Gumusut-Kakap Semi-Floating Production System (Labuan) Limited v Sabah Shell Petroleum Company Limited (W-02(IM)(C)-124-01/2023)

This judgment raises for determination, among other issues, a question of some significance to the arbitral process, namely whether an arbitral tribunal’s jurisdiction is circumscribed by the limitation of liability clause contained in the substantive agreement between the parties. The Appellant contends that, by virtue of section 30(5) of the Arbitration Act 2005, which obliges the arbitral tribunal to decide the disputes ‘… in accordance with the terms of the agreement’, the arbitral tribunal lacked jurisdiction to render an award in excess of the contractual cap on liability. The Respondent, on the other hand, maintains that such clauses do not delimit jurisdiction but merely define the scope of substantive rights and remedies, leaving the arbitral tribunal’s jurisdiction to be governed by the arbitration agreement itself. It is against this backdrop that the Court is invited to consider, inter alia, the proper characterisation of limitation clauses within the framework of arbitral jurisdiction under Malaysian law.

There are 2 appeals before this Court. Both the appeal no. W- 02(IM)-124-01/2028 (“Appeal 124”) and appeal no. W- 02(C)(A)-125-01-2023 (“Appeal 125”) concern the arbitral award dated 8.4.2020 (“Award”) issued in an arbitration between the Appellant, Gumusut-Kakap Semi-Floating Production System (Labuan) Limited (“GKL” or “the Appellant”), and the Respondent, Sabah Shell Petroleum Company Limited (“SSPC” or “the Respondent”), where the arbitral tribunal awarded a sum of USD 422 million (with interest of 6.65% from date of the Award until full payment) in favour of

The Award arose from a dispute concerning a semi-submersible floating production system for a deepwater oil field in Malaysia. Appeal 124 is the Appellant’s appeal against the High Court’s decision dismissing its application to set aside the ex-parte order obtained by the Respondent to enforce the Award pursuant to section 39 of the Arbitration Act 2005 (“AA 2005”). Appeal 125 is also the Appellant’s appeal against the High Court’s decision to dismiss its application to set aside the Award pursuant to section 37 of AA 2005. Both applications were dismissed on 29.12.2022 by the learned High Court Judge (as he then was), Lim Chong Fong J.

The Appellant contended that the Award was made in excess of jurisdiction, breach of natural justice, and breach of public policy. More specifically, that: a) the arbitral tribunal exceeded its jurisdiction by awarding monetary relief to the Respondent in excess of the maximum amount permitted to be awarded (i.e. USD200million) under the limitation of liability clause in the contract between the parties; b) by determining the Respondent’s claim for the costs of hiring two Accommodation Vessels (i) on the basis of a document that was not produced in evidence, (ii) in a manner that sanctioned a double recovery, and (iii) on an arbitrary basis, the arbitral tribunal acted in breach of natural justice, in breach of public policy and or exceeded its jurisdiction; c) by determining the Respondent’s claim for Common Costs in a manner that (i) sanctioned a double recovery, (ii) departed from the method of assessment it had resolved to apply to link the Respondent’s claims to defects remediation works, (iii) ignored the basis on which the claim had been advanced by the Respondent and responded to by the Appellant, and (iv) was, without warning or reasonable opportunity for the parties to make submissions, based instead on an arbitrary 50% adjustment that formed no part of either party’s pleaded case, the arbitral tribunal acted in breach of natural justice, in breach of public policy and or exceeded its jurisdiction; d) by determining large parts of the Respondent’s claim for Specific Costs via a sampling and extrapolation approach, and without allowing those claims to be scrutinised or requiring them to be proven, the arbitral tribunal had acted in breach of public policy and or exceeded its jurisdiction.

I finds no merits to both the Appeals and accordingly dismissed the two Appeals with costs.

The Appellant is a wholly-owned subsidiary of MISC Berhad (“MISC”). MISC is a public listed company on the Main Market of Bursa Malaysia, and is 51% owned by Petroliam Nasional Berhad (“PETRONAS”). The Appellant is a special purpose vehicle whose principal activity is owning and leasing the Gumusut Kakap Semi-Submersible Floating Production System (“Semi-FPS”).

The Respondent is part of the Shell group of companies. The Respondent’s principal activity is the extraction of crude petroleum and natural gas. The Respondent is the operator of Malaysia’s Deepwater Gumusut-Kakap oil field, where the Semi-FPS is stationed. The Respondent leases the Semi-FPS from the Appellant. The Semi-FPS can process up to 150,000 barrels of crude oil per day and was valued in 2018 at approximately USD 1.549 billion.

PETRONAS offered the Respondent the opportunity to be involved in the project to develop the Gumusut-Kakap oil field because PETRONAS recognised that the Respondent’s parent company, Shell, could bring additional deep-water expertise.

The project was aimed at bringing in a transfer of technology, development of local capability and capacity, as well as foreign direct investment. The overall purpose was to improve and promote Malaysia as a regional deep-water development hub. The Respondent and the Appellant executed a construction-cum-lease agreement. The Appellant would design, procure, construct and then lease the Semi-FPS to the Respondent. MISC was the agent and or contractor of the Appellant in the performance of the engineering, procurement and construction (“EPC”) of the Semi-FPS.

In 2006, the Respondent issued an Instruction and Letter of Authorisation to Proceed, authorising MISC to proceed with the EPC work scope pending the finalisation of the contract. Malaysia Marine and Heavy Engineering Sdn Bhd was engaged as MISC’s main subcontractor in respect of the EPC work.

On 4.10.2012, MISC sold the Semi-FPS to the Appellant whilst the Semi-FPS was still under construction. MISC undertook to complete all the necessary work for handover completion.

By November 2012, the parties were still negotiating the contract, even though the construction of the Semi-FPS was at an advanced stage.

On 9.11.2012, the Appellant and the Respondent entered into the Contract No.C-5916731 (“Contract”). Certain amendments were subsequently made to the Contract by agreement. In particular, on 28.8.2013, by way of a letter, the Appellant and the Respondent agreed to certain terms whereby the Respondent would have exclusive access to the Semi-FPS, among other terms.

Separately, the Respondent and PETRONAS entered a Production Sharing Contract (“PSC”). The Appellant is not privy to the PSC, which has never been disclosed.

Certain disputes arose between the Appellant and the Respondent in relation to the Contract, and on 22.9.2016, the Appellant initiated adjudication proceedings against the Respondent in respect of its claim for unpaid variation works (“First

On 25.4.2017, the Appellant initiated a second round of CIPAA adjudication proceedings against the Respondent in respect of a third tranche of unpaid variation works (“Second Adjudication Proceedings”).

Both Adjudication Proceedings were decided in the Appellant’s favour and for completeness, the arbitral tribunal in its Award upheld the findings in relation to the Appellant’s claims in the Adjudication Proceedings.

On 2.9.2016, the Appellant commenced arbitration proceedings against the Respondent (the “Arbitration”). The Arbitral Tribunal consisted of: a) Professor Doug Jones AO; b) Dr. Robert Gaitskell QC; and c) Sir Vivian Ramsey (collectively referred as “the Arbitral Tribunal”)

The arbitration proceedings in question was not of the ordinary or usual scale or size arbitration. To illustrate the magnitude of the matter in terms of evidence and facts involved in the arbitration and the level of details that the parties and the Arbitral Tribunal had analysed and gone into: a) the Arbitral Tribunal had to examine 1,647 pages of pleadings and submissions from the Appellant, 1,359 pages of pleadings and submissions from the Respondent, 843 pages of Joint Statements of Experts (not including appendices), 1,124 pages of Expert Reports from the Appellant (not including appendices and exhibits) and 1,050 pages of Expert Reports from the Respondent (not including appendices and exhibits); b) the Appellant and the Respondent each had their own Technical Experts and Delay Experts in relation to the Respondent’s Work Done Claim, and their own respective Quantum Experts; c) over the course of a 3-week hearing, the Arbitral Tribunal heard 9 factual and 9 expert witnesses from the Appellant and 12 factual and 3 expert witnesses from the Respondent, and this was not inclusive of the significant number of factual and expert witnesses who presented testimonies and reports on the matter but were not cross-examined and therefore not heard at the 3-week long hearing; d) in total, the Appellant had 14 factual witnesses who provided a total of 24 witness statements and 13 experts spread across multiple disciplines who provided expert reports, and the Respondent had 13 factual witnesses with a total of 18 witness statements and 4 experts spread across multiple disciplines, and all of the experts participated in joint statements; e) the Arbitral Tribunal had to consider over 450,000 documents (almost a terabyte of documentation), before the Arbitral Tribunal delivered the Award; f) there was also a whole host and thread of communications between the Arbitral Tribunal and the experts and the solicitors of the parties, as set out in paragraphs 64-209 of the Award; g) after the evidentiary hearing took place, the Arbitral Tribunal also invited the parties to make further submissions, inter alia, on their respective positions under Malaysian law, covering subjects such as the burden and standard of proof, and double claiming of costs; h) the parties made such further submissions and the Appellant was provided the opportunity to and did respond to the Respondent's submissions on these points, all of which the Arbitral Tribunal thoroughly considered in making its determinations, as set out in paragraphs 278- 369 of the Award; i) the parties also entered into a Quantum Experts Access Agreement, which granted the Arbitral Tribunal the right to have direct access to the Quantum Experts for the purpose of performing calculations on the basis of existing material contained in their expert report forming part of the evidential record, adopting assumptions provided to them by the Arbitral Tribunal. The communications between the Arbitral Tribunal and the Quantum Experts were disclosed by the Arbitral Tribunal as an appendix to the Award, and have also been listed by the Arbitral Tribunal in paragraphs 157-206 of the Award.

The above underscores the extensive and thorough process undertaken by the parties and the Arbitral Tribunal to resolve the parties' dispute.

The Arbitral Tribunal dealt with (i) the Appellant’s claims against the Respondent for unpaid variation works and (ii) the Respondent’s counterclaim against the Appellant for payment for defects remediation works and costs associated with defects remediation works.

The Appellant’s claims sought determination of the following issues: a) unpaid variation works payments for construction work carried out by MISC; b) the date of Handover Completion of the Semi-FPS; c) the Respondent’s delayed achievement of Commencement of Commercial Production (“CoCP”); d) whether a call, by the Respondent, on a bank guarantee under the Contract was wrongly made; and e) whether the Warranty Defect Action Form (“WDAF”) process had been correctly administered in the correction of defects.

The Respondent in turn by way of counterclaim sought determination of, inter alia, the following issues: a) whether the Appellant had properly completed its scope of work under the Contract, and whether the Respondent was entitled to payment for work done to complete the works or remedy defects; b) whether Handover Completion was completed in accordance with the Contract, and whether the Respondent was entitled to payment of liquidated damages; and c) whether the functionality of the Semi-FPS was as required by the Contract, and if not, whether the Respondent was entitled to damages. Agreement to exclude challenge on question of law

It is significant that in respect of the Arbitration, the parties had agreed to exclude the application of sections 41, 42, 43 and 46 of the AA 2005 in the arbitration proceedings and therefore neither the Appellant nor the Respondent can challenge the Award on the basis that the Arbitral Tribunal had fallen into error of law.

On 8.4.2020, the Arbitral Tribunal issued the Award. More specifically, the Arbitral Tribunal awarded in para [3461] of the Award as follows:

Upon receipt of the Award: a) the Appellant commenced invoicing the Respondent for the uplifted amount of USD 43,336.01 as set out in paragraph 3461(2) of the Award; and b) the Respondent commenced setting off the sums of USD 643,336.01 against the amounts set out in paragraph 3461(3) of the Award.

This Court was informed by the parties that the Respondent, being entitled to set-off its claims against moneys owed by the Respondent to the Appellant under the Contract (including but not limited to the Semi-FPS Day Rate) has effectively recovered fully its counterclaim awarded by the Arbitral Tribunal from the Appellant.

On 22.5.2020, the Respondent filed an application in Court under section 38 of the AA 2005 to enforce the Award. This was filed under Kuala Lumpur High Court Originating Summons No. WA-24C(ARB)-10-05/2020 (“OS 10”).

On 7.7.2020, the Appellant filed an application in Court pursuant to section 37 of AA 2005 to set aside the Award. On the same day, the Respondent obtained an ex parte order to enforce the Award (“SSPC’s Ex Parte Order”).

Subsequently, on 27.7.2020, the Appellant filed its application to set aside the SSPC’s Ex Parte Order pursuant to section 39 of AA 2005. Both setting aside applications shall be collectively referred to as “Appellant’s Setting Aside Applications”.

The Appellant’s Setting Aside Applications were premised on arguments, amongst others, that the Award was in excess of the Arbitral Tribunal’s jurisdiction, in breach of public policy, and or was issued in breach of natural justice.

On 29.12.2021, the learned High Court Judge dismissed the Appellant’s Setting Aside Applications with costs.

Based on the aforesaid, the parties have placed before this Court the following issues of law for determination: a) whether the Arbitral Tribunal in making its award for damages in excess of the cap of USD 200 million set out in Article 34.3 of the Contract had acted in excess of its jurisdiction; b) whether the Arbitral Tribunal in determining the Respondent’s claim for the costs of hiring two Accommodation Vessels had acted in breach of natural justice and in breach of public policy when: i) it made a legal and factual finding based on a document i.e the Production Sharing Contract (“PSC”) between PETRONAS and the Respondent, to which the Appellant was not privy, and which was never produced in evidence, and which the Appellant never had the opportunity to review it; ii) its’ Award sanctioned a double recovery of the Accommodation Vessels Costs and unjustly enriched the Respondent; and or iii) it undertook to assess the proportion of Accommodation Vessels Costs attributable to the Appellant, where this assessment was arbitrary, and the parties had not been allowed to submit on the appropriate proportion. c) whether the Arbitral Tribunal in determining the Respondent’s claim for Common Costs had acted in breach of natural justice, in breach of public policy, and or in excess of jurisdiction in three respects: i) whether the Arbitral Tribunal had sanctioned a double recovery by awarding Time-Related Common Costs in respect of the delay up to February 2014, notwithstanding that it had held that the delay in that period was covered by Liquidated Damages under the Contract and could not be the subject of delay damages; ii) whether the Arbitral Tribunal failed to assess the relationship of the Respondent’s Common Costs claims to defects remediation works according to the method of assessment that it had resolved to apply, and on which the Appellant had based its submissions; iii) whether the Arbitral Tribunal awarded an arbitrary 50% reduction for two heads of Non-Time Related Common Costs without giving reasonable notice or opportunity to the parties to submit, and in manifest disregard of the applicable terms of the Contract and principles of applicable law. d) whether in determining the Respondent’s claims for Specific Minor Costs, the Arbitral Tribunal had acted in breach of public policy and or exceeded its jurisdiction by applying a methodology of “sampling and extrapolation” to decide which categories of costs were proven and were to be awarded.

