CHY & CHZ v CIA: Setting Aside Arbitration Award for Conflict with Public Policy
In CHY and CHZ v CIA, the Singapore International Commercial Court dismissed the plaintiffs' application to set aside an arbitration award. The plaintiffs, CHY and CHZ, sought to set aside the award on the grounds that it conflicted with Singapore's public policy because it allegedly compelled them to perform an illegal act under Indian law, specifically violating the Foreign Exchange Management Act (FEMA) regulations. The court, presided over by Vivian Ramsey IJ, found that it could not reopen the arbitral tribunal's findings of fact, including findings of Indian law, and that the award did not violate Singapore's public policy. The court also allowed the defendant's application to strike out the plaintiffs' expert evidence on Indian law.
1. Case Overview
1.1 Court
Singapore International Commercial Court1.2 Outcome
Plaintiffs’ application to set aside the Award dismissed.
1.3 Case Type
Arbitration
1.4 Judgment Type
Judgment
1.5 Jurisdiction
Singapore
1.6 Description
Singapore court dismisses application to set aside an arbitration award, finding no conflict with Singapore's public policy regarding FEMA regulations.
1.7 Decision Date
2. Parties and Outcomes
3. Judges
| Judge Name | Title | Delivered Judgment |
|---|---|---|
| Vivian Ramsey | International Judge | Yes |
4. Counsels
4. Facts
- CHY and CHZ are companies incorporated under the laws of India.
- CIA is an investment holding company incorporated under the laws of the Republic of Mauritius.
- CIA acquired approximately 14.91% of CHZ’s shared capital by 12 March 2010.
- The Transaction Documents included a Shareholders Agreement (SHA) and a Letter Agreement, both dated 9 October 2009.
- Clause 10.1 of the SHA obliged the plaintiffs to list CHZ on the Bombay Stock Exchange or the National Stock Exchange by 30 June 2012.
- CIA exercised the Put Option by way of a notice dated 14 July 2017.
- The Tribunal made orders requiring that the plaintiffs pay damages to CIA in the amount of the Put Price.
5. Formal Citations
- CHY and another v CIA, Originating Summons No 1 of 2021 (Summons No 5567 of 2020), [2022] SGHC(I) 3
6. Timeline
| Date | Event |
|---|---|
| Shareholders Agreement and Letter Agreement signed. | |
| CIA acquired shares in CHZ. | |
| Deadline for listing CHZ on Bombay Stock Exchange or National Stock Exchange. | |
| Amended Share Purchase Agreement executed. | |
| CIA issued Put Notice. | |
| CHY notified CIA it would not recognize the Put Notice. | |
| CIA submitted Request for Arbitration to the ICC. | |
| Tribunal constituted. | |
| Final Award dated. | |
| Arbitration proceedings closed. | |
| Plaintiffs received the Award. | |
| Plaintiffs commenced proceedings to set aside the Award. | |
| Proceedings transferred to the Singapore International Commercial Court. | |
| Hearing took place. | |
| Judgment reserved. | |
| CIA drew attention to the judgment of the Privy Council in Betamax Ltd v State Trading Corporation (Mauritius). | |
| Plaintiffs responded to submissions on Betamax. | |
| Judgment reserved. |
7. Legal Issues
- Conflict with Public Policy
- Outcome: The court found that the award did not violate Singapore's public policy.
- Category: Substantive
- Illegality under Indian Law (FEMA Regulations)
- Outcome: The court found that the terms of the SHA and Letter Agreement did not give rise to a violation of FEMA Regulations.
- Category: Substantive
- Review of Arbitral Tribunal's Findings
- Outcome: The court held that it could not reopen findings of fact made by the arbitral tribunal.
