Arbitration analysis: The Singapore High Court (SGHC) dismissed an application under section 48 of the Arbitration Act to set aside a Singapore-seated International Chamber of Commerce (ICC) award. Although the arbitrator’s finding on a particular issue was against common ground between the parties (the ‘impugned finding’), the SGHC refused to set aside the ICC award. While the impugned finding was made in excess of the scope of the submission to arbitration, no prejudice was caused and thus a setting aside was not warranted. In any event, the impugned finding could be separated from the other reasons upholding the award. Shaun Lee, counsel, and Low Zhe Ning, associate, in the dispute resolution group at Bird & Bird ATMD LLP explain the implications of the decision of the SGHC in this case.

CHH v CHI [2020] SGHC 269

What are the practical implications of this case?

The decision suggests that to succeed in a setting aside application, the applicant is required to show not only that a ground for setting aside has been made out, but that prejudice has been caused as a result thereof. This appears to be so, even though among all the grounds for setting aside an arbitral award, breach of natural justice is the only statutory ground that expressly requires an aggrieved party to show that prejudice has been caused.

It bears noting that the setting aside application was made under the domestic Arbitration Act (Cap 10, 2002 Rev Ed) (the AA) and not the International Arbitration Act (the IAA). However, regardless of the type of arbitration and the resultant operative act, the Singapore courts retain a discretion in determining whether or not to set aside an award, even where the grounds for setting aside are made out. A party seeking to invalidate an award under the IAA should also, for good measure, demonstrate that prejudice has been caused.

Finally, parties to a Singapore-seated arbitration are still under a general obligation of confidentiality. This is so even if the applicable rules of arbitration (eg the ICC Rules) are silent or neutral as to confidentiality.

What was the background?

The respondent (plaintiff in the court proceedings) was the main contractor for a construction project. The claimant (defendant in the court proceedings) was the subcontractor under a ‘Design, Supply and Installation of Stone and Tile Sub-Contract’ (the ‘subcontract’). The subcontract work included the supply and installation of S stones and SV stones (collectively, the ‘stones’) and the subcontract provided for a quality assurance and quality control process for stone selection.

In the course of the project, the respondent and/or architect rejected all the S stones and most of the SV stones, which rejection was disputed by the claimant. Accordingly, the claimant commenced ICC arbitration for payment.

The issue in the arbitration was whether the stones complied with the acceptance criteria. The arbitrator held that the question was answered in the affirmative and that the stones should not have been rejected by the respondent. In finding that the stones complied with the subcontract, the arbitrator had, inter alia:

  • opined that the respondent and architect ‘chose not to attend most of the Dry Lays in Singapore’ and whose reliance on photographs was problematic
  • accepted the stone inspector’s conclusions that the stones were compliant, rather than the architect who should have relied on the stone inspector

The respondent challenged the ICC award on the following grounds:

  • the arbitrator should not have decided that the architect should have relied on the stone inspector (unless it could be plainly demonstrated he was wrong) (the ‘stone inspector finding’)
  • it was common ground between the parties that the architect had physically inspected the rejected stones. Thus, the finding that the architect ‘chose not to attend the Dry Lays’ exceeded the scope of submission to arbitration and/or was in breach of natural justice (together, the ‘setting aside application’)

The respondent also applied for sealing and redaction orders to preserve the confidentiality of the arbitration.

What did the court decide?

The application for sealing and redaction was allowed, but the setting aside application was dismissed.

The arbitrator’s findings did not go beyond the scope of submission to arbitration

The respondent argued that the stone inspector finding went against the contractual scheme that final approval rested with the architect and not the stone inspector. Nonetheless, the SGHC considered that while it was for the architect to decide whether to approve or reject the stones, the claimant could challenge that rejection on the basis that the stone inspector’s approval demonstrated that the stones had met the acceptance criteria.

The SGHC therefore held that the arbitrator’s finding that the architect should have relied on the stone inspector was simply ‘part and parcel of [the arbitrator] preferring the stone inspector’s views to those of the architect’. Whether the stones complied with the contractual requirements was an issue in the arbitration and thus, it was open to the arbitrator to make the stone inspector finding, and that finding was not in excess of jurisdiction nor a breach of natural justice. This was so even if the claimant had not made any arguments in line with the stone inspector finding.

In any event, the SGHC noted that the arbitrator had other reasons for finding that the stones complied with the contractual requirements. As such, setting aside the arbitrator’s stone inspector finding would not affect the conclusion that the stones met the acceptance criteria.