Singapore International Arbitration Blog

In September 2020, Singapore’s Ministry of Law (“MinLaw”) proposed the International Arbitration (Amendment) Bill (the “Bill”) to introduce two new features to the International Arbitration Act (Cap. 143A) (“IAA”).

The Bill was passed on 5 October 2020 and the amendments came into force on 1 December 2020.

We look at the two new features in detail and provide our takeaways on their likely impact on the international arbitration regime in Singapore.

Default process for appointment of arbitrators in multi-party proceedings

The first amendment to the IAA provides for a default mode of appointment of arbitrators in multi-party arbitrations. It sets out the processes and timeframes that should be adopted when appointing a three-member tribunal. To apply this provision, the agreement of parties must not specify any appointment procedure in a situation where there are more than two parties to a dispute.

Before the introduction of the Bill, the IAA only addressed the process for default appointment of a three-member arbitral tribunal in situations where there are two disputing parties. It did not address situations where there are more than two parties involved in a dispute.

The new section 9B of the IAA sets out how the default appointment procedure will operate:

• The claimants will be required to jointly appoint an arbitrator and state their choice in the request for the dispute to be referred to arbitration, or the Notice of Arbitration (“NOA”).
• The respondents must jointly appoint an arbitrator and inform the claimants of the appointment within 30 days from the date of receipt of the request for dispute to be referred to arbitration, or NOA.
• The 1^st and 2^nd arbitrators must then nominate a 3^rd arbitrator within 60 days from date of receipt of the request for dispute to be referred to arbitration by the last respondent. The 3^rd arbitrator shall be the presiding arbitrator.
• Where the 1^st and 2^nd arbitrators are unable to agree on the appointment of the 3^rd arbitrator within the specified period of time, the appointing authority must, upon the request of any party and having regard to all relevant circumstances, appoint the 3^rd arbitrator.
• If either the claimants or the respondents are unable to appoint their arbitrator within the specified period, the appointing authority must, upon the request of any party, appoint all three arbitrators. In doing so the appointing authority may re-appoint or revoke any appointment already made and designate one of the three arbitrators as the presiding arbitrator.

The new amendment brings Singapore’s IAA in line with the current procedures set out in the rules of the world’s leading arbitral institutions, such as the Singapore International Arbitration Centre (SIAC), the International Chamber of Commerce (ICC), the London Court of International Arbitration (LCIA) and the Hong Kong International Arbitration Centre (HKIAC).

All of the above institutional rules provide, in some form or other, for the appointing authority to have the power to select all three arbitrators in a three-member tribunal where the parties fail to select a co-arbitrator among themselves.

The introduction of this new statutory regime for the default appointment of a three-member tribunal in multi-party arbitrations reduces delays and inefficiencies in the conduct of arbitral proceedings.

High Court’s and tribunal’s power to enforce confidentiality obligations

At present, parties and tribunals have a duty of confidentiality at common law not to disclose confidential information obtained in the course of proceedings or to use them for any purpose other than the dispute.

The second amendment explicitly recognises the powers of the arbitral tribunal and the High Court to enforce obligations of confidentiality, by making orders or giving directions where such obligations exist. The amendment’s focus is not on codifying such obligations of confidentiality, but to strengthen the parties’ ability to enforce these obligations.

In particular, sections 12(1)(j) and 12A(2) of the IAA empower both the arbitral tribunal and the High Court to make orders for enforcing confidentiality obligations when:

1. The parties to the arbitration agreement have agreed to the same in writing, whether in the arbitration agreement or any other document;
2. Under any written law or rule of law; or
3. Under the rules of arbitration (of an arbitral institution or otherwise) agreed or adopted by the parties.

Takeaways

The amendments to the IAA bring Singapore’s legislative framework in line with important innovations in the global international commercial arbitration regime.

The provision for the default appointment of arbitrators in multi-party arbitrations increases the efficiency of the arbitral process for Singapore seated arbitrations. This addresses an important lacuna in the IAA in a scenario that is increasingly more common in disputes involving international commercial contracts.

The confidentiality amendment strengthens Singapore’s commitment to party confidentiality in arbitral proceedings by statutorily recognising the powers of the High Court and arbitral tribunal to enforce obligations of confidentiality.

Both changes are welcome developments that will cement Singapore’s reputation as a global dispute resolution hub of choice for savvy users. 

* This article may be cited as Wei Ming Tan and Dami Cha, “Amendments to Singapore’s International Arbitration Act to Enhance Statutory Regime” (14 December 2020) (Amendments to Singapore’s International Arbitration Act to Enhance Statutory Regime | Singapore International Arbitration Blog)

+Also published on CMS Law-Now.

Arbitration Analysis: This decision clarifies the scope of the public policy ground for setting aside of arbitral awards. In dismissing the appellants’ application to set aside a partial award, the court makes it clear that arbitral decisions invoking the doctrine of res judicata remain final and binding on parties, notwithstanding arguments to the effect that a party is deprived of its right to a hearing as a result.

BTN and another v BTP and another [2020] SGCA 105

What are the practical implications of this case?

This decision clarifies the scope of the “public policy” ground for the setting aside of arbitral awards. The appellants contend that they were deprived from litigating on a vital component of their defence in an arbitration because the arbitral tribunal had determined that the matter before it was res judicata.

Whilst recognising that litigants adversely affected by the res judicata doctrine would often consider themselves to have been “unfairly deprived of their right to a hearing”, the court ultimately found that the doctrine of res judicata has long been part of the law of Singapore and its invocation is neither unusual nor should ever be described as “shocking the conscience or wholly offensive to informed members of the public”. 

The decision also clarifies the applicability of the res judicata doctrine in arbitral decisions – whether it goes toward a tribunal’s jurisdiction or the admissibility of a claim.

The court found that, even if an arbitral tribunal were to erroneously apply the res judicata doctrine in its award, this would not be a basis for setting aside the award. Errors of law or fact made in an arbitral decision are final and binding on parties and may not be appealed against or set aside on public policy grounds.

Only a decision on a tribunal’s jurisdiction is subject to a de novo independent review by the courts. Since an arbitral decision made on the basis of res judicata is a decision on admissibility, not jurisdiction, it is not subject to review.

What was the background?

The respondents, BTP and BTQ, are individuals. The first appellant, BTN, is a Mauritian company and the owner of the second appellant, BTO, a Malaysian company. The respondents were substantial shareholders in BTO and another holding company (“the Group”).

Pursuant to a Share Purchase Agreement (“SPA”) with BTN, the respondents sold their shares of the company and BTN assumed 100% control of the Group. Employed under certain Promoter Employment Agreements (“PEAs”), the respondents stood to gain an Earn Out Consideration of US$35m if they were dismissed without cause.

BTO purported to dismiss the respondents “With Cause”. Dissatisfied, the respondents went to the Malaysian industrial Court (“MIC”) and obtained MIC Awards which found that they had been dismissed without cause. Due to the appellants’ own internal reasons, they did not participate in the MIC proceedings.

The respondents commenced arbitration against both BTO and BTN for the Earn Out Consideration. In its partial award (“Partial Award”), the tribunal found in the respondents’ favour and held that the appellants were precluded by the MIC Awards from arguing that the respondents were terminated with cause (“Res Judicata Issue”).

The appellants applied to the High Court to set aside the Partial Award but failed. This was their appeal to the Court of Appeal against the High Court’s decision.

What did the court decide?

The appellants contended that:

(i) the tribunal committed a breach of natural justice in making the Partial Award;

(ii) the Partial Award is contrary to the public policy of Singapore; and

(iii) the tribunal’s decision on the Res Judicata Issue meant that it had failed to decide matters contemplated by and/or falling within the submission to arbitration.

