3 April, 2019
A recent decision by the High Court in Singapore emphasises the high bar which applicants must be able to meet in order to set aside an international arbitral award on public policy grounds, an expert has said.
The High Court (12-page / 171KB PDF) found that 'BVX', a South Korean state owned company, had not "deliberately concealed or withheld relevant and material evidence from the tribunal" by not calling a particular witness sought by 'BVU', one of its suppliers. BVX was not "under a general obligation to produce all documents that could be relevant and material to its case or to produce witnesses", so its refusal was not in breach of arbitral rules or public policy.
"This judgment further underscores the reluctance of the Singapore courts to interfere with international arbitral awards, even where a party has potentially supressed or not disclosed evidence during arbitral proceedings," said disputes resolution expert Rakesh Nelson of Pinsent Masons MPillay, the Singapore joint law venture between MPillay and Pinsent Masons, the law firm behind Out-Law.com.
"The High Court reviewed earlier authorities and neatly summarised that in order for the non-disclosure or suppression of evidence to warrant the setting aside of the award, three requirements would have to be satisfied. First, it must be shown that there was deliberate, as opposed to innocent or negligent, concealment aimed at deceiving the arbitral tribunal. Secondly, there must be a causative link between the deliberate concealment and the decision in favour of the concealing party: i.e., the concealment must have substantially impacted the making of the award. And thirdly, there must not have been a good reason for the non-disclosure," he said.
BVU had been appointed "most preferred supplier" to BVX, in connection with a national food security project. BVU was contracted to use its "best commercially reasonable effort" to perform its supplying obligations, while BVX agreed to use its "best commercially reasonable effort to order and purchase" food from BVU. The dispute resolution clause in the most preferred supplier contract provided for Singapore-seated arbitration under International Chamber of Commerce (ICC) rules.
BVX did not place any orders with BVU, instead inviting the supplier to participate in a public tender process. BVU commenced an arbitration against BVX for damages, for breach of the most preferred supplier contract. Before oral hearings took place, BVX indicated that it would only call one factual witness, and that it would not call three individuals in particular who were involved in the negotiations.
BVX applied to the tribunal to compel attendance of these three individuals, but its application was refused.
The majority of the tribunal accepted an argument from BVU that, under the laws of Korea, it was required to carry out a public tender before actually purchasing any products from BVX. It went on to find that the "best commercially reasonable effort" wording of the contract created no "absolute obligation" on either party.
The parties agreed that there were no discussions whatsoever on the public tender requirement during the pre-contract phase. However, in the view of the tribunal, BVX "could not have been unaware" that certain countries would require public tenders, especially in the case of purchases by state-owned entities. A reasonable person in the same circumstances would not, therefore, expect that the "best commercially reasonable effort" obligations would require BVX to act in contravention of Korean public procurement law.
After the award was handed down, BVX made contact with one of the BVU employees who did not give evidence during the proceedings. The employee agreed to provide evidence on the facts and circumstances surrounding the making of the agreement, which BVX said would "go towards showing that the parties' understanding of how the agreement would operate was contrary to the position that [BVU] had taken in the arbitration.
However, the High Court ruled that the tribunal had been within its rights to not force BVU to call the witness.
"The tribunal noted that it was not persuaded that [BVX] 'had identified specific subjects or relevant issues on which the witness testimony is sought that would be material to the outcome of the case'," the judge said. "It considered that it was for [BVU] to decide whether it needed to call the three employees and if it did not do so, the tribunal would hear submissions and be able to weigh the evidence on the relevant matters in dispute."
"In the circumstances, it seems to me that [BVX] had simply been unable to persuade the tribunal to secure the attendance of [the employee] because it failed to sufficiently show the materiality of [the employee's] evidence, and it was not the case that [BVU] had deceived or misled the tribunal as to what [the employee's] views were," the judge said.
"Such situations arise regularly as a result of the cut and thrust of dispute resolution proceedings, whether in arbitration or in litigation. I did not find that it involved, as [BVX] alleged, a fraudulent suppression of evidence to deceive the tribunal on the part of [BVU]. There was nothing stated in [BVU's] communications to the tribunal, when it was considering [BVX's] application, that can be said to be untrue or misleading," the judge said.
The judge was also "unconvinced" of a causative link between the alleged concealment and the decision in favour of BVU, meaning BVX's application failed the second test. On the final, "good reason", test, the judge concluded that BVU's decision not to call the employee as a witness during the arbitral proceedings was a legitimate one.
For further information, please contact:
Mohan Pillay, Partner, Pinsent Masons
mohan.pillay@pinsentmasons.com
