Hong Kong court: Does arbitrator’s prior witness exposure create apparent bias?

Overview

In O v. S [2026] HKCFI 4910 (31 August 2026), the Hong Kong Court of First Instance dismissed an application to set aside a partial award on the grounds of apparent bias and breach of a bifurcation agreement. The applicant contended that the presiding arbitrator’s undisclosed involvement in a prior arbitration, in which the same witness had testified and the tribunal had made adverse findings against entities associated with that witness, gave rise to a real possibility of bias. The court held that a fair-minded and informed observer, having considered all the circumstances, including the partial award itself, would not conclude that there was a real possibility of bias. The decision provides important guidance on the test for apparent bias in international arbitration, the scope of an arbitrator’s duty to disclose prior encounters with witnesses, and the requirement to demonstrate prejudice when seeking to set aside an award.

Background

The dispute arose out of an investment management agreement dated 25 September 2019 (IMA), under which Party P agreed to act as Party D’s investment manager in respect of US$117 million of Party D’s proceeds deposited into an account with Party P. Party D instructed Party P to invest the funds in a bond issued by LRC (LRC Bond). Over time, the original investments were withdrawn and replaced with promissory notes and ultimately a perpetual bond (Fund Note) issued by a fund associated with Witness Z, the founder and chairman of the parent group of LRC.
 
In September 2021, Party D served a termination notice on Party P, seeking to terminate the IMA and demanding the immediate return of the managed assets. Party P declined, contending that the IMA continued indefinitely until both parties agreed to terminate.
 
In August 2023, Party D commenced an HKIAC arbitration seeking, inter alia, a declaration that the IMA had expired, an order for the return of the managed assets (US$66.36 million), and damages.
 
The arbitration was bifurcated into two phases by the parties’ agreement: Phase 1 for liability and already-quantified claims, and Phase 2 for remaining damages to be assessed. The oral hearing of Phase 1 took place in April 2025, and the tribunal issued its partial award in December 2025, finding in favour of Party D on the key issues.
 
After the partial award was issued, Party P discovered that Member R, the presiding arbitrator, had also served as an arbitrator in a prior arbitration concerning an investment product issued by entities of the LRC Group, in which Witness Z had testified as a witness. The prior award, issued in September 2024, contained findings adverse to the respondents, which included two LRC Group entities. Member R had not disclosed his involvement in the prior arbitration at any point during the subject arbitration. 

Hong Kong court’s decision and analysis

The test for apparent bias
 
The court confirmed the established test: whether an objective fair-minded and informed observer, having considered all the relevant facts, would conclude that there was a real possibility that the tribunal was biased (see CNG v. G (No 2) [2025] 4 HKLRD 781 at §31). The court emphasised that this is a two-stage test: first, ascertaining all relevant circumstances; and second, asking whether the fair-minded and informed observer would conclude that there was a real possibility of bias. The possibility must be “real”, not merely fanciful, on an objective basis.
 
In determining whether there is a real possibility that the tribunal was biased, a logical connection must be articulated between the conduct giving rise to the apprehension of bias and the possibility of departure from impartial decision-making (see Re Li Xiaoming [2021] HKCA 779 at §19). An arbitrator’s reputation for integrity and experience in arbitration are relevant to the objective assessment of bias – the stronger the reputation and greater the experience, the harder any doubts as to bias may be to justify.
 
No real possibility of bias on the facts
 
Having read the partial award in detail, the court found that a fair-minded and informed observer would note that:

• On the key issue of the proper construction of the IMA as regards termination (Issue 1), the tribunal did not deal with Witness Z’s evidence at all in rejecting Party P’s interpretation. It relied on documents, inherent probabilities, and other witnesses’ evidence.
• The tribunal’s comment that it found it “puzzling” that Witness Z could not provide more details of the LRC Bond was a fair comment that any reasonable tribunal would make, given Witness Z’s supposed familiarity with the bond’s terms. This failure alone was sufficient to sustain such a view.
• In deciding whether the managed assets (or a sum representing their value) should be returned to Party D (Issue 3), the tribunal’s findings on control over the managed assets were based on other evidence, including Party P’s failure to respond to Party D’s repeated requests, rather than on Witness Z’s evidence. Nothing was said against Witness Z.
• On the breach of duty claim (Issue 4), the tribunal’s expression of “sympathy” with Party D’s argument that the Fund Note investment was a dissipation was in the context of whether the investment guaranteed a loss due to management fees exceeding the coupon rate, and did not indicate any finding against Witness Z personally.
• Overall, the tribunal did not deal with the credibility and reliability of Witness Z’s evidence, whether explicitly or implicitly, in the partial award. Nor did the partial award contain any finding of dishonesty or other unfavourable finding against Witness Z at all.

The court acknowledged that Party P’s “biggest grievance” lay in its inability to know what had occurred in the prior arbitration, and that a fair-minded and informed observer might have “some doubt” as to the arbitrator’s integrity and impartiality. However, having considered all the circumstances, including the partial award, this would remain a doubt only, and the observer would conclude that there was no real possibility of bias.
 
Disclosure obligations
 
Citing Halliburton Co v. Chubb Bermuda Insurance Ltd [2021] AC 1083, the court noted that the distinguishing features of arbitration, including the private nature of arbitral proceedings, the limited powers of review, the arbitrator’s financial interest in obtaining further appointments, and the inability of non-parties to know what occurs in related arbitrations, place a “premium on frank disclosure” by arbitrators. 
 
That said, neither the IBA Guidelines nor leading commentary required disclosure of the mere fact that an arbitrator had previously heard evidence from a witness in an unrelated arbitration. However, the court did not treat this as an absolute rule, observing that disclosure would be required if the arbitrator had made extreme adverse comments on the witness’s integrity in the prior proceedings. In such a case, if the arbitrator were prevented by confidentiality from making the disclosure, he might have to consider declining the appointment. A failure to disclose, while a relevant factor, does not automatically lead to a conclusion of apparent bias.

Prejudice requirement
 
The court confirmed, following Grand Pacific Holdings Ltd v. Pacific China Holdings Ltd (in liq) (No 1) [2012] 4 HKLRD 1, that even if apparent bias is established, the applicant must demonstrate that the outcome would or might have been different. This requirement was consistent with international practice, as endorsed in Singapore (DLS v. DLT [2025] SGHC 61) and England (Aiteo Eastern E & P Company Limited v. Shell Western Supply and Trading Limited [2024] EWHC 1993 (Comm)). The court found that the outcome of the partial award would not have been affected by Witness Z’s evidence or his credibility, as the tribunal mainly relied on inherent probabilities and documentary evidence.

No breach of the bifurcation agreement
 
The court also rejected Party P’s alternative ground for setting aside. The parties had not put the question of liability for additional damages as an issue for determination in either Phase 1 or Phase 2 – both sides had assumed the additional losses were recoverable, and the only question was quantum. The tribunal was entitled to raise, of its own motion, the legal question of whether such losses were in fact recoverable, and to defer the issue to Phase 2 for proper submissions. This was reasonable case management, and in fact operated in favour of Party P.

Comment and practical implications

This decision provides important clarification on the application of the apparent bias test to arbitrators who have previously encountered the same witness in an earlier arbitration. The court’s detailed analysis of the partial award illustrates the practical importance of the prejudice requirement: even where an arbitrator’s non-disclosure may give rise to concern, the court will scrutinise the award itself to determine whether the impugned witness’s evidence was material to the tribunal’s decision.
 
For arbitrators, the decision serves as a reminder of the premium placed on frank disclosure in international arbitration. While disclosure of prior encounters with witnesses in unrelated proceedings is not currently required, the court left open the possibility that disclosure may be necessary where the arbitrator has made extreme adverse comments on the witness’s integrity. Where confidentiality obligations prevent such disclosure, the arbitrator may need to decline the appointment.

Client Alert 2026-183