HK Court Grants Anti-Suit Injunction To Bind Non-Party To Arbitration

Baker McKenzie review the Hong Kong High Court’s decision in Dickson Valora Group (Holdings) Co Ltd. v Fan Ji Qian [2019] HKCFI 48, where the Defendant commenced court proceedings in China to claim benefits under a contract to which it was not a party in circumstances where the contract provided for arbitration in Hong Kong. The Court granted the anti-suit injunction, holding that a non-party to a contract who becomes entitled to enforce an obligation which is subject to an arbitration clause must do so by arbitration in accordance with the contract (referring to Schiffahrtsgesellschaft Detlef Von Appen Gmbh v Wiener Allianz Versichrungs AG and Voest Alpine Intertrading GmbH (The Jay Bola) [1997] CLC 993 ; [1997] 2 Lloyd’s Rep 279, and Shipowners’ Mutual Protection and Indemnity Association (Luxembourg) v Containerships Denizcilik Nakliyat ve Ticaret AS (The Yusuf Cepnioglu) [2016] 3 All ER 697).

In relation to privity, the Court stated [32]:

“Outside of statute there exist various devices at common law which are sometimes employed to temper the strictures of the doctrine of privity. One is to say that a promise by one contractual party to another to pay a sum of money to a third party is held on trust by the promisee for the benefit of the third party. Another device is an assignment by the promisee to the third party of the benefit of the promise. A further technique is to treat the promisee as having acted as an agent for the third party or for both himself and the third party in receiving the promise (though this is not strictly an exception since it renders the third party a party to the contract).”

When considering comity in the context of the injunction, the Court emphasised the importance of respecting a conscious choice of Hong Kong as a mutually acceptable neutral ground in terms of joint venture formations, governing law, and dispute resolution forum. The Court stated [46-47]:

“In pursuing court proceedings in the Mainland against the Companies, Fan is seeking to claim a benefit under the contract without recognising the condition to which it is plainly subject. Such conduct in my view falls within the principles expounded in The Angelic Grace, The Jay Bola and The Yusuf Cepnioglu. The Companies have the right to prevent a claim against them based on their contractual obligations being pursued otherwise than by the contractually agreed mode, viz arbitration in Hong Kong. 7 Unless an injunction is granted such right will be rendered wholly ineffective and valueless.”

“For the above reasons I consider that in determining whether an anti-suit injunction should be granted against Fan in this case, this court should be guided by The Angelic Grace approach. It should grant an injunction to restrain Fan from acting inconsistently with the inherent conditions forming part of the promise of success fees, unless there are strong reasons for not doing so.”

The authors note that this decision illustrates that the Hong Kong Court will not hesitate to restrain a party from commencing or proceeding with foreign court proceedings in breach of an arbitration agreement unless the applicant is guilty of inexcusable or inordinate delay or there are any other good reasons for not granting an injunction. At [69], the Court stated:

“…[it was] submitted that this case has strong connections with the Mainland and it is not appropriate for the Hong Kong courts to interfere. I recognise that Fan is a Mainland resident, the Subsidiary is a Mainland company and the project is situated in the Mainland. But at the same time it must not be forgotten that the Company — the joint venture vehicle — is a Hong Kong company, the contract is governed by Hong Kong law and stipulates that “[a]ny dispute, controversy or claim arising out of or relating to” the agreements is to be submitted to arbitration in Hong Kong under Hong Kong arbitration rules. These features are explicable by the fact the foreign and Chinese investors have consciously chosen Hong Kong (a Special Administrative Region albeit part of China) as a mutually acceptable neutral ground, quite possibly for some of the reasons mentioned in Fiona Trust referred to … above. Such choices are an important part of the bargain between commercial men, and should not be easily neglected or thwarted.”

See also the following reviews of this case:

Note also the 3 July 2019 decision of the Hong Kong High Court in AIG Insurance Hong Kong Limited v McCullough [2019] HKCFI 1649, where in a dispute concerning coverage under an insurance policy and involving proceedings in Florida and Hong Kong, the Court held that a party is not entitled to found a claim on rights arising out of an insurance policy without also being bound by the dispute resolution provisions in the policy: the case law is to the effect that an anti-suit injunction will ordinarily be granted to restrain the claimant from pursuing proceedings in a non contractual forum unless there are strong reasons to the contrary, whether the claimant is a party to the policy or not. The Court considered that the underlying rationale is that the dispute resolution provision is an essential part of the contractual basis upon which coverage arises under the insurance policy, and that a party seeking to enforce the policy cannot do so free of the contractual dispute resolution mechanism.

About Phillip Rompotis

Phillip practices as a barrister and arbitrator in Hong Kong. He has over 25 years’ litigation and arbitration experience in commercial disputes relating to construction & engineering, financial services, joint venture & shareholders agreements, technology, trusts, property and landlord & tenant. He is a Fellow of the Chartered Institute of Arbitrators, the Singapore Institute of Arbitrators, the Malaysian Institute of Arbitrators, and a member of various lists/panels of arbitrators.

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