Singapore

Despite concerns that the growth of international arbitration in Singapore may have hit a plateau, statistics from the Singapore International Arbitration Centre (SIAC) and the Singapore courts show that there was a steady rise in new cases in Singapore in 2015.

In 2015, the SIAC recorded its highest ever number of administered cases and highest ever sum in dispute since commencing operations in 1991. There was also a relatively larger number of international arbitration cases that came before the Singapore courts and that is a positive indication of the continued increased activity in international arbitrations seated in Singapore.

Continued growth of international arbitration in Singapore

The 2015 International Arbitration Survey: Improvements and Innovations in International Arbitration undertaken by the Queen Mary University of London and White Case LLP found Singapore to have been the most improved seat over the past five years.

In 2015, the SIAC received 271 new cases from parties from 55 jurisdictions; a 22 per cent increase from the 222 cases filed in 2014. Of these new cases, a record number of 244 cases were administered at the SIAC. Another new record set in 2015 was the total sum in dispute, amounting to S$6.23 billion. The SIAC reported a total of 116 awards having been issued in 2015.

In August 2015, the SIAC commenced the review of its 2013 Arbitration Rules. A public consultation on the draft revised Rules was undertaken in early 2016. The revision takes into account recent developments in international arbitration practice and procedure, and is aimed at better serving the needs of businesses, financial institutions and governments that use the SIAC. The draft Rules include new proposed joinder, intervention and consolidation provisions, revisions to the SIAC’s emergency arbitrator and expedited procedures, and new provisions requiring tribunals to commit to a schedule for the closing of proceedings and subsequent delivery of draft awards. The SIAC will launch its new SIAC Arbitration Rules 2016 at the biennial SIAC Congress to be held in Singapore on 27 May 2016.

The SIAC also sought public feedback in February 2016 on its draft Investment Arbitration Rules 2016, a comprehensive set of specialised rules for the administration of investment arbitrations by the SIAC. The draft Investment Arbitration Rules aim to provide an alternative, bespoke set of procedures to the SIAC Arbitration Rules. They are intended to address issues that have been the focus of much discussion within the international investment arbitration community including, provisions on early dismissal of claims, confidentiality, submissions by non-disputing parties and disclosure of third-party funding arrangements.

In September 2015, the SIAC released a revised SIAC model clause that harmonises the previous SIAC model clause with the SIAC model clause for contracts with Chinese parties, providing a single user-friendly model clause for contracting parties. The revised model clause offers parties flexibility in selecting the seat of arbitration, while providing certainty in designating the SIAC as the arbitral institution to administer their disputes.

Development of Singapore’s tripartite dispute resolution mechanisms

In our last report, we reported on the establishment of the Singapore International Mediation Centre (SIMC) and the Singapore International Commercial Court (SICC).

In 2015 there were five new cases at the SIMC, three of which were arb-med-arb cases jointly administered with the SIAC. All the cases that proceeded to mediation at the SIMC were successfully settled.

The SICC heard its first case in 2015 which involved claims of over S$800 million and concerned Indonesian, Australian and Singapore business interests. The case was heard before a panel of three judges comprising a Singapore High Court judge, an English judge and a Hong Kong judge.

