Failed mediation

Gao Haiyan v Keeneye Holdings Ltd, a decision of Reyes J in the Hong Kong Court of First Instance, 12 April 2011, contains important comments on the use of ‘med-arb’ and also on the ability of a court to refuse enforcement of a foreign award on public policy grounds even though the curial court has rejected an appeal against the award. The facts of the case were somewhat extreme, in that the so-called ‘mediation’ failed to comply with any of the usual characteristics of that process, but the approach of the court is of great interest.

Keeneye: the facts

The claimants, husband and wife, were shareholders in a company, Zhongxin, which was a 70% shareholder in a joint venture which operated a coal mine on mainland China. The claimants transferred 50% of their interest to a trustee for the benefit of Baijum, a Hong Kong company, under a Cooperation Agreement. In 2008 the claimants transferred their interest in Baijum to the respondents (Keeneye and New Purple) under two Share Transfer Agreements which contained an arbitration clause for disputes to be resolved by arbitration in Xian. In June 2009 the claimants commenced judicial proceedings in Hong Kong to have the Share Transfer Agreements set aside for misrepresentation and duress on the part of the respondents’ controller. The respondents for their part commenced arbitration proceedings in Xian, in accordance with the arbitration clause in the Share Transfer Agreements. Each party appointed an arbitrator (ZJ for the claimants and LC for the respondents) and a third (chief) arbitrator (JP) was also appointed.