Tgl v. Sdc and Another

HCCT 41/2023

[2024] HKCFI 1796

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION PROCEEDINGS

NO 41 OF 2023

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D E C I S I O N

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Background

1.By order dated 10 July 2023 (“Enforcement Order”), this Court granted leave to the Applicant to enforce an arbitral award delivered by the Shenzhen Court of International Arbitration (“SCIA”) dated 23 May 2022 (“Award”) in an arbitration commenced by the Applicant as Claimant against the Respondents (“Arbitration”). The Arbitration related to disputes which arose under an agreement whereby the 1^st Respondent appointed the Applicant as sales agent of products, and amounts were claimed to be outstanding and due from the Respondents to the Applicant. Under the Award, the Respondents were ordered to pay to the Applicant an outstanding debt of US$7,864,178.08, damages of US$1,106,586.81, interest and costs.

2.On 3 August 2023, the Respondents applied by its Summons to set aside the Enforcement Order. The grounds relied upon were not set out in the Summons. Although an affirmation was filed in support of the application, it is not the function of the Court to comb through the affidavit and exhibits, to speculate on all the relevant grounds which may be raised under the Arbitration Ordinance (“Ordinance”) by virtue of the facts outlined in the affirmation. As the Applicant rightly pointed out, the Respondents’ application made by the Summons can be regarded as an abuse of process, and is liable to be dismissed on such basis.

3.In the Skeleton Submissions filed by Counsel for the Respondents, it was contended that the composition of the tribunal in the Arbitration was not in accordance with the parties’ agreement and/or the law of the Mainland, and/or that it would be contrary to the public policy of Hong Kong to enforce the Award, such that the Enforcement Order should be set aside and enforcement refused under section 95(2)(e) and section 95(3)(b) of the Ordinance. The hearing of the Summons on 7 March 2024 was conducted on that basis.

4.The facts of the underlying dispute are not material. The Arbitration was governed by Mainland law and to be conducted in accordance with the SCIA Rules. The Tribunal was formed in September 2020 when the Applicant appointed one Mr Chen and the Respondents appointed one Mr Huang as their respective choice of arbitrator, and Chen and Huang appointed Mr Lu as the presiding arbitrator.

5.In essence, the ground pursued by the Respondents against enforcement is that on the facts relating to the relationship between Chen (the arbitrator appointed by the Applicant), and companies associated with the Applicant, there was apparent bias on the part of Chen, in that he failed to disclose his relationship with the relevant companies associated with the Applicant and the possibility of the existence of a conflict of interests on his part. According to the Respondents, the relationship between Chen and the Applicant and his failure to disclose the relevant facts relating thereto, give rise to justifiable and reasonable doubts in the mind of an objective observer as to the arbitrator’s independence or impartiality, and of apparent bias on his part, such that the composition of the tribunal was not in accordance with the parties’ arbitration agreement, or the law of the Mainland, and it would be contrary to the public policy of Hong Kong to enforce the Award as being in breach of the basic principles of natural justice.

Relationship between Chen and the Applicant

6.It is not alleged that there is any direct relationship between the Applicant, and Chen. According to the organization structure of the group of companies of which the Applicant forms part, Chen’s impugned relationship is said to be with companies associated with the Applicant, including its indirect shareholder.

7.Chen was at the material time of the Arbitration a senior partner of a firm of lawyers on the Mainland (“CA”). He joined CA in September 2019. Prior to that, Chen was a partner in another firm (“GL”), from December 2017 to September 2019.

8.The Applicant was the Claimant in the Arbitration. At the material time, it was a company wholly owned by Tongfang Holdings Co Ltd (“TFH”/ “Parent”). TFH also held 31.5% of the shareholding of another company, Tongfang Environment Company Ltd (“TFE”). The Respondents have referred to TFE as the Applicant’s “sister company”.

