Jay L. Alexander, Phillip Georgiou and Carmen Chung
and-party costs basis, the winning party would only be able to recover approximately two-thirds of its costs of the challenge, effectively reducing the deterrent effect on unjustified challenges.
In Chimbusco, the plaintiff argued that there was a difference between a failed attempt to resist enforcement of an arbitral award, and a failed attempt to challenge an arbitration agreement. In the case of the latter, the plaintiff alleged that given that it had not yet had the opportunity to argue its case before the tribunal in the arbitration, the indemnity costs principle should not apply.
The court rejected this argument on the basis that the parties should comply with their obligation to proceed to arbitration under their arbitration agreement, which would be treated the same as their obligation not to challenge enforcement of an arbitration award made under their arbitration agreement without valid grounds. Further, the parties should be obligated to assist the court in the cost-effective and efficient resolution of disputes, which is undermined by an unsuccessful challenge of the arbitration agreement. Accordingly, the court concluded, there is no reason to differentiate between unsuccessful challenges to an arbitral award and unsuccessful challenges to an arbitration agreement.
The plaintiff also argued that the arbitration clause was null and void due to uncertainty, as it called for arbitration at the Singapore International Arbitration Centre in accordance with the Singapore Bunker Claims Procedure. Without expressing any specific conclusions on the choice of those rules (which apply in contracts for the sale and/or supply of bunkers), the court rejected plaintiff’s argument, explaining that the parties had expressed a clear intent to arbitrate in Singapore and such agreement was capable of being performed in Singapore, even if any deficiency in the clause might oblige the parties to apply to the Singapore court to appoint the arbitrators. The judge found that the tribunal should rule on its own jurisdiction and on the rules to be applied.
Conclusion
This case extends the existing jurisprudence in Hong Kong favoring arbitration and using the power of imposing indemnity costs as a disincentive to engage the courts in matters subject to final and binding resolution through arbitration. The decision is further confirmation of the practice of courts in pro-arbitration jurisdictions, such as Hong Kong and Singapore, to uphold arbitration agreements and ensure efficient and effective dispute resolution proceedings. By ordering costs on an indemnity basis against a party who commences litigation proceedings in the context of an arbitration agreement that might even have had some defects necessitating judicial support at the seat, a clear message has been sent that non-compliance with arbitration agreements will face the same criticisms as unsuccessful attempts to set aside awards or challenge enforcement proceedings.