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Nature of Matter

Setting aside of Arbitral Award / Challenging of enforcement of Arbitral Award

Case Summary

1. The SGHC was required to decide an application by the plaintiffs (collectively, “Bloomberry”) to set aside a Final Award on quantum dated 27 September 2019 that was issued in favour of the defendants (collectively, “GGAM”) for wrongful termination of a Management Services Agreement dated 9 September 2011 (“the MSA”)
2. Alternatively, Bloomberry sought to challenge the enforcement of the Final Award in Singapore before the SGHC. The court had previously granted leave to GGAM to enforce the Final Award on 10 October 2019, and Bloomberry thus applied to the SGHC to set aside the leave order to enforce the Final Award in Singapore (“the Leave Order”).
3. For context, the Final Award follows an earlier award on liability dated 20 September 2016 (“Partial Award”). Bloomberry’s previous applications to set aside and resist enforcement of the Partial Award were dismissed in the SGHC’s decision in Bloomberry Resorts v Global Gaming [2020] SGHC 1 (“the 2020 Judgment”). Notwithstanding the 2020 Judgement, Bloomberry argues that there are additional grounds for setting aside the Final Award, which form the basis of this application before the SGHC to set aside and/or challenge enforcement of the Final Award.
4. In the Final Award, the Tribunal (a) ordered Bloomberry to pay GGAM a certain amount of damages, costs and interests, and (b) granted GGAM’s further request in respect of Bloomberry’s continued interference with GGAM’s sale of the shares, for an order that Bloomberry buy the Shares based on their value as of 9 December 2014 (“Constructive Remedy”). Under the terms of the order, Bloomberry were required to take all steps necessary to enable GGAM to sell the Shares such as directing Bloomberry’s agent and controlling shareholder Prime Metroline Holdings Inc (“PMHI”) to cooperate.
5. Bloomberry relied on the following grounds to set aside the Final Award under s 24 of the IAA, and Art 34 of the Model Law (as set out in the First Schedule to the IAA):

• First, the Constructive Remedy ordered in the Final Award relates to matters outside the scope of parties’ submission to arbitration because (i) it causes a non-party to the MSA to effectuate the Final Award, and (ii) it is a punitive remedy expressly disallowed by the terms of the arbitration agreement in the MSA.
• Second, there was a breach of natural justice because (i) the Tribunal refused to consider evidence material to remedies on the basis that it could not revisit liability; (ii) the Tribunal refused to apply its mind to Bloomberry’s demonstration that GGAM had committed procedural fraud; and (iii) GGAM made deliberate concealments in document production that were relevant for assessing damages arising from termination of the MSA.
• Third, the grant of damages to GGAM Netherlands is contrary to the public policy of Singapore because it upholds tax evasion fraud in the Philippines.

6. Alternatively, Bloomberry relied on the same further grounds for resisting enforcement of the Final Award, citing analogous articles in Art 36 of the Model Law.
7. In response, GGAM argued that Bloomberry continues to raise matters / arguments already decided in the Partial Award and the 2020 Judgment, and that Bloomberry’s grounds raised for setting aside / challenging the enforcement of the Final Award lack merit for the following reasons:

• First, the Constructive Remedy ordered in the Final Award is entirely within the scope of the parties’ submission to arbitration because (i) Bloomberry had applied to the domestic courts in Philippines, informing that the issue concerning the Shares would be decided by the Tribunal, (ii) the dispute falls within the language of the arbitration clause in the MSA, (iii) the parties actively submitted the issue concerning the Shares to the Tribunal through their pleadings / submissions and (iv) the damages awarded are compensatory rather than punitive in nature.
• Second, there was no breach of natural justice because (i) the Tribunal considered all evidence that was material to the Final Award, particularly on the question of reasonable certainty of damages vis-à-vis the FCPA Findings, and (ii) the SGHC’s findings in the 2020 Judgment on the concealment of documents and the probative value of the FCPA Findings, which are res judicata, confirm that the purported additional evidence would not have had a material impact on the Tribunal’s decision in the Final Award.
• Third, the grant of damages to GGAM Netherlands is not contrary to the public policy of Singapore because (i) there is no evidence of tax evasion fraud and (ii) GGAM Netherlands is entitled to the benefits of the Philippines-Netherlands Tax Treaty.

8. The issues to be determined by the SGHC were thus as follows:

• First, whether the Constructive Remedy should be set aside / refused enforcement, on the basis that it relates to matters falling outside the scope of the submission to arbitration (“Constructive Remedy Issue”);
• Second, whether the Final Award should be set aside / refused enforcement, on the basis of GGAM’s purported concealment of documents and the Tribunal’s alleged refusal to consider material evidence (i.e. the FCPA Findings) and the issue of procedural fraud (“Alleged Refusal to Consider Material Evidence Issue”); and
• Third, whether the grant of damages to GGAM Netherlands should be set aside / refused enforcement on the basis that it is a tax evasion scheme contrary to public policy (“Public Policy Issue”).

