Craig I. Celniker, Sarah Thomas, David Hambrick, Jessica Chan, Cheryl Zhu, Daniel Steel, Pietro Grassi, Sheryl Janet George, and Nicole Tsui
Singapore Passes Amendment Bill on Recognition of Foreign Judgments
On September 2, 2019, Singapore’s Parliament passed the Reciprocal Enforcement of Foreign Judgments (Amendment) Bill and the Reciprocal Enforcement of Commonwealth Judgments (Repeal) Bill. Prior to the passage of these bills, Singapore already had the ability to enter into reciprocal arrangements recognizing final money judgments of foreign superior courts in civil and criminal cases. The bills expand Singapore’s ability to enter into reciprocal arrangements with other jurisdictions for the enforcement of judgments, repealed the Reciprocal Enforcement of Commonwealth Judgments Act and made consequential amendments to the International Arbitration Act. As a result of the amendments, the Reciprocal Enforcement of Foreign Judgments Act now permits Singapore to negotiate reciprocal enforcement agreements recognizing a broader range of judgments, including non-money judgments, lower court judgments, interlocutory judgments, and consent judgments and orders.
U.S. Investor Initiates Arbitration Against Former Vietnamese Prime Minister Purportedly Arising Out of the U.S.-Vietnam Trade Agreement
On September 4, 2019, an individual U.S. investor and two related companies commenced an ad hoc arbitration under the UNCITRAL Rules against a former Vietnamese Prime Minister, Mr. Nguyen Tan Dung, both as an organ and agent of the Socialist Republic of Vietnam and in his personal capacity. Extraordinarily, the Notice of Arbitration states that the investors are not seeking redress from, but are acting in cooperation with, the Vietnamese government. The arbitration was purportedly commenced pursuant to arbitration agreements contained in the U.S.-Vietnam Trade Agreement and various Vietnamese laws and decrees. The dispute arose out of an investment of more than US$250 million in the Kien Luong Thermal Complex Power Project. In their Notice of Arbitration, the investors name Mr. Dung as the sole respondent and allege that he personally and directly cancelled the project in violation of the U.S.-Vietnam Trade Agreement and various Vietnamese laws and decrees. The investors allege that Mr. Dung personally persuaded one of the investors, a U.S. individual, to make the investment and signed one of the relevant decrees himself. Review of the decree shows, however, that the signature block reads “[o]n behalf of the Government.” The investors allege that Mr. Dung then wrongfully cancelled the project and was motivated by personal reasons in doing so. The investors seek damages of not less than US$2.5 billion.
Hong Kong Court Examines Factors to Be Considered When Deciding Whether to Order Security for an Application to Set Aside an Arbitral Award
On September 5, 2019, the Hong Kong Court of First Instance handed down its decision on an application for security for costs in X v Jemmy Chien  HKCFI 2172. The applicant, a BVI company, sought to set aside two partial final arbitral awards on the basis that (i) there was no valid arbitration agreement between the parties, and (ii) the awards were in conflict with the public policy of Hong Kong (s.81(2)(a)(i) and (b)(ii) of the Hong Kong Arbitration Ordinance (“HKAO”)). The defendant applied for leave to enforce the awards, and for security (amount unstated) under O.73 r.10A of the Rules of High Court as a condition for further conduct of the plaintiff’s set aside application. The defendant also sought security for his costs of the proceedings on the basis that the plaintiff was a company resident abroad.
In deciding whether to order security specifically as a condition for further conduct of the set aside application, the Court applied the test set out in the seminal case of Soleh Boneh International Ltd. and another v Government of the Republic of Uganda and National Housing Corporation  2 L1 Rep 208. Under the Soleh Boneh approach, courts mainly consider two important factors. The first factor is the strength of the argument that the award is invalid. If the award is manifestly invalid, the party seeking to set it aside should not be ordered to give security; if the award is manifestly valid, there should be an order for substantial security. The second factor is the ease or difficulty of enforcement of the award, specifically, whether delay will render enforcement of the award more difficult. If delay is likely to make enforcement more difficult, then the case for security for costs as a condition for the application will be stronger. If the party seeking set aside has insufficient assets within the jurisdiction, the case for security for costs as a condition for the application will be weaker because enforcement of the award will not be rendered more difficult by delay.
