In a judgment handed down on 15 August 2016, the Hong Kong Court of Appeal has dismissed an appeal seeking to set an ICC award (Tronic International Pte Ltd v Topco Scientific Co Ltd and Others CACV 235/2013).
Disputes arose in relation to four agreements between the plaintiff and the three defendants. Two of the agreements were between the plaintiff and the first defendant, while one agreement was between the plaintiff and the second defendant. The last agreement was between the plaintiff and the third defendant. The plaintiff submitted the case to arbitration, claiming damages against all three defendants for breach of the agreements. The defendants counterclaimed for damages in the arbitration against the plaintiff for wrongful termination of the agreements.
The tribunal delivered a partial award on liability. The plaintiff's claims were dismissed, while the defendants' counterclaims were successful. The tribunal delivered its final award after further hearings, upholding part of the counterclaims and awarding the first and second defendants damages and the costs to the arbitration.
Basis for set aside
The plaintiff applied to the Court of First Instance (CFI) to set aside the final award, on the basis that:
- the plaintiff was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings, or was otherwise unable to present its case (Article 34(2)(a)(ii) of the UNCITRAL Model Law on Commercial Arbitration); and
- the award dealt with a dispute not contemplated by or not falling with in the terms of the submission to arbitration, or contained decisions on matters beyond the scope of the submission to arbitration, provided that, if the decisions on matters submitted to arbitration could be separated from those not so submitted, only that part of the award which contained decisions on matters not submitted to arbitration could be set aside (Article 34(2)(a)(iii) of the UNCITRAL Model Law on Commercial Arbitration).
The Court of Appeal's refusal to set aside
With respect to 1), the plaintiff submitted that it was unable to present its case because the tribunal had refused the plaintiff's application to inspect the originals of the documents, equipment and material on which the defendants had relied on for their counterclaims.
The CFI rejected this argument, on grounds that the court was not hearing an appeal against the outcome of the arbitration, and thus was not concerned with the substantive merits of the dispute or the correctness of the award, but rather with the fairness of the arbitral process. In this case the arbitral process was held to be fair. The parties had been given the opportunity to make submissions for the inspection application before the tribunal ruled on it. As a result, the CFI declined to set aside the final award on these grounds. The Court of Appeal agreed.
The plaintiff further submitted that the tribunal had refused to stay the arbitration pending the outcome of criminal proceedings in Taiwan against certain employees of the defendants for forgery and the use of forged documents. Hence, the plaintiff concluded again that it had not been able to properly present its case. The Court reiterated that it would not consider the merits of the tribunal's decision, so this ground of appeal was also unsuccessful.
WIth respect to 2), the tribunal had considered issues under the Hong Kong Sale of Goods Ordinance. The plaintiff argued that the Ordinance was not raised in the pleadings, thus issues based on the Ordinance did not fall within the scope of arbitration.
The Court of Appeal held that Article 19 of the ICC Rules clearly permits a party to raise new issues beyond the limits of the terms of reference, if authorised to do so by the tribunal. Even if an issue that had not been raised by the parties were raised by the tribunal, it was open to the tribunal to permit such an issue to be argued, provided that the parties were given an opportunity to make submissions on such issue, including whether or not the issue should be canvassed. Such opportunity was given to the plaintiff so there was no infringement of Article 34(2)(a)(iii).