Hong Kong SAR court reconfirms admissibility impact of non-compliance with pre-arbitration procedures

Out-Law Analysis | 11 Jan 2022 | 5:38 am | 4 min. read

The Hong Kong Special Administrative Region (SAR) court has reconfirmed that non-compliance with pre-arbitration procedures impacts on admissibility of the claim, and not the tribunal’s jurisdiction.

The recent case of T v B confirms that a tribunal’s decision as to compliance with pre-arbitration procedures, such as those included in multi-tiered dispute resolution mechanisms, is for a tribunal alone and is final and non-reviewable by the court. 

The decision in T v B is important given multi-tiered dispute resolution mechanisms are common. Allowing a tribunal to make a swift and decisive decision on compliance with such mechanisms, without that decision later being opened up and argued in court, preserves one of the objects of Hong Kong’s Arbitration Ordinance (AO) which is to facilitate the fair and speedy resolution of disputes by arbitration.

This judgment also reinforces Hong Kong’s position as a global arbitration hub by confirming its alignment with other major arbitration centres, where the distinction between admissibility and jurisdiction has already been confirmed. These include Singapore, confirmed in the case of BBA v BAZ; and England and Wales, in the cases of Republic of Sierra Leone v SL Mining Ltd and NWA v NVF.

There are important policy reasons which justify different legal treatment of jurisdictional challenges and admissibility challenges, despite the lack of any express terms in the AO. In doing so the courts recognise and support the institution of arbitration, the parties’ autonomy in choosing arbitration as the means to resolve their disputes and the tribunal’s power to rule on its own competence.

This case provides clear guidance on the court’s role in arbitration-related proceedings. It further clarifies when the court can and will intervene and when it cannot and will not. Multi-tiered dispute resolution clauses are a matter of the parties’ bargain and a negotiable part of any contract - where any commercial risks, such as when a dispute shall arise or when a matter can be referred to arbitration, can be rendered or accepted.

Claim admissibility versus jurisdictional challenges

The decision clarifies the difference between a jurisdictional challenge and the admissibility of a claim. The former targets the tribunal’s power to hear a claim at all because of concerns as to the existence, scope and validity of the arbitration agreement, and ultimately whether arbitration is the right forum at all. The latter considers whether it is appropriate for a claim to be referred to arbitration at all, or at least at the particular point in time in view of possible defects of the claim or non-fulfilment of pre-arbitration procedures.

However, when considering whether an issue is one of jurisdiction or admissibility, the question to ask is whether the objecting party is taking aim at the tribunal or at the claim.

When a jurisdictional challenge is raised, a tribunal is asked whether there is a contractual duty to refer the claim to arbitration. The objection is that there is no valid consent to submit a particular claim to arbitration. A lack of jurisdiction is permanent, meaning a tribunal does not have jurisdiction to hear the issue or make an award on the merits of the case. A tribunal’s decision on jurisdiction can be reviewed by the court in Hong Kong SAR under the AO, including section 81 which incorporates Article 34 of the UNCITRAL Model Law. Section 81 sets out exhaustively the bases on which the court may set aside an award. If the question raised is a true question of jurisdiction, the court may review the arbitral decision. 

The question of compliance or non-compliance with pre-arbitration procedures is an admissibility issue. The objection behind an admissibility challenge is not that there is no contractual duty to arbitrate at all, but that it should not be heard by the tribunal, or at least not yet. However, the challenge may concern the timing of the reference to arbitration, for example whether it is too early or too late or whether other pre-arbitration conditions such as issuance of notices in advance have been fulfilled.

A tribunal’s decision on admissibility may mean a bar to the continuation of an arbitration or hearing of an issue. In many instances the bar can be removed once the contractually agreed pre-arbitration requirements have been complied with. However, a tribunal’s decision on admissibility, unlike a decision on jurisdiction, is final and not subject to review by the court.

The decision

In T v B, B engaged T as one of the sub-contractors for part of the main contract works. The subcontract contained an arbitration agreement, which was also the multi-tiered dispute resolution clause, which provided that a notice of dispute could only be filed after a certificate of completion or, if there is more than one certificate, after the last certificate of completion is issued by the relevant person under the main contract. T submitted a dispute to arbitration, but B objected on the basis it was premature as a completion certificate had not been issued and the other conditions precedent had not been satisfied.

An arbitrator was appointed and asked to determine a “jurisdictional challenge or dispute”. The arbitrator issued an interim award deciding he did not have “jurisdiction” on the proper construction of the material dispute resolution clause and held that the purported commencement of arbitration was premature. The court confirmed the decision was one of admissibility rather than jurisdiction.

In arriving at this decision the court followed an earlier case, C v D, which is one of the few Hong Kong cases to date dealing with non-fulfilment of a multi-tiered dispute resolution clause in the context of arbitration. In C v D the court had considered, in detail, international cases and commentary on the point of admissibility. It concluded that the question of whether a party has complied with the pre-arbitration procedures is a question of admissibility of the claim and the court has no role to play. The court also referred to Kinli Civil Engineering Limited v Geotech Engineering Limited where a similar point arose. 

Co-written by Cynthia Chan of Pinsent Masons.