C v. D

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Press Summary (Chinese)

FACV No. 1 of 2023

[2023] HKCFA 16

IN THE COURT OF FINAL APPEAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

FINAL APPEAL NO. 1 OF 2023 (CIVIL)

(ON APPEAL FROM CACV NO. 387 OF 2021)

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J U D G M E N T

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Chief Justice Cheung:

1.  I have had the benefit of reading in draft the judgments of Mr Justice Ribeiro PJ and Mr Justice Gummow NPJ and agree with their conclusion in common that the appeal should be dismissed. As regards whether the jurisdiction/admissibility distinction discussed in their respective judgments is helpful to the construction and application of the relevant provisions in the Arbitration Ordinance,[1] I respectfully agree with Mr Justice Ribeiro PJ that it is. Given the difference in views, I would like to say a few words of my own.

2.  Section 34(1) of the Ordinance (incorporating article 16 of the Model Law[2]) provides for the arbitral tribunal’s competence to rule on its own “jurisdiction”.[3] More importantly for our present purpose, it provides for the court’s power to intervene by reviewing the tribunal’s ruling as a preliminary question “that it has jurisdiction”.[4] (A ruling of the tribunal that it does not have jurisdiction to decide a dispute is not subject to appeal.[5])

3.  Thus, section 34 by itself requires one to construe the word “jurisdiction” and decide what objections would go to “jurisdiction”, and what would not.

4.  If the tribunal does not make a ruling on its jurisdiction as a preliminary question, but leaves it to be decided together with the substantive dispute between the parties in its arbitral award[6] (which is what happened in the present case), the matter will fall squarely within section 81 of the Ordinance (incorporating article 34 of the Model Law) when an application to set aside the arbitral award is made on the basis that the tribunal lacks jurisdiction. Although the word “jurisdiction” is not used as such in section 81, it is plain that construing the two sections (and the two articles in the Model Law) consistently, section 81 must cover an award made by the tribunal without “jurisdiction” in the section 34 sense.[7] In other words, there is a substantial overlap between sections 34 and 81 insofar as an objection based on the tribunal’s “jurisdiction” is concerned.

5.  This being the case, although section 81 does not use the word “jurisdiction”, the construction of that word under section 34 necessarily informs the construction and application of section 81 where, relevantly, the question is whether an arbitral award is liable to be set aside for want of jurisdiction.

6.  What then does “jurisdiction” mean? This is where the distinction between jurisdiction/admissibility becomes helpful. Subject to one important qualification which I will presently turn to, the distinction is helpful in distinguishing those objections which truly go to “jurisdiction” within the meaning of section 34, from those that do not. In short, under the distinction, objections to the tribunal, as opposed to the claim itself, are, generally speaking, objections going to “jurisdiction” within the meaning of section 34. As explained, this, in turn, informs the construction and application of section 81 in terms of when the court may review de novo the tribunal’s decision on a “jurisdictional” objection and set aside an arbitral award under that section, and when it may not.

7.  The qualification I mentioned above is this. In arbitration, the “jurisdiction” of an arbitral tribunal is essentially agreement-based. Leaving aside jurisdiction conferred by statute, it depends, and indeed wholly depends, on the content and extent of the parties’ consent to arbitration. Given the freedom of contract, it is up to the parties to agree what matters should be left to be decided by the arbitral tribunal and what should not. By definition, given their autonomy, the parties are not bound by any jurisdiction/admissibility distinction as such. In other words, in the context of arbitration, the “jurisdiction” of a tribunal has no fixed definition but is ultimately dependent on the parties’ agreement, reflecting their consent to arbitration.

8.  Thus, if they want to, the parties may, by clear language, agree that certain matters which would otherwise be classified as ones going to admissibility only under the distinction are matters going to “jurisdiction” affecting fundamentally their consent to arbitrate, such that the “jurisdiction” of the tribunal is circumscribed accordingly.

9.  Whether they have so agreed is a matter of construction, not of the Ordinance, but of their agreement to arbitrate. And in finding out what their objective intention as expressed in the arbitration agreement is, one would no doubt bear in mind what was said by Lord Hoffmann in Fiona Trust & Holding Corp v Privalov,[8] quoted by Mr Justice Ribeiro PJ in [48] of his judgment.

10.  However, if on a purposive and contextual construction of their arbitration agreement, the parties have really agreed that a certain matter that would otherwise be classified as going to admissibility only under the distinction is a “jurisdictional” matter affecting the parties’ consent to go to arbitration, the result is that (1) the tribunal, as empowered by article 16(1), will still have competence to decide the matter; but (2) the tribunal’s decision is open to review by the court under article 16(3) in the case of a preliminary ruling, or under section 81 of the Ordinance when the court deals with an application to set aside the award for want of jurisdiction. This is so because although the matter is one which would be classified as going to admissibility under the distinction, it has been made a matter going to consent to arbitration by the parties’ agreement.

11.  Thus, for instance, if the parties, for whatever reason, wish to make every pre-arbitration step a pre-condition to their consent to arbitration (and thus a “jurisdictional” condition), it is their prerogative, and the Ordinance has no business in overriding their agreement, so long as it is sufficiently clearly worded and unequivocally expressed.

12.  What about the converse situation? This has not been the focus of this appeal and no submission has been heard on it. One possible argument is that where the parties, by clear language, have agreed that a certain matter that would otherwise be regarded as a “jurisdictional” one under the distinction (such that a decision on it would be reviewable by the court) is a matter to be exclusively determined by the tribunal, then by definition, it is not a matter going to the tribunal’s “jurisdiction” within the meaning of section 34, and any preliminary ruling by the tribunal on it is not open to review under that section.[9] Likewise, the tribunal’s award is not susceptible to be set aside for want of jurisdiction under section 81. However, I am not sure whether this argument is applicable to “jurisdictional” matters such as those concerning the very existence or validity of the agreement to arbitrate. In any event, it may not be possible to square this argument with the language of sections 34 and 81. As the court has heard no submission on this point, I need not express any definite view on it.

13.  Barring these extreme cases at the opposite ends of the spectrum, in the majority of cases in commercial arbitration (and the present case is one of them), the jurisdiction/admissibility distinction is, in my view, helpful in construing the arbitration agreement between the parties as well as in construing and applying sections 34 and 81 of the Ordinance. For the reasons explained in the judgments of Mr Justice Ribeiro PJ and Mr Justice Gummow NPJ, on a proper construction of the parties’ agreement, the pre-arbitration step in the present case does not affect the parties’ consent to arbitration, and section 81 therefore does not apply.

Mr Justice Ribeiro PJ:

14.  I have had the benefit of reading the judgment in draft of Mr Justice Gummow NPJ and respectfully agree with his conclusion that the appeal should be dismissed. However, with great respect, I differ from his Lordship’s view that the jurisdiction/admissibility distinction discussed is an unnecessary distraction and presents a task of supererogation.[10] While the Court is fundamentally concerned with the interpretation and application of the Arbitration Ordinance (“AO”),[11] to my mind that distinction is properly distilled from the relevant statutory provisions and may serve as a helpful aid to construction when deciding whether, in a particular case, judicial intervention in an arbitral process is permissible.

A.  The issue

15.  A contractual dispute arose between the appellant (a Hong Kong company) and the respondent (a Thai company) regarding the operation of a jointly-owned broadcasting satellite. The respondent alleged that the appellant was in material default by preventing transmission of some broadcasts. The contract, which was made subject to Hong Kong law, stipulated certain pre-arbitration procedures which included an attempt to resolve the dispute through good faith negotiations. It provided that if the dispute could not be resolved amicably within 60 days of the request for negotiation the dispute should be referred by either Party “for settlement exclusively and finally by arbitration in Hong Kong at the Hong Kong International Arbitration Centre (‘HKIAC’) in accordance with the UNCITRAL Arbitration Rules” then in force.[12] Invoking that clause, the respondent referred the dispute to arbitration at the HKIAC before a tribunal of three arbitrators.

16.  The appellant objected to the arbitration going ahead on the ground that the pre-arbitration procedures had not been complied with, but the tribunal found that those procedures had been duly observed and went on to hold the appellant liable for breach of contract, reserving the question of damages for the next phase.

17.  The appellant brought proceedings in the Court of First Instance to set aside the tribunal’s partial award, contending that the arbitrators were wrong to decide that the pre-arbitration requirements had been complied with. The issue which arises is whether the Court has power to review and set aside that decision. The answer depends on the AO which incorporates the provisions of the UNCITRAL Model Law (“ML”)[13] giving them the force of law in Hong Kong, subject to stated modifications.[14]

B.  The statutory scheme

B.1  The court’s limited power of interference

18.  Consideration of a court’s power to interfere with an arbitral process begins with AO s 3 which provides as follows:-

(1) The object of this Ordinance is to facilitate the fair and speedy resolution of disputes by arbitration without unnecessary expense.

(2) This Ordinance is based on the principles—

(a) that, subject to the observance of the safeguards that are necessary in the public interest, the parties to a dispute should be free to agree on how the dispute should be resolved; and

(b) that the court should interfere in the arbitration of a dispute only as expressly provided for in this Ordinance.

19.  The AO thus establishes that, apart from promoting fair, speedy and economic dispute resolution, it has party autonomy as its purpose, leaving parties free to agree on how their dispute should be resolved. Where they have agreed to arbitration, AO s 3(2)(b) confines the court’s power to interfere with their agreement and the arbitration process to matters expressly provided for by the Ordinance.

B.2  The provisions expressly authorising judicial interference

20.  Consideration of the statutory scheme may begin with two related provisions. The first is AO s 34 which relevantly provides as follows:

(1) Article 16 of the UNCITRAL Model Law, the text of which is set out below, has effect subject to section 13(5)[15] —

“Article 16. Competence of arbitral tribunal to rule on its jurisdiction

(1) The arbitral tribunal may rule on its own jurisdiction, including any objections with respect to the existence or validity of the arbitration agreement. ...

(2) A plea that the arbitral tribunal does not have jurisdiction shall be raised not later than the submission of the statement of defence. ... A plea that the arbitral tribunal is exceeding the scope of its authority shall be raised as soon as the matter alleged to be beyond the scope of its authority is raised during the arbitral proceedings. ...

(3) The arbitral tribunal may rule on a plea referred to in paragraph (2) of this article either as a preliminary question or in an award on the merits. If the arbitral tribunal rules as a preliminary question that it has jurisdiction, any party may request, within thirty days after having received notice of that ruling, the court specified in article 6 to decide the matter, which decision shall be subject to no appeal; ...”.

(2) The power of the arbitral tribunal to rule on its own jurisdiction under subsection (1) includes the power to decide as to—

(a) whether the tribunal is properly constituted; or

(b) what matters have been submitted to arbitration in accordance with the arbitration agreement.

(3) If a dispute is submitted to arbitration in accordance with an arbitration agreement and a party—

(a) makes a counter-claim arising out of the same dispute; or

(b) relies on a claim arising out of that dispute for the purposes of a set-off,

the arbitral tribunal has jurisdiction to decide on the counter-claim or the claim so relied on only to the extent that the subject matter of that counter-claim or that claim falls within the scope of the same arbitration agreement. ...

