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    12:13 AM Darius Chan (Norton Rose Fulbright (Asia) LLP)

    The scope of ‘de novo’ review of an arbitral tribunal’s jurisdiction

        

    Introduction

    In PT First Media TBK (formerly known as PT Broadband Multimedia TBK) v Astro Nusantara International BV [2014] 1 SLR 372 (“Astro”), the Singapore Court of Appeal held that the court will apply a de novo standard of review when reviewing an arbitral award on the grounds of lack of jurisdiction.

    What exactly is the scope of de novo review? Specifically, can a party adduce before the court fresh evidence that had not been put before the arbitral tribunal? Can a party insist that the court re-hear oral testimony of witnesses who had testified before the arbitral tribunal?

    Two recent Singapore High Court judgments considered these issues.  In Government of the Lao People’s Democratic Republic v Sanum Investments Ltd [2015] SGHC 15 (“Sanum”), and AQZ v ARA [2015] SGHC 49 (“AQZ”), which were delivered approximately three weeks apart, the Singapore High Court appeared to give somewhat differing guidance.

    Sanum: no unconditional power to adduce fresh evidence at will

    In Sanum, the plaintiff was the Government of Laos. The defendant investor, Sanum Investments Limited, was a company incorporated in Macau. Disputes subsequently arose in relation to those investments and the defendant commenced arbitration proceedings against the plaintiff. The plaintiff disputed the jurisdiction of the arbitral tribunal.  The Tribunal held otherwise. The plaintiff subsequently brought an s 10 IAA application before the Singapore High Court.

    As part of the s 10 proceedings, the plaintiff sought to adduce as evidence two diplomatic letters which had not been adduced before the arbitral tribunal. 

    The investor argued that the Ladd v Marshall conditions were applicable (or, alternatively, relevant), and that Laos had not satisfied any of the conditions for the admission of the two letters. 

    The learned Leow JC recognised that “the Ladd v Marshall principles do not strictly apply in this application … However, a party does not in my view have a full unconditional power to adduce fresh evidence at will” (Sanum at [43] ― [44]).  Adopting a modified Ladd v Marshall test introduced by the Singapore Court of Appeal in Lassiter Ann Masters v To Keng Lam (alias Toh Jeanette) [2004] 2 SLR(R) 392, Leow JC held that fresh evidence may be admitted if:

    (a)      the party seeking to admit the evidence demonstrates sufficiently strong reasons why the evidence was not adduced at the arbitration hearing;

    (b)      the evidence if admitted would probably have an important influence on the result of the case though it need not be decisive; and

    (c)       the evidence must be apparently credible though it need not be incontrovertible (Sanum at [44]).

    By way of background, Lassiter involved an appeal on a Registrar’s assessment of damages to the High Court. The Court of Appeal in Lassiter was concerned that any liberal use of wide discretion to admit fresh evidence would defeat the very rationale underlying the delegation of matters to the Registrar, viz, to save the time of the judge.  This objective would be lost, or substantially diminished, if the applicable principle is that either party is freely entitled to adduce new evidence at the hearing before the judge or that the judge should, as a rule, exercise his discretion liberally to admit such fresh evidence, including the viva voce examination of witnesses. That would mean that everything could be re-opened or further clarified.

    Consequently, Lassiter held that in cases where a hearing before a Registrar takes on the characteristics of a full trial or where oral evidence has been recorded (such as assessments of damages, takings of accounts and inquiries), all the evidence should be presented to the Registrar. Fresh evidence should not be allowed to be adduced unless the modified Ladd v Marshall test (set out above) is satisfied (1).

    Questioning of Sanum

    The transposition of the modified Ladd v Marshall test in an application under s 10 of the IAA drew swift comments as follows (2):

    The analogy with Lassiter is, however, flawed as this case concerned an appeal from a registrar’s assessment of damages to a judge in chambers and the Court of Appeal’s reasoning in that case was based on the fact that the function of the registrar was one of administrative convenience, “to save the time of the judge” (Lassiter, para. 20). This reason is however not applicable to a court’s review of an investment arbitral tribunal’s decision on jurisdiction and, thus, the test is not transposable to a case like the present. …

    The sole raison d’être of the test in Ladd v Marshall is to allow fresh evidence to be adduced in a case on which judgment has already been delivered. It is thus directly linked to the appellate process. By applying the test, even in a relaxed version, to a review of an arbitral tribunal’s decision on jurisdiction, the High Court seems to indicate that it exercises an appellate function and does not carry out a complete rehearing.

    AQZ: Parties free to adduce new evidence

    In AQZ, an SIAC arbitral tribunal held in an award that it had jurisdiction in a dispute between the parties, and found in favour of the defendant on the merits.

    The plaintiff applied under s 10 of the IAA to review the tribunal’s ruling on jurisdiction, or alternatively, under s 3(1) of the IAA read with Article 34(2)(a) of the Model Law to set aside the award.

