The Singapore High Court decision in China Machine New Energy Corp v Jaguar Energy Guatemala LLC and another raises a number of points of wider significance for the arbitration community.
This post focuses on the procedural implications of the parties’ agreement to the expedited arbitration of a complex dispute (in a particularly short time frame) and its impact on the duty of the tribunal to ensure that due process is observed.
The arbitration arose out of an engineering, procurement and construction contract (EPC) contract which provided that disputes should be resolved by ICC arbitration in Singapore. Critically, the arbitration clause specifically provided for an expedited arbitration within a very tight time frame.
The relevant provisions provided that the arbitration should be completed within 90 days of the selection of the third arbitrator, with the proviso that if the majority of the tribunal felt that additional time was required, they may extend time by an additional 90 days.
Jaguar filed its request for arbitration at the end of January 2014. The third arbitrator was appointed on 27 March 2014, meaning that the 90 day time period for the conduct of the arbitration would expire on 25 June 2014 or, if further extended by the maximum 90 days permitted, on 23 September 2014.
The parties subsequently amended this requirement, agreeing to a procedural timetable which provided for a merits hearing in January/ February 2015. In the event, the arbitration took much longer to complete, with the merits hearing finally taking place in July 2015 and the award being rendered in favour of Jaguar on 22 November 2015.
CMNC applied to the Singapore court to set aside the award. The crux of CMNC’s case was that the arbitration was tainted by “procedural dysfunction”. CMNC argued that the tribunal breached Article 18 of the UNCITRAL Model Law by failing to treat the parties equally and failing to give each party a reasonable opportunity to present its case.
CMNC argued, amongst other things, that various procedural measures which had been adopted by the tribunal, such as the “attorney eyes only” (AEO) document production regime, had “significantly undermined” CMNC’s opportunity to present its case. The prejudice that CMNC claimed it suffered due to the AEO regime arose because it allegedly did not have sufficient time fully and adequately to review certain documents due to the AEO regime. CMNC also submitted that the tribunal did not afford CMNC a reasonable opportunity to present its case, because the tribunal “unreasonably insisted that CMNC adhere to existing procedural timelines”.
Impact of agreeing to expedited arbitration
CMNC conceded that a “reasonable opportunity” of presenting one’s case in an expedited arbitration is not going to be the same “reasonable opportunity” as in a full-length arbitration. However, it submitted that, since the arbitration was expedited, the arbitral tribunal bore a “heightened duty… to police the process”, that is, additional vigilance regarding due process was required from the arbitral tribunal.
This contention was rejected by the court. In setting out its reasons, the court emphasised that the parties decided to an expedited arbitration whilst being well aware of the nature of the contract and the type of disputes that it could engender, to which the arbitration agreement would relate. The parties knew that the contract in question was a highly complex EPC contract which, if disrupted, would likely spawn complex disputes (the present dispute being a perfect example). The parties should have foreseen this when they agreed to an expedited arbitration.
The court noted that, under the terms of the arbitration agreement, the arbitral tribunal would have had to render the award by 23 September 2014. While the parties agreed to amend this requirement by agreeing the procedural timetable, their intention was plainly that the arbitration would be conducted quickly and without any undue delay.
The court asked itself what a heightened duty would entail; no doubt, it would require more of the arbitral tribunal in relation to due process or otherwise. But what more would be required and where does one draw the line? When can it properly be said that the arbitral tribunal has failed to discharge such a duty? The court concluded that the difficulties inherent in these questions spoke against the imposition of a heightened duty, simply by reason of an arbitration agreement that required the arbitration to be expedited. Accordingly, it rejected CMNC’s contention that the arbitral tribunal bore a heightened duty in relation to due process. The arbitral tribunal was required to give effect to the agreement of the parties to an expedited arbitration (despite the scale and intricacy of the dispute before them), which it had done.
The court also emphasised that it was the parties who decided on an expedited arbitration and that: “They did so well aware of the nature of the contract and the type of disputes that it could engender.” The contract in this case was a highly complex EPC contract which, if disputed, was likely to result in complicated disputes. The court held that the parties should have foreseen this when they agreed to expedited arbitration and that the primary responsibility had also to be on the parties to agree on an arbitral procedure that would ensure due process.
The court accepted that the tribunal had a responsibility to ensure due process. However, it recognised that it had to do so “… within the strictures that the parties had placed it in, principally the constraint of time.” The tribunal noted this on a number of occasions in the award; it made clear that the tribunal was seeking to give effect to the parties’ agreement to expedited arbitration, whilst doing its utmost to preserve due process given this constraint.
A number of institutions have now adopted expedited procedures. Therefore, the discussion as to whether an arbitral tribunal in an expedited process bore a heightened duty to police the process, or whether additional vigilance was required regarding due process, is of some significance.
The court was evidently sceptical of any argument that arbitral tribunals bear a “heightened duty” in this context. It appears to be common ground that an agreement of the parties to an expedited arbitration requires the procedural timelines for the arbitration to be compressed, with concomitant implications for the quality of due process that could be afforded to the parties within that framework.
As expedited arbitration becomes increasingly popular, this decision is a salient reminder to parties that, if they agree to the expedited arbitration of complex disputes, they must also be prepared to take responsibility for agreeing a procedure for ensuring due process.