CHINA INTERNATIONAL FUND LTD v. DENNIS LAU & NG CHUN MAN ARCHITECTS & ENGINEERS (HK) LTD

HCMP 2472/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO. 2472 OF 2014

(ON AN INTENDED APPEAL FROM HCCT NOS. 49 OF 2013 & 9 OF 2014)

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J U D G M E N T

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Hon Lam VP (giving the Judgment of the Court):

1.  On 13 June 2014, L Chan J dismissed an application by the Applicant to set aside an arbitration award of 21 November 2013. By that award, the arbitrator awarded US$7,551,643.70 in favour of the Respondent in respect of works done by the latter under an architectural consultancy contract. The Applicant sought leave to appeal against the decision of the learned judge [“the Judge”]. The Judge refused leave on 24 September 2014.

2.  Notwithstanding the apparent finality of the matter after the refusal of leave by the Judge as provided by section 81(4) of the Arbitration Ordinance Cap 609 [“the Ordinance”], the Applicant applied to this court to seek leave.   In the statement opposing leave, the Respondent contended, amongst other things, that this court has no jurisdiction to grant leave because of the statutory provision.  The Applicant responded by contending that section 81(4) is unconstitutional in that it disproportionately restricts the power of final adjudication of the Court of Final Appeal under Art 82 of the Basic Law. 

3.  In light of the challenge to the constitutionality of a statutory provision, this court directed that the matter be argued at a full hearing and the Secretary for Justice was asked to consider whether he would intervene.  After the Secretary indicated that he would wish to intervene, directions were given and the relevant evidence was filed on behalf of the Secretary explaining the genesis of section 81(4) and the aims for including that in our statute book.

4.  At the hearing, the oral arguments focused on the constitutionality issue.  Lord Pannick QC appeared (together with Mr Mok SC and Mr Ho) on behalf of the Applicant.  Mr Yu SC and Mr Dawes SC appeared for the Respondent.  Mr Jat SC and Ms Ho appeared for the Secretary for Justice. We are grateful to all the counsel for their comprehensive, clear and concise arguments which have been of immense assistance to us.

5.  Mr Yu also invited us to deal with substantive merit of the leave application irrespective of our decision on the constitutionality issue.

The constitutionality of section 81(4): submissions of counsel

6.  Though this is only a leave application, it is agreed by the parties that the issue of constitutionality, being one which goes to the jurisdiction of this court to grant leave, should be determined on a final basis rather than merely considering whether the challenge of constitutionality is reasonably arguable.

7.  Lord Pannick properly accepted that as in the case of section 84(3) of the Ordinance as discussed by another division of this court in Guangdong Changhong Electric Co Ltd v Inspur Electronics (HK) Ltd [2015] 2 HKLRD 714, the Court which has the power to grant leave in section 81(4) is the Court of First Instance.   

8.  As mentioned, it is contended on behalf of the Applicant that section 81(4) failed to pass the proportionality test in restricting the power of final adjudication of the Court of Final Appeal and as such needs to be read down in order to be Art 82 compliant.  

9.  The relevant principles for testing a finality provision were discussed by the Court of Final Appeal in A Solicitor v Law Society (2003) 6 HKCFAR 570 and Mok Charles Peter v Tam Wai Ho (2010) 13 HKCFAR 762.  For present purposes, it is sufficient to state the following propositions derived from those cases:

(a) Art 82 vests the power of final adjudication in the Court of Final Appeal and it is constitutionally entrenched;

(b) Since there is no constitutionally entrenched right of appeal to the Court of Final Appeal, any consideration relating to Art 82 should be examined by reference to that Court’s power of final adjudication and function;

(c) By its very nature, subject to special statutory provisions, the final appellate power is exercisable upon appeal from an intermediate appellate court.  Thus, other than cases where there is statutory provision for direct appeal to the Court of Final Appeal, restriction of appeal to an intermediate appellate court would also restrict the exercise of the power of final adjudication;

(d) The power of final adjudication requires regulation, which may include limitation, having regard to the power;

(e) Any restriction on the power of final adjudication must satisfy the proportionality test as follows:

(i) The restriction or limitation must pursue a legitimate aim;

(ii) The restriction or limitation must also be rationally connected to that legitimate aim; and

(iii) The restriction or limitation must also be no more than is necessary to accomplish that legitimate aim.

