309

A PCCW Global Ltd

and
Interactive Communications Service Ltd

B
(Court of Appeal)
(Civil Appeal No 18 of 2006)

C Tang V-P and Barma J

24 October and 16 November 2006

Arbitration — arbitration agreement — whether prima facie case parties in

relation to billing dispute bound by arbitration clause
D







 !"#$%&'()*+,-./0123



P sued D in Hong Kong in respect of a billing dispute arising out

E of an agreement (the Agreement) for the supply and purchase of
international long-distance services. Clause 4.3 provided in relation
to billing disputes that “the parties will submit the differences to the
Hong Kong courts”. Clause 5 provided “the parties submit to the
exclusive jurisdiction of [Hong Kong courts]”. Clause 11.3 headed
F “Arbitration” provided “Either party may require that any dispute
arising hereunder be settled by binding arbitration in accordance
with the commercial arbitration rules of the American Arbitration
Association …”. D attempted to bring the matter to arbitration by
giving notice under cl.11.3 and then applying to have the action stayed
G under s.34C of the Arbitration Ordinance (Cap.341). This application
was refused and D appealed.

Held, dismissing the appeal, that:

(1) In considering an application to stay in favour of arbitration, the
H proper test was whether there was a prima facie case that the parties
were bound by an arbitration clause. The onus was on the applicant
to demonstrate this. Unless the point was clear, the court should
not attempt to resolve the issue and the matter should be stayed
for arbitration (Private Company “Triple V” Inc v Star (Universal) Co
I Ltd & Another [1995] 3 HKC 129, Pacific Crown Engineering Ltd v
Hyundai Engineering and Construction Co Ltd [2003] 3 HKC 659
applied; Ahmad Al-Naini v Islamic Press Agency Inc [2000] 1 Lloyd’s
Rep 522 distinguished). (See paras.49, 50, 53, 55, 57, 60, 61)
(2) Here, the position was clear. The parties were not bound to
J arbitrate. Clause 11.3 was a permissive arbitration clause. On its true
construction, cl.4.3 was a self-contained provision and billing

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 310 HONG KONG LAW REPORTS & DIGEST [2007] 1 HKLRD

disputes fell outside cl.11.3. This view was fortified by, though not A
dependent on, the fact that in the standard form agreement, on
which the Agreement was based, cl.4.3 provided for arbitration,
but this had been replaced by, inter alia, “submit the difference to
the Hong Kong courts”. Clause 4.3 was to be construed in its factual
matrix, and it was permissible to have regard to what the standard B
form agreement provided. A deliberate omission was as much a
surrounding circumstance as a deletion, and hence admissible to aid
interpretation (Team Services PLC v Kier Management & Design Ltd
(1993) 63 BLR 82, Investor Compensation Scheme Ltd v West Bromwich
Building Society [1998] 1 WLR 896 applied). (See paras.21, 27–29, C
64.)
(3) Clause 11.3 was permissive. The apparent inconsistency between
cls.5 and 11.3 could be resolved as follows: although cl.11.3
might require a dispute to be arbitrated there was no obligation
on the other party to accede to the invitation to arbitrate (Paul D
Smith Ltd v H & S International Holding Inc [1991] 2 Lloyd’s Rep
127 considered). (See paras.15–18.)

Appeal
This was an appeal against a judgment of Reyes J, dated 13 December E
2005, refusing an application to stay proceedings in favour of arbitration.
The facts are set out in the judgment.

Mr Roger Beresford, instructed by Richards Butler, for the plaintiff.

Mr Charles Sussex SC, instructed by Holman, Fenwick & Willan, for F
the defendant.

Legislation mentioned in the judgment

Arbitration Ordinance (Cap.341) s.34C
Rules of the Supreme Court [England] O.73 r.6(2) G

Cases cited in the judgment

Ahmad Al-Naimi v Islamic Press Agency Inc [2000] 1 Lloyd’s Rep
522
Investors Compensation Scheme Ltd v West Bromwich Building H
Society [1998] 1 WLR 896, [1998] 1 All ER 98, [1998] 1 BCLC
531
Pacific Crown Engineering Ltd v Hyundai Engineering and Construction
Co Ltd [2003] 3 HKLRD 440, [2003] 3 HKC 659
Paul Smith Ltd v H & S International Holding Inc [1991] 2 Lloyd’s I
Rep 127
Private Company “Triple V” Inc v Star (Universal) Co Ltd & Another
[1995] 2 HKLR 62, [1995] 3 HKC 129
Team Services PLC v Kier Management and Design Ltd [1993] 63
BLR 82 J
Westfal-Larsen & Co A/S v Ikerigi Compania Naviers SA (The
Messiniaki Bergen) [1983] 1 All ER 382, [1983] 1 Lloyd’s Rep 424