Generally, the applicable test that has to be satisfied by the appellate court before intervening with the decision of the trial judge below is well established – it is the “plainly wrong test”. In other words, in the absence of some other identifiable error, such as a material error of law or the making of a critical factual finding which had no basis in the evidence, the appellate court should not interfere with the factual findings of the trial judge unless it was satisfied that the decision of the trial judge was ‘plainly wrong’ in the sense that it could not reasonably be explained or justified and so was one which no reasonable judge could have reached. If the appellate court was not satisfied that the decision came within that category, it was irrelevant that, with whatever degree of certainty, it considered that it would have reached a different conclusion from the trial judge [See: Gan Yook Chin (P) & Anor v Lee Ing Chin @ Lee Teck Seng & Ors [2005] 2 MLJ 1; [2004] 4 CLJ 309 (FC); Ng Hoo Kui & Anor vWendy Tan Lee Peng (administratrix for the estate of Tan Ewe Kwang, deceased) & Ors [2020] 12 MLJ 67; [2020] 10 CLJ 1; [2020] 1 LNS 1060 (FC); UEM Group Bhd v Genisys Integrated Engineers Pte Ltd & Anor [2010] MLJU 2225; [2010] 9 CLJ 785 (FC)].

However, in arbitration cases, the “plainly wrong test’ is not the correct threshold. Instead, the appellate court has to ask: did the learned High Court Judge apply the correct principles under the AA 2005? The appellate court is not to re-evaluate the merits but only to check if the learned High Court Judge fell into an error of law within the strict confines of the AA 2005.

The aforesaid approach by the appellate courts is well established. The Federal Court in Master Mulia Sdn Bhd v Sigur Rus Sdn Bhd [2020] 9 CLJ 213 at paras [39] and [54] encapsulated this in the following manner: “[39] The fourth key concept of the Model Law is that of limited and clearly defined instances of court intervention into the arbitration process, with a curtailed right of appeal from a court decision sought during the pendency of the arbitral proceedings. The role of the courts in general is one of assistance supportive of the arbitral process and not one of interference with it. The approach of the Model Law, which allows prompt recourse to court during the arbitral proceedings, but simultaneously permits the arbitration to go forward, represents a balance between the potential for delay through dilatory tactics of a recalcitrant party, and the futility and high cost of arbitral proceedings in which the award is ultimately set aside by the court. : : [54] Underlying these guiding principles is the policies and objectives of the New York Convention and the Model Law. As a matter of principle and policy, the courts will seek to support rather than frustrate or subvert the arbitration process. The role of courts in the arbitral regime in general is one of assistance supportive of the arbitral process and not one of interference with it. Bearing in mind the two primary objectives of the Model Law (respect for and preservation of party autonomy and ensuring procedural fairness), the courts do not review the merits of the arbitral tribunal’s decision.” [emphasis added]

Similarly, the Singapore Court of Appeal in AKN v. ALC [2015] 4 SLR 744 held as follows: “38 In particular, there is no right of appeal from arbitral awards. That is not to say that the courts can never intervene. However, the grounds for curial intervention are narrowly circumscribed, and generally concern process failures that are unfair and prejudice the parties or instances where the arbitral tribunal has made a decision that is beyond the scope of the arbitration agreement. It follows that, from the courts’ perspective, the parties to an arbitration do not have a right to a “correct” decision from the arbitral tribunal that can be vindicated by the courts. Instead, they only have a right to a decision that is within the ambit of their consent to have their dispute arbitrated, and that is arrived at following a fair process. 39 In the light of their limited role in arbitral proceedings, the courts must resist the temptation to engage with what is substantially an appeal on the legal merits of an arbitral award, but which, through the ingenuity of counsel, may be disguised and presented as a challenge to process failures during the arbitration …” [emphasis added]

With the aforesaid approach in mind, each of the issues presented shall now be considered.

The foundation of arbitration is rooted in the consent of the parties. In this regard, it is trite that the parties’ consent to arbitrate and the scope of matters agreed to be submitted to arbitration are to be found in the parties’ agreement. If the arbitral tribunal strays from the confines of its mandate as defined by the parties, it would have acted in excess of jurisdiction and its award is liable to be set aside. Indeed, in Garden Bay Sdn Bhd v Sime Darby Property Bhd [2021] 2 MLJ 281 at para [61], this Court held as follows: “[61] On the legal position, we agree that it is trite law that when parties refer their dispute to arbitration, the mandate of the arbitrator must be limited to the terms defined by the parties for him to exercise his jurisdiction. If the arbitrator strays from the confines of this mandate, he will be acting in excess of his jurisdiction, even though he may have the initial and primary jurisdiction to arbitrate between the parties.” [emphasis added]

The arbitral tribunal’s jurisdiction is also circumscribed and mandated by the law of the seat. As a tribunal seated in Malaysia, its decision-making process is circumscribed by the AA 2005, in particular, in our present case, section 30 of the AA 2005, which governs the Arbitral Tribunal’s decision-making process, provides (where relevant) as follows: “30. Law applicable to substance of dispute

The arbitral tribunal shall decide the dispute in accordance with such rules of law as are chosen by the parties as applicable to the substance of the dispute. […]

The arbitral tribunal shall decide according to equity and conscience only if the parties have expressly authorized it to do so.

The arbitral tribunal shall, in all cases, decide in accordance with the terms of the agreement and shall take into account the usages of the trade” [emphasis added]

The relevance of section 30 of the AA 2005 to the arbitral tribunal’s jurisdiction for purposes of setting aside an arbitral award was determined very recently by the Court of Appeal in Hindustan Oil Exploration Co Ltd v Hardy Exploration & Production (India) Inc [2023] 4 MLJ 113 (CA).

In that case, this Court held that although section 30 of the AA 2005 is not an ‘actionable provision’ per se, a conjunctive reading of sections 30 and 37 would be warranted where purely procedural aspects of the arbitration or the decision-making process are concerned. In other words, where the provisions of section 30 of the AA 2005 are transgressed and this impairs a procedural aspect of the arbitration or the decision-making process, this can be read conjunctively with section 37(1)(a) of the AA 2005 as a ground to set aside the arbitral award.

More specifically, the question in Hindustan Oil Exploration Co Ltd v Hardy Exploration & Production (India) Inc was whether the time bar which arises from the expiry of statutory limitation periods is an issue of ‘procedural admissibility’ or an issue of merits or substance. In paras [68] and [69], the Court held thus: “[68] The High Court in addressing the issue of time limitation must ask the more helpful question, that is ‘whether the disputation is purely procedural or the disputation would also involve the question and examination of merits’. To this court’s mind, if a particular issue or disputation would remain unchanged notwithstanding the merits of a case, then that particular issue or disputation is purely procedural. Alike in an arbitral award involving time limitation, time limitation is a purely procedural issue that is entirely disjointed and unaffected by the merits of any parties’ cases. Time limitation is entirely blind to whether or not a party can prove any measure of liability against another. Even if there was any form of civil wrong proven on merits, time limitation shall still prevail if the complaint of such civil wrong was not procedurally voiced out within the prescribed limitation period. Therefore, since time limitation is blind to the substance or merits of the case, it cannot at all be said that time limitation is a matter of substantive law. In this sense, this court is in full agreement with the learned JC’s finding that time limitation is a matter of procedural law (and not of substantive law). [69] A more meaningful expansion of the term ‘admissibility’ as propounded in the case of BBA v BAZ, would be ‘procedural admissibility’. Thus, instead of embarking on a lengthy discourse on whether time limitation is a matter of admissibility or jurisdiction, it would be infinitely more helpful to determine whether time limitation is an issue of procedural admissibility or an issue of merit (or substance). Thus, this court is inclined to adopt the expanded meaning of ‘procedural admissibility’, as opposed to the Singaporean court’s classification exercise between a matter of admissibility or jurisdiction. Thus, this court does not entirely follow the test in BBA v BAZ to classify time limitation to either be a matter of admissibility or jurisdiction. [70] The more meaningful classification would be (as this court has previously stressed) is to classify whether or not the matter was purely a procedural issue (which remains unchanged and undisturbed notwithstanding the merits of the case) or a substantive issue (which is indubitably affected by the facts, evidence, and merits of the case). And clearly, time limitation is one procedural issue that is indeed blind to the merits of the case. [71] This manner of test and classification would effectively reconcile the appropriate approach to a time limitation issue in all aspects (in the face of the differences between s 37 and the repealed s 42, and the Malaysian Federal Court’s (in Jan De Nul (M) Sdn Bhd & Anor v Vincent Tan Chee Yioun & Anor [2019] 2 MLJ 413; [2019] 1 CLJ 1) classification of matters concerning the decision-making process (under s 37) and issue of law and fact which affects the parties’ positions (under the repealed s 42). [72] Nonetheless, even if the High Court is clothed with the necessary jurisdiction to examine the arbitral tribunal’s decision-making process (in applying time limitation), the High Court ought not to interfere with the arbitral tribunal’s interpretation and application of the relevant time limitation if the arbitral tribunal’s interpretation and application of time limitation is legally sound. [73] Notwithstanding the slight dissonance within the analysis and reasoning of the learned judicial commissioner, this court is still in agreement with the learned judicial commissioner’s final conclusion that the issue of time limitation is purely and strictly a matter of curial or procedural law. Thus, the applicable law of time limitation shall be the governing procedural law of the seat of arbitration (that being the Malaysian law). [emphasis added]

Accordingly, in Hindustan Oil Exploration Co Ltd v Hardy Exploration & Production (India) Inc, this Court held that a plea of statutory time bar is to be treated as an issue of procedural law because the ability or otherwise of a party to prove liability of the claim will not affect the issue or disputation of the same. It makes no difference whether the applicable statute of limitations is classified as substantive (extinguishing the claim) or procedural (barring the remedy) in the private international law sense, since in both cases the complaint is that the claim is stale and therefore defective.

However, the plea of statutory time bar, even if it is a procedural issue would not be one that goes towards the jurisdiction of the arbitral tribunal unless there is an express bar in the arbitration clause limiting the arbitral tribunal’s jurisdiction to hear claims that are time-barred eg, “the tribunal shall have no jurisdiction to hear claims that are time-barred under statute”. This is because the bringing of claims that are out of time under limitation laws in such a case would fall outside the scope of consent to arbitration. Express provision by the parties is necessary given that statutes of limitation do not generally target or affect arbitral jurisdiction by design.

Indeed, in Hindustan Oil Exploration Co Ltd v Hardy Exploration & Production (India) Inc, the Court opined that “… even if the High Court is clothed with the necessary jurisdiction to examine the arbitral tribunal’s decision-making process (in applying time limitation), the High Court ought not to interfere with the arbitral tribunal’s interpretation and application of the relevant time limitation if the arbitral tribunal’s interpretation and application of time limitation is legally sound”.

The Court by obiter opined that in some instances i.e. if the arbitral tribunal were to mistakenly apply the chosen substantive lex contractus under section 30 as the curial or procedural law (instead of the chosen lex arbitri or the law of the chosen seat of arbitration), the conjunctive readings of the provisions in sections 30(1), (2) and (5) and section 37(1)(v) may be resorted to remedy such a glaring error as to the appropriate procedural law to be applied which would make the arbitral award procedurally impaired.

Accordingly, just because the arbitral tribunal decides a procedural issue under section 30(5) of the AA 2005, that does not transform it into a jurisdictional ruling at all. A jurisdictional ruling is narrower. It has to do with the arbitral tribunal’s powers to hear the disputes.

What then are the sources of the arbitral tribunal’s powers or jurisdiction?

Arbitration is a consensual dispute resolution process. The consent of the parties serves as the touchstone in determining the jurisdiction of the arbitral tribunal. In this regard, the scope of the parties’ consent to the arbitral tribunal’s jurisdiction is rooted in: a) The arbitration agreement A valid arbitration agreement is the primary source of jurisdiction. It reflects the parties’ consent to exclude the Court’s original jurisdiction and to refer the disputes to arbitration. Without a valid arbitration agreement, the arbitral tribunal has no jurisdiction. It defines the scope of the disputes that can be referred for arbitration. Even if the main contract is alleged to be invalid, the arbitration agreement is treated as autonomous. It is the source as well as the limit of jurisdiction. If a dispute falls outside the terms of the clause, the arbitral tribunal has no authority. b) The terms of reference The terms of reference crystalize the specific claims. The parties’ pleadings (statement of claim, defence, counterclaim and reply) define the issues referred for the arbitral tribunal’s determination. The arbitral tribunal’s jurisdiction is not just a matter of the arbitration agreement in the abstract but is shaped by how the parties frame their disputes. For example, if both parties plead and submit on the effect of a limitation of liability clause, this may show that the issue is within the arbitral tribunal’s jurisdiction, because the parties have consented to have it determined by the arbitral tribunal. Conversely, if a claim is advanced that was never pleaded, or a relief is granted beyond the submissions, the arbitral tribunal may have acted beyond its jurisdiction. In PT Prima International Development v Kempinski Hotels SA and other appeals [2012] 4 SLR 98, the Singapore Court of Appeal explained the distinction between the scope of an arbitration agreement and the scope of submission to arbitration (at para [32]) in this manner: … It is plain that the scope of an arbitration agreement in the broad sense is not the same as the scope of submission to arbitration. The former must encompass the latter, but the converse does not necessarily apply, in that the particular matters submitted for arbitration may not be all the matters covered by the arbitration agreement. The parties to an arbitration agreement are not obliged to submit whatever disputes they may have for arbitration. Those disputes which they choose to submit for arbitration will demarcate the jurisdiction of the arbitral tribunal in the arbitral proceedings before them. [emphasis added] c) The law of the seat or lex arbitri Lex arbitri or the curial law means the law of the seat and this refers to the body of law that governs how the arbitration is conducted, i.e. the appointment and challenge of arbitrators, the tribunal’s powers, interim measures, procedural timelines, setting aside awards and the role of the Courts in supporting or supervising the arbitration. It governs the conduct of the arbitration process itself. Typically, the lex arbitri is the arbitration law of the seat of arbitration. So, if the seat of arbitration is Kuala Lumpur, our AA 2005 is the lex arbitri, regardless of the substantive governing law of the contract (which is the proper law of the contract or lex causae). d) Party autonomy and Agreement on the Procedure In arbitration, party autonomy is the principle that the scope of the arbitral tribunal’s jurisdiction, the rules it applies and the matters it decides are primarily determined by the agreement of the parties. It is often referred to as the cornerstone of arbitration. Just as the parties decide what disputes can be referred (eg. “all disputes arising out of or in connection with this contract”), the parties may also limit the arbitral tribunal’s powers or jurisdiction (eg. by including an exclusion clause that the arbitral tribunal has no power to award punitive damages or a limitation of liability clause that the arbitral tribunal has no jurisdiction to award a sum exceeding a certain amount). In Malaysia, prior to the amendment in 2018, parties may exclude the application of sections 41 and 42 of the Arbitration Act 2005, making the arbitral tribunal’s jurisdiction as regards its finding of law as final and binding on the parties.

