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Singapore – Arbitration Round Up 2012.

19 February, 2013

 

Legal News & Analysis – Asia Pacific – Singapore – Dispute Resolution

 

2012 has been a year of interesting developments for arbitration in Singapore. This article provides a summary of the key changes and cases from the past year.

Changes to Singapore’s arbitration laws come into operation

The Singapore International Arbitration (Amendment) Act 2012 (IA(A)A) and Foreign Limitation Periods Act 2012 (FLPA) were passed in Parliament. On 1 June 2012, the IA(A)A and FLPA came into force.

The main amendments to the law contained in the Acts were:

  • Relaxation of the requirement that arbitration agreements be in writing
  • Conferral of power on the Singapore courts to review an arbitral tribunal’s decision to refuse jurisdiction
  • Confirmation of the courts’ power to make costs orders against any party when ruling that a tribunal does not have jurisdiction
  • Clarification of the scope of the arbitral tribunal’s powers to award simple or compound interest on both the principal amounts claimed and on amounts awarded in respect of costs as well as confirmation that interest will accrue from the date of the award at the rate prescribed for judgment debts (unless the award otherwise directs)
  • Statutory recognition and support for an emergency arbitrator procedure through amendments to the definition of “arbitral tribunal” and ensuring that the awards of emergency arbitrators are enforceable through an appropriate amendment to the definition of “arbitral award”.

The IA(A)A amendments only apply to arbitral proceedings commenced on or after 1 June 2012 (unless the parties agree otherwise).

Giant Light Metal Technology (Kunshan) Co Ltd v Aksa Far East Pte Ltd

The Singapore High Court dismissed the Defendant’s application to stay an action to recover a debt. The debt arose from the Defendant’s non-payment of a judgment sum awarded by the Suzhou Intermediate Court, Jiangsu Province, in the People’s Republic of China. The High Court found that since the Plaintiff’s action relating to the debt arising from the PRC Court’s judgment did not fall within the terms of the Parties’ arbitration agreement, section 6 of the Singapore International Arbitration Act did not apply. Accordingly, the Defendant’s application to stay the proceedings did not succeed.

This case provides a demonstration of the Singapore courts’ robust approach towards the interpretation of arbitration agreements. Whilst they will typically look to honour the parties’ intentions and ensure that an obligation to arbitrate is upheld, in situations that clearly fall outside of the wording of an agreement, the courts will resist attempts to extend an obligation beyond what the parties agreed.

PT Prima International Development v Kempinski Hotels SA and other

The Singapore Court of Appeal reversed a decision of the High Court and thereby restored three arbitral awards which had previously been set aside. In doing so, the Court of Appeal clarified the circumstances in which matters are said to be within the “scope of the submission to arbitration” such that they may form the basis for an award, even if they are not specifically pleaded.

This reversal of the first instance decision demonstrates that the Singapore courts will not lightly set aside a tribunal’s decision under the Model Law.

The Court of Appeal clarified how to determine the “scope of the submission to arbitration” for the purposes of Art 34(2)(a)(iii) of the Model Law. One of the arguments submitted to the Court of Appeal was that the “scope of the submission to arbitration” was determined by the scope of the arbitration agreement. By deciding that the scope is determined by the disputes which the parties choose to submit to arbitration, a scenario could be envisaged in which a narrowly drafted claim comes out of a widely drafted arbitration agreement. In such circumstances, the courts would look to the narrower claim as providing the scope of the submission rather than the wider agreement.

It will need to be clarified what constitutes a fact or change in law which is “ancillary” to the dispute, such that it comes within the rule set down by the Court of Appeal. In this case, it was clear that a fact affecting one party’s right to a remedy was not too remote.

Quarella SpA v Scelta Marble Australia Pty Ltd

The Singapore High Court dismissed the claimant’s application to have an arbitral award set aside on the grounds that the tribunal had applied an incorrect choice of substantive law when making its determination. The High Court held that this basis for setting aside the award did not fall within the grounds for setting aside under the International Arbitration Act (IAA)and the UNCITRAL Model Law.

