IBA Rules – Failure to Produce Documents in a Singapore International Arbitration

We considered the IBA Rules on the Taking of Evidence in International Arbitration (the “IBA Rules“) in a previous post.

The Singapore case of Dongwoo Mann+Hummel Co Ltd v Mann+Hummel GmbH [2008] 3 SLR(R) 871; [2008] SGHC 67 demonstrates how a tribunal may approach the issue of document production and withholding of such documents as well as the manner in which the Singapore court would approach the tribunal’s determination of such issues. In particular, issues of fact finding and the adducing of evidence are well within the remit of the tribunal’s discretion and are not something that the courts will interfere with.

The material facts in relation to the issue of document production and disclosure are as follows. The plaintiff Dongwoo, which had been the respondent in the arbitration, had sought production of a certain class of documents. The respondent M+H initially declined disclosure of these documents on the basis that it might be a breach of M+H’s confidentiality obligations to its customers. M+H refused to produce the documents unless the tribunal so ordered. The tribunal order disclosure on the basis that the documents were relevant and material to the matters in dispute insofar as they related to whether M+H had breached its obligation under a trademark and licensing agreement with Dongwoo, to produce such documents and information that would enable Dongwoo to manufacture certain products.

In a subsequent letter to the tribunal, M+H attached certain standard designs drawings and asked the tribunal to reconsider its decision on the basis that the drawings were designed to specifications by a major customer and M+H was not permitted to disclose the information in the drawings (the relevant confidentiality provision was also exhibited, which prohibited disclosure of the documents except with an order of court). Dongwoo had sight of the letter but not the exhibits and protested at M+H’s approach. Dongwoo, amongst other things, requested that the tribunal disregard the request and that an adverse inference ought to be drawn against M+H for refusing to disclose the documents. The tribunal agreed with Dongwoo to the extent that M+H should disclose those documents it had been ordered to disclose pursuant to the tribunal’s earlier direction. However, the tribunal did not decide that it would draw an adverse inference in the event of M+H’s non-disclosure and left it open to Dongwoo to make such a submission in the event of M+H’s non-disclosure. Consequently, M+H disclosed some but not all of the documents i.e. the non-disclosed documents were those it had exhibited only to the tribunal and not to Dongwoo.

In the substantive hearing, an award was made in favour of M+H. The tribunal considered that if the non-disclosed documents were indeed confidential to third parties, then M+H was justified in not providing the documents to Dongwoo under their agreement. Since M+H had sufficiently established on the evidence as a whole that they were bound by confidentiality, accordingly, there could have been no breach for failing to disclose those documents and similarly the tribunal refused to draw an adverse inference against M+H for the non-disclosure.

In its application to set aside the award before the Singapore courts, Dongwoo alleged, inter alia, that the tribunal had breached the rules of natural justice by not giving Dongwoo a fair opportunity to be heard. Dongwoo argued that by having examined the exhibited documents which were not extended to Dongwoo at any time in the proceedings, the Tribunal had thereby deprived Dongwoo an opportunity to fully present its case. In this respect, the tribunal had also failed to direct that M+H extend copies of such documents to Dongwoo. Dongwoo also alleged that the award made which was in conflict with public policy of Singapore by allowing M+H to “flagrantly flout” the tribunal’s directions in relation to the document production and by not drawing an adverse inference against M+H’s refusal to furnish the documents as directed.

The Singapore High Court disagreed and refused to set aside the award.

Assistance of the IBA Rules

The High Court recognised the problem that in applications for production of documents, an arbitral tribunal often has to deal with “threshold questions” on whether a particular document is in fact not relevant or whether there is any basis for resisting disclosure. In such situations “[t]here will be instances where the “threshold questions” can only be determined by a review of the contents of the document itself. A party, who may well be prepared to disclose the document to the tribunal for its review, may not necessarily want to disclose it to the other party often for reasons of confidentiality” (see paragraph [82]).

In this respect, the High Court highlighted the possibility of then Article 3.7 (now Article 3.8) of the IBA Rules as to the manner in which a document may be examined by an independent and impartial expert in situations where the examination of the document itself is the only way to determine whether an objection to production has merit.

Other possible measures (at paragraph [84]) identified were:

  1. The sensitive confidential information is redacted and the document is then produced.
     
  2. Counsel signs a confidentiality agreement not to disclose to anyone including his client whatever he has seen during the review of the contents of the document, unless the other party producing the document consents.
     
  3. The document is produced only to the tribunal who will decide the threshold question after inspecting the document, but the other party will not be given a copy of the document. The tribunal can also consider what special measures are needed to preserve confidentiality if it orders production after inspecting the document.
     
  4. A neutral third party (not necessarily an expert) bound by confidentiality is asked to examine the document and report its findings to the tribunal and the parties.

Opportunity to present case on adverse finding

The High Court found that Dongwoo had opportunity to and managed to present its case fully on the issue of whether or not an adverse inference should be drawn against M+H for failing to produce the documents. It held that “[i]f, after hearing full arguments from both parties, the tribunal decided wrongly that it was not appropriate to draw any adverse inference, that would be a mere error of fact-finding and/or of law, which could not be a ground for setting aside the award…Just because the tribunal had ruled against Dongwoo on that question did not mean that the losing side (ie, Dongwoo) was thus unable to present its case on this issue. If losing on an issue would ordinarily mean that the party concerned was not able to present its case on that issue, then it would be a remarkable distortion of logic. It would also follow that in all arbitration cases, where one side must necessarily lose, a situation would be invariably created for setting aside because the losing party must have been unable to present its case and hence, it lost for that reason. That cannot be right” (see paragraph [70]).

