China Machine New Energy Corp v Jaguar Energy Guatemala LLC and another
Jurisdiction | Singapore |
Judge | Sundaresh Menon CJ |
Judgment Date | 28 February 2020 |
Neutral Citation | [2020] SGCA 12 |
Plaintiff Counsel | Toby Landau QC (Essex Court Chambers Duxton (Singapore Group Practice)) (instructed), Tan Beng Hwee Paul, Pang Yi Ching Alessa, Ching Meng Hang, Koh Wei-Jen Aaron and Rachel Low Tze-Lynn (Rajah & Tann Singapore LLP) |
Date | 28 February 2020 |
Docket Number | Civil Appeal No 94 of 2018 |
Hearing Date | 10 September 2019,05 July 2019 |
Subject Matter | Rules of natural justice,Setting aside,Arbitration,Recourse against award,Award |
Year | 2020 |
Defendant Counsel | Michael Hwang SC, Rachel Ong Yue Qing and Chong Kin Yeong Ryan (Michael Hwang Chambers LLC) (instructed), Chia Yijuan Germaine, Chong Xiu Bing Denise and Tan Yi Lei (Virtus Law LLP) |
Court | Court of Appeal (Singapore) |
Citation | [2020] SGCA 12 |
Published date | 03 March 2020 |
The concept of due process encompasses a basic guarantee of procedural fairness in legal proceedings. It requires that each party be given, amongst other things, appropriate notice of the proceedings and of the case it has to meet, as well as a fair opportunity to prepare and present its case before a neutral and unbiased decision-maker. These are basic procedural safeguards which are applied in order to ensure the fairness of the proceedings by which the parties’ substantive rights are disposed of. In short, due process is concerned with ensuring fair process, and this is a matter of critical importance because the fairness of the process is integral to its legitimacy in the eyes of the parties who submit themselves to it.
These procedural safeguards can assume an enhanced significance in international arbitration because an alleged violation of a party’s due process rights offers one of a limited number of grounds on the basis of which an award may be set aside or denied enforcement. In arbitration, the tribunal is ordinarily the master of its own procedure, but the requirement of due process is an essential limitation on the wide autonomy that the parties and the tribunal otherwise have with respect to procedure.
While due process serves to protect the legitimacy of the process, some have warned of the need to scrutinise due process arguments so as to guard against their being wielded cynically and improperly to attack the award (see Lucy Reed, “Ab(use) of Due Process: Sword vs Shield” (2017) 33 Arbitration International 361 at 376). It has been suggested that such misuse of due process complaints can lead to defensive procedural decision-making on the part of the tribunal in an effort to safeguard its award. This can be problematic not only because the parties are exposed to delays and increased costs as a consequence, but, more importantly, because it undermines and cheapens the real importance of due process in international arbitration, and over time, this can erode the legitimacy of arbitration as a whole and its critical role as a mode of binding dispute resolution.
Many of the complaints that are presented as due process violations typically concern the management of the particular arbitration, involving questions such as extensions of time, the ability to introduce additional evidence, or even the way in which documents are to be described and disclosed to the other parties. These typically and almost inevitably are matters that fall within the discretion of the tribunal, which, after all, is primarily charged with deciding the matter fairly. When this is subsequently challenged in court, it is essential that the court steers a course which holds two potentially competing interests in balance: first, the need to robustly uphold what may properly be regarded as the parties’ due process rights; and second, the importance of preserving the proper limits of the tribunal’s discretion in dealing with the procedural details of the case it must decide. This appeal presents us with the opportunity to clarify this important area of arbitration law, so that tribunals may be guided as to the sorts of concerns that may undermine their awards. In our judgment, this should ultimately reduce the opportunity for those attempting to
The present parties went to arbitration over disputes relating to the construction of a power generation plant in Guatemala (“the Plant” and “the Project”). The appellant, China Machine New Energy Corporation (“CMNC”), was the contractor, and the respondents, Jaguar Energy Guatemala LLC (“Jaguar Energy”) and AEI Guatemala Jaguar Ltd (“AEI Guatemala”) (collectively referred to as “Jaguar”), were the owners of the Plant.