No breach of natural justice in making Partial Award

The court held that the tribunal did not commit any breach of natural justice in making the Partial Award because it was not based on any facts in dispute. The Partial Award was clearly within the scope of the parties’ agreement for the tribunal to determine “all issues necessary to resolve whether the findings of the MIC are binding on both appellants”.

There was no breach of natural justice in the arbitral proceedings as the parties had submitted both the Construction and Res Judicata Issues to the tribunal for determination. Both appellants were given the opportunity to make submissions and did avail themselves of that opportunity through appointed counsel.

Partial Award was not contrary to Singapore’s public policy

The court held that the Partial Award did not contravene public policy since the doctrine of res judicata has long been a part of Singapore law and its invocation in the Singapore courts is not unusual.

The tribunal had decided the Res Judicata Issue in favour of the respondents, holding that the MIC Awards precluded the appellants from reopening arguments as to whether the respondents’ termination was “With Cause” under the SPA.

Even if the tribunal’s decision on the Partial Award was erroneous (which was not the case here), this would not have been a ground to set aside the Partial Award. As such, Singapore’s public policy would not have been engaged. 

The appellants’ contention that the respondents had breached the arbitration agreements in the PEAs by seeking recourse in the MIC proceedings was dismissed. The appellants failed to invoke the arbitration process during the MIC proceedings or to seek to restrain the further conduct of the MIC proceedings. Since the arbitration clauses were not invoked by either appellant, the respondents’ actions in bringing the MIC proceedings could not be impugned.

Error of law preventing tribunal from exercising its mandate

The appellants advanced a relatively novel argument that, if an award rests on an error of law by reason of which the tribunal was unable to exercise its mandate and determine the merits of the parties’ positions, such an award would be contrary to Singapore’s public policy.

The appellants argued that the tribunal’s decision on the Res Judicata Issue was such an error of law. The tribunal should not delegate or reserve matters submitted to it to another to decide.

The court disagreed, and held that determinations of res judicata issues go toward the admissibility of a claim, not a tribunal’s jurisdiction to hear a case. There was no good reason why erroneous decisions on res judicata should be treated any differently from other errors of law. Contrary to the appellants’ contention, the court found that the Res Judicata Issue was an issue that the tribunal had been specifically tasked to adjudicate on.

Tribunal’s decision on Res Judicata Issue not a failure to decide matters

The appellants argued that in holding that the MIC Awards precluded them from raising the issue of With Cause termination in the arbitration, the tribunal had abdicated its duty to decide that issue.

The court rejected this outright, and reiterated that the tribunal was specifically tasked to decide on the Res Judicata Issue, i.e. whether the MIC’s findings were contractually binding and had res judicata effect. The tribunal determined these issues in accordance to the parties’ agreement.

+First published on LexisPSL on 4 November 2020.

*This article may be cited as Wei Ming Tan, “Singapore – Court of Appeal considers doctrine of res judicata in clarification of public policy ground for setting aside awards” (4 November 2020) (Singapore – Court of Appeal considers doctrine of res judicata in clarification of public policy ground for setting aside awards (BTN v BTP) | Singapore International Arbitration Blog)

A recent decision of the Singapore High Court declined to set aside a Singapore International Arbitration Centre (“SIAC”) award where the applicant asserted that the Tribunal had improperly excluded its General Manager from acting as co-counsel. This decision contains important guidance on the qualified nature of a party’s right to be heard, and re-emphasises the “light touch” taken by the Singapore courts in relation to reviewing arbitral awards. 

CGS v CGT

The applicant commenced an expedited SIAC arbitration in June 2018. In August 2018 it dismissed its initial legal counsel and was to be represented by its General Manager (the “GM”).

Paragraph 6 of the first Procedural Order (“PO1”) provided that, “[w]here a Party was represented by Counsel, communications with the Tribunal shall be with Counsel instead of the Party’s representatives”. Subsequently the applicant appointed new legal counsel (“Legal Counsel”) for the substantive hearing, during which, its Legal Counsel clarified that the GM intended to participate but would “solely” address the Tribunal for its Opening Statement.

Due to PO1, the GM was omitted from certain email communications with the Tribunal leading up to the hearing. At the hearing, the GM was “interrupted” during Opening Statement when the Tribunal requested a better explanation of an aspect of the claim, and was prevented from asking a question of a factual witness by the Tribunal.

The applicant subsequently applied to set aside the award on the basis that (i) the arbitral procedure was not in accordance with the agreement of the parties; (ii) the applicant was unable to present its case; and (iii) a breach of the rules of natural justice had occurred, and the applicant’s rights were prejudiced.

Exclusion from Email Correspondence

The Honourable Judicial Commissioner Andre Maniam held that there was no protocol for communications agreed between the parties, and that PO1 was not the parties’ “agreed procedure” for the purposes of a setting aside application under the Model Law. The Judge also held that PO1 did not infringe the parties’ right to representation, and the Tribunal could reasonably direct that there be only one line of communication between each party and the Tribunal.

Further, the Judge held that if the applicant considered its rights to have been infringed it should have raised its objection or applied to vary PO1 immediately, instead of raising the issue in a set-aside action. In circumstances where the applicant considered there to have been a fatal failure in the process, it ought to have complained and not simply press on with the hearing.

The Judge also noted that fairness of the procedure must be judged against what the parties contemporaneously communicated to the Tribunal. In the present case, the Legal Counsel had, in fact, acknowledged the Tribunal’s request to follow paragraph 6 of PO1 by email. Therefore, the Judge was of the view that there was no reason for the Tribunal to think that paragraph 6 of PO1 was objectionable. 

The Judge also found no merit in the applicant’s allegation that the omission of the GM from certain correspondence led to a document being served out of time, and so no prejudice was suffered by the applicant.

Conduct of the Hearing 

The respondent argued that rule 23.1 of the SIAC Rules (“any party may be represented by legal practitioners or any other authorised representatives”) required the parties to choose between either being represented by legal practitioners, or by other authorised party representatives (such as the GM). While rejecting the respondent’s argument and holding that rule 23.1 of the SIAC Rules does allow for representation by both legal counsel and non-legally qualified representatives, the Judge nevertheless dismissed the applicant’s complaint that it was unable to “present its case as intended”.

The applicant’s complaint was based on the grounds that the GM was interrupted in the Opening Submissions, and was also prevented from asking a question of a witness.

After reviewing the transcripts of the hearing, the Judge held that the alleged interruption was in fact “entirely innocuous” and that “it would be a sad day if such a complaint sufficed to set aside an arbitral award”. The Judge also ruled that the GM had only been granted permission to assist in the Opening Statement, and not with interrogation of witnesses.

Therefore, the Judge held that the Tribunal had been reasonable and fair in holding the applicant to what it had represented as being the GM’s role for the hearing. It was, in the Judge’s view, “fanciful and entirely speculative” for the applicant to argue that the GM had participated more extensively as co-counsel.

Conclusion

This case is an important reminder that the Singapore courts will not set an award aside lightly. Parties who choose to arbitrate in Singapore agree to give the Tribunal wide and flexible discretion to determine its own procedures and processes.

This case also reinforces that a party’s rights to be heard and to present its case are not absolute. While a party must be given a fair and reasonable opportunity to be heard, what is fair and reasonable will depend on the particular circumstances of each case. The Judge held that the Tribunal is entitled to make procedural decisions to give the parties a reasonable right to present their case, after weighing the competing considerations.

Finally, the decision emphasises how critical it is for parties to raise their objections on procedural unfairness (or anything else which may lead to an award being impugned) in a timely manner with the Tribunal. Where a party fails to do so, it cannot expect a sympathetic reception from the courts by belatedly trying to set aside the award based on the objections which should have been raised earlier.

References: CGS v CGT [2020] SGHC 183.

