TaxTMI 
TaxTMI 
2019 (5) TMI 1879
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....nery, and other local materials was agreed to be calculated as per a formula given in sub-clause 70.3 of the contract. The relevant portion of sub-clause 70.3 states as under: "ii. Adjustment for Cement Component Price adjustment for increase or decrease in the cost of cement procured by the contractor shall be paid in accordance with the following formula: Vc = 0.85 x Pc x Ri x (C1 - C0) 100 C0 Where, Vc = increase or decrease in the cost of work during the month under consideration due to change in rates of component. C0 = the all India average wholesale price index for cement on the day 28 days prior to the closing date of submission of bids, as published by Ministry of Industrial Development, Government of India, New Delhi. C1 = the all India average wholesale price index for cement on the day 28 days prior to the last day of the period to which a particular interim payment certificate is related, as published by Ministry of Industrial Development, Government of India, New Delhi. Pc = percentage of Cement component." Insofar as the compo....
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....nt had an efficacious alternative remedy, it was relegated to the same. The respondent then asked the appellant to give its consent to receive monthly payment under the Circular. The appellant submitted a conditional undertaking dated 17.05.2013, in which it was clearly stated: "The above undertaking is without prejudice to the Contractor's right to challenge the said Circular dated 15.02.2013 as per provisions of contract and other legal remedies available to the Contractor before the appropriate forum." 5. The appellant then approached the Delhi High Court vide an application under Section 9 of the Arbitration and Conciliation Act, 1996 ["1996 Act"], for interim protection against deduction and recoveries sought to be made by the respondent by applying the said Circular. The Delhi High Court, by its order dated 31.05.2013, restrained the respondent from implementing the said Circular retrospectively. 6. Meanwhile, the aforesaid dispute was referred to the Dispute Adjudicating Board as envisaged under sub-clause 67 of the contract. The Dispute Adjudicating Board, by its majority recommendation dated 31.10.2013, recommended a certain linking factor and then arrived a....
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.... y and x is linear. Average of 12 months for x is taken 100." Thus, the final majority award, based on the aforesaid linking factor, was as follows: "9. Award 9.1. Based on the findings above, we hold that introducing linkage factor is imperative and required for conversion of indices from the base 2004-05 series to the earlier series base 1993-94 as basis for determination of price adjustment. Linking factors for four items of work/materials involved in price adjustment, shall be as under: Cement 1.528 Steel 2.365 Plant and Machinery 1.840 Other Materials 1.873 9.2. The final amount of price adjustment shall be worked out on the basis of above-mentioned linkage factors. After deducting the amount already paid to the Claimant, the amount payable to them against their claim shall be determined and the same shall be paid by the Respondent to the Claimant. 9.3. This amount shall also attract interest @ 10% per annum compounded monthly from due date of payment to the date of award, viz. 02.05.2016. 9.4. Further interest @ 12% per annum, simple interest, shall be payable to the Claimant from 02.05.2016 onwards till ....
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.... conscience of the Court, as a new contract was foisted on one of the parties unilaterally. For this, she cited various judgments. She also argued that the principles of natural justice were violated and, therefore, Section 34(2)(a)(iii) would also be attracted. She argued that the government guidelines were never produced before the arbitrators, and the arbitrators applied the said guidelines behind the back of the parties, thus, resulting in breach of Section 34(2)(a)( iii) of the 1996 Act. Finally, though she argued the ground of patent illegality, this argument was given up when it was pointed out by the Court that this ground, which obtains under Section 34(2A) of the 1996 Act, would not be available in the case of an international commercial arbitration that is decided in India. Shri Mukul Rohatgi, learned Senior Advocate, supplemented the submissions of Smt. Rashmeet Kaur. 9. On the other hand, Shri S. Nandakumar, learned counsel appearing on behalf of the respondent, argued that applying the new formula with the base index of 2004-05 would make the contract unworkable, as a result of which, it was imperative to have a linking factor. According to the learned counsel, the....
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.... fact, a substantive change that has been made from the earlier position or whether a doubt has merely been clarified. According to the learned Senior Counsel, since fundamental changes have been made, doing away with at least two judgments of this Court, being Saw Pipes Ltd. [ONGC Ltd. v. Saw Pipes Ltd., (2003) 5 SCC 705] and Western Geco [ONGC Ltd. v. Western Geco International Ltd., (2014) 9 SCC 263 : (2014) 5 SCC (Civ) 12], as has been held in para 18 in HRD Corpn. v. GAIL (India) Ltd. [HRD Corpn. v. GAIL (India) Ltd., (2018) 12 SCC 471], it is clear that such amendments would only be prospective in nature. We do not express any opinion on the aforesaid contention since the amendments made to Section 34 are not directly before us. It is enough to state that Section 26 of the Amendment Act makes it clear that the Amendment Act, as a whole, is prospective in nature. Thereafter, whether certain provisions are clarificatory, declaratory or procedural and, therefore, retrospective, is a separate and independent enquiry, which we are not required to undertake in the facts of the present cases, except to the extent indicated above, namely, the effect of the substituted Section 36 of t....
