By Alexander Botashev and Joseph Bentley
On 7 June 2022, the Hong Kong Court of Appeal issued a significant decision in relation to whether compliance with pre-arbitration steps in a tiered dispute resolution provision, so-called "conditions precedent", raises questions of jurisdiction, on the one hand, or admissibility, on the other.
The Hong Kong Court of Appeal followed recent English authority by confirming that compliance with pre-arbitration steps (for example, entry into ‘good faith’ negotiations for a set period of time before referral to arbitration) are invariably matters of admissibility. As matters of admissibility, they are questions which the tribunal alone is empowered to determine, and are not a basis on which to challenge an arbitral award on grounds of want of jurisdiction.
While the difference between jurisdiction and admissibility may at first appear a point of academic interest, it has important real-world consequences. Until relatively recently, the English courts did not recognise the difference at all, exposing contractual parties to a risk that the courts might improperly set aside an arbitral award on grounds of jurisdiction as a result of a challenge that in fact concerns questions of admissibility.
We consider below the recent line of English authority which has shone a light on the distinction, and on which the Hong Kong Court of Appeal’s decision in C v D  HKCA 729 relies, before discussing the judgment in C v D itself.
Evolution of the English law position
The English courts historically treated a failure to comply with steps in a tiered arbitration agreement as being a matter of the tribunal’s jurisdiction. While there are many examples, the case typically referred to is Emirates Trading Agency v Prime Mineral Exports  EWHC 2104 (Comm).
The question before the court was whether an agreement that the parties would “seek to resolve the dispute or claim by friendly discussion…for a continuous period of 4 weeks” was enforceable, and a condition precedent to arbitration, or otherwise a mere agreement to agree. The court held that the agreement was enforceable because it was complete and sufficiently certain. Relevantly, the court treated it as settled law that, if a party failed to comply with an enforceable condition precedent, the tribunal would lack jurisdiction. Nonetheless, the court held that the condition precedent had in any event been complied with, and so did not consider whether there was any effect on the tribunal’s jurisdiction.
The first English court decision to tentatively tease out the distinction between jurisdiction and admissibility was Tatneft v Ukraine  EWHC 1797 (Comm), handed down in July 2018. In that case, the court dismissed Ukraine’s challenges to enforcement of an award in Tatneft’s favour under the Bilateral Investment Treaty between Ukraine and Russia on the basis that the challenges primarily concerned questions of admissibility, not jurisdiction. This was important because, if not a question of jurisdiction, there would be no grounds for challenging enforcement on the basis of state immunity.
Importantly, in Tatneft v Ukraine, the court delineated the difference between jurisdiction and admissibility as follows: “Issues of jurisdiction go to the existence or otherwise of a tribunal's power to adjudge the merits of a dispute; issues of admissibility go to whether the tribunal will exercise that power in relation to the claims submitted to it”. Issues of admissibility therefore inherently assume that the tribunal is already empowered to hear the claim in question, i.e. that it has jurisdiction. The question of admissibility is rather whether it is appropriate for the tribunal to exercise that power at that time.
The defining moment in English law was the decision in Republic of Sierra Leone v SL Mining  EWHC 286 (Comm) in February 2021. In that case, the award debtor applied to have a London-seated award set aside under Section 67 of the Arbitration Act 1996, contending that the tribunal lacked substantive jurisdiction because the award creditor had failed to comply with pre-conditions to arbitration in a tiered arbitration agreement.
The dispute resolution provisions in Sierra Leone were similar to those in Emirates Trading Agency v Prime Mineral Exports. Before referring a dispute to arbitration, the parties were obliged to endeavour in good faith to reach an amicable settlement of all differences of opinion and disputes for a period of not less than 3 months. The award creditor served a notice of dispute on 14 July 2019, triggering the 3 month period for good faith negotiations. However, the award creditor then filed its request for arbitration on 30 August 2019, only six weeks later.
