ISSUES IN A SETTING ASIDE APPLICATION
In this brief blog, we take a quick look at some of the issues arising in the recent Singapore International Commercial Court (“SICC”) decision of The Government of the Lao People’s Democratic Republic & 2 Ors v Sanum Investments Limited & Anor [2022] SGHC(I) 9 (“GOL v Sanum”)
Backdrop. This decision arose from an application taken up by Lao Holdings NV (“LH”) and Sanum Investments Ltd (“Sanum”) (collectively, the “Investors”) to set aside an arbitral award (“Award”) which found in favour of the Lao People’s Democratic Republic (“GOL”), San Marco Capital Partners LLC (“SM”) and Kelly Gass (“Gass”) (collectively, the “GOL Parties”). There was also a related application by the Investors to set aside an ex parte order of court granting the GOL Parties leave to enforce the said Award.
Readers may find the names of the parties familiar. This is because the applications are, as the Court stated at [3] GOL v Sanum, “continuations of a long-running dispute relating to the Investors’ investments in the Lao People’s Democratic Republic … which has been the subject of numerous decisions from the Singapore courts…”
The procedural backdrop to the present applications is set out at [6] – [19] GOL v Sanum. For the purposes of this blog, we will focus on the two grounds relied upon by the Investors to set aside the Award as identified at [20] GOL v Sanum, namely, that:
They were not given a reasonable opportunity to be heard on their claims against SM and Gass; and
The Award was in conflict of Singapore’s public policy “of ensuring that parties to a dispute have fair access to justice”.
Both grounds rely on the same “factual substratum”, i.e., that the “… Tribunal, on the erroneous basis that the doctrine of collateral estoppel under New York law barred the Estopped Claims, failed to consider the merits of those claims…” ([21] GOL v Sanum).
First ground. The SICC found that the Investors’ rights to be heard were not breached in the manner alleged by the Investors ([33] GOL v Sanum), citing the case of Soh Beng Tee & Co Pte Ltd v Fairmount Development Pte Ltd [2007] 3 SLR(R) 86 at [29] on the test for setting aside an arbitration award under s. 24(b) of the International Arbitration Act (“IAA”) and the case of China Machine New Energy Corp v Jaguar Energy Guatemala LLC and another [2020] 1 SLR 697 at [104] on the right to be heard (at [32] GOL v Sanum).
To refresh the readers’ memory, in gist, in order for a party to set aside an arbitral award for breach of natural justice under s. 24(b) of the IAA, the party must:
Identify the rule of natural justice that was breached;
Establish how the said rule was breached;
Establish that the breach was connected to the making of the challenged arbitral award; and
Establish that the breach prejudiced the party’s rights.
The crux for the SICC’s finding at [33] GOL v Sanum is set out in [34] - [39] GOL v Sanum, with [38] – [39] GOL v Sanum being key, which we set out below. But in essence, the SICC found that the reason for the Tribunal not examining the merits of the Estopped Claims is because the Tribunal had made findings of law and fact on whether the Estopped Claims were precluded from being beard before the Tribunal.
“38 It can be seen then that the Tribunal made determinations of law and fact in relation to a doctrine of substantive law under the governing law, namely New York law. It was these determinations that in turn led to the conclusion that the doctrine of collateral estoppel applied so as to preclude the Investors from arguing the merits of the Estopped Claims.
39 This is very different from a tribunal mistaking its procedural powers or the scope of issues in play before it, and on the basis of such a mistake either proceeding to an award without hearing one party or excluding evidence. It is instead the Tribunal doing what it was tasked to do, namely, to determine the dispute referred to it, including determining the application of any preclusionary or exclusionary doctrines raised by a party before it. Whether the Tribunal made an error of law or fact in its decision that the doctrine of collateral estoppel applied goes only to the merits, and cannot found a challenge to the Award.”
(our emphasis added)
Hence, as set out in [39] – [41] GOL v Sanum, since the Investors were not alleging that they were not heard on the collateral estoppel issue, whether the Tribunal had made an error of law or fact in its decision or not, the “… well-settled position that curial intervention in arbitral proceedings is generally limited to process failures and does not extend to a merits-based review of the award” applied to the facts of the case (emphasis in original).
Second ground. As for the second ground, the SICC started by referring to BTN and another v BTP and another [2021] 1 SLR 276 (“BTN v BTP”) at [56], before holding that an award that is made on res judicata principles would not be contrary to public policy ([46] GOL v Sanum). We duplicate the relevant passage from BTN v BTP below for ease of reference:
“The public policy ground for setting aside provided by Art 34(2) of the Model Law is a narrow one. This court has held that the ground should only succeed in cases where upholding or enforcing the arbitral award would “shock the conscience”, or be “clearly injurious to the public good or … wholly offensive to the ordinary reasonable and fully informed member of the public”, or violate “the forum’s most basic notion of morality and justice”: PT Asuransi Jasa Indonesia (Persero) v Dexia Bank SA [2007] 1 SLR(R) 597 (“PT Asuransi”) at [59]. In this respect, we reiterate that the doctrine of res judicata has long been part of the law of Singapore and its invocation in cases brought in the Singapore courts is not unusual. Accordingly, a decision based on res judicata principles can never in itself be described as shocking the conscience or wholly offensive to informed members of the public. Recognising this, the appellants aim their attack at erroneous applications of the doctrine. Importantly, however, the general principle is that even if an arbitral tribunal’s findings of law and/or fact are wrong, such errors would not per se engage the public policy of Singapore: AJU v AJT [2011] 4 SLR 739 at [66]; PT Asuransi at [57].“
(our emphasis added)
The SICC found that “… Not only was it within the Tribunal’s purview to decide that it was not a condition for the application of collateral estoppel that the claims against SM and Gass could have been brought in the Prior SIAC Arbitration, the Investors never argued that it was” (at [49] GOL v Sanum), but also that it was “beside the point” that the Investors did not have the opportunity to pursue their claims against SM and Gass because effectively, the collateral estoppel that the Tribunal accepted concerned issues which the Investors had the opportunity of addressing before. See [50] GOL v Sanum as excerpted below:
“50 Further, while it is true that the Investors did not have the opportunity to pursue their claims against SM and Gass, this is beside the point. The collateral estoppel that the Tribunal accepted concerned issues common to the Prior SIAC Arbitration and to the dispute before it, as shown by the preclusion chart. The Investors had had the opportunity to run their case regarding those common issues in the Prior SIAC Arbitration. The effect of the finding of collateral estoppel was that the Investors could not reopen those matters, and this finding was based on the Tribunal’s view that SM and Gass were GOL’s privies for this purpose. Thus, the Investors did argue those common issues, but only once, ie in the Prior SIAC Arbitration. There is nothing repugnant about their not being allowed to argue the same issues a second time.”
(our emphasis added)
Conclusion. In general, curial intervention in arbitral proceedings generally will not involve a merits-based review of the arbitral award. While this is trite, it is nonetheless important to bear in mind. Even if a tribunal has applied the law wrongly, so long as it is an error of law within the tribunal’s jurisdiction, such an error will not entitle the aggrieved party to set aside the award.
It is also relevant to note how this decision has applied BTN v BTP in terms of how a decision that is based on res judicata principles would not, per se, engage the public policy of Singapore for the purposes of a setting aside application. Practically, it would be difficult to challenge an arbitral award based on an erroneous application of res judicata principles given that, in engaging in the application of such principles, the tribunal would almost invariably be engaged in findings of law and/or fact, and errors in those findings would (generally) be within the tribunal’s jurisdiction.
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