JUNG SCIENCE INFORMATION TECHNOLOGY CO LTD v. ZTE CORPORATION

HCCT 14/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION PROCEEDINGS

NO. 14 OF 2008

----------------------

----------------------

----------------------

----------------------

J U D G M E N T

----------------------

INTRODUCTION : THE APPLICATION BEFORE THE COURT

1. These proceedings concern an international arbitration in Hong Kong between Jung Science Information Technology Co Ltd (“JSIT”), a South Korean corporation, and ZTE Corporation (“ZTE”), a PRC corporation, before a tribunal (“the Tribunal”) comprising Mr Yang Liang Yee Philip (“Mr Yang”) as the Presiding Arbitrator and Ms Sally Harpole (“Ms Harpole”) and Mr Li Haifeng (“Mr Li”) as members.

2. Before the court is JSIT’s application for an order that the continued appointment of Mr Yang be challenged and that a substitute arbitrator be appointed by the Hong Kong International Arbitration Centre (“HKIAC”) as the Presiding Arbitrator in the Arbitration in place of Mr Yang on the grounds that there are justifiable doubts as to Mr Yang’s impartiality or independence and that he has misconducted himself in the arbitration proceedings. 

3. It will be seen that JSIT characterizes the conduct grounding this application as “misconduct” in the Originating Notice of Motion and the supporting evidence essentially because it says that such conduct gives arise to justifiable doubts as to Mr Yang’s impartiality or independence.  The acts/omissions complained of therefore come within Article 12 of the UNCITRAL Model Law on International Commercial Arbitration (“the Model Law”) which governs the Arbitration :

“(1)    When a person is approached in connection with his possible appointment as an arbitrator, he shall disclose any circumstances likely to give rise to justifiable doubts as to his impartiality or independence.  An arbitrator, from the time of his appointment and throughout the arbitral proceedings, shall without delay disclose any such circumstances to the parties unless they have already been informed of them by him.

(2) An arbitrator may be challenged only if circumstances exist that give rise to justifiable doubts as to his impartiality or independence, or if he does not possess qualifications agreed to by the parties.  A party may challenge an arbitrator appointed by him, or in whose appointment he has participated, only for reasons of which he becomes aware after the appointment has been made.”

4. More particularly, JSIT makes the following specific complaints :

(1)    Complaint 1 : that Mr Yang failed to disclose his relationship with the solicitors for ZTE, Messrs. Freshfields Bruckhaus Deringer (“Freshfields”), in particular, the handling solicitor, Mr Michael Joseph Moser (“Mr Moser”), prior to accepting appointment as the Presiding Arbitrator in the Arbitration;

(2) Complaint 2 : that having failed to make disclosure, Mr Yang then refused to answer JSIT’s enquiries in relation to his relationship with Freshfields and Mr Moser during the course of the Arbitration;

(3) Complaint 3 : that Mr Yang failed to act impartially and independently in the Arbitration;

(4) Complaint 4 : that Mr Yang was and is incapable of acting impartially and independently in the Arbitration;

(5) Complaint 5 : that Mr Yang rejected JSIT’s challenge against him, decided the matter himself and refused or failed to give reasons for his decision in writing.

Although JSIT puts forward five separate grounds of complaint, I am invited to consider their cumulative effect.

5. Although JSIT made these complaints in the correspondence preceding this application and in the evidence in support of this application in language and tone that gave me the impression that JSIT was alleging actual bias on the part of Mr Yang, Mr Jonathan Wong, Counsel for JSIT, puts JSIT’s case in submission on the footing of apparent bias.  I will proceed accordingly.

THE UNDERLYING ARBITRAL PROCEEDINGS

6. The background from which this application arose is as follows.

The dispute

7. The Arbitration, commenced by JSIT’s Notice of Arbitration dated 8 March 2005, arose out of two agreements (“the Agreements”) for the development, manufacture and sale of CDMA 1.9GHz PCS Terminal :

(1) “the Co-operation Agreement” which was an agreement dated 8 February 2002 between JSIT, ZTE and one Cosmo Telecom Technology Co. Ltd (“Cosmo”); and

(2) “the Purchase Agreement” which was an agreement dated 29 April 2002 between JSIT and ZTE.

Cosmo was subsequently acquired by ZTE and had its name changed to ZTE Mobile Technology Co. Ltd (“ZTEMT”).

8. In addition to claiming damages for alleged breaches by ZTE of the Agreements, JSIT also alleges infringement by ZTE of various intellectual property rights asserted by it (“the IPR Claims”).  ZTE disputes both sets of claims by JSIT and counterclaims for damages for the loss and damage caused to it by alleged breaches of the Agreements by JSIT.

Representation of the parties

9. JSIT is represented by Zhong Sheng Law Firm (“Zhong Sheng”) in Beijing and, since about February 2008, also by Messrs Deacons (“Deacons”) in Hong Kong while ZTE is represented by Guangdong Shentiancheng Law Firm in Shenzhen as well as Freshfields in Hong Kong.

10. With regard to Freshfields’ involvement, by a letter dated 19 August 2005 to the HKIAC, Freshfields advised the HKIAC that they were co-counsel acting for ZTE in the Arbitration.  This letter was marked with a file reference which included the initials “MJM” which denoted Mr Moser.  Mr Moser was the partner in Freshfields handling this matter from March 2005 to February 2006.  Mr Moser retired from the partnership of Freshfields as of March 2006.  Between March 2005 and February 2006, Mr Peter Yuen (“Mr Yuen”), then a senior associate with Freshfields, assisted Mr Moser.  In March 2006, Mr Yuen became the main handling solicitor for ZTE in the Arbitration.

Constitution of the Tribunal

11. The constitution of the Tribunal was not without incident.  Mr Yang’s appointment was preceded by the appointment of Mr Li (appointed by JSIT) and Ms Harpole (appointed for ZTE by the HKIAC).  In appointing Ms Harpole, HKIAC overrode ZTE’s nomination following objection by JSIT.

12. The choice of the Presiding Arbitrator in the Arbitration was the subject-matter of correspondence from July to October 2005 between the parties, their legal representatives, the HKIAC and the two members of the Tribunal appointed before Mr Yang.  The HKIAC initially proposed to appoint a local Leading Counsel to whose appointment JSIT objected because it preferred to have someone of a third nationality.

