In L v B (HCCT41/2015), the Honourable Madam Justice Mimmie Chan of the Hong Kong Court of First Instance (“CFI“) adjourned enforcement of an arbitral award for four months on the condition that a substantial security of HK$41.6 million including unpaid award and costs to be furnished by the losing party in the arbitral proceedings.


The Applicant commenced arbitral proceedings against the Respondent for breach of a Non-Recourse Loan Agreement (“the Agreement”). Under the Agreement, the Respondent agreed to advance a loan to the Applicant against the transfer of Applicant’s shares in a Hong Kong-listed company as collateral and security for the loan to be advanced. The Applicant transferred 800 million shares to the Respondent; however, the Respondent advanced loans in respect of only 200 million shares transferred.

The arbitral tribunal found the Respondent liable for breach of contract and breach of fiduciary duties and awarded approximately US$41.8 million to the Applicant. On 22 June 2015, the Respondent commenced proceedings in a Bahamian court to challenge the arbitral award. The application to set aside the award was made under section 90 of the Bahamian Arbitration Act 2009 (“the Act”) on the ground of serious irregularity, and under section 91 of the Act to appeal on a question of law. Three months later, the Applicant obtained leave from the CFI to enforce the award. The Respondent applied subsequently for a stay of the proceedings before the CFI pending the determination of the challenge against the award. The Applicant argued for either immediate dismissal of the application or provision of substantial security by the Respondent.


The CFI reiterated its wide, residual discretionary powers under Rule 10A of Order 73 of the Rules of the High Court (Cap. 4A) in granting orders to enforce an award. This provides that where a debtor has applied to set aside an order made for leave to enforce, the Court may, either of its own motion or on an application made by the creditor, impose such terms, as to giving security or otherwise, as a condition of the further conduct of the application, as it thinks fit. The primary aim of the court is to assist with enforcement of arbitral awards, to enforce arbitration agreements made by the parties, and to treat arbitral awards as final.

In determining applications for security under section 89(5) of the Arbitration Ordinance (Cap 609) (“the Ordinance“), the CFI applied the two-factor test set out in Soleh Boneh International Ltd v Government of the Republic of Uganda [1993] 2 Lloyd’s Rep 208, which considered the strength of the argument that the award was invalid, and the ease or difficulty of enforcement of the award.

(1) Strength of argument that the award was invalid

The CFI did not consider the award to be “manifestly invalid”. On the Respondent’s argument of egregious arbitral irregularities, the CFI found that the arbitral tribunal acted within its authority and power to make “case management decisions” and that the Respondent had been given full opportunity to make submissions. Moreover, the commencement of challenge proceedings in the supervisory court did not automatically mean that the award had not become binding. An arbitral award was final and binding except where it was open to appeal on the merits. In the present case, as the appeal in the Bahamian court concerned only setting aside an arbitral award but not the merits, the award was valid and binding on the parties pursuant to the arbitration agreement, which set out the parties’ intention to treat awards as final and binding.

Moreover, pursuant to section 90 of the Act, an appeal against an award is subject to the contrary agreement of the parties. The parties, in their arbitration agreement, had agreed that the arbitral award would be final, conclusive and binding. The Respondent had thus not established to the CFI’s satisfaction that it had the right to appeal.

(2) Ease or difficulty of enforcement of the award

The CFI did not find any difficulties in enforcing the award and confirmed its “unfettered discretion”, derived from Article VI of the New York Convention, in deciding whether to adjourn award enforcement and to order the provision of security. Factors for consideration in an exercise of that discretion included the merits of the proposed challenge to be made, the delay likely to be occasioned, the conduct and bona fide of the parties, risk of inconsistent judgments and whether such inconsistencies could be remedied, and balancing the respective prejudice to each party.

The CFI rejected the Respondent’s argument of potentially inconsistent judgments between Hong Kong and Bahamian courts. If the award was ultimately set aside by the Bahamian court, the Bahamian court could order the Applicant to repay any amount recovered under the award, which would be enforced and recognised by the CFI under principles of international comity or as a foreign judgment.


The CFI adjourned enforcement proceedings for four months on the condition that the Respondent provided security of HK$41 million for the outstanding award and HK$600,000 for legal costs within 21 days. Indemnity costs (costs on a higher basis) were awarded against the Respondent consistent with the practice in Hong Kong for parties unsuccessfully resisting enforcement.


This judgment reinforces the arbitration-friendly and non-interventionist approach of Hong Kong courts, which respects the finality of arbitral awards and will generally require the posting of substantial security for applications to adjourn enforcement proceedings.

It is interesting that the Court ruled that the arbitration agreement which stated that the award would be “final, conclusive and binding”, had not established to the Court’s satisfaction that the Respondent had the right to appeal. There have been previous English court cases in which the wording that an award was “final, conclusive and binding on the parties” was not construed as an agreement excluding the parties’ rights of appeal under section 69 of the 1996 English Arbitration Act.

In previous cases, the English courts have held that in order to amount to an agreement to exclude appeals as envisaged by section 69(1) of the 1996 Act, sufficiently clear words are necessary, although no express reference to section 69 is required. In the context of a fairly standard arbitration clause, the use of the words “final, conclusive and binding” in isolation would not convey to a reasonable person that the parties had agreed to exclude all rights of appeal on points of law under section 69.

Although, on their face, the words “final, conclusive and binding” are words of considerable width, the reality is that the expression “final and binding” in the context of arbitration and arbitration agreements has long been used to state the well-recognised rule that an award is final and binding in the traditional sense and creates res judicata and issue estoppel between the parties.

For Hong Kong seated arbitrations, there are no rights of appeal on questions of law, unless the parties specifically opt in to Schedule 2 of the Arbitration Ordinance (the old domestic regime containing appeals on questions of law with leave of the Court). The Schedule 2 provisions will also automatically apply (unless the parties expressly opt out) to an arbitration agreement entered into before or within 6 years from commencement of the Arbitration Ordinance (1 June 2011), if the arbitration agreement provides that it is a domestic arbitration.