Setting Aside Arbitral Awards – How Close to the Wind Can Tribunals Sail?

In the context of international arbitration, the Singapore courts have a well-established policy of minimal curial intervention.

Where parties subscribe to have their disputes resolved by arbitration, they are deemed to accept “the attendant risks of having only a very limited right of recourse to the courts”.¹

Therefore, save for very limited, statutorily-prescribed grounds,² an award is final and cannot be appealed or challenged on its merits. At the same time however, “minimal” curial intervention does not mean that the courts will never intervene. Whilst approximately only 20% of setting aside challenges have been successful over the past two decades,³ the Singapore courts have, where appropriate, stepped in to provide relief to an arbitral party which has experienced real procedural injustice.

However, where exactly is the line? What happens when a tribunal renders a “borderline unintelligible” award? Or when an award consists of copy-pasted passages from other awards?

Two recent decisions, Swire Shipping Pte Ltd v Ace Exim Pte Ltd [2024] SGHC 211 (“Swire Shipping”) and DJO v DJP and others [2024] SGHC(I) 24 (“DJO v DJP”), shed some light on where the line may be drawn. The point being that poor drafting, muddled reasoning, or even recycling paragraphs from previous awards, are not per se sufficient to warrant court intervention. These issues must go toward establishing one of the recognized grounds for setting aside an award under Art 34(2) of the Model Law or s 24 of the IAA.

I. Swire Shipping

In Swire Shipping, the SCMA arbitration, seated in Singapore, concerned a dispute over the sale of a vessel with just one central issue – whether the seller had validly tendered a notice of readiness in accordance with the terms of the contract.

Despite the relatively straightforward nature of the dispute however, the sole arbitrator rendered a 386-page award, described by the court as “borderline unintelligible”,⁴ a “thoroughly unhappy, maze-like combination of innumerable internal cross-references coupled with the indiscriminate use of sub-paragraphs and sub-sub paragraphs”,⁵ and a “labyrinth for the reader to navigate through and conquer, requiring the utmost willpower and concentration just to try to understand the Arbitrator’s reasoning”.⁶

However, the 1-star rating (as it were) was not sufficient basis for the award to be set aside. As the learned judge observed, “manifest incoherence”⁷ in an award is a means to an end, and not an end in itself.⁸ In other words, the incoherence must be sufficient, whether directly or through some inference, to bring the case within one of the recognized, limited grounds for setting aside an award.

An example cited by the court was the situation where the incoherence evidenced the fact that the tribunal had breached the fair hearing rule by failing to apply its mind to essential issues and/or adopted a chain of reasoning that had no nexus to the parties’ submissions.⁹

On the facts of Swire Shipping, the court held that whilst the award “sailed close to the wind”, it had not crossed the line so as to warrant curial intervention.¹⁰ It was apparent (enough) that the arbitrator had applied his mind to the evidence and the issues at hand and therefore, despite the poor quality of the award, the parties had, in fact, been accorded a fair hearing.

As a post-script however, the court made two noteworthy observations.

• First, the fact that arbitral tribunals enjoy a measure of immunity from substantive challenge should not be seen as a licence to render awards that end up being a “labyrinthine tome that would test even the most stout-hearted”,¹¹ or to be “cavalier, flippant or lackadaisical in the clarity of their reasoning in awards”.¹²
• Second, the award in this case exhibited facets of “due process paranoia” i.e., where an arbitral tribunal acts defensively in the conduct of the arbitration and award writing, to guard against due process challenges. In the present case, it was evident from the award that the arbitrator’s predominant aim was to avoid being set aside, which led him to sacrifice intelligibility and clarity in his quest to render an award that exhaustively turned over every stone.

With respect, the court’s words of caution in Swire Shipping are both timely and apt. Incoherent awards, even if they survive a challenge, undermine confidence in the arbitral process. The case also reminds parties that parties, having chosen their arbitrator(s), must accept the finality of the award, whether it is good, bad or ugly.

We now turn to consider DJO v DJP, where an award containing passages copied verbatim from other awards was set-aside, on the basis that the copy-and-pasting evidenced a breach of the rules of natural justice.

II. DJO v DJP

In DJO v DJP, a consortium of construction companies (“Consortium X”) had entered into what was called the “CPT-13 Contract” with DJO for works relating to a network of railway lines in India. Disputes arose and Consortium X eventually commenced ICC arbitration, seated in Singapore, against DJO (“the CPT-13 Arbitration”). The 3-member tribunal, all of whom were eminent retired Indian judges, eventually rendered an award in Consortium X’s favour (“the CPT-13 Award”).

Before the Singapore International Commercial Court, DJO sought to set aside the CPT-13 Award, alleging that the rules of natural justice had been breached and citing the fact that the award contained over 200 paragraphs which had been copied-and-pasted from other awards.

To put this complaint in context, around the time of the CPT-13 Arbitration, there were 2 other parallel arbitrations (“the Parallel Arbitrations”). These were seated in India and conducted under the rules of Arbitration for the International Center for Alternative Dispute Resolution, New Delhi. The issues and disputes in the Parallel Arbitrations, whilst similar in that they arose out of the same underlying project, were not identical. Apart from some overlaps, the 3 arbitrations had different parties and tribunal members. However, all 3 arbitrations had the same presiding arbitrator, Judge C, who was appointed by the ICC.