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....otions of justice and morality i.e. such notions as would shock the conscience of the Court as understood in Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204. Section 28(3) has also been amended to bring it in line with the judgment of this Court in Associate Builders, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204 , making it clear that the construction of the terms of the contract is primarily for the arbitrator to decide unless it is found that such a construction is not a possible one."] It would be important to remember that the 246th Law Commission Report has itself bifurcated proceedings into two parts, so that the Amendment Act can apply to court proceedings commenced on or after 23-10-2015. It is this basic scheme which is adhered to by Section 26 of the Amendment Act, which ought not to be displaced as the very object of the enactment of the Amendment Act would otherwise be defeated." (emphasis supplied ) 11. There is no doubt that the amendments made in Explanations 1 and 2 to Section 34(2)(b)(ii) have been made for the avoidance of any doubt, which language, however, is not found in Section 34(2A). Apart from the anomalous position which woul....
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....4 applications that have been made to the Court on or after 23.10.2015 , irrespective of the fact that the arbitration proceedings may have commenced prior to that date. Changes made by the Amendment Act, 2015 13. It is first necessary to survey the law insofar as it relates to the ground of setting aside an award if it is in conflict with the public policy of India, as it existed before the Amendment Act, 2015. In Associate Builders v. Delhi Development Authority, (2015) 3 SCC 49 ["Associate Builders"], this Court referred to the judgment in Renusagar Power Co. Ltd. v. General Electric Co., 1994 Supp (1) SCC 644 ["Renusagar"], as follows: "18. In Renusagar Power Co. Ltd. v. General Electric Co. [Renusagar Power Co. Ltd. v. General Electric Co., 1994 Supp (1) SCC 644], the Supreme Court construed Section 7(1)(b)(ii) of the Foreign Awards (Recognition and Enforcement) Act, 1961: "7. Conditions for enforcement of foreign awards.-(1) A foreign award may not be enforced under this Act- xxx xxx xxx (b) if the Court dealing with the case is satisfied that- xxx xxx xxx (ii) the enforcement of the award will be contrary to the pub....
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.... would be contrary to the public policy of India. Explanation.-Without prejudice to the generality of clause (b) of this section, it is hereby declared, for the avoidance of any doubt, that an award is in conflict with the public policy of India if the making of the award was induced or affected by fraud or corruption. xxx xxx xxx" It will thus be seen that whether the ground of "public policy of India" is used to set aside an award under Section 34, or to refuse recognition and enforcement of a foreign award under Section 48, Section 34(2)(b) ought to have been construed in the same manner as Section 48(2)(b). 15. However, this Court, in Saw Pipes ( supra), added yet another ground, namely, that of "patent illegality" to the three grounds mentioned in Renusagar (supra) in order to set aside an award under Section 34 of the 1996 Act. This ground was added in the following terms: "31. ...... [Patent] Illegality must go to the root of the matter and if the illegality is of trivial nature it cannot be held that award is against the public policy. Award could also be set aside if it is so unfair and unreasonable that it shocks the conscience of the cour....
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....rinciples that must necessarily be understood as a part and parcel of the fundamental policy of Indian law. The first and foremost is the principle that in every determination whether by a court or other authority that affects the rights of a citizen or leads to any civil consequences, the court or authority concerned is bound to adopt what is in legal parlance called a 'judicial approach' in the matter. The duty to adopt a judicial approach arises from the very nature of the power exercised by the court or the authority does not have to be separately or additionally enjoined upon the fora concerned. What must be remembered is that the importance of a judicial approach in judicial and quasi-judicial determination lies in the fact that so long as the court, tribunal or the authority exercising powers that affect the rights or obligations of the parties before them shows fidelity to judicial approach, they cannot act in an arbitrary, capricious or whimsical manner. Judicial approach ensures that the authority acts bona fide and deals with the subject in a fair, reasonable and objective manner and that its decision is not actuated by any extraneous consideration. Judicial approach in ....
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....by an Arbitral Tribunal that enjoys considerable latitude and play at the joints in making awards will be open to challenge and may be cast away or modified depending upon whether the offending part is or is not severable from the rest." (emphasis in original ) 29. It is clear that the juristic principle of a "judicial approach" demands that a decision be fair, reasonable and objective. On the obverse side, anything arbitrary and whimsical would obviously not be a determination which would either be fair, reasonable or objective. 30. The audi alteram partem principle which undoubtedly is a fundamental juristic principle in Indian law is also contained in Sections 18 and 34(2)(a)(iii) of the Arbitration and Conciliation Act. These sections read as follows: "18. Equal treatment of parties.-The parties shall be treated with equality and each party shall be given a full opportunity to present his case. xxx xxx xxx 34. Application for setting aside arbitral award.- xxx xxx xxx (2) An arbitral award may be set aside by the court only if- (a) the party making the application furnishes proof that- xxx xxx x....
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....re up in quality to a trained legal mind would not be held to be invalid on this score. Once it is found that the arbitrator's approach is not arbitrary or capricious, then he is the last word on facts. In P.R. Shah, Shares & Stock Brokers (P) Ltd. v. B.H.H. Securities (P) Ltd. [(2012) 1 SCC 594 : (2012) 1 SCC (Civ) 342], this Court held: (SCC pp. 601-02, para 21) "21. A court does not sit in appeal over the award of an Arbitral Tribunal by reassessing or reappreciating the evidence. An award can be challenged only under the grounds mentioned in Section 34(2) of the Act. The Arbitral Tribunal has examined the facts and held that both the second respondent and the appellant are liable. The case as put forward by the first respondent has been accepted. Even the minority view was that the second respondent was liable as claimed by the first respondent, but the appellant was not liable only on the ground that the arbitrators appointed by the Stock Exchange under Bye-law 248, in a claim against a nonmember, had no jurisdiction to decide a claim against another member. The finding of the majority is that the appellant did the transaction in the name of the second respondent and ....
