 [2024] HKCFI 3052, the Court of First Instance provided important guidance on the proper approach to security for costs applications in the context of arbitration-related court proceedings and reaffirmed the Hong Kong courts’ pro-arbitration policy.

 Plaintiffs, who were the Respondents in an HKIAC arbitration, sought to set aside an award issued by the arbitral tribunal. Subsequently, the Defendant applied for security for costs pursuant to RHC O.23 r.(1)(1)(a) (as regards P1).

The Plaintiffs contended that in the arbitration context, (i) while residence overseas is a relevant gateway to engage RHC O.23 rule 1, where the circumstances are evenly balanced, it would ordinarily be just to dismiss the application for security for costs and (ii) orders for security for costs would typically only be made where the respondent is likely to be impecunious.

DHCJ Jonathan Wong rejected both propositions. The Court observed that the first proposition would create a situation where a challenge of an award is made easier and more accessible, contrary to Hong Kong’s policy of supporting arbitration agreements and awards. It is one thing to say that the applicant understood the risks of dealing with a foreigner, but it is an entirely different proposition to say that the applicant has agreed not to seek security for costs where the foreigner invokes the jurisdiction of the Hong Kong court.

Further, while the first proposition may be reflected by s.56(2) of the Arbitration Ordinance (“

”), s.56 is only concerned with the arbitral tribunal’s power to order security for costs of the arbitral proceedings. As a matter of legislative choice, the AO stopped short of circumscribing the Court’s power to order security for costs in a manner that mirrors the power conferred upon an arbitral tribunal by s.56. A distinction should be drawn between the determination phase and challenge phase of the arbitral process.

As regards the second proposition, the Court saw no reason why impecuniosity should be elevated into a typical requirement. Even in the context of applications for security for costs within an arbitration, there is no need to show that the respondent is “globally” impecunious.

 and Simon Chapman (Solicitor Advocate), instructed by Herbert Smith Freehills, acted for the 1

, instructed by Gall, acted for the Defendant.

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Court Clarifies Approach to Security for Costs Applications in Arbitration-related Court Proceedings

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