The Hong Kong Court of Appeal (CA) overturned the first instance decision that First Media was precluded by the principle of good faith from relying on section 44(2) Arbitration Ordinance (Cap. 341) from resisting enforcement. Chow J had misdirected himself in exercising his discretion under section 44(2) to refuse enforcement, by failing to take into account the "fundamental defect" that the Awards were sought to be enforced against parties who were "wrongly joined" to the arbitration.

Toby Landau QC, for First Media, took the court through each aspect of First Media's conduct that Chow J had criticised, and identified the relevant parts in the Singapore Court of Appeal judgment in which it was conclusively determined, as a matter of Singapore law, that First Media was entitled to act in the way it did. Mr Landau also attempted to demonstrate that First Media had "persistently raised its objections to jurisdiction and had expressly reserved its rights in the course of the Arbitration".

The CA held that the first instance judge had "fallen into error", in not giving proper recognition to the findings in the Singapore Court of Appeal judgment. "In considering the conduct of the arbitration for the purpose of the "good faith" principle, it is particularly relevant to take account of the law of the seat of arbitration and the ruling of the supervisory court of the seat of arbitration", the CA noted.

The judge was wrong in his finding that the fact the awards were made without jurisdiction was not to be taken into account when exercising discretion as to whether a ground for refusal of enforcement under section 44(2) was made out, but only when exercising discretion to permit enforcement where such a ground for resisting had been made out. The CA commented: "In considering whether the 'good faith' principle may be successfully invoked to resist enforcement, there is only one discretion to exercise…and that discretion is found in the word 'may' in the opening part of section 44(2)…It is the use of the word 'may' that 'enables the enforcing court to enforce an award, notwithstanding that a section 44 ground might otherwise be established".

The CA held that it was "quite clear" that "fundamental jurisdictional objections" should be taken into account when considering the exercise of discretion under section 44(2). The CA cited the English case Dallah Real Estate and Tourism Holding Co v Government of Pakistan [2010] UKSC 46, in which it was held that the discretion is a narrow one, and is "unlikely to be exercised where the award in question was subject to a fundamental or structural defect. There can hardly be a more fundamental defect than an award against someone who was never party to the relevant contract or agreement to arbitrate (CA's emphasis)" (see Legal update, Dallah Supreme Court decision: full update). The judge had misdirected himself and failed to take account the "fundamental defect" that enforcement was sought against the Additional Parties, who had been wrongly joined to the arbitration. Had he taken this into account, he could only have exercised his discretion to refuse enforcement.

In obiter comments, the CA also accepted First Media's argument that the cases cited by Chow J, China Nanhai Oil [1994] 3 HKC 375 and Hebei Import & Export Corp [1999] 2 HCK 205, should be distinguished. In those cases, the parties resisting enforcement had remained silent about their objections to the tribunal's jurisdiction, keeping them "up their sleeve", and deploying them for the first time to resist enforcement. Here, although First Media did not challenge the tribunal's preliminary award on jurisdiction, it did raise its objection before the tribunal, and (importantly) expressly reserved its rights. Moreover, the Singapore Court of Appeal subsequently confirmed that such reservation was effective, not least because Astro had not been misled. However, the CA did recognise that there might be circumstances in which a party's failure to challenge jurisdiction before the supervisory court under Article 16(3) of the UNCITRAL Model Law could be construed as a breach of the good faith principle.

The CA found that the good faith principle is complementary with the "choice of remedies" principle, under which parties are entitled to pursue both "active remedies" in the supervisory court (such as an Article 16(3) application to contest jurisdiction) and "passive remedies" (resisting enforcement). If the good faith principle is applied too rigorously where there is a failure to pursue active remedies, it might come into conflict with the choice of remedies principle. In order to avoid this, the court must have regard to "the full circumstances why an active remedy is not pursued or other relevant considerations (such as whether there was a clear reservation of rights so the opposite party was not misled)".

The CA disagreed with First Media's submissions regarding the extension of time, preferring the approach in Terna Bahrain Holding Co WLL v Al Shamsi and others [2013] EWHC 3283 (Comm), discussed in Legal update, No extension of time for challenge to arbitration award (Commercial Court). That case emphasises the need for "speedy finality" of arbitral proceedings, which is the policy underpinning both the English Arbitration Act and the Arbitration Ordinance. Astro successfully argued that arbitration is "entirely different territory" from court proceedings, and calls for a "more disciplined approach" to time limits. Moreover, the CA did not agree that Chow J had either failed to consider all relevant matters or exercised his discretion in a "rigid mechanistic fashion".

The CA further rejected First Media's submission that Chow J had given insufficient weight to its "incontrovertible and fundamental" jurisdictional objection, which had been upheld in the Singapore Court of Appeal. The CA was not persuaded that the judge's assessment of the factors for and against extending time was "plainly wrong". To allow a delay of 14 months, against a time limit of 14 days, "would make nonsense of the policy of speedy finality, which underpins Hong Kong's Arbitration Ordinance".

The appeal was dismissed. However, the CA awarded Astro only 60% of the costs of the appeal, on the basis that it had lost on the principle of good faith, and that argument on that issue had taken considerable time and effort.