Aqz v Ara

• Judgment Date: 13 February 2015
• Date: 13 February 2015
• Docket Number: Originating Summons No 530 of 2014 and Summons No 3168 of 2014
• Court: High Court (Singapore)

AQZ

Plaintiff

and

ARA

Defendant

[2015] SGHC 49

Judith Prakash J

Originating Summons No 530 of 2014 and Summons No 3168 of 2014

High Court

Arbitration—Award—Recourse against award—Setting aside—Arbitrator's decision on jurisdiction—Whether oral evidence and cross-examination allowed in application to set aside award on ground of lack of jurisdiction to hear dispute—Order 69 A r 2 and O 28 r 4 (3) Rules of Court (Cap 322, R 5, 2014 Rev Ed)

Arbitration—Award—Recourse against award—Setting aside—Arbitrator's decision to hear dispute contained in award that dealt with merits of dispute—Whether award could be set aside—Section 10 (3) International Arbitration Act (Cap 143 A, 2002 Rev Ed) (‘IAA’) and Art 16 (3) UNCITRAL Model Law on International Commercial Arbitration (set out in First Schedule of IAA) (‘Model Law’)

Arbitration—Award—Recourse against award—Setting aside—Procedure followed by tribunal—Whether arbitration governed by arbitral rules applicable at date of commencement of arbitration—Whether parties' agreement for arbitration before three arbitrators could be overridden by provision in arbitral rules allowing for arbitration before sole arbitrator—Section 3 (1) IAA and Art 34 (2) (a) (iv) Model Law

Arbitration—Award—Recourse against award—Setting aside—Validity of arbitration agreement—Whether current version of IAA applicable—Writing requirement—Whether content of agreement recorded in any form—Sections 2 A (4) and 3 (1) IAA and Art 34 (2) (a) (i) Model Law

The plaintiff (‘the Supplier’) was a mining and commodity trading company incorporated in Singapore and the defendant (‘the Buyer’) was the Singapore subsidiary of an Indian trading and shipping conglomerate. In or around November 2009, the parties discussed the possibility of entering into twoseparate agreements for the sale and purchase of coal. The negotiations were carried on concurrently. By 7 December 2009, these discussions resulted in a contract for the shipment of 50,000 mt of coal in January 2010 (‘the First Shipment’). The parties accepted that by 8 December 2009 they had discussed and verbally agreed on the terms of a further contract for a second shipment of the same quantity of coal in January 2010 (‘the Second Shipment’). All the terms of the Second Shipment, except the period during which the coal was to be shipped, were to be identical to those in the First Shipment. However, it was the Supplier's position that such agreement had not resulted in a binding contract because the parties intended the 8 December 2009 agreement to be ‘subject to contract’ before it became binding. The Supplier contended that this intention was reflected in cl 2 of the First Shipment which was a clause which was intended to appear in the Second Shipment contract as well. Further it relied on the evidence provided by the Buyer's expert witness (‘PG’), that companies with strong corporate governance would not book barges until a signed contract was in place to argue that it was in line with commercial practice and expectation for the 8 December 2009 agreement to be ‘subject to contract’. The Buyer's position was that a valid and binding contract for the Second Shipment was formed on 8 December 2009 and that the Supplier subsequently breached the contract.

On 20 March 2013, the Buyer issued a ‘Notice of Arbitration’, purportedly under cl 16 of the alleged Second Shipment, to commence arbitration proceedings in the Singapore International Arbitration Centre (‘SIAC’) against the Supplier. The Buyer also applied to the SIAC for the arbitration to be conducted under the ‘Expedited Procedure’ pursuant to r 5 of the Arbitration Rules of the SIAC (4th Ed, 1 July 2010) (‘SIAC Rules 2010’). The Supplier's solicitors wrote to the SIAC and challenged the existence of an arbitration agreement and the applicability of the Expedited Procedure. The President of the SIAC Court of Arbitration (‘SIAC President’) decided to allow the Buyer's application for the arbitration to be conducted under the Expedited Procedure provision. The SIAC President appointed a sole arbitrator (‘the Arbitrator’) to conduct the arbitration proceedings.

The Arbitrator ordered a preliminary hearing to resolve the issues of jurisdiction and liability. Following the hearing he issued an award (‘the Award’) finding that the tribunal had jurisdiction and that the Supplier was liable to the Buyer for breach of contract.

