Introduction
The dispute arose from two non-disclosure agreements (“NDAs”) between The Tata Power Company Limited and Kleros Capital Partners Limited (“Kleros”) concerning a proposed coal mining project in Russia. Kleros alleged that Tata misused confidential information disclosed under the NDAs, acted in breach of the non-circumvention provisions and its contractual duty of good faith, and ultimately excluded Kleros from participation in the project while pursuing the opportunity for itself. Kleros commenced a SIAC arbitration on 30 November 2020 for breaches of the two NDAs (the “Arbitration”). Its primary claim was for damages for the loss of the chance to invest and/or participate in the project as the principal investor and shareholder and to profit therefrom.
The Arbitration was bifurcated into liability and quantum phases. In the liability phase, the tribunal of three unanimously found Tata liable for breaches of the NDAs, including misuse of confidential information, circumvention of Kleros and breaches of contractual good faith obligations. In the quantum phase, the majority awarded Kleros approximately US$490 million for the loss of chance to invest and/or participate in the project and profit from it. The minority arbitrator reached a different view and was only prepared to award Kleros negotiating damages of approximately US$13.5 million (plus interest), representing the amount Tata would hypothetically have paid to be released from its obligations under the NDAs.
Following the issuance of the Quantum Award and Final Award, Tata commenced three applications before the Singapore International Commercial Court. These included a challenge to the appointments of the presiding arbitrator and Kleros’ appointed arbitrator, and applications to set aside the Quantum Award and Final Award on grounds including alleged breaches of natural justice, failure to follow the agreed arbitral procedure and apparent bias. The Court dismissed all three applications. Key issues in the decision are summarised as follows.
No breach of natural justice
Tata’s principal complaint was that the tribunal breached the rule of natural justice that every party is entitled to a fair hearing and fair opportunity to present its case. It was argued that in the quantum award, the tribunal had failed to determine essential issues relating to causation, remoteness and mitigation. According to Tata, this amounted to both a breach of natural justice and a departure from the parties agreed arbitral procedure. The Court rejected these arguments in their entirety and found that the quantum award contained numerous and sufficient references demonstrating the tribunal’s engagement with these issues.
Reaffirming established Singapore authorities, the Court emphasised that an applicant seeking to challenge an award on an infra petita basis must demonstrate a “clear and virtually inescapable” (1) inference that the tribunal completely failed to consider the essential issues. The focus is on whether the tribunal did in fact consider the point(s) at all, not whether its consideration was adequate or incorrect. It is not a breach of natural justice if the tribunal failed to comprehend an argument or evidence.
In relation to causation, Tata argued that the tribunal had failed to analyse the relevant “but for” counterfactual, namely what would have happened had Tata not committed any breaches of the NDAs. Absent a proper analysis of that counterfactual, the tribunal could not conclude that its breaches caused Kleros’s loss of opportunity. The Court rejected this and found that there was sufficient evidence in the award that the tribunal had applied its mind and considered the counterfactual, by accepting Kleros’ submissions. The tribunal was perfectly entitled to accept Kleros’ submissions and proceed with its analysis on that basis.
The Court adopted a “close, commercial and reasonable reading of the Quantum Award” and “not with a hypercritical eye but supportively, and with a view to understanding the Tribunal’s approach in substance” (2). It also affirmed that the “Majority’s reasoning need only be discernible” and that “[t]he court is not concerned with the quality of the award or the depth of its analysis but the fact or existence of analysis” (3). What is critical is that “natural justice requires that parties be heard, not that they receive responses on every submission” (4). Therefore, if the tribunal has genuinely applied its mind to an issue, there is no breach of natural justice merely because its conclusion “appears inexplicable or reflects a miscomprehension” (5).
Tata ultimately failed to demonstrate that a “virtually inescapable inference” arose that the Tribunal “completely failed” to determine the issue of causation (6).
