In Wing Bo Building Construction Company Limited v. Discreet Limited (HCA 146/2015), the Hong Kong court confirmed that section 20(8) of the Arbitration Ordinance (“AO”), which provides that a decision of the court to refer the parties to arbitration is not appealable, was constitutional.
The dispute arose out of a construction contract where the plaintiff was the main contractor and the defendant was the employer. Court proceedings commenced by the plaintiff were stayed in favour of arbitration. The plaintiff argued that section 20(8) of the AO was unconstitutional as it disproportionately restricts the power of final adjudication conferred upon the Court of Final Appeal by article 82 of the Basic Law (The Basic Law is Hong Kong’s post-handover ‘mini constitution’, and preserves the pre-1997 English-based common law legal system).
In considering the case, the Court adopted a three-limb test where:
“Any restriction on the power of final adjudication must satisfy the proportionality test as follows:
(i) The restriction or limitation must pursue a legitimate aim;
(ii) The restriction or limitation must also be rationally connected to that legitimate aim; and
(iii) The restriction or limitation must also be no more than is necessary to accomplish that legitimate aim.”
The Court considered the objectives of the AO which include promoting speed, finality and reduction of costs in relation to arbitration, and found that the first two limbs of the proportionality test were satisfied.
In terms of the third limb, the Court commented that the AO minimizes judicial intervention so as to reduce costs and allow for court resources to be allocated to matters other than arbitration. Although the nature of the restriction in section 20(8) of the AO is not appealable, it is not final.
A party could challenge the decision before the arbitral tribunal and (in the event of an adverse ruling against the party opposing the stay of proceedings) to return to the court for challenge against the arbitral tribunal’s jurisdiction.
The Court held that proportionality should be considered against the overall scheme of the AO, and ultimately it was a matter of the implementation of a policy to promote the use of arbitration, to facilitate the fair and speedy resolution of disputes by arbitration without unnecessary expense, and to promote Hong Kong as an arbitration friendly jurisdiction. The Court concluded that the present scheme under the AO, including section 20(8), was within the range of reasonable options which the legislature can adopt to achieve the legitimate aims of the AO. The Court therefore rejected the challenge against the constitutionality of section 20(8) of the AO.
This is another pro arbitration decision in Hong Kong. Parties seating their arbitration in Hong Kong will take comfort that court proceedings will be stayed in favour of arbitration for ultimate determination by an arbitral tribunal of their jurisdiction, and a Hong Kong court will adopt a minimal interventionist approach, only exercising its powers in support of the arbitral process when expressly provided for under the legislation.
A major benefit of an arbitration seated in Hong Kong is its predictability – supervision by an arbitration friendly court and minimal court interference. The Court in Wing Bo Building Construction Company Limited v. Discreet Limited recognised that judicial intervention permitted by the AO is predominantly in relation to matters that support the arbitral process, such as enforcement and the collection of evidence. Under section 3(2) (b) of the AO, a Hong Kong court should interfere in the arbitration of a dispute only as expressly provided for in the AO