Singapore International Commercial Court Considers First Application To Set Aside An Arbitral Award.

Legal News & Analysis - Asia Pacific - Singapore - Dispute Resolution

10 September, 2019

 

In BXS v BXT [2019] SGHC(I) 10, the Singapore International Commercial Court ("SICC") heard its first application to set aside an arbitral award. The SICC considered whether it had the power to extend the time limit imposed on bringing an application to set aside an award, particularly in circumstances where a setting aside application that has been brought out of time lacks merit.

The SICC also considered the wording of an arbitration agreement that failed to identify the applicable version of the arbitral rules to determine whether the Singapore International Arbitration Centre ("SIAC") had correctly allowed the arbitration to commence under the Expedited Procedure in the 2016 version of the SIAC Rules and whether a sole arbitrator could be appointed contrary to the express terms of the arbitration agreement.

 

Background Facts

 

The Plaintiff, a Thai listed company, commenced an arbitration under the auspices of the SIAC against the Defendant, a Mauritius-registered investment company. The Plaintiff claimed that the Defendant was liable under a sale and purchase agreement between the parties to indemnify the Plaintiff for tax paid to the Thai tax authority. The agreement contained an arbitration clause stating that disputes are to be settled by three arbitrators appointed according to the SIAC Rules.

 

The Defendant in response applied, under the Expedited Procedure provided in the 6th Edition of the SIAC Rules ("2016 Rules"), for the arbitration to be conducted by a sole arbitrator in the interest of saving time and costs. The Plaintiff objected to the appointment of a sole arbitrator stressing that the arbitration agreement expressly provided for three arbitrators. The President of the SIAC Court of Arbitration decided that the arbitration would proceed under the Expedited Procedure and appointed a sole arbitrator. Ultimately, the sole arbitrator dismissed the Plaintiff’s claim to be indemnified by the Defendant.

 

The Plaintiff initiated proceedings before the Thai Central Intellectual Property and International Trade Court to set aside the arbitral award. The Thai court dismissed the application on the basis that it lacked the power to set aside the arbitral award which was rendered in Singapore.

 

The Plaintiff also applied to the SICC to set aside the award alleging that (i) the composition of the tribunal was contrary to the arbitration agreement; (ii) the award dealt with matters outside the terms of submission to arbitration; and (iii) the award was contrary to public policy. The Defendant applied to strike out the application on the basis that it was brought outside of the three-month period for challenging an arbitral award stipulated by Article 34(3) of the UNCITRAL Model Law ("Model Law") and that the Singapore courts lacked jurisdiction even to consider its merits. 

 

Decision of the SICC

 

The SICC concluded that none of the alleged grounds relied on by the Plaintiff had been made out. It dismissed the Plaintiff's application to set aside the award and granted the Defendant's strike out application.

 

The Plaintiff's setting aside application

 

The SICC held that the arbitration agreement simply provided for the resolution of disputes by arbitration pursuant to the SIAC arbitration rules without specifying which edition of the rules was to apply. Thus, the 2016 Rules in force at the time the arbitration commenced were applicable. Under the 2016 Rules, the President of the SIAC Court of Arbitration is empowered to determine whether an application using the Expedited Procedure should be granted and, if so, whether the proceedings should be referred to a sole arbitrator. This was applicable even where the agreement contained contrary terms, that is, the appointment of three arbitrators. Hence, the appointment of a sole arbitrator under the Expedited Procedure did not contravene the parties’ arbitration agreement.

 

The Plaintiff also argued that because the appointed sole arbitrator did not have knowledge of Thai law, the sole arbitrator misapplied Thai law. The SICC was of the view that the sole arbitrator made careful (as opposed to mere superficial) reference to Thai law in the award, acknowledging that the only point of contention between the parties was the extent to which pre-contractual negotiations were relevant in interpreting a contract.

 

Despite preferring the Defendant’s expert evidence, the arbitrator nonetheless looked specifically into the parties’ pre-contractual negotiations in coming to a decision. The Plaintiff’s criticism that the sole arbitrator came to a wrong conclusion when assessing the factual evidence in light of Thai law was not a valid ground for setting aside the award.

 

The Defendant's strike out application

 

The SICC held that Article 34(3) imposed a mandatory three-month time limit and was a “written law relating to limitation”. Although the SICC has the general power to extend time under section 18 of the Supreme Court of Judicature Act (“SCJA”), it found that paragraph 7 of the First Schedule to the SCJA extinguished a right of action to set aside an award upon the expiry of three months. Therefore, the SICC had no power to extend the time limit to revive that lost right.

 

In addition, Article 5 of the Model Law suggests that the provisions of Article 34(3) are meant to be self-contained since no court shall intervene in arbitration- related matters except in limited circumstances as authorised by the Model Law. Hence, following the expiry of the three-month limitation in Article 34(3), the Singapore courts have no jurisdiction to intervene by extending the time for setting aside the award through the invocation of a power conferred by paragraph 7 of the First Schedule to the SJCA, which is extraneous to the Model Law. 

 

The SICC observed that even if it did have the power to extend the time limit, it would not have granted an extension. The nearly two months of delay amounting to more than 60% of the three-month limitation was significant. The Plaintiff provided no good reason why it chose to set aside a Singapore award before the Thai courts rather than the courts of Singapore, which was the seat of arbitration.

 

Implications

 

This decision clarifies the importance of clearly stating the parties' intention in an arbitration agreement to mitigate the risk of a future dispute on whether the terms of an arbitration agreement are superseded by a contrary provision in a future edition of the chosen arbitral rules. For instance, parties should clearly state the composition of the arbitral tribunal and expressly state that any contradictory provisions in subsequent versions of the rules shall not override a mandatory requirement stipulated in the arbitration agreement. In the event that parties are unclear of the applicable edition of the rules, the parties will be taken to have accepted any modifications of the stipulated rules following the date of the arbitration agreement.

 

This decision also clarifies the Singapore position on the nature of the time limit in Article 34(3) of the Model Law. Once the three months stipulated in Article 34(3) have lapsed, the right to apply to set aside an award is lost and cannot be revived by resorting to the court’s power to extend time. This is aligned with the finality and conclusiveness of the arbitral process as stressed by the Singapore Court of Appeal in a number of its decisions.

 

Notably, the Singapore position on Article 34(3) of the Model Law differs from the Hong Kong position where the court can extend the three months in exceptional circumstances. In Sun Tian Gang v Hong Kong & China Gas (Jilin) Ltd [2016] 5 HKLRD 221, the Hong Kong Court of First Instance found that the words "may not" in Article 34(3) gave the court a discretion to decide whether or not to permit the setting aside application to be made after the three months' period. The court noted that bearing in mind the objective of finality in an award, the short period of three months should not, as a general rule, be extended unless the applicant could establish to the court's satisfaction that there are good reasons to do so. The court held that the limitation period in that case had not even been triggered, but noted that if it had, the court would have extended time as the applicant's circumstances had been "very exceptional". 

 

Baker McKenzie

For further information, please contact:

 

Nandakumar Ponniya , Principal, Baker & McKenzie.Wong & Leow

nandakumar.ponniya@bakermckenzie. com