Case law

• We report on the following judgments that were released between March 2015 and February 2016:
• In Coal & Oil Co LLC v GHCL Ltd [2015] SGHC 65, the High Court held that the failure of the arbitral tribunal to declare the proceedings closed before issuing the award did not constitute a breach of duty on the part of the tribunal and did not warrant the award being set aside.
• In PT Perusahaan Gas Negara (Persero) TBK v CRW Joint Operation [2015] SGCA 30 the Court of Appeal, reaffirming the principle of temporary finality in construction contracts, held that a binding, non-final decision of the Dispute Adjudication Board (DAB) under a contract incorporating the ‘Conditions of Contract for Construction: For Building and Engineering Works Designed by the Employer’ published by the FIDIC (the Red Book) was capable of being enforced by a partial award in arbitration proceedings pending final adjudication of the merits of the DAB’s decision.
• The High Court affirmed in Malini Ventura v Knight Capital Pte Ltd & Ors [2015] SGHC 225 that if an arbitration agreement was shown to exist on a prima facie basis, the issue regarding the existence of the arbitration agreement would have to be determined by the arbitral tribunal.
• In Cassa di Risparmio di Parma e Piacenza spA v Rals International Pte Ltd [2015] SGHC 264, the High Court had to determine whether a plaintiff suing on a promissory note was obliged to arbitrate because it was also an assignee of a related contract containing an arbitration agreement with the defendant.
• The Court of Appeal considered in Tomolugen Holdings Ltd and another v Silica Investors Ltd and other appeals [2015] SGCA 57 the arbitrability of minority oppression actions.
• In AMZ v AXX [2015] SGHC 283 the High Court held that parties, in an application to set aside an award, could not put forward an alternative case on the merits and were bound by the case submitted by them in the arbitration proceedings.
• In AYH v AYI and another [2015] SGHC 300 the High Court held that the failure of a party to make full use of the opportunities afforded to him including by raising arguments against issues which arose during the pendency of the proceedings, would not amount to a breach of natural justice justifying the setting aside of an award.
• In AKN and another v ALC and others and other appeals [2015] SGCA 63, the Court of Appeal considered whether under the Singapore International Arbitration Act (IAA) and the UNCITRAL Model Law on International Commercial Arbitration (the Model Law) it had the power to remit matters back to the tribunal that passed the award for reconsideration, when the award has been set aside.
• The High Court considered in Five Ocean Corporation v Cingler Ship Pte Ltd (PT Commodities & Energy Resources, intervener) [2015] SGHC 311 its powers to order interim measures preserving assets outside Singapore in aid of international arbitrations.

The tribunal is not under an obligation to declare proceedings closed before releasing its award

In Coal & Oil Co LLC v GHCL Ltd [2015] SGHC 65, a dispute arose concerning an agreement for the supply of coal and which was heard pursuant to the 2007 SIAC Rules.

The legal issue involved the interpretation of rule 27.1 of the 2007 SIAC Rules, which provides that the ‘Tribunal shall submit the draft award to the Registrar within 45 days from the date on which the Tribunal declares the proceedings closed’. The plaintiff argued that the tribunal had breached its duty under rule 27.1 by failing to declare the arbitral proceedings closed before releasing its award and sought to have it set aside.

The Court held that rule 27.1 only conferred a power, but did not impose an obligation, on the tribunal to declare the arbitral proceedings closed. This was because:

• under the 2010 and 2013 SIAC Rules, the tribunal could only declare the proceedings closed once it had consulted with the parties and formed a view that the parties had no further evidence or submissions to present. To accept the plaintiff’s construction would mean that the 2007 SIAC Rules were even stricter than its successor rules since it would impose an unqualified obligation to issue a declaration of closure without the duty to first consult the parties and be subjectively satisfied that parties had no further evidence or submissions to present;
• the declaration of closure was a ‘case-management tool’ and not a condition precedent for the release of an award; and
• the declaration of closure was not critical and did not add anything substantive to the arbitration process. The Court was of the view that to construe Rule 27.1 in any other manner would not be commercially sensible as the drafters of the SIAC Rules were mindful of the need to avoid impeding the arbitration process with pointless formalities.

The Court therefore held that there was no breach of duty when the tribunal elected not to issue a declaration of closure of the proceedings before releasing its award.

Confirmation that a decision of a DAB under the Red Book can be enforced by a partial award

In PT Perusahaan Gas Negara (Persero) TBK v CRW Joint Operation [2015] SGCA 30, PT Perusahaan Gas Negara (Persero) TBK (PGN) engaged CRW Joint Operation (Indonesia) (CRW) to, inter alia, design and pre-commission a gas pipeline. Disputes between the parties were referred to and adjudicated by the DAB.

PGN disputed one of the decisions of the DAB requiring it to pay CRW US$17,298,834.57 (adjudicated sum). PGN did not comply with the DAB decision and issued its notice of dissatisfaction (NOD) in terms of clause 20.4 of the Red Book against the DAB decision.