* This article may be cited as Jeremie Witt, Kelvin Aw, Lynette Chew, David Wright, Lakshanthi Fernando and Dami Cha, “Rights of representation in international arbitration: are you being heard?” (22 October 2020)

+Also published on CMS Law-Now.

In the case of PUBG Corp v Garena International I Pte Ltd and others [2020] SGCA 51 (“PUBG”), the Singapore Court of Appeal had to decide whether or not to grant a stay of the parties’ ongoing court proceedings (“Court Proceedings”) in favour of a subsequent arbitration arising out of a settlement agreement that was entered into between the parties in the midst of the Court Proceedings (“Settlement Agreement”). In the arbitration proceedings, the validity of the Settlement Agreement was the main issue to be determined by the tribunal.

In particular, the Court of Appeal had to decide whether or not to stay the Court Proceedings on “case management” grounds – a ground that was first recognised and developed in Singapore by Tomolugen Holdings Ltd and anor v Silica Investors Ltd and or appeals [2016] 1 SLR 373 (the “Tomolugen”). In essence, a “case management stay” was developed under case law whereas a “mandatory stay” is based on statute at Section 6(1) of the International Arbitration Act. A “mandatory stay” is granted where an arbitration is the proper forum to resolve the parties dispute and not the court (i.e. where the same issue that has been brought under court proceedings is in fact subject to an arbitration). In contrast, a “case management stay” is applicable to the situation where the particular issue to be resolved under the arbitration proceedings is different from that raised in the court proceedings. If the court is of the view that determination of the arbitrable issue would supersede or compromise the existing issues under the court proceedings, the court can grant a stay of the court proceedings albeit there being no overlapping issue between the arbitration and the court proceedings.

The Court of Appeal in PUBG found that the validity issue of the Settlement Agreement had to be resolved first by way of arbitration proceedings before proceeding with the Court Proceedings because a valid settlement between the parties would have the effect of dispensing the existing Court Proceedings – i.e. the arbitral tribunal’s ruling on the Settlement Agreement would have the effect of superseding or compromising the parties’ original claims under the Court Proceedings. Accordingly, in PUBG,a stay of the Court Proceedings was granted on case management grounds in favour of the arbitration proceedings arising from the Settlement Agreement. We discuss the Court of Appeal’s reasoning in detail and the implications of the decision in PUBG below.

Factual Background of PUBG

The Appellant initially commenced the Court Proceedings against the five Respondents alleging copyright infringement. Subsequently, the Court Proceedings were suspended in light of the Appellant’s proposal for the Settlement Agreement. After delaying the execution of the Settlement Agreement for a considerable amount of time, the Respondents finally accepted the settlement terms. However, the Claimant protested that it could no longer accept the Settlement Agreement, and argued that the Settlement Agreement was no longer valid.

The Settlement Agreement contained an arbitration clause which provided for “any dispute, controversy, claim or difference of any kind” arising in connection with the Settlement Agreement to be resolved by arbitration (the “Arbitration Clause”). The Respondents commenced an arbitration proceeding against the Appellant (the “Arbitration”), contending that the Appellant had acted in breach of the terms of the Settlement Agreement by alleging that the Settlement Agreement was not valid. The Respondents also applied for a stay of the Court Proceedings on case management grounds, pending the resolution of the Arbitration.

The High Court Judge granted a stay of the Court Proceedings on case management grounds in favour of the Arbitration. When the Appellant appealed against the decision, the Court of Appeal upheld the High Court’s decision and held that the Court Proceedings had to be stayed until the issue relating to the validity of the Settlement Agreement was resolved by the Arbitration.

Court of Appeal’s Decision in PUBG

In reaching its decision, the Court of Appeal recognised that there essentially existed two seemingly distinct disputes, (i) the dispute on infringement of intellectual property rights (i.e. the “primary” dispute under the Court Proceedings), and (ii) the dispute onthe validity of the Settlement Agreement (i.e. a “secondary” dispute under the Arbitration). However, the Court of Appeal ultimately took the view that such analysis of the parties’ dispute would not capture the “real essence” of the situation. The Court of Appeal was of the opinion that if there was a valid settlement that would effectively compromise the underlying claims of the parties, then the Court Proceedings could not proceed. Accordingly, the Court of Appeal held that the validity of the Settlement Agreement had to be resolved first. The Court of Appeal noted that, if the Settlement Agreement were held to be valid, this would supersede the original cause of action altogether. Hence, the question of whether the settlement exists between the parties had to be tried as a preliminary issue.

The Court of Appeal also held that the correct forum to determine the validity of the Settlement Agreement would be the Arbitration pursuant to the Arbitration Clause contained in the Settlement Agreement. The Court of Appeal stated that as long as the court is presented with what appears on its face to be a valid arbitration agreement, the court should allow any dispute that falls within such arbitration agreement to be determined by the arbitral tribunal.

In coming to its decision, the Court of Appeal also considered the following points relating to granting a stay of court proceedings on case management grounds.

First, the Court of Appeal cautioned that the Appellant could not seek to improve its own position by disregarding the Settlement Agreement and seeking to continue with the Court Proceedings on the ground that the issues that were being dealt with under the Court Proceedings and the Arbitration did not overlap. Even in such a case, the court could still exercise its inherent discretion to stay the court proceedings on case management grounds, as long as the issues that are being dealt with under the arbitration proceedings have a superseding effect on the issues of the original court proceedings. In this case, since a finding that the Settlement Agreement was valid under the Arbitration would have the effect of dispensing with the need to continue with the Court Proceedings, the Court of Appeal granted the stay.

Second, the Court of Appeal noted that the validity of the Settlement Agreement was not raised by the Appellant in the Court Proceedings. If the Appellant had raised the validity issue of the Settlement Agreement in the Court Proceedings, the Respondents could have applied for a mandatory stay under s 6 of the International Arbitration Act (rather than a case management stay). This is because in such a scenario, the issue to be determined under the Arbitration and the Court Proceedings would be identical, and resolution of that issue pursuant to the Arbitration would be mandatory pursuant to the parties’ Arbitration Clause. As discussed above, a mandatory stay is granted when the parties’ dispute, which was supposed to be subjected to the arbitration agreement, has instead been brought under court proceedings. On the other hand, a case management stay could be granted even when the issues that are being determined by the court do not overlap with the issues that are being handled by the arbitration tribunal. The purpose of a mandatory stay is to uphold the parties’ agreement to arbitrate their dispute, while the purpose of a case management stay is to ensure that the fair and efficient resolution of the parties’ dispute as a whole is achieved. However, as the subject matter of the Arbitration Clause (i.e. the validity of the Settlement Agreement) was only raised in the Arbitration and not in the Court Proceedings, the more appropriate stay that the Respondents could apply for was a stay on case management grounds.

Third, where the court is tasked with exercising its inherent power to grant a stay on case management grounds, the Court of Appeal found that the principles laid out in Tomolugen were relevant. In Tomolugen, it was held that the court should “take the lead in facilitating the fair and efficient resolution of the dispute as a whole”. Therefore, when granting a stay on case management grounds, the courts would have to balance three “higher-order concerns”: (1) preserving the plaintiff’s right to choose whom to sue and where, (2) upholding agreements to arbitrate, and (3) preventing an abuse of process. However, the Court of Appeal cautioned against applying the principles laid out in Tomolugen in a “mechanical” way. Instead, the court’s inherent power to grant a case management stay of court proceedings should be “exercised with due sensitivity and regard to the facts and in particular, the nature of the overlapping issues”.

Implications

The decision in PUBG has implications that parties must consider carefully. Namely, if two parties are engaged in a Singapore court proceedings but later execute a settlement agreement midway through the court proceedings, one party may invoke the arbitration clause contained in the settlement agreement and seek a stay of the original court proceedings on case management grounds.

