In Singapore, arbitral awards benefit from minimal intervention by the courts. Save for very limited circumstances, an award is final and will not be set aside. “A duly rendered arbitral award would bind the parties on a good day – where they like the outcome – as much as a bad day – where they do not” (Swire Shipping – see below).
However, what if an arbitrator issues an award that is “borderline unintelligible” and “manifestly incoherent“, or copies and pastes significant portions from an award in another case with different parties? Would that be sufficient to justify court intervention and setting aside?
The recent decisions of Swire Shipping Pte Ltd v Ace Exim Pte Ltd [2024] SGHC 211 (Swire Shipping) and DJO v DJP and others [2024] SGHC(I) 24 (DJO v DJP) show that it will be necessary to examine what such concerns reveal about the way in which the tribunal reached its conclusions. The mere fact of a tribunal issuing a poorly reasoned or badly drafted award, or seemingly copying from another award, is not sufficient in itself to justify setting aside. One has to look further and consider whether these concerns bring the case within established legal grounds for setting aside.
At a practical level, no one wants to receive an award that it unintelligible, incoherent or even plagiarised. Choosing the right arbitrator is one of the most important decisions in arbitration.
Coherence and due process paranoia
In Swire Shipping, the High Court agreed that the arbitrator’s award was “very difficult to read and understand“, even “a labyrinth for the reader to navigate through and conquer, requiring the utmost willpower and concentration just to try to understand the Arbitrator’s reasoning“.
However, this was insufficient in itself for the award to be set aside. Justice Mohan reiterated that the question is whether unintelligibility is sufficient – directly or by inference – to bring the award within one of the recognised grounds for setting aside under Section 24 of the International Arbitration Act and Article 34(2) of the UNCITRAL Model Law on International Commercial Arbitration. If not, the “unintelligible” label is nothing more than a descriptor that reflects poorly on the arbitrator.
In this case, it was evident (despite the quality of the award) that the arbitrator had applied his mind to the evidence and issues at hand in granular detail – the parties had been accorded a fair hearing. The application to set aside was refused.
Despite refusing the application, Justice Mohan made two important reflections. First, he noted that, although arbitrators are not held to the same strict standards of reasoning as judges, this does not give carte blanche to issue poorly reasoned awards. In egregious cases, an award may be so incoherent as to indicate a failure of due process and fair hearing, justifying setting aside. Second, he commented that the award in this case exhibited features of due process paranoia – a tribunal acting excessively defensively in the arbitration and when writing the award to shield against allegations of due process violations. He added that, “while arbitrators are to be commended for seeking to be comprehensive in their awards, that should not be an end in itself especially if the resultant end product is a twisted, mangled mess – brevity as well as ease of reading and understanding ought to be the ultimate objective“.
Apparent bias and the lack of a fair hearing
In DJO v DJP, the award concerned a contract providing for Singapore-seated arbitration under the ICC Rules.
As it happened, the presiding arbitrator had been involved in two prior arbitrations under contracts containing the same or similar clauses and arising from the same underlying issues. However, those earlier arbitrations were seated in India under the rules of the International Centre for Alternative Dispute Resolution, New Delhi.
A detailed review of the challenged award revealed that the tribunal had used the awards from the earlier arbitrations as a ‘template’, without considering necessary changes. For example, the award attributed submissions made by counsel in the prior arbitrations to counsel in the present arbitration, reproducing those submissions verbatim; it referred to authorities that had been cited in the earlier arbitrations but not in the present arbitration; it referred to terms found in the contracts from the prior arbitrations but not in the contract from the present arbitration; and it applied Indian law instead of Singapore law to the determination of interest and costs.
The court noted that the test for apparent bias is whether a fair-minded and reasonable observer, considering the facts and circumstances, would suspect that the arbitrator had approached the matter with a closed mind. It is not necessary to reach a concluded view that justice had not been done; the test is merely whether there is a reasonably suspicion or apprehension that justice may not have been done. That test was easily satisfied in this case. There could be “no clearer indication” that the tribunal may have approached the matter with a closed mind.
In the same vein, the right to a fair hearing includes the right to a fair, independent and impartial decision. On the facts of this case, it was undeniable that this right to a fair hearing had been lost. The award was not the independent work of the tribunal based solely on the material and submissions placed before them. Instead, the tribunal had drawn heavily on material from the prior arbitrations without giving the parties an opportunity to address them on those matters.
Comment
These decisions illustrate that, despite the high threshold required for court intervention, arbitral awards are not immune from scrutiny and may be set aside where they fall below the required standard.
A poorly reasoned award will not be set aside easily which can leave parties with an unsatisfactory or incomprehensible decision but no recourse. Conversely, if the award is so deficient as to be set aside, the parties have expended significant time and money only to land back at square one: with a dispute on their hands and a long road ahead to resolve it, albeit with emptier pockets.
Choosing the right arbitrator is therefore of paramount importance at the start of any arbitration as it can greatly impact the outcome and efficiency of the process. Arbitrator selection is one of the significant benefits of arbitration, enabling parties to be able to select decision-makers with significant sector expertise or relevant experience.
Choosing an arbitrator can be a daunting task. Confidentiality in commercial arbitration makes it difficult for parties to access real-time, real-world information about individual arbitrator performance. Difficulty in choosing the right arbitrator is compounded by the sheer number available – for instance, the SIAC has over 700 arbitrators on its panel, and diversity initiatives (though certainly welcome) will expand the pool still further. As a result, arbitrator selection often turns on word-of-mouth and personal experience. Historically, parties with limited prior experience have had to rely heavily on their legal counsel to advise on suitable arbitrator candidates to both maximise the benefits of arbitrator selection and minimise any risks to the arbitration process.
There are initiatives to make information more accessible. Kluwer, Jus Mundi, Arbitrator Intelligence, the ICC and others now provide online access to information about the prior caseload of arbitrators and there are other initiatives (such as the ERA pledge) which seek to increase the pool of available arbitrators. Some institutions are also publishing awards with party names redacted but arbitrator details available. These initiatives are welcome, but are likely to remain incomplete given the importance of confidentiality to the commercial arbitration process. The deficiencies illustrated in Swire Shipping and DJO v DJP continue to underline the importance of informed and experienced legal advice on the selection of arbitrator candidates.
For further information, please contact:
Alastair Henderson, Partner, Herbert Smith Freehills
Alastair.Henderson@hsf.com
