Mb v. Hb

HCCT 28/2026

[2026] HKCFI 4437

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION PROCEEDINGS

NO 28 OF 2026

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D E C I S I O N

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Background

1.On 30 July 2020, the Applicant (“MB”) commenced an ICC arbitration (“Arbitration”) against the Respondent (“HB”), pursuant to an arbitration agreement contained in a contract whereby HB agreed to design and construct a cement plant in Mongolia (“Plant”) for the Applicant (“Contract”).

2.MB is a Mongolian company which carries on a business of producing, distributing and selling cement. HB is a company incorporated in Mainland China, is listed on the Shanghai Stock Exchange and its shares are also listed in Hong Kong. It is also in the business of producing and selling cement, and has a principal place of business in Hong Kong.

3.MB claimed in the Arbitration that HB was in breach of the provisions of their Contract by failing to comply with the technical requirements contained therein, which resulted in defects to the steel structure and in the foundation of the cement Plant.

4.The Arbitration was governed by the relevant ICC Rules. The hearing took place in Paris in March 2024, and on 26 March 2025, the Tribunal issued an award, whereby HB was ordered to pay damages to MB, in the amount of US $70,342,453.31 together with interest (“Award”).

5.Shortly thereafter, in April 2025, HB applied to the Paris Court of Appeal for annulment of the Award (“Paris Annulment Proceedings”), claiming that there were serious procedural errors and that the Award should be set aside. In essence, HB claims that the Tribunal failed and refused to consider a key document, namely Annex H-11 of the Contract (which contained the text of Chinese construction standards said to be relevant to the construction of the Plant) (“Annex H11”) (the “Annex H11 Ground”), and further, that there were ties between the presiding Tribunal Member and the Tribunal Member nominated by MB which were not disclosed by the Tribunal (the “Tribunal Composition Ground”).

6.As a consequence of the alleged irregularities, HB claims that it was unable to present its case, the composition of the Tribunal was not in accordance with the parties’ agreement, and that it would be contrary to the public policy of Hong Kong to enforce the Award, under section 89 of the Arbitration Ordinance (“Ordinance”). These grounds were raised in HB’s opposition to MB’s application made in January and February 2026 for leave to enforce the Award in Hong Kong.

7.Procedural hearings of the Paris Annulment Proceedings took place in October 2025 and March 2026.

8.On 10 March 2026, HB issued its summons to adjourn MB’s application for leave to enforce the Award, pending determination of the Paris Annulment Proceedings.

9.In response, MB applied on 13 March 2026 for security to be furnished by HB in the event of an adjournment being granted as sought. MB opposed the adjournment and claims that the Court should order immediate enforcement of the Award since there are no merits in the Paris Annulment Proceedings, and further delay in enforcement is prejudicial to MB.

10.According to MB, the Court should grant leave to enforce the Award in Hong Kong, as there are no grounds on which enforcement may be refused under section 89 of the Ordinance. On HB’s part, its primary position is that the Court should refuse enforcement of the Award under section 89(2)(c)(ii), 89(2)(e)(i) and 89(3)(b) of the Ordinance, and alternatively, the enforcement proceedings should be adjourned under section 89(5), which states:

“If an application for the setting aside or suspension of a Convention award has been made to a competent authority…, the court before which enforcement of the award is sought-

(a)  may, if it thinks fit, adjourn the proceedings for the enforcement of the award; and

(b)  may, on the application of the party seeking to enforce the award, order the person against whom the enforcement is invoked to give security.”

11.It is HB’s contention that no security should be ordered for the adjournment.

The apparent merits of the challenge to Award and its enforcement

12.Consideration of the merits of HB’s challenge to the Award made to the Paris Court and of its opposition to enforcement of the Award in Hong Kong is relevant in perhaps two respects.

13.First, Counsel for MB referred to IPCO (Nigeria) Ltd v Nigerian National Petroleum Corporation [2005] 2 Lloyd’s Rep 326, where the Court explained (at paragraph 5) that the provision in the English Arbitration Act corresponding to section 89(5) of the Ordinance does not provide a threshold test in respect of the grant of an adjournment and the power to order the provision of security in the exercise of the court’s discretion. Gross J went on to explain:

“In my judgment, it would be wrong to read a fetter into this understandably wide discretion (echoing, as it does, article VI of the New York Convention). Ordinarily a number of considerations are likely to be relevant: (i) whether the application before the court in the country of origin is brought bona fide and not simply by way of delaying tactics; (ii) whether the application before the court in the country of origin has at least a real (ie realistic) prospect of success (the test in this jurisdiction for resisting summary judgment); (iii) the extent of the delay occasioned by an adjournment and any resulting prejudice. Beyond such matters, it is probably unwise to generalize; all must depend on the circumstances of the individual case. As it seems to me, the right approach is that of a sliding scale, in any event embodied in the decision of the Court of Appeal in Soleh v Boneh International Ltd v Government of the Republic of Uganda [1993] 2 Lloyd’s Rep 208 in the context of the question of security:

… two important factors must be considered on such an application, although I do not mean to say that there may not be others. The first is the strength of the argument that the award is invalid, as perceived on a brief consideration by the court which is asked to enforce the award while proceedings to set it aside are pending elsewhere. If the award is manifestly invalid, there should be an adjournment and no order for security; if it is manifestly valid, there should either be an order for immediate enforcement, or else an order for substantial security. In between there will be various degrees of plausibility in the argument for invalidity; and the judge must be guided by his preliminary conclusion on the point.

The second point is that the court must consider the ease or difficulty of enforcement of the award, and whether it will be rendered more difficult… if enforcement is delayed. If that is likely to occur, the case for security is stronger; if, on the other hand, there are and always will be insufficient assets within the jurisdiction, the case for security must necessarily be weakened.”

(Emphasis added)

14.As highlighted in the extract from the judgment set out in the preceding paragraph, the preliminary examination of the merits is for the consideration of whether the application made to the Paris Court in this case is bona fide, and has at least a realistic prospect of success.

15.The second but related aspect of the consideration is, by application of the principles set out in Soleh (also set out in the above extract of the judgment in IPCO), for deciding whether the Award is manifestly valid (such that there should be an order for immediate enforcement or an order for substantial security in the event of an adjournment being granted), or manifestly invalid (in which event there should be an adjournment and no order for security).

The Tribunal Composition Ground

16.On a brief consideration of the matter, I have grave reservations as to whether the Tribunal Composition Ground has real prospects of success. As Counsel for MB rightly contended, the evidence said to establish a duty of disclosure, or to create reasonable doubt in the mind of the reasonable and objective observer as to the independence and impartiality of the arbitrators concerned, is tenuous to say the least. Four of the arbitrations in which the 2 arbitrators had sat together had all been closed before the commencement of the Arbitration. They did not at the relevant time of the Arbitration serve together as arbitrators in another arbitration. They had also ceased to be members of the same chambers since 2015, before the Arbitration. The fact that they had authored books together was apparent from the declaration of independence of the Tribunal Member. The fact that they had expressed that they were good friends and colleagues, had a “personal friendship” and a “happy professional collaboration” could not be evidence of such closeness or association which would lead to their decision-making process being influenced, or lacking in independence. The objective fair-minded and informed observer, with the attributes described in Helow v Secretary of State for the Home Department [2008] 1 WLR 2416 and in CNG v G&G and SIL [2025] HKCFI 3598, would not conclude in all the circumstances and from the failure of disclosure of the alleged relationship between the arbitrators that there was any real possibility that the arbitrators were not independent or impartial.

17.As Counsel for MB pointed out, the “Orange List” under the IBA Guidelines on which HB sought to rely would not apply to the facts concerning the arbitrators in this case, and no duty of disclosure arises.

The Annex H11 Ground

18.As for the Annex H11 Ground, on my brief consideration, I am certainly not persuaded that the Award is manifestly invalid by reason of the irregularity claimed.

19.HB’s claim is that the issue in dispute between the parties in the Arbitration was the applicable construction standards for the Plant, as incorporated under the Contract. MB contended that the Mongolian and/or Russian standards were applicable, whilst HB contended that the Chinese national standards applied instead. According to HB, the Chinese standards were incorporated into the Contract by Annex H11.

20.HB’s complaint is that the entire Annex H11 of the Contract was omitted from the hearing bundles before the Tribunal, and on 1 June 2024 (only 9 days before the parties were due to file their post-hearing briefs), HB requested the Tribunal to include Annex H11 into the bundles, but the Tribunal declined and directed HB to make a formal application. After the parties had filed their post-hearing briefs on 10 June 2024, HB made a formal application to admit Annex H11, but this application was dismissed by the Tribunal due to the objections made by MB, that the application related to new evidence and new allegations of fact. On HB’s case, the Chinese codes and standards of construction contained in Annex H11 were material to the claims of breaches of the Contract as alleged, and by wrongfully rejecting the inclusion of Annex H11, the Tribunal had failed or refused to properly consider the relevant arguments and evidence, failed to properly consider HB’s Defence, and had prevented HB from properly presenting its case on (inter alia) the relevant Chinese codes.

21.As highlighted by Counsel for MB, HB had itself to blame for failing to produce Annex H11 as the purportedly material evidence on which it sought to rely in the Arbitration. It was only on the eve of the service of Post‑Hearing Briefs that HB sought, for the first time, to put Annex H11 into the evidence.

