AQZ v ARA [2015] SGHC 49

In AQZ v ARA, the Singapore High Court dealt with the interesting issue on how the court’s power to hear questions of jurisdiction de novo should be exercised. It also addressed the applicability of the expanded definition of “in writing” in the current version of the International Arbitration Act (the “IAA”) to arbitration agreements that were concluded before the 2012 amendments came into force.

Background facts

The plaintiff (the “Supplier”) and the defendant (the “Buyer”) entered into a contract for the shipment of coal in December 2009 (the “First Shipment”). A dispute subsequently arose as to whether a further contract for a second shipment of coal (the “Second Shipment”) had been concluded. The Buyer took the position that there was a concluded contract for the Second Shipment, and that the Supplier had breached this contract. The Supplier, however, argued that the contract for the Second Shipment never came into existence.

The Buyer subsequently issued a Notice of Arbitration, purportedly under the arbitration clause of the alleged Second Shipment contract, to commence arbitration proceedings in the Singapore International Arbitration Centre (the “SIAC”) against the Supplier. The Buyer also applied to the SIAC for the arbitration to be conducted under the Expedited Procedure under the Arbitration Rules of the SIAC (4th Ed, 1 July 2010) (the “SIAC Rules 2010”). The Supplier denied that there was an arbitration agreement between the parties and objected to the Expedited Procedure.

The SIAC allowed the Buyer’s application for the arbitration to be conducted under the Expedited Procedure and an arbitrator (the “Arbitrator”) was appointed to conduct the arbitration proceedings. In a “Ruling and Partial Award on Preliminary Issues relating to Jurisdiction and Liability” dated 12 May 2014 (the “Award”), the Arbitrator rejected the Supplier’s jurisdictional challenge and found that the Supplier was liable to the Buyer for breach of contract.

Set aside application before the Singapore High Court

The Supplier applied to the Singapore High Court to set aside the Award for the following reasons:

  • The Arbitrator lacked the requisite jurisdiction because there was no valid arbitration agreement between the parties; and
  • The composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties.

Whether the Arbitrator lacked the requisite jurisdiction

The Singapore High Court first dealt with how the court’s power to hear questions of jurisdiction de novo should be exercised. It opined that not every jurisdictional challenge would entail a complete rehearing of all that had occurred before the arbitral tribunal.  Rather, the proper approach was that the court was at liberty to consider all the materials before it, and would not be fettered in its fact-finding abilities. Thus, the court might allow oral evidence and/or cross-examination when it considers: (a) that there is or may be a dispute as to fact; and (b) that to do so would secure the just, expeditious and economical disposal of the application. Moreover, parties could adduce new evidence in their affidavits which were filed in support of their application to set aside the arbitral award.

On the facts, the Singapore High Court held that a valid and binding contract for the Second Shipment was formed in December 2009, and that its terms were identical to the terms of the First Shipment contract (apart from laycan). The Singapore High Court rejected the Supplier’s argument that the arbitration agreement was not valid because it was not “in writing” as required by section 2(1) of the 2009 version of the IAA (the “IAA 2009”), viz. the provision in force when the Second Shipment contract was entered into. Instead, the Singapore High Court held that the applicable provision was section 2A of the current IAA, which applied to all arbitral proceedings commenced on or after 1 June 2012. In particular, section 2A(4) of the existing IAA stated that:

“An arbitration agreement is in writing if its content is recorded in any form, whether or not the arbitration agreement or contract has been concluded orally, by conduct or by other means.”

In this case, the Buyer had commenced the arbitration in March 2013. Moreover, section 2A(4) of the IAA had been satisfied since the arbitration agreement was recorded in the First Shipment contract, and parties had agreed that all the terms of that contract would apply to the Second Shipment. The written drafts of the contract for the Second Shipment that the Supplier had sent the Buyer by e-mail for its signature also contained an arbitration clause that was identical to the arbitration clause of the First Shipment contract. Whilst the Buyer did not sign either draft of the Second Shipment contract, there was no evidence that its failure to do so was related to its disagreement with the terms of the arbitration clause. Thus, the drafts of the Second Shipment contract also served as a record of the arbitration agreement.

Whether the composition of the arbitral tribunal or the arbitral procedure was in accordance with the agreement of the parties

The Supplier argued that the arbitral procedure was not in accordance with the agreement of the parties because it was conducted under the Expedited Procedure contained in the SIAC Rules 2010, and that there was no provision for such a procedure in the Arbitration Rules of the SIAC (3rd Ed, 1 July 2007) (the “SIAC Rules 2007”). According to the Supplier, the SIAC Rules 2007 applied because they were the rules in force at the time the Second Shipment contract was entered into. Further, the Supplier contended that even if the SIAC Rules 2010 applied, the composition of the arbitral tribunal was not in accordance with the parties’ agreement since they had expressly agreed to arbitration before three arbitrators.

The Singapore High Court rejected the Supplier’s arguments. It held that there was a presumption that reference to the rules of a particular institution in an arbitration clause referred to such rules as were applicable at the date of commencement of arbitration, and not at the date of contract. The SIAC Rules 2010 were therefore the applicable rules. In addition, given that: (a) the SIAC Rules 2010 provided for arbitration to be conducted under the Expedited Procedure if the SIAC President agreed that this procedure should be used; and (b) the Expedited Procedure provided for the appointment of a single arbitrator, it could not be said that the procedure that was followed was not in accordance with the parties’ agreement.

Conclusion

This decision comes subsequent to the Court of Appeal decision in PT First Media TBK (formerly known as PT Broadband Multimedia TBK) v Astro Nusantara International BV and another appeal[2014] 1 SLR 372 and provides additional clarification on the manner in which the courts will treat an application to set aside an arbitral award based on jurisdictional grounds. It also provides useful guidance on what constitutes an “arbitration agreement” under the IAA.