Since the jurisdiction of the Arbitral Tribunal is primarily defined by the arbitration agreement, the terms of reference, the lex arbitri and the principle of party autonomy, it follows that where the arbitral tribunal goes beyond those limits, its award may be set aside.

More specifically, under our AA 2005, section 37(1)(a) provides that an award may be set aside if (iv) “the arbitral award deals with a dispute not contemplated by or not falling within the terms of submission to arbitration” and or if (v) “the arbitral award contains decisions on matters beyond the scope of the submission to arbitration”.

These sections codify the principle that the arbitral tribunal’s jurisdiction is limited by party autonomy and the arbitration agreement. So, if the arbitration clause covers “payment disputes” but the arbitral tribunal decides on “validity of patents”, that decision deals with “a dispute not contemplated by or not falling within the terms of submission” or if the arbitral tribunal is asked to decide on breach of contract but goes further to decide on damages for tortious misrepresentation when that is not pleaded or submitted, it would be making “decisions on matters beyond the scope of the submission to arbitration”.

It is trite and now beyond disputes that a distinction is made between a decision made by the arbitral tribunal that is an error within jurisdiction and that made outside its mandate or jurisdiction. Both our Federal Court and the Singapore Court of Appeal in the following decisions has established this distinction: a) Far East Holdings Bhd & Anor v Majlis Ugama Islam Dan Adat Resam Melayu Pahang & Other Appeals [2018] 1 CLJ 693 where the Federal Court held at paragraph 115: “[115] ... Since the setting aside of an award is a matter governed by AA 2005, the court is permitted to set aside an award only in manner prescribed by AA 2005. The court is not permitted to set aside an award in manner not prescribed by AA 2005. ‘Error of fact or law on the face of the award’ is not prescribed as a ground for court intervention. Hence, under AA 2005, there is no jurisdiction to set aside an award on the ground of ‘error of fact or law on the face of the award’. It is accepted that under AA 1952, the jurisdiction for court intervention stemmed from both common law and statute. But under AA 2005, “the common law ground of setting aside an award for ‘error on the face of the award’ no longer exists” (The Arbitration Act supra at 8.23(b)).” [emphasis added] b) AKN and another v. AKL and others and another appeals [2015] SGCA 18 where at para [73] the learned Chief Justice Sundaresh Menon held: 73 In CRW, we noted (at [33]) the distinction between the “erroneous exercise by an arbitral tribunal of an available power vested in it (which would amount to no more than a mere error of law)” and the “purported exercise by the arbitral tribunal of a power which it did not possess”. This distinction had earlier been enunciated by Lord Steyn in the House of Lords decision of Lesotho Highlands Development Authority v Impregilo SpA [2006] 1 AC 221 (at [25]) as follows: Given the general importance of the point it is necessary to explain it in a little more detail. The reasoning of the lower courts, categorising an error of law as an excess of jurisdiction, has overtones of the doctrine in Anisminic Ltd v Foreign Compensation Commission [1969] 2 AC 147 which is so well known to the public law field. It is, however, important to emphasise again that the powers of the court in public law and arbitration law are quite different. This has been clear for many years, and is now even more manifest as a result of the enactment of the [Arbitration Act 1996 (c 23) (UK)]. Sir Michael J Mustill (now Lord Mustill) and Steward Boyd QC (Commercial Arbitration in England, 2nd ed

(1989), p 555) explained: ‘If … [the arbitrator] applies the correct remedy, but does so in an incorrect way – for example by miscalculating the damages which the submission empowers him to award – then there is no excess of jurisdiction. An error, however gross, in the exercise of his powers does not take an arbitrator outside his jurisdiction and this is so whether his decision is on a matter of substance or procedure.’ [emphasis added]

The legal effect of the distinction is that errors of law or fact made by the arbitral tribunal are still within its jurisdiction and the Courts will not interfere because the arbitral tribunal’s awards are meant to be final [See: sections 36 and 46 of AA 2005] whereas decisions made exceeding jurisdiction, being made without the authority given by the parties may be set aside under section 37(1)(a) (iv) and (v). Application of section 30(5) to section 37(1)(a)

Now, under section 30(5) of AA 2005, it is provided that the arbitral tribunal “shall decide in accordance with the terms of the agreement and shall take into account the usages of the trade applicable to the transaction”. To my mind, this provision codifies the principle of party autonomy. Simply put, it stipulates that the arbitral tribunal must apply the contract as agreed by the parties. The Question framed by the Appellant on issue of jurisdiction

The question for determination in this appeal as framed by the Appellant is this - whether in the case where the substantive agreement between the parties i.e. the Contract, contains a limitation of liability clause and given that section 30(5) mandates the Arbitral Tribunal to decide in accordance with the terms of the agreement, namely, to apply the terms of the Contract as written including the limitation of liability clause, this necessarily means that the Arbitral Tribunal’s jurisdiction to award any damages must be limited by the cap stipulated in the limitation of liability clause.

In the context of the present case, Article 34.3 of the Contract provides as follows: “Notwithstanding any other provision of this CONTRACT, the total liability of [GKL] to [SSPC] arising howsoever out of or in connection with the CONTRACT in respect of all claims, loss and/or expenses of every kind and nature whatsoever whether by way of indemnity or by reason of any breach of the CONTRACT (including without limitation any payment of Liquidated Damages) and/or in tort (including without limitation, negligence or gross negligence) or breach of any duty (statutory or otherwise), shall not exceed UNITED STATES DOLLARS TWO HUNDRED MILLION (USD 200,000,000.00) in aggregate. The provision of this Article shall not apply to any indemnities given by [GKL] under Article 29 headed INSURANCE BY [GKL], Article 23 headed TAXES AND TAX EXEMPTION CERTIFICIATES, Article 27 headed PATENTS AND OTHER PROPRIETARY RIGHTS, Article 28 headed LIABILITES INDEMNITIES, Article 32 headed CONFIDENTIALITY and Article 30 headed PERMITS, LAWS AND REGULATIONS.”

Thus, it is contended on behalf of the Appellant that because Article 34.3 stipulates the Appellant’s liability in respect of ‘any claims howsoever arising …’ is capped at USD 200 million and because the Arbitral Tribunal has awarded the sum of USD 422 million, the Award has exceeded the mandate of the Arbitral Tribunal under section 30(5) making it vulnerable to be set aside under section 37(1)(a)(iv) and (iv) of the AA 2005.

To my mind, the answer to the question put before this Court depends very much on whether the limitation of liability clause in this case was treated by the parties as a jurisdiction constraint on the Arbitral Tribunal’s jurisdiction.

There is no question that the jurisdiction of the Arbitral Tribunal flows from the arbitration agreement in the Contract. In this case this would be Article 36 which stipulates thus: “36.1 Any dispute, controversy or claim relating to, arising out of, or in connection with the WORK or the CONTRACT including any dispute as to the construction, validity, interpretation, enforceability or breach of the CONTRACT shall first be resolved by means of the following procedure:

the dispute shall initially be referred to the COMPANY REPRESENTATIVE and the CONTRACTOR REPRESENTATIVE who shall meet to discuss the matter in dispute and make all reasonable efforts to reach an agreement;

If no agreement is reached under Clause 36.1(b) the dispute shall be referred to the Managing Directors of the COMPANY and the CONTRACTOR.

36.2 In the event no agreement is reached pursuant to Clause 36.1 above, the COMPANY and the CONTRACTOR hereby agree that any dispute which arise in connection with the activities contemplated in the CONTRACT on the application, implementation, validity, breach or termination of all or any part of the WORK or any provision thereof (whether resulting from a claim in contract, tort or otherwise) shall be finally and exclusively settled in accordance with the UNCITRAL (United Nations Commission on International Trade Law) Arbitration Rules as applied by the Regional Centre of Arbitration at Kuala Lumpur, Malaysia. The place of arbitration shall be the Regional Centre for Commercial Arbitration, Kuala Lumpur. The number of arbiters shall be three (3) and the third arbitrator shall always be a suitably qualified and experienced lawyer.

36.3 The language to be used in the arbitration proceedings shall be English.

36.4 Notwithstanding the foregoing, the parties may agree to refer any disputes to a person or a body possessing expert knowledge, if it is considered, in view of the nature of such dispute, to be more suitable than resorting to arbitration. Such a person or a body shall then be appointed by mutual agreement, and the place of proceedings and determination shall be Kuala Lumpur and the language to be used shall be English. Any decision of such a person or a body shall be final and binding upon the parties concerned.

36.5 Whilst any matter or matters are in dispute except where either party has terminated or purported to terminate the CONTRACT, the CONTRACTOR shall proceed with the execution and completion of the WORK and both the CONTRACTOR and the COMPANY shall comply with all the provision of the CONTRACT”.

Article 34.3 is but one of the many clauses in the Contract. With respect to learned counsel for the Appellant, I am unable to agree that a limitation of liability clause, or for that matter even an exclusion of liability clause, is to be treated as a jurisdictional clause that must be read together with the arbitration clause in the Contract. This is so regardless of the fact that the parties may have engaged in extensive negotiations and risk management exercises before settling on the limitation of liability clause in the Contract. The aforesaid cannot and ought not to change the principles of contractual interpretation normally applied by the Courts and arbitral tribunals when considering the meaning and scope of the clause.

To my mind, an exclusion or limitation of liability clause, however carefully and or hotly negotiated, is still a substantive defence available to the parties to the contract, namely, it serves to govern the extent of liability of the parties. It does not have any bearing on the arbitral tribunal’s jurisdiction to hear the disputes at all. In this regard, learned counsel for the Appellant had referred this Court to the introductory paragraph of Teare J’s judgment in Seadrill Ghana Operations Limited v Tullow Ghana Limited [2019] 1 All ER (Comm) 34 at [1] where he commented that because drilling for oil is a risky business, oil companies would seek to protect themselves from the financial consequences of risks by appropriate clauses in the contract, for example by a force majeure clause. That comment, with respect, does not assist the Appellant’s case at all. It has nothing to do with the issue before this Court.

Further, the fact that Article 34.3 is expressly drafted as taking precedence over all other terms of the agreement by the words “Notwithstanding any other provision of this Contract, …” and is also drafted in broad terms as regards the limit on the amount of liability that can be awarded by the Arbitral Tribunal by the words “…the total liability of [the Appellant] to [the Respondent] arising howsoever out of or in connection with the CONTRACT in respect of all claims, loss and/or expenses of every kind and nature whatsoever whether by way of indemnity or by reason of any breach of the CONTRACT … and/or in tort … or breach of any duty … shall not exceed [USD200 million] in aggregate”, also to my mind, do not and cannot transform the said clause into a jurisdictional clause at all.

The scope of a limitation of liability clause, no matter how widely drafted, is, at the end of the day, a substantive defence to the claim and does not cut into the jurisdiction of the Arbitral Tribunal. Unless the arbitration agreement expressly or otherwise limits the Arbitral Tribunal’s jurisdiction to award damages up to a certain maximum sum, a limitation of liability clause that is found in the terms of the Contract does not strip the Arbitral Tribunal of its jurisdiction over claims above the sum stated in the clause. There is no question that the Arbitral Tribunal has the jurisdiction to hear the claims, but it must determine the same by interpreting the limitation of liability clause to see whether the claims fall within or outside the clause, and if the cap applies to those claims. A substantive interpretative error of the clause is not a jurisdiction defect because the jurisdiction flows from the arbitration agreement and not from the limitation clause.

Put it in another way, the Arbitral Tribunal’s jurisdiction is defined by the scope of the arbitration agreement as regards what disputes are referred, the terms of reference, and any applicable statutory limits. The exclusion or limitation of liability clause does not of itself oust or limit the jurisdiction of the Arbitral Tribunal, but merely constrains the remedies or quantum of reliefs that the Arbitral Tribunal may award once it determines liability and whether the exclusion or limitation clause applies to the claims.

The position is different if the parties have expressly restricted the Arbitral Tribunal’s jurisdiction in the arbitration agreement that it has only a mandate to award damages up to a certain agreed cap, for example, where the parties agree that the Arbitral Tribunal is to arbitrate their disputes, but shall have no jurisdiction to award damages beyond [X] sum. Alternatively, the arbitration agreement may incorporate the limitation of liability clause as part of the submission to arbitration, for example, where the parties agree to the Arbitral Tribunal to decide on disputes subject to and within the limits of the liability as agreed in Clause [X]’ (where the said clause sets out the limit without any qualifications).

