Pccw Global Ltd v Interactive Communications Service Ltd

CACV 18/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 18 OF 2006

(ON APPEAL FROM HCA NO. 2826 OF 2004)

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J U D G M E N T

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Hon Tang VP (giving the judgment of the Court):

1. Beyond The Network, Limited’s (“Beyond”) claim against the Vectone Limited (“Vectone”) arose out of an agreement dated 4 April 2003 whereby Beyond and Vectone agreed to supply to and purchase from each other international long-distance services, with the net amount due from one party to the other to be billed and settled periodically.

2. It is Beyond’s claim that there is a net amount of US$718,999.26 due and payable by Vectone. That has been disputed by Vectone. This has been referred to in the submissions as a billing dispute.

3. The writ was issued on 14 December 2004 and served on Vectone on 17 December 2004. On 16 February 2005, Vectone gave formal notice that it wished to go to arbitration under clause 11.3 of the agreement.

4. On 31 March 2005, Vectone applied to have the action stayed under section 34C of the Arbitration Ordinance, Cap. 341.

5. Reyes J refused a stay on 13 December 2005.

6. This is Vectone’s appeal.

7. The agreement is contained in a document headed “Master Service Agreement for International Voice Services”. It is clear from the document that the agreement was based on a standard form in respect of which Beyond claimed copyright.

8. The relevant provisions in the agreement are set out below:

“	4.	SETTLEMENT AND PAYMENT
	4.3	Each party will be responsible for payment of all undisputed charges as reflected on any billing statement.... Neither party shall have an obligation to pay any amount which has been disputed in good faith until such time that the dispute is satisfactorily resolved by the Parties.... In the event the Parties are unable to resolve the dispute amicably with[in] a reasonable period of time and havin[g] exchanged their respective call detail records, not to exceed 14 days, then, the parties will submit the difference to the Hong Kong Courts.
	5.	REGULATIONS. This Agreement is made expressly subject to all present and future valid orders, regulations of any regulatory body having jurisdiction over the subject matter of this Agreement, and to the laws of the Hong Kong, SAR. The Parties hereby submit to the exclusive jurisdiction of the courts of Hong Kong, SAR.
	11.	GENERAL PROVISIONS
	....
	11.2	GOVERNING LAW. This Agreement will be interpreted in accordance with the laws of the State of New York, USA, notwithstanding the principles of conflicts of laws thereof, and any dispute shall be submitted to the courts in the State of New York. The Parties agree that the United Nations Convention on Contracts for the International Sale of Goods will not apply to this Agreement.
	11.3	ARBITRATION. Either Party may require that any dispute arising hereunder be settled by binding arbitration in accordance with the commercial arbitration rules of the American Arbitration Association provided that alleged breaches of Section 7 (Confidentiality) may be settled by injunctive relief in a court as provided in Section 11.2. The arbitral tribunal shall be composed of a sole arbitrator. The English language shall be used throughout the arbitral proceeding. The arbitration shall take place in New York, NY, USA. The cost of the arbitration, including the fees and expenses of the arbitrator(s), shall be shared equally by the Parties unless that award provides otherwise.
	....
	11.8	CAPTIONS. Captions of the sections and subsections of this Agreement are for reference purposes only and do not constitute terms or conditions of this Agreement, and shall not limit or affect the terms and conditions hereof.
	11.9	WAIVER. No provision of, right, power or privilege under this Agreement shall be deemed to have been waived by any act, delay, omission or acquiescence on the part of either Party, its agents, or employees, but only by an instrument in writing signed by an authorized officer of each Party. No waiver by either Party of any breach or default of any provision of this Agreement by the other Party shall be effective as to any other breach or default, whether of the same or any other provision and whether occurring prior to, concurrent with, or subsequent to the date of such waiver.”

9. It is obvious that there is an apparent conflict between clause 5 where the parties “submit to the exclusive jurisdiction of Hong Kong, SAR”, and clause 11.2 which provided that “any dispute shall be submitted to the courts in the State of New York”.

