As a general proposition, the grounds on which an arbitral award may be set aside are narrowly defined. One such ground is a breach of natural justice, which may occur where either the rule against bias or the right to a fair hearing has been violated – by their nature, such breaches will often lead to the conclusion that a set-aside is intuitively the obvious solution. In any event, the threshold for finding a breach is high.1 Occasionally, however, a situation that presents seemingly obvious grounds for a set-aside will in fact suggest itself to be more nuanced upon closer review.
One such example recently occurred in the Singapore International Commercial Court's decision inDJO v DJP, wherein the president of the tribunal had been appointed in three overlapping arbitrations. There, the tribunal allowed itself to be influenced by the submissions of the first two proceedings, and re-used excerpts of prior awards in composing the third. Despite the seemingly-obvious grounds for set-aside, the Court's review of the circumstances confirms that even in such circumstances, closer scrutiny may be required. Below, we provide an overview of the case and consider its key takeaways.
Factual Background
DJO, the claimant, was responsible for the operation of a network of railway lines in India. In 2015, it was involved in contract negotiations regarding one line – the Western Dedicated Freight Corridors – with the defendant consortium ("Consortium X"). Consortium X, which was bidding on a construction project, consisted of three companies – a Japanese company, DJP, and two Indian companies, DJQ and DJR. DJO and Consortium X entered into a FIDIC contract ("CPT-13" or the"Contract") in August 2015.2
In January 2017, the Indian Ministry of Labour issued a notification increasing the minimum wage with immediate effect. This resulted in unexpected project cost increases. However, it was not until three years later, in March 2020, that Consortium X gave notice to DJO that it was seeking an adjustment under the Contract for the additional labour costs. Consortium X claimed this adjustment under clause 13.7 of the Contract, which provided for time and cost adjustments for changes in legislation in the country where the work was performed (i.e. India).
In response, DJO argued that any claim resulting from the changes in minimum wage had already been addressed under clause 13.8 of the Contract (Adjustment for Changes in Cost). It further argued that Consortium X had, in any case, failed to meet the 28-day notice period required under clause 20.1 for contractor claims.3
In December 2021, after the two sides failed to reach an amicable resolution, arbitration was commenced. An amendment to the standard FIDIC conditions made during contract negotiations required that arbitrations involving foreign contractors be conducted in accordance with the ICC's arbitration rules, and that the arbitration be seated in Singapore. Because the lead member of Consortium X was a Japanese company, the dispute was therefore to be resolved in Singapore in accordance with ICC Rules.4The governing law of the Contract was that of India.
The arbitration commenced on September 10, 2022, and closed on August 16, 2023. The arbitral tribunal consisted of three arbitrators – Judge A, Judge B, and Judge C, the latter of whom was the presiding arbitrator. Consortium X (as claimant) sought (1) a declaration that the notification of change to minimum wage constituted a change in law under clause 13.7 of the Contract, and (2) payment for the increased labour costs following the notification. The Tribunal issued its Award in November 2023, finding in Consortium X's favour.5
Significantly, two other arbitrations were ongoing at roughly the same time and dealt with largely similar issues, albeit in respect of two different projects. The first parallel arbitration ("CP-301") was commenced in May 2021, and also involved DJO as a respondent and Judge C as the presiding arbitrator. However, as the consortium consisted exclusively of Indian companies, the arbitration was seated in New Delhi and conducted in accordance with the arbitral rules of the International Centre of Alternative Dispute Resolution, New Delhi. The arbitral tribunal in CP-301 found in favour of the consortium, holding that the notification of increase in minimum wage constituted a change of law within the meaning of clause 13.7, and that the 28-day notice period under clause 20.1 was "directory" rather than "mandatory."6
The second parallel arbitration ("CP-302") was commenced in October 2021. It again involved DJO as a respondent, Judge C as the presiding arbitrator, and consisted solely of Indian companies.7
As such, three arbitrations dealing with three different contracts containing similar clauses, involving similar questions of law, with DJO as a respondent and Judge C as the presiding arbitrator, overlapped one another.
As noted, the Singapore tribunal ultimately delivered an award in which Consortium X was substantially successful in its claim. As a result, DJO commenced a set-aside application in the Singapore International Commercial Court, relying upon several grounds available under Singapore'sInternational Arbitration Act.
