Arbitration analysis: The Singapore International Commercial Court ("SICC") dismissed an application to introduce new evidence on foreign law and to set aside an arbitral award (the "Award") on the basis that (i) the Award contained decisions on matters beyond the scope of submission to arbitration; (ii) there was a breach of the rules of natural justice in the making of the Award; and (iii) the Award is contrary to Singapore public policy.
Shaun Lee, counsel and Low Zhe Ning, associate, in the dispute resolution group at Bird & Bird ATMD LLP explain the implications of the decision of the SICC in this case.
What are the practical implications of this case?
An applicant seeking to introduce additional evidence at the setting aside stage, even if it is evidence on foreign law, is also likely to find an unreceptive audience with the Singapore courts.
What was the background?
The respondent had subscribed to the securities in GAPL by way of a Share Subscription and Shareholders Agreement dated 4 March 2010 (the "SSSA"). The applicant was also a party to the SSSA. The SSSA contained an arbitration agreement which provided for arbitration seated in New Delhi.
The applicant commenced proceedings under the International Arbitration Act ("IAA") and in the SICC to set aside the Award (the "Setting Aside Application") on the basis, inter alia, that the award violated Indian law and public policy and therefore was contrary to the public policy in Singapore.
The applicant thereby filed evidence on Indian law by way of an affidavit of one Justice Patnaik ("Justice Patnaik's Affidavit"). The respondent sought to strike out the affidavit on the grounds that Justice Patnaik's Affidavit amounted to fresh evidence not brought up in the arbitration, was an attempt to revive issues which the arbitrator had determined in the arbitration, and was irrelevant as it dealt with issues of Indian law and public policy and did not concern the question as to whether the award was contrary to the public policy in Singapore.
What did the SICC decide?
The Setting Aside Application was dismissed and Justice Patnaik's Affidavit was struck out.
(i) Award did not contain matters beyond the scope of submission to arbitration
The SICC adopted the 2 -stage enquiry as set out PT Asuransi Jasa Indonesia (Persero) v Dexia Bank SA [2007] 1 SLR(R) 597 and CRW Joint Operation v PT Perusahaan Gas Negara (Persero) TBK [2011] 4 SLR 305: first, what matters were within the scope of submission to the arbitral tribunal; and second, whether the arbitral award involved such matters or whether it involved a matter outside the scope of the submission to arbitration.
(ii) No breach of natural justice in connection with the making of the Award
(iii) Award not in conflict with Singapore's public policy
The SICC dismissed Mr Patnaik submission that it would be a breach of international comity and thus contrary to Singapore public policy to enforce an award arising out of contracts which themselves breached Indian law and Indian public policy.
The SICC accepted that, pursuant to AJU v AJT [2011] 4 SLR 739, if the tribunal had decided that it was not against Singapore public policy to enforce a contract which was illegal, this would be a finding of law which, if erroneous, was liable to setting aside by a Singapore court if the contract was governed by Singapore law.
The SICC noted, however, that the arbitrator had examined the nature of the transactions and found that the 2014 SPA and the SSSA were not illegal contracts under Indian law. These were findings of fact by a tribunal which, absent vitiating factors such as fraud or breach of natural justice, were final and binding and could not be reopened by the curial court. In any event, even if the tribunal made findings of law, they would be findings of Indian, not Singapore, law and therefore were findings of fact as to a foreign law. On the facts, no issue of Singapore public policy was engaged since the tribunal had decided that the contract was not illegal under Indian law.
Even if the court could reconsider the issue on Indian law afresh, it would not have the chosen to do so since the policy of sustaining international awards outweighed the policy of discouraging international commercial transactions which breached a country's foreign exchange regulations (and which the tribunal found had not happened).
In this respect, the applicant cited no authority for the proposition that a contract which is illegal in another state necessarily leads to a breach of international comity and thus engages Singapore public policy, if that impugned arbitral award were not set aside. In any event, the illegality in the foreign state must be so egregious as to shock the conscience, or violate the most basic notions of morality and justice, for it to amount to a breach of Singapore public policy. Here, there was no reason why a breach of the laws of India would, without more, cross such a high threshold. The applicant's argument, taken to its logical conclusion, would entail that any minor illegality or regulatory infringement by a contract in its place of performance would lead to an award having to be set aside. This would be contrary to public policy being a narrow ground for setting aside.
In light of the findings above, Justice Patnaik's Affidavit was irrelevant and was thus struck out.
This article was first published on LexisPSL linked here.
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