In the recent decision of PT Prima International Development v. Kempinski Hotels SA and other appeals,1 the Singapore Court of Appeal clarified the role of pleadings in international arbitration and highlighted the less formalistic approach taken in arbitration compared to that taken in litigation. In this case, where arbitration was commenced in respect of a breach of contract claim, and where a new fact arose that was both ancillary to the main claim and known to both parties (relating to a management agreement not formally pleaded), the Court of Appeal, reversing the decision of the High Court, held that despite the lack of formal pleadings, this did not put the new fact outside the scope of the parties’ submission to arbitration.
The Singapore High Court
Among other arguments before the High Court, Kempinski argued that with regard to two of five awards handed down in the arbitration, the Arbitrator had decided issues that had not been formally pleaded, thereby acting beyond the scope of his authority (the “pleadings argument”).
In respect of the pleadings argument, the High Court judge indicated that the purpose of the arbitration agreement between the parties was to “bind [the] parties to submit the disputes arising under the [management contract] to determination by arbitration … [and] did not imply that [the] parties would be free at any time during the proceedings to raise material and unpleaded points pleadings”. The Court went on to find that pleadings were an essential component of a procedurally fair hearing before both a court and an arbitral tribunal, and particularly so in arbitration proceedings where the right of appeal was very limited. The High Court held that the challenged awards should be set aside on the basis that the new fact, which had a significant impact on the arbitrator’s decision, had not been specifically pleaded.
In reversing the decision of the High Court, the Court of Appeal considered that the High Court had erred by taking “too narrow an approach in determining the extent or scope of the Arbitrator’s jurisdiction under the parties’ submission to jurisdiction”. Specifically, the error was the finding that simply because the new management contract had not been formally pleaded, its legal effect on Kempinski’s claim in the arbitration was not within the parties’ submission to arbitration. This, they held, was an error of law.
The Court of Appeal observed that pleadings are required under the UNCITRAL Model Law and the SIAC Rules (2007 edition), and that they provide a convenient way for parties to define the jurisdiction of the tribunal by setting out the nature and scope of the dispute. However, significantly, the court stated that “any new fact or change in law arising after a submission to arbitration which is ancillary to the dispute submitted for arbitration and which is known to all the parties to the arbitration is part of that dispute and need not be specifically pleaded”. The Court of Appeal found that, although Prima had not formally amended its pleadings, Kempinski was not prejudiced, and the failure to do so was therefore “immaterial”. This was hence not considered a basis to set aside the award.