In Associated Provincial Picture Houses v Wednesbury Corporation [1948] 1 KB 223, the court held that the power to quash decisions of government officers could be exercised where an administrative decision was so outrageous in its defiance of logic or accepted moral standards that no sensible person who applied his mind to the question to be decided could have arrived at it, or no reasonable person could have come to such a view (known as Wednesbury unreasonableness).

The grounds for setting aside an arbitral award made in Singapore are contained in the Singapore International Arbitration Act (IAA), which adopts the UNCITRAL Model Law on International Commercial Arbitration (Model Law), and are expressly limited to the grounds set out in Article 34 of the Model Law, including:

Sui Southern Gas Company Limited (SSGC) entered into an agreement with Habibullah Coastal Power Company (Private) Limited (HCPC) to supply natural gas to HCPC in order to allow HCPC to generate electricity at a power generation complex in Pakistan. A dispute arose between SSGC and HCPC, which they referred to arbitration in Singapore in accordance with the agreement. HCPC claimed that SSGC had failed to supply sufficient quantities of gas, causing HCPC to suffer a loss. The arbitration concluded with the arbitral tribunal issuing an award in favour of HCPC.

In essence, SSGC asked the High Court to recognise that it could, independently of the provisions of the IAA, set aside arbitral awards that were "Wednesbury unreasonable".

The applicant also argued, in the alternative, that the award fell within the grounds for setting aside stipulated in Article 34(2)(a)(iii)) and Article 34(2)(b)(ii)) of the Model Law.

The Singapore High Court rejected the application to set aside the award.

The High Court found the applicant's contention that High Court should set aside the award for Wednesbury unreasonableness untenable as a matter of principle and authority. It noted that administrative and arbitral decisions were not analogous and that judicial review for Wednesbury unreasonableness only existed because, when Parliament gave discretion to an administrative decision-maker, it intended for that discretion to be exercised reasonably. However, in the context of a private arbitration, parties have contractually agreed to abide by the decision of the arbitral tribunal and must therefore be held to that agreement in the absence of any of the specific grounds for challenging an award set out in Article 34 of the Model Law.

The court then affirmed that the IAA provided the only means by which a disappointed party to an arbitration may challenge the award. The ability to challenge an award for unreasonableness or irrationality was not a ground set out in the IAA and therefore there could be no right to set aside on such a basis.

With regard to the argument under Article 34(2)(a)(iii) of the Model Law (that the award contained decisions on matters beyond the scope of the submission to arbitration), the High Court noted that Article 34 was concerned with the jurisdiction of an arbitral tribunal to decide certain matters, not the substantive correctness of those matters. The court held that the issues determined by the tribunal in reaching its award were well within the scope of submission to the tribunal, and it therefore could not set aside the award on this basis.

As regards the argument under Article 34(2)(b)(ii) of the Model Law (that the award was against Singapore's public policy), the court noted that SSGC did not identify which particular public policy of Singapore the award offended. Accordingly, the public policy argument failed on this threshold point. In any event, the contention of SSGC that upholding such an arbitral award would "shock the conscience" did not cross the very high threshold required of demonstrating egregious circumstances such as corruption, bribery or fraud, which would violate the most basic notions of morality and justice.

This decision again serves to show that the Singapore courts are firm in their continued support of arbitration, and will not interfere unnecessarily with arbitration proceedings.