IpsofactoJ.com: International Cases [2008] Part 8 Case 4 [CFA]




- vs -

Rainbow Joy Shipping Ltd






28 APRIL 2008


Justice Bokhary PJ

  1. I agree with the judgment of Mr Justice Ribeiro PJ.

    Justice Chan PJ

  2. I agree with the judgment of Mr Justice Ribeiro PJ.

    Justice Ribeiro PJ


  3. The appellant, a Philippine national, was employed as Second Engineer on board the “RAINBOW JOY”, a Hong Kong-registered general cargo vessel. On 3 September 2003, he was ordered by the Master to repair the starboard accommodation ladder together with the Chief Engineer. When the latter attempted to straighten a bent portion of the ladder using a sledge hammer, a fragment, described as “a piece of metal shrapnel”, flew out and struck the appellant, causing him the total loss of vision in his right eye. He was then 54 years of age.

  4. The respondent was the owner of the vessel and the appellant’s employer. It is a Panamanian company registered in Hong Kong as a foreign corporation under Part XI of the Companies Ordinance (Cap 32).

  5. On 5 November 2003, the appellant sought compensation by commencing an arbitration under the auspices of the National Labour Relations Commission in the Philippines. However, on 15 January 2004, he withdrew from the arbitration which was dismissed without prejudice to his claim. He then brought an Admiralty action in rem against the vessel in Singapore. But the respondent successfully obtained a stay of those proceedings on the ground of forum non conveniens. The appellant’s appeals in Singapore from the Registrar to the High Court and then to the Court of Appeal were dismissed on 28 September 2004 and 27 April 2005 respectively.

  6. It was not until 23 June 2005 that the respondent gave notice of the accident to the Commissioner for Labour in Hong Kong, although it had been obliged by the Employees’ Compensation Ordinance (“ECO” – Cap 282 – the notice requirement is in section 15) to do so within 14 days of the accident. The appellant then issued a claim under the ECO (s 14) on 29 August 2005, just within the time limit. The respondent again applied for a stay, this time in favour of arbitration in the Philippines. On 13 June 2006, Deputy District Judge Kot dismissed that application – DCEC 1032/2005. However, the Court of Appeal allowed the employer’s appeal and granted the stay – CACV 243/2006, Yeung JA and Sakhrani J (15 February 2007). It is from that judgment that this appeal is brought.


  7. The case has been argued below throughout on the footing that the appellant is party to an arbitration agreement which supplies the basis for the stay. The existence of such agreement had been conceded on the appellant’s behalf and was common ground. Accordingly, the appellant sought leave to appeal to this Court on the basis that a point of law of great general or public importance arises involving the question whether the District Court has exclusive jurisdiction to deal with all ECO claims so as to preclude a stay of ECO proceedings in favour of arbitration (“the exclusive jurisdiction point”).

  8. Leave to appeal was granted in respect of that question. However, the Appeal Committee observed that the correctness of the concession mentioned above may have to be examined:

    .... an anterior question may have to be determined by the Court, namely, as to what the operative terms of the applicant’s contract of employment with the respondent were and in particular, whether such terms included an arbitration agreement.

    I will refer to this as the “arbitration agreement point”. The Committee recorded that it would be open to the respondent to contend that this point is not available to the applicant in the light of the concession.


  9. Mr Russell Coleman SC, appearing for the respondent, does indeed submit that the appellant is barred from raising the arbitration agreement point. His objection is based on the well-known principles set out in Flywin Co Ltd v Strong & Associates (2002) 5 HKCFAR 356, whereby the court will not permit a new point to be raised unless one can exclude all reasonable possibility that the state of the evidence relevant to that point would have been materially more favourable to the other side if it had been taken at first instance. The Court in Flywin also emphasised a strong reluctance to consider points not duly considered by the Court of Appeal.

  10. These are principles consistently adhered to and accorded great importance by the Court. However, they do not stand in the way of the arbitration agreement point. The concession was based on the view taken by the appellant’s legal advisers that his contract of employment was constituted by three documents which are discussed later in this judgment. That view was accepted by the courts below apparently without discussion. Whether that view is correct is a question of law. The factual basis of the concession, namely, the execution and contents of the three documents concerned, is not in dispute. The relevant evidence would therefore not have differed if the legal effect of those documents had been put in issue at first instance.

  11. In any event, as was stated in Mariner International Hotels Ltd v Atlas Ltd (2007) 10 HKCFAR 1, the Court cannot be bound by a concession or an agreement between the parties regarding a question of law which it holds to be erroneous. As Bokhary PJ pointed out at §23, the principle is stated by Lord Diplock in Bahamas International Trust Co Ltd v Threadgold [1974] 1 WLR 1514 at 1525 in the following terms:

    In a case which turns, as this one does, upon the construction to be given to a written document, a court called upon to construe the document in the absence of any claim for rectification cannot be bound by any concession made by any of the parties as to what its language means. This is so even in the court before which the concession is made; a fortiori in the court to which an appeal from the judgment of that court is brought. The reason is that the construction of a written document is a question of law. It is for the judge to decide for himself what the law is, not to accept it from any or even all of the parties to the suit; having so decided it is his duty to apply it to the facts of the case. He would be acting contrary to his judicial oath if he were to determine the case by applying what the parties conceived to be the law, if in his own opinion it was erroneous.

