Source: https://legalresearch.blogs.bris.ac.uk/2017/09/setting-aside-of-arbitral-awards-under-the-arbitration-act-1996-and-the-uncitral-model-law-on-international-commercial-arbitration-failure-to-deal-with-all-the-issues/
Timestamp: 2019-04-18 11:20:07+00:00

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The combined effect of these differences is to produce setting-aside regimes which, although largely seeking to implement the same policies, work in rather different ways. This point can be illustrated by the quite common scenario in which, after an award has been rendered, one of the arbitrants (typically, a respondent whose defence was wholly or partly unsuccessful) challenges the award on the basis that it fails to address an issue which was raised in the arbitration.
According to section 68(2)(d) of the 1996 Act, an award may be set aside if the tribunal ‘failed to deal with all the issues that were put to it’. In the context of applications based on this provision, there are four significant questions: (i) was the matter which the tribunal (allegedly) failed to deal with an ‘issue’? (ii) if so, was that issue ‘put to’ the tribunal? (iii) if so, did the tribunal fail to deal with it? (iv) if so, did (or will) the applicant suffer substantial injustice as a result?
It is important not to underestimate the ingenuity of counsel who seek to launch backdoor appeals or, worse still, completely reinvent their client’s cases with the benefit of hindsight in the guise of a challenge based on an alleged breach of natural justice.
Third, that the ‘issue’ had, in fact, been dealt with by the tribunal. This is far and away the most common reason for the rejection of applications based on section 68(2)(d); when the award is looked at in a reasonable and commercial way, it is normally clear that the tribunal had decided the allegedly omitted issue – albeit not in the way that the applicant had hoped. Fourth, that, even if the issue had not been dealt with, the omission had not caused substantial injustice. The requirement of serious injustice will not be met unless the supervisory court is satisfied that, in the absence of the alleged defect, the tribunal ‘might well have reached another conclusion favourable to the applicant’: Colman J in Vee Networks Ltd v Econet Wireless International Ltd  EWHC 2909 (Comm) at .
The Model Law has no provision equivalent to section 68(2)(d). This does not mean, of course, that disappointed arbitrants do not seek to challenge awards on procedural grounds in cases where it is alleged that the tribunal failed to deal with all the issues. The question, though, is: how do the sort of challenges which fall within section 68(2)(d) of the Arbitration Act 1996 fit within article 34 ML?
The cases decided in Model Law jurisdictions such as Singapore, Hong Kong, Australia and Canada suggest that there are potentially four pegs on which to hang a procedural challenge based on the tribunal’s failure to deal with all the issues. As will be seen, none of them is completely without its problems.
Art 34.2.a.iii ML provides that an award may be set aside if it ‘deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or contains decisions on matters beyond the scope of the submission to arbitration.’ Although this provision is drafted in terms of awards that are ultra petita (in the sense that they go beyond the submission to arbitration), it is interpreted by some commentators and courts also to cover infra petita awards (where the award omits matters that were referred to arbitration). In CRW Joint Operation v PT Perusahaan Gas Negara (Persero) TBK  SGCA 33, for example, the Singapore Court of Appeal accepted that article 34.2.a.iii ML covers not only the situation where an arbitral tribunal improperly decides matters that have not been submitted to it but also where the tribunal fails to decide matters that have been submitted to it.
Failure to consider an issue is a matter that goes to the substantive decision rather than a failure to follow the arbitral procedure agreed by the parties. Thus, the fact that the Tribunal failed to consider the Respondent’s case properly is at most an error of law which cannot be a basis for this court to set aside the award.
A party might be said to have been ‘unable’ to present his or her case when … the tribunal ignored or failed to take the evidence or submissions of the parties into account.
Nevertheless, this view of article 34.2.a.ii is unorthodox and an expansive interpretation of the provision involves treating it as though it includes words ‘that are simply not there’: Chiappetta J in Depo Traffic v Vikeda  ONSC 999 at .
Art 34.2.b.ii ML allows for the setting aside of an award if it in conflict with the public policy of the forum. In a system which has limited grounds on which an award may be set aside, there is a danger that there will be pressure for the courts to expand the scope of public policy to accommodate cases in which it appears that the arbitration has gone seriously wrong in some way, but the complaint does not obviously fall within any of other grounds for setting aside.
