In Coal & Oil Co LLC v GHCL Ltd  SGHC 65, the Singapore High Court dismissed an application to set aside an arbitral tribunal’s award issued 19 months after receiving the parties’ post-hearing submissions, finding that the delay did not constitute a breach of natural justice.
In April 2007, the plaintiff entered into a coal supply agreement with the defendant. Following an increase in the market price of coal, the plaintiff sought to renegotiate the coal price stipulated in the agreement, and informed the defendant that a shipment of coal would not be delivered unless it agreed to the proposed increase. The defendant initially agreed to the increase, but, after receiving the coal, demanded that the plaintiff repay the additional amount paid under the price increase arguing that it had been illegally coerced to agree to the higher price. The plaintiff refused the repay the amount demanded and, in accordance with the agreement, the defendant referred the dispute to arbitration in Singapore under the SIAC Rules 2007.
The tribunal heard the matter in May 2012, received final submissions in August 2012, and issued its final award, in favour of the defendant, in March 2014.
The plaintiff then applied to the Singapore High Court to set aside the award on three grounds, that:
- The issuance of the award was in breach of the parties’ agreed procedure under the SIAC Rules 2007.
- The award was in conflict of the public policy of Singapore.
- There was a breach of natural justice.
The grounds for setting aside the award were based on two factual premises, that:
- The tribunal had breached its duty under rule 27.1 of the SIAC Rules 2007 because it failed to declare the arbitral proceedings closed before releasing its award.
- There was “inordinate delay” in the release of the award because it was issued 19 months after the parties’ final submissions.
The court dismissed the plaintiff’s application on all grounds.
The first ground: breach of the parties’ agreed procedure
The court held that the tribunal had the power, and not a duty, to declare the proceedings closed before releasing the award. Thus, the tribunal was not in breach of rule 27.1 when it elected to not issue a declaration of closure of the proceedings before releasing the award. In this regard, the court also noted that the plaintiff’s “arid procedural objection” to the failure of the tribunal to close proceedings was not sufficient to declare that there had been a breach of the parties’ agreed procedure.
The second ground: breach of public policy
In dismissing the plaintiff’s allegations that the breaches of agreed procedure and delay in the issuance of the award were breaches of public policy, the court noted that “despite the very high threshold that has been set, public policy, together with the rules of natural justice, still appear to be the last refuge of the desperate, as far as applications to set aside arbitral awards are concerned. This case is no exception.”
The court observed that the breaches of agreed procedure were not breaches of public policy, as public policy is intended to capture matters of general, rather than particular, interest. The court held that it did not consider procedural breaches to be an issue which engages the interests of the wider community or one which rises to the level of gravity that the notion of public policy contemplates.
The court further held that while delay in the release of an arbitral award might not necessarily be in the public interest, it cannot, in itself without more, constitute a violation of public policy. It observed that if the delay had been truly intolerable, the plaintiff should have applied under Article 14 of the Model Law for the mandate of the arbitrator to be terminated before the award was released. The fact that it did not do so indicated that the plaintiff was only making the argument now because the award was adverse to the plaintiff and not because of any delay.
The third ground: breach of natural justice
The plaintiff argued that the tribunal ought to have invited the parties to give submissions on its failure to comply with rule 27.1 before issuing the award, and the failure to do so was a denial of the plaintiff’s right to be heard. The court found this submission “misconceived”, as rule 27.1 could only have been breached after the award was issued and in any event, the SIAC Rules 2007 do not grant either party a right to be heard in these circumstances. There was no evidence to suggest that the outcome of the proceedings had itself been prejudiced, and the delay in the issuance of the award affected both parties equally.
This decision demonstrates the reluctance of the Singapore courts to set aside arbitral awards on grounds of public policy or natural justice. It reiterates the position that the evidential threshold is high and limited only to “egregious cases where the error is clear on the record”, as such accusations may have an adverse impact on the arbitrator’s reputation and standing in the arbitration community, and the tribunal is not given the opportunity to defend itself.
*A version of this article was originally published by Practical Law Arbitration