PT Perusahaan Gas Negara (Persero) TBK v CRW Joint Operation (Indonesia) and another matter

• Jurisdiction: Singapore
• Judge: Vinodh Coomaraswamy J
• Judgment Date: 16 July 2014
• Neutral Citation: [2014] SGHC 146
• Plaintiff Counsel: Mr Philip Antony Jeyaretnam SC and Ms Wong Wai Han (Rodyk & Davidson LLP)
• Docket Number: Originating Summons No 683 of 2013, Originating Summons No 585 of 2013 (Summons No 3923 of 2013)
• Date: 2014
• Hearing Date: 10 October 2013,09 October 2013
• Subject Matter: Setting aside,Arbitration,Recourse against award
• Published date: 21 July 2014
• Citation: [2014] SGHC 146
• Defendant Counsel: Mr Cavinder Bull SC, Ms Foo Yuet Min, Ms Lim May Jean and Mr Ho Ping Darryl (Drew & Napier LLC)
• Court: High Court (Singapore)
• Year: 2014

Vinodh Coomaraswamy J:

In the two applications before me, PT Perusahaan Gas Negara (Persero) TBK (“PGN”) applies to set aside: (1) a majority arbitral award dated 22 May 2013 issued in favour of CRW Joint Operation (Indonesia) (“CRW”); and (2) an order permitting that award to be enforced as though it were a judgment of the High Court. Having received and considered both parties’ written and oral submissions, I dismissed both of PGN’s applications.

PGN has appealed to the Court of Appeal against my decision. In brief, it is my view that the majority’s award is entirely consistent with the parties’ contract and with the manner in which that contract was interpreted by the Court of Appeal in earlier litigation between the same parties on the same contract. It is also my view that the majority’s award is not prohibited by Singapore’s international arbitration legislation, whether explicitly or by implication. I now set out the grounds for my decision.

Background The parties, their contract and their disputes

PGN is a listed, state-owned company established under Indonesian law. It owns and operates gas transmission systems in Indonesia.¹ CRW is also an entity established under Indonesian law. It comprises three Indonesian limited liability companies.²

By a contract entered into in 2006, PGN engaged CRW to design, procure, install, test and pre-commission a pipeline to convey natural gas from South Sumatra to West Java.³ In early 2008, CRW and PGN found themselves in dispute on a number of variation claims made by CRW under their contract. The parties referred their disputes for decision by a neutral body constituted by their contract for precisely that purpose. That body is known as a dispute adjudication board (“DAB”).

In due course, the DAB rendered a series of decisions dealing with all of the parties’ disputes. PGN accepted all of the DAB’s decisions except for its decision delivered on 25 November 2008. In that decision, the DAB held that as at 25 November 2008, CRW had “become entitled to” the total sum of US$17,298,834.57.⁴ PGN has failed to pay to CRW pursuant to that DAB decision.

PGN accepts that it has been under a contractual obligation since 25 November 2008 to comply promptly with that DAB decision by paying CRW that sum. PGN further accepts, as it must, that its failure to do so is a breach of contract. I shall refer to the parties’ underlying dispute which forms the subject-matter of the DAB decision as the “primary dispute”. I shall refer to the dispute which arises from PGN’s failure to pay CRW, whether promptly or at all, pursuant to the DAB decision as the “secondary dispute”.

The phrase “secondary dispute” is convenient for present purposes but is not entirely accurate (see [62] below). That is because PGN’s contractual obligation to pay CRW pursuant to the DAB decision is indisputable and is in fact undisputed. Despite this, PGN submits that the parties’ contract and Singapore’s arbitration legislation does not permit CRW to do anything to enforce that obligation. Counsel for PGN, Mr Philip Jeyaretnam SC, put it this way in the course of argument:⁵

Court: … is it common ground between the parties that PGN is in breach in not paying [CRW] pursuant to [the DAB decision] notwithstanding the notice of dissatisfaction and the pending arbitration?

Mr Jeyaretnam: Your Honour, the--- I think we really would not be able to resist that… conclusion on the contract. The contract… provides for… the DAB decision to be binding and DAB Decision has been granted. … And that … has been our legal position. But the question is what is the enforcement options available and those enforcement options depend on the law and on the procedural provision in Singapore… [I]nevitably the Court’s sympathies must lie with the party who has not received payment under a form of contract such as this…. [b]ut regardless of that, the question remains what actually is the legal position.

[emphasis added]

It is true that one’s sympathies inevitably lie with CRW and not with PGN, whose arguments have evolved over the course of the parties’ protracted dispute. But it is my task to judge the parties’ arguments on their merits and not on my sympathies. It is on the merits that I have dismissed PGN’s applications, for the detailed reasons which follow.

