Case Note

Citation(2017) 29 SAcLJ 540
Date01 December 2017
Published date01 December 2017


KVC Rice Intertrade Co Ltd v Asian Mineral Resources Pte Ltd

[2017] SGHC 32

As arbitration continues to gain popularity as a means of resolving disputes privately, there appears to be an increasing tendency in the courts to recognise, and thereafter, give effect to parties' supposed bare intention to arbitrate, even if the intention can only be tenuously ascertained. It is hoped that the experience in KVC Rice Intertrade Co Ltd v Asian Mineral Resources Pte Ltd will provoke a reconsideration of the circumstances under which a bare intention to arbitration will be enforced.

I. Introduction

1 Until the High Court's decision in KVC Rice Intertrade v Asian Mineral Resources Pte Ltd1 (“KVC”), there was no reported decision of a Singapore court enforcing a bare arbitration clause, that is, a clause which is silent as to the seat of arbitration, number of arbitrators and a method for establishing the arbitral tribunal. KVC is, thus, groundbreaking. However, while KVC will come to be heralded as yet another example of Singapore's progressive and “pro-arbitration” judicial policy, there are a number of aspects of the court's decision which merit further and more careful consideration. This note limits itself to the aspect concerning the validity of bare arbitration clauses.

II. Background
A. Facts

2 There were two almost identical actions involving two sellers which sold rice to the same buyer. The arbitration clauses in both contracts of sale were identical save in one respect (as per the square brackets below):2

The Seller and the Buyer agree that all disputes arising out of or in connection with this agreement that cannot be settled by discussion and mutual agreement shall be referred to and finally resolved by arbitration as per [Indian Contract Rules/Singapore Contract Rules]. [emphasis in original]

3 A dispute arose. The sellers individually proposed arbitrating in Singapore and even proposed an arbitrator. This was summarily rejected by the buyer. The sellers then commenced the actions in the Singapore High Court. This was met by an application for a stay of the action on the basis of the arbitration clause.

4 The sellers contended that the arbitration clause was incapable of being performed as “Singapore Contract Rules” and “Indian Contract Rules” did not refer to any existing or known set of procedural rules and the clause did not designate a seat of arbitration. The buyer's position was that the arbitration clause was workable because the details of the arbitration could be agreed between the parties or resolved by the mechanisms provided under the law. Curiously, the sellers did not oppose the stay on the basis that the arbitration clause was invalid.3

B. High Court's decision

5 The crux of the court's decision is that the arbitration clauses, although in the nature of a “bare arbitration clause” in that they merely provided for submission of disputes to arbitration without specifying the place of the arbitration, the number of arbitrators or the method for establishing the arbitral tribunal, “remain[ed] a valid and binding arbitration agreement if the parties ha[d] evinced a clear intention to settle any dispute by arbitration”.4

6 The court was not unduly troubled by the absence within the arbitration clause of an agreed mechanism to appoint arbitrators.5 The court held that where the connecting factors “point unequivocally to Singapore as the place of arbitration”, the arbitration would be a “domestic arbitration”6 governed by the Arbitration Act,7 which would provide for the appointment process. Where the connecting factors point unequivocally to “some other country”, the parties “should look to the courts or statutory appointing authority of [that] some other country to assist with the establishment of the arbitral tribunal”.8 When the connecting factors are ambivalent, which the court noted was the situation it was faced with on the facts of the dispute, Art 11 of the Model Law9 read with s 8 of the International Arbitration Act10 (“IAA”) apply and the president of Singapore International Arbitration Centre “can step in to make the necessary appointment if parties are not able to agree on the sole arbitrator or presiding arbitrator”.11

III. Analysis
A. Issue of formation and validity of bare arbitration clause was not considered

7 The court did not question the validity of the arbitration agreement, even though it had recognised that the arbitration clauses in question were bare arbitration agreements. While this may seem curious at first blush, it is explicable by the fact that the sellers rested their challenge only on the workability of the arbitration clause, not its formation or validity.12 As a rule of practice, the court's role is to decide every case before it on the basis of the arguments and case presented. If the sellers were content to challenge only the workability of the arbitration clause, as opposed to its formation or validity, the court would be entitled to approach the dispute on that same basis.

