When one party challenges an arbitral award on grounds of inability to present its’ case, and the other party applies for security; how should the Court decide?

In COB v FCD [2026] HKCFI 4162, the Honourable Madam Justice Mimmie Chan (“Chan J“) considered whether a party challenging the enforcement of an arbitral award should be required to provide security pending determination of the setting-aside application.

• The Respondent in the arbitral proceeding (the “Defendant“) alleged that it had been unable to present its case because the Arbitrator had developed a grudge or bias against its quantum expert (“D’s Expert“).
• The Defendant relied on a specific incident of the Arbitrator conducting his own research on an issue, which took D’s Expert by surprise, and refusing to allow additional expert evidence.
• Chan J confirmed that actual bias has a high threshold and emphasised the Arbitrator’s duty to evaluate competing expert evidence.
• Furthermore, an Arbitrator’s case-management and time-management powers include entitlement to refuse a further round of expert evidence.
• The Court found that since the setting-aside application was clearly without merit, it would be contrary to procedural economy to delay enforcement.
• The Court, therefore, ordered the Defendant to pay 70% of the principal sum awarded as security.

Background

 The underlying dispute arose from a construction contract (“Contract“). The Defendant was the developer, and the Claimant in the arbitral proceeding (the “Plaintiff“) was the main contractor. In an HKIAC arbitration, the Plaintiff claimed payment of sums certified as outstanding under the Contract. The Defendant advanced, among other matters, a claim for the costs allegedly required to remedy defects in the works (“Defect Costs“), which were relevant to the Defendant’s defence of set-off.

The final award (“Award“) was issued on 9 March 2026, which ordered the Defendant to pay the Plaintiff the principal amount outstanding under the Contract. On 17 March 2026, the Court granted leave to the Plaintiff to enforce the Award (“Enforcement Order“).

On 2 April 2026, the Defendant then applied to set aside the Enforcement Order, complaining of the conduct of the arbitration, and in particular, the treatment of D’s Expert and his evidence.

The Plaintiff subsequently applied for security under Order 73 rule 10A. The security application was heard on 17 July 2026. The substantive setting-aside application had been listed for hearing on 5 August 2026. The Court therefore had to decide whether the Defendant should provide security as a condition of pursuing the challenge.

The Defendant’s Allegations

The Defendant’s case primarily focused on D’s Expert’s evidence on Defect Costs. The Defendant alleged that, on the first day of the arbitration, the Plaintiff had launched a “scathing and unwarranted attack” on D’s Expert’s report. The Plaintiff’s complaint was that D’s Expert report had not grouped the assessments by trades in accordance with the Arbitrator’s directions. The Defendant contended that the attack included “blunt and inaccurate, if not misleading, assertions”.

The Defendant claimed that as a result, the Arbitrator had “egregiously developed a grudge and/or bias” against D’s Expert. The Defendant relied on the Arbitrator’s criticisms of D’s Expert for failing to update his report in light of the latest evidence and for deciding not to produce a supplemental report despite the Arbitrator’s direction. The Defendant alleged that the Arbitrator’s conduct during D’s Expert’s cross-examination demonstrated that the Arbitrator had already decided to reject D’s Expert’s evidence and to assess the Defect Costs at zero.

The Defendant relied on a particular incident when during D’s Expert’s cross-examination, the Arbitrator conducted his own research on the cost of a waste disposal machine. The Defendant argued that D’s Expert had been taken by surprise and had been unable to consider or answer the Arbitrator’s questions fairly.

The Defendant also argued that D’s Expert had prepared his final report on a misunderstanding of what the Arbitrator required. Once the Arbitrator realised this, the Defendant posited that D’s Expert should have been allowed to submit a further report or additional evidence. The failure to provide that opportunity was said to have deprived the Defendant of a reasonable opportunity to present its case.

Approach to Granting Security

 Chan J applied the principles from Soleh Boneh International Ltd v Government of the Republic of Uganda [1993] 2 Lloyd’s Rep 208 and the Hong Kong decision of L v B HCCT 41/2015, 5 May 2026. Two considerations were central.