  12. While it is true that this arbitration agreement point has not been considered by the Court of Appeal, it is a case-specific question which does not require discussion of any difficult or far-reaching doctrinal issue. It is therefore my view that the arbitration agreement point is open to the appellant. As it is logically anterior to the exclusive jurisdiction point, I will deal with it first.


    D.1  The employment and arbitration agreements identified by the respondent

  13. It was common ground below and continues to be the respondent’s case  that the relevant contract of employment is constituted by three documents, namely:

    1. a contract dated 9 August 2002 between the appellant and Cleene Maritime Corporation signing as sub-agent of the respondent (“the Philippine contract”);

    2. a contract dated 27 August 2002 between the applicant and the respondent entitled “Agreement and Lists of the Crew” (“the Hong Kong agreement”); and

    3. a collective bargaining agreement dated 2 October 2002 between Hang Woo Ship Management Limited on the one hand and three trade unions, namely, the Merchant Navy Officers’ Guild Hong Kong, the Amalgamated Union of Seafarers and the Hong Kong Seamen’s Union, on the other (“the Collective Agreement”).

  14. The arbitration agreement which the respondent relies on as the basis of the stay of the ECO proceedings is found in Section 29 of the Philippine contract (“Section 29”) and provides as follows:


    Dispute Settlement Procedures

    In cases of claims and disputes arising from this employment, the parties covered by a collective bargaining agreement shall submit the claim or dispute to the original and exclusive jurisdiction of the voluntary arbitrator or panel of arbitrators. If the parties are not covered by a collective bargaining agreement, the parties may at their option submit the claim or dispute to either the original and exclusive jurisdiction of the National Labor Relations Commission (NLRC), pursuant to Republic Act (RA) 8042 otherwise known as the Migrant Workers and Overseas Filipinos Act of 1995 or to the original and exclusive jurisdiction of the voluntary arbitrator or panel arbitrators. If there is no provision as to the voluntary arbitrators to be appointed by the parties, the same shall be appointed from the accredited voluntary arbitrators of the National Conciliation and Mediation Board of the Department of Labor and Employment.

    D.2  Problems with the concession

  15. The concession made below faces a fundamental difficulty. There are irreconcilable inconsistencies between the Philippine contract on the one hand and the Hong Kong agreement and the Collective Agreement read together, on the other, making it impossible to read the three documents in combination as constituting the contract of employment. This difficulty is heightened by the operation of the Merchant Shipping (Seafarers) Ordinance (Cap 478) (“MS(S)O”).

    D.2a  The Philippine contract

  16. The Philippine contract, annexing certain standard conditions (i.e. Standard Terms and Conditions Governing the Employment of Filipino Seafarers On-board Ocean-Going Vessels), is clearly intended as a self-contained contract governing the employment of Filipino seafarers under Philippine law. It was executed in Manila on 9 August 2002 and took effect on 12 August 2002 upon receiving approval from the Philippine Overseas Employment Administration (“POEA”), a government agency.

  17. It is signed by the appellant and by one Marcelino R Mortel, the general manager of Cleene Marine Management Limited (“Cleene”) as “Agent” for and on behalf of Hang Woo Ship Management Limited (“Hang Woo”) as “Principal”. Hang Woo was the respondent’s Hong Kong agent and, as the Court of Appeal noted, it was accepted that Cleene was the respondent’s sub-agent. However, the respondent itself is nowhere identified in the Philippine contract.

  18. The appellant is stated to be employed as Second Engineer on the vessel at a basic monthly wage of US$1,000 plus overtime of US$300. Four important conditions provide that:

    1. any claims and disputes arising from the employment are to be referred to arbitration in the Philippines, as noted above (Section 29) – set out in Section D.1 of this Judgment;

    2. any claims or disputes arising out of or in connection with the Philippine contract are to be governed by Philippine law (Section 31);[1]

    3. in case of a work-related injury resulting in permanent partial disability, the appellant is to be compensated in accordance with a schedule (Section 20.B.6)[2] which fixes compensation for total blindness of one eye in the sum of US$20,900 – being 41.8% of US$50,000 as stipulated in the Schedule of Disability Allowances under Section 32; and,

    4. payment of such compensation is to cover all claims arising from or related to the appellant’s employment including claims for contract damages, tort, fault or negligence both under Philippine law and the laws of any other country (Section 20.G).[3] 

    D.2b  The Hong Kong agreement and the Collective Agreement

  19. The Hong Kong agreement is in a printed form entitled “Agreement and Lists of the Crew” which refers to the MS(S)O in its heading. It is designed to accommodate crew members signing up for employment on board the vessel on various dates and at various ports.

