Dermajaya Properties Sdn Bhd v Premium Properties Sdn Bhd and Another

• Jurisdiction: Singapore
• Judge: Woo Bih Li JC
• Judgment Date: 20 March 2002
• Neutral Citation: [2002] SGHC 53
• Date: 20 March 2002
• Subject Matter: Power of arbitrator to order security for costs,Whether International Arbitration Act applies,International Arbitration,Whether arbitrator has power to order security for costs,s 12 International Arbitration Act (Cap 143A, 1995 Ed),Powers,Whether mere adoption of incompatible set of rules sufficient to exclude Model Law or Pt II of International Arbitration Act,Agreement to refer dispute to arbitrator under UNCITRAL Rules,Whether arbitrator exceeding jurisdiction by including arbitrator's fee and Singapore International Arbitration Centre costs in award for security for costs,Curial law,Whether incompatible set of rules totally excluded if Model Law applies,ss 5, 12, 15 & Pt II, Sch 1 International Arbitration Act (Cap 143A, 1995 Ed),Whether amendments to s 15 of International Arbitration Act to clarify or change law,Conflict of laws,Whether Model Law and Pt II to be read and applied together,Singapore as place of arbitration,Arbitration,Arbitral tribunal
• Docket Number: Originating Motion No 600037 of
• Published date: 19 September 2003
• Defendant Counsel: Sundaresh Menon and Hilbert Lee (Rajah & Tann)
• Court: High Court (Singapore)
• Plaintiff Counsel: Christopher Chuah and Michael Chia (Drew & Napier LLC)

Judgment

GROUNDS OF DECISION

Introduction

1. The Claimant Dermajaya Properties Sdn Bhd is a company incorporated in Brunei.

2. The First Respondent Premium Properties Sdn Bhd and the Second Respondent CFE Holdings (Malaysia) Sdn Bhd are companies incorporated in Malaysia.

3. By an agreement dated 4 October 1996 (‘the Agreement’) the Claimant agreed to buy from both the Respondents 100% of the paid up capital in another company incorporated in Malaysia, President Hotel Sdn Bhd, for RM297,000,000.

4. Clause 12.15 and 12.16 of the Agreement provides:

‘12.15 Arbitration

Any dispute or difference between the parties in connection with this Agreement shall be referred to a sole arbitrator under the Arbitration Rules of the United Nations Commission on International Trade Law -

12.15.1 the arbitration shall be held in Singapore; and

12.15.2 the arbitrator shall be appointed by the parties or, failing agreement, by the Director, for the time being of the Regional Center for Arbitration at Kuala Lumpur.

12.16 Law

This Agreement shall be governed by, and construed in accordance with, the laws of Malaysia.’

5. Disputes arose between the parties subsequently. An action was commenced in the High Court of Malaya in Kuala Lumpur by the Claimant naming both Respondents and President Hotel Sdn Bhd as Defendants. This action was stayed by order of the High Court of Malaya in Kuala Lumpur on 3 September 1997.

6. About three and a half years later, by an agreement dated 9 March 2001, the parties agreed to the appointment of Dato Mahadev Shankar as arbitrator.

7. On 17 August 2001, the Respondents applied for security for costs from the Claimant in the sum of RM500,000. This was reduced during submission to RM470,000.

8. After submissions, the arbitrator made an Interim Award dated 5 November 2001 under which the Claimant was to deposit S$200,000 as security for the Respondents’ costs in the arbitration. His decision rested on the applicability of the International Arbitration Act (Cap 143A) (‘IAA’) and in particular s 12 IAA. This in turn depended on the interpretation of s 15 IAA.

9. The Claimant, being dissatisfied with the decision of the arbitrator, then appealed to the High Court.

10. The appeal came up for hearing before me on 19 February 2002. The primary issue is whether the arbitrator had jurisdiction to order security for costs against the Claimant.

11. It is common ground that:

(a) the Arbitration Rules of the United Nations Commission on International Trade Law (‘the UNCITRAL Rules’) do not enable the arbitrator to order security for costs against the Claimant.

(b) Section 12 IAA does enable the arbitrator to order security for costs against the Claimant.

(c) The other legislation in Singapore applicable to arbitration is the Arbitration Act (Cap 10) (‘AA’). This Act is often described as applying to domestic arbitration. At the material time, the AA does not enable the arbitrator to order security for costs against the Claimant. However, the High Court of Singapore may do so.

12. I would add that it is also common ground that the place, or seat, of the arbitration is Singapore.

Section 15 IAA

13. Section 15 IAA has been amended recently. However it is the pre-amendment s 15 and not the current s 15 which is applicable.

14. The pre-amendment s 15 states:

‘15. If the parties to an arbitration agreement have (whether in the arbitration agreement or in any other document in writing) agreed that any dispute that has arisen or may arise between them is to be settled or resolved otherwise than in accordance with this Part or the Model Law, this Part and the Model Law shall not apply in relation to the settlement or resolution of that dispute.’
[Emphasis added.]

15. The IAA is:

‘An Act to make provision for the conduct of international commercial arbitrations based on the Model Law on International Commercial Arbitration adopted by the United Nations Commission on International Trade Law and conciliation proceedings and to give effect to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards and for matters connected therewith.’