Therefore, the parties should be wary of the effect that their settlement agreement (in particular, the arbitration clause contained therein) might have on their original court proceedings. If the arbitral tribunal’s ruling on the settlement agreement has the effect of superseding or compromising the parties’ original claims, then the Singapore courts are likely to grant a stay of the original court proceedings in favour of the pending arbitration for case management grounds. Hence, parties should be alert to the fact that their rights to resolve their original dispute under the court proceedings can be held in abeyance pursuant to a “case management stay” until their dispute on the settlement agreement (reached midway through the court proceedings) is resolved by way of an arbitration, even if the issue to be arbitrated was never raised in the court proceedings.

* This article may be cited as Dami Cha, “Arbitration Clause in Settlement Agreement Triggers a Stay of Court Proceedings on Case Management Grounds” (10 June 2020)

+Also published on CMS Law-Now.

The coronavirus pandemic has left companies increasingly concerned about the possibility of winding-up as a result of a failure to pay debts. In a situation where a party’s disputed debt is subject to an arbitration clause, the debtor may wish to seek a stay or dismissal of any winding-up applications commenced against it before the court in favour of arbitration.

This issue came to the fore in the decision by the Singapore Court of Appeal (the “CA”) in AnAn Group (Singapore) Pte Ltd v VTB Bank (Public Joint Stock Company) [2020] SGCA 33. In particular, the CA examined the applicable standard of review that a debtor needs to satisfy in order for the court to order a stay or dismissal of winding-up proceedings.

Decided by a coram of five Court of Appeal judges, the CA resolved an apparent inconsistency in the applicable standard of review, concluding that in the situation where the debt was subject to an arbitration clause, the debtor only needs to meet the lower prima facie standard as opposed to the triable issue standard.

Background facts

The appellant, AnAn Group (Singapore) Pte Ltd (“AnAn”), entered into a global master repurchase agreement (the “Agreement”) with the respondent, VTB Bank (Public Joint Stock Company) (“VTB”). Under the Agreement, AnAn was required to maintain sufficient collateral for VTB. The Agreement also contained an arbitration clause to the effect that any dispute arising out of or in connection with the Agreement would be referred to arbitration.

AnAn failed to meet its obligations under the Agreement and VTB initiated winding-up proceedings against AnAn on the basis of a statutory demand for a debt of approximately USD 170 million.

In the High Court, AnAn argued that the winding-up proceedings should be stayed in favour of arbitration in accordance with the parties’ arbitration agreement. AnAn also argued that there was an event of frustration or force majeure and that the amount claimed was overstated.

Holding himself bound by the CA’s decision in Metalform Asia Pte Ltd v Holland Leedon Pte Ltd [2007] 2 SLR(R) 268 (albeit reluctantly), the High Court Judge ruled in favour of VTB and ordered the winding-up of AnAn.

AnAn appealed against the High Court’s decision on the basis that:

1. the appropriate standard of review where a dispute is governed by an arbitration agreement is the prima facie standard of review; and
2. the threshold had been crossed in the current case.

The applicable standard

It is well established that a debtor “need only raise triable issues in order to obtain a stay or dismissal of [a] winding-up application” in litigation proceedings. The CA was faced with the issue of whether this same standard, i.e. the “triable issue” standard, would apply where the debt in question was subject to an arbitration agreement. After conducting a comprehensive survey of developments across a multitude of jurisdictions including England, Hong Kong and Malaysia, the CA clarified the applicable standard in Singapore.

In holding that the applicable standard of review was the prima facie standard, the CA pronounced that winding-up proceedings will ordinarily be stayed or dismissed as long as:

1. there is a valid arbitration agreement between the parties, and
2. the dispute falls within the scope of the arbitration agreement, provided that the dispute is not being raised by the debtor in abuse of the court’s process.

The CA reasoned as follows:

1. Coherence in law

The CA concluded that adopting the prima facie standard, which is a “lower standard of review” in a situation where the dispute or the debt is subject to arbitration would promote coherence in the law.

In particular, the CA shared the view expressed by the English Court of Appeal in Salford Estates (No 2) Ltd v Altomart Ltd (No 2) [2015] Ch 589 (“Salford”) that parties to an arbitration agreement should not be encouraged to present a winding-up application as a tactic to pressure the alleged debtor to make payment on a debt that is disputed or which may be extinguished by a legitimate cross-claim.

Therefore, in resisting a winding-up application, the debtor would simply have to demonstrate on a prima facie basis that there is an arbitration clause, and that the dispute is caught in that clause. If the higher triable issue standard was to be applied, this would encourage the abuse of the winding-up jurisdiction of the court, which would not be the appropriate forum to adjudicate on disputed claims that are subject to arbitration.

2. Party autonomy

The CA also opined that the triable issue standard when applied in the context of arbitrable disputes would offend against the principle of party autonomy, which is the “cornerstone underlying judicial non-intervention in arbitration”.

This was because the triable issue standard is one that requires a thorough examination of evidence, which would require the court to consider the merits of the defences. This would inevitably lead to displacement of the decision-making capacity of the arbitral tribunal in respect of the dispute. Hence, substantive prejudice may be caused to the parties if their choice of dispute resolution is not strictly adhered to.

The CA also noted that a party does not lose his genuine desire for recourse to arbitration just because his case may appear weak, and the courts should not undercut the bargain of the parties by examining the merits of the debtor’s defences irrespective of whether the debt is pursued by way of a court action or a winding-up application.

Exception to the prima facie standard

The CA observed that the prima facie standard would be subject to an overarching restriction – namely, that the court will not grant a stay of the winding-up proceedings notwithstanding that the prima facie standard has been met if the application for a stay amounts to an abuse of process.

The CA emphasised that the threshold for abusive conduct is “very high” and provided the following non-exhaustive examples:

1. Where the debt is admitted as regards both liability and quantum;
2. Where the debtor has waived or may be estopped from asserting his rights to insist on arbitration, such as where the parties have agreed subsequently that disputes may be resolved by litigation; and
3. Where the debtor company is seeking to stave off substantiated concerns which justify the invocation of the insolvency regime. Examples include instances when assets have gone missing and there is an urgent need to appoint independent persons to investigate with a view of recovering the company’s assets, or when there is a proper basis to conclude that there had been fraudulent preferences or the need to engage the avoidance provisions in the Bankruptcy Act.

The CA also added that in cases where the applicant creditor can demonstrate legitimate concerns about the solvency of the debtor company as a going concern, and no triable issues are raised by the debtor-company, the court would be prepared to grant a stay of the winding-up proceedings. The creditor will then be given liberty to apply to the court to proceed with the winding up if, for example, it can be shown that the debtor company has no genuine desire to arbitrate the dispute and is taking active steps to stifle the arbitration.

Application

Having determined the applicable standard of review, the CA held that there was clearly a prima facie dispute in this case. It was uncontroversial that AnAn had disputed the debt amount that was due and owing, and that this dispute was governed by the arbitration clause in the Agreement.

The CA was also satisfied that there was no abuse of process on AnAn’s part. While AnAn’s arguments on frustration and force majeure (which were not pursued in the CA proceedings) were “misconceived or legally unsustainable”, that did not mean that AnAn made such arguments in bad faith. Further, while AnAn could have raised its objections earlier in the proceedings and could have fleshed out its case on the quantification of the debt amount in greater detail before the High Court Judge, this delay was not sufficient to show an abuse of process. The CA also considered it crucial that AnAn did not at any time expressly admit to its liability for the debt amount.

Accordingly, the CA reversed the High Court’s decision and dismissed the winding-up application. The CA considered ordering a stay inadequate, as a stay of the winding-up application would in itself carry severe consequences for AnAn (e.g. stifling critical capital injections into the company).

