International Research Corporation Plc v

• Jurisdiction: Singapore
• Judgment Date: 12 November 2012
• Date: 12 November 2012
• Docket Number: Originating Summons No 636 of 2012
• Court: High Court (Singapore)

International Research Corp PLC

Plaintiff

and

Lufthansa Systems Asia Pacific Pte Ltd and another

Defendant

[2012] SGHC 226

Chan Seng Onn J

Originating Summons No 636 of 2012

High Court

Arbitration—Arbitral tribunal—Jurisdiction—Whether arbitration clause in main agreement was binding on third party to supplementary agreement—Effect of condition precedent to commencement of arbitration

The plaintiff entered into two agreements with the two defendants. These two agreements were supplementary agreements to a main agreement which was entered into between the two defendants. The main agreement contained a dispute resolution mechanism which prescribed that any dispute shall first be resolved by specified a mediation procedure, failing which, the dispute shall be resolved by arbitration. After several rounds of meetings to attempt to resolve the dispute had failed, the first defendant commenced arbitration proceedings against the plaintiff and second defendant. The plaintiff challenged the jurisdiction of the arbitral tribunal on the grounds that it was not bound by the arbitration agreement and even if it was, the condition precedent to the commencement of arbitration had not been satisfied as the parties had not attempted the mediation procedure. The arbitral tribunal rejected the plaintiff's challenge by way of a preliminary ruling on jurisdiction. The plaintiff applied to the High Court to set aside the arbitral tribunal's ruling on jurisdiction on the same grounds canvassed before the arbitral tribunal.

Held, dismissing the application:

(1) The strict rule that clear words were required to incorporate an arbitration agreement was not applicable on the present facts. The question was whether by entering into the supplementary agreements, the plaintiff and the two defendants had intended that the terms of the main agreement, in particular the dispute resolution mechanism, were to be binding on all three parties: at [33] to [44] and [48] to [51].

(2) The plaintiff's obligations in the supplementary agreements were linked to the terms of the main agreement. The plaintiff was aware of the context of the main agreement and the reasons for the three parties entering into the supplemental agreements. In these circumstances, it was unlikely that the parties intended for different dispute resolution mechanisms - the applicability of which depends on the identity of the parties - to resolve the same issue in dispute: at [70] to [73].

(3) By using language which stressed that the supplementary agreements were annexed to and made a part of the main agreement, the parties had objectively intended for the dispute resolution mechanism in the main agreement to be binding on all three parties to the supplementary agreements. This was the only commercially sensible and rational conclusion and this conclusion was not opposed by language in either the dispute resolution mechanism or the supplementary agreements: at [78].

(4) The mediation procedure was not a bare agreement to negotiate. It was part of a broader dispute resolution mechanism. The procedure was certain as it was expressed to be mandatory and had prescribed the various steps and stages of the procedure. The court was in a position to discern if the mediation procedure was complied with: at [90] to [97].

(5) The mediation procedure was a condition precedent to the commencement of arbitration. A duty to arbitrate did not arise until the condition precedent was satisfied: at [103].

(6) The first defendant had complied in substance with the mediation procedure as there had been numerous high-level meetings between the parties to resolve the very dispute which was the subject of the arbitration proceedings: at [110].

[Observation: While a party who was dissatisfied with the arbitral tribunal's preliminary ruling on jurisdiction was permitted to apply to the Singapore court to have the Singapore court decide the matter, the court might be precluded from setting aside the ruling on jurisdiction as such a ruling was not an award: at [111] to [113].]

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International Arbitration Act (Cap 143 A, 2002 Rev Ed) ss 10, 24

Subramanian Pillai and Jasmin Yek (Colin Ng & Partners LLP) for the plaintiff

Dhillon Dinesh Singh, Tan Xeauwei, Joel Lim and Teh Shi Ying (Allen & Gledhill LLP) for the first defendant.

Judgment reserved.

Chan Seng Onn J

Introduction

1 This case concerns the challenge of an arbitral tribunal's (‘the Tribunal’) ruling on jurisdiction pursuant to s 10 of the International Arbitration Act (Cap 143 A, 2002 Rev Ed) (‘the IAA’). The gist of the challenge is whether an arbitration clause contained in one contract between two parties binds a third party who subsequently enters into a supplemental agreement with the original two parties.

Background

Parties

2 The plaintiff, International Research Corporation Public Company Ltd (‘IRCP’), is a company engaged primarily in the business of providing information and communication technology products and services. The first defendant, Lufthansa Systems Asia Pacific Pte Ltd (‘Lufthansa’), is in the business of providing information technology services to companies in the aviation industry. The second defendant, Datamat Public Company Ltd (‘Datamat’), provides information and computer technology services, including the distribution of hardware and software maintenance services.

3 Lufthansa is the claimant and IRCP and Datamat are the respondents in SIAC Arb No 061 of 2010 (‘the arbitration proceedings’) which was instituted by Lufthansa on 13 May 2010.

Facts

The Cooperation Agreement

4 The dispute in the arbitration proceedings pertains to payments due to Lufthansa under the Cooperation Agreement for Application and Services Implementation SAP R/3 IS A&D Contract No LSY ASPAC 1 ZW-B (‘the Cooperation Agreement’) entered into between Lufthansa and Datamat on or about 11 March 2005. Under the Cooperation Agreement, Lufthansa agreed to supply, deliver and commission a new maintenance, repair and overhaul system (‘MRO System’). The MRO System was a component of the electronic data protection system (‘the EDP System’) which Datamat had agreed to provide to Thai Airways International Public Company Ltd (‘Thai Airways’) under an agreement between Datamat and Thai Airways entered into earlier on 12 January 2005 (‘the EDP System Agreement’).

IRCP's initial involvement with Datamat

5 On or about 14 March 2005, Datamat entered into a sale and purchase agreement (‘the S&P Agreement’) with IRCP under which IRCP had three main obligations. First, IRCP would provide a bankers' guarantee in the name of Datamat in order for Datamat to comply with its obligations under the...