* Kohe Hasan is a Partner in Reed Smith's Singapore office and a Director of Resource Law LLC. Nikisha Mirpuri is an Associate in Reed Smith's Singapore office.
Speedread
The Singapore High Court has denied an application by the claimant in the underlying arbitration to set aside an international arbitral award on grounds of fraud or public policy under section 24(a) of the International Arbitration Act (IAA) and Article 34(2)(a)(ii) of the UNCITRAL Model Law. However, it allowed a related application by the respondent, who was the successful party in the arbitration, to set aside a subpoena against one of its employees to produce documents in support of the claimant’s application.
This case combines the test in Singapore for attempting to set aside an arbitral award on the basis of fraud, and highlights the high standard that an applicant will need to show to set aside an award on grounds of fraud or public policy, including the requirement to show a causative link between the alleged concealment and the decision. It is important for parties to consider use of all available avenues under the IAA or any applicable rules to procure witnesses and documents from their opponents during the arbitration. If a party waits until they are applying to set aside the award, they are unlikely to successfully convince the court that the application is not a backdoor appeal on merits or an abuse of process. (BVU v BVX [2019] SGHC 69 (13 March 2019).)
Background
Section 24(a) of the International Arbitration Act (IAA) states:
“… the High Court may, in addition to the grounds set out in Article 34(2) of the Model Law, set aside the award of the arbitral tribunal if – the making of the award was induced or affected by fraud or corruption.”
Article 34(2)(b)(ii) of the UNCITRAL Model Law provides that "An arbitral award may be set aside… only if the court finds that the award is in conflict with the public policy of this State.”
Section13(1) of the IAA provides that "any party to an arbitration agreement may take out a subpoena to testify or a subpoena to produce documents".
Facts
The arbitration was commenced by the South American supplier of goods against a Korean state-owned company, alleging breach of a purchasing agreement (the Agreement).
The two key issues that were in dispute during the arbitration were:
- The interpretation the Agreement, that is, whether it had required a minimum number of orders by the respondent, and whether there had been a breach.
- Whether the Respondent was obliged in any event under Korean law to call a public tender before purchasing from the claimant, therefore prohibiting the respondent from making direct orders from the claimant.
The majority of the tribunal found in favour of the respondent on both of the above points. First, they found that the Agreement did not place any absolute obligation on the respondent regarding any minimum quantity of orders and therefore, there had been no breach. Second, it found that, under Korean public procurement law, the respondent was, in any event, required to call a public tender before purchasing from the claimant. The claimant had not offered any contrary expert evidence on this point.
Following the issuance of the award in favour of the respondent, the claimant applied to set it aside on the grounds of the award having been induced by fraud or due to a breach of public policy. The claimant alleged that the respondent had not called certain key witnesses to give evidence and had not disclosed certain documents. On that basis, it argued that the respondent had deliberately put forward a false case in the arbitration by concealing the true facts and withholding and suppressing crucial evidence. One of the respondent’s employees (the Employee) filed an affidavit in support of the claimant’s setting aside application.
The claimant then obtained a subpoena for the Employee to produce four categories of documents (which were the respondent’s internal documents). The respondent applied to set the subpoena aside.
The court heard the claimant’s setting aside application together with the respondent’s application to set the subpoena aside, on the basis that if the court was unconvinced by the claimant's set-aside application, the subpoenaed documents would not be relevant or necessary.
Decision
The Singapore High Court denied the claimant's an application to set aside the award and allowed the respondent's application to set aside the subpoena.
The court's analysis of the relevant law
Based on previous case law, the court found that it was uncontroversial that a high threshold had to be met for an award to be set aside for fraud or a contravention of public policy. Fraud would only be inferred with cogent and strong evidence, and a high standard of proof would apply for an award to be found to contravene public policy because it was secured by fraudulent or unconscionable means.