First, the Court should undertake a brief consideration of the apparent strength of the challenge to the award. If the award appeared manifestly invalid, an adjournment and no order for security might be appropriate. If it appeared manifestly valid, the Court should either permit immediate enforcement or order substantial security. Cases falling between those two extremes would require an assessment of the plausibility of the challenge.

Second, the Court should consider whether enforcement would become more difficult if it were delayed, for example, for reasons of movement or dissipation of assets.

The Defendant relied on Czech Republic v Diag Human SE [2024] 1 WLR 3593, arguing that the second consideration was generally more important and that the merits of a challenge should not be examined in detail. Chan J rejected that argument. She explained that the observations in Czech Republic were intended to discourage an overly detailed examination of the merits at the security stage, not to make the merits irrelevant. Where a challenge was clearly without merit, there was nothing in that decision preventing the Court from ordering security.

 The Judge’s Reasoning

 Chan J began by addressing the allegations of actual and apparent bias. Actual bias has a high threshold; it requires proof that the decision-maker was influenced by partiality or prejudice and was actually prejudiced against a party or its case. The Court also applied the apparent-bias test from Jung Science Information Technology Co Ltd v ZTE Corporation [2008] 4 HKLRD 776 and Porter v Magill [2002] 2 AC 357: whether a fair-minded and informed observer, having considered the relevant facts, would conclude that there was a real possibility of bias.

Chan J found no factual basis for the allegation that the Arbitrator had developed a personal “grudge” against D’s Expert. The adversarial nature of the Plaintiff’s cross-examination could not reasonably be treated as a cause of bias. Parties and their legal representatives are entitled to put their cases vigorously, and experienced arbitrators are accustomed to robust cross-examination and technical challenges.

Chan J emphasised that the Arbitrator had a duty to evaluate the competing expert evidence. That necessarily involved testing D’s Expert’s methodology, assumptions, valuations and conclusions. The Arbitrator was not required to accept D’s Expert’s opinion as if the expert witness had carte blanche over the expert report. If the Arbitrator had concerns about the reliability of the evidence, it was appropriate for him to raise them during the hearing rather than leave them unanswered until the Award.

Chan J also rejected the complaint concerning the Arbitrator’s internet research into the cost of the waste disposal machine. D’s Expert had been given an opportunity to answer the questions and justify his valuation. The Arbitrator had also allowed counsel to address him on the issue. Objectively, the questions were not oppressive, harsh, scathing or unfair.

The alleged differential treatment of the parties’ respective experts was likewise unsupported. Chan J noted that the Arbitrator had questioned the Plaintiff’s expert about her valuation methodology, payment records, actual costs and quotations. The Defendant’s legal team had also attacked the Plaintiff’s expert evidence in submissions, referring to inconsistencies, unsupported assumptions and methodological weaknesses. It could not therefore be shown that D’s Expert had been treated differently because of prejudice.

The Court further held that the Arbitrator was entitled to refuse a further round of expert evidence. The tribunal is the master of its own proceedings, and there must eventually be an end to the filing of evidence. Whether D’s Expert had misunderstood an earlier direction, and whether further reports should be permitted, were matters falling within the Arbitrator’s case-management and time-management powers. The decision to reject D’s Expert’s evidence rather than reopen the evidential process did not demonstrate an improper exercise of discretion.

The Decision

The Court concluded that the Defendant had failed to establish either actual or apparent bias. The Defendant had also failed to show that it was unable to present its case. The Defendant’s legal team had a full opportunity to address all issues, including quantum. Since the allegations of bias and inability to defend were rejected, the associated public-policy argument also failed. Chan J found no serious or egregious breach of due process and nothing that would “shock the Court’s conscience”.

The Court found that the setting-aside application was clearly without merit even on a preliminary review and considered it contrary to procedural economy to delay enforcement. The Defendant was ordered to pay 70% of the principal sum under the Award into Court. If the Defendant failed to do so, the setting-aside application would be dismissed, costs would be awarded on an indemnity basis, and judgment would be entered on the Award pursuant to the Enforcement Order.

The Plaintiff was also granted costs of the security application on an indemnity basis. The decision illustrates that allegations of unfair treatment will not, without more, establish arbitral bias or an inability to present a case. It also confirms that, where a challenge appears manifestly weak, the Court may protect the award creditor by requiring substantial security rather than allowing the challenge to delay enforcement.