In response to a challenge to its jurisdiction during the arbitration, the tribunal determined that failure to comply with the tiered dispute resolution provision (by filing a request for arbitration before the expiry of 3 months) was a question of admissibility, and therefore a matter which it alone was empowered to address. The award debtor then applied to have the award set aside and the court was asked to consider whether premature filing of a request for arbitration gave rise to a question of admissibility or of jurisdiction, and the practical consequences of there being a difference.
After a painstaking review of judicial and academic authority, the court held that the parties’ failure to attempt good faith settlement discussions for the requisite timeframe, and in fact all issues relating to prematurity or ‘ripeness’ of claims under a tiered arbitration agreement, were points of admissibility.
The decision in Sierra Leone is notable because of its overt reliance on commentary by distinguished arbitration practitioners. In reaching its decision, the court explicitly endorsed commentary by Gary Born in which he expressed the view that there ought to be a presumption that “pre-arbitration procedural requirements” are not jurisdictional, and must therefore be resolved by the tribunal, with minimal scope for judicial review in the event of subsequent annulment proceedings. The rationale is that these are issues which relate to the timing, conduct and procedure of an arbitration. As parties to an arbitration agreement should be presumed to have intended for a single tribunal to have authority to resolve and dispose of all of the disputes referred to it, these threshold issues (what Jan Paulsson describes as “alleged impediments to consideration of the merits”) are matters best left to the tribunal.
The court therefore summarised its findings in Sierra Leone v SL Mining as follows
- Jurisdiction is ‘the power of the tribunal to hear a case’, whereas admissibility is a question of ‘whether it is appropriate for the tribunal to hear it’.
- Whether a reference is premature could “only be a matter of procedure, that is, a question of admissibility of the claim, and not a matter of jurisdiction".
- All questions relating to compliance with pre-conditions to commencement of an arbitration, such as adherence to as time limits or requirements to mediate or negotiate first, and all surrounding questions of ‘ripeness’, are matters of admissibility.
- A challenge on the basis that a claim, or part of a claim, is time-barred or prohibited until a pre- condition has been fulfilled is a challenge to the admissibility of that claim at that time. It is not a challenge to the tribunal’s jurisdiction to decide the claim.
- If a matter relates to jurisdiction, it is subject to judicial recourse under Section 67 of the Arbitration Act 1996.
- If a matter relates to admissibility, the tribunal’s decision is final (in the same way as the tribunal’s decision on other merits of the arbitration is final).
- A tribunal must first have (or determined that it has) jurisdiction to decide a claim before it can decide whether a particular claim is admissible.
The decision in Sierra Leone was promptly followed in October 2021 when the courts dismissed another challenge under Section 67 of the Arbitration Act 1996 in NWA v NVF  EWHC 2666 (Comm). In that case, the award debtor applied to have the award set aside on the basis that the award creditor had failed to comply with a condition requiring the parties to seek to mediate for a period of 30 days before referring the matter to arbitration.
In its decision, the court endorsed Sierra Leone, finding that “if reaching the end of the settlement period is to be viewed as a condition precedent at all…it could only be a matter of procedure, that is, a question of admissibility of the claim, and not a matter of jurisdiction”. The court came to the same view that issues of admissibility were ‘case management decisions’ for the tribunal, and not issues which call into question its jurisdictional footing.
NWA v NVF is also notable because it provided some much needed guidance on steps that a tribunal can take when considering a meritorious challenge on admissibility. The court endorsed academic commentary suggesting that, if it is possible to overcome the issues of admissibility (i.e. procedural deficiencies), the tribunal could consider staying the proceedings so as to allow any outstanding requirements to be satisfied.
The decision in C v D
The Hong Kong Court of Appeal’s decision in C v D expressly endorses the English decisions in Sierra Leone and NWA v NVF, as well as similar judgments issued in other common law jurisdictions such as Singapore and New South Wales.