  20. It identifies the vessel as the “RAINBOW JOY”, gives Hong Kong as its port of registry and names the respondent as its registered owner and Hang Woo as its Hong Kong representative. It is signed by the Master whose signature appears within a stamp bearing the names of the respondent and the vessel. Printed notes instruct the Master to annex the List of Crew “as part of this agreement”. The form also provides for the annexation of the crew’s terms of employment, stipulating that any annexed terms “should not be less favourable than those under the provisions of the laws of Hong Kong”.

  21. The List of Crew is signed by each crew member, including the appellant. Apart from giving his personal particulars, it states that he is employed as Second Engineer at a monthly wage of US$1,869, that he signed on at Singapore on 27 August 2002 and that he was discharged on 9 September 2003, also at Singapore.

  22. While there is no evidence that any terms were physically annexed to the Crew Agreement and Lists, it is clearly to be inferred (and is common ground) that the parties intended to incorporate the terms of the Collective Agreement into each crew member’s individual contract of employment. Thus, the Collective Agreement is signed by Hang Woo (the respondent’s representative) with three trade unions and states that it covers all officers and ratings serving on the “RAINBOW JOY” – Article 2 and Appendix One. Although it post-dates the Hong Kong agreement by some 12 days, there had obviously previously been in place a Collective Agreement in like terms since its Appendix Two sets out wage scales stated to be effective from 1998. These included monthly wages of US$1,869 for a Second Engineer, which corresponds with the sum set out as the appellant’s wages in the Hong Kong agreement. As the Collective Agreement has a duration of one year ( Article 3), the inference is that the version put in evidence was a renewal on terms materially identical to the collective agreement in force at the date of the Hong Kong agreement.

  23. As there is no inconsistency between the Hong Kong agreement and the Collective Agreement and as the evidence shows that the parties intended to incorporate the terms of the latter into the former, they can properly be read together as constituting the contract of employment governing the parties under Hong Kong law. I shall refer to these two documents in combination as “the Hong Kong contract”. Like the Philippine contract, the Hong Kong contract is clearly intended to function as a self-contained contract of employment. The Philippine and Hong Kong contracts make no reference to one another.

    D.2c  Inconsistencies between the Hong Kong and Philippine contracts

  24. It will be evident from the foregoing that fundamental inconsistencies exist between the two contracts. Thus, the appellant’s monthly wages under the Hong Kong contract are US$1,869 based on a 44 hour week, whereas monthly wages under the Philippine contract are US$1,383 based on a 48 hour week (in each case including overtime and leave pay). This is relevant to an ECO claim since the compensation payable is calculated on the basis of the employee’s monthly wages.

  25. While the Hong Kong contract does not require seafarers’ contracts of employment to be governed by Hong Kong law, it requires their terms to be no less favourable to the seafarer than under Hong Kong law – as noted in Section 2.Db of this Judgment. The Philippine scheme of compensation is clearly less favourable in at least two respects of immediate relevance.

    1. As we have seen ( Section 2.Da of this Judgment), pursuant to Section 20.B.6 of the Philippine contract, loss of his eye entitles the appellant to compensation in the sum of US$20,900. However, under the ECO which is applicable under the Hong Kong contract, compensation payable for such an injury to an employee of the appellant’s age is in the sum of US$67,284.[4]

    2. Secondly, by virtue of ECO section 26(1), the Hong Kong contract preserves the employee’s right to claim common law damages over and above any sums recovered under the ECO.[5]  In contrast, Section 20.G (set out in Section 2.Da of this Judgment) of the Philippine contract stipulates that payment of US$20,900 by way of compensation covers all claims arising from or related to the appellant’s employment both under Philippine law and the laws of any other country.

  26. And of course, the Hong Kong contract contains no arbitration agreement. In acknowledging the applicability of the ECO, it envisages that all ECO claims will be dealt with by the District Court.

    D.2d  Consequences of the inconsistency

  27. Given these inconsistencies, it is impossible to construct a contract of employment between the parties by lumping together the terms of the Hong Kong and Philippine contracts. The parties may at any one time have intended to contract on the terms of one or other of these free-standing agreements, but not both.

    D.3  The Philippine contract is not the employment contract

  28. Might it then be suggested that the contract of employment consisted of the Philippine, rather than the Hong Kong, contract so that the parties are bound by the arbitration agreement contained in Section 29?  In my view, the answer must be “No”.

  29. To ignore the Hong Kong contract in favour of the Philippine contract would be to impose on the appellant a scheme of compensation for work-related injuries extraneous to and less favourable than the ECO scheme. That would fall foul of ECO sections 29(1) and 31(1).  By section 29(1),[6] the ECO is compulsorily applicable to the crew of a Hong Kong ship (which the “RAINBOW JOY” is).[7]  And by section 31(1),[8] any contractual attempt to reduce or remove liability under the ECO on the employer’s part is rendered null and void. The Philippine contract could not be accepted by a Hong Kong court applying Hong Kong law as a valid basis for staying an ECO claim.

