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Let's talk antitrust: Discussing recent cases and emerging competition issues
Recent cases and judgments have shone a light on some emerging themes and trends that companies will want to consider as part of their risk management framework.
Global | Publication | October 2014
For the first time since it was established in 1985, the Hong Kong International Arbitration Centre has been sued in the Hong Kong courts (Gong Ben Hai v HKIAC). However, the Hong Kong Court of First Instance has struck down the claim, in a move that highlights both Hong Kong’s robust anti-intervention stance on arbitration and its importance as an international arbitration venue.
To protect its operational freedom, the HKIAC has incorporated exclusions of liability into its arbitration rules. These provide that – barring instances of dishonesty on the part of the HKIAC – it and associated bodies or personnel are not liable to the parties in respect of arbitrations conducted under those rules.
The exclusions are provided in article 40 of the HKIAC 2008 Administered Arbitration Rules (HKIAC 2008 Rules) and article 40 of the updated 2013 rules (HKIAC 2013 Rules).
The HKIAC’s partial immunity is also supported by the provisions of the Hong Kong Arbitration Ordinance (Cap 609) (the Ordinance). Section 105(1) of the Ordinance provides that an arbitration institution is not liable in law for the consequences of exercising its functions unless the function was exercised dishonestly.
By virtue of the above provisions, and its reputation for handling cases effectively, the HKIAC has not been subject to a court challenge since its establishment almost 20 years ago.
As part of its administrative role, the HKIAC’s Council may be called upon to decide challenges to arbitrator appointments (HKIAC 2008 Rules, article 11.7; HKIAC 2013 Rules, 11.9). Parties may challenge the choice of arbitrator in circumstances where there are justifiable doubts as to the arbitrator’s impartiality or independence (section 25 of the Ordinance, giving effect to article 12(2) of the UNCITRAL Model Law – see also article 11.4 of HKIAC 2008 Rules and article 11.6 of HKIAC 2013 Rules).
A two-step procedure is established by the Ordinance and HKIAC rules. This involves
In Gong Ben Hai v HKIAC, the parties of the original arbitration proceedings were Gong Ben Hai and the Dan Dong Tyre Factory. They entered into an arbitration agreement in August 2012. This agreement referred any disputes to resolution by arbitration in Hong Kong with the HKIAC as administering institution. It specified that a three-person arbitration tribunal would be appointed by the HKIAC.
In September 2012, Gong Ben Hai commenced arbitration proceedings. He claimed repayment of a loan together with interest from his counter-party. The HKIAC duly appointed the three arbitrators for the tribunal which started in February 2013.
However, before the conclusion of proceedings, Gong Ben Hai applied to the HKIAC to challenge the independence and impartiality of two of the appointed arbitrators. The HKIAC Council rejected the challenge for lack of substantive evidence. Gong Ben Hai was notified of this decision on December 24, 2013.
In February 2014, Gong Ben Hai applied to the Hong Kong Court of First Instance requesting several orders, including an order that the HKIAC’s decision be set aside. Gong Ben Hai’s application listed the HKIAC as the only defendant. The challenged arbitrators and respondent did not participate in the proceedings.
By an order dated March 18, 2014, the court rejected Gong Ben Hai’s application on the following grounds:
On the basis of the first two points above, the court went so far as to find that under section 3(2)(b) of the Ordinance, it was prohibited from hearing the matter. This would constitute the court interfering in the arbitration of a dispute in circumstances which were not provided in the Ordinance.
In recent years, a number of important decisions have been made by Hong Kong courts which capture a pro-arbitration philosophy. These include refusals to grant anti-arbitration injunctions or overturn arbitration awards. This continued support for arbitration from a strong and independent Hong Kong judiciary is an important factor in maintaining Hong Kong’s pre-eminence as an international arbitration seat.
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Recent cases and judgments have shone a light on some emerging themes and trends that companies will want to consider as part of their risk management framework.
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After a lacklustre finish to 2022 when compared to the vintage year for M&A that was 2021, dealmakers expected 2023 to see the market continue to cool in most sectors, in response to the economic headwinds of rising inflation (with its corresponding impact on financing costs), declining market valuations, tightening regulatory scrutiny and increasing geopolitical tensions.
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On 18 September 2023, the CMA published its Initial Report (Initial Report) on AI Foundation Models (FM), supplemented in April 2024 with the publication of its “Update Paper” focused on potential antitrust risks associated with FMs and a “Technical Update Report” providing more detail on the development on FMs (collectively the “Reports”). Below, we consider these CMA publications.
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