Hong Kong Court of First Instance rejects challenge to presiding arbitrator's impartiality

In CNG v G & Ors, the Hong Kong Court of First Instance dismissed a party's challenge to remove the presiding arbitrator in an HKIAC arbitration based on doubts as to his impartiality. The decision reflects the difficulties in bringing a successful challenge to an arbitrator's conduct and emphasises the importance of making such challenges promptly to avoid waiving the right to an impartial tribunal.

Background

In November 2020, the claimants commenced the arbitration against CNG, the respondent. The Tribunal issued four partial awards with continued resistance from CNG to comply with those awards and multiple failed attempts to set them aside in court.  

CNG applied to seek to remove the presiding arbitrator on the ground of doubts as to his impartiality. 

CNG first made the challenge to the HKIAC (pursuant to the HKIAC Rules) under Article 12 of the Model Law (given effect by section 25 of the Arbitration Ordinance (Cap 609) ("Arbitration Ordinance")) on 10 July 2024, requesting that the arbitrator should resign or, alternatively, that the HKIAC remove the arbitrator and appoint a replacement arbitrator to conclude the arbitration. 

On 2 October 2024, the HKIAC dismissed the challenge as it was not satisfied that the grounds under section 25 of the Arbitration Ordinance had been made out. The HKIAC also held that any challenge concerning the arbitrator's conduct before 25 June 2024 had been waived under Article 32.1 of the HKIAC Rules, as the challenge was made outside the 15 days specified in Article 11.7 of the HKIAC Rules (being the time period within which any party aware of the relevant circumstances should serve notice of its challenge).

Subsequently, CNG requested the Hong Kong Court of First Instance under Article 13(3) of the Model Law to decide on its challenge and raised two issues:

(a)  whether CNG had waived its rights to bring a challenge by virtue of delay in respect of the arbitrator's conduct before 25 June 2024, and

(b)  in respect of the arbitrator's conduct on or after 25 June 2024, whether that gave rise to justifiable doubts.

Decision

The Court referred to the following legal principles applicable to challenging an arbitrator:

• Article 12 of the Model Law which states that an arbitrator may be challenged "only if" circumstances exist that give rise to justifiable doubts as to his impartiality or independence.  

• The test for apparent bias is applicable to a challenge made under section 25 of the Arbitration Ordinance, being whether “an objective fair-minded and informed observer, having considered the relevant facts, would conclude that there was a real possibility that the tribunal was biased”.

Regarding waiver, the Court reiterated that a party's right to object to an arbitrator based on justifiable doubts and their right to an impartial tribunal can be waived.  To avoid this risk, a party should act promptly if it seeks to allege that there has been any breach of the rules of natural justice. A failure or delay in doing so can result in the party being estopped from relying on such matter as an objection at a later stage.

The Court found that "there has been voluntary, informed and unequivocal waiver of the incidents said to comprise the [arbitrator's] lack of impartiality or bias before 25 June 2024" as, even on CNG's own case, the arbitrator's conduct had allegedly persisted throughout the arbitration including hearings in April and May 2024. Further, CNG had made assertions of their perception of the arbitrator's hostility as early as April 2023, but it only sought to challenge the arbitrator's impartiality on 10 July 2024. 

On the issue of whether justifiable doubts had arisen, the Court only considered the events of the hearing on 25 June 2024 for the purposes of the challenge, namely that:

1. the arbitrator had fallen asleep or was inattentive at the hearing, and
2. the arbitrator had treated CNG and its legal representatives with overt hostility and had prejudged matters relevant to CNG's position. 

On the allegation of inattentiveness, the Court held that a fair minded and informed observer would not have inferred a real possibility of bias by the arbitrator based on CNG's allegation (even if it was true) that he had fallen asleep for intermittent periods of 15 minutes during a 2-day hearing. 

In reaching its conclusion, the Court relied on the following reasons:

• the sleeping episodes did not give rise to "any meaningful period of lack of attention" by the arbitrator,
• CNG's lawyers present at the hearing did not raise any immediate objection to the arbitrator having fallen asleep, which suggested that they did not regard the arbitrator's inattention to have had a material impact on the possible outcome of the application,
• the arbitrator is experienced in arbitrations and was appointed jointly by the co-arbitrators, and it could be assumed that a professional arbitrator would by training and experience practise impartiality, and
• the fact the arbitrator had fallen asleep cannot by itself mean that he was partial and had shut his mind to CNG's case.

On the issue of hostility, the Court found that the comments made by the arbitrator did not give rise to any reasonable perception by a fair-minded and informed observer that there was a real risk or possibility that the arbitrator was biased or had prejudged the issues against CNG. 

The Court found that in most cases the arbitrator was expressing preliminary views on CNG's case, and that his comments on CNG's conduct during the proceedings and its subsequent failure to comply with the awards made against it were justified. 

The Court considered that there is nothing wrong with an arbitrator expressing his preliminary views on the case, and that it could only "indicate bias if they are stated in terms which suggest that the judge has already reached a final decision before hearing all the evidence and arguments".

Comment

This decision serves as an important reminder for parties seeking to challenge an arbitrators' impartiality to object to any perceived irregularities as soon as they become aware of them, to not risk waiving their rights.

The decision also demonstrates the high threshold required to challenge arbitrators on grounds based on justifiable doubts. The expression by an arbitrator of his or her preliminary views on a party's case would not amount to justifiable doubts and it would require more than robust or even critical comments by an arbitrator to satisfy the relevant test.