21.  The following features of AO s 34, ML Art 16 may be noted.

(a)  It makes it clear that a tribunal has power to rule “on its own jurisdiction”, reflecting what has been referred to as the Kompetenz-Kompetenz (compétence-compétence) principle. It also establishes that where the tribunal rules that it does have jurisdiction, an objecting party may request the court to “decide the matter”,[16] constituting an instance of permitted judicial interference. A court undertaking that task decides the matter de novo.[17]

(b)  The court’s power to interfere in this context thus depends on whether the ruling is as to the tribunal’s own jurisdiction. What then qualifies as such a ruling? AO s 34(1), ML Art 16(1) open-endedly specifies rulings “including” those on “any objections with respect to the existence or validity of the arbitration agreement”. The paragraph which follows[18] indicates that a ruling on a plea that the tribunal “is exceeding the scope of its authority” also qualifies. AO s 34(2) adds to the list, stating that the tribunal’s power to rule on its own jurisdiction under AO s 34(1) “includes the power to decide as to ... whether the tribunal is properly constituted; or ... what matters have been submitted to arbitration in accordance with the arbitration agreement.” Use of “includes” again indicates that instances within this class of objection are non-exhaustively stated. The AO and the Model Law acknowledge that certain questions which the statute governs may not be “expressly settled in it” and provide that such questions “are to be settled in conformity with the general principles on which this Law is based”.[19]

(c)  In relation to counterclaims and claims raised by way of set-off, AO s 34(3) empowers the tribunal to decide those claims “only to the extent that the subject matter of that counter-claim or that claim falls within the scope of the same arbitration agreement”. It follows that it has no jurisdiction to decide matters falling outside the scope of the agreement so that a ruling on the question of its scope would evidently qualify as reviewable.

22.  AO s 34, ML Art 16 should be read together with AO s 81, ML Art 34. Under the former section, a party may challenge the tribunal’s jurisdiction at the start of the arbitration and the arbitrators may rule on that objection either as a preliminary question or as part of a later award on the merits.[20] If the tribunal takes the latter course and assumes jurisdiction, the resultant award can only be challenged by a setting aside application under AO s 81, ML Art 34, which is the main focus of this appeal. The two provisions are therefore intended to operate in tandem.

23.  AO s 81 materially provides:-

(1) Article 34 of the UNCITRAL Model Law, the text of which is set out below, has effect subject to section 13(5)[21]—

“Article 34. Application for setting aside as exclusive recourse against arbitral award

(1) Recourse to a court against an arbitral award may be made only by an application for setting aside in accordance with paragraphs (2) and (3) of this article.

(2) An arbitral award may be set aside by the court specified in article 6 only if:

(a) the party making the application furnishes proof that:

(i) a party to the arbitration agreement referred to in article 7 was under some incapacity; or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of this State;[22] or

(ii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or

(iii) the award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or contains decisions on matters beyond the scope of the submission to arbitration, provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the award which contains decisions on matters not submitted to arbitration may be set aside; or

(iv) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Law from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Law; or

(b) the court finds that:

(i) the subject-matter of the dispute is not capable of settlement by arbitration under the law of this State; or

(ii) the award is in conflict with the public policy of this State.

(3) An application for setting aside may not be made after three months have elapsed from the date on which the party making that application had received the award ...

(4) The court, when asked to set aside an award, may, where appropriate and so requested by a party, suspend the setting aside proceedings for a period of time determined by it in order to give the arbitral tribunal an opportunity to resume the arbitral proceedings or to take such other action as in the arbitral tribunal’s opinion will eliminate the grounds for setting aside.”.

24.  The following features of AO s 81, ML Art 34 are noteworthy.

(a)  AO s 81(1), ML Art 34(1) addresses “recourse to a court against an arbitral award” obviously providing for judicial intervention in the cases specified.

(b)  Although AO ss 34 and 81 are intended to operate in tandem, AO s 81 makes no mention of rulings by the tribunal on its own jurisdiction, although such issues are central to AO s 34. Nevertheless, there is a substantial correspondence between the classes of objection falling within the two respective sections, although conveyed in language which does not exactly overlap.

(c)  Under AO s 81(1), ML Art 34(1), the court’s power to interfere arises in two ways: First, under ML Art 34(2)(a), it arises where a party makes an application and furnishes proof regarding the matters set out in sub-paragraphs (i) to (iv); and secondly, where the court finds (whether or not raised by a party) that the subject-matter of the dispute is non-arbitrable; or that the award is in conflict with the public policy of Hong Kong.

(d)  The court is therefore clearly empowered to disturb an award on non-arbitrability or public policy grounds under AO s 81. However, those grounds are not mentioned in AO s 34, ML Art 16.[23] The statutory intent is apparently that such grounds should only be addressed if and when an award has been made. Additionally, as discussed in Section C.3 below, such grounds exceptionally involve judicial powers to enforce public policy whatever may be the intentions of the parties.

(e)  As noted above, variations exist in the language used to define the various types of objection which justify judicial intervention in each of the two sections. Thus under AO s 34, ML Art 16 and AO s 81, ML Art 34 respectively, recourse to the court may be had (i) where the tribunal’s decision sought to be challenged concerns the “existence or validity of the arbitration agreement,” under the former section[24] and where “a party to the arbitration agreement … was under some incapacity[,] or the said agreement is not valid” under the latter;[25] (ii) where the question under the former is “whether the tribunal is properly constituted”,[26] and, in the latter, whether the “composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement”;[27] and, (iii) (put variously in AO s 34) whether the tribunal “is exceeding the scope of its authority”,[28] with the tribunal deciding “what matters have been submitted to arbitration in accordance with the arbitration agreement”,[29] and (in relation to set-off claims and counterclaims) whether “the subject matter of that counter-claim or that claim falls within the scope of the same arbitration agreement”,[30] while under the latter provision, the question is whether “the award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or contains decisions on matters beyond the scope of the submission to arbitration”.[31]

25.  Where an objection is of such a nature that doubt arises as to whether judicial intervention is warranted, it would be helpful if a unifying principle underlying the variously worded, incompletely overlapping, non-exhaustively stated categories mentioned above, could be discerned as a guide to construction.

26.  This is the more so since the permitted judicial intervention is not confined to cases falling within the two sections just discussed. The court may also “interfere” with an arbitration by refusing enforcement of an award under AO s 86 which relevantly states:

(1) Enforcement of an award referred to in section 85[32] may be refused if the person against whom it is invoked proves—

(a) that a party to the arbitration agreement was under some incapacity ...;

(b) that the arbitration agreement was not valid ...;

(c) that the person—

(i) was not given proper notice of the appointment of the arbitrator or of the arbitral proceedings; or

(ii) was otherwise unable to present the person’s case;

(d) subject to subsection (3), that the award—

(i) deals with a difference not contemplated by or not falling within the terms of the submission to arbitration; or

(ii) contains decisions on matters beyond the scope of the submission to arbitration;

(e) that the composition of the arbitral authority or the arbitral procedure was not in accordance with—

(i) the agreement of the parties; or

(ii) (if there was no agreement) the law of the country where the arbitration took place; or

(f) that the award—

(i) has not yet become binding on the parties; or

(ii) has been set aside or suspended by a competent authority of the country in which, or under the law of which, it was made.

(2) Enforcement of an award … may also be refused if—

(a) the award is in respect of a matter which is not capable of settlement by arbitration under the law of Hong Kong;

(b) it would be contrary to public policy to enforce the award; or

(c) for any other reason the court considers it just to do so. ...

27.  These grounds for refusing enforcement of an award closely overlap with the grounds for judicial challenges to a tribunal’s award under AO s 81, ML Art 34. However, in AO s 86 the court is given a broad discretionary power to interfere where “for any other reason the court considers it just to do so”. Such a power does not feature in either of the other sections discussed.

28.  Another instance of judicial intervention is sanctioned by AO s 20, ML Art 8 which requires the court to stay court actions on the ground that they are brought in breach of an arbitration agreement “unless it finds that the agreement is null and void, inoperative or incapable of being performed”. Such a finding provides a further basis for judicial interference in the guise of permitting a party to proceed with court action despite the other party objecting on the basis of an arbitration agreement.

C.  The jurisdiction/admissibility distinction

29.  The jurisdiction/admissibility distinction seeks to encapsulate a principle distilled from the disparate provisions mentioned above. It involves distinguishing between a party’s challenge to a tribunal’s “jurisdiction” and a challenge to the “admissibility” of a particular claim. The principle is that the court may review a tribunal’s ruling on the former, but not on the latter, category of challenge.

30.  In holding that the Court lacks power to set aside the tribunal’s award in the present case, the Judge[33] and the Court of Appeal[34] applied that distinction as an aid to construing AO s 81(1), ML 34(2)(a)(iii), holding that the objections raised by the appellant related to “admissibility” and not “jurisdiction” (as further discussed below). It is an approach widely adopted by academic writers[35] and in the recent case-law of courts in other jurisdictions which are, like Hong Kong, leading centres for arbitration.[36]

31.  A word might be said about the terms “jurisdiction” and “admissibility”. It is natural that “jurisdiction” should be used in the first half of the distinction given the prominence afforded by ML Art 16 to the tribunal’s rulings on its own jurisdiction as a ground for judicial intervention. If it is contended that a tribunal has wrongly ruled that it has jurisdiction when in law it has no authority to deal with the arbitration, the policy of the law is clearly that the supervisory or enforcing court should have power to decide whether jurisdiction was correctly assumed. As Lord Saville of Newdigate JSC commented, an arbitral tribunal may rule on its own jurisdiction but cannot be the final arbiter of jurisdiction, “for this would provide a classic case of pulling oneself up by one’s own bootstraps”.[37]

32.  It is less obvious why “admissibility” has been adopted as the label for the other half of the distinction. It has nothing to do with evidential admissibility but refers to what might be termed “procedural admissibility”. The term is used to characterise objections which allege that a claim is defective and cannot be proceeded with, to be contrasted with challenges to the authority of the tribunal to conduct the arbitration. In guidance given to its members, the Chartered Institute of Arbitrators explained:

“When considering challenges, arbitrators should take care to distinguish between challenges to the arbitrators’ jurisdiction and challenges to the admissibility of claims. For example, a challenge on the basis that a claim, or part of a claim, is time-barred or prohibited until some precondition has been fulfilled, is a challenge to the admissibility of that claim at that time, i.e. whether the arbitrators can hear the claim because it may be defective and/or procedurally inadmissible. It is not a challenge to the arbitrators’ jurisdiction to decide the claim itself.”[38]

C.1  Objection to tribunal versus claim

33.  The distinction has thus been expressed, perhaps more descriptively, as a distinction between a challenge to the tribunal and a challenge to the claim. As Alex Mills puts it:

“... the question of jurisdiction concerns the power of the tribunal. The question of admissibility is related to the claim, rather than the tribunal, and asks whether this is a claim which can be properly brought.”[39]

And Jan Paulsson[40] states:

“Our lodestar takes the form of a question: is the objecting party taking aim at the tribunal or at the claim?”

34.  This approach was adopted in Singapore, a Model Law jurisdiction, where the Singapore Court of Appeal in BBA v BAZ,[41] stated:

“In our judgment, the ‘tribunal versus claim’ test underpinned by a consent-based analysis should apply for purposes of distinguishing whether an issue goes towards jurisdiction or admissibility.

The ‘tribunal versus claim’ test asks whether the objection is targeted at the tribunal (in the sense that the claim should not be arbitrated due to a defect in or omission to consent to arbitration), or at the claim (in that the claim itself is defective and should not be raised at all).” (italics in original)

35.  That Court held that an objection to the claim on the basis that it was time-barred was targeted at the claim (and thus based on admissibility) and was not reviewable by the court. BTN v BTP,[42] was decided on the same lines, the Singapore Court of Appeal holding that an objection on the basis of res judicata was aimed at the claim and so went to admissibility.

