Quarella Sp A v Scelta Marble Australia Pty Ltd

• Jurisdiction: Singapore
• Judgment Date: 14 August 2012
• Date: 14 August 2012
• Docket Number: Originating Summons No 122 of 2012
• Court: High Court (Singapore)

Quarella Sp A

Plaintiff

and

Scelta Marble Australia Pty Ltd

Defendant

[2012] SGHC 166

Judith Prakash J

Originating Summons No 122 of 2012

High Court

Arbitration—Award—Setting aside—Tribunal applying Italian law instead of CISG as law governing merits of dispute—Whether arbitral procedure was not in accordance with agreement of parties—Article 34 (2) (a) (iv) UNCITRAL Model Law on International Commercial Arbitration (‘Model Law’)

Arbitration—Award—Setting aside—Tribunal applying Italian law instead of CISG as law governing merits of dispute—Whether tribunal had gone beyond scope of submission to arbitration—Article 34 (2) (a) (iii) Model Law

The plaintiff (‘Quarella’) and the defendant (‘Scelta’) entered into a distributorship agreement (‘the Agreement’) dated 27 January 2000. The Agreement provided for disputes to be resolved by arbitration. Clause 25 of the Agreement set out that the Agreement was governed by the Uniform Law for International Sales under the United Nations Convention of 11 April 1980 (Vienna) (‘the CISG’) and where not applicable by Italian law. Clause 26 of the Agreement set out that any dispute which might arose be decided by arbitration. A dispute arose between parties. Scelta then filed a request for arbitration. A sole arbitrator was subsequently jointly nominated and confirmed.

Scelta took the position that Italian law applied rather than the CISG. In Quarella's Answer to the Request for Arbitration, it stated that the CISG had a limited application as it did not govern expressly distributorship agreements, which was a framework agreement. It also stated that accordingly it would mostly refer to and rely on Italian law. However, subsequently, in a letter from its solicitors, Quarella stated that the parties' choice was for CISG to be the rules of law that would be used to determine the dispute between the parties. This change of position took place three weeks before the re-scheduled hearing of the arbitration, and Scelta objected to Quarella raising the application of the CISG at such a late stage in the arbitration proceedings.

The arbitral tribunal (‘the Tribunal’) decided three preliminary issues prior to determining the main issue of whether the CISG applied to the Agreement. First, the Tribunal decided to allow Quarella to raise the new argument on the applicable law and gave Scelta an opportunity to reply. Second, the Tribunal found that there was no modification of cl 25 to completely exclude the application of the CISG. Third, the Tribunal decided that the correct interpretation of cl 25 was that the parties intended the CISG to apply to the extent that the CISG was applicable according to its own rules on applicability, and if it did not apply in part or in whole then Italian law applied. Having decided this, the Tribunal then decided that the CISG was not applicable because the Agreement did not contain a contract of sale but was a framework agreement. The first award (‘the Award’) was issued on 11 November 2011 and was in Scelta's favour. On 22 December 2011, an award on costs (‘the Costs Award’) was issued.

Quarella contended that the Tribunal's decision on the applicable law was wrong, and that the Tribunal failed to apply the law chosen by the parties. Scelta submitted that the Tribunal applied the correct substantive law, and even if this was not the case, this was not a ground for setting aside the Award under Art 34 (2) (a) (iv) of the Model Law. In addition, Scelta argued that it was not a ground for setting aside the Award under Art 34 (2) (a) (iii) of the Model Law to allege that the Tribunal applied the wrong substantive law.

Held, dismissing the application:

(1) Parties did agree on the rules of law to be applied to the dispute and the Tribunal did apply the chosen rules of law to the dispute. The Tribunal in this case respected the choice of law clause chosen by the parties, interpreted the law so chosen and came to the conclusion that the CISG did not apply and Italian law applied. The real point of dispute was that Quarella considered that the Tribunal applied the chosen law wrongly, and this was not a dispute which engaged Art 34 (2) (a) (iv) of the Model Law: at [37] to [40].

(2) This was not a case where the arbitral tribunal improperly decided matters that had not been submitted to it or failed to decide matters that had been submitted to it. The issue of the applicable law was submitted to the Tribunal; the Award addressed this explicitly. The Tribunal did decide the matters that were submitted to it: at [53].

(3) Quarella's attempt to set aside the Award under Art 34 (2) (a) (iii) was based entirely on a disagreement with the interpretation the Tribunal took regarding the choice of law clause. The dispute was not one that engaged Art 34 (2) (a) (iii) of the Model Law: at [55].

(4) The Tribunal here did not deliberately disregard or ignore or overrule the parties' choice of law clause. It did not fail to honour the choice of law clause set out by the parties: at [58].