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 PCCW Global Ltd v Interactive Communications Service Ltd
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A Other material mentioned in the judgment

UNCITRAL Model Law on International Commercial Arbitration
arts.8, 16(3)

Tang V-P
B 1. Beyond The Network Ltd’s (Beyond) claim against the Vectone
Ltd (Vectone) arose out of an agreement dated 4 April 2003 whereby
Beyond and Vectone agreed to supply to and purchase from each other
international long-distance services, with the net amount due from
one party to the other to be billed and settled periodically.
C 2. It is Beyond’s claim that there is a net amount of US$718,999.26
due and payable by Vectone. That has been disputed by Vectone. This
has been referred to in the submissions as a billing dispute.
3. The writ was issued on 14 December 2004 and served on
Vectone on 17 December 2004. On 16 February 2005, Vectone gave
D formal notice that it wished to go to arbitration under cl.11.3 of the
agreement.
4. On 31 March 2005, Vectone applied to have the action stayed
under s.34C of the Arbitration Ordinance (Cap.341).
5. Reyes J refused a stay on 13 December 2005.
E 6. This is Vectone’s appeal.
7. The agreement is contained in a document headed “Master
Service Agreement for International Voice Services”. It is clear from
the document that the agreement was based on a standard form in
respect of which Beyond claimed copyright.
F 8. The relevant provisions in the agreement are set out below:

4. SETTLEMENT AND PAYMENT

…
G
4.3 Each party will be responsible for payment of all
undisputed charges as reflected on any billing statement
… Neither party shall have an obligation to pay any
amount which has been disputed in good faith until
such time that the dispute is satisfactorily resolved by
H
the Parties … In the event the Parties are unable to
resolve the dispute amicably with[in] a reasonable
period of time and havin[g] exchanged their respective
call detail records, not to exceed 14 days, then, the
parties will submit the difference to the Hong Kong
I
Courts.
5. REGULATIONS. This Agreement is made expressly subject
to all present and future valid orders, regulations of any
regulatory body having jurisdiction over the subject matter of
this Agreement, and to the laws of the Hong Kong SAR. The
J Parties hereby submit to the exclusive jurisdiction of the courts
of Hong Kong SAR.
…

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 312 HONG KONG LAW REPORTS & DIGEST [2007] 1 HKLRD

11. GENERAL PROVISIONS A

…
11.2 GOVERNING LAW. This Agreement will be
interpreted in accordance with the laws of the State of
New York, USA, notwithstanding the principles of B
conflicts of laws thereof, and any dispute shall be
submitted to the courts in the State of New York. The
Parties agree that the United Nations Convention on
Contracts for the International Sale of Goods will not
apply to this Agreement. C
11.3 ARBITRATION. Either Party may require that any
dispute arising hereunder be settled by binding arbitration
in accordance with the commercial arbitration rules of
the American Arbitration Association provided that
alleged breaches of s.7 (Confidentiality) may be settled D
by injunctive relief in a court as provided in s.11.2. The
arbitral tribunal shall be composed of a sole arbitrator.
The English language shall be used throughout the
arbitral proceeding. The arbitration shall take place
in New York, NY, USA. The cost of the arbitration, E
including the fees and expenses of the arbitrator(s), shall
be shared equally by the Parties unless that award provides
otherwise.
…
11.8 CAPTIONS. Captions of the sections and subsections F
of this Agreement are for reference purposes only and
do not constitute terms or conditions of this
Agreement, and shall not limit or affect the terms and
conditions hereof.
11.9 WAIVER. No provision of, right, power or privilege G
under this Agreement shall be deemed to have been
waived by any act, delay, omission or acquiescence on
the part of either Party, its agents, or employees, but only
by an instrument in writing signed by an authorized
officer of each Party. No waiver by either Party of any H
breach or default of any provision of this Agreement by
the other Party shall be effective as to any other breach
or default, whether of the same or any other provision
and whether occurring prior to, concurrent with, or
subsequent to the date of such waiver. I

