In K v JX [2026] HKCFI 2854, the Hong Kong Court of First Instance set aside an order granting leave to K to enforce a Mainland award on public policy grounds. The arbitration arose from a settlement agreement and the award required JX to discontinue a Hong Kong court action in accordance with that agreement. The Court found that the agreement was signed on behalf of JX by a person with no authority, and that K and his representative WP had no reason to believe otherwise.
Hong Kong courts apply the public policy exception narrowly and are generally reluctant to revisit decisions made in arbitration. But in K v JX, the Court clarified that it could examine serious allegations of lack of authority and collusion where the relevant evidence only surfaced after the award and had not been considered by the tribunal.
In a follow-up decision, K v JX [2026] HKCFI 4344, the Court granted K leave to appeal. While the Court considered that the proposed appeal grounds had no reasonable prospect of success, it found that its approach to refusing enforcement on public policy grounds raised a question of public interest warranting consideration by the Court of Appeal.
Factual background
The dispute arose out of a 2012 cooperation agreement for the development of lands in Fuzhou. JX, a Mainland company, commenced Hong Kong court proceedings against K and others, claiming damages, alternatively loss of profits of that agreement.
In January 2021, a settlement agreement was signed in the names of K and JX. It required JX to discontinue the court action, and recorded compensation arrangements relating to the lands. The agreement was governed by PRC law and contained an arbitration clause providing for disputes arising from the settlement agreement to be resolved by arbitration before the Beijing Arbitration Commission.
The settlement agreement was signed for JX by an individual referred to as C, who was described as JX’s “actual controller”. JX’s position was that C had no authority to sign, he was not JX’s legal representative or director and he had resigned before the settlement agreement was executed.
JX did not discontinue the court action. K commenced arbitration in June 2022, seeking performance of the settlement agreement and damages. In November 2023, the tribunal issued its award, ordering JX to discontinue the action and pay K RMB 15 million, together with costs and arbitration expenses.
The tribunal found no evidence that C had actual authority or was JX’s actual controller. But it concluded that K had reason to believe C was authorised, in part because evidence showed that JX had used its old and new company seals concurrently, such that signing the settlement agreement and affixing JX’s old seal were valid acts of agency. Applying Article 172 of the PRC Civil Code, which deals with apparent authority, the tribunal held that C’s signing bound JX.
K obtained leave to enforce the award in Hong Kong on 31 May 2024. JX applied to set aside the enforcement order on 23 July 2024. The application was advanced on two principal grounds: no valid arbitration agreement and enforcement would be contrary to Hong Kong public policy.
The enforcement decision
The Court rejected JX’s jurisdiction challenge. JX had not challenged the tribunal’s jurisdiction during the arbitration. On the contrary, JX’s lawyers had confirmed at the hearing that the tribunal had jurisdiction and that the arbitration clause was valid. The Court held that challenging the validity of the underlying settlement agreement did not, without more, amount to a challenge to the arbitration agreement or the tribunal’s jurisdiction.
The public policy ground was a different matter. The Court considered evidence of C’s alleged lack of authority to be still relevant to whether enforcement should be refused. If the settlement agreement had been signed without authority, and if K or his representative knew or should have known that C lacked authority, enforcing an award that gave effect to that agreement could offend Hong Kong public policy.
The evidential position was unusual. After the award was issued, C provided affirmations claiming that he had signed the agreement without authority and for personal gain. But C did not attend the substantive hearing for cross-examination, and the Court excluded his affirmations. The Court assessed the remaining evidence, including the oral testimony of K and WP, and of Y, who claimed that K colluded with C in entering into the settlement.
The Court focused on what K and WP knew, or should reasonably have appreciated, when the agreement was negotiated and signed. The agreement was not an ordinary commercial document. It required JX to withdraw substantial court claims, included admissions that those claims were inconsistent with the facts, and dealt with land compensation arrangements. It also addressed personal loans C had obtained from project companies regarding the lands, pointing to a potential personal interest on his part.
Against that background, the Court found that a reasonable person in the position of K and WP would have sought to verify C’s authority. This was especially so as WP was a lawyer by training and the risk control director of K’s company. Yet, neither of them checked whether C was JX’s legal representative or director, or whether he had written authority. Simple checks would have revealed that he was neither.
The Court concluded that K and WP had no reason to believe that C had authority, and they had simply ignored the issue. Enforcing an award requiring JX to withdraw its court action, and giving effect to a settlement agreement made without JX’s knowledge or authority, would be grossly unjust. Enforcement would be contrary to fundamental conceptions of morality and justice, and therefore contrary to Hong Kong public policy. The enforcement order was set aside.
The appeal decision
K sought leave to appeal, arguing in essence that the Court had impermissibly reviewed the tribunal’s findings on the validity of the settlement agreement and had substituted its public policy case for the case advanced by K in deciding that enforcement would contravene public policy.
The Court rejected that characterisation. JX’s application had always relied on both invalidity of the arbitration agreement and public policy. The evidence concerning C’s lack of authority remained relevant to public policy even though the Court had rejected the jurisdiction challenge.
The Court also rejected the suggestion that it had reopened issues already determined by the tribunal. The critical question was whether the alleged wrongdoing had been put to, considered, and determined by the tribunal. The Court drew a clear line between cases where a party seeks to relitigate matters decided in arbitration and cases (like this one) where evidence of collusion and bribery surfaced only after the award and had not been available to the tribunal.
The Court emphasised that it does not condone attempts to reargue a case under the guise of public policy. But equally, it will not ignore serious allegations of fraud, corruption, or bribery of witnesses. Where such allegations are supported by evidence that was not available during the arbitration, the Court may need to examine them before deciding whether enforcement would offend public policy.
Although the Court considered that K’s proposed appeal grounds had no reasonable prospect of success, it granted leave to appeal because the exercise of the Court’s discretion to refuse enforcement on public policy grounds was a matter of public interest. It remains to be seen whether the Court of Appeal will clarify the limits of the public policy exception where post-award evidence of serious wrongdoing comes to light.
Key takeaways
- The two decisions confirm that Hong Kong’s public policy exception remains narrow, but it is not merely theoretical. Where serious allegations of fraud, bribery, collusion, or lack of authority emerge only after an award and were not determined by the tribunal, the enforcement court can and will examine them. The inquiry is not an appeal on the merits. The focus is on whether enforcement itself would offend fundamental conceptions of morality and justice.
- The cases also underscore the high evidential bar parties are facing when resisting enforcement on public policy grounds. Objections require cogent evidence and will be closely scrutinised. The Court excluded C’s affirmations when he did not attend for cross-examination, but still carefully evaluated the remaining evidence. The message is clear: public policy is not a back door for rearguing issues already decided in arbitration.
- The practical lesson from a transactional perspective is the importance of verifying settlement authority entering into a settlement. Doing so is especially critical where a settlement disposes of substantial litigation, contains unusual terms, is executed by someone other than the company’s legal representative or directors, or involves circumstances suggesting a potential conflict of interest. Failing to verify authority can create enforcement risks that materialise long after an award has been rendered.
- The decisions remind parties that enforcement strategy should not be an afterthought. Parties should maintain contemporaneous records of authority, settlement negotiations, and key communications from the outset.