The SGHC rejected Bloomberry’s application to set aside and/or resist enforcement of the Final Award, for the following reasons:
Issue 1: Constructive Remedy Issue

The SGHC rejected Bloomberry’s framing of its argument that the Constructive Remedy fell outside the scope of the Tribunal’s jurisdiction, and instead found that Bloomberry’s case (even at its highest) had to do with the erroneous exercise by the Tribunal of an available power (i.e. constituting a mere error of law / fact) as opposed to the Tribunal’s exercise of a power that it did not possess: at [43]. Additionally, the SGCA found that the Constructive Remedy did not bind or impose an obligation on a non-party to the Arbitration (i.e. PMHI), neither did it affect PMHI’s rights or interests. Rather, it merely awarded GGAM damages for which Bloomberry is liable: at [44].

The SGHC instead accepted GGAM’s submission that the claim for wrongful interference fell within the arbitration agreement in Clause 19.1 of the MSA: at [47] and [51]. The SGHC also appeared to agree with GGAM’s submission that in any event, Bloomberry had positively submitted to the Tribunal’s jurisdiction over the wrongful interference claim when Bloomberry applied to the RTC informing that the issue concerning the Shares would be decided by the Tribunal: at [52].

The SGHC rejected Bloomberry’s argument that by granting the Constructive Remedy, the Tribunal has enforced its own orders, thereby depriving PMHI / Bloomberry of its passive remedy to challenge enforcement of an award. The basis for the SGHC’s decision was that (i) the Constructive Remedy has not yet taken effect and it remains open for Bloomberry to challenge the first part of the Constructive Remedy, (ii) the purpose of the Constructive Remedy has little to do with aiding the Tribunal to enforce its own orders, which is a causation argument rather than a jurisdictional challenge, and (ii) the Tribunal was entitled to treat its Interim Measures Order dated 9 December 2014 as binding on the parties in the Arbitration: at [54] to [57].

The SGHC also rejected Bloomberry’s argument that the Constructive Remedy was punitive and thus transgressed the arbitration agreement in Clause 19.2(c) of the MSA. The SGHC instead found that the language of the Final Award indicates that the Constructive Remedy was fashioned with a compensatory objective in mind, notwithstanding any language critical of GGAM’s conduct: at [63] to [64]. Any errors by the Tribunal on its choice of valuation date and percentage discount was at best an error of fact going to the merits, which the court will not interfere with: at [65].
Issue 2: Alleged Refusal to Consider Material Evidence Issue

The SGHC rejected Bloomberry’s arguments that the Final Award should be set aside / refused enforcement because of an alleged breach of natural justice, Bloomberry’s inability to present its case, and/or the arbitral procedure was not in accordance with the agreement of the parties.

First, the SGHC found that Tribunal had rightly denied Bloomberry’s Request for Reconsideration of the Partial Award as it did not have the power to revisit / reopen the issue of liability under Singapore law, and the Tribunal was thus right to reject matters that would effectively cause it to revisit / reconsider the issue of liability in the Partial Award: at [75].

Second, the SGHC was satisfied on the facts that the Tribunal did consider (a) the FCPA Findings for the purpose of assessing damages, and (b) Bloomberry’s submission that GGAM’s damages ought to be reduced to nil given the multiple breaches of the MSA and the existence of the FCPA Findings: at [76] to [78]. It is the Tribunal’s prerogative to determine the relevance of evidence, and any mistakes in the Tribunal’s factual findings are not to be revisited by the court: at [79].

Third, SGHC rejected Bloomberry’s argument that the Tribunal’s failure to address concealments in document production concomitantly resulted in an arbitral procedural that deviated from the arbitration agreement. The SGHC gave two reasons for doing so: first, the SGHC was not satisfied that GGAM had actually concealed documents in violation of the Tribunal’s orders. Second, the Tribunal had evaluated the FCPA Findings and concluded that there was an evidential gap between any concealment of documents and the termination of the MSA. Only significant (and not minor) departures from the parties’ agreed arbitral procedure are captured by Art 34(2)(a)(iv) of the Model law, and there was no evidence to suggest that the alleged departure from the Tribunal’s procedure (if any) was material to the Tribunal’s final determination: at [81].
Issue 3: Public Policy Issue

The SGHC rejected Bloomberry’s claim that the grant of damages to GGAM Netherlands was contrary to the public policy of Singapore: at [90].

The public policy ground of resisting enforcement / setting aside an award was a narrow ground that requires an outcome which would “shock the conscience”, or be contrary to “the forum’s most basic notion of morality and justice”: at [84].

The SGHC noted that the Tribunal had already dismissed Bloomberry’s ‘sham entity argument’ at paragraphs 178 to 180 of the Final Award, where Bloomberry argued that damages should not be awarded to GGAM Netherlands because the latter is a sham entity incapable of complying with the MSA’s obligations or performing the Post-Opening Services: at [85] – [86]. The SGHC agreed with GGAM’s submissions that the Tribunal’s findings of fact are binding on Bloomberry and cannot be reopened by the court: at [87].