9. It is obvious that there is an apparent conflict between cl.5 where

the parties “submit to the exclusive jurisdiction of Hong Kong, SAR”,
and cl.11.2 which provided that “any dispute shall be submitted to
the courts in the State of New York”. J
10. Mr Beresford, who appeared for Beyond, accepted that
provided an election to arbitrate was made within a reasonable time

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 PCCW Global Ltd v Interactive Communications Service Ltd
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A and within the scope of cl.11.3, there would have been a binding
agreement to arbitrate such that the court would be obliged to stay
the action. We agree.
11. The principal point in this appeal is whether or not cl.11.3
covered a billing dispute.
B 12. Mr Sussex SC, who appeared for Vectone, submitted that
under cl.11.3, once one has elected to have a dispute referred to
arbitration, the court must give effect to it. In other words, the
submission to the jurisdiction of the Hong Kong courts in cl.4.3 is
overridden as soon as an election to arbitration is made under cl.11.3.
C 13. The effect of a clause similar to cl.11.3 was considered in
Westfal-Larsen & Co A/S v Ikerigi Compania Naviers SA [1983] 1 Lloyd’s
Rep 424, a decision of Bingham J (as he then was). There the relevant
provisions were:

D 40. (a) This charter shall be construed and the relations between the
parties determined in accordance with the law of England.
(b) Any dispute arising under this charter shall be decided by
the English Courts to whose jurisdiction the parties agree
… Provided that either party may elect to have the dispute
E referred to the arbitration of a single arbitrator in London
in accordance with the provisions of the Arbitration Act,
1950 … Such election shall be made by written notice by
one party to the other not later than 21 days after receipt
of a notice given by one party to the other of a dispute
F having arisen under this charter.

14. Bingham J said at p.426:

… The proviso is not an agreement to agree because upon a valid

G election to arbitrate (and assuming the clause to be otherwise effective)
no further agreement is needed or contemplated. It is, no doubt,
true that by this clause the parties do not bind themselves to refer
future disputes for determination by an arbitrator and in no other
way. Instead, the clause confers an option, which may but need not
H be exercised. I see force in the contention that until an election is
made there is no agreement to arbitrate, but once the election is
duly made (and the option exercised) I share the opinion of the
High Court of Delhi in the Bharat case that a binding arbitration
agreement comes into existence. Where the option agreement and
I the exercise of the option are both, as here, expressed in writing, the
statutory requirement of a written agreement is in my view satisfied.

15. The Judge read cl.11.3 as providing that although the party may
require a dispute to be arbitrated, “but there is no obligation on the
J other party to accede to the invitation to arbitrate”. The Judge arrived
at that conclusion because he took the view that under cl.5 the parties
had submitted to the exclusive jurisdiction of the Hong Kong courts.

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16. In Paul Smith Ltd v H & S International Holding Inc [1991] 2 A

Lloyd’s Rep 127, Steyn J (as he then was) was concerned with similar
provisions which provided as follows:

13. SETTLEMENT OF DISPUTES If any dispute or difference

shall arise between the parties hereto concerning the construction B
of this Agreement or the rights or liabilities of either party
hereunder the parties shall strive to settle the same amicably
but if they are unable to do so the dispute or difference shall
be adjudicated upon under the Rules of Conciliation and
Arbitration of the International Chamber of Commerce by C
one or more Arbitrators appointed in accordance with those
Rules.
14. LANGUAGE AND LAW This Agreement is written in the
English language and shall be interpreted according to English
law. D

The Courts of England shall have exclusive jurisdiction over it to

which jurisdiction the parties hereby submit.

