March 1, 2016
Can a court, after setting aside an arbitral award, remit the matter back to the original tribunal that rendered the award in the first place? The Singapore Court of Appeal considered this question in the recently adjudicated case of AKN and another v ALC and others and other appeals  SGCA 63.
The Court of Appeal disagreed with the appellants and concluded that once a tribunal had delivered an award, it was rendered functus officio with respect to all matters addressed in the award. Therefore, it could not be asked to reconsider any matters that had already been addressed in the previously delivered award. Further, a successful setting aside did not empower the court to remit the award back to the original tribunal that rendered the impugned award in the first place.
Rodyk acted for the respondents, namely the Funds, in one of the appeals.
The underlying arbitral proceedings arose from an Asset Purchase Agreement (the "APA") entered into by the liquidators of an insolvent corporation, its secured creditors and the purchasers. The asset under sale was the insolvent corporation’s complete production facility. The APA provided for the sale of the insolvent corporation’s assets by liquidators and the secured creditors of the corporation to the purchasers, free from all liens and encumbrances. Concurrently, the purchasers and the secured creditors entered into another agreement, the omnibus agreement, under which the purchasers would issue notes to the secured creditors, which subsequently, would be used to make payments.
Upon discovering that certain taxes on the assets remained unpaid, the purchasers (appellants in the appeals) commenced arbitration proceedings at the Singapore International Arbitration Centre (“SIAC”) against the liquidator and the secured creditors. The purchasers claimed that the unpaid taxes constituted a failure to deliver the assets free of all liens, and was thus a breach of the APA. The arbitration ensued and the purchasers’ claim was successful.
The liquidator, the secured creditors and the Funds successfully set aside the award in proceedings commenced by them before the Singapore High Court. The liquidator, eleven of the secured creditors and the Funds had applied to the High Court to set aside the award primarily on the grounds of breaches of natural justice and excess of jurisdiction. The High Court found that the arbitral tribunal had, among other things, failed to consider the liquidator’s arguments, evidence and submissions on whether the obligation in the APA to deliver title was qualified. Though the High Court held that the entire award should be set aside on this basis alone, it went on to address the remaining issues, which involved both breach of natural justice and excess of jurisdiction arguments.
The matter was subsequently appealed to the Singapore Court of Appeal. The Court of Appeal held that the High Court had erred in setting aside the award in its entirety. The Court of Appeal, examining the High Court's decision on the seven issues addressed by the High Court, found that the High Court had erred in its findings on four of the seven issues identified. As a result only parts of the award remained set aside (see the earlier judgment of AKN v ALC  3 SLR 488).
The question before the Court of Appeal in these proceedings was whether matters addressed by the award which had already been set aside, could be remitted back to the original arbitral tribunal for further consideration.
The Court of Appeal recognised that Article 34(4) of the UNCITRAL Model Law on International Commercial Arbitration (the “Model Law”) empowered a court to suspend setting aside proceedings and give the arbitral tribunal an opportunity to resume the arbitral proceedings or to take such other action which would, in the arbitral tribunal’s opinion, eliminate the grounds for setting aside. The Court of Appeal however concluded that once an award had been set aside, there was no power to remit such matters back to the arbitral tribunal either under the International Arbitration Act (Cap 143A, 2002 Rev Ed) (“IAA”) or the Model Law.
The court clarified that under Article 34(4) of the Model Law read with section 19B of the IAA, a court may remit certain matters arising from an arbitral award back to the very same arbitral tribunal which made the award, before deciding whether to set aside the award. However, remission was a curative option that was available to the court in certain circumstances where it considered that it may be possible to avoid setting aside the award.
The court also rejected the argument advanced by the purchasers that an award, which has no legal effect because it has been set aside, should be treated as having not been made in the first place, allowing the original tribunal to re-examine all matters addressed in the portions of the award which have been set aside. The court clarified and held that such an approach would be counter-intuitive as a tribunal’s mandate would have been spent, i.e. it would have been functus officio upon the making of its award, unless a court, in certain narrow circumstances, restored the tribunal.
Addressing the issue of whether parties to the proceedings could issue new proceedings upon an award being set aside, the court held that the parties’ right to start fresh arbitration proceedings was fettered by the principle of res judicata. Emphasizing the significance of finality of arbitral proceedings, the court held that in view of the doctrine of res judicata, if a dispute is considered to have been decided by an arbitral tribunal, that dispute cannot subsequently be the subject of a fresh reference to arbitration. However, in a scenario where the arbitral tribunal did not deal with the matters raised, then the doctrine of res judicata would potentially not be engaged and fresh arbitration proceedings before a new tribunal could possibly be commenced.
This case makes clear that once an award is set aside, it is the end of the road for that particular arbitration; the court cannot remit the matter back to the tribunal to re-decide the matter at that stage. The decision serves to reinforce the settled position that an arbitral tribunal is functus officio after it renders an award, and that it cannot reconsider matters except when the court remits the matter under Article 34(4) of the Model Law read with section 19B of the IAA. The case also clarifies how the doctrine of res judicata is to be applied to arbitration, and more particularly arbitration which has culminated in an award that is ultimately set aside.
Again, the Court of Appeal’s decision serves as a timely reminder of the finality of arbitration proceedings, and of successful setting aside proceedings