Background
The agreements
Pursuant to the terms of a Consultancy Agreement dated 7 September 2012 between the respondent and a third party company (ZCo), ZCo was to provide services to the respondent in relation to mergers and acquisitions of oil and gas fields around the world. ZCo would be entitled to payment of a success fee subject to certain conditions (Success Fee) upon its presentation of an “Opportunity” to the respondent and the successful completion of that Opportunity.
In October 2013, ZCo, the appellant (ZCo’s sister company) and the respondent executed a Deed of Novation under which ZCo assigned and novated the Consultancy Agreement to the appellant. The Consultancy Agreement was also extended by one year from 31 December 2012 to 31 December 2013. The appellant and respondent also entered into an Assignment, Amended and Restated Consultancy Agreement (Amended Agreement), the terms of which were in substance the same as the Consultancy Agreement and due to expire at the same time on 31 December 2013.
The Consultancy Agreement, Deed of Novation and Amended Agreement all provided for disputes to be finally resolved by arbitration in Singapore at the Singapore International Arbitration Centre.
The dispute
A dispute arose over whether the appellant was entitled to payment of the Success Fee under the Amended Agreement arising out of two opportunities presented to the respondent, namely the acquisition of shares in XCo (an owner-operator of oil fields in Africa) (Acquisition Opportunity), and a collaboration with YCo (an integrated energy company) (Collaboration Opportunity). The Acquisition Opportunity did not materialise during the time of the Consultancy Agreement and the Amended Agreement. It was not until 2016 that the respondent signed an agreement to acquire XCo’s shares, but that did not involve either ZCo or the appellant.
The appellant claimed that there was an oral agreement to extend the Consultancy Agreement beyond 31 December 2013 and it was entitled to Success Fees for both opportunities. The respondent rejected the appellant’s claim on the basis that the Consultancy Agreement and Amended Agreement had expired and it was not due to make payments after 2013.
The award
In its award, the tribunal allowed the appellant’s claim for the Success Fee for the Acquisition Opportunity, although it rejected the appellant’s assertion that there was an oral or implied contract and found that there was no extension by mutual agreement after the expiry of the Amended Agreement. In arriving at its conclusion, the tribunal found that the parties’ contract was contained entirely in the three agreements. It rejected the appellant’s claim relating to the Collaboration Opportunity. The tribunal found, amongst other things, that:
(a) A sale and purchase agreement was not necessary to be executed or completed before the expiry of the Consultancy Agreement or Amended Agreement.
(b) The right to recover the Success Fee was not lost as long as a “clear link” to the successful completion of the Opportunity was demonstrated.
(c) There was no time bar under the relevant provision of the Consultancy Agreement or Amended Agreement.
High Court decision
The respondent applied to the High Court to set aside part of the award in relation to the findings of the tribunal as regards the Success Fee awarded to the appellant for the Acquisition Opportunity. The respondent’s application was made under section 24(b) of the International Arbitration Act (Cap 143A, 2002 Rev Ed) and Article 34(2)(a)(iii) of the UNCITRAL Model Law.
The High Court allowed the respondent’s application on the ground that the tribunal had exceeded its jurisdiction. The High Court found that it was an excess of jurisdiction for the tribunal to have found that there was no subsisting agreement but go on to allow the appellant’s claim for the Success Fee on grounds that did not exist in the appellant’s pleadings and submissions in the arbitration. According to the High Court, the entire premise of the appellant’s claim had been rejected by the tribunal and that ought to have ended the appellant’s claim. The tribunal’s findings were inconsistent with the appellant’s pleaded case and could not be described as ancillary to the matter submitted to arbitration.
Court of Appeal decision
The appellant appealed, arguing that the High Court erred by taking a “narrow and limited view” of the appellant’s pleaded case in the arbitration by confining its case to its entitlement to the Success Fee on the basis of an oral agreement, an implied contract, or estoppel.
The issue on appeal was whether the High Court had correctly held that the tribunal’s finding and its interpretations of the articles of the Amended Agreement were not within the scope of the tribunal’s jurisdiction.
Two-stage inquiry
The Court of Appeal applied a two-stage inquiry in assessing whether an arbitral award should be set aside for an excess of jurisdiction: (i) a court must first identify what matters were within the scope of submission; and (ii) whether the arbitral award involved such matters, or whether it involved a “new difference… outside the scope of submission to arbitration and accordingly would have been irrelevant to the issues requiring determination.”
The question of what matters are within the scope of the parties’ submission to arbitration can be answered by reference to five sources: (i) the parties’ pleadings; (ii) the list(s) of issues; (iii) opening statements; (iv) evidence adduced; and (v) closing submissions in the arbitration. In doing so, a court must look at what was presented in totality to determine whether the issues in question were live issues in the arbitration.
Findings of the Court of Appeal
The Court of Appeal allowed the appeal and overturned the decision of the High Court. It agreed with the appellant that the High Court erred in finding that the appellant’s case in the arbitration had been advanced entirely on the basis of a subsisting agreement. Further, the tribunal had sufficiently apprised the parties of its provisional thinking as to an Opportunity which was embraced by the Consultancy Agreement or Amended Agreement, but which Opportunity only bore fruit subsequently. The issue of whether the parties owed each other any obligation in relation to such Opportunity following the expiry of the Amended Agreement was listed by the appellant in its second list of issues and was also listed by the respondent. These points were also picked up by the appellant in its closing argument and the respondent therefore had sufficient opportunity to address these points.
In answering whether the award involved a “new difference”, the Court of Appeal reasoned that the fundamental point upon which the tribunal eventually found for the appellant – namely, that various provisions of the Amended Agreement pointed to the Success Fee being payable upon completion of the Opportunity regardless of when that took place – was present in the appellant’s submissions in the arbitration. The tribunal’s findings did not involve a new difference outside the scope of the parties’ submission to arbitration. They were premised on the fundamental point raised by the appellant in its submissions that the respondent’s obligation to pay the Success Fee was not constrained by the term limits of the Consultancy Agreement or Amended Agreement.
Comment
This case serves as a reminder to parties seeking to set aside an award that a distinction must be drawn between the erroneous exercise by an arbitral tribunal of an available power vested in it (such as the findings of fact and law) and the purported exercise by the arbitral tribunal of a power which it did not possess (which would be an excess of jurisdiction).
This decision also reaffirms Singapore’s policy of minimal curial intervention and provides helpful guidance on determining the scope of matters submitted by the parties to arbitration. Pleadings set out the nature and scope of a dispute submitted to arbitration. Ultimately, however, when ascertaining whether a tribunal exceeded its jurisdiction, a court will consider the ‘totality’ of what was presented to the tribunal and will look at the arbitration ‘in the round’ to see which issues were live. It is therefore important for parties to pay close attention to the pleadings, list of issues, submissions and evidence during the course of the arbitration to ensure that all necessary matters have been submitted for determination and minimise the risk of a potential challenge to the award.
Client Alert 2022-138
