When challenging arbitral awards, it is said that ‘as parties have made their bed … they must lie in it’ –[1] parties ‘must live with the decision of the arbitrator, good or bad’.[2] This is a manifestation of party autonomy in ‘limiting the scope of post-award review’[3] to narrow grounds such as ‘fraud or corruption’ or ‘a breach of … natural justice’ through their choice of the relevant seat of arbitration.[4] Viewed in conjunction with Singapore courts’ stance of ‘minimal curial intervention in arbitration proceedings’,[5] it is no surprise that the setting aside of awards by Singapore courts is a ‘[r]are’ and ‘exceptiona[l]’ occurrence.[6]
The decision by the Singapore High Court (the ‘Court’) in BZV v BZW[7] to set aside the arbitral award in the case (the ‘Award’) for breaches of natural justice (the ‘Decision’) thus provides some valuable insights in this regard. For one, it highlights the limits imposed by parties on courts’ control over arbitral awards. Relatedly, the Court’s analysis also helpfully illustrates the extent to which judicial deference can no longer cover for deficiencies in an award. Moreover, the unique facts of the case precipitate a discussion on whether Singapore courts should be given greater latitude to set aside awards.
Last, this paper eschews any superfluous understanding that ‘national courts are the sole guardians to watch over arbitral awards’, and evaluates the Decision through the valuable and perceptive lens of the ‘[s]hared [c]ontrol of [a]rbitral [a]wards’ exercised by the parties (the ‘Parties’), the tribunal (the ‘Tribunal’), and the Court.[8]
I. Background Facts and Summary of the Decision
In BZV v BZW, the plaintiff and defendants entered into a shipbuilding contract (the ‘Contract’) for the purchase of a vessel by the plaintiff buyer from the defendant shipbuilders. A dispute arose between the Parties which proceeded to arbitration, where the plaintiff alleged that the defendants had (a) ‘delayed in delivering the vessel’ (the ‘Delay Claim’),[9] and (b) ‘breached the Contract by delivering the vessel with [incorrect] generators’, having provided the plaintiffs with generators of a lower ingress protection rating (IP23) than contractually specified (IP44) (the ‘IP44 Claim’). In response, the defendants argued, inter alia, that the plaintiff was entitled to neither the Delay nor IP44 Claim since ‘the delay was in fact caused by the plaintiff’,[10] and the plaintiff was ‘estopped from asserting that the defendants were under an obligation to deliver the vessel with generators rated IP44’.[11]
The Tribunal dismissed the plaintiff’s claims, prompting the plaintiff’s application to the Court to set aside the Award. The plaintiff relied on, inter alia, section 24(b) of the Singapore International Arbitration Act (the ‘IAA’), arguing that the Tribunal ‘breached natural justice in dismissing its claim’.[12] In turn, apart from contesting the claim, the defendants argued that (a) the plaintiff’s application under article 34(3) of the Model Law was filed outside of the three-month window and ought to be dismissed ‘in limine’, and (b) even if the Award should be set aside, the Court should remit the Award to the Tribunal under article 34(4) of the Model Law.[13]
The Court quickly disposed of the defendants’ preliminary objection, finding that article 34(4) of the Model Law only required that the Originating Summons and not the supporting affidavit be filed within the specified three-month time limit. The plaintiff had complied with this and had made a valid application.[14]
Importantly, the Court allowed the plaintiff’s application under section 24(b) of the IAA in finding that the Tribunal had rendered its Award ‘in breach of the fair hearing rule and … natural justice’, and declined to remit the Award to the Tribunal.[15] On both the Delay and IP44 Claims, the Court found that the Tribunal’s reasoning had ‘no nexus to any of the defendants’ defences’.[16] On the Delay Claim, the Tribunal had failed to ‘apply its mind to determine … an essential issue’ – whether the plaintiff’s acts actually caused the delay.[17] As for the IP44 Claim, the central tenet of the Tribunal’s conclusion that the plaintiff was estopped from rejecting the IP23 generators was its initial impression that the plaintiff’s representative had expressed that the IP23 generators were acceptable.[18] However, this was ‘based on an entirely false premise’ as the Tribunal had ‘misidentified’ the representative as the plaintiff’s, who was actually the defendants’ instead.[19] When responding to the plaintiff’s request to correct the Award under article 33(1)(a) of the Model Law, the Tribunal only had corrected the reference to the representative, but not its conclusions on liability. This therefore led to a gap in the Tribunal’s reasoning.[20]
II. Analysis and Key Takeaways
Overall, the Decision well illustrates the equilibrium of control between the Parties, Tribunal, and Court. While it appears that the right outcome was reached, it is nevertheless proposed that parties in Singapore-seated arbitrations be given greater autonomy to empower courts to review and set aside awards for patent errors of fact.
