Hong Kong courts order substantial security for awards pending challenges

• In the first decision (made under Order 73 Rule 10A of the Rules of the High Court), the court granted security for 70% of the principal amount awarded in an HKIAC award rendered in a Hong Kong-seated arbitration, as a condition for the continuation of the award debtor's enforcement challenge (COB v. FCD [2026] HKCFI 4162).
• The challenge to enforcement was advanced on due process and public policy grounds, centred on allegations of actual or apparent bias arising from the sole arbitrator's treatment of the award debtor's quantum expert.  In particular, it was alleged that the arbitrator had "launched a scathing and unwarranted attack" on the expert's report on the first day of the arbitration, developed a "grudge and/or bias" against the expert (influenced by the cross-examination of the expert conducted by the award creditor's counsel), conducted his own research on an issue during the expert's cross-examination and taken the expert by surprise with questions about it, and subjected the expert to "grossly unfair and unequal treatment".
• The court considered the enforcement challenge to be "clearly without merit" and the award to be "manifestly valid".  The judge failed to see how and why the arbitrator should have any personal grudge against the expert as a result of his cross-examination or evidence.  Experienced arbitrators were accustomed to robust cross-examination and would not easily form biases or grudges as a result of it (see the judge's full comment in this regard below).  The arbitrator was entitled to ask questions, and those he had asked were reasonably raised and not oppressive, harsh, scathing or unfair.  Even the arbitrator's own research on a matter of expert evidence, and his questions put to the expert on it, were not unreasonable or unwarranted.  The arbitrator had not been unreasonable, unfair, unduly harsh or oppressive in his treatment of the expert.
• Although this assessment was made on a summary and preliminary basis, the court noted that all the evidence in the enforcement challenge had already been filed, and that it would not be appropriate to delay an order for enforcement simply because of an unmeritorious challenge to enforcement.  Applying Soleh Boneh, there should therefore be an order for immediate enforcement or substantial security. 
• The court acknowledged arguments by the award debtor that it had sufficient assets in Hong Kong to meet the award and that there was no evidence of risk of dissipation of those assets, and a reference by the award creditor to legal proceedings that it alleged shed doubt on the award debtor's ability and/or willingness to pay.  The court also alluded to the fact that there was a limited period of less than one month between the hearing of the security application and that of the set-aside application.  Ultimately, however, these factors do not appear to have weighed heavily in the court's decision, and its view that the award was "manifestly valid" was determinative. 
• The court ordered the security to be provided within nine days of its decision, failing which the award debtor's enforcement challenge would be dismissed.  Costs were awarded against the award debtor on an indemnity basis.

"[P]arties and their legal representatives and experts should be attuned and accustomed to the adversarial features of litigation and dispute resolution by arbitration.  Parties engage in arbitration or litigation to win.  The legal advisers present their cases to the best of their ability, and this pursuit may include making vigorous attacks on the witnesses in cross-examination, even making technical objections or challenges in order to increase their chances of succeeding in their claims.  Trained adjudicators and experienced arbitrators are accustomed to such cross-examination and would not be easily led to form bias, or “grudges” as suggested in this case, to the extent that his/her judgment would be clouded by such bias or prejudice, to reach a conclusion without any factual basis or evidential foundation."  The Honourable Madam Justice Mimmie Chan, COB v. FCD [2026] HKCFI 4162

