Read the full judgment text of HCCT000014/1994 on BabelCite. This HIGH COURT judgment was delivered on 18 August 1994 before The Hon. Mr. Justice Kaplan.
Arbitration - incorporation of arbitration clause by reference - construction of last sentence of Article 7(2) of the Model Law - applicability of Thomas v Portsea [1912] AC 1 - whether the term that contracts between parties should be 'back to back' and 'proportional' to the upstream contract is sufficient to incorporate the arbitration clause - approach to construction of incorporation terms. The High Court held that the reference to a document containing an arbitration clause under Article 7(2) does not require the document to be between the same parties, allowing incorporation by reference. The restrictive interpretation advocated by the Plaintiff was rejected as unworkable in commercial practice. English authorities on incorporation of arbitration clauses in negotiable instruments such as bills of lading were found distinguishable and do not dictate the result under Hong Kong's Model Law. The court found, based on the contractual language and factual matrix, that the parties intended to incorporate the upstream arbitration clause into the assembly sub-sub-contract with due modifications where necessary. Practical difficulties argued against incorporation were found irrelevant to the determination of parties’ intention. Accordingly, the court granted the Defendant's application to stay proceedings pending arbitration under the incorporated clause and made a costs order nisi in favour of the Defendant.
Legal issues: Proper construction of Article 7(2) of the Model Law · Incorporation of arbitration clause by reference in construction contracts · Effect of practical difficulties in incorporation of arbitration clauses
Outcome: Arbitration agreement incorporated; stay of proceedings granted