PT Asuransi Jasa Indonesia (Persero) v Dexia Bank SA

• Jurisdiction: Singapore
• Judgment Date: 01 December 2006
• Date: 01 December 2006
• Docket Number: Civil Appeal No 127 of 2005
• Court: Court of Appeal (Singapore)

PT Asuransi Jasa Indonesia (Persero)

Plaintiff

and

Dexia Bank SA

Defendant

[2006] SGCA 41

Chan Sek Keong CJ

,

Andrew Phang Boon Leong JA

and

Belinda Ang Saw Ean J

Civil Appeal No 127 of 2005

Court of Appeal

Arbitration–Award–Recourse against award–Setting aside–Application to set aside arbitral award–Legal scope for setting aside arbitral award where arbitral award allegedly conflicting with previous award on same issue or dealing with issues beyond scope of submission to arbitration or conflicting with public policy–Section 19B and First Schedule Art 34 (2) International Arbitration Act (Cap 143A, 2002 Rev Ed)–Words and Phrases–“Award”–Whether negative ruling on jurisdiction to hear matter by arbitral tribunal amounting to award–Section 2 (1) International Arbitration Act (Cap 143A, 2002 Rev Ed)

PT Asuransi Jasa Indonesia (Persero) (“the appellant”), an Indonesian state-owned entity, appealed against the decision of the High Court dismissing an application for an order to set aside an arbitral award (“the Second Award”) that was the result of an arbitration (“the Second Arbitration”) involving the appellant as claimant and Dexia Bank SA (“the respondent”).

The Second Arbitration was commenced by the appellant after the conclusion of a preceding arbitration between the same parties (“the First Arbitration”). In the First Arbitration the respondent, as claimant, obtained an award (“the First Award”) from the arbitral tribunal against, inter alia, the appellant for a sum in excess of US$8.6m as guarantor for a series of US dollar notes (“BI Notes”) held by the respondent. The BI Notes had been issued by Rekasaran BI Ltd (“the Issuer”), a special-purpose vehicle incorporated in the Cayman Islands under a “Debt Issuance Programme” (“DIP”).

The BI Notes had matured in 1999. In 2000, the appellant initiated a scheme (“the Restructuring Scheme”) pursuant to the terms and conditions of the DIP to release their payment obligations under the BI Notes by replacing them with a new series of notes issued by another company. Though the respondent and some other BI Noteholders opposed the Restructuring Scheme, it was purportedly approved at a BI Noteholders' meeting on 29 February 2000 (“the February 2000 meeting”) at which the respondent was absent.

On 22 March 2001, the respondent commenced the First Arbitration against the Issuer and the appellant. The issues submitted for determination by the tribunal hearing the First Arbitration (“the First Tribunal”) were whether any obligation arose under the BI Notes to make payment to the respondent, whether the obligations under the BI Notes were restructured pursuant to the February 2000 meeting and whether the appellant was immune from the proceedings pursuant to their claim to sovereign immunity.

The Issuer and appellant did not appear and were unrepresented at the First Arbitration, choosing instead to give notice to the BI Noteholders for another meeting to, inter alia, ratify the resolutions passed at the February 2000 meeting, on the basis that the February 2000 meeting was invalid with the consequence that they remained liable as guarantors on the BI Notes. The resolutions to ratify the resolutions that had been passed at the February 2000 meeting were passed on 4 June 2001 (“the June 2001 meeting”).

The First Tribunal heard the First Arbitration on 7 June 2001. It was not aware of the June 2001 meeting at that time. Sometime in August 2001 however, it received from the appellant a copy of a notarised document dated 5 June 2001 containing the minutes of the June 2001 meeting and the resolutions passed at the meeting (“the Minutes”). There was no covering note to explain the intent or purpose of such communication.

The First Tribunal issued the First Award on 18 October 2001 granting the respondent's claim on the basis of the three-fold finding that the Issuer and the appellant were under an obligation to pay under the BI Notes, that such obligations had not been restructured pursuant to the February 2000 meeting and that the appellant had not been entitled to plead sovereign immunity.