17. He resolved the submissions that the provisions were inconsistent E

with these words at p.129:

Fortunately, there is a simple and straightforward answer to the

suggestion that cls.13 and 14 are inconsistent. Clause 13 is a self-
contained agreement providing for the resolution of disputes by F
arbitration. Clause 14 specifies the lex arbitri the curial law or the
law governing the arbitration, which will apply to this particular
arbitration. The law governing the arbitration is not to be confused
with (1) the proper law of the contract, (2) the proper law of the
arbitration agreement, or (3) the procedural rules which will apply G
in the arbitration. These three regimes depend on the choice, express
or presumed, of the parties. In this case it is common ground that
both the contract and the arbitration agreement are governed by
English law. The procedural rules applicable to the arbitration are
not rules derived from English law. On the contrary, the procedural H
regime is the comprehensive and sophisticated ICC rules which
apply by virtue of the parties’ agreement.
What then is the law governing the arbitration? It is, as Martin
Hunter and Alan Redfern, International Commercial Arbitration, p.53,
trenchantly explain, a body of rules which sets a standard external to I
the arbitration agreement, and the wishes of the parties, for the conduct
of the arbitration. The law governing the arbitration comprises the
rules governing interim measures (eg Court orders for the preservation
or storage of goods), the rules empowering the exercise by the Court
of supportive measures to assist an arbitration which has run into J
difficulties (eg filling a vacancy in the composition of the arbitral
tribunal if there is no other mechanism) and the rules providing for

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 PCCW Global Ltd v Interactive Communications Service Ltd
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A the exercise by the Court of its supervisory jurisdiction over arbitrations

(eg removing an arbitrator for misconduct).
If cl.14 is read as specifying the law governing the arbitration;
there is no inconsistency between cls.13 and 14. Admittedly, the
language is not felicitous: it provides for the exclusive jurisdiction
B of the English Courts “over it”, ie the agreement. Strictly, it should
refer to the law governing the arbitration. This incongruity pales
into insignificance, however, when compared to the unfortunate
consequences of treating the arbitration clause in a non-domestic
commercial agreement as pro non scripto.
C
18. We too, would resolve the apparent inconsistency between cls.5
and 11.3 in the same way.
19. However, cl.5 is inconsistent with cl.11.2. The Judge resolved
that inconsistency by saying that:
D
… despite cl.5, the parties (if they agree) may bring their dispute
to the New York Court. Obviously, if the parties do not agree to a
relaxation of cl.5, the Hong Kong Court will retain its “exclusive
jurisdiction”.
E
20. We return to the principal point which is whether or not cl.11.3
covered a billing dispute. The proper approach to interpretation is
to consider the agreement as a whole, then decide whether billing
disputes are covered by cl.11.3. The parties agreed that there are no
F material differences between the rules of interpretation in the laws
of the State of New York and the laws of Hong Kong. We were told
that New York law requires that in interpreting the contract, a court
must read the contract as a whole, and give effect to all of the language
used by the parties, and must avoid an interpretation that would leave
G contractual clauses meaningless and that one must give unambiguous
provisions their plain and ordinary meaning.
21. Mr Sussex also accepted that the authoritative statement of the
law by Lord Hoffmann in ICS Ltd v West Bromwich Building Society [1998]
1 WLR 896 at pp.912–913 are applicable. There Lord Hoffmann said
H “almost all the old intellectual baggage of legal interpretation has been
discarded” (at p.912):

Subject to the requirement that it should have been reasonably

available to the parties and to the exception to be mentioned next,
I it includes absolutely anything which would have affected the way
in which the language of the document would have been understood
by a reasonable man.

22. But, Lord Hoffmann also said:

J
(3) The law excludes from the admissible background the previous
negotiations of the parties and their declarations of subjective

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 316 HONG KONG LAW REPORTS & DIGEST [2007] 1 HKLRD

intent. They are admissible only in an action for rectification. A

The law makes this distinction for reasons of practical policy
and, in this respect only, legal interpretation differs from the way
we would interpret utterances in ordinary life. The boundaries
of this exception are in some respects unclear. But this is not
the occasion on which to explore them. (p.913) B

23. Mr Sussex submitted that cl.11.3 is clear in its terms. It permits

a party to require any dispute arising under the agreement to be settled
by binding arbitration.
24. Equally, one could say that cl.11.2 also expressly provided C
that “any dispute shall be submitted to the courts in the State of New
York”. However, Mr Sussex agreed that having regard to the terms
of cl.4.3, a dispute over billing charges is an exception to cl.11.2.
25. So, whether in either clause, “any” means “all” cannot be
resolved without considering the agreement in its entirety. What we D
have to consider is whether a billing dispute is also an exception to
cl.11.3.
26. Clause 4.3 provides that in relation to the billing dispute, “the
parties will submit the difference to the Hong Kong Courts”.
27. But whether cl.4.3 is ambiguous or not, it should be construed E
in its factual matrix. Thus, we believe it is permissible to have regard
to the fact that in the standard form agreement, on which the agreement
was based, cl.4.3 provided that:

In the event the parties are unable to resolve the dispute amicably, F
it shall be resolved by arbitration in accordance with s.11.3.

