The Kuala Lumpur High Court recently ruled on which of two competing arbitration clauses applied in Cyber Business Solutions Sdn Bhd v Elsag Datamat SPA.(1)
The defendant claimed that the operative arbitration agreement should be that contained in the general supply terms and conditions, which provided for arbitration before the International Court of Arbitration of the International Chamber of Commerce (ICC) in Paris. The plaintiff contended that it had never signed the general supply terms and conditions (or the arbitration clause contained therein), and that the operative arbitration agreement was that contained in the subcontract concluded in June 2008 and signed by the defendant. The clause in the subcontract provided for disputes to be settled by way of arbitration under the rules of arbitration of the Kuala Lumpur Regional Centre for Arbitration (KLRCA). The defendant referred the dispute for arbitration to the ICC in Paris. The plaintiff applied for injunctive relief to restrain the defendant from continuing with the ICC arbitration in Paris.
The court found that the dispute as to which of the two arbitration clauses prevailed should be left to determination at trial, as it involved serious disputes that required resolution after the witness testimony of the parties had been heard in court. The disputes constituted good-faith issues to be tried and formed the basis for grant of the injunction pending trial.
The defendant had first contended that, by virtue of the ICC arbitration clause, the jurisdiction of the Malaysian courts had been ousted. In its decision, the court held that the presence of an arbitration clause did not oust the jurisdiction of the Malaysian courts.
The defendant then contended that the plaintiff had "wilfully submitted" to the jurisdiction of the ICC, such as to oust the jurisdiction of the Malaysian courts. The court found that the plaintiff took the position that the ICC arbitration clause was not binding on it, and that the issue of competing arbitration clauses should be resolved by the court. The court therefore found that the plaintiff had not submitted to the jurisdiction of the ICC. The court held it was not for either the ICC or the KLRCA to determine the jurisdictional issue of which tribunal was seized in view of the competing forums. In this regard, the court found that the balance of convenience favoured the grant of the injunction. The court further held that allowing the ICC arbitration to proceed would result in large sums of money being incurred that would be wasted if it were found at trial that the operative arbitration agreement was that governed by the KLRCA.
For further information on this topic please contact K Shanti Mogan at Shearn Delamore & Co by telephone (+60 3 2070 0644), fax (+60 30 2078 5625) or email ([email protected]).