36.  This approach was also adopted in the English High Court in Republic of Sierra Leone v SL Mining Ltd,[43] following BBA v BAZ and citing Paulsson, among others. As Sir Michael Burton put it:

“... if the issue relates to whether a claim could not be brought to arbitration, the issue is ordinarily one of jurisdiction and subject to further recourse under section 67 of the 1996 Act, whereas if it relates to whether a claim should not be heard by the arbitrators at all, or at least not yet, the issue is ordinarily one of admissibility, the tribunal decision is final and section 30(1)(c) does not apply.”[44]

37.  This was followed in NWA v NVF,[45] where, after considering authorities and academic writings including those that had been referred to in earlier decisions, Calver J discounted reliance on certain cases where the relevant point was not argued,[46] declined to follow a decision of the Singapore High Court[47] pre-dating BBA v BAZ, and pointed out that Smith v Martin[48] “was obviously decided long before” the applicable statutory provisions came into force.[49]

38.  Similarly in New South Wales, in The Nuance Group (Australia) Pty Ltd v Shape Australia Pty Ltd,[50] the approach in BBA v BAZ was adopted.

C.2  The basis of the jurisdiction/admissibility or tribunal/claim distinction

39.  As the Judge pointed out below, the distinction “is a concept rooted in the nature of arbitration itself”.[51] And as the Singapore Court of Appeal put it, the “tribunal versus claim test” is “underpinned by a consent-based analysis”.[52]

40.  Those statements are grounded on the premise that arbitrations are consensual. The tribunal’s authority or jurisdiction to conduct the arbitration rests entirely on the parties’ consent expressed in the arbitration agreement. Thus, an appropriate challenge to the tribunal’s jurisdiction involves grounds which impugn the existence, validity or viability of that agreement or otherwise deny the challenger’s consent to the arbitration. Such a challenge targets the tribunal’s authority rather than the claim and is subject to judicial intervention.

41.  Thus, as Jan Paulsson observes, “the nub of the classification problem [between jurisdiction and admissibility] is whether the success of the objection necessarily negates consent to the forum”.[53]

42.  In BBA v BAZ, it was put as follows:

“Consent serves as the touchstone for whether an objection is jurisdictional because arbitration is a consensual dispute resolution process: jurisdiction must be founded on party consent. For this reason, arguments as to the existence, scope and validity of the arbitration agreement are invariably regarded as jurisdictional, as are questions of the claimant’s standing to bring a claim or the possibility of binding non-signatory respondents ...”[54]

43.  And in New South Wales, Rees J noted that a jurisdictional challenge involves the submission:

“... that a claim should not be arbitrated due to a defect in, or omission to, consent to arbitration and success of the challenge necessarily negates consent to the forum ...”[55]

44.  The other side of the distinction, ie, challenges which target the claim or which go to “admissibility”, can be described conversely as concerning non-jurisdictional objections, ie, those which do not negate consent to the tribunal’s authority but allege that the claim is defective and should not be entertained. As this was put in BBA v BAZ:

“Conversely, admissibility relates to the ‘nature of the claim, or to particular circumstances connected with it’ ... It asks whether a tribunal may decline to render a decision on the merits for reasons other than a lack of jurisdiction, and is determined by the tribunal on the basis of their discretion guided by, amongst others, principles of due administration of justice and any applicable external rules ...”[56]

C.3  The distinction and pre-arbitration conditions

45.  The appellant complains that the tribunal wrongly assumed jurisdiction and made an award favouring the respondent when a condition requiring negotiations to take place before commencing the arbitration had not been complied with. It asks the Court to intervene and to decide de novo whether the tribunal was right to rule that such condition had been satisfied, contending that non-compliance with that condition deprived the tribunal of jurisdiction. The appeal is thus concerned with the reviewability of a pre-arbitration condition.

46.  Such clauses are commonly found in arbitration agreements, stipulating that conditions such as negotiations, mediation, conciliation or the passage of a stated period of time have to be satisfied before commencing the arbitration. They are sometimes referred to as multi-tiered or cascading dispute resolution clauses.

47.  When considering an objection relating to a pre-arbitration condition, it is necessary first to construe the arbitration agreement. It is open to the parties expressly to agree that compliance with such a condition is amenable to review by the court. If the agreement so provides, the issue of reviewability is obviously resolved.[57] However, the court will require unequivocally clear language to arrive at that conclusion. That is because it would be contrary to all normal expectations to find that such was the parties’ intention. They have opted to submit their disputes to an arbitral tribunal rather than a court for resolution. It would be surprising to discover that they intend to have a court involved and to undergo two rounds of decision-making to determine whether a pre-arbitration condition has been met.

48.  As Lord Hoffmann observed in Fiona Trust & Holding Corp v Privalov[58] in an analogous context:

“In approaching the question of construction, it is therefore necessary to inquire into the purpose of the arbitration clause. As to this, I think there can be no doubt. The parties have entered into a relationship, an agreement or what is alleged to be an agreement or what appears on its face to be an agreement, which may give rise to disputes. They want those disputes decided by a tribunal which they have chosen, commonly on the grounds of such matters as its neutrality, expertise and privacy, the availability of legal services at the seat of the arbitration and the unobtrusive efficiency of its supervisory law. Particularly in the case of international contracts, they want a quick and efficient adjudication and do not want to take the risks of delay and, in too many cases, partiality, in proceedings before a national jurisdiction.

If one accepts that this is the purpose of an arbitration clause, its construction must be influenced by whether the parties, as rational businessmen, were likely to have intended that only some of the questions arising out of their relationship were to be submitted to arbitration and others were to be decided by national courts. Could they have intended that the question of whether the contract was repudiated should be decided by arbitration but the question of whether it was induced by misrepresentation should be decided by a court? If, as appears to be generally accepted, there is no rational basis upon which businessmen would be likely to wish to have questions of the validity or enforceability of the contract decided by one tribunal and questions about its performance decided by another, one would need to find very clear language before deciding that they must have had such an intention.”

49.  Thus, as Gary B Born points out,[59] pre-arbitration conditions should be regarded as presumptively non-jurisdictional:

“In interpreting the parties’ arbitration agreement, the better approach is to presume, absent contrary evidence, that pre-arbitration procedural requirements are not ‘jurisdictional’. ...

The rationale for this presumption is that requirements for cooling off, negotiation or mediation inherently involve aspects of the arbitral procedure, often requiring interpretation and application of institutional arbitration rules or procedural provisions of the arbitration agreement. Equally important, the remedies for breach of these requirements necessarily involve procedural issues concerning the timing and conduct of the arbitration. In both cases, these issues are best suited for resolution by arbitral tribunal, subject to minimal judicial review, like other procedural decisions.

Similarly, parties can be assumed to desire a single, centralized forum (a ‘one-stop shop’) for resolution of their disputes, particularly those disputes regarding the procedural aspects of their dispute resolution mechanism. Fragmenting resolution of procedural issues between national courts and the arbitral tribunal produces the risk of multiple proceedings, delays and expense, inconsistent decisions, judicial interference in the arbitral process and the like. The more objective, efficient and fair result, which the parties should be regarded as having presumptively intended, is for a single, neutral arbitral tribunal to resolve all questions regarding the procedural requirements and conduct of the parties’ dispute resolution mechanism.” (footnotes omitted)

50.  Such a presumption is consistent with the consensual basis of the tribunal’s jurisdiction: in the absence of unequivocal language to the contrary, an objection to how the tribunal has resolved an issue concerning a pre-arbitration condition does not challenge the tribunal’s authority to arbitrate conferred by the parties’ consent. As Calver J pointed out in NWA v NVF:[60]

“To give an arbitration clause such as this a commercial construction so that pre-arbitration procedural requirements are not jurisdictional is appropriate because, in most cases, if a dispute is not settled in the pre-arbitration procedure, it remains the same dispute, so non-compliance with the pre-arbitration procedure does not affect whether it is a dispute of the kind which the parties agreed to submit to arbitration.”

C.4  The distinction and the AO

51.  In my view, the distinction does provide a helpful aid to construction when deciding whether a particular objection warrants judicial interference. It accurately distils a unifying principle applicable to the various instances justifying judicial intervention expressly provided for in accordance with AO s 3(2)(b). Subject to the public policy exception referred to below, the objections which warrant recourse to the court uniformly postulate situations where consent to the tribunal’s authority is negated.

52.  Those instances may be grouped as follows:

(a)  Objections affecting the validity of the arbitration agreement: Alleging that the agreement is non-existent,[61] invalid,[62] vitiated by the incapacity of a party to the agreement,[63] or null and void, inoperative or incapable of being performed.[64]

(b)  Objections that the reference or content of the award go beyond what was agreed to be referred to arbitration: Allegations that a tribunal is exceeding the scope of its authority,[65] that, on its true construction, the matters submitted to arbitration are not in accordance with the arbitration agreement,[66] that a counterclaim or claim by way of set-off falls outside the scope of the same arbitration agreement,[67] or that the award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or contains decisions on matters beyond the scope of the submission to arbitration.[68]

(c)  Objections that the tribunal’s composition is not what was agreed: That the tribunal is not properly constituted,[69] or that the composition of the tribunal is not in accordance with the agreement.[70]

(d)  Objections to being excluded from the agreed arbitral process: That the party was not given proper notice of the appointment of the arbitrator or the proceedings or was otherwise unable to present his case.[71]

53.  In each of the abovementioned cases, the objection is that the relevant party has not agreed to the tribunal exercising authority to conduct the arbitration in the circumstances specified. The objection is to the tribunal and not just to the claim. It goes to jurisdiction and not admissibility.

54.  The public policy grounds constitute an exception to the principle so stated. As noted above, interference by the court under AO s 81(1), ML 34(2)(b)[72] does not depend on an applicant party furnishing proof as in the cases covered by AO s 81(1), ML Art 34(2)(a). The court may set an award aside if it finds that the subject-matter of the dispute is non-arbitrable or that the award is contrary to public policy. The party seeking recourse to the court may of course advance those grounds in arguing for the award to be set aside, but the court is entitled to act upon those grounds of its own motion, whether or not raised by a party. To that extent, judicial interference with the arbitration would not be premised on an objection involving non-consent to the tribunal’s authority, but on overriding public policy considerations. The same is a fortiori the case where a court refuses to enforce an award “for any other reason [it] considers just to do so” under AO s 86(2)(c). However, the existence of a clearly demarcated public policy exception does not lessen the utility of the tribunal/claim distinction as an aid to construction.

D.  The principles applied in the present case

D.1  The arbitration agreement

55.  There is nothing in the operative clauses of the parties’ contract that suggests an intention to confer jurisdictional status on the pre-arbitration conditions in question. On the contrary, those clauses lend themselves to a construction that the relevant conditions are merely procedural and intended to be exclusively decided by the tribunal.

56.  Thus, clause 8.2, dealing with the triggering “material default” provides:

“Material Default by either Party. In the event that either Party believes that the other Party is in material default of its obligations under this Agreement, such Party shall give a written notice to the defaulting Party in writing requiring remedy of the default (the ‘Material Default Notice’). If defaulting Party fails to remedy the default within thirty (30) Business Days of receipt of the Default Notice, the Parties shall resolve the dispute by referring to the procedure set forth at Section 14.2.”