It is generally assumed that the principles of natural justice are part of public policy. Admittedly, there is also international consensus that, for the purposes of the NYC and the Model Law, public policy is a narrow concept which is engaged only if an award is ‘contrary to the fundamental conceptions of morality and justice’ of the forum (Parsons and Whittemore Overseas Co. Inc. v Societe General de Industrie du Papier (Rakta) (1974) 508 F 2d 969 at 974) or if upholding the arbitral award ‘would “shock the conscience” … or is “clearly injurious to the public good or … wholly offensive to the ordinary reasonable and fully informed member of the public”’ (Chan Sek Keong CJ in PT Asuransi Jasa Indonesia (Persero) v Dexia Bank SA  SGCA 41 at ). Nevertheless, the key principles of natural justice (audi alteram partem and nemo judex in causa sua) may legitimately be regarded as fundamental in a public policy sense.
But, is the audi alteram partem principle engaged if an arbitral tribunal fails to decide an issue that was put to it? Although the argument may appear somewhat stretched, there are authorities from Australia and Singapore that proceed on the basis that the audi alteram partem principle includes a sub-rule that the arbitral tribunal must bring its mind to bear on all important aspects of the dispute before it. According to Front Row Investment Holdings (Singapore) Pte Ltd v Daimler South East Asia Pte Ltd  SGHC 80 and subsequent authorities, an arbitral tribunal’s failure even to consider the case presented by one of the arbitrants is a breach of natural justice. But, to justify setting aside on the basis of public policy, the applicant would need to demonstrate a clear and virtually inescapable inference that the arbitrator did not apply his mind at all to a particular aspect of the applicant’s submissions (see Vinodh Coomaraswamy J in ASG v ASH SGHC 130 at ).
Arbitrators are, as a general rule, required to provide reasons for their decisions. If the tribunal fails to provide reasons (or adequate reasons), arguably it has failed to comply with the procedural rules governing the arbitration and, in principle, the award may be set aside under art 34.2.a.iv (‘the arbitral procedure was not in accordance with the agreement of the parties … or, failing such agreement, was not in accordance with this Law’).
For example, in A v B  HKCFI 1077, a Hong Kong case, an application was made to set aside an award which had failed either to deal with the applicant’s ‘limitation defence’ (that the claims advanced in the arbitration were time-barred under the express provisions of the contract) or to offer any reasons for this omission. Having analysed the award and the way in which the arbitration had been argued, Chan J concluded that the reasons expressed in the award were not sufficient to enable the applicant to understand how, and why, the limitation defence had been rejected.
Chan J decided that the award should be set aside on public policy grounds, a conclusion which entailed an expansive view of the scope of public policy. But, the judge seems to have accepted that, as an alternative, the award could have been set aside under art 34.2.a.iv ML. Chan J rightly pointed out (at ) that ‘[a]n award should be reasoned, to the extent of being reasonably sufficient and understandable by the parties.’ If an important issue in the arbitration does not feature (at all) in the award, the parties are not able to understand how and why the tribunal reached its decision and the tribunal has failed in its obligation to provide reasons.
Does this failure entails a breach of the rules governing the arbitral procedure and, as a consequence, justify setting aside under art 34.12.a.iv ML? The answer to this question is unclear. In terms of the Model Law, there is a clear distinction between ‘Conduct of Arbitral Proceedings’ (Chapter V) and ‘Making of Award and Termination of Proceedings’ (Chapter VI), which – in art 31.2 – includes the obligation of the tribunal to provide reasons for its decision. If art 34.2.a.iv ML (which refers to the ‘arbitral procedure’) is concerned only with the matters covered by Chapter V (and not matters within Chapter VI), failure by the tribunal to provide (adequate) reasons cannot be a ground for setting aside under art 34.2.a.iv ML.
Opinions differ on the respective strengths and weaknesses of the 1996 Act and the Model Law. As regards setting aside, the strengths of the Model Law scheme are its relative simplicity and the fact that the grounds for setting aside mirror the grounds in art V NYC (thereby enabling cross-fertilisation of case law under the two instruments and increased opportunities for international harmonisation). However, as the foregoing discussion reveals, the apparent simplicity of the Model Law may be tested by a relatively routine scenario.
Whereas section 68(2)(d) of the 1996 Act provides a clear framework for dealing with challenges based on a tribunal’s failure to deal with all the issues, how such cases should be handled under the Model Law is rather opaque. The courts of different Model Law countries have tried different doctrinal approaches, none of which is entirely satisfactory. Of course, it does not follow from this comparison that the 1996 Act is ‘better’ than the Model Law; indeed, section 68(2)(d) is not without its own problems. But, it needs to be recognised that legislation which appears simple on the page may prove to be rather less straightforward in practice.

References: Art 34

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