AuthorLawrence BOO LLB (University of Singapore), LLM (National University of Singapore); FSI Arb, FCI Arb, FAMINZ, Chartered Arbitrator; Solicitor (England and Wales), Advocate and Solicitor (Singapore).
Published date01 December 2004
Citation(2004) 5 SAL Ann Rev 47
Date01 December 2004
The arbitration agreement
Scope of the arbitration agreement

3.1 The arbitration agreement is the source of the jurisdiction of the arbitral tribunal. Depending on the needs and intentions of the parties to an agreement, arbitration clauses may be very specific and narrow or very general and wide in application. Narrow and specific clauses may often be seen in insurance policies where typically only the question of quantum is to be determined by arbitration. Wider all-encompassing clauses may be found in standard ‘model clauses’ recommended by arbitral institutions which are intended to cover all possible scenarios and issues that could arise from the parties” dealings with each other. Such general and widely-worded clauses may employ terms like ‘all disputes’, ‘arising from’‘arising out of’, ‘in connection with’, ‘whether in tort or contract’ or numerous variations of such. While courts have attributed a general meaning to these terms in a series of cases, it is never always easy to construe its scope in particular circumstances.

3.2 In Sabah Shipyard (Pakistan) Ltd v Government of the Islamic Republic of Pakistan[2004] 3 SLR 184, the court had to consider whether a second arbitration commenced to recover costs incurred in an earlier terminated arbitration was within the scope of the arbitration clause. There, Sabah Shipyard commenced arbitration in Singapore pursuant to the International Chamber of Commerce (‘ICC’) Rules against Pakistan in 1998, under an agreement in which Sabah Shipyard had agreed to design, finance, construct and operate a barge-mounted electric power plant for Pakistan. The arbitration was terminated by the ICC due to Pakistan”s default in the payment of its share of the ICC”s advance on costs. Following the termination of that first arbitration, Pakistan commenced a second arbitration, also under the ICC Rules, for the recovery of the costs incurred by them in the first arbitration. Sabah Shipyard challenged the jurisdiction of the arbitrator to determine the costs of the first arbitration in this subsequent arbitration proceeding. The arbitrator held that he had jurisdiction over the dispute on the basis of the arbitration clause in the

agreement that ‘any dispute or difference between the parties arising out of or in connection with this Agreement’ shall be submitted for arbitration. Aggrieved, Sabah Shipyard sought recourse against that decision in accordance with Art 16(3) of the UNCITRAL Model Law on International Commercial Arbitration (‘the Model Law’) found in the First Schedule of the International Arbitration Act (Cap 143A, 2002 Rev Ed).

3.3 Judith Prakash J noted that the principles applicable to the construction of an arbitration clause were that courts would make the prima facie assumption that the parties intended all disputes relating to a particular transaction to be resolved by the same tribunal and that where words of broad import were used, they were to be given their natural meaning in the context in which they were found, and were not to be cut down by reference to earlier decisions giving a narrower meaning to the same or similar expressions in other contexts. The phrase ‘arising out of … this Agreement’ was generally to be considered as having a more limited ambit than the phrase ‘arising … in connection with … this Agreement’. The phrase ‘arising out of’ would require a more direct connection between the dispute and the contract than the phrase ‘arising in connection with’. Thus, from the language of the arbitration clause, the court determined that the parties had intended that all disputes which might arise in relation to the agreement would be submitted for arbitration under the ICC Rules. This, in the learned judge”s view, would include the question of costs arising out of the arbitration. The parties, having chosen ICC arbitration to resolve their disputes, would also have contemplated that the costs of such resolution would also be settled in this same manner. The dispute over the costs of arbitration arose by virtue of the dispute between the parties on the termination of the agreement and hence, the dispute on costs was intimately connected with and arose from the application of the agreement.

