In <span class="news-text_italic-underline">LT v RV [2026] HKCFI 1280</span>, the Hong Kong Court of First Instance held that a settlement agreement and a procedural order terminating a Hong Kong International Arbitration Centre (“<span class="news-text_medium">HKIAC</span>”) arbitration could not be treated as awards capable of being set aside on public policy grounds. Nevertheless, the Court exercised its supervisory jurisdiction, together with an exclusive jurisdiction clause, to declare the settlement agreement null and void, finding that the individual who signed it on behalf of the platform operator had lacked both actual and apparent authority to do so. The decision underscores the willingness of the Hong Kong courts to invoke supervisory powers over the settlement and termination of Hong Kong-seated arbitrations in exceptional circumstances.
The Hong Kong Court of First Instance has held that a settlement agreement and a procedural order terminating an HKIAC arbitration could not be treated as awards for the purposes of being set aside, whilst nonetheless granting relief by way of its supervisory jurisdiction and an exclusive jurisdiction clause contained within the settlement agreement itself.
The settlement agreement, which was governed by Hong Kong law and included an exclusive jurisdiction clause in favour of the Hong Kong courts, provided for a “drop hands” resolution of two substantial competing claims: a USD 84 million claim brought by the operator of a now defunct cryptocurrency trading platform against a major individual customer and a USD 250 million counterclaim by that customer against the platform operator.
The agreement was signed by the co-founder and sole director of the platform operator, referred to as the “purported platform operator signatory”, and by the customer. It was executed one week after a contested change in the platform operator's legal representation in the arbitration and more than five months after a court in the Seychelles, the jurisdiction in which the platform operator was incorporated, had approved a scheme of arrangement for the platform operator. That scheme, of which the customer had knowledge, provided for the platform operator's creditors to receive pro rata rights to sums recovered from the customer. The settlement agreement was therefore directly at odds with the interests of those creditors.
The arbitral tribunal subsequently elected to terminate the proceedings by way of a procedural order rather than an award on agreed terms, taking the view that there were no terms of settlement to record. The platform operator then applied to the Hong Kong court to treat both the settlement agreement and the termination order as awards and to set them aside on public policy grounds.
Chan J concluded that neither the settlement agreement nor the termination order could be treated as awards so as to engage the public policy ground for setting aside. As regards the settlement agreement, because its terms had not been recorded in an award on agreed terms, it could be treated as an award only for enforcement purposes, not for setting aside. As regards the termination order, the judge found that it did not satisfy the legal requirements for an award, as explained in the earlier decisions of <span class="news-text_italic-underline">G v N [2024] HKCFI 721</span> and <span class="news-text_italic-underline">W v Contractor [2024] HKCFI 1452</span>.
The order merely recorded the termination of the arbitration and addressed costs; it made no final or complete determination of the substantive merits submitted for resolution. In the absence of such a determination, fresh arbitration proceedings remained available to the parties, provided the relevant limitation period had not expired. Notwithstanding these conclusions, the judge held that the Court retained the power to declare the settlement agreement null and void, by virtue of both its supervisory jurisdiction over the arbitration and the exclusive jurisdiction clause in the settlement agreement. The judge was unable, however, to go further and remit the agreement to the tribunal, given that it did not constitute an award.
On the evidence, Chan J found no basis to depart from the Seychelles court's finding that the purported platform operator signatory had lacked actual authority to execute the settlement agreement. The Court also rejected the customer's contention that the signatory had possessed apparent authority to conclude the settlement.
Applying the principles set out by Lord Neuberger NPJ in <span class="news-text_italic-underline">Thanakharn Kasikorn Thai Chamkat (Mahachon) v Akai Holdings Ltd (No 2) (2010) 13 HKCFAR 479 and Lord Sumption NPJ</span> in <span class="news-text_italic-underline">PT Asuransi Tugu Pratama Indonesia TBK v Citibank NA (2023) HKCFAR 1,</span> the judge found that a reasonable person in the customer's position would have been bound to raise enquiries as to whether the platform operator's creditors had knowledge of and had consented to, the terms of the settlement, particularly given that those terms were plainly adverse to the creditors' interests.
The judge found that, notwithstanding the "unusual and remarkable" facts known to the customer and his own evidence that he distrusted the signatory and regarded him as a perjurer and fraudster, the customer had failed to make further enquiries. In doing so, he had acted unreasonably, recklessly and irrationally and had "turned a blind eye" to the signatory's lack of authority.
Where parties to a Hong Kong-seated arbitration reach a settlement, they may request the tribunal to record the terms in an award on agreed terms (commonly referred to as a consent award), provided the tribunal raises no objection (Article 30(1), <span class="news-text_italic-underline">UNCITRAL Model Law</span>, given effect by section 66(1) of <span class="news-text_italic-underline">The Hong Kong Arbitration Ordinance</span>). Such an award carries the same status as any other award on the merits and may be enforced under section 84 or set aside under section 81 of <span class="news-text_italic-underline">The Hong Kong Arbitration Ordinance.
Where no award on agreed terms is recorded, the settlement agreement itself will be treated as an award solely for enforcement purposes under section 66(2) of the <span class="news-text_italic-underline">The Hong Kong Arbitration Ordinance</span>. The grounds for setting aside an award will not apply in such circumstances, as confirmed in the present case. Whether an order terminating arbitration proceedings constitutes an award - and is therefore subject to enforcement and setting aside provisions - will depend on the facts of each case, with both form and substance taken into account.
The central requirement is that an award must constitute a final determination of the substantive issues submitted for resolution, without leaving matters outstanding. A decision labelled as a procedural order may nonetheless qualify as an award if it finally disposes of the merits of the dispute. The Hong Kong courts may exercise their supervisory jurisdiction to grant relief in connection with the settlement and termination of Hong Kong-seated arbitrations in exceptional circumstances, as illustrated by the declaration of nullity in the present case.
Whilst Chan J described the circumstances of the case as "unusual and exceptional", the decision serves as a clear illustration of the readiness of the Hong Kong courts to invoke their supervisory jurisdiction not only over the conduct of Hong Kong-seated arbitrations, but also their settlement and termination, where the interests of justice so require.