  30. This is reinforced by the fact that the Philippine contract does not meet the statutory requirements relating to crew agreements applicable to Hong Kong ships, as laid down by the MS(S)O. Thus, by MS(S)O section 80, such agreements have to be signed by or on behalf of the employer,[9] have to be in one document (subject to inapplicable exceptions)[28] and must contain provisions and be in a form approved by the statutory authority.[29]  The crew agreement must be kept on board “whenever the ship goes to sea” (MS(S)O s 80(4)) and the employer commits an offence if he is party to permitting a Hong Kong ship going to sea in contravention of the abovementioned requirements.[12]  These are provisions obviously aimed at ensuring that crew members are properly informed of their terms of employment and provided with the identity of the employer against whom such terms may have to be enforced.

  31. The Hong Kong agreement identifies the respondent and states that it is signed on its behalf, complying with MS(S)O s 80(1). The Philippine contract does not mention the employer but only its agent and sub-agent. The Hong Kong contract incorporates the terms of a collective agreement made and periodically renewed with three trade unions representing crews on Hong Kong ships, expressly refers to the MS(S)O and is in a printed form which reflects the statutory requirements. These are features which justify the inference that it is in a form and contains provisions having the statutory approval required by MS(S)O s 80(3).  There is no basis for suggesting that the Philippine contract has the approval of any Hong Kong authority, as opposed to the POEA in the Philippines.

  32. While the Hong Kong contract may properly be taken to be in one composite document comprising the Crew Agreement and List and incorporating the Collective Agreement, the Philippine contract is an entirely separate document. To regard the contract of employment as comprising the Philippine contract in addition to the Hong Kong contract is inconsistent with the “one document” requirement of MS(S)O section 80(2).

  33. Additionally, and perhaps more basically, the Philippine contract cannot be regarded as the operative contract of employment since the Hong Kong contract was made subsequently between the same parties on terms inconsistent with the Philippine contract. The parties must therefore be taken to have intended the Hong Kong contract to supersede the earlier contract.

    D.4  Reliance on Heyman v Darwins

  34. Mr Coleman endeavours to argue that the problem of inconsistency is solved by treating the less favourable terms of the Philippine contract as having been struck down as invalid by ECO section 31 but with the arbitration agreement contained in its Section 29 left intact and somehow carried forward to be given effect alongside the terms of the Hong Kong contract. He places reliance on a passage from Lord Macmillan’s speech in Heyman v Darwins, Ltd [1942] AC 356 at 373 (which was cited in the Court of Appeal’s judgment at §53) as follows:

    I venture to think that not enough attention has been directed to the true nature and function of an arbitration clause in a contract. It is quite distinct from the other clauses.  The other clauses set out the obligations which the parties undertake towards each other hinc inde, but the arbitration clause does not impose on one of the parties an obligation in favour of the other. It embodies the agreement of both parties that, if any dispute arises with regard to the obligations which the one party has undertaken to the other, such dispute shall be settled by a tribunal of their own constitution. And there is this very material difference, that whereas in an ordinary contract the obligations of the parties to each other cannot in general be specifically enforced and breach of them results only in damages, the arbitration clause can be specifically enforced by the machinery of the Arbitration Acts ....

    I am, accordingly of opinion that what is commonly called repudiation or total breach of a contract, whether acquiesced in by the other party or not, does not abrogate the contract, though it may relieve the injured party of the duty of further fulfilling the obligations which he has by the contract undertaken to the repudiating party. The contract is not put out of existence, though all further performance of the obligations undertaken by each party in favour of the other may cease. It survives for the purpose of measuring the claims arising out of the breach, and the arbitration clause survives for determining the mode of settlement. The purposes of the contract have failed, but the arbitration clause is not one of the purposes of the contract.

  35. This well-known authority deals with the effect of repudiation of a contract on the arbitration clause it contains. It was held that the court will give effect to a suitably worded arbitration agreement as providing the machinery for resolving disputes arising under that contract even where, in consequence of the repudiation, the parties have been relieved of further performance of their substantive obligations thereunder. Heyman v Darwins provides no support whatsoever for the notion that an arbitration agreement which existed as part of a separate and superseded agreement is capable of acquiring a life of its own and attaching itself to a later contract between the same parties where that subsequent contract makes no provision for arbitration. Indeed, Lord Macmillan himself expressly rejected any such suggestion (at 371):

    It is clear too, that the parties to a contract may agree to bring it to an end to all intents and purposes and to treat it as if it had never existed. In such a case, if there be an arbitration clause in the contract, it perishes with the contract. If the parties substitute a new contract for the contract which they have abrogated the arbitration clause in the abrogated contract cannot be invoked for the determination of questions under the new agreement. All this is more or less elementary.

