Hong Kong Court Re-affirms High Threshold to Prove "Fraud" as the Ground for Not Enforcing Arbitral Award
On 14 March 2016, Hong Kong Court of First Instance (CFI) dismissed an application to set aside an order granting leave to enforce an arbitral award made in Malaysia. (T v C [2016] HCCT 23/2015).
C, the Respondent and debtor of the award, made an application to set aside the order alleging that no binding contract had been entered into between C and T, that there had been fraud and forgery of documents. And thus, it would be contrary to public policy to enforce the Award.
Mimmie Chan J reasoned that the public policy ground should be narrowly construed. Before a Convention jurisdiction could refuse enforcement of a Convention award on public policy grounds, "the award must be so fundamentally offensive to that jurisdiction's notions of justice that, despite its being a party to the convention, it cannot reasonably be expected to overlook the objection"(Hebei Import & Export Corp v Polytek Engineering Co Ltd (1999) 2 HKCFAR 123).
She applied the threshold test confirmed in Karaha Bodas Co LLC v Perusahaan Pertambangan Minyak Dan Gas Bumi Negara (2009) 12 HKCFAR 84, which required the applicant to show that it had a "real prospect of success" in persuading the judge to find that the award had been obtained by fraud. It was incumbent on C as the applicant to make full and adequate disclosure of the facts and matters it reliedupon to substantiate its allegation of fraud, as opposed to simply making bare assertions.
All of C's claims, such as 1) C had never seen any of the Key Documents; 2) C had no bank accounts opened or maintained with the issuing Bankof the bonds; 3) the wrong letterhead on 2 letters from C to T,failed to meet the thresholds.
Significantly, C had made all these claims of forgery of the Key Documents before the Tribunal in its challenge to the jurisdiction, and also before the Malaysian court when C applied to set aside the Award. Both the Tribunal and the Malaysian court had considered, and dismissed, these claims of forgery.Mimmie Chan J confirmed the decision of the latter should be given "due weight" by an enforcement court.
Moreover, the fact that there might be an appeal before the Malaysian courts was not a persuasive reason to set aside the Order, as the arbitral award remained "valid and binding".
This decision follows the established practice of the Hong Kong courts in applying a very high threshold to challenges on public policy grounds.
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