13. By a letter dated 6 October 2005, the HKIAC proposed to nominate Mr Yang and circulated copies of a fax of Mr Yang dated 26 September 2005 whereby he confirmed that he was available for the Arbitration and that he could act independently and impartially between the parties.  Attached to this fax was Mr Yang’s curriculum vitae by which he described himself in these terms : “Self-employed, full-time maritime and international trade arbitrator, handled maritime and international trade disputes since 1980; published/issued over 200 awards in the past 10 years as sole or co-arbitrator.  Arbitrate mainly in Hong Kong but also in London, Singapore and Beijing.”  It also set out his many achievements in the field of arbitration including his then current chairmanship of the HKIAC.

14. According to JSIT, there was not much information available to it (being a company in South Korea) or Zhong Sheng (being a law firm in Beijing) about Mr Yang or the appropriateness of his appointment save that he was then Chairman of the HKIAC.  Having had the Arbitration held up for sometime over the constitution of the Tribunal, JSIT was eager to proceed without any further delay.  In the absence of disclosure of any circumstances which would likely give rise to justifiable doubts as to Mr Yang’s impartiality or independence, JSIT agreed to Mr Yang’s appointment on 20 October 2005. 

15. Mr Yang was formally appointed by the HKIAC as the Presiding Arbitrator in the Arbitration on 21 October 2005. 

Progress of the Arbitration

16. Pleadings were closed on 25 May 2006 with the service of JSIT’s Statement of Defence to the Counterclaim on that date.

17. In addition to the claims and counterclaims, with regard to the IPR Claims, ZTE takes the view that the issues raised by such claims are not covered by the provisions for arbitration in the Agreements and contests the jurisdiction of the Tribunal in respect of the IPR Claims (‘the Jurisdictional Challenge”).  On 24 January 2006, ZTE requested the Tribunal to rule on the Jurisdictional Challenge pursuant to Article 16 of the Model Law as a preliminary issue.  Exchange of submissions on the Jurisdictional Challenge was completed on 22 May 2006.  On 22 March and 27 June 2006, ZTE repeated its request for the Jurisdictional Challenge to be decided as a preliminary issue.  JSIT opposed.  On 29 June 2006, the Tribunal decided against ZTE by deferring the determination of the Jurisdictional Challenge to the substantive hearing of the Arbitration on the ground that the Tribunal believed it would be better assisted if the whole case was heard in one single hearing.

18. By the same decision, the Tribunal also tentatively scheduled the hearing of the Arbitration to begin on 30 October through 3 November 2006.

19. However, it appears that dates for the substantive hearing of the Arbitration were thereafter fixed and re-fixed a number of times due, at least partly, to the time taken by the parties on various interlocutory applications (“the Interlocutory Applications”).

20. The Interlocutory Applications were :

(1) JSIT’s request for discovery of documents and information relating to the IPR Claims and verification of ZTE’s case (“the Basic Requests” as it is called by JSIT);

(2) JSIT’s request for discovery of various technical documents which JSIT says are necessary for an expert opinion to be obtained on technical similarities;

(3) JSIT’s request for authentication by an expert of two documents produced as Appendices 1 and 13 to ZTE’s Statement of Defence and Counterclaim to confirm that they were not newly fabricated;

(4) ZTE’s request for further and better particulars of the IPR Claims as set out in JSIT’s Statement of Claim;

(5) ZTE’s request for specific discovery of specification, test and design documents that would ordinarily be produced by a manufacturer in the design and production of mobile phones which ZTE says are relevant to the question whether the phones in issue were defective; and

(6) the issue whether JSIT should translate the technical documents disclosed by it from Korean into English.

JSIT’s dissatisfaction with Mr Yang

21. For the reason stated in §§69-70 below, with the exception of the Basic Requests (a chronology of which is annexed to this Judgment), it is not necessary for me to go into any detail as to how the Interlocutory Applications were argued between the parties or dealt with by the Tribunal.

22. It is sufficient for present purpose to note that by January 2008, JSIT began to suggest (which suggestions JSIT has repeated in the evidence in support of this application) that for no reason that JSIT could see or Mr Yang had given, Mr Yang was biased against JSIT and/or in favour of ZTE in the Interlocutory Applications throughout the Arbitration :

(1) Mr Yang failed either to deal with JSIT’s requests and applications or to do so in a timely, diligent and effective manner in that he :

(A) gave ZTE opportunity after opportunity to respond and comment despite ZTE’s repeated refusals and/or failures to do so or to do so responsively or constructively;

(B) left it to the parties to co-operate when it should have been apparent that ZTE was being evasive and/or was stalling;

(C) simply accepted ZTE’s assertions that it had nothing further to disclose;

(D) did not make any order against ZTE despite JSIT’s repeated requests and reminders;

(E) did not make any peremptory order against ZTE despite its non-compliance or delays in compliance with orders made against it;

(F) showed impatience at receiving communications from JSIT.

(2) In contrast, Mr Yang’s handling of the Interlocutory Applications by ZTE was glaringly different.  He was responsive, dealing with ZTE’s requests promptly, often within a day or two.  He readily expressed agreement with ZTE without first giving JSIT any or any proper or reasonable opportunity to respond or comment.  He made orders against JSIT in disregard of its explanations and protests.  He made peremptory orders against JSIT before any default by it. 

(3) In further contrast, when Mr Yang was travelling in November 2006, Ms Harpole and Mr Li promptly made an order against ZTE for disclosure of five out of the ten items of technical documents sought by JSIT and imposed a time limit for ZTE to do so, which order Mr Yang then compromised after his return when he allowed ZTE to stall disclosure of the technical documents ordered by taking issue with the wording of the undertakings as to confidentiality to be provided by JSIT and its expert and by exceeding the time limit imposed for such discovery.

The challenge against Mr Yang

23. According to JSIT, the perceived disparity in the treatment of the parties by Mr Yang prompted JSIT to conduct preliminary investigation into the relationship between Mr Yang, ZTE and Freshfields in December 2007, which led to JSIT’s discovery of the following about Mr Yang and Mr Moser :

(1) They were both sitting on the Council of the HKIAC, which fact JSIT says it learnt from the website of the HKIAC.

(2) They from time to time spoke at seminars and meetings together, which fact JSIT says it learnt from the internet.

(3) They were actually friends (which fact JSIT says it only learnt in February 2008 upon retaining Deacons to act for them in this matter).

JSIT inferred from the aforesaid the existence of “a very close relationship in social and/or professional aspects” and frequent meetings between Mr Yang and Mr Moser prior to Mr Yang’s said fax of 26 September 2005 to the HKIAC and appointment on 21 October 2005.

24. By a letter written in Chinese dated 7 January 2008 and bearing the caption “異議書” (letter of objection), JSIT complained to Mr Yang, in very strong accusatory and emotive language, about the injustice that it had suffered throughout the Arbitration, retracing the Interlocutory Applications and going into the merits of JSIT’s position and the demerits of ZTE’s stance in such applications as JSIT perceived them. 