In the absence of such clear drafting, a limitation of liability clause or even an exclusion clause remains a matter of substantive defence and comes under the merits of the disputes and not jurisdiction at all. In other words, Article 34.3 in this case remains as a contractual term that the Arbitral Tribunal must apply under section 30(5) of AA 2005, and if the Arbitral Tribunal misinterprets the same, this only leads to an error on the merits and within the Arbitral Tribunal’s jurisdiction rather than exceeding its jurisdiction.

Quite clearly, the case before us is not one where the limitation of liability clause has been framed as a restriction on the Arbitral Tribunal’s remedial powers where the clause directly curtails the Arbitral Tribunal’s mandate. It is also not one where the arbitration agreement itself incorporates the limitation as part of the reference, thereby imposing a cap on the boundary of submission. Indeed, there is no evidence that the parties had agreed under the principle of party autonomy that the Arbitral Tribunal’s jurisdiction to award damages cannot exceed USD 200 million.

To be clear, this is not a case where the Arbitral Tribunal had totally disregarded altogether Article 34.3. Arguably, if the Arbitral Tribunal had simply ignored the limitation of liability clause under Article 34.3 without any reasoning (as oppose to considering it and interpreting it in a certain manner), it can be contended that the Arbitral Tribunal had breached section 30(5) of AA 2005 as it would not have decided the disputes in accordance with the terms of the agreement. Such omission can potentially transform what would otherwise be a merit error into an excess of jurisdictional error under section 37(1)(a)(iv) and (v). We are not dealing with such a case here. Article 34.3 expressly referred for Arbitral Tribunal’s interpretation

Indeed, the facts in the present case even exclude this Court from entertaining the possibility that the parties had by implication intended Article 34.3 to be incorporated as part of the submission to arbitration or in the arbitration agreement. It is not disputed and in fact it is an undeniable fact that the parties had in this case expressly submitted the interpretation, scope and the application of Article 34.3 to the Arbitral Tribunal for its determination. In fact, the parties had never even asserted before the Arbitral Tribunal that Article 34.3 itself curtailed its jurisdiction to award in excess of USD 200 million. Instead, the parties had submitted before the Arbitral Tribunal on their respective interpretations of the scope of Article 34.1 and 34.3, as to whether the Respondent’s claims for damages ought to be limited by reason of the clauses. The following excerpts from the Award will make this abundantly clear: “Issue 2: Whether the claim for compensatory damages is excluded under Article 34.1 of Section II of the Contract. GKL’s submissions

GKL submits that any loss suffered by SSPC would be excluded by Section II Article 34.1 of the Contract, which expressly excludes consequential loss. GKL refers to paragraph 624 of the Statement of Defence and Counterclaim where SSPC set out the consequences of the staggered start-up and how “any gas flared is a lost commercial opportunity that can never be recovered”.

GKL submits that this falls squarely within the purview of Article 34.1, which covers, amongst other things, “any indirect or consequential losses, any loss of use of property or loss of production, revenue, profit or anticipated profit or loss of contracts suffered by the COMPANY GROUP, its contractors or PETRONAS howsoever caused arising in connection with the performance of the CONTRACT (except to the extent of any Liquidated Damages provided for in the CONTRACT).”

GKL also submits that even if not excluded by Article 34.1, any claim would fall under Section II Article 34.3 of the Contract, the limitation of liability clause. In those circumstances, this Head of Claim, together with SSPC’s other claims, is capped at a limit of USD 200 million. SSPC’s submissions

SSPC submits that this claim has nothing to do with consequential damages, such as loss of production or loss of revenue. It is a simple compensation for the fact that SSPC received the use of a Semi-FPS which is less valuable than the Semi-FPS that it should have received under the Contract. SSPC submits that it is claiming compensation for not receiving the Semi-FPS that it was promised and for which it paid. Tribunal’s decision

The loss which SSPC claims as damages is an abatement of the Semi-FPS day rate because it says that during the period when the Semi-FPS was operating without seawater and gas injection, the loss of use of those injection systems meant that the value of the Semi-FPS was less than it would have been had it been able to use those injection facilities.

This is not a claim for the cost of remedying the seawater and gas injection systems so that they could operate, it is a claim for diminution in the value of the Semi-FPS because SSPC was unable to use those injection systems.

In common law the reference to “indirect” or “consequential” loss is generally to be distinguished from “direct” loss which naturally arises from a breach as considered in the classic case of Hadley v Baxendale (1854) 9 Ex. 341. Where a person receives something less than contracted for the measure of damages could either be the cost of providing the full contractual performance or the diminution in the value of the item contracted for. In this case, the Tribunal does not consider that the diminution in value of the Semi-FPS can be described as an indirect or consequential loss. It is the normal measure of loss where a party is provided with something less than contracted for.

The exclusion clause also excludes “any loss of use of property”. The use of the word “any” indicates, in the Tribunal’s view, that this does not need to be indirect or consequential loss. In this case the diminution in value of the Semi-FPS arises because there was a loss of use of the seawater and gas injection facilities. The fact that there were not those facilities meant that SSPC had to proceed to achieve CoCP without being able to use the seawater and gas injection systems which were to be part of the Semi-FPS. The Tribunal therefore finds that the type of loss which SSPC seeks to claim as an abatement of the Semi-FPS day rate can properly be described as “loss of use of property”, the property being the injection facilities and the claim being based on the loss of use of those facilities.

GKL also submits that the claim is excluded because the loss amounts to a claim for loss of production. The way in which the claim is put is not for a claim for the loss of production of oil or gas which would arise because SSPC were unable to use the seawater or gas injection facilities. As a result, the Tribunal does not find that the loss would have been excluded as a loss of production. Nor does the Tribunal consider that any other part of Section II Article 34.1 would apply to exclude the claim.

As a result, the Tribunal concludes that SSPC’s limited functionality claim fails because the head of damages sought by SSPC is excluded by Section II

The effect of the parties’ aforesaid conduct in the arbitral proceedings is that the parties, particularly the Appellant, had expressly and incontrovertibly submitted the interpretation, scope, and application of Article 34.3 to the Arbitral Tribunal, recognising that the Arbitral Tribunal had jurisdiction to decide on the limitation of liability issue. This effectively turned the dispute on Article 34.3 into one of merits and an issue of interpretation and not jurisdiction. [For completeness, Article 34.1 deals with the exclusion of liability for consequential losses]

Accordingly, it is the judgment of this Court that the contention that Article 34.3 has the legal effect of placing a jurisdictional constraint on the Arbitral Tribunal’s mandate is unsustainable and must be rejected. Once the parties put the limitation of liability clause in issue, its meaning and effect are part of the matters submitted to the Arbitration. This means that the Arbitral Tribunal’s ruling on Article 34.3, whether correct or erroneous, is an exercise of jurisdiction and not in excess of jurisdiction at all.

Verily, the Appellant cannot remain silent on the jurisdiction of the Arbitral Tribunal, submitted fully on the merits, and when the decision turns out to be unfavourable to them, now seeks to claim that the Award made is in excess of jurisdiction. I hold that it is simply impermissible for the Appellant to seek to re-characterise Article 34.3 as a jurisdictional bar only after being unsuccessful in persuading the Arbitral Tribunal to accept its interpretation of its scope. It is clearly an afterthought and must be rejected.

Where a question that had been specifically posed to the arbitral tribunal for determination and the arbitral tribunal had made a decision on the question, the same can no longer be amenable to curial intervention. This principle that has come to be known as the Absalom exception and has been referred by our Federal Court in The Government of India v Cairn Energy India Pty Ltd & Anor [2011] 6 MLJ 441 where at para [30] it was held as follows: [30] With respect we are not persuaded that we should depart from the long line of authorities holding such a distinction. Thus, where a specific matter is referred to arbitration for consideration, it ought to be respected in that ‘no such interference is possible upon the ground that the decision upon the question of law is an erroneous one. However, if the matter is a general reference, interference may be possible ‘if and when any error appears on the face of the award’ (see: Sharikat Pemborong Pertanian). (See also: King v Duveen [1913] 2 KB 32 and Absalom Ltd v Great Western (London) Garden Village Society, Ltd [1933] AC 592.) (Emphasis added.) Richard Malanjum CJ (Sabah & Sarawak) further observed there as follows: [52] We note that the arbitrators were faced with a question on the construction of a clause in an agreement. From the reading of it, no doubt it could be given two interpretations — one in favour of the appellant and one in favour of the respondents. For that very reason, the matter was sent for arbitration. The fact that the learned arbitrators took one approach in interpretation (which was in favour of the respondents) over the other cannot be a ground for challenge. [51] And as Scrutton LJ put it ‘…if you refer a matter expressly to the arbitrator and he makes an error of law you must take the consequences; you have gone to an arbitrator and if the arbitrator whom you choose makes a mistake in law that is your look-out for choosing the wrong arbitrator; if you choose to go to Caesar you must take Caesars’s judgment’ (see African & Eastern (Malaya) Ltd v White, Palmer & Co Ltd (1930) 36 LI L REP 113; cited with approval by the Court of Appeal in Dato’ Teong Teck Kim & Ors v Dato’ Teong Teck Leng [1996] 1 MLJ 178 … (at p 452)”. [emphasis added]

The aforesaid is all the more so when the Appellant had in this case expressly agreed at the outset that the provisions in the Arbitration Act 2005, which permit parties to refer error of law by the Arbitral Tribunal to be referred to Court for review are to be excluded, thus agreeing to accept the Arbitral Tribunal’s finding of law as final and binding.

Accordingly, whilst the Arbitral Tribunal must decide according to the terms of the agreement including Article 34.3 under section 30(5) of AA 2005, once the parties have expressly submitted the Article 34.3 to the Arbitral Tribunal for its determination, an error of interpretation, if any, is an error within jurisdiction and by reason of the same, section 37(1)(a)(iv) and

simply have no application at all. Invitation to review Arbitral Tribunal’s interpretation of Article 34.3

Additionally, the Appellant also invited this Court to review whether the Arbitral Tribunal’s exercise of its jurisdiction was in accordance with Article 34.3 of the Contract, in other words, to review the correctness or otherwise of the Arbitral Tribunal’s interpretation of Article 34.3. The Appellant contended that this exercise be conducted in the interests of fairness and justice. Were the court to conclude that the Arbitral Tribunal misinterpreted its jurisdiction as delimited by Article 34.3, then justice would be served by this Court righting that wrong.

The Arbitral Tribunal in its interpretation of Article 43.3 had found that the limitation clause is only applicable “in respect of all claims, loss and or expenses of every kind and nature whatsoever” only where the same were “… by way of indemnity or by reason of any breach of the contract (including without limitation any payment of Liquidated Damages) and or in tort (including without limitation, negligence or gross negligence) or breach of any duty (statutory or otherwise)”. The Arbitral Tribunal found that the Work Claims did not fall within these categories and were therefore not subject to the limitation clause.

To accept the invitation to undertake a review of the Arbitral Tribunal’s decision on its interpretation of Article 34.3 is to ask this Court to act beyond what the AA 2005 permits. Our AA 2005 is based on the UNCITRAL Modal Law, and it provides a narrow and exhaustive grounds for setting aside an award. AA 2005 does not provide for a general appeal on a point of law, and the Courts certainly cannot review the merits of the Arbitral Tribunal’s decision under the guise of a jurisdictional challenge. In this regard, our Federal Court in Master Mulia Sdn Bhd v. Sigur Rus Sdn Bhd [2020] 12 MLJ 198 at para [54] has held as follows: “[54] … The role of the courts in the arbitral regime in general is one of assistance supportive of the arbitral process and not one of interference with it. Bearing in mind the two primary objectives of the Model Law (respect for and preservation of party autonomy and ensuring procedural fairness), the courts do not review the merits of the arbitral tribunal’s decision. …” [emphasis added]

If this Court were to undertake a review, this would amount to the Court arrogating to itself an appellate power which the AA 2005 deliberately excludes by the repeal of the old section 42. The amendment to the AA 2005 (vide Arbitration (Amendment) (No. 2) Act 2018) by repealing section 42 of the AA 2005 was clearly intended by Parliament to strengthen the sanctity and inviolability of an arbitration award to ensure the finality and conclusiveness of all arbitral awards, that they can no longer be challenged on the ground that the Arbitral Tribunal had fallen into error of law.

Indeed, in this case, the parties themselves have expressly agreed to exclude the application of sections 41, 42, 43, and 46 of the AA 2005 in the Arbitration. Having agreed to exclude the Court exercising such review powers on a question of law, it is no longer open to the Appellant to challenge the Award on the basis that the Arbitral Tribunal had fallen into error of law and inviting this Court to review the Arbitral Tribunal’s interpretation of Article 34.3.