9.The Parent of the Applicant, ie THL, was and is itself owned as to 31% of its shareholding by China National Nuclear Corporation Capital Holdings Co Ltd (“CN Nuclear Captial”), and CN Nuclear Capital is in turn wholly owned by China National Nuclear Corporation (“CN”). CN also owns 100% of the shares in China Nuclear Investment Co Ltd (“CN Investment”), and 61.22% of the shares in China Nuclear Engineering & Construction Corporation Limited (“CN Engineering”).

10.In laymen’s terms, and to facilitate understanding, CN Nuclear Capital, CN Investment and CN Engineering are at the level which can be described as the Corporate Grandparent of the Applicant.

11.In turn, CN Engineering holds 100% of the shares in China Nuclear Industry Zhongyuan Construction Co Ltd (“CN Zhongyuan”).

12.What the Respondents complain of as to Chen’s relationship with the Applicant/its associates is that firstly, Chen had on CN Zhongyuan’s invitation given a lecture at a conference in July 2016.

13.The second complaint is that Chen’s firm, CA, had in 2015 and 2016 acted for TFE in an appeal and retrial of proceedings on the Mainland.

14.Thirdly, CN Nuclear Capital/CN Investment had on 12 May 2022 made an announcement to invite tenders for services to be provided in respect of legal due diligence to be conducted. On 24 May 2022, the day following the issue of the Award, CN Nuclear Capital/CN Investment announced the results of the tender and CN was recommended as the candidate to be awarded the relevant contract. On 31 May 2022, CN Nuclear Capital/CN Investment announced that the contract was awarded to CA.

15.It may be pointed out at this stage that on the Respondents’ case and according to the affirmation filed on their behalf, the announcements and tenders were made by CN Nuclear Capital, but on the face of the exhibits relied upon, the announcements were issued in the name of CN Investment. Both CN Nuclear Capital and CN Investment are actually at the same tier of companies, being owned 100% by CN, although it is CN Nuclear Capital (and not CN Investment) which holds 30.11% of the shares in the Applicant.

16.The fourth complaint is that Chen’s former firm, GL, had acted for TFH (the Parent) in a construction dispute at an unspecified time.

17.On behalf of the Respondents, it was argued that Chen knew of, or should have made reasonable inquiries which would have disclosed to him, his/his firm’s involvement in the above matters relating to companies which were all associated with the Applicant, and that his failure to make such disclosure firstly deprived the Respondents of the opportunity to make objections to his acting as arbitrator in the Arbitration, and give rise to reasonable and justifiable doubts as to Chen’s impartiality or independence, to constitute a breach of his duties of disclosure under Mainland law. It was contended that the arbitral procedure was, for that reason, not in accordance with the parties’ agreement and the award should be set aside as being contrary to the public policy of Hong Kong. The reasonable opportunity to present case ground (under section 95(2)(c)(ii) of the Ordinance) was not argued by Counsel at the hearing.

18.On behalf of the Respondents, Counsel argued that Chen’s failure to make reasonable inquiries and his failure to act impartially and independently was in breach of the SIAC Rules governing the Arbitration. It was also breach of his duties of disclosure under Article 12(1) of the Model Law which applies under section 25(1) of the Ordinance, and breach of his duty to act independently, fairly and impartially under section 46 of the Ordinance.

19.The Respondents also rely on common law principles to argue that there was apparent bias on Chen’s part, in that an objective fair-minded and informed observer with knowledge of the relevant facts would conclude in this case that there was a real possibility that the tribunal in the Arbitration was biased, and that enforcement of the Award should be refused on public policy grounds.

Breach of Mainland law and rules

20.After the Award was handed down on 23 May 2022, the 1^st Respondent applied to the Shenzhen Intermediate People’s Court to set aside the Award, on the same grounds now relied upon, namely that Chen had acted in breach of the relevant rules and regulations governing the Arbitration, and that the constitution of the tribunal and the procedure in the Arbitration was against the agreed procedure prescribed by law. It was claimed that under Article 34 of the Mainland Arbitration Law, an arbitrator should recuse himself if he had an interest in the case, or had other relationship with the parties which may affect the fairness of the arbitration. Further, under Article 27 of the SIAC Arbitration Rules, an arbitrator should be independent from the parties and should treat the parties fairly.