57.  “Section 14.2” lays down the pre-arbitration conditions. It is noteworthy that clause 8.2 refers to that clause as setting forth “the procedure” to be adopted, indicating that those conditions are concerned with the how the dispute is to be dealt with procedurally, and not about the tribunal’s authority.

58.  Clauses 14.2 and 14.3 materially provide as follows:

“14.2 Dispute Resolution. The Parties agree that if any controversy, dispute or claim arises between the Parties out of or in relation to this Agreement, or the breach, interpretation or validity thereof, the Parties shall attempt in good faith promptly to resolve such [dispute] by negotiation. Either Party may, by written notice to the other, have such dispute referred to the Chief Executive Officers of the Parties for resolution. The Chief Executive Officers (or their authorized representatives) shall meet at a mutually acceptable time and place within ten (10) Business Days of the date of such request in writing, and thereafter as often as they reasonably deem necessary, to attempt to resolve the dispute through negotiation.

14.3 Arbitration. If any dispute cannot be resolved amicably within sixty (60) Business days of the date of a Party’s request in writing for such negotiation, or such other time period as may be agreed, then such dispute shall be referred by either Party for settlement exclusively and finally by arbitration in Hong Kong at the Hong Kong International Arbitration Centre … in accordance with the UNCITRAL Arbitration Rules in force at the time of commencement of the arbitration …

(e) Any award made by the arbitration tribunal shall be final and binding on each of the Parties that were parties to the dispute. To the extent permissible under the relevant laws, the Parties agree to waive any right of appeal against the arbitration award.”

59.  The parties could not agree on the meaning of clause 14.2 and whether, on its true interpretation, its stipulations had been met. The tribunal construed the clause and decided that its requirements had been fulfilled and proceeded with the arbitration which led to an award in favour of the respondent. Clause 14.3 provides that “any dispute” that is not amicably settled “shall be referred by either Party for settlement exclusively and finally by arbitration”. There is no suggestion that a dispute as to whether a pre-arbitration condition has been met should not be exclusively and finally settled by arbitration.

D.2  The appellant’s case based on condition precedent

60.  Mr Benjamin Yu SC, appearing for the appellant sought to argue that the pre-arbitration condition operates as a condition precedent under the law of contract and that, unless complied with, relieves the parties from any obligation to proceed with the arbitration. Thus, he contended, the respondent’s failure to comply with the pre-arbitration condition negated his client’s consent to the arbitration and deprived the tribunal of jurisdiction. The tribunal’s decision was, he argued, susceptible to review de novo by the court and the Courts below wrongly refused to review and set aside the partial award. In this context, he submitted that the jurisdiction/admissibility distinction should be ignored.

61.  Mr Yu’s condition precedent argument is untenable. It is not in dispute that the pre-arbitration condition in clause 14.2 is a condition precedent to the tribunal dealing with the claim. The question is who finally decides – the tribunal or the Court – whether it has been met. The appellant made its argument before the tribunal. If the arbitrators had agreed, they would not have proceeded with the arbitration (perhaps suspending the arbitration pending compliance with the condition precedent). However, the tribunal concluded that, as a matter of construction, the condition had been satisfied and went on to find liability for breach of the contract. The question is whether the Court should have reviewed that decision.

62.  Simply describing clause 14.2 as laying down a condition precedent does not mean that the statutory constraints on judicial interference laid down in the AO can be ignored. Mr Yu went so far as to submit that, on his condition precedent argument, there was no material difference between the condition precedent which prevented enforcement of an award under the New York Convention in Dallah Real Estate and Tourism Holding Co v Ministry of Religious Affairs of the Government of Pakistan,[73] and the alleged non-compliance with the pre-arbitration condition in the present case. That submission is wholly unsustainable. In Dallah, enforcement was refused because, applying French law as the law of the country where the contract was made, the respondent Pakistani Government was not a party to the relevant agreement. It was thus a clear case of the tribunal lacking authority because of the non-existence of the agreement upon which its putative authority was based. No parallel exists in the present case.

63.  In support of his condition precedent argument, Mr Yu relied on early authorities which pre-date the statutory constraints on the courts’ power to intervene, including: May v Mills;[74] Produce Brokers Co Ltd v Olympia Oil and Cake Co Ltd;[75] Smith v Martin.[76] Such cases are of no assistance, as Calver J noted in NWA v NVF.[77]

D.3  The appellant’s argument based on AO s 81(1), ML 34(2)(a)(iii)

64.  As a fall-back position Mr Yu sought to argue that, applying that distinction, an objection concerning non-compliance with the pre-arbitration condition went to the tribunal’s jurisdiction and so justifies judicial interference. He submitted that the power of the Court to interfere rests on AO s 81(1), ML 34(2)(a)(iii) which relevantly provides:

An arbitral award may be set aside by the court specified in article 6 only if ... the award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or contains decisions on matters beyond the scope of the submission to arbitration.

65.  As discussed in Section C.4 above, an objection based on the aforesaid provision is properly grouped with objections that the arbitral reference or content of the award go beyond what was agreed to be referred to arbitration, negating consent to the tribunal’s authority. Does the present case involve such a challenge?

66.  In my view, the answer is “No”. Here, the objection was that the claim had been prematurely referred to arbitration, ie, before the prescribed attempts at amicable settlement. It was not an objection denying consent to the tribunal’s authority. Clauses 8.2, 14.2 and 14.3 have been examined. On their true construction, both the dispute as to whether the pre-arbitration condition had been complied with and the contractual dispute as to whether the appellant was in material default were intended to be dealt with exclusively and finally by the tribunal. In other words, the present disputes came within the parties’ contemplation and intended submission to arbitration so that AO s 81(1), ML 34(2)(a)(iii) does not provide a basis for judicial intervention.

D.4  A concern regarding the distinction

67.  A concern has been expressed that adoption of the distinction may lead to a position inconsistent with the provisions of the AO, distorting the proper scope for curial intervention under ML 34(2)(a)(iii).[78] This stems from the observation referred to above[79] that the parties may expressly agree to elevate what is presumptively a non-jurisdictional pre-arbitration condition into a jurisdictional matter enabling judicial intervention, thus expanding the scope of the court’s power to intervene beyond what is provided for in the AO. The “elevation” observation is seen to flow from the consent-based distinction and to be indicative of the undesirability of its adoption.

68.  As I understand it, the argument is that a purported agreement by the parties to confer a jurisdictional and thus reviewable quality on a given aspect of the arbitration agreement (such as a pre-arbitration condition), could not succeed since a dispute regarding such a condition would not come within AO s 81(1), ML 34(2)(a)(iii) which permits curial interference “only if” the tribunal is alleged to exceed its agreed authority. It does not cater for judicial intervention on the basis of the parties’ agreement to expand the scope of such intervention.

69.  While I agree that the postulated ability of the parties to elevate a non-jurisdictional matter to one permitting curial intervention does not rest on AO s 81(1), ML 34(2)(a)(iii), I respectfully do not accept that the parties are disabled from achieving such a result by express agreement. If, contrary to all normal commercial expectations, they should consensually choose to expand the scope of curial review of the tribunal’s decisions on such matters as pre-arbitration conditions, there is no reason why they should not be free to do so.

70.  It is true that AO s 81(1), ML Art 34(2)(a) provides that a court may set aside an arbitral award “only if” specified cases are applicable. Similarly, AO s 12, ML Art 5 provides that “In matters governed by this Law, no court shall intervene except where so provided in this Law”. However, construed in context and purposively, those provisions are not intended to preclude the parties from otherwise autonomously deciding how their disputes should be resolved.

71.  Such autonomy is declared by AO s 3(2)(a) to be a basic principle: “This Ordinance is based on the principles ... that, subject to the observance of the safeguards that are necessary in the public interest, the parties to a dispute should be free to agree on how the dispute should be resolved ...” That includes agreeing to expand the scope of curial review of the tribunal’s decisions.

72.  When AO s 3(2)(b) goes on to provide that the court “should interfere with the arbitration of a dispute only as expressly provided for” it is significant that the verb used is “interfere”. This bears the connotation of the court uninvitedly intruding upon or overriding the agreement of the parties, with “intervene” bearing the same connotation. The Ordinance does not authorise such interference except in specified instances where intervention is deemed justifiable or necessary,[80] with the courts otherwise giving effect to the parties’ arbitration agreement freely reached, subject to public policy safeguards.

73.  The need for any construction of the AO and ML to be informed by such basic principles is reiterated by AO s 9, ML Art 2A(2) which provides: “Questions concerning matters governed by this Law which are not expressly settled in it are to be settled in conformity with the general principles on which this Law is based”.

74.  And as previously pointed out,[81] the circumstances where curial intervention is envisaged “include” the specified instances, leaving room for other grounds upon which review by the court may be based, including grounds specified by the parties’ express agreement.

75.  For the foregoing reasons I respectfully do not share the abovementioned concern.

D.5  The international decisions relied on by the appellant

76.  Mr Yu also cited certain decisions of the International Court of Justice (“ICJ”) and of tribunals of the International Centre for Settlement of Investment Disputes (“ICSID”) involving sovereign states. Those decisions are of no assistance in the present case.

77.  We are concerned with parties who are commercial entities who have entered into a business relationship and chosen to refer any dispute arising out of that relationship for settlement exclusively and finally by an arbitral tribunal which they have chosen for reasons such as its neutrality, expertise, privacy and efficiency, where the legal framework at the seat of the arbitration is known to be effective and to adopt a policy favouring party autonomy and unobtrusive judicial supervision. As noted above, given the parties’ evident commercial intentions, pre-arbitration conditions are presumptively non-jurisdictional.

78.  The context of the international decisions cited is entirely different. Sovereign states are entitled to claim sovereign immunity and, where they agree to waive such immunity by submitting to the jurisdiction of an international court or tribunal only upon specified conditions, those conditions are presumptively jurisdictional. Unless such conditions are met, the state does not consent to the tribunal’s authority. Often, unless such conditions are satisfied, no agreement comes into existence.

79.  Thus, Mr Yu cited the ICJ Case Concerning Armed Activities on the Territory of the Congo, Democratic Republic of the Congo (“DRC”) v Rwanda.[82] There, the DRC sought to rely on the compromissory clauses (ie, clauses permitting unilateral reference to the ICJ) of the Convention on Discrimination Against Women to found jurisdiction against Rwanda in the ICJ. However, Rwanda objected on the ground that pre-conditions to its submission to the ICJ’s jurisdiction had not been met.

80.  The DRC sought to argue that Rwanda’s objection merely went to the admissibility of its application rather than to the jurisdiction of the Court. This was rejected by the ICJ which held that:

“... its jurisdiction is based on the consent of the parties and is confined to the extent accepted by them ... When that consent is expressed in a compromissory clause in an international agreement, any conditions to which such consent is subject must be regarded as constituting the limits thereon. The Court accordingly considers that the examination of such conditions relates to its jurisdiction and not to the admissibility of the application.”[83]

81.  Moreover, Art 36(6) of the Statute of the ICJ states: “In the event of a dispute as to whether the Court has jurisdiction, the matter shall be settled by the decision of the Court.” So the ICJ determines for itself whether it has jurisdiction and there is no question of that decision being reviewable by some supervisory court or anyone else.

