Hong Kong Supreme Court Issues First Decision on Model Law - WAMR 1991 Vol. 2, No. 12
Originially from: World Arbitration and Mediation Review (WAMR)
HONG KONG SUPREME COURT ISSUES
FIRST DECISION ON MODEL LAW
By Professor Michael Pryles, Minter Ellison, Melbourne
The first Hong Kong decision on the UNCITRAL Model Law was handed
down by Mr. Justice Kaplan of the Supreme Court on 29 October 1991, in Fung
Sang Trading Ltd v. Kai Sun Sea Products & Food Co Ltd. He determined that an
arbitration was “international” under Article 1(3) of the Model Law; that, upon
the failure of one party to appoint its arbitrator, the court would appoint the
arbitrator; and that the arbitral tribunal should determine its own jurisdiction.
Two Hong Kong companies purportedly entered into a written contract on 9
November 1990, for the sale of Chinese soybean extraction meal, FOB Dalian,
China. Payment was to be made by 100 percent irrevocable and transferable atsite
letters of credit in favour of the plaintiff, and the advising bank was to be the
Hong Kong and Shanghai Bank in Hong Kong. The agreement provided for the
arbitration of disputes in Hong Kong.
The plaintiffs alleged that the defendants failed to nominate a vessel to take
delivery of the soybean and claimed damages of US$124,000, the amount they
were required to pay their chief suppliers. They sent a letter of demand to the
defendants and, on 1 August 1991, wrote to the defendants informing them that
they had appointed an arbitrator.
They pointed out that, as the contract did not specify the number of arbitrators,
there would be three arbitrators by virtue of Article 10(2) of the UNCITRAL
Model Law, which entered into force in Hong Kong in April 1990 (see Caldwell,
A Practitioner’s Guide to the New Hong Kong Arbitration Ordinance, 1 WAMR
143, November 1990). When the defendants failed to appoint their arbitrator, the
plaintiff issued a summons asking the Hong Kong court to appoint an arbitrator
on their behalf.
Was The Arbitration ‘International’?
A central issue was whether the arbitration was “international” within Article
1(3) of the Model Law: “An arbitration is international if: (a) the parties to an
arbitration agreement have, at the time of the conclusion of that agreement, their
places of business in different States; or (b) one of the following places is situated
outside the State in which the parties have their places of business; (i) the place of
arbitration if determined in, or pursuant to, the arbitration agreement; (ii) any
place where a substantial part of the obligations of the commercial relationship is