22.If Annex H11 was as material as HB claims, it is indeed surprising that HB had to wait until June 2024 to take the initiative of producing Annex H11 into the evidence.

23.As Counsel for both parties sought to highlight for their arguments, Annex H11 and its contents, namely the relevant Chinese Codes or standards, had been referred to throughout the Arbitration: in the Defence filed, in the Reply, the Rejoinder, the Surrejoinder, the witness statement served by HB, the expert reports and in HB’s Post-Hearing Briefs. Yet, HB was content with the state of the evidence put before the Tribunal until late June 2024, and did not see fit to produce the document until after the substantive hearing of the Arbitration and just before the Post-Hearing Briefs were due.

24.However, even without the production of Annex H11 itself or in its entirety, it is apparent that the material contents of Annex H11, the relevant provisions, and pertinently, their effect have all been referred to or are set out in the different pleadings, reports and statements served in the Arbitration and in the submissions made before the Tribunal. The alleged failure to include the Annex H11 does not appear to have made any material difference.

25.I accept the submissions made for MB, that Annex H11 did not have any bearing on the Award or the outcome of the disputed issues. This is apparent from the Award. On behalf of HB, Counsel highlighted that the Tribunal had in fact carefully considered and examined the arguments made by HB that the Chinese standards set out in the Chinese codes were applicable, but had held that the same conclusion would have been reached by the Tribunal on breach, even assuming that the relevant standard of GB 50017‑2003 was applicable. At paragraph 336 of the Award, the Tribunal stated:

“336. Accordingly, the Tribunal finds that the Respondent's use of 235 and 345 types of steel did not comply with CNR 53-03-07. In this regard, the Tribunal notes that even assuming arguendo that the Chinese code GB50017-2003 was applicable, the Tribunal would have reached the same conclusion because the Respondent acknowledged that the "grades of steel used on the Plant are Q345C, Q345B, Q235C, and Q235B", which "can all be used in temperatures not colder than -30°C".146 Indeed, GB50017-2003 explicitly notes that using 235B steel in welded structures for temperatures lower than -30°C is not allowed.” (emphasis added)

26.Similarly, in relation to the application of the Chinese standard under GB 50011- 2010, the Tribunal stated at paragraphs 377 to 381 as follows:

“377. The Tribunal is of the view that this issue is relatively straightforward. Clause 3.2 (Local Conditions) of Chapter E02 of the EPC Contract provides that the seismic activity is "Richter scale 7'. It is not disputed that the Respondent did not use a seismic load of 7 when designing and constructing the structures of the Plant.

378. In several submissions, the Respondent accepted that it breached the EPC Contract … Nevertheless, the Respondent argued that it complied with (i) the SC-CI 4.2.1 and the Chinese Standard (GB) 50011-2010; (ii) the Works and its constituent parts are fit for purpose. Therefore, according to the Respondent, "nothing turns on the fact that the Plant does not comply with the Owner's Requirements of an intensity of 7".

379. The Tribunal disagrees with the Respondent. Putting aside the Parties' dispute as to whether the Respondent should have relied on Mongolian seismic codes or Chinese seismic codes, there is nothing in the Contract that prevents the Claimant, as the Owner, from requiring higher safety standards than those required by the Mongolian/Chinese codes to protect its investment…

380. Moreover, as stated under Issue 2 above,207 GC-CI 4.2.1 provides that where there are different standards or specifications in the codes and/or the "Technical Conditions", "the most stringent ones shall prevail".

381. Therefore, even assuming arguendo that the Respondent is correct that the relevant code/standard is (GB) 50011-2010 and that the Respondent complied with this standard, the Respondent was obliged to follow the "most stringent" specification by taking into account seismic index 7 when it designed and constructed the structures of the Plant.” (emphasis added)

27.Even if there had been any defect or irregularity arising from the alleged exclusion of Annex H11, the outcome of the Arbitration would not have been different, and HB cannot show any prejudice suffered.

28.Under the ground of public policy, HB adduced expert evidence on French law to argue that the Award of damages of US $70.3 million is nearly the entire contract price of US $77.5 million, is disproportionate to MB’s loss and constitutes unjust enrichment for MB under French law, to be contrary to international public policy. According to HB, the French court has the discretion to assess the proportionality or otherwise of the Award and the prospects of success of its Paris Annulment Proceedings are reasonable.