25. JSIT held Mr Yang responsible for the injustice that it thought it had suffered and accused Mr Yang of actual bias, partiality and lack of independence.  To convey the flavor of this letter, JSIT wrote and I quote (from the agreed English translation) :

(1)   “However, the way that the case proceeded gave the applicant an increasingly strong feeling of being unjustly treated.  Based on the same consideration as above, we still maintained kind hopes on Mr Yang Liangyi that he could handle the case independently and impartially and this also expressed our sufficient respect on him.  Nevertheless, Mr Yang Liangyi did not give us the same respect as against our good faith and respect by repeatedly treating the applicant in the case unjustly.  As the presiding arbitrator, Mr Yang Liangyi shall be responsible for the injustice demonstrated in the following incident” (p.2)

(2)   “Mr Yang Liangyi’s indifferent and delaying attitude towards the applicant’s requests constituted a sharp contrast to his prompt and cooperative responses to ZTE’s requests.  It is all too clear that Mr Yang Liangyi’s treatment to the parties was biased and unjust.” (p.6)

(3)   “Why ZTE itself did not disclose the core technical documents after it required the applicant to disclose?  And why did Mr Yang Liangyi not order ZTE to proceed with the disclosure of the core technical documents either?  Is it a plot?” (p.7)

(4)   “However, despite the fact that the applicant submitted new evidence on 23 May and 25 September 2007 respectively, proving that ZTE906A was introduced into the market as early as in 2003, Mr Yang Liangyi failed to make any order or draw any adverse inferences against ZTE as he indicated and ignored the applicant’s application and the new evidence it submitted.  Was Mr Yang Liangyi making a fool of the applicant?  Such unfair treatment towards the two parties involved has reached an inconceivable extent.  We consider that any third party with a reasonable judging ability would not have done that.” (p.8)

(5)   “Obviously, no matter from the relevancy between the verification and the case or from the attitudes of the two parties, the reasons and evidence the applicant based on to apply for verification were enough to give rise to reasonable doubts as to the authenticity of the evidence in the Zhizun transaction.  The Arbitral Tribunal had no grounds of not giving support thereto.  Mr Yang Liangyi, nevertheless, rejected the applicant’s application without giving any reasons.  His subjective and partial acts were obvious.” (p.9)

(6)   “Is it that Mr Yang Liangyi, after knowing that he has to make an order or arrive at a conclusion in respect of the disclosure of ZTE’s technical documents, has used another method to safeguard ZTE’s interests by exercising his power and artificially imposing an obstacle on the attainment of the applicant’s rights?” (p.10)

(7)   “Mr Yang Liangyi, as the presiding arbitrator, having treated the two parties in such an unequal manner during the whole course of the arbitral proceedings, has obviously been in serious breach of the above moral standards and arbitration requirements.  Mr Yang shall bear responsibility for his partial acts.” (p.11)

(8)   “Judging from the series of extremely unreasonable and unjust treatment made by Mr Yang Liangyi to the applicant during the followed arbitration procedures, anyone would be doubtful about his impartiality and independence since the start.” (p.15)

(9)   “The applicant has fully noticed that the “Arbitration Ordinance” of Hong Kong and the “Model Law on International Commercial Arbitration” have established sufficient legal mechanisms for the arbitration parties to ensure that the arbitration shall proceed independently, fairly and impartially.  In view of this, any improper or malicious efforts will all be in vain.  The applicant will safeguard its legitimate interests according to the law.” (p.15)

26. JSIT seemed to attribute as a cause of Mr Yang’s alleged bias, partiality and lack of independence his relationship with Mr Moser.  JSIT posed these questions : Why did Mr Yang not consider it inappropriate for an international law firm such as Freshfields to use its firm name in acting for ZTE without clearly specifying the attorney handling the matter?  Why did he not question the concealment of the specific attorney in Freshfields who was acting for ZTE?  Why did he not ask for the identity of such attorney?   JSIT concluded that Mr Yang should know from the inclusion of Mr Moser’s initials in Freshfields’ file reference and Mr Moser’s email address (which spelt out his name) in the correspondence that Mr Moser was ZTE’s attorney.  JSIT asserted that the relationship between Mr Yang and Mr Moser was likely to give rise to justifiable doubts as to Mr Yang’s impartiality or independence.  JSIT criticized Mr Yang for not disclosing his relationship with Mr Moser prior to his appointment as the Presiding Arbitrator thereby depriving JSIT of the opportunity to object to his appointment.  It was said that the unjust treatment of JSIT by Mr Yang proved his partiality and lack of independence. 

27. JSIT requested the Tribunal, in particular, Mr Yang to make a direct reply to the various issues raised and to state his opinion whether it was appropriate for him to serve as the Presiding Arbitrator, threatening to refer his qualification to do so to this court for a ruling, if necessary. 

28. It is necessary for me to set out the ensuing correspondence in some detail because the manner in which Mr Yang handled and dealt with JSIT’s challenge of him forms the subject-matter of a specific complaint by JSIT against Mr Yang.

29. Mr Yang responded on the next day by :

(1) asking JSIT to confirm whether its challenge was directed against any other members of the Tribunal apart from him;

(2) if he was the only one being challenged, explaining the working of the Tribunal, i.e.

(A) that all interlocutory decisions were made only after full deliberation of the whole Tribunal;

(B) that the three members did not agree in every case;

(C) that that was why some of the interlocutory orders, directions and comments were stated to be by majority meaning that it was a decision by two members of the Tribunal;

(D) that he could be in the minority;

(3) indicating that if ZTE agreed to the challenge, the affected member(s) would have to withdraw;

(4) asking his co-arbitrators to speak up if he had made any unilateral decision, in which event he was willing to consider withdrawal forthwith.

30. On 9 January 2008, ZTE confirmed that it did not wish to challenge Mr Yang’s appointment.

31. By a fax dated 10 January 2008, Mr Yang said he welcomed the challenge to this court which would allow him the opportunity to openly explain and disclose the Tribunal’s deliberation process before exercising its interlocutory discretion, which was probably a lot more thorough than what JSIT would like to believe.

32. Then in a second fax message of the same date (in response to a fax by Zhong Sheng which does not appear to have been put in evidence), Mr Yang became pessimistic in the usefulness of any further explanation about the working of the Tribunal and ceased to be hopeful of pacifying JSIT and Zhong Sheng.  He volunteered to withdraw as the Presiding Arbitrator if ZTE agreed to release him but making clear that this offer had nothing whatsoever to do with JSIT’s accusations against him which were in his view wholly misconceived.  If ZTE did not agree to release him, he urged JSIT to commence the formal challenge in this court without any delay. 

