Key takeaways
- The court must look at matters in the round to determine what issues were live in the arbitration, including the following sources: the parties' pleadings, the list(s) of issues, opening statements, evidence adduced, and closing submissions.
- A tribunal is entitled to make findings that go further than the parties' arguments, provided that such findings are premised on the fundamental points raised by parties. Such findings would not amount to exceeding jurisdiction.
- A tribunal is entitled to arrive at conclusions that are different from the views adopted by parties. There is no breach of natural justice rules as long as parties had a reasonable opportunity to address the determinative issue.
- In a situation involving questions of fact (c.f. questions of law), pleadings would assume greater significance in determining whether natural justice rules were breached. For questions of law, the reasoning adopted by the tribunal need not be pleaded by the parties in those precise terms — the focus was on whether the issue had been canvassed before the tribunal.
Background
By way of a Deed of Novation, the appellant took over a Consultancy Agreement to provide consultancy services to the respondent in relation to mergers and acquisitions of oil and gas fields. The respondent agreed to pay the appellant a Success Fee upon the appellant's presentation of an 'Opportunity' and the respondent's corresponding completion of an acquisition of an interest in an oil field. The appellant and respondent also entered into an Amended Agreement, which terms were in substance the same as those of the Consultancy Agreement. Both the Consultancy Agreement and the Amended Agreement were stated to expire on 31 December 2013.
A dispute arose as to whether the appellant was entitled to a Success Fee in respect of the respondent's acquisition in 2016 of shares in X Co, an operator and owner of oil fields ("X Opportunity"). The appellant commenced arbitration against the respondent. In its Statement of Claim, the appellant averred that the Consultancy Agreement had been extended by an oral agreement such that it subsisted at the time of the respondent's acquisition of the shares in X Co. The respondent denied this and averred in its defence that there was no subsisting agreement after 31 December 2013.
The Arbitral Tribunal hearing the matter ("Tribunal") awarded the appellant the Success Fee for the X Opportunity. The Tribunal rejected the appellant's assertion of a subsisting agreement after 31 December 2013. Instead, the Tribunal found that the Consultancy Agreement did not require the Opportunity to be completed before the expiration of the Consultancy Agreement and/or Amended Agreement, and that the subject of the X Opportunity (i.e., shares in X Co) was exactly the same as in an earlier transaction that the appellant had worked on.
The respondent applied to the Singapore High Court (SGHC) to set aside the part of the award relating to the Success Fee for the X Opportunity on the grounds that (i) this was beyond the scope of the submission to arbitration and (ii) there had been a breach in the rules of natural justice in connection with the making of the award. The SGHC allowed the respondent's application on the first ground, and the appellant appealed.
Decision of the SGCA
The SGCA allowed the appeal. The SGCA held that the appellant's case in the arbitration was broader than what was found by the SGHC, and included the fundamental point upon which the Tribunal had found for the appellant — namely, that the Success Fee was payable upon completion of the Opportunity even if that took place after the Consultancy Agreement or Amended Agreement had expired ("Fundamental Point").
Whether the award involved a 'new difference'
The SGCA reiterated the two-stage inquiry in assessing whether an arbitral award should be set aside for an excess of jurisdiction: (a) first, the court must identify what matters were within the scope of submission to the arbitral tribunal; and (b) second, whether the arbitral award involved such matters, or whether it involved a "new difference … outside the scope of the submission to arbitration".
In relation to the first stage, the court must look at matters in the round to determine what issues were live in the arbitration, including the following sources: the parties' pleadings, the list(s) of issues, opening statements, evidence adduced, and closing submissions. The SGCA held that the SGHC erred in holding that a tribunal is not entitled to depart from the pleadings to the extent of making a decision based on a ground that has not been pleaded at all or is not ancillary to the pleadings.
Having gone through the relevant sources, the SGCA found that it was 'apparent' that the Fundamental Point was present in the appellant's submissions and therefore did not amount to a 'new difference'. In this regard, although the Tribunal had gone further than the appellant in construing the effect of an article of the Amended Agreement, this did not involve a 'new difference' but was premised on the Fundamental Point.