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....commercial arbitration and a foreign award - as the same. The Commission believes that this has caused some problems. The legitimacy of judicial intervention in the case of a purely domestic award is far more than in cases where a court is examining the correctness of a foreign award or a domestic award in an international commercial arbitration. 35. It is for this reason that the Commission has recommended the addition of section 34 (2A) to deal with purely domestic awards, which may also be set aside by the Court if the Court finds that such award is vitiated by "patent illegality appearing on the face of the award." In order to provide a balance and to avoid excessive intervention, it is clarified in the proposed proviso to the proposed section 34 (2A) that such "an award shall not be set aside merely on the ground of an erroneous application of the law or by re-appreciating evidence." The Commission believes that this will go a long way to assuage the fears of the judiciary as well as the other users of arbitration law who expect, and given the circumstances prevalent in our country, legitimately so, greater redress against purely domestic awards. This would also do aw....
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.... or foreign awards (under S 48). Under the formulation of the Commission, an award can be set aside on public policy grounds only if it is opposed to the "fundamental policy of Indian law" or it is in conflict with "most basic notions of morality or justice"." (emphasis supplied ) 19. Consequently, changes were suggested in Sections 28, 34, and 48 of the 1996 Act. The amendment to Section 28 was prescribed in the following terms: "Amendment of Section 28 16. In section 28, xxx xxx xxx (ii) In sub-section (3), after the words "tribunal shall decide" delete the words "in accordance with" and add the words "having regard to" [Note: This amendment is intended to overrule the effect of ONGC Ltd. v. Saw Pipes Ltd., (2003) 5 SCC 705 , where the Hon'ble Supreme Court held that any contravention of the terms of the contract would result in the award falling foul of Section 28 and consequently being against public policy.]" Similarly, amendment of Section 34 was prescribed as follows: "Amendment of Section 34 18. In section 34, (i) In sub-section (1), after the words "sub-section (2)" add the words ", subsection....
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....ide awards.] xxx xxx xxx" So far as Section 48 is concerned, an amendment was proposed as follows: "Amendment of Section 48 22. In section 48, (i) In sub-section (2), in the "Explanation.-", delete the words "Without prejudice to the generality of clause ( b), it is hereby declared, for" and add the word "For" and after the words "avoidance of any doubt," add the words "it is clarified" and after the words "the public policy of India" add the word "only" and after the word "if" delete "-" and ";" and insert sub-clause "(a)" before the words "the making of the award" and delete "." And add ";" after the words "by fraud or corruption" and add sub-clauses "(b) it is in contravention with the fundamental policy of Indian law; (c) it is in conflict with India's most basic notions of morality or justice." xxx xxx xxx" 20. After Western Geco ( supra) was delivered by this Court, a Supplementary Report of February 2015 ["Supplementary Report"] was made by the Law Commission of India, in which the Law Commission stated: "10. The 246th Report of the Law Commission and the decision in Western Geco. 10.1. The Law Commission, ....
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....followed by a subsequent two-judge bench in Associate Builders v. Delhi Development Authority, (2015) 3 SCC 49 dated 25.11.2014. In the words of Supreme Court in Western Geco: 35. What then would constitute the "fundamental policy of Indian law" is the question. The decision in ONGC [ONGC Ltd. v. Saw Pipes Ltd., (2003) 5 SCC 705] does not elaborate that aspect. Even so, the expression must, in our opinion, include all such fundamental principles as providing a basis for administration of justice and enforcement of law in this country. Without meaning to exhaustively enumerate the purport of the expression "fundamental policy of Indian law", we may refer to three distinct and fundamental juristic principles that must necessarily be understood as a part and parcel of the fundamental policy of Indian law. The first and foremost is the principle that in every determination whether by a court or other authority that affects the rights of a citizen or leads to any civil consequences, the court or authority concerned is bound to adopt what is in legal parlance called a "judicial approach" in the matter. The duty to adopt a judicial approach arises from the very nature of the powe....
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....re open to challenge in a court of law often in writ jurisdiction of the superior courts but no less in statutory processes wherever the same are available. 40. It is neither necessary nor proper for us to attempt an exhaustive enumeration of what would constitute the fundamental policy of Indian law nor is it possible to place the expression in the straitjacket of a definition. What is important in the context of the case at hand is that if on facts proved before them the arbitrators fail to draw an inference which ought to have been drawn or if they have drawn an inference which is on the face of it, untenable resulting in miscarriage of justice, the adjudication even when made by an Arbitral Tribunal that enjoys considerable latitude and play at the joints in making awards will be open to challenge and may be cast away or modified depending upon whether the offending part is or is not severable from the rest. ( emphasis in original ) Therefore, among others, the Wednesbury principle of reasonableness has now been incorporated into the public policy test under Section 34, as it is deemed to be part of "fundamental policy of Indian law." 10.4. Such a ....
