Arbitration is increasingly viewed as a beneficial alternative to traditional court litigation, but how do you know if your dispute should go to arbitration or to the courts? Several recent foreign cases, including C v D (Hong Kong Court of Final Appeal), shed light on this issue. We take a look at C v D and consider whether it is likely to be followed in New Zealand.
What is Arbitration?
In many sectors of the economy, including Construction, Trade & Transport, and International Commerce, arbitration is either mandated or provided as an alternative to traditional court proceedings. Arbitration is a respected system for private, final, and binding resolution of civil disputes based on party autonomy; facilitated by a tolerant, light-touch supervisory regime (which includes limited supervision by the courts).
However, because an arbitration can play out quite differently to court proceedings, and lead to a final and binding award, which will have much the same effects as an equivalent court judgment, it is important to be able to tell whether the parties intend for a dispute to be determined by arbitration, or by the courts.
Should my dispute go to Arbitration?
The key to determining whether any dispute should go to arbitration or the courts is to answer the question “what have the parties agreed?”. Put simply, if the parties have agreed that a dispute should be resolved by arbitration, this is what should happen. Otherwise, the dispute must go through the courts.
Simple as this may sound, this can generate complex issues in practice particularly where contracts are ambiguous. One of the more complex issues is: “who should decide what the parties have actually agreed?” Is it the arbitral tribunal or the courts? This question is difficult because until it is answered (by either the arbitral tribunal or the courts) it is not clear who the parties agreed would decide this question, and it is quite possible that the ‘wrong’ decision maker will end up deciding this question (ie the court may end up deciding when the arbitral tribunal was meant to decide, or vice versa).
To help avoid this ‘chicken and egg’ scenario, foreign courts have developed presumptions to help create certainty as to how issues like this will be dealt with upon which users of arbitration can base their expectations (and draft arbitration agreements accordingly).
C v D – Hong Kong Court of Final Appeal (Admissibility vs Jurisdiction)
The Hong Kong Court of Final Appeal (HKCFA) addressed just this sort of question in C v D  HKCFA 16.
Disputes arose between a Hong Kong company (C) and a Thai company (D) about whether there had been a breach of a contract for the development, construction, and deployment of a broadcasting satellite. D took the disputes to arbitration, but C argued that D had not fulfilled contractual ‘pre-conditions’ to arbitration (and therefore could not go to arbitration until it did). The arbitral tribunal dismissed C’s arguments and went on to award D substantial damages.
C appealed to the Court requesting that it review whether the arbitral tribunal had the jurisdiction (power) to finally decide whether the pre-conditions had been fulfilled, and, if so, requesting the Court decide the question afresh. The dispute made its way up to the HKCFA, which decided that this type of question is one which arbitral tribunals (not courts) should presumptively determine.
In making this decision, the HKCFA applied a distinction between questions of “admissibility” (ie whether the objection relates to whether a particular claim should be heard by an arbitral tribunal) and questions of “jurisdiction” (ie whether the objection is to whether the parties agreed to arbitration at all). Essentially, questions of “admissibility” are presumptively questions that the arbitral tribunal should answer (in which the court should not intervene without more), while questions of “jurisdiction” are questions that are open to court review. If the court decides that the arbitral tribunal did not have “jurisdiction” (ie the parties did not agree to arbitration) then the court may set aside any arbitral award, and the dispute will be heard by the courts.
In C v D, because C’s objection was over whether the breach of contract claim had complied with the relevant ‘pre-conditions’ to arbitration (and not whether the parties generally intended disputes to go to arbitration) this was presumptively a matter of “admissibility” and therefore the Court would not interfere with the arbitral tribunal’s decision that the ‘pre-conditions’ had been complied with. The HKCFA held that the presumption would apply in the absence of evidence of clear and unequivocal language to the contrary.
Jurisdiction and Admissibility in New Zealand
To date, courts in New Zealand have not yet explicitly adopted an “admissibility” / “jurisdiction” distinction when deciding whether the courts or an arbitral tribunal should decide disputes.
Two general lines of authority have emerged regarding these sorts of questions:
- One line of cases, following decisions such as Ursem v Chung  NZHC 436, and McKenzie v Mortimer  NZHC 17, have taken what they describe as a “prima facie review” approach. This essentially involves deciding whether, at face value, there is a valid arbitration agreement. If there is, all questions presumptively go to the arbitral tribunal to decide.
- The other line of cases includes decisions such as SRG Global Remediation Services (NZ) Ltd v Body Corporate 197281  NZCA 518 which demonstrate a more interventionalist approach, with courts appearing willing to actively engage in deciding whether disputes should be resolved by arbitration, or alternatively by the courts, even where there appears to be, at face value, an applicable arbitration agreement.
Given that New Zealand courts are often open to following decisions from other common law jurisdictions (eg England, Singapore, Australia, and Hong Kong), and that the New Zealand Arbitration Act 1996 expressly states that its purposes include promoting international consistency of arbitral regimes, the “admissibility” / “jurisdiction” distinction in C v D may provide a compelling way for New Zealand courts to harmonise its existing case law and provide a consistent and principled answer to the question of whether courts or arbitral tribunals should decide disputes.
If you are considering whether your dispute should go to arbitration or to the courts, it may be worth considering whether the “admissibility” / “jurisdiction” distinction could provide clarity. While not yet settled by the New Zealand courts, arguments based on C v D and other associated foreign authorities may provide guidance as to what can be a complex issue.
If you have any questions about arbitration, litigation or which applies to your dispute, please get in touch with our Litigation team or your usual contact at Hesketh Henry.
Disclaimer: The information contained in this article is current at the date of publishing and is of a general nature. It should be used as a guide only and not as a substitute for obtaining legal advice. Specific legal advice should be sought where required.
 The Inaugural Aotearoa New Zealand Arbitration Survey, Royden Hindle and Dr Anna Kirk, Assisted by Diana Qiu, In collaboration with the NZDRC, available at https://nzdrc.co.nz/wp-content/uploads/2023/05/The_Inaugural_Aotearoa_New_Zealand_Arbitration_Survey_Report_2022.pdf
 English High Court in Republic of Sierra Leone v SL Mining Ltd  Bus LR 704
 Singapore Court of Appeal in BBA v BAZ  SGCA 53
 Supreme Court of New South Wales in The Nuance Group (Australia) Pty Ltd v Shape Australia Pty Ltd  NSWSC 1498
 Arbitration Act 1996, section 5; “The purposes of this Act are – …(b) to promote international consistency of arbitral regimes based on the Model Law on International Commercial Arbitration adopted by the United Nations Commission on International Trade Law on 21 June 1985; and (c) to promote consistency between the international and domestic arbitral regimes in New Zealand; …”