Re An Arbitration Between Hainan Machinery Import and Export Corporation and Donald & McArthy Pte Ltd

• Jurisdiction: Singapore
• Judge: Judith Prakash J
• Judgment Date: 29 September 1995
• Neutral Citation: [1995] SGHC 232
• Docket Number: Originating Summons No 1056 of 1994
• Date: 29 September 1995
• Year: 1995
• Published date: 19 September 2003
• Plaintiff Counsel: S Thulasidas (Shook Lin & Bok)
• Citation: [1995] SGHC 232
• Defendant Counsel: Lawrence Teh (Rodyk & Davidson)
• Court: High Court (Singapore)
• Subject Matter: Arbitration,Defences,Enforcement,Application to enforce,Objections raised by defendants,ss 31(2)(b), (d), (e), 31(4)(a) & (b) International Arbitration Act 1994,Foreign award

In October 1992, the plaintiffs and defendants entered into a contract for the sale of goods by the defendants to the plaintiffs. A dispute subsequently arose which dispute the plaintiffs submitted to arbitration in China in accordance with the contract. The arbitral tribunal issued its award in favour of the plaintiffs in April 1994.

The defendants did not satisfy the award and, as the defendant company is incorporated in Singapore, the plaintiffs in October 1994 applied in these proceedings for an order that they be at liberty to enforce the award in the same manner as a judgment or order of this court. An order to that effect was made shortly thereafter and served on the defendants. The defendants then applied for the order to be set aside and for the further order that the arbitration award should not be enforced against them. Their application was heard by the assistant registrar in February 1995 and was dismissed. The defendants appealed. I dismissed their appeal and they have now appealed to the Court of Appeal.

Background

The plaintiffs are an organisation constituted under the laws of China. On 15 October 1992, they agreed to buy from the defendants 15,000 metric tons of steel wire rods from a Black Sea port to be delivered to the plaintiffs at the ports of Tianjin and Haikou in China. The contract provided that the latest date of shipment was 25 October 1992 and that if the delay in shipment should exceed three weeks, the plaintiffs would have the right to cancel the contract and the defendants would pay a penalty of 5% of the value of the contract.

The contract also contained the following material articles:

20 Force majeure: The sellers shall not be held responsible for the delay in shipment or non-delivery of the goods due to force majeure, which might occur during the process of manufacturing or in the course of loading or transit. The sellers shall advise the buyers immediately of the occurrence mentioned above and within fourteen days thereafter, the sellers shall send by airmail to the buyers for their acceptance a certificate of the accident issued by the competent government authorities or the chamber of commerce where the accident occurs as evidence thereof. Under such circumstances the sellers, however, are still under the obligation to take all necessary measures to hasten the delivery of the goods. In case the accident lasts for more than 10 weeks, the buyers shall have the right to cancel the contract.

...

(22) Arbitration: All disputes in connection with the execution of this contract shall be settled friendly (sic) though negotiations. In case no settlement can be reached, the case may then be submitted for arbitration to the Arbitration Committee of the China Council for the Promotion of International Trade in accordance with the Provisional Rules of Procedure promulgated by the said arbitration committee. The arbitration shall take place in Beijing and the decision of the arbitration committee shall be final and binding upon both parties. Neither party shall seek recourse to a law court or other authorities to appeal for revision of the decision. Arbitration fee shall be borne by the losing party.

After the contract was concluded there were further negotiations between the parties with regard to the shipment date as the defendants were unable to ship the goods within the originally prescribed dates. Finally, the plaintiffs agreed to amend the latest shipment date to 31 January 1993 and this was provided for by an amendment of the letter of credit which the plaintiffs had procured in favour of the defendants.

There is a dispute as to what happened next. According to the plaintiffs, shipment was not effected on or before 31 January 1993 due to the default of the defendants although the defendants had sent the plaintiffs a fax dated 30 January 1993 stating that the arrangements for loading the cargo were complete and that loading at the port of Reni in the Black Sea onto a vessel called St Nikatriov was currently underway and expected to be over shortly. The plaintiffs replied the same day to say that their information was that no such vessel was at that port on that date. On 1 February 1993, the plaintiffs formally cancelled the contract and preserved their right to claim the penalty provided for in the contract.

