Reed Smith Client Alerts

The Singapore Supreme Court has recently declined to set aside arbitral awards on the grounds of breaches of natural justice and conflict with Singapore public policy. This case demonstrates the high threshold required to invoke arguments of such nature, in support of curial intervention in arbitral proceedings. The Singapore courts maintain their pro-arbitration stance in refusing to set aside awards, despite their financial outcome potentially appearing to favour the non-paying respondents in the underlying proceedings (the defendants in this case). In fact, both the plaintiff and the defendants were in breach of different agreements between them, and the plaintiff’s net damages were reduced significantly as a result.

In the prevailing economic climate, seeking legal advice prior to taking drastic steps such as unilaterally acting to terminate high value contracts may prove valuable. The consequences of failing to do so could be very significant.

Authors: Dan Perera Kohe Hasan

Background and facts

The facts of the case in issue relate to claims brought by an Indian plaintiff, who had entered into a number of commodity sale and purchase agreements for the sale of edible oils and other commodities to two UAE-incorporated defendants (CEC and CEE), under some of which contracts the plaintiff had supplied the commodities as required. The defendants failed to pay for the commodities supplied, despite being granted extensions of time in order to perform their payment obligations. The plaintiff acted unilaterally to terminate a number of further sale and purchase contracts between the parties, under which the delivery of commodities had not yet been made.

Rather than proceeding to court, the parties agreed between them, after the disputes had arisen, to enter into arbitration agreements on practically identical terms. Those arbitration agreements stated that the parties’ disputes were to be resolved at arbitration “conducted in accordance with the Indian Arbitration and Conciliation Act of 1996” (the Indian Act). One of the arbitration agreements continued, “The arbitral tribunal shall consist of sole arbitrator and the seat of the arbitration shall be Singapore. The Arbitration shall be governed by and construed in accordance with the laws of India. The Language of the arbitration shall be English.” The other was in similar, but not entirely identical, terms.

The plaintiff duly commenced two arbitrations – one against each of the defendants – which were heard together by the parties’ agreed sole arbitrator. The plaintiff, being the claimant seller of the commodities in the arbitration proceedings, sought (inter alia) (i) payment of the sums outstanding in relation to the commodities delivered to the defendants under certain contracts, and (ii) damages for the consequential losses suffered. The consequential damages sought by the plaintiff represented a very small proportion (less than 1 per cent, in each instance) of the overall value of the claims.