XCHRX YU LONG TRADING INTERNATIONAL CO. LTD. v. SINO-JINLINK PETROCHEMICAL CO. LTD.

HCMP2768/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO.2768 OF 2000

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D E C I S I O N

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1. By an originating summons dated 8 June 2000, the plaintiff applies for the enforcement of a CIETAC award on a judgment in Hong Kong pursuant to section 40B of the Arbitration Ordinance, Cap. 341. The arbitral award is in excess of US$1.3 million. The defendant does not seek to argue that the order of enforcement cannot be made but submits that the court can entertain an application by the defence for leave to file a counterclaim in the enforcement proceedings. The basis of the counterclaim is another CIETAC award in their favour for a lesser sum against the plaintiff arising out of a different contract, albeit similar in nature.

2. Mr Chan, for the defendant, submits that the rules permit him to, in effect, enforce the defendant's award in Hong Kong by adding it in the form of a counterclaim to the plaintiff's application under section 40B of the Arbitration Ordinance. He submits that the rules governing the making of counterclaims in ordinary proceedings, Order 28, rule 7, shall apply unless he is specifically excluded from doing so. His submission continues that the rules relating to Arbitration proceedings, Order 73, do not specifically prevent him from counterclaiming.

3. In my judgment, his application should not be granted. The starting point is Part IIIA of Cap. 341, which provides the mechanism for enforcement of mainland awards. Section 40B(1) states two ways by which a mainland award is enforceable, namely, either "by action in the Court" or "by virtue of section 2GG". Mr Kat for the plaintiff correctly submits that the defendant's award falls into neither category. They, therefore, do not have an enforceable award. By the same token they cannot rely on section 40B(2) which starts "Any mainland award which is enforceable under this Part shall ...."

4. The procedure to be followed when seeking an order for enforcement is specifically provided by Order 73 of the Rules of the High Court. As the defendant's present position falls outside Part IIIA, Cap. 341 and Order 73, it is not open to them to seek to enforce their award by simply annexing it as a counterclaim in the plaintiff's enforcement proceedings. The only course available to them to enforce their award in Hong Kong is to follow the provisions of Part IIIA and Order 73. If there is no provision for them to be granted leave to make a counterclaim, there can be no defence by way of set-off.

5. Finally, the defendant's position is further weakened by the fact that once the plaintiff obtained its CIETAC award, the defendant applied to have its own award (which pre-dated the plaintiff's) set off by an application to the arbitration tribunal in the mainland. The application was refused. There is force in Mr Kat's submission that that refusal is res judicata and conclusive against them.

6. For these reasons, I make the order for enforcement in the terms of the plaintiff's summons and refuse leave to the defendant in respect of its counterclaim. I see no reason why costs should not follow the events and will therefore be to the plaintiff.