Takeaways

Following the CA’s decision, debtor companies (faced with a default on debts due to a force majeure event or otherwise) now have greater clarity on their rights in seeking a stay or dismissal of winding-up proceedings commenced against them based on a disputed debt that is subject to an arbitration clause. Conversely, creditors are now likely to be more circumspect in commencing winding-up proceedings in the face of an arbitration clause so as to avoid having their application stayed or dismissed.

The CA had to exercise a fine balance between any misuse by debtors of the prima facie standard to stay or dismiss winding-up proceedings on the one hand, and the possibility of abuse by creditors unliterally choosing the insolvency route to bypass their obligation to refer the dispute to arbitration on the other.

In deciding that the prima facie standard was the applicable standard of review, the CA took an arbitration-friendly approach in holding that any potential misuse by the debtor of the prima facie standard can be addressed by the abuse of process control mechanism. This would ensure that party autonomy is respected and preserved, and that the courts do not run the risk of displacing the arbitral tribunal’s role in adjudicating disputes that should have been subject to arbitration.

The CA decision is likely to have major implications for many companies in the face of the coronavirus pandemic, which has had a debilitating effect on the global economy. The decision safeguards against “trigger-happy” creditors who may attempt to use the commencement of winding-up proceedings to pressure debtor companies into unfavourable settlement agreements. At the same time, creditors pursuing legitimate debts have the assurance that debtor companies without a bona fide case would be caught by the abuse of process mechanism.

* This article may be cited as Wei Ming Tan, Dami Cha and Pradeep Nair, “ASGCA clarifies applicable standard of review in dismissal of winding-up proceedings in favour of arbitration” (30 April 2020)

+Also published on CMS Law-Now.

In its recently released Annual Report 2019 (the “Report”), the Singapore International Arbitration Centre (“SIAC”) continues to report strong growth and positive numbers. We provide a summary of the Report’s findings and a few key takeaways, particularly in light of the COVID-19 pandemic and the unique challenges it is likely to present.

Record case filings and sum in dispute

2019 has been another watershed year for SIAC, with the arbitral institution reporting a record 479 new case filings in the past year. This was a significant increase from 2018, which had a total of 402 new case filings. Of the new cases filed, 87% (416) were international in nature; 13% (63) were domestic cases.

The total sum in dispute also rose by 14.6% to USD 8.09 billion from 2018. The average value of the new cases filed was USD 30.99 million, with new SIAC-administered cases valued at an average of USD 27.86 million. The highest sum in dispute for a single administered case was USD 1.41 billion.

Top users of SIAC

India emerged as the top foreign user of SIAC in 2019, contributing 485 cases to SIAC’s existing caseload. Whilst China (76) and the United States (65) remained in the ranks of top foreign users, countries like the Philippines (122), Brunei (49) and Thailand (39) joined these rankings for the first time, demonstrating SIAC’s growing appeal in the Asia Pacific region. SIAC’s top foreign users came from a mix of common and civil law traditions, belying Singapore’s status as a common law jurisdiction.

The geographical origin of parties for new cases remained extremely diverse, with parties coming from 59 jurisdictions ranging across the Americas, Africa, Europe, Asia Pacific and the Middle East.

Parties also filed their claims across a wide range of sectors, including corporate, trade, commercial, construction / engineering, maritime / shipping, banking / financial services (including cryptocurrency and blockchain), employment, insurance / reinsurance, IP / IT, media / broadcasting and real estate, to name a few. Corporate (140) and trade (100) accounted for the most cases, with the construction / engineering (76) and commercial (77) sectors following closely behind.

Arbitrator appointments

SIAC made a total of 159 arbitrator appointments in 2019. 145 of these appointments were for sole arbitrators and the other 14 were three-member tribunals. The majority of arbitrator appointments (138) were made under the SIAC Rules. The rest of the arbitrators were appointed for ad hoc arbitrations or under other Rules.

Another 138 arbitrators were nominated by parties in 2019 and confirmed by SIAC.

The arbitrators appointed by SIAC were geographically diverse and came from 25 different countries. SIAC is a strong proponent of gender diversity and female arbitrators accounted for 36.5% of the total appointed arbitrators. 30.3% of SIAC’s Court of Arbitration members are women, and women constitute 60% of SIAC’s Management and Secretariat.

Usage of procedural rules

Over the past decade, SIAC has introduced a number of innovative procedures designed to facilitate increased efficiency and flexibility in the resolution of disputes. Unsurprisingly, these have been widely adopted by users. Some highlights from the Report as follows:

• The Emergency Arbitrator (“EA”) provisions have proved very popular since their introduction in the SIAC Rules 2010. In 2019, 10 EA applications were received and all 10 were accepted by SIAC. 94 EA applications have been made by parties since its introduction in 2010.
• The Expedited Procedure (“EP”) was likewise introduced in 2010 as a time and costs-saving measure for parties. In 2019, 61 such requests were received out of which 32 were accepted. SIAC has received 534 EP applications since its introduction in 2010.
• SIAC was one of the world’s first major arbitral institutions to introduce an Early Dismissal (“ED”) procedure in 2016. 8 ED applications were received in 2019. 5 ED applications were allowed to proceed – 1 application was granted, 2 rejected, and the other 2 are pending. Since its introduction in 2016, 30 ED applications have been filed, 18 allowed to proceed and 9 granted. The limited number of ED applications granted reflect the stringent threshold requirements that need to be met in order for a claim or defence to be dismissed at an early stage of the proceedings.
• SIAC also introduced its consolidation and joinder provisions in 2016. In 2019, 53 applications for consolidation were received and 31 applications were granted by end 2019. 10 applications for joinder were received and 4 have been granted as at the end of 2019.

Governing laws

The governing laws of 20 jurisdictions were applied in disputes referred to SIAC in 2019. Of these, Singapore law (41%) was the most commonly applied, followed by that of India (24%) and the United Kingdom (16%).

Interestingly, the governing laws of a number of civil law and mixed law jurisdictions were also applied, including China, France, Indonesia, the Netherlands, the Philippines, Thailand and Vietnam.

Key takeaways

SIAC has enjoyed another bumper year in 2019, particularly with respect to the number of new cases filed and the value of the disputes being heard. The impressive numbers from the Report demonstrate a consolidation of SIAC’s position as one of the top arbitral institutions globally.

While there are many encouraging signs, the COVID-19 pandemic threatens to herald in a new economic downturn, not to mention creating new challenges on how disputes are to be adjudicated under the ‘new normal’. As the pandemic evolves, so have the measures taken by SIAC to adapt to these changes.

Although SIAC’s offices have been closed from 7 April 2020, it remains fully operational with all staff telecommuting in accordance with the Singapore government’s enhanced ‘circuit-breaker’ measures. Parties who wish to commence proceedings been requested to file their Notices of Arbitration via email; applications for emergency interim relief are likewise to be filed via email. All payments to SIAC are to be made via electronic bank transfers only. The Maxwell Chambers, SIAC’s usual venue for oral hearings, have also set up Virtual ADR Hearing solutions to replace in-person hearings.

Depending on the duration of the global pandemic, SIAC’s continued success in 2020 and beyond may depend largely on how the institution continues to innovate in respect to the conduct of its procedural hearings. The more successful SIAC is in implementing hearing procedures that are conducive to users kept apart by ‘safe distancing’ rules, the more confidence users are likely to have in referring their disputes to SIAC.

Given the agility with which SIAC has responded to users’ needs and concerns over the years, it would be interesting to see how the institution further innovates and responds to the challenges presented by the current crisis.

* This article may be cited as Wei Ming Tan, “The SIAC Annual Report 2019: Findings and Takeaways in the light of COVID-19” (15 April 2020) (https://singaporeinternationalarbitration.com/2020/04/15/the-siac-annual-report-2019-findings-and-takeaways-in-the-light-of-covid-19/).