Dissatisfied with the Arbitrator's ruling, the Supplier took out an application to have the Award reversed and/or wholly set aside. The Supplier challenged the Arbitrator's jurisdiction on the basis that there was no valid arbitration agreement because the Second Shipment was never concluded. The Supplier initially argued that the court had to consider the issue of whether the Second Shipment was concluded de novo. It argued that this meant that the court had to hear oral evidence from parties' witnesses before deciding that issue. However, the Supplier withdrew this submission after some argument and was content for its challenge to proceed on affidavit evidence alone. The Supplier also argued that even if the Second Shipment was concluded, there was no valid arbitration agreement that satisfieds 2 (1) of the version of the International Arbitration Act (Cap 143 A, 2002 Rev Ed) that was in force in December 2009 (‘IAA 2009’). The Supplier's jurisdictional challenge was based on two separate statutory grounds: (a) s 10 (3) of the IAA and/or Art 16 (3) of the UNCITRAL Model Law on International Commercial Arbitration set out in the First Schedule of the IAA (‘Model Law’); and (b) s 3 (1) of the IAA read with Art 34 (2) (a) (i) of the Model Law.

Alternatively, the Supplier argued that the arbitral procedure was not in accordance with the agreement of the parties because it was erroneously conducted under the Expedited Procedure, when there was no provision for such a procedure in the Arbitration Rules of the SIAC (3rd Ed, 1 July 2007) (‘SIAC Rules 2007’) which, according to the Supplier, were the applicable rules. It further contended that even if the SIAC Rules 2010 were applicable, the composition of the arbitral tribunal, in so far as the arbitration was conducted before a sole arbitrator, was not in accordance with the parties' agreement since they had expressly agreed to arbitration before three arbitrators. This ground of challenge was based on s 3 (1) of the IAA read with Art 34 (2) (a) (iv) of the Model Law.

Held, dismissing the application:

(1) A review of the drafting history of the Model Law made it clear that relief under Art 16 (3) was not available when a party sought to set aside a ruling which was predominantly on jurisdiction but also marginally dealt with the merits because that was simply not the purpose that the drafters intended Art 16 (3) to serve. Only a preliminary ruling on jurisdiction could be challenged under Art 16 (3) of the Model Law. A party which was dissatisfied with an award that dealt with the merits could seek to have it set aside pursuant to s 3 (1) of the IAA read with the relevant limbs of Art 34 (2) of the Model Law: at [65] and [69] .

(2) The fact that the tribunal could rule on its own jurisdiction ‘at any stage of the arbitral proceedings’ pursuant to s 10 of the IAA only dealt with the issue of when such a determination could be made rather than the question of the form that the tribunal's ruling was to take. The form that the ruling took determined the question of whether it was amenable to be reviewed by a supervisory court pursuant to Art 16 (3) of the Model Law. Only a preliminary ruling on jurisdiction could be challenged under Art 16 (3) of the Model Law: at [70] .

(3) The court would undertake a de novo hearing of the arbitral tribunal's decision on its jurisdiction in an application to set aside an arbitral award on the ground of lack of jurisdiction to hear the dispute. But that did not mean that oral evidence and cross-examination would be allowed in every application, in effect, turning every challenge into a complete rehearing of all that had occurred before the arbitral tribunal. Rather, O 69 A r 2 of the Rules of Court (Cap 322, R 5, 2014 Rev Ed) which set out the procedure to be followed in an application to set aside an arbitral award, contemplated that generally the matter would be resolved by way of affidavit evidence. The court could allow oral evidence and/or cross-examination pursuant to O 28 r 4 (3) if it considered (a) that there was or could be a dispute as to fact; and(b) that to do so would secure the ‘just, expeditious and economical’ disposal of the application. The existence of substantial disputes of fact as to whether a party had made the relevant arbitration agreement was by itself, not a sufficient reason to allow oral evidence and/or cross-examination: at [49] , [52] , [53] and [55] .

(4) A valid and binding contract for the Second Shipment was formed on 8 December 2009 and the terms of the same were, apart from the laycan, identical to the terms of the First Shipment contract. From 8 December 2009 onwards, both parties acted as if there was a binding contract in place, notwithstanding that they had not yet signed a formal document. The Supplier's reliance on PG's evidence was misplaced because in fact, in his expert report, PG had placed the parties into the bracket of companies where buyer and seller agreed on main terms and conditions of the sale and then began the process of assembling cargoes and chartering barges and vessels prior to the contract document being signed. Clause 2 was a ‘duration of contract’ term rather than a ‘subject to contract term’: at [92] , [97] , [101] and [104] .

(5) The validity of the arbitration agreement was governed by the version of the IAA that existed at the time of the court proceedings. The definition of arbitration agreement contained in s 2 (1) of the IAA 2009 ceased to be applicable as of 1 January 2010. Thereafter, the sole...