CRW commenced arbitration proceedings in 2009 seeking a declaration that PGN had an immediate obligation to pay CRW and an order for prompt payment. Although PGN did not file any counterclaim, it disputed its liability to make payment, having issued a NOD, and requested the tribunal to review the merits of the DAB’s decision. The tribunal issued an award requiring PGN to give prompt effect to the DAB decision despite having issued a NOD. The award was set aside by the Court of Appeal, inter alia, on the ground that the tribunal had exceeded its jurisdiction by not considering the PGN’s challenge to the merits of the DAB decision. We reported on this decision in our report in the 2012 Review.

Thereafter, CRW commenced a second arbitration in 2011 seeking a final determination that PGN was liable to pay the adjudicated sum and pending a final determination, a partial or interim award requiring PGN to pay the adjudicated sum. By an interim award dated 22 May 2013 (interim award) a majority of the tribunal held that PGN was bound to comply with the DAB decision and directed PGN to pay the adjudicated sum.

Dismissing PGN’s application to have the interim award set aside, the Court of Appeal held:

• A party’s distinct contractual obligation to comply promptly with a DAB decision, whether final and binding or merely binding but non-final, is capable of being directly enforced by arbitration without the issue of non-compliance being first referred to the DAB or parties attempting amicable settlement, as provided in clause 20 of the Red Book.
• A tribunal would be entitled to make a final determination on the issue of prompt compliance alone if that is all it has been asked to rule on.
• Where both the dispute of non-compliance with a binding but non-final DAB decision as well as the dispute over the merits of that DAB decision are put before the same tribunal, the tribunal may:
• make an interim or partial award which finally disposes of the issue of prompt compliance with the DAB decision;
• proceed to consider the merits of the DAB decision, which is a separate and conceptually distinct matter; and
• subsequently make a final determination of the underlying dispute between the parties.

The Court drew a distinction between partial, interim and provisional awards and held that only provisional awards are prohibited by section 19B of the IAA. The Court held that an award enforcing the DAB’s decision was not provisional in respect of the issue it determined (ie, PGN’s obligation to comply with the DAB decision); and section 19B of the IAA rendered the interim award final and binding qua that particular issue. The Court of Appeal’s judgment was one of the runner-ups in the GAR Awards 2016 for ‘the most important decision’ category.

Where an arbitration agreement prima facie exists, it is for a tribunal to decide on the existence of an arbitration agreement

Malini Ventura v Knight Capital Pte Ltd & Ors [2015] SGHC 225 involved an application by the plaintiff for an interim injunction staying SIAC arbitration proceedings. Disputes arose out of a personal guarantee (guarantee) pursuant to which the plaintiff guaranteed a loan granted by the defendants to a Singapore company (borrower). The guarantee contained a SIAC arbitration clause.

The borrower defaulted on the loan and the defendants demanded that the plaintiff repay the loan under the guarantee. The plaintiff refused and the defendants commenced arbitration. The plaintiff contended that her signature on the guarantee was forged and thus, there was no arbitration agreement. The plaintiff asked the tribunal to stay the proceedings on the basis that no valid arbitration agreement existed. The tribunal indicated that it wished to proceed with the arbitration, over the plaintiff’s objections and request for a stay, and ruled that it would decide the jurisdictional objection in a final award together with the merits of the dispute.

The plaintiff then filed an application to the High Court submitting that pursuant to section 6(1) of the IAA, until a challenge to the existence of an arbitration agreement was resolved by the court, there could be no arbitration agreement. The plaintiff contended that it was for the court to decide whether there was an arbitration agreement or not.

The High Court dismissed the plaintiff’s application and held that the issue of whether there was a valid arbitration agreement was to be determined by the tribunal. The Court affirmed the principle of Kompetenz-Kompetenz holding that pursuant to section 6 of the IAA, article 16 of the Model Law and rule 25.2 of the SIAC Rules, the tribunal had the authority to rule on its own jurisdiction and decide on the existence of an arbitration agreement. The Court held that, so long as the defendant satisfied the Court on a prima facie basis that an arbitration agreement existed, the issue would be referred to the tribunal for determination.