Decision of the Singapore International Commercial Court
The question before the Court was whether the tribunal had applied "its mind to the issue in an independent, impartial, and fair manner."8 In considering Judge C's role as presiding arbitrator of three parallel arbitrations, the Court found that Judge C had failed to approach the issues and submissions of the Arbitration afresh with an open mind. It found instead that the Tribunal had used the prior awards from arbitrations CP-301 and CP-302 as a template, attempting to "massage" it into a state where it appeared to deal with the facts and issues set out in the Arbitration.9 As such, the Court held that the Award had been rendered in breach of natural justice and ordered that it be set aside.
The Court supported this conclusion with five observations.
- In multiple instances, the Tribunal took submissions originally made in CP-301 and, attributing them to someone else, reproduced them in the Award.10
- In at least nine instances, the Tribunal referenced authorities cited in CP-301 which had not been cited to the Tribunal in the Arbitration.11
- The Tribunal referenced provisions that were not actually contained in the CPT-13 contract. For example, the Tribunal, in its Award, reproduced clause 13.8 from CP-301, rather than clause 13.8 from CPT-13.12
- The Tribunal applied the wrong law (the law of the seat) in determining interest and costs. Notably, the Tribunal made reference to sections 31(7) and 31(A) of theIndian Arbitration Act, while failing to reference Singapore law.13
- The Tribunal failed to consider issues unique to the Arbitration. Most notably, the Tribunal failed to consider the significant delay between the notice of the change in minimum wage and the time at which Consortium X first sought an adjustment. There was no such delay present in the CP-301 or CP-302 arbitrations.14
The Court held that these facts demonstrated the Tribunal had failed to draw upon material presented to it by the parties of the Arbitration, and instead allowed its reasoning to be guided by "events remote from those in the Arbitration."15
With these facts in mind, the Court explained that in addition to the usual grounds available under the Model Law with respect to set-aside applications (e.g. the arbitration was not in compliance with the agreed-upon procedure, or is contrary to public policy), Singapore's International Arbitration Act also provides a more general ground for set-aside where the rules of natural justice have been breached.
In that regard, according to the principle of minimal curial intervention, the threshold for finding a breach of natural justice is high – it will only be met in exceptional cases that involve "actual or real prejudice" to the rights of the aggrieved party.16 Here, that threshold was met, with the Court elaborating that natural justice consists of two pillars – the rule against bias and the right to a fair hearing.17
First, the Court, following the High Court of Singapore inCNQ v CNR [2023]4 SLR 1031, set out the test for the rule against bias18:
[113] ...the correct approach is for the court to assume the mantle of a fair-minded, informed and reasonable observer and to ask whether such person, after considering the facts and circumstances, would suspect or apprehend that the arbitrator had approached the matter with a closed mind.
Second, the Court described the right to a fair hearing as including a right to a fair, independent, and impartial decision.19
Interestingly, the Court concluded that on the facts of this case, the act of copying and pasting from one award to another was not sufficient in and of itself to justify setting aside the award, but that further assessment was necessary in order to confirm that natural justice had been breached. Rather, the relevant question was whether this copy-pasting indicated that the tribunal "did not exercise its mind properly in respect of the issues in the Arbitration and decide them independently and impartially".
Applying the above analysis, the Court considered whether the parties in the Arbitration had been given "a proper opportunity to present their arguments" and whether the Tribunal had "considered all the issues that fell to it for decision."20 Considering the circumstances of the case, the Court concluded that neither condition had been met. Thus, the Court held:21
[115] ...In my judgment, it is abundantly clear from the facts which I have rehearsed at length above that the Award was not the independent work of the Tribunal based solely on the material and submissions before them in the Arbitration. Where, in making its award, a tribunal draws heavily on facts and arguments in previous cases and does not clearly distinguish between those facts and arguments and those which are presented to them in the instant case and also fails to give the parties an opportunity to address it on the previous award, the right to a fair, independent and impartial award will be lost.
Accordingly, the Court concluded that the tribunal had in fact approached the arbitration with a "closed mind", that natural justice was therefore breached, and that the award should be set aside. Parenthetically, however, the Court also concluded that the tribunal's conduct did not rise to the level of a breach of public policy, and therefore this was not grounds for set-aside.
