17 March, 2013

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

Singapore has long been favoured as a seat for international arbitration by Japanese and multinational companies alike. With many Japanese companies now choosing to relocate key functions to Singapore, the prospects of being involved in arbitral proceedings there are increasingly likely. In three recent decisions in particular, the Singapore High Court has showed active support for arbitral awards subject to its jurisdiction, making the case for arbitrating in Singapore even more compelling.

• Astro Nusantara International BV and others v PT Ayunda Prima Mitra and others [2012] SGHC 212
• PT Pukuafu Indah and others v Newmont Indonesia Ltd and another [2012] SGHC 187
• International Research Corp PLC v Lufthansa Systems Asia 
• Pacific Pte Ltd and another [2012] SGHC 226

Astro Nusantara International BV and others v PT Ayunda Prima Mitra 
and others [2012] SGHC 212

The Singapore High Court in this case rejected a jurisdictional challenge to the 
enforcement of arbitral awards obtained in an arbitration in Singapore. 

Facts

The dispute arose out of a failed joint venture arrangement between the Astro group of companies and the Lippo group of companies to provide Pay TV and other multimedia services in Indonesia. 

Astro commenced arbitration in Singapore in 2008 and sought to join two Astro companies to the arbitration. The companies had provided supporting services and funding but were not themselves parties to the agreement governing the joint venture. Lippo claimed that the tribunal did not have jurisdiction to join the Astro companies to the arbitration.

In 2009, the tribunal delivered an award which held that it did have jurisdiction to join the two companies as parties to the arbitration. Lippo did not appeal the award on jurisdiction but proceeded to contest the substantive merits of Astro's claim. Astro went on to succeed in the arbitration and obtained leave to enforce the awards in Singapore. Lippo argued that it was able to resist enforcement because section 19 of the Singaporean International Arbitration Act (the "IAA") imported clauses from the UNCITRAL Model Law allowing it to resist enforcement of an arbitral award at both the setting-aside stage and the recognition and enforcement stage.

Decision

The court held that Lippo was not entitled to challenge the arbitral tribunal's jurisdiction at the enforcement stage in circumstances where the tribunal had ruled, as a preliminary question, that it had jurisdiction and Lippo had not appealed from that ruling. The court commented that, "There are no passive remedies when it comes to challenging jurisdiction under the IAA − a party wishing to oppose a jurisdictional award must act."

Comment

This decision reflects a deliberate move to curtail the intervention of the courts and uphold the finality of arbitration. It should be welcomed as a signal that the Singaporean courts understand the need to protect the certainty of arbitral awards. 

PT Pukuafu Indah and others v Newmont Indonesia Ltd and another 
[2012] SGHC 187

In this case, the Singapore High Court refused to set aside an interim anti-suit injunction ordered by an arbitral tribunal.

Facts

The parties, Newmont Indonesia ("Newmont") and PT Pukuafu Indah ("PTPI") were shareholders in a company operating a copper and gold mine in Indonesia. Newmont alleged that PTPI was in breach of a Release Agreement between the parties, under which it was obliged to discontinue proceedings against Newmont in the Indonesian courts. Newmont initiated arbitral proceedings in Singapore and sought to restrain PTPI from pursuing court proceedings against it. The tribunal issued an interim anti-suit injunction and the Singapore High Court granted leave for enforcement of the tribunal's order. PTPI applied to the court to have the order set aside.

Decision

The court concluded that notwithstanding the link between the interim injunction and the substance of the arbitration, it should nevertheless tip the balance in favour of minimal curial intervention, and exclude its jurisdiction in relation to the order. It ruled that the order did not fall within the definition of an 'award' under the IAA and therefore it did not have jurisdiction to consider an application for the setting aside of the interim injunction. 

Comment

This case confirms that the Singapore courts’ attitude is inclined towards minimal intervention. Significantly, the court expressly acknowledged the need to uphold the efficiency of arbitration and to come down firmly in favour of independence rather than interventionism.

International Research Corp PLC v Lufthansa Systems Asia Pacific Pte Ltd and another[2012] SGHC 226

The Singapore High Court decided that an arbitration clause in a contract between two parties bound a third party who later entered into supplemental agreements with the parties to the original contract.

Facts

Lufthansa entered into an agreement with Datamat which provided for disputes to be settled by arbitration in Singapore. Subsequently, Datamat entered into an agreement with International Research Corp ("IRC") whereby IRC would pay Lufthansa, on Datamat's behalf, for the goods and services provided to Datamat by Lufthansa. When Datamat ran into financial difficulties, supplemental agreements were entered into, providing for IRC to pay Lufthansa directly. When IRC refused to pay, Lufthansa commenced arbitration proceedings against both Datamat and IRC. The supplemental agreements to which IRC was a party did 
not refer to the arbitration clause in the original contract between Lufthansa and Datamat and so IRC claimed that the arbitral tribunal did not have jurisdiction over it. The arbitral tribunal found that it did have jurisdiction over IRC, whereupon IRC applied to the Singapore High Court requesting that the tribunal's decision be set aside.

Decision

The court began by acknowledging the strict rule that an arbitration clause in one agreement must be specifically referred to in order to be incorporated into another agreement. However, the court accepted that there could be flexibility in the rule's application where various agreements may be deemed to be one composite agreement. Here, the court ruled that the contracts should not be viewed in isolation but read as a whole. In particular, looking at the parties' common intention, the parties intended that the agreements were to function as one composite agreement and so the arbitration clause contained in the original agreement could therefore apply to all of the agreements. The court therefore dismissed IRC's application.

Comment

Once again, the court upheld the arbitral tribunal's decision, this time allowing a flexible application of the rule on incorporation of arbitration agreements. In this instance it is worth remembering that the question of jurisdiction might never have arisen if the supplemental agreements themselves had contained express dispute resolution provisions. It is therefore important to remember to draft clear dispute resolution provisions when negotiating contracts, in order to avoid costly litigation in the future. 

Conclusion

The approach of the Singapore High Court in the above cases demonstrates a welcome move to uphold the finality and integrity of arbitral awards subject to its jurisdiction. These decisions also follow in the wake of recent amendments to Singapore's International Arbitration Act, where steps were taken by the Singapore legislature to fine-tune aspects of its arbitration law. Overall, these developments serve to reinforce Singapore's standing as an arbitration hub, especially in Asia.