8 November 2022

Parties commonly appoint the same arbitral tribunal in related arbitration proceedings to save time and costs. The common tribunal would gain familiarity with key aspects of the dispute in the arbitrations, including parties, subject-matter and commercial background.

However, where a common tribunal reaches the same conclusions in an earlier arbitration and a later arbitration, there may be allegations that the common tribunal had prejudged the issue in the later arbitration. In essence, the allegation is that the common tribunal simply followed its previous ruling in the first arbitration, instead of genuinely trying to understand the new arguments or contentions raised in the second arbitration. Such allegations of prejudgment, although discussed academically in textbooks, arise relatively rarely in practice.

In CNQ v CNR [2022] SGHC 267, the Singapore High Court had the opportunity to consider such prejudgment allegations in relation to an International Chamber of Commerce (“ICC”) arbitration award. The High Court dismissed the plaintiff’s allegations of prejudgment and, in doing so, provided valuable guidance on the principles for determining the existence of prejudgment in related arbitrations.

The award in question was the second award (“Second Award”) issued by a sole arbitrator (“Arbitrator”) in an ICC arbitration between the parties (“Second Arbitration"). The Arbitrator had issued an award (“First Award”) in an earlier ICC arbitration between the same parties (“First Arbitration”). The Arbitrator ruled against the plaintiff in both the First Award and the Second Award. The plaintiff then applied to set aside the Second Award. The plaintiff had also previously unsuccessfully attempted to set aside the First Award.

The High Court dismissed the plaintiff’s arguments and affirmed the Second Award.

Allen & Gledhill Partners Tay Yong Seng and Ng Si Ming successfully defended the Second Award in the High Court. Yong Seng and Si Ming had also defended the First Award in the High Court.

First Award - Setting aside arguments based on alleged breach of natural justice

A seller (“Seller”) and buyer (“Buyer”) entered into an agreement (“Contract”) for the sale and purchase of specialised optical fibre materials for industrial use. The Buyer failed to accept the Seller’s goods.

In the First Arbitration, the Seller claimed against the Buyer for breach of contract. In the First Award, the Arbitrator found that the Buyer wrongfully refused to accept the Seller’s goods under the Contract and awarded substantial damages to the Seller.

In the setting aside application before the High Court, the Buyer did not challenge its liability for breach of contract, but sought to set aside part of the First Award dealing with damages. This first setting aside application culminated in the High Court decision in CNQ v CNR [2021] SGHC 287 where the High Court dismissed the Buyer’s application as it found that none of the natural justice grounds raised for setting aside were established. The High Court found that, in any event, the Buyer had not suffered prejudice from the matters complained of. For more information about the decision in CNQ v CNR [2021] SGHC 287, please read our article titled “General Division of Singapore High Court finds grounds for setting aside of arbitral award not established”.

Second Award - Setting aside arguments based on alleged prejudgment 

In the Second Arbitration, the Buyer sought a declaration that it had validly invoked the force majeure clause in the Contract to avoid liability to the Seller. The Seller counterclaimed damages against the Buyer for non-acceptance of goods under the Contract, but involving a different period from the First Arbitration. The Second Arbitration was heard by the same Arbitrator who heard the First Arbitration.

In the Second Arbitration, the Arbitrator again found that the Buyer had acted in breach of contract and awarded the Seller damages.

The Buyer again sought to set aside part of the Second Award dealing with damages. However, this time, the Buyer relied on relatively novel arguments:

  • The Arbitrator failed to attempt to understand the new evidence and contentions in the Second Arbitration in relation to damages (which evidence and contentions the Buyer did not submit in the First Arbitration); and
  • The Arbitrator had prejudged the issues in the Second Arbitration by displaying an unreasonable inclination to uphold his ruling in the First Award.

Setting aside application for Second Award - Decision of the High Court

The High Court dismissed the setting aside application for the Second Award.

Failure to attempt to understand new evidence and contentions

In relation to the Buyer’s first argument that the Arbitrator had failed to attempt to understand the new evidence, the High Court reiterated the established principle that an inference that an arbitrator failed to consider an important pleaded issue “if it is to be drawn at all, must be shown to be clear and virtually inescapable”. In determining whether such an inference ought to be drawn, the High Court emphasised that the court will consider not only the relevant arbitral award but the entire arbitration record of the Second Arbitration as a whole. If, in the course of the Second Arbitration proceedings, the Arbitrator had attempted to understand the relevant issues, but still failed to understand it, that is not a breach of natural justice.