33. ZTE reverted on 11 January 2008, refusing to agree to Mr Yang’s withdrawal.

34. In light of ZTE’s position, by a fax dated 11 January 2008, Mr Yang noted that :

(1) There was the further option of a voluntary withdrawal of the challenged arbitrator under Article 13(2) of the Model Law but he had decided not to take that way out because he had a duty to perform and discharge and because he intended to clear his name, openly if possible.

(2) The next step under Article 13(2) was for the Tribunal to decide on the challenge.  He had made clear to Ms Harpole and Mr Li with whom he had been in discussion that he would be happy to withdraw if they considered that he should do so.  However, they both wished to abstain.  Mr Li further took the view that the Tribunal had no jurisdiction to decide the challenge.

(3) Leaving the matter to himself, he rejected JSIT’s challenge.

(4) The next step was for JSIT to proceed to this court under Articles 13(3) within 30 days.

(5) He would be happy to explain the working of the Tribunal in procedural decisions once the matter went to this court.

35. JSIT did not respond until 1 February 2008.  It did so by asking Mr Yang to answer these 15 questions (“the Questions”) for the purpose of considering and, if necessary, preparing the application to this court :

“1.    How did you know Mr Michael Moser of [Freshfields]?  In what circumstances did you know each other? 

2.  How long have you known Mr Moser?

3.  How often do you meet with Mr Moser?

4.  What are the purposes of your meetings with Mr Moser?

5.  How often do you meet with Mr Moser for non-business related matters?

6.  What are the purposes of your non-business related meetings with Mr Moser?

7.  Apart from being co-members of the Council of the [HKIAC], do you and Mr Moser hold other public offices within the same institution or body?

8.  Are you an existing client of [Freshfields]?

9.  If not, were you a former client of [Freshfields]?  When was it?

10.    Whether you are an existing or a former client of [Freshfields], when did you first become its client?

11.    In the event that you are / were a client of [Freshfields], does / did it go through Mr Moser?

12.    Have you ever been instructed by [Freshfields] for any matter (for example as an expert witness)?

13.    If yes, when was the first instruction?

14.    When was the most recent instruction to you from [Freshfields]?

15.    Was / Is Mr Moser the handling or supervising solicitor for such matters in [Freshfields]?”

36. Mr Yang replied on the same date by saying that :

(1) JSIT was probably unfamiliar with litigation in Hong Kong.  There was no practice of discovery or cross-examination of judges or arbitrators.  He suggested that JSIT should consult “a competent Hong Kong lawyer in the practice”.

(2) In taking the serious step of raising a formal challenge, JSIT must have adequate grounds, supported by evidence rather than by speculations.

37. Deacons came onto the record at this juncture.  By a letter dated 8 February 2008, Deacons reiterated to Mr Yang the Questions and added a new one as to whether Mr Yang knew Mr Yuen through Mr Moser (hereinafter included in “the Questions”).  Answers to the Questions were said to be necessary to enable JSIT to prepare the application to this court.  Mr Yang was also asked to give written reasons for his rejection of JSIT’s challenge.

38. By a fax also of 5 February 2008, Mr Yang again declined to answer the Questions because :

(1) There was a vast difference between disclosure and cross-examination of the arbitrator, especially if the cross-examination appeared to be a fishing expedition.  If such cross-examination be allowed, any dissatisfied party could at anytime raise numerous and/or endless questions for the tribunal, especially the arbitrator nominated by the opposite party, to answer.

(2) He firmly believed that his social and professional relationship with Mr Moser was irrelevant, noting that the arbitral circle was small and everyone knew each other and that he had friends in virtually every law firm handling arbitration cases.

(3) He informed JSIT that the challenge was then before the HKIAC and suggested that JSIT communicate with the HKIAC, following its challenge rules.  He would be happy to answer any relevant questions that the HKICA’s Committee may have for him.  He concluded as follows : “As I have said before, your client has raised a serious challenge against me must have good grounds and supported by adequate evidence already.  I sincerely hope and believe it is not an expensive exercise just to embarrass me.”

39. The present application was made by Originating Notice of Motion issued on 6 February 2008.  All further proceedings in the Arbitration have since been suspended.

ANSWERS TO THE QUESTIONS AND MORE

Mr Yang’s relationship with Freshfields

40. Mr Yuen has confirmed by §32 of his 1^st Affirmation made on 8 April 2008 and §7 of his 2^nd Affirmation made on 25 April 2008 that :

(1) Mr Yang is not and has never been a client of Freshfields, nor have Freshfields ever instructed Mr Yang for any matter. 

(2) Mr Yuen was not introduced to Mr Yang through Mr Moser. 

41. As for Mr Yang, by an Order dated 21 February 2008 made by Mr Justice Burrell, leave was given to Mr Yang to file evidence on or before 18 April 2008, if so advised, and to make representations at the hearing.  Mr Yang chose to explain the following matters by two letters dated 18 and 22 April 2008 addressed to Deacons and Freshfields and copied to Ms Harpole, Mr Li and the HKIAC.

Mr Yang’s social and professional relationship with Mr Moser

42. Mr Yang says he cannot provide answers to Questions 1-7.  For instance, he cannot recall when he first met Mr Moser (though there was a photograph of them together taken about 20 years ago at the signing of the cooperation agreement between the HKICA and the China International Economic and Trade Arbitration Commission (“CIETAC”).  Nor has he kept an account of his encounters with Mr Moser over the years. 

43. His relationship with Mr Moser is strictly professional and social in arbitration-related matters.  They have known each other for a long time.  They have met a lot.  They are co-members of many arbitral institutions other than the HKIAC, e.g. the ICC-HK Arbitration Sub-committee, the Asia-Pacific Regional Arbitration Group (of which they are President and Vice-President), the Council of CIETAC, etc. 

44. Mr Yang has similar relationships with virtually all law firms in Hong Kong handling arbitration cases on a consistent basis.  Given his long full-time experience in maritime arbitration, he has far closer professional and social relationships with four to five leading shipping law firms in Hong Kong than with Freshfields.  He receives at least several appointments to arbitrate each year from each of these firms.  Arbitration is a very small circle in Hong Kong.  An arbitrator having no professional or social relationship with any individuals in a law firm is unlikely to be nominated or appointed.

45. Mr Yang cannot recall having ever been appointed by Freshfields.  Mr Yang sounds a reminder that he was appointed by the HKIAC in the Arbitration.  That being the case, he did not even have any initial contact with Mr Moser at or before his appointment. 

