Singapore High Court rejects challenge to unclear award

Reproduced from Practical Law with the permission of the publishers. For further information visit www.practicallaw.com.

In Swire Shipping Pte Ltd v Ace Exim Pte Ltd [2024] SGHC 211, the Singapore High Court rejected an application to set aside an arbitration award said to be so "manifestly incoherent" that it demonstrated the parties had not received a fair hearing. The court held that, although the award "sailed close to the wind", all the issues addressed in the award were put to the parties and arose naturally from the main issues in dispute.

The Singapore High Court has rejected a challenge to an arbitral award, alleged to be manifestly incoherent.

Two parties, Swire and Ace Exim, entered into an agreement for the sale of a ship. When a dispute arose, it was referred to Singapore-seated arbitration. The sole arbitrator rendered a 386-page award, which Swire then applied to the Singapore High Court to have set aside.

Lack of comprehensibility is not a separate ground for setting aside an award. However, Swire argued (relying on the decision in BZW v BZV [2022] 1 SLR 1080), that the "manifestly incoherent" nature of the award meant that the arbitrator had either not understood, or failed to adequately deal with, the case. Therefore, the parties had not received a fair hearing and the award should be set aside. Swire alleged that findings made by the arbitrator went beyond the parties' pleaded cases or contradicted the evidence.

Rejecting Swire's application, the High Court held that the reference in BZW to "manifest incoherence" was not a charter for appeals. An applicant must satisfy the court that any incoherence was sufficient to bring the case within one of the recognised set aside grounds.

Here, the court observed that the award "did sail close to the wind", describing it as "a thoroughly unhappy, maze-like combination" of internal cross-references and sub-paragraphs, requiring "the utmost willpower and concentration" to understand. However, all the points addressed were put to the parties and arose naturally from the main disputed issues, even if not specifically pleaded. Further, even if the arbitrator had reached the "wrong" conclusion on the evidence, it sufficed that the arbitrator had applied his mind to the issues. Indeed, the arbitrator had sought to address every single issue out of a sense of "due process paranoia".

Although the challenge was rejected, the judge cautioned that drafting a comprehensive award was not an end in itself, especially where the resulting "twisted, mangled mess", ironically, opened the door to potential challenges. Brevity, and ease of reading and understanding, should be the "ultimate objective" of any award.

The decision serves as a reminder of the importance of the tribunal selection process (with arbitrators not held to the same standard as judges in providing reasoned judgments), while also reinforcing the high threshold to set aside awards in Singapore. The judge's remarks should also serve as a caution to arbitrators that, sometimes, less is more.

Case: Swire Shipping Pte Ltd v Ace Exim Pte Ltd [2024] SGHC 211 (16 August 2024) (Mohan J).