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Unexpected praise for Hong Kong arbitration

Unexpected praise for Hong Kong arbitration
With the 30th anniversary of the Hong Kong International Arbitration Centre (HKIAC) this year, it is appropriate to look back at how the centre has been spectacularly fruitful for the practice of arbitration in Hong Kong.

This success has been recognised, with the HKIAC being a recent recipient of the Global Arbitration Review (GAR) award for innovation by an individual or organisation 2014; the GAR Awards have been described as “the Oscars for the arbitration community”.

And this is a trend that shows every sign of continuing. Further recognition comes this week in the form of yet another prestigious event coming to Hong Kong. The International Congress of Maritime Arbitrators will be held in the city from May 11 to May 15.

However, apart from just popular recognition, an important recent decision from the High Court of England and Wales, arising in connection with a shipping dispute, also provided a glowing endorsement for Hong Kong as a centre for international arbitration.

An English High Court decision ruling in favour of Hong Kong against London as the appropriate venue for an arbitration case that was in dispute further enhances Hong Kong’s arbitration credentials.

A well-known UK legal publication headlined a review of the Shagang decision, discussed below, in which Robert Bright QC appeared for the successful Charterers, as: “English High Court boost for Hong Kong arbitration”.

The case of Shagang South-Asia (Hong Kong) Trading Co. Ltd v Daewoo Logistics Corp [2015] EWHC 194 (Comm) was an appeal to the English High Court from the decision of a sole arbitrator who had declared that he had jurisdiction to hear the matters in dispute between Shagang/Charterers (“Claimant” in the High Court appeal proceedings) and Daewoo/Owners (as “Defendant” in the High Court).

The underlying dispute arose from a short landing claim by cargo receivers, subsequently passed down the charterparty chain to Daewoo. The appeal to the High Court from the decision on jurisdiction of the sole arbitrator involved a “battle of the forms”; would the dispute resolution terms of a Fixture Note between Daweoo and Shagang be preferred over the template arbitration options in a GENCON 1994 form. The Fixture Note provided for “Arbitration: Arbitration to be held in Hong Kong. English law to be applied”. It also provided – as is common enough – “other terms / conditions and charter party details base on GENCON 1994 Charter party”. The relevant GENCON 1994 form included (clause 19(a)) a provision stipulating London arbitration and English law as well as additional language prescribing other arbitrator appointment processes.

In dealing with a challenge by Charterers (Shagang) to his jurisdiction, the sole arbitrator – appointed by Owners (Daewoo) on the view that London was the appropriate venue / place of the arbitration – had in effect ruled that clause 19(a) of the GENCON form trumped the Fixture Note reference to “Arbitration: Arbitration to be held in Hong Kong. English law to be applied”.

On appeal, Mr. Justice Hamblen in the High Court disagreed with the sole arbitrator’s analysis.

His Lordship stated that in order to identify the applicable rules governing the appointment of an arbitrator / arbitrators and the procedural conduct of an arbitration generally (i.e. the “curial law”) there is a presumption that the curial law will be that of the place of the arbitration (paragraphs 16 – 22, and 28) of the Judgment)

At paragraph “28” his Lordship emphasized:

"If the parties do not make an express choice of procedural law to govern their arbitration, then the court will consider whether they have made an implicit choice, In this circumstance the fact that the parties have agreed to a place for the arbitration is a very strong pointer that implicitly they must have chosen the laws of that place to govern the procedures of the arbitration. The reason for this is essentially one of common sense. By choosing a country in which to arbitrate the parties have, ex hypothesi, created a close connection between the arbitration and that country and it is reasonable to assume from their choice that they attached some importance to the relevant laws of that country, i.e. those laws which would be relevant to an arbitration conducted in that country…."

On the facts before him, His Lordship found that the Owners had improperly commenced London Arbitration. He found that the sole arbitrator did not have jurisdiction to hear the various matters in dispute between the parties to the underlying charterparty.

Justice Hamblen therefore set aside the sole arbitrator’s award purporting to confirm jurisdiction. One would expect that (in the absence of settlement now being negotiated), Owners will now commence arbitration in Hong Kong.

The decision reinforces Hong Kong’s reputation as an acknowledged international arbitration centre. Much of the credit for this rests with the efforts of the HKIAC over the past 30 years, as seen in the recent award by the Global Arbitration Review, and the comments of Mr. Justice Hamblen.

In making his decision Justice Hamblen said: “Moreover, whilst Hong Kong is no doubt geographically convenient, it is also a well-known and respected arbitration forum with a reputation for neutrality, not least because of its supervising courts”.

Conributed by Damien Laracy, Hill Dickinson, Hong Kong 

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