HAIKOU CITY BONDED AREA WANSEN PRODUCTS TRADING CO. v. LOGY ENTERPRISES LTD.

1995, No.MP2900

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

MISCELLANEOUS PROCEEDINGS

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J U D G M E N T

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1. This is an application by Logy Enterprises Limited to persuade me to refuse to enforce an arbitration award made in China. Leave to enforce was given by Leonard J. on 17 November 1995 under Sections 2H and 42 of the Arbitration Ordinance, Cap.341.

2. The grounds for setting aside have been set out in a very well prepared written submission and there has been a vast number of documents produced, only a few of which have been necessary to examine. This case was set down for two days, I do not understand why, but I accept I had the opportunity yesterday and this morning to read not only the written submissions but a number of the documents. The principles are known to me. This is a convention award and can be enforced in Hong Kong; it can only be set aside under s.44.

3. The approach of the court is highlighted by the wording of s.44 which starts off by saying "Enforcement of a convention award should not be refused except in the cases mentioned in this section". It is clear from the wording itself that courts must only refuse to enforce when it is clear that the ground for complaint falls within and is proved to fall within one of the specified subsections. Here, the defendant relies upon s.44(2)(e). The approach of the court also is that even if one of the grounds is proved, the court still has a residual discretion. (See China Nanhai Oil Joint Service Corporation v. Gee Tai Holdings Ltd. [1994] 3 HKC 375).

4. The object of Part IV of this Ordinance is to prevent technical and unmeritorious points except where there is a substantial complaint, see for example, Shenzhen Nan Da Industrial and Trade United Co. Ltd. v. FM International Ltd. [1992] 1 HKC 328.

5. Those who choose arbitration in their contractual arrangements must recognise that it is the arbitration procedure that governs their disputes. Courts do not get dragged into these matters unless and until it is clear that there has been some substantial transgression which falls within one of the grounds of s.44. The merits of the award are not for the court to go into, the court does not retry the case. There is substantial authority for that.

6. There is a ground under subsection (3) which is also relied upon by Mr Xavier which says that enforcement may be refused if it is contrary to public policy. This, in my judgment, means matters which would indeed violate the standard principles of justice. I agree with Mr Yuen that a narrow approach should be adopted in this type of case. (See Halsbury's Laws Vol.1 pp.739-740 and Qinhuangdao Development Co. v. Million Basic Co. Ltd. [1993] 1 HKLR 173.) There is a chronology which has been kindly set out by Mr Yuen which, if necessary, I would include in this judgment. I do not think it is necessary for me to go through it, but it sets out all the important dates.

7. Essentially what this case is about, which is dealing with an allegedly short delivery of some steel rods, is that the arbitrator that was appointed could not take up his appointment. So a new person came upon the scene. This gentleman, is called Zhai Bao Shan (although a slightly different name appeared in the relevant list). He is the Chief Official of the Inspection Technology Section at the Import and Export Commodity Inspection Bureau of the PRC, the CCIB, a national entity, so his is a national appointment and his duties are set out at page 739 of the Bundle. He was responsible for inspection relating to the import and export of commodities involving safety hygiene and environmental protection. Inspection of steel does not lie within the ambit of that group.

8. The important matter which was raised here was a certificate that was issued by the Haikou CCIB which is a subsidiary, of course, of the Hainan area CCIB and the pleadings that were placed before the arbitration panel raised the issue as to the authenticity of the certificate. Everyone knew about this being raised, it was argued fully, there was nothing procedurally irregular that took place, everything was dealt with as far as one can see from the papers, perfectly fairly. But what is complained of here is that it is said by Mr Xavier, on behalf of the defendant, that the general principle of CIETAC rules is that the arbitration is carried out in an independent and impartial manner and that therefore this was not carried out in an independent and impartial manner because the gentleman in question was a senior official in the CCIB and if he was, he would not hold against the authenticity of a certificate issued by one of the Regional CCIBs. He has put forward the opinion of a professor, Professor Wang, and a retired judge who have given their opinions for what they are worth and he said that there was a contravention here of Article 28 of the Rules which says :-

"Any appointed arbitrator having a personal interest in the case shall himself disclose such circumstances to the Arbitration Commission and request a withdrawal from his office."

He said there being a breach of that, then this falls within sub-paragraph (e) that either the composition or the procedure was not in accordance with the law of the land. In other words, this gentleman, he said, had a personal interest.

9. I confess I cannot find that there is anything in this. Although he clearly was a high official, he was a professional man, I cannot see why he would in anyway have any problem over finding that a sub-region might have forged a certificate. At any rate, the matter was canvassed at great length and the Arbitration Tribunal came to a conclusion that it was not. Although that in itself was not sufficient to prove the case and it is clear from the arbitral award that they examined other matters. Mr Xavier said that Mr Cao Jia Rui was interviewed. I find this very strange, and I have never heard of arbitrators being interviewed after the arbitration procedure, but he said "I realized that one of the arbitrators was with CCIB but eventually the three arbitrators came to a unanimous view". He had said originally he had been supportive in rejecting the certificate. It may be he was, but the conclusion was that it was upheld. I can find nothing in the evidence which would indicate that there was unfair or undue pressure or anything which in anyway is contrary to the rules. By Article 81 the interpretation of the rules is vested in the Arbitration Commission. The Arbitration Commission themselves have stated there is no conflict of interest. I have had regard to that, I do not think it is conclusive. I do not think I would need to decide the case on that basis. It is still for the court to make the decision.

10. I obviously pay respect to the views of any professor or the Commission itself, but ultimately it is for me to decide on the evidence whether or not, there has been proved to my satisfaction that there has been a breach of s.44(2)(e). In my judgment, there was none. Further I cannot find in any shape or form that this could be said to be contrary to public policy to enforce the award. It is a straightforward commercial dispute between two commercial bodies. It does not raise anything other than the determination of that basic fact.

11. Mr Xavier has also relied on some other points, one is about a CNF defence, which was considered by the tribunal. They are not pursued with any great vigour. I have looked at those but none of them, in my judgment, would possibly cause the court to have any disquiet. The only matter of any substance has been the position of this CCIB official.

12. In my judgment, albeit that there is a large amount of paper here which has been set out in a very helpful manner, the issue is a short one.

13. I can find nothing which permits me to set aside this convention award.