    According to the plaintiff, the court had to conduct “a complete retrial and/or rehearing” of the question of whether the arbitral tribunal had jurisdiction. Hence, the court ought to hear oral evidence from the parties’ witnesses before deciding such applications.

    The plaintiff eventually withdrew this submission and was content for its challenge to proceed on affidavit evidence alone.  Nevertheless, because parties had made submissions, Prakash J set out her “brief views” as follows (at [49] – [59]):

    (a)      There can be no doubt that the court will undertake a de novo hearing of the arbitral tribunal’s decision on its jurisdiction in an application to set aside an arbitral award on the ground of lack of jurisdiction to hear the dispute.

    (b)      But that does not mean that oral evidence and cross-examination will be allowed in every application, in effect, turning every challenge into a complete rehearing of all that had occurred before the arbitral tribunal. The Rules of Court contemplates that generally the matter will be resolved by way of affidavit evidence.  Witnesses who had already been heard by the tribunal will only be called back when necessary.

    (c)       However, the Court may allow oral evidence and/or cross-examination when it considers (i) that there is or may be a dispute as to fact; and (ii) that to do so would secure the “just, expeditious and economical” disposal of the application.  There must be a reason beyond the existence of factual disputes.

    (d)      There is nothing in the Rules of Court which restricts parties from adducing new material that was not before the arbitrator. Parties can adduce new evidence in the affidavits they file in the Originating Summons and if there is a need, the court may order the deponents to appear and be cross-examined on the new evidence.

    On this last point, the learned Prakash J explained as follows (at [59]):

    [I]n Electrosteel [Castings Ltd v Scan-Trans Shipping & Chartering Sdn Bhd [2003] 1 Lloyd’s Rep 190] … the court came to the conclusion that parties were free to adduce new evidence because there was no provision restricting the introduction of additional evidence on rehearing. However, it cautioned that parties should not:

    … seek two evidential bites of the cherry in disputes as to the jurisdiction of arbitrators, not least because: (1) evidence introduced late in the day may well attract a degree of scepticism and (2) the Court has ample power to address such matters when dealing with questions of costs. …

    I would agree with this proposition as well. …

    Commentary

    It is possible to read Sanum and AQZ as two ends of a spectrum.  On one end, Sanum stands for the proposition that the modified Ladd v Marshall test has to be satisfied before any fresh evidence will be admitted.  On the other end, AQZ can be taken to stand for the proposition that fresh evidence is admissible as of right, with the caveat that the late introduction of evidence may affect its weight as well as costs.

    Beginning from first principles, it is indisputable that an application to challenge a tribunal’s jurisdiction does not operate by way of an appeal.  Nor does an arbitral tribunal serve a function that is purely delegated by the court in order to save the judge’s time.  On that basis, the rationale for having a modified Ladd v Marshall test that was expounded in Lassiter does not strictly apply in this context.

    Nevertheless, the underlying rationale of Ladd v Marshall is not completely irrelevant.  The justification for Ladd v Marshall is embodied in the Latin maxim interest reipublicae ut sit finis litium – it is in the public interest that there is an end to litigation (3). It can similarly be said that it would be in the public interest to prevent any abuse of the process by which an arbitral tribunal’s jurisdiction is finally determined by the courts.

    Strands of similar reasoning have emerged in the Hong Kong Court of First Instance Hong Kong judgment of Astro Nusantara International BV and ors v PT Ayunda Prima Mitra and ors HCCT 45/2010 (17 February 2015), albeit in a different way.  The Hong Kong court held that there was a principle of good faith under Hong Kong law (4). It would be inimical to the principle of good faith that:

    “a party to an arbitration, while being fully aware of an objection (whether in relation to the jurisdiction of the tribunal or the procedure or conduct in the course of the arbitration), should be permitted to keep the objection in reserve, participate fully in the arbitration and raise the objection in the enforcing court only after an award had been made against him by the tribunal”.

    Without having to go so far as finding that a principle of good faith subsists under Singapore law, it is arguable that any unfettered right for a party to adduce fresh evidence at will may unduly expose the process (by which an arbitral tribunal’s jurisdiction is finally determined) to abuse.

    A possible way of calibrating the right balance between these two ends represented by Sanum and AQZ can be gleaned from the recent English decision of Males J in Central Trading & Exports Ltd v Fioralba Shipping Co [2014] EWHC 2397 (“Fioralba”). 

    The precise facts of Fioralba are not relevant here, but it involved an application under s 67 of the English Arbitration Act 1996 under which a party may challenge an arbitral award on jurisdiction grounds.