Commentary
Although the facts of DJO v DJP suggested obvious grounds for the set-aside of an award, the Court's reasons make it clear that the issue was in fact more nuanced than it appeared at first blush.
Fundamentally, the critical inquiry is not simply whether issues or materials from separate arbitrations overlap, but whether the tribunal has applied its mind to the issues before it in an independent, impartial, and fair manner. The Court was clear in this case that the issue was not that Judge C had been appointed to preside over three parallel arbitrations, but that he had failed to approach the Arbitration with a fresh and open mind; instead, he had allowed knowledge and opinions accumulated in the parallel arbitrations to influence the tribunal in this arbitration.22
In that regard, DJO emphasizes the principle of minimal curial intervention and the limited circumstances in which a court will be willing to set aside an arbitral award. Notably, the fact that Judge C was appointed as president of the tribunal in all three arbitrations was not a grounds for set-aside in and of itself. The ICC did not take issue with the three appointments, nor did the Court find that to be sufficient grounds in and of itself for set-aside. That being said, the Court did raise significant concerns that while such an arrangement could "in theory" be successfully implemented, it would be "fraught with difficulties" (and in this case, placed Judge C in an "invidious position") given the extent to which such an arbitrator would already have accumulated significant knowledge and opinions. Accordingly, arbitrators with multiple, overlapping appointments risk walking a very fine line.
This to some extent also recalls a more general concern sometimes expressed in the arbitration context with respect to selecting arbitrators with deep experience in a given area law or industry – that is, they have accumulated decades of experience and knowledge in that area, and have formed certain views over their career that they must then consciously put aside in order to remain impartial.23 This is why, in some instances at least, parties may prefer to rely upon arbitrators who do not have extensive knowledge and experience in the subject matter of the arbitration.
Conversely, DJO also provides an interesting parallel to the use of dispute resolution boards in the construction context. As readers will appreciate, dispute boards are specifically intended to be empaneled for the duration of a project, hearing multiple disputes or matters between the same parties. It is expected that the board will maintain its knowledge of all issues on the project, including where those issues overlap. In that context, it may in some circumstances be debatable as to whether the board could re-use prior written opinions or determinations in drafting new ones, although it would appear equally true that such re-use would not, in and of itself, necessarily undermine the validity of the board's opinion or determination. This is particularly true in circumstances where a dispute board is arguably not an arbitral panel, and the same principles of procedural fairness would not necessarily apply.
In any event, DJO confirms that to the extent a party wishes to challenge an award on what appear to be obvious grounds, they would do well to avoid relying upon the most eye-catching aspects of their case in favour of reliance on the fundamentals of set-aside principles.
Footnotes
1. See, generally, The Honourable Chief Justice Sundaresh Menon, "Dispelling due process paranoia: Fairness, efficiency and the rule of law" (October 13, 2020), delivered to the Chartered Institute of Arbitrators Australia
2. DJO v DJP[2024] SGHC(I) 24 at paras 7-9. ["DJO"]
3. DJO at paras 13-22.
4. DJO at paras 10-12.
5. DJO at paras 23-28.
6. DJO at para 40.
7. DJO at paras 29-46.
8. DJO at paras 108.
9. DJO at para 51.
10. DJO at paras 57-65.
11.< em>DJO at paras 66-67.
12. DJO at paras 68-71.
13. DJO at paras 72-74.
14. DJO at para 75.
15. DJO at paras 72-74.
16. DJO at para 89.
17. DJO at para 88.
18. DJO at para 113.
19. DJO at para 115.
20. DJO at para 90.
21. DJO at para 115.
22. DJO at para 49.
23. Furthermore, some authors have cautioned that the "systematic features of arbitration make it difficult for arbitrators to be entirely unbiased in their decisions" – not only are arbitrators often party-appointed, but they are also generally "unfettered by precedent, deprived of strict uniform rules against conflicts of interest, and insulated from any judicial system": Sergio Puig & Anton Strezhnev, "Affiliation Bias in Arbitration: An Experimental Approach" (2017) 46:2 J Leg Stud 371 at 371-372
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