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....ion matters, which tend to defeat the object of the Act . With a view to overcome the difficulties, the matter was referred to the Law Commission of India, which examined the issue in detail and submitted its 176th Report. On the basis of the said Report, the Arbitration and Conciliation ( Amendment) Bill, 2003 was introduced in the Rajya Sabha on 22-12-2003. The said Bill was referred to the Department-related Parliamentary Standing Committee on Personnel, Public Grievances, Law and Justice for examination and report. The said Committee, submitted its Report to Parliament on 4-8-2005, wherein the Committee recommended that since many provisions of the said Bill were contentious, the Bill may be withdrawn and a fresh legislation may be brought after considering its recommendations. Accordingly, the said Bill was withdrawn from the Rajya Sabha. 3. On a reference made again in pursuance of the above, the Law Commission examined and submitted its 246th Report on "Amendments to the Arbitration and Conciliation Act, 1996" in August, 2014 and recommended various amendments in the Act. The proposed amendments to the Act would facilitate and encourage Alternative Dispute Mechanism....
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....(ii) it is in contravention with the fundamental policy of Indian law; or (iii) it is in conflict with the most basic notions of morality or justice. Explanation 2.-For the avoidance of doubt, the test as to whether there is a contravention with the fundamental policy of Indian law shall not entail a review on the merits of the dispute. xxx xxx xxx" Sub-section (2A) of Section 34 was also added, which reads as follows: "34. Application for setting aside arbitral award.- xxx xxx xxx (2 A) An arbitral award arising out of arbitrations other than international commercial arbitrations, may also be set aside by the Court, if the Court finds that the award is vitiated by patent illegality appearing on the face of the award: Provided that an award shall not be set aside merely on the ground of an erroneous application of the law or by reappreciation of evidence. xxx xxx xxx" Correspondingly, Section 48 was also amended to bring the unamended Section 48 in line with the amendments made in Section 34 , except that sub-section (2A) of Section 34 is missing in Section 48 as the said Section deals with recognition and enforce....
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....ic notions of morality or justice". This again would be in line with paragraphs 36 to 39 of Associate Builders ( supra), as it is only such arbitral awards that shock the conscience of the court that can be set aside on this ground. 25. Thus, it is clear that public policy of India is now constricted to mean firstly, that a domestic award is contrary to the fundamental policy of Indian law, as understood in paragraphs 18 and 27 of Associate Builders (supra), or secondly, that such award is against basic notions of justice or morality as understood in paragraphs 36 to 39 of Associate Builders (supra). Explanation 2 to Section 34(2)(b)(ii) and Explanation 2 to Section 48(2)(b)(ii) was added by the Amendment Act only so that Western Geco (supra), as understood in Associate Builders (supra), and paragraphs 28 and 29 in particular, is now done away with. 26. Insofar as domestic awards made in India are concerned, an additional ground is now available under sub-section (2A), added by the Amendment Act, 2015, to Section 34. Here, there must be patent illegality appearing on the face of the award, which refers to such illegality as goes to the root of the matter but which does not....
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....haracterised as perverse. 31. Given the fact that the amended Act will now apply, and that the "patent illegality" ground for setting aside arbitral awards in international commercial arbitrations will not apply, it is necessary to advert to the grounds contained in Section 34(2)(a)(iii) and (iv) as applicable to the facts of the present case. Section 34(2)(a) Does Not Entail a Challenge to an Arbitral Award on Merits 32. Section 34(2)(a)(iii) and (iv) state as under: "34. Application for setting aside arbitral award.- xxx xxx xxx (2) An arbitral award may be set aside by the Court only if- (a) the party making the application furnishes proof that- xxx xxx xxx (iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or (iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration: Provided that, if the decisions on matters submitt....
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....on and enforcement of the foreign award on grounds set out in sub-clauses (a) to (e) of clause (1) of Article V and the court can, on its own motion, refuse recognition and enforcement of a foreign award for two additional reasons set out in sub-clauses (a) and (b) of clause (2) of Article V. None of the grounds set out in sub-clauses ( a ) to ( e) of clause (1) and sub clauses ( a ) and ( b) of clause (2) of Article V postulates a challenge to the award on merits. 35. Albert Jan van den Berg in his treatise The New York Arbitration Convention of 1958 : Towards a Uniform Judicial Interpretation, has expressed the view: "It is a generally accepted interpretation of the Convention that the court before which the enforcement of the foreign award is sought may not review the merits of the award. The main reason is that the exhaustive list of grounds for refusal of enforcement enumerated in Article V does not include a mistake in fact or law by the arbitrator. Furthermore, under the Convention the task of the enforcement judge is a limited one. The control exercised by him is limited to verifying whether an objection of a respondent on the basis of the grounds for refu....
