By August Attorneys LLP
INTRODUCTION
The arbitration community witnessed a significant ruling recently when the Supreme Court of Singapore set aside an arbitral award on grounds that substantially call into question the integrity of the arbitration process. The decision delivered by Chief Justice Sundaresh Menon and Justice Steven Chong raises important issues regarding the independence of arbitral proceedings, the duty of arbitrators, and the standards expected in drafting arbitral awards.
CASE BACKGROUND
The dispute originated from a contract between a special-purpose vehicle (SPV) managing freight corridors in India and a consortium of three infrastructure companies. The disagreement arose when, in 2017, an Indian government notification increased minimum wages, leading to a question of whether the consortium was entitled to additional payments under their existing contractual terms.
After failed negotiations, the parties referred the dispute to arbitration in Singapore under the International Chamber of Commerce (ICC) Rules. The tribunal was chaired by a former Chief Justice of India, with two other arbitrators who were former judges of the Indian judiciary. The tribunal ultimately ruled in favor of the consortium.
THE CHALLENGE TO THE AWARD
The award was challenged before the Singapore High Court on grounds that large portions were directly “copy-pasted” from previous awards in parallel proceedings also chaired by the same presiding arbitrator but with different co-panelists. The High Court set aside the award, finding that the extensive similarities demonstrated bias and a failure to independently assess the parties’ positions.
On appeal, the Singapore Supreme Court upheld the High Court’s decision, identifying several critical issues with the award.
KEY FINDINGS OF THE SINGAPORE SUPREME COURT
1. Improper Reliance on Previous Awards
The Court acknowledged that while an arbitrator can refer to earlier rationale used to resolve similar disputes, in this case, the tribunal had simply copied substantial portions from previous awards without accounting for the different factual matrices. The Court noted:
“It is not inherently wrong for an arbitrator to resolve two related disputes in the same manner…that is simply not the case here, where not only was there no possibility of the parties addressing the points raised or conclusions reached in the separate proceedings, but portions from the Parallel Awards were reproduced in the Award, without even being adjusted for differences in the arguments made or in the terms of the applicable contracts.”
2. Persistent Errors Indicating Lack of Independent Analysis
The Court found several errors in the award, including the application of wrong law on interest and costs, and incorrect references to contract titles. The Court held that these errors, viewed in totality, evidenced problems with the underlying decision-making process:
“To the fair-minded and informed observer, it would appear that the Tribunal might not have adequately applied itself to the facts and submissions actually made in the Arbitration. Again, this would cast doubt on the integrity of the decision-making process.”
3. Reference to Extraneous Considerations
The Court determined that the tribunal had relied on materials from parallel arbitrations to which the parties in the present case had no access. This denied the parties their right of audience:
“…The patently substantial material derived from the Parallel Arbitrations were extraneous considerations that had not been raised to the parties’ attention. That material formed such a pervasive part of the Award that it simply could not be overlooked.”
4. Unequal Position of Arbitrators
The Court highlighted that since much of the material was imported from parallel proceedings where only the presiding arbitrator had been present, this created an inequality among the arbitrators:
“While, as we have noted, there is no evidence as to what actually transpired between the members of the Tribunal, it is known that the two co-arbitrators in this case were not privy to the Parallel Arbitrations. They would thus have had no direct access to any material or knowledge derived from those proceedings, but which appeared to have significantly influenced the outcome of the present Arbitration.”
IMPLICATIONS FOR ARBITRATION PRACTICE
This decision by the Singapore Supreme Court has several significant implications for international arbitration practice:
1. Independent Assessment Required
Arbitrators must independently assess each case on its own merits, even when they have presided over similar disputes. The use of templates or previous awards must be done with extreme caution and with appropriate adjustments to reflect the unique circumstances of each case.
2. Transparency in Decision-Making
The decision emphasizes the need for transparency in the arbitral process. Arbitrators should not rely on materials or knowledge from parallel proceedings unless such materials are disclosed to all parties and they have an opportunity to address them.
3. Equality Among Arbitrators
All members of a tribunal should have equal access to the materials that form the basis of the award. This ensures that the decision represents the collective judgment of the tribunal rather than being dominated by one member’s perspective.
4. Attention to Detail
The errors identified in the award, such as references to incorrect contract titles, underscore the importance of meticulous attention to detail in drafting awards. Such errors can undermine confidence in the decision-making process.
PERSPECTIVE FROM INDIAN ARBITRATION JURISPRUDENCE
From an Indian perspective, this case raises important considerations regarding the conduct of arbitrators, especially given that the arbitral tribunal was composed of former members of the Indian judiciary, including a former Chief Justice of India.
In India, courts have increasingly emphasized the need for arbitral integrity and independence. The Arbitration and Conciliation Act, 1996 (as amended) places significant emphasis on the independence and impartiality of arbitrators. Section 12 of the Act requires arbitrators to disclose circumstances that may give rise to justifiable doubts as to their independence or impartiality.
The Supreme Court of India, in cases like Voestalpine Schienen GmbH v. Delhi Metro Rail Corporation Ltd. (2017) and TRF Ltd. v. Energo Engineering Projects Ltd. (2017), has emphasized the importance of arbitrator independence and impartiality. This Singapore Supreme Court decision aligns with these principles and serves as an important reminder of the standards expected from arbitrators, regardless of their eminence.
CONCLUSION
The Singapore Supreme Court’s decision is a significant contribution to international arbitration jurisprudence. It reinforces the fundamental principles of natural justice, independence, and impartiality that form the bedrock of arbitration.
For practitioners, this case serves as a reminder of the rigorous standards expected in arbitral proceedings. It underscores that even eminent arbitrators must approach each case with fresh eyes, ensuring that their decisions are based solely on the specific facts, arguments, and applicable law of the case before them.
For parties considering arbitration, this case highlights the importance of selecting arbitrators who not only possess the requisite expertise but also demonstrate a commitment to procedural fairness and independent analysis.
As international arbitration continues to evolve as a preferred method of dispute resolution, decisions like this from the Singapore Supreme Court play a crucial role in maintaining the integrity and credibility of the process.
DISCLAIMER
The views expressed in this article are the personal views of the author and are purely informational in nature. Nothing contained herein shall constitute or be deemed to constitute legal advice, solicitation, or an inducement or invitation of any sort. This article is being published for educational purposes only, and readers are advised to seek professional legal advice before making any decisions related to matters discussed herein. This article does not create an attorney-client relationship. The author practices law in accordance with the rules and regulations of the Bar Council of India.