28. Those words have been replaced in the agreement by:

… In the event the Parties are unable to resolve the dispute amicably G
with[in] a reasonable period of time and havin[g] exchanged their
respective call detail records, not to exceed 14 days, then, the parties
will submit the difference to the Hong Kong Courts.

29. In Team Services PLC v Kier Management and Design Ltd [1993] H
63 BLR 82, Lloyd LJ said (with the concurrence of Kennedy LJ) at
p.88, a deliberate omission “is as much a surrounding circumstance
as a deletion” and hence admissible as an aid to interpretation.
30. Here, the Judge said:
I
… Vectone’s communication to Beyond that Vectone was not
prepared to enter into an agreement in the absence of a provision
enabling billing disputes to be brought before the Hong Kong Court,
forms part of the factual matrix against which I am entitled to construe
the present contract. J

31. And then:

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 PCCW Global Ltd v Interactive Communications Service Ltd
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A … I do not think that I can ignore, as inadmissible, evidence about

Vectone’s stance on jurisdiction which actually led to a change in
the language of the original version of cl.4.3.

32. The evidence of Beyond came from affidavit of Ms Cynthia Rich

B Perkinson dated 4 May 2005. She said, in January 2003, she had had
presented to her a document entitled “Vectone Reciprocal Minutes
Agreement 16 July 02 clean”. That document was exhibited to her
affidavit and marked “CP-1”. Clause 4.3 of CP-1 provided that:

C In the event, the parties are unable to resolve the dispute amicably,
[billing disputes] shall be resolved by arbitration in accordance with
s.11.3.

33. However, it is relevant to note that in CP-1 cl.11.3 provided for

D arbitration “in United Kingdom”. There, cls.11.2 and 11.3 provided:

11.2 GOVERNING LAW. This Agreement will be interpreted

in accordance with the United Kingdom and any dispute
shall be submitted to the London Courts. The Parties agree
E that the United Nations Convention on Contracts for the
International Sale of Goods will not apply to this Agreement.
11.3 ARBITRATION. Either Party may require that any dispute
arising hereunder be settled by binding arbitration in
accordance with the commercial arbitration rules of the
F American Arbitration Association provided that alleged
breaches of s.7 (Confidentiality) may be settled by injunctive
relief in a court as provided in s.11.2. The arbitral tribunal
shall be composed of a sole arbitrator. The English language
shall be used throughout the arbitral proceeding. The
G arbitration shall take place in United Kingdom. The cost
of the arbitration, including the fees and expenses of the
arbitrator(s), shall be shared equally by the Parties unless that
award provides otherwise.

H 34. Ms Perkinson then went on to say in para.7:

7. There were protracted negotiations on commercial and legal

terms with the defendant from January 2003 through March
2003. On 3 April 2003, I received an e-mail from Ramy Caspi
I of the defendant attaching some comments and further revisions
that the defendant wanted to make to the draft service agreement.
In the e-mail, Ramy Caspi stated that the comments and revisions
had been made by the defendant’s legal department. A copy
of the said e-mail and this attachment are now shown to me
J and marked “CP-2”. The notations which can be seen in the
electronic copy of the document indicate a Miguel Gulave of
the defendant, who I understand was from the defendant’s legal

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 318 HONG KONG LAW REPORTS & DIGEST [2007] 1 HKLRD

department, made all of the revisions and comments which A

were shown as mark-ups in the document. At the end of cl.4.3
of the draft service agreement, the following comment had
been inserted by the defendant in relation to the mechanism for
resolving billing disputes:
B
This is not acceptable, if we do not agree, we will submit
our difference to the Hong Kong Courts as per art.5.

35. It is necessary to set out the relevant part of cl.4.3 in CP-2, which
provided: C

… In the event the Parties are unable to resolve the dispute amicably
within a reasonable period of time, not to exceed 14 days, then in
the absence of manifest error, the call detail records of the owed Party
shall be deemed conclusive and the owing Party will immediately D
render payment of the disputed amounts.

