PT Asuransi Jasa Indonesia (Persero) v Dexia Bank SA

• Jurisdiction: Singapore
• Judge: Judith Prakash J
• Judgment Date: 20 October 2005
• Neutral Citation: [2005] SGHC 197
• Docket Number: Originating Motion No 8 of 2004
• Date: 20 October 2005
• Year: 2005
• Published date: 21 October 2005
• Plaintiff Counsel: Prakash Mulani, Aftab A Khan and Alvin Chang (M and A Law Corporation)
• Citation: [2005] SGHC 197
• Defendant Counsel: Joseph Ang (Tan Kok Quan Partnership)
• Court: High Court (Singapore)
• Subject Matter: Award,Whether failure to conduct oral hearing amounting to breach of natural justice in relation to right to be heard and to present case fully,Whether award dealing with issues not falling within terms of submission to arbitration,Whether award in conflict with law that arbitral awards final and binding necessarily in conflict with public policy also,Setting aside,Arbitration,Section 19B International Arbitration Act (Cap 143A, 2002 Rev Ed), Art 34(2) UNCITRAL Model Law on International Commercial Arbitration,Arbitral award allegedly in conflict with previous award on same issue,Recourse against award,Arbitral tribunal making award determining preliminary issues,Only written submissions considered in determining preliminary issues,Whether award should be set aside

Background

1 The applicant, PT Asuransi Jasa Indonesia, has come before the court to obtain, inter alia, the following orders:

(a) that the arbitration award dated 5 December 2003 (“the Award”) in an arbitration in Singapore entitled Case No ARB 005 of 2002 (“the Arbitration”), ordering that the Arbitration be dismissed on the basis that the arbitral tribunal had no jurisdiction to entertain the proceedings, be set aside;

(b) that the preliminary issues/objections raised by Dexia Bank SA, the respondent, be dismissed; and

(c) that the Arbitration be remitted back to the arbitral tribunal for hearing.

The Arbitration was not the first arbitral proceedings that had taken place between the applicant and the respondent. There had been previous proceedings and a previous award and, to put it simply, the basis of the challenge to the Award was an alleged conflict between it and the outcome of the previous proceedings.

2 The applicant is a state-owned entity of the Republic of Indonesia. It guaranteed notes valued at approximately US$288m issued by four special-purpose vehicles (collectively “the Rekasaran Group”), one of which was Rekasaran BI Ltd, a Cayman Islands-incorporated company (“the Issuer”). The respondent, a bank, was one of the holders of notes issued by the Issuer (“BI Notes”).

3 The applicant took steps in 2000 (“the Restructuring Scheme”) to restructure its obligations to all holders of notes issued by members of the Rekasaran Group (“the Noteholders”), including the respondent. The essence of the Restructuring Scheme was as follows:

(a) the notes would be replaced by equivalent notes (“the MCP Notes”) of Mega Caspian Petroleum (“MCP”), an entity registered in the British Virgin Islands;

(b) the MCP Notes would be secured by shares owned by MCP in Central Asia Petroleum (“CAP”), a company registered in the British Virgin Islands that owned oil fields in the Republic of Kazakhstan; and

(c) in return, the applicant would be released from its guarantee.

4 The Restructuring Scheme was approved by a majority of the Noteholders who attended a Noteholders’ meeting held on 29 February 2000 (“the February 2000 meeting”).

5 The respondent, however, together with a few other holders of BI Notes, opposed the Restructuring Scheme. To enforce recovery under the BI Notes, the respondent commenced arbitration proceedings in the Singapore International Arbitration Centre (“SIAC”) by way of Arbitration No 23 of 2001 (“the Previous Arbitration”). Those proceedings were issued against the Issuer as the borrower under the BI Notes and against the applicant as the guarantor of the Issuer’s liabilities. The respondent contended that the Issuer and the applicant were still liable to it and that it was not bound by the Restructuring Scheme because:

(a) there was nothing in the documentation of the notes that allowed a joint Noteholders’ meeting of all five note issues;

(b) the nature of the business transacted at the February 2000 meeting was allegedly not properly notified to the Noteholders;

(c) there was allegedly no quorum for the February 2000 meeting; and

(d) the requisite majority was allegedly not achieved at the February 2000 meeting.

The notice of arbitration leading to the Previous Arbitration was issued in March 2001.

6 In the course of the Previous Arbitration, the tribunal (“the Previous Tribunal”) dealt with and considered the following issues:

(a) whether any obligation arose under the BI Notes to make payment to the respondent;

(b) whether the obligations under the BI Notes were restructured pursuant to the February 2000 meeting; and

(c) whether, by reason of sovereign immunity, the applicant could not be brought before the Previous Tribunal.

7 The Previous Arbitration was heard on 7 June 2001. In October 2001, the Previous Tribunal issued an award granting the respondent’s claim (“the Previous Award”) and ordering the Issuer and the applicant to pay the respondent a sum in excess of US$8.6m.

