Kei Kin Hung v Hua She Asset Management (Shanghai) Co Ltd

Recognition and enforcement of a New York Convention award is subject to the limited grounds in Arbitration Act 1996, s 103. If no ground is established, the court has no residual discretion to refuse enforcement. Even where a ground is established, refusal remains discretionary.

An unsuccessful challenge in the supervisory jurisdiction may create an issue estoppel where substantially the same issue is raised in England. Raising a challenge which could and should have been advanced before the supervisory court may also be an abuse of process. A party relying on s 103(2)(c) must prove that it lacked proper notice or was otherwise unable to present its case. Actual knowledge may be distinct from procedural validity, but the burden remains on the applicant.

Hua She obtained an arbitration award against Kei Kin Hung and Beijing Yaolai Investment Co Ltd. The English court granted permission to enforce the award and a freezing injunction against Mr Kei’s assets.

Mr Kei applied to set aside that order under s 103(2)(c) of the Arbitration Act 1996, alleging that he had not known of the arbitration and had been represented without authority. He also alleged that Hua She had concealed a settlement or set-off arising from the transfer of shares in companies connected with Beijing Yaolai.

Before the English application was determined, the Shanghai supervisory court dismissed Mr Kei’s application to set aside the award. The central issues were whether Mr Kei had proved that he was unable to present his case, and whether exceptional circumstances displaced issue estoppel or abuse of process.

1. The application to set aside the English enforcement order was dismissed. The freezing injunction stood or fell with the enforcement order, and the alternative application to adjourn or stay enforcement under s 103(5) was not pursued.
2. The court adopted the principles summarised by Butcher J in Carpatsky Petroleum Corp. v Ukrnafta, [2020] EWHC 769 (Comm). The policy of the Arbitration Act 1996 favours enforcement. Recognition or enforcement must be refused only if one of the limited statutory grounds is established. If no ground is made out, the court has no residual discretion to refuse enforcement. If a ground is established, refusal remains discretionary.
3. An unsuccessful challenge before the supervisory court may give rise to issue estoppel where the issues are substantially the same. A further challenge may alternatively be an abuse of process if it could and should have been made before that court.
4. Section 103(2)(c) encompasses more than procedural invalidity. Actual knowledge and procedural validity may be distinct questions. Nevertheless, Mr Kei bore the burden of proving that he lacked notice or was otherwise unable to present his case.
5. Mr Kei failed to discharge that burden. The evidence that he did not sign the power of attorney personally was insufficient. His shareholding and status as legal representative, the change of legal representative during the arbitration, Ms Liu’s evidence, and the absence of any prompt complaint supported the conclusion that he probably knew of the arbitration. The Shanghai proceedings also provided a sufficient basis for issue estoppel on the knowledge issue.
6. The alleged concealment of a settlement or set-off did not constitute an exceptional circumstance. The evidence did not establish any settlement or set-off. In any event, the defence could and should have been raised before the Shanghai court, and Hua She’s alleged lack of explanation caused no prejudice because Mr Kei had the information needed to advance the point himself.
7. The court expressed no concluded view on the fallback discretion to maintain the enforcement order, because the application failed at the threshold.