46. Mr Yang has never talked to Mr Moser about this case.

The working of the Tribunal

47. Mr Yang expands on what he had already disclosed in his letter dated 8 January 2008 about the process of interlocutory decision-making followed by the Tribunal.  Mr Yang consulted and discussed with Ms Harpole and Mr Li in every interlocutory decision.  Whenever he received a party’s application, he went to his co-arbitrators, usually with a draft order or direction and asked for their comments and/or approval.  The draft served to provide a basis for further discussion.  In most cases, Ms Harpole and Mr Li reverted with their views and the draft orders or directions had to be amended before the final versions could be sent out to the parties.  In other words, all three arbitrators participated fully in making the interlocutory decisions.  There were disagreements from time to time.  Mr Yang’s view would become a decision of the Tribunal only if it had the support of at least one other member of the Tribunal.  A decision by majority would be stated as such.

48. As for the individual Interlocutory Applications, since an arbitrator is not required to give reasons for interlocutory decisions, Mr Yang will not now explain why the Tribunal ruled on the Interlocutory Applications as it did.  However, he does dispel the suggestion that the order for disclosure by ZTE of five items of the technical documents sought by JSIT contained in Ms Harpole’s fax dated 14 November 2006 to Freshfields was made by Ms Harpole and Mr Li behind Mr Yang’s back when he was travelling.  Mr Yang produces an email dated 7 November 2006 from him to his co-arbitrators, setting out his initial views that eight out of the ten items asked for by JSIT ought to be disclosed.

COMPLAINTS 1 AND 2

49. The same test applies in determining an issue of apparent bias on the part of arbitrators as it does to judges : AT&T Corp v. Saudi Cable Co. [2000] 2 All ER (Comm) 625 (CA), per Lord Woolf MR at pp.637-638, §§39-40.  

50. The parties agree that that test is 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 (In re Medicaments Related Classes of Goods (No 2)) [2001] 1 WLR 700 (CA), per Lord Philips at pp.722-723, §69 and Potter v. Magill [2002] 2 WLR 37 (HL(E)), per Lord Hope of Craighead at pp.83-84, §§102-103.  They agree rightly.  The “reasonable apprehension of bias” test was applied by Deputy High Court Judge J. Poon (as he then was) in Deacons v. White & Case LLP, unreported, HCA2433/2002, 9 June 2003, §7 (the relevant part of which was set out in Deacons v. White & Case LLP (2003) 6 HKCFAR 322, p.332, §27).  Deputy Judge J. Poon’s approach was approved by the Court of Appeal in Deacons v. White & Case LLP [2003] 2 HKLRD 840, pp.845-846.  Although in response to the 3^rd and 4^th defendants’ application for leave to appeal to the Court of Final Appeal, the Appeal Committee considered it unnecessary to comment definitively on the applicable test because this question did not divide the parties or the lower courts, we are bound by the Court of Appeal’s adoption of the test propounded in Director General of Fair Trading v. Proprietary Association of Great Britain and Potter v. Magill.  This test was also followed by Burrell J in Pacific China Holdings Ltd v. Grand Pacific Holdings Ltd [2007] 3 HKLRD 741.

51. The test is not whether the particular litigant thinks or feels that the judge has been or may have been biased : per Chadwick LJ in Taylor v. Lawrence endorsed by the 5-member Court of Appeal [2002] 2 All ER 353, per Lord Woolf CJ at p.375, §69 and p.376, §75.  The following points raised by JSIT are therefore irrelevant for present purpose :

(1) JSIT has genuine grievances against Mr Yang.  The challenge of Mr Yang is not an attempt to derail the Arbitration (which I am prepared to assume in favour of JSIT).

(2) Neither JSIT nor its then sole advisor, Zhong Sheng, is resident in Hong Kong.  They are therefore ignorant of or unfamiliar with what is or might have been “in the public domain” in Hong Kong.

(3) JSIT objected to the appointment of the first candidate nominated as Presiding Arbitrator by the HKIAC.  Had Mr Yang disclosed his relationship with Mr Moser (though now accepted by JSIT to be not of a disqualifying nature) prior to his appointment, JSIT would have rejected him too.

52. What matters is the viewpoint of the hypothetical objective fair-minded and informed observer.  Such an observer was described as follows by Kirby J in Johnson v. Johnson (2000) 201 CLR 488 at pp.508-509, §53, which description was cited as being worth repeating in full by Burrell J in Pacific China Holdings Ltd v. Grand Pacific Holdings Ltd at p.749, §16 :

“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.  The bystander would be taken to know commonplace things, such as the fact that adjudicators sometimes say, or do, things that they might later wish they had not, without necessarily disqualifying themselves from continuing to exercise their powers.  The bystander must also now be taken to have, at least in a very general way, some knowledge of the fact that an adjudicator may properly adopt reasonable efforts to confine proceedings within appropriate limits and to ensure that time is not wasted.  The fictitious bystander will also be aware of the strong professional pressures on adjudicators (reinforced by the facilities of appeal and review) to uphold traditions of integrity and impartiality.  Acting reasonably, the fictitious bystander would not reach a hasty conclusion based on the appearance evoked by an isolated episode of temper or remarks to the parties or their representatives, which was taken out of context.  Finally, a reasonable member of the public is neither complacent nor unduly sensitive or suspicious.”

53. 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.

56. JSIT has, through Mr Wong, accepted that the relationship between Mr Yang and Mr Moser as disclosed by Mr Yang in his letters of 18 and 22 April 2008 is not a disqualifying relationship.  This must, in my view, be right in light of the above-mentioned principles.  It would not occur to the objective onlooker in possession of the following relevant facts and circumstances to even consider it possible that Mr Yang was influenced to favour ZTE with whom he had no relationship whatsoever merely because ZTE happened to be represented in the opening stage of the Arbitration by a solicitor with whom he had a social and professional relationship in arbitration-related matters :

(1)  The international arbitration circle in Hong Kong is small.  Frequent contacts between persons which are active in this area are to be expected.  Links and connections can arise without calling into question independence and impartiality between colleagues.

(2)  Both Mr Yang and Mr Moser (whose profile on the internet is adduced in evidence) are senior, highly experienced and well-respected practitioners in international arbitration in Hong Kong and overseas. 

(3)  Both can be expected to observe high standards of integrity.

(4)  Given the time they have respectively been involved and the standing they have respectively attained in international arbitration in Hong Kong and elsewhere, the social and professional interactions described by Mr Yang are not and cannot be said to be out of the ordinary.  One would have expected them to know or even be very familiar with each other.