36. Thus, what was not acceptable to Vectone at the time was the
provision that:
E
… in the absence of manifest error, the call detail records of the
owed Party shall be deemed conclusive and the owing Party will
immediately render payment of the disputed amounts …

37. It was in relation to that that Miguel Gulave of Vectone’s legal F

department commented:

This is not acceptable, if we do not agree, we will submit our difference

to the Hong Kong Courts as per art.5.
G
38. In the affirmation of Mr Fernandez affirmed on 17 June 2005,
he said at para.21:

21. I have seen the draft affidavit of James Berenthal. I understand that,
as a matter of the law of New York — which law Mr Berenthal H
has advised me applies to interpretation of the Agreement —
Ms Perkinson’s evidence is even if it is correct, inadmissible as a
question of construction of the Agreement, if it is unambiguous,
and of the parties’ intentions. Therefore I shall not set out the
full history of the negotiations leading up to completion of the I
Agreement — consisting of the preparation of seven draft versions
of that Agreement — which would explain the factual context
in which each party negotiated, and made suggestions, as to the
appropriate wording used in the Agreement. However, I do not
accept that Ms Perkinson has set out, in full, that factual context J
or that the wording of s.4.3 should be construed against Vectone.

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 PCCW Global Ltd v Interactive Communications Service Ltd
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A 39. Even so, the omission, in cl.4.3, of the reference to arbitration

in cl.11.3, remained part of the background and hence may be referred
to as an aid to interpretation.
40. The Judge took the view that since it was Vectone who
suggested the inclusion of the last sentence of cl.4.3, if there is any
B ambiguity, the ambiguity should be construed against Vectone (See
para.37).
41. Although it appears that the suggestion that the parties should
submit their difference to the Hong Kong courts came from Vectone,
there is no evidence that they were responsible for the language which
C was eventually adopted. If Beyond was responsible for the language,
or that the language was the result of negotiation between the parties,
we do not believe it would be right to read cl.4.3 against Vectone.
42. Indeed, we believe it is helpful to return to the evidence of
Ms Perkinson. She said:
D
6. The plaintiff has a standard form service agreement for international
voice services which formed the basis of the negotiations with the
defendant. The document that was presented to me in January
2003 was entitled “Vectone Reciprocal Minutes Agreement
E 16 July 02 clean]”. A copy of the said document is now shown to
me and marked “CP-1”. I would point out that cl.4.3 of the said
document states that “In the event the Parties are unable to resolve
the dispute amicably, [billing disputes] shall be resolved by
arbitration in accordance with s.11.3”. This language is consistent
F with the plaintiff ’s standard form agreement in use at the time. The
arbitration referred to was arbitration in the UK in accordance with
American Arbitration Association (AAA) rules. The reference to
the UK was inconsistent with the plaintiff ’s standard terms, which
would have provided for arbitration in Hong Kong, and appears
G to have been the result of prior negotiations between the plaintiff
and the defendant.

43. One notes therefore that, according to her, Beyond’s standard

terms provided for arbitration in Hong Kong and that, that “CP-1”
H provided for arbitration in the UK, which “appears to have been the
result of prior negotiations between the plaintiff and the defendant”.
44. Since Beyond’s standard terms provided for arbitration in
Hong Kong, presumably, cl.11.2 would have provided for the
agreement to be interpreted in accordance with Hong Kong law. In
I that case, if it went on to provide that “any dispute shall be submitted
to the Hong Kong courts”, that would not be repugnant to cl.5,
though possibly, superfluous.
45. It seems, though there is no evidence on it, as a result of
further negotiation, the venue for arbitration was changed to the State
J of New York, with consequential changes to cl.11.2 (see eg CP-2).
There is no evidence who was responsible for this further change.

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 320 HONG KONG LAW REPORTS & DIGEST [2007] 1 HKLRD

46. It may be that changes were made to cls.11.2 and 11.3, first A
to arbitration in London, eg in CP-1, and then to the State of New
York, eg in CP-2, but the parties had omitted to consider cl.5 and
decide whether any changes were necessary.
47. In such circumstances, we do not believe the agreement
should be read against any particular party. B
48. We return to cl.11.3 in the agreement. As noted, it provided
for “any dispute arising hereunder be settled by binding arbitration”.
49. Mr Sussex submitted that the correct approach is for the court
to determine on a prima facie basis whether there is a valid arbitration
agreement. In Private Company “Triple V” Inc v Star (Universal) Co Ltd C
& Another [1995] 2 HKLR 62, a decision of this Court, Litton V-P (as
he then was) said with the concurrence of the other members of the
Court:

The Judge said this: D

There is prima facie evidence of a dispute between the plaintiff

and D1 in relation to contract 93RV-1034HK and an arbitrator
ought to be appointed to arbitrate their dispute. It will be
for the arbitrator to decide the effect, if any, of the alleged E
subsequent agreement cancelling the contract.

