Article 34(2)(a)(iii) of the UNCITRAL Model Law provides that an arbitral award may be set aside by the court if the award deals with a dispute not contemplated by or not falling within the submission to arbitration, or contains decisions on matters beyond the scope of the submission to arbitration.

Section 24 of the Singapore International Arbitration Act provides that the High Court may, in addition to the grounds set out in Article 34(2) of the Model Law, set aside an award if:

PT Perusahaan Gas Negara (Persero) TBK, an Indonesian state company (PGN), entered into an agreement dated 28 February 2006 with CRW Joint Operation (CRW) for the construction by CRW of a pipeline and optical fibre cable from Grissik to Pagardewa in Indonesia.

The contract adopted the standard provisions of the Federation Internationale des Ingenieurs Conseil (FIDIC) Conditions of Contract for Construction (1st Edition, 1999) (the Red Book), with some modifications.

A dispute arose between the parties concerning certain Variation Order Proposals. In accordance with the terms of the contract, the parties referred the dispute to a Dispute Adjudication Board (DAB), which rendered several decisions. PGN accepted all of these decisions bar one, which required PGN to pay CRW approximately US$17 million. PGN submitted a Notice of Dissatisfaction (NOD) in relation to this decision, in accordance with the terms of the contract.

On 13 February 2009, CRW filed a request for arbitration with the ICC on the basis that, notwithstanding the NOD, PGN remained obliged to pay the US$17 million. The arbitration (heard by a panel comprising Mr Alan J. Thambiayah, Mr Neil Kaplan CBE, QC, SBS and Prof. Dr. H Priyatan Abdurrasyid) considered two issues:

The relevant terms of the contract were as follows:

CRW argued that, under clause 20.4, PGN was required to "promptly give effect" to the decision of the DAB. PGN, on the other hand, argued that because it had submitted a NOD, the DAB decision was not "final and binding" as the merits of the DAB decision had not been reviewed by the arbitral tribunal. Accordingly, PGN argued, the decision was "binding" but not "final and binding" and could not be converted into a final arbitral award without the tribunal first determining whether the DAB decision was correct on the merits.

The tribunal made an award in favour of CRW, ordering PGN to pay CRW the US$17 million. The tribunal found that PGN's argument that the tribunal should open up the DAB decision failed as a defence to CRW's claim for payment.

CRW registered the award in Singapore as a judgment. In addition to a separate application to set aside the registration order, PGN subsequently filed an originating summons in order to set aside the tribunal's award, pursuant to section 24 of the Singapore International Arbitration Act and Article 34(2) of the UNCITRAL Model Law (set out in the First Schedule to the International Arbitration Act). The basis of PGN's claim was that the tribunal had exceeded its jurisdiction by converting the DAB decision into a final award without determining whether the DAB decision was made in accordance with the contract.

The court found in favour of PGN and held that the tribunal's award should be set aside pursuant to Article 34(2)(a)(iii) of the Model Law, on the basis that the tribunal had exceeded its powers (the court however rejected the argument based on natural justice under section 24 of the International Arbitration Act).

The court referred to the distinction between the proceedings envisaged by clauses 20.6 and 20.7 of the contract. Clause 20.7 was designed to address the situation where a party had failed to implement a final and binding award (that is, where no NOD had been filed). It was accepted that this was not the case. Clause 20.6, on the other hand, provided for a fresh procedure to decide the merits of the dispute.

The court found that the question that CRW had referred to arbitration was whether CRW was entitled to immediate payment of the US$17 million that the DAB had decided was due. It was accepted by the parties that this was not a dispute relating to the DAB decision, but was a "second" dispute. Accordingly, under clause 20.6, the tribunal was required to review the merits of the case. By failing to do so, the tribunal had acted outside the scope of its mandate by rendering a final award pertaining to:

The case is a reminder that parties must take care to frame referrals to arbitration in such a way that the dispute clearly falls within the scope of the relevant arbitration agreement. Failure to do so may result in the eventual award being overturned.

As the judge noted, the case also serves to highlight an apparent lacuna in the FIDIC Red Book, in that it does not confer an express right on the winning party to refer to arbitration a failure of the losing party to comply with a DAB decision that is "binding" but not "final". While acknowledging the possibility of a party obtaining an interim award in respect of such a decision, the court held that in such circumstances a tribunal must be asked to review the correctness of the DAB decision before it can make that decision "final and binding". Construction practitioners may wish to consider this when drafting agreements based on FIDIC standard contracts.

The case is also of interest for the helpful discussion of subclauses 20.4 to 20.7 of the Red Book and the analysis of possible changes to the standard form that might also be considered by practitioners.