Singapore Court of Appeal Affirms Finding to Set Aside Arbitral Award for Fair Hearing Breach, But Reverses Remission

In a recent case before the Singapore Court of Appeal, the court affirmed the High Court of Singapore’s finding of a breach of the fair hearing rule, but disagreed that remission was an appropriate remedy and set aside the part of the arbitral award in question. The Court of Appeal further opined that, contrary to the High Court’s finding, it did not consider the tribunal to have acted in excess of jurisdiction. The decision further highlights that close attention must be paid to determining the appropriateness of remission based on the unique circumstances of each case.

The case of Vietnam Oil and Gas Group v Joint Stock Company (Power Machines – ZTL, LMZ, Electrosila Energomachexport) and another appeal, [2025] SGCA 50, concerned cross-appeals by the parties against the Singapore High Court’s decision; Joint Stock Company (Power Machines – ZTL, LMZ, Electrosila Energomachexport) (PM), a member of the consortium that served as the contractor for a project to construct a thermal power plant in Vietnam, appealed the finding that parts of the arbitral award (the Award) were liable to be set aside, while Vietnam Oil and Gas Group (PVN), the owner of the project, appealed against the order for remission to the tribunal.

The parties had referred their dispute arising out of the project to an arbitration in Singapore in accordance with the Arbitration Rules of the Singapore International Arbitration Centre. Central to the dispute were Clauses 16.2(b) (which permitted PM to terminate the contract if payments due were not received within 150 days of the specified time) and 19.6 (which permitted any party to terminate the contract by reason of force majeure) of the “Conditions of Contract,” which formed part of the contract between PVN and the consortium.

PM had issued two termination notices: first, on 28 January 2019 pursuant to Clause 19.6 on the grounds that the imposition of US sanctions on PM constituted a force majeure event and the contract would terminate on 18 February 2019 (the First Notice); and second on 8 February 2019 pursuant to Clause 16.2(b), stating that the contract would terminate on 22 February 2019 (the Second Notice). PM made a claim for monetary relief, arguing that the contract was deemed to have been terminated on 18 February 2019 by way of the First Notice or alternatively on 22 February 2019 pursuant to the Second Notice.

PVN contended, amongst other things, that (1) the US sanctions did not amount to a force majeure event and PM’s issuance of the First Notice amounted to a wrongful termination of the contract and (2) the Second Notice was not a valid termination notice since PM had, by its First Notice, wrongfully repudiated the contract and abandoned the works.

The Tribunal found that PM had validly terminated the contract on 22 February 2019 by way of the Second Notice and awarded damages in the sum of $307,755,346.38 to PM.

PVM applied to the Singapore High Court to set aside the Award and the order granting PM leave to enforce the Award. The High Court found that the Tribunal had acted in excess of jurisdiction and in breach of natural justice but considered that it was appropriate to make an order for remission instead of setting aside.

Central to the parties’ cross-appeal were the Tribunal’s findings at paragraphs 548 and 549 of the Award:

548 In the Tribunal’s opinion, a valid Second Notice issued while the contract remains on foot overrides and supersedes the ineffective First Notice. By issuing a Second Notice prior to the First Notice taking effect, [PM] must be taken to have intended the Second Notice to replace or, at the very least, supplement the First Notice. To hold otherwise would lead to the absurd conclusion that a party seeking to terminate a contract only has ‘one shot’ to do so, and cannot afterwards, even while the contract remains effective, do anything to withdraw or amend its attempt.

549 For completeness, the Tribunal notes that the Vietnamese law experts did not specifically deal with the present scenario involving an unlawful First Notice and a lawful Second Notice (albeit, in any event, the Tribunal is satisfied to proceed on the basis of the above).

TRIBUNAL’S BREACH OF THE FAIR HEARING RULE

The Court of Appeal set out the applicable legal principles in this regard, including:

• One facet of the fair hearing rule requires a tribunal’s chain of reasoning to have sufficient nexus to the case advanced by the parties and be one that the parties had reasonable notice the tribunal could or might adopt.
• A reasonable litigant in the parties’ shoes should be able to foresee the possibility of reasoning of the type that is eventually revealed in the award. This analysis is to be applied in a sensible way and not in a rigid or mechanical way. The question is fundamentally one of fairness and whether the parties had adequate opportunity to address the issues that they knew or ought reasonably to have known were in play.
• The extent of opportunity that needs to be given to a party to address an issue depends on whether the issue is a question of fact (chance to question evidence produced and introduce rebuttal evidence), a question of law (sufficient time to make legal submission), or a question of mixed fact and law.

The Court of Appeal found that the Tribunal’s chain of reasoning did not have sufficient nexus to the parties’ case. Agreeing with PVN’s position, the court held that a party in PVN’s shoes could not have reasonably anticipated the Tribunal’s conclusion at paragraph 548 of the Award as it was neither addressed in the parties’ submissions or in expert evidence.

In arriving at this holding, the court first examined in detail the parties’ pleadings and expert evidence on Vietnamese law to understand the parties’ respective case and the issues that were in play.