A. Party Autonomy as a Constraint on the Remit of the Court’s Review of the Award
First, parts of the Decision establish that parties do exercise a considerable degree of control over their award, most significantly by selecting the seat of arbitration (and, thus, the lex arbitri). Inasmuch as the Court easily dismissed the defendants’ preliminary objection, some insight can yet be gleaned as to the balance of control. Primarily, the Court noted that even if the plaintiff had requested to extend the three-month period, the Court was ‘prepared to accept’ that article 5 of the Model Law ‘excludes the court’s general procedural power’ to do so.[21] Thus, in choosing the lex arbitri, the Parties exerted control by restricting the Court from exercising its procedural powers.
Next, a constant refrain of the Court was that insofar as the plaintiff’s alleged breaches of natural justice were properly characterised as ‘attempt[s] to seek … review of the [A]ward on the merits’, this was ‘impermissible’.[22] This merely reflects the Court enforcing party autonomy in deciding on the lex arbitri, and as a corollary, the contours of possible post-award actions. If the Parties wanted an appeal on a point of law, they could have opted to arbitrate with English or Hong Kong Law as the lex arbitri.[23]
This fetter on the Court’s review certainly operated at its greatest and most dramatic where the Court noted that if the Award had not been corrected (to correctly attribute the defendants’ representative’s statement), while this would have left ‘an egregious and fundamental error of fact patent on the face of the [A]ward’, the Court would not have been able to set aside the Award as ‘a tribunal’s error – no matter how fundamental, egregious or patent, and whether of fact or law – is no basis whatsoever on which to set aside an award’.[24]
B. Tribunals’ and Courts’ Control: Judicial Deference and its Proper Limits
Second, certain nuances in the Court’s analysis reflect the limits of courts’ control over arbitration (in deference to tribunals), yet the Court’s ultimate finding of a breach of natural justice also draws the line beyond which judicial deference can no longer countenance a faulty award. Generally, the Court granted the Tribunal ‘fair latitude’ in reading the Award ‘with all the generosity [it] could muster’ without intent ‘to find fault … or errors’.[25] Indeed, the Court did adopt the most favourable interpretations: [26] for instance, ‘no breach [by the defendants]’ was construed liberally as meaning ‘no liability [to the plaintiff]’, to ensure consistency with the Tribunal’s earlier finding that the defendants had not fulfilled a contractual obligation.[27] However, ‘[e]ven on a generous reading’, the Court found breaches of natural justice. There was ‘no sign anywhere in the [A]ward’ relating to any finding of causation (vis-a-vis the Delay Claim), and ‘nothing … in the [A]ward’ to support the finding that the plaintiffs represented to the defendants that the IP23 generators were acceptable (regarding the IP44 Claim).[28] Judicial deference, therefore, rightly exists only to the point where a tribunal’s error is ‘demonstrably clear on the face of the record’.[29]
Notably, the Court declined to extend such deference to the Tribunal’s ‘general and self-serving paragraph’ which stated that the Tribunal ‘ha[d] considered in detail [all] documents and submissions’ and that any failure to specifically mention any argument ‘d[id] not suggest that [it] h[ad] not been considered’.[30] This could not ‘immunise [the] [A]ward against an allegation that the [T]ribunal ha[d] breached the fair hearing rule’, and so the Court ‘gave this paragraph no weight’.[31] This is certainly welcomed as judicial deference should not be used to support such boilerplate paragraphs and give Tribunals carte blanche to commit breaches of natural justice.
C. Expanding Party Autonomy and Courts’ Control: Setting Aside Awards for Errors of Fact?
Last, the unique facts of this case bring certain difficulties to the fore. For one, while the Court’s hands would undoubtedly have been tied if the Tribunal had not corrected its error – as a ‘fundamental, egregious or patent … [error] of fact … is no basis … to set aside an award’ –[32] this strikes as quite dissatisfactory in the circumstances. Indeed, the Tribunal had ‘read a key piece of evidence hopelessly wrong’.[33] Next, the plaintiff’s subsequent request for a correction left the Tribunal in a difficult position, since on the one hand correcting the error would risk the Award being set aside for a breach of natural justice, and on the other, leaving it untouched would be ‘professionally dishonest’ in allowing the defective Award to be upheld.[34] In fact, the propriety of the Tribunal’s correction is also doubtful as corrections under article 33(1)(a) of the Model Law are only allowed for computational, typographical or clerical errors. The Tribunal’s error ‘c[ould not] on any view’ be a mere ‘clerical error’ as the Tribunal clearly ‘intended to find, albeit on an erroneous factual basis’ that the representation was attributable to the plaintiff.[35] This puts similarly situated tribunals in an even more impossible position, as allowing the correction is legally ‘wrong’, yet would lead to the ‘right’ outcome in allowing defective awards to be set aside.
