Mitsui Engineering & Shipbuilding Co Ltd v PSA Corp Ltd And Another

• Jurisdiction: Singapore
• Judge: Woo Bih Li JC
• Judgment Date: 02 August 2002
• Neutral Citation: [2002] SGHC 170
• Date: 02 August 2002
• Subject Matter: Arbitration,Which of plaintiff's two places of business has closer relationship to arbitration agreements,International Arbitration Act (Cap 143A, 1995 Rev Ed) ss 5(2) and 5(3),Mandatory stay under international arbitration act,Place of substantial performance,Whether arbitration an international one,Stay of court proceedings
• Docket Number: Suit No 114 of 2002 (Registrar's
• Published date: 19 September 2003
• Defendant Counsel: Steven Chong SC, Deanna Seow and Chua Kee Loon (Rajah & Tann)
• Court: High Court (Singapore)
• Plaintiff Counsel: Leslie Chew SC, John Chung and Alvin Chang (Khattar Wong & Partners)

Judgment

GROUNDS OF DECISION

INTRODUCTION

1. The Plaintiff Mitsui Engineering & Shipbuilding Co Ltd (‘Mitsui’) and the Second Defendant Keppel Engineering Pte Ltd (‘Keppel’) acting as a consortium, were contractors of a project with the First Defendant PSA Corporation Limited (‘PSA’).

2. There were two contracts between PSA on the one hand and Mitsui and Keppel on the other hand i.e Contract Nos 619 and 801.

3. Under Contract No 619, the Consortium was required to carry out the design, construction, supply, installation, testing, commissioning and integration of an Overhead Bridge Crane System comprising 16 units of 40-tonne lifting container handling overhead bridge cranes (‘cranes’) including superstructure and foundation for the new container terminal at Pasir Panjang plus eight additional cranes at PSA’s option.

4. Under Contract No 801, the Consortium was required to carry out the design, construction, supply, installation, testing, commissioning and integration of 16 cranes for the new container terminal at Pasir Panjang, including an option for eight additional cranes (however, in the event, PSA only required the Consortium to supply a total of 20 cranes under Contract No 801).

5. There were also two contracts as between Mitsui and Keppel each dated 29 December 1997. These were referred to as Consortium Agreement Nos 619 and 801.

6. Article 14 of the Consortium Agreements provides:

‘All disputes arising in connection with the present Agreement shall be finally settled according to the UNCITRAL Arbitration Rules of 1976 which Rules are deemed to be incorporated in this Clause, by a sole arbitrator. The arbitration will be held in Singapore unless otherwise agreed.

7. At the time the present suit was filed, arbitration had already commenced in which Keppel is the Claimant and Mitsui is the Respondent. The arbitration is undertaken pursuant to arbitration provisions in each of the two Consortium Agreements.

8. PSA is not a party to the Consortium Agreements. There is an arbitration provision in Contract No 619 but not in Contract No 801, although both contracts relate to the same project.

9. In the present suit, Mitsui’s claims against PSA and Keppel arise from both contracts. However, Keppel applied for a stay of the claims by Mitsui against it in the suit in view of the arbitration provisions in the Consortium Agreements. It was common ground that their disputes fell within such arbitration provisions. Keppel’s application for a stay was granted by an Assistant Registrar. Mitsui then appealed against the stay.

10. Keppel’s application was based on two grounds:

(a) if the International Arbitration Act (‘IAA’) applies to the arbitration, the stay is mandatory,

(b) if the Arbitration Act applies, the stay is discretionary and the court should exercise its discretion in favour of a stay.

11. Mitsui did not dispute that if the IAA applies, the stay is mandatory. Hence, the first and main argument was whether the IAA applies.

12. Keppel contended that the arbitration was an international arbitration for the purpose of the IAA on various grounds:

(a) Mitsui’s place of business was in Japan within the meaning of s 5(2)(a) read with s 5(3)(a) IAA,

(b) alternatively, if Keppel’s and Mitsui’s places of business are considered to be in Singapore under s 5(2)(a) read with s 5(3)(a), a substantial part of the obligations of the commercial relationship was nevertheless to be performed by Mitsui in Japan and hence s 5(2)(b)(ii) IAA applies.