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....the country of enforcement and the ground of challenge is confined to the recognition and enforcement being contrary to the public policy of the country in which the award is set to be enforced. There is nothing to indicate that the expression "public policy" in Article V(2) (b) of the New York Convention and Section 7(1)(b)(ii) of the Foreign Awards Act is not used in the same sense in which it was used in Article I(c) of the Geneva Convention of 1927 and Section 7(1) of the Protocol and Convention Act of 1937. This would mean that "public policy" in Section 7(1)(b)(ii) has been used in a narrower sense and in order to attract the bar of public policy the enforcement of the award must invoke something more than the violation of the law of India. Since the Foreign Awards Act is concerned with recognition and enforcement of foreign awards which are governed by the principles of private international law, the expression "public policy" in Section 7(1)(b)(ii) of the Foreign Awards Act must necessarily be construed in the sense the doctrine of public policy is applied in the field of private international law. Applying the said criteria, it must be held that the enforcement of a foreig....
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....rom the language of the Convention, which makes no reference to the possibility of a review of the merits in Article V's exhaustive list of the exclusive grounds for denying recognition of foreign and nondomestic awards. There is also no hint in the New York Convention's drafting history of any authority to reconsider the merits of an arbitral award in recognition proceedings. Likewise, the prohibition against review of the merits of the arbitrator's decision is one of the most fundamental pillars of national court authority interpreting the Convention. This prohibition has repeatedly and uniformly been affirmed by national courts, in both common law and civil law jurisdictions. Simply put: "the court may not refuse to enforce an arbitral award solely on the ground that the arbitrator may have made a mistake of law or fact" [Karaha Bodas Co. LLC v. Perusahaan Pertambangan Minyak Dan Gas Bumi Negara, 364 F.3d 274, 287-88 (5th Cir. 2004)]. Thus, in the words of the Luxembourg Supreme Court [Judgment of 24 November 1993, XXI Y.B. Comm. Arb. 617, 623 ( Luxembourg Cour Supérieure de Justice ) (1996)]: "The New York Convention does not provide for any control on ....
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.... or applications made to the arbitral tribunal by one party shall be communicated to the other party, and any expert report or evidentiary document on which the arbitral tribunal may rely in making its decision shall be communicated to the parties." Section 26 of the 1996 Act is also important and states as follows: "26. Expert appointed by arbitral tribunal.-(1) Unless otherwise agreed by the parties, the arbitral tribunal may- (a) appoint one or more experts to report to it on specific issues to be determined by the arbitral tribunal; and (b) require a party to give the expert any relevant information or to produce, or to provide access to, any relevant documents, goods or other property for his inspection. (2) Unless otherwise agreed by the parties, if a party so requests or if the arbitral tribunal considers it necessary, the expert shall, after delivery of his written or oral report, participate in an oral hearing where the parties have the opportunity to put questions to him and to present expert witnesses in order to testify on the points at issue. (3) Unless otherwise agreed by the parties, the expert shall, on the request of ....
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....ts Submitted by the Other Party As part of their right to comment, the parties must be given an opportunity to opine on the evidence and arguments introduced in the proceedings by the other party. The right to comment on the counterparty's submissions is regarded as a fundamental tenet of adversarial proceedings. However, in accordance with the general requirement of causality, the denial of an opportunity to comment on a particular piece of evidence or argument is not prejudicial, unless the tribunal relied on this piece of evidence or argument in making its decision. In order to ensure that the parties can exercise their right to comment effectively, the arbitral tribunal must grant them access to the evidence and arguments submitted by the other side. Affording a party the opportunity to make submissions or to give its view without also informing it of the opposing side's claims and arguments typically constitutes a violation of due process, unless specific non-disclosure rules apply (e.g., such disclosure would constitute a violation of trade secrets or applicable legal privileges). In practice, national courts have afforded arbitral tribunals conside....
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....ert appointed by the tribunal [Paklito Inv. Ltd. v. Klockner East Asia Ltd., XIX Y.B. Comm. Arb. 664, 671 (Supreme Court of Hong Kong) (1994)], and again where the arbitral tribunal criticized a party for having employed a method of presenting evidence which the tribunal itself had suggested [Iran Aircraft Indus. v Avco Corp., 980 F.2d 141 (2nd Cir. 1992)] ." ( at p. 987) Gary Born (supra) states: "German courts have adopted similar reasoning, holding that the right to be heard entails two related sets of rights: (a) a party is entitled to present its position on disputed issues of fact and law, to be informed about the position of the other parties and to a decision based on evidence or materials known to the parties [See, e.g., Judgment of 5 July 2011, 34 SCH 09/11, II(5)(c)(bb) ( Oberlandesgericht Munchen)]; and (b) a party is entitled to a decision by the arbitral tribunal that takes its position into account insofar as relevant [See, e.g., Judgment of 5 October 2009, 34 Sch 12/09 ( Oberlandesgericht Munchen)]. Other authorities provide comparable formulations of the content of the right to be heard [See, e.g., Slaney v. Int'l Amateur Athletic Foundation, 244 F.3....
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....he court held that the due process defence to enforcement was not intended to accommodate circumstances in which a party had failed to take advantage of an opportunity duly accorded to it." 38. In Minmetals Germany GmbH v. Ferco Steel Ltd., [1999] CLC 647, the Queen's Bench Division referred to this ground under the New York Convention, and held as follows: "The inability to present a case issue Although many of those states who are parties to the New York Convention are civil law jurisdictions or are those which like China derive the whole or part of their procedural rules from the civil law and therefore have essentially an inquisitorial system, art. V of the Convention protects the requirements of natural justice reflected in the audi alteram partem rule. Therefore, where the tribunal is procedurally entitled to conduct its own investigations into the facts, the effect of this provision will be to avoid enforcement of an award based on findings of fact derived from such investigations if the enforcee has not been given any reasonable opportunity to present its case in relation to the results of such investigations. Article 26 of the CIETAC rules by reference....
