Arbitration

Citation(2012) 13 SAL Ann Rev 59
Date01 December 2012
Published date01 December 2012
Recourse against awards – Domestic arbitration

Institutional rules operating as ‘exclusion agreement’

4.1 An arbitral award made under the Arbitration Act (Cap 10, 2002 Rev Ed) (‘AA’) may be appealed against on a question of law, upon notice to the other parties and to the arbitral tribunal. Such a right may nevertheless be excluded by agreement of the parties. The mere declaration by the parties that the award is intended to be ‘final and binding’ is not of itself sufficient to constitute such an agreement: see Holland Leedon Pte Ltd v Metalform Asia Pte Ltd[2011] 1 SLR 517 at [5]. Adoption of the institutional rules which excludes an appeal to court without specific reservation has the effect of an exclusion agreement: Halsbury's Laws of Singapore vol 1(2) (Singapore: LexisNexis, 2011 Reissue) at para 20.126.

4.2 In Daimler South East Asia Pte Ltd v Front Row Investment Holdings (Singapore) Pte Ltd[2012] 4 SLR 837, the parties entered into a joint venture agreement which provides for all disputes arising out of the said agreement to be finally settled under the International Chamber of Commerce (‘ICC’) Rules of Arbitration 1998. Disputes arose and the plaintiff commenced arbitration to which the defendant lodged a counterclaim. Both claim and counterclaim were dismissed by the first arbitrator (‘First Award’). The defendant applied and obtained an order setting aside the First Award in relation to the dismissal of its counterclaim. The defendant thereafter commenced another arbitration (‘second arbitration’) against the plaintiff to pursue its claim (the counterclaim in the first arbitration). The second arbitrator issued a partial award holding that the defendant was not precluded from pleading its claim for breach of contract in the second arbitration. Dissatisfied, the plaintiff sought leave to appeal against the partial award. The defendant resisted the application on the basis that both parties had agreed to exclude their right to appeal to the High Court under s 49(1) of the AA.

4.3 The ICC Rules 1998 which were adopted by agreement provide in Art 28(6) that ‘[b]y submitting the dispute to arbitration under these Rules, the parties undertake to carry out any Award without delay and shall be deemed to have waived their right to any form or recourse in so far as such waiver can validly be made’. Woo Bih Li J held that the parties, by agreeing to the ICC Rules without reservation, had agreed to exclude the right of appeal under s 49(1) of the AA. This decision reflects the court's recognition of institutional rules and its role in international arbitration. Parties who have adopted institutional rules must be held to abide by the rules so agreed. To do otherwise would undermine the important role played by institutions such as the ICC and the Singapore International Arbitration Centre (‘SIAC’) in the development of arbitration in Asia.

No power to declare award a ‘nullity’

4.4 The AA also provides for setting aside as another means of recourse against domestic awards. The grounds for setting aside require the applicant to prove procedural irregularities spelt out in s 48(1) of the AA, including the ground that the ‘breach of natural justice occurred in connection with the making of the award by which the rights of any party have been prejudiced’.

4.5 In L W Infrastructure Pte Ltd v Lim Chin San Contractors Pte Ltd[2013] 1 SLR 125 (‘L W Infrastructure Pte Ltd’), the plaintiff was the defendant's subcontractor in a building project. The defendant terminated the subcontract on the basis of the plaintiff's failure to complete certain works on the agreed completion date which the plaintiff disputed. Arbitration was commenced by the defendant resulting in a final award being made generally in favour of the plaintiff. Both parties appealed against the award on questions of law under s 49 of the AA. The High Court dismissed the plaintiff's appeal but substantially allowed the defendant's appeal. The arbitrator then resumed the arbitration and issued a Supplementary Award No 2 where the defendant was awarded liquidated damages. In both awards, the arbitrator awarded only post-award interest. The defendant subsequently wrote to the arbitrator requesting for an additional award for pre-award interest. The arbitrator made an ‘Additional Award’ on pre-award interest without hearing the plaintiff, who then applied to set aside the Additional Award under s 48(1)(a)(vii) of the AA on the ground that it was made in breach of natural justice and that the Additional Award be declared a nullity. The High Court set aside the Additional Award but decided against declaring it a nullity.

