BYL and another v BYN

JurisdictionSingapore
CourtInternational Commercial Court (Singapore)
JudgeAnselmo Reyes IJ
Judgment Date03 March 2020
Neutral Citation[2020] SGHC(I) 6
Citation[2020] SGHC(I) 6
Plaintiff CounselDavinder Singh SC, David Fong and Sivanathan Jheevanesh (Instructed), Kabir Singh and Tan Tian Yi (Cavenagh Law LLP)
Published date07 March 2020
Hearing Date17 February 2020
Docket NumberOriginating Summons No 9 of 2019
Subject MatterAward,Arbitration,Challenge against arbitrator,Bias,Recourse against award
Date03 March 2020
Defendant CounselThio Shen Yi SC, Niklas Wong and Kevin Elbert (TSMP Law Corporation)

[2020] SGHC(I) 6

Singapore International Commercial Court

Anselmo Reyes IJ

Originating Summons No 9 of 2019

BYL and another
and
BYN

Davinder Singh SC, David FongandSivanathan Jheevanesh(instructed), Kabir Singh and Tan Tian Yi (Cavenagh Law LLP) for the plaintiffs;

Thio Shen Yi SC, Niklas WongandKevin Elbert (TSMP Law Corporation) for the defendant.

Case(s) referred to

BOI v BOJ [2018] 2 SLR 1156 (folld)

Halliburton Co v Chubb Bermuda Insurance Ltd [2018] 1 WLR 3361 (refd)

PT Central Investindo v Franciscus Wongso [2014] 4 SLR 978 (refd)

UES Holdings Pte Ltd v KH Foges Pte Ltd [2018] 3 SLR 648 (refd)

Legislation referred to

International Arbitration Act (Cap 143A, 2002 Rev Ed) ss 3(1), 24(b)

Foreign Exchange Management Act 1999 (Act No 42 of 1999) (India)

Arbitration — Award — Recourse against award — Award providing for cumulative reliefs — Whether award was liable to be set aside for lack of finality

Arbitration — Challenge against arbitrator — Bias — Arbitrator appearing before court for other clients of law firm that represented defendant before award released — Arbitrator being appointed as co-counsel in unrelated arbitration with law firm that represented defendant after award released — Whether there was apparent bias on part of arbitrator

Facts

[BYM] (“Company”) was set up by [BYL] (“Promoter”) (collectively, “Plaintiffs”) for the construction and operation of a development. [BYN] (“Investor”) entered into an agreement with the Plaintiffs (“Agreement”) for the Investor to buy 35% of the Company's shares. Under cl 14 of the Agreement, if the Promoter failed to undertake an initial public offering of the Company, the Promoter was obligated to buy the Investor's shares in the Company at Fair Market Value. Under cl 17 of the Agreement, upon other breaches of the Agreement, the Promoter was obligated to buy the Investor's shares in the Company at a premium. Under cl 28.3 of the Agreement, the rights of the parties under cll 14 and 17 were “independent” and “cumulative”.

There were delays to the development, causing the Plaintiffs to be in breach of the Agreement. The Investor commenced arbitration against the Plaintiffs before the International Chamber of Commerce (“ICC Arbitration”), seeking relief pursuant to cll 14 and 17 of the Agreement “in tandem”. The tribunal released a partial award (“Award”) in April 2019. The Award directed the Promoter to pay the Investor cumulative relief under cll 14 and 17 (collectively, “Reliefs”).

In June 2019, the arbitrator nominated by the Plaintiffs (“Arbitrator”) disclosed that back in March, he acted for certain companies before the Delhi High Court for the enforcement of an arbitral award in favour of these companies against the Indian government. The arbitration giving rise to this award (“India Arbitration”) was unrelated to the ICC Arbitration. However, the law firm (“Firm”) that represented the companies in the India Arbitration also represented the Investor in the ICC Arbitration. Further, the head lawyer of the Firm's team representing the Investor (“Advocate”) was also a prominent member of the Firm's team representing the companies in the India Arbitration. In July 2019, the Arbitrator was engaged as counsel for the companies in the India Arbitration.

The Plaintiffs applied to set aside the award on two grounds. First, they argued that the Reliefs were alternative in nature so that the tribunal had in effect failed to decide the dispute before it and improperly conferred upon itself the power to change the Award if the relief granted under cl 17 was later found to be unenforceable. Second, they charged the Arbitrator with making belated and only partial disclosures of his co-counsel relationship with the Firm and the Advocate. This, they argued, amounted to apparent bias on the part of the Arbitrator and vitiated the Award.

Held, dismissing the application:

(1) The first ground. The tribunal was justified in granting the Reliefs as it did. The Award was not “contingent” in the sense of being an award in the alternative: at [38] and [41] to [43].