21.Upon inquiry made by the Shenzhen Court, Chen issued a Response on 28 February 2023 (“Response”). In the Response, Chen claimed that prior to accepting the appointment in the Arbitration, he had conducted a conflicts search, and had confirmed that there was no conflict of interests in his acting. He claimed that he had no relationship with CN Nuclear Capital, CN Investment or the Applicant to create any conflict of interests. According to Chen, he had given legal training to CN Zhongyuan in 2016 on referral by a third party, but he did not know CN Zhongyuan, nor did he have any dealings with the company. Chen also explained in the Response that after the Award, in late June 2022, other partners of CA were successful at securing a tender for due diligence in a project of CN Nuclear Capital, but Chen did not have any knowledge of the project nor did he participate in the project.

22.Chen stated in the Response that CA had acted for TFE in a litigation in 2015 and 2016, which had already been concluded. He explained that he only joined CA in September 2019, so he had no knowledge of the matter. He could not find any information concerning the proceedings involving TFH, but he had only worked at his former firm, GL, from December 2017 to September 2019, and neither knew nor had participated in the case concerning TFH.

23.The SCIA also issued a reply to the Shenzhen Court (“Reply”). It confirmed that it had made inquiries from Chen, who had confirmed his independence and impartiality in the Arbitration. According to the SCIA, the Applicant should (in accordance with Article 35 of the Arbitration Law) have applied for an arbitrator’s recusal upon stated grounds at the first hearing of the Arbitration, and in respect of matters known after the commencement of the hearing, before the last hearing in the Arbitration. The SCIA stated that the matters relied upon by the 1^st Respondent, and which are claimed to have affected the independence and impartiality of Chen, had taken place before the Arbitration, and there were avenues for the 1^st Respondent to have ascertained these matters before the first hearing. The SCIA pointed out that throughout the entire Arbitration, the 1^st Respondent had failed to take any action to seek Chen’s recusal, and should be treated as having waived its rights.

24.In the opinion of SCIA, the fact that Chen’s present or former firm had provided legal advice to TFH, TFE, CN Investment, or CN Nuclear Capital did not give rise to reasonable suspicion as to Chen’s independence or impartiality. SCIA considered that these matters did not constitute reasons for recusal under the Arbitration Law, nor do the SCIA Rules require the arbitrator to make disclosure or to recuse himself under the circumstances.

25.On the basis of Chen’s Response and the Reply from SCIA, the Shenzhen Court ruled in a Decision dated 18 April 2023 that an arbitrator’s duty of disclosure or to recuse himself was confined to cases in which a relationship of conflict exists between the arbitrator and the case itself, or the parties to the arbitration, or the agents/representatives of the parties, or by virtue of other matters which may affect a fair decision. The Shenzhen Court considered that the companies stated to have business dealings with Chen were CN Zhongyuan, CN Investment, TFH and TFE, and these companies were not parties to the Arbitration, but were independent legal entities, with businesses which were unrelated to the dispute in the Arbitration. According to the Shenzhen Court, there was no evidence of any relationship of interest between Chen and these companies which might affect the impartiality of Chen’s judgment, nor create reasonable doubt as to Chen’s independence and fairness, to require disclosure under the SCIA Rules.

26.The Shenzhen Court also referred to the fact that the 1^st Respondent had failed to make any application in the course of the Arbitration and before the final hearing, to seek Chen’s recusal, and should be treated as having concurred in Chen’s acting as arbitrator.

27.The 1^st Respondent’s application to set aside the Award was accordingly dismissed by the Shenzhen Court.

28.As the underlying contract and the Arbitration which was held on the Mainland are governed by PRC law, this Court gives due regard and weight (Gao Haiyan v Keeneye Holdings Ltd [2012] 1 HKLRD 627, para 102) to the Shenzhen Court’s findings and dismissal of the application to set aside the Award on the grounds of procedure, the constitution of the tribunal, and the alleged failure to comply with PRC law. The Shenzhen Court’s decision is evidence of the applicable Mainland law, and whether there is breach of such law and of the SCIA Rules. According to the Shenzhen Court, there was no breach of the law and no breach of the SCIA Rules concerning the arbitrator’s duty of disclosure, and no actual or apparent bias on his part in that there were no circumstances which may give rise to reasonable doubt as to Chen’s fairness and impartiality.