The principle accepted in all Modal Law jurisdictions is that the arbitral tribunal has the jurisdiction to interpret the limitation clause, and a wrong interpretation, even if ‘obviously wrong’, is an interpretational error and is not a jurisdictional defect at all. At this juncture, it may be apt to remind ourselves again what the Federal Court said in the case of Pancaran Prima Sdn Bhd v Iswarabena Sdn Bhd & Another Appeal [2020] 9 CLJ 466 at paragraphs [8] and [9] as follows: “[8] Section 8 of the Act enshrines the principle of minimal interference by the court, which is an ingrained aspect of the United Nations Commission on International Trade Law (UNCITRAL) Model on International Commercial Arbitration … [9] This Court in the recent case of Jan De Nul (M) & Anor v Vincent Tan Chee Yioun & Anor [2019] 2 MLJ 413 made the following observations on the effect of sections 8, 9, 37 and 42 of the Act: The effect of ss. 8, 9, 37 and 42 of the AA 2005 is that the court should be slow in interfering with or setting aside an arbitral award. The court must always be reminded that constant interference of arbitral award will defeat the spirit of the AA 2005 which for all intent and purposes, is to promote one-stop adjudication in line with the international practice. … In this regard, the court needs to recognise the autonomy of the arbitral process by encouraging finality; and its advantage as an efficient alternative dispute resolution process should not be undermined.” [emphasis added]

In fact, it is necessary to also caution why, as a matter of policy, this Court should not treat the exclusion and or limitation of liability clause in an agreement as a jurisdictional constraint to the Arbitral Tribunal’s jurisdiction as contended by the learned counsel for the Appellant and or to undertake a review of the Arbitral Tribunal’s interpretation of the clause. To do so will undermine the principle of finality of arbitration, which is an established and entrenched doctrine under the Modal Law that Malaysia has adopted. This is precisely the reason why our Federal Court and all courts in countries adopting the Modal Law routinely emphasised the narrow approach to ‘excess of jurisdiction’, confining it to matters not submitted before the Arbitral Tribunal. The Federal Court case of Far East Holdings Bhd & Anor v Majlis Ugama Islam Dan Adat Resam Melayu Pahang & Other Appeals [2018] 1 CLJ 693 makes this very clear at para [115] of the judgment, stating as follows: “[115] ... Since the setting aside of an award is a matter governed by AA 2005, the court is permitted to set aside an award only in manner prescribed by AA 2005. The court is not permitted to set aside an award in manner not prescribed by AA 2005. ‘Error of fact or law on the face of the award’ is not prescribed as a ground for court intervention. Hence, under AA 2005, there is no jurisdiction to set aside an award on the ground of ‘error of fact or law on the face of the award’. It is accepted that under AA 1952, the jurisdiction for court intervention stemmed from both common law and statute. But under AA 2005, “the common law ground of setting aside an award for ‘error on the face of the award’ no longer exists” (The Arbitration Act supra at 8.23(b)).” [emphasis added]

If exclusion and limitation of liability clauses are treated as jurisdictional instead of substantive, as contended, it would mean that every alleged ‘mis-interpretation’ of such clauses, which are common in most contracts, can now be framed as a ‘jurisdictional excess’. This opens the door for Courts to review arbitral reasoning under the guise of jurisdiction. Arbitration rests on finality. If contractual defences like the exclusion and limitation of liability clauses are jurisdictional, any dissatisfied party could routinely challenge the awards under section 37 of AA 2005, eroding the arbitral efficiency. Limitation clauses go to quantum and liability and not to the power to hear the disputes. Recasting the substantive interpretative disputes as jurisdictional issues would destroy the distinction leading to judicial review beyond what the Modal Law allows. This will open the door to parties, having argued the limitation clauses as substantive issues before the Arbitral Tribunal, and if they lose, re-characterise the same arguments as jurisdictional objections in the Courts. This only creates uncertainty, encourages tactical delay, and undermines party autonomy. This Court will be expanding court intervention beyond the parameters currently accepted by Courts of countries that have adopted the Modal Law. More significantly, this will also turn away parties from considering Malaysia as the seat for arbitration and undermine the efforts to promote Malaysia as a one-stop centre for arbitration. To quote Ramly Ali FCJ in Jan De Nul (M) Sdn Bhd & Anor v. Vincent Tan Chee Yioun & Anor [2019] 2 MLJ 413 at 429, para [57]: [57] The court must evaluate the nature and impact of the particular breach in deciding whether the award should be set aside under s 37. The court must also consider the background policy of encouraging arbitral finality and minimalist intervention approach to be adopted in line with the spirit of UNCITRALModel Law. The effect of ss 8, 9, 37 and 42 of the AA 2005 is that the court should be slow in interfering with or setting aside an arbitral award. The court must always be reminded that constant interference of arbitral award will defeat the spirit of the AA 2005 which for all intent and purposes, is to promote one-stop adjudication in line with the international practice (see: Ajwa For Food Industries Co (MIGOP), Egypt v Pacific Inter-Link Sdn Bhd & another appeal [2011] MLJU 1537; [2013] 2 CLJ 395; Taman Bandar Baru Masai Sdn Bhd v Dindings Corporations Sdn Bhd [2009] MLJU 793; [2010] 5 CLJ 83; and Lesotho Highlands Development Authority v Impregilo SpA and others [2005] UKHL 43). In this regard, the court needs to recognise the autonomy of the arbitral process by encouraging finality; and its advantage as an efficient alternative dispute resolution process should not be undermined. [emphasis added]

The principle of minimal curial intervention being treated as the mainstay of the Modal Law is reiterated also by the Singapore Court of Appeal in AKN and another v AKL and others and other appeals [2015] SCGA 18, where at para [37], Chief Justice Sundaresh Menon stated as follows:

A critical foundational principle in arbitration is that the parties choose their adjudicators. Central to this is the notion of party autonomy. Just as the parties enjoy many of the benefits of party autonomy, so too must they accept the consequences of the choices they have made. The courts do not and must not interfere in the merits of an arbitral award and, in the process, bail out parties who have made choices that they might come to regret, or offer them a second chance to canvass the merits of their respective cases. This important proscription is reflected in the policy of minimal curial intervention in arbitral proceedings, a mainstay of the Model Law and the IAA (see BLC v BLB [2014] 4 SLR 79 (“BLC”) at [51]–[53])” [emphasis added]

It is therefore unsurprising that whilst learned counsel for the Appellant has cited many cases before this Court, none of the cases in fact support his proposition made before us. The case of Dallah Real Estate and Tourism Holding Co v Ministry of Religious Affairs of the Government of Pakistan [2011] 1 AC 763 at [159] per Lord Saville cited by learned counsel for the Appellant, is, with respect, of no assistance to the issue. That was a case where the defendant had challenged the enforcement of the arbitral award on the ground that he was never a party to the arbitration agreement. The English Supreme Court quietly rightly held that, notwithstanding that an arbitral tribunal is competent to rule on its jurisdiction, it cannot be the final arbiter of its own jurisdiction. That would be a “classic case of pulling oneself up by one’s own bootstraps”. Thus, whether the arbitrators had jurisdiction when they made the findings of fact and their view of the law as to whether the defendant was a party to the arbitration agreement under which the award was made, was a matter that in enforcement proceedings the court must consider for itself de novo. The case has nothing to do with whether a limitation of liability clause is to be treated as a jurisdictional constraint to the arbitral tribunal at all.

Similarly, the cases of Albion Energy Ltd v Energy Investments Global BRL [2020] EWHC 301 (Comm) at [22]–[29], H v G [2022] HKCFI 1327 at [17]–[39], Transocean Offshore International Ventures Ltd v Burgundy Global Exploration Court [2010] SGHC 31, [2010] 2 SLR 821 at [21]–[27] and PT Thiess Contractors Indonesia v PT Kaltim Prima Coal & Standard Chartered Bank, Singapore Branch [2011] EWHC 1842 (Comm) at [35]–[44] cited by the Appellant involved completely different factual scenarios. In those cases, the Courts were dealing with 2 different dispute resolution clauses under 2 different agreements, and the issue was whether the parties had intended for the different dispute resolution mechanisms to deal only with the specific disputes arising from each of the agreements. At the end of the day, whether a jurisdiction clause applies to a dispute is a question of construction. Where there are numerous jurisdiction agreements which may overlap, the parties must be presumed to be acting commercially, and not to intend that similar claims should be the subject of inconsistent jurisdiction clauses. There is no presumption that a jurisdiction or arbitration agreement in one contract, even if expressed in wide language, is intended to capture disputes arising under another contract.

Suffice it to say that in the present case, there is absolutely no basis to suggest that the parties had intended by Article 36 that the jurisdiction of the Arbitral Tribunal to award damages was limited to only the sum stated in Article 34.3. Contrary to the contention of counsel for the Appellant, the parties had not made Article 34.3 a jurisdictional limiting clause at all. Indeed, no authorities have been cited in support of such a contention.

For the above reasons, the contention that the Arbitral Tribunal had exceeded its jurisdiction when it awarded damages in excess of USD 200 million is wholly without any merit and is hereby rejected.

The Respondent’s Accommodation Vessels Costs were for USD151,550,814.49 in costs incurred in relation to, among others, the hiring of two Accommodation Vessels, namely, the Lewek Crusader and Lewek Champion to accommodate personnel on board the Semi-FPS.

According to the Respondent, these costs were necessary due to the increased onshore carry-over scope and prolonged period of defects remediation. This was the single largest head of claim amongst the Respondent’s counterclaims against the Appellant in the Arbitration.

On the issue of the Accommodation Vessels Costs, the Appellant contended that in determining the Respondent’s claim for the costs of hiring two Accommodation Vessels (“AV”) (“SSPC’s AV Claim”), the Arbitral Tribunal acted in breach of natural justice and in breach of public policy in three respects: a. firstly, the Arbitral Tribunal made a legal and factual finding on the meaning of a Production Sharing Contract (“PSC”) between PETRONAS and the Respondent, to which the Appellant was not privy, and which was extraneous to the Arbitration in that it was never produced in evidence and the Appellant never had the opportunity to review it (“Non-Production of PSC”); b. secondly, the Arbitral Tribunal’s award sanctioned a double recovery of the AV costs and unjust enrichment of the Respondent, in circumstances where the Respondent’s witness had admitted that the Respondent had recovered the AV costs (“Double Recovery”); and or c. thirdly, the Arbitral Tribunal undertook to assess the proportion of AV costs attributable to the Appellant, where this assessment was arbitrary, and the parties had not been given the opportunity to submit on the appropriate proportion (“Arbitrary Apportionment”).

In relation to the Non-Production of PSC, the Appellant claimed that the Arbitral Tribunal in awarding the Respondent’s claim for Accommodation Vessels on the basis that the PSC did not prevent the Respondent to recover the same and further that the accounting procedures between PETRONAS and the Respondent also did not affect the claims without the Respondent producing the SPC document before the Arbitral Tribunal had resulted in a breach of natural justice as the non-production of the PSC had deprived the Appellant of a full opportunity to present its case on every point in issue including the contention that the Respondent had already recovered the costs from PETRONAS.

The Appellant claimed that the learned High Court Judge had erred in not finding a denial of natural justice occasioned by the non-disclosure of the PSC contract.

More specifically, the Appellant contended that the Arbitral Tribunal’s factual findings on this issue turned on the meaning and effect of the PSC and the content of its terms; the PSC was the key document on this issue. The Appellant claimed that it had no opportunity to make submissions or cross-examine witnesses on the meaning and effect of the PSC and the factual assertions being advanced by the Respondent about the PSC, that the Arbitral Tribunal ultimately credited, because the PSC had been withheld by the Respondent and was not in evidence.

With respect, I see no merit in the Appellant’s contention.

The principle of natural justice requires that parties be given a fair opportunity to address material relied upon by the tribunal. In Master Mulia Sdn Bhd v Sigur Rus Sdn Bhd 2020] 9 CLJ 213, the Federal Court held at paragraphs 60 and 62 thus: [60] ... We are therefore in agreement with the views expressed by the Court of Appeal in paras [90]–[92] of the written judgment: that without these two pieces of extraneous evidence which were never put to the parties, the arbitration would also have reached a different outcome. As such, the Court of Appeal was correct in setting aside the entire award on the basis that the breach had materiality and causative effect on the outcome of the arbitration. On the established facts and on a perusal of the evidence on the appeal record, we are satisfied that the High Court judge erred and that appellate intervention was warranted. … [62] … As stated a mere finding of a breach of the rules of natural justice is in itself insufficient. It must be shown that the breach was significant or serious such as to have an impact on the outcome of the arbitration. Prejudice, though, a relevant consideration, is not a requirement.”

To my mind, that requirement was met here because both parties had advanced submissions on the PSC, and the Arbitral Tribunal had evaluated those submissions before coming to its Award. The mere fact that the PSC was not tendered as an exhibit cannot amount to reliance on extraneous material at all since the Arbitral Tribunal, in coming to its conclusion on the relevance of the PSC, was merely resolving arguments presented by the parties themselves.

There is no dispute that the Appellant had pleaded and submitted on the PSC. By doing so, the Appellant had voluntarily put the PSC into issue and invited the Arbitral Tribunal to consider it, notwithstanding that the Appellant did not take steps to compel production of the document through discovery.

In its Statement of Reply and Defence to Counterclaim, the Appellant had specifically alluded to the issue of double recovery under the Respondent’s contract with PETRONAS:

This was followed by the Respondent’s Statement of Rejoinder and Defence to the Counterclaim, wherein again the cost recovery mechanism with PETRONAS was pleaded:

After the pleadings phase, the Appellant’s own witness, Mr. Abu Fitri, alluded in his witness statement to the Respondent’s cost recovery of the Accommodation Vessel from PETRONAS, referring to his understanding that the Accommodation Vessel claimed by the Respondent was cost recovered from PETRONAS through the cost-sharing mechanism under the

Further, the Appellant's witness Mr. Milan Hendrikse (whom the Appellant had claimed in its Closing Submissions to have been surprised by his oral testimony on the point of cost recovery of the Accommodation Vessel) had in fact, before his oral testimony at the hearing, submitted an exhibit with his witness statement - a letter from PETRONAS confirming its approval to the Respondent for an extension of the Accommodation Vessel for the period up to 31.08.2014.

Despite being aware of the Respondent’s cost recovery arrangement with PETRONAS as early as in the pleadings phase, the Appellant did not at any time throughout the arbitration request for documents, including during the document production phase (which was right after the pleadings phase), in respect of the Appellant’s allegation of double recovery concerning the Respondent’s claims for Accommodation Vessel. The only requests for documents during the document production phase were with regard to the arrangement with PETRONAS specifically and limited to the Appellant’s claim for variation works (where the approval of PETRONAS in respect of certain parts of the Appellant's claim for variation works was an issue in dispute).

At all times, the Appellant did not make any request for any documentation in regard to any cost recovery of the Respondent's Work Done Claims. Nor did the Appellant make any application to the Arbitral Tribunal for an order of production of documents after the phase of witness statements (including documents exhibited together with such witness statements), during which the Respondent’s witness had submitted the exhibit on PETRONAS’ letter of approval on the cost recovery of the Accommodation Vessels by the Respondent, as stated above.

In fact, the evidence clearly demonstrated that the Appellant did have a full opportunity to present its case. In particular, the Appellant raised its contention of double claiming on the cost recovery of the Accommodation Vessel in its Written Closing Submissions.

