Part 3 of the International Arbitration Act 1994 (2020 Edition) (“IAA”) deals with foreign arbitral awards and Section 31 of the IAA sets out the limited circumstances under which a foreign award may be refused enforcement by the Singapore courts.
One such circumstance is found in Section 31 (2) (c): enforcement may be refused where the party adversely affected by the award “was otherwise unable to present [its] case in the arbitration proceedings.” The captioned case provides a rare example of when the italicized words are satisfied.
The facts
The defendant had been the claimant’s franchisee in Singapore since 1997. Their relationship was governed by 4 agreements (the “Agreements”) whose governing law was Pennsylvania law. That state was also expressed to be the seat of any arbitration.
On 6 May 2022, the claimant sent the defendant a notice of default, threatening to default the defendant for alleged breaches of the Agreements. On 20 May 2022, the defendant terminated the Agreements on the grounds of the claimant’s material breaches and/or anticipatory repudiation of the same. In response, the claimant: (a) removed the defendant’s access to its worldwide ordering system, which removed the defendant’s ability to order or procure new products to sell in Singapore; (b) cancelled various pending orders that had been made by the defendant and sought to impose liability on the defendant for these cancellations; and (c) sold its products directly in Singapore via its website and other e-commerce platforms.
On 25 May 2022, the claimant filed in Pennsylvania its Demand for Arbitration and Application for Emergency Measures of Protection Including Injunctive Relief (“the Emergency Application”) with the International Centre for Dispute Resolution (“ICDR”). The reliefs sought included reliefs to enforce post-termination provisions in the Agreements. Relevantly, the claimant did not seek to enjoin termination of the Agreements.
On 27 May 2022, the Emergency Arbitrator (“EA”) was appointed to deal with the Emergency Application. Parties thereafter filed their respective written responses on the Emergency Application. On 6 June 2022, the parties made oral arguments before the EA (the “Emergency Hearing”).
Pertinently, at the Emergency Hearing, the claimant’s counsel confirmed that the claimant was merely asking the arbitrator to apply the agreed upon post-termination provisions.
When the EA asked whether “when this goes to the full tribunal, [the claimant was] going to ask that the termination be enjoined and that the relationship continue”, the claimant’s counsel said “No, we’re not”.
Thus, by counsel’s concession, the claimant’s case then was premised on the Agreements having been terminated (the “Original Case”).
The day after the Emergency Hearing, the EA sent an e-mail to the parties with a list of issues directing parties to provide further submissions on them the following day. Notably, one of the issues was a question directed to the claimant asking whether the claimant considered that the Agreements were terminated. The defendant’s post-hearing submissions responded to the claimant’s Original Case. However, in its post-hearing submissions, the claimant took the position that it “[did] not consider the agreements to have been terminated at this time” (the “New Case”). This contradicted the claimant’s position taken at the Emergency Hearing.
Having received the aforesaid post-hearing submissions and without conducting a further hearing, on 15 June 2022, the EA issued the Award. The Award granted reliefs which restored the status quo of the parties to the position before the defendant had terminated the Agreements. In other words, the Award was made on the basis that the claimant did not treat the Agreements as terminated.
The claimant’s application in the Singapore High Court for permission to enforce the Award in Singapore was allowed by the Assistant Registrar (the “Enforcement Order”). Thereafter, the defendant filed an application to set aside the Enforcement Order. Although the defendant raised several grounds, we need discuss only 2 of them.
The first ground related to the ambit of Section 29(1) of the IAA which provides that “a foreign award may be enforced in a court either by action or in the same manner as an award of an arbitrator made in Singapore is enforceable under section 19.” The defendant argued, based on its interpretation of various sections in the IAA, that Section 29 (1) is inapplicable to awards made by foreign emergency arbitrators.
This argument was rejected. Adopting a purposive interpretation of the relevant statutory interpretations, the High Court Judge concluded that a foreign emergency arbitrator’s award was covered by Part 3 IAA and therefore capable of recognition and enforcement.
The defendant’s second ground was that the Award was made in breach of Section 31 (2) (c) in that the defendant “was otherwise unable to present the party’s case in the arbitration proceedings.” The gravamen of the defendant’s contention was that the defendant was not given the opportunity to present its case with respect to the claimant’s New Case which was only raised in the post-hearing submissions.
The High Court Judge agreed with the defendant and set aside the Enforcement Order reasoning as follows:
54 ……..The claimant’s New Case was raised only in its post-hearing submissions, and even then, it was raised in the alternative. The defendant had no reason to treat the claimant’s New Case as being part of the submission to arbitration until then. However, the EA made the Award after the parties made their post-hearing submissions without hearing any further submissions. The EA simply did not give the defendant any opportunity to resist the claimant’s alternative application for injunctive relief based on the claimant’s New Case. In particular, the defendant contended that it was denied the opportunity to:
(a) make legal submissions that the claimant was not entitled to take the position that the Agreements were not terminated when it had by its conduct accepted that the Agreements were terminated;
(b) adduce factual evidence in support of (a) above; and
(c) address the EA on what orders (if any) were appropriate based on the claimant’s New Case, in particular, whether specific performance of the Agreements was permissible under Pennsylvanian law.
55 I agreed with the defendant that it had been prejudiced as a result of the above. For the purposes of the present application, the defendant adduced an expert’s opinion stating that as a matter of Pennsylvanian contract law, the claimant would not be able to seek relief on the basis that the Agreements had not been terminated, if the claimant had taken actions unequivocally indicating that it considered the Agreements to be terminated. The claimant did not adduce any expert opinion to the contrary. I concluded that the defendant’s arguments, had it had the opportunity to present them, could have reasonably made a difference to the EA’s decision.
Concluding remarks
Not infrequently, post-hearing, arbitrators request parties to make further submissions. This case demonstrates that care must be taken to ensure that the further submissions do not reveal a new case being asserted and, more importantly, if they do, then it is imperative that both sides are given the opportunity to present their case in response. Otherwise, the award, as in this rare instance, would be liable to be set aside.
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