This case demonstrates the High Court’s continued reluctance to extend the grounds for setting aside an arbitral award beyond the literal wording of the provisions of the IAA and the Model Law. Parties will likely face difficulty in setting aside an award where the tribunal retains a discretion in interpreting an agreed choice of law clause. In addition, the incorrect application of a choice of law will not necessarily constitute a matter which falls outside the submission to arbitration for the purposes of the Model Law.

PT Pukuafu Indah and others v Newmont Indonesia Ltd and another

The Singapore High Court refused to set aside an interim anti-suit injunction ordered by an arbitral tribunal. It rejected the application on the grounds that, in contrast to its ability to set aside awards, it did not have jurisdiction to set aside interlocutory orders. The Court discussed, amongst other things, the scope of the Singapore courts’ powers to set aside arbitral orders and awards and the policy considerations behind the act of balancing judicial intervention with arbitral independence.

This case is a useful reminder of the Singapore courts’ concerns in deciding upon their jurisdiction and power to interfere with arbitral proceedings and sets out the policy considerations behind the balancing exercise undertaken.

Further, this case confirms that the Singapore courts’ attitude is inclined towards minimal intervention. The balancing exercise between fairness and efficiency demonstrates the courts’ understanding of parties’ needs in arbitration, and confirms Singapore’s successful establishment as an arbitration hub in the Asia region.

In the Court’s own words, “the pendulum swings between independence and interventionism, but the overarching aim is always to facilitate the efficiency of arbitration. (…) The issue of whether interlocutory orders may be subject to judicial challenge is simply another manifestation of the perennial debate over the role that courts should play in arbitration; and under the IAA, the scales have come down firmly in favour of independence in the ongoing conduct of arbitral proceedings.

Astro Nusantara International BV and others v PT Ayunda Prima Mitra and others

The Singapore High Court refused to entertain a jurisdictional objection to the enforcement of domestic international arbitration awards (i.e., international arbitration awards made in Singapore and sought to be enforced in Singapore) to the value of over US$250m. The Court held that the award debtor was precluded from challenging the arbitral tribunal’s jurisdiction at the enforcement stage in circumstances where the Tribunal ruled, as a preliminary question, that it had jurisdiction and where the award debtor did not appeal from that ruling and proceeded to contest the substantive claims in the arbitration. The Court examined the scope of parties’ powers to resist the enforcement of domestic international arbitration awards and the differences in approach to the curial oversight of international arbitration between Singapore, Model Law and civil law jurisdictions on the one hand and the United Kingdom on the other.

The decision on the jurisdictional objection was dictated by an orthodox interpretation of the reasonably plain terms of Singapore’s IAA and the Model Law as enacted (and modified) by the IAA. The decision reflects a deliberate decision on the part of the Singapore legislature to curtail curial intervention in favour of finality, certainty and efficiency – all important objectives of international arbitration.

International Research Corp PLC v Lufthansa Systems Asia Pacific Pte Ltd and another

The Singapore High Court considered whether an arbitration clause in a contract bound a third party who subsequently entered into supplemental agreements with the original parties. Rather than viewing the supplemental agreements, which did not expressly make reference to the arbitration clause in the original contract, in isolation, the High Court found that based on an objective interpretation of the agreements taken together, as well as the intention of the parties, the original contract and the supplemental agreements should be treated as one composite agreement as the parties must have intended that the arbitration clause in the original contract should apply to the supplemental agreements as well.

While the High Court acknowledged the strict rule that an arbitration clause in one agreement must be specifically referred to in order for it to be incorporated into another agreement, the High Court also accepted that there may be flexibility in applying this strict rule. If various agreements are deemed to be one composite agreement, instead of separate agreements, then the arbitration clause contained in one agreement may apply to all of the agreements. In determining whether various agreements will be deemed to be one composite agreement, the Singapore courts will look to the objective interpretation of the parties’ intentions. This case is a reminder of the importance of clear drafting when entering into contracts

 

For further information, please contact:

 

Alastair Henderson, Partner, Herbert Smith Freehills

alastair.henderson@hsf.com

 
 

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