England and Wales
Arbitrator’s duty to act fairly is recognized in the English Arbitration Act, 1996 (the English Act). In this regard, reference can be made to Section 33 of the English Act which defines the applicable due process standards in arbitrations. Section 33(1)(a) mandates the arbitral tribunals to “act fairly and impartially” “giving each party a reasonable opportunity of putting his case”. Under Section 33(b), it is the duty of an arbitrator “to provide a fair means” for resolving the matters submitted, taking into account considerations of time and expense as well as the special needs of the particular case.
Next in line is Section 68, which sets out grounds on which enforcement of an award can be challenged for “serious irregularity” of procedure. The term “serious irregularity” includes nine such grounds for challenging the award. The one that is of particular relevance here is Section 68(2)(b) which links it with Section 33. The conjoint reading of these two provisions establishes the constituents of inadequate arbitral due process and articulates the basic principle for determining the legitimacy of arbitral proceedings and determinations: the avoidance of “substantial injustice” to the party or parties. So in nutshell the English law is crystal clear in this regard and an award can be challenged for serious irregularity if an arbitrator acts in an unfair manner or does not provide adequate opportunity to any party to present its case. The relevant sections are reproduced below:
68 Challenging the award: serious irregularity.
(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.A party may lose the right to object (see section 73) and the right to apply is subject to the restrictions in section 70(2) and (3).
(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—
(a) failure by the tribunal to comply with section 33 (general duty of tribunal);
(b) the tribunal exceeding its powers (otherwise than by exceeding its substantive jurisdiction: see section 67);
(c) failure by the tribunal to conduct the proceedings in accordance with the procedure agreed by the parties;
(d) failure by the tribunal to deal with all the issues that were put to it;
(e) any arbitral or other institution or person vested by the parties with powers in relation to the proceedings or the award exceeding its powers;
(f) uncertainty or ambiguity as to the effect of the award;
(g) the award being obtained by fraud or the award or the way in which it was procured being contrary to public policy;
(h) failure to comply with the requirements as to the form of the award; or
(i) any irregularity in the conduct of the proceedings or in the award which is admitted by the tribunal or by any arbitral or other institution or person vested by the parties with powers in relation to the proceedings or the award.
(3) If there is shown to be serious irregularity affecting the tribunal, the proceedings or the award, the court may—
(a) remit the award to the tribunal, in whole or in part, for reconsideration,
(b) set the award aside in whole or in part, or
(c) declare the award to be of no effect, in whole or in part.The court shall not exercise its power to set aside or to declare an award to be of no effect, in whole or in part, unless it is satisfied that it would be inappropriate to remit the matters in question to the tribunal for reconsideration.
(4)The leave of the court is required for any appeal from a decision of the court under this section.
33 General duty of the tribunal
(1) The tribunal shall—
(a) act fairly and impartially as between the parties, giving each party a reasonable opportunity of putting his case and dealing with that of his opponent, and
(b) adopt procedures suitable to the circumstances of the particular case, avoiding unnecessary delay or expense, so as to provide a fair means for the resolution of the matters falling to be determined.
(2) The tribunal shall comply with that general duty in conducting the arbitral proceedings, in its decisions on matters of procedure and evidence and in the exercise of all other powers conferred on it.”
The Model Law which is inherited as a part of Arbitration Act (AA) and International Arbitration Act (IAA) (with some additions) in Singapore provides six grounds for setting aside awards. To shed some light on this issue, I would like to cite the speech of Justice Judith Prakash, Supreme Court of Singapore delivered in CIArb International Arbitration Conference 2013 wherein he stated that “The Model Law provides six grounds for setting aside awards. Breach of the rules of natural justice as such is not one of them, though it may be argued that Art 34(2)(a) encompasses the procedural fairness element of the rules. But, natural justice is an integral part of Singapore’s common law heritage”.
The breach of natural justice is a ground to set aside an award under Section 24 (b) of IAA. The leading decision in Singapore on this topic is the Court of Appeal’s decision in Soh Beng Tee & Co Pte Ltd v Fairmount Development Pte Ltd  3 SLR 86. That case firmly established that a party challenging an arbitral award as having contravened the rules of natural justice must establish four requirements: (a) which rule of natural justice has been breached; (b) how it was breached; (c) in what way the breach was connected to the making of the award; and (d) how the breach prejudiced the rights of the challenger. As regards the fourth requirement, the Court of Appeal emphasized that the prejudice suffered had to be actual or real. There has to be more than technical unfairness that caused no harm in the final analysis.
