In another instalment in the long running Karaha Bodas v Pertamina arbitration, the Hong Kong Court of Appeal recently dismissed Pertamina's appeal against a first instance decision granting Karaha Bodas leave to enforce a final arbitration award made in Geneva in Hong Kong.
Pertamina's appeal was based on a number of grounds, but the primary focus was on its allegation that enforcement of the award would be contrary to public policy because it was tainted by bad faith or fraud.
In dismissing the appeal in its entirety (so upholding Karaha Bodas's right to enforce the award), the Court of Appeal took the opportunity to address the question of the benchmark which must be met by a party seeking to resist enforcement on the basis of an allegation of fraud. Pertamina initially contended that if it was able to establish a prima facie case of fraud, the allegation should be the subject of a full trial. The Court of Appeal disagreed and observed that such a low benchmark would require the Hong Kong courts to become embroiled in unnecessary satellite litigation concerning a final arbitral award. Rather, it held that any allegation of fraud should be fully identified and be shown to have a "real prospect of success" before the court should pay any heed to it, and that any case which could not responsibly be asserted by counsel to meet this benchmark should not even be raised before a Hong Kong court. Karaha Bodas Company LLC v Pertamina CACV121/2003 (judgment handed down on 9 October 2007)