8 In the meantime, the Issuer had convened a further meeting of holders of BI Notes alone to ratify the resolutions passed at the February 2000 meeting. On 19 April 2001, the Issuer gave notice that it intended to call a meeting for the purpose of passing, inter alia, the following resolutions:

(a) that the resolutions passed at the February 2000 meeting be ratified;

(b) that the BI Notes be exchanged for MCP Notes;

(c) that the applicant be released from its obligations under the guarantee; and

(d) that the respondent and certain other parties cease their arbitration actions against the Issuer and the applicant and lift an injunction that they had obtained against these parties from the Singapore court.

9 The ratification meeting was first held on 18 May 2001. Only one Noteholder, PT Bhakti Investama (“PT Bhakti”), attended it. PT Bhakti held US$46m of the BI Notes (amounting to 46% of the BI Notes issuance). This was insufficient to form a quorum under the relevant documentation which specified a quorum of one or more persons holding BI Notes of not less than two-thirds in nominal value of the BI Notes outstanding. The ratification meeting was thus adjourned.

10 The adjourned meeting was held on 4 June 2001 (“the June 2001 meeting”). Once again, only PT Bhakti attended it. As this was an adjourned meeting, however, PT Bhakti’s attendance was sufficient to constitute the quorum. The documentation provided that persons holding not less than one-third in nominal amount of the BI Notes outstanding would constitute the quorum at an adjourned meeting. Upon a vote being taken, PT Bhakti voted to approve the resolutions put before the meeting. In August 2001, the Previous Tribunal was sent a note of the June 2001 meeting. This note was actually the minutes of the meeting and contained the names of the persons who attended the meeting and the resolutions passed at the meeting. The note was accompanied by a cover sheet addressed to one of the arbitrators and which simply described the contents of the note without more.

11 The respondent did not attend the June 2001 meeting. Through counsel, the respondent had objected to the proposed ratification meeting on the grounds that it would allegedly be in violation of an injunction obtained by certain BI Noteholders in the High Court of Singapore and also that the Restructuring Scheme itself was in violation of the terms of the BI Notes. The injunction had been obtained on the basis of an allegation that contractual terms relating to meetings of holders of the BI Notes had not been complied with in respect of the February 2000 meeting.

12 On 25 July 2001, the applicant made an application to this court to discharge the injunction so as to allow the holders of the BI Notes to proceed with the Restructuring Scheme. Although the application to discharge the injunction was not granted, the court on 27 September 2001 observed that the Issuer was not precluded from taking steps that might render the BI Notes void or ineffective as long as such steps were taken in accordance with the governing documentation. The court also stated that it made no finding on the issue of the validity or effectiveness of the ratification meeting. The respondent continued to dispute the validity of the June 2001 meeting and the resolutions passed on that date.

Proceedings in the present arbitration

13 On 10 January 2002, the applicant issued a notice of arbitration against the respondent and three other holders of the BI Notes, ie, those noteholders who had obtained the injunction in Singapore. By this notice the applicant sought, as against all the other four parties including the respondent, a declaration that:

(a) the June 2001 meeting was valid and binding on all holders of the BI Notes including the respondent; and

(b) the Restructuring Scheme was valid and binding on all the holders of the BI Notes including the respondent.

As a result of this notice, the Arbitration was commenced and, on 10 October 2002, the SIAC appointed a three-man arbitration tribunal (“the Tribunal”) comprising Mr V K Rajah, as chairman, Mr Roderick Martin and Mr Gabriel Peter.

14 A preliminary meeting was held on 12 November 2002. On the respondent’s application, the Tribunal ordered that the following issues be tried as preliminary jurisdictional issues:

(a) whether the Tribunal had jurisdiction to entertain the Arbitration in the light of the history of the Previous Arbitration; and

(b) whether the divestment by MCP of its shares in CAP would prevent the applicant from proceeding with the Arbitration.

The Tribunal gave directions on the filing and service of written submissions by both parties. The Tribunal also ordered that oral submissions be heard on 11 February 2003.

15 For some reason, the submissions were not presented by the original deadlines and no hearing took place on 11 February 2003. Instead, on 30 July 2003, the respondent made further allegations to the effect that the arbitration proceedings were allegedly “moot” and ought to be discontinued because the respondent had disposed of its holdings in the BI Notes. On 20 August 2003, the Tribunal directed the applicant to respond to these allegations. In September 2003, both parties filed their written submissions on the new allegations. In October 2003, the Tribunal gave further directions in relation to the submissions on the preliminary objections. These were filed by the respondent on 23 October 2003 and by the applicant on 17 November 2003.

16 To the great surprise of the applicant, the Tribunal issued an award determining the preliminary issues on 5 December 2003 without calling for an oral hearing. It is this award that the applicant seeks to set aside.

The Award and the Previous Award

17 In the Award, the Tribunal set out the following issues as determinative of the preliminary questions relating to jurisdiction:

5 ISSUES

5.1 Whether the claim against the respondent is moot now that the respondent has disposed of its [BI] Notes.

5.2 Whether...