(f) It is the duty of courts in the exercise of their independent judicial power to review any legislation which seeks to impose any limitation on the power of final adjudication by asking whether such limitation satisfies the proportionality test.  And that assessment has to be conducted by examining all the circumstances; and

(g) Art 82 is a provision that may have relevance to all levels of court or statutory tribunals in terms of the appellate process.

10.  There was no serious dispute to these propositions before us.  Though Mr Jat in his skeleton submissions brought to our attention the approach adopted by the Court of Appeal in Mok Chalres v Tam Wai Ho [2010] 1 HKLRD 261 which suggested that Art 82 was not engaged in respect of appeal to this court, we agree with Lord Pannick that that approach had been reversed by the judgment of the Court of Final Appeal.  Very properly, Mr Jat did not press the point after hearing the submissions of Lord Pannick.

11.  Since the finality provision in section 81(4) of the Ordinance has the effect of limiting appeals to this court, which in turn would limit appeals to the Court of Final Appeal, Art 82 is engaged and it must be examined against the proportionality test.

12.  In the application of the proportionality test, Lord Pannick accepted properly that the first limbs (mentioned in paragraph 9(e)(i) and (ii) above) are satisfied.  Counsel took us to section 3 of the Ordinance to identify the legitimate aims: promoting speed, finality and reduction of costs in relation to arbitration and parties’ autonomy in choosing their own dispute resolution process.  He also accepted that the limitation in section 81(4) is rationally connected to these aims.

13.  The difference between the parties is over the third limb of the proportionality test: whether section 81(4) is no more than is necessary to accomplish that legitimate aim.  Lord Pannick submitted that the burden is on the party upholding the limitation to satisfy the court that the criterion under this limb is met.  He advanced the following grounds for contending that the criterion cannot be met in the present instance:

(a) The UNCITRAL Model Law on International Commercial Arbitration, on which section 81 is based, has no such requirement;

(b) The exclusion of the role of the Court of Appeal under section 81(4) is absolute;

(c) At the same time, section 81(1) allows for judicial intervention only in limited circumstances[1]. With such high threshold, it is more difficult to justify the absolute exclusion of this court in deciding whether there should be an appeal to this court;

(d) It is wrong in principle to give the judge who decided the application for setting aside the award an exclusive power over the grant of leave to appeal against his own judgment when judges in the Court of Appeal and the Court of Final Appeal would have more experience and expertise;

(e) Parties to arbitration should be able to appeal to this court if something has gone badly wrong.  Otherwise it would undermine confidence in using the arbitral process;

(f) The finality provision in section 81(4) is inconsistent with the provisions in Schedule 2, sections 3(5), 4(6), 5(8) and 6(5) of the Ordinance where the parties has a broader right to come to this court;

(g) There are less drastic means which could be adopted to achieve the same legitimate aims, e.g.  Schedule 2, sections 5(9) and 6(6): restricting the court’s power to grant leave to question of general importance or some other special reason;

(h) Leave applications to the Court of Appeal can be proceeded on papers and be dealt with summarily;

(i) In other types of cases, the appellate court itself has the final say in determining whether leave should be granted; and

(j) The practice in the other jurisdictions does not show that it is proportionate to have such limitation.   

14.  Mr Yu accepted that Art 82 is engaged.  He submitted that the court shall have regard to the following distinctions between the present case and the position facing the Court of Final Appeal in Mok Charles Peter v Tam Wai Ho, supra:

(a) Unlike that case, section 81(4) does not create an absolute bar against appeal, instead it provides for appeal in cases where the Court of First Instance grants leave if the appeal has a reasonable prospect of success;

(b) The present case should be considered in the context of arbitration awards.  Importance should be ascribed to respecting the parties’ autonomy in choosing arbitration as the means to resolve their disputes with its incident of speed and finality as well as privacy; and

(c) The Ordinance provides for different options for the parties to choose and if they so wish, they could opt for the scheme in Schedule 2.  There is no inconsistency between that under section 81(4) when the parties choose not to adopt Schedule 2.  It is all a matter of respecting the parties’ autonomy. 