The appellant commenced the Second Arbitration on 10 January 2002 against, inter alia, the respondent seeking a declaration that the June 2001 meeting and the Restructuring Scheme were valid and binding on all BI Noteholders, including the respondent. Before filing their statement of defence, the respondent had raised several jurisdictional issues before the Second Tribunal, the sole issue of importance in this appeal being whether the tribunal had jurisdiction to entertain the proceedings in light of the earlier proceedings. The Second Tribunal, without holding an oral hearing, issued the Second Award on 5 December 2003 finding, inter alia, that it had no jurisdiction to determine the substantive issues in the submission to arbitration as the action constituted a misuse of process since the appellant could and should have brought the claim in the First Arbitration (and were accordingly estopped from raising the issue of the June 2001 meeting).

The appellant applied to the High Court for an order that the Second Award be set aside on a four-fold basis, namely: (a) that the Second Award was in conflict with the public policy of Singapore and was thus in breach of Art 34 (2) (b) (ii) of the United Nations Commission on International Trade Law (“UNCITRAL”) Model Law on International Commercial Arbitration (“Model Law”); (b) that the Second Award had dealt with disputes or issues not failing within the terms of submission to arbitration, thus leading to a breach of Art 34 (2) (a) (iii) of the Model Law; (c) that a breach of natural justice under s 24 (b) of the International Arbitration Act (Cap 143A, 2002 Rev Ed) (“the Act”) had occurred in connection with the making of the Second Award by which the rights of the appellant had been prejudiced; and (d) that the appellant had not been given a full opportunity to present its case.

With respect to the first two grounds, counsel for the appellant had focused his attack on three critical findings in the Second Award that formed the basis of the issue estoppel that led the Second Tribunal to decide that it had no jurisdiction to determine the substantive issues. The first finding (“the first critical finding”) was the finding that the appellant did not raise the June 2001 meeting at the First Arbitration because it chose not to participate in the First Arbitration. The second finding (“the second critical finding”) was the finding that had the June 2001 meeting been raised, it would have been directly relevant for the First Tribunal to consider. The third finding (“the third critical finding”) was that the appellant was estopped from raising the issue of the June 2001 meeting which it should have brought forward as part of the First Arbitration. Counsel for the appellant contended that each of these three critical findings contradicted the findings of the First Tribunal and were therefore illegal and contrary to public policy for contravening the finality principle enacted in s 19B of the Act. In the alternative, it was argued that the three critical findings were beyond the scope of submission for the same reasons.

The trial judge dismissed the application. Although she decided that the first critical finding was liable to be set aside, she held that it did not affect the third critical finding and therefore the validity of the First Award. In that connection, the trial judge also rejected the appellant's argument that the second and third critical findings were inconsistent with the First Award. The appellant's appeal was canvassed on the same grounds as those in the High Court.

Held, dismissing the appeal:

(1) While the court agreed with the trial judge that the first critical finding was irreconcilable with the First Award because a party could participate in arbitral proceedings without being present or represented at the hearing, there was no purpose in setting it aside since it had no effect on the validity of the third critical finding and therefore no effect on the validity of the First Award: at [24] and [26].

(2) The second critical finding subsumed two separate findings on two different questions, one of fact and the other of law. The first was the finding of fact that the appellant did not raise the June 2001 meeting before the First Tribunal. The second was the finding of law that the June 2001 meeting would have been relevant for the First Tribunal to consider had it been raised: at [28].

(3) As the First Tribunal had said that the June 2001 meetingwas irrelevant for its determination, and the Second Tribunal had said that if the June 2001 meeting had been raised, it would have been relevant for the determination of the First Tribunal, on their face, it was evident that these statements were inconsistent on the issue of relevance. Indeed, the only circumstance in which it may be said that there was no inconsistency would be if the First Tribunal had expressly stated that the reason it found the June 2001 meeting irrelevant was because it was not raised before it as a defence. However, the First Tribunal made no such statement nor could such a statement be implied or logically deduced from the First Tribunal's finding: at [29] and [32].

(4) While the June 2001 meeting had not been formally raised before the First Tribunal, given that the appellant had informed the First Tribunal of the June 2001 meeting by sending it the Minutes, a strong argument could be made out that it was raised, albeit informally. Nonetheless, since the June 2001 meeting was a new difference arising after the First Tribunal had been constituted and therefore not an issue that was within the original submission to arbitration, it would have been irrelevant to the issues requiring determination in the First Arbitration. As such, on the balance of probabilities, the First Tribunal found the June 2001 meeting...