SSANGYONG ENGINEERING & CONSTRUCTION CO. LTD. v. NATIONAL HIGHWAYS AUTHORITY OF INDIA (NHAI)

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26Copy pinpoint26. 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 amount to mere erroneous application of the law. In short, what is not subsumed within B “the fundamental policy of Indian law”, namely, the contravention of a statute not linked to public policy or public interest, cannot be brought in by the backdoor when it comes to setting aside an award on the ground of patent illegality.

27Copy pinpoint27. Secondly, it is also made clear that re-appreciation of evidence, C which is what an appellate court is permitted to do, cannot be permitted under the ground of patent illegality appearing on the face of the award.

28Copy pinpoint28. To elucidate, paragraph 42.1 of Associate Builders (supra), namely, a mere contravention of the substantive law of India, by itself, is no longer a ground available to set aside an arbitral award. Paragraph D 42.2 of Associate Builders (supra), however, would remain, for if an arbitrator gives no reasons for an award and contravenes Section 31(3) of the 1996 Act, that would certainly amount to a patent illegality on the face of the award.

29Copy pinpoint29. The change made in Section 28(3) by the Amendment Act E really follows what is stated in paragraphs 42.3 to 45 in Associate Builders (supra), namely, that the construction of the terms of a contract is primarily for an arbitrator to decide, unless the arbitrator construes the contract in a manner that no fair-minded or reasonable person would; in short, that the arbitrator’s view is not even a possible view to take. Also, F if the arbitrator wanders outside the contract and deals with matters not allotted to him, he commits an error of jurisdiction. This ground of challenge will now fall within the new ground added under Section 34(2A).

30Copy pinpoint30. What is important to note is that a decision which is perverse, as understood in paragraphs 31 and 32 of Associate Builders (supra), G while no longer being a ground for challenge under “public policy of India”, would certainly amount to a patent illegality appearing on the face of the award. Thus, a finding based on no evidence at all or an award which ignores vital evidence in arriving at its decision would be perverse and liable to be set aside on the ground of patent illegality. Additionally, a finding based on documents taken behind the back of the H

SSANGYONG ENG. & CONST. CO. LTD. v. NATIONAL 569 HIGHWAYS AUTH. OF INDIA (NHAI)[R. F. NARIMAN, J.]

parties by the arbitrator would also qualify as a decision based on no evidence inasmuch as such decision is not based on evidence led by the parties, and therefore, would also have to be characterised as perverse.

31Copy pinpoint31. 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

32Copy pinpoint32. Section 34(2)(a)(iii) and (iv) state as under: C

“34. Application for setting aside arbitral award.— xxx xxx xxx (2) An arbitral award may be set aside by the Court only if— D (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; E 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: F Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or G xxx xxx xxx”

33Copy pinpoint33. In Renusagar (supra), this Court dealt with a challenge to a foreign award under Section 7 of the Foreign Awards (Recognition and Enforcement) Act, 1961 [“Foreign Awards Act”]. The Foreign Awards H

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A Act has since been repealed by the 1996 Act. However, considering that Section 7 of the Foreign Awards Act contained grounds which were borrowed from Article V of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958 [“New York Convention”], which is almost in the same terms as Sections 34 and 48 of the 1996 Act, the said judgment is of great importance in understanding B the parameters of judicial review when it comes to either foreign awards or international commercial arbitrations being held in India, the grounds for challenge/refusal of enforcement under Sections 34 and 48, respectively, being the same. After referring to the New York Convention, this Court delineated the scope of enquiry of grounds under Sections 34/ C 48 (equivalent to the grounds under Section 7 of the Foreign Awards Act, which was considered by the Court), and held: “34. Under the Geneva Convention of 1927, in order to obtain recognition or enforcement of a foreign arbitral award, the requirements of clauses (a) to (e) of Article I had to be fulfilled and in Article II, it was prescribed that even if the conditions laid down in Article I were fulfilled recognition and enforcement of the award would be refused if the Court was satisfied in respect of matters mentioned in clauses (a), (b) and (c). The principles which apply to recognition and enforcement of foreign awards are in substance, similar to those adopted by the English courts at common law. (See: Dicey & Morris, The Conflict of Laws, 11th Edn., Vol. I, p. 578). It was, however, felt that the Geneva Convention suffered from certain defects which hampered the speedy settlement of disputes through arbitration. The New York Convention seeks to remedy the said defects by providing for a F much more simple and effective method of obtaining recognition and enforcement of foreign awards. Under the New York Convention the party against whom the award is sought to be enforced can object to recognition 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 G 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. H

SSANGYONG ENG. & CONST. CO. LTD. v. NATIONAL 571 HIGHWAYS AUTH. OF INDIA (NHAI)[R. F. NARIMAN, J.]

35. Albert Jan van den Berg in his treatise The New York A 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 B 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 C refusal of Article V(1) is justified and whether the enforcement of the award would violate the public policy of the law of his country. This limitation must be seen in the light of the principle of international commercial arbitration that a national court should not interfere with the substance of the arbitration.” (p. D 269)

36. Similarly Alan Redfern and Martin Hunter have said: “The New York Convention does not permit any review on the merits of an award to which the Convention applies and, in this respect, therefore, differs from the provisions of some systems E of national law governing the challenge of an award, where an appeal to the courts on points of law may be permitted.” (Redfern & Hunter, Law and Practice of International Commercial Arbitration, 2nd Edn., p. 461.)

37. In our opinion, therefore, in proceedings for enforcement of a F foreign award under the Foreign Awards Act, 1961, the scope of enquiry before the court in which award is sought to be enforced is limited to grounds mentioned in Section 7 of the Act and does not enable a party to the said proceedings to impeach the award on merits. G xxx xxx xxx

65. This would imply that the defence of public policy which is permissible under Section 7(1)(b)(ii) should be construed narrowly. In this context, it would also be of relevance to mention that under H

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A Article I(e) of the Geneva Convention Act of 1927, it is permissible to raise objection to the enforcement of arbitral award on the ground that the recognition or enforcement of the award is contrary to the public policy or to the principles of the law of the country in which it is sought to be relied upon. To the same effect is the provision in Section 7(1) of the Protocol & Convention Act of B 1837 which requires that the enforcement of the foreign award must not be contrary to the public policy or the law of India. Since the expression “public policy” covers the field not covered by the words “and the law of India” which follow the said expression, contravention of law alone will not attract the bar of public policy and something more than contravention of law is required.