• In the most recent decision, the court ordered the award debtor to provide security of 50% of the damages awarded under a US$70 million ICC award as a condition of adjourning Hong Kong enforcement proceedings, pending the determination of an application to the courts of the seat in Paris to set aside the award (MB v. HB [2026] HKCFI 4437).  The decision was made under section 89(5) of the Arbitration Ordinance, which applies to New York Convention awards.
• The set-aside proceedings in Paris were advanced on two grounds.  The first was the non-disclosure of alleged links between the presiding arbitrator and the arbitrator nominated by the award creditor, including the fact that they had sat together in a number of previous arbitrations, their prior membership of the same chambers (which had ceased before the arbitration), the fact they had authored books together, and their personal friendship.  The second was an alleged failure by the tribunal to consider a key document.
• On a preliminary consideration of the merits, the court was highly sceptical of the award debtor's grounds for challenging the award.
• First, the court expressed "grave reservations" about the award debtor's case on the links between the presiding arbitrator and the award creditor's nominee.  The judge considered that (i) the alleged links between the arbitrators did not fall within the "Orange List" under the IBA Guidelines on Conflicts of Interest in International Arbitration, (ii) no duty of disclosure arose in relation to them, and (iii) an objective and fair-minded observer would not conclude that there was any real possibility that the arbitrators lacked independence or impartiality. 
• Second, the court was "certainly not persuaded" that the award was manifestly invalid due to the alleged failure to consider a key document.  The judge considered that the award debtor had only itself to blame for only seeking to produce the document on the eve of the service of post-hearing briefs, and even if there had been a procedural irregularity in this regard, the result of the arbitration would not have been different.
• However, the court acknowledged the possibility that there could be a different view based on French law in the Paris set-aside proceedings, and noted that the enforcement court had to give "due weight" to the decision of the supervisory court on the validity of the award.  Accordingly, it decided to adjourn the enforcement proceedings pending the result of the Paris set-aside application, in order to avoid inconsistent results.
• The court then considered whether an adjournment without security would cause prejudice to the award creditor, compared with the position it would be in if permitted to enforce immediately.  The court concluded that it would, given the delay of almost a year which would arise from the adjournment, the substantial size of the award (the courts having recognised that, where there is a large award, delay without security is inherently likely to prejudice the award creditor), the heavy burden on the award creditor's finances that would accordingly arise from a delay in enforcement, and doubts as to the reliability and credibility of the award debtor, which were relevant to the court's consideration of whether the award would be honoured. 
• The court therefore ordered the award debtor to provide security of 50% of the damages awarded (approximately US$35 million) within 21 days as a condition of the adjournment, failing which the award creditor would be granted leave to enforce the award.  Costs were awarded against the award debtor on an indemnity basis.

• In another decision handed down one week earlier (also under section 89(5) of the Arbitration Ordinance), the court adjourned proceedings for the enforcement of a Singapore award for the equivalent of approximately US$2 million pending the determination of an application to the Singapore courts to set aside the award, and ordered security on the terms of an offer made by the award debtor (TC v. LC [2026] HKCFI 4304).
• The application to set aside the award in Singapore had been made on the grounds that (i) there was no valid arbitration agreement due to a lack of certainty as to its essential and material terms, and because the award debtor was acting solely as an agent, and (ii) the tribunal had failed to determine the applicable arbitral rules. 
• On the adjournment, the court held that "the Singapore court is obviously in the best position, as the supervisory court, to decide on matters of Singapore law which governs the underlying contracts between the parties as well as the procedure and governing rules of the Arbitration."
• On security for the award, the court first considered the merits of the challenge to the award and determined that, while the award could not be said to be "manifestly invalid", the issues raised by the award debtor were not unarguable and were best decided by the supervisory court applying Singapore law.
• The court then considered the relative ease or difficulty of enforcement if enforcement was delayed, taking into account the principle that it is not the purpose of security to improve the position of the creditor under the award.  In this regard: the award debtor's only asset in Hong Kong was real property which had been the subject of a legal charge since before the contract between the parties; the charge secured a loan facility for more than the value of the property; and there was no evidence of dissipation of assets or improvident trading on the part of the award debtor. 
• The court also took account of delay (i) by the award creditor in applying for security (which it had done three months after the award debtor first challenged the enforcement of the award in Hong Kong) and (ii) by the award debtor in serving the Singapore proceedings on the award creditor in Korea, which meant it was uncertain when a decision would be available in those proceedings.
• Finally, the court noted that the award debtor had offered to provide security of US$400,000 (representing approximately 20% of the value of the award) and to make additional payments of US$50,000 per month, and had undertaken not to dispose of its real property pending the determination of the enforcement challenge.  The court considered this offer to have been made in good faith and to be reasonable and adequate for the purposes of security, and declined to order any further security in addition.
• The court therefore ordered the award debtor to provide security on the terms of its offer within 28 days, failing which the enforcement challenge would be dismissed.  Costs were awarded against the award creditor notwithstanding that security was granted, because it had failed to obtain a better result than the award debtor's offer.