Arbitration
| Published date | 01 December 2013 |
| Citation | (2013) 14 SAL Ann Rev 72 |
| Author | Lawrence BOO LLB (University of Singapore), LLM (National University of Singapore); FSIArb, FCIArb, FAMINZ, Chartered Arbitrator; Solicitor (England and Wales), Advocate and Solicitor (Singapore); Adjunct Professor, Faculty of Law, National University of Singapore, Adjunct Professor, Faculty of Law, Bond University (Australia), Visiting Professor, School of Law, Wuhan University (China). |
| Date | 01 December 2013 |
Stay of court proceedings – Whether claim on dishonoured cheques comes within the scope of arbitration agreement
4.1 The court's power to grant a stay of proceedings commenced before it where there is an arbitration agreement falling within the International Arbitration Act (Cap 143A, 2002 Rev Ed) (‘IAA’) is said to be mandatory. Questions of whether the subject matter falls within the scope of the arbitration agreement or that there was in fact a matter in dispute, have sometimes been raised to challenge such a reference to arbitration.
4.2 A cheque, regarded as a bill of exchange, has been considered under English law as an instrument separate and distinct from the underlying contract. A claim for damages arising from the underlying contract cannot thus operate as a defence to the claim based on the bill of exchange: see Nova (Jersey) Knit Ltd v Kammgarn Spinnerei GmbH[1977] 1 WLR 713 (‘Nova’). In the case of Piallo GmbH v Yafriro International Pte Ltd[2014] 1 SLR 1028 (‘Piallo’), the question of whether the dispute over a dishonoured cheque made pursuant to the contract ought to come within the scope of the arbitration agreement was considered.
4.3 In Piallo, the parties entered into a distributorship agreement (‘the Agreement’) pursuant to which Yafriro International Pte Ltd (‘Yafriro’) issued post-dated cheques to Piallo GmbH (‘Piallo’) for the exclusive right to sell the latter's products. The cheques were countermanded by Yafriro and dishonoured by the bank. Piallo commenced court proceedings and Yafriro put forth its cross-claims. The Agreement had a clause providing for arbitration in Geneva and that the laws of Switzerland were to govern the contract. Yafriro successfully applied for a stay of the proceedings in favour of arbitration before the assistant registrar. On appeal, Piallo, relying on Nova, inter alia, advanced the argument that each cheque was a distinct and separate contract from the Agreement and the claim arising therefrom would not fall under the scope of the arbitration clause. It added that even if it would, there could be no defence to the claims under the dishonoured cheques and there was thus no dispute referable to arbitration.
4.4 In dismissing the appeal, the High Court noted the wide terms of the arbitration clause in the Agreement and could find no suggestion that the parties could have intended to exclude any matter from the said clause and concluded that the parties had most likely intended to have their disputes arising from their business relationship decided by the same tribunal.
4.5 The High Court held (at [36]) that the ‘presumption against taking bills of exchange into arbitration’ may be revisited if there are ‘clear words’ in the arbitration clause to include claims such as the claim on the cheques in this case. The court did not elaborate on what could be understood as ‘clear words’ but proceeded on an analysis of the nature of the claim and cross-claim and concluded that they all arose from the same incident. The learned judge reasoned (at [38]) that the parties had most likely intended such claims to be resolved by arbitration as they were so intertwined that ‘an agreement to arbitrate on one can properly be construed as covering the other’. The court thus concluded that the subject matter in the court action fell within the purview of the arbitration clause and stay of the court proceedings was accordingly upheld.
4.6 Piallo's second line of defence was that there could, in any event, be no dispute that could be referred to arbitration as it was a claim under a bill of exchange. Referring to the Hong Kong decision of Getwick Engineers Ltd v Pilecon Engineering Ltd[2002] HKCFI 189 at [26(4)] for the proposition that a dishonoured cheque was ‘to be regarded as a clear and unequivocal admission on the defendant's part of its liability and quantum’, Piallo argued that there would therefore be no dispute in existence that could be referred to arbitration. To this the court said that Yafriro had countermanded the cheques and had refused to make payment. It then considered the fact that Yafriro subsequently denied the claim when it countermanded the cheques and had averred grounds to refuse payment to Piallo. This was considered as sufficient to constitute a dispute, just as was the case in the Court of Appeal's decision in Tjong Very Sumito v Antig Investments Pte Ltd[2009] 4 SLR(R) 732. Any admission as to liability and quantum by Yafriro must be made clear and unequivocal, and the same had not been forthcoming from Yafriro.
