Non-disclosure in international commercial arbitration: the High Court of Singapore offers guidance

In the decision in BVU v BVX [2019] SGHC 69, the Republic of Singapore High Court dismissed an application to set aside an international arbitral award because of a non-disclosure by a party to the arbitration.

In its decision, the Court canvassed the applicable principles in Singapore and the United Kingdom – providing an insight into the approach an Australian court would be likely to take in a similar case. The decision brings into sharp relief the different disclosure obligations applying to arbitration and litigation.

The story

BVX is a state-owned company in the Republic of Korea. It was tasked with securing a long term stable food supply for the country. BVX engaged BVU to supply the Republic of Korea with food products. The supply agreement contained a term that BVU would be BVX’s 'preferred supplier' and included a 'forecast range' for product purchases. In fact, BVX purchased significantly less than the forecast range, and began a tender process for the remaining products set out in the forecast range.

On 25 July 2013, BVU commenced International Chamber of Commerce (ICC) arbitration proceedings against BVX, claiming damages for breach of contract.

The arbitration

BVX provided disclosure of documents on which it proposed to rely and responded to requests for production by BVU. During the arbitration, BVU asked the ICC Tribunal to order employees of BVX to attend and give evidence that BVU maintained was relevant to the dispute. The Tribunal declined to compel the witnesses’ attendance, because it was not persuaded that the proposed evidence was material to the issues in dispute.

On 10 December 2015, the ICC Tribunal issued the final award in favour of BVX.

BVU subsequently contacted employees from BVX who had not given evidence in the proceedings. BVU hoped that the BVX employees might give evidence that would assist BVU in an application to set aside the award. One of the employees agreed to give evidence in support of BVU.

The High Court action

On 10 March 2016, BVU commenced an action in the Singapore High Court to set aside the award. BVU also subpoenaed the BVX employee, to compel the employee to produce documents it maintained were relevant but which had not been disclosed in the arbitration.

BVX applied to the Court to set aside the subpoena. Judicial Commissioner Ang Cheng Hock heard BVU’s application to set aside the award and the application for a subpoena.

The non-disclosure

BVU claimed that BVX’s failure to call its employee as a witness and disclose key documents in the arbitration was in breach of public policy, such that the award was procured by fraud. BVU argued that the employee’s evidence and BVX’s internal documents were “crucial evidence” and that BVX had made a conscious and deliberate decision not to disclose them.

BVX did not dispute that it intentionally did not lead evidence from the employee or disclose its internal documents (which it did not view as being relevant to its case and were confidential and commercially sensitive).

The award was not set aside

BVU argued that the award should be set aside on two grounds, which are familiar to countries adopting the Model Law:

• first, on the ground that the award was induced or affected by fraud or corruption; and
• second, on the ground that the award was in conflict with Singapore’s public policy.

The Court emphasised that when dealing with non-disclosure issues, the two grounds were founded on substantially the same premise under the Singapore International Arbitration Act and the UNCITRAL Model Law. This is consistent with earlier decisions in Singapore and the United Kingdom.

The Court said it would not infer fraud and that BVU would be held to a high standard of proof. In order for the Court to set aside the award on the basis of non-disclosure of evidence, BVU needed to satisfy three requirements:

• BVX must have deliberately concealed evidence to deceive the Tribunal (negligence is not sufficient);
• there must be a causative link between BVX deliberately concealing evidence and the Tribunal’s decision in BVX’s favour (the concealment must have had a substantial effect on the Tribunal’s decision); and
• BVX must not have had a good reason for non-disclosure.

The Court referred to the decision in Swiss Fortune.[1] In that case, Justice Prakash explained that for there to be fraud on the basis of non-disclosure, the document must have been 'so material that earlier discovery would have prompted the arbitrator to rule in favour of the applicant'.

In determining the application, the Court outlined the following principles to be considered in similar situations:

1. The upholding of an award conflicts with public policy only if it would be a 'shock [to] the conscience', 'clearly injurious to the public good', 'wholly offensive to the ordinary reasonable and fully informed member of the public', or if the award 'violates the forum’s most basic notion of morality and justice'.[2]
2. The claimant would have to produce evidence that is 'cogent and strong'; fraud will not be inferred.[3]
3. A high standard of proof 'applies where the upholding of an award is said to contravene public policy because it was secured by fraudulent or unconscionable means.'[4]
4. This does not mean that the standard is something other than the balance of probabilities, but when it relates to the failure to call a witness or disclose documents, it must be shown that what is involved is dishonesty, and not the more likely explanation of human error.[5]
5. The suppression of a document as a result of negligence, an error of judgment, or an innocent failure to give disclosure, would not suffice. Instead, where an important document is deliberately withheld and as a result, the party withholding the document has obtained an award in its favour, the Court may consider that the award was procured in a manner contrary to public policy.[6]
6. The aggrieved party would have to show that 'reprehensible or unconscionable conduct' by the party concerned had contributed in a 'substantial way' to the obtaining of an award in that party’s favour.[7]
7. The winning party to the arbitration may resist the setting aside application by demonstrating a good reason for the non-disclosure.[8]