3.4 No doubt the factual situation in the Sabah Shipyard decision is exceptional and not typical of most arbitrations. The ICC Court, in deeming the arbitration withdrawn, had in those circumstances expressly stipulated that the withdrawal was without prejudice for parties to re-commence arbitration. The case nevertheless raises the question of when an arbitration clause exhausts its life or whether it will ever exhaust its life. Where an ‘all-dispute’ clause is relied upon, would it oblige the parties to bring before the tribunal all matters in difference? Can a party invoke the arbitration for one or more of its claims and should that fail, then commence fresh arbitration under the same arbitration clause based on a new cause of action or claim?

Construction of the arbitration clause: Institutional rules

3.5 Institutional rules adopted by parties may from time to time be amended or modified. Sometimes old rules are replaced and new ones adopted. It is not unusual that at the time when an arbitration agreement is entered into, making reference to a set of institutional rules then in force, the rules can, at the time a dispute arises and the arbitration invoked, be different from those applicable at the time the agreement was made.

3.6 In Jurong Engineering Ltd v Black & Veatch Singapore Pte Ltd[2004] 1 SLR 333 the arbitration clause made a general reference to the rules of the Singapore International Arbitration Centre (‘SIAC’). When the agreement was signed, SIAC only had rules for international arbitration, generally called the SIAC Rules. When the dispute arose, however, SIAC had issued another set of rules for the conduct of domestic arbitration. The plaintiffs commenced arbitration under the SIAC Domestic Rules on the basis that the parties were both local entities carrying on businesses within Singapore. The defendants objected, arguing that as the SIAC Domestic Rules had only come into existence after the making of the contract, the applicable rules should be the SIAC Rules. The plaintiffs then sought a declaration from the court that the arbitration clause contained a general reference to the arbitration rules of the SIAC and that in the circumstances of the case, the Domestic Rules ought to apply.

3.7 Lai Kew Chai J determined whether the arbitration clause contained a general or specific reference to the arbitration rules of the SIAC and if a general reference was made out, whether the appropriate rules to apply to the dispute were the Domestic Rules of the SIAC. The court held that given the language in the arbitration clause, the parties indicated that they had intended to refer to the arbitration rules of the SIAC generally and that if the parties had intended a specific reference, they would have so indicated by referring to the ‘Arbitration Rules of the Singapore International Arbitration Centre’ which was the full title of the SIAC Rules. As the arbitration clause contained a general reference to the arbitration rules of the SIAC, it was probably the parties” intention to apply the most appropriate rules to the dispute, even if such rules were not in force at the time the contract was concluded between the parties. Where general reference was made to the arbitration rules of the SIAC, the Domestic Rules would apply to a domestic arbitration case and the SIAC Rules would apply to an international arbitration case. As it was not disputed between the parties that the case fell within the domestic arbitration regime, following the reasoning above, the Domestic Rules of the SIAC ought to apply.

3.8 The defendants appealed to the Court of Appeal in Black & Veatch Singapore Pte Ltd v Jurong Engineering Ltd[2004] 4 SLR 19. Woo Bih Li J, on behalf of the Court of Appeal, affirmed the decision of the High Court. The court relied on Bunge SA v Kruse[1979] 1 Lloyd”s Rep 279 and Peter Cremer v Granaria BV[1981] 2 Lloyd”s Rep 583 which ruled that where the arbitration clause provided that the rules of a specific institution will apply in the event of a dispute between the parties, a presumption exists in favour of the application of arbitration rules in force at the time the dispute arose. Such prima facie inference applies where the rules contain mainly procedural provisions. However, where the rules contain mainly substantive provisions, then the rules in force at the date of the conclusion of the contract will apply. The defendants attempted to overcome this presumption by highlighting the substantive differences between the International Arbitration Act and the Arbitration Act (Cap 10, 2002 Rev Ed) (‘Arbitration Act 2001’). The court rejected this argument, saying that the arbitration clause did not refer to arbitration legislation in Singapore but to arbitration rules in the SIAC. The defendants” argument, that the presumption ought not to apply where the rules to be applied to the arbitration were not...

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