In a decision handed down on 5 December 2016, the Hong Kong Court of Appeal has denied an appeal by First Media, a member of the Lippo Group from Indonesia, against an order which permitted Malaysia’s Astro Group to enforce sizeable SIAC awards obtained in 2009 and 2010 against its assets in the jurisdiction.

The Astro v Lippo case has provided a fascinating narrative for clients and arbitration practitioners in recent years particularly with the Courts of rival jurisdictions – Singapore and Hong Kong – until now approaching an important issue arising out of the timing of Lippo’s jurisdictional challenge from different perspectives. The approaches of the Hong Kong and Singapore courts have now been aligned following the latest decision.

Background

The original arbitration which commenced in 2008 pitted two of Asia’s media giants against each other in arbitration in Singapore stemming from a satellite television and multimedia joint venture involving First Media, a broadband company, and several other subsidiaries of the Lippo Group and a number of Astro entities. The Tribunal dismissed a jurisdictional challenge and permitted three Astro companies to participate in the arbitration despite not being party to the arbitration agreement. In 2009 and 2010 the Tribunal made a series of awards worth some US $130m in favour of Astro (including the 3 “non-party” companies) but it was only after the merits phase had concluded that matters became interesting.

Jurisdiction challenge in Singapore

During the arbitration, Lippo chose not to challenge the Tribunal’s decision that it had jurisdiction by way of an application pursuant to Article 16(3) of the UNCITRAL Model Law to the court of the seat (Singapore). Instead Lippo waited until the Astro entities took steps to enforce the awards and raised its challenge at that stage.

Lippo did not seek to set aside the award in Singapore on the basis that the Tribunal did not have jurisdiction to hear the dispute in respect of the additional Astro entities but did raise these arguments when resisting Astro’s application to the Singapore court to enforce the award against assets in Singapore. In October 2013, the Singapore Court of Appeal held that the awards were not enforceable in Singapore by the Astro entities which were not party to the arbitration agreement as the Tribunal did not have jurisdiction to determine disputes involving those parties. It did however permit enforcement of a smaller sum – US $700,000 - awarded to signatories to the arbitration agreement. Importantly the court confirmed that a party has a “choice of remedies” when seeking to challenge jurisdiction by determining that a party can seek relief either on an “active” basis (whereby the applicant brings its challenge at the earliest possible opportunity by way of set aside proceedings as the arbitration is ongoing) or on a “passive” basis (whereby the arbitration is completed and the applicant seeks redress by challenging the award at the enforcement stage).

Hong Kong Court of Appeal decision

Astro obtained judgment on the award in Hong Kong in November 2010 and in July 2011 obtained a garnishee order to attach funds in the amount of US $44m due to First Media from its parent company. Lippo only took steps to set aside the judgment in Hong Kong in early 2012, well after the time limit for doing so had expired and those proceedings were stayed to await the outcome of the decision in Singapore referred to above. Once the Singapore judgment was handed down, the Hong Kong Court of First Instance had to address the question of enforceability in Hong Kong and, whilst declining to extend the 14 day deadline for challenging the enforcement decision, found that First Media had acted in bad faith by not challenging the Tribunal’s joinder decision by way of set aside proceedings, waiting instead until the enforcement stage to mount its challenge. In February 2015, leave to enforce was granted. First Media appealed.

The main issues which fell to the Hong Kong Court of Appeal to decide were whether: (i) Lippo was entitled to an extension of time to set aside the orders giving leave to enforce; (ii) the judgment in Hong Kong should be set aside; and (iii) the garnishee order should be discharged. On 5 December 2016, Lippo’s appeal was dismissed.

On the basis that arbitrations should be concluded with “speedy finality”, the Court of Appeal refused to interfere with the lower court’s decision not to extend the time limit within which the application should have been made.

It was not all bad news for First Media however as it was successful in overturning the lower court’s finding that by participating in the arbitration (expressly under protest) and not raising jurisdictional objections until the enforcement stage, it had breached the principle of good faith. Whilst this was not sufficient to persuade the court to set aside the enforcement order it did bring the Hong Kong approach into line with that of the Singapore court insofar as it confirmed a party’s right to challenge jurisdiction at a time of its choosing – either on an “active” basis or on a “passive” basis or both. The Court of Appeal noted that situations may arise where the good faith principle could be breached in circumstances where there has been a failure to challenge jurisdiction before the courts of the seat pursuant to Article 16(3) of the UNCITRAL Model Law. Whilst it considered that such circumstances did not arise here on the facts, the court noted that it was required to consider “the full circumstances why an active remedy is not pursued or other relevant considerations (such as whether there was a clear reservation of rights so the other party was not misled).” In this regard it was held to be important that Lippo had been vocal in registering its objection with the Tribunal and had not kept quiet about the issue until the enforcement stage so it was not, in effect, springing a surprise on Astro by bringing a jurisdiction challenge out of the blue.

Whilst this part of the decision is of interest to the arbitration market, it will no doubt be of little consolation to Lippo as the overall outcome means that the awards are enforceable in Hong Kong. The aligned approach between the courts of Asia’s premier arbitration destinations - Singapore and Hong Kong - on the question of choice of remedies is to be welcomed from a certainty perspective and demonstrates further evidence that the courts in both jurisdictions deserve the reputations they have as being supportive of arbitration.