After the Written Closing Submissions, the Arbitral Tribunal had sought further information from the parties on the issue of double recovery. The Appellant had provided Further Submissions on the purported double recovery issue and stated in the Further Submissions that it was not suggesting a further evidentiary hearing but merely urging the Arbitral Tribunal to disregard the Respondent’s submissions on the issue:

Accordingly, I agree with the Respondent that it is therefore simply incorrect for, and unfair of, the Appellant to now aver that it had been deprived of its full opportunity to present its case, when the Appellant did do so and stated on numerous occasions (in its Further Submission and Cost Submission) its acknowledgement that it had done so.

In truth, the Arbitral Tribunal did specifically consider the issue of disclosure in its Award and had in this regard specifically decided that in relation to the Appellant’s assertion that PETRONAS may have borne the Accommodation Vessel costs under the PSC, any recovery against the Appellant would amount to double recovery by the Respondent and the Appellant’s seeking to rely on some form of fraud or failure to make disclosure, "[t]he Tribunal firmly rejects allegations of fraud or failure to make disclosure".

Accordingly, the Appellant’s contention that it was limited to the evidence obtained during the cross-examination at the Arbitration due to the non-production of the PSC is wholly without any merit and if at all, was a result of the Appellant’s own omission and or failure to seek the production of the PSC.

Quite plainly, it is the Arbitral Tribunal alone that would and could decide on the evidence placed before it by the parties in the proceedings. It was wholly within the Arbitral Tribunal’s remit to “reject” the Respondent’s witness’s admission that it had already recovered its AV costs “based on [its] evaluation of all the evidence adduced contextually”. The Arbitral Tribunal is the final arbiter of facts and as correctly found by the learned High Court Judge, there was no denial of natural justice occasioned by the non-disclosure of the PSC contract at all.

Anchoring on the same contention of double recovery but this time from the perspective of breach of public policy, the Appellant contended that the Arbitral Tribunal’s decision in allowing the Respondent’s recovery of the Accommodation Vessels Costs, in light of the Respondent’s own witness’s admission of recovery from PETRONAS renders the Award to be in breach of public policy since the outcome of the Award was to sanction a double recovery by the Respondent for the costs of the AVs.

The contention is that an arbitral award which permits a double recovery is in breach of public policy and, for that reason, it is liable to be set aside.

In Johawaki Development Sdn Bhd v Majlis Agama Islam Wilayah Persekutuan and another Summon [2020] MLJU 6060 at [142]–[144], the High Court held that “where an arbitral award allows for double recovery, and this incontrovertibly goes against the cardinal principle of justice and morality which disallows such double recovery, then the enforcement of the award would not be allowed as it is contrary public policy”.

Similarly, in Indian Farmers Fertiliser Cooperative Ltd v Gutnick [2015] VSC 724 at [107], the Supreme Court of Victoria in Australia held that where an award allows for double recovery: It would render the enforcement of such an award “contrary to public policy” and fundamental principles of justice and morality may be engaged as “a claimant cannot recover more than has been lost”.

The Federal Court case of Jan De Nul (M) Sdn Bhd & Anor v Vincent Tan Chee Yioun & Anor [2019] 2 MLJ 413 held at paras [55-58] as follows: “[55] … in applying the concept for the purpose of setting aside an award under s 37 of the AA 2005, the concept of public policy ought to be read narrowly and more restrictively. The court’s intervention should be sparingly used. The court must be compelled that a strong case has been made out that the arbitral award conflicts with the public policy of Malaysia. As clearly stated by the Court of Appeal in Sigur Ros (with which we agree): ‘The concept of public policy must be one taken in the higher sense where some fundamental principle of law or justice is engaged, some element of illegality, where enforcement of the award involves clear injury to public good or the integrity of the court’s process or powers will be abused’. [56] Even though the court finds that a breach of the rules of natural justice has been established or that an arbitral award is in conflict with the public policy under s 37 of the AA 2005, it does not necessarily mean that the award must be set aside as a matter of course. The power of the court to set aside an award under s 37 is discretionary and will not be exercised automatically in every case where the complaints are established … [57] The court must evaluate the nature and impact of the particular breach in deciding whether the award should be set aside under s 37. The court must also consider the background policy of encouraging arbitral finality and minimalist intervention approach to be adopted in line with the spirit of UNCITRAL Model Law. The effect of ss 8, 9, 37 and 42 of the AA 2005 is that the court should be slow in interfering with or setting aside an arbitral award. The court must always be reminded that constant interference of arbitral award will defeat the spirit of the AA 2005 which for all intent and purposes, is to promote one-stop adjudication in line with the international practice ... In this regard, the court needs to recognise the autonomy of the arbitral process by encouraging finality; and its advantage as an efficient alternative dispute resolution process should not be undermined. [58] The scope of public policy ground for setting aside an arbitral award could only be invoked in deserving case ie in instances where it appears a violation of the most basic notions of morality and justice. It covers fundamental principles of law and justice in substantive as well as procedural respect. Instances where the upholding of an arbitral award would shock the conscience, or clearly injurious to the public good, or wholly offensive to the ordinary reasonable and fully informed member of the public, had been held by courts in various jurisdiction to fall within the category of public policy ground for setting aside an arbitral award.…”

The Appellant’s contention based on section 37(1)(b)(ii) is, of course, premised on the assumption that there was indeed double recovery in respect of the Accommodation Vessel Costs awarded by the Arbitral Tribunal to the Respondent. This, however, was not the case at all.

In reaching its conclusion that there was no double recovery, the Arbitral Tribunal found, after having heard the evidence and the parties' submissions on this matter, that the question of how costs are dealt with as between the Respondent and PTRONAS under the PSC did not prevent the Respondent from making a recovery of costs for which the Appellant is liable under the Contract. In this regard, the Tribunal further concluded that “the accounting procedures between SSPC and Petronas do not affect GKL’s liability to SSPC under the Contract”.

The finding by the Arbitral Tribunal on the lack of double recovery, in fact, reflects the Respondent's position, as set out in the pleading phase, which is that any compensation received from the Appellant will be taken into account in cost recovery from PETRONAS, and there is therefore no double recovery.

For a public policy challenge under s 37(2)(b)(ii) to succeed, the Award must offend fundamental notions of justice and morality. Here, the Arbitral Tribunal had examined the very issue of whether the Respondent was allegedly barred from claiming and or was to be compensated elsewhere, and the Arbitral Tribunal had concluded in the negative. That conclusion, even if debatable, does not meet the high threshold for contravening public policy.

Unless the Appellant could prove by hard evidence that the Respondent in fact recovered the same costs from PETRONAS (rather than merely having the potential to do so), the allegation remains speculative. The issue of whether or not there is double recovery is a question of evidence and fact, and or application of law for the Arbitral Tribunal. Any alleged error in its determination of the evidence and or facts and or application of the law does not fall within the limited categories stipulated in sections 37 or 39 of the AA 2005.

Quite clearly, the Appellant is, in its Setting Aside Appeals, trying to reopen and rehash the substantive arguments on issues already heard and determined by the Arbitral Tribunal, and this cannot be permitted. Again, in this regard, this Court finds that the learned High Court Judge was correct again when he found that “the Tribunal plainly made a conclusive finding of fact that there would be no double recovery by SSPC for the costs of accommodation vessel and this again must now be incapable of review by the court based on trite appellate case laws”. Arbitrary Apportionment - Quantum of Award was Determined in Breach of Natural Justice and/or in Excess of Jurisdiction

In respect of the Accommodation Vessels Costs, the Respondent had claimed all its Accommodation Vessels Costs from the Appellant, whilst the Appellant had opposed this on the basis that the Respondent had failed to draw a causative link between the Accommodation Vessels Costs incurred after February 2014 and the defects remediation works for which the Appellant was liable.

The Arbitral Tribunal in its Award had awarded the Respondent 70% of the Accommodation Vessels Costs post-February 2014 claimed. The Appellant complained that it was not given any opportunity to lead evidence or make submissions on the percentage of the Accommodation Vessels Costs for which the Arbitral Tribunal had awarded that it should be liable. The Appellant further contended that in awarding 70%, the Arbitral Tribunal also decided on a matter not argued before them.

Further or alternatively, the Appellant contended that the Award in this respect was in excess of jurisdiction because the Arbitral Tribunal failed to assess and determine an issue that it was constituted to resolve on the basis of findings of fact and law.

More specifically, the Appellant contended that, having stated that a proportion had to be determined and yet failing to analyse the appropriate proportion in fact and in law, the Arbitral Tribunal was doing “rough justice” to arrive at a resolution for the parties. Such a method of resolution, namely, not based on discernible findings of fact or law, was a process of decision-making based on equity and conscience as plainly prohibited by section 30(4A) of the AA 2005 in the absence of the parties’ authorisation and in excess of jurisdiction.

Clearly the thrust of the Appellant’s grievance in this case is that the Arbitral Tribunal had determined and awarded to the Respondent 70% of its total claims for the Accommodation Vessels Costs and not rejecting the same in its entirety as the Appellant had contended.

In this regard, it is instructive to refer to what the Court of Appeal in the case of Tune Group Sdn Bhd & Ors v Padda Gurtaj Singh and another appeal [2023] 6 MLJ 345 held at paragraph 38: “[38] Moreover and in any event, we find and hold that the arbitrator need not have to slavishly decide based on the exact pleas of the parties so long they are within the cause of action pursued. We find that the cause of action here has all the time been maintained by PGS as breach of the concluded contract for non-transfer of the shares by TG & Others to PGS. We are fortified by the Singapore Court of Appeal case of Soh Beng Tee & Co. Pte Ltd v. Fairmount Development Pte Ltd [2007] 3 SLR 86 where V K Rajah JA held as follows with emphasis added by us: “It is almost invariably the case that parties propose diametrically opposite solutions to resolve a dispute. They may expect the arbitrator to select one of these alternative positions. The arbitrators, however, is not bound to adopt an either/or approach. He is perfectly entitled to embrace a middle path (even without appraising the parties of his provisional thinking or analysis) so long as it is based on evidence that is before him. Similarly, an arbitrator is entitled – indeed, it is his obligation, to come to his own conclusions or inferences from the primary facts placed before him. In this context, he is not expected to inexorably accept the conclusions being urged upon him by parties, neither is he expected to consult the parties on his thinking process before finalizing the award unless it involves a dramatic departure from what has been presented to him. Each case should be decided within its own factual matrix. It must always be borne in mind that it is not the function of the court to assiduously comb an arbitral award microscopically in attempting to determine if there was any blame or fault in the arbitral process; rather an award should be read generously such that only meaningful breaches of the rules of natural justice that have actually caused prejudice are ultimately remedied.”

To my mind, it must have been within the contemplation of the parties and indeed wholly within their expectation that the Arbitral Tribunal may come to conclude that only a proportion of the Respondent’s total claims would be allowed. This was never a case where, under the Contract or the parties’ pleadings where the Arbitral Tribunal is confined to a strict binary choice of all or nothing in awarding damages. The Arbitral Tribunal’s function is to assess the evidence and the legal submissions and to determine which part of the claims is proven. It is totally within the scope of the Arbitral Tribunal to determine any amount between the sums claimed by the parties. Accordingly, quite clearly, the reduction or moderation of the quantum of damages of the sum claimed is not in excess of jurisdiction but is part of the Arbitral Tribunal’s fact-finding function.

As regards the rule of natural justice, this requires that each of the parties be given a fair hearing and opportunity to present its case and respond to the other’s case. The Arbitral Tribunal’s decision to reduce or moderate the quantum of damages claimed based on evidence and arguments ventilated during the arbitral proceedings is not a breach of natural justice.

This is not a case where the Arbitral Tribunal had invented a wholly new methodology or basis for the reduction without allowing the parties to comment at all. Neither is this a case where the Arbitral Tribunal had relied on extraneous evidence which was never put to the parties in holding that only 70 % of the Respondent’s claims are allowed.

Further, as regards the contention that by awarding 70% of the Respondent’s total claims, the Arbitral Tribunal had breached section 30(4A) of the AA 2005 because the parties in this case had not expressly authorised the Arbitral Tribunal to decide according to equity and conscience, the short and simple answer to this is that the Arbitral Tribunal in deciding that only a portion of the damages claimed by the Respondent has been proven, was not deciding in accordance with equity and conscience at all but was acting based on a fact and legal assessment of the evidence and submissions presented.

I agree with the learned High Court Judge that “the act of the Tribunal adjusting thereby reducing SSPC’s claim in the assessment of damages is in any event neither an act of equity and conscience nor failure to decide in accordance with the Contract”.

Indeed, there was no arbitrary assessment on the part of the Arbitral Tribunal as contended at all. Adjustment of quantum or amounts to be awarded is well within the discretion and jurisdiction of the Tribunal. The learned High Court Judge has correctly referred to the Direct Access Agreement, whereby the parties had agreed that the Arbitral Tribunal would be given full access to the Quantum Experts for the purposes of computation or performing calculations (See: paragraph 75 of the Grounds of Decision). This is notwithstanding that quantum and assessment of amounts to be awarded are matters within the jurisdiction and ambit of the Arbitral Tribunal; the Arbitral Tribunal does not have any obligation to consult the parties or the Quantum Experts on its determination of the amounts or quantum to be awarded.

The learned High Court Judge is further correct to make the following findings regarding the Appellant’s contentions on the breach of section 30(4A) of the AA 2005, namely, that: a) “s. 30(4A) of the AA is inapplicable by reason that it was only introduced in May 2018 via Arbitration (Amendment No. 2) Act 2018 after the arbitral proceeding had commenced on 2 September 2016”; b) “the material date is the date of commencement of the arbitral proceeding by the Tribunal wherein s. 30(4A) of the AA is not yet in force”.

In this case, both the Appellant and the Respondent had agreed that the law applicable to the arbitration proceedings is the AA 2005, as amended by the Arbitration (Amendment) Act 2011. Section 30(4A) of the AA 2005 was an amendment which came into force in May 2018 vide Arbitration (Amendment No. 2) Act 2018, after the arbitration proceedings had commenced on 02.09.2016.

