As the Singapore Court of Appeal recently said in AJU v. AJT, the Courts' attitude to awards that violate public policy is shown by their handling of disputes involving judgments that go against public policy. This case was about an interim ruling that upheld the legitimacy of an agreement to drop specific criminal accusations in Thailand.
When the appellant entered into an agreement with the respondent on 4 February 2008, which stated, among other things, that the appellant would withdraw a fraud complaint brought to the Thai authorities against specific persons, they were bound by the agreement. After conducting a full investigation, the Thai authorities filed cases against the people involved in the fraud and forgery. In the cases in question, no matter how severe the criminal conduct, it could not be compounded under Thai law. In the arbitration, the respondent asserted that the agreement was invalid, being contrary to Thai law. In both Thailand and Singapore, public policy dictated that the arrangement should not be upheld.
The arbitral panel dismissed the respondent's claim and so delivered an interim decision in which they affirmed the legality and enforceability of the agreement. As an interim award under Article 34(2)(b)(ii) of the UNCITRAL Model Law on International Commercial Arbitration, the respondent then took his case to the High Court. The judge issued an order in his favour setting aside the interim award under Article 34(2)(b)(ii) of the UNCITRAL Model Law on International Commercial Arbitration (the Model Law).
In deciding that the arrangement was in bad faith, the court ruled that the arrangement was put in place to obstruct the prosecution in Thailand of the alleged charges in the complaint, which were not compoundable under Thai law. In any case, the agreement was invalid according to both the governing legislation of Singapore (the deal's legal authority) and Thai law (the law of the place of performance).
Article 34(2)(b)(ii) of the Model Law specifies that an arbitral decision may be set aside by the court only if it is in contradiction with the public policy of the state. Section 3 of the International Arbitration Act applies in Singapore, which means the Model Law is applicable in Singapore (Cap. 143A). The appeal to the Court of Appeal was allowed because it concurred with the judge who had ruled that the Court was within its jurisdiction to determine whether the agreement was unconstitutional or adverse to public policy. Should the Court conclude that the arrangement was contaminated with illegality, it would be empowered to strike aside the interim award.
While this was the case, however, it did not follow that in every instance where illegality was raised to the underlying contract, the Court was given the authority to reopen the arbitral tribunal's determination that the underlying contract was not unlawful. There were differences in the findings that the arbitral tribunal and the court found, and that is why the two groups arrived at two distinct verdicts.
The arbitral tribunal found that it was not possible to read the terms of the agreement in a way that would clearly show the illegality of the contract. In contrast, the High Court judge found that the tribunal should not have taken a literal reading of the terms of the agreement but should instead have considered all the surrounding circumstances pointing to the illegality of the contract.
The court of appeal concluded that the arbitration panel did not disregard the existence of a blatant and undeniable violation of the law and did not believe that the contract was contaminated by unlawful behaviour. In the circumstances, the judge was not allowed to reject the arbitral tribunal's conclusions and instead base his decision on his facts.
For this case, it was agreed that even if the tribunal's conclusions of law and/or fact were incorrect, these mistakes would not in and of themselves impact the public policy of Singapore unless the error in law touched the public policy of Singapore. The grounds for setting aside an award are, of course, the only error of law, and this was an issue of law. Therefore the only mistake of law that may allow the setting aside of an award under Article 34(2)(b)(ii) of the Model Law could be the problem with the findings of fact.
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