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....sence of an arbitration agreement, either because the agreement is void (as in subsection (a)) or because it does not cover the subject-matter on which the arbitrator reached a decision (as in subsection (c)). For that reason, more recent arbitration statutes often either treat the two grounds as one, as in Article 1502 1o of the French New Code of Civil Procedure, or refer generally to the "absence of a valid arbitration agreement," as in Article 1065 of the Netherlands Code of Civil Procedure. However, Article V, paragraph 1(c) does not cover all the cases listed in Article 1502 3o of the French New Code of Civil Procedure, which provides that recognition or enforcement can be refused where "the arbitrator ruled without complying with the mission conferred upon him or her." That extends to decisions that are either infra petita and ultra petita, as well as to situations where the arbitrators have exceeded their powers in the examination of the merits of the case (for example, by acting as amiable compositeurs when that was not agreed by the parties, or by failing to apply the rules of law chosen by the parties). Generally speaking, such situations cannot be said to be ou....
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....limits on the arbitrators' authority (which, in this respect, are more rigorous under French law than some other national arbitration regimes) as follows [Judgment of 30 June 2005, Pilliod v. Econosto, 2006 Rev. arb. 687, 688 ( Paris Cour d'appel )]: "The fact that the contract was governed by French law does not allow the arbitrators to award interest pursuant to Art.1153 (1) of the Civil Code on the sole ground that this is permitted under that provision, even in the absence of a request of the parties. There is a difference between the role of a state court and that of an arbitrator, whose jurisdiction is based on the parties' consent and who must therefore preserve the consensual character of the proceedings by consulting the parties on their intention as to the mission of the tribunal." Similarly, another court annulled an award on the grounds that the relief ordered by the tribunal "exceeded the arbitrators' powers because it was not sought by either party, and was completely irrational because it wrote material terms of the contract out of existence" [PMA Capital Inc. Co. v. Platinum Underwriters Bermuda, Ltd., 400 F. Appx. 654 (3d Cir. 2010)]. Non....
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....ct that these issues had been raised in argument during the arbitration [See PT Prima Int'l Dev. v. Kempinski Hotels SA, [2012] SGCA 35]. The better view is not to look to local rules of civil procedure or litigation practices in determining whether an issue was presented to the arbitrators; the proper inquiry is instead a pragmatic one into whether the parties and tribunal had an opportunity to consider and submit evidence and argument on a particular issue." ( at pp. 3289-3293) ( emphasis supplied ) Redfern and Hunter (supra) states as follows: "11.77. The first part of this ground for refusal of enforcement under the Convention (and under the Model Law) envisages a situation in which the arbitral tribunal is alleged to have acted in excess of its authority, ie ultra petita, and to have dealt with a dispute that was not submitted to it. According to a leading authority on the Convention, the courts almost invariably reject this defence [See Albert Jan van den Berg, 'Court Decisions on the New York Convention', Swiss Arbitration Association Conference, February 1996, Collected Reports, 86]. By way of example, the German courts have rejected ultra petita defences ....
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....er, it has also been said (correctly) that no State will permit a binding arbitral award to be given or enforced within its territory without being able to review the award, or, at least, without allowing the parties an opportunity to address the court if there has been a violation of due process or other irregularities in the arbitral proceedings (see Peter Binder, International Commercial Arbitration and Conciliation in UNCITRAL Model Law Jurisdictions ( Sweet & Maxwell, 3rd Ed, 2010) at para 7-001). 27. While the Singapore courts infrequently exercise their power to set aside arbitral awards, they will unhesitatingly do so if a statutorily prescribed ground for setting aside an arbitral award is clearly established. The relevant grounds in this regard can be classified into three broad categories (see generally Nigel Blackaby et al, Redfern and Hunter on International Arbitration (Oxford University Press, 5th Ed, 2009) ("Redfern and Hunter") at paras 10.30-10.86). First, an award may be challenged on jurisdictional grounds (ie, the nonexistence of a valid and binding arbitration clause, or other grounds that go to the adjudicability of the claim determined by the arbitr....
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....Co Ltd v Habibullah Coastal Power Co (Pte) Ltd [2010] 3 SLR 1 at [19]-[22]). In the House of Lords decision of Lesotho Highlands Development Authority v Impregilo SpA [2006] 1 AC 221, which concerned an application to set aside an arbitral award on the ground of the arbitral tribunal's "exceeding its powers" (see s 68(2)(b) of the Arbitration Act 1996 (c 23) ( UK) ("the UK Arbitration Act")), Lord Steyn made clear ( at [24]-[25]) the vital distinction between the erroneous exercise by an arbitral tribunal of an available power vested in it (which would amount to no more than a mere error of law) and the purported exercise by the arbitral tribunal of a power which it did not possess. Only in the latter situation, his Lordship stated, would an arbitral award be liable to be set aside under s 68(2)(b) of the UK Arbitration Act on the ground that the arbitral tribunal had exceeded its powers. In a similar vein, Art 34(2)(a) ( iii) of the Model Law applies where an arbitral tribunal exceeds its authority by deciding matters beyond its ambit of reference or fails to exercise the authority conferred on it by failing to decide the matters submitted to it, which in turn prejudices either or....
