China Machine v Jaguar Energy: Setting Aside Arbitration Award for Breach of Natural Justice

The Singapore Court of Appeal heard an appeal by China Machine New Energy Corporation (CMNC) against Jaguar Energy Guatemala LLC and AEI Guatemala Jaguar Ltd (Jaguar), concerning an application to set aside an arbitration award. The arbitration arose from a dispute over the construction of a power generation plant in Guatemala. CMNC argued that the award should be set aside due to breaches of natural justice, defective arbitral procedure, and public policy concerns. The Court of Appeal dismissed CMNC's appeal, finding that CMNC had not demonstrated that the arbitral tribunal's conduct fell outside the range of what a reasonable and fair-minded tribunal might have done, and therefore no breach of the rules of natural justice occurred.

1. Case Overview

1.1 Court

Court of Appeal of the Republic of Singapore

1.2 Outcome

Appeal Dismissed

1.3 Case Type

Civil

1.4 Judgment Type

Judgment

1.5 Jurisdiction

Singapore

1.6 Description

Singapore Court of Appeal upholds arbitration award, rejecting China Machine's claim of breached due process in construction dispute.

1.7 Decision Date

2. Parties and Outcomes

Party NameRoleTypeOutcomeOutcome TypeCounsels
China Machine New Energy CorporationAppellant, ApplicantCorporationAppeal DismissedLostToby Landau, Tan Beng Hwee Paul, Pang Yi Ching Alessa, Ching Meng Hang, Koh Wei-Jen Aaron, Rachel Low Tze-Lynn
Jaguar Energy Guatemala LLCRespondentCorporationAppeal UpheldWonMichael Hwang, Rachel Ong Yue Qing, Chong Kin Yeong Ryan, Chia Yijuan Germaine, Chong Xiu Bing Denise, Tan Yi Lei
AEI Guatemala Jaguar LtdRespondentCorporationAppeal UpheldWonMichael Hwang, Rachel Ong Yue Qing, Chong Kin Yeong Ryan, Chia Yijuan Germaine, Chong Xiu Bing Denise, Tan Yi Lei

3. Judges

Judge NameTitleDelivered Judgment
Sundaresh MenonChief JusticeYes
Tay Yong KwangJudge of AppealNo
Quentin LohJudgeNo

4. Counsels

Counsel NameOrganization
Toby LandauEssex Court Chambers Duxton (Singapore Group Practice)
Tan Beng Hwee PaulRajah & Tann Singapore LLP
Pang Yi Ching AlessaRajah & Tann Singapore LLP
Ching Meng HangRajah & Tann Singapore LLP
Koh Wei-Jen AaronRajah & Tann Singapore LLP
Rachel Low Tze-LynnRajah & Tann Singapore LLP
Michael HwangMichael Hwang Chambers LLC
Rachel Ong Yue QingMichael Hwang Chambers LLC
Chong Kin Yeong RyanMichael Hwang Chambers LLC
Chia Yijuan GermaineVirtus Law LLP
Chong Xiu Bing DeniseVirtus Law LLP
Tan Yi LeiVirtus Law LLP

4. Facts

  1. CMNC was the contractor for the construction of a power generation plant in Guatemala.
  2. Jaguar Energy and AEI Guatemala Jaguar Ltd were the owners of the Plant.
  3. Disputes arose relating to the construction of the power generation plant.
  4. Jaguar commenced arbitral proceedings against CMNC under cl 20.2 of the EPC Contract.
  5. CMNC denied Jaguar’s claims, and made counterclaims asserting Jaguar’s breach of the DPSA.
  6. CMNC was evicted from the work site and alleged that Jaguar seized project-related documents.
  7. The arbitral tribunal substantially allowed Jaguar’s claims, including the Estimate to Complete Claim.

5. Formal Citations

  1. China Machine New Energy Corp v Jaguar Energy Guatemala LLC and another, , [2020] SGCA 12
  2. China Machine New Energy Corporation v Jaguar Energy Guatemala LLC, Civil Appeal No 94 of 2018, Civil Appeal No 94 of 2018