CRW Joint Operation v PT Perusahaan Gas Negara (Persero) TBK [2011] 4 SLR 305 (folld)

PT Asuransi Jasa Indonesia (Persero) v Dexia Bank SA [2007] 1 SLR (R) 597; [2007] 1 SLR 597 (refd)

Sheng Siong Supermarket Pte Ltd v Carilla Pte Ltd [2011] 4 SLR 1094 (refd)

Soh Beng Tee & Co Pte Ltd v Fairmount Development Pte Ltd [2007] 3 SLR (R) 86; [2007] 3 SLR 86 (refd)

Sui Southern Gas Co Ltd v Habibullah Coastal Power Co (Pte) Ltd [2010] 3 SLR 1 (refd)

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

Ang Wee Tiong (Chris Chong & CT Ho Partnership) for the plaintiff

Cavinder Bull SC, Woo Shu Yan and Colin Liew (Drew & Napier LLC) for the defendant.

Judith Prakash J

Introduction

1 Ihad before me an application to set aside two arbitration awards made in an international arbitration conducted under the International Arbitration Act (Cap 143 A, 2002 Rev Ed) (‘the Act’). The first award dealt substantively with the dispute whilst the second dealt with costs.

2 The central issue the plaintiff, Quarella Sp A (‘Quarella’), wanted me to decide was this: Does a purportedly wrong interpretation of the choice of law clause (chosen by the parties to govern their distributorship agreement) by a tribunal justify a setting aside of an award under Art 34 (2) (a) (iii)-34 (2) (a) (iv) of the UNCITRAL Model Law on International Commercial Arbitration (‘the Model Law’)? The basis of the plaintiff's application was that the tribunal had failed to apply the rules of law that were agreed upon by the parties to govern the merits of the dispute.

3 In its Originating Summons, Quarella had also alleged that the rules of natural justice were breached in connection with the making of the first award and that its rights had been prejudiced thereby. This ground for setting aside the first award was, however, abandoned at the start of the hearing.

4 At the conclusion of the hearing I dismissed the application. I now set out my grounds.

Facts

Parties to the dispute

5 Quarella is a company incorporated in Italy which manufactures and exports composite stone products.

6 The defendant, Scelta Marble Australia Pty Ltd (‘Scelta’), is a company incorporated in Australia which supplies composite stone products in Australia.

7 In the proceedings before me, the President of Quarella, Giuseppe Godi (‘Mr Godi’), filed two affidavits. The Managing Director of Scelta, Stewart Macciolli (‘Mr Macciolli’), filed one affidavit. There was also a legal opinion from Prof Marco Torsello, a professor at the Department of Law of the University of Verona in Italy.

Background to the dispute

8 Quarella and Scelta entered into a distributorship agreement (‘the Agreement’) dated 27 January 2000 for the distribution of Quarella's products in Australia. The Agreement provided, inter alia:

Clause 25

This Agreement shall be governed by the Uniform Law for International Sales under the United Nations Convention of April 11, 1980 (Vienna) and where not applicable by Italian law.

Clause 26

Any dispute which might arise shall be decided by arbitration to be carried out in Singapore in English according to the rules of the International Chamber of Commerce of Paris.

9 Adispute subsequently arose. Scelta filed a Request for Arbitration dated 19 October 2009 with the Paris Secretariat of the International Chamber of Commerce (‘ICC’) International Court of Arbitration.

10 On 10 December 2009, Assoc Prof Gary F Bell was nominated jointly by Quarella and Scelta to be the sole arbitrator. On 17 February 2010, the Secretary General of the ICC International Court of Arbitration, pursuant to Art 9 (2) of the ICC Rules of Arbitration, confirmed Assoc Prof Gary Bell as the sole arbitrator (‘the Tribunal’). The parties and the Tribunal subsequently agreed on the terms of reference.

11 On 11 November 2011, the Tribunal issued a Partial Award on All Substantive Issues in Dispute (Final as to All Matters Except Costs) (‘the Award’). The Award was in Scelta's favour and Quarella was ordered to, inter alia, pay A$1,075,964.25 to Scelta as damages for Quarella's wrongful termination and breach of the Agreement. On 22 December 2011, the Tribunal issued a Final Award (on Costs) (‘the Costs Award’) which awarded Scelta costs fixed at A$824,917.50.

12 As at the date of the hearing before me, Quarella had not made any payment towards settlement of the Award or the Costs Award. Scelta was attempting to enforce the Award in Italy but this attempt was resisted by Quarella on the basis that it was seeking to set aside the Award in Singapore, the supervisory jurisdiction.

The Tribunal's decision on the applicable law

13 The question as to what the law applicable to the arbitration was, did not at first appear to be in doubt. Scelta took the position that Italian law applied rather than the Uniform Law for International Sales (‘CISG’) under the 1980 UN Vienna Convention and...