MUST AN ARBITRAL TRIBUNAL FOLLOW THE PARTIES’ LINE OF ARGUMENT?
In Essar Exploration and Production India Ltd v Nayara Energy Ltd [2026] SGHC 215 (“Essar”), the Singapore High Court dismissed an application to set aside part of an arbitral award. The decision explains when a tribunal may adopt reasoning that the parties have not expressly advanced, without breaching their right to a fair hearing (Essar at [103]–[111]).
A tribunal may draw its own conclusions from the evidence. It need not adopt either party’s reasoning or invite comments on every inference it intends to draw. However, there are limits: its reasoning must remain sufficiently connected to the parties’ cases, and must not take a course that a reasonable litigant could not have foreseen (Essar at [50], [103]–[104] and [108]).
Background
The dispute arose from an agreement between Essar, Nayara and a third party to implement an earlier arbitral award concerning the payment for, and supply of, natural gas. The earlier award required Nayara to pay Indian Oil Corporation Limited (“IOCL”). However, IOCL demanded interest calculated on a higher principal sum than that awarded. Essar and Nayara agreed that the excess interest was wrongly claimed (Essar at [6]–[9]).
Essar alleged that it subsequently agreed with Nayara that, if IOCL did not agree to resolve the disputed interest through the proposed arrangements, Nayara would take the matter to an execution court. Nayara eventually paid the disputed interest, but Essar maintained that Nayara was obliged to pursue recovery from IOCL (Essar at [13]–[17] and [27]).
The Tribunal found insufficient evidence of the alleged subsequent agreement and rejected Essar’s claim to recover the excess interest from Nayara. Essar sought to set aside that part of the award on several natural justice grounds, including complaints about the Tribunal’s reasoning (Essar at [26]–[36] and [37]).
Can a tribunal make a point that neither party has expressly made?
The Court explained that a tribunal’s reasoning may arise from the parties’ express pleadings, matters reasonably implied by those pleadings, or an unpleaded point brought to the opposing party’s attention. It may also follow reasonably from, or relate to, arguments actually advanced by either party (Essar at [103]).
The question is therefore not simply whether a party advanced the precise reasoning adopted in the award. A party challenging that reasoning must show that a reasonable litigant in its position could not have foreseen reasoning of that kind. The Court referred to the requirement of a “dramatic departure” from the parties’ submissions (Essar at [104]).
Here, the Tribunal had examined whether Essar’s oral submissions were consistent with its witness evidence, written submissions and correspondence. It found that those materials did not support Essar’s position that a letter recorded only part of a broader oral agreement requiring Nayara to commence proceedings (Essar at [107]).
Nayara had not itself made that specific point about the inconsistency in Essar’s case. Nevertheless, this did not prevent the Tribunal from making the observation. Nayara’s pleaded position was that Essar could not prove the alleged subsequent agreement. Assessing the consistency of Essar’s evidence was part of deciding whether Essar had proved its case (Essar at [108]).
The Tribunal was not required to flag every step in that assessment before reaching its conclusion. A reasonable litigant in Essar’s position should have anticipated that its submissions would be tested against its evidence. The reasoning therefore followed naturally from the dispute before the Tribunal (Essar at [108]–[110]).
Even if the Tribunal’s assessment was factually wrong, that would be an error in evaluating the case, rather than a breach of natural justice permitting the Court to intervene (Essar at [111]).
What if the tribunal relies on a legal provision not argued on that issue?
Essar also challenged the Tribunal’s reference to section 63 of the Indian Contracts Act 1872, concerning waiver or dispensation of contractual performance. Although the provision had been raised on another issue, Essar argued that neither party had relied on it to address the alleged subsequent agreement (Essar at [112]–[115]).
The Court accepted that section 63 had not been pleaded on whether that agreement arose. However, it examined what role the provision actually played in the Tribunal’s decision (Essar at [119]).
Read fairly, the award referred to section 63 when considering the consequences of Nayara’s failure to pay by the original payment date. The rejection of Essar’s excess interest claim rested on a separate, independently sufficient finding: there was no subsequent agreement requiring Nayara to commence proceedings (Essar at [120]–[121]).
This distinguished the case from one where a tribunal decides an issue using a legal principle that the parties had no opportunity to address. Essar also failed to show prejudice: further submissions on section 63 could not reasonably have changed the outcome, because the rejection of its claim rested on independent findings (Essar at [122]–[126]).
Key takeaways
A tribunal has room to assess the evidence and develop its own reasoning. Parties should not assume that an observation is off limits merely because their opponent did not make it. The relevant question is whether the reasoning was reasonably foreseeable from the issues and arguments before the tribunal (Essar at [103]–[110]).
A challenge must also identify how the disputed reasoning affected the decision and caused prejudice. Pointing to an unargued provision somewhere in the award is insufficient where the adverse finding rests on independent grounds (Essar at [119]–[126]).
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