82.  The ICSID tribunal decisions cited are similarly of no assistance. This is illustrated by Daimler Financial Services AG v Argentine Republic.[84] Argentina was a Contracting State Party to the ICSID Convention and the claimant company, Daimler, was a national of the Federal Republic of Germany, another Contracting State. Art 25(1) of the ICSID Convention relevantly provides:

“The jurisdiction of the Centre shall extend to any legal dispute arising directly out of an investment, between a Contracting State … and a national of another Contracting State, which the parties to the dispute consent in writing to submit to the Centre. ...”[85]

83.  The ICSID Convention thus provides the framework for subsequent Bilateral Investment Treaties (“BITs”) entered into between Contracting States. The German-Argentine BIT in the Daimler case provided for a tiered, sequential dispute-resolution process between each Host State and a prospective investor from the other State. Art 10 of the BIT provided:

“(1) Disputes which arise between a Contracting Party and a national or company of the other Contracting Party concerning an investment under the Treaty, shall, to the extent possible, be settled amicably.

(2) If a dispute referred to in paragraph 1 cannot be settled within six months from the date either of the parties to the dispute formally announced it, it shall be referred upon the request of either party to the dispute to the competent courts of the Contracting Party in whose territory the investment was made.

(3) Under either of the circumstances referred to below, the dispute may be submitted to an international arbitral tribunal:

(a) at the request of a party to the dispute if, within a period of 18 months of initiation of the judicial proceeding in accordance with paragraph 2, the tribunal has not rendered a final decision or if such a decision has been rendered but the dispute between the parties continues;

(b) if both parties have so agreed.”

84.  It should be noted that no individual investor is party to the BIT. A clause like Art 10 represents a unilateral conditional offer made by each of Germany and Argentina to as yet unidentified investors from the other State to agree to the stipulated dispute resolution process upon acceptance by a qualified investor in relation to a dispute with the State in question.

85.  Daimler, a German company, sought to commence an arbitration pursuant to Art 10, but Argentina objected to the jurisdiction of the tribunal to deal with anything other than the jurisdictional issue because of Daimler’s failure to submit the substantive dispute to the competent Argentine courts for a period of 18-months before resorting to an arbitral tribunal as required by Art 10(2) and (3). That requirement, it argued, constituted a necessary condition of Argentina’s consent to arbitration and thus to the tribunal’s jurisdiction.[86] Daimler argued on the other hand that such requirement was “a mere procedural directive and not a true jurisdictional pre-requisite”.[87]

86.  Argentina’s argument was upheld by the tribunal which emphasised the crucial importance of the sovereign state’s consent as a voluntary restraint on its sovereign immunity:

“Stepping back from the specific case of bilateral treaties, all international treaties – whether bilateral, plurilateral or multilateral – are essentially expressions of the contracting states’ consent to be bound by particular legal norms. They encapsulate voluntarily accepted restraints upon the universally recognized principle of state sovereignty. Consent is therefore the cornerstone of all international treaty commitments, at least insofar as those commitments exceed the minimum requirements of customary international law. The primacy of the principle of consent runs through all types of treaty commitments entered into by states. ...”[88]

87.  The tribunal emphasised that this approach at the treaty level is entirely different from that relating to national courts and domestic arbitral tribunals:

“One may ask whether the Tribunal may nonetheless waive the 18-month domestic courts requirement on the grounds that it is merely procedural, not jurisdictional, and therefore within the discretionary power of the Tribunal to observe or discard. Such is the case, for example, with admissibility objections before domestic courts and tribunals. However, admissibility analyses patterned on domestic court practices have no relevance for BIT-based jurisdictional decisions in the context of investor-State disputes. In the domestic context, admissibility requirements are judicially constructed rules designed to preserve the efficiency and integrity of court proceedings. They do not expand the jurisdiction of domestic courts ...”[89]

“All BIT-based dispute resolution provisions, on the other hand, are by their very nature jurisdictional. The mere fact of their inclusion in a bilateral treaty indicates that they are reflections of the sovereign agreement of two States – not the mere administrative creation of arbitrators. They set forth the conditions under which an investor-State tribunal may exercise jurisdiction with the contracting state parties’ consent, much in the same way in which legislative acts confer jurisdiction upon domestic courts. That this is so is particularly evident in the case of the German-Argentine BIT, which describes its dispute resolution process in mandatory and necessarily sequential language.”[90]

“Since the 18-month domestic courts provision constitutes a treaty-based pre-condition to the Host State’s consent to arbitrate, it cannot be bypassed or otherwise waived by the Tribunal as a mere ‘procedural’ or ‘admissibility-related’ matter.”[91]

88.  The same approach was taken in the other BIT tribunal decisions cited by the appellant.[92] Notably, in Kilic Insaat Ithalat Ihracat Sanayi Ve Ticaret Anonim Sirketi v Turkmenistan,[93]the Daimler decision was approved[94] and such preconditions were held to amount to “a conditional offer to arbitrate”. Put in offer and acceptance terms, unless and until the investor accepted the unilateral offer made by the state in accordance with the conditions stipulated, no arbitration agreement came into existence between the State and the investor, so that the tribunal lacked jurisdiction to deal with the dispute.

89.  One might add that citation of such tribunal decisions is of limited value, as was observed in the Daimler case:

“... there is no system of precedent in investor-State arbitration, nor indeed could there be, given the large and diverse set of treaties presently applicable to various investor-State claims. Each case must be decided on the basis of the applicable treaty texts and in the light of the relevant facts. ...”[95]

E.  Conclusion

90.  On an analysis that is, in my view, helped by the jurisdiction/admissibility or tribunal/claim distinction, the appeal should be dismissed. I respectfully agree with the Judge’s summary of the position as follows:

“The objection in the present case seems to me to be one going to admissibility of the claim. There is no dispute about the existence, scope and validity of the arbitration agreement. There is no dispute that [the respondent’s] claim, as far as its subject matter is concerned, ‘arises out of or in relation to’ the Agreement and falls within the scope of the arbitration agreement. ... The parties’ commitment to arbitrate is not in doubt; they intend the arbitral award to be final and binding. [The appellant’s] objection is that the particular reference to arbitration was invalid because the stipulated mechanism of negotiation between the CEOs had not been gone through. The objection is not that such a claim should not be arbitrated at all, but that the tribunal should reject the reference as premature. There is no indication in clauses 14.2 or 14.3 of the Agreement that the parties intended compliance with these provisions to be a matter of jurisdiction. It seems unlikely to be the parties’ intention that despite a full hearing before and a decision by a tribunal of their choice the same issue should be re-opened in litigation in the courts. In my view the challenge is one of admissibility rather than jurisdictional.”[96]

91.  A further reason for adopting the jurisdiction/admissibility (or tribunal/claim) distinction is provided by AO s 9, ML Art 2A(1) which states:

Article 2A of the UNCITRAL Model Law, the text of which is set out below, has effect—

“Article 2A. International origin and general principles

(1) In the interpretation of this Law, regard is to be had to its international origin and to the need to promote uniformity in its application and the observance of good faith.”

92.  ML Art 2A promotes an important object of the Model Law (and also of the New York Convention on the enforcement of awards) which is to facilitate international arbitration by harmonizing the arbitral regimes of different countries. As has been noted, academic writings and the recent case-law of courts in ML jurisdictions which are also leading centres of arbitration have adopted the distinction as a principle which elucidates the limits of judicial intervention in arbitrations. In my view, we should in this jurisdiction confirm that we do likewise.

Mr Justice Fok PJ:

93.  I have had the benefit of reading the judgments in draft of Mr Justice Ribeiro PJ and Mr Justice Gummow NPJ. I respectfully agree with the conclusion reached by both of them that the appeal should be dismissed. I only add this short concurrence to state my view, briefly, on an issue that has divided the Court.

94.  For the reasons set out in Section D of Mr Justice Ribeiro PJ’s judgment and in paragraphs [112] to [139] of Mr Justice Gummow NPJ’s judgment, the dispute between the parties as to whether, on the true interpretation of clause 14.2 of the operative agreement, its stipulations had been complied with so that the underlying dispute between the parties could proceed to arbitration, was one which, in accordance with clause 14.3 of the agreement, should be finally settled by the arbitral tribunal. The appellant’s application to set aside the tribunal’s partial award on the basis of Article 34(2)(a)(iii) of the Model Law was therefore properly dismissed by the Court of First Instance and that decision correctly upheld by the Court of Appeal.

95.  As Mr Justice Gummow NPJ observes, the Court of Appeal stated that it would have dismissed the appeal to it on the basis that the dispute between the parties on the question of fulfilment of the pre-arbitration procedural requirement under clauses 14.2 and 14.3 was clearly a dispute falling within the terms of the submission to arbitration under Article 34(2)(a)(iii) of the Model Law. On this basis, the appeal could have been disposed of without regard to the distinction between admissibility and jurisdiction. Like Mr Justice Gummow NPJ, I agree that the reasoning in the Court of Appeal’s judgment at [61] is correct and leads to the dismissal of the appeal in any event.

96.  The area of disagreement concerns the appropriateness of the adoption of the jurisdiction/admissibility distinction as a means to assist in determining which disputes are properly subject to court review under the Arbitration Ordinance. Adopting it supports the conclusion that the appellant’s challenge to the arbitrator’s determination as regards the fulfilment of the pre-arbitration procedural requirement is not subject to court review.

97.  For the detailed reasons set out in Section C of Mr Justice Ribeiro PJ’s judgment, I agree that the jurisdiction/admissibility distinction provides a useful principle by which to distinguish between those issues that are reviewable by a supervising court and those that are not. As his Lordship points out, the distinction has gathered such support as to be widely recognised across several jurisdictions, including England and Wales, Singapore and New South Wales, and in leading academic texts on arbitration law and practice. For Hong Kong to reject the distinction now would risk placing this jurisdiction at variance with other jurisdictions which, like Hong Kong, promote international arbitration and limit the extent of court intervention in the arbitral process and, for my part, I would decline to do so.

Mr Justice Lam PJ:

98.  I have the benefit of reading the draft judgments of Mr Justice Ribeiro PJ and Mr Justice Gummow NPJ. I am also of the view that the appellant had not made good a challenge under Art 34(2)(a)(iii) of the UNCITRAL Model Law on International Commercial Arbitration for setting aside the award and the appeal should be dismissed. Clause 14.2 of the contract is clearly wide enough to confer authority on the arbitral tribunal to determine a dispute on whether its pre-arbitration condition has been fulfilled. Applying the approach of Lord Hoffmann in Fiona Trust & Holding Corp v Privalov[97], in the absence of explicit provision for judicial review of the determination of such a dispute, the determination of the issue by the arbitral tribunal cannot be regarded as not falling within the terms of the submission to arbitration or going beyond the scope of the submission to arbitration.

99.  In light of the difference between Mr Justice Ribeiro PJ and Mr Justice Gummow NPJ on the utility of the “jurisdiction/admissibility” distinction, I would succinctly express my views on the topic.

100.  I confess that I was initially attracted by Mr Justice Gummow NPJ’s opinion that the only question is whether the contention raised by the appellant is within one of the grounds on which Art 34 of the Model Law permits recourse to judicial review[98]. As my Lord observed, previously the courts were able to apply Art 34(2)(a)(iii) without any reference to the “jurisdiction/admissibility” distinction. Placing too much reliance on such distinction carries with it the risk of inadvertent substitution of the grounds laid down in Art 34(2)(a)(iii) with a consideration if the challenge of a party is one goes to admissibility as opposed to jurisdiction.

101.  However, Mr Chapman submitted that “admissibility” was just a label and the distinction could be useful in determining whether a ground of challenge raised by a party is really a jurisdictional question. If an applicant raised a real jurisdictional question, the court could conduct a de novo review of the question. On the other hand, if what purported to be a jurisdictional question does not really go to jurisdiction, the court should not review a decision of the arbitral tribunal on such question.

