International Arbitration Newsletter - November 2021 | Regional Overview: Asia Pacific
The most relevant Asia Pacific updates from the global International Arbitration and ADR practice group at Garrigues.
Hong Kong share freeze remains under COVID-19 plea
An interim injunction preventing Unipax Properties (Unipax), a Californian company owned by a Chinese national, from transferring equity of a Hong Kong investment vehicle pending the outcome of a Beijing-seated CIETAC arbitration has been granted by the Hong King Court of First Instance to a Chinese private equity firm called Shenzhen Hina New Economy (Hina), with a precondition that the latter issues a cross-undertaking in damages within 21 days.
The dispute relates to an agreement entered into between Unipax and Hina for the equity transfer over 100% shareholding of HK Bao Cheng Ka Yip Trading (HK) at a price of USD 11.7 million in July 2020. However, Unipax then sought to terminate the agreement, claiming force majeure events of restrictions on the visa and bank caused by COVID-19 and “deteriorating Sino-US relations”, which further resulted in failure to open a jointly controlled Hong Kong bank account for receiving the purchase funds for conformity with overseas direct investment requirements. Hina launched the CIETAC arbitration in February 2021 requesting transfer of the equity. Hina believed that there were other buyers providing higher bid for this transaction, while Unipax insisted Hina was motivated by the information that JD Logistics applied to list in Hong Kong, of which HK holds 2.62% interest.
Justice Mimmie Chan approved the injunction restricting Unipax from disposing of the BC shares. The Justice Chan held that neither the Sino-US relation, nor the COVID-19 could constitute a basis for force majeure, especially the latter had already spread worldwide before execution of the agreement, while the determination of constitution of force majeure shall be subject to the ruling of the arbitral tribunal. Nevertheless, Justice Chan emphasized that if Hina fails to make a payment of the purchase price of US$ 11.7 million into the court or providing a bank guarantee as a cross-undertaking in damages, the injunction would be lifted.
Singapore Court Refuses to Set Aside Manila Award
As disclosed in a judgment handed down 4 October 2021, the Singapore Court of Appeal rejected an application filed by Philippine-domiciled Bloomberry Resorts (Bloomberry) to revoke a final award valued US$ 296 million in favour of US casino management company named Global Gaming and upheld the award, which ordered the owner of a Manila gaming resort to promote an equity transfer in the event of a failure to pay the compensation. The Court found the remedy to be a pragmatic solution to the reality of the situation. In fact, earlier in 2021, for the same UNCITRAL arbitration, the Court had already upheld a partial award on liability, dismissing Bloomberry’s claims that Global Gaming and its lawyer had fraudulently misled the tribunal.
In 2011 Global Gaming and Bloomberry’s subsidiary in Manila called Solaire Resort & Casino concluded a management services agreement, under which Global Gaming was obliged to provide management services to Solaire Resort & Casino. In 2016 the Singapore-seated tribunal found that Bloomberry terminated the agreement wrongfully and rejected its assertion that the agreement was the result of misrepresentation. Meanwhile, the tribunal dismissed the right of Bloomberry to challenge Global Gaming’s purchase of equity of Bloomberry’s ultimate parent company. In 2019, the final award was issued, ordering Bloomberry to compensate the damages of Global Gaming, otherwise a “constructive remedy” would be adopted to facilitate Global Gaming to sell the equity to third parties.
In February 2021 the partial award was upheld by the Court of Appeal and the arguments of Bloomberry that Global Gaming’s lawyer had misled the tribunal by concealing evidence of Global Gaming’s corruption investigation at the arbitration liability stage. In 2020 the High Court also upheld the final award, likewise rejecting the allegation of concealment of evidence as well as the argument that the tribunal exceeded its mandate in granting the constructive remedies.