Singapore remains a strong commercial choice for arbitration

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Summary: Singapore continues to shine as a seat for international arbitration. The Singapore Court of Appeal has recently confirmed the principle of minimal court interference in arbitration by rejecting an attempt to challenge an award via a spurious appeal based on the rules of natural justice. This approach demonstrates Singapore’s credentials as a sound choice of location for resolving business disputes.

Singapore continues to shine as a seat for international arbitration. The Singapore Court of Appeal has recently confirmed the principle of minimal court interference in arbitration by rejecting an attempt to challenge an award via a spurious appeal based on the rules of natural justice. This approach demonstrates Singapore’s credentials as a sound choice of location for resolving business disputes.

The twin pillars


Where parties opt to resolve their commercial disputes by arbitration, rather than via a country’s courts, they are effectively choosing:

(i) to side-step court interference in the process and outcome of the arbitration, whether in the place where the arbitration is seated or where the award is enforced; and

(ii)  finality of outcome over escalating tiers of appeal on points of fact and law.

These twin pillars of minimal curial interference and finality of outcome are central to national arbitration laws, as well as international instruments such as the New York Convention and the UNCITRAL Model Law. The grounds for setting aside or resisting enforcement of arbitral awards are strictly limited: the substantive merits of the tribunal’s decision are beyond the courts’ remit. Only serious procedural irregularities, issues of public policy or breaches of natural justice will provide sufficient grounds for courts to interfere.

Nations which do not have, or do not strictly apply, arbitration laws to support these fundamental tenets of the international arbitral system place an additional burden upon commercial actors looking to participate in their economies.

Even in countries where arbitral law is well-established, the judiciary faces the ongoing challenge of combating what the Singapore Court of Appeal recently described in this case as “the ingenuity of counsel who seek to launch backdoor appeals [on the merits of a decision] … in the guise of a challenge based on an alleged breach of natural justice”.

A recent decision of the Singapore Court of Appeal rejecting such an argument highlights Singapore’s credentials as an arbitration-friendly jurisdiction and endorses the principle of minimal court interference in arbitration.

What happened?


The dispute in BLC and others v BLB and another [2014] SGCA 40 arose out of an unsuccessful joint venture for the manufacture and supply of component parts for the automotive industry in Malaysia.

BLC was successful in obtaining an international arbitral award in its favour. BLB applied to have the award set aside on the grounds that the sole arbitrator had failed to address one of BLB’s counter-claims in his award. This, BLB claimed, was a breach of the rules of natural justice for the purposes of the Singapore International Arbitration Act entitling the Court to set aside the award.

Singapore’s international arbitration law is based on the UNCITRAL Model Law.

The Singapore High Court agreed with BLB and partially set aside the award, remitting the counter-claim issue to a newly formed tribunal for decision. BLC appealed.

The Court of Appeal’s decision


Allowing BLC’s appeal, and reinstating the award, the Court of Appeal found that the arbitrator had addressed the relevant counter-claims because they were inextricably linked to other issues in the case which were decided.

However, the Court also took the opportunity to discuss the circumstances in which it is appropriate for courts to intervene under Article 34 of the UNCITRAL Model Law, which outlines a domestic court’s authority to set aside an international arbitral award.

The Court observed that even if the arbitrator had erred in failing to address the counter-claims in question, this may amount to a serious error of law and/or fact, but found that it did not follow that BLB was denied natural justice. The Court reiterated the position that the “court cannot interfere if there has … been an error (even a serious error) of law and/or fact on the part of the arbitrator”.

Respecting the finality of arbitration


It sometimes strikes non-lawyers as odd that even if an arbitral tribunal makes a mistake of law or fact, its award will still be enforceable. However, finality of outcome is one of the cornerstones of arbitration as a commercially effective approach for resolving disputes: having selected the decision-makers who will decide the outcome of a dispute, the parties agree that the outcome will be final in all but the most egregious of circumstances.

Commercial actors have demonstrated that they are willing to trade the option of appealing a decision they are unhappy with through various levels of courts for the certainty of a final and enforceable decision. Nations’ courts must respect that.

While the UNCITRAL Model Law (like most countries’ arbitration laws), permits the courts to intervene in circumstances where the fundamental requirements of natural justice have been violated, courts should be wary of being drawn into arguments on the substantive merits.

The approach taken by the Singapore courts in this case continues to demonstrate the city state’s credentials as a sound commercial choice of location for resolving business disputes. Whether referring parties agree to conduct their arbitration under the rules and auspices of the respected Singapore International Arbitration Centre (SIAC) or under other institutional rules such as the ICC or ad hoc, Singapore is a reliable and sensible choice of seat.

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