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....rm "submission to arbitration" can include an arbitration agreement modified, amended or supplemented by an arbitral institution's terms of reference agreed to by the arbitrators and disputing parties. Terms of reference may indeed supplement or modify the arbitration agreement. For example, a German court of appeal held that the parties had concluded a new arbitration agreement by signing ICC Terms of Reference. Similarly, a decision by the English House of Lords stated that "[i]n the present case one is dealing with an ICC arbitration agreement. In such a case the terms of reference which under article 18 of the ICC rules are invariably settled may, of course, amend or supplement the terms of the arbitration agreement." 8. Authors and courts have also considered whether article V (1)(c) provides grounds for refusing to recognize or enforce where the arbitrator's decision goes beyond the parties' pleadings or prayers for relief to render an award ultra petita. Though some authors have argued that article V (1)(c) provides a second, separate ground for refusal to enforce an award rendered ultra petita, courts have rejected challenges to recognition or enforcement under art....
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....ipally directs its challenge at the $185,000 awarded for loss of production. Its jurisdictional claim focuses on the provision of the contract reciting that 'neither party shall have any liability for loss of production.' The tribunal cannot properly be charged, however, with simply ignoring this alleged limitation on the subject matter over which its decision-making powers extended. Rather, the arbitration court interpreted the provision not to preclude jurisdiction on this matter. As in United Steelworkers of America v. Enterprise Wheel & Car Corp., supra, the court may be satisfied that the arbitrator premised the award on a construction of the contract and that it is 'not apparent,' 363 U.S. 593 at 598, 80 S.Ct. 1358, that the scope of the submission to arbitration has been exceeded." xxx xxx xxx "24. Although the Convention recognizes that an award may not be enforced where predicated on a subject matter outside the arbitrator's jurisdiction, it does not sanction second-guessing the arbitrator's construction of the parties' agreement. The appellant's attempt to invoke this defense, however, calls upon the court to ignore this limitation on its decision-making....
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....itration were in part a provenance of section 68: see General Note to section 68 of the Arbitration Act 1996 as published in Current Law Statutes 1996, p 23-46. Specifically, it is likely that the inspiration of the words "the tribunal exceeding its powers (otherwise than by exceeding its substantive jurisdiction)" in section 68 are the terms of article V(1)(c) of the New York Convention and the jurisprudence on it. The context is that article V(1)(a) stipulates that the invalidity of the arbitration agreement is a ground for non-enforcement of an award: it involves the competence of the arbitrator. Article V(1)(c) relates to matters beyond the scope of the submission to arbitration. It deals with cases of excess of power or authority of the arbitrator. It is well established that article V(1)(c) must be construed narrowly and should never lead to a re-examination of the merits of the award: Parsons & Whittemore Overseas Co Inc v Sociéte Générale de l'Industrie du Papier (RAKTA) 508 F 2d 969 (2nd Cir 1974); Albert Jan van den Berg, The New York Arbitration Convention of 1958 (1981), pp 311318; Domenico Di Pietro and Martin Platte, Enforcement of International A....
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....sis that the tribunal exceeded its powers in ruling on the currency of the award. Such decisions are an everyday occurrence in the arbitral world. If the view of the Court of Appeal had been upheld, a very serious defect in the machinery of the 1996 Act would have been revealed. The fact that this case has been before courts at three levels and that enforcement of the award has been delayed for more than three years reinforces the importance of the point." ( emphasis supplied ) The High Court of Ireland, in Patrick Ryan & Ann Ryan and Kevin O'Leary (Clonmel) Ltd. & General Motors, [2018] IEHC 660 (High Court of Ireland, 2018), put it thus: "24. As regards the second principle which emerges from the case law, namely, that an application to set aside is not an appeal from the decision of the arbitrator and does not confer upon the court the opportunity of second-guessing the arbitrator's decision on the merits, it is sufficient to refer to a small number of the Irish cases and the observations made in those cases. In Snoddy (Snoddy v. Mavroudis [2013] IEHC 285), Laffoy J. made it very clear that it was not open to the court to secondguess the construction of the releva....
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....nal Arbitration (1st Ed., Kluwer, 2010). In that text, the commentators also state (at p. 647) that 'a strong presumption should exist that a tribunal acts within its mandate'." (per Laffoy J. at para. 32, pp. 14 - 14). 40. Laffoy J. in Snoddy (Snoddy v. Mavroudis [2013] IEHC 285) went on to observe that Article 34(2)(a)(iii) of the Model Law was based on a corresponding provision contained in the New York Convention (the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, done at New York on 10th June, 1958), which was Article V(1)(c). Laffoy J. continued: "As was pointed out by Lord Steyn in Lesotho Highlands Development v. Impregilo SpA [2006] 1 AC 221, s. 68 of the UK Arbitration Act 1996 was modelled on the New York Convention and on the Model Law. In considering the application of that statutory provision, Lord Steyn considered Article V(1)(c) of the New York Convention stating (at p. 236): 'It deals with cases of excess of power or authority of the arbitrator. It is well established that article V(1)(c) must be construed narrowly and should never lead to a re-examination of the merits of the award.' Lord Steyn cited a....