In relation to the strength of the arguments, the court did not consider the awards to be manifestly invalid. The court was not convinced by the applicant’s argument that the arbitration agreement was invalid or that the awards were contrary to Hong Kong public policy.
In relation to the ease or difficulty of enforcement, the applicant argued that it had no presence, business or assets in Hong Kong, so a short delay between the hearing of the application for security and the substantive hearing of the set aside application (three weeks in the instant case) would not render enforcement of the awards more difficult. The Court emphasized in paragraphs 24-26 that the purpose of security is not to facilitate the enforcement process by requiring assets to be brought into a jurisdiction where there were none before. On the entirety of the evidence, the Court considered that there was no real risk that a short delay would render enforcement more difficult and decided not to order security as a condition for the further conduct of the set aside application.
In determining whether the plaintiff should provide security for the defendant’s costs of the set aside application, the court recognized that the plaintiff had no assets in Hong Kong and that if defendant were to prevail, it would have to incur additional costs to seek enforcement overseas of any costs order in its favor. The Court therefore ordered the plaintiff to provide security for the defendant’s costs in the sum of HK$500,000.
Singapore High Court Rules in BTN v BTP that Arbitral Tribunal’s Res Judicata Holding Was Neither a Negative Jurisdictional Finding Nor a Breach of Natural Justice
On September 16, 2019, the Singapore High Court issued its judgment in BTN v BTP  SGHC 212 concerning an application under Singapore’s International Arbitration Act for review of an alleged negative jurisdictional ruling and for set aside of a partial award. The underlying dispute in the arbitration concerned the entitlement of a group of employees to certain payments under a Share and Purchase Agreement (“SPA”) following dismissal “without cause.” The employees brought a claim against a company before the Malaysian Industrial Court. The company did not participate in the Malaysian proceedings, and the Industrial Court found that the dismissal was “without just cause or excuse” and ordered compensation for lost salary. The employees then commenced Singapore-seated arbitration, claiming “Earn Out Consideration” of US$35 million against the company under the SPA. The tribunal considered itself bound by the findings of the Industrial Court and held in its partial award that the issue of whether the employees had been terminated “without cause” was subject to the doctrine of res judicata.
The company equated this ruling to a decision that the tribunal had no jurisdiction to hear a dispute and applied to the High Court to seek review of that alleged negative jurisdictional ruling pursuant to section 10(3)(b). It further applied to set aside the partial award on the basis that, among other things, there had been a breach of natural justice because – by applying the res judicata doctrine without considering the parties’ substantive arguments – the tribunal had failed to consider the merits of the parties’ dispute. The Court ruled that the company could not avail itself of the section 10(3)(b) review mechanism because the Court considered that the res judicata issue before the tribunal was a decision on the substance of the dispute. The Court also held that, because the partial award decided various other substantive matters in addition to the res judicata issue, the partial award was, in any event, an award on the merits, precluding an application under section 10(3). The Court also dismissed the company’s application to set aside the partial award.
Hong Kong Court of First Instance Clarifies that Failure to Provide Adequate Reasons in Arbitral Award Does Not Give Rise to a Right to Set Aside Under Schedule 2 of the HKAO
On September 16, 2019, the Hong Kong Court of First Instance handed down its decision in N v C  HKCFI 2292 concerning an application to set aside an arbitral award. The underlying dispute arose out of a contract between an employer and its main contractor for the construction of a residential development in Macau. When a dispute arose as to the main contractor’s entitlement to payment for loss and expense resulting from extensions of time, the main contractor referred the dispute to arbitration. The parties agreed that Hong Kong procedural law would apply to the arbitration, including, specifically, the HKAO and Schedule 2 thereto (“Schedule 2”). Schedule 2 allows parties to “opt in” to apply additional grounds for set aside beyond those found in the New York Convention.
