A1 AND ANOTHER v. W1 AND ANOTHER

A1 AND ANOTHER v. W1 AND ANOTHER

On preliminary consideration the Awards concern contractual commercial rights under the SPA and do not constitute a direct or indirect adjudication of PRC tax authority functions; the commercial reservation, arbitrability and public policy grounds did not apply at this stage; defendants had not been forthright about Hong Kong assets and payments (monthly US$600,000 transfers) raising a real risk of dissipation; accordingly security was required and ordered as a condition of adjourning enforcement proceedings.

Citation
[2022] HKCFI 3173
Parties
1st Plaintiff: A1; 2nd Plaintiff: A2; 1st Defendant: W1; 2nd Defendant: W2
Court
Court of First Instance
Jurisdiction
Hong Kong
Judgment Date
17 October 2022
Case Number
HCCT14/2022
Procedural Posture
Enforcement of Arbitration Awards; Setting Aside Application; Application for Security Pending Challenge Under S87 Arbitration Ordinance / Interlocutory (security Ordered Pending Hearing of Defendants' Setting Aside Application)
Outcome
Plaintiffs' application for security granted in part; security for enforcement ordered and security for costs ordered; costs awarded to Plaintiffs.
Legal Topics
Security for Costs, Recognition and Enforcement of Arbitral Awards, Commercial Reservation (new York Convention), Arbitrability of Tax/revenue Matters, Dissipation of Assets, Setting Aside Enforcement Order
Source Language
EN
Arbitration Enforcement Commercial Law Public Policy Tax Law Civil Procedure Security for Costs Recognition and Enforcement of Arbitral Awards +4 more

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Parties

A1

1st Plaintiff

A2

2nd Plaintiff

W1

1st Defendant

W2

2nd Defendant

Procedural Posture

Enforcement of Arbitration Awards; Setting Aside Application; Application for Security Pending Challenge Under S87 Arbitration Ordinance / Interlocutory (security Ordered Pending Hearing of Defendants' Setting Aside Application)

Legal Issues

  1. 1 Whether the LCIA Awards are commercial awards within the New York Convention/Arbitration Ordinance (commercial reservation)
  2. 2 Whether the Awards deal with foreign revenue or PRC tax matters making them non-arbitrable
  3. 3 Whether enforcement of the Awards would be contrary to public policy of the PRC

Ratio Decidendi

On preliminary consideration the Awards concern contractual commercial rights under the SPA and do not constitute a direct or indirect adjudication of PRC tax authority functions; the commercial reservation, arbitrability and public policy grounds did not apply at this stage; defendants had not been forthright about Hong Kong assets and payments (monthly US$600,000 transfers) raising a real risk of dissipation; accordingly security was required and ordered as a condition of adjourning enforcement proceedings.

Court Disposition

Plaintiffs' application for security granted in part; security for enforcement ordered and security for costs ordered; costs awarded to Plaintiffs.

Orders

  • Order that the Defendants provide security equal to 40% of the amounts specified in the Final Award on Quantum (as condition for adjournment of enforcement proceedings)
  • Order that the Defendants provide security for costs in the sum of HK$750,000 (substituting HK$1,100,000 in paragraphs 4 and 5 of the Summons)