10. Mr Beresford, who appeared for Beyond, accepted that provided an election to arbitrate was made within a reasonable time and within the scope of clause 11.3, there would have been a binding agreement to arbitrate such that the court would be obliged to stay the action. We agree.

11. The principal point in this appeal is whether or not clause 11.3 covered a billing dispute.

12. Mr Sussex SC, who appeared for Vectone, submitted that under clause 11.3, once one has elected to have a dispute referred to arbitration, the court must give effect to it. In other words, the submission to the jurisdiction of the Hong Kong courts in clause 4.3 is overridden as soon as an election to arbitration is made under clause 11.3.

13. The effect of a clause similar to clause 11.3 was considered in The Messiniaki Bergen [1983] 1 Lloyd’s Law Rep. 424, a decision of Bingham J (as he then was). There the relevant provisions were:

“	40(a)	This charter shall be construed and the relations between the parties determined in accordance with the law of England.
	(b)	Any dispute arising under this charter shall be decided by the English Courts to whose jurisdiction the parties agree … Provided that either party may elect to have the dispute referred to the arbitration of a single arbitrator in London in accordance with the provisions of the Arbitration Act, 1950 … Such election shall be made by written notice by one party to the other not later than 21 days after receipt of a notice given by one party to the other of a dispute having arisen under this charter.”

14. Bingham J said at page 426:

“… The proviso is not an agreement to agree because upon a valid election to arbitrate (and assuming the clause to be otherwise effective) no further agreement is needed or contemplated. It is, no doubt, true that by this clause the parties do not bind themselves to refer future disputes for determination by an arbitrator and in no other way. Instead, the clause confers an option, which may but need not be exercised. I see force in the contention that until an election is made there is no agreement to arbitrate, but once the election is duly made (and the option exercised) I share the opinion of the High Court of Delhi in the Bharat case that a binding arbitration agreement comes into existence. Where the option agreement and the exercise of the option are both, as here, expressed in writing, the statutory requirement of a written agreement is in my view satisfied.”

15. The judge read clause 11.3 as providing that although the party may require a dispute to be arbitrated, “but there is no obligation on the other party to accede to the invitation to arbitrate”. The judge arrived at that conclusion because he took the view that under clause 5 the parties had submitted to the exclusive jurisdiction of the Hong Kong courts.

16. In Paul Smith Ltd v H & S International Holding Inc [1991] 2 Lloyd’s Law Rep. 127, Steyn J (as he then was) was concerned with similar provisions which provided as follows:

“	13.	SETTLEMENT OF DISPUTES If any dispute or difference shall arise between the parties hereto concerning the construction of this Agreement or the rights or liabilities of either party hereunder the parties shall strive to settle the same amicably but if they are unable to do so the dispute or difference shall be adjudicated upon under the Rules of Conciliation and Arbitration of the International Chamber of Commerce by one or more Arbitrators appointed in accordance with those Rules.
	14.	LANGUAGE AND LAW This Agreement is written in the English language and shall be interpreted according to English law.
The Courts of England shall have exclusive jurisdiction over it to which jurisdiction the parties hereby submit.”

17. He resolved the submissions that the provisions were inconsistent with these words at 129:

“Fortunately, there is a simple and straight forward answer to the suggestion that cll. 13 and 14 are inconsistent. Clause 13 is a self-contained agreement providing for the resolution of disputes by arbitration. Clause 14 specifies the lex arbitri the curial law or the law governing the arbitration, which will apply to this particular arbitration. The law governing the arbitration is not to be confused with (1) the proper law of the contract, (2) the proper law of the arbitration agreement, or (3) the procedural rules which will apply in the arbitration. These three regimes depend on the choice, express or presumed, of the parties. In this case it is common ground that both the contract and the arbitration agreement are governed by English law. The procedural rules applicable to the