4.7 One aspect of the case that needs noting is that while the governing law of the Agreement was Swiss Law and the seat of the arbitration was Geneva, the parties had agreed with each other not to address the court on the application of Swiss Law to aid in the interpretation of the arbitration clause but had instead agreed to proceed on the assumption that Swiss law was the same as Singapore law in relation to the construction of the arbitration clause. This is a pragmatic move and the court did nothing to disturb the arrangement. In her order affirming the grant of stay of the proceedings before the Singapore court, Belinda Ang Saw Ean J also granted liberty for Piallo to apply for a lifting of the stay should the tribunal subsequently find in favour of Piallo that Yafriro had no defence to the claims on the cheques. In doing so, the court adopted the prima facie approach that a court should take when considering matters of scope and jurisdiction, and was quite rightly content to leave the determination of substantive defences to the arbitral tribunal.
4.8 Singapore courts have been robustly supportive of international arbitration and have on many occasions granted interim measures including injunctions and anti-suit injunctions in support of arbitration. The power to grant such interim measures is undeniably discretionary. In granting such measure, courts must be circumspect and must fully apprise itself of the consequences of making or not rendering such support. The case of Maldives Airports Co Ltd v GMR Malé International Airport Pte Ltd[2013] 2 SLR 449 (‘Maldives’) involved an issue which straddles both commercial interest of a party and the need to be conscious of the principle of international comity.
4.9 In Maldives, the High Court had granted an interim injunction against the Government of the Republic of the Maldives and Maldives Airports Co Ltd (‘Maldives Airports’) (collectively, ‘the Appellants’) from doing anything that may interfere in the performance of the obligations of GMR Malé International Airport Pte Ltd (‘GMR’). The dispute between the parties arose from a concession agreement (‘the Concession Agreement’) under which the consortium was granted a concession to modernise and maintain the Malé International Airport for 25 years. The consortium incorporated GMR and assigned all its rights and obligations under the Concession Agreement to GMR. The Concession Agreement contained an arbitration agreement. The principal dispute concerned the clause in the Concession Agreement that allowed GMR to impose a fee on departing passengers, which the Appellants said was contrary to the laws of Maldives and the Maldives court upheld such assertion. As a consequence, the Appellants issued a letter (‘first letter’) agreeing to a variation of the fees payable by GMR to Maldives Airports under the Concession Agreement to compensate GMR for any expected loss of revenue.
4.10 Following a change in the Government in Maldives, Maldives Airports issued another letter (‘second letter’) stating that its first letter had been issued by its former chairman without authority. The Government then purportedly withdrew the consent that it had ‘ostensibly given’ on the variation of fees set out in the first letter. GMR continued to operate the airport on the basis that it was entitled to a variation of fees under the first letter.
4.11 GMR commenced arbitration against the Appellants (‘the First Arbitration’) on 5 July 2012 seeking a declaration that it was entitled to the variation of fees. On 27 November 2012, the Appellants gave notice to GMR that the Concession Agreement was void ab initio and gave seven days for GMR to vacate. The Appellants thereafter commenced arbitration against GMR seeking for a declaration that the Concession Agreement was void and of no effect (‘the Second Arbitration’). GMR applied to the High Court for an injunction against the Appellants from interfering with GMR's performance of its obligations under the Concession Agreement and from taking possession and control of the airport. The court granted an injunction in terms of the interference but no order was made in relation to the taking of possession of the airport. The Government and the airport authority appealed.
4.12 In considering the matter, the court had to be concerned with several issues of jurisdiction, sovereign immunity and the balancing of the harm that could befall the parties whether it grants or refuses to grant the interim injunction sought.
Waiver of immunity under the State Immunity Act
4.13 The Appellants raised two jurisdictional objections, namely, (a) an injunction could not be granted against a state pursuant to s 15(2) of the State Immunity Act (Cap 313, 1985 Rev Ed) unless the State gives its consent (‘First Objection’); and (b) the Singapore court had no jurisdiction to grant an injunction as it offends the ‘act of State’ doctrine (‘Second Objection’). The Appellants argued that the Concession Agreement was void ab initio and, as such, cl 23 which expressly stated that Maldives ‘irrevocably and unconditionally agrees not to claim and hereby irrevocably and unconditionally waives any such immunity to the fullest extent permitted by the laws of such jurisdiction’ would follow in their reasoning that no waiver of immunity and no consent was...
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