seen in how the court, in Hilton International Manage (Maldives) Pvt Ltd v Sun Travels & Tours Pvt Ltd [2024], imposed the statutory maximum of SGD100,000 (USD75,600) for committal against a non-paying debtor company, and an imprisonment term of one year for its managing director who knew of the company’s non-compliance.

But the situation there was particularly aggravating given the judgment creditor was deprived of benefit to its award for eight years.

Where anti-suit injunctions are concerned, the court adopts a generally pro-arbitration approach that favours upholding parties’ intent to arbitrate. In Gate Gourmet Korea Co Ltd and others v Asiana Airlines, Inc [2023], the court held the foreign tort proceedings were covered by the relevant arbitration clauses and granted anti-suit injunctions in favour of people who were not parties to the arbitration agreement, as the parties were joint tortfeasor in the enjoined proceedings.

The court considered the arbitration agreement covered tort actions arising from the underlying contract, and that a non-party to the arbitration agreement who is joined as a co-tortfeasor is entitled to the arbitration clause.

Jurisdiction of the tribunal

In [2024], the appellant sought to set aside a partial award rendered by the tribunal under ICC rules, based on a Singapore law-governed arbitration clause entered into in 2000. The appellant claimed that the subsequent agreement of parties in 2017 had superseded the prior arbitration agreement.

The 2017 extension agreement contained an arbitration agreement to settle all disputes at the Shanghai International Arbitration Centre, applying the law of the People’s Republic of China. The Court of Appeal rejected the argument that the tribunal was without jurisdiction because the 2017 extension agreement had superseded parties’ prior agreement in 2010.

The language of the 2017 extension agreement did not remove the prior jurisdictional foundation established in the 2000 agreement. For a subsequent agreement to affect an ongoing arbitration, there must be more explicit terms. On the facts of CNA v CNB, the court found that the 2017 extension agreement was entered into to fabricate a jurisdictional challenge in respect of the ICC arbitration.

Due process and natural justice

The Court of Appeal, in [2024], clarified the extent to which an arbitral tribunal is obliged to give reasons. The court observed that tribunal has a general duty to give reasons under article 31(2) of the Model Law, but it is not settled if a tribunal’s failure to give adequate reasons itself is a reason to set aside an award.

Further, the court observed that the extent of the tribunal’s duty to give reasons is also not settled. Unlike court proceedings where open justice dictates that the court sets out its reasons, which can then be reviewed by an appellate court, arbitration proceedings are confidential and not subject to the same level of scrutiny on the merits.

While the court did not pronounce conclusively on these unsettled issues, the court’s observation shows that tribunals are unlikely to be subject to the same standard to give reasons, and inadequate reasons must be so grave and glaring in order to demonstrate a breach of due process.

The Court of Appeal’s holding that the tribunal’s duty to give reasons is not held to a judicial standard in CVV v CWB was followed in DGE v DGF [2024]. Further, the court held, in DGE v DGF, that the tribunal is not required to explain every step of its evaluation of the evidence, and no further clarification is needed where it is “unambiguously clear” that the tribunal placed more weight on one particular evidence rather than other evidence.

In [2024], the Court of Appeal held that parties who have failed to challenge the conduct of the arbitral tribunal by raising its objection during arbitration cannot belatedly raise a breach of natural justice allegation in the setting aside application.

The appellant took issue with the presentation of certain evidence by the respondent’s counsel during the arbitration and argued that it was not afforded a reasonable and fair opportunity to address such evidence. Those objections were not raised in the proceedings before the arbitral tribunal. The court considered it opportunistic for the appellant to only raise such objections in the court proceedings.

The court also clarified that the principle of natural justice does not require the tribunal to give responses to all submissions made, and is only required to deal with the essential issues. Further, even if there is a breach of natural justice, the court affirmed its previous decision that the court would only intervene if there was actual or real prejudice occasioned by the breach.

In DBL v DBM, the court considered the final outcome of the arbitral proceedings would not have been different in any meaningful way, even if the tribunal had found in favour on one part of the appellant’s defence.

Finality of award

An award, as defined under section 2(1) of the Internation Arbitration Act, refers to one that is a “decision of the arbitral tribunal on the substance of the dispute and includes any interim, interlocutory or partial award but excludes any order or direction made under section 28”.

Parties typically seek to enforce a final award, which is issued at the conclusion of arbitral proceedings to deal with all remaining issues. The question that may arise is whether a conditional award may also fall within the definition of a final award, as a conditional award is one where the tribunal makes an award on quantum that is conditional upon another event, such as whether the successful party needs to pay certain sums to a third party.

In [2024], the Court of Appeal had the opportunity to address this issue. The court held that a conditional award may constitute a final award if it disposes of all outstanding claims, and if an enforcement court is able to assess whether the conditions in the award have been satisfied.

Where the tribunal has decided on the substance of the dispute and the conditional award is res judicata (considered as final), and the arbitrator is functus officio (cannot re-examine), a conditional award may constitute a final award.

In the same judgment, the court also canvassed situations where a tribunal should expressly reserve its jurisdiction when it purports to issue a final award, or else the tribunal’s mandate would be terminated following a final award.

An implied reservation of jurisdiction would be inconsistent with the regime of the International Arbitration Act, which provides a limited statutory exception to the termination of the tribunal’s mandate following the issuance of a final award.

COLIN SEOW CHAMBERS LLC

10 Marina Boulevard, Level 39,

Marina Bay Financial Centre Tower 2, Singapore 018983

Email: info@colinseowchambers.com

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