CFJ & Anor v CFL & Anor

Facts

The plaintiffs CFJ and CFK (the Seller) and the defendants CFL and CFM (the Purchaser) are members of large oil and gas groups. Under a share purchase agreement of 23 July 2012, the Purchaser acquired a 49% stake in one of the Seller's subsidiaries. The Purchaser later alleged that it had been deceived into overpaying by representations about five aspects of the subsidiary's fields: reserves, projects, production, decommissioning and maintenance. It began a Singapore-seated arbitration on 13 July 2015, claiming in deceit, for breach of warranty and under a pre-effective date indemnity (PEDI) clause, and sought damages of some US$5 billion. The arbitration ran on memorials rather than formal pleadings and was split into liability and quantum phases.

The three-member tribunal dismissed the warranty claim on limitation in a first partial award. In the Second Partial Award (29 January 2020) it found for the Purchaser on the deceit and PEDI claims about reserves, holding that the reserves representation was false and made with reckless indifference to its truth. In the Third Partial Award (20 April 2021) it found for the Purchaser on deceit about production and against it on projects, maintenance and decommissioning and the remaining PEDI claims.

After the Second Partial Award, the Seller says, its lawyers discovered that the tribunal's President had been appointed on 26 August 2018 to a panel of experts constituted by the highest court of a state referred to as Ruritania; this was not disclosed until 18 February 2020. The Seller says the Purchaser is closely tied to that state. The SIAC dismissed its challenge. The Seller then filed Originating Summons No 7 of 2020 to set aside the Second Partial Award, Originating Summons No 8 of 2020 to remove the President, and Originating Summons No 9 of 2021 to set aside the Third Partial Award.

Issues

1. Whether the President's appointment to the panel gave rise to apparent bias
2. Whether issuing a separate award on reserves breached an agreed arbitral procedure
3. Whether the tribunal decided matters beyond the scope of the submission to arbitration
4. Whether the tribunal breached the fair hearing rule in reaching its findings

Holding

The Singapore International Commercial Court dismissed all three applications in their entirety. It declined to remove the President and declined to set aside either the Second or the Third Partial Award, and invited submissions on costs.

Reasoning

On bias, the court held that no fair-minded and informed observer would doubt the President's impartiality. The Seller's chain of connections from the Purchaser to the Ruritanian government, then to its court and the panel, was tenuous. Unrebutted expert evidence showed that the country's judiciary was independent, and the Seller relied largely on internet searches and press material. The panel role was advisory, not adjudicatory, no duties had been requested, and no one linked to the Purchaser influenced the appointment. Since the test for disclosure is the same, the non-disclosure raised no doubt. The Third Partial Award, adverse to the Purchaser on several claims, confirmed this.

On procedure, the Seller could point to no agreement that a single award would cover all five topics; an impression given by the tribunal is not an agreement, and the SIAC Rules allow separate awards on different issues.

On the Second Partial Award, the tribunal's reading of a final investment decision as requiring objective "commitment" was a permissible middle path between the parties' positions, and the President had explored it with the Seller's witness. The remark that UK accounting rules resembled the SEC Standards went to causation, not liability, and could be revisited at the quantum stage. The finding that the 2012 Business Plan was "contaminated" by the sale process was foreseeable and caused no prejudice. Most complaints about reliance were attacks on the merits. Treating the PEDI clause as a "definitive indication" of reliance, a point not argued, caused no prejudice because the tribunal had already found reliance on other grounds.

On the Third Partial Award, reading the memorials as a whole, the Purchaser's production case was never confined to 2016: the presentation slides it relied on showed forecasts from 2012 to 2020, and the Seller's own filings answered a case spanning many years. The tribunal did not decide an unpleaded claim on the net present value of the subsidiary; the cost figures were evidence of falsity. Its remark on how damages would be assessed did not foreclose argument in the ongoing quantum phase, so that complaint was premature. As no excess of jurisdiction was shown, the overlapping natural justice complaints also failed.

From the judgment