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　　The Appellants did not deliver the Property to the Applicant and purported to terminate the Agreement on the basis that performance would be contrary to PRC law. Consequently, the Applicant commenced arbitration proceedings in Beijing (the “First Arbitration”) and an award (the “Award”) was made in its favour ordering the Appellants to, inter alia, “continue to perform the agreement”. The Applicant then obtained an ex parte enforcement order of the Award in Hong Kong (the “Order”).

　　The Appellants applied to set aside the Order, arguing that enforcement should be refused as being contrary to public policy under the Arbitration Ordinance (Cap.341) (“Arbitration Ordinance”) on the basis that performance was impossible because: (a) construction on the Property had commenced; and (b) a restructuring of the Eton Group, which was implemented during the course of the First Arbitration, had diluted and transferred their shares in Hong Kong Legend to their parent company. The judge refused to set aside the Order.

　　In the meantime, the Appellants sought from the arbitral body a determination (the “Second Arbitration”) on whether the parties had been discharged from the Agreement. The arbitral body ruled against the Appellants on this.

　　By the time of the present hearing to deal with the Appellants’ appeal against the judge’s refusal to set aside the Order, the development of the Property had been completed and 99% of the units had been sold to third parties. The Appellants submitted that as performance was impossible, the Applicant was really looking at “further stages” remedies such as damages in lieu of or an account of profits rather than any rights in the Property itself; and offered an undertaking that they would commence further arbitration before the arbitral body for a determination of such alternative remedies (the “Undertaking”). Alternatively, it was said that the court could remit the matter to the arbitral body so that directions could be obtained or adjourn the appeal pending such directions.

　　II.Issues

　　1.Whether it was impossible for the Appellants to perform the Agreement? (“Issue 1”)

　　2.Whether, in light of issue 1, refusal to enforce the Award on public policy grounds can be justified? (“Issue 2”)

　　3.Whether the court had jurisdiction to remit the matter to the arbitral body? (“Issue 3”)

　　III.Analysis

　　Issue 1

　　The court reckoned the Undertaking was simply meaningless, given that the Appellants had had ample opportunity to raise squarely before the arbitral body the issue of impossibility of performance. The court was of the view that there was no rational explanation for their failure to do so except the very obvious one that the omission was intentional. The court rejected the Appellants’ arguments that the construction on the Property having been commenced; that the dilution of shares as a result of the restructuring of the Eton Group and that most units of the Property having been transferred to third parties barred the Appellants from performing the Agreement. The court further found that they were calculated risks and self-inflicted, of which consequences the Appellants must bear. The court also remarked that the risk of imprisonment for contempt, which the Appellants raised, was entirely fanciful, since the Order did not specify any time for performance and a person who genuinely is unable to carry out the Order cannot be made liable for the contempt.

　　Issue 2

　　The court held that, in considering whether or not to refuse the enforcement of the Award on public policy grounds, the court does not look into the merits or at the underlying transaction. Its role is confined to determining whether such grounds existed for refusing to enforce the award because it would be contrary to public policy.  The court’s role should be as mechanistic as possible. Accordingly, the court ruled that impossibility of performance was not relevant at the registration stage of the Award and was not a sufficient reason to justify a refusal of enforcement under public policy grounds.

　　Issue 3

　　It was held that the court could not remit the matter to the arbitral body. Under Arbitration Ordinance, the court may enforce the Award or refuse to enforce it but there is no jurisdiction to remit.

　　IV.Decision

　　Appeal dismissed.

　　V.Significance

　　In considering whether to refuse the enforcement of the Award, the court does not look into the merits or at the underlying transaction. The court’s role is confined to determining whether grounds for refusal of enforcement existed. On this basis, it was held that impossibility of performance is not a relevant factor at the registration/recognition stage of enforcement and, accordingly, it would not be a sufficient reason to justify refusal of enforcement on the grounds that enforcement would be contrary to public policy.

　　CASE No.4：  Shandong Hongri Acron Chemical Joint Stock Company Limited v. PetroChina International (Hong Kong) Corporation Limited

　　[2011] 4 HKLRD 604

　　CACV 31/2011

　　I.Brief Facts

　　The Appellant as the buyer and the Respondent as the supplier contracted for the supply of a total of 3,937.448 tonnes of sulphur in exchange for purchase price of US$ 3,051,522.20.