15.  Regarding the matters Lord Pannick relied on, Mr Yu submitted that none of them points to the balance struck in section 81(4) as being disproportionate.  Mr Yu also defended the final determination of leave application by the Court of First Instance on these grounds:

(a) By the very nature of the proceedings for enforcement or setting aside of arbitration awards, by the time the Court of First Instance considered a leave application, the parties already had the case being considered by two different tribunals: (1) by the arbitrator; and (2) the Court of First Instance;

(b) As mentioned, it was a matter of choice of the parties in whether to opt for the scheme in Schedule 2;

(c) The cases are heard by specialist judges in the Construction and Arbitration List and the judge who dealt with the leave application in the Court of First Instance would have  greater familiarity with the case than the Court of Appeal; and

(d) If one were to take Lord Pannick’s analysis to its full logical end, even if leave is refused by this court, it should be reviewable by the appeal committee of the Court of Final Appeal.

16.  Mr Yu submitted there is a range of reasonable options which the legislature could adopt to achieve the legitimate aims in questions and the present scheme in the Ordinance, including section 81(4), is within that range.  He submitted that this court should accord the appropriate margin of appreciation to the measure adopted in the statute passed by the legislature.

17.  Counsel also referred us to the residual jurisdiction that this court has in supervising the process in the Court of First Instance (see CGU International Insurance Plc v AstraZeneca Insurance Co Ltd [2007] 1 All ER (Comm) 501; Guangdong Changhong Electric Co Ltd v Inspur Electronics (HK) Ltd, supra) and the decision of the English Court of Appeal in Republic of Kazakhstan v Istil group Ltd (No 2) [2008] 1 All ER (Comm) 88 on the proportionality of a similar provision in the English Arbitration Act.

18.  Mr Jat, on behalf of the Secretary for Justice, adopted Mr Yu’s submissions on the constitutionality issue.  He emphasized that proportionality should be considered against the overall scheme of the Ordinance and ultimately it is a matter of the implementation of a policy to promote the use of arbitration in Hong Kong and to promote Hong Kong as an arbitration friendly jurisdiction.  In the present context, the question is about who should be the gatekeeper deciding whether there should be an appeal to this court and the limitation in section 81(4) cannot be said to be disproportionate. 

19.  On the residual jurisdiction, Mr Jat submitted that it is derived from a broad construction of “appeal” in section 14(1) of the High Court Ordinance.

The residual jurisdiction

20.  We agree that the constitutionality of section 81(4) should not be examined in isolation.  The limitation should be considered together with the entire scheme of judicial scrutiny of arbitration awards in determining whether it satisfies the proportionality test in view of Art 82 of the Basic Law.

21.  Thus, it is important for us to determine whether this court has any residual jurisdiction to supervise the process in the Court of First Instance notwithstanding the apparent finality of section 81(4).

22.  In Guangdong Changhong Electric Co Ltd v Inspur Electronics (HK) Ltd, supra, this court discussed the nature of the residual jurisdiction as expounded in the English cases.  It is a jurisdiction to provide redress in the extreme situation where the refusal of leave by the lower court cannot be properly regarded as a “judicial” decision, or in the words of Mustill LJ in Aden Refinery Co Ltd v Ugland Management Co Ltd [1987] QB 650, a decision reached “not by any intellectual process, but through bias, chance, whimsy or personal interest”.  It targets against substantial defect in the fairness of the process which invalidates the decision, per Rix LJ in CGU International Insurance Plc v AstraZeneca Insurance Co Ltd, supra.  The remedy that the Court of Appeal may grant is not to substitute the Court of Appeal with the lower court in deciding whether to grant leave.  Rather, the Court of Appeal would only decide whether or not to set aside the original decision to refuse leave and if it is set aside, the intended appellant could re-apply to the lower court for leave to appeal, see Kyla Shipping Co Ltd v Bunge SA [2013] EWCA Civ 734 per Longmore LJ at [23].   