A party is not bound by an arbitration agreement in a related contract if its claims do not fall within the terms of the arbitration agreement

In Cassa di Risparmio di Parma e Piacenza SpA v Rals International Pte Ltd [2015] SGHC 264, the arbitration agreement was contained in a contract for the sale of goods (supply agreement), between the seller, Oltremare SRL (Oltremare) and the buyer, Rals International Pte Ltd (Rals), which was the defendant in the court proceedings.

Pursuant to the supply agreement, Rals provided eight promissory notes in favour of Oltremare as deferred payment for the goods. Oltremare negotiated these promissory notes to its bank, the plaintiff, Cassa di Risparmio di Parma e Piacenza SpA (Cariparma). Oltremare had also previously assigned its contractual right to payment under the supply agreement to Cariparma under a discount arrangement. When the promissory notes were subsequently dishonoured, Cariparma sued Rals in court.

Rals claimed that Cariparma was bound by the arbitration agreement in the supply agreement as assignee and sought a stay of the court proceedings under section 6 of the IAA.

The High Court held that an assignment of a contract carried with it both the benefit and the burden of the arbitration agreement. The Court considered the principle of conditional benefit and noted that an instrument may be framed so that it conferred only a conditional or qualified right, the condition or qualification being that certain restrictions shall be observed or certain burdens assumed. Such restrictions or qualifications were an intrinsic part of the right, the assignee takes the right as it stands and cannot pick out the good and reject the bad. In such cases, it is not only the original obligor who is bound by the burden, but his successors in title are also unable to take the right without assuming the burden.

Accordingly, the Court found that the right to receive the purchase price under the supply agreement, which had been transmitted by assignment to Cariparma, carried with it the burden of the arbitration agreement contained in article 9 of the supply agreement. Cariparma was therefore bound to arbitrate all disputes that fell within the scope of the arbitration agreement.

The Court held that, in applying section 6(1) of the IAA to the terms of article 9 of the supply agreement, it was bound to stay the proceedings if the subject matter of the action could be said to ‘arise in connection with’ the supply agreement. However, Cariparma had not framed its claim on its right as assignee to receive the purchase price under the supply agreement from Rals. Instead, Cariparma’s claim was deliberately confined to the eight promissory notes and on that basis Cariparma argued that the subject matter of the action did not ‘arise in connection with’ the supply agreement.

The Court therefore dismissed the application for a stay, holding that it was highly unlikely that Rals and Cariparma intended to bring claims related to the notes under the arbitration agreement. The rights and obligations arising under the contract were separate and independent from the statutory contract represented by the notes. Further, the parties had confined their arguments to those under the Bills of Exchange Act and had not made any arguments that prompted an inquiry into the performance obligations under the underlying contract. Rals has been given leave to appeal against the High Court decision.

Statutory minority shareholder’s oppression claims are arbitrable

In Tomolugen Holdings Ltd and another v Silica Investors Ltd and other appeals [2015] SGCA 57, the plaintiff (Silica) was a minority shareholder in the eighth defendant, having purchased its shares from the second defendant pursuant to a share sale agreement containing an arbitration agreement. Silica subsequently commenced court proceedings for minority shareholder’s oppression claims under section 216 of the Singapore Companies Act.

One of the majority shareholders applied for a stay of the proceedings under section 6(1) of the IAA, in favour of arbitration. The application was dismissed by the High Court on the basis that the minority oppression claim was not arbitrable as the tribunal would not possess the broad remedial powers vested with the Court under the relevant provisions in the Companies Act.

The Court of Appeal overturned the High Court’s decision. In considering arbitrability, the Court of Appeal held that where there is a valid arbitration agreement covering the subject matter of the dispute, there will be a presumption that the subject matter is arbitrable. This presumption can only be rebutted by showing that parliament had intended to preclude a particular type of dispute from arbitration or that it would be contrary to public policy to resolve that type of dispute by arbitration.

