PT Central Investindo v Franciscus Wongso & Ors and another matter [2014] SGHC 190

The Singapore High Court in PT Central Investindo v Franciscus Wongso & Ors and another matterconsidered the correlation between an early application to remove an arbitrator during the conduct of the arbitration for impartiality and the setting aside of an arbitral award made by that same arbitrator, when the award was made before the application to remove was concluded.

Background

The parties

The respondent in the arbitration and the applicant in this application (“PTCI”) was an Indonesian company in the business of leasing telecommunications towers. PTCI had entered into an Arranger Fee Agreement (the “Agreement”) with the defendants to this action (the “defendants”). The defendants were appointed through the Agreement to secure a specific customer to lease PTCI’s telecommunications towers. This end was achieved but there arose a dispute between the parties as to whether the defendants were responsible for securing the customer. PTCI refused to make payment to the defendants as stipulated in the Agreement. The arbitration was commenced in relation to this dispute pursuant to the arbitration clause in the Agreement.

The arbitration

The substantive hearing in the arbitration took place in April 2011. The arbitrator gave no indication when he expected to render an award. Over time, the defendants became impatient and their counsel entered into intermittent correspondence with the arbitrator regarding when the parties might expect an award. The arbitrator responded to these overtures at the end of November 2012 with an apology and requested that he be updated on any developments and asked whether the parties wished to make further submissions. This was directed to counsel for both sides. The defendants at this point replied in the affirmative and eventually filed a supplemental memorial.

The April directions

On 1 April 2013, the defendants requested that the arbitrator order PTCI to confirm whether it had sold 200 of its tower sites and to disclose details thereto (the “1 April direction”). It was the defendants’ position that if such a sale had occurred, it would constitute a fundamental breach of the Agreement (the “fresh claim”). The arbitrator requested PTCI to respond within two days. PTCI did not respond by the deadline, prompting the arbitrator to extend the deadline to 8 April and in that same communication, invited the defendants to address him on his powers if they wanted their purported fresh claim to be heard and stating that he may have to draw “adverse inferences” if no response from PTCI was forthcoming (the “5 April direction”).

The April directions prompted PTCI to file a formal Notice of Challenge with the Singapore International Arbitration Centre (the “SIAC”) to challenge the appointment of the arbitrator, which was dismissed by the SIAC Chairman. PTCI then commenced an action under Article 13(3) of the UNCITRAL Model Law on International Commercial Arbitration (challenging an arbitrator) (the “Model Law”). Article 13(3) provides that the challenged arbitrator is entitled to continue with the arbitration and to render an award pending the removal application. The supervising court has no power under the Model Law to intervene to restrain the arbitrator from continuing with the arbitral proceedings.

The arbitrator issued the award in October 2013, before the determination of the removal application, and it was not in PTCI’s favour (the “Award”). PTCI chose to proceed with the arbitrator challenge and also commenced an application to set aside the Award. The court considered both applications together.

Application to remove the arbitrator

The court first considered the application to remove the arbitrator.

PTCI’s argument was that there were justifiable doubts about the arbitrator’s impartiality and sought to support this contention by stating that it was demonstrated through the delay in rendering the Award, the short timelines given to PTCI in the April directions, and the arbitrator’s threat to draw adverse inferences against PTCI in the 5 April direction. It was repeatedly contended that the arbitrator did not treat the parties equally and ignored PTCI’s right to be heard in imposing short timelines. These actions were, it contended, “an unmitigated and fundamental breach of the rules of natural justice”.

The court found that the main thrust of PTCI’s criticisms related to the purported “fresh” claim raised by the defendants on 1 April 2013 and the April directions.

The court found that the April directions and its circumstances were related to and fell within the realm of the case management powers of the tribunal and as such was within the discretion of the arbitrator. The court noted that there was no logical reason to differentiate between the proactive case management powers of a judge under the Rules of Court and the proactive case management powers of an arbitrator. Indeed, the parties here had given the arbitrator wide and flexible procedural powers by conducting the arbitration pursuant to the SIAC Rules 2007 which obliges the arbitrator to conduct the arbitration as appropriate “to ensure the fair, expeditious, economical and final determination of the dispute”.

The court found that PTCI was unable to show that the April directions had not been case management issues. It was also the court’s opinion that, as case management directions, the April directions were fair and reasonable and did not manifest any objective lack of impartiality in the conduct of the arbitral proceedings. The April directions were nothing more than an arbitrator’s attempt to seek information.

Similarly, the court was not convinced that PTCI had not had a reasonable opportunity to be heard in relation to the fresh claim. The 1 April direction did not prevent PTCI from presenting its position on the matters alleged by the defendants. Through the 1 April direction, the arbitrator was giving PTCI an opportunity to be heard and PTCI was invited to communicate in writing its position on the matters alleged.

The court disagreed with PTCI’s assertion that the 5 April direction gave rise to justifiable doubt as to the arbitrator’s impartiality, noting that it was well within the arbitrator’s case management powers to draw adverse inferences when faced with a party that ignored his case management decisions.

The court also did not find the timelines provided to PTCI to be unreasonable, noting that whilst PTCI was directed to respond within one day of the 1 April direction, in fact the arbitrator waited till 5 April before reminding PTCI to respond and extending the deadline to 8 April. PTCI therefore had seven days to comply with the 1 April direction.

Whether award should be set aside

The court then turned to consider whether the Award should be set aside on the grounds that the arbitrator was in breach of natural justice, that the arbitration was not conducted in accordance with the Agreement and that the Award was contrary to public policy.

PTCI submitted that PTCI had been denied its’ fundamental right to be heard and that the arbitrator was biased to support its contention that the Award constituted a breach of natural justice. However, PTCI shifted its position in this regard by stating that the arbitrator had breached PTCI’s right to be heard by not considering PTCI’s evidence and this was also evidence of apparent bias.

The court found all these claims to be baseless, noting that it was clear the arbitrator had applied his mind to the facts. The court also noted that an adverse award, in and of itself, could not show bias unless there was some evidence of improper conduct.

Judgment

For the reasons discussed above, the court dismissed PTCI’s applications. PTCI is appealing the decision on the challenge to the Award.

Obiter considerations

The court considered obiter the additional issues of whether arbitrator disqualification by removal would have the consequential effect of annulling or setting aside the final award and would the supervisory court have the power to make such a consequential order. Case law was unhelpful in this regard as the issue was unresolved.

PTCI argued that it was the drafters’ intention that a successful challenge to an arbitrator pursuant to Article 13 of the Model Law would render any award made null. The court considered the Model Law’s legislative history and was not convinced that such an intention exised. It appeared to the court that a separate application would have to be filed to set aside the award even if the party was successful under Article 13.