Arbitration
| Date | 01 December 2015 |
| Citation | (2015) 16 SAL Ann Rev 100 |
| 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). Earl J Rivera-DOLERA BSc (Phils), LLB (Phils), LLM (National University of Singapore); FSIArb, MCIArb, MPIArb; Attorney-at-law (Philippines). |
| Published date | 01 December 2015 |
4.1 In 2015, Singapore courts continued to see a flow of arbitration cases coming before them for judicial assistance. The two stages of the arbitral proceedings most commonly besieged with such applications involve the (a) enforcement of the arbitration agreement; and (b) setting aside of the award. Based on reported decisions, Singapore courts had on seven occasions been asked to stay their own court proceedings in favour of arbitration (under s 6 of the International Arbitration Act (Cap 143A, 2002 Rev Ed) (‘IAA’), Art 8 of the United Nations Commission on International Trade Law Model Law on International Commercial Arbitration (‘MAL’) or Art II(3) of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (10 June 1958) 330 UNTS 3 (entered into force 7 June 1959) (‘New York Convention’)) and nine cases were brought to it to set aside arbitral awards. As always there was the occasional application for interim measures. Not surprisingly, several of the cases had references to the Singapore Arbitration Centre (‘SIAC’) and its rules. The year also witnessed a rare case of a challenge of arbitral jurisdiction arising out of a bilateral investment treaty (‘BIT’) being brought before a Singapore court for determination, by a state party.
4.2 Disputes arising out of claims relating to BITs are often non-contractual and non-commercial in nature. Such claims would include claims for breach of treaty obligations such as wrongful losses arising from expropriation, failure to accord national treatment or most-favoured nation treatment or for withdrawal of promised investment incentives. Depending on the agreed dispute resolution mechanism provided in the BIT, claims may be pursued directly by an investor against a host-state in international arbitration. Unlike claims arising out of commercial contracts therefore and as investors are not parties to BITs, they need to bring themselves within the class of investors covered by the BIT and to show that the host-state has consented to the arbitration.
4.3 In Government of the Lao People's Democratic Republic v Sanum Investments Ltd[2015] 2 SLR 322, the High Court dealt with issues such as (a) whether the BIT between the People's Republic of China (‘PRC’) and the Lao People's Democratic Republic (‘Laos’) (‘PRC-Laos BIT’) applies to the Macau Special Administrative Region of China (‘Macau’); and (b) whether the court could admit new evidence after the tribunal's decision on jurisdiction has been made.
4.4 Sanum Investments Limited (‘Sanum’) is a company incorporated in Macau, who had made investments in the gaming and hospitality industry in Laos. Sanum commenced arbitration pursuing expropriation claims against the Government of Laos (‘Government’) pursuant to the dispute resolution mechanism in the PRC-Laos BIT. The Government challenged the jurisdiction of the tribunal on the basis that the PRC-Laos BIT does not apply to Macau. The tribunal ruled in favour of its own jurisdiction and the Government appealed against the tribunal's decision to the High Court under s 10 of the IAA (the amended version of Art 16 of the MAL). In the appeal, the Government filed an application for the admission of two diplomatic letters: (a) a letter from the Laotian Ministry of Foreign Affairs (‘Laos Letter’) to the PRC Embassy in Vientiane, Laos; and (b) the reply from the PRC Embassy in Vientiane, Laos (‘PRC letter’) (collectively the ‘Two Letters’). Both letters state that the PRC-Laos BIT does not apply to Macau. In seeking the non-admittance of the Two Letters, Sanum argued that the Two Letters had been issued after the arbitral proceedings had commenced and they could not be used as indicators of the intention of the PRC and Laos governments in relation to the applicability of the PRC-Laos BIT to Macau. What ought to be determinative of both governments' respective intentions, Sanum adds, was their intention at the time of the handover of Macau to the PRC in 1999, and not the PRC's present intention.
4.5 The High Court determined that on the face of the Two Letters alone, it was clear that Laos and the PRC are in agreement and their intention is for the PRC-Laos BIT not to apply to Macau. Under the Vienna Convention on the Law of Treaties 1969 (‘VCLT’), subsequent agreements such as the Two Letters are allowed as between the contracting parties. The PRC's intention at the time of the handover of Macau in 1999 is thus irrelevant. Even if the PRC-Laos BIT were to apply to Macau, the High Court determined that Sanum's claim for expropriation falls outside the scope of the arbitration agreement set out in the PRC-Laos BIT as the parties to that BIT had agreed that only disputes over the amount of compensation for expropriation could be submitted to arbitration.
