COB v FCD (Arbitration: Secuity for Costs) [2026] 4 HKLRD 124, [2026] HKCFI 4162 (Belinda Law)

Belinda Law represented the defendant in COB v FCD (Arbitration: Secuity for Costs) [2026] 4 HKLRD 124; [2026] HKCFI 4162.

P was granted leave to enforce a final award (the Award) made by an Arbitrator in an HKIAC arbitration, for the outstanding payment under a construction contract. D applied to set aside the enforcement order, alleging that: (i) it was unable to present its case in the arbitration, such that there was a lack of due process, structural integrity issues, serious irregularity and breach of natural justice; and (ii) the enforcement of the Award would be contrary to public policy by reason of the alleged lack of due process. Specifically, D alleged that P had “launched a scathing and unwarranted attack” on the report of D’s quantum expert, H, and on such basis the Arbitrator had “egregiously developed a grudge and/or bias” against H, rendering D and H unable to present their evidence properly. P applied for security for costs in respect of D’s setting aside application.

Held, ordering that (i) D pay into court 70% of the principal sum under the Award as security, failing which the setting aside application shall be dismissed with costs on an indemnity basis; and (ii) costs of the security application to be paid to P on an indemnity basis, that:

Legal principles on security and bias

• The factors to be considered in an application for security for costs in connection with an application to set aside an enforcement order for an arbitral award included: (i) the strength of the argument that the award was invalid, as perceived on a brief consideration by the court pending setting aside proceedings; and (ii) the ease or difficulty of enforcement of the award, and whether it would be rendered more difficult if enforcement was delayed. D’s contention that the first factor was less important than the second was rejected. Where the award was manifestly valid, there should be an order for immediate enforcement or for substantial security (Soleh Boneh International Ltd v Government of the Republic of Uganda [1993] 2 Lloyd’s Rep 208, L v B [2016] 4 HKC 254 applied; Czech Republic v Diag Human SE [2024] 1 WLR 3593 explained). (See paras.12–16.)
• Actual bias referred to a decision maker being influenced by partiality or prejudice. Proving actual bias was very difficult, and the shortage of relevant cases reflected the fact that it was very rare, and largely redundant given the ground of apparent bias. The test for apparent bias was 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 (Locabail (UK) Ltd v Bayfield Properties Ltd [2000] QB 451, Flaherty v National Greyhound Racing Club Ltd [2005] EWCA Civ 1117, Jung Science Information Technology Co Ltd v ZTE Corp [2008] 4 HKLRD 776, CNG v G (No 2) [2025] 4 HKLRD 781 applied). (See paras.18–20.)

Brief consideration of the merits of the setting aside application

• Even on a brief consideration of D’s evidence, there was no factual basis for concluding that the Arbitrator was actually or apparently biased against D or H. Parties and arbitrators should be accustomed to the adversarial features of litigation and arbitration which could involve vigorous attacks on witnesses in cross-examination. It was an arbitrator’s duty to evaluate the competing expert evidence produced; and he had to decide which he preferred, whether the expert’s evaluation [2026] 4 HKLRD 124 126 HONG KONG LAW REPORTS & DIGEST was sound, supported by satisfactory and adequate evidence and reliable. The Arbitrator was entitled to ask H questions to test the soundness of his opinions and conclusions and was not unreasonable, unfair, unduly harsh, or oppressive in doing so. It was not improper for the Arbitrator to exercise case management powers to refuse further reports and to reject D’s application to stay the proceedings to hear interest and costs, and these were not evidence of bias. D’s claim that it did not have the opportunity to present its case was premised on the Arbitrator’s bias and was accordingly also unmeritorious. The ground based on public policy likewise fell away. (See paras.21–38.)

Difficulty of enforcement if delayed

• D’s application for setting aside was clearly without merit, and it would be contrary to the principles set out in s.3 of the Arbitration Ordinance (Cap.609) and the underlying objectives of the Rules of the High Court (Cap.4A, Sub.Leg.) to delay enforcement. The Award being manifestly valid, there should either be an order for immediate enforcement or an order for substantial security. In the circumstances, D was ordered to pay 70% of the principal sum under the Award as security (Soleh Boneh International Ltd v Government of the Republic of Uganda [1993] 2 Lloyd’s Rep 208 applied; G v N [2023] HKCFI 2437 considered). (See paras.39–44, 46.)

[The above is excerpted from the headnote to the report in HKLRD.]