By the time that the CPT-13 Arbitration came for hearing, Judge C had already heard arguments from other parties and other counsel in the Parallel Arbitration and therefore, because of the confidential nature of each individual arbitration, Judge C was placed in any invidious position where he was effectively required to start afresh with an open mind and not seek to influence his co-arbitrators or the proceedings in the arbitration with any accumulated knowledge or opinions. As it turned out, he was ultimately unsuccessful in doing so.

The SICC judge undertook a detailed review of the CPT-13 Award and observed that over 200 paragraphs – about half of the entire award – had been reproduced or substantially reproduced from the earlier awards. The SICC judge further observed that the CPT-13 Award, amongst other things:

• Cited cases which had not been relied upon by Consortium X and DJO in the CPT-13 Arbitration;
• Applied the wrong lex arbitri to the assessment of interest and costs;
• Recited contractual provisions from the wrong contracts i.e. from contracts relevant to the Parallel Arbitrations, rather than the CPT-13 Arbitration; and
• Failed to properly consider issues of limitation, waive and estoppel, on the basis of the facts and arguments made in the CPT-13 Arbitration.

In fact, as the SICC judge further found, the CPT-13 Award did not canvass submissions actually made to the tribunal but instead, wrongly attributed submissions made in the earlier arbitrations – repeated almost verbatim – to counsel in the CPT-13 Arbitration. As the SICC Judge held, there can “no clearer indication … that Judge C may have approached the matter with a closed mind” and he accordingly agreed with DJO’s submission that there was apparent bias in the making of the award.

Apart from apparent bias, the SICC judge also found that it was clear that the CPT-13 Award was not the independent work of the tribunal based solely on the material and submissions before them in the CPT-13 Arbitration. Instead, the tribunal had drawn heavily on material from the Parallel Arbitrations without giving the parties an opportunity to address them on such matters.

Accordingly, DJO’s right to a fair, independent and impartial award had been lost. The CPT-13 Award was made in breach of natural justice, and it was therefore liable to be set aside.

III. Concluding Thoughts

As both Swire Shipping and DJO v DJP establish, the court will not step in to save parties from the consequences of their own choices. Even if a tribunal sails close to the wind by rendering an award which is manifestly incoherent or borderline unintelligible, as was the case in Swire Shipping, that in itself will not sink the award. Only if the deficiencies in the award go toward establishing one of the statutorily prescribed grounds for setting aside will the court step in, as it ultimately did in DJO v DJP.

An Outlook

A healthy award¹³ is a sign of healthy arbitration and limited court intervention in respect of award is a sign of a healthy arbitration eco-system.

Indeed, one of the perceived wisdoms in international arbitration is that arbitration awards, although not entirely immune from challenges, can only reviewed by national courts on very limited grounds and most specifically (a) when the arbitral tribunal did not exercise its jurisdiction properly (by either not exercising jurisdiction at all or exceeding its jurisdiction), (b) serious procedural irregularity in the conduct of the arbitration that would amount to a serious breach of due process or (c) public policy at the seat of arbitration. Some national legal systems allow the parties to reduce the level of review of awards a national court may provide.

All established international arbitral seats including London, Paris, Singapore, and Switzerland produce regular reports and statistics about applications to have awards set aside and the success of such applications. For example, the Commercial Court in England and Wales published in February 2024 its annual report for 2022-2023. Leaving aside section 69 appeals which is a peculiarity of the English Arbitration Act, there were 25 applications under section 68, which in fact was 37% less applications in relation to the previous year, and none was successful at the time of application, while 11 were pending. There were also eight applications filed under section 67, which in turn was 70% fewer applications in relation to the previous year, and two were dismissed on paper, one was discontinued and five remained pending.¹⁴ Statistics in other major seats are comparable and the drop in application numbers suggests that the stakeholders in the arbitration process acknowledge that the challenge to arbitral awards is not an easy process and the awards are final.

Indeed, only in exceptional circumstances a national court would entertain an action to set aside an award. As the two recent cases from Singapore manifest, national courts engage in a delicate balancing act. The legitimacy of international arbitration requires that national courts have a significant albeit largely dormant (in most cases) role in the process as a guarantor of due process and the rule of law. At the same national courts can be robust in rejecting ‘due process paranoia’¹⁵ type claims in setting aside proceedings. Still, there remains cases where the courts have to set aside arbitration awards. Such cases would include flagrant procedural irregularities and manifest breaches of due process and cases of fraud and corruption where the tribunal have not uphold their own role as gatekeepers of the rule of law. While one would expect that such cases would be rare and most likely would be, it is also important that option exists so that the legitimacy of arbitration is also endorsed by national courts.

1. Swire Shipping Pte Ltd v Ace Exim Pte Ltd [2024] SGHC 211 (“Swire Shipping”), [4]
2. Ibid [116]
3. CAJ and another v CAI and another appeal [2021] SGCA 102, [2]
4. Swire Shipping, [31]
5. Ibid [30]
6. Ibid [30]
7. A phrase used in the case of BZW and anor v BZV [2022] 1 SLR 1080 
8. Swire Shipping, [116]
9. Swire Shipping, [117]
10. Ibid [138]
11. Ibid [132]
12. Ibid [137]
13. Christoph Christoph. The Healthy Award: Challenge in International Commercial Arbitration, Kluwer 2003.
14. The Commercial Court Report 2022–2023, at pp 11-13.
15. A term first coined in the 2015 Queen Mary University of London and White & Case International Arbitration Survey, at 2015 International Arbitration Survey.