    After reviewing a string of previous cases, Males J’s decision was in summary as follows:

    (a)      “[G]enerally, the court will not normally exclude evidence which is relevant and admissible, even if it may cause prejudice to the other side -- for example, if a claimant has deliberately waited until the end of the limitation period to bring his claim and in the meanwhile the other side's key witness has died.” (Fioralba at [29])

    (b)      “[A] section 67 challenge is ‘a full judicial determination on evidence’, in this respect like any other. It is in general up to the parties … to determine the evidence on which they wish to rely, and that evidence is not limited to whatever evidence was before the arbitrators.” (Fioralba at [30])

    (c)       “[T]hat does not mean … that the parties’ right to adduce evidence is unconstrained by the court’s rules of procedure. On the contrary those rules of procedure concern the way in which evidence is to be received and enable the court to exercise control over the disclosure of documents, the service of evidence in the form of witness statements and, where necessary, experts’ reports, and the adducing of oral evidence with cross examination.” (Fioralba at [30])

    (d)      The court does not have an unfettered discretion to exclude relevant evidence.  At the same time, it is incorrect that the only ground on which the court may do so is that the admission of new evidence would cause prejudice to the other party.  However, the court may refuse to allow a party to produce documents selectively where that would prejudice the other party.  Equally, it may refuse to allow evidence which does not comply with the court’s rules for ensuring that evidence is presented in a fair manner. That too is a form of prejudice which may not be capable of being remedied. Fairness may require that the evidence is not adduced at all. (Fioralba at [32])

    In Fioralba, most of the new evidence on which the claimant sought to rely appeared to have been available to it in the arbitration. The arbitral tribunal had made an order for full disclosure with which the claimant had deliberately failed to comply. The fresh evidence the claimant now sought to present still did not represent full disclosure, and basic documents remained outstanding.

    Males J concluded that it would cause the defendant “irremediable prejudice” if it allowed the claimant to rely on a selection of documents without giving full disclosure as ordered by the tribunal. The claimant was therefore not allowed to adduce the fresh evidence.

    While the relevant statutory scheme in England and Singapore obviously differs, Males J’s analysis arguably strikes the appropriate balance between the two ends of the spectrum.  It accords appropriate significance to the fact that a challenge on the tribunal’s jurisdiction does not operate by way of an appeal by holding that the starting point is that a party generally has the right to adduce fresh evidence. 

    At the same time, the court retains control, not merely through the weight of the evidence or costs orders, but by considering the entire factual and procedural matrix carefully, including the manner in which the fresh evidence is presented, whether there was adherence to the tribunal’s procedural orders, etc, to determine whether the admission of fresh evidence would cause irremediable prejudice to the other party.  This “safety valve” prevents any abuse of process.

    Indeed, the two ends of the spectrum may not be as far apart as they might appear at first blush. 

    Sanum may be understood in a different context.  Leow JC was neither fashioning an immutable nor exclusive test to be applied in every case.  Rather, Sanum could be understood as suggesting that the court is entitled to consider, among other things, the factors in the modified Ladd v Marshall test in an attempt to evaluate, on the facts of each case, whether it would be unfair to admit the fresh evidence. 

    This reading of Sanum would not be novel.  In WBG Network (S) Pte Ltd v Sunny Daisy Ltd [2007] SGCA 1, the Singapore Court of Appeal considered whether the modified Ladd v Marshall test applied when a party, who was appealing against a Registrar’s refusal to grant summary judgment, sought to adduce fresh evidence.  The Court of Appeal eventually held that the judge below was entitled, though not obliged, to employ the conditions of Ladd v Marshall to help her decide whether or not to exercise her discretion to admit or reject the further evidence.

    Similarly, in AQZ Prakash J offered her brief views by way of dicta. The learned Judge did not shut out the possibility of the court retaining residual discretion to refuse admission of fresh evidence in limited circumstances.

    * This blog entry may be cited as Darius Chan, “The scope of ‘de novo’ review of an arbitral tribunal’s jurisdiction”, Singapore Law Blog (8 October 2015) (http://www.singaporelawblog.sg/blog/article/140)

    ** A version of this note will be published in a forthcoming issue of Singapore Law Gazette.

    *** A PDF version of this entry may be found here

    (1) See Tan Boon Heng v Lau Pang Cheng David [2013] SGCA 48 at [42] per Chao JA.

    (2) Kelvin Poon et al, “Singapore Court Reviews Investment Arbitral Tribunal’s Decision on Jurisdiction: What Standard Should Apply As to Evidence?”, Kluwer Arbitration Blog, 4 February 2015 (accessible at http://kluwerarbitrationblog.com/blog/2015/02/04/singapore-court-reviews-investment-arbitral-tribunals-decision-on-jurisdiction-what-standard-should-apply-as-to-evidence-2/)

    (3) See Su Sh-Hsyu v Wee Yue Chew [2007] 3 SLR(R) 673 at [35] per VK Rajah JA.

    (4) For a critique of this decision, see Nicholas Poon, “Issues and Problems in Enforcing Arbitral Awards Across Multiple Jurisdictions: Astro v Lippo, the Hong Kong edition”, Singapore Law Blog, 9 April 2015 (accessible at http://www.singaporelawblog.sg/blog/article/103).

Comment Section