Fraud in the arbitration

It is settled law that perjury or the deliberate withholding of material documents in the course of an arbitration will justify the setting aside of the award. However, the mere fact that the arbitrators have not been presented with all available documents is not necessarily enough to justify judicial intervention. As is shown by the decision of Judith Prakash J in Swiss Singapore Overseas Enterprises Pte Ltd v Exim Rajathi India Pvt Ltd [2009] SGHC 231, it has to be shown that fraud or unconscionable conduct were present and that the documents, if disclosed, would have affected the outcome.

Swiss Singapore: the facts

In March 2005 Swiss Singapore Overseas Enterprises (‘SSO’) entered into a contract to purchase 40,000 mt of iron ore fines from Exim Rajathi India (‘ERIP’) free on board Karwar Port in South India. Shipment of the cargo was to be in April 2005. Any dispute was to be referred to arbitration under the rules of the Singapore International Arbitration Centre (SIAC) if they could not settle the same amicably. In the event the contract was not performed, and ERIP issued a notice of arbitration on 11 January 2007. A sole arbitrator was appointed and a hearing took place in January 2008. In the arbitration ERIP asserted that SSO had refused to take delivery because of a sudden drop in the world market price for iron ore, and that ERIP had mitigated its loss by reselling the iron ore to two Indian buyers: 12,500 mt to Terapanth (at a 42% discount) and 27,500 mt to Susmi (at a 57% discount). The difference between the contract price and the resale price was claimed to be US$1,201,609.20. SSO for its part claimed that ERIP was the party in breach in that the cargo had not been ready for loading on the agreed date. By his award dated 12 September 2008 the arbitrator made an award in favour of ERIP for the sum claimed by it. In so deciding, the arbitrator found that: (a) the parties had agreed on a laycan period, so that the latest shipping date had been extended to 15 April 2005; (b) there had been congestion at Karwar port at the time, so that ERIP had justifiably refused SSO’s nomination of the vessel MV Nava Eliza because she was too big for the port and (c) ERIP had not been in anticipatory breach of contract because the cargo had been ready for loading and could have been loaded by the agreed date. As regards damages, the arbitrator held that the measure of damages – that of the amount that could have been obtained in an ‘available market’ – had to be assessed by reference to the resales in India because the Chinese market was in turnmoil at the time.