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In recent years, the Singapore Courts have reinforced their position as a leading authority in arbitration, delivering important decisions that shape and refine the arbitration legal landscape. This article examines three recent decisions – BZW and another v BZV [2022] 1 SLR 1080 (“BZW”), Swire Shipping Pte Ltd v Ace Exim Pte Ltd [2024] SGHC 211 (“Swire Shipping”), which relate to setting aside awards based on allegations of manifest incoherence and Wuhu Ruyi Xinbo Investment Partnership v Shandong Ruyi Technology Group Co Ltd and another [2024] SGHC 308 (“Wuhu Ruyi”), which concerns resisting enforcement of foreign awards due to breaches of domestic procedural rules. We unpack these cases and explore their potential influence on future arbitration-related matters both within Singapore and globally.
Manifest Incoherence of the Award: BZW and Swire Shipping
Arbitral awards issued in an international arbitration seated in Singapore are governed by the International Arbitration Act 1994 (“IAA”), which provides limited grounds that such awards can be set aside including an invalid arbitration agreement or a breach of natural justice. On the other hand, it is also well-established that a mere error of law and/or fact is not a ground for setting aside an arbitral award. But what if the errors are so egregious that they render the arbitral award incomprehensible or “manifestly incoherent”? This issue was addressed head-on in BZW and Swire Shipping.
In BZW, which involved a dispute arising from a shipbuilding contract, the buyer pursued claims for liquidated damages arising from delay in the delivery of the vessel (the “Delay Claim”) and damages arising from the installation of inadequate generators (the “Rating Claim”). The shipbuilders counterclaimed for payment for additional work. A three-member tribunal issued an award dismissing both the buyer’s claims and the shipbuilders’ counterclaims. The buyer applied to set aside the award before the Singapore Courts, asserting various breaches of natural justice under Section 24(b) of the IAA, in particular that: (a) there was no nexus between the tribunal’s chain of reasoning and the cases that the parties had advanced in respect of both the Delay Claim and the Rating Claim; and (b) the tribunal had failed to direct its mind to the merits of the Delay Claim.
The Court of Appeal set aside the award. It explained that the fair hearing principle required that a tribunal paid attention to what was put before them and gave its reasoned decision on the arguments and evidence presented. If an award was “manifestly incoherent”, this requirement would not be met given that the tribunal had not understood or dealt with the case at all. On the facts, the Court of Appeal observed that the Tribunal’s findings were often mere assertions rather than the apparent result of examining documentary evidence and considering the credibility of witnesses and the Tribunal “did very little, if anything, to connect the proverbial dots”. The Court of Appeal also agreed with the High Court that it was “impossible on the face of the award to distinguish between those findings which form part of the tribunal’s chain of reasoning on the [Delay Claim] and those which form party of its chain of reasoning on the [Rating Claim]” and “exceedingly difficult to map those findings to the essential issues from the parties’ cases on both claims”.
Further guidance on the ground “manifest incoherence” was provided in Swire Shipping by the Singapore High Court. In that case, Swire applied to set aside an arbitral award relying on the “manifestly incoherent” nature of the award as per BZW. Rejecting Swire’s application, the High Court stressed that the reference to “manifest incoherence” in BZW was not a charter for those seeking a de facto right of appeal to the court on the merits. What is important is whether the alleged incoherence is sufficient, whether directly or through some inference, to bring the case within one of the statutorily recognised grounds for setting aside an award (such as Section 24(b) of the IAA for breach of natural justice).
In that case, while the High Court stated that the Award “sailed close to the wind”, and was a “thoroughly unhappy, maze-like combination of innumerable internal cross-references coupled with the indiscriminate use of sub-paragraphs and sub-sub-paragraphs”, it did not cross the line to warrant curial intervention. It sufficed that the arbitrator did apply his mind to the evidence and the issues at hand.
Crucially, the abovementioned cases illustrate that in contemplating a potential setting aside application, parties should not entirely discount the impact of the quality of reasoning in the award. Where properly framed and substantiated by evidence, deficiencies in the reasoning of an award could serve as a credible starting point for assessing the prospects of setting aside an award.
Breach of Domestic Procedural Rules: Wuhu Ruyi
An oft-overlooked aspect of the New York Convention (“NYC”) is that, while Contracting States are obliged under Article III to recognise foreign arbitral awards as binding and enforce them, they are only obliged to do so “in accordance with the rules of procedure of the territory where the award is relied upon”. This issue came up for consideration by the Singapore Courts in Wuhu Ruyi.
In that case, an award was purportedly issued in an arbitration seated in the People’s Republic of China in favour of the award creditor (“Xinbo”). Xinbo sought to enforce the award in Singapore, which was resisted by the award debtors. The award debtors first obtained a production order for Xinbo to produce certain categories of documents that the award debtors claimed to be material to their case that the arbitration award was procured by fraud. Due to inadequate compliance with the production order, the Singapore Courts subsequently made an “unless order”, which specified, amongst other things, the dismissal of Xinbo’s enforcement action as a consequence of non-compliance. Xinbo ultimately failed to comply with the unless order, which led to the Singapore Courts dismissing Xinbo’s enforcement application.
On appeal to the High Court, Xinbo asserted amongst other things that: (a) the dismissal contravened the NYC as it had the practical effect of fashioning a new ground for refusing enforcement of a foreign arbitral award outside of the exhaustive grounds provided in the NYC (the “NYC Argument”); and (b) the dismissal was in contravention of the Singapore courts’ pro-arbitration policy undergirded by the principle of minimal curial intervention (the “Policy Argument”).
Justice S Mohan (“Mohan J”) dismissed the appeal. On the NYC Argument, Mohan J rejected it and highlighted that Article III of the NYC expressly subjects the enforcement of NYC Awards to the procedural rules of each Contracting State. He added that “the pro-enforcement policy of the [NYC] bends to the domestic procedural rules of an individual Contracting State rather than the other way around”. On the Policy Argument, Mohan J rejected it on the ground that the principle of minimal curial intervention was premised on “a proper ordering of roles between the court and the arbitral tribunal in the arbitration ecosystem”, and that compliance with the court’s orders was exclusively a matter within the province of the courts. As a parting comment, Mohan J dismissed Xinbo’s assertion that the enforcement of the unless order would set a “dangerous precedent” as fearmongering, stating instead that it was even more dangerous to give the impression that award creditors had an “open road” to disobey the court’s orders with impunity.
Wuhu Ruyi demonstrates that while Singapore courts maintain a pro-enforcement stance toward foreign arbitral awards, this policy is not without limits. In particular, it does not override the court’s ability to address serious procedural concerns, such as allegations of fraud in the arbitration process. The decision also serves as a reminder that the procedural dimensions of enforcement proceedings warrant careful attention and should not be underestimated.
Conclusion
The decisions of BZW, Swire Shipping and Wuhu Ruyi reflect the Singapore Courts’ nuanced approach in balancing the minimal curial intervention principle and providing the appropriate judicial oversight by ensuring procedural integrity. In addition, they further solidify the Singapore Courts’ reputation as delivering high quality jurisprudence that influences the international arbitration landscape.
For more information on the setting aside and enforcement of arbitral awards, please contact our authors.
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