Engaging English consumer law to challenge the enforcement of arbitral awards

A recent English Commercial Court judgment provides clarification on the circumstances in which consumer law can be engaged to prevent enforcement of an arbitration award on public policy grounds pursuant to s103(3) of the Arbitration Act 1996. In Eternity Sky Investments Ltd v Zhang [2023] EWHC 1964 (Comm) the Court refused a consumer’s application to set aside an order enforcing a New York Convention arbitration award. The consumer had alleged that the Consumer Rights Act 2015 (CRA 2015) applied, and enforcement of the award would infringe the losing party’s rights under the Act.


The consumer, Mrs Zhang, had signed a guarantee (the “Personal Guarantee”) in favour of the claimant, Eternity Sky, in relation to a bond issue. Chong Sing, the company issuing the bonds, failed to redeem the bonds and therefore defaulted under the underlying Subscription Agreement. Eternity Sky sought payment of the outstanding amounts due under the Subscription Agreement from Mrs Zhang. An arbitration seated in Hong Kong resulted in a New York Convention arbitration award ordering Mrs Zhang to pay Eternity Sky the sum of HK$ 500,000,000, plus interest and costs. Eternity Sky subsequently applied for and obtained an enforcement order from the English Court pursuant to s101 of the Arbitration Act 1996.

Mrs Zhang applied for the order to be set aside, alleging that the public policy exception under s103(3) of the Arbitration Act 1996 applied as she was a consumer, resident in the UK and enforcement would infringe her rights under the CRA 2015.


To determine whether enforcement of the award was contrary to public policy, such that it should not be enforced, the Commercial Court had to consider whether the CRA 2015 applied. This required analysis of whether Mrs Zhang was a consumer for the purposes of the CRA 2015 and whether the Personal Guarantee had a close connection with the UK.

The Court ultimately held that the CRA 2015 did not apply, as while Mrs Zhang could be considered a consumer for these purposes, the Personal Guarantee did not have a close connection to the UK. The Court also considered whether the terms of the Personal Guarantee were unfair and went on to hold that the terms were fair.

Was Mrs Zhang a consumer?

The Court applied the test for whether a guarantor providing a personal guarantee in support of a company is a “consumer” from Tarcău Banca Comerciala Intesa Sanpaolo Romania SA (Case C-74/14), which is:

“… whether that person acted for purposes relating to his trade, business or profession or because of functional links he has with that company, such as a directorship or a non-negligible shareholding, or whether he acted for purposes of a private nature.”

The Court accepted Mrs Zhang’s case that she was a consumer within the meaning of the CRA 2015 and rejected Eternity Sky’s case that she had entered into the Personal Guarantee because of a functional link with Chong Sing. It found that Mrs Zhang’s shareholding, which amounted to 0.4% of Chong Sing, is not one which constitutes or can give rise to a functional link.

Was there a close connection between the Personal Guarantee and the UK?

In considering whether the Personal Guarantee had a close connection with the UK the Court had regard to s74(1) of the CRA which deals with choice of law clauses, as follows:

“(1)  If—

 (a)  the law of a country or territory other than an EEA State is chosen by the parties to be applicable to a consumer contract, but

(b)  the consumer contract has a close connection with the United Kingdom,

this Part applies despite that choice.”

The Court confirmed that where a “close connection” with the UK is satisfied, the CRA 2015 applies as well as the applicable law (Hong Kong) and the Personal Guarantee’s terms as a whole would fall to be assessed under the CRA 2015.

The Court held that while Mrs Zhang’s residence in London is a connection between the Personal Guarantee and the UK, the Personal Guarantee was much more closely connected to Hong Kong – where the transaction was centred, devised and regulated, and where performance by Mrs Zhang would take place (i.e., payment to Eternity Sky). Although the Personal Guarantee was connected to the UK, it was not a “close” connection within the meaning of s74(1) of the CRA 2015 and the CRA 2015 did not therefore apply.

Was the Personal Guarantee unfair?

The Court found that even if there had been a close connection with the UK (and the CRA 2015 applied), the terms of the Personal Guarantee (including the term providing for Hong Kong choice of law and arbitration) were not unfair within the meaning of the CRA 2015 (ss62 and 64).


This judgment follows closely behind the judgment of the same judge (Mr Justice Bright) in Payward Inc. v Chechetkin [2023] EWHC 1780 (Comm), which involved some similar points. Each case examined a contract with a choice of law and arbitration clause and in each case the losing party at arbitration sought to set aside enforcement of the arbitration award on grounds that enforcement would be contrary to public policy because the CRA 2015 applies, and the underlying contract terms are unfair. The two cases provide helpful guidance as examples of when the Court will (and will not) enforce arbitration awards on these grounds.

In Payward, which was the subject of an earlier Perspective, the Court found that the arbitrator’s failure to apply the CRA 2015 caused unfairness to Mr Chechetkin. This was principally as the contractual choice of law clause in that case (together with the requirement to arbitrate in San Francisco) deprived Mr Chechetkin of the right which he would have had under English law to bring a claim under the Financial Services and Markets Act 2000. The Court in Payward found that the arbitrator had therefore failed to assess the substantive fairness of Payward’s terms under s62 of the CRA 2015 and if she had, would have rejected them as substantively unfair. Further, the failure to apply the CRA 2015 made real differences as excluding the claim Mr Chechetkin would have had under English law under the Financial Services and Markets Act 2000 could have resulted in Mr Chechetkin winning against Payward, rather than losing.

In differentiating Payward from Mrs Zhang’s case (where the CRA 2015 was not engaged and the underlying terms were not deemed to be unfair) the judge explained that when deciding whether a choice of law clause is unfair it is necessary to consider whether it gave rise to a significant imbalance, which means an imbalance that would not otherwise exist. He explained that it is necessary to consider whether the application of the contractual choice of law has actually made a difference when considering if it constitutes an unfair term.

If the CRA 2015 applies, enforceability of an award therefore depends on whether the terms of the underlying contract are unfair, such that they would have made a difference to the outcome of the arbitration. In other words, this ground to challenge an arbitration award only crystalises if the outcome of the arbitration would have been different if the protections of the CRA 2015 had been applied.

This decision is an important further clarification of the circumstances in which the English courts will block enforcement of awards in the context of consumer contracts. It has long been clear that the English courts will not readily block enforcement of arbitral awards.  However, where the withholding of the CRA 2015 protections results in unfairness to the consumer, the English courts will be prepared to refuse enforcement of the award. This is evident from the reasoning of this case (albeit that there was found to be no unfairness here) and in the consumer-friendly decisions both in Payward and in the earlier similar case of Soleymani v Nifty Gateway LLC, which was covered in our earlier Perspective here.