Shaping Arbitration in 2026: a Mid-year Review of Four Significant Hong Kong Court Decisions
1) LY v HW [2026] HKCA 936 – Court of Appeal confirmed high threshold for setting aside arbitral awards for failure to deal with key issues
The Court of Appeal upheld the dismissal of an application to set aside an HKIAC award, reaffirming the high threshold for challenging arbitral awards based on a tribunal’s failure to deal with key issues.
Facts:
The dispute arose from a pharmaceutical distribution agreement under which HW was the exclusive distributor in the PRC. The supplier later assigned its rights and obligations under the agreement to LY.
The agreement required HW to achieve specific annual sales values (“ASV”). LY terminated the agreement in 2019 and alleged that HW had failed to meet the ASV target for the previous year.
A central issue was whether excess inventory value deducted from a given year’s ASV for rebate purposes could be carried forward and included in the following year’s ASV (the “Rollover Arrangement”).
HW commenced HKIAC arbitration and contended that LY’s termination was wrongful because, applying the Rollover Arrangement, the 2017 excess inventory formed part of the 2018 ASV and the target was therefore met. The Tribunal accepted HW’s argument and awarded HW damages for LY’s wrongful termination.
LY applied to set aside the award on due process and public policy grounds under section 81 of the Arbitration Ordinance (Cap. 609). It argued that the Tribunal had failed to address or give sufficient reasons on key issues pleaded in its defence, namely: (i) whether the Rollover Arrangement was consistent with and incorporated in the agreement; and (ii) whether LY had notice of and was bound by the Rollover Arrangement as an assignee under PRC law.
First instance decision dismissing the set aside application [2022] HKCFI 2267
The Honourable Madam Justice Mimmie Chan dismissed the application and reaffirmed that the grounds for setting aside arbitral awards must be construed narrowly.
Although the Tribunal did not make explicit findings on the two issues, the Court made the following ruling:
· The Judge cited a Singapore case (AKN v ALC [2015] 3 SLR 488) with approval – a court should not infer a tribunal failed to deal with an essential issue unless the inference is “clear and virtually inescapable.”
· The Judge was not satisfied that the Tribunal’s omission was a deliberate decision to leave certain issues unaddressed; her view is that the Tribunal did not consider them necessary to deal with at length.
· The Tribunal’s alleged failure to address certain issues goes to the merits of its decision and may, at most, amount to an error of law. It does not, however, constitute a ground for challenging or setting aside the arbitral award.
· The Judge held that parties to arbitration do not have a right to “have all their arguments addressed by the Tribunal.” The Judge declined to interfere where the tribunal has implicitly addressed matters through its reasoning on related points.
The Court further emphasised that arbitral awards should be read “in a reasonable and commercial way, without a meticulous legal eye endeavouring to pick holes, inconsistencies and faults, but generously, and only to remedy serious breaches of rules of natural justice which cause injustice”.
The set-aside application was dismissed with indemnity costs.
Appeal decision [2026] HKCA 936
LY appealed the CFI decision. The Court of Appeal dismissed the appeal and again awarded indemnity costs.
The Court of Appeal noted a possible tension between the “clear and virtually inescapable inference” test from AKN v ALC [2015] 3 SLR 488 (Singapore decision) and the more flexible “apparent to the parties” test from Z v R[2021] HKCFI 2312. However, the Court did not decide which approach prevails, holding that LY would not even satisfy the more generous test – it is (or should be) apparent to the parties why the key issues were handled by the Tribunal as they were.
The Court of Appeal found that the Tribunal was clearly alive to the key definition of ASV and engaged with the Rollover Arrangement issue. In light of the Tribunal’s reasoning, there was no need to deal separately with other issues (including those concerning assignment under PRC law).
Takeaway:
(1) With a pro-arbitration stance, the Hong Kong Courts will not easily set aside an arbitral award because a party alleges that certain arguments were ignored or only briefly addressed by a tribunal.
(2) Only egregious errors causing a substantial failure of justice would meet the very high threshold to set aside an arbitral award.