The 2009 arbitration

The parties’ contract contains an arbitration agreement. CRW has made two attempts through arbitration to compel PGN to pay the sum awarded by the DAB. CRW’s first attempt was an arbitration commenced in 2009. That attempt failed. Its second attempt is an arbitration commenced in 2011. It is from this 2011 arbitration that the two applications before me arise.

For a variety of evolving reasons, PGN has maintained throughout the 2009 arbitration, throughout the 2011 arbitration and throughout all the associated litigation (including the two applications now before me) that it cannot be compelled to comply promptly with the DAB decision unless its primary dispute with CRW has been heard and determined on its merits and with finality.

In the 2009 arbitration, CRW placed before the tribunal only the secondary dispute and sought as relief a final award compelling PGN to pay it the sum awarded by the DAB decision. PGN’s principal argument before the 2009 tribunal was that the parties’ arbitration agreement does not permit an arbitral tribunal to compel PGN to comply with the DAB decision unless the same arbitral tribunal in the same arbitration goes on to hear and determine the primary dispute on the merits and with finality.

By a majority, the 2009 tribunal rejected PGN’s argument. The majority issued what it described as a “Final Award” requiring PGN to comply with the DAB decision and noting expressly that PGN was at liberty to commence a separate arbitration to have the primary dispute heard and determined on the merits. PGN applied to the High Court to set aside that final award. The High Court in 2010 agreed with PGN that that award should be set aside. CRW appealed to the Court of Appeal against the High Court’s decision. The Court of Appeal in 2011 dismissed CRW’s appeal. The result is that CRW’s attempt through the 2009 arbitration to compel PGN to comply with the DAB decision has failed.

The 2011 arbitration

Rebuffed but undaunted, CRW commenced the second arbitration in 2011. In the 2011 arbitration, CRW adjusted its approach specifically to meet PGN’s earlier argument. It did so by placing before the 2011 tribunal both the primary dispute and the secondary dispute. In response, PGN adjusted its argument to meet CRW’s new approach. This time, PGN argued that the parties’ arbitration agreement and Singapore’s international arbitration legislation do not permit an arbitral tribunal to compel PGN to comply promptly with the DAB decision unless the same arbitral tribunal– in the same award and not merely in the same arbitration – also hears and determines the primary dispute on the merits.

The 2011 tribunal has, by a majority, rejected PGN’s argument. It has therefore issued an interim or partial award compelling PGN to comply with the DAB decision. CRW has obtained leave to enforce that award against PGN as though it were a judgment of the High Court. PGN applies now to set aside the 2011 tribunal’s interim or partial award and, with it, the order permitting CRW to enforce that award. PGN makes these applications even though: (1) the majority’s award simply requires PGN to pay promptly a sum to CRW now which PGN accepts it has been obliged to pay promptly to PGN since 2008; and (2) the 2011 tribunal fully intends to go on to hear and determine the primary dispute on the merits and with finality in the same arbitration.

Arguments and issues PGN’s arguments

Mr Jeyaretnam puts the central issue before me in the following way:

The central issue to be decided is whether CRW is entitled to enforce [the DAB decision] by way of an interim award, which is final and binding, without the [tribunal] first determining the underlying merits of the [DAB decision].⁶

PGN’s arguments on this central issue, put simply, are as follows: The majority in the 2011 arbitration have issued an award which they have described as an interim or partial award but which is in truth a provisional award. It is provisional because the majority intend their interim award to have finality only up until the time the 2011 tribunal hears and determines the primary dispute on the merits and with finality.⁷ The International Arbitration Act (Cap 143A, 2002 Rev Ed) (“IAA”) does not permit a tribunal to issue a provisional award. As a matter of form, s 2 of the IAA refers only to interim, interlocutory or partial awards and makes no mention of provisional awards.⁸ As a matter of substance, and more importantly, s 19B(1) of the IAA (see [109] below) deems every award which a Singapore-seated arbitral tribunal issues – however it may be described – to be final and binding. Finally, the legislative history of s 19B shows an intent not to permit provisional awards. The 2011 tribunal therefore has no power to award CRW provisional relief as it attempted to do: as an award that PGN “shall promptly pay the sum of US$17,298,834.57 as set out in the DAB Decision” to CRW “pending the final resolution of the Parties’ dispute raised in these proceedings” (see [114] below, emphasis added). Section 19B(1) of the IAA deems the majority’s award to be a final and binding award. That overrides the majority’s intent that its award should have only provisional effect. Further, under s 19B(2) of the IAA, no future award can vary the majority’s award. The majority has therefore converted a DAB decision which has only interim finality under the parties’ contract into an award which, under s 19B of the IAA, is final and unalterable. The majority has therefore determined with finality the existence and extent of PGN’s...