23.  The Court of Appeal in Guangdong Changhong Electric Co Ltd v Inspur Electronics (HK) Ltd, supra, accepted the reasoning in those cases and tentatively observed that similar residual jurisdiction might stem from section 14(1) of the High Court Ordinance.  However, as the statutory basis for the jurisdiction had not been fully argued before it, the court did not express a conclusive view in that case. 

24.  At the hearing before us, we received able assistance from eminent counsel on this question.  We are now in a position to conclude that a similar residual jurisdiction exists in Hong Kong.  With respect, we do not feel able to accept Mr Jat’s approach on the construction of section 14 of the High Court Ordinance to provide the statutory basis for this residual jurisdiction.  We prefer to adopt Lord Pannick’s analysis: that section 14(3)(ea)(iv) and (v) has to be read down in light of Art 82 to carve out from the exclusions in those sub-sub-sections the residual jurisdiction for the supervision of the fair processing of the leave application by the Court of First Instance.  Once this is achieved, an application invoking the residual jurisdiction would fall into scope of section 14(1) as an appeal from an order of the Court of First Instance in a civil matter.

The role of the Court of Appeal in the scheme of the Ordinance

25.  The Ordinance adopts many features of the UNCITRAL Model Law on International Commercial Arbitration, one of which can be found in section 81 of the Ordinance which incorporates Article 34 of the Model Law into our domestic legislation.  An important objective of the Ordinance is to delineate the proper scope for judicial interference in arbitration.  The underlying policy is clearly set out in Section 3 of the Ordinance, in particular Section 3(2):

“ (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.”

26.  Section 3(2) is particularly important for present purposes.  Section 2 of the Ordinance designates the Court of First Instance as the court to performing some specified functions under the Ordinance.  In line with the Model Law, the Ordinance provides for that court’s involvement or interference in the arbitration process in limited manner:

(a) Section 22B: grant of leave for enforcement of emergency relief, such decision is not appealable;

(b) Section 26(3): challenge against the appointment of a particular arbitrator, such decision is not appealable;

(c) Section 31(8): deciding whether the umpire is to replace the arbitrators when the arbitrators cannot agree and fails to give the requisite notice, the decision is not appealable;

(d) Section 45: grant of interim measure, the decision is not appealable;

(e) Section 55: ordering a person to attend arbitration proceedings to give evidence  or to produce documents, the decision is not appealable;

(f) Section 58(7): extending time for arbitration, the decision is not appealable;

(g) Section 59(5): dismissal of claims in case of unreasonable delay in the pursuit of a claim by arbitration, the decision is not appealable;

(h) Section 60: directions of inspection, photocopying, preservation, custody, detention, sale of relevant property or taking of samples in relation to arbitration proceedings, a decision on sale is appealable only with the leave of the Court, and apart from that, such decisions are not appealable;

(i) Section 61: grant of leave to enforce an order or direction made by an arbitral tribunal, the decision is not appealable;

(j) Section 62: recovery of arbitrator’s fees, the decision is not appealable;

(k) Section 72: extension of time for making an award, the decision is not appealable;

(l) Section 77: determination of arbitral tribunal’s fees and expenses, the decision is not appealable;

(m) Section 81: setting aside of award, the decision is only appealable with the leave of the Court;

(n) Section 84: grant or refusal of leave to enforce an arbitration award, only appealable with the leave of the Court;

(o) Section 86(4): adjournment of enforcement proceedings and ordering security in the wake of application to set aside an award, the decision is not appealable;

(p) Section 89(5): mirror provision as per Section 86(4) for Convention awards, the decision is not appealable;

(q) Section 98D(5): mirror provision as per Section 86(4) for Macao awards.