In rejecting the Buyer’s first argument, the High Court found that the Arbitrator had dealt with the Buyer’s new evidence and contentions at length in the Second Award. The Arbitrator not only made reference to the new evidence and contentions in the Second Award, but went further to set out his understanding of them and explained his reasons for not accepting them.

In particular, the High Court found that the fact that the Arbitrator took time to question the Buyer’s expert further in the course of the Second Arbitration proceedings indicated that the Arbitrator had attempted to understand the expert’s methods (which constituted part of the new evidence and contentions put forth by the Buyer in the Second Arbitration). There was therefore no failure, nor even reluctance, of the Arbitrator to attempt to understand the Buyer’s new evidence and contentions as alleged.

Prejudgment

In relation to the Buyer’s second argument that the Arbitrator had prejudged the issues in the Second Arbitration, the High Court referred to the test established by the Singapore Court of Appeal in BOI v BOJ [2018] 2 SLR 1156 at [109]:

“To establish prejudgment amounting to apparent bias, therefore, it must be established that the fair-minded, informed and reasonable observer would, after considering the facts and circumstances available before him, suspect or apprehend that the decision-maker had reached a final and conclusive decision before being made aware of all relevant evidence and arguments which the parties wish to put before him or her, such that he or she approaches the matter at hand with a closed mind.”

In the present case, the High Court found that it could not infer from the arbitration record that the Arbitrator had approached the issues in the Second Arbitration with a closed mind. Importantly, the High Court held that “[i]n so far as the arbitrator was being asked to decide the same issues between the same parties, there was nothing inherently wrong in him deciding them the same way”.

The High Court was of the view that this was particularly so as parties were given the opportunity in the Second Arbitration to submit on the First Award and the Buyer was also given the opportunity to put forward new evidence and contentions. Where the Arbitrator had considered the evidence and contentions (both new and old) in relation to a particular issue (e.g. quantification of damages) and set out points from the First Award which it was deciding the same way in the Second Award, this by itself did not amount to an inference that the Arbitrator was accepting the Seller’s arguments just because he had accepted similar arguments in the First Arbitration. On the contrary, the High Court noted that the Arbitrator had expressly stated in the Second Award that he noted the Buyer’s new evidence and contentions and would address it subsequently in the Second Award.

Finally, the High Court highlighted that aside from the analysis of the Buyer’s new evidence and contentions in the Second Award, in the course of the Second Arbitration proceedings, the Arbitrator had engaged with the Buyer’s counsel and expert witness during the oral hearing in the Second Arbitration on the Buyer’s new evidence and contentions. This showed that the Arbitrator had indeed attempted to understand the Buyer’s case in the course of the Second Arbitration and had not prejudged the issues in the Second Arbitration.

In any event, the High Court was not satisfied that the Buyer had been prejudiced by the way in which the Arbitrator had handled the Second Arbitration. In the absence of such prejudice, the High Court declined to set aside the Second Award.

Key takeaways

The case of CNQ v CNR [2022] SGHC 267 provides comfort to parties in related arbitrations.

The High Court has held that the mere fact that in a later award, an arbitral tribunal refers to a prior award and decides an issue the same way as the prior award does not in itself warrant an inference that the arbitral tribunal had prejudged the second arbitration. The High Court will take into account not only the tribunal’s analysis in the second award, but also the tribunal’s conduct of the second arbitration in dealing with the new evidence and contentions.

If, in the second arbitration proceedings, the tribunal had afforded parties the opportunity to address the first arbitration award and to put forth new evidence and contentions, and had shown an attempt to understand the parties’ cases in the second arbitration (e.g. by engaging with counsel and witnesses on new evidence and contentions), prejudgment allegations may not easily succeed.

Given the relatively common practice of appointing common tribunals in related arbitrations to save time and costs, this decision provides welcome guidance for the conduct of such proceedings and represents an important affirmation of arbitration awards given in such arbitrations.

Reference materials

The judgment is available on the Singapore Courts website www.judiciary.gov.sg.