66. Article V(2)(b) of the New York Convention of 1958 and Section 7(1)(b)(ii) of the Foreign Awards Act do not postulate refusal of recognition and enforcement of a foreign award on the ground that it is contrary to the law of 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 E 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 foreign award would be refused on the ground that it is contrary to public policy if such enforcement would be contrary to (i) fundamental policy of Indian law; or (ii) the interests of India; or (iii) justice or morality.” H (emphasis supplied)

SSANGYONG ENG. & CONST. CO. LTD. v. NATIONAL 573 HIGHWAYS AUTH. OF INDIA (NHAI)[R. F. NARIMAN, J.]

This judgment was cited with approval in Redfern and Hunter A on International Arbitration by Nigel Blackaby, Constantine Partasides, Alan Redfern, and Martin Hunter (Oxford University Press, Fifth Ed., 2009) [“Redfern and Hunter”] as follows: “11.56. First, the New York Convention does not permit any review on the merits of an award to which the Convention applies. B [This statement, which was made in an earlier edition of this book, has since been cited with approval by the Supreme Court of India in Renusagar Power Co. Ltd. v. General Electric Co. The court added that in its opinion ‘the scope of enquiry before the court in which the award is sought to be enforced is limited [to the grounds mentioned in the Act] and does not enable a party to the said proceedings to impeach the Award on merits’]. Nor does the Model Law.” The same theme is echoed in standard textbooks on international arbitration. Thus, in International Commercial Arbitration by Gary B. Born (Wolters Kluwer, Second Ed., 2014) [“Gary Born”], the learned author deals with this aspect of the matter as follows: “[12] No Judicial Review of Merits of Foreign or Non- Domestic Awards in Recognition Actions It is an almost sacrosanct principle of international arbitration that courts will not review the substance of arbitrators’ decisions contained in foreign or nondomestic arbitral awards in recognition proceedings. Virtually every authority acknowledges this rule and virtually nobody suggests that this principle should be abandoned. When national courts do review the merits of awards, they labour to categorize their action as an application of public policy, excess of authority, or some other Article V exception, rather than purporting to justify a review of the merits. [a] No Judicial Review of Awards Under New York and Inter- American Conventions G Neither the New York Convention nor the Inter-American Convention contains any exception permitting non-enforcement of an award simply because the arbitrators got their decision on the substance of the parties’ dispute wrong, or even badly wrong. This is reasonably clear from the language of the Convention, H

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A 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. B 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 C 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 D [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 the manner in which the arbitrators decide on the merits, with as the only reservation, the respect of international public E policy. Even if blatant, a mistake of fact or law, if made by the arbitral tribunal, is not a ground for refusal of enforcement of the tribunal’s award.” Or, as a Brazilian recognition decision under the Convention held [Judgment of 19 August 2009, Atecs Mannesmann GmbH F v. Rodrimar S/A Transportes Equipamentos Industriais e Armazes Gerais, XXXV Y.B. Comm. Arb. 330, 331 (Brazilian Tribunal de Justiça) (2010)]: “these questions pertain to the merits of the arbitral award that, according to precedents from the Federal Supreme Court G and of this Superior Court of Justice, cannot be reviewed by this Court since recognition and enforcement of a foreign award is limited to an analysis of the formal requirements of the award.”

SSANGYONG ENG. & CONST. CO. LTD. v. NATIONAL 575 HIGHWAYS AUTH. OF INDIA (NHAI)[R. F. NARIMAN, J.]

Commentators have uniformly adopted the same view of the A Convention [See, for e.g., K.-H. Böckstiegel, S. Kröll & P. Nacimiento, Arbitration in Germany 452 (2007)].” (at pp. 3707-3710) (emphasis supplied) B Likewise, the UNCITRAL Secretariat Guide on the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, 1958) (2016 Ed.) [“UNCITRAL Guide on the New York Convention”] also states: “9. The grounds for refusal under article V do not include an C erroneous decision in law or in fact by the arbitral tribunal. A court seized with an application for recognition and enforcement under the Convention may not review the merits of the arbitral tribunal’s decision. This principle is unanimously confirmed in the case law and commentary on the New York Convention.” D The Ground of Challenge under Section 34(2)(a)(iii)

34Copy pinpoint34. Under Section 34(2)(a)(iii), one of the grounds of challenge of an arbitral award is that a party is unable to present its case. In order to understand the import of Section 34(2)(a)(iii), Section 18 of the 1996 Act should also be seen. Section 18 reads as follows: E “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.” (emphasis supplied) Section 24(3) also states as follows: F

“24. Hearings and written proceedings.— xxx xxx xxx (3) All statements, documents or other information supplied to, or applications made to the arbitral tribunal by one party shall be G 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.”

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A 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 (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 C 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.

D (3) Unless otherwise agreed by the parties, the expert shall, on the request of a party, make available to that party for examination all documents, goods or other property in the possession of the expert with which he was provided in order to prepare his report.”

35Copy pinpoint35. Section 24(3) is a verbatim reproduction of Article 24(3) of the UNCITRAL Model Law on International Commercial Arbitration E [“UNCITRAL Model Law”]. Similarly, Section 26(1) and (2) is a verbatim reproduction of Article 26 of the UNCITRAL Model Law. Sub-section (3) of Section 26 has been added by the Indian Parliament in enacting the 1996 Act.

36Copy pinpoint36. Sections 18, 24(3), and 26 are important pointers to what is contained in the ground of challenge mentioned in Section 34(2)(a)(iii). Under Section 18, each party is to be given a full opportunity to present its case. Under Section 24(3), all statements, documents, or other information supplied by one party to the arbitral tribunal shall be communicated to the other party, and any expert report or document on which the arbitral tribunal relies in making its decision shall be communicated to the parties. Section 26 is an important pointer to the fact that when an expert’s report is relied upon by an arbitral tribunal, the said report, and all documents, goods, or other property in the possession of the expert, with which he was provided in order to prepare his report, must first be made available to any party who requests for these things. Secondly, once the report is arrived at, if requested, parties

SSANGYONG ENG. & CONST. CO. LTD. v. NATIONAL 577 HIGHWAYS AUTH. OF INDIA (NHAI)[R. F. NARIMAN, J.]

have to be given an opportunity to put questions to him and to present their own expert witnesses in order to testify on the points at issue.