The Court held that a dispute over minority oppression or unfairly prejudicial conduct was arbitrable as section 216 of the Companies Act was not introduced to protect or further any public interest. Further, rejecting the High Court’s reasoning of remedial inadequacy, the Court held that overlapping court and arbitral proceedings arising from the incomplete coverage of the arbitration clause to the dispute, does not in itself justify refusal of a stay under section 6 of the IAA. There was nothing to preclude the underlying dispute from being resolved by arbitration with parties remaining free to subsequently apply to the courts to grant such relief that were beyond an arbitrator’s powers.

The Court held that a distinction should be drawn between a minority oppression claim under section 216 of the Companies Act and those involving the liquidation of an insolvent company or avoidance claims arising out of insolvency, which were non-arbitrable, and observed that there was nothing in section 216 that suggested a preclusion of arbitration.

The Court of Appeal stayed the court proceedings qua the issue that fell within the scope of the arbitration agreement. The Court further held that if Silica commences arbitration, all other issues would be stayed as a matter of case management. Notably, the Court ordered that the stay would be conditional upon the arbitration being administered expeditiously.

Parties cannot put forward an alternative case on the merits in proceedings for setting aside an award

In AMZ v AXX [2015] SGHC 283, AMZ, the seller of crude oil, commenced arbitration proceedings against AXX, the buyer, for breach of contract. AMZ claimed that AXX committed three breaches of contract including failure to take delivery of the crude oil. AMZ alleged that by reason of the cumulative effect of the three breaches, AXX was in repudiatory breach of contract.

The tribunal held that AXX was not in repudiatory breach as two alleged acts did not amount to a breach of contract and the third breach did not constitute a repudiatory breach of the contract. As AMZ had failed to claim for damages for each individual breach, the tribunal dismissed AMZ’s claim in its entirety.

AMZ applied to have the award set aside, inter alia, on the ground that the tribunal breached the rules of natural justice as AMZ was unable to present its case in the arbitration and the tribunal failed to accord equality of treatment to it in the arbitration.

The High Court dismissed AMZ’s application, finding that there were no procedural defects and no breach of natural justice. The Court noted that, even if there were procedural defects, they caused no prejudice to AMZ because they touched on findings that were not necessary for the tribunal’s ultimate decision. The Court observed that since AMZ did not put forward an alternative case before the tribunal that it would be entitled to damages for even a single breach of contract, which did not amount to a repudiatory breach; it could not put forward an alternative case on the merits in proceedings for setting aside and was bound by the case submitted in the arbitration proceedings. This decision is currently under appeal.

Failure of parties to take the opportunity to submit on issues of law and fact which arose during the arbitration does not amount to a breach of natural justice

The High Court dismissed a challenge to set aside an arbitration award in AYH v AYI and another [2015] SGHC 300. AYH was a former director of AYI and had been involved in the operations of an Indonesian mining company which AYI indirectly owned. When AYH stepped down from his posts, AYH and AYI entered into a settlement deed under which AYH was to make payments for previously impugned transactions on certain dates (the settlement deed).

AYH defaulted on the payments. AYI commenced arbitration seeking specific performance. The tribunal found in favour of AYI and ordered specific performance by AYH. AYH applied to set aside the award on the ground that the dispute was beyond the scope of the arbitration and that there was a breach of natural justice pursuant to articles 34(2)(a)(iii) and 34(2)(a)(ii) of the Model Law.

A key issue was whether the settlement deed was capable of performance. AYH claimed that the settlement deed was void for common mistake as the liabilities covered under it were owed to the Indonesian mining company and not to AYI. AYH asserted that the settlement deed did not settle all of the claims, because payments made under it could not release his liability to the Indonesian mining company, which was not bound by the settlement deed. AYI subsequently entered into an additional agreement with the Indonesian mining company (the additional agreement), which referred to the settlement deed and stated that cash or assets received from AYH by AYI would be passed to the Indonesian mining company, which would release its claims against AYH.

The additional agreement was entered into less than a week before the arbitration hearing, and only after the agreed list of issues had already been settled and submitted to the tribunal. During the course of the hearing before the tribunal, AYI referred to the additional agreement. AYH did not object to the production of the additional agreement at the hearing although he did not admit its validity or legal effect.

