Hong Kong Court: Questions of Compliance With Pre-Arbitration Requirements Should Be Decided by the Arbitrator

The Court of Appeal has confirmed that, subject to any agreement to the contrary, the failure to comply with pre-conditions to arbitration goes to the admissibility of a claim and should be determined by the arbitral tribunal, rather than the court.

Hong Kong's Court of Appeal recently provided much needed clarification on the proper forum to decide issues of noncompliance with preconditions to arbitration and the consequences of such failure. In C v D [2022] HKCA 729, the arbitration agreement contained an escalation clause that stipulated that, before a dispute could be referred to arbitration, the parties "shall attempt in good faith promptly to resolve such dispute by negotiation. Either Party may, by written notice to the other, have such dispute referred to the [CEOs] of the Parties." While the parties agreed that a written request for negotiation was a pre-condition to arbitration, they disagreed on whether it was necessary to give written notice to the CEOs. The arbitral tribunal held that referral of the dispute to the CEOs was optional and that the pre-condition only required a written request for negotiation. 

The Court of First Instance dismissed C's challenge on grounds that the issue of compliance with a pre-condition to arbitration goes to the 'admissibility' of the claim (i.e., whether a claim is defective and should not be raised at all)—rather than the 'jurisdiction' of the tribunal (i.e., whether a claim should not be arbitrated due to a defect in or omission to consent to arbitration)—which was not the basis of C's challenge. C subsequently appealed the decision.  

On 7 June 2022, in C v D [2022] HKCA 729, the Court of Appeal rejected C's appeal and upheld the lower court's decision. The Court of Appeal confirmed that: 

  • A dispute that goes to the admissibility of a claim, rather than the jurisdiction of the tribunal, should be regarded as a dispute falling within the terms of the submissions to arbitration.
  • Absent any agreement to the contrary, noncompliance with pre-conditions to arbitration go to admissibility of the claim—not the jurisdiction of the tribunal.
  • Noncompliance with pre-conditions to arbitration is a matter that should be determined by the tribunal and is not open to review by the court, unless the parties clearly intended (or agreed) otherwise.

This is a landmark decision that clarifies an important point of law and limits the grounds for potential judicial intrusion in the early stages of an arbitration. The Court of Appeal's decision is consistent with the approach of the English High Court in Republic of Sierra Leone v. SL Mining Ltd, discussed in a previous Jones Day Commentary

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