The case of PCCW Global Ltd (formerly Beyond the Network Ltd) v Interactive Communications Service Ltd (formerly Vectone Ltd) [2006] HKEC 2102, involved proceedings over alleged billing discrepancies in invoices in the sum of US$718,999.26 issued by Beyond the Network (Beyond) to Vectone for the provision of international telephone services. Vectone applied to stay the proceedings to arbitration on the basis that a clause providing for arbitration in the agreement with Beyond contained an agreement to arbitrate.

Whether or not the parties were subject to an arbitration agreement was not clear. There was an apparent contradiction within the contract, which on the one hand required the parties to deal with their disputes by way of court proceedings (and determine whether the jurisdiction would be Hong Kong or New York) in clause 4.3, and on the other hand, referred disputes to arbitration in New York (clause 11.3).

The stay was refused on grounds that there was no effective arbitration agreement. Instead, the court found that the parties had agreed to submit their billing disputes to the exclusive jurisdiction of the Hong Kong courts. Vectone appealed to the Court of Appeal, the principle point of appeal being whether there was an agreement to arbitrate. The court was of the view that clause 11.3 provided for enforceable (though permissive) arbitration and the question was whether a billing dispute fell within the ambit of that clause. The judge noted that it was important for the court not to usurp the function of the arbitrators, and unless the point was clear, the matter should be stayed to arbitration (so only if it was clear that the arbitration clause did not cover billing disputes, should the court refuse a stay).

It was held that there was no agreement to arbitrate billing disputes. Clause 4.3 was a self-contained provision on how any dispute over billings should be determined. It provided for formal notification of disputes, a tight timetable for amicable settlement "not to exceed 14 days" and "then, the parties will submit the difference to the Hong Kong courts". From reading that as a whole, the court held it was clear that the parties had agreed that billing disputes should be dealt with differently and separately from clause 11.3. Vectone's appeal was dismissed, and their subsequent application for leave to appeal to the Court of Final Appeal was refused.

This case serves as a reminder of the importance of drafting clearly worded dispute resolution provisions in contracts so as to avoid unnecessary litigation.