The High Court set aside an enforcement order granting leave to the Applicant to enforce an arbitral award. In the Court’s judgment, Mimmie Chan J took the opportunity to review whether an “Optional/Inchoate Arbitration Clause” is valid.

The Respondent (being the borrower) entered into a loan agreement with the Applicant (a licensed money lender). The parties further entered into a supplemental loan agreement which contained a clause stating that “Any dispute…arising out of…the Loan Agreement shall…at the option of the Claimant (or the Plaintiff, as may be applicable), be referred to and finally resolved by arbitration…or by court proceedings in Hong Kong courts” (凡因借款合約…所引起的…爭議…，均應由申請人(或原告人，視何者適用而定)選擇提交…仲裁，或提交香港法庭進行法院程序，最終解決) (“𝐭𝐡𝐞 𝐂𝐥𝐚𝐮𝐬𝐞”). The Applicant eventually commenced arbitration which the Respondent did not take part. The arbitrator rendered an award without holding a hearing which he found in favour of the Applicant (“𝐭𝐡𝐞 𝐀𝐰𝐚𝐫𝐝”). The Applicant sought, on an ex parte basis, for enforcement of the Award.

Mimmie Chan J held that despite 𝑻𝒐𝒎𝒎𝒚 𝑪𝑷 𝑺𝒛𝒆 & 𝑪𝒐 𝒗 𝑳𝒊 & 𝑭𝒖𝒏𝒈 (𝑻𝒓𝒂𝒅𝒊𝒏𝒈) 𝑳𝒕𝒅 [2003] 1 HKC 418 (Ma J as Ma CJ then was) and 𝑲𝒊𝒏𝒍𝒊 𝑪𝒊𝒗𝒊𝒍 𝑬𝒏𝒈𝒊𝒏𝒆𝒆𝒓𝒊𝒏𝒈 𝑳𝒕𝒅 𝒗 𝑮𝒆𝒐𝒕𝒆𝒄𝒉 𝑬𝒏𝒈𝒊𝒏𝒆𝒆𝒓𝒊𝒏𝒈 𝑳𝒕𝒅 [2021] 6 HKC 524 (Mimmie Chan J) which held that “an agreement which does not compel parties to have disputes or differences resolved by agreement is not an arbitration agreement”, the Court was of the view that the Clause was a valid arbitration clause. Although the Clause was unlike the line of cases which adopts language such as “may” or “can”, the Court was not persuaded that this would make a difference. Adopting a pro-arbitration approach and ascertaining the objective intention of the parties at the time of entering into the contract, the Court found that a challenge against the validity of the Clause was not successful.

That said, the Court was persuaded that the Respondent was not given proper opportunity to present his case. Accepting the Respondent’s submission, the Court noted that the email address which the Notice of Arbitration was served to and the email address on the Loan Agreement was different. The Court emphasised that despite adopting a pro-arbitration approach, an arbitral award is recognized and enforced by the Court only if the award and the arbitral process leading to the award is structurally intact and there is due and fair process: [28]. The Court cannot turn a blind eye to the irregular service of the notice of arbitration. Eventually, the Court set aside the Enforcement Order and ordered the Applicant to pay the Respondent costs on an indemnity basis.

Simon So, a fellow of CIArb (with Herman Ho, a member of CIArb) represented the Respondent. The Full Judgement was published on https://legalref.judiciary.hk/lrs/common/ju/ju_frame.jsp?DIS=154657&currpage=T