If the Pre-Arbitration Procedure Has Not Been Completed, Will the Arbitral Award Be Set Aside?
2026/10/14
——The Hong Kong Court's Latest
Position: This Is a Question of Admissibility, and the Court Has No Power to
Review It.
In a satellite development contract
dispute, one party sought to set aside an arbitral award on the ground that the
parties had not first negotiated before proceeding to arbitration as agreed.
The Hong Kong Court's judgment was unexpected: this is a question of
admissibility, and the court has no power to intervene.
The Issue: If No Negotiation Was Held
Before Arbitration, Is the Award Valid?
A satellite development contract
provided that disputes should first be negotiated and that only if negotiation
failed within 60 days could the matter be submitted to arbitration. One party
applied directly for arbitration, and the other party objected, arguing that
the arbitral tribunal lacked jurisdiction. The arbitral tribunal found that a
request for negotiation had been made, dismissed the objection, and issued an
award. The losing party then applied to the Hong Kong court to set aside the
award on the ground that the arbitral procedure did not comply with the
agreement.
The Hong Kong Court: The
Pre-Arbitration Procedure Is a Question of Admissibility, and the Arbitral
Tribunal Has the Final Say.
The Hong Kong Court of Appeal clearly
stated that whether the pre-arbitration procedure has been satisfied is a question
of admissibility, not a question of jurisdiction. The arbitral tribunal has
the power to decide it, and the court may not review it de novo. The court
emphasized that where the parties have not excluded the pre-arbitration
procedure dispute from arbitration, it should be presumed that they intended it
to be resolved by the same arbitral tribunal. This position is consistent with
that of England, Singapore, the United States, and other jurisdictions, and
reflects the principles of supporting arbitration and respecting party
autonomy.
How Do Mainland Courts See It? They
Tend Toward a Liberal Interpretation, but Risks Remain.
Mainland courts generally do not link
pre-arbitration procedures to jurisdiction and interpret
"negotiation" broadly, taking the view that the filing of an
arbitration application itself may be regarded as evidence that negotiation has
failed. However, in a very small number of cases, courts have refused to
enforce foreign arbitral awards on the ground that the pre-arbitration
procedure was not satisfied. The risk cannot be ignored.
Lawyer's Recommendation: Procedural
Compliance Is the "Safety Valve" for the Validity of an Award.
Our lawyers advise that, before
commencing arbitration, it is essential to strictly comply with the
pre-arbitration procedures stipulated in the contract, fully perform
obligations such as negotiation and mediation, and retain written records. If
the pre-arbitration procedure is ignored, the other party may raise an
"admissibility" defense, and the award may even be set aside or
refused enforcement. The role of counsel is: to review the dispute
resolution clause in advance and design a compliant path; to secure evidence of
performance during the process and prevent procedural defects; and to respond
to challenges to set aside and enforcement after the event, so as to preserve
the validity of the award.
Procedure is no small matter, and
pre-arbitration procedure is by no means a mere formality. A compliant
arbitration begins with compliance with the pre-arbitration procedure.