Furthermore, the inability to present the case could not be attributed to the mere fact of non-production in contravention of the disclosure ruling, since the contravention was the very reason why the question of adverse inference had arisen. Once the issue of adverse inference had arisen and the tribunal had given both sides an opportunity to submit fully on it, there could be no question that any party had been denied an opportunity to present its case on that question.

Whether the Tribunal had relied on the documents disclosed to it but not to Dongwoo

The High Court held that Dongwoo had not discharged its burden of proving that the tribunal had relied on the documents that M+H had disclosed to it, but not to Dongwoo, in arriving at its decision in the substantive hearing as well as when deciding the question of drawing an adverse inference. The High Court held that Dongwoo had “simply assumed conveniently that the tribunal had done so (or appeared to have done so), and then it set up a whole series of arguments based on that assumption to justify its application in this action to set aside the award” (see paragraph [73]).

First, Dongwoo did not produce “strong and unambiguous evidence” of the matters forming its complaint.

Second, on the High Court’s careful study of the tribunal’s detailed reasoning, the learned judge considered that there was no evidence that the tribunal had actually relied on what it had seen in those documents when deciding the question of drawing an adverse inference.

Finally, on balance, the absence of any reference in the award to any information obtained from the disclosed documents pointed more to the fact that the tribunal had disregarded what it might have seen earlier, rather than to the fact that it had secretly made use of such information in deciding the question of whether to draw an adverse inference against M+H.

Tribunal relied on other evidence and not disclosed documents

From the High Court’s “careful perusal” of the award, it was apparent from the record and the award, rather, that the tribunal had rightly relied on “other evidence (which was also available to Dongwoo and which would also include the evidence of a continued deliberate non-production [of the documents])” in deciding that no adverse inference was to be drawn (see paragraph [75]). The High Court considered that the tribunal was entitled to find on this “other evidence” that M+H was bound by confidentiality to third parties. At this stage of the hearing, there was no breach of natural justice, nor was Dongwoo unable to present its case on the effect of the non-disclosure by M+H of the design standard drawings for the CCV oil separator on such “other evidence.”

Critically, even if the tribunal had made a wrong finding of fact in reliance of this “other evidence” that the documents were confidential and had to be accounted for to third parties, such bona fide error of fact or law was insufficient grounds to set aside the award (see paragraph [77]).

No breach of natural justice

In light of the above the High Court held that there was no breach of natural justice in the case before it. This was because insofar as there was no reliance on the exhibited documents and since the refusal to draw an adverse finding was based on “other evidence“, there could not be any causal nexus between the breach of natural justice made by Dongwoo and the award made. Such causal nexus is a requirement under Singapore law in setting aside an award for breach of natural justice. The tribunal had properly concluded that there was no material breach of the relevant agreement and that M+H had fulfilled its obligations under the same based on all the credible evidence disclosed to it. As the determiner of fact and law the tribunal was entitled to make those findings (see paragraph [129].

Refusal to comply with disclosure order not a contravention of public policy of Singapore

The High Court held that “[a] deliberate refusal to comply with a discovery order is not per se a contravention of public policy because the adversarial procedure in arbitration admitted of the possible sanction of an adverse inference being drawn against the party that did not produce the document in question in compliance with an order” (see paragraph [145]).

The High Court also noted that Dongwoo could have approached the Singapore courts for recourse and to compel production of the documents pursuant to what was then ss 13 and 14 of the International Arbitration Act (Cap 143A, 2002 Rev Ed) [see now the consolidated version in s. 13] if it was not satisfied with merely arguing for an adverse inference and needed the production of those documents. However, Dongwoo had not done so.

Furthermore, this was not a case where M+H had dishonestly sought to hide damning evidence so as to deny Dongwoo even the opportunity to argue that an adverse inference should be drawn. The court accepted that M+H honestly thought they had good reason not to disclose those documents (see paragraph [142]).

Singapore’s pro-arbitration and pro-enforcement regime sets a high standard of proof for any allegation of fraudulent, unconscionable or similar reprehensible conduct against another party. An award must “shock the conscience” or be “clearly injurious to the public good” or “wholly offensive to the ordinary and reasonable fully informed member of the public,” or “violate the forum’s most basic notion of morality and justice” (see paragraph [147]) before it can be set aside for violating public policy in Singapore. Dongwoo had not met that standard.

Conclusion

This case fairly emblemises the approach of the Singapore courts when it comes to adjudicating upon the arbitral tribunal’s determination on issues relating to evidence. The courts rightly recognise that the arbitral tribunal is master of the arbitration proceedings and procedure. In the absence of some flagrant breach of natural justice, the court will defer to the arbitral tribunal’s decisions and exercise of its discretions.

The High Court’s parting paragraph is noteworthy, “the courts strive to uphold arbitration awards. They do not approach them with a meticulous legal eye endeavouring to pick holes, inconsistencies and faults in awards and with the objective of upsetting or frustrating the process of arbitration. Far from it. The approach is to read an arbitration award in a reasonable and commercial way, expecting, as is usually the case, that there will be no substantial fault that can be found with it” (citing Zermalt Holdings SA v Nu-Life Upholstery Repairs Ltd [1985] 2 EGLR 14).

About Shaun Lee

International Dispute Resolution and Arbitration lawyer. Fellow of the Chartered Institute of Arbitration. Panel of Arbitrators and Panelist for DNDR at the KLRCA.
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