37Copy pinpoint37. Under the rubric of a party being otherwise unable to present its case, the standard textbooks on the subject have stated that where materials are taken behind the back of the parties by the Tribunal, on which the parties have had no opportunity to comment, the ground under B Section 34(2)(a)(iii) would be made out. In New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards – Commentary, edited by Dr. Reinmar Wolff (C.H. Beck, Hart, Nomos Publishing, 2012), it is stated: “4. Right to Comment C According to the principle of due process, the tribunal must grant the parties an opportunity to comment on all factual and legal circumstances that may be relevant to the arbitrators’ decision- making. a) Right to Comment on Evidence and Arguments D 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 E 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. F 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 G 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 considerable leeway in setting and adjusting the procedures by which parties respond to one another’s submissions and H

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A evidence, reasoning that there were “several ways of conducting arbitral proceedings.” Accordingly, absent any specific agreement by the parties, the arbitral tribunal has wide discretion in arranging the parties’ right to comment, permitting or excluding the introduction of new claims, and determining which party may have the final word. B b) Right to Comment on Evidence Known to or Determined by the Tribunal The parties’ right to comment also extends to facts that have not been introduced in the proceedings by the parties, but that the tribunal has raised sua sponte, provided it was entitled to do so. For instance, if the tribunal gained “out of court knowledge” of circumstances (e.g., through its own investigations), it may only rest its decision on those circumstances if it informed both parties in advance and afforded them the opportunity to comment thereon. The same rule applies to cases where an arbitrator intends to base the award on his or her own expert knowledge, unless the arbitrator was appointed for his or her special expertise or knowledge (e.g., in quality arbitration). Similarly, a tribunal must give the parties an opportunity to comment on facts of common knowledge if it intends to base its decision on those facts, unless the parties should have known that those facts could be decisive for the final award.” (emphasis in original) In Fouchard, Gaillard, Goldman on International Commercial Arbitration (Kluwer Law International, 1999) [“Fouchard”] it is stated: F “In some rare cases, recognition or enforcement of an award has been refused on the grounds of a breach of due process. One example is the award made in a quality arbitration where the defendant was never informed of the identity of the arbitrators hearing the dispute [Danish buyer v German (F.R.) seller, IV G Y.B. Comm. Arb. 258 (1979) (Oberlandesgericht Cologne)]. It also occurred in a case where various documents were submitted by one party to the arbitral tribunal but not to the other party [G.W.I. Kersten & Co. B.V. v. Société Commerciale Raoul Duval et Co., XIX Y.B. Comm. Arb. 708 (Amsterdam Court of Appeals) (1992)], in another case where the defendant was not given the H

SSANGYONG ENG. & CONST. CO. LTD. v. NATIONAL 579 HIGHWAYS AUTH. OF INDIA (NHAI)[R. F. NARIMAN, J.]

opportunity to comment on the report produced by the expert A 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 B 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 C 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 D 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.3d 580, 592 (7th Cir. 2001)].” E

(at p. 3225) Similarly, in Redfern and Hunter (supra): “11.73. The national court at the place of enforcement thus has a limited role. Its function is not to decide whether or not the award is correct, as a matter of fact and law. Its function is simply to decide whether there has been a fair hearing. One mistake in the course of the proceedings may be sufficient to lead the court to conclude that there was a denial of justice. For example, in a case to which reference has already been made, a US corporation, which had been told that there was no need to submit detailed invoices, had its claim rejected by the Iran-US Claims Tribunal, for failure to submit detailed invoices! The US court, rightly it is suggested, refused to enforce the award against the US company [Iran Aircraft Ind v Avco Corp. 980 F.2d. 141 (2nd Cir. 1992)]. In different circumstances, a German court held that an award H

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A that was motivated by arguments that had not been raised by the parties or the tribunal during the arbitral proceedings, and thus on which the parties had not had an opportunity to comment, violated due process and the right to be heard [See the decision of the Stuttgart Court of Appeal dated 6 October 2001 referred to in Liebscher, The Healthy Award, Challenge in International B Commercial Arbitration (Kluwer law International, 2003), 406]. Similarly, in Kanoria v Guinness, [2006] EWCA Civ. 222, the English Court of Appeal decided that the respondent had not been afforded the chance to present its case when critical legal arguments were made by the claimant at the hearing, which the C respondent could not attend due to a serious illness. In the circumstances, the court decided that ‘this is an extreme case of potential injustice’ and resolved not to enforce the arbitral award. 11.74. Examples of unsuccessful ‘due process’ defences to enforcement are, however, more numerous. In Minmetals D Germany v Ferco Steel, [1999] CLC 647, the losing respondent in an arbitration in China opposed enforcement in England on the grounds that the award was founded on evidence that the arbitral tribunal had obtained through its own investigation. An English court rejected this defence on the basis that the respondent was eventually given an opportunity to ask for the disclosure of evidence E at issue and comment on it, but declined to do so. The 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.”

38Copy pinpoint38. In Minmetals Germany GmbH v. Ferco Steel Ltd., [1999] F 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 G 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 H

SSANGYONG ENG. & CONST. CO. LTD. v. NATIONAL 581 HIGHWAYS AUTH. OF INDIA (NHAI)[R. F. NARIMAN, J.]

into the facts, the effect of this provision will be to avoid A 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 to which the parties had agreed to arbitrate provided: B ‘Article 26 – The parties shall give evidence for the facts on which their claim or defence is based. The arbitration tribunal may, if it deems it necessary, make investigations and collect evidence on its own initiative.’ That, however, was not treated by the Beijing court as permitting C the tribunal to reach its conclusions and make an award without first disclosing to both parties the materials which it had derived from its own investigations. That quite distinctly appears from the grounds of the court’s decision – that Ferco was, for reasons for which it was not responsible, unable ‘to state its view’. Those reasons could only have been its lack of prior access to the sub- D sale award and the evidence which underlay it. I conclude that it was to give Ferco’s lawyer an opportunity to refute this material that the Beijing court ordered a ‘resumed’ arbitration.” (at pp. 656-657) E The Ground of Challenge under Section 34(2)(a)(iv)

39Copy pinpoint39. So far as this defence is concerned, standard textbooks on the subject have held that the expression “submission to arbitration” either refers to the arbitration agreement itself, or to disputes submitted to arbitration, and that so long as disputes raised are within the ken of the arbitration agreement or the disputes submitted to arbitration, they cannot be said to be disputes which are either not contemplated by or which fall outside the arbitration agreement. The expression “submission to arbitration” occurs in various provisions of the 1996 Act. Thus, under Section 28(1)(a), an arbitral tribunal “… shall decide the dispute submitted to arbitration …”. Section 43(3) of the 1996 Act refers to “… an arbitration agreement to submit future disputes to arbitration ….”. Also, it has been stated that where matters, though not strictly in issue, are connected with matters in issue, they would not readily be held to be matters that could be considered to be outside or beyond the scope of submission to arbitration. Thus, in Fouchard (supra), it is stated: H

