Hong Kong / 27 March 2003 / Hong Kong, Court of First Instance, In the High Court of the Hong Kong Special Administrative Region / Karaha Bodas Company LLC v. Perushahaan Pertambangan Minyak Dan Gas Bumi Negara (Pertamina) / HCCT 28/2002
| Country | Hong Kong |
| Court | Hong Kong, Court of First Instance, In the High Court of the Hong Kong Special Administrative Region |
| Date | 27 March 2003 |
| Parties | Karaha Bodas Company LLC v. Perushahaan Pertambangan Minyak Dan Gas Bumi Negara (Pertamina) |
| Case number | HCCT 28/2002 |
| Applicable NYC Provisions | V | V(1) | V(2) |
| Source |
http://www.judiciary.gov.hk (website of the Judiciary of the Hong Kong Special Administrative Region of the People’s Republic of China) |
| Languages | English |
| Summary | The plaintiff (“KBC”, a company incorporated in the Cayman Islands and operating out of the US) entered into two contracts with the defendant (“Pertamina”, a company incorporated in Indonesia), both of which provided for arbitration in Geneva, Switzerland. Another Indonesian state-owned company was party to the second contract and both contracts were governed by Indonesian law. A dispute arose between KBC and Pertamina, which KBC referred to arbitration. KBC obtained an award in its favour, which it sought to enforce in Hong Kong. Pertamina opposed the award’s enforcement under several grounds in Hong Kong’s Arbitration Ordinance 2000 (Cap. 341) (the “Ordinance”). Pertamina made five arguments as to why the award should not be enforced: (i) because, pursuant to Section 44(2)(f) of the Ordinance (mirroring Article V(1)(e) NYC), the award had been annulled by an Indonesian court, which was a competent authority according to the law under which the award was made; (ii) because, pursuant to Sections 44(2)(d) and (e) and Section 44(3) of the Ordinance (mirroring Articles V(1)(c) and V(1)(d) and Article V(2) NYC, respectively), KBC had submitted only one request for arbitration when its claims arose under two contracts which contained separate arbitration clauses; (iii) because, pursuant to Section 44(2)(c) (mirroring Article V(1)(b) NYC) Petamina had been unable to present its case when it was deprived of an opportunity to respond to allegedly new arguments put forth in KBC’s; (iv) because, pursuant to Section 44(2)(d) (mirroring Article V(1)(c) NYC), the tribunal had failed to apply Indonesian law and therefore had exceeded its jurisdiction; and, finally, (v) because, pursuant to Section 44(3) (mirroring Article V(2) NYC), enforcing the award would be against public policy as, according to Pertamina, it had simply complied with the Decrees terminating the contract under the applicable law (Indonesian law). The Court of First Instance ordered the enforcement of the award, holding that none of the grounds presented by Pertamina carried weight. Concerning the first ground, the Court held that, under Section 44(2)(f) of the Ordinance, reference to “the law” indicated the law applicable to the arbitral procedure, i.e. Swiss law, and not the law applicable to the contract, i.e. Indonesian law. According to the Court, the law applicable to the arbitral procedure would normally be the law of the place of the seat of the arbitration. Turning to Pertamina’s second argument concerning KBC’s submission of one request for arbitration when KBC relied on two contracts, the Court accepted the tribunal’s decision that one notice for the two agreements was sufficient in the circumstances. With respect to Pertamina’s third argument – that it had been unable to present its case – the Court held that KBC had not pleaded a substantially new case and, therefore, that was a simple procedural matter which fell within the competence of the Tribunal and which the tribunal had adequately dealt with. The Court considered that the fourth and fifth grounds did not materialise in the violations that Pertamina complained of. As a separate matter, and on an obiter basis, the Court treated the question of how it would have to apply its discretion, had any of the grounds for non-enforcement been successful. The Court remarked that if the grounds for non-enforcement under Sections 44(2)(c)-(e) of the Ordinance (mirroring Articles V(1)(b), V(1)(c) and V(1)(d) NYC, respectively) had materialised, the Court would have nonetheless exercised its discretion and enforced the award. If the ground for non-enforcement, however, was that the award had been set aside by a competent court under Section 44(2)(f) of the Ordinance (mirroring Article V(1)(e) NYC) or should not be enforced because the subject-matter was non-arbitrable or the award was contrary to public policy under Section 44(3) of the Ordinance (mirroring Article V(2) NYC), then, the Court reasoned, an enforcing court would in most circumstances refuse to enforce the award. |
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