Moreover, the respondent had also argued against the Fundamental Point in its closing submissions. Thus, the issue was clearly canvassed before the Tribunal even though the eventual reasoning of the Tribunal was not explicitly in the terms argued by the appellant.
Whether the Tribunal acted in breach of natural justice
The respondent also argued that the appeal should be dismissed on the additional ground that the Tribunal breached the rules of natural justice, i.e., by finding for the appellant based on a case that the appellant did not advance (i.e., the Fundamental Point), and that the Tribunal's findings did not reasonably follow from the disputed issue.
The SGCA found that the respondent's argument was unsustainable. The SGCA observed that a tribunal is entitled to arrive at conclusions that are different from the views adopted by parties, as long as the conclusions are based on evidence before the tribunal and the tribunal consults parties where the conclusions involve a 'dramatic departure' from what has been presented to it. Put differently, a tribunal is entitled to derive an alternative case from the parties' submissions as the basis for its award. Further, a tribunal is not limited to adopting a 'middle path' between the parties' positions — the focus was on whether the parties had been given a reasonable opportunity to address the determinative issue.
In the present case, the Tribunal specifically asked parties to consider the situation where an Opportunity was presented but the transaction was (through no fault of either party) only completed after the expiry of the Amended Agreement, and both parties had made their respective submissions in closing submissions.
Moreover, the SGCA noted that in a situation involving questions of fact, pleadings would assume greater significance in determining whether natural justice rules were breached. Conversely, the present situation involved a legal issue of contractual interpretation, and the SGCA was satisfied that the parties submitted on this and that the respondent had sufficient opportunity to canvass evidence on the contextual dimension and commercial purpose of the Amended Agreement. It was accordingly clear that the determinative issue was canvassed before the Tribunal, and it did not matter that the reasoning eventually adopted by the Tribunal had not been pleaded by the appellant in those precise terms.
Finally, the SGCA found that the chain of reasoning adopted by the Tribunal bore sufficient nexus to the parties' cases, in that it appears to have (a) arisen by reasonable implication on the parties' pleadings, or (b) at the very least been brought to the respondent's notice.
Conclusion
The SGCA's decision in CJA v CIZ is a welcome addition to the jurisprudence regarding curial intervention in international arbitration awards. It acknowledges two important realities in the practice of international arbitration and provides guidelines for their reconciliation with the cornerstones of party autonomy and procedural fairness:
- First, a party's case can evolve over the course of the proceedings. Pleadings are the start, and not the end, of a party's case, and further issues could have been submitted to arbitration in the course of the proceedings. In determining the scope of the submission to arbitration, the court must therefore have regard to the totality of what was placed before the tribunal and cannot just fixate on pleadings.
- Second, both parties' positions could be 'wrong' (in the tribunal's view). In that situation, the tribunal is not compelled to rubber stamp either position or to attempt to pave an artificial 'middle path' between the two positions. The tribunal is entitled to arrive at conclusions that are different from (or go further than) the views adopted by parties, provided that these conclusions are based on evidence and that the tribunal affords parties a reasonable opportunity to address the determinative issue. Doing so would not involve a 'new difference' insofar as the finding is premised on the fundamental point raised by parties' submissions.
Due to their hitherto broad ambit, challenges on the basis of excess of jurisdiction and breach of natural justice have been by far the most common ground of attempting to set aside Singapore-seated arbitral awards. It is hoped that this decision will help to weed out frivolous challenges where the matters sought to be impugned have in fact been put into issue by the parties and fully ventilated before the tribunal, leaving behind cases where there are real grievances as to the tribunal's conduct. This, in turn, will increase certainty and finality in Singapore-seated arbitral awards.
© 2022 Baker & McKenzie.Wong & Leow. All rights reserved. Baker & McKenzie.Wong & Leow is incorporated with limited liability and is a member firm of Baker & McKenzie International, a global law firm with member law firms around the world. In accordance with the common terminology used in professional service organizations, reference to a "principal" means a person who is a partner, or equivalent, in such a law firm. Similarly, reference to an "office" means an office of any such law firm. This may qualify as "Attorney Advertising" requiring notice in some jurisdictions. Prior results do not guarantee a similar outcome.
