Nature of Matter

Remission

Case Summary

1. The defendant commenced arbitration proceedings against the plaintiff claiming for the original price of iron ore fines (“Iron Ore Fines”) agreed upon by the parties under certain contracts.

   In her award (“Award”), the arbitrator (“Arbitrator”) found, inter alia, that:

1. the plaintiff was in breach of the contracts and owed the defendant fiduciary duties as the defendant’s agent in the onward sale of the Iron Ore Fines to third parties.
2. As the defendant’s fiduciary, the plaintiff was obliged to account to the defendant. The plaintiff had breached its fiduciary duties to the defendant by unilaterally calculating the final price of the Iron Ore Fines.
3. The parties had not agreed upon a final price for the Iron Ore Fines in the contracts, and the price adjustment mechanism (“Price Adjustment Mechanism”) set out in the addenda to the contracts was vague and ambiguous. In the circumstances, section 8 of the Sale of Goods Act 1979 (UK) (“SOGA”) applies and the plaintiff was obliged to pay the defendant a “reasonable price”.

The plaintiff then applied to set aside the Award on the basis that:

1. there had been a breach of the rules of natural justice in connection with the making of the Award;
2. the plaintiff had been unable to present its case under Art 34(2)(a)(ii) of the Model Law; and
3. the Award dealt with issues beyond the scope of the parties’ submission to Arbitration.

After the hearing of the setting aside application on 4 February 2022 (“4 February Hearing”), the plaintiff raised further grounds for setting aside the Award, which was that parties had not pleaded or raised: (i) the alleged ambiguity in the Price Adjustment Mechanism contained in the addenda (“Ambiguity Issue”); and (ii) the applicability of Section 8 of SOGA (“SOGA Issue”).

These grounds of challenge were not canvassed in the plaintiff’s supporting affidavit, and only came to the fore in the parties’ further submissions following the 4 February Hearing.

3 issues therefore arose for the High Court’s consideration:

1. Was the plaintiff was precluded from relying on the Ambiguity Issue or the SOGA Issue as a ground for setting aside the Award (“Issue 1”)
2. If Issue 1 was answered in the negative, did the Ambiguity Issue or the SOGA Issue provide a basis for setting aside the Award (“Issue 2”)?
3. If Issue 2 was answered in the affirmative, was it appropriate to remit the Award to the Tribunal (“Issue 3”)?

On Issue 2, the Court found that the Arbitrator had breached the rules of natural justice. Specifically, the Arbitrator had applied section 8(2) of the SOGA without giving parties reasonable notice that she would ultimately adopt a chain of reasoning based on that provision. As parties were not given a reasonable opportunity to present further evidence and/or submissions on the same, there was a breach of the fair hearing rule, which is a ground for setting aside the Award under s 24(b) of the International Arbitration Act.

As for Issue 3, the Court found it appropriate to suspend the setting aside proceedings and remit the Award to the Tribunal under Art 34(4) of the Model Law. This was because:

1. The defendant’s failure to request for remission of the Award during the 4 February Hearing was not a bar to remission. Art 34(4) of the Model Law does not impose time limits on when a request for remission must be made.
2. The Arbitrator’s breach of natural justice involved a sufficiently discrete and standalone factual issue – namely, what would constitute a “reasonable price” within the meaning of s 8(2) of the SOGA.
3. The totality of the Arbitrator’s conduct did not raise questions as to her ability to decide any remitted issues fairly, objectively and even-handedly.