In the recent decision of BLC and others v BLB and another (30 July 2014) (BLC v BLB), the Singapore Court of Appeal reversed the Singapore High Court’s decision to set aside an arbitral award on the grounds of a breach of natural justice.

Its decision strongly reaffirms the non-interventionist, pro-arbitration stance of the Singapore Courts and should encourage international traders to choose Singapore as an arbitral seat in their contractual dispute resolution clauses going forward. The decision also provides clear guidance to parties who are faced with an unfavourable award in relation to a Singapore seated arbitration.

Background

The case concerned a dispute between two groups of companies, BLC (the Appellants) and BLB (the Respondents), following an unsuccessful joint venture.

The Appellants commenced arbitration proceedings alleging that goods manufactured and delivered by the Respondents were defective and claiming rectification costs. The Respondents counterclaimed for certain sums, including an amount which they alleged the Appellants owed for goods delivered but for which the Appellants had not paid (the Disputed Counterclaim).

As the parties could not agree a framework of issues to be heard, they submitted separate lists of issues to the arbitrator.

The award

The arbitrator held that the goods supplied were defective and allowed the Appellants’ claim for rectification costs. He dismissed all of the Respondents’ counterclaims, including the Disputed Counterclaim. The arbitrator suggested in his award that he had accepted the Appellants’ list of issues as a convenient framework to discuss the counterclaims. The award did not expressly identify or discuss two issues which featured only on the Respondents’ list of issues, relating to the Disputed Counterclaim.

The Singapore High Court’s decision

The Respondents applied to the Singapore High Court for the award to be set aside on the ground of denial of natural justice resulting from the arbitrator’s failure to address the Disputed Counterclaim.

The High Court agreed and held that as a result of extensively adopting the Appellants’ list of issues, the arbitrator had failed to deal with the Disputed Counterclaim and there had been a denial of natural justice. It set aside the part of the award which dealt with the Disputed Counterclaim and remitted it to a new tribunal for determination.

The Appellants then appealed to the Singapore Court of Appeal where the central question raised was a factual one – whether the High Court judge was correct in finding that the arbitrator had not addressed his mind to the Disputed Counterclaim and thereby failed to deal with an essential issue in the dispute.

The Singapore Court of Appeal’s decision

The Singapore Court of Appeal disagreed with the High Court, holding that the arbitrator had both considered the Disputed Counterclaim and rendered a decision in respect of this aspect of the dispute. It reinstated the arbitral award in full.

The decision of the Singapore Court of Appeal strongly affirmed the principle of minimal curial intervention and made the following key points:

  1. The Court must be wary of accusations by dissatisfied parties that an arbitrator has failed to consider an issue that was never before him in the first place.
  2. The Court should resist the natural inclination to be drawn into the arguments in relation to the substantive merits of the underlying dispute between the parties. These are beyond the remit of the Court. There is “no right of recourse to the courts where an arbitrator has simply made an error of law and/or fact”.
  3. Where a breach of natural justice is alleged, the Court is not required to conduct a “hypercritical or excessively syntactical analysis” of the award and must only remedy meaningful breaches that have actually caused prejudice.

In this case, the provisions of the joint venture agreement that the Respondents relied on in their application to set aside the award did not appear in the pleadings, list of issues or written submissions before the arbitrator. The Court held that the Respondents were seeking to rely on the case they wished they had put forward and not the case which was actually run.

The Court also held that the award must be read as a whole, not in isolated parts. From the award as a whole, it was clear that the arbitrator did in fact address his mind to each of the Respondents’ counterclaims, including the Disputed Counterclaim.

The Court noted that dissatisfied parties should first seek redress from the tribunal before turning to the Courts. It considered Article 33(3) of the UNCITRAL Model Law which allows a party to make an application for an additional award where a claim has been presented in the arbitral proceedings but omitted from the award. Turning to the Courts should be a remedy of last resort.

Finally, the Court of Appeal disagreed with the High Court’s decision to remit the award to a newly constituted tribunal. There was no language in the UNCITRAL Model Law which permitted remission to a newly constituted tribunal: if the Disputed Counterclaim had not been considered because of a pure oversight, it would have been open to the High Court to remit the award back to the original tribunal. Only if the arbitrator himself decided to withdraw would the parties need to appoint a substitute tribunal.

Conclusion

This decision will reinforce Singapore’s efforts to market itself as a dispute resolution “hub”. This is significant because trade within Asia is growing faster than anywhere else in the world and with it, the number of commercial disputes has also increased. In recognition of this, Singapore has put considerable work into developing itself as a centre for all types of dispute resolution. The Singapore International Mediation Centre (SIMC) was launched on 5 November 2014, focusing on providing amicable solutions, through mediation and other related services, to cross border commercial disputes. The Singapore International Commercial Court is due to open in early 2015, targeting international commercial disputes that may be subject to foreign law and may not otherwise be dealt with in Singapore.

Alongside these newer developments, Singapore is maintaining its reputation as a key location for international arbitration. The legal regulatory environment in Singapore is an important factor to its success in this field. No restrictions are placed on foreign counsel or foreign arbitrators acting in Singapore seated arbitrations. In addition, and as reiterated by BLC v BLB, the Singapore Courts have consistently adopted a policy of minimal curial intervention, even with regard to domestic cases. Under Singapore’s International Arbitration Act, the Singapore Courts can only set aside an arbitral award in circumstances of fraud or breach of natural justice and have taken a narrow approach when interpreting these rules. They will not examine an award assiduously looking for blame or fault in the arbitral process.