+Also published on CMS Law-Now and LinkedIn.

Pursuant to the passing of the Intellectual Property (Dispute Resolution) Bill in August 2019, amendments have been made to, amongst others, the Singapore Arbitration Act (“AA”) and the International Arbitration Act (“IAA”) to clarify the arbitrability of intellectual property rights (“IPR”) disputes in Singapore. These changes came into effect on 21 November 2019.

The Key Amendments

By way of section 52B of the AA and section 26B of the IAA, both statutes now expressly stipulate that the subject matter of an IPR dispute is capable of settlement by arbitration.

Under the newly amended AA and IAA, “IPR” is defined to cover various IP-related rights, including patents, trade marks, registered designs and copyrights, amongst others. The list was deliberately kept non-exhaustive so as to allow for the flexibility of including new kinds of IPRs that may arise in future.

An IPR dispute is defined to include:

• a dispute over the enforceability, infringement, subsistence, validity, ownership, scope, duration or any other aspect of an IPR;
• a dispute over a transaction in respect of an IPR; and
• a dispute over any compensation payable for an IPR.

Significantly, the arbitrability of IPR disputes under the amended AA and IAA will not be forfeited simply because a law of Singapore or elsewhere: (i) gives jurisdiction to a specific entity to decide the IPR dispute; and (ii) does not mention possible settlement by arbitration.

In relation to enforcement of arbitral awards, however, the amended AA and IAA do not consider a third-party licensee or third-party holder of a security interest in respect of the IPR (or any person claiming through or under the same) as a party to the arbitral proceedings. Therefore, such parties are not entitled to rely on the judgment enforcing the award and only the parties themselves or any persons claiming through or under them would be able to rely on the same. In other words, the judgment only has effect on the parties (in personam), and is not enforceable against the whole world (in rem).

Impact of the Amendments

With the amendments to the AA and IAA, the arbitrability of IPR disputes is now statutorily recognised in Singapore. This is a notable shift away from the past misconception that IPR disputes can only be adjudicated by national authorities or national courts. This serves to make arbitration a more attractive option for IP disputes users and will invariably enhance Singapore’s reputation as an arbitration hub of choice for savvy users.

Notwithstanding the statutory amendments, however, there still exists a limitation to the arbitrability of IPR disputes – namely, that arbitral awards obtained under the same will remain binding only on parties, and not third parties.

Despite the aforesaid limitations, the clarifications made to the arbitrability of IPR disputes are a welcome development. In particular, the amendments to the AA and IAA will provide the flexibility to accommodate different types of IPRs in various jurisdictions and new types of IPRs / IP-related disputes that may arise in the future.

* This article may be cited as Lakshanthi Fernando, Wei Ming Tan and Dami Cha, “Arbitrability of IP disputes in Singapore – recent amendments to the AA and the IAA” (30 December 2019)

+Also published on CMS Law-Now.

Introduction

We consider why a recent decision of the Singapore High Court – BTN and another v BTP and another [2019] SGHC 212 – should be seen as further proof of Singapore’s commitment to respecting the binding nature of international arbitral awards.

What are the practical implications for international arbitration practitioners?

This case is a cautionary tale against parties disguising a challenge on the substantive merits of an award behind arguments alleging breach of natural justice or a jurisdictional challenge. The Singapore courts are particularly robust about respecting the limited grounds for judicial review and/or setting aside an award under the International Arbitration Act (“IAA“) and the United Nations Commission on International Trade Law Model Law on International Commercial Arbitration (“Model Law“) and disapprove of such ‘creative’ attempts to seek a de novo review.

The court’s reluctance to intervene in the tribunal’s substantive findings demonstrates the judiciary’s intent to respect party autonomy and the final and binding nature of arbitral awards. This can only further enhance Singapore’s reputation as a key international arbitration hub both in the region and globally.

What was the background?

The parties and their agreements

The defendants were the owners of a group of companies (“the group“) which entered into a share and purchase agreement (“SPA“) with the first plaintiff, BTN, a publicly listed company incorporated in Mauritius. Pursuant to the SPA, BTN acquired 100% ownership and control of the group. The second plaintiff, BTO, was the principal holding company of the group (BTO and BTN hereinafter referred to as “the companies“).

The SPA provided that the first defendant, BTP, and the second defendant, BTQ, were to be employed as the chief executive officer and chief technical officer of BTO, respectively. The employment of the defendants (hereinafter “the employees“) was governed by promotor employment agreements (“PEAs“). The SPA and PEAs contained materially identical provisions relating to the employees’ ‘with cause’ and ‘without cause’ termination.

If the employees were dismissed without cause, they would be entitled to an earn out consideration (“EOC“) of US$35m, subject to the financial performance of the group in 2013–15. If their dismissals were with cause, they would not be entitled to any EOC.

The employees’ dismissals

On 8 January 2014, BTO gave notices summarily dismissing the employees, citing various grounds of with-cause termination, namely the employees’ failure to achieve positive earnings before interest, taxes, depreciation, and amortization for 2013 and their alleged detrimental behaviour to the group.

The Malaysian Industrial Court (MIC) proceedings

In response, the employees commenced proceedings under section 20 of the Malaysian Industrial Relations Act 1967. The employees and BTO attended a mandatory conciliation meeting but could not reach settlement.

The cases were referred to the MIC which adjourned the hearings multiple times because of BTO’s failure to attend. Due to BTO’s absence, the MIC proceeded to hear the employees’ claims. The MIC found that the employees were dismissed without just cause as BTO had failed to prove that the employees committed the alleged wrongs justifying
their dismissals (“the MIC awards“).

BTO did not deny that MIC’s notices were properly served but claimed that the notices were concealed by an employee. BTO only resurfaced when the employees commenced non-compliance proceedings, seven months after the MIC awards were issued and after the expiry of the three-month period for judicial review. Initially wanting to challenge the MIC awards, BTO eventually decided to make full compensation.

The arbitration

In July 2016, the employees commenced arbitration under the SPA (pursuant to the Arbitration Rules of the Singapore International Arbitration Centre), claiming their entitlement to US$35m. The companies countered that the dismissals were with cause.

The employees claimed that the issues regarding their dismissals were res judicata by virtue of the MIC awards (“the res judicata issue“) and that as a matter of construction of the SPA and PEAs, a determination that the dismissals were without just cause under the PEAs was binding on the SPA (“the construction issue“).

The partial award

The arbitral tribunal unanimously held in a partial award dated 30 April 2018 (“partial award“) addressing a list of agreed legal issues that:

• the determinations by the MIC that the employees were terminated without just cause or excuse is binding and conclusive under the SPA and PEAs;
• the companies are prevented from arguing that the employees were terminated ‘with cause’ under the SPAs and PEAs by virtue of issue estoppel under Singapore law;
• a valid termination under the SPA requires the existence of audited accounts at the time of termination, which accounts must comply strictly with the SPA definition (“the audited accounts issue“).

What did the court decide?

Originating Summons No 683/2019 (OS 683)

In OS 683, the companies sought a judicial review by the Singapore High Court of the partial award as a negative jurisdictional decision pursuant to IAA, s 10(3).

Alternatively, the companies applied to set aside the partial award pursuant to IAA, s 24(b) and Article 34(2) of the Model Law. The companies cited various grounds such as:

• the tribunal made findings on disputed facts despite the parties’ agreement to reserve such issues to subsequent hearings;
• the tribunal decided on an issue that was not pleaded or argued;
• the tribunal failed to consider the companies’ argument against giving the MIC awards res judicata effect;
• the tribunal failed to decide on the substantive merits of the dispute by regarding itself bound by the MIC awards; and
• the partial award was in conflict with Singapore’s public policy.

