Sabah Shipyard (Pakistan) Ltd v Government of the Islamic Republic of Pakistan

• Jurisdiction: Singapore
• Judge: Judith Prakash J
• Judgment Date: 28 May 2004
• Neutral Citation: [2004] SGHC 109
• Docket Number: Originating Motion No 31 of 2003
• Date: 28 May 2004
• Year: 2004
• Published date: 03 June 2004
• Plaintiff Counsel: Michael Hwang SC (Michael Hwang), Nicholas Narayanan and Jeffrey Ong (Ang and Partners)
• Citation: [2004] SGHC 109
• Defendant Counsel: Davinder Singh SC (Drew and Napier LLC)
• Court: High Court (Singapore)
• Subject Matter: Whether tribunal has jurisdiction over costs arising out of prior related arbitration proceedings,"Arising out of",Jurisdiction,Arbitration,Whether "arising out of" has narrower ambit than "in connection with",Words and Phrases,Arbitral tribunal,Article 16(3) First Schedule International Arbitration Act (Cap 143A, 2002 Rev Ed),"In connection with"

28 May 2004 Judgment reserved.

Judith Prakash J:

Introduction

1 This is an application under Art 16(3) of the First Schedule of the International Arbitration Act (Cap 143A, 2002 Rev Ed) (“the Model Law”) for a declaration as to the jurisdiction of an arbitral tribunal.

2 In March 1996, the applicant entered into a contract known as the Implementation Agreement (“IA”) with the respondent. By the IA, the applicant agreed to design, finance, construct and operate a barge-mounted electric power plant for the respondent. The IA contained an arbitration clause providing for arbitration in Singapore under the Rules of Arbitration (“ICC Rules”) of the International Chamber of Commerce (“ICC”). Following the purported termination of the IA by the respondent on two occasions, on 7 December 1998, the applicant commenced arbitration proceedings against the respondent under the auspices of the ICC. These proceedings were known as “ICC Arbitration Reference No 10255/OL/ESR/MS” and for reasons that will become apparent, I will refer to them as “the First Arbitration”. The ICC appointed one Mr Derek S Firth as the arbitral tribunal in the First Arbitration.

3 The First Arbitration went on for about three years. It did not come to a conclusion because of a default by the respondent in the payment of costs. On 15 November 2001, the ICC increased the advance on costs by a sum of US$80,000 as a result of an increase in the amount claimed by the applicant. The additional advance was payable by the respondent, but the applicant could have chosen to pay it as well. On 25 February 2002, the ICC informed the parties that they were given a final time limit of 30 days to pay the sum failing which the claims in the arbitration would be considered withdrawn, without prejudice to their reintroduction at a later date in another Request for Arbitration. Neither party paid the amount. On 4 April 2002, the ICC informed the parties that, as a result, the claims were considered as having been withdrawn as of 2 April 2002 pursuant to Art 30(4) of the ICC Rules without prejudice to their being introduced in a new Request for Arbitration.

4 On 10 April and 4 May 2002, the respondent wrote to the arbitrator to request that an order be made for its costs in the First Arbitration. On 19 April and 10 May 2002, the ICC itself responded to these letters. It stated that the arbitrator did not have the power to act after a matter was considered withdrawn pursuant to Art 30(4) of the ICC Rules, whether with regard to costs or otherwise.

5 On 12 August 2002, the respondent commenced another international arbitration against the applicant under the ICC Rules. These proceedings have been referred to as “the Second Arbitration” but are formally known to the ICC as “Reference No 12286/MS”. In the Second Arbitration, the respondent sought an order for its costs of US$292,090 incurred in respect of the First Arbitration and for which no order could be made by the tribunal in the First Arbitration. Mr Firth was jointly nominated and appointed as the arbitral tribunal in the Second Arbitration. Whilst the applicant agreed to this appointment, that agreement was without prejudice to its position that the second arbitral tribunal had no jurisdiction to deal with the costs of the First Arbitration.

6 In October 2002, the applicant formally challenged the jurisdiction of the arbitral tribunal in the Second Arbitration. The challenge was first considered by the ICC Court. In December 2002, the ICC Court stated that it was prima facie satisfied that “an arbitration agreement under the [ICC] Rules may exist” and therefore the Second Arbitration could proceed and the arbitrator decide whether he had jurisdiction or not. Further submissions were exchanged. On 5 November 2003, the arbitral tribunal delivered its award on the preliminary issue of jurisdiction. The arbitrator held that he had jurisdiction in the Second Arbitration for the reason that:

[T]he claim for costs arising out of the first arbitration comes within the meaning of “… any dispute or difference between the parties arising out of or in connection with this Agreement …” in the Implementation Agreement. Those words are entitled to their plain meaning. They are clearly wide enough to include expenses of the kind incurred by the [respondent] when defending a claim against it under the Implementation Agreement by the [applicant] and where, for whatever reasons, they remain undetermined.

These proceedings

7 The applicant was not satisfied with the tribunal’s decision on its jurisdiction. As permitted by Art 16(3), within 30 days of receiving notice of that ruling, the applicant lodged the present originating motion to ask this court to decide the matter of the jurisdiction of the arbitral tribunal.

8 The originating motion asks for the following reliefs:

(a) That a declaration be made that:

(i) the arbitral tribunal constituted by the sole arbitrator, Mr Firth, in the Second Arbitration has no jurisdiction over the dispute in the Second Arbitration; and

(ii) the arbitral tribunal in the Second Arbitration has no jurisdiction over the disposal of, or to deal with the bank guarantee furnished by the applicant in the First Arbitration; and

(b) That specified portions of the arbitral tribunal’s award dated 5 November 2003 in the Second Arbitration dealing with the jurisdiction of the tribunal be set aside.

9 Before me, it was common ground that the main relief sought by the applicant was a declaration in terms of prayer (a)(i) of [8] above and that my decision on that prayer would determine prayers (a)(ii) and (b) as well. The arguments before me therefore focused entirely on the issue of the jurisdiction of the arbitral tribunal in the Second Arbitration to make an order relating to the costs of the First Arbitration. I therefore do not have to deal with or mention the circumstances in which the guarantee referred to in prayer (a)(ii) was furnished or any arguments relating to the same.

The issue: how should the arbitration clause be construed?

10 It was also common ground that my determination of the main issue would depend on how I construed the arbitration clause in the IA, Art XXI entitled “Resolution of Disputes”. Both parties accepted that the jurisdiction of the arbitral tribunal could only be derived from this clause. The material part of this Article, sub-art 21.2(a), provides:

The Parties expressly consent that any dispute or difference between the Parties arising out of or in connection with this Agreement (each a “Dispute”) shall be settled by arbitration …

11 The applicant submitted that the issue of costs of the First Arbitration did not fall within the meaning of the words “arising out of or in connection with this Agreement”. The arbitrator in making his award in the Second Arbitration had come to the contrary conclusion without a detailed analysis of the principles and case law governing the interpretation of those words.

12 The principles applicable to the construction of words contained in an arbitration clause are discussed in The Law and Practice of Commercial Practice in England (2nd Ed, 1989) by Mustill and Boyd. At 118 of the book the authors state that courts will make the prima facie assumption that the parties intended all disputes relating to a particular transaction to be resolved by the same tribunal....