Introduction

Audi alteram partem is a fundamental principle of natural justice recognized and enforced by the Hong Kong courts. That means no person shall be judged without a fair hearing in which each party is given the opportunity to respond to the evidence against it, and to be heard on its case.  

In the recent case of Song Lihua v Lee Chee Hon [2023] HKCFI 2540, Hong Kong Court of First Instance has demonstrated that it will set aside the enforcement of an arbitral award on the ground of public policy when the conduct of the arbitrator in the arbitral proceedings may cast doubt on an objective observer’s mind as to whether he/she did hear the case.

Facts

The Applicant on 9 December 2022 applied for leave to enforce an arbitral award (the “Award”) made by the tribunal in an arbitration conduct in the Mainland (the “Arbitration”). The Award was for the payment by the Respondent of the sum of over RMB337million together with interest and costs due and payable to the Applicant. An order granting leave to enforce the Award was made by the Court on 12 January 2023 (the “Enforcement Order”). To oppose, the Respondent on 26 January 2023 applied to set aside the Enforcement Order based on six grounds, one of the grounds is that the conduct of one of the arbitrators (the “Arbitrator”), who attended the Arbitration by video conferencing facilities, deprived the Respondent of the opportunity to present his case, and of the right to a fair hearing, which is contrary to public policy.

Decision and reasoning

The Court has reviewed the entire video of the Arbitration, and found that the Arbitrator had scarcely been stationary for more than 1 minute essentially for the second half of the Arbitration (apart from the last part when he was inside a car). The video clearly showed that when the parties’ lawyers were adducing and challenging the evidence produced and when the members of the tribunal were asking questions as to the evidence and the parties’ respective case, the Arbitrator had been moving from one location to another, indoors and outdoors and had eventually left his premises and travelled in a car. He was also seen to be at times talking to and/or gesturing to others, and frequently looking into the distance instead of watching the screen and the video of the proceedings.

The Arbitrator was also seen to be off-line for periods of time during the said period, and on at least two occasions when members or secretary of the tribunal asked if the Arbitrator could hear them or was online, he had not answered at all, or made any indication or gesture that he had heard the questions.

The Court granted an order to set aside the Enforcement Order on the ground of public policy and the reasons for the decision are summarized as follows:-

1.       It is established and well-known that not only must justice be done, but it must also be seen to be done.

 

2.       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. The first role of the judge and the arbitrator is to preside and hear the case.

 

3.       If the Arbitrator was not concentrating on or not hearing the submissions made by the parties, an objective observer would have reasonable doubts as to:-

 

a.       firstly, whether the Arbitrator had already made up his mind as to the dispute before or without hearing the parties, and was not interested in what the parties had to say on the evidence or on the law; and

 

b.       secondly, whether the Arbitrator’s decision in the case can be actually supported by the evidence, when he had not properly focused on the parties’ submissions in the proceedings.

 

4.       There is no apparent justice and fairness, when a member of the decision-making tribunal was not hearing and focused on hearing the parties in the course of the trial.

 

In this case, the Applicant placed much reliance on the fact that the supervisory court on the Mainland has dismissed the Respondent’s application to set aside the Award and permitted its enforcement despite the Respondent’s complaints as to the manner and conduct of the Arbitrator in the proceedings. The Court rejected such argument by setting out the following basic principles:-

1.       Proceedings to set aside are governed by the law under which the award was made or the law of the place where it was made, while proceedings in the court of enforcement are governed by the law of that forum.

 

2.       Although an award may be valid by the law of the place where it is made, its making may be attended by such a grave departure from basic concepts of justice as applied by the court of enforcement that the award should not be enforced.

 

3.       A failure to raise the public policy ground in proceedings to set aside an award cannot operate to preclude a party from resisting on that ground the enforcement of the award in the enforcing court in another jurisdiction, because each jurisdiction has its own public policy.

 

4.       It is the domestic public policy of the relevant court of enforcement which is relevant.

Takeaway

This case serves as a reminder that not only must the rules of natural justice be applied, but they must be seen by the objective reasonable observer to have been applied. When such rules cannot be observed in the arbitral proceedings, like the present case, the Court will interfere and reject enforcement of an arbitral award, despite the pro-arbitration and pro-enforcement approach as adopted by the Court.

 

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Important: The law and procedure on this subject are very specialised and complicated. This article is just a very general outline for reference and cannot be relied upon as legal advice in any individual case. If any advice or assistance is needed, please contact our solicitors.

Published by ONC Lawyers © 2023