In G v S [2021] HKCFI 1461, the High Court of Hong Kong dealt with an application by S to set aside an order enforcing a CIETAC award which ordered S to:
- continue to specifically perform its obligations under a Cooperation Agreement (Specific Performance Order);
- to bear the marketing costs of RMB 1,181,664.95 and US$161,211.03 incurred by G during the period of the parties’ cooperation (Marketing Costs Order);
- to provide G with EUR 890,833.27 worth of sample products or pay the equivalent amount to G (Alternative Relief); and
- to compensate and pay to G arbitration costs and fees (Costs Order).
The grounds relied upon for setting aside the enforcement order were that:
- The Specific Performance Order was contrary to the public policy of Hong Kong;
- The Marketing Costs Order and the Alternative Relief Order were made outside the scope of the arbitration agreement between the parties, as there was no valid arbitrationagreement that formed the basis of these orders in the Award; and
- The Costs Order should likewise be set aside as it arose out of the other orders.
Public Policy
In relation to public policy, S argued that it would be contrary to public policy to enforce the Specific Performance Order in circumstances where S had after the date of the Award issued a fresh notice of termination of the 2018 Agreement, on grounds of G’s breaches of the 2018 Agreement which came to light only after the commencement of the arbitration, and these claims had not been considered by the Tribunal. In short, S argued that to compel S to perform the 2018 Agreement would preclude it from relying on its lawful right to terminate the 2018 Agreement, and this would be contrary to public policy. The Court rejected this argument, stating [@6]:
“I reject the argument that the Specific Performance Order should be set aside as being contrary to public policy, simply because S purported to serve a new notice of termination of the 2018 Agreement after the date of the Award. The Award does not by itself prohibit S from relying on new grounds to terminate the 2018 Agreement. Whether S was entitled to terminate the 2018 Agreement on the basis of breaches not dealt with in the arbitration, or on the basis of events after the date of the Award, or on any other basis, is a matter to be determined in accordance with the dispute resolution mechanism contained in the 2018 Agreement. Even the fact that performance of the 2018 Agreement would be impossible is not a ground to set aside the Award (Xiamen Xinjingdi Group Ltd v Eton Properties Limited [2009] 4 HKLRD 353).”
As a result of the service of a notice of termination of the agreement, it became impossible and of no practical value for G to continue its efforts in seeking specific performance of the 2018 Agreement under the Award; accordingly, G confirmed that it no longer sought to enforce the Specific Performance Order under the Award, but did intend to seek leave to enforce the Marketing Costs Order, the Alternative Relief Order and the Costs Order.
The court noted that it could enforce only part of an enforcement order, stating [@9]:
“Section 84 of the Ordinance applies to enforcement of a Mainland award. Section 84 (1) provides that an award is enforceable in the same manner as a judgment of the Court that has the same effect, with the leave of the court, and section 84 (2) provides that if leave is granted, the Court may enter judgment “in terms of the award”. In the first instance decision of the Court in Xiamen v Eton Properties Limited and ors, HCCT 54/2007, 24 June 2008, Reyes J pointed out that there is nothing in the Arbitration Ordinance which ties the Court’s hand as to enforcing only part of an award where appropriate, and further, that the Court has a degree of flexibility in the deployment of the means of enforcement available to it. In JJ Agro Industries (P) Ltd v Texuna International Ltd [1992] 2 HKLR 391, Kaplan J also held that the doctrine of severability of an award enables the Court to enforce such part of an award as is within its jurisdiction, and that it would be contrary to the spirit of the Arbitration Ordinance if enforcement were to be refused in respect of a severable part of an award which was not in issue. A plaintiff is entitled to enforce a part of the award, even if another part of the award is objectionable or defective, so long as the good part is severable from the bad.”
The issue for the Court was therefore whether the Marketing Costs Order, the Alternative Relief Order and the Costs Order were in any way defective such that the order granting leave to enforce them should be set aside. S argued that it was not open to G to enforce the Alternative Relief Order, or any other part of the Award, on the basis of the continued performance of the 2018 Agreement, when it had commenced a new arbitration for loss and damage in respect of S’s alleged breach of the 2018 Agreement. The Court disagreed, stating that it saw nothing contrary to the fundamental conceptions of morality and justice, or offensive to this Court’s notions of justice, to enforce the Marketing Costs Order and the Alternative Relief Order in Hong Kong without the Specific Performance Order.
Outside Scope of Arbitration Agreement
In relation to the second ground, the Court noted that the arbitration clause in the 2018 Agreement provided for arbitration of “any dispute” arising between the parties “out of or in relation to” the 2018 Agreement, including any dispute regarding its breach, termination or validity.
S’s argument – that the marketing costs claimed to be due should be disputes which arose out of an earlier agreement in 2017 (which provided for resolution of disputes in the courts of Hong Kong) – was rejected on the basis that the 2018 Agreement clearly indicated that it was intended to replace and supersede the earlier agreement.
There was therefore nothing which made enforcement of the Marketing Costs Order and the Alternative Relief Order objectionable or unconscionable to the Court’s sense of justice.
