C v D

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...