Section 3 of the Singapore International Arbitration Act (Cap 143A, 2002 Rev Ed) (the IAA) provides that the UNCITRAL Model Law (Model law) shall have force of law in Singapore.

Article 34(2)(b)(ii) of the Model Law provides that a state's courts may set aside arbitral awards where the award is in conflict with the public policy of that state.

Under the Criminal Code of Thailand (Thai law):

A dispute arose between AJU (applicant) and AJT (respondent) in respect of the early termination of a contract between the parties relating to the staging of a tennis tournament in Bangkok (the Contract). The Contract was governed by Thai law and provided for disputes to be settled by arbitration in Singapore under the UNCITRAL Arbitration Rules 2010.

During the course of the dispute, the applicant made a complaint to the Thai prosecution authority against a company associated with the respondent. The applicant alleged that documents had been forged to induce the applicant to enter into the Contract. The Thai prosecution authority commenced investigations in relation to both fraud and forgery.

In an attempt to settle the dispute, the parties signed an agreement under which the applicant agreed to discontinue the criminal proceedings and pay a fee to the respondent. In return, the respondent agreed to terminate the arbitration (the Settlement Agreement). The Settlement Agreement was governed by Singapore law.

The applicant duly paid the fee and withdrew its complaint to the Thai authorities, which resulted in the Thai prosecution authority issuing a cessation order in respect of the allegation of fraud and a non-prosecution order in respect of the allegation of forgery.

The respondent, however, refused to terminate the arbitration proceedings, claiming that the Settlement Agreement had been procured through duress and undue influence, and that the non-prosecution order had been obtained by bribing Thai officials. The parties submitted the question of the Settlement Agreement's validity to the arbitral tribunal. The applicant claimed that a full and final settlement of all claims had been reached. However, the respondent contested that the Settlement Agreement was invalid because, amongst other reasons, it required the applicant to stifle the prosecution of a non-compoundable offence in contravention of Thai law.

The arbitral tribunal found that the Settlement Agreement was legal under Thai law and that the arbitration was terminated in accordance with the Settlement Agreement. The respondent applied to the High Court under Article 34(2)(b)(ii) of the Model Law (read in conjunction with section 3(1) of the IAA) to set aside the tribunal's decision, primarily on the basis that:

The High Court found in favour of the respondent, ruling that the Settlement Agreement was, on the facts, illegal under Thai law and that enforcement of the illegal agreement would be contrary to the public policy of Singapore (for a full discussion of the High Court's decision, see Legal update, Singapore High Court sets aside SIAC award as contrary to public policy).

The applicant appealed against the decision, arguing that the High Court was incorrect:

The Court of Appeal found in favour of the applicant in relation to both arguments.

On the first point, the Court of Appeal held that the High Court was not entitled to re-open the tribunal's finding in relation to the legality of the Settlement Agreement. The court ruled that when considering an application to either enforce or set aside an arbitral award, the existence of a potential public policy issue does not automatically entitle the court to re-open an arbitral tribunal's findings. To do so would be contrary to the principle of finality of arbitral decisions under the IAA.

The Court of Appeal held that a tribunal's findings can only be re-opened under Article 34(2)(b)(ii) of the Model Law when the tribunal has made an error in deciding what constitutes a violation of Singapore public policy. The Court of Appeal reasoned that court intervention is justified in such cases because the state does not give authority to arbitral tribunals to decide what constitutes a violation of Singapore public policy. However, errors of law that do not involve a misinterpretation of Singapore public policy, or errors of fact, do not conflict with Singapore public policy and may not be re-opened on the basis of Article 34(2)(b)(ii).

The Court of Appeal reasoned that the High Court's objection to the tribunal's decision was an alleged error of fact, not of law or public policy. The court found that the tribunal had correctly based its decision, in relation to the legality of the Settlement Agreement, on whether the Settlement Agreement represented an attempt to stifle the prosecution of a non-compoundable offence. The court also found that the tribunal had focused on the correct legal question and, accordingly, its finding of fact could not be questioned on the basis of public policy. The court, having decided in the applicant's favour on the first point, was not required to rule on the second point. However, the court held, obiter, that the Settlement Agreement was in fact legal.

This case demonstrates the Singapore courts' continued pro-arbitration jurisprudence. The Court of Appeal's judgment reinforces the general rule that the courts will only set aside an arbitral award in very limited circumstances and will respect the autonomy of arbitral proceedings.

AJU v AJT [2011] SGCA 41.