Singapore High Court Refused To Set Aside Arbitral Award Made In Error

In CBX & Anor v CBZ and Anors [2020] SGHC(1) 17, the SGP High Court dismissed an application to set aside an arbitral award even though the Tribunal erred in applying the relevant substantive law.  

In 2015, the Plaintiffs and Defendants entered into two Sale and Purchase Agreements (“SPAs”) for the sale of shares of a company. The SPAs were governed by Thai Law and provided for ICC arbitration seated in Singapore.  

On 26 January 2016, in an arbitration proceeding, the Defendants counterclaimed that the Plaintiffs had failed to pay an instalment in accordance with Schedule 5 of the SPAs (“Remaining Sum”).  

One of the issues before the Tribunal was whether a clause providing for the payment of compound interest was void because it contravened Thai law. Despite this, the Tribunal ordered the Plaintiffs to pay the Remaining Sum (“Remaining Sum Order”) with 15% interest compounded annually (“Compound Interest Order”).  

The Plaintiffs thereafter applied to the Singapore High Court to set aside the orders. In particular, the Plaintiffs contended that the Compound Interest Order should be set aside, amongst others, on the basis that the Tribunal exceeded its jurisdiction because Thai law disallows the computation of compounding of interest provided for in the SPAs.  

Justice Reyes held that the Tribunal did not exceed its jurisdiction as  SGP’s International Arbitration Act conferred to the Tribunal the power to award compound interest. Nevertheless, the Court agreed that the Tribunal has come to a finding which contravenes Thai law, but this error could not be characterised as the Tribunal acting beyond its jurisdiction, stating that:  

“The risk that a Tribunal makes an error of this sort is a routine hazard of arbitration. Parties to an arbitration have nonetheless agreed to be bound by a tribunal’s decision, whether right or wrong, even egregiously wrong, in fact or law.” 

This case illustrates that by submitting to arbitration proceedings, parties generally curtail their recourse even in the event that the Tribunal makes an error.