Arbitration
| Published date | 01 December 2002 |
| Date | 01 December 2002 |
| Author | LAWRENCE G S BOO LLB, LLM (NUS), FSI Arb, FCI Arb, FAMINZ, Chartered Arbitrator, Solicitor (England & Wales), Advocate & Solicitor (Singapore) |
3.1 The existence of an arbitration agreement between parties allows any of the parties to have matters in dispute under such an agreement referred to arbitration at the chosen forum. Where an action is commenced in a Singapore court in breach of an arbitration agreement, a party may seek to apply for such an action to be stayed. If the action is commenced in a foreign court, an anti-suit injunction may be applied for. The power of the court to grant a stay of court proceedings is discretionary in respect of a domestic arbitration agreement, whereas in the case of an international arbitration agreement, the court is mandated to order a stay.
3.2 To invoke the court”s discretionary power to order a stay of court proceedings in favour of a domestic arbitration agreement, the party seeking stay has often been asked to show the existence of a dispute referable to arbitration. In Mae Engineering Ltd v Dragages Singapore Pte Ltd[2002] 3 SLR 45, Dragages sub-contracted to Mae certain mechanical and electrical (“M&E”) works on the Fullerton Building. Payments to Mae under the sub-contract were to be made upon receipt of payment by Dragages from the employers. Differences arose as to whether Dragages was entitled to amend the interim payment certificates (deducting amounts for backcharges they claimed would be incurred). Mae commenced arbitration for payment. Subsequently, it turned out that Dragages had received payment of the full amounts under the certificates in question. Mae commenced court proceedings to seek payment and obtained summary judgment. Dragages” appeal was dismissed by S Rajendran J. The court followed the Court of Appeal”s decision in Kwan Im Tong Chinese Temple v Fong Choon Hung Construction Pte Ltd[1998] 2 SLR 137 holding that there were circumstances when the courts should, despite the existence of an arbitration clause, assume jurisdiction to adjudicate the matter. This is no doubt a correct approach in respect of a domestic arbitration agreement where the court”s discretion has been preserved. (The situation is different under the International Arbitration Act (Cap 143A, 2002 Ed).)
3.3 An interesting feature of this decision is the fact that Mae had in fact commenced arbitration before instituting the court action. Dragages” argument that this was an admission of the existence of a dispute had initially found some sympathy with the learned judge. However, upon further consideration, and despite the need to consider in some detail the evidence adduced, the court held that there was really no basis whatsoever for Dragages to make the deductions, viz, Dragages had by amending the interim certificates merely tried to delay the payments. In choosing to take this approach, the court was clearly influenced by the need to assist sub-contractors as “interim payments are the lifeblood of the sub-contractors” (at [26]).
3.4 The factors to be considered in the exercise of the court”s discretion to grant or refuse a stay of court proceedings under the Arbitration Act is further considered in Tavica Design Pte Ltd v Schindler Lifts (Singapore) Pte Ltd (Originating Summons 601594/2001, unreported judgment dated 9.1.2002). The plaintiffs were the main contractors and the defendants were sub-contractors who had supplied and installed lifts to a flatted factory project in Kaki Bukit. The defendants had commenced action in the subordinate courts for payment due and the plaintiffs applied to the High Court for stay pending arbitration (this application was made under the repealed Arbitration Act (Cap 10, 1985 Ed) which had no provision for making a stay application to the court before which an action was pending). In resisting the application for stay, the defendants argued that the liquidated damages clause was invalid as it was not a genuine pre-estimate of damage but was, in fact, a penalty clause (and therefore, ought to be struck down). They also contended that the applicants had not shown that they were ready and willing to arbitrate.
3.5 The court ruled that the issue of whether the liquidated damages clause was a penalty clause clearly constituted a dispute for the arbitrator to decide and that the court should not be swayed by a submission that the dispute could be easily and readily resolved by the court. Whether or not an applicant is willing and ready to proceed to arbitration is a fact that the court has to ascertain by looking into the circumstances and conduct of the parties within a reasonable period of time after the writ has been served on the applicant. There is no requirement that willingness and readiness be specifically expressed in the affidavit. The court also hinted that in exercising its discretion, it would take account of the possible savings in terms of time, expense, and inconvenience to the parties.
