Last week, in its decision in CFJ and another v. CFL and another, the Singapore International Commercial Court (SICC) refused to set aside partial arbitral awards issued in a SIAC international arbitration.
The SICC found that: (a) there was no apparent bias on the part of the President of the Tribunal; (b) there was no breach of agreed arbitral procedure; (c) the Tribunal did not exceed its jurisdiction; and (d) there was no breach of natural justice.
- This SICC decision continues to reinforce the high degree of deference that Singapore courts afford arbitral tribunals, respecting the autonomy of the arbitration proceedings, in line with the principle of minimal intervention by courts.
- It confirms that Singapore courts adopt a holistic approach when identifying the issues at play in the dispute by considering not only the parties’ written submissions, but also the evidence adduced, witness statements, and expert reports submitted by the parties. With Singapore courts adopting this broad perspective on the scope of issues to be resolved in the arbitration, setting aside applications on the basis of excess of jurisdiction might be more difficult to win.
- To prevent possible set aside of an arbitral award based on excess of jurisdiction or breach of natural justice, parties should include the main issues at play in the arbitration in their earliest submissions. Otherwise, they risk having their arbitral award set aside, as decided by the Singapore court in CJA v. CIZ where the appellants raised an unpleaded defence for the first time only in their written closing submissions.
Parties and Dispute
In 2012, CFL and CFM (together, the "Purchaser") and CFJ and CFK (together, the "Seller") entered into a Share Purchase Agreement for the sale of one of the Seller’s subsidiaries. Following the sale, the Purchaser alleged that the Seller had made several misrepresentations and in July 2015 commenced arbitration proceedings against the Seller.
The written submissions in the arbitration adopted a memorials approach, rather than a pleadings approach; meaning that the parties’ written submissions were a mix of submissions on the facts and law, accompanied by key documents, witness statements and expert reports.
The arbitration was bifurcated into liability and quantum phases. Three partial awards during the liability phase were eventually issued. Both the Seller and Purchaser prevailed on some of the claims in the partial awards.
During the course of the arbitration, the President of the Tribunal was appointed to a panel of experts (the “Panel”) constituted by the highest court in Ruritania in August 2018.
The Seller did not learn about this appointment until after the issuance of the second partial award. Shortly afterwards, in February 2020, the Seller filed with SIAC a notice to challenge, asking that the President withdraw or be removed by SIAC, claiming justifiable doubts over his independence and impartiality. SIAC dismissed the challenge in June 2020.
The Seller then commenced the SICC proceedings, seeking to remove the President of the Tribunal and to set aside two of the partial awards.
The SICC addressed four main issues: (a) whether the appointment of the President of the Tribunal to the Panel raised appearance of bias; (b) whether there was a breach of the agreed arbitral procedure by issuing partial awards addressing the Seller’s claims; (c) whether any of the Tribunal’s findings in the partial awards were in excess of jurisdiction; and (d) whether the Tribunal’s findings in the partial awards were in breach of natural justice.
The SICC reaffirmed that the test for apparent bias is an objective one, based on whether there are circumstances present that would give rise to a reasonable suspicion or apprehension of bias in the fair-minded and informed observer, as set out in BOI v. BOJ.
In rejecting the Seller’s argument, the SICC found that any alleged link between the Purchaser, a state-owned entity, and the Panel, constituted by the state’s judiciary, was too “tenuous” – based on speculative claims and circumstantial evidence of lack of independence between the judiciary and the government. The SICC also found that the President’s non-disclosure of the appointment did not raise doubts.
The SICC concluded that the test for apparent bias and disclosure are the same – an objective test, based on the perception of the fair-minded and informed observer.
Agreed Arbitral Procedure
The SICC also rejected the Seller’s argument that the issuance of multiple partial awards was a breach of the agreed arbitral procedure by stating that there was no agreement between the parties to deal with all claims in a single award. The SICC noted Rule 28 of the SIAC Rules, the rules governing the arbitral procedure – specifically allowing tribunals to issue separate awards on different issues at different times.
Excess of Jurisdiction
The SICC reasoned that a tribunal acts in excess of jurisdiction when it decides matters outside the scope of the submission to arbitration.
In its analysis, the SICC highlighted the importance of the memorials approach in this arbitration, which meant that the “submission to arbitration” encompassed not only issues in the parties’ pleadings, but also issues in the supporting documents, witness statements and expert reports. Thus, in identifying the issues raised in the arbitration, the SICC may consider the witness statements, supporting documents and expert reports.
The SICC dismissed all of the Seller’s arguments about the Tribunal’s findings made in excess of jurisdiction. In doing so, the SICC distinguished the facts of CJA v. CIZ from the present case in that the facts of the present case reflected the parties had included specific disputed issues (range of years for production forecasts) in their earliest submissions, whereas in CJA v. CIZ, the appellants raised an unpleaded defence for the first time in their written closing submissions. The Singapore Court of Appeals set aside the arbitral award in CJA v. CIZ finding excess of jurisdiction and a breach of natural justice.
Breach of Natural Justice
The SICC held that the foundation of the Seller’s allegation was breach of the fair hearing rule, affording parties a general right to be heard effectively on every issue that may be relevant to the resolution of a dispute.
Singapore courts have held that a challenge on this ground would only be successful if a reasonable litigant could not have foreseen the possibility that the award would employ the reasoning it did.
In rejecting the Seller’s claims for breach of natural justice, the SICC distinguished situations where a tribunal disregards points made by the parties and a tribunal’s misunderstanding of the case or the law, or the tribunal choosing not to deal with a point it deemed unnecessary.
In particular, the SICC held that it must be “clear and virtually inescapable” that the tribunal disregarded an important issue or submission for a breach of natural justice; whereas in the case of a misunderstanding, there would be no such breach.