8 The question remains, though, whether a bare arbitration clause ought to be enforced. The answer is not so obvious.

B. Enforceability of bare intention to arbitrate
(1) Competing considerations

9 It is true that there is strong judicial support for the enforceability of other types of bare alternative dispute resolution (“ADR”) agreements (namely, mediation and negotiation),13 characterised principally by a firm intention, “expressed in unqualified and mandatory terms”, to participate in the ADR process.14 However, it would be far too simplistic to extend the interpretative approach applicable to ADR agreements to bare arbitration clauses. Particularly in the Singapore context, ADR agreements such as mediation and negotiation agreements are regarded as being consistent with the “cultural value” and “wider public interest in Singapore” [emphasis in original] in “promoting consensus” when resolving disputes.15 It is arguably more difficult to situate such specific public interest and cultural value within the sphere of commercial arbitration.

10 The absence of any strong judicial authority in support of the enforceability of bare arbitration clauses is telling. In fact, the sole judicial precedent cited in KVC in support of the enforceability of a bare arbitration clause,16Insigma Technology Co Ltd v Alstom Technology Ltd17 (“Insigma”), actually involved the enforcement of a substantially more complete arbitration clause. In that case, the arbitration clause contained the following: (a) “arbitration before the Singapore International Arbitration Centre”; (b) “in accordance with the Rules of Arbitration of the International Chamber of Commerce”; and rather importantly, (c) “proceedings shall take place in Singapore”. In other words, the arbitration clause referred to an arbitral institution, a set of arbitral institutional rules and the seat of arbitration, respectively. The reference to an arbitral institution and the arbitral institutional rules is especially significant, because they provide the framework for the resolution of any uncertainty or dispute in relation to the constitution of the arbitral tribunal.

11 Three other decisions, although mentioned by the court only in passing, deserve further consideration.

12 The first is HKL Group Co Ltd v Rizq International Holdings Pte Ltd,18 a decision of an assistant registrar (“asst registrar”) of the Singapore High Court. This case does not offer any direct support because the arbitration clause provided Singapore as the seat of arbitration, and for the arbitration to be conducted under the International Chamber of Commerce Rules.19 In fact, the asst registrar expressly stated that the clause was “operative and workable” for four cumulative reasons, two of which were that the clause provided for the (a) place of arbitration, and (b) applicable institutional rules.20

13 The second case, Comtec Components Ltd v Interquip Ltd,21 is a decision of the Hong Kong High Court. This case, too, is distinguishable as the arbitration clause provided that “any dispute … shall be settled by arbitration in Hong Kong” and that “the arbitrator was to be appointed by the Hong Kong International Arbitration Centre”.

14 The third, Lucky-Goldstar International (HK) Ltd v Ng Moo Kee Engineering Ltd22 (“Lucky-Goldstar”), is arguably the strongest authority in favour of the conclusion reached in KVC. In that case, the arbitration clause enforced by the Hong Kong High Court provided for arbitration in a “third country”, “under the rules of the third country” and in accordance with the rules of procedure of a non-existent institution, the “International Commercial Arbitration Association”.23

15 Suffice it to say, Lucky-Goldstar is a shining example of what is popularly called the “pro-arbitration” approach. Unsurprisingly, therefore, Lucky-Goldstar has attracted much controversy, with one respectable commentary describing it as “an extreme case”.24 But, to be fair, Lucky-Goldstar is not a complete outlier. There are a fair number of cases and commentaries which are sympathetic to the proposition that a bare intention to arbitrate is enforceable.25 Nevertheless, for the

reasons below, Lucky-Goldstar and the jurisprudence in favour of the enforceability of bare arbitration clauses ought not to be followed.
(2) Arguments from principle against...

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