In modern cross-border investment transactions, parties often structure their agreements to accommodate regulatory restrictions and commercial risks. However, disputes may arise where parties later disagree on the legal effect of those arrangements, particularly where foreign regulatory approvals and payment structures are involved. Such disputes frequently test the extent to which courts may interfere with arbitral awards on grounds of procedural fairness and public policy. These issues were central in AT v. QC 2026 HKCFI 1437.
The dispute concerned a Share Purchase Agreement (“SPA”) and related supplemental agreements involving the sale of shares for US$110 million. Because the transaction required Overseas Direct Investment (“ODI”) approval from Mainland Chinese authorities, the parties agreed that payment would initially be made in Renminbi as a “Domestic Payment” pending formal approval and completion under the SPA. The agreements further provided that if the company failed to achieve a public listing within a specified period, the plaintiffs would repurchase the shares and pay agreed investment returns.
When ODI approval was not obtained, the proposed IPO failed, and completion under the SPA never occurred, the defendants sought repayment and investment returns under the agreements. The dispute proceeded to arbitration, where the plaintiffs argued that the Domestic Payment could not legally be treated as equivalent to the original US dollar purchase price. They further contended that the arbitral tribunal adopted a position inconsistent with the parties’ agreed understanding and thereby denied them a fair opportunity to present their case.
The Hong Kong Court of First Instance rejected the application to set aside the awards. The Court held that the tribunal had not departed from the parties’ agreed facts and that the defendants’ position had been sufficiently pleaded throughout the proceedings. It further found that the plaintiffs had been given a fair opportunity to respond to the issues raised in the arbitration and that the tribunal merely interpreted the agreements as part of one integrated commercial transaction.
On the issue of public policy, the Court emphasized that the relevant consideration was Hong Kong public policy, not Mainland Chinese law. Since the tribunal had already determined that the transaction did not contravene Mainland regulations, the Court declined to revisit the merits of that finding. It also held that enforcement of the awards would not offend Hong Kong’s notions of justice or morality, particularly as the dispute essentially concerned the interpretation of contractual obligations and investment repayment arrangements rather than the enforcement of an illegal transaction.
Ultimately, the decision reinforces Hong Kong’s strong pro-arbitration stance and confirms that courts will not interfere with arbitral awards merely because a party disagrees with the tribunal’s contractual or regulatory interpretation.
