CIP v CIQ

• Judge: Patricia Bergin IJ
• Judgment Date: 19 November 2021
• Neutral Citation: [2021] SGHC(I) 13
• Citation: [2021] SGHC(I) 13
• Court: International Commercial Court (Singapore)
• Published date: 24 November 2021
• Docket Number: Originating Summons No 4 of 2021
• Plaintiff Counsel: Toby Landau QC and Liang Hanwen Calvin (Duxton Hill Chambers (Singapore Group Practice)) (instructed), Yu Kexin (Yu Law) (instructed), Tnee Zixian Keith (Zheng Zixian), Chin Wan Yew Rachel, Leong Lijie and Teo Jin Yun Germaine (Tan Kok Quan Partnership)
• Defendant Counsel: Davinder Singh s/o Amar Singh SC, Jaikanth Shankar, Fong Cheng Yee David and Gerald Paul Seah Yong Sing (Davinder Singh Chambers LLC)
• Subject Matter: Arbitration,Award,Recourse against award,Setting aside
• Hearing Date: 01 September 2021,30 September 2021,02 September 2021

Patricia Bergin IJ: Introduction

By an Originating Summons filed in the High Court of Singapore on 19 November 2020, CIP, the applicant, respondent in the arbitration, seeks orders setting aside an arbitral award (“the Award”) rendered in a Singapore International Arbitration Centre (“SIAC”) arbitration (“the Arbitration”) in favour of CIQ, the respondent, claimant in the Arbitration. CIP will be referred to as “the applicant”. CIQ will be referred to as “the respondent”.

On 29 January 2021 the proceedings were transferred into the Singapore International Commercial Court.¹

The proceedings were heard on 1 and 2 September 2021.

Background

The applicant and the respondent are companies incorporated in the Republic of the Philippines.² They, together with a company related to the respondent, were parties to a Joint Venture Agreement dated 10 May 2013 (as amended on 13 August 2013 and by a Supplemental Agreement on 3 September 2015) (“JVA”) relating to a mining project in the Philippines (“the Project”).³ The purpose of the joint-venture (“JV”) was to prospect, explore and develop an open-pit mine and processing plant (“the Plant”) within the relevant “Zone” defined in the JVA (“the Project Zone”).⁴

Natural resources in the Philippines are owned by the State. The Philippines Mines and Geosciences Bureau (“MGB”) within the Department of Environment and Natural Resources (“DENR”) issues exploration permits (“EP”) to qualified persons granting them the rights to explore, mine and process those resources.⁵

The MGB issued EPs to the respondent and the Project proceeded between 2013 and 2015 when the parties’ relationship appears to have become somewhat dysfunctional.

Under the JVA, the applicant was given the right to acquire up to a 36% interest in the JV during the defined “Earn-in Period” subject to the fulfilment of certain conditions.⁶ It was to provide counterpart funding, drilling services and management services.⁷ A Memorandum of Understanding dated 22 November 2013 gave the applicant the right to acquire an additional 6% interest in the JV also subject to the fulfilment of certain conditions (“the 6% MOU”).⁸

The Recitals to the Supplemental Agreement of 3 September 2015 referred to previous agreements constituting the JVA, certain of the applicant’s obligations, drilling services provided by the applicant, and the respondent’s waiver, and that of its related company, of the applicant’s two year⁹ Earn-in Period. Recital F recorded that in view of those matters, the applicant “is considered to have earned its full 36% interest in the joint venture”.¹⁰

The parties agreed in the JVA that they would enter into good faith discussions to convert the applicant’s 36% (and later an additional 6%) interest in the JV into equity in the respondent.¹¹

One important aspect of the parties’ relationship was that the applicant would use its connections and contacts within the Philippines to facilitate the granting and continuation of the appropriate enabling permits and approvals crucial to exploration activities and extraction of mining deposits.¹² The respondent was to be the party to whom the EP was to be issued. However, the applicant took the view that because it had become at least a 36% shareholder or a 42% shareholder in the respondent (having on its case converted its interest in the JV into equity in the respondent) it was entitled to be named as a “co-permittee” in the EPs. In accordance with this view the applicant approached the MGB to be named as a co-permittee on the EP.¹³ The respondent did not share the applicant’s view about this entitlement and this difference between them was referred to by the parties as the “co-permittee issue”.

The applicant became concerned that its shareholding had not been regularised¹⁴ and a dispute arose between the parties as to the proper reflection of the applicant’s equity interest in the respondent.

Another issue that arose during the parties’ working relationship was the ownership of rights that the applicant had acquired to the land (“the Surface Rights”) within the Project Zone,¹⁵ the subject of the JV operations. It is not in issue that the applicant had acquired some Surface Rights within the Project Zone and the respondent subsequently claimed that these acquisitions were secretive and not consistent with the applicant’s obligations to the JV.