102.  In this connection, I agree with Mr Justice Ribeiro PJ that Art 34 of the Model Law and Section 81 of the Arbitration Ordinance should be construed in a manner which is coherent with the other provisions in the Model Law as adopted under the Arbitration Ordinance. In particular, in light of the provisions in Art 16 of the Model Law as applied under Section 34 of the Arbitration Ordinance, the concept of judicial review of the jurisdiction of the arbitral tribunal is also relevant in the context of an application to set aside an award under Art 34(2)(a)(iii).

103.  In the present case, the appellant had requested the issue of jurisdiction be determined by the arbitral tribunal as a preliminary question. However, the arbitral tribunal did not do so. Thus, the procedure under Art 16(3) for a further request to the court for such determination was not applicable and the appellant had to seek to set aside the award under Art 34(2)(a)(iii) of the Model Law.

104.  In these circumstances, I accept that an application could be made under Art 34(2)(a)(iii) to put forward a jurisdictional challenge[99].

105.  For my part, the important consideration is whether the use of the “jurisdiction/admissibility” distinction as an aid for determining if an issue falls within the terms of the submission to arbitration or goes beyond the scope of the submission to arbitration is objectionable for the reason that such distinction distorts the grounds set out under Art 34(2)(a)(iii).

106.  The critical question is whether there is any risk of distortion?

107.  Mr Justice Ribeiro PJ made a powerful case for the utility of such distinction. In section C.1 of his judgment Mr Justice Ribeiro PJ elaborated on the substance of the “jurisdiction/admissibility” distinction by reference to the distinction between a challenge to the tribunal and a challenge to the claim. “Admissibility” concerns challenges which do not negate consent to the tribunal’s authority. The distinction does not hinge merely on the parties’ labelling of the nature of a dispute. Further, in the context of the present appeal which focused on pre-arbitration conditions in multi-tiered dispute resolution clauses, His Lordship adopted the view that pre-arbitration conditions should be regarded as presumptively non-jurisdictional.

108.  In formulating the distinction between objections aiming at the tribunal and those aiming at the claim, Professor Paulsson referred to an earlier article of Professor Rau[100] in which the latter pinpointed the fundamental question as the parties’ consent to arbitral authority. Instead of relying on labels or metaphors, one should enquire whether in a given case the parties have agreed that contentions regarding any particular issue should be decided conclusively by the arbitrators.

109.  Likewise, the grounds laid down in Art 34(2)(a)(iii) also focused on the parties’ consent to arbitral authority. For present purposes, the terms of submission to arbitration are to be determined by the common intention of the parties as set out in the arbitration agreement. In such exercise, as acknowledged by Mr Justice Ribeiro PJ as well as Mr Justice Gummow NPJ, the approach of Lord Hoffmann in Fiona Trust & Holding Corp v Privalov provided helpful guidance. The presumption adopted by Mr Justice Ribeiro PJ can be regarded as a specific application of that approach in respect of pre-arbitration conditions.

110.  Viewed in this light, the analysis of Mr Justice Ribeiro PJ is firmly based on the grounds laid down in Art 34(2)(a)(iii).

111.  For these reasons, I respectfully agree that it is sound in principle and useful to adopt a distinction between a challenge to the tribunal and a challenge to the claim as well as a presumption that challenge based on non-fulfilment of pre-arbitration condition is non-jurisdictional. Since the distinction only operates as a presumptive aid to the construction of an arbitration clause, it is open to the parties to draft a clause in a manner which clearly overrides the effect of such presumption in respect of the fulfilment of pre-arbitration conditions. The availability of judicial recourse is therefore ultimately dependent upon the proper construction of the parties’ agreement. If on proper construction the parties have agreed that a dispute on the fulfilment of pre-arbitration conditions should be determined conclusively by the court instead of an arbitral tribunal, such an award could be challenged under Art 16(3) (read together with Section 34(2)(b) of the Arbitration Ordinance) or Art 34(2)(a)(iii).

Mr Justice Gummow NPJ:

112.  This appeal from the Court of Appeal concerns the operation of provisions of the Arbitration Ordinance (Cap 609) (“the Ordinance”) respecting a challenge in the Court of First Instance to an arbitral award made in Hong Kong. If an arbitration agreement stipulates a pre-arbitration condition precedent, is the determination of the arbitral tribunal that the condition was satisfied, “subject to recourse to the Court” under the Ordinance? However, there is some ambiguity here. The provisions of the Ordinance set out below at [126]-[127] indicate that it is the award which is subject to recourse to the Court not the dispute which led to the award.

The dispute

113.  The appellant C is a Hong Kong company which owns and operates satellites. The respondent D is a Thai company which is a satellite operator in the Asia Pacific region.

114.  On 15 December 2011 these parties entered into a written agreement (“the Agreement”), essentially that by the deployment of Satellite A, C would develop its business in the PRC, while D would do so outside the PRC. The governing law of the Agreement was Hong Kong law. On 6 December 2018, C issued certain commands to Satellite A which D considered a breach of the Agreement. Clauses 14.2 and 14.3 of the Agreement provided for dispute resolution by negotiation between the parties, and if this was not achieved, for arbitration in Hong Kong in accordance with the UNCITRAL Arbitration Rules:

“14.2 Dispute Resolution. The Parties agree that if any controversy, dispute or claim arises between the Parties out of or in relation to this Agreement, or the breach, interpretation or validity thereof, the Parties shall attempt in good faith promptly to resolve such [dispute] by negotiation. Either Party may, by written notice to the other, have such dispute referred to the Chief Executive Officers of the Parties for resolution. The Chief Executive Officers (or their authorized representatives) shall meet at a mutually acceptable time and place within ten (10) Business Days of the date of such request in writing, and thereafter as often as they reasonably deem necessary, to attempt to resolve the dispute through negotiation.

14.3 Arbitration. If any dispute cannot be resolved amicably within sixty (60) Business days of the date of a Party’s request in writing for such negotiation, or such other time period as may be agreed, then such dispute shall be referred by either Party for settlement exclusively and finally by arbitration in Hong Kong at the Hong Kong International Arbitration Centre (‘HKIAC’) in accordance with the UNCITRAL Arbitration Rules in force at the time of commencement of the arbitration (the ‘Rules’) …”

115.  On 18 April 2019, D issued a notice of arbitration under clause 14.3. The Tribunal, in its extensive written Partial Award issued on 21 April 2020, rejected the submission by C that the precondition to arbitration set up by clauses 14.2 and 14.3 had not been satisfied. It went on to hold that C was liable to pay damages to D in an amount to be assessed. The contention then advanced by C that the Partial Award be set aside by the Court of First Instance was rejected and C’s appeal to the Court of Appeal was dismissed on 7 June 2022.

The legislation

116.  The Ordinance states in section 4 that the provisions of the UNCITRAL Model Law on International Commercial Arbitration (“the Model Law”) which are “expressly stated” in the Ordinance as having effect “have the force of law in Hong Kong subject to the modifications and supplements as expressly provided for in this Ordinance”.

117.  An appreciation of the attitude of the courts to arbitration is assisted by the observations of Lord Hoffmann in Fiona Trust & Holding Corporation v Privalov[101]. His Lordship noted (at [6]) that:

“… The parties have entered into a relationship, an agreement or what is alleged to be an agreement or what appears on its face to be an agreement, which may give rise to disputes. They want those disputes decided by a tribunal which they have chosen, commonly on the grounds of such matters as its neutrality, expertise and privacy, the availability of legal services at the seat of the arbitration and the unobtrusive efficiency of its supervisory law. Particularly in the case of international contracts, they want a quick and efficient adjudication and do not want to take the risks of delay and, in too many cases, partiality, in proceedings before a national jurisdiction.”

118.  Lord Hoffmann went on (at [7]) to ask:

“… whether the parties, as rational businessmen, were likely to have intended that only some of the questions arising out of their relationship were to be submitted to arbitration and others were to be decided by national courts.”

119.  These general statements are to be read with the remarks of Lord Collins of Mapesbury in Dallah Real Estate and Tourism Holding Co v Ministry of Religious Affairs of the Government of Pakistan[102]. His Lordship observed (at [83]) that:

“The principle that a tribunal has jurisdiction to determine its own jurisdiction does not deal with, or still less answer, the question whether the tribunal’s determination of its own jurisdiction is subject to review, or, if it is subject to review, what that level of review is or should be.”

120.  Lord Collins then went on (at [85]) to refer to Articles 16 and 34 of the Model Law. He observed that these provisions illustrated the proposition that the power of the tribunal to determine its jurisdiction was not exclusive, given the power of the court to set aside an award on the specified grounds in Article 34.

121.  In BG Group Plc v Republic of Argentina[103], Breyer J in the opinion of the United States Supreme Court observed (at p. 34) that:

“… courts presume that the parties intend arbitrators, not courts, to decide disputes about the meaning and application of particular procedural preconditions for the use of arbitration.”

These included “time limits, notice, laches, estoppel, and other conditions precedent to an obligation to arbitrate.”

122.  Section 3(1) of the Ordinance states “the object” of the Ordinance as the facilitation of “the fair and speedy resolution of disputes by arbitration without unnecessary expense”. Section 3(2) states that the Ordinance is based on two principles. Paragraph (a) provides that “the parties to a dispute should be free to agree on how the dispute should be resolved”, subject to necessary safeguards in the public interest. Paragraph (b) states the principle that “the court should interfere in the arbitration of a dispute only as expressly provided for in the Ordinance”. In this way, section 3 implements the general principle that, save as regards the public interest, the parties are free to avoid the expense and delay of litigation and to provide for arbitration. Questions concerning matters governed by the Model Law but not expressly settled in it are to be settled in accordance with the “general principles” on which the Model Law is based (section 9 of the Ordinance). Those “general principles” include those in section 3, as discussed above.

123.  Section 34 of the Ordinance gives effect to the provision in Article 16(1) of the Model Law that:

“The arbitral tribunal may rule on its own jurisdiction, including any objections with respect to the existence or validity of the arbitration agreement …”

Article 16(3) as applied to the Ordinance provides that if the arbitral tribunal rules as a preliminary question that it has jurisdiction, any party, within thirty days of receipt of notice of that ruling, may request the Court of First Instance to decide the matter and its decision shall be subject to no appeal. Article 16(3) indicates that the “jurisdiction” upon which the tribunal rules as a preliminary question is that which attracts curial intervention.

124.  Section 12 of the Ordinance adopts the important principle in Article 5 of the Model Law, that:

“In matters governed by this Law, no court shall intervene except where so provided in this Law.” (emphasis added)

Section 81, adopting Article 34 of the Model Law, limits the grounds of recourse to a court to challenge an arbitral award. The relevant text of Article 34 is set out below at [126]-[127]. The relationship between Articles 16 and 34 is discussed in the concluding portion of these reasons, at [157].

125.  The use of the mandatory word “shall” in Article 5 indicates that the Model Law provides exhaustively and exclusively for the grounds of curial intervention: see UNCITRAL Model Law on International Commercial Arbitration: A Commentary (Cambridge University Press, 2020) (“the Commentary”) at p. 92 et seq. Returning to section 3(2) of the Ordinance, the view that paragraph (b) must give way to paragraph (a), so that the court may have a power of intervention solely and sufficiently based on the terms of the agreement of the parties, is inconsistent with the scheme of the Model Law. By contrast, the United Kingdom Arbitration Act 1996 (“the 1996 Act”) did not adopt the mandatory word “shall” in Article 5 of the Model Law, instead using in section 1(c) the word “should”. Lord Mance JSC described this as a “deliberate departure” from Article 5: AES Ust-Kamenogorsk Hydropower Plant LLP v Ust-Kamenogorsk Hydropower Plant JSC [2014] 1 All ER 355 at [33]. This topic will be referred to further at [154].