Thereafter, the court dissected the Tribunal’s holding at paragraph 548 of the Award into separate findings of law and fact and found that PVN could not reasonably have anticipated the Tribunal’s reasoning or conclusion and did not have any reasonable opportunity to address both of these issues:

• Where the Tribunal found, as a matter of Vietnamese law, that the Second Notice issued while the contract remained in place could override and supersede the invalid and unlawful First Notice, the Court of Appeal noted that this was not advanced in either party’s case and neither side’s expert squarely engaged with it. Further, PVN’s case expressly argued against this legal position and PM’s case was hinged on a separate line of legal reasoning. The Tribunal’s reasoning and conclusion therefore did not bear a reasonable nexus to the arguments.
• On the factual findings, the Court of Appeal highlighted that PM did not lead any evidence to show that the Second Notice was intended to replace or supplement the First Notice and instead expressly pleaded otherwise. Further, PVN did not even address this question because neither party approached the dispute on this footing.

THE TRIBUNAL DID NOT ACT IN EXCESS OF JURISDICTION

The High Court held that the Award offended Art. 34(2)(a)(iii) of the Model Law on the basis that the Tribunal had departed from the parties’ cases in its finding at paragraph 548 of the Award. While it was not necessary for the Court of Appeal to come to a decision on this issue having found that there was a breach of the fair hearing rule, it set out its views on this issue explaining why it disagreed with the High Court.

The Court of Appeal begun by exploring the applicable legal principles:

• A two-stage enquiry is adopted to assess whether an arbitral award ought to be set aside under Art. 34(2)(a)(iii) of the Model Law. First, the Court identifies what matters were within the scope of submission to the arbitral tribunal by reference to (1) parties’ pleadings, (2) list(s) of issues, (3) opening statements, (4) the evidence adduced, and (5) closing submissions. However, the overriding consideration is whether the relevant issues had been properly raised before the tribunal and should not be mechanistic. Second, the Court assesses whether the arbitral award involved such matters or whether it involved some difference outside the scope of the submission to arbitration and that was, accordingly, irrelevant to the issues requiring determination.
• A practical view has to be taken regarding the substance of the dispute that has been referred to arbitration. The Court does not undertake an overly restrictive or exacting review when considering the proper scope of the submission to arbitration. As an underlying principle, the Court must look at matters in the round to determine whether the issues in question were live issues in the arbitration, having regard to the totality of what was presented to the tribunal.

Notwithstanding the Tribunal’s breach of the fair hearing rule, the Court of Appeal considered that the issue of whether the Second Notice overrode, superseded, replaced, or supplemented the First Notice could be seen as a logically anterior issue to the validity of the Second Notice and, at least in principle, this issue fell within the scope of the parties’ submission to arbitration.

Amongst other things, the Court referred to the parties’ pleadings and expert evidence, which showed that the legal effect of the Second Notice on the First Notice was an issue raised by the parties in the arbitration, and adopted a practical approach where tribunals may consider and determine issues that are a “necessary step” or “anterior issue” to an issue squarely within the court’s scope of submission. Notably, the Court opined that while the parties in this case did not join issue in this regard or make it part of their case, this may not be determinative of whether an issue falls within the scope of submission.

REMISSION WAS NOT AN APPROPRIATE REMEDY

Remission is meant to enable a tribunal to cure or eliminate remediable defects in its award. As a starting point, remission of an award may be appropriate when the identified defect is capable of being cured, and in determining the appropriateness of doing so the court assesses several factors: (1) whether the defect would affect the confidence in the tribunal’s ability to afford a fair process in considering the remitted issue(s); (2) the centrality of the impugned issue to the arbitral award; (3) the need for a party to amend its pleadings if remission is granted; and (4) time and cost savings.

Having regard to the aforesaid factors, the Court of Appeal disagreed with the High Court that remission was an appropriate remedy:

• The Tribunal’s breach of the fair hearing rule was serious in nature as paragraph 548 bore no relationship to the arguments of the parties and was contrary to the factual position taken by PM.
• Paragraph 548 of the Award was a pivotal decision that went to the heart of the dispute on liability—but for it PM could conceivably be found to have wrongfully terminated the contract, which in turn could have affected several of the Tribunal’s findings on damages that were contingent on paragraph 548.
• The Tribunal came to its decision despite knowing that neither party’s expert evidence had addressed the issue. This gives rise to the concern of prejudgment if the matter were remitted for the purpose of receiving such evidence.
• An order for remission would likely necessitate PM’s change of its case as stated in the Statement of Defence since PM would no longer be able to maintain that the Second Notice was not intended to withdraw the First Notice if it intended to adopt the Tribunal’s reasoning at paragraph 548 of the Award. This highlights the impossibility of concluding that the matter could fairly be remitted.

KEY TAKEAWAYS

The Court of Appeal decision provides valuable guidance not only in respect of the applicable law for the respective grounds for setting aside of an arbitral award, but more pertinently as a reminder that each ground serves a distinct purpose and that a breach established on one ground would not necessarily lead to the finding of a breach on another ground.

Further, while as a starting point remission of an award may be appropriate when a remediable defect is identified, close attention must be paid to determining the appropriateness of remission based on a detailed analysis of the unique circumstances of each case with reference to relevant assessment factors. This decision underscores that the Singapore Court would not readily order remission without substantively engaging and determining the question of appropriateness.