In XX, YY & Ors v ZZ [2025] HKCFI 3089, the Honourable Madam Justice Mimmie Chan, the Arbitration Judge, dismissed an application to set aside a ruling by an arbitral tribunal (the “Tribunal”) that it has jurisdiction under the arbitration clause contained in a Share Purchase Agreement entered into in 2017 (the “2017 SPA”). The plaintiffs challenged the Tribunal’s ruling on the ground that the “centre of gravity” of the indemnity claim – which turns on the alleged failure to perform a put option – lay with a subsequent, tripartite share (re-)purchase agreement made in 2021, and thus fell outside the scope of the arbitration agreement in the 2017 SPA. The Defendant was awarded costs on indemnity basis, with certificate for two Counsel.
The Court recognises “the difficulties in the present case” which arise out of the fact the parties’ dispute may involve intertwined issues which might reasonably be regarded as falling within the ambit of two arbitration clauses. The Court held that the claim seeking indemnification for loss arising from the failure to perform the put option fell squarely within the arbitration clause of the 2017 SPA. While recognising that the 2017 SPA and the 2021 SPA were not “unrelated”, the Court found they dealt with different aspects of the parties’ overall relationship. The 2021 SPA, concluded 4 years after the 2017 SPA, was not a settlement agreement and did not supersede the earlier arbitration clause. Notably, the “PRC Entities” (i.e. the 3rd to 10th Plaintiffs) were not even parties to the 2021 SPA, and could not participate in the arbitration commenced under the 2021 SPA. Nor would they be bound by the findings made by the other arbitral tribunal constituted under the 2021 SPA. Bearing in mind the warranties from the PRC Entities can only be found in the 2017 SPA, the Court rejected the Plaintiffs’ unmeritorious argument that the formulation of the claim was “artificial” or “manipulated”, holding that there was “simply no other agreement to avoid”. The Court concluded that the tribunal has the requisite jurisdiction over the impugned claims, “whether as a matter of construction of the relevant arbitration clause in the 2017 SPA, or on the application of the centre of gravity test”.
Read the judgment here at: https://legalref.judiciary.hk/lrs/common/ju/ju_frame.jsp?DIS=170744&currpage=T
Adrian Lai of Des Voeux Chambers and Matthew Suen, instructed by Mun Lee Ming Law Firm, appeared for the Defendant.