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A “This provision applies where the arbitrators have gone beyond the terms of the arbitration agreement. It complements Article V, paragraph 1(a), which concerns invalid arbitration agreements. The two grounds are similar in nature: in both cases, the arbitrator will have ruled in the absence of an arbitration agreement, either because the agreement is void (as in subsection (a)) or because it B 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,” C 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 3 o 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 D 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). E Generally speaking, such situations cannot be said to be outside the terms of the arbitration agreement within the meaning of the New York Convention. In practice, it is only where the terms of reference – which, provided that they have been accepted by the parties, can constitute a form of arbitration agreement – set out the parties’ claims in detail that arbitrators who have decided issues other than those raised in such claims can be said both to have ruled ultra petita and to have exceeded the terms of the arbitration agreement. If, on the other hand, the arbitration agreement is drafted in general terms and the claims are not presented in a way that contractually determines the issues to be resolved by the arbitrators, a decision that is rendered ultra petita would not contravene Article V, paragraph 1(c). It is important to note that the Convention provides that the refusal of recognition or enforcement can be confined to aspects of the award which fail to comply with the terms of the arbitration H

SSANGYONG ENG. & CONST. CO. LTD. v. NATIONAL 583 HIGHWAYS AUTH. OF INDIA (NHAI)[R. F. NARIMAN, J.]

agreement, provided that those aspects can be separated from A the rest of the award (Art. V(1)(c)). Once again, the courts have taken a very restrictive view of the application of this ground.” (at p. 988) B Similarly, Gary Born (supra) states: “There are a number of recurrent grounds for claiming that an arbitral tribunal has exceeded its authority. These generally involve claims of either extra petita (the tribunal went beyond the limits of its authority) or infra petita (the tribunal failed to fulfil its mandate by not exercising authority it was granted). [a] Awards Ruling on Matters Outside Scope of Parties’ Submissions Article 34(2)(a)(iii) permits annulment of awards where the arbitrators “rule (d) on issues not presented to [them] by the parties” – so-called “extra petita” or “ultra petita” [Allen v. Hounga [2012] EWCA Civ 609 (English Ct. App.)] As with other grounds for annulment, most courts are reluctant to accept claims that the arbitrators exceeded the scope of the parties’ submissions [See, e.g., Stark v. Sandberg, Phoenix & von Gontard, PC, E 381 F.3d 793, 800 (8th Cir. 2004)]. One of the clearest examples of an excess of authority under Article 34(2)(a)(iii) and parallel provisions of other national arbitration legislation is a tribunal’s award of relief that neither party requested. A French appellate decision explained the rationale F for these 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 G (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 H

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A 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 B 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)]. Nonetheless, an award will not be subject to annulment where the arbitrators grant relief that, while different from what C a party requested, is subsumed within relief that the party requested (most obviously, a lower quantum of damages than that requested by the claimant). More generally, courts also accord arbitrators substantial discretion in fashioning remedies, including granting relief that neither party has expressly requested [See, e.g., Harper Ins. Ltd. v. Century Indem. Co., 819 F. Supp. 2d 270, 277 D (S.D.N.Y 2011)]. Although categorical rules are impossible to formulate, the decisive issue appears to be whether the relief granted by the arbitrators was subsumed within or reasonably related to that requested by the parties. Another example of an excess of authority under Article E 34(2)(a)(iii) and parallel provisions of other arbitration statues involves awards deciding issues or disputes that the parties have not submitted to the arbitral tribunal [See, e.g., Emilio v. Sprint Spectrum LP, 2013 WL 203361 (2d Cir.)]. A tribunal exceeds its authority by ruling on an issue not presented by the parties in the F arbitration even if the issue or dispute that it addresses is within the scope of the parties’ arbitration agreement. As one court explained: “Arbitrators have the authority to decide only those issues actually submitted by the parties” [AGCO Corp. v. Anglin, 216 F.3d 589, 593 (7th Cir. 2000)].

G Doubts about the scope of the parties’ submissions are resolved in most legal systems in favour of encompassing matters decided by the arbitrators. Put differently, a considerable measure of judicial deference is accorded to the arbitrators’ interpretation of the scope of their mandate under the parties’ submissions [See, e.g., Downer v. Siegel, 489 F.3d 623, 627 (5th Cir. 2007)]. In the words of one court, “[w]e will not over-scrutinize the panel’s

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A for consequential loss, when the contract between the parties clearly excluded this head of damage [Libyan American Oil Company (Liamco) v Socialist Peoples Libyan Arab Yamahirya, (1982) VII Y.B. Comm. Arb. 382]. The court stated that, without an in-depth review of the law of contract, the court could not state whether a breach of contract would abrogate a clause which B excluded consequential damages. However, ‘the standard of review of an arbitration award by an American Court is extremely narrow’, and (adopting the words of the US Court of Appeals in the well-known case of Parsons Whittemore Overseas Co Inc v Societe Generale de l’Industrie du Papier (RAKTA), 508 F.2d C 969 (2nd Cir. 1974)) the Convention did not sanction ‘second- guessing the arbitrators’ construction of the parties’ agreement’. Nor would it be proper for the court to ‘usurp the arbitrators’ role’ [Libyan American Oil Company (Liamco) v Socialist Peoples Libyan Arab Yamahirya, (1982) VII Y.B. Comm. Arb., 382 at 388]. Accordingly, enforcement was ordered.” D

40Copy pinpoint40. The Court of Appeal of Singapore, in CRW Joint Operation v. PT Perusahaan Gas Negara (Persero) TBK, [2011] SGCA 33, held as follows: “25. The court’s power to set aside an arbitral award is limited to setting aside based on the grounds provided under Art 34 of the Model Law and s 24 of the IAA. As declared by this court in Soh Beng Tee & Co Pte Ltd v Fairmount Development Pte Ltd [2007] 3 SLR(R) 86 (“Soh Beng Tee”) at [59], the current legal framework prescribes that the courts should not without good reason interfere in the arbitral process. This policy of minimal curial intervention by respecting finality in the arbitral process acknowledges the primacy which ought to be given to the dispute resolution mechanism that the parties have expressly chosen.

26. However, 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 H Jurisdictions (Sweet & Maxwell, 3rd Ed, 2010) at para 7-001).