4.6 The Court of Appeal affirmed the High Court's decision not to declare the Additional Award a nullity. In arriving at this decision, Sundaresh Menon JA (as he then was) interpreted s 47 of the AA as the equivalent provision of Art 5 of the UNCITRAL Model Law on International Commercial Arbitration (‘Model Law’) and adopted the view (at [38]) that s 47 has been enacted to provide certainty which ‘would be significantly undermined if the courts retained a concurrent “supervisory jurisdiction” over arbitral proceedings or awards that could be exercised by the grant of declaratory orders not expressly provided for in the [AA]’. The court also found support for its view by the legislature's removal of what was previously O 69 r 2(3) of the Rules of Court (Cap 322, R 5, 2006 Rev Ed) which expressly provided for a court to declare that an award was not binding. The court also referred to the observation in Halsbury's Laws of Singapore vol 1(2) (Singapore: LexisNexis, 2011 Reissue) at fn 6 of para 20.120 where it was stated that ‘aggrieved parties may only seek recourse against an award on the bases set out under the [AA] viz to set aside for procedural irregularities or appeal on a question of law … The new RC O 69 … no longer contains any procedural rule to allow for such a declaration’.

Breach of natural justice –‘Actual and real prejudice’

4.7 It has been established in Soh Beng Tee & Co Pte Ltd v Fairmount Development Pte Ltd[2007] 3 SLR(R) 86 that not every breach of the rules of natural justice justifies the intervention of the court to set aside an award. There must be some causal link between the breach and the making of the award in order to establish actual and real prejudice (at [86]). Starting on that basis, Menon JA (as he then was) in LW Infrastructure Pte Ltd then proceeded further to say (at [51]) that what was needed to be established is actual or real prejudice, a ‘lower hurdle than substantial prejudice’. In his Honour's view (at [54]), the real question was ‘whether the breach of natural justice was merely technical and inconsequential or whether as a result of the breach, the arbitrator was denied the benefit of arguments or evidence that had a real as opposed to a fanciful chance of making a difference to his deliberations’.

4.8 Disabusing the suggestion by the defendant's counsel that as s 43(4) of the AA does not specifically require the arbitrator to provide an opportunity for parties to be heard, his Honour pointed out that the notice requirement demands within it that the other party be provided an opportunity to respond to the request for additional award. As such, the arbitrator should have given to the plaintiff what was rightfully due to it, notwithstanding the lack of express reference to such right. This right to be heard extends to both (a) whether the requirements of s 43(4) of the AA were met –ie, whether pre-award interest was a presented claim that had been omitted from the final award; and (b) if the requirements of s 43(4) of the AA were met, whether pre-award interest should be awarded and if so, to what extent. The court found on both counts that the arbitrator had not afforded the plaintiff the opportunity to respond after the defendant submitted its request to the arbitrator.

4.9 Although the decision in LW Infrastructure Pte Ltd was made in the context of a domestic arbitration, the Court of Appeal's analyses of ss 43(4) (on the power to make additional awards) and 48(1)(a)(vii) (on breach of natural justice) of the AA would equally apply to considerations arising from the application of Art 33(3) of the Model Law and s 24(b) of the International Arbitration Act (Cap 143A, 2002 Rev Ed) (‘IAA’) in the context of an international arbitration under the IAA. Arbitrators must take heed that the right of a party to be heard cannot be given short shrift. Although some delay and inconvenience may result from waiting for some response from the plaintiff, the haste in which the additional award was made deprived the plaintiff of the opportunity to present its case against the additional award which the tribunal eventually made.

Setting aside of awards under the IAA

Interim orders are not awards

4.10 The distinction between awards and interim orders or directions does at times give rise to issues or confusion. The Court of Appeal had in PT Asuransi Jasa Indonesia (Persero) v Dexia Bank SA[2007] 1 SLR(R) 597 (‘PT Asuransi’) made a clear statement on the substance-procedure distinction of an award and an order. Decisions on interlocutory matters pertaining to procedure such as security for costs or for the claim, preservation of property, discovery of documents or inspection, or admissibility of witnesses, are not awards but orders or directions. Such orders or directions, not being awards, are not subject to...

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