Review under IAA, s 10(3)

The court declined to review the partial award pursuant to IAA, s 10(3).

The court held that the partial award was not a ruling on jurisdiction, because neither the construction issue nor the res judicata issue were jurisdictional issues. The court found that res judicata was a doctrine that goes to the issue of the admissibility of a claim, and not the jurisdiction of a tribunal. In any event, the partial award ruled on the audited accounts issue, which was a decision on the substantive merits of the case.

The court had strong words on the companies’ jurisdictional challenge, describing it as a ‘clever argument to mask a challenge on the substantive decision by the tribunal’. The court cited the warning by the Court of Appeal in AKN v ALC [2015] 3 SLR 488 that:

‘The courts must resist the temptation to engage with what is substantially an appeal on the legal merits of an arbitral award, but which, through the ingenuity of counsel, may be disguised and presented as a challenge to process failures during the arbitration.’

Application to set aside under IAA, s 24(b) and Article 34(2) of the Model Law

The court declined to set aside the partial award as there was no breach of natural justice.

Dismissing the multiple grounds raised by the companies, the court found that:

• a tribunal was not obliged to deal with every argument;
• natural justice does not require that the parties be given responses on all submissions made; and
• the tribunal was keenly aware that BTO was absent from the MIC proceedings, albeit as a result of the companies’ own internal failings.

The court found no reason to set aside the partial award since the tribunal was tasked precisely with determining whether the MIC findings were contractually binding and had res judicata effect.

The court also found that the partial award did not offend Singapore’s public policy as the companies were given full opportunity to present their case on the legal issues before the tribunal and cannot now complain against the outcome.

Whether the partial award should be set aside as against BTN

Finally, the court declined to set aside the partial award as against BTN. The tribunal clearly determined that the MIC awards were binding on both BTO and BTN based on its construction of the SPA and PEAs. Since the MIC proceedings applied to BTN by way of issue estoppel, this is neither a shock to the public conscience nor wholly offensive to a reasonable and informed member of the public.

* Originally published by LexisNexis; with thanks to Jenny Rayner.

This article may be cited as Wei Ming Tan, ‘Singapore — ‘creative’ attempts to challenge an award given short shrift’ (BTN v BTP)‘ (15 October 2019).

In June 2019, Singapore’s Ministry of Law (“MinLaw”) announced that it will be holding a public consultation on certain proposed amendments to the International Arbitration Act (Cap. 143A) (the “IAA”). This follows a written response provided on 1 April 2019 to a parliamentary question on whether MinLaw would consider reviewing the IAA to provide an avenue of appeal in relation to errors of law in arbitral awards.

We summarise the proposed amendments to the IAA – including 2 proposals from third parties – and provide brief comments.

1. Introducing a default mode of appointment of arbitrators in multi-party situations

Under the current IAA, the mode of appointment of arbitrators only applies to situations where there are two parties to the arbitration agreement. As multi-party arbitrations become increasingly more common, the proposed amendment provides for guidance under the IAA on the mode of appointment of arbitrators in multi-party cases.

2. Allowing parties to, by agreement, request the arbitral tribunal to decide on jurisdiction at a preliminary stage

At present, the IAA permits the arbitral tribunal to decide on the issue of jurisdiction either at a preliminary stage or when making the final award. The proposed amendment enables parties to jointly request the tribunal to decide on the issue of jurisdiction at a preliminary stage so that parties can enjoy savings in time and costs.

3. Recognising that an arbitral tribunal and the High Court have powers to enforce obligations of confidentiality in an arbitration

Confidentiality is one of the key features of arbitration. At present, parties and the tribunal have a duty of confidentiality under common law not to disclose confidential information obtained in the course of proceedings or to use them for any purpose other than in respect of the dispute. Most major arbitral institutions also have rules expressly providing for confidentiality in relation to all matters surrounding an arbitration. The proposed amendment to the IAA gives explicit recognition to the powers of the Court and the arbitral tribunal to enforce these duties of confidentiality.

4. Allowing parties to appeal to the High Court on a question of law in an award based on an opt-in mechanism

Currently, parties may only apply to the High Court to set aside an arbitral award on relatively limited grounds only – that is, on the grounds of fraud or corruption in the making of the award, or where there is a breach of the rules of natural justice, or where an award is in contravention of Singapore’s public policy.

The proposed amendment introduces an opt-in mechanism for parties to incorporate a right for them to appeal to the High Court on a question of law arising out of an arbitral award. This allows parties who prefer greater court supervision on issues of law to make a deliberate choice for curial supervision of such a nature. Parties who prefer the arbitral tribunal to have the final say on matters of law will remain unaffected as they can simply elect not to opt in to this new mechanism.

Apart from the 4 amendments proposed by MinLaw, 2 other third party proposals are up for consideration.

5. Allowing parties to agree to waive or limit the annulment grounds under the Model Law and the IAA

This is the mirror image of the 4^th proposal above. Instead of broadening the grounds for setting aside an award, it seeks to further limit these grounds by giving parties the option to limit or waive, by agreement, the annulment grounds set out in section 24(b) of the IAA and article 34(2)(a) of the UNCITRAL Model Law (“Model Law”). Such an agreement can only be made after the award has been rendered.

6. Allowing the Court to have the power to order costs in certain arbitral proceedings

Presently, the High Court has no power to make an order on costs in respect of arbitral proceedings where an award has been set aside. This is problematic because the tribunal would usually be functus officio in such cases and will not be able to make any further orders on costs.

The proposal considers whether legislative amendments should be introduced to empower the High Court to make an order on costs after a successful application to set aside an award. The proposal also considers whether similar amendments should be made to the domestic Arbitration Act (Cap. 10).

Comment

• In the past decade, Singapore’s popularity as an arbitral seat has gone from strength to strength. The authoritative Queen Mary University of London’s 2018 International Arbitration Survey ranked Singapore as the third most preferred seat and the Singapore International Arbitration Centre as the third most preferred arbitral institution in the world. The proposed IAA amendments represent MinLaw’s continued efforts to promote Singapore as a global dispute resolution hub of choice for savvy and well-connected commercial parties.

• The proposal to give parties the power to appeal to the High Court against errors of law in an award is eye-catching. The opt-in mechanism is an important touch as it mitigates against potential criticism that the Singapore courts are seeking greater curial intervention in arbitral proceedings. Party autonomy is preserved as parties are at liberty not to incorporate this option to their arbitral proceedings if preferred.

• Conversely, parties that prefer minimal curial intervention to arbitral proceedings will welcome the proposal to limit the grounds for annulling an award under section 24(b) of the IAA and article 34(2)(a) of the Model Law.

• The proposal to allow the Court to make an order on costs in respect of arbitral proceedings where there has been a successful setting aside application is sensible and timely. Section 10(7) of the IAA already empowers the Court to make orders as to costs in respect of jurisdictional challenges, so there is no reason why such powers should not be extended to cases where the Court set asides an arbitral award.

• The public consultation is being held from 26 June to 21 August 2019. All feedback is to be submitted to MinLaw by post or email on 21 August.

* This article may be cited as Wei Ming Tan and Pradeep Nair, “Singapore’s MinLaw launches Public Consultation on Amendments to International Arbitration Act”  (6 August 2019) (https://singaporeinternationalarbitration.com/2019/08/14/singapores-minlaw-launches-public-consultation-on-amendments-to-international-arbitration-act/)

+Also published on CMS Law-Now.

Introduction

Can an arbitral award be set aside on the grounds of fraud or breach of public policy on the basis that a successful party failed to call certain witnesses and/or failed disclose certain internal documents it did not consider relevant to the arbitration? This was the issue that confronted the Singapore High Court (the “Court”) in BVU v BVX [2019] SGHC 69.