Before the High Court, AYH argued that any dispute with respect to the additional agreement was outside the proper scope of the arbitration because, inter alia, the additional agreement had not been included in the agreed list of issues and the effect of the additional agreement was never placed before the tribunal as an issue to be determined during the hearing. Accordingly, AYH claimed that the tribunal did not have jurisdiction to make findings with respect to the additional agreement or make the award it did.

The High Court found that the additional agreement had been properly put forward before the tribunal even though it had not been included in the agreed list of issues or mentioned in the pleadings. More significantly, the Court found that the tribunal had not made a substantive finding regarding the additional agreement. The Court held that the fact that the additional agreement was submitted when the arbitration was substantially under way did not preclude its admission in the proceedings since the existence of the additional agreement had already been made known to AYH, who was aware of AYI’s intention to rely upon it during the arbitration. AYH was therefore not prejudiced or deprived of the opportunity to make submissions to the tribunal on the additional agreement.

The Court has no power to refer a matter back to the tribunal if an award has been set aside

In our chapter in the previous edition, we reported on the decision of the Court of Appeal in AKN & Anor v ALC & Ors [2015] SGCA 18, where the setting aside of part of an award by the High Court was affirmed. The Court of Appeal subsequently had to consider issues of costs and consequential orders arising from that decision in AKN and another v ALC and others and other appeals [2015] SGCA 63. Specifically, the Court considered whether it could remit any matter that was the subject of an award that had been set aside (in whole or in part) to the same tribunal that made the award.

It was common ground before the Court that the only express provision permitting a court to remit an award to the original tribunal is found in article 34(4) of the Model Law. The Court went on to hold that article 34(4) confers only a limited power and does not empower the court to remit any matter after setting aside an award. The Court further held that article 34(4) is a curative provision available in limited circumstances where the court considers it appropriate to suspend the setting aside proceedings and remit the matter to the tribunal in order to obviate a defect which may result in the award being set aside. This decision makes it clear that the only recourse that may be available to a party after an arbitral award has been set aside, is to commence fresh arbitration proceedings.

The Court can make an order for interim relief over foreign assets in support of international arbitraiton

Finally, Five Ocean Corporation v Cingler Ship Pte Ltd (PT Commodities & Energy Resources, intervener) [2015] SGHC 311 involved a consideration of the court’s powers to order interim measures in aid of arbitration under section 12A of the IAA.

The case involved the shipment of a cargo of coal from Indonesia to India. A dispute arose when the defendant failed to pay the freight due after the release of the bill of lading. The charter party between the plaintiff and the defendant contained a lien clause and an arbitration clause referring disputes to arbitration in Singapore. Both the owner of the vessel and the plaintiff subsequently gave notice of lien and exercise of the lien to the defendant and intervener. The plaintiff issued a notice of arbitration to the defendant, who did not respond or appoint an arbitrator. The plaintiff then applied to the High Court for an order for sale so as to preserve the value of the cargo, which had shown visible signs of heating damage.

The High Court examined its powers to grant the order for the sale of the cargo under section 12A(4) of the IAA. A preliminary question was whether the court had the power to preserve assets situated outside Singapore. Although noting that the main legislative intention behind the enactment of section 12A was to give a court power over assets and evidence situated in Singapore, the Court held that the provision was wide enough to confer the court with the power to preserve assets outside Singapore provided the seat of the arbitration is Singapore and the court has in personam jurisdiction over the parties to the local proceedings. The Court also noted that since at the time of the hearing the cargo was situated in international waters, the grant of the sale order would not interfere with the jurisdiction of any other court.

Having found that it had jurisdiction and power to grant an order of sale, the Court proceeded to find that a plaintiff’s right to detain possession of the cargo until it received payment of the freight was an ‘an asset’ within the meaning of section 12A(4) of the IAA and capable of being preserved through an order for sale. Further, the right to detain possession could effectively be preserved through an order for sale because the right to detain possession was transferred to a right to the proceeds of the sale, which could be held in court in Singapore until further orders by the tribunal. Finally, the Court held that the order for sale was urgent and necessary, inter alia, as the cargo was overheating and there was some risk that the coal may self-ignite and the arbitral tribunal had not yet been constituted.