    D.5  Would Philippine arbitrators apply the ECO?

  36. An argument accepted in both courts below is that, contrary to what I have stated in Section D.3 above, adoption of the Philippine contract involves no attempt at contracting out of the ECO and so gives rise to no difficulty involving ECO section 31. The contention is that Section 29’s reference to a collective agreement – interpreted to mean the Collective Agreement referred to above – has the effect of requiring any Philippine arbitrators to apply the ECO in their assessment of compensation under the Philippine contract.

  37. That suggestion is unsustainable. As noted above, the Philippine contract expressly applies Philippine law and provides its own scheme of compensation for work-related injuries. The argument finds no support in the wording of Section 29 (set out in Section D.1 above). That provision is an arbitration clause and is concerned with identifying the arbitral tribunal to which any dispute under the Philippine contract should be referred, depending on whether the parties are or are not covered by a collective bargaining agreement. It has nothing to do with the Collective Agreement and certainly says nothing about importing the ECO as the applicable scheme of compensation to displace the Philippine scheme in any Philippine arbitration.

    D.6  Ad hoc arbitration agreement

  38. At the hearing, Mr Coleman also endeavoured to argue that even if the arbitration agreement contained in Section 29 does not avail his client, a separate ad hoc arbitration agreement capable of founding the stay came into existence.

  39. Mr Coleman sought to argue that such an ad hoc agreement arose from the fact that the appellant had started an arbitration, coupled with the fact that the respondent has always been in favour of an arbitration in the Philippines. However, that is plainly insufficient. The Arbitration Ordinance ( Cap 341) (“AO”) requires an arbitration agreement to be in writing,[13] identifying several instances capable of constituting such an agreement in writing. [14]  The arbitration commenced by the appellant was abandoned before any written submissions were exchanged and there is no evidence of any exchange of written communications capable of constituting an ad hoc agreement.

    D.7  No arbitration agreement

  40. For the foregoing reasons, in my view, there was at the date of the accident no arbitration agreement in existence between the parties and therefore no basis for the stay ordered by the Court of Appeal.


  41. I turn next to the exclusive jurisdiction point: as a matter of law, does the court have the power, or indeed, is it bound, to stay an ECO claim in favour of arbitration where an operative arbitration agreement exists?

  42. For the purposes of this discussion, let it be assumed that an employee has entered into an otherwise valid arbitration agreement with his employer, worded so as to be apt to cover ECO claims, and that a stay of ECO proceedings in favour of Hong Kong arbitration is sought.

    E.1  Mandatory stays

  43. The grant of a stay would rest on the mandatory stay provisions of the AO. By its section 34C(1), the relevant provisions of the UNCITRAL Model Law (“UML”) are made applicable, and UML Article 8(1) provides:

    A court before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party so requests not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration unless it finds that the agreement is null and void, inoperative or incapable of being performed.

    This applies both to international and domestic arbitrations – AO s 6(1).

  44. However, it is clear that there is no overriding right to insist on arbitration. The AO makes it clear that the parties’ freedom to agree on how their dispute is to be resolved is “subject to the observance of such safeguards as are necessary in the public interest”.[15]  Furthermore, the UML[16] expressly recognizes that domestic laws may be enacted which exclude certain disputes from arbitration. It follows that the mandatory stay provisions of Article 8 are inoperative if some other law precludes their application to the dispute in question.

    E.2  Section 18A(1) of the ECO

  45. The appellant contends that this is precisely the effect of ECO section 18A(1) which is in the following terms:



    Except where otherwise provided under this Ordinance, all claims for compensation, except to the extent that such claims are determined –


    by agreement under section 8; or ....


    by a Certificate of Compensation Assessment for Fatal Case or Review Certificate of Compensation Assessment for Fatal Case; or 


    by a Certificate for Funeral and Medical Attendance Expenses or Review Certificate for Funeral and Medical Attendance Expenses; or 


    by certificate under section 16A; or 


    by agreement under section 16CA; ....

    and any matter arising out of proceedings in respect of such claims shall be determined by the District Court, whatever may be the amount involved, and the Court may, for that purpose, call upon any person to give evidence, if the Court is of the opinion that such person is, by virtue of his expert knowledge, able to assist the Court.

  46. The Court of Appeal rejected this argument. Sakhrani J construed section 18A(1) as providing that ECO claims “for whatever amount shall be determined by the District Court to the exclusion of all other courts, (emphasis supplied) the only exception being the Small Claims Tribunal as provided for in section 10(11) of the ECO”. He held that section 18A does not identify “exclusivity of jurisdiction by reference to anything other than judicial or court proceedings”: Judgment §§31 and 32. Thus, it was decided that a stay of ECO proceedings in favour of arbitration is not in principle excluded. Reference was made to ECO section 21 and Li Kwok Shing v Law Ka Fu [2003] 4 HKC 543 as showing that the District Court is armed with the procedural power to grant a stay.