The substantive contractual dispute between the parties concerned two key agreements. The first was the Engineering, Procurement and Construction Contract (“the EPC Contract”) entered into in March 2008 between CMNC and Jaguar Energy. The EPC Contract provided for the construction of the Plant for an approximate sum of US$450m, to be paid by Jaguar Energy to CMNC in instalments upon the completion of certain milestones. The second was the Deferred Payment Security Agreement (“DPSA”), entered into sometime in November 2009. Under the DPSA, CMNC agreed to finance the Project by allowing Jaguar Energy the option of issuing debit notes in its favour instead of making the relevant milestone payments. These debit notes were secured by interests in Jaguar Energy’s assets, including its rights under the EPC Contract.
Work on the Project’s two phases commenced in March 2010, and was expected to be completed in March and June 2013 respectively. Sometime in November 2010, Jaguar Energy exercised its option under the DPSA to issue debit notes in lieu of making cash payments. In all, Jaguar Energy issued a total of 61 debit notes with a total value of approximately US$129m.
Signs of trouble first appeared in 2013, when CMNC failed to meet the scheduled take-over dates for both phases of the works. In October and November 2013, Jaguar Energy issued notices of breach, and reserved its right to terminate the EPC Contract. In response, on 28 November 2013, CMNC purported to exercise its “step-in rights” as secured lender under the DPSA to take over Jaguar Energy’s rights under the EPC Contract. On the next day, 29 November 2013, Jaguar Energy notified CMNC of its intention to terminate the EPC Contract, and requested that CMNC vacate the work site (“the Site”) within 15 days.
The Site comprised two separate areas: the Construction Area and the Living Quarters. On 11 December 2013, Jaguar Energy fenced off the Construction Area and prevented CMNC’s employees from entering CMNC’s site office, which contained documents related to the construction of the Plant. At that stage, CMNC retained access to the Living Quarters and therefore to project documents that were stored in laptops and computers that had been kept in the Living Quarters.
On 14 December 2013 (upon the expiry of the 15-day notice period), Jaguar Energy informed CMNC of the termination of the EPC Contract with immediate effect, and asserted that the DPSA was also therefore automatically terminated by its own terms. On the same day, Jaguar Energy terminated CMNC’s access to Project Solve, which was a shared online document platform which contained communications and construction documentation relating to the Project.
CMNC’s staff continued to reside in the Living Quarters until 20 June 2014, when CMNC’s employees were, by an order of the Guatemalan courts, sent to an immigration shelter. According to CMNC, Jaguar then seized two desktop computers and hard drives containing documents concerning the Project from the Living Quarters. CMNC’s employees were subsequently released from the immigration shelter on 28 July 2014.
The arbitration On 28 January 2014, Jaguar commenced arbitral proceedings (“the Arbitration”) against CMNC under cl 20.2 of the EPC Contract. Clause 20.2 provided for disputes to be referred to a Singapore-seated arbitration conducted under the 1998 Rules of Arbitration of the International Chamber of Commerce. Notably, cl 20.2 provided for an
In gist, Jaguar’s case in the Arbitration was that it had validly terminated the EPC Contract for CMNC’s breach, and that it was entitled to, amongst other reliefs, the aggregate cost of completing the Project (“the Estimate to Complete Claim”, or “the ETC Claim”). CMNC denied Jaguar’s claims, and made counterclaims asserting Jaguar’s breach of the DPSA. The ETC Claim, which was allowed, almost in its entirety, by the arbitral tribunal (“the Tribunal”), is central to these proceedings because the nub of CMNC’s complaint is that it was not allowed a full opportunity to respond to that claim.
According to CMNC, its response to the ETC claim required it to undertake two strands of analyses:
To carry out the Interrogation and Comparison Analyses, CMNC claimed that it needed access to the following categories of documents:
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