In CVV and others v CWB [2023] SGCA(I) 9, the Singapore Court of Appeal (“SGCA“) upheld the Singapore International Commercial Court’s (“SICC“) refusal to set aside an arbitral award for, among others, a breach of the rules of natural justice.
According to the SGCA, arbitrators are not held to the same standards as judges of a court when giving a reasoned decision. This is because the grounds on which one may challenge a judgment are distinct from the grounds which apply in arbitration proceedings. It would therefore be inappropriate to apply standards applicable to judges in the context of arbitration proceedings.
Factual Background
The dispute concerned advisory agreements between eleven related entities in the fund management industry (the “Claimants“) and an advisory firm with a focus on real estate investments (the “Respondent“).
Due to alleged breaches of the advisory agreements, the Claimants commenced arbitration proceedings against the Respondent. The Respondent counterclaimed for outstanding advisory fees. However, the Claimants disputed their liability to pay any outstanding fees under the advisory agreements.
The arbitral tribunal (the “Tribunal“) issued its final award on 20 June 2022 (the “Award“). In the Award, the Tribunal dismissed all the Claimants’ claims and allowed the Respondent’s counterclaims.
Unsatisfied with the outcome, the Claimants filed an application to set aside the Award (the “Application“) on the basis that the Tribunal had breached the rules of natural justice in various ways. However, the SICC dismissed the Application and refused to set aside the Award.
The Claimants went on to appeal the SICC’s decision on the narrower basis that the Tribunal had breached the fair hearing rule by failing to apply its mind and/or to give reasons for its decision on essential issues in the Award.
Singapore Court of Appeal Decision
The SGCA dismissed the appeal, holding that there was no breach of the rules of natural justice and there were no grounds on which to set aside the Award. On the facts, the SGCA found that the alleged breach of natural justice was in essence a challenge based on the merits of the award. In dismissing the appeal, the SGCA reminded future parties coming before the Singapore courts that parties in an arbitration must accept the consequences of their choice of the arbitral tribunal as regards the merits of the award, irrespective of the degree of their dissatisfaction with the outcome in the award.
In its judgment, the SGCA acknowledged that although Article 31(2) of the UNICITRAL Model Law on International Commercial Arbitration (the “Model Law”) imposes on an arbitral tribunal the “general duty to give reasons”, there remained two unsettled issues under Singapore law:
- whether an arbitral tribunal’s failure to give adequate reasons is a ground for setting aside an award; and
- if so, the scope of the arbitral tribunal’s duty to give reasons.
On the first issue, the SGCA noted that there has not been a Singapore case where an arbitral award was set aside for an arbitral tribunal’s failure to give reasons.
On the second issue, the SGCA disagreed with obiter remarks in an earlier Singapore High Court judgment (TMM Division Maritima v Pacific Richfield Marine [2013] 4 SLR 972) that considered that standards in relation to judges in court decisions may be assistive to arbitrators in determining the scope of their duty to give reasons. This is because different considerations are at play in a court case as opposed to an arbitration. Notably, in court cases, there is a need for open justice and to set out the court’s reasons in detail, because a review by the appellate court would involve a re-examination of the merits. In contrast, arbitration proceedings are confidential in nature and not subject to a review of the merit at the setting-aside or enforcement stage.
However, the SGCA declined to resolve these two issues conclusively, on the basis that the Claimants’ appeal was actually premised on a breach of the rules of natural justice, rather than the Tribunal’s alleged failure to give reasons. Specifically, the Claimants had only argued that the Tribunal’s failure to give reasons was demonstrative of the fact that the Tribunal must have failed to apply its mind.
Accordingly, the current position in Singapore remains that the inadequate provision of reasons by an arbitral tribunal is, without more, only an error of law that cannot justify the setting aside of an arbitral award. Insofar as the arbitral tribunal’s failure to give reasons demonstrates that it failed to apply its mind, the omission to give reasons must be so serious such that an inescapable inference arises that the arbitral tribunal did not even attempt to comprehend the essential issues in the arbitration.
Key Takeaways
- The SGCA’s decision upholds the principle of minimal curial intervention in international arbitration proceedings. As the SGCA emphasised, the Singapore courts will not examine the substantive merit of the arbitration and that awards will only be set aside on limited grounds.
- This decision also reinforces the principle of finality in arbitration. While arbitration proceedings are confidential in nature and not subject to a review of the merits at the setting-aside or enforcement stage, court proceedings require open justice and the need to set out the court’s reasons in detail since a review by the appellate court will involve a re-examination of the merits.