I agree. If the judge were to go into the matter more deeply, he

would in effect be usurping the function of the arbitrator. Whilst,
clearly, the judge had to make a judgment as to whether there existed F
an underlying agreement to arbitrate, he could do no more than to
form a prima facie view.

50. The same approach was adopted by Burrell J in Pacific Crown

Engineering Ltd v Hyundai Engineering & Construction Co Ltd [2003] 3 G
HKLRD 440. There Burrell J was concerned with the proper test to
be applied in determining the question whether it was for the court
on a stay application or the arbitrator to decide whether an arbitration
agreement existed. He said, after reviewing the Hong Kong authorities:
H
12. The proper test is therefore is there a prima facie or plainly
arguable case that the parties were bound by an arbitration
clause. The onus being on the defendant to demonstrate that
there is.
I
51. We are bound to and would adopt the same approach.
52. In relation to the submissions that the court should stay these
proceedings to an arbitrator who can then determine whether or not
he has jurisdiction, the Judge said at para.43:
J
43. While I accept that is a possible course, it does not strike me as
appropriate here. A decision by an arbitrator on his jurisdiction

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 PCCW Global Ltd v Interactive Communications Service Ltd
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A would still be open to challenge before this Court. The matter

would simply return to me. Where (as here) a question of
construction is involved and little (if any) extrinsic evidence
is sought to be adduced in aid of construction, it would be
conducive to saving time and cost to determine the question
B of jurisdiction now.
44. The writ was issued in December 2004. It is presently December
2005 and a defence has yet to be filed. Given my views on
cls.4.3, 5, 11.2 and 11.3, it would be wrong to refrain from
deciding the jurisdictional issue now. To remit the question to
C an arbitrator would only lead to unjustifiable delay and expense.

53. Support for the Judge can be found in Ahmad Al-Naimi v Islamic
Press Agency Inc [2000] 1 Lloyd’s Rep 522, a decision of the English
Court of Appeal.
D 54. At that time, in England, O.73 r.6(2) of the Rules of the
Supreme Court provided that:

Where a question arises as to whether an arbitration agreement has

been concluded or as to whether the dispute which is the subject
E matter of the proceedings falls within the terms of such agreement,
the court may determine that question or give directions for its
determination, in which case it may order the proceedings to be
stayed pending the determination of that question.

F 55. We do not have a similar provision in Hong Kong. But what

Waller LJ said at p.524 is applicable here. He said:

… if it is clear on the evidence that a contract did or did not exist

then the court should so decide for it cannot be right either to
G direct an issue pursuant to O.73 r.6(2) or to leave the “dispute” to
be determined by an arbitral tribunal.

56. The Judge regarded the point as clear. He held there was no
agreement to arbitrate at all. There was not a prima facie or arguable
H case otherwise. If so, the judgment must be upheld.
57. So we turn to decide whether it is clear that there was no
agreement to arbitrate billing disputes.
58. We remind ourselves of Litton V-P’s dictum quoted in para.49
above.
I 59. Since we are of the view that cl.11.3 provided for enforceable
though permissive arbitration, the only remaining question is whether
a billing dispute falls within the ambit or scope of cl.11.3.
60. It is important for the court not to usurp the function of the
arbitrators, and unless the point is clear, the matter should be stayed
J for arbitration. In that respect, the absence of provisions similar to O.73
r.6(2), is significant. In Hong Kong, we do not believe the court should
attempt to resolve that issue, even though under art.16(3) of the Model

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 322 HONG KONG LAW REPORTS & DIGEST [2007] 1 HKLRD

Law, the court has power to decide the question of jurisdiction after A
determination of the question by the arbitral tribunal as a preliminary
question.
61. Only if it is clear that cl.11.3 does not cover billing disputes,
should the court refuse a stay.
62. It is necessary to look at cl.4.3 as a whole. It provided: B

