Singapore: lessons from the Singapore courts in breach of natural justice cases

So, how do Singapore courts set aside arbitral awards for breach of natural justice and what are the practical implications for parties?

Because of the importance of natural justice, the Singapore courts have the power to set aside an arbitral award where they consider that there has been a breach of the rules of natural justice during the course of an arbitration (pursuant to the Arbitration Act 2001 (2020 Rev Ed) and the International Arbitration Act 1994 (2020 Rev Ed)). However, the courts exercise this power with considerable restraint, recognising both the finality of arbitral awards and the need to respect the autonomy of the arbitral process.

While the importance of upholding natural justice is clear, it has been notoriously difficult to successfully establish breaches of natural justice before the Singapore courts. The courts have repeatedly emphasised that their intervention is reserved for only the most serious and clear cases of breaches.  

Judicial reluctance: a high threshold for intervention

The Singapore courts have consistently emphasised that the threshold for setting aside an award on account of a breach of natural justice is a high one and the courts will not entertain arguments arising out of a losing party’s dissatisfaction with an unfavourable award.

Two key principles may be drawn from the authorities:

Clear and material procedural incidents of unfairness

The courts will only set aside awards on the basis of a breach of natural justice in exceptional cases involving clear and material procedural incidents of unfairness. The courts distinguish between genuine due process violations and harmless irregularities, and have consistently held that an award will only be set aside if the alleged breach results in actual or real prejudice.

Actual or real prejudice

Not every procedural misstep or technicality will justify judicial interference (see, in particular, the decision of the Singaporean Court of Appeal in Soh Beng Tee & Co Pte Ltd v Fairmount Development Pte Ltd [2007] 3 SLR(R) 86) (“Soh Beng Tee”)). It is not enough to simply identify a procedural irregularity in order to establish a breach of natural justice – there must be more than technical unfairness.

Parties must demonstrate that the irregularity caused actual or real prejudice. While what constitutes real or actual prejudice depends on the facts of each case, the authorities make clear that the prejudice must be sufficiently material in nature. As held in Soh Beng Tee:

"It is neither desirable nor possible to predict the infinite range of factual permutations or imponderables that may confront the courts in the future. What we can say is that to attract curial intervention it must be established that the breach of the rules of natural justice must, at the very least, have actually altered the final outcome of the arbitral proceedings in some meaningful way. If, on the other hand, the same result could or would ultimately have been attained, or if it can be shown that the complainant could not have presented any ground-breaking evidence and/or submissions regardless, the bare fact that the arbitrator might have inadvertently denied one or both parties some technical aspect of a fair hearing would almost invariably be insufficient to set aside the award."

This demonstrates the high threshold that must be met before the Singapore courts will be willing to set aside awards based on procedural unfairness or breaches of natural justice.

Arbitrators must remain impartial and fully consider all the parties’ arguments

The responsibility for maintaining a procedurally fair playing field falls on all parties involved in an arbitration proceeding, including the tribunal, counsel and parties. But what, in particular, can the tribunal do to ensure that proceedings comply with the rules of natural justice?

As a general caution, arbitrators should be mindful of how they conduct themselves when discharging their arbitral duties and issuing awards. Two key lessons may be gathered from the caselaw:

Case-specific reasoning

First, and at a minimum, tribunals should provide case-specific reasoning and avoid heavily recycling awards, even if there may be overlapping factual or legal issues in related proceedings.

Tribunals must be alert to the possibility that their approach may potentially invite scrutiny and ensure that their awards are free from prejudgment or bias. Counsel should also remain vigilant to any inadequate or recycled reasoning from a tribunal (particularly where there may be related proceedings) and promptly raise their concerns to protect their clients’ position.

Ensure thorough understanding of the parties’ cases and arguments

Second, tribunals should ensure that they correctly understand the cases before them. If they proceed on the basis of a material misunderstanding on the parties’ cases, their award may be liable to be set aside.

The above cases might appear to be unusual incidents involving basic errors but they are illustrative of the degree of error required to establish a claim for breach of natural justice and such errors will necessarily (and thankfully) be very rare.

Avoid nitpicking arbitral awards

While it is clear that arbitrators owe clear duties to uphold and administer a fair hearing, counsel and parties to an arbitration are equally expected to discharge their own duties and responsibilities competently. In particular, the Singapore courts are alert to veiled attempts to thwart or nitpick unfavourable awards under the guise of natural justice breaches.

Arbitration practitioners should fully consider all potential arguments and plead them explicitly and clearly in the course of arbitration.

Parties must raise procedural objections promptly

Finally, parties should also raise any objections regarding a perceived breach promptly: delay may prove to be fatal to any claim of procedural unfairness.

In China Machine New Energy Corp v Jaguar Energy Guatemala LLC [2020] 1 SLR 695 (“China Machine”), the Court of Appeal sharply criticised a party claiming procedural unfairness after the award was rendered, despite having taken no steps to object during the arbitration:

"An aggrieved party cannot complain after the fact that its hopes for a fair trial had been irretrievably dashed by the acts of the tribunal, and yet conduct itself before that tribunal “in real time” on the footing that it remains content to proceed with the arbitration and obtain an award, only to then challenge it after realising that the award has been made against it. In our judgment, such tactics simply cannot be countenanced."

If a party intends to contend that there has been a fatal failure of due process during the course of an arbitration, the case of China Machine makes clear that the party must provide a “fair intimation” to the tribunal that it intends to take that point at an appropriate time if the tribunal insists on proceeding.

The expectation that parties raise objections proactively is once again illustrative of the Singapore courts’ strict approach towards natural justice challenges and also reflects the courts’ broader attitude that arbitral awards should only be set aside in rare and exceptional circumstances. Counsel should, therefore, raise any procedural concerns promptly and in writing. Making timely objections is critical to preserving a party’s position and demonstrating that any procedural unfairness was not waived or acquiesced by the objecting party. 

Conclusion

Natural justice safeguards the fairness and attractiveness of the arbitration process and the ability of national courts to set aside awards on those grounds is a powerful tool (that is available in addition to the usual bases for setting aside arbitral awards provided for under the Model Law). That said, it is clear that the threshold for establishing a breach of natural justice is necessarily high. The Singapore courts have shown a marked reluctance to set aside awards on this basis, intervening only in the most exceptional cases. As such, parties can have confidence that a well-conducted arbitration will not be readily disturbed by the courts.