13. Mitsui contended that:

(a) its place of business was in Singapore, and not Japan under s 5(2)(a) and s 5(3)(a), and

(b) as regards s 5(2)(b)(ii), both Keppel and Mitsui have their places of business in Singapore and no substantial part of the obligations of the commercial relationship is to be performed outside Singapore.

SECTION 5 IAA

14. Section 5 IAA states:

‘5.(1) This Part and the Model Law shall not apply to an arbitration which is not an international arbitration unless the parties agree in writing that this Part of the Model Law shall apply to that arbitration.

(2) Notwithstanding Article 1(3) of the Model Law, an arbitration is international if -

(a) at least one of the parties to an arbitration agreement, at the time of the conclusion of the agreement, has its place of business in any State other than Singapore; or

(b) one of the following places is situated outside the State in which the parties have their places of business:

(i) the place of arbitration if determined in, or pursuant to, the arbitration agreement;

(ii) any place where a substantial part of the obligations of the commercial relationship is to be performed or the place with which the subject-matter of the dispute is most closely connected; or

(c) the parties have expressly agreed that the subject-matter of the arbitration agreement relates to more than one country.

(3) For the purpose of subsection (2) -

(a) if a party has more than one place of business, the place of business shall be that which has the closest relationship to the arbitration agreement;

(b) if a party does not have a place of business, a reference to his place of business shall be construed as a reference to his habitual residence.

(4) Notwithstanding anything to the contrary in the Arbitration Act, that Act shall not apply to any arbitration to which this Part applies.’

[Emphasis added.]

WHETHER MITSUI’S PLACE OF BUSINESS IS IN JAPAN FOR THE PURPOSE OF S 5(2)(a) READ WITH S 5(3)(a)

The Arguments

15. It was common ground that Mitsui is a company incorporated in Japan and its head office is in Japan. It is also a foreign company registered in Singapore with an office in Singapore for which it has a lease. Mitsui also alleged that it manages and oversees projects in Singapore through its Singapore office.

16. Hence, it was not disputed that Mitsui has a place of business in Japan and a place of business in Singapore. This brought into play s 5(3)(a) which required me to determine which of these two places of business ‘has the closest relationship’ to the arbitration agreements.

17. Mr Stephen Chong SC, Counsel for Keppel, submitted that it was common ground that the closest relationship was to be determined with reference to the negotiations leading to the Consortium Agreements which contained the arbitration provisions. Therefore, the individuals who took part in the negotiations and the place of the negotiations were important in this determination.

18. Mr Chong referred to an Analytical Commentary on Draft Text of A Model Law on International Commercial Arbitration. Article 1(3) of the Draft Text is similar to s 5(3)(a) and (b) IAA. With regard to ‘the closest relationship to the arbitration agreement’, the Commentary states, at para 32:

‘Determination of place of business, paragraph (3)

32. If a party has two or more places of business, one of which is in the same State as is the other party’s place of business, it is necessary to determine which of his places is relevant for the purposes of paragraph (2). According to paragraph (3), first sentence, it is the one which has the closest relationship to the arbitration agreement. An instance of such close relationship would be that a contract, including an arbitration clause, is fully negotiated by the branch or office in question, even if it is signed at another place (e.g. the principal place of business).’

19. As regards negotiations, Mr Chong submitted that:

(a) the main negotiator from Mitsui was Mr Shirai who was from Mitsui’s head office. The involvement of Mitsui’s personnel from its Singapore office was purely administrative and insignificant. They did not initiate any material change to terms during negotiations.

(b) The Consortium Agreements referred to Mitsui being a company incorporated under the laws in Japan and its head office’s address. Any formal communication thereunder was to be sent by Keppel to Mitsui in Japan. Much of the correspondence on negotiations were in fact sent to Mitsui’s head office.

(c) There was a Portions List attached to each of the Consortium Agreements. The List sets out the respective party’s scope of work and purchasing of materials. The Mitsui representative responsible...