The application to set aside the Award was heard by Mr Justice Saunders in February and June 2011.
In his judgment, Mr Justice Saunders ruled that, in light of the pro-enforcement scheme of both the Old Arbitration Ordinance and the UNCITRAL Model Law, a party seeking to set aside an award under Article 34(2) of the UNCITRAL Model Law must pass a two-step test in order to satisfy the court that it should exercise its discretion in favour of setting aside.
Firstly, the party seeking to set aside the award must establish the basis for the appropriate exercise of the discretion, i.e. one or more of the grounds under Article 34(2) of the UNCITRAL Model Law. In this respect, Mr Justice Saunders commented that:
- as a matter of basic fairness, the denial of opportunity to make a submission in reply on a matter of law would invariably constitute a serious violation under Article 34(2) of the UNCITRAL Model Law; and
- basic fairness between parties to an arbitration also required that when new material was raised by the party who would normally have the last word, an opportunity must be given to the other party to respond, even if only by way of a short written submission.
Secondly, where a violation under Article 34(2) of the UNCITRAL Model Law is established, the party seeking to set aside the award must satisfy the court that it cannot be said that if the violation had not occurred the result of the arbitration could not have been different (i.e. that there is a possibility that the violation could have made a difference to the result). In this respect, Mr Justice Saunders provided further guidance:
- although a court retained a narrow and limited residual discretion not to set aside an award even where a violation of Article 34(2) of the UNCITRAL Model Law is established, it is only if it is beyond any doubt that the decision could have been the same that a court would be allowed to override a violation. If the court cannot exclude the possibility - a real as opposed to a remote possibility that cannot be sensibly ignored - that the result might be different, then it will not be beyond any doubt that the decision would have remained the same;
- whether or not the result could have been different, is a determination which must be made, not by examining the merits of the award, but by examining the nature of the violation and the potential consequences that flow from the violation. It is the quality of the violation that must be examined rather than the materiality and the effect on the outcome of the arbitration; and
- in assessing whether it can exclude such a possibility, the court will take into account the type of violation, the nature of the violation and the result of the award.
Mr Justice Saunders applied the above two-step test when considering the three discrete procedural matters relied upon by the Applicant in its setting aside application and held that:
- Taiwanese law issue
The effect of the directions of 20 November 2007 was that the Respondent would have the Applicant's best case on the Taiwanese law issue for ten days prior to being required themselves to file their best case on that issue. This change in the Procedural Timetable was not a change with which both parties agreed, and the Tribunal did not respond to the protest made by the Applicant to these directions. That was a particular advantage to the Respondent, when it would be filing its pre-hearing submissions on the Taiwanese law issue, on a Friday afternoon, with the hearing due to begin on the following Monday morning. Thus, the Respondent had ten days to peruse the Applicant's submissions and prepare to meet the Applicant's "best case" submissions at the December 2007 hearing, when the Applicant had only two calendar days and zero working days to peruse and prepare on the basis of Respondent's evidence and submissions on this issue.
- Joint expert meeting and report
The Tribunal did not consider or review the additional legal authorities the Applicant wished to rely upon. Thus, there was no basis upon which the Tribunal could say whether or not those authorities came within the category of "sensational authorities" which it had indicated would be allowed.
- Hong Kong law issue
Once the Tribunal had invited the Respondent to respond to the Applicant's Hong Kong law submissions, the Tribunal was bound to give the Applicant the opportunity to reply on those matters of law. The Tribunal’s refusal to grant leave to the Applicant to do so should also be viewed in the light of the fact that although the Respondent submitted two new authorities, which were duly received and considered by the Tribunal, the Tribunal had refused to allow the Applicant to submit new authorities on the Taiwanese law issue.
Mr Justice Saunders held that the above procedural matters amounted to violations of Article 34(2) of the UNCITRAL Model Law which meant that the Applicant was unable to present its case and that the arbitral procedure was not in accordance with the agreement of the parties. As Mr Justice Saunders was unable to say that, had there been no such violations, the result of the ICC arbitration could not have been different, His Honour exercised his discretion under Article 34(2) of the UNCITRAL Model Law to set aside the Award.