The Court reached the same conclusion in relation to remoteness and mitigation. On remoteness, the Court found that the tribunal had referred to the issue at several specific points in the award, analysed the applicable English law principles and provided reasons for its conclusions with references to Tata’s submissions. Although the tribunal did not analyse remoteness in a separately demarcated section, there is no requirement for adherence to any particular structure. The Court is concerned with substance rather than form, and the award and its findings must be read as a whole and in context to determine the substance of the tribunal’s decision.
Likewise, the Court found that the tribunal did devote a substantial section of the award to mitigation and was entitled to decide that mitigation was of little or no legal relevance. Notwithstanding its different view of the law, the tribunal still proceeded to analyse in some detail the arguments and evidence on mitigation. Therefore, the tribunal did apply its mind to this issue in reaching its conclusion.
The Court reiterated that all these challenges were, in substance, an attempt to re-argue the merits of the award and not grounds for setting aside.
No apparent bias
Tata also alleged apparent bias in respect of the appointment of the presiding arbitrator and Kleros’s nominated arbitrator. The allegations focused on alleged non-disclosure of appointments in unrelated arbitrations involving the same third-party funder, Omni Bridgeway, which funded Kleros in the Arbitration, as well as alleged professional connections between the presiding arbitrator and a member of Omni Bridgeway’s investment committee.
The Court first noted that substantially all of the grounds relied on by Tata had already been found to be time-barred by the SIAC Court because they had not been raised within the applicable challenge period. While the Court considered it unnecessary to determine whether it was similarly time-barred before the Court, it concluded that the apparent bias challenge failed on the merits in any event.
Applying the established objective test of whether a reasonable and fair-minded person observing the proceedings and knowing all the relevant facts would have a reasonable suspicion that a fair determination of the dispute is not possible, the Court found that none of the circumstances relied upon by Tata met that threshold. The inquiry is whether there is a “real possibility of bias”, where “real” means a possibility that is substantial and not merely “imagined or fanciful” (7). Any suspicion must be grounded in “objectively ascertainable facts” and supported by evidence (8). The hypothetical observer is assumed to be “fair-minded, neither complacent nor unduly sensitive or suspicious”, and the “degree of likelihood of bias must be substantial and not merely imagined” (9).
The Court found that the mere fact that the same funder, Omni Bridgeway, happened to fund a party in unrelated proceedings, was insufficient to give rise to any apparent bias.
The Court likewise rejected the alleged connection arising from shared membership of professional chambers and academic appointments. The mere fact that two individuals had at one time been members of the same arbitration chambers, were door tenants at the same set of chambers or held adjunct academic appointments at the same university did not establish the kind of close relationship that would give rise to a reasonable apprehension of bias.
The Court also attached weight to the SIAC Court’s earlier rejection of the challenge, noting that such a decision is itself evidence of the views of reasonable, fair-minded and informed observers.
The Court further rejected Tata’s argument that the third-party funder should effectively be equated with the funded party for disclosure purposes. Whether a funder should be treated as bearing the identity of a party depends on the context, and there was no basis to do so here. Ultimately, the Court concluded that a reasonable, fair-minded and informed observer would not conclude that there was a real possibility of bias or that a fair determination of the dispute was not possible.
Significance of the decision
The decision reaffirms Singapore courts’ policy of minimal curial intervention in arbitration while recognising the importance of judicial scrutiny on serious procedural irregularities to preserve natural justice. The Court reiterated that setting aside proceedings are not an avenue for disguised attempts to challenge the tribunal’s reasoning and merits of an award. Only irregularities such as a complete failure to consider an essential issue submitted for decision and apparent bias may warrant curial intervention.
The judgment reflects the Singapore courts’ careful and detailed approach in assessing the arbitration proceedings and award to determine whether there exist irregularities that are “egregious and occasion real and proven prejudice to justify judicial intervention” (10).
It also reinforces the finality of arbitral awards in Singapore and the high threshold that parties must satisfy before the Singapore courts will intervene.
