Reed Smith In-depth

The Singapore Court of Appeal dismissed an appeal against a judgment of the High Court setting aside an arbitral award for breach of natural justice. Though this decision relates to an arbitration conducted under the rules of the Singapore Chamber of Maritime Arbitration, the findings have application in arbitrations conducted under the SIAC Rules or under the UNCITRAL Model Law on International Commercial Arbitration.

The Court of Appeal ruled that the sole arbitrator’s decision to proceed on a documents-only basis (a) was not a procedural choice open to the arbitrator in the absence of an agreement on the issue between the parties, and (b) constituted a breach of natural justice as the gating of the respondent buyer’s witnesses caused real prejudice to the buyer’s ability to present its case. The Court of Appeal further noted that the exercise of a tribunal’s discretionary powers to limit witness evidence where allowed was in any event subject to an overriding obligation to ensure that the arbitration was conducted in a just manner and that fundamental rules of natural justice were upheld.

Underlying facts

An Indian company (the Buyer) entered into an agreement with a Singapore-based third party (the Seller) for 20,000 metric tonnes (MT) of coal (Coal) at US$74 per MT, to be delivered in January 2015. The relevant terms of the agreement:

  1. Required disputes to be resolved by arbitration governed by the Rules of the Singapore Chamber of Maritime Arbitration (3rd Edition, 2015) (the SCMA Rules).
  2. Allowed the agreement to be assigned.
  3. Required that any amendment had to be in writing and contained an entire agreement clause militating against oral variations.

Problems arose when the bank to whom the Seller had assigned all its receivables (the Bank) sent the Buyer a bill of exchange in January 2015 for payment of US$1,480,400 by 22 June 2015. Though the Buyer’s bank sent a SWIFT message acknowledging the amount and due date, no payment was ever made.

The Bank requested payment multiple times between July and October 2015. The Buyer responded twice and requested more time to pay in each response. The Buyer’s position changed suddenly in October 2015, when it alleged to have received only part of the agreed quantity and stated an intent to pay US$61 per MT due to falling prices for coal.

The parties’ representatives met in December 2015 to discuss the issues (the December meeting). At the December meeting, four people represented the Buyer while the Seller had two representatives present. A seventh person, from a trade credit insurer, accompanied the Seller’s representatives. What transpired at the December meeting is at the heart of the eventual arbitration and the case before the Singapore courts. According to the Buyer, the parties agreed to a reduced price of US$61 per MT while the Seller disputed that any such agreement was ever reached.