COT v COU and others and other appeals

• Jurisdiction: Singapore
• Judge: Judith Prakash JCA
• Judgment Date: 11 October 2023
• Neutral Citation: [2023] SGCA 31
• Court: Court of Appeal (Singapore)
• Docket Number: Civil Appeals Nos 12 of 2022, 13 of 2022 and 15 of 2022
• Hearing Date: 11 August 2023
• Citation: [2023] SGCA 31
• Year: 2023
• Plaintiff Counsel: Koh Swee Yen SC, Hannah Lee Ming Shan and Claire Lim (WongPartnership LLP),Tan Ly-Ru Dawn, Teo Wei Jian Tristan and Cheyenne Valenza Low (ADTLaw LLC),Lok Vi Ming SC, Law May Ning, Tan Kah Wai and Joshua Ho Jun Ling (LVM Law Chambers LLC)
• Defendant Counsel: Teh Kee Wee Lawrence, Thng Huilin Melissa and Kavitha Ganesan (Dentons Rodyk & Davidson LLP)
• Subject Matter: Arbitration,Award,Recourse against award,Setting aside,Arbitral tribunal,Jurisdiction,Conduct of arbitration,Pleadings,Contract,Formation
• Published date: 11 October 2023

Steven Chong JCA (delivering the judgment of the court): Introduction

The policy of minimal curial intervention in arbitral proceedings is well settled in our arbitration jurisprudence (BLC and others v BLB and another [2014] 4 SLR 79 at [51]). This policy is engendered by considerations of party autonomy and the finality of the arbitral process, dictating that the courts should act with a view to “respecting and preserving the autonomy of the arbitral process” (Soh Beng Tee & Co Pte Ltd v Fairmount Development Pte Ltd [2007] 3 SLR(R) 86 (“Soh Beng Tee”) at [59]). Thus, curial intervention is warranted only on limited grounds. In Singapore, the grounds on which the seat court can set aside an arbitral award are exhaustively prescribed in s 24 of the International Arbitration Act 1994 (2020 Rev Ed) (“IAA”) and Article 34 of the UNCITRAL Model Law on International Commercial Arbitration, as adopted in Singapore by virtue of s 3(1) read together with the First Schedule of the IAA (“the Model Law”).

Critically, the seat court has no jurisdiction to examine the substantive merits of the arbitration. As this court stated in AKN and another v ALC and others and other appeals [2015] 3 SLR 488 (“AKN”) at [37], an integral feature and consequence of party autonomy is that parties choose their arbitrators and are bound by the decisions of their chosen arbitrators.

It has been observed that this minimal-intervention policy reflects the expectation that courts “should supervise with a light touch but assist with a strong hand” (Michael Hwang, “Commercial Courts and International Arbitration – Competitors or Partners?” (2015) 31 Arbitration International 193 at 194). But how, then, should the courts toe this fine line?

This case presents the challenge of determining the limits of curial intervention where the jurisdictional challenge bleeds into the merits of the arbitral award. When the jurisdictional challenge is raised on the premise that no arbitration agreement was concluded, it is inevitable for the seat court to conduct a limited review of the merits of the underlying dispute – in particular, the issue as regards the existence of the contract containing the arbitration agreement. Therein lies the tension in determining the line between a jurisdictional and a substantive challenge.

In their respective applications to set aside the arbitral award (“the Award”), the three appellants contended that the arbitral tribunal (“the Tribunal”) lacked jurisdiction because there was no concluded contract and hence no binding arbitration agreement. Specifically, the appellants claimed that there was no concluded contract since there had been no consensus ad idem on the terms of the contract. The question before this court is whether it is open to the appellants to dispute the existence of certain terms and obligations of the contract in the event the court decides that a valid arbitration agreement was reached between the parties. This issue provides a fitting opportunity for this court to expound on the tension we have identified above, and to explain where the line should be drawn and why it should be so drawn to ensure that the exercise of the seat court’s supervisory jurisdiction is kept within its limited statutory remit.

The appellants raise three discrete bases to challenge the Award: (a) there is no valid arbitration agreement between the parties; (b) the Tribunal exceeded the scope of its jurisdiction; and (c) there was a breach of natural justice. Nevertheless, the common thread in each of the three bases is the existence or lack thereof of a contract containing an arbitration agreement. As we will explain below, our decision on this has consequences on the remaining bases of challenge.

Material background facts

We first summarise the material background facts.

To maintain the confidentiality of the arbitration, the judge below (“the Judge”) used pseudonyms in place of the parties’ names (including their directors and employees), their related entities and the currency by which the parties transacted. Unless otherwise stated, we adopt the same pseudonyms in this judgment.