(5)  That relationship is open given what JSIT managed to find out about it from the internet and from instructing a local firm of solicitors. 

(6)  Freshfields and Mr Moser’s representation of ZTE has likewise been open at all material times.  Correspondence emanating from Freshfields were marked with a file reference which included what anyone more familiar with legal practice in Hong Kong would have realized to be Mr Moser’s initials thereby signifying his involvement in the matter. 

(7)  Mr Yang was in fact nominated and appointed by the HKIAC, not by Freshfields.

(8)  In any event, Mr Moser ceased acting for ZTE before the close of pleadings and before the Arbitration became procedurally contentious.

(9)  The Tribunal did rule against ZTE in favour of JSIT on whether the Jurisdictional Challenge should be decided as a preliminary issue and on five items of technical documents sought by JSIT from ZTE.

57. There is, however, a distinction between circumstances which give rise to a duty to disqualify and those which give rise to a duty to disclose.  A failure to disclose, of itself, can be one of the circumstances which together with others may give rise to a reasonable apprehension of bias as a party or the public may well be left with the impression that there was intentional concealment or non-disclosure, or that something was “wrong about it all”.  A failure to disclose, no matter how unwitting, can undermine public confidence in the integrity of, and the administration of justice by, the judicial officer or the tribunal concerned. See Merkel J’s judgment in Aussie Airlines Pty Ltd v. Australian Airlines Pty Ltd at pp.758-759.

58. The facts to be disclosed are not confined to those warranting or perceiving to be warranting disqualification but those that might found or warrant a bona fide application for disqualification : per Merkel J in Aussie Airlines Pty Ltd v. Australian Airlines Pty Ltd at p.759.

59. JSIT does not accept that Mr Yang has now by his letters of 18 and 22 April 2008 made full disclosure of his relationship with Mr Moser.  Counsel refers to Questions 1-7 which he says Mr Yang has not answered fully.  That presupposes that Mr Yang was in the first place obliged to answer those questions, with which proposition I disagree for reasons to be set out below.  Given the nature and length of the relationship in question, I have no reason to doubt Mr Yang’s statement that he cannot answer questions about that relationship in the great detail demanded by JSIT.  In my opinion, the information given by Mr Yang in his letters of 18 and 22 April 2008 sufficiently conveys the nature/tenor of the relationship between Mr Yang and Mr Moser.  The objective onlooker does not need to get bogged down by say the date, time and place of the occasion at which these 2 gentlemen first became acquainted.

60. JSIT contends that Mr Yang should have disclosed his relationship with Mr Moser prior to his appointment because such relationship, though not disqualifying, might found or warrant a bona fide application for disqualification.

61. Mr Wong seeks to derive assistance from Mr Yang’s letter dated 22 April 2008, the penultimate paragraph of which ends as follows :

“I believe the issue here is, can an arbitrator who has a professional and social relationship with a member in one of the parties’ law firm be allowed to sit.  I believe it is now beyond the stage of my failure to disclose relationship at the time of appointment, rightly or wrongly.”

Mr Wong construes the underlined sentence as suggesting that Mr Yang now accepts that he could be wrong in not making disclosure of his relationship with Mr Moser.  I am not sure that this is the meaning intended by Mr Yang.  More importantly, I am not concerned with whether Mr Yang might look at things differently now.  I am here to consider how the objective onlooker would regard the matter.

62. Whether particular facts might or might not found or warrant a bona fide application for disqualification must, to my mind, be assessed with reference to how the fictitious fair-minded and informed observer (having the attributes described by Kirby J) would look at those facts.

63. Lord Woolf CJ sounded a caution to adjudicators to be circumspect about declaring the existence of a relationship where there was no real possibility of it being regarded by a fair-minded and informed observer as raising a possibility of bias.  If such a relationship was disclosed, it necessarily raised an implication that it could affect the judgment and approach of the judge.  If that was not the position, no purpose was served by mentioning the relationship : Taylor v. Lawrence, at p.370, §64.  In Taylor v. Lawrence, the judge informed the parties at the trial of a boundary dispute on 9 November 1999 that the claimants’ solicitors had prepared and were holding his and his wife’s wills but that it had been many years since he had instructed them.  The defendants were unrepresented and did not object to the judge continuing to hear the case.  After judgment was given for the claimants, the defendants appealed on the ground, inter alia, that there was an appearance of bias because of the judge’s relationship with the claimants’ solicitors.  Before the hearing of the appeal, it transpired that the judge had not disclosed the fact that at the time of the trial he had made arrangements to attend the claimants’ solicitors’ office and meet with persons from the claimants’ solicitors to execute a codicil and have it witnessed on 11 November 1999 which would be immediately after hearing the closing submissions and the day before he was to give judgment.  As it turned out, their signatures were witnessed by, inter alia, a secretary who had worked in the litigation department of the claimants’ solicitors and whose initials had appeared (with the initials of another) on some letters to the defendants.  The judge however made clear that he had not discussed the case with anyone from the claimants’ solicitors.  Subsequent to the dismissal of the appeal, the defendants found out that the judge had not been rendered a bill for the services of the solicitors.  The defendants applied to reopen the appeal on the basis that the judge had received a financial benefit from the solicitors which he had failed to disclose and that the earlier appeal had been dismissed in ignorance of that fact.  The Court of Appeal held that the judge was not required to raise his personal relations with the claimants’ solicitors and it was a mistake to do so.  It was unthinkable that an informed observer would regard it as conceivable that a judge would be influenced to favour a party with whom he had no relationship merely because that party happened to be represented by solicitors who were acting for the judge in a purely personal matter in connection with a will (p.376, §§73-74).

64. It is, to my mind, equally unthinkable that an objective and fair-minded observer, informed as to the relationship between Mr Yang and Mr Moser and the other relevant facts and circumstances mentioned in §56 above, would even consider applying for Mr Yang’s disqualification.

65. And logically, if Mr Yang was not required to disclose his relationship with Mr Moser prior to his appointment as the Presiding Arbitrator in the Arbitration, he should not be held to any obligation to answer questions or otherwise explain about that relationship so that a failure to explain could be suggestive of bias, especially when the questions put do not appear to have arisen from any or any proper basis.  Questions 9-12 which ask if Mr Yang is or was a client of Freshfields immediately come to mind.  I have not been directed to any material which hints at the existence of a solicitor and client relationship between Freshfields and Mr Yang.