6. Timeline

DateEvent
Engineering, Procurement and Construction Contract entered into between CMNC and Jaguar Energy.
Deferred Payment Security Agreement entered into.
Work on the Project's two phases commenced.
Jaguar Energy exercised its option under the DPSA to issue debit notes.
Jaguar Energy issued notices of breach.
Jaguar Energy issued notices of breach.
CMNC purported to exercise its “step-in rights” as secured lender under the DPSA.
Jaguar Energy notified CMNC of its intention to terminate the EPC Contract.
Jaguar Energy fenced off the Construction Area.
Jaguar Energy informed CMNC of the termination of the EPC Contract.
Jaguar Energy terminated CMNC’s access to Project Solve.
Jaguar commenced arbitral proceedings against CMNC.
Last member of the three-man Tribunal was appointed.
Parties agreed to amend the timeline.
CMNC requested that the main evidentiary hearing be brought forward to October 2014.
Procedural Order No 2 was issued.
The Tribunal rejected CMNC’s request to bring forward the main evidentiary hearing.
Jaguar stated that it was withholding production of 13 of the 375 documentary exhibits referenced in its Statement of Case.
Jaguar applied to the Tribunal for an order permitting it to produce the 13 Exhibits on an AEO basis.
The Tribunal ruled in favour of Jaguar, and permitted its disclosure of the 13 Exhibits and the other documents on an AEO basis.
CMNC requested that the Tribunal reconsider its decision to allow Jaguar to disclose documents under the AEO Regime.
In Tribunal Communication No 51, the Tribunal upheld its decision.
Pursuant to the AEO Order, Jaguar disclosed the 13 Exhibits to CMNC’s external counsel and expert witnesses.
CMNC sought to have the AEO Regime lifted and replaced by a disclosure regime under which documents would be produced to CMNC’s employees.
CMNC sought a reset of the timelines previously agreed and recorded in PO 2.
A teleconference involving the Tribunal and the parties was convened to address both the redaction issue and the timelines issue.
The Tribunal ruled in favour of CMNC on the redaction issue and lifted the AEO Regime.
Jaguar began to disclose the relevant redacted documents to CMNC.
CMNC indicated that it was agreeable “for now” to relieve Jaguar of its obligation to produce redacted copies of contracts and purchase orders involving sums of $100,000 or less.
At the Toronto Hearing, the Tribunal addressed CMNC’s request for an adjournment of the dates for the main evidentiary hearing.
Redacted versions of these documents were eventually provided to CMNC.
Procedural Order No 3 was issued.
CMNC informed the Tribunal that its counsel for the expert issues of design, scheduling and quantum, Reed Smith LLP, would be replaced by MinterEllison.
CMNC announced that its counsel for all remaining matters, Herbert Smith Freehills LLP, would be replaced by King & Wood Mallesons.
CMNC replaced its quantum expert, Mr Iain Wishart, with Mr Charles Gurnham.
First tranche of documents was uploaded.
CMNC applied to the Tribunal for the AEO Regime to be lifted altogether.
Parties informed the Tribunal that they had agreed that Jaguar would disclose all material in unredacted form to 28 specified CMNC employees.
A Supplemental Order issued by the Tribunal.
By Procedural Order No 4, the Tribunal issued timelines for the remainder of the Arbitration.
CMNC filed Amended Statement of Case in Relation to Counterclaims.
Submission of Mr McGeehin’s finalised outline opinion.
Mr Gurnham confirmed in a teleconference with the Tribunal that he would be able to meet the 15 May 2015 deadline for the Gurnham Responsive Report.
Submission of Mr Gurnham’s finalised expert report.
Parties agreed an extension of time for CMNC’s submission of the Gurnham Responsive Report to 5 June 2015.
Submission of the Gurnham Responsive Report.
Jaguar uploaded a third tranche of supporting documents corresponding to the C-840 update.
CMNC replaced MinterEllison with counsel from State Chambers.
CMNC sought a short extension of time for the submission of the Gurnham Responsive Report to 10 June 2015.
CMNC requested that a cut-off date of 3 April 2015 be imposed on documents to be relied upon by Mr McGeehin.
In TC No 208, the Tribunal ordered that a cut-off date was to be imposed for the production of documents and particulars relating to Jaguar’s costs to complete, though not of 3 April 2015, but of 5 June 2015 instead.
Jaguar uploaded the final tranche of Costs Documents to the data room.
Submission of Mr McGeehin’s report responsive to Mr Gurnham’s finalised expert report.
CMNC sought yet another extension to 25 June 2015.
The Tribunal rejected CMNC’s request for an extension.
CMNC filed the Gurnham Responsive Report out of time.
CMNC filed the Aspinall Report, along with six witness statements.
Submission of the parties’ pre-hearing submissions.
CMNC formally applied to admit the Gurnham Responsive Report, the Aspinall Report, as well as the six witness statements.
The Tribunal reserved the issue of whether to exclude the evidence referred to in RC No 245 for consideration at the “appropriate time”.
Jaguar formally filed its objection to CMNC’s application.
By TC No 230, the Tribunal declined to grant CMNC leave to rely upon the Aspinall Report.
Main evidentiary hearing of the Arbitration was held in Dublin.
Main evidentiary hearing of the Arbitration was held in Dublin.
The Project works were completed.
The Tribunal rendered its award.
CMNC commenced Originating Summons No 185 of 2016, seeking to set aside the Award.
Hearing date.
Hearing date.
It was announced that Prof Douglas Jones would be appointed an International Judge of the Singapore International Commercial Court.
The parties were notified of this by way of a case management conference.
Jaguar responded, stating that they had no concerns.
CMNC responded, stating that it had no comment on the appointment of Prof Jones as an International Judge.
Judgment reserved.