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27. While the Singapore courts infrequently exercise their power A 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 B 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 non-existence of a valid and binding arbitration clause, or other grounds that go to the adjudicability of the claim determined by the arbitral tribunal). Second, an award may be challenged on procedural grounds (eg, failure to give proper notice of the appointment of an arbitrator), and, third, the award may be challenged on substantive grounds (eg, breach of the public policy of the place of arbitration).” xxx xxx xxx

31. It is useful, at this juncture, to set out some of the legal principles underlying the application of Art 34(2)(a)(iii) of the Model Law. First, Art 34(2)(a)(iii) is not concerned with the situation where an arbitral tribunal did not have jurisdiction to deal with the dispute which it purported to determine. Rather, it applies where the arbitral tribunal improperly decided matters that had not been submitted to it or failed to decide matters that had been submitted to it. In other words, Art 34(2)(a)(iii) addresses the situation where the arbitral tribunal exceeded (or failed to exercise) the authority that the parties granted to it (see Gary B Born, International Commercial Arbitration (Wolters Kluwer, 2009) at vol 2, pp 2606– 2607 and 2798–2799). This ground for setting aside an arbitral award covers only an arbitral tribunal’s substantive jurisdiction and does not extend to procedural matters (see Robert Merkin & Johanna Hjalmarsson, Singapore Arbitration Legislation Annotated (Informa, 2009) (“Singapore Arbitration Legislation”) at p 117). G

32. Second, it must be noted that a failure by an arbitral tribunal to deal with every issue referred to it will not ordinarily render its arbitral award liable to be set aside. The crucial question in every case is whether there has been real or actual prejudice to either (or both) of the parties to the dispute. In this regard, the following H

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A passage in Redfern and Hunter ([27] supra at para 10.40) correctly summarises the position: The significance of the issues that were not dealt with has to be considered in relation to the award as a whole. For example, it is not difficult to envisage a situation in which the issues that were overlooked were of such importance that, if they had been dealt with, the whole balance of the award would have been altered and its effect would have been different. [emphasis added]

33. Third, it is trite that mere errors of law or even fact are not sufficient to warrant setting aside an arbitral award under Art 34(2)(a)(iii) of the Model Law (see Sui Southern Gas 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 both of the parties to the dispute (see above at [31]).” G (emphasis supplied) The UNCITRAL Guide on the New York Convention (supra) states: “2. Article V (1)(c) finds its roots in article 2(c) of the 1927 Geneva Convention. The language at the outset of article V (1)(c), H

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providing a ground for refusal of recognition or enforcement of awards exceeding the scope of the arbitration agreement, is largely unchanged from its counterpart in the 1927 Geneva Convention. The New York Convention, however, limits the scope of article V (1)(c) by omitting language found in article 2 of the 1927 Geneva Convention which permitted enforcing authorities to delay, or create conditions in relation to, the enforcement of awards, where the award did not cover all the questions submitted to the arbitral tribunal.

3. The drafters of the New York Convention further built on the 1927 Geneva Convention by explicitly allowing for severability of the part of the award dealing with a difference not contemplated by or not falling within the terms of the submission to arbitration, or containing decisions on matters beyond the scope of the submission to arbitration, in order to permit recognition and enforcement of the part of the award containing decisions on matters submitted to arbitration. Although there is generally little discussion of article V (1)(c) in the travaux préparatoires, the inclusion of the provision allowing for partial recognition and enforcement was the subject of some debate. The travaux préparatoires show that various concerns were raised over the form and substance of this principle, including concerns that severability of arbitral awards would in practice “open the door to E a review as to substance”, which the drafters of the New York Convention sought to prevent. Courts have since uncompromisingly asserted that article V (1)(c) does not permit an enforcing authority to reconsider the merits of a dispute. xxx xxx xxx F

6. Courts and commentators agree that an arbitration agreement constitutes a “submission to arbitration” within the meaning of article V (1)(c). Consequently, where an arbitral tribunal has rendered an award which decides matters beyond the scope of the arbitration agreement, there is a ground for refusing to enforce G an award under article V (1)(c).

7. Courts have also held that the term “submission to arbitration” can include an arbitration agreement modified, amended or

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A 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 B 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.”

C 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, D separate ground for refusal to enforce an award rendered ultra petita, courts have rejected challenges to recognition or enforcement under article V (1)(c) based on the fact that the arbitrators had exceeded their authority by deciding on issues or granting forms of relief beyond those pleaded by the parties. As one United States court observed, “[u]nder the New York E Convention, we examine whether the award exceeds the scope of the [arbitration agreement], not whether the award exceeds the scope of the parties’ pleadings”. This interpretation of article V (1)(c) which distinguishes the parties’ pleadings or prayers for relief from the “submission to arbitration” referred to in article V F (1)(c), is consistent with a narrow interpretation of the grounds for refusal to recognize or enforce an award.” (emphasis supplied)

41Copy pinpoint41. In an early U.S. judgment, viz., Parsons & Whittemore Overseas Co., Inc., v. Societe Generale De L’industrie Du Papier G (RAKTA), 508 F.2d 969 (United States Court of Appeals, Second Circuit, 1974) [“Parsons”], it was held: “19. Under Article V(1)(c), one defending against enforcement of an arbitral award may prevail by proving that:

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20. The award deals with a difference 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.

21. This provision tracks in more detailed form 10(d) of the Federal Arbitration Act, 9 U.S.C. 10(d), which authorizes vacating an award ‘where the arbitrators exceeded their powers.’ Both provisions basically allow a party to attack an award predicated upon arbitration of a subject matter not within the agreement to submit to arbitration. This defense to enforcement of a foreign award, like the others already discussed, should be construed narrowly. Once again, a narrow construction would comport with the enforcement-facilitating thrust of the Convention. In addition, the case law under the similar provision of the Federal Arbitration Act strongly supports a strict reading. See, e.g., United Steelworkers of America v. Enterprise Wheel & Car Corp., 363 U.S. 593, 80 S.Ct. 1358, 4 L.Ed.2d 1424 (1960); Coenen v. R. W. D Pressprich & Co., 453 F.2d 1209 (2d Cir.), cert. denied, 406 U.S. 949, 92 S.Ct. 2045, 32 L.Ed.2d 337 (1972).