29.However, since the Respondents rely on the Award having been made against principles of natural justice, and claim that enforcement of the Award would be contrary to the public policy of Hong Kong, this Court still has to consider common law principles governing bias, and decide whether there were circumstances which would indicate to an objective observer in Hong Kong that there was a real possibility that the tribunal was biased, and that it would be shocking to the conscience of the Hong Kong Court to enforce the Award given in such circumstances (A v R (Arbitration: Enforcement) [2009] 3 HKLRD 389, X Chartering v Y HCCT 20/2013, 3 March 2014).

Common law principles

30.Counsel for the Respondents highlighted the fact that under Article 12 of the Model Law which has effect by virtue of section 25(1) of the Ordinance, an arbitrator approached in connection with his possible appointment as an arbitrator “shall” disclose any circumstances likely to give rise to justifiable doubts as to impartiality or independence, and from the time of his appointment and throughout the entire proceedings, the arbitrator shall without delay disclose any such circumstances to the parties.

31.Section 46 of the Ordinance requires the tribunal to be independent, and to act fairly and impartially as between the parties. A challenge to an arbitrator’s independence and impartiality as called for by section 46 may be made on the ground of apparent bias, on the basis that the essential rule of natural justice nemo judex in causa sua has been breached.

32.In ASM Shipping Ltd v TTMI Ltd [2005] EWHC 2238 (Comm), the English Court pointed out (at paragraph 39 (3) of the judgment) that the right to a fair hearing by an impartial tribunal is fundamental, and that there can be no more serious or substantial injustice than having a tribunal which was not, ex hypothesi, impartial to determine parties’ rights. The learned judge had also cited in his judgment the observation made in Merkin: Arbitration Law, that the impartiality of arbitrators is central to the entire arbitral process, and that actual or apparent bias on the part of an arbitrator is sufficient ground for setting a determination aside.

33.The test for determining apparent bias on the part of judges applies to arbitrators (Jung Science Information Technology Co Ltd v ZTE Corporation [2008] 4 HKLRD 776). This is the “reasonable apprehension of bias” test, of 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 (Director General of Fair Trading v Proprietary Association of Great Britain [2011] 1 WLR 700). It was applied in Hong Kong, in Deacons v White & Case Limited Liability Partnership & Others, HCA433/2002, [2003] 2 HKLRD 840, 845-846.

34.In ASM Shipping, Morrison J referred to Lord Steyn’s observation in Lawal v Northern Spirit [2003] UKHL 35, that the threshold for establishing apparent bias is “only a real possibility of unconscious bias”.

35.As the Court emphasized in Jung Science (at paragraph 51 and 52 of the judgment), the test is not whether a particular litigant thinks or feels that the judge has been or may have been biased (per Chadwick LJ in Taylor v Lawrence [2002] 2 All ER 353). What matters is the viewpoint of the hypothetical objective fair-minded and informed observer, as described by Kirby J in Johnson v Johnson (2000) 201 CLR 488:

“The attributes of the fictitious bystander to whom courts defer have therefore been variously stated. Such a person is not a lawyer. Yet neither is he or she a person wholly uninformed and uninstructed about the law in general or the issue to be decided. Being reasonable and fair-minded, the bystander, before making a decision important to the parties and the community, would ordinarily be taken to have sought to be informed on at least the most basic considerations relevant to arriving at a conclusion founded on a fair understanding of all the relevant circumstances... Finally, a reasonable member of the public is neither complacent nor unduly sensitive or suspicious.”