126.  Article 34(1) of the Model Law (adopted by section 81 of the Ordinance) provides that recourse to a court against an arbitral award may be made “only” in reliance upon the grounds laid out in the balance of that Article. Article 34(2) states that an arbitral award may be set aside “only if” paragraphs (a) or (b) apply. Paragraph (b) is in these terms:

“(b) the court finds that:

(i) the subject-matter of the dispute is not capable of settlement by arbitration under the law of this State; or

(ii) the award is in conflict with the public policy of this State.”

127.  Paragraph (a) contains four grounds. Ground (iii) is of particular importance to this case, but all grounds (i)-(iv) should be set out:

“(a) the party making the application furnishes proof that:

(i) a party to the arbitration agreement referred to in article 7 was under some incapacity; or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of this State; or

(ii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or

(iii) the award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or contains decisions on matters beyond the scope of the submission to arbitration, provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the award which contains decisions on matters not submitted to arbitration may be set aside; or

(iv) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Law from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Law …” (emphasis added)

128.  As regards the particular ground at issue, namely, ground (iii), it would appear that it is concerned with whether the arbitral tribunal improperly embarked on deciding a dispute on matter that had not been submitted to it. In other words, it is concerned with the ambit of the submission to arbitration, not the merits of the relevant dispute or matter. Upon reviewing the ambit of the submission to arbitration, if the court finds that the arbitral award deals with a dispute or matter falling outside of such ambit, the court may set aside the award but does not go on to review the merits of such dispute or matter.

129.  As the Singapore Court of Appeal put it in CRW Joint Operation v PT Perusahaan Gas Negara (Persero) TBK[104] (at [31]):

“… Art 34(2)(a)(iii) … applies where the arbitral tribunal improperly decided matters that had not been submitted to it or failed to decide matters that had been submitted to it. In other words, Art 34(2)(a)(iii) addresses the situation where the arbitral tribunal exceeded (or failed to exercise) the authority that the parties granted to it (see Gary B Born, International Commercial Arbitration (Wolters Kluwer, 2009) at vol 2, pp 2606–2607 and 2798–2799) …”

The Court continued to observe (at [33]):

“… it is trite that mere errors of law or even fact are not sufficient to warrant setting aside an arbitral award under Art 34(2)(a)(iii) of the Model Law (see Sui Southern Gas Co Ltd v Habibullah Coastal Power Co (Pte) Ltd [2010] 3 SLR 1 at [19]–[22]). In the House of Lords decision of Lesotho Highlands Development Authority v Impregilo SpA and others [2006] 1 AC 221, which concerned an application to set aside an arbitral award on the ground of the arbitral tribunal’s ‘exceeding its powers’ (see s 68(2)(b) of the Arbitration Act 1996 (c 23) (UK) (‘the UK Arbitration Act’)), Lord Steyn made clear (at [24]–[25]) the vital distinction between the erroneous exercise by an arbitral tribunal of an available power vested in it (which would amount to no more than a mere error of law) and the purported exercise by the arbitral tribunal of a power which it did not possess. Only in the latter situation, his Lordship stated, would an arbitral award be liable to be set aside under s 68(2)(b) of the UK Arbitration Act on the ground that the arbitral tribunal had exceeded its powers. In a similar vein, Art 34(2)(a)(iii) of the Model Law applies where an arbitral tribunal exceeds its authority by deciding matters beyond its ambit of reference or fails to exercise the authority conferred on it by failing to decide the matters submitted to it, which in turn prejudices either or both of the parties to the dispute …”

The above understanding of Article 34(2)(a)(iii), as expounded in CRW, has since been followed in numerous Singapore decisions, and is consistent with the approach adopted in two recent judgments of Lord Mance delivered as an International Judge, namely CBX v CBZ[105] and CKH v CKG[106].

130.  It is true that a different stance appears to have been taken by the Singapore Court of Appeal in Swissbourgh Diamond Mines (Pty) Ltd v Kingdom of Lesotho[107]. The Court appeared to be making the point that in Article 34(2)(a)(iii) the expressions “a dispute not contemplated by or not falling within the terms of the submission to arbitration” and “matters beyond the scope of the submission to arbitration” indicate distinct grounds for curial intervention, one pertaining to the ambit of the submission to arbitration and the other going beyond that issue. However, it appears that the different wording is designed to accommodate the gradation of disputes submitted to arbitration rather than to create distinct grounds for intervention. This construction is supported in the Commentary, the work referred to above at [125]. At p. 882 of the Commentary it is said:

“The first two limbs of article 34(2)(a)(iii) consider respectively the case of: (1) an award that ‘deals with a dispute not contemplated or not falling within the terms of the submission to arbitration’; and (2) an award that ‘contains decisions on matters beyond the scope of the submission to arbitration’. While similar, these two situations are not identical. In the first scenario, the provision refers to a ‘dispute’ … In the second scenario, instead, the dispute may well have fallen within the terms of the parties’ agreement, but the award rules on ‘matters’ beyond its scope. In other words, the arbitrators made a mistake not by retaining jurisdiction over the dispute (which was, in principle, covered by a valid agreement), but by including in the award issues that did not belong with that dispute and that the parties had not agreed to arbitrate.” (emphases added)

131.  Article 34(2)(a)(iii) follows closely the wording of Article V(1)(c) of the 1958 Convention on the Recognition of and Enforcement of Foreign Arbitral Awards (“New York Convention”). Article V(1)(c) states:

“Recognition and enforcement of the award may be refused, at the request of the party against whom it is invoked, only if that party furnishes to the competent authority where the recognition and enforcement is sought, proof that:

(c) The award deals with a difference not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration, provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, that part of the award which contains decisions on matters submitted to arbitration may be recognized and enforced …”

The commentary on Article V(1)(c) in the UNCITRAL Secretariat Guide on the New York Convention (2016 Edition) (at p. 183), is consistent with the view that this provision only pertains to the ambit of submission to arbitration:

“Where article V (1)(a) concerns the existence of a valid arbitration agreement which is binding on all the parties addressed by an award, article V (1)(c) assumes the existence of a valid arbitration agreement between the parties and is concerned instead with whether an award has gone beyond the scope of the subject matter the parties intended to submit to arbitration.”

The Court of Appeal

132.  Much consideration was given in the Court of Appeal’s judgment to a distinction between “admissibility” and “jurisdiction”. Consideration of the utility of such a distinction in construing section 81 of the Ordinance (adopting Article 34 of the Model Law) will be made later in these reasons at [140]-[156]. This consideration of the distinction extends to that length, given its importance for Hong Kong arbitrations. That importance is exemplified in the article by Leung and Hui “Making Sense of Jurisdiction-Admissibility Distinction: When Day Becomes Night” in the issue of Hong Kong Lawyer for April 2023.

133.  However, the Court of Appeal added (at [61]):

“For the sake of completeness, we should mention that we would have reached the same conclusion even if we disregard the distinction between admissibility and jurisdiction, and consider the question simply as a matter of construction and application of Art 34(2)(a)(iii). We consider it to be clear that the dispute between the parties on the question of fulfilment of the pre-arbitration procedural requirement under Clauses 14.2 and 14.3 is a dispute falling within the terms of the submission to arbitration under Art 34(2)(a)(iii). Clause 14.3 provides that ‘any’ dispute which cannot be resolved amicably within 60 business days … shall be referred by either party for settlement exclusively and finally by arbitration. The disputes which may be settled by arbitration under Clause 14.3 are those referred to in Clause 14.2, namely, ‘any controversy, dispute or claim [arising] between the Parties out of or in relation to this Agreement, or the breach, interpretation or validity thereof’. There is no reason to confine the scope of arbitrable disputes under Clause 14.3 to substantive disputes arising out of or in relation to the Agreement, and exclude from it disputes on whether the pre-arbitration procedural requirement under Clauses 14.2 and 14.3 has been fulfilled.”

134.  The reasoning in this passage is, with respect, correct and leads to the dismissal of C’s appeal. It should be noted that this passage accords with the understanding of Article 34(2)(a)(iii) set out above at [128]-[131]. This ground is concerned with the ambit of the submission to arbitration. It does not afford any room for the court to review the merits of a particular dispute, including a dispute as to compliance with a pre-arbitration condition. The conclusion to which the reasoning in this passage leads is simply that the award cannot be set aside.

135.  We should deal with two further matters which are the subject of intense debate on this appeal. The first concerns what may be identified as the “condition precedent” submission by C. The second concerns the significance both parties, albeit with different conclusions, attached to the “admissibility/jurisdiction” distinction.

The “condition precedent” submission

136.  C contends that clauses 14.2 and 14.3 provided a “condition precedent” to the agreement to arbitrate, the compliance with which was a “jurisdictional issue” attracting the ground in paragraph (iii) of Article 34(2)(a) that “the award deals with a dispute not contemplated by … the terms of the submission to arbitration”. The premise of C’s argument is that if the “condition precedent” had not been fulfilled, the contractual dispute as to whether C was in breach of the Agreement would not fall within “the terms of the submission to arbitration”. Hence, the essence of C’s case is that the satisfaction of clauses 14.2 and 14.3 was a “jurisdictional issue” and was to be finally determined not by the Tribunal but by the Court.

137.  C’s contention is misplaced for two reasons. First, as D submits, as a matter of contractual construction, the precondition contained in clauses 14.2 and 14.3 was directed to the obligation to arbitrate with respect to the specific claim in question, not to the agreement to arbitrate.

138.  Secondly, and more fundamentally, C’s argument is premised on a misunderstanding of Article 34(2)(a)(iii). It invites the Court to review the correctness of the Tribunal’s ruling that the pre-arbitration procedural requirements had been complied with, contending that non-compliance with such requirements deprived the Tribunal of its jurisdiction to deal with the contractual dispute by virtue of it falling outside the “terms of the submission to arbitration”. Such a contention goes against the permissible extent of curial intervention under Article 34(2)(a)(iii), as explained above at [128]-[131] and [134].

139.  As noted above at [112], it is the award which is subject to recourse to the Court.

The “admissibility/jurisdiction” distinction

140.  C contends that the answer to the question whether the Court may review the issue of satisfaction of a condition precedent to arbitration does not lie in seeking to fit the issue into the classification of “admissibility” or “jurisdiction”. On the other hand, D contends that the distinction can be applied in construing Article 34(2)(a)(iii). But D also contends that the Tribunal correctly determined that the precondition in clauses 14.2 and 14.3 was satisfied in this case and thus no question of curial intervention under Article 34(2)(a)(iii) arose. The term “admissibility” is not used here in the sense understood by common lawyers and exemplified by the Evidence Ordinance (Cap 8); rather it refers to defects of a temporary quality upon decision making by tribunals (as opposed to those of a permanent quality).

