The Court of Appeal held that while Singapore courts infrequently exercise their power to set aside arbitral awards, they will do so if a ground for setting aside an arbitral award prescribed by statute is clearly established. There are three broad grounds on which an award may be set aside:

The Court of Appeal also held that while assessing whether an award should be set aside under Article 34(2)(a)(iii) of the Model Law, the court must adopt a two-pronged enquiry as follows:

The Court of Appeal analysed the scope of Article 34(2)(a)(iii) and held that it only covered an arbitral tribunal's substantive jurisdiction and did not extend to procedural matters. The Court of Appeal noted that failure by a tribunal to deal with every issue referred to it will not, in itself, render an award liable to be set aside. There must have been real or actual prejudice caused to either of the parties to the dispute. Mere errors of law, or even fact, are not sufficient to warrant setting aside an arbitral award.

To set aside an award under section 24(b) of the IAA, the court has to be satisfied of both of the following:

After examining the pleadings and the submissions made by the parties, the Court of Appeal decided that the arbitral tribunal was appointed to decide whether CRW was entitled to an immediate payment of the sum ordered by the DAB, as well as any additional issues of fact or law which the tribunal deemed necessary to decide, for the purpose of rendering its award.

The dispute resolution procedure under the FIDIC Conditions of Contract states that a dispute is to be referred to a DAB first, with resort to arbitration if there is dissatisfaction with the DAB's decision, which the parties are unable to resolve amicably.

A DAB's decision has an interim binding effect and it has contractual force even if a notice of dissatisfaction is filed. A DAB's decision does not have the status of finality that an arbitral award has under the New York Convention. Since there is no treaty or legislation under which a decision of the DAB may be enforced, any avenue of enforcement of a DAB decision is dependent on the terms of the contract between the parties. The FIDIC Conditions of Contract provide that any DAB decision that has not become final and binding shall finally be settled by arbitration.

The Court of Appeal held that in an arbitration, in respect of a non-final DAB decision brought under the FIDIC Conditions of Contract, if a party requests a tribunal to review a DAB's decision and decide the matter afresh, the tribunal should do so. Moreover, the Court of Appeal found that where the DAB decision has been validly challenged, the FIDIC Conditions of Contract require the parties to finally settle their differences in the same arbitration, both in respect of compliance with the DAB decision and the merits of that decision.

The Court of Appeal held that the arbitral tribunal had erred in issuing the final award without an examination of the merits of the DAB's decision, and, therefore, the final award was not issued in accordance with the FIDIC Conditions of Contract.

The Court of Appeal held that the arbitral tribunal exceeded its jurisdiction as it issued an award without assessing the merits of PGN's submissions or the DAB's decision afresh. In doing so, the tribunal deprived PGN of its contractual right to have the decision of the DAB reviewed, causing PGN real prejudice.

The Court of Appeal concluded that there had been a breach of the principles of natural justice in this case. This was due to the fact that PGN was not afforded a real opportunity to defend its position, nor was it given the opportunity to produce evidence on how much it believed it owed to CRW.

In the light of the above findings, the Court of Appeal found that the elements necessary to set aside the final award under both Article 34(2)(a)(iii) of the Model Law and section 24(b) of the IAA had been established.

While the Court of Appeal held that in certain instances the court may decline to set aside an award even if one of the prescribed grounds for doing so is made out, it found that it was only to exercise this residual discretion if no prejudice had been sustained by the aggrieved party. The Court of Appeal held that in the present case, PGN had suffered real prejudice as a result of the tribunal exceeding its jurisdiction and breaching the rules of natural justice. Therefore, there was no basis for the Court of Appeal to invoke its residual discretion to refuse to set aside the award.

The Court of Appeal held that the arbitral tribunal summarily enforced a binding but non-final DAB decision without a hearing on the merits, in violation of the FIDIC Conditions of Contract. The tribunal did not have the jurisdiction or the power to make the decision of the DAB final without following the prescribed procedure.