36.At paragraphs 53 to 55 of the judgment in Jung Science, the Court also made these pertinent observations:

“And what the objective onlooker has to decide, after having been informed of all the relevant circumstances, is not whether it would be better for another adjudicator to hear the matter but whether the adjudicator sitting to hear the matter might not bring an impartial and unprejudiced mind to the resolution of the dispute: per Merkel J in Aussie Airlines Pty Ltd v. Australian Airlines Pty Ltd (1996) 135 ALR 753 at p.767. Nor is the question whether the adjudicator was wise to act as he did; nor whether other adjudicators might have acted differently: per Chadwick LJ in Taylor v. Lawrence quoted in the Court of Appeal’s judgment at p.374h.

54. Where the objection arises from an association between the adjudicator and the legal representative for a litigant, there must be a cogent and rational link between the association and its capacity to influence the decision to be made in the particular case before it can be concluded that the adjudicator might not bring an impartial and unprejudiced mind to the resolution of the dispute. It is the capacity of the association to influence the decision rather than the association as such that is disqualifying: per Merkel J in Aussie Airlines Pty Ltd v. Australian Airlines Pty Ltd at pp.761 & 763.

55. And in evaluating whether such an association had the capacity to influence, the objective onlooker could be expected to be aware of the legal traditions and culture of the English jurisdiction which have played an important role in ensuring the high standards of integrity on the parts of both the judiciary and the profession, and accordingly he would be aware that in the ordinary way contacts between the judiciary and the legal profession should not be regarded as giving rise to a possibility of bias: per Lord Woolf CJ in Taylor v. Lawrence at p.370, §§61-63. In my view, this statement applies equally to the legal traditions and culture of Hong Kong and the same statement can be made of the wider dispute resolution circle, embracing those participating in arbitration as arbitrators and arbitration advocates.”

37.Counsel for the Respondents sought to draw analogy from the IBA Guidelines on Conflict of Interest in International Arbitration (“Guidelines”), which suggest that an arbitrator should decline to accept an appointment, or refuse to continue to act as an arbitrator, if facts or circumstances exist or have arisen since the appointment which, from the point of view of a reasonable third party having knowledge of the relevant facts and circumstances, would give rise to “justifiable doubts” as to the arbitrator’s impartiality or independence. Under these Guidelines, doubts are justifiable if a reasonable third party with knowledge of the relevant facts and circumstances would reach the conclusion that there is a likelihood that the arbitrator may be influenced by factors other than the merits of the case. This reflects essentially the general position under common law principles. Counsel for the Respondents drew attention to the fact that under the Guidelines, the arbitrator is in principle considered to bear the identity of his law firm or employer, but when considering the relevance of facts or circumstances to determine whether a potential conflict of interest exists or whether disclosure should be made, the activities of the arbitrator’s law firm or employer, the organization structure and mode of practice of the law firm or employer, and the relationship of the arbitrator with the law firm or employer should all be considered in each individual case.

38.As the Court explained in ASM Shipping, the Guidelines cannot purport to be comprehensive, and should be applied “with a robust common sense and without pedantic and unduly formulaic interpretation”.

39.It is clear from the authorities, that the test applied by the courts is that of the reasonable third person, and the Court is required to look at the matter through the eyes of that reasonable man, to ascertain the relevant circumstances from the available evidence as would have been considered by the reasonable man, and consider what that properly informed, independent and objective observer would have concluded, as to whether there was a real possibility of bias.

40.In this case, Chen made a Response, but as explained in Helow v Secretary of State for the Home Secretary [2008] 1 WLR 2416, the Court is not necessarily bound to accept the statement made by the judge/adjudicator at face value, and no attention will be paid to any statement by the judge/adjudicator as to the impact of any knowledge on his/her mind. Put simply, the key question is what the objective observer, and not what Chen himself, considered as to the possibility or otherwise of bias, and Chen’s own statement of any impact on his mind is not relevant to the issue which the objective observer must decide.

41.The judgment in Aussie Airlines Pty Ltd v Australian Airlines Pty Ltd and anr (1996) 135 ALR 753 (cited in the judgment of Jung Science) highlighted the fact that the objective observer must be treated as fully informed of the facts and circumstances constituting the association alleged and relied upon in the complaint.

