Case Note

• Citation: (2019) 31 SAcLJ 349
• Author: Albert MONICHINO QC LLM (Cambridge); Barrister-at-Law, List A Barristers (Melbourne); Chartered Arbitrator; Fellow of the Singapore Institute of Arbitrators.
• Publication year: 2019
• Published date: 01 December 2019
• Date: 01 December 2019

1 In Rakna Arakshaka Lanka Ltd v Avant Garde Maritime Services (Pte) Ltd1 (“Rakna”), Quentin Loh J of the Singapore High Court held that Art 16(3) of the United Nations Commission on International Trade Law (UNCITRAL) Model Law on International Commercial Arbitration2 (“Model Law”) has a preclusive effect in respect of a non-participating party (that is, a party that has not participated in the arbitration, including by not submitting a defence or not substantially

participating in any hearing).3 According to this view, if an arbitral tribunal makes a preliminary ruling that it has jurisdiction, a party that has not participated in the arbitration is precluded from applying under Art 34 of the Model Law to set aside a later award on the merits on the grounds of lack of jurisdiction. This holding is an ostensible extrapolation from obiter comments made by the Singapore Court of Appeal in PT First Media TBK v Astro Nusantara International BV4 (“First Media”).

2 Rakna is on appeal.5 This note respectfully submits that Rakna is wrongly decided in so far as the purported preclusive effect of Art 16(3) on non-participating parties is concerned.

I. Facts

3 When a dispute arose between the two Sri Lankan parties regarding a commercial maritime security agreement, Avant Garde Maritime Services (Pte) Ltd (“Avant”) exercised its right under the agreement to refer the matter to arbitration in Singapore under the Singapore International Arbitration Centre (“SIAC”) Arbitration Rules 2013 (“SIAC Rules”). The respondent, Rakna Arakshaka Lanka Ltd (“RALL”) (which was wholly owned by the Sri Lankan government), refused to participate in the arbitration in any meaningful way. It failed to appoint an arbitrator, file a statement of defence or attend any hearing. Its engagement with the proceedings was limited to requesting extensions from the SIAC to respond to the notice of arbitration and, subsequently, to informing the SIAC (not the tribunal) that the arbitration proceedings should be discontinued because the parties had settled their dispute by entering into a memorandum of understanding (“MOU”).

4 After Avant informed the tribunal that settlement had in fact not occurred, the tribunal held a preliminary hearing to determine whether the matter had actually been settled. Following the hearing (which RALL did not attend), the tribunal made a preliminary ruling that the dispute was still alive and that the arbitration would proceed. Inferentially, this was a ruling that the tribunal had jurisdiction to entertain Avant's claim.

5 RALL took no further part in the arbitration. Ultimately, the tribunal made an award in Avant's favour. When Avant sought to enforce the award in Singapore, RALL sought to set it aside on the primary basis that the tribunal lacked jurisdiction because the MOU had effectively terminated the reference to arbitration.6

II. Singapore legislative framework

6 The International Arbitration Act7 (“IAA”) governs international arbitration in Singapore. The legislation gives effect – with some modifications – to the Model Law.8

7 Article 16(3) of the Model Law provides that where an arbitral tribunal makes a preliminary determination on jurisdiction, any party to the arbitration may apply to the supervisory court for review of the determination. This application must be made within 30 days of the party receiving notice of the determination.9

8 Section 10 of the IAA modifies Art 16(3) by allowing court review (by the High Court of Singapore) of findings of negative jurisdiction (that is, a finding that the arbitral tribunal does not have jurisdiction) and, further, providing for appeal from the High Court to the Court of Appeal with leave of the High Court.