    E.3  Construction of section 18A(1) 

  47. I am prepared to assume, without deciding, that if a stay of ECO proceedings is not precluded by section 18A(1), the District Court possesses the procedural power to grant such a stay. However, with respect, I am unable to accept the construction placed by the Court of Appeal on that section.

  48. It is, in the first place, unwarranted as a matter of language. On its face, section 18A(1) (subject to specified exceptions) covers all claims and gives the District Court exclusive jurisdiction. It provides that  “all claims for compensation .... and any matter arising out of proceedings in respect of such claims shall be determined by the District Court.”  To ensure comprehensive coverage, the District Court is expressly empowered to deal with ECO claims “whatever may be the amount involved”, that is, including claims exceeding the usual monetary limits to its civil jurisdiction (presently HK$1,000,000: District Court Ordinance Cap 336, s 32). The Court of Appeal’s construction requires this language to be cut down so that section 18A(1) is read, not as prescribing that the District Court shall determine “all claims”, but that the exclusivity of its jurisdiction extends only to “such claims as are made in judicial or court proceedings”. I do not see any justification for such a restrictive reading of the words. 

  49. The intention to confer exclusive jurisdiction on the District Court is reinforced by ECO section 21[17] which, in addressing the Court’s procedural powers, postulates that it is “empowered to determine all claims for compensation under this Ordinance whatever the amount involved”. These are general words covering all claims under the statute, leaving little room for distinguishing between the pursuit of such claims in an arbitral rather than a judicial tribunal.

  50. Secondly, section 18A(1) sets out a list of exceptions identifying categories of cases where ECO claims are not to be determined by the District Court. The Court of Appeal’s approach involves positing the existence of further exceptions – namely, claims determined by arbitration or by “anything other than judicial or court proceedings”. It is difficult to accept that the statutory intent is to let in such an open-ended series of exceptions given that the section takes the trouble of listing particular exceptions in detail.

  51. Thirdly, when one considers the subject-matter of the exceptions listed, the suggestion that section 18A(1) is concerned with establishing the District Court’s exclusive jurisdiction merely as against other judicial or court proceedings appears quite untenable.

    1. It is true that since section 18A(1) admits of exceptions by the words “otherwise provided under this Ordinance” and in so doing, it accommodates the jurisdiction given by the ECO in certain cases to the Small Claims Tribunal[18] and to the Court of First Instance and courts hearing appeals therefrom.[19]  To that extent, such exceptions do relate to the exercise of jurisdiction by other judicial organs. However, all the other exceptions listed in section 18A(1) address the determination of ECO claims by non-judicial means.

    2. Thus, the exception (ECO s 18A(1)(a)) involving agreements made under section 8 concerns the determination of claims for the cost of caring for severely incapacitated employees by the parties coming to an agreement which is approved by the Commissioner.

    3. The three classes of exception (ECO s 18A(1)(ab), (ac) and (b)) involving various Certificates all relate to ECO claims determined as a result of assessments made by the Commissioner (for instance, under ECO ss 6B, 6C, 6E and 16A).

    4. The exception (ECO s 18A(1)(c)) involving agreements made under section 16CA relates to minor temporary incapacity claims determined by agreement between the employer and employee, subject to cancellation by the Commissioner pursuant to section 16CB.

  52. The structure of section 18A(1) therefore involves the conferment of exclusive jurisdiction to determine ECO claims on the District Court while expressly carving out exceptions to that jurisdiction concerning specified ways of determining such claims by non-judicial processes. The carving out of such exceptions would plainly have been unnecessary if the jurisdiction conferred in the first place was intended to be exclusive only vis-à-vis claims in other judicial tribunals. The exclusive jurisdiction is therefore intended to be general and not confined in the manner suggested by the Court of Appeal. It extends to preclude stays in favour arbitration.

  53. Fourthly, reference to AO section 6(2) is instructive.[20]  It is clear that section 7 of the Labour Tribunal Ordinance[21] confers exclusive jurisdiction on the Labour Tribunal to deal with specified claims. However, AO section 6(2) creates an exception, giving the court a discretion to stay claims which fall within the Tribunal’s exclusive jurisdiction in favour of arbitration. Significantly, such exception was expressly created by statute. No parallel provision exists regarding arbitration of ECO claims falling within the exclusive jurisdiction of the District Court.

  54. Finally, policy considerations militate strongly against a construction of section 18A(1) which permits ECO claims to be stayed in favour of arbitration.

    1. The ECO’s policy is self-evidently to provide a framework of legal protection for injured and incapacitated employees, operated by the Commissioner for Labour and the District Court. To this end, it restricts freedom of contract, for example, by requiring certain settlement agreements to be approved by the Commissioner and (by section 31) nullifying any contractual attempts to extinguish or reduce the employer’s ECO liabilities. That policy favours a construction of section 18A(1) which restricts the parties’ freedom to contract in favour of arbitration with a view to preventing the employee being thereby removed from the protective framework. Such a restriction, imposed in the public interest, is expressly accommodated by the AO – see AO s 2AA(2)(a) set out in Section E.1 above.

