Arbitration analysis: The Singapore International Commercial Court (“SICC”) dismissed an application to introduce new evidence on foreign law and to set aside an arbitral award (the “Award”) on the basis that (i) the Award contained decisions on matters beyond the scope of submission to arbitration; (ii) there was a breach of the rules of natural justice in the making of the Award; and (iii) the Award is contrary to Singapore public policy.
The SICC’s decision highlights the pro-arbitration approach that the Singapore courts have consistently adopted in upholding arbitral awards in the face of allegations of breaches of public policy and law. The court reiterated the well-established principle that the ground for setting aside on the basis of a breach of public policy is a narrow one. To successfully invoke the public policy ground, the applicant must demonstrate “egregious circumstances” which would “violate the most basic notions of morality and justice”. In this regard, a mere breach of foreign law would not, without more, cross such a high threshold.
An applicant seeking to introduce additional evidence at the setting aside stage, even if it is evidence on foreign law, is also likely to find an unreceptive audience with the Singapore courts.
What was the background?
The applicant (respondent in the arbitration), Mr Patnaik, and the respondent (claimant in the arbitration), Nine Rivers, were parties to an agreement (the “2014 SPA”), under which the applicant had agreed to purchase certain securities which the respondent held in GAPL (an Indian-incorporated company). The 2014 SPA provided for SIAC arbitration seated in Singapore.
The respondent had subscribed to the securities in GAPL by way of a Share Subscription and Shareholders Agreement dated 4 March 2010 (the “SSSA”). The applicant was also a party to the SSSA. The SSSA contained an arbitration agreement which provided for arbitration seated in New Delhi.
As a result of the applicant’s failure to complete the purchase, the respondent relied on an arbitration agreement contained in the 2014 SPA and commenced arbitration in the SIAC for payment in respect of the securities held in GAPL. The tribunal found that the applicant was required to purchase the respondent’s GAPL securities.
The applicant commenced proceedings under the International Arbitration Act (“IAA”) and in the SICC to set aside the Award (the “Setting Aside Application”) on the basis, inter alia, that the award violated Indian law and public policy and therefore was contrary to the public policy in Singapore.
The applicant thereby filed evidence on Indian law by way of an affidavit of one Justice Patnaik (“Justice Patnaik’s Affidavit”). The respondent sought to strike out the affidavit on the grounds that Justice Patnaik’s Affidavit amounted to fresh evidence not brought up in the arbitration, was an attempt to revive issues which the arbitrator had determined in the arbitration, and was irrelevant as it dealt with issues of Indian law and public policy and did not concern the question as to whether the award was contrary to the public policy in Singapore.
What did the SICC decide?
The Setting Aside Application was dismissed and Justice Patnaik’s Affidavit was struck out.
(i) Award did not contain matters beyond the scope of submission to arbitration
The applicant contended that the SSSA’s arbitration clause applied and not that under the 2014 SPA. Insofar as a finding of liability was made against the applicant under the SSSA but not the 2014 SPA, the tribunal had exceeded its jurisdiction.
The SICC adopted the 2 -stage enquiry as set out PT Asuransi Jasa Indonesia (Persero) v Dexia Bank SA  1 SLR(R) 597 and CRW Joint Operation v PT Perusahaan Gas Negara (Persero) TBK  4 SLR 305: first, what matters were within the scope of submission to the arbitral tribunal; and second, whether the arbitral award involved such matters or whether it involved a matter outside the scope of the submission to arbitration.
The SICC agreed with the arbitrator’s finding that the arbitration agreement was widely drawn – it provided that to cover disputes “arising out of or in relation to or in connection with the interpretation or implementation of” the 2014 SPA. In this regard, the SICC noted that the 2014 SPA entitled Nine Rivers to exercise certain rights and remedies under the SSSA in the event of a default under the 2014 SPA. As such, the issue of whether Nine Rivers was entitled to exercise its rights and remedies under the SSSA was one which fell within the ambits of the quoted phrase.
(ii) No breach of natural justice in connection with the making of the Award
Mr Patnaik argued that the arbitrator’s rejection of his application, which had been made on the first day of the hearing, to amend his Statement of Defence deprived him of the right to a fair hearing. This argument was dismissed by the SICC since it amounted to a challenge to the arbitrator’s decision not to allow the application to amend, i.e. it was a case management decision falling within the arbitrator’s discretion and could not be challenged.
The SICC further observed that Mr Patnaik had failed to plead the relevant issues at the correct time, which led to the issues being “raised late and slipped into opening submissions for the hearing”. Since the arbitrator had allowed parties to ventilate their submissions on the amendment application – and the challenge was not to the fairness of the hearing of the amendment application but rather the tribunal’s refusal to allow the amendment – the decision not to allow the amendment could not be challenged on natural justice grounds. In any event, the tribunal did allow one amendment but disallowed another two on the basis that the latest of the amendment would prejudice the respondent.
(iii) Award not in conflict with Singapore’s public policy
The SICC dismissed Mr Patnaik submission that it would be a breach of international comity and thus contrary to Singapore public policy to enforce an award arising out of contracts which themselves breached Indian law and Indian public policy.
The SICC accepted that, pursuant to AJU v AJT  4 SLR 739, if the tribunal had decided that it was not against Singapore public policy to enforce a contract which was illegal, this would be a finding of law which, if erroneous, was liable to setting aside by a Singapore court if the contract was governed by Singapore law.
The SICC noted, however, that the arbitrator had examined the nature of the transactions and found that the 2014 SPA and the SSSA were not illegal contracts under Indian law. These were findings of fact by a tribunal which, absent vitiating factors such as fraud or breach of natural justice, were final and binding and could not be reopened by the curial court. In any event, even if the tribunal made findings of law, they would be findings of Indian, not Singapore, law and therefore were findings of fact as to a foreign law. On the facts, no issue of Singapore public policy was engaged since the tribunal had decided that the contract was not illegal under Indian law.
Even if the court could reconsider the issue on Indian law afresh, it would not have the chosen to do so since the policy of sustaining international awards outweighed the policy of discouraging international commercial transactions which breached a country’s foreign exchange regulations (and which the tribunal found had not happened).
The SICC accepted that the Singapore courts will not, as a matter of public policy, enforce a contract if the real object and intention of the parties necessitates them joining in an endeavour to perform, in a foreign and friendly country, an act which is illegal in that country. However, this did not mean that every illegal contract would always, as a matter of Singapore public policy, not be enforced or would be set aside on the basis that it was illegal in the place of performance.
In this respect, the applicant cited no authority for the proposition that a contract which is illegal in another state necessarily leads to a breach of international comity and thus engages Singapore public policy, if that impugned arbitral award were not set aside. In any event, the illegality in the foreign state must be so egregious as to shock the conscience, or violate the most basic notions of morality and justice, for it to amount to a breach of Singapore public policy. Here, there was no reason why a breach of the laws of India would, without more, cross such a high threshold. The applicant’s argument, taken to its logical conclusion, would entail that any minor illegality or regulatory infringement by a contract in its place of performance would lead to an award having to be set aside. This would be contrary to public policy being a narrow ground for setting aside.
In light of the findings above, Justice Patnaik’s Affidavit was irrelevant and was thus struck out.
This article was first published on LexisPSL linked here.
This article is produced by our Singapore office, Bird & Bird ATMD LLP, and does not constitute legal advice. It is intended to provide general information only. Please contact our lawyers if you have any specific queries.