42.In this case, the facts which the independent third-party observer is taken to have known are that:

(1)  In April 2019, the Applicant commenced the Arbitration against the Respondents.

(2)  Chen was a partner of CA, having joined the firm in September 2019. Formerly, he had been a partner of GL from December 2017 to September 2019.

(3)  In September 2020, the tribunal in the Arbitration was enpanelled with 3 arbitrators, and Chen was appointed as arbitrator on the Applicant’s nomination.

(4)  In 2016, some 4 years prior to Chen’s appointment as an arbitrator, he had given a lecture or legal training to CN Zhongyuan on the referral of some other party. CN Zhongyuan is a subsidiary of CN Engineering which is an associated company of CN Nuclear Corporation, the 30.11% shareholder of the parent company of the Applicant.

(5)  In 2015/2016, some 4/5 years prior to the constitution of the tribunal in the Arbitration, CA had acted for TFE, a sister company of the Applicant, in proceedings on the Mainland.

(6)  At some other unknown time prior to the Arbitration, GL, the former law firm of Chen of which he was a partner from December 2017 to September 2019, had acted for TFH, the parent company of the Applicant in a construction litigation on the Mainland.

(7)  In May 2022, in the course of the Arbitration, a partner of CA had tendered for a project of CN Nuclear Corporation/CN Investment. CN Nuclear Corporation was the 30.11% shareholder of TF Holdings, the parent company of the Applicant.

(8)  The Award was issued in the Arbitration on 23 May 2022 in favour of the Applicant, and the Respondents were ordered under the Award to pay US$7.86 million, and damages of US$1.1 million, with interest and costs to the Applicant.

(9)  One day after the issue of the Award, it was announced that CA was recommended to be the service provider for the project of CN Nuclear Corporation/CN Investment, and on 31 May 2022, the relevant contract for services was announced to be awarded to CA.

43.Counsel for the Respondents argued that the facts and circumstances of this case should not be considered singly or individually. It was contended that there was a whole history of dealings and a long relationship between Chen and the entire group of companies of which the Applicant forms part. Considering the past relationship and the series of dealings made as a whole, it was argued that the fair-minded objective bystander would be justified in having doubts and questions as to how Chen had carried out his conflicts search before accepting his appointment in the Arbitration, why he did not find out CA’s involvement in the tender, whether Chen actually knew of the tender submission but failed to disclose the likely conflict of interests, whether Chen had financial interest in CA’s successful tender to CN Nuclear Capital/CN Investment, whether Chen as a partner of CA had financial interest in possible revenue from the companies associated with the Applicant, all to give rise to a real possibility of Chen being partial towards the Applicant.

44.The authorities on the test of the hypothetical objective observer have highlighted the fact that although such a person is not a lawyer, he is neither wholly uninstructed about the law in general or the issue to be decided. As Deputy High Court Judge Lisa Wong SC (as Her Ladyship then was) pointed out in Jung Science, the hypothetical observer is informed, reasonable and fair-minded, and would ordinarily be taken to have sought to be informed on the most basic considerations relevant to arriving at a conclusion. His conclusion would be founded on a fair understanding of all the relevant circumstances. He would not reach a hasty conclusion, is neither complacent, nor unduly sensitive or suspicious.

45.With these attributes, would the objective, reasonable and fair‑minded observer conclude from the facts described in paragraph 42 above that there is a real possibility that Chen was biased, and would not act impartially and fairly as arbitrator of the dispute between the Applicant and the Respondents? I am not satisfied that he would be.

46.It is important to bear in mind that the complaint made in this case is the alleged association or relationship between Chen as arbitrator and the companies related to the Applicant with which Chen and his firm had dealings. I am prepared not to confine the companies with which Chen had dealings to just the Applicant, and to extend the consideration to the extent of the association and dealings with CN Zhongyuan, TFE, TFH and CN Nuclear Capital.