66. Indeed, I am at a loss as to why JSIT considers it necessary to have the details sought to be elicited by the Questions.  By late 2007/early 2008, JSIT had ascertained from other (public) sources the matters set out in §23 above and deduced therefrom the existence of “a very close relationship in social and/or professional aspects” and frequent meetings between Mr Yang and Mr Moser prior to Mr Yang’s appointment to preside at the Arbitration.  At the risk of repeating myself, I do not see how the relationship assumed by JSIT to have existed between Mr Yang and Mr Moser is different in nature/tenor from that alluded to by Mr Yang in his letters dated 18 and 22 April 2008 for the purpose of the application before me.  

67. Mr Wong places reliance on Bithrey Construction Ltd v. Edmunds, unreported, QBD, 29 July 1996, the facts of which he says are not dissimilar to the facts of the present case.  In that case, Clark J removed an arbitrator on the ground that in all the circumstances he had conducted the proceedings in such a way that it was apparent to a reasonable man that there was a real danger of bias.  Those circumstances were : (1) non-disclosure to the claimants that he was acquainted with the handling solicitor of the firm acting for the respondents as an advocate in other arbitration proceedings pending before the arbitrator, as instructing solicitor in respect of a prospective arbitration in which the arbitrator had been retained as an expert witness and as fellow officers of the Devon & Cornwall Discussion Group at the Western Counties Branch of the Chartered Institute of Arbitrators; (2) the arbitrator’s failure to respond when invited by the respondents’ solicitors to make disclosure to the claimants; (3) the use of intemperate language in correspondence with the claimants’ solicitor when the latter invited him to withdraw and (4) ordering the claimants to pay security for costs without giving either party an opportunity to consider the advice that the arbitrator had obtained thereon from his own accountant.  With regard to the acquaintance between the arbitrator and the respondents’ solicitor, Clarke J said at p.4 of the Lexis transcript that it appeared to him that there was no reason to think that the nature of that acquaintance in any way impugned the impartiality of the arbitrator, but it did seem to him that it would have been appropriate for the arbitrator to respond to that letter so that the claimants might see the true nature of the position as it appeared to the arbitrator.  I am afraid I do not find this decision as helpful as Mr Wong thinks it would be.  The respondents’ solicitors’ letter pretty much disclosed the details of the association that might be objected to.  The learned judge did not set out his reasoning as to why and how the lack of a response by the arbitrator to this letter rendered it apparent to a reasonable man that there was a real danger of bias on the part of the arbitrator.

68. For the sake of completeness, I should also mention Mr Wong’s citation of the following statement made by Deputy Judge Bokhary QC (as he then was) in Asia Construction Co. v. Crown Pacific Ltd [1989] 1 HKC 387 at p.391H :

“If an arbitrator has decided an issue without a proper hearing, and the question then arises whether there is any real likelihood that he could not, or would not, fairly determine it if it is re-submitted to him for a proper hearing, a reasonable man is inherently less likely to be apprehensive if the arbitrator fully recognized, rather than denied or minimized, his error upon it being pointed out to him.”

To put this remark in the context, the arbitrator mistook the submissions as to whether certain questions concerning part of the claim should be dealt with as a preliminary issue as submissions on the preliminary issue itself and made an interim award embodying his decision on the proposed preliminary issue.  Upon the claimant’s application to set aside the award and to remove the arbitrator, the arbitrator maintained that there had been no breach of natural justice and stated that he would be prepared to re-open the award if remitted to him.  This statement has no application to Mr Yang who did not err given my ruling that he was not required to disclose his relationship with Mr Moser in the first place.

COMPLAINTS 3 AND 4

69. At the hearing before me on 9 May 2008, JSIT has acknowledged through Mr Wong that the working of the Tribunal as explained by Mr Yang in his letter of 18 April 2008 made it difficult for JSIT to maintain the charge of partiality arising from JSIT’s perception of inequality of treatment of the parties based on the results of the Interlocutory Applications. 

70. Mr Wong expressly confines Complaints 3 and 4 to the two matters mentioned in his Skeleton Argument.  They are :

(1)  that the Tribunal has never properly dealt with the Basic Requests; and

(2)  that the Tribunal had used “intemperate language” in the correspondence with the parties.  A letter dated 11 December 2006 from Mr Yang to JSIT is identified in this context.

The Basic Requests

71. To avoid cluttering up this Judgment with a recital of the somewhat tedious correspondence pertaining to the Basic Requests, I attach a chronological summary of what appears to be the material correspondence between JSIT, ZTE and the Tribunal on the Basic Requests.

72. In short, JSIT is dissatisfied with the Tribunal for not making any order against ZTE after 1½ years to disclose certain outstanding documents which ZTE has repeatedly claimed to be non-existent and which JSIT insists must exist.

73. In my view, an objective fair-minded and informed observer would not jump to the conclusion of a real possibility that Mr Yang was biased against JSIT from the fact that the Tribunal made no order against ZTE for the discovery of documents, the existence of which was in dispute between the parties.

74. Firstly, the mere fact that a party has repeatedly lost his arguments, without more, does not of itself call into question the adjudicator’s impartiality or independence.  The losing party’s arguments could simply be bad.  Even if the adjudicator did err, mistake(s) should not, without more, give rise to doubts as to the adjudicator’s impartiality or independence.  He could have just erred without having been influenced by any bias, conscious or unconscious.

75. Secondly, in the absence of any allegation or evidence to the contrary, I assume that the Tribunal processed the Basic Requests in the same way as it has done in respect of the other Interlocutory Applications as disclosed by Mr Yang in his letter dated 8 January and 18 April 2008 (which were copied to both Ms Harpole and Mr Li).  That is to say, although the letters to the parties from the Tribunal were issued by Mr Yang, they embodied the unanimous or majority views of the Tribunal, reached after consultations and discussions between all three members.

76. Thirdly, the Tribunal has on 22 December 2006, 4 January and 13 November 2007 indicated :

(1) that it would not order ZTE to disclose documents that it was adamant that it did not have;

(2) that ZTE would be precluded from producing any documents said by it to be non-existent;

(3)  that if JSIT could show that the documents it sought must or ought to exist, the Tribunal may at the hearing of the Arbitration draw adverse inferences against ZTE in the absence of an acceptable explanation for non-disclosure. 

An objective onlooker would consider such an approach to be both practical and sensible.  Indeed, I do not see how a court of law would have disposed of this matter differently.  See, for example, Hong Kong Civil Procedure 2008, Volume 1, p.473, §24/7/1.