Background

In response to spiralling food prices and growing concerns about scarcity, the South Korean government embarked on a project to secure long-term lines of food supply from international sources to supplement domestic food supply (the “Project”). The Defendant, a state-owned company, was appointed to spearhead the Project (the “Purchaser”). The Purchaser was introduced to the Plaintiff (the “Supplier”) which recommended that the Purchaser procure food from South America (the “Products”). After governmental approval was obtained, the Purchaser and Supplier formally entered into an agreement (the “Agreement”).

The material terms of the Agreement were as follows:

1. The Supplier shall be the Purchaser’s “most preferred Supplier”;

2. The Agreement would commence on 1 October 2012 for a period of 20 years (or until terminated in accordance with the termination clause);

3. The Purchaser would use its “best commercially reasonable effort to order and purchase” the Products during the course of the Agreement in accordance with the forecast range which was defined to be a “[m]inimum of 1,000,000 tons in total per annum”;

4. The Agreement was to be governed by the “rules of the Vienna Convention on Contracts for the International Sale of Goods” and that disputes arising out of or in connection with the Agreement were to be finally settled by Singapore-seated arbitration in accordance with the ICC Rules.

A few months after the Agreement was signed, the Purchaser informed the Supplier that it had entered into a Memorandum of Understanding with one of the Supplier’s competitors. Subsequently the Purchaser provided the Supplier with a forecasted range that was well below the forecast range in the Agreement and began a public tender process for the supply of Products (which it invited the Supplier to take part in).

The arbitration

The Supplier commenced arbitration against the Purchaser claiming USD 2.25m in damages plus interest for various breaches of the Agreement among other requests for relief. Before the oral hearings for the arbitration took place, the Purchaser indicated that it would only call one factual witness and not three other individuals who the Supplier had identified in its Statement of Claim as being involved in the negotiations for the Agreement. The Supplier applied to the arbitral tribunal for an order that the Purchaser procure the attendance of these three individuals as witnesses in the arbitration but this application was not successful.

The hearing proceeded with the Purchaser calling its sole factual witness, who was not involved in negotiations leading to the Agreement but who was, at the time of the arbitration, responsible for the purchase and sale of the Products and for monitoring the performance of the Agreement with the Supplier. The Purchaser also called on two expert witnesses to give their opinions on comparative and Korean Law.

The award was subsequently issued in favour of the Purchaser by the majority of the tribunal with one dissenting opinion.

On the balance of the parties’ arguments, the majority concluded, amongst other things, that a reasonable person in the same circumstances as the parties would not expect that the Purchaser’s obligation to use “best commercially reasonable effort” to purchase Products under the Agreement would require the Purchaser to act in contravention of Korean public procurement law. The majority further considered that the Purchaser had satisfactorily discharged its obligations under the Agreement by calling a public tender and inviting the Supplier to participate.

While the majority found that the Purchaser was not in breach of the Agreement, the dissenting arbitrator held that adverse inferences ought to be drawn in respect of the Purchaser’s decision not to produce its employees who were involved in the contractual negotiations of the Agreement and that the Purchaser was in breach of the Agreement because the parties had not anticipated that purchases under the Agreement would only be made by way of conducting public tenders.

Post-award applications before the Singapore High Court

After the award was issued, the Supplier’s Korean solicitors were able to reach out to one of the three witnesses who the Purchaser declined to call as a witness in the arbitration to give evidence in favour of the Supplier for the purpose of setting aside the Award (the “Witness”). The Supplier subsequently applied to the Court to set aside the award on the basis that as a result of the Purchaser’s failure to call the Witness to give evidence in the arbitration: (1) The award was induced or affected by fraud or corruption; and (2) The award is in conflict with the public policy of Singapore.

The Supplier then procured the issuance of a subpoena to the Witness to disclose certain categories of documents, which were all essentially the Purchaser’s internal documents (the Witness was unable to disclose these documents without a subpoena as he was subject to confidentiality obligations as an employee of the Purchaser). The Purchaser applied for the subpoena to be set aside. The Court then directed that the applications for setting aside the Award and the subpoena be heard together.

Decision

The Supplier’s application to set aside the Award

After a review of local cases, the Court observed that a high threshold had to be met for an award to be set aside for fraud or a contravention of public policy and that in order for the non-disclosure or suppression of evidence to warrant the setting aside of an award, three requirements have to be satisfied:

1. It must be shown that there is deliberate concealment aimed at deceiving the arbitral tribunal;

2. There must be a causative link between the deliberate concealment and the decision in favour of the concealing party; and

3. There must not have been a good reason for the non-disclosure.

The Court ultimately found that the Supplier failed to make out all of the requirements above. We highlight the following key observations of the Court:

• The disclosure obligations of a party in an arbitration are not as wide as those in common law jurisdiction court proceedings. In the latter case, there is a continuing obligation to disclose documents relevant and material to the case, including documents which have the potential to adversely affect the party’s own case or support the counterparty’s case.

• Under the IBA Rules on the Taking of Evidence in International Arbitration (which governed the procedural aspects of the arbitration), the Purchaser was not under a general obligation to produce all documents that could be relevant and material to its case or to call particular witnesses unless it was seeking to rely on his or her testimony.

• The Tribunal had already thoroughly considered the question of whether the Witness should be called to give evidence in the arbitration. By the Purchaser’s own admission, the Witness’s purpose was “to further corroborate” factual allegations – suggesting that the Witness’s testimony was not material but at best cumulative.

• In any event, it appeared to the Court that the Tribunal had invited submissions from the parties on whether certain witnesses (including the Witness) should be called to give evidence and ultimately decided that it would not direct the witnesses to give evidence. In the circumstances, it seemed to the Court that the Supplier had simply been unable to persuade the Tribunal to secure the attendance of the Witness, as opposed to a case where the Purchaser had fraudulently suppressed the Witness’s evidence.

• There is no obligation to call a particular witness in international arbitration and the decision to take the risk of having an adverse inference drawn (in the event the decision is made not to call a witness) is part of the adversarial process and not unconscionable conduct.

The Purchaser’s application to set aside the subpoena

The Court noted that the threshold for setting aside a subpoena, which is not easily surmountable, was crossed in the present case. Given the Court’s observations on the setting aside application, it concluded that the documents sought via the subpoena were legally irrelevant and/or unnecessary for the determination of the setting aside application. The Court also held that the subpoena was an abuse of process as it was an attempt by the Supplier to reopen the arbitrated dispute though a backdoor appeal on the merits.

Comment

• In reiterating the high threshold for the setting aside of an arbitral award, the Singapore Courts are once again reaffirming its support of party autonomy and finality in international arbitration.

• This case highlights the different disclosure regimes under common law litigation and international arbitration and the different disclosure obligations a party is subject to under each adjudication mechanism.

• Parties should be mindful of their potential future disclosure obligations when deciding on a particular dispute resolution mechanism in their contracts. Had this dispute been subject to the exclusive jurisdiction of the Singapore Courts, both parties would have been obliged to disclose all relevant and material documents, even documents detrimental to their case and helpful to their counterparty’s case.

• If the parties to a Singapore seated arbitration have concerns about the production of documents, they should seek curial assistance as soon as possible and while the arbitration is ongoing (under section 13 of the International Arbitration Act) as opposed to waiting until the outcome of the arbitration. The latter approach is likely to be perceived – as it was in this case – as an attempt to re-arbitrate the merits of the substantive dispute.

* This article may be cited as Pradeep Nair and Wei Ming Tan, “Singapore High Court refuses to set aside arbitral award for alleged suppression of evidence”  (30 July 2019) (https://singaporeinternationalarbitration.com/2019/08/13/singapore-high-court-refuses-to-set-aside-arbitral-award-for-alleged-suppression-of-evidence)

** Originally published on CMS Law-Now.