4.3 Each Party will be responsible for payment of all undisputed

charges as reflected on any billing statement. Any request for
a billing adjustment must be made in good faith and in writing
within thirty (30) days of the invoice date, together with its C
call detail record including date, time, duration and destination
of each call. Any such request for adjustment shall not be
cause for delay in the payment of the undisputed balance due.
Neither Party shall have an obligation to pay any amount
which has been disputed in good faith until such time that the D
dispute is satisfactorily resolved by the Parties. Service Partner’s
notification of any contested or disputed amount must be in
writing and sent to: Billing Disputes, BtN Ltd, 41/F The Sun
Group’s Centre, Place, Quarry Bay, 200 Gloucester Road,
Wanchai, Hong Kong or to 852 2621 5686 by confirmed E
facsimile with duplicate notification to follow via overnight
delivery. BtN’s notification of any contested or disputed
amount must be in writing and sent to: Mr V Mahalingam,
Vectone Ltd, 58 Marsh Wall, London E14 9TP, United
Kingdom by confirmed facsimile with duplicate notification F
to follow in accordance with s.11.4. Written notification
must be accompanied with a detailed written support, for any
service interruption credit or other credit to which the Party
requesting the billing adjustment believes itself entitled, and
both Parties will promptly address and attempt to resolve the G
claim. In the event the Parties are unable to resolve the dispute
amicably with[in] a reasonable period of time and havin[g]
exchanged their respective call detail records, not to exceed 14
days, then, the parties will submit the difference to the Hong
Kong Courts. H

63. We believe cl.4.3 is a self-contained provision on how any dispute

or contest over billing should be determined. It provided for formal
notification of disputes, a tight timetable for amicable settlement “not
to exceed 14 days” and “then, the parties will submit the difference I
to the Hong Kong Courts”.
64. Our view is fortified by, though it is not dependent on,
the fact that in the standard terms, cl.4.3 provided for arbitration in
accordance with cl.11.3. That has been replaced by “then, the parties
will submit the difference to the Hong Kong Courts”. J
65. Mr Sussex submitted that what the parties intended was that
the difference should be submitted to the Hong Kong courts unless

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 PCCW Global Ltd v Interactive Communications Service Ltd
CA Tang V-P 323

A one party required arbitration. He submitted since the fact that cl.11.2
provided for “any dispute shall be submitted to the courts in the State
of New York” would not affect the operation or binding effect of
cl.11.3, so too, cl.3 should be read subject to cl.11.3. Despite the force
of Mr Sussex’s argument, we are of the view that reading cl.4.3 as a
B whole it is clear that the parties had agreed that billing disputes should
be dealt with differently and separately from cl.11.3.
66. We acknowledge that it is difficult to reconcile cl.5 with
cl.11.2. But reconciliation of cl.5 with cl.11.2 is not essential to the
resolution of the issue before us. It may be that the Judge’s view
C that “shall” in cl.11.2 cannot be mandatory, may provide the only
satisfactory answer.
67. Lastly, Mr Sussex submitted that the Judge was wrong in
holding that in any event, it was too late for Vectone to seek arbitration.
The Judge held that since Vectone did not give formal notice of its
D wish to go to arbitration until 10 February 2005, which was nearly
five months after disputing Beyond’s invoices on 24 September 2004,
Vectone had waived any right under cl.11.3 to arbitrate. The Judge
came to that view because he held that the right to require arbitration
under cl.11.3 must be exercised within a reasonable time.
E 68. If cl.11.3 covered billing disputes, there was no necessity to
imply any term into the agreement or cl.11.3 which is inconsistent
with art.8 of the Model Law. In our view, an election for arbitration,
may be made “not later than when submitting his first statement on
the substance of the dispute”.
F 69. Nor can we agree that, time should begin to run after Vectone
had queried Beyond’s invoices on 24 September 2004. It would make
good commercial sense for Vectone to wait for Beyond’s next move,
which might never come or it might be an election to go for arbitration.
So in any event, time should not begin to run until commencement
G of proceedings by Beyond. That being so, the latest time at which an
election for arbitration may be made must be that provided by art.8.
There is no justification for the implication of any different term.
70. In the result, the appeal is dismissed with costs.

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