Highest court allows challenge of domestic international award on ground of joinder objection.

In a landmark decision PT First Media TBK (formerly known as PT Broadband Multimedia TBK) v Astro Nusantara International BV and others [2013] SGCA 57, the Singapore Court of Appeal (the nation’s highest court) (CA) allowed an award debtor to challenge the enforcement of “domestic international awards” (i.e., international commercial arbitral awards made in the same territory as the forum in which recognition and enforcement is sought) on the basis of the arbitral tribunal’s improper exercise of its power in respect of joinder of third parties to an arbitration.

The underlying dispute related to an unsuccessful joint venture between Indonesian conglomerate Lippo Group and Malaysia’s Astro Group for provision of television services in Indonesia. Terms of the proposed joint venture, including an arbitration agreement, were contained in a subscription and shareholders’ agreement dated 11 March 2005 (SSA) signed by, inter alia, the appellant PT First Media TBK (First Media) and the 1st to 5th respondents to the appeal. However, the 6th to 8th respondents, which were companies belonging to the Astro group and which had provided funds and services to the proposed joint venture, were not parties to the SSA.

The parties were unable to conclude the proposed joint venture due to the failed fulfilment of conditions precedent set out in the SSA and Astro commenced arbitration under the auspices of Singapore International Arbitration Centre (SIAC) seeking recovery, inter alia of sums invoiced by the 6th to 8th respondents (Arbitration). By virtue of an award on preliminary issues made by the SIAC tribunal (Jurisdictional Award), the 6th to 8th respondents were joined as parties to the arbitration on the basis of rule 24.1(b) of the SIAC Arbitration Rules (2007) (2007 SIAC Rules). The said rule provided that the tribunal shall have the power to allow other parties to be joined in the arbitration with their express consent, and make a single final award determining all disputes among the parties to the arbitration.

Although First Media could have challenged the Jurisdictional Award under Article 16(3) of the Model Law (which, with the exception of Chapter VIII, is given the force of law in Singapore pursuant to section 3(1) of the Singapore International Arbitration Act (Cap. 143A) (IAA)), First Media had chosen not to do so. In the absence of such challenge, the Singapore High Court issued enforcement orders in respect of all awards made in the Arbitration. First Media appealed to the CA against the enforcement orders issued by the High Court.

The key issue for the CA to determine was whether an application to set aside an arbitral award on jurisdictional grounds under Article 16(3) of the Model Law is the sole route available to raise objection against a domestic international arbitral award on the grounds of lack of jurisdiction, or whether a party can raise a jurisdictional objection by resisting enforcement proceedings under section 19 of the IAA. The CA found that both routes are available and First Media was not prevented from objecting to the SIAC tribunal’s jurisdiction at the enforcement stage by its election not to initiate an application to challenge the preliminary ruling on jurisdiction. In reaching its decision, the CA considered the legislative history to the relevant provisions of the IAA together with rules governing statutory interpretation in Singapore and the United Nations Commission on International Trade Law (UNCITRAL) Model Law. The CA held that First Media could take (a) an “active” route and elect to challenge the Jurisdiction Award and set the award aside on jurisdiction in the supervisory court, while the arbitration was still pending or (b) a “passive” route and assert its jurisdictional objection as a defence to enforcement proceedings.

As regards First Media’s argument that the tribunal did not have the power to join the 6th to 8th respondents as parties to the arbitration, the CA found that the CA had the power to review the tribunal’s findings on jurisdiction to bring or join nonparties de novo and undertake a fresh examination of the objection. The CA found that the SIAC tribunal had improperly exercised its power under Rule 24.1(b) of the 2007 SIAC Rules by joining those respondents to the arbitration, as the rule did not confer on the tribunal the power to join third parties who were not party to the arbitration agreement in the absence of the consent of such third parties. The CA was influenced, amongst other things, by the recent revisions of the SIAC Rules in 2013, which expressly provide that “third parties” may only be joined to arbitration if they are party to the same arbitration agreement.