4.6 Interesting arguments were raised in the course of the appeal, including whether a question of international law between two states should be justiciable by a court in Singapore which has no relation to the dispute save for the fact that the arbitration is seated in Singapore. The court answered this issue in the affirmative on the basis that the Government had sought the review of the tribunal's positive holding on jurisdiction and thus the issue had a bearing on the application of Singapore law. It is curious that the parties seemed to accept that the Government was entitled to bring a review of the tribunal's jurisdictional ruling under s 10 of the IAA simply on the basis that the arbitration was seated in Singapore.
4.7 BIT disputes may be arbitrated under the auspices of the International Centre for Investment Disputes (‘ICSID’) based in Washington in the US, and hosted by the World Bank or by other arbitral institutions and/or ad hoc arbitral tribunals. While ICSID arbitrations are a-national, other BIT arbitrations, whether institutional or ad hoc, like any other arbitration would need a place or seat of arbitration. This in turn brings into play the application of the lex arbitri and the jurisdiction of the court of the place or seat of arbitration. The parties in this case therefore, not surprisingly, assumed that the IAA empowers the Singapore court to review the tribunal's ruling upholding its own jurisdiction. The IAA is, however, a legislation based on and intended to give effect to the MAL, and is replete with references to the ‘commercial’ nature of the relationship between the parties (see the long title: ‘conduct of international commercial arbitrations’; the title to Pt II: ‘International Commercial Arbitration’; and s 5(b)(ii) where, in relation to what ‘international’ is, reference is made to ‘the obligations of the commercial relationship’). By its own terms, the MAL is intended to apply to ‘all relationships of a commercial nature’ (see Art 1(1) and the footnote to the term ‘commercial’).
4.8 While an agreement between a foreign investor and a host-state for the admission of certain investments into the territory of the host-state could sometimes be considered commercial, the claims made by an investor against the host-state based only on a BIT, absent any other agreement between them, could well not fall within the ambit of the IAA as it could hardly be said that the parties are in a ‘commercial relationship’. It is doubtful therefore that a Singapore court could be asked to invoke its jurisdiction under s 10 of the IAA to review the tribunal's jurisdiction.
4.9 The power of the court under s 6 of the Arbitration Act (Cap 10, 2002 Rev Ed) (‘AA’) to grant or refuse an application for stay of proceedings before it remains a matter of discretion by the court.
4.10 Before 2012, NTUC Income Insurance Cooperative Limited (‘NTUC Income’) appointed agents to sell insurance policies under various contracts of employment. Having been alerted to non-compliance with regulatory requirements, NTUC Income sought to clarify the status of such agents and appointed them as independent contractors. It did so by terminating the contracts of employment and appointing them as financial consultants under financial consultant agreements (‘FC contracts’).
4.11 A representative action on behalf of these individuals was brought to court against NTUC Income alleging that the termination of the contracts of employment and entry of FC Contracts were done in breach of an implied term of mutual trust and confidence under the contracts of employment and they had been procured by economic duress. NTUC Income applied for stay in favour of arbitration under s 6 of the AA referring to the arbitration clause found in the FC contracts. The stay application was granted by the assistant registrar (‘AR’). The plaintiffs appealed to the High Court averring that their claims arose out of their contracts of employment (where there is no arbitration agreement) and not from the FC contracts. The High Court affirmed the stay. The plaintiffs appealed to the Court of Appeal which dismissed the appeal as set out in Sim Kay Choon v NTUC Income Insurance Co-operative[2016] 2 SLR 871 (‘Sim Kay Choon’).
4.12 Before the Court of Appeal, the plaintiffs changed their case accepting that their disputes fell within the ambit of the arbitration agreement in the FC contracts. The plaintiffs then sought the court to consider circumstances that might enable the court to ignore the existence of the arbitration agreement found therein. They proffered arguments such as higher costs of arbitration as opposed to litigation, the nature of the statutes invoked by the plaintiffs such as the Central Provident Fund Act (Cap 36, 2013 Rev Ed) (‘CPF Act’), Employment Act (Cap 91, 2009 Rev Ed) and Industrial Relations Act (Cap 136, 2004 Rev Ed), and the belief that the plaintiffs would get a better hearing in court. Chief Justice Sundaresh Menon, who delivered the judgment of the...
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