22. In making this defense as to three components of the award, Overseas must therefore overcome a powerful presumption that the arbitral body acted within its powers. Overseas principally 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, G 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 H

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A 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 powers and usurp the arbitrator’s role. The district court took a proper view of its own jurisdiction in refusing to grant relief on this ground.” B (emphasis supplied) In Lesotho Highlands Development Authority v. Impregilo SpA and Ors., [2005] 3 All ER 789 [HL], after setting out the English statutory provision, the precise question which faced the Court was stated thus: “[3] …… Section 68, so far as material, reads as follows: “(1) A party to arbitral proceedings may (upon notice to the other parties and to the tribunal) apply to the court challenging an award in the proceedings on the ground of serious irregularity affecting the tribunal, the proceedings or the award … (2) Serious irregularity means an irregularity of one or more of the following kinds which the court considers has caused or will cause substantial injustice to the applicant – … (b) the tribunal exceeding its powers (otherwise than by exceeding its substantive jurisdiction: see section 67)” The question arises how section 68(2)(b) and section 69, so far as the latter excludes a right of appeal on a question of law, are to operate. Specifically, can an alleged error of arbitrators in interpreting the underlying or principal contract be an excess of power under section 68(2)(b), so as to give the court the power to intervene, rather than an error of law, which can only be challenged under section 69 if the right of appeal has not been excluded?” This was answered by the Court, thus: G “[23] Contrary to the view I have expressed, I will now assume that the tribunal committed an error of law. That error of law could have taken more than one form. The judge (para 25) and the Court of Appeal (para 35) approached the matter on the basis that the tribunal erred in the interpretation of the underlying contract. H

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Another possibility is that the tribunal misinterpreted its powers, A under section 48(4) to express the award in any currency. Let me approach the matter on the basis that there was a mistake by the tribunal in one of these forms. Whichever is the case, the highest the case can be put is that the tribunal committed an error of law.” B xxx xxx xxx “[30] The New York Convention on the recognition and enforcement of Foreign arbitral awards 1958 and article 34 of the UNCITRAL Model Law on International Commercial Arbitration were in part a provenance of section 68: see General Note to C 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) D 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 E 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 311-318; Domenico Di Pietro and Martin Platte, Enforcement F of International Arbitration Awards: The New York Convention of 1958 (2001), pp 158-162. By citing the Parsons decision counsel for the contractors alerted the House to this analogy. It points to a narrow interpretation of section 68(2)(b). The policy underlying section 68(2)(b) as set out in the DAC report similarly G points to a restrictive interpretation. [31] By its very terms section 68(2)(b) assumes that the tribunal acted within its substantive jurisdiction. It is aimed at the tribunal exceeding its powers under the arbitration agreement, terms of reference or the 1996 Act. Section 68(2)(b) does not H

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A permit a challenge on the ground that the tribunal arrived at a wrong conclusion as a matter of law or fact. It is not apt to cover a mere error of law. This view is reinforced if one takes into account that a mistake in interpreting the contract is the paradigm of a “question of law” which may in the circumstances specified in section 69 be appealed unless the parties have excluded that right by agreement. In cases where the right of appeal has by agreement, sanctioned by the Act, been excluded, it would be curious to allow a challenge under section 68(2)(b) to be based on a mistaken interpretation of the underlying contract. Moreover, it would be strange where there is no exclusion agreement, to allow parallel challenges under section 68(2)(b) and section 69. [32] In order to decide whether section 68(2)(b) is engaged it will be necessary to focus intensely on the particular power under an arbitration agreement, the terms of reference, or the 1996 Act which is involved, judged in all the circumstances of the case. In D making this general observation it must always be borne in mind that the erroneous exercise of an available power cannot by itself amount to an excess of power. A mere error of law will not amount to an excess of power under section 68(2)(b). [33] For these reasons the Court of Appeal erred in concluding E that the tribunal exceeded its powers on the currency point. If the tribunal erred in any way, it was an error within its power. [34] I am glad to have arrived at this conclusion. It is consistent with the legislative purpose of the 1996 Act, which is intended to promote one-stop adjudication. If the contrary view of the Court F of Appeal had prevailed, it would have opened up many opportunities for challenging awards on the basis 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 G 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)

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The High Court of Ireland, in Patrick Ryan & Ann Ryan and A 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 second-guess the construction of the relevant contractual issue in that case by the arbitrator by way of a set aside application. Laffoy J. stated that if the court were to do so, it would be usurping the arbitrator’s role (para. 34, p. 16). In Delargy (Delargy v. Hickey [2015] IEHC 436), Gilligan J. stated: “It is no function of this Court to attempt in any way to second guess the decision as arrived at by the arbitrator and this Court does not propose to do so.” (para. 74, p. 37). Later in his judgment, Gilligan J. stated that: E “This Court does not consider that it is appropriate to revisit the merits of the arbitrator’s award.” (para. 78, p. 39).

25. In O’Leary Lissarda (O’Leary Lissarda v. Ryan [2015] IEHC 820), McGovern J. noted the acknowledgment of the F applicant that an application to set aside an award “…is not a proceeding in the nature of an appeal against the arbitral award on the merits.” (para. 5, p. 2). He rejected one of the grounds on which it was sought to set aside the award in that case on the basis that it “… effectively amounts to an attempt to appeal the arbitrator’s decision which is not permissible.” G (para. 11, p. 4). xxx xxx xxx “39. The Irish courts have had the opportunity of considering the proper approach to be taken in considering a challenge to an award H

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A based on Article 34(2)(a)(iii) where it is suggested that an arbitrator has exceeded his or her authority or acted outside his or her mandate. The leading Irish case on this point is Snoddy (Snoddy v. Mavroudis [2013] IEHC 285). In Snoddy, (Snoddy v. Mavroudis [2013] IEHC 285) Laffoy J. quoted with approval the commentary contained in Mansfield in relation to Article B 34(2)(a)(iii). She stated as follows: “Mansfield’s commentary on that provision is that it is a ground – ‘[t]hat the award deals with a dispute not contemplated by C or not falling within the terms of the submission to arbitration, or contains decisions on matters beyond the scope of the submission to arbitration. Commentators have noted that ‘this ground is infrequently invoked and it is even less frequently accepted by national courts to set an award aside’ and international case-law decided under the Model Law D has held that this ground is to be narrowly construed.’ The commentators cited in that passage are Brekoulakis and Shore in Mistelis on Concise International Arbitration (1st Ed., Kluwer, 2010). In that text, the commentators also state (at p. 647) that ‘a strong presumption should exist that a tribunal E 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 F 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 G 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 H arbitrator. It is well established that article V(1)(c) must be

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construed narrowly and should never lead to a re- A examination of the merits of the award.’ Lord Steyn cited a decision of the US Federal Courts as authority for that last proposition: Parsons & Whittemore Overseas Co Inc v Sociéte Générale de l’Industrie du Papier, (1974) 508 F. 2d 969 (2nd Circuit). The limits on the excess of jurisdiction ground for setting aside an arbitration are, in my view, clearly brought home by the following passage from the opinion of Judge Smith in the Parsons case where he stated: ‘Although the Convention recognises 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 powers and usurp the arbitrator’s role.’” D (per Laffoy J. at para. 33, pp. 15 - 16).”

