The claimant initiated a litigation claim in Hong Kong in 2012 (Action 1). Subsequently, the action was stayed with consent and referred to arbitration according to the arbitration agreement at issue. In November 2013, the claimant obtained a favourable award from the arbitral tribunal in Shanghai.
The claimant obtained an order for enforcement of the arbitral award in Hong Kong in 2014. However, the Defendant did not take appropriate actions according to the order. Instead, he attempted to re-litigate the matter under Action 1.
The claimant restored Action 1 and a hearing was fixed in March 2016. Just five working days before the hearing, the Defendant applied to consolidate Action 1 with another separate High Court action. No evidence was filed by the Defendant in support of the consolidation and the Defendant also filed evidence in Action 1 after the designated time.
The Court rejected the consolidation and also decided for the claimant in Action 1. Specifically, the Court awarded indemnity costs to the claimant. The Court is of the view that although the Defendant did not directly challenge the arbitral award, the overall behaviours of the Defendant were “clearly an attempt to delay the enforcement” of the arbitral award. The Court considered that if the costs order was not on an indemnity basis, but rather a more lenient party-and-party basis, it would encourage people to employ similar strategies other than a direct challenge of the arbitral award to delay the enforcement.
This case reinforced the Court’s pro-arbitration stance. The Court’s position is that not only would a failed attempt to challenge or set aside an arbitral award result in an unfavourable costs order on an indemnity basis, but also where a party seeks to indirectly impede the enforcement of an arbitral award. Therefore, a party must carefully consider the binding effect of an arbitral award as recognized by the Court in Hong Kong when agreeing to an arbitration agreement.