Circling back to party autonomy, within the current Singapore lex arbitri, parties are ‘entitled to a fair decision, but not necessarily a correct one’.[36] It is within this framework that judicial deference, even to factually or legally defective awards, exists. However, it is perhaps time to recognise that in exceptional circumstances an error of fact is a basis upon which a court should be allowed to set aside an award. On these particular facts, the error was both indisputable, and undisputed – the Tribunal agreed to correct, and the defendants did not object.[37] Moreover, this was a central plank of the Tribunal’s reasoning on the IP44 claim.[38]
Such a proposal understandably brings with it concerns that this will erode efficiency and finality as hallowed virtues of arbitration. While a detailed examination of this proposal to amend the IAA is beyond the remit of this paper, suffice to say, courts can safeguard these virtues by imposing appropriate costs awards on parties bringing frivolous claims on these grounds, deterring others from the same. Further, courts can weed out unmeritorious challenges by requiring parties to first obtain leave to appeal, as is the procedure under the English Arbitration Act on appeals on points of law.[39] Indeed, an opt-in mechanism to allow parties to appeal to the Singapore High Court on points of law is under consideration by the Ministry of Law,[40] and BZV v BZW makes a strong case that patent errors of fact should, at the very least, be included for consideration as well.
III. Conclusion
BZV v BZW thus aptly exemplifies how various entities’ control an award, while exposing potential deficiencies in the balance of control – or at least, in parties’ options to adjust the balance. It was perhaps fortunate for the plaintiffs that the Tribunal corrected the Award in the manner it did, exposing the Award to the successful set aside application.[41] However, future parties may not be so fortunate, and parties ought to be allowed to empower courts to exercise greater review to prevent such defective awards from being enforced. Finally, this analysis is also a testament to how the framework of control over arbitral awards is a useful analytical tool to understand the underlying tensions and drivers of how different entities act, and understand potential problems in a holistic manner.
Kay Han Lee is an LL.M. candidate (Dean’s Graduate Scholar) in the International Business Regulation, Litigation and Arbitration program at the NYU School of Law, on a dual-degree program with the National University of Singapore Faculty of Law where he is also pursuing an LL.B. (Hons).
[1] Iris Ng and others, ‘Five Recurring Problems in International Arbitration: The Relationship between Courts and Arbitral Tribunals’ (2020) 8 Indian J Arb L 19, 20.
[2] TMM Division Maritima SA de CV v Pacific Richfield Marine Pte Ltd [2013] SGHC 186, [2013] 4 SLR 972 [65].
[3] Friedrich Rosenfeld, ‘The Shared Control of Arbitral Awards’ in Larry A. DiMatteo, Marta Infantino, and Nathalie M-P. Potin (eds), The Cambridge Handbook of Judicial Control of Arbitral Awards (CUP 2020) 443.
[4] See, e.g., International Arbitration Act (Cap 143A, 2002 Rev Ed Sing) s 24.
[5] BLC v BLB [2014] SGCA 40, [2014] 4 SLR 79 [51].
[6] Sapna Jhangiani and Jarret Huang, ‘Limits, Latitude, and Lacunae: Rare Set-aside of Award in CBX v CBZ’ (Kluwer Arbitration Blog, 26 July 2021) <http://arbitrationblog.kluwerarbitration.com/2021/07/26/limits-latitude-and-lacunae-rare-set-aside-of-award-in-cbx-v-cbz/> accessed 21 November 2021.
[7] [2021] SGHC 60.
[8] Rosenfeld (n 3) 443 (control is also shared with arbitral institutions, and courts at the place of enforcement).
[9] BZV v BZW (n 7) [1], [89].
[10] id [95].
[11] id [98].
[12] id [48].
[13] id [20], [217].
[14] id [45].
[15] id [224]-[227] (the Tribunal’s reasoning ‘d[id] not inspire confidence’ that it would genuinely re-evaluate the case).
[16] id [149], [191].
[17] id [145].
[18] id [172]-[173].
[19] id [175].
[20] id [175].
[21] id [26] (emphasis removed).
[22] id [131], [153].
[23] Arbitration Act 1996 (UK) s 69 and Arbitration Ordinance (HK, 2011, Cap 609) sch 2, items 5, 6.
[24] BZV v BZW (n 7) [191].
[25] id [52], [109].
[26] id [141], [161].
[27] id [161] (which was therefore a ‘breach’ of contract).
[28] id [145], [191].
[29] id [52].
[30] id [128].
[31] ibid (emphasis added).
[32] id [191].
[33] Nicholas Poon, ‘Singapore—the arbitral tribunal’s right to be wrong, up to a point (BZV v BZW)’ (LexisNexis, 27 April 2021) <www.lexisnexis.co.uk/legal/news/singapore-the-arbitral-tribunals-right-to-be-wrong-up-to-a-point-bzv-v-bzw>.
[34] ibid.
[35] BZV v BZW (n 7) [184].
[36] Ng and others (n 1) 20.
[37] BZV v BZW (n 7) [182]-[183].
[38] id [187].
[39] Patric McGonigal, ‘The Appeal of the Law: Singapore’s Decision to Hold Off Introduction Option to Appeal on Point of Law and Other Changes’ (King & Wood Mallesons, November 2020) <https://pulse.kwm.com/international-arbitration/appeal-arbitral-award-on-law-singapore/> accessed 24 November 2021.
[40] ibid.
[41] One view is, possibly, that the Tribunal recognised the patent error it had committed, and decided that the partial correction was the best way for a set aside application to succeed – but this is, admittedly, a generous interpretation.