16. Part II of the IAA is the main part. It comprises ss 2 to 26 of the IAA. Under s 3, the Model Law, with the exception of Chapter VIII thereof, is to have the force of law in Singapore.

17. Under s 5, Part II and the Model Law shall not apply to an arbitration which is not an international arbitration. However, the parties before me agreed that their arbitration is an international arbitration for the purpose of the IAA. Thus, prima facie, Part II and the Model Law apply to the arbitration in question.

18. The Model Law is set out in the First Schedule to the IAA. It covers various matters such as the composition and jurisdiction of the arbitral tribunal and the conduct of arbitral proceedings, the making of the award and termination of proceedings. It also provides for recourse against an award and recognition and enforcement of awards.

19. However Part II IAA provides for other powers of an arbitral tribunal including, as I have mentioned, the power to make orders for security for costs under s 12.

Claimant’s position

20. The Claimant’s position is as follows:

(a)	The UNCITRAL Rules were published by UNCITRAL in 1976. The Model Law was published in 1985. Although the Agreement is dated 4 October 1996, the parties had adopted the UNCITRAL Rules and not the Model Law.
(b)	(i)Although the UNCITRAL Rules and the Model Law were promulgated by the same body, i.e UNCITRAL, they are incompatible.
	(ii) For example, where there is to be one arbitrator, and if parties cannot agree to the appointment of the arbitrator and if there is no agreement on the appointing authority, Article 6 of the UNCITRAL Rules provides that either party may request the Secretary-General of the Permanent Court of Arbitration at the Hague to designate an appointing authority.
	(iii) However, in a similar situation, Article 11(3)(b) read with Article 6 of the Model Law, provides that each State adopting the Model Law is to designate the appointing authority. In the case of Singapore, the appointing authority is designated under s 8(2) IAA as the Chairman for the time being of the Singapore International Arbitration Centre (‘SIAC’), or such other person as the Chief Justice may appoint.

21. I would digress to say that, in the case before me, the Agreement does specifically identify the authority to appoint the arbitrator, if the parties should fail to agree on the arbitrator. However, this is immaterial to the argument before me because my conclusion about s 15 IAA must be the same whether an arbitration agreement does or does not have an express provision on the appointing authority.

22. Coming back to the Claimant’s position, Mr Christopher Chuah, for the Claimant, submitted that since the UNCITRAL Rules are incompatible with the Model Law, then both the Model Law and Part II do not apply. The parties have by implication opted out of the Model Law and Part II and this is sufficient for the purpose of s 15 IAA. The word ‘agreed’ in s 15 includes agreement by implication and is not restricted to an express agreement to the contrary.

23. Mr Chuah also submitted that:

(a) The heading to every pleading referred only to the UNCITRAL Rules.

(b) The Respondents had initially relied solely on Article 15 of the UNCITRAL Rules. ‘This shows that the Respondents were not aware of the IAA at that time nor did they intend to rely on the IAA’ (para 14 of Claimant’s Submission).

(c) The parties had not referred to the IAA in the arbitration provision. ‘It was never the intention of the parties to be governed by the IAA and the Model Law’ (para 24 of Claimant’s Submission).

(d) Malaysia and Brunei have not adopted the Model Law.

24. Mr Chuah referred to two cases. The first was Coop International Pte Ltd v Ebel SA [1998] 3 SLR 670, a decision by Chan Seng Onn JC.

25. In that case, the first agreement which incorporated an arbitration provision provided that the Rules of Arbitration of the Chamber of Commerce and Industry of Geneva Switzerland (‘the Geneva Rules’), were to apply. It also provided that ‘The arbitral tribunal shall have its seat in Geneva’. This agreement was terminated by a termination agreement which did not have an arbitration provision. Subsequently, the parties entered into a third agreement which was in the nature of a settlement agreement. A dispute arose under the third agreement and a question arose whether the arbitration provision in the first agreement applied.

26. Chan JC held that it did not. However he also gave his views, though obiter, on the arbitration provision and s 15 of the IAA in relation to a mandatory stay of court proceedings.

27. As the arbitration provision had provided for arbitration outside Singapore, Chan JC was of the view that s 15 IAA was not applicable and hence it could not and need not be used to oust the application of the Model Law and Part II. Chan JC then rendered his view on the hypothetical situation whereby parties had chosen Singapore as the place of their arbitration but agreed to abide entirely by the Geneva Rules.

28. In his view, the Geneva Rules were incompatible with the Model Law as applied in Singapore and he referred to the Geneva Rules on an appointment of a sole arbitrator as an illustration. He concluded thus:

‘143 Article 19 does not help much as the selection of the arbitrator is not simply a rule of procedure that has to be followed by the arbitral tribunal in conducting proceedings. It is substantive in nature. In this hypothetical case, the parties had selected a procedure which is contrary to the mandatory provision in the IAA and the Model Law.

144 In my opinion, it is not necessary to have an explicit agreement stating that the Model Law or Part II will not apply, as counsel for the respondents had contended. Section 15 itself does not...