The defendants` position was that on 27 January they were informed by the port authorities in Reni that there was a fierce storm and earthquake in the Black Sea area and that movement of underwater soil and silt in and around Reni had rendered navigation of vessels into that port impossible. The defendants were further informed by the port authorities that shipment from Reni was unsafe and that all loading had been postponed. The defendants said that they had immediately written to the plaintiffs informing them of the situation at Reni and declaring a situation of force majeure under art 20 of the contract. They said that their letter of 30 January 1993 was sent in error due to a miscommunication. The defendants alleged that on 6 February 1993 they had written to the plaintiffs informing them again about the force majeure position and that on 8 February 1993 they had sent the plaintiffs a copy of the original force majeure certificate dated 29 January 1993 which they had received from the Chamber of Commerce and Industry of the Russian Federation.

The plaintiffs, on the other hand, contended that the defendants had not sent any letter declaring force majeure to the plaintiffs on 27 January 1993 and that the letters of 27 January 1993 and 6 February 1993 were both typed on the same day. The plaintiffs said that they only received the letter of 27 January 1993 on 18 February 1993. They denied receiving the letter of 8 February 1993 or the force majeure certificate. They did not accept that any incident of force majeure had occurred so as to excuse the defendants from their shipment obligations under the contract pursuant to art 20.

In late March 1993, the plaintiffs informed the defendants that they required payment of the sum of US$217,500 being the non-performance penalty payable by the defendants under the contract. They further notified the defendants that they had authorised a Singapore company to collect payment on their behalf and that if the defendants did not pay they would seek recourse through legal channels to recover the losses sustained by them by reason of the defendants` breach.

The defendants did not pay the plaintiffs the amount demanded. In June 1993, the plaintiffs submitted the dispute for arbitration to the China International Economic And Trade Arbitration Commission (`the Commission`) which, apparently, is the same body as the China Counsel for the Promotion of International Trade, the body nominated under the contract to conduct the arbitration. The defendants then received a letter dated 24 June from the Commission informing them that the Commission had taken cognisance of the plaintiffs` case and that they had started the arbitration proceedings. The defendants were asked to do various things, including naming an arbitrator and filing their defence. Various documents in Chinese were forwarded with the said letter.

On 1 July 1993 and 4 September 1993 the defendants wrote to the Commission asking for an English translation of the documents and stating that they did not agree to the institution of arbitration proceedings. The Commission wrote to the defendants again in November 1993 stating that if they did not appoint an arbitrator, the Commission would proceed with the arbitration. In January 1994, the defendants were informed that the hearing of the arbitration would take place on 7 April 1994. The defendants did not attend the hearing and, by a letter dated 9 April 1994, the Commission told the defendants that the plaintiffs had presented their case and asked the defendants to submit their request or supplementary materials within the next 15 days. The defendants` only response to this letter was a fax stating that they did not agree to the arbitration. The Arbitration Commission proceeded to issue its award in favour of the plaintiffs on 30 April 1994.

The grounds of the defendants` objections

The plaintiffs` original application had been made pursuant to the provisions of the Arbitration (Foreign Awards) Act (Cap 10A). This statute was repealed by the International Arbitration Act 1994 (`the Act`) which came into force on 27 January 1995. Section 36 of the Act provides that any proceedings commenced by virtue of the Arbitration (Foreign Awards) Act should continue as if it had been commenced under the Act. Accordingly, the legislative provisions governing this application were those contained in s 31 of the Act. This section sets out the various grounds on which the court may refuse to enforce a foreign arbitration award.

Before me, the defendants argued that the award should not have been registered under the Act for the following reasons:

(i) the order of court dated 27 October 1994, as drawn, failed to comply with RSC O 69 r 7(7);

(ii) the award dealt with a difference not contemplated by, or not falling within the terms of the submission to arbitration or contained a decision on a matter beyond the scope of the submission to arbitration in that the plaintiffs had by their conduct waived their right to arbitration and did not raise the issue to the arbitrators;

(iii) the arbitral procedure was not in accordance with the agreement between the plaintiffs and the defendants or was not in accordance with the law of the country where the arbitration took place, in that the arbitrators were not prompted to and did not in any event adhere to the proper procedure when making the award in favour of the plaintiffs;

(iv) the subject matter of the difference between the plaintiffs and the defendants with respect to the award was not capable of settlement by arbitration under the law of Singapore in that the jurisdiction...