The general rule is that statutes, particularly amending statutes, are prima facie prospective and retrospective effect is not to be given to them unless by clear words of necessary implication. The Federal Court case of Tenaga Nasional Bhd v Kamarstone Sdn Bhd [2014] 2 MLJ 749 at paragraph 5.

On this point, the Appellant had sought to rely on the High Court decisions in AMDAC (M) Sdn Bhd v BYD Auto Industry Co Ltd [2020] 11 MLJ 281 and Tokio Marine Insurans (M) Berhad v Hi-Poly Industries Sdn Bhd [2020] 1 LNS 1477 where in the former case, Justice Nanda Balan J (as he then was) held that the repeal of section 42 of the AA 2005 affected all arbitration awards issued after the coming into force of the amending statute, even if they had been commenced prior to that date. In the latter case, Justice Darryl Goon (as he then was) whilst holding that the repeal of section 42 of the AA 2005 was prospective, nevertheless opined that the said section would be applicable at the time when the arbitral award is issued.

According to learned counsel for the Appellant, in either case, assuming that section 30(4A) is to be similarly interpreted, the said section will be applicable to the present arbitration proceedings since the Award was issued post the amendment.

However, as observed above, this is not a case where the Arbitral Tribunal had acted based on equity and conscience at all.

In the Arbitration, the Respondent claimed that due to the alleged defective nature of the Semi-FPS, certain costs had to be incurred in order to carry out defect remediation works on the Semi-FPS. These costs were common to all defects and SSPC was unable to allocate the costs specifically to any particular work scope. The Parties’ Quantum Experts described these costs as “Common Costs”.

Common Costs were categorised into: a) Category H – Common Costs (Time-Related) (“Time-Related Common Costs”); and b) Category I – Common Costs Remedying Defects (“Non Time-Related Common Costs”).

The Appellant contended that in determining the Respondent’s claim for Common Costs, the Arbitral Tribunal acted in breach of natural justice, in breach of public policy, and or in excess of jurisdiction in three respects: iv) firstly, the Arbitral Tribunal sanctioned a double recovery by awarding Time-Related Common Costs in respect of the delay up to February 2014, notwithstanding that it had held that delay in that period was covered by Liquidated Damages under the Contract and could not be the subject of delay damages (“the Double Recovery Issue”); v) secondly, the Arbitral Tribunal failed to assess the relationship of the Respondent’s Common Costs claims to defects remediation works according to the method of assessment that it had resolved to apply, and on which the Appellant had based its submissions (“the Causation Issue”); vi) thirdly, the Arbitral Tribunal awarded an arbitrary 50% reduction for two heads of Non-Time Related Common Costs — on which parties were not given reasonable notice or opportunity to submit, and which was in manifest disregard of the applicable terms of the Contract and principles of applicable law (“the Arbitrary Apportionment Issue”).

Each of the issues shall be considered in turn.

In relation to the Time-Related Common Costs, the Appellant contended that the Arbitral Tribunal had unjustifiably awarded the Respondent a double recovery which it is contended is in breach of public policy.

The Arbitral Tribunal decided that, as the general approach for Time-Related Common Costs, the Respondent is entitled to recover the time-based costs during the period of critical delay caused by the defect remediation works where this is appropriate for the given head of claim.

However, the Appellant contended that the Arbitral Tribunal had also determined, with regard to Respondent’s Accommodation Vessels Costs, that the Respondent is not entitled to claim unliquidated damages for delay prior to February 2014 as such damages are only recoverable as Liquidated Damages under the Contract. More specifically at para [3175] of the Award, the Arbitral Tribunal stated thus: “SSPC is not entitled to claim unliquidated damages for delay in terms of the use of the AV up to February 2014 because such delay damages are only recoverable as Liquidated Damages”

The Arbitral Tribunal had decided that the delay up to February 2014 was not caused by defects but was simply a delay in relation to Handover Completion and one that would be covered under the LAD clause of the Contract (i.e., Clause 37). Given this finding, the Appellant contended that it must follow that an adjustment of the same should have been applied in the evaluation of the Time-Related Common Costs for delays up to February 2014. By not applying such an adjustment, the Arbitral Tribunal permitted a double recovery by awarding the unadjusted amount on top of the award for liquidated damages.

Further or alternatively, the Appellant contended that this unadjusted award of Time-Related Common Costs was manifestly incoherent given the Arbitral Tribunal’s clear statement of the exclusion of delay damages up to February 2014, and its failure to follow through with this logic in relation to the Time-Related Common Costs. This was a breach of natural justice in that the unadjusted amount was an assertion that manifestly departed from the Arbitral Tribunal’s very own findings on the evidence. Following the outcome in the Singapore Court of Appeal case of BZW v. BZV [2022] SGCA 1 where the arbitral award had been manifestly incoherent, it is submitted that the Appellant had not been accorded a fair hearing.

At the outset, I agree with the holding by the learned High Court Judge that the Double Recovery Issue raised by the Appellant is without any merits. More specifically, the learned High Court Judge found that: a) they were “not satisfactorily demonstrated … in detail that this actually occurred”; b) “the Tribunal was in fact cognisant of that danger of double recovery” and “therefore do not find it likely that there was double recovery”;

Indeed, apart from mere assertions, the Appellant has not been able to show any instant of double recovery in respect of the claims that the Arbitral Tribunal had awarded under the Time-Related Common Costs at all.

Further, it certainly cannot be said in this case that the award for the Time-Related Common Costs was manifestly incoherent as contended. It is trite that error of law or fact, even serious ones, are not grounds for setting aside. The Court will intervene only where the award is so illogical, incoherent or contradictory that it shows that the arbitral tribunal did not genuinely perform its adjudication function or deprived the parties of fair hearing.

In the instant case, in coming to its award on the claims for the Time-Related Common Costs, it has not been shown at all that the Arbitral Tribunal’s Award is internally contradictory, wholly unsupported by evidence and or based on reasoning never put forth by the parties. As correctly found by the learned High Court Judge, the Arbitral Tribunal was conscious of the danger of double recovery and having considered the evidence and submissions of counsel, did not find any basis for the claim.

It is a basic principle of law that losses must be proven to be caused by another party if they are to be recovered from that party. The Appellant had made the point in the Arbitration that the Respondent was unable to prove large sections of its Common Costs claims, as required by Article 5A of the Contract, pursuant to which the Respondent had to demonstrate “reasonable and properly documented direct costs incurred”.

Essentially, the Time-Related Common Costs are costs of personnel or resources that were prolonged or incurred because of the critical path delay attributable to the defects rectification work carried out on the Appellant’s defective work. The methodology to compute the Time-Related Common Costs was based on a delay analysis carried out by the Appellant and the Respondent’s respective Delay Experts.

The Non Time-Related Common Costs essentially means the Common Costs that is dependent on the volume of work, and in this regard are considered work-related costs, with this volume of work being assessed based on available data and records recording work being carried out in remedying the Appellant’s defective work, and not based on critical delay and hence not time-related.

The Quantum Experts for both the Appellant and the Respondent agreed that some heads of claims fell within the categories of both Time-Related and Non Time-Related Common Costs – see paragraphs [3092] and [3129] of the Award.

The purpose of the Quantum Experts identifying certain costs as being Time-Related and others Non Time-Related was to enable the assessment of the Time-Related Common Costs as being reasonable and directly based on the outcome of the delay or critical path analysis of the Delay Experts. The appropriateness of such a delay or critical path analysis methodology to assess the reasonableness and directness of such Common Costs was in fact initially proposed by the Appellant in the pleadings phase, where the Appellant proposed that based on a critical delay analysis, the reasonableness and properly documented direct costs of such extended resources can then be assessed accordingly:

Both the Appellant’s and the Respondent’s respective Quantum Experts had initially agreed on a critical delay analysis approach.

In this regard, the Arbitral Tribunal resolved at the outset that it would determine whether the Time-Related Costs were attributable to defects remediation works by determining whether the costs were incurred during a period of “critical delay” caused by a given defect. Crucially, the Arbitral Tribunal directed that the appropriateness of this method would be assessed for each Head of Claim, given that not all costs incurred during a delay period would have been for remedial works on the critical path for which the Appellant would be liable [See para [2797] to [2799] of the Award]:

However, the Appellant contended that in the Award, the Arbitral Tribunal had proceeded to include certain costs incurred during critical delays in the face of facts and evidence that this approach was not appropriate, for examples in cases where the charges and fee would have been incurred not just for the defects remediation works or where the costs had no relation to the defects remediation works or costs which would have to be incurred in any event.

Quite clearly, the complaints, even if established, are matters pertaining to errors, if at all, by the Arbitral Tribunal in its evaluation of the evidence and quantum, which falls directly within the remit of the arbitral tribunal and do not constitute grounds for setting aside. The Courts are not sitting as an appellate forum on the merits, and for this reason, an award cannot be set aside merely because the arbitral tribunal did in fact make a mistake in its assessment of damages [See: TNB Fuel Services Sdn Bhd v. China National Coal Group Corp [2013] 4 MLJ 857; Master Mulia Sdn Bhd v. Sigur Rus Sdn Bhd [2020] 11 MLJ 198; AKN v. ALC [2015] 4 SLR 744 (SGCA)].

In the present case, it has not been demonstrated that in arriving at the award for the Time-Relation Costs, the Arbitral Tribunal had adopted a methodology not submitted or awarded compensation in respect of matters not submitted. In fact, the methodology adopted was proposed by the Appellant’s Quantum Expert. The experts then worked together to develop on this suggestion, and all the experts’ joint statements and reports issued would show how the experts worked on developing and progressing their approach, which led to the subsequent agreed approach between the parties and the experts on the Time-Related Common Costs methodology. Although the Appellant’s Quantum Expert eventually chose not to follow the agreed methodology and instead claimed in his report that the costs could not be analysed and provided a nil assessment, the Appellant’s Quantum Expert did not provide an alternative assessment, and consequently, the Arbitral Tribunal had only one methodology to consider the evaluation and assessment of the Time-Related Common Costs.

The Appellant has also not demonstrated that the Arbitral Tribunal, having simultaneously found that certain costs were not causally connected with the defects remediation works, nevertheless had proceeded to award the same, making the award contradictory or inherently incoherent. The complaints that the Arbitral Tribunal wrongly included certain costs because these costs were inevitable, unrelated or had mixed or overlapping purposes cannot be a basis for setting aside as they are merely merits issue. There is no basis under sections 37 and 39 of the AA 2005 for the Appellant to rehash such contentions in its Setting Aside Applications and now in these Setting Aside Appeals.

The complaint here relates to the Non Time-Related Common Costs claimed by the Respondent which were mainly for manpower costs that the Respondent had incurred to carry out defects remediation works.

The Appellant had contended before the Arbitral Tribunal that the method adopted by the Respondent’s Quantum Expert, Mr Prudhoe was flawed and unreliable. In determining whether the methodology adopted by Mr. Prudhoe was reliable, the Arbitral Tribunal agreed that Mr. Prudhoe’s analysis was, in principle, a sound basis for allocating the Appellant’s manpower to various other categories. However, the Arbitral Tribunal had also stated that it “considers that GKL has properly identified weaknesses in the way the method of analysis has been applied” (at [2755]).

The Arbitral Tribunal then proceeded to note that the methodology adopted was open to potential misallocations and errors that require certain adjustments to properly determine the recoverable costs. The Arbitral Tribunal also noted that the adjustment was necessary in light of the fact that “not all defects have been established to be GKL’s responsibility” (Se para [2757] of Award).

In light of the aforesaid, the Arbitral Tribunal considered that any figure produced by Mr. Prudhoe using the methodology above ought to be reduced by 50% to take into account the two factors above.

The Appellant contended that in making this adjustment, the Arbitral Tribunal had acted in breach of natural justice as it failed to allow parties and or the parties’ Quantum Experts to address the 50% adjustment adopted by the Arbitral Tribunal. Before the issuance of the Award on 8.4.2020, the Arbitral Tribunal had not made any indication to the parties that it was considering adopting a 50% adjustment for the Non Time-Related Common Costs claims. The only mention of the Arbitral Tribunal’s adoption of the 50% adjustment before the Award was made to the parties’ Quantum Experts in the Arbitral Tribunal’s communication to the Quantum Experts dated 1.2.2020, where it was stated:

The Appellant contended that since neither party had the opportunity to make submissions in relation to the 50% adjustment, the Appellant was deprived of a “fair and reasonable opportunity” to answer or refute the application of such an adjustment, which had a direct impact on the quantum assessment of the Non Time-Related Common Cost claim.

It was further contended by the Appellant that the Arbitral Tribunal’s approach of making an arbitrary 50% adjustment to account for deficiencies in the Respondent’s case (instead of dismissing it altogether or putting these deficiencies to the parties so they could be addressed) is akin to the Arbitral Tribunal’s “flexible” approach to damages in CEF v CEH [2022] SGCA 54. Like the parties in that case, it was submitted that the Appellant (and the Respondent) had no notice that such an approach would be adopted. Instead, both parties had put their cases on the understanding that the Arbitral Tribunal would only award compensation for losses (or costs) that could be proved. The parties had no reasonable notice that the Arbitral Tribunal was considering a level of adjustment to the costs — which had not been sought by either party — and therefore did not have the occasion or opportunity to submit on the same. Accordingly, it was contended that the Arbitral Tribunal’s determination of Non Time-Related Common Costs breached the fair hearing rule and natural justice.

The Appellant’s contentions here are similar to those made in relation to the Arbitral Tribunal’s decision to award 70% of the claims by the Respondent for its claims for the Accommodation Vessels Costs, which have been dealt with above.

The Arbitral Tribunal has latitude to assess damages (even imperfectly) where the precise quantification is impractical or impossible, provided the methodology is grounded in the evidence and submissions made before it. Courts are generally deferential to arbitral tribunals where they make evaluative judgments that involve accepting part of the expert’s evidence and assessing the credibility of the testimonies and evidence. It is axiomatic that the assessment of damages is not an exact science and determined with mathematical precision.

