The Hong Kong Court of First Instance handed down its
judgment on 8 March 2012 refusing an application for an
injunction seeking to restrain arbitration proceedings before the
Hong Kong International Arbitration Centre (HKIAC).
The decision recognises the conflict between the general
jurisdiction of Hong Kong courts to restrain arbitral proceedings
(section 21L of the High Court Ordinance) and the principle that
the courts shall not intervene in an arbitration (section 12 of the
Arbitration Ordinance). Despite the court's refusal to grant
the anti-arbitration injunction on this occasion, the case affirms
the general jurisdiction of Hong Kong courts to restrain arbitral
proceedings but that this jurisdiction will only be exercised in
The dispute arose from the Sequedge Group's
("Sequedge") purchase of shares of a PRC food processing
company from Chinese entrepreneur Lin Ming ("Lin"). The
Share Purchase Agreement contained an arbitration clause which
applied to any "dispute, controversy or claim arising out of
or relating to this Agreement, or the breach, termination or
There was a dispute over a put option. Sequedge referred the
matter to arbitration at the HKIAC. Lin then commenced parallel
proceedings in the Hong Kong Court of First Instance and sought an
injunction to restrain the arbitration proceedings, alleging that
the Share Purchase Agreement had been terminated by breach.
Sequedge on the other hand applied to the court for a stay of court
proceedings in favour of the arbitration.
The basis of Lin's application for an anti-arbitration
injunction was the court's general jurisdiction to grant
injunctive relief (section 21L of the High Court Ordinance (Cap.
4)), on the ground that it would be unjust to require Lin to face
two sets of proceedings. However, this general jurisdiction
conflicts with Section 12 of the Arbitration Ordinance (Cap. 609)
(Article 5 of the UNCITRAL Model Law on International Commercial
Arbitration ("Model Law")), which provides that "in
matters governed by this law, no court shall intervene except where
so provided". The question was whether this had the effect of
ousting the court's jurisdiction to grant such an
Mr. Justice Ng found that the Court's general jurisdiction
to grant anti-suit injunction was not ousted by the Arbitration
Ordinance, following a line of English precedent. However, this
jurisdiction would only be exercised in exceptional circumstances,
such as where the arbitration was oppressive, vexatious,
unconscionable, or an abuse of process. The Judge did not find
these in the present case and refused to restrain the
Stay under Section 20 Arbitration
The natural consequence was that the court proceedings were stayed
in favour of the arbitration, pursuant to section 20 of the
Arbitration Ordinance (Article 8 of the Model Law) which provided
that where an action is brought in a matter which is the subject of
an arbitration agreement, the court must refer the parties to
arbitration unless it is established that the arbitration agreement
is null and void, inoperative or incapable of being performed.
The Court found that there was a valid arbitration agreement and
therefore stayed the court proceedings. As to the alleged
termination of the Share Purchase Agreement, Mr. Justice Ng noted
that the arbitration clause would survive repudiation of the
contract containing it, pursuant to section 34 of the Arbitration
Ordinance which provides that an arbitration clause which forms
part of a contract should be treated as an agreement independent of
the other terms of the contract.
Implications for arbitration proceedings in Hong Kong
The decision affirms the general jurisdiction of the courts
under Section 21L of the High Court Ordinance to grant an
injunction to restrain the continuance of an arbitration. However,
such jurisdiction should be exercised "very sparingly and with
Mr. Justice Ng also noted that the extent of this jurisdiction
and its conflict with the Arbitration Ordinance is "eminently
suitable for decision by the higher Courts".
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guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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