47.However, as the Court sought to explain at paragraphs 54 and 55 of the judgment in Jung Science, the objection raised is to the capacity of the association to influence the decision of the adjudicator (citing Aussie Airlines Pty Ltd v Australian Airlines Pty Ltd & Another (1996) 135 ALR at 761 and 763). As held in Aussie Airlines, there must be “a cogent and rational link between the association and its capacity to influence the decision to be made”, before it can be concluded that by virtue of the association alleged, the adjudicator might not bring an impartial and unprejudiced mind to the resolution of the dispute. After analyzing the decided cases, the Court in Aussie Airlines explained that the key question for determination in each case is not just the existence of the association in question, but whether the nature and extent of the association in the circumstances of the particular case resulted in a reasonable bystander concluding from it that the adjudicator might be influenced by it, to be biased, or prejudiced, or partial. Where the association in question is “trivial, remote or indirect”, the court might conclude that the association is not a disqualifying one.

48.The first complaint made by the Respondents concerns CN Zhongyuan, which as the Applicant pointed out is only tengentially related to the Applicant. CN Zhongyuan can only be described as an indirectly associated company of the Applicant’s Parent. The lecture or legal training provided by Chen had taken place 3 years prior to the Applicant’s nomination of Chen as arbitrator in the Arbitration.

49.The second complaint concerns TFE, which is the sister company of the Applicant (both being subsidiaries of TFH), but Chen was a partner only after the time when CA had acted for TFE in the proceedings in 2015/2016. Chen could not have derived any financial interest, or benefit from CA’s involvement in the proceedings.

50.The tender submitted to either CN Nuclear Capital or CN Investment, which is the subject matter of the third complaint, was made by another partner of CA, allegedly without knowledge or involvement of Chen. Invitation for the tender was apparently announced on 12 May 2022, which was after Chen’s appointment in the Arbitration, and would not have been known to Chen even if he had conducted a conflict of interests search prior to accepting the nomination as arbitrator. Applying the strictest standards, if CA had followed the best practice relating to searches of possible conflicts prior to making a bid for any assignment, such search might or should have revealed Chen’s involvement in the Arbitration and the parties involved, and might have caused CA to alert Chen to the bid. However, the Applicant is only a subsidiary of TFH, in which CN Nuclear Capital had a 30.11% interest in shareholding, and CN Nuclear Capital is an associated company only of CN Investment. It is Chen’s claim in the Response (which is of course not conclusive evidence) that he had no knowledge of the tender, and in the absence of knowledge of his firm’s involvement, he did not make any disclosure to the tribunal all the parties.

51.Likewise, Chen claims that he had no knowledge and had not taken any part in the proceedings in which Chen’s former firm, GL, had acted for TFH, at some unknown time prior to Chen’s appointment in the Arbitration. Chen had left GL since September 2019.

52.Leaving aside the tender for CN Nuclear Capital/CN Investment, the involvement of Chen, CA and GL in the matters complained of took place some years before Chen’s appointment in the Arbitration. Apart from the lecture/legal training Chen gave to CN Zhongyuan, Chen did not take any part in and had no knowledge of the other involvement of CA and GL.

53.In my judgment, Chen’s past involvement or dealings with CN Zhongyuan, TFE, and TFH were not sufficiently close or frequent to cause the objective and fair-minded observer to think that Chen had a close and serious relationship with the CN group in the wider sense, which relationship might be reasonably perceived to have a capacity to influence how Chen might approach the resolution of the dispute to be decided by him in the Arbitration.

54.When the Court considers the perspective of the objective, reasonable and fair-minded observer, some reasonable leeway should be given to cater for the realities of the practical and commercial world, as the reasonable observer would accept that it would be unreasonable and unreal to expect the observance of the best and highest standards of practices, over and above what can be described to be reasonable.

55.From my experience, the best practice for solicitors and other professionals require conflict searches to be conducted prior to the acceptance of any new assignment or instructions, to enable relevant members of the firm to inform each other and be informed of potential work and any conflicts of interests that may be created by accepting such work. The best practice would involve the disclosure of general information of the potential work and the parties involved, and may include particular information of the group of companies to which the parties belong. However, some practices may not be so stringent to require such detailed or mass of particulars, other than the basic information of the actual party or parties concerned.