41. These dicta of Laffoy J. in Snoddy (Snoddy v. Mavroudis [2013] IEHC 285) were cited with approval and followed by Galligan J. in Delargy (Delargy v. Hickey [2015] IEHC 436) (at para. 31, pp. 13 - 14 and para. 65, pp. 33 - 34). The cases E make clear that there is a presumption that the arbitral tribunal has acted within its mandate and the onus of establishing otherwise rests with the party seeking to set aside the award on this ground.” (emphasis in original) F In State of Goa v. Praveen Enterprises, (2012) 12 SCC 581 [“Praveen Enterprises”], this Court set out what is meant by “reference to arbitration” as follows: “10. ”Reference to arbitration” describes various acts. Reference G to arbitration can be by parties themselves or by an appointing authority named in the arbitration agreement or by a court on an application by a party to the arbitration agreement. We may elaborate:

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A (a) If an arbitration agreement provides that all disputes between the parties relating to the contract (some agreements may refer to some exceptions) shall be referred to arbitration and that the decision of the arbitrator shall be final and binding, the “reference” contemplated is the act of parties to the arbitration agreement, referring their disputes to an agreed B arbitrator to settle the disputes. (b) If an arbitration agreement provides that in the event of any dispute between the parties, an authority named therein shall nominate the arbitrator and refer the disputes which required to be settled by arbitration, the “reference” C 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 from arbitration, then, the arbitrator will exclude the excepted matter and decide only those disputes which are arbitrable. But where the reference to the arbitrator is to decide specific disputes enumerated by the parties/ court/appointing authority, the arbitrator’s jurisdiction is circumscribed by the specific reference and the arbitrator can decide only those specific disputes.”

42Copy pinpoint42. A conspectus of the above authorities would show that where an arbitral tribunal has rendered an award which decides matters either

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beyond the scope of the arbitration agreement or beyond the disputes referred to the arbitral tribunal, as understood in Praveen Enterprises (supra), the arbitral award could be said to have dealt with decisions on matters beyond the scope of submission to arbitration.

43Copy pinpoint43. We therefore hold, following the aforesaid authorities, that in the guise of misinterpretation of the contract, and consequent “errors of jurisdiction”, it is not possible to state that the arbitral award would be beyond the scope of submission to arbitration if otherwise the aforesaid misinterpretation (which would include going beyond the terms of the contract), could be said to have been fairly comprehended as “disputes” within the arbitration agreement, or which were referred to the decision of the arbitrators as understood by the authorities above. If an arbitrator is alleged to have wandered outside the contract and dealt with matters not allotted to him, this would be a jurisdictional error which could be corrected on the ground of “patent illegality”, which, as we have seen, would not apply to international commercial arbitrations that are decided under Part II of the 1996 Act. To bring in by the backdoor grounds relatable to Section 28(3) of the 1996 Act to be matters beyond the scope of submission to arbitration under Section 34(2)(a)(iv) would not be permissible as this ground must be construed narrowly and so construed, must refer only to matters which are beyond the arbitration agreement or beyond the reference to the arbitral tribunal. E Most Basic Notions of Justice

44Copy pinpoint44. The expression “most basic notions of … justice” finds mention in Explanation 1 to sub-clause (iii) to Section 34(2)(b). Here again, what is referred to is, substantively or procedurally, some fundamental principle of justice which has been breached, and which shocks the conscience of 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 H

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8. Perhaps more probative, however, are the inferences to be drawn from the history of the Convention as a whole. The general pro-enforcement bias informing the Convention and explaining its C supersession of the Geneva Convention points toward a narrow reading of the public policy defense. An expansive construction of this defense would vitiate the Convention’s basic effort to remove preexisting obstacles to enforcement. [See Straus, Arbitration of Disputes between Multinational Corporations, in D New Strategies for Peaceful Resolution of International Business Disputes 114-15 (1971); Digest of Proceedings of International Business Disputes Conference, April 14, 1971, at 191 (remarks of Professor W. Reese)]. Additionally, considerations of reciprocity – considerations given express recognition in the Convention itself – counsel courts to invoke the public policy defense with caution lest foreign courts frequently accept it as a defense to enforcement of arbitral awards rendered in the United States.

9. We conclude, therefore, that the Convention’s public policy defense should be construed narrowly. Enforcement of foreign arbitral awards may be denied on this basis only where enforcement would violate the forum state’s most basic notions of morality and justice. [Restatement Second of the Conflict of Laws 117, comment c, at 340 (1971); Loucks v. Standard Oil Co., 224 N.Y. 99, 111, 120 N.E. 198 (1918)].” In Dongwoo Mann+hummel Co. Ltd. v. Mann+hummel G Gmbh, [2008] SGHC 67, the High Court of Singapore held: “131. In PT Asuransi Jasa Indonesia (Persero) v Dexia Bank SA [2007] 1 SLR 597 (“PT Asuransi Jasa Indonesia (Persero)”), the Court of Appeal explained what would constitute a conflict with public policy (at [57] and [59]): H

SSANGYONG ENG. & CONST. CO. LTD. v. NATIONAL 601 HIGHWAYS AUTH. OF INDIA (NHAI)[R. F. NARIMAN, J.]

57. … The legislative policy under the Act is to minimise curial intervention in international arbitrations. Errors of law or fact made in an arbitral decision, per se, are final and binding on the parties and may not be appealed against or set aside by a court except in the situations prescribed under s 24 of the Act and Art 34 of the Model Law. … In the present context, errors of law or fact, per se, do not engage the public policy of Singapore under Art 34(2)(b) (ii) of the Model Law when they cannot be set aside under Art 34(2)(a) (iii) of the Model Law. xxx xxx xxx

59. Although the concept of public policy 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 E 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 F 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): In discussing the term ‘public policy’, it was understood G that it was not equivalent to the political stance or international policies of a State but comprised the fundamental notions and principles of justice… It was understood that the term ‘public policy’, which was used in the 1958 New York Convention and many other treaties, H

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A covered fundamental principles of law and justice in substantive as well as procedural respects. Thus, instances such as corruption, bribery or fraud and similar serious cases would constitute a ground for setting aside.” (emphasis in original)

B 132. In Profilati Italia SRL v Paine Webber Inc [2001] 1 Lloyd’s Rep 715 (“Profilati”), Moore-Bick J made the following observations in relation to the argument that non-disclosure of material documents constituted a breach of public policy in the context of s 68 of the English Arbitration Act 1996 (at [17], C [19] and [26]):

17. … Where the successful party is said to have procured the award in a way which is contrary to public policy it will normally be necessary to satisfy the Court that some form of reprehensible or unconscionable conduct on his part has D contributed in a substantial way to obtaining an award in his favour. Moreover, I do not think that the Court should be quick to interfere under this section [ie, s 68(2)(g) of the Arbitration Act 1996]. In those cases in which s. 68 has so far been considered the Court has emphasized that it is intended to operate only in extreme cases... E xxx xxx xxx

19. Where an important document which ought to have been disclosed is deliberately withheld and as a result the party withholding it has obtained an award in his favour the F Court may well consider that he procured that award in a manner contrary to public policy. After all, such conduct is not far removed from fraud… xxx xxx xxx

26. Even if there had been a deliberate failure to give G disclosure of the two documents in question it would still be necessary for Profilati to satisfy the Court that it had suffered substantial injustice as a result.” And finally, in BAZ v. BBA and Ors., [2018] SGHC 275, the High Court of Singapore stated: H

SSANGYONG ENG. & CONST. CO. LTD. v. NATIONAL 603 HIGHWAYS AUTH. OF INDIA (NHAI)[R. F. NARIMAN, J.]