2) G, G v CNG and SIL [2026] HKCFI 902 – Hong Kong court strikes down collateral attack on arbitral awards
The Hong Kong court delivered a strong reaffirmation of core principles: the finality of arbitral awards and the exclusive jurisdiction of the courts of the seat.
Facts:
Arising from a long saga of disputes over a mining project in the Democratic Republic of Congo and legal proceedings between China National Gold Group (Hong Kong) Ltd (“CNG”) and Global Mining Development L.P. and related entities (“G Parties”), four partial awards were issued in the previous arbitration proceedings in favour of the G Parties (“Original Arbitration”).
The latest decision concerns two contested applications:
· CNG applied for a stay of the execution of the orders made by the court granting leave to the G Parties to enforce awards in the Original Arbitration;
· The G Parties applied for an anti-arbitration injunction to restrain CNG from pursuing a fresh arbitration alleging that the underlying agreements and the awards themselves had been procured by bribery (“Injunction Application”).
The G Parties relied on two main grounds to support their Injunction Application:
(1) Contractual Ground: under the arbitration agreements, CNG agreed to submit disputes to arbitration in Hong Kong, accept Hong Kong as the seat of arbitration, and for Hong Kong courts to have exclusive supervisory jurisdiction. The pursuit of fresh arbitration breached the arbitration agreement.
(2) Abuse Ground: CNG’s claim to set aside the awards on the ground of alleged fraud/bribery is an abuse of process because, among others, CNG is seeking to collaterally attack the arbitral awards and the Court’s enforcement orders.
CNG argued that newly discovered bribery/fraud justified a fresh arbitration and a stay of enforcement.
Decision:
The Honourable Madam Justice Mimmie Chan granted the G Parties’ Injunction Application on both the Contractual Ground and Abuse Ground and dismissed CNG’s application to stay execution and enforcement of arbitral awards. The following key issues were addressed in the judgment:
(1) Exclusive supervisory jurisdiction over challenges to awards:The court affirmed that Hong Kong-seated arbitral awards are subject only to the exclusive supervisory jurisdiction of the Hong Kong courts and attempts to invoke the jurisdiction of another court undermine that exclusive jurisdiction, which should be protected.
(2) Article 34 of the Model Law (section 81 of the Arbitration Ordinance) provides the exclusive recourse to challenge a Hong Kong award: The court held that any application or action to resist recognition or enforcement of the rights conferred and obligations imposed by an award should be considered as a “recourse” (which should be interpreted broadly to cover “indirect” attack) and must comply with Article 34 requirements.
(3) Statutory time bar (3 months) is absolute, even in cases of fraud: the three-month period for a challenge to be made under Article 34(1) is absolute and cannot be extended by the court even where fraud is alleged.
The Court ordered CNG to pay costs on an indemnity basis with certificate for three counsels.
Takeaway:
(1) The Hong Kong Court is willing to grant anti-arbitration injunctions where necessary to protect the integrity and finality of arbitral awards.
(2) A party cannot evade Article 34 by repackaging a challenge to an arbitral award as a claim for fraud, bribery, or other relief. If the substance of the claim is to undermine the award, Article 34 applies.
(3) When fraud is discovered after the three-month time limit for challenging arbitral awards, options are limited. Active participation in arbitrations or enforcement proceedings after discovering alleged fraud may amount to affirmation, barring subsequent claims for rescission.
3) A v B1 and B2 [2026] HKCFI 2444 – Application to set aside an HKIAC Partial Award granted under the Early Determination Procedure dismissed
On 28 April 2026, the CFI dismissed the plaintiff’s entire case to set aside an arbitral award and a costs award made under the Early Determination Procedure (“EDP”), which was invoked by the defendants pursuant to Article 43 of the 2018 HKIAC Administered Rules (“Rules”).
The EDP is similar in substance to, but not the same as, an application for summary judgment under the court procedures. It enables a party to request the tribunal to summarily decide one or more points of law or fact.
Facts:
The plaintiff applied to Court to set aside the arbitral award on the following grounds:
(1) Article 43 complaint: The Tribunal failed to comply with the agreed procedures for the EDP by failing to identify point(s) of law or fact throughout the Tribunal’s handling of the EDP application.