The Court held that BVX’s failure to call the employee as a witness and disclose certain documents did not satisfy the requirements for fraudulent conduct. In coming to that conclusion, the Court found that:

• Neither party was obliged to call particular witnesses or adduce particular evidence.
• The IBA Rules on the Taking Evidence in International Arbitration (IBA Rules) (which governed the procedural aspects of the arbitration) did not require BVX to produce all relevant documents and materials but only those 'on which it relies'. Accordingly the continuing disclosure obligations in arbitrations, which require parties to disclose adverse documents and materials, 'are not as wide' as those in court proceedings.
• BVX could have requested the documents it now seeks during the arbitration if it considered them relevant. BVX argued that it did not know about the documents at the time. However, the Court again referred to the IBA Rules, which provide that a party may make a request for the production of documents as long as it reasonably believes the documents exist.
• In any event, the evidence would not have impacted on the Tribunal’s decision.

The Court dismissed BVU’s application to set aside the arbitral award and refused to grant BVU’s subpoena on the same grounds. The Court held that BVU’s subpoena was 'an abuse of process' and that BVU was 'seeking to reopen the arbitrated dispute through a backdoor appeal'.

Some useful guidance

There are two noteworthy aspects of this decision.

First, it is a reminder that the bar to set aside an award on grounds of non-disclosure is high. Not only must a non-disclosure be shown, but it must have been deliberate, must have affected the outcome of the arbitration, and cannot have been done for a good reason. This means that if a non-disclosure issue arises during an arbitration, it is dangerous to treat it as ‘a card in hand’ to be played to resist enforcement later.

Second, it is a good illustration of the dangers of approaching arbitration with the presumption that usual Court-based procedures and obligations apply. The IBA Rules only require disclosure of evidence and documents on which the parties rely. Accordingly, where documents do not support a party’s position, procedures should be put in place in the arbitration to ensure those documents are disclosed if that is what the parties expect should occur.[9] The procedures may include appropriate and carefully drawn disclosure directions, which provide for each party to obtain categories of documents that enable them to make their respective cases.

Without such directions, the party looking to withhold disclosure can of course assert that it was under no obligation to disclose. This is a stark difference to continuing disclosure obligations that exist in Australian superior courts, which can require that parties disclose any documents that are relevant to the case (adverse or not).[10]

^{[1] PT Asuransi Jasa Indonesia (Persero) v Dexia Bank SA [2007] 1 SLR(R) 597, 622 [59].}

^{[2] Swiss Singapore Overseas Enterprises Pte Ltd v Exim Rajathi India Pvt Ltd [2010] 1 SLR 573, 597 [64].}

^{[3] Dongwoo Mann+Hummel Co Ltd v Mann+Hummel GmbH [2008] 3 SLR(R) 871, 926 [147].}

^{[4] Celtic BioEnergy Ltd v Knowles Ltd [2017] 1 Lloyd’s Rep 495, 503 [69]; Chantiers de L’Atlantique SA v Gaztransport & Technigaz SAS [2011] EWHC 3383 [56].}

^{[5] Profilati v PaineWebber [2001] 1 Lloyd’s Rep 715, 720 [19]–[21].}

^{[6] SA v Vivendi Universal SA [2007] 1 Lloyd’s Rep 693, 710 [86].}

^{[7] Swiss Singapore Overseas Enterprises Pte Ltd v Exim Rajathi India Pvt Ltd [2010] 1 SLR 573, 587 [29].}

^{[8] Swiss Singapore Overseas Enterprises Pte Ltd v Exim Rajathi India Pvt Ltd [2010] 1 SLR 573, 586 [28] citing Dongwoo Mann+Hummel Co Ltd v Mann+Hummel GmbH [2008] 3 SLR(R) 871, 921 [133].}

^{[9] Where an arbitration involves parties from jurisdictions which are not accustomed to the disclosure of adverse evidence, different considerations will of course apply.}

^{[10] Although courts are moving away quickly from the prevenance of so called 'general ' discovery orders: see Built Environs WA Pty Ltd v Perth Airport [2019] WASC 76 [18] [19]; Federal Court of Australia, Commercial and Corporations Practice Note (2016) [8].}