Hong Kong court rejects challenge to arbitrators for apparent bias

The Hong Kong Court of First Instance has dismissed an application for the removal of arbitrators in an UNCITRAL arbitration administered by the HKIAC (P v. D [2024] HKCFI 1132).

The party advancing the challenge contended that various procedural decisions and comments made by the tribunal demonstrated apparent bias.  These included: the tribunal's refusal to hold an oral hearing on an evidential application; allegations that the challenging party had been deprived of an opportunity to present its case on, and had been treated unequally in relation to, various procedural matters; criticisms by the tribunal of the challenging party’s conduct; and an alleged attack "by insinuation" on the challenging party's lawyers.

The challenge was initially made to the HKIAC (as required by the applicable rules) against all three arbitrators, including the challenging party's appointee (a senior counsel), who resigned before the HKIAC issued a decision rejecting the challenge.  The challenging party then applied to the court for an order removing the presiding arbitrator (who had been appointed by the HKIAC) and the other party's appointee, who were described by the court as "arbitrators of standing and experience".

In dismissing the challenge, the court held that: (i) the need for an oral hearing on procedural matters was "not without controversy" and there were "respectable arguments" in support of the decision taken by the tribunal; (ii) other relevant decisions were legitimate exercises of the tribunal’s procedural discretion; (iii) the tribunal's criticisms of the challenging party's conduct had been factual and fair; and (iv) the complaint of an attack "by insinuation" on the challenging party's lawyers was not made out.  An objective fair-minded and informed observer (the classic "fictitious bystander") therefore would not consider there to be a real possibility of bias, applying the test for apparent bias set out in Jung Science Information Technology Co Ltd v. ZTE Corporation [2008] 4 HKLRD 776.

In assessing an arbitrator challenge from the perspective of the fictitious bystander, the courts can be expected (amongst other things): (i) to take account of the fact that arbitrators may sometimes say or do things they might later regret, without necessarily disqualifying themselves from continuing to exercise their powers; (ii) not to reach a hasty conclusion based on the appearance evoked by an isolated episode of temper or remarks to the parties or their representatives, which was taken out of context; and (iii) to be neither complacent nor unduly sensitive or suspicious in assessing the conduct of arbitrators (although points (i) and (ii) do not appear to have been directly applicable in the present case).

The decision also provides helpful guidance on the scope of the arguments which can be advanced in challenges to arbitrators before the Hong Kong courts.  Such applications are permitted only if an unsuccessful challenge has already been determined (i) under the procedures agreed by the parties or (ii) by the tribunal, in the absence of such procedures (Article 13(3) of the UNCITRAL Model Law, given effect by section 26 of the Hong Kong Arbitration Ordinance).  Against that backdrop, should the challenging party be confined to the arguments advanced in the original challenge, or can it advance new grounds of challenge before the court (as contended by the challenging party in this case)?

The court held that Article 13(3) of the UNCITRAL Model Law required it, in its supervisory role, to decide afresh on an unsuccessful challenge previously determined.  It was quite plain that, if the challenging party were allowed to rely on additional grounds, the challenge before the court would no longer be the unsuccessful challenge previously determined.  Accordingly, the court rejected an attempt by the challenging party to introduce at least two serious new grounds (including an allegation that the tribunal had prejudged its fraud defence) which had not been argued in the original application to the HKIAC.  The court also indicated its provisional view that the additional grounds "[did] not come close to showing apparent bias” in any event.