7. Legal Issues

  1. Breach of Natural Justice
    • Outcome: The court held that there was no breach of natural justice as the Tribunal's conduct fell within the range of what a reasonable and fair-minded tribunal might have done.
    • Category: Procedural
    • Sub-Issues:
      • Denial of opportunity to present case
      • Unequal treatment of parties
  2. Defective Arbitral Procedure
    • Outcome: The court rejected CMNC’s submission that the Tribunal had failed to treat the parties equally.
    • Category: Procedural
    • Sub-Issues:
      • Failure to treat parties equally
      • Failure to ensure full opportunity of presenting case

8. Remedies Sought

  1. Setting aside of the arbitration award

9. Cause of Actions

  • Breach of Contract
  • Breach of Deferred Payment Security Agreement

10. Practice Areas

  • Arbitration
  • Commercial Litigation
  • Construction Disputes

11. Industries

  • Construction
  • Energy

12. Cited Cases

Case NameCourtAffirmedCitationJurisdictionSignificance
Soh Beng Tee & Co Pte Ltd v Fairmount Development Pte LtdSingapore High CourtYes[2007] 3 SLR(R) 86SingaporeCited for the principles regarding the setting aside of an arbitral award for breach of natural justice.
L W Infrastructure Pte Ltd v Lim Chin San Contractors Pte Ltd and another appealSingapore High CourtYes[2013] 1 SLR 125SingaporeCited for the principles regarding the setting aside of an arbitral award for breach of natural justice.
Triulzi Cesare SRL v Xinyi Group (Glass) Co LtdSingapore High CourtYes[2015] 1 SLR 114SingaporeCited for the principle that the right of each party to be heard does not mean that the Tribunal must sacrifice all efficiency in order to accommodate unreasonable procedural demands by a party.
ASM Shipping Ltd of India v TTMI Ltd of EnglandEnglish High CourtYes[2005] EWHC 2238 (Comm)EnglandCited for the test of whether the decision to refuse an adjournment was so far removed from what could reasonably be expected of the arbitral process that it must be rectified.
PT Reasuransi Umum Indonesia v Evanston Insurance Company, Utica Mutual Insurance Company and AMP UnitedUnited States District Court for the Southern District of New YorkYes[1992] WL 400733 (SDNY, 1992)United StatesCited for the principle that where there is a reasonable basis for the arbitrator’s decision not to grant a postponement, courts are reluctant to interfere with the arbitration award.
Trustees of Rotoaira Forest Trust v Attorney-GeneralNew Zealand Court of AppealYes[1999] 2 NZLR 452New ZealandCited for the principle that what natural justice demands turns in part on the parties’ particular agreement to arbitrate.
ABB AG v Hochtief Airport GmbHEngland and Wales Court of Appeal (Civil Division)Yes[2006] 2 Lloyd’s Rep 1England and WalesCited for the principle that the court will not intervene simply because it might have done things differently.

13. Applicable Rules

Rule Name
No applicable rules

14. Applicable Statutes

Statute NameJurisdiction
International Arbitration Act (Cap 143A, 2002 Rev Ed)Singapore
Rules of Court (Cap 322, R 5, 2014 Rev Ed)Singapore

15. Key Terms and Keywords

15.1 Key Terms

  • Due process
  • Natural justice
  • Arbitration award
  • Setting aside
  • Estimate to Complete Claim
  • Attorneys’ Eyes Only
  • Redaction Ruling
  • Construction Documents
  • Costs Documents
  • UNCITRAL Model Law

15.2 Keywords

  • arbitration
  • construction
  • due process
  • natural justice
  • setting aside
  • singapore
  • court of appeal

16. Subjects

  • Arbitration
  • Construction Dispute
  • Civil Procedure

17. Areas of Law

  • Arbitration Law
  • Construction Law
  • Civil Procedure