By way of brief context, in C v D, a dispute arose between a satellite owner in Hong Kong (C) and a Thai satellite operator (D) in relation to D’s entitlement to transmit video content into China and C’s efforts to switch off the satellite’s transponders. In the event of a dispute, the relevant provisions required the parties to “attempt in good faith promptly to resolve such dispute by negotiation”, permitting either party to refer the dispute to each party’s Chief Executive Officers for resolution at a meeting to be arranged within 10 business days of any such referral.
Neither party observed these provisions and, on 18 April 2019, D issued a notice of arbitration, to which C responded by asserting that the tribunal did not have jurisdiction because the parties had not complied with the pre-conditions to arbitration. Ultimately, the tribunal issued a partial award finding in D’s favour and dismissing C’s jurisdiction objection on the basis that D had in any event satisfied the requirement to attempt in good faith to resolve the dispute by negotiation. C then made an application for the partial award to be set aside under Section 81 of the Arbitration Ordinance (Cap 609), which imports Article 32 of the UNCITRAL Model Law wholesale, contending that the tribunal lacked jurisdiction.
The principal question before the court was whether compliance with pre-arbitration steps was a question of jurisdiction or admissibility. The court found that there was broad international consensus for the view that “non-compliance with procedural pre-arbitration conditions such as a requirement to engage in prior negotiations goes to admissibility of the claim rather than the tribunal’s jurisdiction”. Moreover, the court held that whether pre-arbitration procedural requirements have been fulfilled is a question that is “intrinsically suitable for determination by an arbitral tribunal”.
The court also emphasised that the question is fundamentally a point of construction, that is to say, whether the parties intended for disputes relating to the fulfilment of pre-arbitration procedural requirements to be a matter capable of reference to arbitration. Although there is a presumption that parties to an arbitration agreement intend any dispute arising out of their relationship to be decided by one tribunal, it is possible for parties to rebut that presumption with clear and unequivocal language, providing that satisfaction of pre-arbitration requirements is a strict condition precedent, absent compliance with which the tribunal will lack jurisdiction (although it is unclear why any party would choose to take this approach because it paves the way for expensive satellite litigation).
The Hong Kong Court of Appeal’s decision in C v D follows a recent trend in common law jurisdictions such as England & Wales and Singapore, now finally catching up to civil law jurisdictions like France and Switzerland, by confirming the difference between jurisdiction and admissibility.
However, accepting there is a distinction is one thing; clearly drawing the dividing line is quite another. It is not always obvious on which side of the line an issue falls. In his 2010 article, Jurisdiction and Admissibility, Jan Paulsson memorably compared the problem to trying to perceive the divide between night and day in twilight. Mr Paulsson’s recommended approach, his ‘lodestar’, was to try to identify whether the objecting party was taking aim at the tribunal, in which case it was likely an issue of jurisdiction, or at a particular claim, in which case it was likely an issue of admissibility. In C v D, the court described this approach as the “tribunal versus claim” test, and applied it to the arguments when determining that the objection was a question of admissibility.
A further question that often arises is what law should govern questions of admissibility. Questions of jurisdiction are typically addressed by reference to the law of the arbitral seat. So, until the decisions discussed above clarified the distinction between jurisdiction and admissibility, issues of admissibility were addressed in the same way. However, following the UK Supreme Court’s decision in Enka Insaat Ve Sanayi A S v OOO Insurance Company Chubb  UKSC 38, it is now settled under English law that “the law which determines the validity and scope of the arbitration agreement will determine the validity and scope of the whole dispute resolution agreement”. Issues of admissibility will therefore be determined by the law governing the arbitration agreement which may of course differ from the law of the seat and the law governing the rest of the agreement.
The position is now clear that virtually all procedural conditions to arbitration (for example, good faith negotiation obligations, time-bar clauses, mandatory ADR provision and expert determinations prior to arbitration) are bars to admissibility. And, if a bar to admissibility, it is an issue that the tribunal alone is empowered to decide. The tribunal may or may not decide the stay the arbitration pending compliance with the procedural condition – perhaps the usual course, given most pre-conditions are tied to a fixed period of time – but that is its decision and not one that is potentially subject to judicial scrutiny.