a. Legal consequences of non-arbitrability under Hong Kong law

a. Legal consequences of non-arbitrability under Hong Kong law  

Where a dispute concerns a subject matter that is not capable of settlement by arbitration, the consequences may arise at every stage of the arbitral process: from an application to stay court proceedings, through the tribunal’s jurisdictional ruling, to setting aside, recognition and enforcement. 

Refusal to stay court proceedings 

The issue may first arise when one party commences court proceedings despite an arbitration agreement, and the other party applies for a stay in favour of arbitration. 

Section 20 of the Arbitration Ordinance (Cap. 609) generally requires the court to refer parties to arbitration where the dispute is the subject of an arbitration agreement. However, that obligation does not apply if the arbitration agreement is “null and void, inoperative or incapable of being performed”. A dispute over a non-arbitrable subject matter renders the agreement null and void in the context of that specific claim. 

If the subject matter of the dispute is non-arbitrable, the court may refuse to stay the proceedings. 

At this gateway stage, the court will often conduct only a prima facie review, particularly where the issue is not clear-cut. If it is arguable that the matter falls within the arbitration agreement and is arbitrable, the court may leave the arbitral tribunal to make the first full determination of jurisdiction. However, if it is clear that the subject matter is not capable of settlement by arbitration, the court need not refer the matter to arbitration. 

The arbitral tribunal’s jurisdiction 

Even where court proceedings are stayed or no court proceedings have been brought, the arbitral tribunal must still consider whether it has jurisdiction to hear the dispute. Under section 34 of the Arbitration Ordinance, an arbitral tribunal may rule on its own jurisdiction. This is the principle of competence-competence. 

The tribunal must consider whether the dispute is capable of settlement by arbitration under the law of the seat, namely Hong Kong law. In appropriate cases, it may also need to consider whether the award would face arbitrability objections under the law of the place where enforcement is likely to be sought. 

That power, however, is not exclusive. The tribunal’s jurisdiction remains subject to supervision by the courts, especially where the issue concerns arbitrability. 

If the tribunal rules as a preliminary question that it has jurisdiction despite an arbitrability objection, a party may request the Court of First Instance (“CFI”) to decide the matter. The CFI determines the issue of the tribunal’s jurisdiction afresh, meaning that it makes its own independent determination and is not bound by the tribunal’s findings. 

This application must be made within the statutory time limit, which is 30 days from receipt of notice of the tribunal’s ruling. The decision of the CFI on such a jurisdictional ruling is final and not subject to appeal. 

If, by contrast, the tribunal concludes that the dispute is non-arbitrable and that it therefore lacks jurisdiction, that ruling is generally not subject to appeal. In such case, the parties must pursue the dispute before the competent court or statutory forum. 

Setting aside an award on grounds of non-arbitrability 

If a tribunal proceeds to determine a dispute that is not arbitrable under Hong Kong law, any resulting award is vulnerable to being set aside. 

Section 81 of the Arbitration Ordinance provides that an award may be set aside if the court finds that the subject matter of the dispute is not capable of settlement by arbitration under the law of Hong Kong. 

Unlike some grounds for setting aside, which depend on proof by the party challenging the award, the court may consider non-arbitrability of its own motion. 

If the award is set aside on this basis, it cannot stand as a binding arbitral determination. The parties are effectively returned to the position that the dispute must be resolved by the court or other body with lawful jurisdiction over the subject matter. 

Refusal of recognition and enforcement 

Non-arbitrability may also arise at the final stage, when a party seeks recognition or enforcement of an award in Hong Kong. The Arbitration Ordinance contains separate enforcement regimes for different categories of awards, but each regime recognises non-arbitrability as a ground on which enforcement may be refused: 

• Section 86(2)(a): Hong Kong awards and non-Convention awards 
• Section 89(3)(a): Convention awards 
• Section 95(3)(a): Mainland awards 
• Section 98D(3)(a): Macao awards 

Severability of awards 

If an award contains decisions on both arbitrable and non-arbitrable matters, the court may enforce the arbitrable parts of the award provided they can be separated from the portions that are not capable of settlement by arbitration.