Singapore Court Refuses Set Aside Under Article 34 Model Law

In CDM & Ors v CDP [2020] SGHC 141, the High Court of Singapore dealt with disputes arising out of the construction of an offshore drilling rig.  The arbitration proceedings culminated in a partial arbitration award rendered in the Defendant’s favour, which it sought to enforce; the Plaintiffs applied to set the award aside.

The Plaintiff’s grounds were as follows:

  • that the Award was made in excess of the Tribunal’s jurisdiction, in breach of Article 34(2)(a)(iii) of the UNCITRAL Model Law; and
  • that the Award was made in breach of the Plaintiffs’ right to present its case, in violation of Article 34(2)(a)(ii) of the Model Law and/or in breach of the rules of natural justice, in violation of s 24(b) of the Act.

Article 34(2)(a)(iii) of the Model Law

On the facts of the case, the Court held that the Tribunal did act within the scope of submission and the Award did not exceed its jurisdiction. 

As to the applicable law, the Court stated (@59 -61):

“When a party seeks to challenge an arbitral award on the ground that the award (or part thereof) determined matters that were not within the scope of submission to arbitration, as noted in Sui Southern Gas Co Ltd v Habibullah Coastal Power Co (Pte) Ltd [2010] 3 SLR 1 at [34], the task of the court is to ascertain:

(a) the matters which were within the scope of submission to the arbitral tribunal; and (b) whether the arbitral award (or the part being impugned) involved such matters, or whether it was a “new difference” which would have been “irrelevant to the issues requiring determination” by the arbitral tribunal.”

“In PT Prima International Development v Kempinski Hotels SA and other appeals [2012] 4 SLR 98 (“PT Prima”), the Court of Appeal explained that the “role of pleadings in arbitral proceedings is to provide a convenient way for the parties to define the jurisdiction of the arbitrator by setting out the precise nature and scope of the disputes in respect of which they seek the arbitrator’s adjudication” (at [33]). The Court of Appeal also noted, at [34], that in order to determine whether an arbitral tribunal had jurisdiction to adjudicate on and render an award on a particular dispute, “it is necessary to refer to the pleaded case of each party to the arbitration and the issues of law and fact that are raised in the pleadings to see whether they encompass that dispute.”

“In addition to the pleadings of the parties, the court may also refer to the list of issues agreed by the parties, as a reference point for determining what issues or matters were within the scope of submission (see for example, GD Midea Air Conditioning Equipment Co Ltd v Tornado Consumer Goods Ltd and another matter [2018] 4 SLR 271 at [43]).”

In addition, the Court held that there was in any event no prejudice suffered by the Plaintiffs as they had ample notice of all of the issues that were in the arena, at the latest, prior to the commencement of the oral hearing.

Article 34(2)(a)(ii) of the Model Law

On the facts of the case, the Court held that the Plaintiffs were aware of the Defendant’s case and had, not just reasonable, but ample opportunity to respond to it. Further, the Tribunal’s reasoning and decision in the Award were based on the issues placed before it and arguments advanced by the parties.

The Court summarised the relevant legal principles (@84 – 87)

“It is a well-entrenched principle in our arbitration jurisprudence that any party seeking to challenge an arbitral award on the ground that there has been a breach of natural justice must establish the following (L W Infrastructure Pte Ltd v Lim Chin San Contractors Pte Ltd [2013] 1 SLR 125 (“L W Infrastructure”) at [48], affirming Soh Beng Tee & Co Pte Ltd v Fairmount Development Pte Ltd [2007] 3 SLR(R) 86 (“Soh Beng Tee”) at [29]):

– which rule of natural justice has been breached;

– how it was breached;

– in what way the breach was connected to the making of the award; and

– how the breach prejudiced the rights of the challenging party.

“A complaint that there has been a breach of natural justice comprises, broadly, two facets. The first is that an arbitral tribunal was biased against a party thereby contravening the rule of equality of treatment of the parties. The second facet is commonly referred to as the fair hearing rule, encapsulated in the well-known Latin maxim audi alteram partem. When the fair hearing rule is invoked, the aggrieved party’s complaint is that it was not given a fair or reasonable opportunity to be heard or to otherwise present its case. The fair hearing rule forms the second ground of objection relied on by the Plaintiffs in this case.”

“In relation to the fair hearing rule, the Court of Appeal, in its oft-cited decision in Soh Beng Tee, held that parties have, in general, a right to be heard and an arbitrator “should not base his decision(s) on matters not submitted or argued before him”. In other words, the arbitrator “should not make bricks without straw” (at [65(a)]). In essence, an arbitral tribunal should not surprise the parties with its own ideas (at [44]). However, consistent with the policy of limited curial intervention, the courts should only intervene in arbitral awards in limited circumstances. For example, where the “impugned decision reveals a dramatic departure from the submissions, or involves an arbitrator receiving extraneous evidence, or adopts a view wholly at odds with the established evidence adduced by the parties or arrives at a conclusion unequivocally rejected by the parties as being trivial or irrelevant” (at [65(c)–(d)]). Whilst a tribunal should not make bricks without straw, where the factual basis or “building blocks” of the award were present during the arbitral proceedings, it cannot be said that a tribunal reached its own conclusions in breach of natural justice (at [67]).”

“In addition, a particular chain of reasoning would be open to a tribunal, even if not specifically argued by the parties, if it flows reasonably from a premise argued or actually advanced by either party (TMM Division Maritima SA de CV v Pacific Richfield Marine Pte Ltd [2013] 4 SLR 972 (“TMM Division”) at [65]). Finally, it is also a well-entrenched principle that the court will not set aside an award under the Act simply because an arbitrator made an error of law or of fact. The court should not allow an aggrieved party a second bite of the cherry by engaging the court on what is, in substance, an appeal on the legal merits of the arbitral award disguised as a breach of natural justice challenge (AKN and another v ALC and others and other appeals [2015] 3 SLR 488 at [39]).”

The court concluded that it rang somewhat hollow for the Plaintiffs to now complain that they were taken by surprise by the Tribunal’s findings and decision, and that the Plaintiffs’ complaints of breach of natural justice were nothing more than Trojan horses deployed to disguise the Plaintiffs’ attempts to challenge the decision of the Tribunal on its legal merits.  This was not permissible.

About Phillip Rompotis

Phillip practices as a barrister and arbitrator in Hong Kong. He has over 25 years’ litigation and arbitration experience in commercial disputes relating to construction & engineering, financial services, joint venture & shareholders agreements, technology, trusts, property and landlord & tenant. He is a Fellow of the Chartered Institute of Arbitrators, the Hong Kong Institute of Arbitrators, the Singapore Institute of Arbitrators, the Malaysian Institute of Arbitrators, and a member of various lists/panels of arbitrators.

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