    2. Secondly, as was pointed out in LKK Trans Limited v Wong Hoi Chung (2006) 9 HKCFAR 103 at §36, the ECO establishes a no-fault, insurance-based scheme aimed at giving quick financial relief to employees incapacitated by work-related injury. Legal aid and supplementary legal aid is available for such claims – Legal Aid Ordinance, Cap 91, ss 5 and 5A. Permitting ECO claims to be interrupted by stay applications in favour of non-legally aided arbitrations is not conducive to the objectives of the statutory scheme. It is difficult in any event to see any practical benefits in an arbitration stay. There is no reason to think that arbitrators would be in any way better equipped to deal with claims. On the contrary, the District Court has relevant experience and expertise in depth. Certainly, without legal aid, the employee is likely to be disadvantaged in conducting an arbitration. And in a case like the present, where the arbitration agreement refers the dispute to a foreign arbitral tribunal, even if (which is not the case here) that tribunal should be amenable to applying the ECO, it would be ill-equipped to give effect to its provisions in the light of the relevant case-law. A foreign arbitral tribunal is in practice far more likely to apply the law of its own jurisdiction, which may or may not be as favourable to the employee.

  55. It follows, in my view, that on its true construction, section 18A(1) confers exclusive jurisdiction on the District Court to deal with all ECO claims save in the cases expressly excepted. Arbitration is not such an exception and there is no power to stay ECO proceedings in favour of arbitration.


  56. I am accordingly of the view that both the arbitration agreement and the exclusive jurisdiction points must be decided in the appellant’s favour. I would therefore allow the appeal and make an order nisi for the respondent to pay the appellant’s costs here and below. I would direct that such order should become absolute within 14 days of the date of this judgment unless submissions in writing on the question of costs are lodged by the respondent before that date. In such event, the appellant is to be at liberty to lodge reply submissions within 14 days thereafter.

    Justice Mortimer NPJ

  57. I agree with the judgment of Mr Justice Ribeiro PJ.

    Justice Gault NPJ

  58. I agree with the judgment of Mr Justice Ribeiro PJ.

    Justice Bokhary PJ

  59. The Court unanimously allows the appeal and makes an order nisi as to costs in the terms set out in the final paragraph of Mr Justice Ribeiro PJ’s judgment.

[1] Section 31:

Any unresolved dispute, claim or grievance arising out of or in connection with this Contract, including the annexes thereof, shall be governed by the laws of the Republic of the Philippines, international conventions, treaties and covenants where the Philippines is a signatory.

[2] Section 20.B.6:

The liabilities of the employer when the seafarer suffers work-related injury or illness during the term of his contract are as follows: ....


In case of permanent total or partial disability of the Seafarer caused by either injury or illness the seafarer shall be compensated in accordance with the Schedule of benefits enumerated in Section 32 of this Contract.

[3] Section 20.G:

The seafarer .... acknowledges that payment for injury, illness, incapacity, disability or death of the seafarer under this contract shall cover all claims arising from or in relation with or in the course of the seafarer’s employment including but not limited to damages arising from the contract, tort, fault or negligence under the laws of the Philippines or any other country.

[4] The combined effect of ECO s 7(1)(b) and the First Schedule, para 38 is to provide for compensation representing 50% of 72 months’ wages (72 x US$1,869 x 50% = US$67,284).

[5] ECO s 26(1):

Where any injury is caused to an employee by the negligence, breach of statutory duty or other wrongful act or omission of the employer, or of any person for whose act or default the employer is responsible, nothing in this Ordinance shall limit or in any way affect any civil liability of the employer independently of this Ordinance:  Provided that any damages awarded against an employer in an action at common law or under any enactment in respect of any such negligence, breach of statutory duty, wrongful act or omission, shall be reduced by the value, as decided by the Court of First Instance or the District Court, as the case may be, of any compensation which has been paid or is payable under the provisions of this Ordinance in respect of the injury sustained by the employee.

[6] ECO s 29(1):


This Ordinance shall apply to masters and seafarers who are employees within the meaning of this Ordinance and are members of the crew of a Hong Kong ship, subject to the [presently immaterial] modifications ....

[7] ECO s 29(4):

In this section – “Hong Kong ship” includes any ship or vessel registered or licensed in Hong Kong ....

[8] ECO s 31(1):


Any contract or agreement ..., whereby an employee relinquishes any right to compensation from an employer for personal injury by accident arising out of and in the course of his employment, shall, subject to subsection (2) [not presently material], be null and void in so far as it purports to remove or reduce the liability of any person to pay compensation under the provisions of this Ordinance.

