In recent years, there has been a marked increase in the prevalence of challenges to arbitral awards based on alleged breaches of “natural justice” or “due process”. Some observers have noted a corresponding impact on the conduct of tribunals, who are increasingly unwilling to deny requests for extensions of time and rights of reply, rejoinder and rebuttal. This phenomenon has been described as “due process paranoia” and can have a potentially detrimental effect on the time and cost efficiency that was once a distinguishing feature of international arbitration, as well as undermining the real importance of due process.
In China Machine New Energy Corporation v Jaguar Energy Guatemala LLC and another,[1] the Singapore Court of Appeal expressed concern at the cynical misuse of due process and natural justice complaints in the context of arbitration proceedings. In order to address this issue and to reduce the opportunity for abuse, the Court of Appeal provided guidance on the balance to be struck between genuine due process concerns and the tribunal’s legitimate duty to ensure a prompt and efficient resolution of the dispute at hand.
The Court of Appeal considered the scope of Section 24(b) of the International Arbitration Act (the “IAA”), which provides for an award to be set aside where “a breach of the rules of natural justice occurred in connection with the making of the award by which the rights of any party have been prejudiced”. The Court of Appeal also considered Articles 18 and 34 of the UNCITRAL Model Law on International Commercial Arbitration (the “Model Law”), which have the force of law in Singapore pursuant to Section 3 of the IAA, and which provide for the parties to an arbitration to be treated with equality and to be given a full opportunity to present their respective cases.
Following an analysis of legal authorities from Singapore, England, New York and New Zealand, the Court of Appeal distilled the following key principles:
- While Article 18 of the Model Law provides for each party to be given a “full” opportunity to present its case, the travaux preparatoires clearly show that the drafters of the Model Law were primarily concerned with placing limits on the right to be heard, so as to prevent its abuse by unscrupulous parties seeking to delay and prolong proceedings.
- Accordingly, a party’s right to be heard is impliedly limited by considerations of reasonableness and fairness. It does not require the tribunal to sacrifice all efficiency in order to accommodate unreasonable procedural demands by a party.
- The best rule of thumb to adopt is to treat the parties equally and allow them reasonable opportunities to present their cases as well as to respond. What constitutes a reasonable opportunity is a contextual inquiry that can only be meaningfully answered within the specific context of the particular facts and circumstances of each case.
- The overarching inquiry is whether the proceedings were conducted in a manner which was fair and the proper approach a court should take is to ask itself if what the tribunal did (or decided not to do) falls within the range of what a reasonable and fair-minded tribunal might have done in those circumstances.
- In undertaking this exercise, the court must put itself in the shoes of the tribunal. This means that:
- the tribunal’s decisions can only be assessed by reference to what was known to the tribunal at the time;
- it follows from this that the alleged breach of natural justice must have been brought to the attention of the tribunal at the material time; and
- the court will accord a margin of deference to the tribunal in matters of procedure and will not intervene simply because it might have done things differently.
- If a party intends to contend that there has been a fatal failure in the process of the arbitration, it must intimate this to the tribunal at the relevant time. This would ordinarily require the complaining party, at the very least, to seek the suspension of proceedings until the alleged breach has been satisfactorily remedied. It cannot simply reserve its position until after the award is issued and then decide whether to take up the point, depending on whether the result turns out to be palatable.
This guidance from the Court of Appeal should hopefully provide some comfort to tribunals and should enable them to exercise their discretion with more confidence, without fear of opportunistic and cynical challenges. This may be all the more relevant in the context of the COVID-19 pandemic, where an increasing number of procedural and merits hearings are being held remotely. The Court of Appeal’s guidance suggests that any objection to remote hearings or other procedural devices adopted by the tribunal should be raised clearly and promptly, because a simply reservation of rights it unlikely to be sufficient.
A copy of the full judgment can be obtained from the Supreme Court website using the following link: China Machine New Energy Corp v Jaguar Energy Guatemala LLC [2020] SGCA 12
[1] [2020] SGCA 12
