The Court of Appeal decision in PT First Media TBK and Astro Nusantara International BV and others [2013] SGCA 57 clarifies the Singapore Court’s approach towards the enforceability of an Arbitral award and the Tribunal’s power to join non-signatories of an arbitration agreement into the Arbitration. It confirms that parties to the Arbitral proceedings are equipped with a “choice of remedies” and the Tribunal only has jurisdiction over parties to the arbitration agreement.  As such, anyone who chooses Singapore as the seat of Arbitration should seek proper legal advice on the timing to challenge an arbitral award and think carefully who should be included in an arbitration agreement before it becomes too late.

Background of PT First Media TBK and Astro Nusantara International BV and others [2013] SGCA 57

The dispute arose out of a joint venture between the Astro Group (“Astro”) (certain companies within a Malaysian media group) and the Lippo Group (“Lippo”) (companies belonging to an Indonesian conglomerate) for the provision of multimedia and television services in Indonesia. The terms of the joint venture were set out in a Subscription and Shareholders’ Agreement (“SSA”). Astro alleged that certain companies of Lippo had breached the SSA by commencing legal action against them in Indonesia. As a result, Astro commenced arbitral proceedings against the members of Lippo at SIAC on 6 October 2008. However, since certain members of Astro were not parties to the SSA, Astro made a joinder application on 19 February 2009. The Tribunal subsequently rendered an award on preliminary issues and held that pursuant to rule 24 (b) of SIAC Rules 2007, the Tribunal had the power to the join the companies of Astro to the Arbitration so long as the parties being joined consented to it. Since then the Tribunal rendered another four awards, together with the award of preliminary issues, five awards in total (the “Awards”). Interestingly, all along Lippo did not make any application to the Singapore Courts pursuant to Article 16(3) of the UNCITRAL Model law (incorporated into the Singapore International Arbitration Act (“IAA”)) to challenge the validity of the Tribunal’s decision regarding the joinder application. It was not until Astro applied for leave to enforce the Awards that Lippo made an application to set aside the enforcement orders on the ground that the parties being joined were not parties to the SSA, and hence the arbitration agreement.

Choice of Remedies

The crux of this dispute was whether FM (a member of Lippo) was precluded from raising the same jurisdictional objections which formed the subject matter of the award on preliminary issues since it had not brought the matter to the Singapore court pursuant to Article 16(3) of the UNCITRAL Model law:

Competence of arbitral tribunal to rule on its jurisdiction

“…If the arbitral tribunal rules as a preliminary question that it has jurisdiction, any 
party may request, within thirty days after having received notice of that ruling, the 
court specified in Article 6 to decide the matter..”

The Judge from the Court below interpreted Article 16(3) as an exclusive route through which a preliminary decision on jurisdiction can be challenged. Therefore, once the time limit for raising an objection under Article 16(3) has expired, the preliminary ruling on jurisdiction becomes final. Since FM had not challenged the award on preliminary issues under Article 16(3) of the UNCITRAL Model law within the prescribed time, the Judge held that FM was not allowed to raise its jurisdictional objection before the Singapore Courts.

However, the Court of Appeal, having examined the legislative background of IAA and the underlying philosophy of the UNCITRAL Model law, overruled the Court’s decision and confirmed that parties can raise objection against an arbitral award in Singapore:

  1. Active remedies - Parties to an arbitration may take positive steps to invalidate the Tribunal’s Award by making an application to challenge jurisdiction under the UNCITRAL Model law Article 16(3); and
  2. Passive remedies - Parties may defend themselves against the award by applying to set aside the Enforcement orders under the grounds set out in UNCITRAL Model law Article 36 (1) (equally available under s.19 of IAA).

As such, under the scheme of “choice of remedies”, passive defence will still be available to the award debtor even if it did not utilise its active remedies under Article 16(3), which is neither an exception to the choice of remedies nor a “one-shot remedy”.

Joinder Objection

The next issue was whether the Tribunal, under rule 24(b) of the 2007 SIAC Rules, had the power to allow non-parties to the arbitration agreement to be joined without first obtaining the consent of the parties that were already part of the arbitration reference.

In determining the standard to review, the Court of Appeal found that the Court can and should review the Tribunal’s decision de novo. The reason is that the Tribunal’s own view of its jurisdiction has no legal or evidential value before a court that has to determine that question. For this reason, the Court is required to conduct a fresh examination of the Joinder application, which was decided on the award on preliminary issues (i.e. the joining of the companies of Astro to the arbitral proceedings).

After examining the construction of rule 24.1 (b) and comparing it against the new SIAC Rules 2013 (which suggests that a party can join the arbitration only if that person is a party to the arbitration agreement), the Court of Appeal overruled the Tribunal’s decision on the ground that it only has jurisdiction over parties to the arbitration agreement, and it is only by the consent of those parties that power to join non-parties can be exercised.

Conclusion

The Singapore Court of Appeal decision confirms at least in Singapore that parties to the Arbitration are equipped with “choice of remedies”. As such, parties have the option to challenge an award immediately or wait until the enforcement proceedings, when the objecting party has more time to prepare for the jurisdictional objection. Also, with the clarification that the Tribunal only has jurisdiction over the parties to the arbitration agreement, parties should be very careful when preparing an arbitration agreement administrated by the SIAC Rules, as the Tribunal does not have the power to join non-signatories to the arbitration agreement into the Arbitration.

In practice, in other jurisdictions it may be best not to wait. Other jurisdictions may not take so benevolent an interpretation of delay as did the Singapore Court of Appeal.