Mr Yang’s letter dated 11 December 2006

77. JSIT takes issue with the first paragraph :

“The Tribunal refers to your 10-page fax this morning, which appears to have crossed with that of the Tribunal.  We are dismayed by the tendency to make excessive and untimely submissions and arguments, apparently without regard for the Tribunal’s earlier warnings concerning steps which trigger delay and unnecessary escalation of costs.”  [Emphasis added]

78. I do not consider it necessary for me to go into the question whether the underlined part could be justified or not.  This is the only incident of use of intemperate language identified and relied upon by Mr Wong.  The short answer to this limb of Complaints 3 and 4 is that as said by Kirby J in Johnson v. Johnson, the fictitious bystander would be taken to know that adjudicators sometimes say, or do, things that they might later wish they had not, without necessarily disqualifying themselves from continuing to exercise their powers.  Acting reasonably, he would not reach a hasty conclusion based on the appearance evoked by an isolated episode of temper or remarks to the parties or their representatives, which was taken out of context. 

79. Mr Wong again relies on Bithrey Construction Ltd v. Edmunds.  I have to say I do not find it constructive to compare different “intemperate language” used in a different case as the question is obviously one of degree and extent. 

COMPLAINT 5

80. Article 13 of the Model Law provides that :

“(1)    The parties are free to agree on a procedure for challenging an arbitrator, subject to the provisions of paragraph (3) of this article.

(2) Failing such agreement, a party who intends to challenge an arbitrator shall, within 15 days after becoming aware of the constitution of the arbitral tribunal or after becoming aware of any circumstance referred to in article 12(2), send a written statement of the reasons for the challenge to the arbitral tribunal.  Unless the challenged arbitrator withdraws from his office or the other party agrees to the challenge, the arbitral tribunal shall decide on the challenge.

(3) If a challenge under any procedure agreed upon by the parties or under the procedure of paragraph (2) of this article is not successful, the challenging party may request, within 30 days after having received notice of the decision rejecting the challenge, the court or other authority specified in article 6 to decide on the challenge, which decision shall be subject to no appeal; …”

81. Apart from Article 13, I have not been pointed by either party to any other challenging procedure binding on this Arbitration.  Nor did JSIT and ZTE agree on a procedure for challenging Mr Yang. 

82. JSIT makes the following criticisms about the course taken by Mr Yang in rejecting JSIT’s challenge, which course, JSIT says, reasonably led to it losing confidence in Mr Yang :

(1)  himself participating in the rejection;

(2)  not giving either JSIT or ZTE the opportunity to make submissions on Ms Harpole and Mr Li’s expressed intention to abstain;

(3)  failing to consult the HKIAC, the appointing body;

(4)  rejecting the challenge before he fully understood the objections; and

(5)  refusing to give reasons for rejecting the challenge.

It is said that Mr Yang did not fully understand JSIT’s objections because Mr Yang subsequently asked Deacons by a letter dated 19 February 2008 for full particulars of JSIT’s allegations against him as he was considering making a statement to the parties so that they could deliberate on the next step.

83. In support, Mr Wong refers to and relies on the possible procedure recommended to an arbitrator invited to resign in Bernstein’s Handbook of Arbitration and Dispute Resolution Practice ,Volume 1, §2-296 :

“The arbitrator should therefore proceed as follows : he should obtain full particulars, in writing, of the objections; he should consult with his appointing party or body; he should decide for himself whether he thinks the objection is well founded; or that there is a sufficient appearance of bias to merit resignation.  If yes, he should offer to resign and leave it to the parties to sort out.  If no, he should say that he considers that the challenge is unjustified, but that he will resign if asked to by both parties or the court.  Only in extreme circumstances should he resign without the agreement of his appointer; and only in an extreme situation should he himself enlist the aid of the court on this.”

84. While I agree that the above advice is full of good sense, the fact that an arbitrator did not follow such advice to the letter in dealing with a party’s challenge should not necessarily cause concern that he was or might be biased against the party challenging him.

85. The question to be asked is whether an objective fair-minded and informed observer, having considered the relevant facts, would conclude from Mr Yang’s rejection of JSIT’s challenge that there was a real possibility that he was biased against JSIT.  I agree with Mr Timothy Harry, Counsel for ZTE, that what JSIT subjectively thinks, or thought, of the matter is irrelevant. 

86. The objective bystander would see from the correspondence between JSIT, ZTE and Mr Yang after JSIT’s letter of objection dated 7 January 2008 that :

(1)  Mr Yang took the first opportunity available to explain in his letter dated 8 January 2008 the working of the Tribunal in making interlocutory decisions.  Although Mr Yang’s subsequent letter of 18 April 2008 is more detailed, the earlier letter did provide a sufficient picture.  The explanation of the working of the Tribunal (which has caused JSIT to withdraw the bulk of Complaints 3 and 4) shows Mr Yang’s appreciation of JSIT’s complaint that it had been treated unfairly in the Interlocutory Applications.  His later request for full particulars of JSIT’s allegations against him was made in the context of Mr Yang proposing to deal with such allegations for the purpose of these proceedings. 

(2)  Mr Yang expressed at a very early stage his strongest desire to have JSIT’s challenge resolved as soon as possible. 

(3)  Mr Yang clearly regarded the charges against him as being “wholly misconceived”.  He was entitled not to resign of his own accord.

(4)  However, he twice offered to withdraw if ZTE agreed to release him.  ZTE expressly did not wish to challenge Mr Yang and refused to release him.

(5)  He also indicated willingness to step down if his co-arbitrators considered that he should do so.  Ms Harpole and Mr Li were copied all of Mr Yang’s letters.  They opted for abstention.

(6)  It was clear that Mr Yang considered this court to be the forum for the resolution of JSIT’s challenge.  In this regard, he twice pressed for JSIT to bring the challenge to this court on 10 January 2008 before he rejected the challenge on 11 January 2008.  Under Article 13(3), the challenging party may resort to this court only if the challenge was unsuccessful before the arbitral tribunal.  A rejection of the challenge was necessary for this court’s jurisdiction under Article 13(3) to be invoked.

(7)  Before the commencement of these proceedings, the challenge was in fact placed before the HKIAC with an invitation from Mr Yang to JSIT to follow the HKIAC’s challenge rules and an offer to answer any relevant questions that the HKIAC’s Committee may have for him.

87. To my mind, an objective fair-minded and informed observer who has read the challenge correspondence in context and noted therefrom the aforesaid points would not conclude that there was any real possibility that Mr Yang was or might be biased against JSIT.

88. For the foregoing reasons, JSIT’s application falls to be dismissed. For the avoidance of doubt, I have considered Complaints 1 to 5 cumulatively but am of the opinion that they fall short of what is required to raise any or any justifiable doubts as to Mr Yang’s impartiality or independence, even if looked at together.

89. I also make an order nisi that JSIT should pay ZTE the costs of this application, including costs previously reserved, to be taxed if not agreed.

The Basic Requests