On 4th May 2020, IN THE SINGAPORE INTERNATIONAL COMMERCIAL COURT OF THE REPUBLIC OF SINGAPORE, the Plaintiff in each of these actions issued an originating summons seeking an award that the final award rendered by the sole arbitrator in two arbitration to be set aside and the Originating Summons No. 2 of 2020 between CEB and CEC & originating summons no. 3 of 2020 between CED and CEE, and the Court comprising of International Judge Simon Thorley upheld the arbitration award after the arbitrator fails to deal with part of the claim.
PLAINTIFF- In both actions is a company organized under the laws of India and has its registered office in Mumbai, India.
CEC is a company organized under the laws of the UAE and has its registered address in Dubai, UAE.
CEE is also a company organized under the laws of the UAE and has its registered address in Sharjah, UAE.
CEE
FACTS
The plaintiff and CEE entered into four contracts for the sale by the plaintiff and the purchase by CEE of palm oil and canola oil. The payment under each contract was due and later after some months the plaintiff and CEE entered into six more contracts, this time for the sale and purchase of castor oil CEE, however, continued to fail to make any payment for the outstanding sums due in respect of the initial four contracts and, the plaintiff unilaterally canceled the later six contracts on the ground that CEE had failed to pay the sums due under the initial four contracts. CEE contended that it was not open to the plaintiff to cancel the six contracts and that the plaintiff was in breach of contract in failing to supply the goods by the agreed date
ARBITRAL PROCEEDINGS
The parties entered into an arbitration agreement which provided that the parties’ dispute was to be resolved by arbitration conducted in accordance with the Arbitration and Conciliation Act, 1996 (India) (“the 1996 Indian Act”), the seat and venue of the arbitration was to be Singapore and the arbitration was to be governed by and construed in accordance with the laws of India. By agreement between the parties, the Arbitrator was appointed as the sole arbitrator.
PLAINTIFF CLAIM: for the sums due under the four initial contracts and interest on those sums together in respect of certain consequential losses and for litigation expenses as well.
CEE COUNTERCLAIMED: for the alleged loss arising from the plaintiff’s failure to deliver the castor oil due on the outstanding six contracts together with interest on that sum and for an alleged consequential loss of opportunity to proceed with its plans for producing sebacic acid, a derivative of castor oil.
CEE-ARBITRATOR AWARD
The Arbitrator issued the CEE Award and the Arbitrator found in favor of the plaintiff in respect of payments due under the first four contracts. And on the Counterclaim the arbitrator held that the plaintiff was in breach of contract in terminating the six contracts for the supply of castor oil. He however rejected CEE’s claim in relation to the alleged loss of opportunity to produce sebacic acid.
ORIGINATING SUMMONS IN CEE ACTION
The grounds on which the plaintiff seeks to have the CEE Award set aside are read to be as follows:
- pertaining to the failure of the Arbitrator to address the issue relating to the plaintiff’s alleged consequential loss,
- alleged breach of public policy in respect of the holding that the plaintiff could not unilaterally cancel the six contracts.
CEC
FACTS
The plaintiff and CEC entered into 25 contracts for the sale and purchase of various commodities including castor oil. The payment under each of the 22 contracts was due. CEC failed to make the payments when they were due. CEC made a part payment but still, the outstanding amount was due.
The remaining three of the 25 contracts were for castor oil. The plaintiff unilaterally canceled these three contracts on the ground that it had not received any further payment. CEC counterclaimed against the plaintiff for losses allegedly suffered due to the plaintiff’s unilateral cancellation of the three contracts.
ARBITRAL PROCEEDING
The parties entered into an arbitration agreement. The substance of the agreement was the same as that in the CEE Arbitration. The plaintiff sought payment of the outstanding sums in addition to interest, together with consequential losses and for litigation expenses.
CEC Written Statement Counterclaim: In this case the counterclaim representing the increase in the value of the castor oil due to be delivered pursuant to the three outstanding contracts.
CEC-ARBITRAL AWARD
The Arbitrator issued the CEC Award the Arbitrator found in favor of the plaintiff in respect of the sums due under the first 22 contracts.
On the counterclaim, the Arbitrator concluded that each of the 25 contracts was a distinct and independent contract from the others such that non-performance of one contract did not give rise to a right in the plaintiff to repudiate any of the other contracts. He, therefore, held that the plaintiff was in breach of contract in terminating the three contracts for the supply of castor oil.
SINGAPORE INTERNATIONAL COMMERCIAL COURT
CEE and CEC appointed the same solicitors and the Originating Summonses then proceeded together as one.
SUBMISSIONS
- Breach of Natural Justice, s 24(b) of the IAA allows the court to set aside an award if a breach of the rules of natural justice occurred in connection with the making of the award by which the rights of any party have been prejudiced.
- Article 34(2)(b)(ii) of the Model Law allows the court to set aside an award if the award is in conflict with the public policy of Singapore.
- The Arbitrator identified one of the issues that arose for the decision to be whether the claimant could prove that it was entitled to the consequential loss claimed. Yet, in neither case did he expressly decide that issue. There was no suggestion that the point was abandoned by the plaintiff but the way in which the issue arose during the hearing is not entirely Breach of Natural Justice in these awards
- The consequences of the Arbitrator’s findings in both cases are striking, the more so in the case of the CEE Action. In that action, the plaintiff was owed over US$25m in respect of goods already delivered under the initial four contracts. The time for payment had been extended until July 2016 but the sums had still not been paid by 31 March 2017 when the plaintiff canceled the later six contracts which had been entered into in June 2016.
COURTS-FINDINGS
- The plaintiff’s failure to invoke s 33(4) of the 1996 Indian Act is not fatal to its case but that it is a factor which may be taken into account in weighing the balance between the principle of minimal curial intervention on the one hand and the desire to avoid a breach of natural justice on the other.
- In these circumstances it would be wholly disproportionate to remit the matter back to the Arbitrator, much less set aside the awards. Where the breach of natural justice is in relation to such a small percentage of the claim, it is even more incumbent on the party seeking relief from the court to adopt the quicker and cheaper course of requesting the tribunal to issue an additional award. This aspect of the plaintiff’s application therefore fails.
- The plaintiff made certain commercial decisions which turned out to be disadvantageous. This is part and parcel of normal trading. There is nothing which “shocks the conscience” about this. The outcome in the CEE Action is, I accept, stark but this cannot turn a bad commercial deal into one that shocks the conscience. This ground for setting aside the award therefore also fails in both actions.
The Court further held that The plaintiff is not entitled to have the CEE Award or CEC Award set aside on either of the grounds relied upon. The Originating Summonses will, therefore, be dismissed. The plaintiff will pay each of the defendant’s costs, to be assessed if not agreed.
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