Shi Yin Kim Xu Jingchen October 6 2022 When will the Singapore courts set aside an award in international arbitration? Helmsman LLC | Arbitration & ADR - Singapore Shi Yin Kim, Xu Jingchen Arbitration & ADR Grounds under IAACommentA court's function in arbitration is to regulate the arbitral proceedings and, if necessary, "rescue the arbitration if it is in danger of foundering".(1) In arbitration-friendly jurisdictions, such as Singapore, the courts adopt a supportive and non-interventionist role towards arbitration. As such, a court will only intervene in exceptional circumstances.Grounds under IAA In Singapore, the grounds for an international arbitral award to be set aside are set out exhaustively in the International Arbitration Act (IAA). They can be broadly grouped into the following categories:fraud – the award was affected by fraud or corruption;defective agreement to arbitrate – where a party was under some incapacity;breach of the arbitration agreement – the award deals with a dispute falling outside the terms of the submission to or beyond the scope of the arbitration or the tribunal composition or arbitral procedure was not in accordance with the parties' agreement;procedural defect – a party's rights were prejudiced as the award was made in breach of the rules of natural justice; or a party was not given proper notice of the tribunal's appointment, arbitral proceedings or unable to present their case; andpublic policy – either the subject matter is not capable of settlement by arbitration, or the arbitral award conflicts with Singapore's public policy.The grounds to set aside an international arbitral award are very narrow. Further, a challenging party is not entitled to have an award set aside as of right if any of the above grounds are satisfied. This is because the IAA provides that the court "may … set aside the award" based on the above grounds. In other words, the court has the discretion to uphold the award nonetheless.Recently, the Singapore courts published several judgments on the setting aside of international arbitral awards. This article examines some of the more recent cases to explore how the courts will exercise its powers under the IAA.CPU v CPXIn CPU v CPX,(2) the original dispute arose from various breaches of an investment arrangement. The parties subsequently entered into two settlement contracts, which provided that the applicants would transfer shares in companies related to the third applicant to ABC, the respondent's nominee. ABC would pay the respondent for the shares, and the applicants' liability towards the respondent would be reduced.The applicants subsequently claimed that the settlement contracts were entered into under duress and coercion, and that the first and second applicants were of unsound mind when they had signed the settlement contracts. In arbitration, the tribunal denied the applicants' request to join ABC as a party (joinder application) and to adduce expert medical reports detailing the first and second applicants' mental illness. The applicants subsequently applied to set aside the arbitral award on two grounds:The applicants were under some incapacity when they entered into the arbitration agreements.The tribunal breached the rules of natural justice by excluding the medical reports and refusing the joinder application.The court found that applicants were not under any incapacity and that the arbitration agreements were valid under the governing law of the arbitration agreement. In addition, the court held that there was no breach of natural justice. The tribunal's decision to exclude the medical reports (which were adduced one day before the main hearing and without the tribunal's leave) was an exercise of its case management power and was reasonable. Separately, the tribunal's reasons for refusing to join ABC in the arbitration were unobjectionable.CEF v CEHIn CEF v CEH,(3) the respondent engaged the appellants in the construction and operation of a steel-making plant. In the arbitral award, the tribunal found that the respondent had been induced to enter into the contract by the appellants' misrepresentations. The tribunal awarded the respondents various reliefs, including the order for the appellants to pay 25% of the respondent's reliance loss claim (damages order). Notably, the tribunal adopted a "flexible approach" to the respondent's proof of damages.The court found that there was a breach of natural justice on the damages order. As the tribunal expressly found that the respondent's evidence on its damages claim was deficient, the court took the view that the appellants could not have reasonably foreseen that the tribunal would nonetheless adopt an arbitrary figure of 25% and award damages accordingly. For the same reason, the court found the tribunal's reasoning did not have sufficient nexus to the parties' arguments because the tribunal was not first satisfied that the respondent had proven its losses. Finally, the appellants were prejudiced because had they been aware that the tribunal would adopt the "flexible approach", they would have had the opportunity to decide whether to pursue the respondent for the relevant source documents, which would have potentially affected the outcome of the arbitration. Accordingly, the court partially set aside the award in respect of the damages order.Sanum Investments Ltd v Government of the Lao PDRThe Sanum Investments Ltd v Government of the Lao PDR(4) case arose out of several disputes relating to the applicants' investments in the first respondent. In the arbitral award, the tribunal dismissed the applicants' claims for breach of fiduciary and contractual duties, and conversion of properties, on the basis that, among other reasons, the claims were barred by the defence of collateral estoppel under New York law.The applicants applied to set aside the award for breach of the rules of natural justice, and that the award conflicted with Singapore's public policy of ensuring disputants have fair access to justice. The applicants argued that the tribunal erred in finding that, under New York law, the doctrine of collateral estoppel barred the applicants' claims and, in doing so, failed to consider the merits of the claims.The court dismissed the applicants' claims. The court noted that a tribunal's decision was premised on certain determinations of fact and law, which must be taken as they are unless they had been tainted by process failures (which was not the case here). In this case, the tribunal had reviewed the facts and several New York court decisions on collateral estoppel and considered the further requirements for the application of collateral estoppel before determining that they were satisfied. It was not open to the court to examine the correctness of these determinations. Separately, the tribunal's finding that the applicants had the opportunity to run their case in prior arbitrations, and were thus estopped from reopening the matters, was not a breach of Singapore's public policy of fair access to justice.Asiana Airlines Inc v Gate Gourmet Korea Co LtdThe Asiana Airlines Inc v Gate Gourmet Korea Co Ltd(5) dispute arose out of differing interpretations of the "Initial Business Plan" contained in a long-term catering agreement between the parties. After the tribunal allowed the respondent's claims, the applicant applied to set aside the tribunal's award for breach of natural justice and a failure to consider all the pleaded issues. The applicant argued that the tribunal, by failing to properly consider the report of a Korean law expert, applied the wrong principles when interpreting the terms of the agreement.The court examined the expert report and the award in detail. The court conceded that the tribunal did not expressly refer to the expert report in reaching its conclusions. However, this was not a breach of natural justice since a review of the report would not have given the tribunal cause to reconsider its analysis of the applicable legal principles in arriving at its conclusions. Even if the tribunal had overlooked the need to review the report, no prejudice was caused to the applicant as the report would not have caused the tribunal to alter its conclusions.CommentThere are several other cases on the law of setting aside under the IAA. The above cases make clear that the Singapore courts will, by and large, respect the consensual and private nature of the arbitral mechanism. The courts will not interfere with the merits of the tribunal's decision but may inspect its reasoning process to ascertain whether the tribunal had considered the arguments and evidence before arriving at its decision. Furthermore, short of breaching the arbitration agreement, misconduct or defect in the arbitral process, the courts are unlikely to set aside an arbitral award.For further information on this topic please contact Kim Shi Yin and Xu Jingchen at Helmsman LLC by telephone (+65 6816 6660) or email ([email protected] or [email protected]). The Helmsman LLC website can be accessed at www.helmsmanlaw.com.Endnotes(1) Coppée-Lavalin SA/NV v Ken-Ren Chemicals and Fertilizers Ltd  AC 38 (HL) per Lord Mustill at 53.(2)  SGHC(I) 11.(3)  SGCA 54.(4)  SGHC(I) 9.(5)  SGHC(I) 8.