(2) Due process complaint: The plaintiff did not have a fair opportunity to present its case.
(3) Excess of submission complaint: The Tribunal exceeded its jurisdiction by ruling on and dismissing matters beyond what was submitted for determination by the EDP.
(4) Public policy ground: The arbitral award conflicted with Hong Kong public policy by reason of the above, and was infra petita and/or manifestly incoherent because the Tribunal failed to deal with the plaintiff’s factual complaints.
The plaintiff also challenged the costs award on the ground that it was unable to present its case because the defendants failed to provide any meaningful breakdown in their statement of costs. It further contended that, in making the costs award in the absence of any breakdown and adopting a broad-brush approach, the Tribunal failed to properly discharge its duty to assess costs and acted in excess of its jurisdiction.
Decision:
The Court applied the prevailing legal principles and dismissed all of the plaintiff’s complaints against both the arbitral award and costs award:
(1) Article 43 complaint: The Court found that there was no non-compliance with Article 43 of the Rules. The alleged breach of the Rules was at most a minor and technical breach and the plaintiff clearly had a fair and reasonable opportunity to set out its arguments to the EDP application.
(2) Due process complaint:The Court found that the plaintiff fully participated in the process without raising any complaint contemporaneously.
(3) Excess of submission complaint: The Court held that the Tribunal’s decisions in the arbitral award were within the scope of the EDP application. On the plain wording of Article 34(2)(a)(iii) of UNCITRAL Model Law (“ML”), it appears that the article only applies if the award contains matters “beyond the scope of the submission to arbitration”. The Court had some doubt as to whether the article can be carved out to apply only to the EDP application.
(4) Public policy ground: The Court held that the plaintiff was unable to show that the alleged manifest incoherence (1) resulted from a chain of reasoning that parties had no reasonable notice of or had an insufficient nexus to the parties’ arguments, such that the parties did not have the chance to address the point in that chain of reasoning, or (2) gave rise to a clear and virtually inescapable inference that the Tribunal had completely failed to consider an essential point. On the infra petitacomplaint, the Court did not find any breach of natural justice, having assessed the issue wholistically.
In relation to the costs award, the Court held that any challenge to the defendants’ costs claim on the basis of a lack of particulars went to the correctness of the Tribunal’s decision, which was a question of merits and therefore not a question with which the Court was concerned in a setting aside application. The Court also held that the Tribunal was entitled to adopt a broad-brush approach, given the absence of any prescribed mechanism for the assessment of costs in arbitration. The Tribunal was not obliged to follow the scales and practices adopted by the court on taxation.
Takeaway:
(1) The Hong Kong Court will only intervene in an arbitral award if the applicant is able to show there was a serious violation of agreed arbitration procedures and that such violation gave rise to flagrant breach of procedural fairness.
(2) The phrase “decisions on matters beyond the scope of the submission to arbitration” in ML 34(2)(a)(iii) should be construed narrowly to only include those decisions which are clearly unrelated to or not reasonably required for the determination of the subject disputes, matters or issues that have been submitted to arbitration.
(3) The public policy ground for opposing the enforcement of an arbitral award will succeed only if it is repugnant to recognised and basic notions of justice, or there is substantial injustice arising out of the award which is shocking to the Court’s conscience. It is not a catch-all provision and should be applied sparingly.
(4) Whether the counterparty has put forward sufficient particulars to substantiate its case is a question of merit and cannot be reframed as a procedural irregularity warranting an application to set aside an arbitral award.
4) Bank v Guarantor & Others [2026] HKCFI 1818 – Court of First Instance dismissed application to set aside a Shenzhen Court of International Arbitration award based on “novel” ground
The Court of First Instance dismissed the Guarantor’s application to set aside an arbitral award made by the Shenzhen Court of International Arbitration (“SCIA”). The decision reaffirms the established principles on condition precedent to arbitration and public policy.
Facts:
The plaintiff Bank obtained a SCIA arbitral award (“Award”), under which the first defendant borrower was to pay the Bank the principal loan with interest and costs, and the second defendant Guarantor was ordered to be jointly and severally liable under a written guarantee contract (“Guarantee”). Leave to enforce the Award in Hong Kong was granted on 28 August 2025.