Here I would like to point out that there is a difference between the English Act and the Singaporean IAA in so far as the former states (at Section 68(2)) that: Serious irregularity means an irregularity of one or more of the following kinds [including a breach of the rules of natural justice] which the court considers has caused or will cause substantial injustice to the applicant whereas the IAA states that the High Court may……set aside the award of the arbitral tribunal if —a breach of the rules of natural justice occurred in connection with the making of the award by which the rights of any party have been prejudiced. To me, it means that while the English Act provides this ground even before the award is rendered (by using the word will cause), the Singaporean IAA provides this remedy once the party have been prejudiced i.e. after the award has been passed. Both Singapore and UK follow minimal curial intervention. The relevant section is reproduced below:
Section 24 of IAA
24. Notwithstanding Article 34(1) of the Model Law, the High Court may, in addition to the grounds set out in Article 34(2) of the
Model Law, set aside the award of the arbitral tribunal if —
(a) the making of the award was induced or affected by fraud or corruption; or
(b) a breach of the rules of natural justice occurred in connection with the making of the award by which the rights of any party have been prejudiced.
The Indian Arbitration Act, 1996 (the Indian Act) does not explicitly recognizes natural justice as a ground to set aside an award. The arbitrator has a duty of disclosure under Section 12 of the Indian Act. Sub-sections (1), (2) and (3) of Section 13 of the Indian Act are identical to clauses (1) and (2) of Article 13 of the Model Law which provide for a challenge to an arbitrator on the ground of ‘justifiable doubts as to his impartiality or independence’ and for an opportunity to the concerned arbitrator to withdraw and, failing that, to the arbitral tribunal to decide on the challenge,. But the similarity ends there. Whereas clause (3) of Article 13 of the Model Law goes further and provides to the party failing in its challenge before the arbitral tribunal an additional and effective remedy viz. the remedy before ‘the court or the other authority specified in article 6’, sub-section (4) of Section 13 of the Indian Act omits the Model Law provision for adopting that course altogether. Instead, sub-section (4) rather straightforwardly directs the sole arbitrator or the multi-member arbitral tribunal, as the case may be, to complete the arbitral process without any let or hindrance.
After the award is made in pursuance of sub-section (4) of Section 13 of the Indian Act, an application may be made under sub-section (5) for setting aside the award in accordance with Section 34 of the Indian Act. But even Section 34 permits an award to be questioned only on the grounds strictly specified therein and a bare look at the grounds specified in Section 34 shows that they do not take in the ground of possible bias or partiality or unfairness or breach of natural justice by the arbitrator as a ground of challenge to the award. The problem of bias, therefore, not only remains unresolved at the arbitration (trial) stage, but it also stands compounded at the post-award stage by the absence of an appropriate remedy under the Indian Act.
Briefly, the grounds for setting aside award are:
- Incapacitation of a party;
- Arbitration agreement is invalid; or
- Lack of notice of appointment of arbitrator/arbitration proceedings or the party was unable to present the case; or
- Excess of jurisdiction on the part of the arbitrator; or
- Arbitration tribunal not properly constituted; or
- Subject-matter of dispute not capable of settlement by arbitration; or
- Award was in conflict with the public policy of India
The concept of ‘public policy of India’ was considerably broadened by the Supreme Court of India in Oil & Natural Gas Corporation Ltd. v. SAW Pipes Ltd., (2003)5 SCC 705. The Court relied on the plethora of landmark judgments on public policy and laid down the heads under the ground of ‘public policy’ as: “Fundamental Policy of Indian law” would include factors such as a) disregarding orders of superior courts; b) judicial approach, which is an antithesis to an arbitrary approach; c) principles of natural justice; d) decision of arbitrators cannot be perverse and irrational in so far as no reasonable person would come to the same conclusion. So in India it arbitral award can be challenged for the breach of natural justice under Section 34(2)(b)(ii) by way of judicial interpretation of the term ‘public policy’ in the aforementioned case which includes breach of natural justice. The relevant section is reproduced below:
34. Application for setting aside arbitral award.
(2) An arbitral award may be set aside by the Court only if—
(a) the party making the application furnishes proof that—
(i) a party was under some incapacity, or
(ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or
(iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or
(iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration:
Provided that, if the decisions on matters 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
(v) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part; or
(b) the Court finds that—
(i) the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or
(ii) the arbitral award is in conflict with the public policy of India.
1[Explanation 1—For the avoidance of any doubt, it is clarified that an award is in conflict with the public policy of India, only if,—
(i) the making of the award was induced or affected by fraud or corruption or was in violation of section 75 or section 81; or
(ii) it is in contravention with the fundamental policy of Indian law; or
(iii) it is in conflict with the most basic notions of morality or justice.
Explanation 2—For the avoidance of doubt, the test as to whether there is a contravention with the fundamental policy of Indian law shall not entail a review on the merits of the dispute.]
2[(2A) An arbitral award arising out of arbitrations other than international commercial arbitrations, may also be set aside by the Court, if the Court finds that the award is vitiated by patent illegality appearing on the face of the award:
Provided that an award shall not be set aside merely on the ground of an erroneous application of the law or by re-appreciation of evidence.]