9 Article 34 of the Model Law provides for the setting aside of an arbitral award on the merits. The supervisory court at the seat may only set aside an award in a limited, exhaustive set of circumstances, including (relevantly) where it can be demonstrated that the award was

made without jurisdiction,10 the subject matter of the dispute is non-arbitrable or conflicts with the State's public policy. In Singapore, s 24 of the IAA provides two additional grounds for setting aside an arbitral award.11

10 Articles 35 and 36 (in Chapter VIII) of the Model Law provide for the recognition and enforcement of arbitral awards. The grounds for resisting enforcement in Art 36 mirror the grounds for setting aside in Art 34.12

11 Section 3(1) of the IAA excludes Chapter VIII of the Model Law.13

12 Section 19 of the IAA provides for enforcement of awards in simple terms.14

13 Notwithstanding s 3(1), the Singapore Court of Appeal in First Media did not accept that the Legislature had intended to deprive award debtors under a domestic international award of passive remedies before Singapore courts.15 Thus, it (creatively) interpreted s 19 as permitting a party resisting enforcement of a domestic international award to do so

“on the same grounds as those in Art 36(1) [of the Model Law]”.16 As such, the court held that s 19 of the IAA implicitly incorporates Arts 35 and 36, with the result that they have effect in Singapore.17

III. First Media

14 In First Media, the Singapore Court of Appeal took the opportunity to comment on the preclusive effect of Art 16 on the enforcement of arbitral awards in Singapore.

15 First Media involved a marathon dispute over a failed joint venture between an Indonesian conglomerate (“Lippo”) and a Malaysian media group (“Astro”). The joint venture was contained in a subscription and shareholders agreement (“SSA”) that included an arbitration agreement providing for arbitration in Singapore under the SIAC Rules. After a dispute arose over funding, Astro initiated arbitral proceedings in Singapore.

16 At the outset, Astro sought to join consenting additional parties (“the Additional Astro Parties”) as co-claimants to the arbitration. The tribunal granted joinder over Lippo's objections and, in a preliminary award, held that it had jurisdiction to entertain the claims brought by the Additional Astro Parties. Although at a second preliminary hearing counsel for Lippo informed the tribunal there was no challenge to jurisdiction, Lippo's subsequent statement of defence stated that its actions were to be taken “without prejudice to [Lippo's] position” that the Tribunal lacked jurisdiction to hear and determine the Additional Astro Parties' claims.

17 Lippo never applied to the High Court for review of the preliminary jurisdiction under Art 16(3). Instead, it continued to participate in the arbitration, which it ultimately lost. Nearly all of the award debt – about US$130m – was payable by Lippo to the Additional Astro Parties. When Astro sought to enforce the several awards in Singapore, Lippo resisted enforcement on the basis that the tribunal lacked jurisdiction to make an award in favour of the Additional Astro Parties.

18 By the time the matter came before the Singapore Court of Appeal, one of the central issues in dispute was whether an award debtor that fails to seek an Art 16(3) review of a preliminary ruling on

jurisdiction is precluded from resisting enforcement of a later award on the merits (under Art 36) on jurisdictional grounds.18

19 The Singapore Court of Appeal affirmed the centrality of the “choice of remedies” in the Model Law; that is, an award debtor faced with an award against it may apply to the courts at the arbitral seat to set aside the award (under Art 34) or may wait – without first applying to set the award aside – until the award creditor seeks to enforce the award and then resist enforcement of the award (via Art 36). In a similar vein the court held that an award debtor that fails to seek court review (pursuant to Art 16(3)) of a preliminary arbitral ruling on jurisdiction is not precluded from subsequently resisting enforcement of a later award on the merits on jurisdictional grounds.

20 Further, the Court of Appeal opined (without deciding) that an award debtor would be precluded from raising a jurisdictional objection at the setting aside stage (under Art 34) if it had not availed itself of its right to seek court review of a preliminary arbitral ruling on jurisdiction (under Art 16(3)).19

21 Notably, the Court of Appeal's comments about the preclusive effect of Art 16(3) vis-à-vis Art 34 were made in the context of a party that continued to actively participate in the arbitration following the preliminary ruling on jurisdiction (hereafter referred to as a “participating party”). The court did not address the position of a non-participating party or, alternatively, a party who boycotts the arbitration immediately following a preliminary ruling on jurisdiction (hereafter referred to as a “boycotting party”).

22 At first instance Belinda Ang Saw Ean J, relying on the Model Law's travaux, suggested by way of obiter that a boycotting party would be able to later rely on a jurisdictional objection to set aside or resist the enforcement of an award, even though it had not previously applied under Art...