56.If Chen had conducted a proper conflict search prior to his acceptance of appointment to act in the Arbitration, he should have been able to find out if he or his partners at CA had advised, or acted for or against the Applicant prior to September 2019, but this might not have disclosed the tender or invitation to tender from CN Nuclear Capital or CN Investment, which only took place after September 2019. If other partners of Chen’s firm failed to do a proper conflict search after September 2019, to bring the tender to Chen’s notice, Chen cannot reasonably be blamed for his partners’ failure.

57.Even if a conflict search had been done by Chen before his appointment as arbitrator, it is probable and reasonable if the search did not disclose Chen’s or CA’s involvement in any work for TFE, or CN Zhongyuan, which are more remotely associated with the Applicant. Although Chen himself should know that he had given a lecture or legal training to CN Zhongyuan in 2016, I accept that this involvement could hardly be said to be a matter which would lead a reasonable, objective and fair-minded observer to conclude that by virtue of such involvement 3 years before the Arbitration, there was a likelihood or any real possibility that Chen would be biased, or that it was a matter which would give rise to justifiable doubts as to Chen’s impartiality or independence.

58.The authorities on apparent bias show that whilst the appearance and perception of impartiality are important, the courts do not take a hypothetical or unrealistic view of associations objected to and relied upon by a party when a claim of either disqualification or apparent bias is made. It is always a question of degree whether the nature and extent of the association is such as to give rise to reasonable doubt and suspicion as to the impartiality of the tribunal. Even if an association can be established, there must be reasonable and rational basis for the conclusion that the association is capable to influence the impartial mind of the decision maker, such that the objective and informed observer can conclude that there is a real risk of bias.

59.In all the circumstances of this case, the objective and informed observer would not be so unduly suspicious as to conclude that because of Chen’s history of dealings with the Applicant’s loosely associated companies, he was in a position to be influenced to act partially in favor of the Applicant. In my judgment, the objective and informed observer would not be so unduly suspicious as to consider that Chen actually had knowledge of his partners’ tender to CN Nuclear Capital/CN Investment after his appointment as arbitrator, and that he had deliberately abstained from disclosing this matter to the tribunal and the Respondents. If Chen had no knowledge of the tender and any association with TFH, he was not in breach of his duty to make disclosure.

60.My conclusion, accordingly, is that there is no cogent and rational link between any association which Chen may have had with the Applicant, and the capacity of such association to influence Chen’s decision in the Arbitration, to give any impression of possible bias on Chen’s part.

Waiver

61.The Respondents did not, whether at the time of the commencement of the Arbitration, the first hearing or the final hearing of the Arbitration, raise objection to Chen’s appointment or his participation in the Arbitration. As submitted by the Respondents, without disclosure by Chen of his work with CN Zhongyuan and TFE, or his former firm’s work with TFH, or CA’s tender to CN Nuclear Capital/CN Investment, the Respondents had no knowledge of Chen’s dealings or relationship with the Applicant, and had no reason or basis to object to Chen’s appointment. Hence, if there had been any conflict or potential bias, there could not have been any informed consent or waiver of such by the Respondents.

Public policy

62.Having rejected the ground of apparent bias or lack of impartiality, I see no other reason to refuse enforcement of the Award on the ground that it is contrary to the fundamental conceptions of morality and justice to enforce the Award, or that it is so shocking to the court’s conscience as to render enforcement repugnant (Hebei Import & Export Corp v Polytek Engineering Co Ltd (1999) 2 HKCFAR 111, 139; A v R (Arbitration: Enforcement) [2009] 3 HKLRD 389).

Disposition

63.The application to set aside the Enforcement Order is accordingly dismissed, with costs to the Applicant on indemnity basis, with Certificate for Counsel.

Ms Natalie So, instructed by Zhong Lun Law Firm LLP, for the applicant

Mr Dixon Co, instructed by Lee & Yik Lawyers, for the 1^st & 2^nd respondents