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....putes which required to be settled by arbitration, the "reference" contemplated is an act of the appointing authority referring the disputes to the arbitrator appointed by him. (c) Where the parties fail to concur in the appointment of the arbitrator(s) as required by the arbitration agreement, or the authority named in the arbitration agreement failing to nominate the arbitrator and refer the disputes raised to arbitration as required by the arbitration agreement, on an application by an aggrieved party, the court can appoint the arbitrator and on such appointment, the disputes between the parties stand referred to such arbitrator in terms of the arbitration agreement. 11. Reference to arbitration can be in respect of all disputes between the parties or all disputes regarding a contract or in respect of specific enumerated disputes. Where "all disputes" are referred, the arbitrator has the jurisdiction to decide all disputes raised in the pleadings ( both claims and counterclaims) subject to any limitations placed by the arbitration agreement. Where the arbitration agreement provides that all disputes shall be settled by arbitration but excludes certain matters f....
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....the Court. Thus, in Parsons (supra), it was held: "7. Article V(2)(b) of the Convention allows the court in which enforcement of a foreign arbitral award is sought to refuse enforcement, on the defendant's motion or sua sponte, if 'enforcement of the award would be contrary to the public policy of (the forum) country.' The legislative history of the provision offers no certain guidelines to its construction. Its precursors in the Geneva Convention and the 1958 Convention's ad hoc committee draft extended the public policy exception to, respectively, awards contrary to 'principles of the law' and awards violative of 'fundamental principles of the law.' In one commentator's view, the Convention's failure to include similar language signifies a narrowing of the defense [Contini, International Commercial Arbitration, 8 Am.J.Comp.L. 283, 304]. On the other hand, another noted authority in the field has seized upon this omission as indicative of an intention to broaden the defense [ Quigley, Accession by the United States to the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 70 Yale L.J. 1049, 1070-71 (1961)]. 8. Perhaps more pr....
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....icy of the State is not defined in the Act or the Model Law, the general consensus of judicial and expert opinion is that public policy under the Act encompasses a narrow scope. In our view, it should only operate in instances where the upholding of an arbitral award would "shock the conscience" (see Downer Connect ([58] supra) at [136]), or is "clearly injurious to the public good or ... wholly offensive to the ordinary reasonable and fully informed member of the public" (see Deutsche Schachbau v Shell International Petroleum Co Ltd [1987] 2 Lloyds' Rep 246 at 254, per Sir John Donaldson MR), or where it violates the forum's most basic notion of morality and justice: see Parsons & Whittemore Overseas Co Inc v Societe Generale de L'Industrie du Papier (RAKTA) 508 F 2d, 969 (2nd Cir, 1974) at 974. This would be consistent with the concept of public policy that can be ascertained from the preparatory materials to the Model Law. As was highlighted in the Commission Report (A/40/17), at para 297 (referred to in A Guide to the UNCITRAL Model Law on International Commercial Arbitration: Legislative History and Commentary by Howard M Holtzmann and Joseph E Neuhaus (Kluwer, 1989) at 914): ....
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....eal has held that the ground should only succeed in cases where upholding or enforcing the arbitral award would "shock the conscience", or be "clearly injurious to the public good or ... wholly offensive to the ordinary reasonable and fully informed member of the public", or violate "the forum's most basic notion of morality and justice" (PT Asuransi Jasa Indonesia (Persero) v Dexia Bank SA [2007] 1 SLR(R) 597 ("PT Asuransi") at [59]). In Sui Southern Gas Co Ltd v Habibullah Coastal Power Co (Pte) Ltd [2010] 3 SLR 1 ("Sui Southern Gas"), the High Court stated that to succeed on a public policy argument, the party "had to cross a very high threshold and demonstrate egregious circumstances such as corruption, bribery or fraud, which would violate the most basic notions of morality and justice" (at [48]). The 1985 UN Commission Report states at para 297 that the term public policy "comprised the fundamental notions and principles of justice", and it was understood that the term "covered fundamental principles of law and justice in substantive as well as procedural respects". The 1985 UN Commission Report further explains that Art 34(2)(b)(ii) of the Model Law "was not to be interprete....
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....ppellant could have argued, without prejudice to the argument that linking is de hors the contract, that of the three methods for linking the New Series with the Old Series, either the second or the third method would be preferable to the first method, which the majority award has applied on its own. For this reason, the majority award needs to be set aside under Section 34(2)(a)(iii). 47. Insofar as the argument that a new contract had been made by the majority award for the parties, without the consent of the appellant, by applying a formula outside the agreement, as per the Circular dated 15.02.2013 , which itself could not be applied without the appellant's consent, we are of the view that this ground under Section 34(2)(a)(iv) would not be available, given the authorities discussed in detail by us. It is enough to state that the appellant argued before the arbitral tribunal that a new contract was being made by applying the formula outside what was prescribed, which was answered by the respondent, stating that it would not be possible to apply the old formula without a linking factor which would have to be introduced. Considering that the parties were at issue on this, the ....