3.6 An arbitration agreement is a contractual arrangement to prefer a mode of dispute resolution to another. While the ordinary rules of contract
may apply to ascertain its conclusion and scope, a party seeking its enforcement and/or to invoke the application of the Arbitration Act (Cap 10, 2002 Ed) or the International Arbitration Act (Cap 143A, 2002 Ed) may only do so if the arbitration comes within the definition of an “arbitration agreement” as defined by the legislation. Issues such as the requirement for writing, certainty, mandatory nature of the obligation and arbitrability of the subject matter may thus be raised as preliminary matters to be considered.
3.7 Questions of certainty and the mandatory nature of the arbitration clause were raised in WSG Nimbus Pte Ltd v Board of Control for Cricket in Sri Lanka[2002] 3 SLR 603. The parties had entered into a Master Rights Agreement (“MRA”) under which WSG Nimbus was granted the commercial rights to cricket matches between the Sri Lankan national cricket team and visiting test playing sides for 14 tours during the period of January 2001 to December 2003. The agreement provided in cl 19 that in the event that matters in dispute between the parties could not be resolved by negotiations, “either party may elect to submit such matter to arbitration in Singapore in accordance with the Arbitration Rules of the Singapore International Arbitration Centre (“SIAC Rules”) for the time being in force which rules are deemed to be incorporated by reference with this Clause to the exclusive jurisdiction of which the parties shall be deemed to have consented”. Some disputes arose and the Board commenced action in the Colombo High Court (Sri Lanka) and obtained an interim injunction restraining WSG from interfering with the Board”s right to enter into arrangements with other parties relating to the commercial rights to the matches. The parties reached settlement on their disputes and executed a Settlement Agreement which expressly preserved the terms of the MRA. A few months later, however, further disputes arose and the Board commenced a second action in the Colombo High Court claiming damages for breach of the terms of the MRA. WSG objected to the court”s jurisdiction. Its application was dismissed by the Colombo High Court on 7 November 2001 and the Supreme Court of Sri Lanka (the appeal court) on 11 January 2002 on the ground that cl 19 of the MRA gave the parties a choice to elect between arbitration and litigation and was therefore not an “arbitration agreement” within the meaning of s 5 of the Sri Lankan Arbitration Act. Before the matters were heard, WSG on 29 October 2001, commenced action in Singapore and applied ex parte and obtained a prohibitive order under s 12(6) of the International Arbitration Act (Cap 143A, 1995 Ed) restraining the Board from dealing with the subject matter of the dispute with any third party, and an anti-suit injunction restraining the Board from proceeding with the Colombo High Court action until further order.
3.8 In the Singapore action, the Board argued that cl 19 was not an arbitration agreement and relied on issue estoppel per rem judicatam to argue
that since the matter had been determined by a Sri Lanka court, WSG could no longer raise the same. However, Lee Seiu Kin JC (as he then was) found that WSG did not submit to the jurisdiction of the Colombo court when it applied to object to the court”s exercise of jurisdiction and thus was not estopped from re-asserting that cl 19 was an arbitration agreement. He also held (at [30]) that cl 19 was an arbitration agreement, ruling that:
“[A]n agreement in which the parties have the option to elect for arbitration which, if made, binds the other parties to submit to arbitration is an arbitration agreement within the meaning of the [International Arbitration] Act.”
An anti-suit injunction was granted against the Board from further proceeding in the Colombo courts.
3.9 The decision in WSG Nimbus Pte Ltd v Board of Control for Cricket in Sri Lanka takes off much of the force in the simplistic argument that the use of the term “may” in relation to a reference to arbitration deprives it of the “mandatory” character of the agreement, a view which had apparently found favour with the Colombo High Court and the Supreme Court of Sri Lanka. While an agreement to agree to arbitrate had been held not to be an arbitration agreement (see Union of India v Bharat Engineering Corp(1977) 11 ILR (Delhi) 57), agreements which provide for arbitration in the event of...
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