Published date01 December 2001
Date01 December 2001
AuthorLAWRENCE G S BOO LLB, LLM (NUS), FSI Arb, FCI Arb, FAMINZ, Chartered Arbitrator, Solicitor (England & Wales), Advocate & Solicitor (Singapore)
The arbitration agreement
Existence of arbitration agreement

3.1 The agreement to arbitrate establishes the jurisdictional basis of the arbitration and the arbitral tribunal. Agreements to arbitrate could take the form of separate submissions or more often, arbitration clauses in commercial contracts. Problems often arise where references to arbitration are sought to be justified on some extraneous sources, such as references to standard terms and conditions, related contracts or previous arrangements. These are generally discussed as issues relating to the incorporation of arbitration clauses. Closely connected with the issue of incorporation by reference is that of the authority of agents to bind the principal in entering arbitration agreements.

3.2 In Overseas Union Insurance Ltd v Turegum Insurance Co[2001] 3 SLR 330, Overseas Union Insurance Ltd (“OUI”) commenced an action against Turegum Insurance Co (“Turegum”) for a declaration that there was no agreement to arbitrate with Turegum under five reinsurance contracts entered between them and an injunction against Turegum from continuing arbitral proceedings in London. OUI also sought a declaration that the claims made by Turegum under the reinsurance contracts had been settled by a binding commutation agreement. The court found as a fact that the claims had not been commuted. The court also ruled that the contracts contained agreements to arbitrate and accordingly dismissed OUI”s action.

3.3 As was usual in the reinsurance market, the reinsurance contracts in this case were evidenced by slips signed by the brokers representing OUI. It was not disputed that they constituted binding contracts. The practice in the reinsurance market is for the parties to follow that up with the execution of a formal treaty or policy in which all the detailed terms are set out. Unfortunately the reinsurance contracts in question were placed more than 30 years ago and Turegum could not trace the formal treaty and had relied only on copies of the slips. These slips did not contain any arbitration clause and made no reference to arbitration. The slips, however, contained a clause reading “Conditions — Wording to be agreed L/U only” (where “L/U” refers to the lead underwriter). Turegum contended that by virtue of these words and the usage or custom of the London reinsurance market, OUI and Turegum had agreed to be bound by the full wording and terms

and conditions of the reinsurance contract as agreed (including any arbitration clause) between the lead underwriter and Turegum. OUI however averred that these words were not capable of incorporating the terms in other documents into these contracts.

3.4 Judith Prakash J held that the presence of a lead underwriter clause in the form above permitted the lead underwriter to agree to treaty wordings including the arbitration clause, and following their agreement, all the reinsurers, including OUI would be held bound.

3.5 The learned judge made clear that the ruling made arose out of Turegum”s argument that a principal making a contract through an agent acting with authority would be bound by all the terms agreed to by that agent. It was not an argument that the arbitration clause in the treaty wording was binding on OUI because it had been incorporated by reference into the insurance contract contained in the slips.

3.6 This decision raises interesting procedural issues. It is noted that the court had earlier in April 2000 dismissed Turegum”s application for stay of the action commenced by OUI and instead ordered an expedited trial of the issues of commutation and the existence of the arbitration agreement. In proceeding with the trial on these issues, her Honour was in effect considering whether there was in respect of each of the reinsurance contracts, an arbitration agreement under the English Arbitration Act 1996 and not whether there were arbitration agreements coming within the requirements of s 6 of the International Arbitration Act (Cap 143A, 1994 Ed). It is interesting that the court had decided to rule on the issue of the non-existence of the commutation agreement. As the court had ruled that binding arbitration agreements existed, would not the issue of whether the claims under the contracts have been commuted be a matter properly within the jurisdiction of the arbitral tribunal?

Scope of the arbitration agreement

3.7 Arbitration clauses may vary in form and scope of application. They may be the widely worded “all disputes” type or those specifically crafted to deal with a clearly identifiable class of disputes under the commercial agreement. Applications to stay proceedings commenced in breach of the agreement may be opposed on the ground, inter alia, that the agreement does not cover the matter in dispute.

3.8 In Transfield Shipping Inc (Panama) v Sino-Ad (Singapore) Pte Ltd, The Angelic Spirit (Suit 763/2001, HC, unreported judgment dated 27.8.2001), the plaintiffs let the vessel “Angelic Spirit” on a voyage to the defendants, a Singapore incorporated company for carriage from Panaji, India to a port in China. The plaintiffs claimed deadfreight, freight, deviation costs, bunkers and port charges, allegedly unpaid, amounting to

US$658,995. The defendants applied to set aside the injunction and to stay the action in favour of arbitration. The court ordered the injunction continued on the basis that there was a real risk of dissipation of assets by the defendants. The court also refused the defendants” application for a stay of proceedings.

3.9 The arbitration clause relied on by the defendants in The Angelic Spirit stated that “General average and arbitration if any to be settled and adjusted in London, English law to apply”. The court held that the clause related only to arbitration of general average disputes and was not an arbitration clause capable of general application. As the claims made were unrelated to any general average act, the arbitration clause had no application and the defendants had therefore no right to an automatic stay of the proceedings. In reaching that decision, the court followed the English Court of Appeal decision in The Ioanna[1978] 1 LLR 238 where the arbitration clause relied on read: “General Average & arbitration to be settled according to York-Antwerp Rules 1950 in London”; the words “& arbitration” being typed over the printed Gencon clause. There, Stephenson LJ took the view that by adding the words “& arbitration” in the General Average clause the parties had only agreed to refer disputes over general average to arbitration and nothing more.

3.10 Short arbitration clauses such as the one in the The Angelic Spirit are not uncommon in the shipping industry. Shipbrokers often adapt and adopt clauses from commonly used charterparty forms. The printed form used in The Angelic Spirit was the Gencon (Revised 1976), which does not provide for arbitration. The printed cl 11 of Gencon is the “General Average” clause which reads:

“General average to be settled according to York-Antwerp Rules, 1974. Proprietors of cargo to pay the cargo”s share in the general expenses even if same have been necessitated through neglect or default of the Owners” servants.”

3.11 The arbitration clause relied on by the defendants was a rider cl 32 added to the printed terms and was expressly stated to form part of the charterparty. Judith Prakash...

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