15 May, 2018
Virtus Law LLP, the Singapore member of Stephenson Harwood (Singapore) Alliance, has successfully resisted a challenge to an arbitration award (“Award”) which awarded the firm’s clients (“Jaguar”) a total sum of US$149 million plus interest. The Award, which had been made under the 1998 Rules of Arbitration of the International Chamber of Commerce (“1998 ICC Rules”) and issued by a panel of 3 distinguished international arbitrators, unanimously found that Jaguar, the claimants in the arbitration proceedings, were entitled to be paid damages as a result of default under an EPC Contract to build a power generation plant located in Guatemala by the contractor, China Machine New Energy Corporation (“CMNC”).
Following a three-day hearing in November 2017, the Singapore High Court on 26 April 2018 dismissed CMNC’s setting aside application on all grounds. Full details of the parties’ arguments and the High Court judge’s reasoning can be found here. The 103-page judgment by the Honourable Justice Kanna Ramesh addresses the following questions of law:
- Whether the arbitral tribunal’s making of an “Attorney’s Eyes Only” (“AEO”) order deprived CMNC of a reasonably opportunity to present its case thereby invoking Article 34(2)(a)(ii) of the UNICTRAL Model Law on International Commercial Arbitration (“Model Law”) and section 24(a) of the International Arbitration Act (“IAA”). In dismissing this ground, the Court held that CMNC’s complaint did not arise from the AEO Order but rather its agreement to an expedited arbitration. Since the parties had agreed to conduct the arbitration on an expedited basis, this entailed compressed procedural timelines for the arbitration with concomitant implications for the quality of due process. In addition, the tribunal was empowered and entitled to impose an AEO order under the 1998 ICC Rules, and had imposed the AEO Order on the preliminary basis of the risk of CMNC misusing documents subject to that order. CMNC was therefore not deprived of a reasonable opportunity to present its case.
- Whether Jaguar had breached an implied duty of good faith to arbitrate by engaging in alleged guerilla tactics. The Court found that whilst it seems that an arbitration agreement includes a duty to cooperate in the arbitral process, it is not clear if this is the same as or falls under a duty of good faith. In any event, even if Jaguar had an implied duty to arbitrate in good faith, the Court held that there was insufficient basis on the facts to infer bad faith on Jaguar’s part. Further, not all guerilla tactics would fall within the bases under the IAA and the Model Law for setting aside an award and to accept CMNC’s arguments would be to implicitly expand the categories of conduct on the basis of which an arbitral award may be set aside.
- Whether the Tribunal breached its duty to investigate the corruption allegations. The Court held that in appropriate cases, an arbitral tribunal may come under a duty to investigate allegations of corruption where the allegations of corruption affect the issues under consideration in the Arbitration. However, a breach of the Tribunal’s duty to investigate corruption allegations in itself does not render the Award liable to be set aside for breach of public policy. The arbitral tribunal in the arbitration proceedings did not come under a duty to investigate the corruption allegations because the evidence submitted of the corruption allegations did not have any bearing on the issue in the arbitration proceedings.
Our firm has observed a recent trend of parties making allegations of corruption in international arbitration proceedings. Companies involved in infrastructure or long-term projects should take proper advice on how such allegations may affect the resolution of their disputes both in arbitration and in subsequent enforcement or setting aside proceedings. In any event, where arbitral proceedings are afoot, proper conduct of arbitral proceedings to ensure due regard is given to due process is critical to ensuring the viability of any arbitral award rendered.
Germaine Chia of Virtus Law LLP, acts for Jaguar in the Singapore litigation. Timothy Cooke, a partner of Stephenson Harwood advised Jaguar in the arbitration and co-ordinates other related proceedings arising out of the dispute. Timothy is a member of the International Bar Association (IBA) Working Group on Corruption and Arbitration. He and Germaine have spoken recently to clients on managing fraud and corruption allegations arising out of investments in Southeast Asia.
For further information, please contact:
Timothy Cooke, Partner, Virtus Law LLP (a member of the Stephenson Harwood (Singapore) Alliance)
timothy.cooke@shlegal.com