Another issue between the parties in relation to their respective obligations was the requirement for the applicant to pay certain outstanding amounts into the JV fund (“the JV Fund”).

By mid-2015 it was necessary for the EP to be renewed. An application for its renewal was lodged with the MGB on 5 May 2015. However, for various reasons the EP expired on 11 July 2015. The applicant then suspended all drilling operations and the Project stalled whilst the parties fell into dispute in relation to a number of issues.¹⁶ Each commenced litigious process; the applicant in the Philippine courts; and the respondent in arbitral proceedings in Singapore.

Although the motivation to settle their differences was in issue, the parties achieved such settlement and entered into a Memorandum of Agreement on 10 June 2016 (“MOA”). As this Agreement is a pivotal aspect of the applicant’s challenges to the Award, it is appropriate to refer to it in some detail.

The MOA

The Recitals to the MOA referred to the existence of the JVA and in particular to the 6% MOU in which the parties agreed to add an additional 6% to the applicant’s 36% interest in the JV upon the fulfilment of certain conditions. The Recitals also referred to the Supplemental Agreement of 3 September 2015 in which the parties acknowledged that the applicant “has fully earned its 36% interest in the JV”.¹⁷ Recital D recorded that: “The Parties have been in discussion on a number of issues in connection with the JVA and are seeking to resolve matters amicably and equitably”.¹⁸

The MOA recorded that the parties had agreed to take steps in three stages within different time frames for specified purposes.

In Stage 1 (in Section 1 of the MOA) the parties agreed to take steps “upon the signing of” the MOA until 30 June 2016 “in order to facilitate timely issuance of the … EP Renewal” and the Declaration of Mining Project Feasibility (“DMPF”).¹⁹

In Stage 2 (in Section 2 of the MOA) the parties agreed to take steps “within 45 days”, which could be extended by agreement between the parties, “from the signing of” the MOA “to Document the Relationship”.²⁰

In Stage 3 (in Section 3 of the MOA) the parties agreed to take steps “within 3 months from the signing of” the MOA “to Accommodate a Separate Mining and Processing Company Structure”.²¹

Section 4 of the MOA was entitled “Conditionality” and provided that: “All proposed Stages would ultimately be conditional on satisfaction of all steps unless all parties agree to a variation in writing”.²²

Stage 1 – on signing of the MOA

The applicant agreed to do five things by 30 June 2016: (a) to secure the necessary support from Local Government Units (“LGUs”) and communities for the renewal of the EP and the DMPF for the relevant part of the Project before 30 June 2016; (b) to provide funding of US$150,000 of the outstanding JVA commitments, subject to agreement as defined; (c) to remit to the JV Fund US$200,000 in order to fund the incremental 6% contribution for expenditure to the date of the MOA; (d) to “stay its Court Proceedings” and application to the MGB on the “co-permittee issue” and confirm such matters in writing with the relevant parties; and (e) to transfer its Surface Rights interests to the respondent at cost plus a modest premium on a timely basis.

The respondent agreed to do four things by 30 June 2016: (a) to be committed to reflect that the applicant owned 42% of shares in the respondent, subject to: (i) the most cost effective and expeditious way of transferring and issuing the shares; and (ii) the applicant confirming its commitment to meet the obligations under the 6% MOU (as amended by the MOA); (b) to provide proof of the applicant’s ownership of the 42% share in the respondent (with the undertaking/acknowledgement to be signed by the president, a director, the treasurer and the corporate secretary of the respondent); (c) to undertake to issue or transfer the shares, issue the certificate of shares and file with the Securities and Exchange Commission (“SEC”) its amended General Information Sheet (“GIS”) as soon as practicable; and (d) to “stay its Singapore Arbitration Proceedings” and confirm such matters in writing with any relevant parties.

The applicant and the respondent agreed to do four things together by 30 June 2016: (a) to request from and work cooperatively with MGB/DENR to have the EP renewed and DMPF approved in the respondent’s name; (b) to confirm that the terms of the JVA, the 6% MOU and the MOA would be fairly reflected in a shareholders’ agreement (“the Shareholders’ Agreement”); (c) to provide full transparency and accounting for all current and future surface title rights related to the Project (covering all key aspects including infrastructure, mineral resources, access, port, etc) acquired by all parties and all their nominees directly or indirectly; and (d) to cooperatively pursue the issue of all permits in the name of the respondent (the incorporated JV vehicle) including the renewal of the EP and mining permits.

This part of the agreement also recorded that the 1.5 million dry metric tonnes of “first material” to be mined out by the applicant as contained in the 6% MOU was to be reimbursed over time chargeable as part of mining cost.

Stage 2 – within 45 days of signing the MOA

The applicant agreed to “subsequently” conduct due diligence on the respondent and all its predecessors, “to ensure” that it was “not exposed to any undue risk (i.e. legally, financially, etc.) as a result from being a shareholder” of the...