The court considered that the cases of Swiss Singapore Overseas Enterprises Pte Ltd v Exim Rajathi India Pvt Ltd [2010] 1 SLR 573 and Dongwoo Mann+Hummel Co Ltd v Mann+Hummel GmbH [2008] 3 SLR(R) 871 set out three requirements that must be met for non-disclosure or suppression of evidence to warrant the setting aside of an award:
- First, it must be shown that there was deliberate concealment aimed at deceiving the arbitral tribunal.
- Second, there must be a causative link between the deliberate concealment and the decision in favour of the concealing party.
- Third, there must not have been a good reason for the non-disclosure.
As to the law on setting aside subpoenas, the court found that there was a high threshold, but would be crossed where the documents sought are clearly irrelevant or when the subpoena application is an abuse of process or used for a collateral purpose.
Additionally, if new evidence is being introduced to demonstrate fraud at the setting aside stage, the applicant would have to demonstrate why, at the time of the arbitration, the evidence was not available or could not have been obtained with reasonable diligence.
Whether there was deliberate concealment aimed at deceiving the tribunal
The court found that there was no deliberate concealment aimed at deceiving the tribunal.
First, there was no obligation on the respondent to have called the Employee as a witness during the arbitration or to adduce the documents set out in the subpoena. This is because there had been no order from the tribunal to do so, and under the IBA Rules on the Taking of Evidence in International Arbitration 2010 (which governed the procedural aspects of the arbitration) there was no general obligation to disclose all documents or produce witnesses unless relying on them.
Second, the tribunal had already thoroughly considered the question of whether the Employee should be called as a witness during the arbitration, and decided not to order the respondent to call him as a witness. The court found that such decisions arise regularly in dispute resolution proceedings and there was no fraudulent suppression of evidence to deceive the tribunal.
Finally, the claimant could have requested the documents that were the subject of the subpoena during the arbitration if it truly believed that these categories of documents were crucial under Article 3(a)(ii) of the IBA Rules, but it did not do so.
Whether there was a causative link between deliberate concealment and the decision in favour of the respondent
The court was also unpersuaded that the Employee’s evidence and the internal documents could have made an impact on the tribunal’s decision in favour of the respondent.
The court found it highly unlikely that the Employee’s factual evidence would have changed the outcome reached by the majority on the issue of Korean procurement law as that was a question of law, not fact. As to the obligations under the Agreement, the court found that it was common ground between the parties that the Agreement ought to be interpreted in an objective fashion and that the Employee’s personal and subjective views would therefore not have impacted the tribunal’s decision.
Whether there was a good reason for the non-disclosure
It was found that there was good reason for the respondent not to have disclosed its own internal documents and communications, or called the Employee as a witness, and it was a legitimate position for it to consider that they were legally immaterial to their case. The respondent had clearly explained its position to the tribunal and had made the decision to take the risk of having an adverse inference drawn as a result of this.
Whether the subpoena ought to be set aside
As to the subpoena application, the court found that the documents were clearly irrelevant for the determination of the originating summons for the reasons set out above.
The court also found that the subpoena was an abuse of process. In the court’s view, the claimant was seeking to reopen the arbitrated dispute through a backdoor appeal on the merits. There had been no explanation as to why the claimant had not sought curial assistance for the production of documents under section 13 of the IAA while the arbitration was still ongoing if it really thought such documents were critical and if it was not content to rely on the tribunal drawing adverse inferences. Therefore, the court set aside the subpoena.
Comment
This case summarises the test in Singapore for setting aside an arbitral award on the basis of fraud, and highlights the high standard that an applicant will need to show to set aside an award on grounds of fraud or public policy, including the requirement to show a causative link between the alleged concealment and the decision. It is important for parties to consider use of all available avenues under the IAA or any applicable rules to procure witnesses and documents from their opponents during the arbitration. If a party does not do so during the arbitration, and waits until it applies to set aside the award, they are unlikely to successfully convince the court that the application is not a backdoor appeal on merits or an abuse of process.
Case
BVU v BVX [2019] SGHC 69 (13 March 2019) (Ang Cheng Hock JC)
