There is little dispute that an arbitrator’s jurisdiction is derived from the pleadings and the issues that are placed before him. In the event the arbitrator considers issues that were not put to him, this could potentially result in the award being set aside on the grounds that the arbitrator has acted in excess of his jurisdiction.
Apart from acting in excess of jurisdiction, to consider an issue which has not been pleaded amounts to a breach of natural justice as it deprives a party the opportunity from addressing the issues which have been considered by the arbitrator. Therefore, it is possible that when an arbitrator considers an issue which has not been pleaded, the arbitrator has not only acted in excess of jurisdiction but the arbitrator has also breached the rules of natural justice.
In Sigur Ros Sdn Bhd v Master Mulia Sdn Bhd [2018] 8 CLJ 291, the Court of Appeal at paragraphs 85 and 86 of the grounds of judgment made the following observation:
“Not only do these pleadings define the dispute(s) that are referred to arbitration, more importantly, the arbitrator takes his mandate and authority from those pleadings insofar a what is required for his determination. The arbitrator cannot exceed those terms of reference or limits of submission which have been demarcated by consensual agreement between the parties. Otherwise, these breaches may become the basis of setting aside of awards under other provisions of s 37(1)(a) of Act 464.
The arbitrator does not set those limits of jurisdiction, the arbitrator’s jurisdiction is denied for him by the parties. In this case, not only do the pleadings precisely demarcate and define the dispute, the terms were also agreed to at a preliminary meeting on 11 February 2014 between the parties and the arbitrator.”
Simply put, a party cannot raise a new dispute in any arbitration without the consent of the other party. These propositions flow inexorably from the consensual nature of arbitration
In PT Prima International Development v Kempinski Hotels SA [2012] SGCA 35, the Court of Appeal at paragraph 32 was of the following view:
“Those disputes which they choose to submit for arbitration will demarcate the jurisdiction of the arbitral tribunal in the arbitral proceedings between them. An arbitral tribunal has no jurisdiction to resolve disputes which have not been referred to it in the submission to arbitration. Simply put, a party cannot raise a new dispute in any arbitration without the consent of the other party. These propositions flow inexorably from the consensual nature of arbitration.”
Given the consensual nature of arbitration, the arbitrator cannot consider new issues unless the parties agree to the same. The Court of Appeal in Kerajaan Malaysia v Perwira Bintang Holdings Sdn Bhd [2015] 1 CLJ 617, the decision of the High Court to set aside an arbitration award on the basis that the arbitrator introduced a “new difference” was upheld.
The question then arises if an arbitrator relies on his own experience and expertise in addressing a specific issue without giving the parties the opportunity to address him, whether the arbitrator is acting in excess of his jurisdiction or in breach of natural justice. This issue has been the subject matter of a number of recent decisions. These recent decisions make it clear that arbitrators can only rely on their own knowledge and expertise in very limited circumstances.
In Sigur Ros Sdn Bhd v Master Mulia Sdn Bhd [2018] 8 CLJ 291, the Court of Appeal at paragraphs 72 and 73 of the grounds of judgment made the following observation:
“As decided in Trustees of Rotoaira Forest Trust, unless there is express or implied agreement to the contrary, the arbitrator is also precluded from taking into account evidence or argument extraneous to the hearing without giving the parties further notice and the opportunity to respond. Extraneous evidence extends to any evidence or even argument which the arbitrator brought up himself. We do not see any claim or argument that the arbitrator in this case was appointed for or known for his special expertise. Unless there was express agreement to the contrary, the arbitrator was obliged to invite the parties to deal or respond to these two pieces of extraneous evidence and line of reasoning on the issue of causation.
The best I can do to provide an acceptable test is to reformulate the question in this way: is the kind of information upon which the arbitrator has relied information of the kind and within the range of knowledge one would reasonably expect the arbitrator to have acquired … If he uses knowledge of that kind he acts fairly; if he draws on knowledge outside that field, then the rule is quite clear
In Pancaran Prima Sdn Bhd v Iswarabena Sdn Bhd [2020] 9 CLJ 466 the Federal Court addressed this issue at some length and concluded that there is a difference between a lay arbitrator and an arbitrator appointed for his expertise and experience. The Federal Court was of the view that lay arbitrators must confine their views to the information provided by the parties but arbitrators chosen for their expertise can draw on their expertise and experience. At paragraph 82 of the grounds of judgment the Federal Court made the following observation:
“In cases where an arbitrator is appointed for his or her special knowledge or skill or expertise, such arbitrator is entitled to draw those sources for the purpose of determining the dispute and need not advice the parties that he or she is doing so: See Mediterranean and Eastern Export Co and Checkpoint Ltd v Strathclyde Pension Fund [2003] EWCA Civ 84.”
As such, it appears that only arbitrators whom are appointed for their special knowledge or skill or expertise would be entitled to draw on his or her expertise and experience. Thus, where the arbitrator was not specifically chosen for his or her special knowledge or skill or expertise, he or she cannot rely on their so call expertise. The Federal Court explained the difference between general and special knowledge at paragraph 89 of the grounds of judgment:
“The demarcation of what is general and what is special knowledge is not always easy to draw This is how Ward LJ expressed the difficulty in Strathclyde Pension Fund (supra):
It will not always be easy to determine when special facts relating to a special or particular case becomes subsumed with the general knowledge that a busy and experienced expert is bound to acquire. The best I can do to provide an acceptable test is to reformulate the question in this way: is the kind of information upon which the arbitrator has relied information of the kind and within the range of knowledge one would reasonably expect the arbitrator to have acquired … If he uses knowledge of that kind he acts fairly; if he draws on knowledge outside that field, then the rule is quite clear.”
The Singaporean Court of Appeal in CAJ and another v CAI [2021] SGCA 102 was of the view that it is necessary for the tribunal to inform the parties of how its experience would be of relevance. At paragraph 55 of the grounds of judgment, the Court of Appeal was of the following view:
“The Tribunal’s prior experience dealing with extension of time claims for other construction projects would be immaterial in deciding on the appropriate extension of time in this case without the benefit of pleadings, specific evidence (both factual and expert) and arguments to determine the proper extension of time to be granted. Once this glaring fact is placed in the correct perspective, it would be immediately apparent that the failure of the Tribunal to inform the parties as to how its experience would bear on the extension of time issue was another classic case of breach of natural justice.”
Conclusion
It therefore appears that when an arbitrator is not specifically appointed for his expertise or experience the arbitrator is duty bound to inform the parties of any additional issues to give parties the opportunity to address these issues. The failure to do so will amount to a breach of natural justice. However, where an arbitrator is appointed specifically for his expertise or experience the arbitrator may draw on his own skill, subject to the fact that all necessary information and evidence has been made available to enable the arbitrator to arrive at a reasoned decision.
Written by Sanjay Mohan
sm@sanjaymohan.com.my