Jurisdiction - Singapore
News
Singapore – R1 International PTE TD V Lonstroff AG [2014] SGHC 69.

9 July, 2014

 

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

 

Introduction

 
In R1 International Pte Ltd v Lonstroff AG [2014] SGHC 69, the High Court of Singapore considered whether a Singapore Court had the power to grant a permanent anti-suit injunction to restrain foreign court proceedings in favour of arbitration. Although the issue did not arise on the present facts as the Court found that there was no arbitration agreement to uphold, it nonetheless made a finding on the issue since both parties addressed the issue extensively and given the significance of the issue in future cases. The Singapore High Court held that it can grant a permanent anti-suit injunction in aid of an international arbitration. However in respect of a foreign-seated international arbitration, the Court did not express a concluded opinion as to its power to grant a permanent anti-suit injunction although it recognised that a Singapore Court could grant an interim anti-suit injunction in aid of a foreign-seated arbitration.

 
Facts

 
This case involved a Singapore plaintiff in the business of wholesale trading and brokering of rubber (R1 International) and a Swiss defendant in the business of processing natural rubber and plastics (Lonstroff). R1 International sold five consignments of rubber to Lonstroff. Each consignment was negotiated and concluded in a similar manner, whereby there were sales negotiations in respect of the consignment via email followed by acceptance of an order by telephone, and subsequently a sales contract containing an arbitration clause being signed and sent by R1 International to Lonstroff for signature, but which Lonstroff never signed. The first sales contract provided for arbitration under the rules of the International Rubber Association Contract (IRAC) – which provided for arbitration in London – while the second to fifth sales contracts provided an additional clause stating that “[i]n the event of any arbitration, it will be conducted in Singapore” . The dispute arose from the second order after Lonstroff alleged that R1 International had breached the contract by supplying rubber that emitted a foul smell. Lonstroff commenced legal proceedings in Switzerland against R1 International in March 2013 after R1 International refused to offset payment against the cost of delivery. In July 2013, R1 International requested the Singapore Commodity Exchange (SICOM) to set up an arbitration tribunal to resolve the same dispute. SICOM responded that it would only consider the request when it was confirmed that the Swiss proceedings had been suspended and that both parties agreed to refer the dispute to it. Consequently, R1 International obtained an interim anti-suit injunction in the Singapore courts to prevent Lonstroff from continuing with the legal proceedings commenced by it in Switzerland. Lonstroff then applied to discharge this Singapore interim injunction while R1 International applied for the same interim injunction to be made permanent. Three issues arose from this for consideration before Judith Prakash J. of the Singapore High Court.

 
Threshold Issue: Did The Contract Contain A Valid Agreement To Arbitrate?

 
The High Court judge noted that the first issue, being a threshold issue, was whether the contract in question provided for disputes to be submitted to arbitration. Counsel for R1 International argued that despite Lonstroff not having signed the sales contract which contained the agreement to arbitrate in Singapore, this clause was incorporated into the contract for the second order on the basis of trade custom, or in the alternative, previous dealings between the parties.

 
With regards to incorporation by trade custom, the High Court held that R1 International failed to establish that it was trade practice for international rubber traders to conclude their contracts based on IRAC terms due to insufficient evidence. In any case, the High Court noted that the agreement to arbitrate in Singapore was not part of the standard IRAC terms, which provide for the place of arbitration to be settled according to the destination of the goods. As Singapore is not a designated arbitration centre for goods shipped to London, R1 International would, in addition to establishing that it is trade custom to incorporate IRAC terms, need to further establish that in the case of shippers from Singapore, these terms included the SICOM arbitration agreement, which it did not.

 
With respect to the incorporation of the arbitration agreement on the basis of previous dealings, the Court held that one prior transaction between the parties was insufficient to establish a course of dealing. The change in the arbitration terms between the first and second orders was also evidence that there was no settled course of dealing. Even if it was found that there was a previous course of dealing between the parties, the Court held that the Singapore arbitration clause could not have been incorporated by reference as the contract in question had already been concluded and performed between the parties before Lonstroff was informed of such clause. It relied on United Eng Contractors Pte Ltd v L&M Concrete Specialists Pte Ltd [1999] 2 SLR(R) 524 in reaching this view.

 
Ultimately, this point alone allowed Lonstroff to proceed with the Swiss proceedings.

 
The Court’s Power To Grant Permanent Anti-Suit Injunction

 
The second issue was whether the Singapore Court had the power to grant a permanent anti-suit injunction. Although there was no need for the court to do so following the outcome of the threshold issue, the Judge proceeded to make a finding on this issue as it was the subject of extensive argument by the parties and as this was an issue which may have significance in future cases.

