In this watershed decision, the Court of Appeal held that parties that do not actively attack a domestic international award may still rely on the defences to enforcement, absent any issues of waiver.
The dispute arose out of a joint venture between companies belonging to an Indonesian conglomerate (“Lippo Group”) and companies within a Malaysian media group (“Astro Group”).
The vehicle for the JV was to be PT Direct Vision (“DV”). PT Ayunda Prima Mitra (“Ayunda”) was to hold the Lippo Group’s share in the joint venture with PT First Media Tbk (“First Media”) guaranteeing Ayunda’s obligations.
The terms of the joint venture were contained in a Subscription and Shareholders’ Agreement dated 11 March 2005 (“SSA”) between First Media, Ayunda and DV, and the 1st to 5th Respondents to the Appeal. It was common ground that the 6th to 8th Respondents were not parties to the SSA.
Pending the fulfilment of the conditions precedent set out in the SSA, the 6th to 8th Respondents provided funds and services to DV
By mid-August 2007, it became clear to the parties that the joint venture would not close. Nonetheless, the 6th to 8th Respondents continued to provide funds and services to DV.
On 6 October 2008, the 1st to 8th Respondents (“Astro”) commenced arbitration proceedings against First Media, Ayunda and DV under the auspices of the Singapore International Arbitration Centre (“Arbitration”). The seat of the arbitration was Singapore.
In the Notice of Arbitration, Astro stated that the 6th to 8th Respondents had consented to being added as parties to the Arbitration, as permitted by rule 24(b) of the SIAC Rules (3rd Ed, 1 July 2007) (“2007 SIAC Rules”). Concurrent with the Notice of Arbitration, the 1st to 5th Respondents filed an application to join the 6th to 8th Respondents as parties to the Arbitration. The joinder application was allowed by way of the Tribunal’s award dated 7 May 2009.
First Media could have challenged the jurisdictional ruling under Article 16(3) of the UNCITRAL Model Law on International Commercial Arbitration adopted by the United Nations Commission on International Trade Law on 21st June 1985 (“Model Law”). However, First Media did not.
Subsequently, the Tribunal rendered four other awards (collectively with the jurisdictional ruling, “Awards”). First Media could have applied to set aside the Awards under Article 34 of the Model Law. However, First Media did not.
In August and September 2010, Astro obtained ex parte Orders to enforce the Awards in Singapore. In March 2011, Judgment was entered on the Awards. On 3 May 2011, First Media applied to set aside the Judgments on the ground that service of the Orders to enforce the Awards had been irregular. The applications succeeded and First Media applied to set aside the Orders to enforce the Awards. However, the Judge dismissed these applications and consequently, First Media appealed to the Court of Appeal.
THE COURT OF APPEAL’S DECISION
The Court of Appeal affirmed that the enforcement of domestic international awards is governed by section 19 of the International Arbitration Act (“IAA”). The purpose of the IAA was to create an omnibus regime for international arbitration which the Model Law and the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“New York Convention”). Adopting a purposive approach to statutory interpretation, the Court of Appeal held that the construction of section 19 had to be consonant with the underlying philosophy of the Model Law.
The Court of Appeal undertook a detailed analysis of the history of the Model Law and concluded that “choice of remedies” is not merely a facet of the Model Law enforcement regime; it is the heart of the Model Law’s entire design. This choice applies equally to both foreign and domestic awards as the policy of the Model Law is to treat awards in a uniform manner, irrespective of their place of origin. Accordingly, parties that do not actively attack a domestic international award remain able to passively rely on defences to enforcement, absent any issues of waiver.
In the Court of Appeal’s view, the most efficacious method of giving full effect to the Model Law philosophy would be to recognise that the same grounds for resisting enforcement under Article 36 of the Model Law are equally available to a party resisting enforcement under section 19 of the IAA. The fact that section 3(1) of the IAA excludes Chapter VIII of the Model Law from having force of law in Singapore did not prohibit this conclusion.
As the Court of Appeal explained, section 3(1) of the IAA was enacted to ensure that the enforcement of foreign awards would be governed by only one set of rules, viz, the New York Convention. Parliament gave no hint of any intention to exclude the “choice of remedies” in relation to domestic international awards.
As regards Article 16(3) of the Model Law, the Court of Appeal held that it was not a “one-shot remedy” which excluded the passive remedy of raising the issue of jurisdiction at the enforcement stage. The Court of Appeal took the view that Article 16(3) is not certainty-centric. Rather, it is meant to render the arbitration process more efficient by enabling earlier court control on jurisdictional rulings.
Turning to the joinder of the 6th to 8th Respondents to the arbitration, the Court of Appeal held that rule 24(b) of the 2007 SIAC Rules acted as a procedural power, rather than a means for a tribunal to extend its jurisdiction. It did not vest tribunals with a broad power to join non-parties to the arbitration, notwithstanding the objections of a party to the arbitration.
Accordingly, First Media’s objection to the Tribunal’s assertion of jurisdiction of the claims of the 6th to 8th Respondents was well-founded.
In any event, the Court of Appeal held that First Media had not waived its objections to the Tribunal’s jurisdiction to determine issues pertaining to the 6th to 8th Respondents, nor was First Media estopped from raising these objections. There was a high threshold for establishing a waiver, viz, the party’s conduct was only consistent with waiver and the waiver had been communicated in clear and unequivocal terms. For estoppel, it had to be shown that the party invoking estoppel had relied on the representation of the other party to its detriment.
The Court of Appeal’s decision is a testament to the Singapore Courts’ firm commitment to the Model Law. Notwithstanding the express provision in section 3(1) of the IAA that Chapter VIII of the Model Law shall not have the force of law, the Court of Appeal has determined that the grounds of resisting enforcement under Article 36(1) of the Model Law will be available under section 19 of the IAA.
As the party which objects to the Tribunal’s jurisdiction has a “choice of remedies”, it has the ability to decide when to raise the issue for the Singapore Courts’ determination. However, the other party will no doubt be anxious to ensure that any arbitral awards which it may obtain will be enforced and that the time and costs expended on the arbitral proceedings will not be wasted.
Such a party may perhaps seek to place the issue before the Singapore Courts by applying to enforce the preliminary ruling on jurisdiction at an earlier stage.
However, as the Court of Appeal noted at , there is an issue as to whether the Singapore courts can enforce or refuse enforcement of preliminary rulings on jurisdiction which are couched as awards. It therefore remains to beseen whether, and how, the Courts will inject certainty into the process.