[9] MS(S)O s 80(1):

..., an agreement in writing shall be made between each seafarer employed in a Hong Kong ship and his employer and shall be signed both by the seafarer and by or on behalf of his employer: ....

[10] MS(S)O s 80(2):

The agreements made under this section with the seafarers employed in a ship shall be contained in one document (to be known as a “crew agreement”) except that in such cases as the Superintendent approves –


the agreements to be made under this section with the seafarers employed in a ship may be contained in more than one crew agreement; and


one crew agreement may relate to more than one ship.

[11] MS(S)O s 80(3):

The provisions and form of a crew agreement shall be of a kind approved by the Superintendent, and different provisions and forms may be so approved for different circumstances.

[12] MS(S)O s 80(8):

Where a ship goes to sea or attempts to go to sea in contravention of a requirement of this section, the master of the ship, and also the employer or agent of the employer, if such employer or agent is party or privy to the offence, commits an offence and is liable on conviction to a fine at level 3 and to imprisonment for 6 months and the ship, if within the waters of Hong Kong, may be detained by the Authority.

[13] AO s 2AC(1):

An agreement is not an arbitration agreement for the purposes of this Ordinance unless it is in writing.

[14] AO s 2AC(2):

An agreement is in writing for the purposes of subsection (1) if –


the agreement is in a document, whether signed by the parties or not; or


the agreement is made by an exchange of written communications; or


although the agreement is not itself in writing, there is evidence in writing of the agreement; or


the parties to the agreement agree otherwise than in writing by referring to terms that are in writing; or


the agreement, although made otherwise than in writing, is recorded by one of the parties to the agreement, or by a third party, with the authority of each of the parties to the agreement; or


there is an exchange of written submissions in arbitral or legal proceedings in which the existence of an agreement otherwise than in writing is alleged by one party against another party and is not denied by the other party in response to the allegation.

[15] AO s 2AA(2)(a):

This Ordinance is based on the principles that – subject to the observance of such safeguards as are necessary in the public interest, the parties to a dispute should be free to agree how the dispute should be resolved; ....

[16] UML Art 1(5):

This Law shall not affect any other law of this State by virtue of which certain disputes may not be submitted to arbitration ....

[17] Save as is provided in this Ordinance and any rules made thereunder, the District Court shall, upon or in connection with any question to be investigated or determined thereunder, have all the powers and jurisdictions exercisable by the District Court in or in connection with civil actions in such Court in like manner as if the Court had by the District Court Ordinance (Cap 336) been empowered to determine all claims for compensation under this Ordinance whatever the amount involved and the law, rules and practice relating to such civil actions and to the enforcement of judgments and orders of the Court shall mutatis mutandis apply.

[18] Under ECO ss 10(11), 10A(7), relating to small amounts of compensation and expenses.

[19] ECO s 26(2):  in the particular case of a common law action being held to fail in, or on appeal from, the Court of First Instance.

[20] AO s 6(2):

Subject to subsection (3) [which is not presently material], if a party to an arbitration agreement that provides for the arbitration of a dispute involving a claim or other matter that is within the jurisdiction of the Labour Tribunal .... commences legal proceedings in any court against any other party to the agreement .... in respect of any matter agreed to be referred, and any party to those legal proceedings applies to that court after appearance and before delivering any pleadings or taking any other step in the proceedings, to stay the proceedings, the court or a judge of that court may make an order staying the proceedings, if satisfied that –


there is no sufficient reason why the matter should not be referred in accordance with the agreement; and


the applicant was ready and willing at the time the proceedings were commenced to do all things necessary for the proper conduct of the arbitration, and remains so.

[21] Cap 25. Section 7:


The tribunal shall have jurisdiction to inquire into, hear and determine the claims specified in the Schedule.


Save as is provided in this Ordinance, no claim within the jurisdiction of the tribunal shall be actionable in any court in Hong Kong.


Flywin Co Ltd v Strong & Associates (2002) 5 HKCFAR 356

Mariner International Hotels Ltd v Atlas Ltd (2007) 10 HKCFAR 1

Bahamas International Trust Co Ltd v Threadgold [1974] 1 WLR 1514

Heyman v Darwins, Ltd [1942] AC 356

Li Kwok Shing v Law Ka Fu [2003] 4 HKC 543

LKK Trans Limited v Wong Hoi Chung (2006) 9 HKCFAR 103


Merchant Shipping (Seafarers) Ordinance (Cap 478): s.80

Arbitration Ordinance ( Cap 341): s.2AA, s.2AC, s.6

UNCITRAL Model Law: Art.1, Art.8

Employees’ Compensation Ordinance: s.6B, s.6C, s.6E, s.10, s.10A, s.15, s.16A, s.16CB, s.18A, s.26, s.29, s.31


Peter Duncan SC & Monica Chow (instructed by Messrs Ng and Partners and assigned by the Legal Aid Department) for the Appellant

Russell Coleman SC (instructed by Messrs DLA Piper Hong Kong) for the Respondent

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