 
Anti-suit injunctions are orders which a court makes to restrain a party before the court from continuing with foreign court proceedings which that party has initiated. The Judge noted that sections 12A(2) and 12(1)(i) of the Singapore International Arbitration Act (IAA), together with the decision in Maldives Airports Co Ltd and another v GMR Male International Airport Pte Ltd [2013] 2 SLR 449 (Maldives Airport), which held that certain provisions under section 12 of the IAA which provided for the court to grant injunctions (including anti-suit injunctions), enable the court to issue interim anti-suit injunctions in aid of both domestic and foreign international arbitration.

 
The Judge went on to note that although the IAA provisions do not extend to permanent anti-suit injunctions, instead, the power to grant the same canbe derived from the Court’s general injunctive powers under section 4(1) of the Civil Law Act (Cap 43, 1999 Rev Ed) (CLA). Section 4(10) of the CLA allows the Court to grant a permanent anti-suit injunction in aid of local court proceedings and in the Judge’s view, there was no reason why this power could not be extended to be in aid of domestic international arbitration proceedings since the IAA provisions and Maldives Airports confirm that the Court can grant interim anti-suit injunctions in such proceedings.

 
The Court also took guidance from the English Supreme Court decision of AES Ust-Kamenogorsk Hydropower Plant LLP v Ust-Kamenorgorsk Hydropower Plant JSC [2013] 1 WLR 1889 – in which the Supreme Court considered the language of section 37 of the English Senior Courts Act 1981 which is very similar to that of section 4(1) of the CLA – and held that the general jurisdiction of the Singapore Court under the CLA is not qualified by IAA, since clear language would be needed to cut down the breadth and scope of the Court’s powers under the CLA and abrogate its general jurisdiction to grant anti-suit injunctions.

 
The Judge held that it was established in Societe Nationale Industrielle Aerospatiale v Lee Kui Jak [1987] AC 879 and further confirmed by Maldives Airports that the Court has both jurisdiction and ability to protect the parties’ contractual rights for their disputes to be resolved by arbitration in a contractually chosen forum. Where there is a clause in an arbitration agreement providing for international arbitration in Singapore, the innocent party can seek a permanent anti-suit injunction to restrain court proceedings initiated in breach of the agreement to arbitrate under the Court’s general power to grant injunctive relief.

 
Does The Court Have The Power To Issue Permanent Anti-Suit Injunctions Under The CLA In Aid Of Foreign Seated Arbitrations?

 
This was the third and final issue. This question was not tackled head-on because the specific order in question provided for arbitration in Singapore, although the Court was asked to consider the issue in the event it found that an arbitration agreement for arbitration in London (pursuant to the first sales contract) was incorporated into the contract. The Judge commented to some degree on this issue but ultimately left open this question of whether it had a similar power to grant a permanent anti-suit injunction in relation to international arbitration held outside of Singapore. On the one hand, the Judge indicated that it was “logical and consistent” that the Courts’ power under the more wide-ranging law in the CLA enabled it to issue a permanent anti-injunction in aid of foreign arbitration proceedings. However, the Judge accepted that logic alone may not be a sufficient condition to form a definitive view as to whether the Singapore Courts had such power in the first place. Moreover, this is an insufficient basis to extend the Court’s powers beyond what is in the IAA to parties who have agreed to arbitrate abroad especially since the interim orders made should be sufficient to put matters on the right track. Any extension of power would have the potential to affect more situations than simply those concerned with arbitration and therefore policy considerations may come into play.

 
Comments

 
This is one of various common law decisions which seek to clarify the scope of courts’ powers to grant injunctive relief in support of agreements to arbitrate. It is becoming increasingly clear that common law courts will not hesitate to find such power and exercise it where appropriate.

 
This judgment confirms in clear words the power of the Singapore Court to grant permanent anti-suit relief to protect domestic international arbitration proceedings. It is a judgment which continues along the track of reinforcing Singapore’s pro-arbitration stance. Parties who have an operative arbitration clause providing for arbitration in Singapore will not be permitted to breach that agreement by commencing proceedings in a foreign court and could find themselves injuncted from doing so on a permanent basis.

 
Judith Prakash J. concluded by echoing Choo Han Teck J. in People’s Insurance Co Ltd v Akai Pty Ltd [1997] 2 SLR(R) 291 that “Singapore should not be an international busybody”: for foreign international arbitration proceedings, the Singapore Court would only grant permanent anti-suit relief in support of such proceedings where strong reasons are shown. One such situation could be where the seat of arbitration did not provide for effective interim measures in support of the arbitration proceedings.

 

This article was supplied by Sheila Ahuja and Ivy M. Wong, Allen & Overy

 

HKIAC Logo

 

For further information, please contact:

 

Hong Kong International Arbitration Centre

[email protected]

 

Homegrown Dispute Resolution Law Firms in Singapore

 

International (with Local Law Capabilities) Dispute Resolution Law Firms in Singapore

Comments are closed.