CONFLICTING ARBITRAL AWARDS AND JUDGMENTS Jessica FEI (Herbert Smith Freehills LLP) Beijing, PRC Veit ÖHLBERGER (Dorda Brugger Jordis Rechtsanwälte) Vienna, Austria Private International Law Commission

Overview Private International Law Commission General position on enforcement of foreign awards in China and HK A few recent Chinese cases: -Hemofarm v. Yongning Castel Electronics v. TCL Wicor v. Haopu 2016 HK: Is anti-suit injunction a solution?

PRC position: General No same claim shall be tried twice No clear binding force of precedents, but as reference only Evidential value of prior decisions (arbitration or litigation) SPC judicial interpretation acts as quasi law

HK position? Private International Law Commission On one hand, under Section 3 of Foreign Judgments (Restriction on Recognition and Enforcement) Ordinance (Cap 46), a civil judgment given by a court in any place outside Hong Kong shall be refused recognition and enforcement if "the bringing of those proceedings in that court was contrary to an agreement under which the dispute in question was to be settled otherwise than by proceedings in the courts of that country“ On the other hand, under Sections 81 or 86 of Arbitration Ordinance (Cap 609), one of the grounds for setting aside the arbitral award or refusing recognition or enforcement of arbitral award is that the award deals with dispute not contemplated by, or not falling within, the terms of submission to arbitration, or contains decisions on matters beyond the scope of submission to arbitration Interpretation of these two provisions not fully tested in case law where there exist conflicting judgments and arbitral awards

Reply of the SPC on “Hemofarm” case (2 June 2008) Facts and background: 23 July 2003: Higher People's Court of Shandong Province entered into final judgment upholding the Jinan Intermediate Court’s decision in support of Yongning’s application for interim property reservation measures. 18 October 2005: Higher People's Court of Shandong Province entered into final judgment upholding the Jinan Intermediate Court’s decision in support of Yongning’s claims for rent payment and return of leased land. 16 March 2007: Despite the PRC judgments, ICC rendered the arbitral award ruling that (a) property preservation measures had a direct, substantive and negative impact on the rights and interests of the joint claimants and (b) the lease litigation in Chinese court violated the arbitration clause. PRC position: “Hemofarm” case Private International Law Commission

Reply of the SPC on “Hemofarm” case (2 June 2008) (Continued) The SPC agreed with Higher People's Court of Shandong Province’s decision to deny the enforcement of the ICC award on the basis that 1)Disputes resolved in the arbitration award went beyond the agreed scope of the arbitration agreement (Article V(1)(c) of the New York Convention) 2)It would be contrary to the public policy (and judicial sovereignty) of China to recognize and enforce the arbitration award (Article V(2)(b) of the New York Convention) PRC position: “Hemofarm” case Private International Law Commission

Reply of the SPC on “TCL” case (10 October 2013) 23 December 2010 and 27 January 2011: arbitral award rendered in Australia 20 December 2012: PRC court decided that the arbitration agreement was invalid SPC replied to Guangdong High Court: no violation of judicial sovereignty. Although the PRC court judgment and the arbitral award decided differently on the validity of the arbitration agreement, it was not contrary to the public policy of China, and thus, was not a sufficient basis to deny enforcement of a foreign arbitral award pursuant to Article V(2)(b) of the New York Convention. PRC position: “TCL” case Private International Law Commission

Wicor v. Haopu (2 June 2016) 11 December 2012: Jiangsu High Court held that the relevant arbitration clause was invalid under PRC law 27 November 2014: the final ICC award rendered despite the PRC judgment Decision: The Taizhou Intermediate Court observed that the ICC award was made under the assumption that the arbitration clause was valid, and thus, was in direct conflict with the Jiangsu High Court’s decision and violated the “societal public interest” of the PRC. The Taizhou Court accordingly denied recognition and enforcement of the ICC award on the basis of public policy (pursuant to Article 7 of Arrangement Concerning Mutual Enforcement of Arbitral Awards Between the Mainland and the Hong Kong SAR). PRC position: Wicor v. Haopu Private International Law Commission

Prevention: stay of proceedings? Private International Law Commission HK Section 20(1) of the Arbitration Ordinance (Cap 609) – Stay of court proceedings unless the arbitration agreement is null and void, inoperative or incapable of being performed Chok Yick Interior Design & Engineering Co Ltd v Fortune World Enterprises Ltd [2010] HKEC 146 Bluegold Investment Holdings Ltd v Kwan Chun Fun Calvin [2016] HKEC 532 Chee Cheung Hing & Company Limited v Zhong Rong International (Group) Limited [2016] HKEC 656 PRC Article 5 of PRC Arbitration Law

Anti-suit injunction as a solution? - HK Private International Law Commission Ever Judger Holding Co Ltd v Kroman Celik Sanayii Anonim Sirketi [2015] 3 HKC 246 The Buyer claimed against Ever Judger in Turkey. Ever Judger promptly commenced an HKIAC arbitration and sought an anti-suit injunction from the Hong Kong court, which was granted. The Court held that parties should be held to their contract: An anti-suit injunction will “ordinarily” be granted to restrain foreign proceedings in breach of an agreement for Hong Kong arbitration. Grounds for resisting an injunction are delay (where the foreign proceedings are too far advanced), “unclean hands” or other “strong reasons to the contrary”.

Anti-suit injunction as a solution? Private International Law Commission HK Anti-suit injunctions must be sought promptly: Essar Shipping v Bank of China [2015] EWHC 3266 (Comm)) Anti-suit injunctions are directed at the offending party, and they do not usurp the foreign court’s function A Hong Kong court is unlikely to enforce a judgment given in breach of an anti-suit injunction PRC However, anti-suit injunction is not encouraged in the PRC Court priority if parallel proceedings re validity of arbitration agreement ( Article 20 of China Arbitration Law )