The International Arbitration Act (Cap 143A) (IAA) incorporates the provisions of the 1985 UNCITRAL Model Law (Model Law) into Singaporean law. Under the IAA and the Model Law, a party's only available recourse to the national courts against an arbitral award is by way of an application to have the award set aside. The grounds for setting aside an award are provided by Article 34 of the Model Law (and supplemented by Section 24 of the IAA).

Article 34(2)(a) of the Model Law provides that an award may be set aside only if the party making the application proves that:

In 2000, Quarella SpA (Quarella) entered into a distributorship contract with Scelta Marble Australia Pty Ltd (Scelta) in relation to Scelta's distribution of Quarella's products in Australia (Agreement). Clause 26 of the Agreement provided for any disputes under the Agreement to be determined by arbitration in Singapore under the rules of the International Chamber of Commerce (ICC Rules). Clause 25 of the Agreement provided that:

A dispute arose and Scelta commenced arbitration under the ICC Rules on 19 October 2009. On 11 November 2011, the tribunal rendered its award. Article 1(1) of the CISG provides that the CISG's application only extends to "contracts of sale of goods". As the Agreement was a framework/distribution agreement, not a contract of sale, the tribunal proceeded to make its award according to Italian law.

Quarella applied to have the award set aside under Article 34(2)(a)(iv) or, alternatively, Article 34(2)(a)(iii) of the Model Law.

In relation to Article 34(2)(a)(iv), Quarella argued that the tribunal had erred in its application of Italian law. Quarella argued that, notwithstanding Article 1(1) of the CISG, Clause 25 should have been interpreted as representing the parties' direct application of the CISG's provisions, such that Italian law was intended to apply only to supplement the CISG where there was a gap or lacuna, and not to replace it. Accordingly, Quarella contended that the tribunal was in breach of Article 17 of the ICC Rules, which provides that the parties are free to agree upon the applicable substantive law and that the tribunal may only determine otherwise in the absence of such an agreement.

This argument led Quarella to submit further that, by applying a choice of law other than that agreed by the parties, the tribunal had exceeded its powers and gone beyond the scope of the submission to arbitration (Article 34(2)(a)(iii)).

The High Court rejected the application to set aside.

With regard to Article 34(2)(a)(iv), the High Court found that there had been no breach of Article 17 of the ICC Rules. Endorsing the tribunal's own analysis of the applicable substantive law in its award, the High Court found that Clause 25 of the Agreement provided that the Agreement was covered by the CISG "and where not applicable" by Italian law. The CISG's rules on its own applicability indicated that such rules did not apply to distribution agreements. The tribunal had not ignored Clause 25, but had, as it was entitled to do, interpreted its meaning. Accordingly, the tribunal had not acted outside the parties' agreement in finding that the CISG was not applicable. The parties had agreed the rules of law to be applied and the tribunal respected this agreement.

With regards to Quarella's application under Article 34(2)(a)(iii), the High Court referred to the decision in PT Asuransi Jasa Indonesia (Persero) v Dexia Bank SA [2007] 1 SLR(R) 597, in which the Singapore Court of Appeal confirmed that this ground "merely reflects the basic principle that an arbitral tribunal has no jurisdiction to decide any issue not referred to it for determination by the parties". The High Court also referred to the Court of Appeal's decision in CRW Joint Operation v PT Perusahaan Gas Negara (Persero) TBK [2011] 4 SLR 305, where it was explained that Article 34(2)(a)(iii) only applies where the tribunal has improperly decided matters that had not been submitted to it or had failed to decide matters that had been submitted to it. The ground does not extend to procedural matters but only the tribunal's substantive jurisdiction. In this case, the issue of the applicable law had in fact been submitted to the tribunal. Accordingly, the tribunal had not considered matters outside its scope. The High Court therefore concluded that "the dispute was not one that engaged Article 34(2)(a)(iii) of the Model Law."

This case demonstrates the High Court's continued reluctance to extend the grounds for setting aside an arbitral award beyond the literal wording of the provisions of the IAA and Article 34(2)(a) of the Model Law. Parties will likely face difficulty in setting aside an award where the tribunal retains a discretion in interpreting an agreed choice of law clause. In addition, the incorrect application of a choice of law will not necessarily constitute a matter which falls outside the submission to arbitration for the purposes for Article 34(2)(a)(iii).