27.  Thus, in general, the role of the Court of Appeal under the scheme of the Ordinance is more limited than usual proceedings in the High Court.  Even in instances where appeal to this court is possible, they have to be brought with the leave of the Court of the First Instance.

28.  However, there is an option for alternative schemes in Schedule 2 to the Ordinance, see Section 99.  Parties can opt for some or all of those provisions in the arbitration agreement.  Schedule 2 also applies automatically to arbitration pursuant to agreement providing for domestic arbitration made within 6 years from the commencement of the Ordinance, see Section 100.  Section 101 also provides for automatic application of Schedule 2 regime in respect of construction sub-contracts.

29.  Under the Schedule 2 regime, there is a wider scope for the involvement of the Court of First Instance as well as the Court of Appeal.  Under Section 3 of Schedule 2, a party to arbitration may apply to the Court for the determination of a question of law.  Such determination is appealable with the leave of the Court or the Court of Appeal.  Under Section 4, a party may challenge an arbitral award on ground of serious irregularity and the determination of that challenge by the Court of First Instance can be subject to appeal with the leave of the Court of the Court of Appeal.  Under Section 5, there can be appeal against an arbitral award on question of law and the determination of such appeal by the Court can be further appealed to the Court of Appeal with the leave of the Court or the Court of Appeal if the question is one of general importance or for some other special reason, should be considered by the Court of Appeal.

30.  It can immediately be seen that there are different regimes governing appeals from the Court of First Instance to this court under Schedule 2 where the Court of Appeal may play a greater role than the one under the primary regime in the Ordinance.  Other than those situations falling within sections 100 and 101, it is entirely a matter of the parties’ choice in deciding whether they would opt for some or part of those provisions in their arbitration agreements.

31.  Hence, looking the scheme of the Ordinance as a whole, it does not impose any strict mandate that parties must follow the primary regime.  In terms of potential engagement of the Court of Appeal in respect of applications for leave to appeal in cases of challenge to an award on ground of serious irregularity, if a party wishes to retain an option to come to this court to seek leave, he can stipulate in his arbitration agreement that section 4 of Schedule 2 shall apply.  Conversely, if a party does not make such stipulation, he is taken to have bargained with the opposite party that the role of this court in such matter would be limited as per section 81 of the Ordinance.

32.  Even in the section 81 regime, as discussed above, this court still retains an overall supervision on the fairness of the process of seeking leave before the Court of First Instance in the form of the residual jurisdiction. 

33.  The proportionality of the limitation in section 81 has to be assessed in this light.  Against such light, with respect, we do not agree with Lord Pannick that the limitation of section 81 is an absolute exclusion.  Nor do we agree that there is no way for a party to come to this court if things had gone badly wrong in the arbitration process.  By that expression, Lord Pannick must be referring to those situations falling within section 81(1) of the Ordinance (which provides for the relevant grounds for setting aside an arbitral award in accordance with Art 34(2) of the Model Law[2]). The primary scheme of the Ordinance provides for the determination of those grounds by the Court of First Instance.  If the Court of First Instance considers that there is reasonable prospect of success (which is not a very high threshold) in an appeal from its determination on such grounds, it would grant leave to appeal.  On the other hand, if a specialist judge[3] in the Court of First Instance decided (after fair and judicial consideration being given to the matter[4]) that there is no reasonable prospect of success, it is very difficult to imagine that such a case could properly be characterized as an arbitration process gone badly wrong.     

34.  The rationale for the differences between the regime of section 81 and that under Schedule 2 is therefore based on parties’ autonomy.  If a party has opted for arbitration with a more limited role of this court (and no role in deciding whether leave should be granted) under section 81, with the expectation that the court process would not entail more rounds of leave applications after it has been determined by the Court of First Instance, it is substantially different from a scenario where a party opted for arbitration under section 4 of Schedule 2.  In our view, it is not correct to regard section 81 as being inconsistent with Schedule 2.