(2) The second ground. The association between the Arbitrator and the Firm was insufficient to support a finding of apparent bias. The Arbitrator was not a partner within the Firm. While the Arbitrator met with some representatives of the Firm before the issuance of the Award, these representatives had no involvement with the ICC Arbitration. Similarly, the Arbitrator only met the Advocate to discuss matters relating to the India Arbitration after the Award had been issued. Further, on the assumption that the Arbitrator's disclosure had been belated, it could not be inferred that the disclosure eventually made was in some way insufficient so as to give rise to reasonable doubts about the Arbitrator's impartiality: at [55] to [57] and [63] to [65].

[Observation: The extent to which a creditor could recover money awarded by a tribunal would self-evidently depend on the degree to which relevant courts held that the award was enforceable. This was a truism characteristic of every award for the payment of money. Such truism could hardly constitute a criticism of the Award or be said to lead to “circularity”: at [42].

A court had to be wary about drawing inferences of bad faith merely because an arbitrator had been laconic in his or her responses to disclosure requests or had expressed personal regret and hurt in a resignation letter. However, this did not mean that an arbitrator could be economical with the truth and make misleading statements: at [66].]

3 March 2020

Judgment reserved.

Anselmo Reyes IJ:

Introduction

1 BYL (the “Promoter”) and BYM (the “Company”) (collectively, the “Plaintiffs”) applied to set aside a Partial Award (the “ICC Award”) dated 30 April 2019. The ICC Award was issued by a tribunal (the “Tribunal”) of three arbitrators in an International Chamber of Commerce (“ICC”) arbitration (the “ICC Arbitration”) wherein BYN (the “Investor”) was the claimant, while the Promoter and Company were the first and third respondents respectively. The Tribunal consisted of two co-arbitrators (respectively, Mr [X] SA (“SA”) and Mr [Y] QC) and the chairperson (“Chairperson”). The ICC Arbitration started on 11 February 2016. The second respondent in the ICC Arbitration had been dissolved on 10 September 2015 and so did not play a material part in the ICC Arbitration. The seat of the ICC Arbitration is Singapore. But, as found by the Tribunal, Indian law governs the arbitration agreement. The ICC Arbitration remains ongoing. SA has since resigned as co-arbitrator in the circumstances described below and has been replaced by Mr [Z]. An oral hearing took place in the ICC Arbitration from 29 May to 1 June 2018. That was followed by several rounds of written closing submissions. On 22 March 2019 the Tribunal notified the parties that the arbitral proceedings were closed, and the Tribunal proceeded to its award.

2 The Plaintiffs' setting-aside application is premised on two grounds. The first ground (the “put option ground”) arises from the Tribunal's decision to award reliefs under two put options in a shareholders' agreement. According to the Plaintiffs, by the ICC Award the Tribunal ordered alternative reliefs. The Plaintiffs say that the Tribunal thus failed to decide the dispute before it and improperly conferred upon itself the power to change the ICC Award if part of it was later found to be unenforceable by a court. The second ground (the “bias ground”) arises from the conduct of a Tribunal member. The latter is said to have made belated and only partial disclosures of a co-counsel relationship that he negotiated and entered into with the Investor's legal representatives in the ICC Arbitration while the ICC Award was still being drafted and finalised. The relevant arbitrator's circumstances are said to give rise to a reasonable suspicion of bias (that is, apparent bias) vitiating the ICC Award.

Background

3 The dispute underlying the ICC Arbitration arose out of a Share Subscription and Shareholders Agreement dated 7 August 2008 (the “SSHA”) among the parties to the ICC Arbitration. The Company was set up by the Promoter as a special purpose vehicle for the construction and operation of a development (“Development”). Under the SSHA, the Investor became a 35% shareholder in the Company, with the Promoter holding the remaining 65%. The Investor was obliged under the SSHA to provide capital for the Development. In consideration for the Investor's investment, the Promoter undertook to construct the Development by a commercial operation date (“COD”) of 1 January 2012 and thereafter to promote the Development. Construction was delayed, so that the Development only commenced operations on 23 September 2017, after the start of the ICC Arbitration. Part of the Development has yet to come into operation.

4 Clauses 14 and 17 of the SSHA gave the Investor two put options. The cl 14 put option could be exercised upon the Promoter's failure to undertake an initial public offering (“IPO”) of the Company. By the cl 14 put option, the Promoter was obliged to purchase the Investor's shares in the Company at their “Fair Market Value” (“FMV”) as at a specified date. The cl 17 put option was exercisable upon an “Event of Default” (“EOD”) as defined in cl 17, including delay to the Development's COD and a material breach of the SSHA. By the cl 17 put option, the Promoter was obliged to purchase the Investor's shares in the Company at a price corresponding to an “Internal Rate of Return” (“IRR) of 25% compounded annually. Clause 28.3 of the SSHA further provided that:

Each of the rights of the Parties hereto under this [SSHA] are independent, cumulative and without prejudice to all other rights available to them, and the exercise or non-exercise of any such rights shall not prejudice or constitute a waiver of any other right of the Party, whether under this [SSHA] or otherwise.

5 On 1 April 2016 the...

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