141.  Since the adoption of the Model Law in 1985 there have been many decisions of courts in various jurisdictions which have adopted the Model Law into their legislation and they have applied Article 34(2)(a)(iii) without any attention to a distinction between “admissibility” and “jurisdiction”. An example from Hong Kong is Brunswick Bowling & Billiards Corp v Shanghai Zhonglu Industrial Co Ltd[108], a judgment of Johnson Lam J. An example from the Singapore Court of Appeal is PT Prima International Development v Kempinski Hotels SA[109]. Moreover, the statements in 2007 by Lord Hoffmann in Fiona Trust set out above at [117]-[118] were made when dealing with the question whether a dispute (in that case, a dispute that certain charterparties were void for inducement by bribery) fell within the scope of an arbitration clause and therefore was to be determined by arbitration. The House of Lords held that it did. In urging the broad interpretation of arbitration clauses Lord Hoffmann was not addressing any question as to whether the court could review the arbitrator’s determination on a dispute, a question on which the Court of Appeal in the present case sought to invoke the distinction between “jurisdiction” and “admissibility”. The point was made in a case note on the judgment of the Court of Appeal: Matos, “Jurisdiction, Admissibility and Escalating Dispute Resolution Agreements: C v D” [2023] LMCLQ 18 at 19-20.

142.  However, in 2020 the Singapore Court of Appeal in BBA v BAZ[110] considered the writings of Professor Jan Paulsson (in particular “Jurisdiction and Admissibility”, published in 2005[111]) when deciding (at [80]-[84]) whether the finding of the arbitral tribunal on the issue that the claim was time barred as a matter of limitation was beyond judicial challenge under the Singapore adoption of Article 34(2)(a)(iii). The Court decided (at [82]) that issues which arise on the expiry of statutory limitation periods “go towards admissibility”, not “jurisdiction”. Thus, the application of the distinction to interpret the Model Law considerably post-dates the adoption of the Law itself.

143.  The Singapore judgment was referred to in another Model Law jurisdiction in the judgment of a single Judge of the New South Wales Supreme Court in The Nuance Group (Australia) Pty Ltd v Shape Australia Pty Ltd[112]. But this was for the unsurprising proposition that a time bar does not go to the jurisdiction of the arbitrator, and without adoption of the “admissibility/jurisdiction” distinction. Thus, it would not appear that New South Wales is a jurisdiction in which the distinction has gathered support.

144.  In Republic of Sierra Leone v SL Mining Ltd[113], a decision of the English High Court, it was said to be “common ground” that there was a distinction “between a challenge that a claim was not admissible before arbitrators (admissibility) and a challenge that the arbitrators had no jurisdiction to hear a claim (jurisdiction)”. Section 30(1) of the 1996 Act defined the term “substantive jurisdiction” and provided in paragraph (c) that unless otherwise agreed between the parties, the arbitral tribunal may rule as to what matters have been submitted to arbitration in accordance with the arbitration agreement. The question of prematurity of the referral to arbitration was clearly not a matter of “substantive jurisdiction” described above. As the judge observed at [16], “at the end of the day the matter comes down at English law to an issue as to whether the question of prematurity falls within section 30(1)(c) of the 1996 Act”.

145.  Returning to the Singapore case, what is significant is that on a fair reading of the terms of Article 34(2)(a)(iii) itself, as explained above at [128]-[131] and [134], the operation of a statutory limitation bar as it did in BBA does not present a decision on a matter beyond the ambit of the arbitration submission. This conclusion is apparent without any need first to classify the issue as going to “admissibility” rather than “jurisdiction”. As noted above at [141]-[144], the adoption of the distinction involves a disruption in the uniform application of the Model Law.

146.  Further, it would appear that the distinction between “admissibility” and “jurisdiction” arose from a different setting to that in which Article 34(2) of the Model Law appears. As noted above, the distinction was developed in scholarly writings, in particular by Paulsson. He explained that the distinction between “jurisdiction” and “admissibility” had a pedigree in decisions of international courts and arbitral tribunals, such as the International Court of Justice (“ICJ”) and tribunals constituted under the International Centre for Settlement of Investment Disputes (“ICSID”). The adoption of the “admissibility” criterion in cases where the applicable domestic arbitration law did not contain an explicit distinction, as Paulsson put it, would be consistent with “an international consensus that decisions of arbitrators having jurisdiction are final”.

147.  There are, however, at least two difficulties in applying the “admissibility/jurisdiction” distinction to Article 34(2)(a)(iii) of the Model Law in the context of the setting aside of arbitral awards in the domestic context.

148.  First, given the international origin of the distinction as noted above at [146], one should be alert to the context in which the “admissibility/jurisdiction” distinction arose. The question usually raised was whether compliance with a procedural requirement, such as the exhaustion of local remedies, as set out in the relevant international treaties considered by the ICJ or in the ICSID dispute resolution clauses in bilateral investment treaties, went to the parties’ consent to submit the dispute to the relevant adjudicative organs for resolution. For example, in the context of investment treaty arbitrations, the pre-arbitration procedural requirements in a bilateral investment treaty constitute the terms of a unilateral offer from the State to arbitrate. Compliance with such terms by the investor is necessary for the arbitration agreement between the State and the investor to come into being. Consent, in this context, is used in a sense which is analogous to the existence of a valid arbitration agreement for the purpose of Article 34(2)(a)(i) of the Model Law. It is against this background that the distinction between “jurisdiction” and “admissibility” was discussed in these cases. In contrast, in the present case, where the existence or validity of an arbitration agreement is not in question, there is no issue with the parties’ consent to arbitrate (in the sense discussed above). Is it then correct to transplant the “admissibility/jurisdiction” distinction, developed in the context of ascertaining whether there is consent on the part of the parties to submit the dispute for resolution to the relevant court or tribunal, to the context of the setting aside of arbitral awards under Article 34(2)(a)(iii) of the Model Law where the existence or validity of the arbitration agreement (and hence, the parties’ consent to arbitrate) is not in dispute?

149.  Secondly, in the absence of any express provision in the relevant instrument on the reviewability of arbitral awards (i.e. when and under what circumstances arbitral awards may be subject to curial intervention), the “admissibility/jurisdiction” distinction may, in Paulsson’s words, serve to police against “an unjustified extension of the scope for challenging awards” so as not to “frustrate the parties’ expectation that their dispute be decided by the chosen neutral tribunal”. But as Paulsson indicates, domestic law may expressly deal with the finality of arbitral awards. Thus, in a domestic context such as the present case, where the circumstances in which arbitral awards may be set aside are clearly delineated by legislation, there is no need to import into the Model Law the “admissibility/jurisdiction” distinction, a concept developed by international courts and arbitral tribunals.

150.  In Hong Kong the Ordinance is an instance of a domestic arbitration law with detailed elaboration on the scope of curial intervention in arbitrations. As has been seen, of central importance to this appeal is section 81 of the Ordinance, which incorporates Article 34 of the Model Law. Article 34(1) provides that recourse to a court against an arbitral award may “only” be made by an application for setting aside under Article 34(2) and (3). Relevant to this appeal is Article 34(2)(a), set out above at [127], which enumerates four situations under which an arbitral award may be set aside, in particular that in paragraph (iii).

151.  As the analysis of the Court of Appeal demonstrates in the passage set out above at [133], the same result can be reached under the Model Law without resorting to concepts such as “jurisdiction” and “admissibility”. The inquiry is simply this: whether the dispute as to the fulfilment of a pre-arbitration procedural requirement falls within the ambit of the submission to arbitration. The question whether an arbitral award is captured by Article 34(2)(a)(iii) can be answered by construing the relevant clauses in the arbitration agreement (in this case, clauses 14.2 and 14.3 of the Agreement), without engaging in any juristic analysis as to whether the dispute which the arbitral award dealt with should be classified as going to “jurisdiction” or “admissibility”.

152.  The question is not whether an issue is one of “admissibility” and therefore not a subject of curial challenge to “jurisdiction” but whether the applicant can bring itself within at least one of the grounds on which Article 34 permits recourse to a court to set aside an arbitral award. If none of those grounds applies then recourse to a court is not permitted, not because of classification of the issue as one of “admissibility”, but because Article 34 the Model Law (adopted by section 81 of the Ordinance) mandates that result.

Designation by the parties of a dispute as “jurisdictional”

153.  It has been suggested that the parties may, by unequivocal language, designate a particular dispute as so-called “jurisdictional” by providing that the court may review the tribunal’s decision on such dispute. But there are two difficulties in this suggestion, commercial reality aside.

154.  First, applying the “admissibility/jurisdiction” distinction this way is liable to produce an outcome contrary to what Article 34(2)(a)(iii) mandates. As mentioned above at [122] and [124]-[125], the “general principles” to be discerned from sections 3 and 9 do not displace sections 12 and 81 of the Ordinance. If the ambit of the submission to arbitration is wide enough to encapsulate a dispute, notwithstanding the parties’ designation in the way suggested, a proper understanding of Article 34(2)(a)(iii), explained above at [128]-[131] and [134], does not allow an arbitral award which includes a decision on such dispute to be set aside. Nor does that Article afford any room for the court to review the tribunal’s decision on the merits of such dispute. Insofar as it is suggested that the merits of such dispute are liable to be reviewed by the court, the application of the “admissibility/jurisdiction” distinction distorts the proper scope of curial intervention under Article 34(2)(a)(iii).

155.  Secondly, to accept the proposition that if the parties agree that an issue is subject to court review, they have thereby made that issue one of “jurisdiction”, misuses that term insofar as the decision on that issue does not affect a tribunal’s authority to deal with the dispute by arbitration.

156.  It may well be that by an express provision the parties may bring the decision on certain disputes within a ground in Article 34. They may, for example, expressly state that the dispute bears on the existence or the validity of the arbitration agreement or that the dispute falls outside the ambit of submission to arbitration. But the availability of curial intervention in such a situation is entirely dependent on the proper construction of the parties’ agreement and the provisions of Article 34. It does not depend on whether the parties use the label “jurisdiction” or “admissibility”, still less whether they agree the tribunal’s decision on a dispute is subject to court review. The distinction as was applied in other jurisdictions might be thought to be helpful in describing the conclusion of the constructional exercises described above, but it does not aid in arriving at that conclusion.

Parenthesis

157.  Something should be said here concerning the relationship between Articles 16 and 34 (sections 34 and 81 respectively), the text of which is set out at [123] and [126]-[127]. Does the phrase in Article 16(1) that the tribunal “may rule on its own jurisdiction” broaden what otherwise are the precise grounds of curial intervention in Article 34, as to include what the parties have chosen in the agreement to identify as “jurisdictional”? The better view is that the Articles operate in tandem so that the scope of curial intervention under Article 34 is epexegetical of Article 16(1). But it should be emphasised that the scope of curial intervention arising from a tribunal ruling under Article 16(1) has not been the subject of focussed submission by the parties to this appeal.

Conclusion

158.  When questions arise as to the permissible scope of curial intervention under the Ordinance, the court should, on the one hand, properly construe the relevant arbitration agreement, bearing in mind the exhortations of Lord Hoffmann in Fiona Trust quoted above at [117], and on the other hand, properly construe the relevant statutory provision, bearing in mind the principle in sections 3(2)(b) and 12 of the Ordinance quoted above at [122] and [124].

159.  In sum, when determining whether the court may set aside an arbitral award under section 81 of the Ordinance, the “admissibility/jurisdiction” distinction is an unnecessary distraction and presents a task of supererogation: there is no need to find the answer somewhere else when it is supplied by construing and applying the statute to the facts of the case.

Order

160.  The appeal should be dismissed with costs on an indemnity basis.

Chief Justice Cheung:

161.  Accordingly, the court unanimously dismisses the appeal and makes a costs order nisi on an indemnity basis in favour of the respondent.