- Category: Procedural
8. Remedies Sought
- Setting aside of Final Award
- Monetary Damages
9. Cause of Actions
- Breach of Contract
10. Practice Areas
- Arbitration
- Commercial Litigation
11. Industries
- Finance
- Investment
12. Cited Cases
| Case Name | Court | Affirmed | Citation | Jurisdiction | Significance |
|---|---|---|---|---|---|
| Betamax Ltd v State Trading Corporation (Mauritius) | Privy Council | Yes | [2021] UKPC 14 | Mauritius | Discussed the extent to which a court could reopen findings of fact or law when considering an application to set aside an award on the basis of public policy. |
| Gokul Patnaik v Nine Rivers Capital Ltd | Singapore High Court | Yes | [2021] 3 SLR 22 | Singapore | Addressed similar issues regarding the setting aside of an award based on non-compliance with FEMA Regulations. |
| BBA v BAZ | Court of Appeal | Yes | [2020] 2 SLR 453 | Singapore | Underlined the policy of minimal curial intervention in arbitral proceedings. |
| AKN and another v ALC and others and other appeals | Court of Appeal | Yes | [2015] 3 SLR 488 | Singapore | Stated that courts do not interfere in the merits of an arbitral award. |
| AJU v AJT | Court of Appeal | Yes | [2011] 4 SLR 739 | Singapore | Central decision on illegality and its relationship with the public policy ground in Article 34(2)(b)(ii) of the Model Law; discussed whether the court could open up the findings of an arbitrator in deciding whether to set aside an award on the ground that an award was contrary to public policy. |
| Westacre Investments Inc v Jugoimport-SPDR Holding Co Ltd | English High Court | Yes | [1999] QB 740 | England | Considered whether the arbitral tribunal was able to understand and determine the particular issue of illegality arising in that case. |
| Soleimany v Soleimany | Court of Appeal | Yes | [1999] QB 785 | England | Addressed the balance between upholding arbitration awards and the policy against unsavoury international trade practices. |
| Westacre Investments Inc v Jugoimport-SPDR Holding Co Ltd | Court of Appeal | Yes | [2000] 1 QB 288 | England | Addressed the balance between upholding arbitration awards and the policy against unsavoury international trade practices. |
| Omnium de Traitement et de Valorisation SA v Hilmarton Ltd | Walker J | Yes | [1999] 2 Lloyd’s Rep 222 | England | Discussed whether the court could open up the findings of an arbitrator in deciding whether to set aside an award on the ground that an award was contrary to public policy. |
| PT Asuransi Jasa Indonesia (Persero) v Dexia Bank SA | Court of Appeal | Yes | [2007] 1 SLR(R) 597 | Singapore | Even if an arbitral tribunal’s findings of law and/or fact are wrong, such errors would not per se engage the public policy of Singapore. |
| Finelvet AG v Vinava Shipping Co Ltd (The Chrysalis) | Mustill J | Yes | [1983] 1 WLR 1469 | England | Discussed the stages of an arbitrator's process of reasoning. |
| NTT Docomo Inc. v. Tata Sons Limited | High Court of Delhi | Yes | (2017) SCC OnLine Del 8078 | India | Upheld an award of damages in a case where the award was challenged based on similar arguments in respect of FEMA. |
| Cruz City 1 Mauritius Holdings v. Unitech Limited | High Court of Delhi | Yes | (2017) (3) ARBLR 20 (Delhi) | India | Involved damages assessed on a similar basis. |
| CBX and another v CBZ and others | Singapore High Court (International) | Yes | [2020] SGHC(I) 17 | Singapore | Considered Westacre (HC), Soleimany and AJU v AJT. |
| CEB v CEC | Court of Appeal | Yes | [2020] 4 SLR 183 | Singapore | Curial intervention is limited to cases where the upholding of an arbitral award would “shock the conscience”. |
| BAZ v BBA | Court of Appeal | Yes | [2020] 5 SLR 266 | Singapore | To succeed on a public policy argument, the party has to cross a ‘very high threshold’ and demonstrate ‘egregious circumstances such as corruption, bribery or fraud, which would violate the most basic notions of morality and justice. |
| Sui Southern Gas Co Ltd v Habibullah Coastal Power Co (Pte) Ltd | Court of Appeal | Yes | [2010] 3 SLR 1 | Singapore | To succeed on a public policy argument, the party has to cross a ‘very high threshold’ and demonstrate ‘egregious circumstances such as corruption, bribery or fraud, which would violate the most basic notions of morality and justice. |
13. Applicable Rules
| Rule Name |
|---|
| ICC Rules |
14. Applicable Statutes
| Statute Name | Jurisdiction |
|---|---|
| International Arbitration Act | Singapore |
| UNCITRAL Model Law on International Commercial Arbitration | Singapore |
| Indian Contract Act 1872 | India |
| Foreign Exchange Management Act 1999 | India |
15. Key Terms and Keywords
15.1 Key Terms
- Put Option
- FEMA Regulations
- Assured Returns
- Public Policy
- International Arbitration
- Shareholders Agreement
- Put Price
- Non-Compete Fee
- Model Law
- International Arbitration Act
15.2 Keywords
- arbitration
- public policy
- FEMA
- Singapore
- Indian law
- international commercial arbitration
17. Areas of Law
16. Subjects
- Arbitration
- International Law
- Contract Law
- Public Policy