The Guarantor applied to set aside the enforcement order on the following grounds, namely:
(1) Procedural ground: Clause 15.2 of the Guarantee provides that “any dispute arising out of or in connection with (the contract) shall be settled by the guarantor and the lender through amicable discussions, failing which the parties agree… to apply to the [SCIA] for arbitration.” The Guarantor claimed that there had been no amicable discussions between the Bank and the Guarantor at all.
(2) Inability to present case ground: The Guarantor claimed that it was not given a reasonable opportunity to be heard on an allegedly “critical” issue in the arbitration relating to the legal validity of the Guarantee. The Guarantor made brief oral submissions during the arbitration that the issue was a question of Cayman law, but the Tribunal did not deal with it during the hearing and directed the parties to provide written submissions on the proper law after the hearing. Pursuant to this, the Bank submitted that the proper law should be Hong Kong law, which the Guarantor claimed was the first time the Bank made this submission.
(3) Public policy ground: The Guarantor claimed that the Bank had acted contrary to the public policy of Hong Kong by commencing the arbitration and enforcing the Award against the Guarantor while it was undergoing restructuring. The Guarantor relied on the policy of the National Financial Regulatory Administration and the People’s Bank of China in 2022, the foreign exchange control regulations of Mainland[AC1] China, and the “Hong Kong Approach to Corporate Difficulties” issued by the Hong Kong Association of Banks and the Monetary Authority (“HKMA Guidelines”).
Decision:
The Court rejected all three grounds and dismissed the application, awarding indemnity costs against the Guarantor.
(1) Procedural ground: The Court applied C v D (2023) 26 HKCFAR 216 and held whether a condition precedent to arbitration had been fulfilled to affect the validity of the arbitration and the award made thereunder goes to the admissibility of a claim. The Court does not review the correctness of a tribunal’s finding on admissibility unless the parties have expressly and clearly provided for the contrary.
(2) The Court also applied Hebei Import and Export Corp v Polyteck Engineering Co Ltd(1999) 2 HKCFAR 111. It was held that, by failing to raise the issue with the Tribunal and thereby depriving it of the opportunity to rectify the alleged breach, the Guarantor was in breach of its duty of good faith in the arbitration and was estopped from raising the issue before the Court.
(3) Inability to present case ground: The Court found that it was incumbent on the Guarantor to raise the issue as to the legal validity of the Guarantee in good time and adduce the necessary evidence. On the facts, the Guarantor chose to raise the issue with the Tribunal at last minute and never applied to adduce the necessary evidence. There was also no evidence of any prejudice suffered by the Guarantor or how the Tribunal’s decision could have been different if the Guarantor had been able to adduce the necessary evidence. The Court therefore refused to exercise its discretion to refuse enforcement of the Award.
(4) Public policy ground: The Court held that the Mainland[AC2] policy and foreign exchange control regulations had no effect in Hong Kong and the HKMA Guidelines were simply general guidelines to banks. There was no public policy recognised in Hong Kong that the Bank should be restrained from pursuing its claim against the Guarantor. The Court further held that the Guarantor had clearly waived the right to make any such challenge before the Court by failing to raise the issue before the Tribunal. The Court concluded that there was nothing shocking to the conscience of the Court or contrary to the fundamental conceptions of morality and justice.
Takeaway:
(1) Pre-arbitration negotiations and discussions, and whether any pre-condition or condition precedent to arbitration had been fulfilled, are issues of admissibility, not jurisdiction. They are within the permit of the tribunal, and the Court does not review the correctness of the tribunal’s findings.
(2) Parties to an arbitration have a duty of good faith and must raise any procedural or substantive issues promptly before the tribunal. The Court is unlikely to entertain any objection to enforcement on issues which had not been raised with the tribunal. A party who fails to pursue its case during the arbitration on its fault will only have itself to blame.
(3) The public policy ground for opposing enforcement of arbitral awards cannot be easily invoked. Non-observance of non-binding policies or measures clearly cannot meet the threshold.
(4) Meritless challenges to enforcement may attract indemnity costs.
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