The first respondent in the present appeals, COU, was the claimant in the arbitration. We refer to COU as “the Claimant” in this judgment. The Claimant produces and supplies a type of technologically advanced and high-value industrial product worldwide. We refer to this product as “the Modules”.

The appellants were the respondents in the arbitration. At the material time, the appellants were members of the same multinational group of companies, which we refer to as “the Rohan Group”. The appellants are briefly described as follows: The third respondent in the arbitration and the appellant in CA/CA 12/2022 is COT. We refer to COT in this judgment as “the Project Company”. The Project Company is a special purpose vehicle (“SPV”) incorporated for the sole purpose of owning and operating an infrastructure project in Gondor (“the Project”). The arbitration arose out of the Project. The second respondent in the arbitration and the appellant in CA/CA 15/2022 is COW. COW is an engineering, procurement and construction (“EPC”) contractor. We refer to COW in this judgment as “the EPC Company”. Its business is in constructing and commissioning infrastructure projects for the Rohan Group in Gondor. The first respondent in the arbitration and the appellant in CA/CA 13/2022 is COV. We refer to COV in this judgment as “the Shareholder Company”. Until late 2016, the Shareholder Company held 99.99% of the shares in both the Project Company and the EPC Company. The Project Company and the EPC Company have since been sold to an unrelated group of companies termed “the Sauron Group” and another unrelated company respectively. For this reason, each of the appellants are separately represented in the appeals.

Aside from the three appellants, another entity in the Rohan Group is of significance in this dispute. We refer in this judgment to this entity as “the Procurement Company”. The Procurement Company is the Rohan Group’s centralised procurement arm, and is tasked with procuring goods for the Rohan Group from vendors around the world and to supply those goods to members of the Rohan Group after applying an intragroup markup. While the Procurement Company was not a party to the arbitration and therefore not a party to the present proceedings, its role in the dispute remains salient because the subject matter of the arbitration was the appellants’ liability to the Claimant for a debt owed by the Procurement Company to the Claimant.

The Modules needed to complete the Project were supplied by the Claimant to the Project Company through a chain of contracts entered into in 2015 and 2016. Under this chain: (a) the Claimant sold the Modules to the Procurement Company; (b) the Procurement Company in turn sold the Modules to the EPC Company; and (c) the EPC Company sold the Modules to the Project Company. Details on each link in the chain are as follows: The Claimant and the Procurement Company concluded a “Module Supply Agreement” (“the MSA”) in August 2015 under which the Claimant agreed to supply Modules to the Procurement Company for use in various projects of the Rohan Group around the world, including but not limited to the Project. No formal contract was concluded between the Procurement Company and the EPC Company. However, the Procurement Company invoiced the EPC Company for the supply of the Modules. The EPC Company accepts that it was contractually bound to pay these invoices to the Procurement Company. The EPC Company and the Project Company entered into an equipment and material supply contract (“the EMS Contract”) in March 2016. Under the EMS Contract, the EPC Company was obliged to procure the Modules for the Project and to supply them to the Project Company.

By March 2016, the Claimant had received payment on only six of the invoices, and three were overdue. On or around 13 March 2016, the Claimant indicated that it would suspend all further deliveries of the Modules for the Project until it received full payment for the delivered Modules.

This led to the commencement of negotiations. Between 15 to 18 March 2016, representatives from the Claimant and the Rohan Group entered into negotiations to resolve the issue of the unpaid invoices and the delivery of the remaining Modules (“the March 2016 Negotiations”). The effect of the March 2016 Negotiations and in particular, whether they resulted in the formation of a contract containing a valid arbitration agreement is at the heart of the dispute.

Two executives from the Claimant took part in the March 2016 Negotiations: Legolas, the Claimant’s Chief Executive Officer (“CEO”) and General Manager; and Gimli, the Claimant’s sales operation manager.

Five executives of the Rohan Group entities were involved in the March 2016 Negotiations: Gandalf, the President, CEO and a director of the Rohan Group’s ultimate holding company; Aragon, a director of the Shareholder Company from June 2011 to April 2017; Boromir, a director of the Shareholder Company and the Project Company from March to October 2016, and General Counsel of the Rohan Group’s business in Gondor from June 2010 to October 2016; Frodo, a director and employee of the EPC Company from February 2015 to April 2017; and Samwise, an employee of the Procurement Company and a senior director of a wholly-owned subsidiary of the Procurement Company in another country.

The key object of the negotiations was over a non-disposal undertaking (“NDU”) drafted by Boromir and the members of his in-house legal team. As mentioned above, representatives from all three appellants were involved in the March 2016 Negotiations. The NDU was drafted as an undertaking to be provided by the Shareholder Company in favour of a “Contractor” (defined as the Claimant), not to dispose of the Shareholder...