In the arbitration, the employer argued that the main contractor was not entitled to recover the claimed loss and damage because it had failed to make a timely application for loss in accordance with the time limit contained in the contract and that this was a condition precedent for any entitlement under the contract. The main contractor argued that compliance with the time-limit was not a condition precedent and that the employer had waived any condition precedent by failing to raise the alleged time-bar issue at the time the main contractor submitted its claims. The tribunal awarded the main contractor damages of MOP 25,500,000 (for prolongation cost) and MOP 12 million (for fluctuation cost).
The employer applied to set aside the award for serious irregularity pursuant to section 4(1) and (3) of Schedule 2 or, in the alternative, because the award contained decisions on matters beyond the scope of the submission to arbitration and/or the arbitral procedure was not in accordance with the parties’ agreement pursuant to section 81 of the HKAO. Factually, the employer alleged that the tribunal had: (a) failed to deal with all the issues put to it by failing to take into account the time-bar issue, (b) failed to provide adequate reasons in its award, and (c) the arbitrator decided on a point that was neither pleaded nor identified as an issue, and neither party sought to adduce evidence on that issue.
On the facts, the Court found that the arbitrator’s findings were pleaded and that the parties had been given a full opportunity to present their cases. In relation to the allegation that the tribunal had committed a serious irregularity by failing to deal with the time bar defence, Hon Mimmie Chan J held that a tribunal’s failure to provide any or any sufficient reasons for a decision is not the same as failing to deal with an issue. She drew support from English precedent in Secretary of State for the Home Department v Raytheon Systems Ltd.  EWHC 4375 (TCC), which held that a tribunal does not fail to deal with issues simply because it does not answer every question that qualifies as an “issue” and that the tribunal can “deal with” an issue even where that issue does not arise in the award. The Court emphasized that factors such as whether the tribunal was right on its findings of facts and law, whether its decision was supported by evidence, whether it gave sufficient reasons for its finding, and the quality of its reasoning are not matters of consideration in an application to set aside for serious irregularity under Ordinance. The Court denied the application for set aside.
The Maldives Accedes to the New York Convention
On September 17, 2019, the Maldives became the 161st party to the 1958 United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention”). The New York Convention will enter into force in the Maldives on December 16, 2019, after which the Maldivian courts will be required by law to recognize and enforce arbitral awards made in other contracting States, subject to specific limited exceptions. The Maldives’ accession to the New York Convention is likely to make it a more attractive destination for foreign direct investment and promote investor confidence.
PRC Supreme People’s Court and Hong Kong Department of Justice Announce that Arrangement on Interim Measures Is Effective from October 1, 2019
On September 26, 2019, the PRC Supreme People’s Court and the Hong Kong Department of Justice announced that the Arrangement Concerning Mutual Assistance in Court-Ordered Interim Measures in Aid of Arbitral Proceedings by the Courts of the Mainland and of the Hong Kong Special Administrative Region (the “Arrangement”) would take effect from October 1 and apply to arbitrations commenced both before and after that date.
Under the Arrangement, PRC courts are empowered to grant interim measures in aid of Hong Kong-seated arbitrations administered by “qualified” institutions. The announcement lists the “qualified” institutions, which include the Hong Kong International Arbitration Centre, the International Court of Arbitration of the International Chamber of Commerce – Asia Office, the China International Economic and Trade Arbitration Commission Hong Kong Arbitration Center, and the South China International Arbitration Centre (Hong Kong). The Arrangement requires applicants to submit applications for interim measures to the relevant arbitral institution, which is responsible for forwarding the application to the appropriate Chinese court. The Announcement clarifies that, in addition, an applicant is entitled to deliver its application directly to the relevant court.
The Arrangement gives Hong Kong a unique advantage over other arbitral seats outside Mainland China for PRC-related disputes and is likely to further consolidate the territory’s position as the preferred arbitral seat for disputes with Chinese parties.
©1996-2019 Morrison & Foerster LLP. All rights reserved.