Singapore Arbitration: Singapore Courts Continue to Be Reluctant to Set Aside Arbitral Awards

Other Author      Beatrice Tsang, Trainee Solicitor

Last week, in the third of a string of such cases this year, in CWP v. CWQ [2023] SGHC 61, the High Court of Singapore refused to set aside an arbitral award on breach of natural justice grounds. As we reported recently (see here and here), this decision affirms the high standard for breach of natural justice claims in set aside applications in Singapore and reflects the Singapore courts’ general reluctance to set aside arbitral awards.

Key Takeaways 

• In this decision, the High Court of Singapore affirmed that the Singapore courts will not interfere with an arbitral award on an allegation by a party that a tribunal reached the wrong decision, but they may intervene if there has been a breach of natural justice. 
• The Court also clarified that a party’s reservation of rights does not absolve it from the responsibility of affirmatively raising an argument during the arbitration, and it cannot belatedly submit such an argument for the first time in its set aside application.

The Parties and Their Dispute

In May 2017, CWP (the “Claimant”), a construction company, and CWQ (the “Defendant”), a marine engineering company, entered into a contract under which the Defendant was to deploy four vessels to carry out construction works to be completed within a 90-day period. 

Article 3.9 of the contract was central to the parties’ dispute. This provision stated that the stoppage of works, other than for mechanical breakdown of the vessels or any other reason attributable to the contractor CWQ, entitled them to an extension of time and compensation. Over the course of the project, there were several stoppages, which resulted in delays. 

Disputes arose between the parties regarding the Defendant’s entitlement to compensation and extension of time under Article 3.9. 

The Defendant commenced arbitration proceedings against the Claimant in October 2018 and sought compensation. 

In May 2022, the Tribunal issued an award, agreeing with the Defendant’s interpretation that Article 3.9 entitled the Defendant to compensation. 

The presiding arbitrator issued a dissenting opinion, finding that the Claimant was not liable for damages for any of the stoppages. 

The Claimant then filed an application to set aside the award on breach of natural justice grounds, arguing that the majority went beyond the scope of submission to arbitration in deciding certain issues.

The Court’s Decision

The Court refused the set aside application. 

In its decision, the Court addressed the main issues raised by the Claimant, which included: (a) whether the majority’s decision on the interpretation of Article 3.9 went beyond the scope of submission to arbitration and/or was made in breach of natural justice (the “Interpretation Issue”); and (b) whether the majority’s decision to award compensation for the delays caused by the typhoon was in breach of natural justice (the “Typhoon Claim”). 

The Interpretation Issue

Relying on the dissenting arbitrator’s opinion, the Claimant argued that the majority’s decision on Article 3.9 was outside the scope of submission to arbitration. The Claimant said that the Defendant’s mention of the word “demurrage” in its Notice of Arbitration required proof of a critical delay, i.e. a delay preventing the Defendant from completing the works within the Time for Completion, which the Defendant failed to prove. 

The Court disagreed. Citing CDM and another v. CDP, the Court noted that there is no single source to consider when determining the scope of the parties’ submission to arbitration. Rather, five sources may be examined, including the parties’ Notice of Arbitration, Statement of Claim, Statement of Defense, etc.; any Agreed List of Issues; the parties’ opening statements; the evidence adduced; and closing submissions in the arbitration. 

The Court further determined that the Defendant used the term “demurrage” in its Notice of Arbitration out of convenience or as a shorthand rather than in a technical sense or a term of art. The Court also noted that the list of issues reflected that the Defendant’s claims for compensation and extension of time were under Article 3.9 and that the Claimant had not raised objections during the hearing on these issues when it had ample opportunity to do so.

The Claimant further argued that, in breach of the fair hearing rule, the majority failed to consider two arguments made by the Claimant, namely: (a) the prevention principle (that a promisee cannot insist upon the performance of an obligation which it had prevented the promisor from performing); and (b) the commercial justification (that the majority’s interpretation of Article 3.9 did not make commercial sense). 

The Court rejected both contentions. It reviewed the award and noted that the majority found the language of Article 3.9 to be clear and unambiguous, and that it did consider the arguments but in fact rejected the Claimant’s interpretation

The Court also stated that, even if there was a breach of the fair hearing rule, that alone would not be sufficient to set aside the award. This is because there was no prejudice to the Claimant given that the majority would have reached the same conclusion on Article 3.9 based on its plain meaning. Thus, the outcome of the proceedings would have been the same. 

The Typhoon Claim 

The Claimant also argued that, in breach of natural justice, the majority failed to properly consider its argument that the delay caused by the typhoon evacuation was a force majeure event, and not an Article 3.9 issue. 

In dismissing the Claimant’s argument, the Court reasoned that the Tribunal had considered the Claimant’s force majeure argument but found that typhoons, in the context of the contract as a whole, were a frequent occurrence in the region where Ruritania was located. Thus, typhoons were to be considered an adverse weather event rather than a natural catastrophe that would trigger the force majeure provision under the contract.

The Claimant also argued that the majority failed to deal with the Claimant’s argument that the Defendant’s one-day delay in getting the equipment up and running after the evacuation was unexplained. 

The Court determined that the Claimant in fact never raised this argument during the arbitration. In its application before the Court, the Claimant pointed to its Statement of Defense and Counterclaim wherein it had reserved its rights to state its position on the Defendant’s stoppage claims. The Court found that the Claimant never made good on this right by actually raising the issue during the arbitration and it was now too late to criticise the majority for not having addressed it.