35.  Mr Jat is correct in identifying the question as who should be the gatekeeper.  Though section 81 relates to appeal to this court, as explained earlier the power of final adjudication of the Court of Final Appeal in Art 82 of the Basic Law is engaged because without any appeal to this court, absent any specific legislation, there cannot be any appeal to the Court of Final Appeal.  As far as the gatekeeper function is concerned, Lord Pannick did not shy away from the proposition that if this court refuses leave, it could equally be argued that the party should be allowed to go to the Appeal Committee to seek leave.  In other words, the party who succeeded in the arbitration (which was upheld by the Court of First Instance with leave to appeal refused) might potentially be subject to two further rounds of leave applications (with its incidental time and costs implications) before the matter reaches it finality. 

36.  Is it a proportionate measure to curtail such further rounds of leave applications having regard to the legitimate aims of the Ordinance as discussed above? A similar question was considered by the English Court of Appeal in Republic of Kazakhstan v Istil Group Ltd (No 2) supra to which we shall presently turn.   

Republic of Kazakhstan v Istil Group Ltd (No 2)

37.  In this case, the English Court of Appeal was concerned with a limitation to appeal against the decision of the High Court in a challenge to an arbitral award under section 67(4) of the Arbitration Act 1966.  Again the statute requires leave of the High Court before such an appeal could be brought.  The intended appellant argued that the limitation was incompatible with the right to a fair trial in Art 6 of the European Convention for the Protection of Human Rights and Fundamental Freedoms. 

38.  On the facts, the High Court set aside the award by the arbitration tribunal and refused leave to appeal.  The party who was successful before the tribunal sought leave to appeal from the Court of Appeal.  The English Court of Appeal held that section 67(4) satisfied the proportionality test and it was compatible with Art 6.  It held that aims similar to those discussed above in the context of our Arbitration Ordinance were legitimate aims[5].

39.  Longmore LJ held that the limitation was proportionate.  At [26], the learned judge said:

“ [26] In my judgment, it is proportionate because it is in the interests of the legitimate aim that only second appeals which do have a reasonable prospect of success should be permitted to proceed. The only way in which the restriction in this case differs from second appeals in general is that it is the judge rather than this court that is given the final say. It is, of course, true that the decision is vested in the judge who has himself decided whether the point argued is right or wrong. That does not seem to me to be a relevant consideration. Judges are independent tribunals and one of their common, though no doubt unenviable, tasks is to decide whether to give permission to appeal against their own decisions. In other parts of the civil system, their decision may not be the final one but it is nevertheless a decision which they are accustomed to make. In the context of arbitration cases, where disputes have to be resolved without unnecessary delay or expense, it is, in my view, proportionate that it should be the judge who knows about the case and who decides the dispute who should be entrusted with the decision whether there is a reasonable prospect of success.”

40.  We are confident that we can make the same observations regarding our judges who hear arbitration cases in the Court of First Instance.

41.  At [35] Toulson LJ, in holding that the limitation was proportionate, highlighted the special considerations in arbitration cases to justify the same:

“ [35] I agree. I add one short point only in relation to the first issue. The point, which may seem rather obvious, is that arbitration is an optional regime. This is relevant when considering the proportionality of the legislative restrictions on rights of appeal. The principal attractions of arbitration are seen as speed, privacy and the limited control available to the court through challenges and appeals. A party which wishes to challenge the jurisdiction of arbitrators must take the point before the arbitrators, and will lose the right to challenge it before the court unless it has taken the point before the tribunal or can show that the party did not know the grounds of objection and could not with reasonable diligence have discovered them (s 73). Therefore, ordinarily in the case of a s 67 challenge there will be hearings at two levels. I can see nothing inimical to art 6 in Parliament leaving it to the judge to decide whether the case is fit to go onto a third tier. As I have said, the limit in the number of permissible court challenges is an integral part of the package for which parties, in the free exercise of their autonomy, opt when they contract out of the ordinary process of litigation and refer their disputes to arbitration.”

