Arbitration Set Aside Proceedings: Court in an UNCITRAL Model Law Jurisdiction Effectively Revises the Award

UN Model Law-jurisdictions, watch out: In a recent decision, the Singapore High Court (“Court”) was asked to set aside an arbitral award which had ordered payment of liquidated damages for delayed construction of an industrial plant.

In its reasoning, the arbitral tribunal had determined the contractors’ delay by taking into account an Extension-Of-Time-defense. This worked to reduce the liquidated damages. The defense, however, had only been raised by the respondents in their closing submission. In admitting the belated defense without granting the claimant a reasonable opportunity to challenge it, the tribunal, as the Court held, had violated natural justice. So far, so clear.

As a consequence, however, the Court did not annul the award in toto (for the tribunal to decide anew). Rather, it set aside only part of the award, i.e. that part which was tainted by the tribunal’s decision to admit the belated Extension-Of-Time-defense. The Court’s setting aside decision hence effectively resulted in an increase of the delay (by 25 days) and, consequently, of the liquidated damages (by about S$ 20 million). According to the Court, this approach was in line with Art 34(2)(a)(iii) of the Model Law which contemplates partial set aside. However, whilst the Court expressly noted that it had no power to vary the award, the practical effect of this ruling seems to be very close.

N.B.: The Court ruled under local arbitration legislation based on the UNCITRAL Model Law, which makes the ruling highly relevant for most of us, particularly when transposing similar arguments into other model law jurisdictions.

Read more on this decision here.