“156. From the outset, it is important to reiterate that the public policy ground for setting aside or refusal of recognition/ enforcement is very narrow in scope. The Court of Appeal 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 D “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 interpreted as excluding instances or events relating to the manner in which an award was arrived at”.

157. It is clear that errors of law or fact, per se, do not engage the public policy of Singapore under Art 34(2)(b)(ii) of the Model Law when they cannot be set aside under Art 34(2)(a)(iii) of the Model Law (PT Asuransi at [57]), with the exception that the court’s judicial power to decide what the public policy of Singapore is cannot be abrogated (AJU v AJT [2011] 4 SLR 739 (“AJU v AJT”) at [62]). …… xxx xxx xxx

159. …… This balance is generally in favour of the policy of enforcing arbitral awards, and only tilts in favour of the countervailing public policy where the violation of that policy would “shock the conscience” or would be contrary to “the forum’s most basic notion of morality and justice”. In determining whether the balance tilts towards the countervailing public policy, it is important H

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A to consider both the subject nature of the public policy, the degree of violation of that public policy and the consequences of the violation.” (emphasis supplied)

45Copy pinpoint45. Given these parameters of challenge, let us now examine the B arguments of learned counsel on behalf of the appellant. There can be no doubt that the government guidelines that were referred to and strongly relied upon by the majority award to arrive at the linking factor were never in evidence before the Tribunal. In fact, the Tribunal relies upon the said guidelines by itself and states that they are to be found on a C certain website. The ground that is expressly taken in the Section 34 petition by the appellant is as follows: “It is pertinent to mention here that no such guidelines of the Ministry of Industrial Development had been filed on record by either of the parties and therefore, the Tribunal had no jurisdiction to rely upon the same while deciding the issue before it. Accordingly, the impugned Award is liable to be set aside.”

46Copy pinpoint46. Learned counsel for the respondent also agreed that these guidelines were never, in fact, disclosed in the arbitration proceedings. This being the case, and given the authorities cited hereinabove, it is clear that the appellant would be directly affected as it would otherwise be unable to present its case, not being allowed to comment on the applicability or interpretation of those guidelines. For example, the appellant 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).

47Copy pinpoint47. 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 H

SSANGYONG ENG. & CONST. CO. LTD. v. NATIONAL 605 HIGHWAYS AUTH. OF INDIA (NHAI)[R. F. NARIMAN, J.]

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 dispute as to whether the linking factor applied, thanks to the Circular dated 15.02.2013, is clearly something raised and argued by the parties, and is certainly something which would fall within the arbitration clause or the reference to arbitration that governs the parties. This being the case, this argument would not obtain and Section 34(2)(a)(iv), as a result, would not be attracted.

48Copy pinpoint48. However, when it comes to the public policy of India argument based upon “most basic notions of justice”, it is clear that this ground can be attracted only in very exceptional circumstances when the conscience of the Court is shocked by infraction of fundamental notions or principles of justice. It can be seen that the formula that was applied by the agreement continued to be applied till February, 2013 – in short, it is not correct to say that the formula under the agreement could not be applied in view of the Ministry’s change in the base indices from 1993- D 94 to 2004-05. Further, in order to apply a linking factor, a Circular, unilaterally issued by one party, cannot possibly bind the other party to the agreement without that other party’s consent. Indeed, the Circular itself expressly stipulates that it cannot apply unless the contractors furnish an undertaking/affidavit that the price adjustment under the Circular is acceptable to them. We have seen how the appellant gave E such undertaking only conditionally and without prejudice to its argument that the Circular does not and cannot apply. This being the case, it is clear that the majority award has created a new contract for the parties by applying the said unilateral Circular and by substituting a workable formula under the agreement by another formula de hors the agreement. F This being the case, a fundamental principle of justice has been breached, namely, that a unilateral addition or alteration of a contract can never be foisted upon an unwilling party, nor can a party to the agreement be liable to perform a bargain not entered into with the other party. Clearly, such a course of conduct would be contrary to fundamental principles of justice as followed in this country, and shocks the conscience of this G Court. However, we repeat that this ground is available only in very exceptional circumstances, such as the fact situation in the present case. Under no circumstance can any Court interfere with an arbitral award on the ground that justice has not been done in the opinion of the Court. H

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A That would be an entry into the merits of the dispute which, as we have seen, is contrary to the ethos of Section 34 of the 1996 Act, as has been noted earlier in this judgment.

49Copy pinpoint49. The judgments of the Single Judge and of the Division Bench of the Delhi High Court are set aside. Consequently, the majority award is also set aside. Under the Scheme of Section 34 of the 1996 Act, the disputes that were decided by the majority award would have to be referred afresh to another arbitration. This would cause considerable delay and be contrary to one of the important objectives of the 1996 Act, namely, speedy resolution of disputes by the arbitral process under the Act. Therefore, in order to do complete justice between the parties, invoking our power under Article 142 of the Constitution of India, and given the fact that there is a minority award which awards the appellant its claim based upon the formula mentioned in the agreement between the parties, we uphold the minority award, and state that it is this award, together with interest, that will now be executed between the parties. D The minority award, in paragraphs 11 and 12, states as follows: “11. I therefore award the claim of the Claimant in full.

12. Costs – no amount is awarded to the parties. Each party shall bear its own cost.”

E Given the reliefs claimed by the appellant in their statement of claim before the learned arbitrators, what is awarded to the appellant is the principal sum of INR 2,01,42,827/- towards price adjustment payable under sub-clause 70.3 of the contract, for the work done under the contract from September 2010 to May 2014, as well as interest at the rate of 10%, compounded monthly from the due date of payment to the F date of the award, i.e., 02.05.2016, plus future interest at the rate of 12% per annum (simple) till the date of payment.

50Copy pinpoint50. The appeal is allowed in the aforesaid terms.

Divya Pandey Appeal allowed. G