Whether there should be adjournment

29.Notwithstanding my preliminary views on the merits (or lack thereof) of the challenge to the Award and its enforcement in Hong Kong, and to the extent that it is suggested that there may be a different outcome by application of French law in the Paris Annulment Proceedings, I accept that the supervisory court is in the best position to decide on the merits of the Paris Annulment Proceedings, and that this Court as the court of enforcement has to give “due weight” to its decision on the validity of the Award (Gao Hai Yan v Keeneye Holdings Ltd [2012] 1 HKC 335, at para 102). To avoid any inconsistent results, it would be prudent to adjourn the enforcement proceedings in Hong Kong pending the supervisory Paris Court’s determination of the Paris Annulment Proceedings.

Ease or difficulty of enforcement as a result of the delay

30.It is necessary to consider whether MB would be prejudiced as a result of the inevitable delay caused by the adjournment pending the decision in the Paris Annulment Proceedings, which will only be heard in October 2026, with judgment likely to be postponed to December 2026 or January 2027. There will be an unsatisfactory and a long period of delay of approximately 11 months from MB’s application for leave to enforce the Award.

31.From the authorities, this Court has emphasized that in considering whether to order security as a condition for an adjournment of the enforcement proceedings, the Court is to compare the position of the creditor under the award, if it was allowed to enforce the award immediately, and its position if enforcement was to be delayed as a result of the adjournment of the enforcement proceedings, pending a determination by the supervisory court (see A v B [2022] HKCFI 607, applying Soleh Boneh, IPCO (Nigeria), and Dana Shipping and Trading SA v Sino Channel Asia Ltd  [2017] 1 HKC 281). The “second point of the consideration” in Soleh is set out at paragraph 13 above.

32.On HB’s part, it has been highlighted that although the Award was issued in March 2025, it was only in January 2026 that MB applied to the Hong Kong Court for leave to enforce the Award. It was argued that that does not reflect any prejudice when MB had been prepared to delay its own application for enforcement. On MB’s part, it was pointed out that the Paris Annulment Proceedings had been in place and it had wanted to wait for and consider HB’s evidence in those proceedings.

33.The Courts have recognized that where there is a very large award, delay without security is “inherently likely to prejudice the award creditor” which would lead to an order providing for some security (IPCO, 中國機床銷售與技術服務有限公司 v 國晟機電設備有限公司 [2024] HKCFI 958).

34.In this case, the Award is for a very substantial sum of US $70,342,453.51. This represents an award of damages, and interest. MB has highlighted the fact that the defects found in the Plant gave rise to safety issues, and that MB had had to incur significant costs to undertake immediate remedial works to address these important issues and to prevent incidents which have impact on the safety of the Plant, and inevitably as can be envisaged, on human lives. Delay in its ability to enforce the Award immediately against HB has created a heavy burden on its financial resources, which burden would aggravate in the interim of the substantial delay caused by the adjournment.

35.HB has sought to highlight that according to its 2025 Annual Report, it had substantial assets of RMB 37.4 billion, and that as a listed company, it is subject to rigorous and continuous disclosure obligations.  Yet, in my view this claim loses force somewhat, and it does not do credit to HB’s position as a listed company, when it failed to disclose its liability under the Award in all the quarterly and interim reports issued after the date of the Award of 26 March 2025. Even in the 2025 Annual Report released on 27 March 2025, when the Arbitration was disclosed, HB stated (misleadingly, as emphasized by MB) that its liability under the Award was only expected to be RMB 40 million. This also sheds doubt on the reliability and credibility of HB or those who manage/control HB, and this is relevant to the Court’s consideration of whether HB would honour the Award, and its liabilities thereunder, in the event that the Paris Annulment Proceedings are dismissed after the delay of 11 months, without security in the interim.

36.Having considered all the relevant factors, and given my view on the merits of the challenge to the Award, I consider that security should be ordered as a condition for granting the adjournment of the enforcement proceedings in Hong Kong.

Disposition

37.The order I make is that HB should provide security of 50% of the damages awarded of US $70,342,453.31, by payment into court or the provision of a guarantee from a bank in Hong Kong acceptable to MB, within 21 days of the handing down of this Decision. If security is not furnished as ordered, HB’s summons issued on 10 March 2026 for adjournment of the enforcement proceedings shall be dismissed with costs to MB on indemnity basis, to be taxed if not agreed; and leave will be granted to MB to enforce the Award and to enter judgment against HB in terms of the Award, as sought in paragraphs 1 and 2 of the summons issued by MB on 11 February 2026, with costs to MB on indemnity basis to be taxed if not agreed. The costs of the hearing on 2 June 2026 are included in the summons for security and are to be paid by HB on indemnity basis.

Mr James Man, instructed by Clyde & Co, for the applicant 

Mr Douglas Lam SC and Ms Tiffany Chan, instructed by Boase, Cohen & Collins, for the respondent