42.  Again, even though we are concerned with Art 82 (which engaged the power of final adjudication as opposed to the right to fair trial), we respectfully agree that similar considerations should inform our assessment of the proportionality of our section 81(4).  Lord Pannick submitted that the focus of Art 82 is on the structural integrity of our judicial system as opposed to fairness between the parties.  In the present context, we cannot discern any special considerations flowing from structural integrity of the judicial system which invalidate the soundness of the analysis of Toulson LJ and counsel did not put forward any before us.   

43.  Arden LJ addressed further the concern over the judge deciding for himself whether his own decision should be subject to appeal at [37]:

“ [37] Secondly, I would like to express my particular agreement with Longmore LJ’s rejection of the argument that it was not open to the judge to decide the question of permission to appeal, given that the permission was sought to appeal from his own judgement. I agree with the reasons my Lord gave and would add that this is not a case in which it is suggested that the judge had any personal or financial interest. In this type of situation, the litigant has the protection that the judge has taken a solemn and important judicial oath. If by chance that there were any evidence, which there is certainly not here, to show that the judge had departed from his judicial oath that would, in my judgement, be procedural unfairness within the exception formulated in CGU International Insurance plc v AstraZeneca Insurance Co Ltd [2006] EWCA Civ 1340, [2007] 1 All ER (Comm) 501.”

44.  Lord Pannick submitted that the recognition of the residual jurisdiction undermines the absolute prohibition against applying to this court for leave. 

45.  We cannot accept this submission.  As explained above, the residual jurisdiction is different in character and purpose from a right to apply to this court for leave to appeal.  Such difference is important in the context of the structural integrity of our judicial system.  It is obvious that this court must provide a means of redress in the rare case where the decision to refuse leave in the court below cannot be regarded as a judicial decision.  The same cannot be said where a judge has refused leave after giving the matter a fair and proper consideration.  The rarity of occasions where it would be proper to invoke the residual jurisdiction and the very high threshold that an applicant must meet have repeatedly been emphasized, see Kyla Shipping Co Ltd v Bunge SA [2013] EWCA Civ 734 at [15]; Republic of Kazakhstan v Istil Group Ltd (No 2), supra at [32] to [33]; Guangdong Changhong Electric Co Ltd v Inspur Electronics (HK) Ltd, supra, at [20].  The number of occasions where the residual jurisdiction would be invoked is likely to be much less than those where leave applications are renewed in this court.

“No more than is necessary”

46.  We accept that it is for the court to decide whether the proportionality test is satisfied.  However, the third limb of the test (viz the limitation must be no more than is necessary to accomplish the legitimate aim) should not be applied without giving recognition to the possibility of a reasonable range of options.  Though we are concerned with the power of final adjudication, an area which the court is more familiar with than, say, socio-economic policy, there is still room for different options which can satisfy the test.

47.  In this connection, the observations of the Chief Justice in Fok Chun Wa v Hospital Authority (2012) 15 HKCFAR 409 at [75] are instructive.  That case is concerned with a subject matter falling within the realm of socio-economic policy.  In our respectful view, what His Lordship said regarding the ultimate purpose of the analysis (whether what has been done is a proportionate response to the legitimate aim) and the different roles of the judiciary, the executive and the legislature is also valid in other cases though the stringency or intensity of the scrutiny by the court will be greater in cases involving fundamental concepts or core-vales. 

48.  It is noteworthy that one of the cases cited by the Chief Justice was RJR-McDonald Inc v A-G of Canada [1995] 3 SCR 199, a case on freedom of expression.  In that context, McLachlin J observed:

“ If the law falls within a range of reasonable alternatives, the courts will not find it overbroad merely because they can conceive of an alternative which might better tailor objective to infringement.”

49.  The point is also vividly illustrated by Leung Chun Ying v Ho Chun Yan Albert (2013) 16 HKCFAR 735 which concerns with a fundamental right, the right of access to court.  At [45], the Chief Justice reiterated the different constitutional roles of the judiciary on the one hand and the executive and legislature on the other. 