In the instant case, the Arbitral Tribunal had expressly stated in para [2755] to [2758] its reasonings for attributing the 50% apportionment of the claims for the Non-Time Related Common Costs. The Arbitral Tribunal had accepted Mr Prudhoe’s method of analysis as sound in principle for the allocation of the Appellant’s manpower to the various categories of Base Scope, Carry On, Appendix A, and Defects. The Arbitral Tribunal, however, also recognised that the Appellant had properly identified weaknesses in the way in which the method of analysis had been applied. In the end, the Arbitral Tribunal determined that “an adjustment needs to be made to ensure that the figure awarded is no more than the properly recoverable costs. The Arbitral Tribunal further “found that not all the defects have been established to be GKL’s responsibility. It was based on the above that the Arbitral Tribunal considers that the figures produced based on Mr Prudhoe’s analysis should be reduced by 50% to take account of those two elements.

Hence, this is clearly a case where the Arbitral Tribunal had provided its reasons and explanation as to why it had moderated or discounted the Respondent’s claims for the Non-Time Related Common Costs. This is certainly not a case where the Arbitral Tribunal did not explain at all or where the reasons are inherently contradictory, rendering the same manifestly incoherent. Further, the determination was based on the methodology and submissions made by the parties, which means that there is no breach of natural justice nor excess jurisdiction at all. Whilst arguably the reasons stated may be brief, this, if at all, is a matter going to the quality of reasoning, which is a merit issue.

It is accepted that the quantification of damages is not an exact science. This is echoed by the Federal Court in the case of Pancaran Prima Sdn Bhd v Iswarabena Sdn Bhd & Another Appeal [2020] 9 CLJ 466, where the Federal Court held: “[54] Having asked himself the right question, ie, “has the claimant proved his loss of profit in the legal sense of on the balance of probability?”, the learned arbitrator went on, based on the material before him, to make a firm finding of fact that the appellant had proved its loss of profit except that the sum claimed was neither fair nor reasonable, hence his decision to award a lower figure but without acceding to the respondent’s contention that the appellant was only entitled to nominal damages. … [62] In awarding a loss of profit of 10% for the remaining drainage works and 7.5% for the remaining vehicular box culvert, the arbitrator was in fact moderating the appellant’s claim of 25% by reducing it for contingencies, albeit taking the 10-15% margin for P&A which he described as “almost the norm” in the Malaysian construction industry. [63] Obviously, what the learned arbitrator did was to strike a balance between the high and the low of the quantum for loss of profit. He did not slavishly apply the 10-15% “norm” but only allowed for a lower range. We agree with learned counsel for the appellant that this is what arbitrators are expected to do. [64] What is also clear from the award is that in determining the quantum of loss of profit, the learned arbitrator found the respondent’s evidence to be of little value but at the same time he considered the quantum claimed by the appellant to be excessive. That was the reason why, as we just mentioned, he brought the appellant’s claim down from 25% to 10% for loss of profit for the remaining drainage works and 7.5% for the remaining vehicular box culvert (provisional quantities) works. … [99] In the context of the present case, we do not think that the drawing by the arbitrator on his own knowledge and expertise of the 10-15% no-risk profit margin for P&A as being “almost a norm” in the Malaysian construction industry was something that was not reasonably foreseeable or was a significant surprise to the respondent, so much so that the failure by the learned arbitrator to give it the opportunity to submit on the issue had resulted in a serious breach of the rules of natural justice. While it is true that the arbitrator was not expected to know everything about the norms in the Malaysian construction industry, neither is he expected to know nothing at all. … [106] ... As we have pointed out earlier in this judgment, the learned arbitrator on the evidence before him was prepared to rule that the appellant had successfully made out its case for a 25% profit but because of the contingencies, he reduced it to 10% and 7.5% respectively. [107] We must not lose sight of the reality that quantification of loss of profit is not an exact science and is the arbitrator’s remit… [108] Given the evidence before the arbitral tribunal, the question of the arbitrator having relied on “extraneous evidence” which he “invented” or “thought up” of the 10-15% no-risk profit norm for P&A in the Malaysian construction industry as alleged by the respondent does not arise at all. As such, the question of the arbitrator having breached the rules of natural justice by failing to give the parties the opportunity to submit on the norm also does not arise.”

The House of Lords in the English case of London & North Eastern Rly Co v BA Collieries Ltd [1945] AC 143 has long ago also held as follows: “In my opinion there is a positive though contingent and future liability expressly imposed if the coal is worked. Its "value" is left to the arbitrator to decide, if the parties do not agree to it. As with other questions of compensation the code expressly leaves the value to be settled by arbitration, presumably by mining engineers or other experienced and instructed experts in the particular art and science. They must use their peritiam artis to evaluate the future contingencies and to picture the possibilities which appertain to the underground coal. They may think the risk of damage is too problematical to be given any but a nugatory value or they may value it at a substantial figure. There can be no certainty in such matters but they must do the best they can. Their decision for all practical purposes cannot be questioned. They must be left to decide according to their judgment of what would be done in the usual course of events, for instance, whether the particular volition or decision of the mine manager in the natural course of events would be that the seam should be worked at all, or if worked, when it would be worked, and so on. The problem is not unlike the problems which constantly arise at common law in estimating damages, for instance, damages for breach of contract or for tortious acts. These damages often have to be based on future probabilities which may include consequences such as the choice or volition, however capricious, of third parties.”

Accordingly, I will not revisit the issue.

In the Arbitration, the Respondent claimed against the Appellant for the costs of rectification of specific systems. These were described as “Specific Minor Costs”. The total value of the Respondent’s Specific Minor Costs claim was USD 181,833,738.00, of which USD 117,263,116.87 was awarded to the Respondent.

In determining part of the Respondent’s claims for Specific Minor Costs, the Appellant contended that the Arbitral Tribunal acted in breach of public policy and or exceeded its jurisdiction by applying a methodology of “sampling and extrapolation” to decide which categories of costs were proven and were to be awarded. For these Specific Minor Claims using the “sampling and extrapolation” method, the Arbitral Tribunal awarded a sum of USD6,074,228.37.

The method of “sampling and extrapolation” involved three elements: a) firstly, sampling — the analysis of results arising from the assessment of agreed representative samples with sufficient commonality within a category; b) secondly, extrapolation — the application of the results of the sampling process to other heads of claim which were not analysed at all, where the application of the results from other categories was purportedly justified by common liability, technical, or other issues which may assist in resolving the unanalysed claims; c) third, the 80:20 principle — the application of the principle that 80% of the value of the claim should be identified and determined, whereupon the remaining 20% in value of the claim can be determined without analysis by imposing the results that arose from the analysis of the 80%.

Although the Arbitral Tribunal had rejected the general application of the sampling and extrapolation method for the Work Done Claims, the Arbitral Tribunal accepted this method for Specific Minor Claims amounting to USD6,074,228.37.

The Appellant contended that the Arbitral Tribunal’s method of determining the Respondent’s Specific Minor Claims permitted the Respondent’s recovery of costs without providing full or adequate proof of any link between certain claimed costs and the underlying defects remediation works. The “sampling and extrapolation” method of determining the Specific Minor Claims was in breach of public policy in that the Appellant was ordered to pay a sum of USD6,074,228.37 in costs to the Respondent without these specific sums being shown to be attributable to the Respondent. The Appellant contended that such an order being made, which is binding and enforceable against the Appellant, is a matter of concern for the public interest. In its violation of the principle of causation, this award is manifestly unconscionable and wholly offensive to an ordinary, reasonable, and fully informed member of the public. It cannot be left undisturbed where it is now before this Court under section 37(1)(b)(ii) of the AA 2005.

Further, in determining the Respondent’s Specific Minor Claims using this method, the Arbitral Tribunal exceeded its jurisdiction in that the Arbitral Tribunal awarded costs to which it had not applied its mind, and which were not based on any finding of fact on the proof of those costs.

It was further said that the Arbitral Tribunal exceeded its jurisdiction in that its process of determination was in manifest disregard of the terms of the parties’ agreement and the applicable substantive law, rendering it a decision-making process which breached section 30(5) of the AA 2005.

In addressing the Appellant on the Specific Minor Costs claims, upon scrutiny of the Award, it would appear that the Arbitral Tribunal at para [2495] of the Award had made it abundantly clear that “its findings in relation to the Work Done Claims were limited to the findings which it has made on the particular Examples in the four categories, with the extrapolation only in respect of particular findings by the Technical Experts but without general extrapolation to the remaining claims”.

Indeed, in the preceding para [2494], the Arbitral Tribunal held that “with the exception of the Technical Experts’ findings dealt with below, there is no basis for it to either adopt a sampling basis by applying findings on an Example or a number of Examples to the remaining claims.”

In fact, the sum of USD6,074,228.37 that was awarded to the Respondent for the Specific Minor Costs claim was never based on the “sampling and extrapolation” methodology at all. At para [2496] and [2497] of the Award, the Arbitral Tribunal then dealt with the claims amounting to USD6,074,228.37 by referring to the Technical Experts’ Third Joint Statement and held that “the Technical Experts found that certain minor defect claims could be directly resolved based on the findings which they made in relation to the particular Examples. The Arbitral Tribunal therefore finds that the relevant categories of defect should also include the costs relating to the following claims which the Technical Experts found were similar to and could be assessed under the results of existing Examples.

The Arbitral Tribunal after referring to the piping system and piping construction issues and the Faulty Equipment/Materials claims and to the existing Examples finally determined at para [2498] that “[t]he Quantum Experts have agreed the value of these agreed samples and in the light of the findings of this Tribunal on liability have calculated that there are Specific Costs of USD6,074,228.37 …”.

In any case, even if the Arbitral Tribunal had relied on the “sampling and extrapolation” methodology in coming to its award of USD6,074,228.37 for the Specific Minor Costs claim, the Award is also not susceptible to being set aside on this ground. This is because the “sampling and extrapolation” methodology was clearly within the scope of the evidence and submissions before the Arbitral Tribunal. The parties were allowed to comment, and they, their Technical Experts, and the Arbitral Tribunal were already discussing the extrapolation method, among others, before the issuance of the Procedural Order No. 2 dated 21.03.2018. Accordingly, there was no breach of natural justice or the Arbitral Tribunal acting in excess of its jurisdiction at all.

In fact, even at the Appellant’s best case, the Arbitral Tribunal had relied on the Technical Experts who had only applied limited extrapolation on a jointly agreed basis to no more than the Minor Specific Costs Claims which the Tribunal adopted and awarded to the Respondent.

For the above reasons, I also find no merit to the Appellant’s contentions on the Specific Minor Claims issue.

Before concluding, there is a matter which I must comment upon. There is no question that in this case, the members of the Arbitral Tribunal comprised all highly esteemed leaders who are experienced in the field of construction arbitrations. They were: a) Prof. Doug Jones is a professionally qualified lawyer and experienced arbitrator in construction and infrastructure disputes. He is a member of the CIDC (Construction Industry Development Council) International Advisory Group, India Construction Industry. b) Sir Vivian Ramsey is a professionally qualified engineer, economist, and lawyer. He is a Chartered Engineer, a Fellow of the Institute of Civil Engineers, and a Fellow of the Royal Academy of Engineering. He also practiced as a barrister, became a Queen’s Counsel, an arbitrator, and is a retired judge of the Queen’s Bench Division and also the Technology and Construction Court in London. c) Dr. Robert Gaitskill is also a professionally qualified engineer and lawyer. He is a Chartered Engineer, a Fellow of the Institute of Engineering and Technology, a Fellow of the Institute of Mechanical Engineers, and a former Senator of the Engineering Council. He has wide experience as an engineer in, among others, oil rig design, and has been appointed and acted as an expert determinator (as a qualified and Chartered Engineer).

There was a suggestion by learned counsel for the Appellant that the learned High Court Judge may have given too much deference to the pre-eminence composition of the Arbitral Tribunal in arriving at his decision to dismiss the GKL’s Setting Aside Applications.

With respect, I am unable to accept the learned counsel’s submission that the learned High Court Judge had accorded undue deference to the Arbitral Tribunal by reason of its distinguished composition. A careful reading of the grounds of judgment discloses no such suggestion at all. On the contrary, the learned High Court Judge had approached the applications by reference to the statutory framework under the AA 2005 and the established principles governing judicial intervention in arbitral proceedings. The reasoning reflects a disciplined adherence to the law, and the conclusions reached were firmly anchored in the facts and issues presented, rather than in any consideration of the Arbitral Tribunal’s stature.

To impute to the learned High Court Judge an undue deference to the Arbitral Tribunal is, with respect, unfounded and does not withstand scrutiny. The judgment reveals that the merits of the complaints were carefully evaluated, and the dismissal of the applications flowed from the absence of grounds warranting judicial interference with the Award. In the circumstances, the criticism levelled at the learned High Court Judge is both unsupported by the record and unwarranted.

In the premises and based on the reasonings set out above, it is my judgment that the GKL’s Setting Aside Applications are without any merit. The Learned High Court Judge was correct to find that the Appellant had not made out a meritorious case, whether to set aside the Award in whole or in part, as the Appellant has failed to establish that the Arbitral Tribunal acted in excess of jurisdiction and or denied the Appellant’s natural justice and or made an award that conflicted with the public policy of Malaysia.

As correctly found by the Learned High Court Judge in paragraph 110 of the Grounds of Decision, all the complaints advanced by the Appellant are actually its appeal against the Award. The Appellant is clearly seeking to reopen, rehash, and re-argue the issues in the arbitration before this Court. This is not permissible in the circumstances of this case.

Accordingly, the Appellant’s Setting Aside Appeals are hereby dismissed with costs to be paid to the Respondent. DATE: 5th day of December 2025 -sgd-ONG CHEE KWAN JUDGE COURT OF APPEAL For the Appellant : 1.

Dato’ Lim Chee Wee;

Mr. Lee Shih;

Mr. Kwan Will Sen;

Encik Muayyad bin Khairulmaini; &

Ms Emily Ho Mei Li. (Messrs. Lim Chee Wee Partnership) For the Respondent : 1.

Ms. Janet Chai Pei Ying;

Ms. Chloe Chew Khe Ying; and

Mr. Umesh Nerwin Nair a/l Sivakumar (Messrs. Chooi & Company)