50.  In Mok Charles Peter v Tam Wai Ho, supra, Bokhary PJ also acknowledged the same approach though His Lordship preferred not to use the expressions “margin of appreciation” and “deference”.  He said at [79]:

“ What the Court will do is to recognise that, save where absolute and non-derogable rights and freedom are concerned, there will generally and naturally be a range of legislative choices as to which any preference that the Court may have is irrelevant. Where legislation lies outside that range, the Court will intervene.”

51.  Thus, the question that this court is concerned with is whether section 81(4) falls outside the range of reasonable options. 

52.  On its terms, section 81(4) imposes finality in respect of the decision of the Court of First Instance on whether leave to appeal should be granted.  As discussed above, this is subject to the limited supervisory residual jurisdiction of this court.  The underlying subject matter is an arbitral award.  As submitted by Mr Yu, by the time when the court’s intervention is sought to set aside an award, the parties have gone through the adjudicative process by a tribunal of their choice whose decision they have agreed to be final and not to be subject to an appeal on the merit.  We respectfully agree with the observation of Waller LJ in Henry Boot Ltd v Malmaison Hotel Ltd [2001] QB 388 at p.396 that limitation on the rights of appeal is consistent with the philosophy underpinning arbitration and that philosophy does not cease to apply when the matter has come to court by way of a challenge to the arbitral award.  We also agree with Mr Yu that to allow multiple rounds of leave application would undermine the legitimate aim of finality and speed and reduction of costs of dispute resolution by arbitration.  

53.  Against such context, it is a matter of policy considerations in deciding who should be the gatekeeper having regard to the importance one placed on party autonomy in arbitration, the promotion of speed and reduction of costs in those cases and the interest of bringing a challenge to an award to courts of the higher level.  As submitted by Mr Yu, we are not dealing with an absolute power of final adjudication.  As in Leung Chun Ying v Ho Chun Yan Albert, supra, in defining the point at which a determination by the court should be final, there is room for recognizing that it is consistent with Art 82 for the legislature to adopt one scheme out of a range of reasonable options.

54.  In light of the considerations mentioned in Republic of Kazakhstan v Istil Group Ltd (No 2), supra, we are satisfied that the limitation in section 81(4) is not more than what is necessary to achieve the legitimate aims.  It falls within the reasonable range of options for achieving the same.  We do not find it objectionable that the judge has to decide whether leave should be granted for an appeal against his own decision.  In addition to the reasons canvassed by the English Court of Appeal, it is also trite that the judge would be more familiar with the case and the arguments of the parties and he or she could usually reach a decision on the leave application promptly.  In this connection, we do not find a comparison with other types of cases to be meaningful.  The arbitration context is different and the legitimate aims in issue are different.

55.  Having reached this conclusion, the submissions of Lord Pannick that there could be more liberal schemes (and no doubt there is, as provided under Schedule 2), is neither here nor there.  Nor is it relevant that the Model Law does not mandate this particular restriction.  Nor the fact that other jurisdictions adopt slightly different schemes.  In that respect, as submitted by Mr Yu, some of the other jurisdictions which we have been referred to also have measures limiting intervention by the courts and Hong Kong is by no means unique in this regard.

The merit of the leave application

56.  Since we have come to the clear conclusion that this court has no jurisdiction to entertain any leave application, we would only briefly comment on the merit of the leave application.  We are in agreement with Mr Yu that the Judge was correct in holding that the appeal does not enjoy a reasonable prospect of success.  In our view what the Applicant sought to attack was the substantive merit of the award though it was dressed up as attacks to the integrity of the arbitration process.

Disposition

57.  We shall dismiss the application by the Applicant and order it to pay the costs of the Respondent, such costs to be taxed on indemnity basis with certificate for 2 counsel.  The Secretary for Justice does not seek costs.  We do not see any good reason why the usual practice of ordering costs to be paid on indemnity basis in arbitration cases should not be followed in the present instance.  The constitutional issue was brought up by the Applicant after the Respondent had properly referred us to section 81(4).  Having lost on that issue, the Applicant must pay the costs in the usual manner.