Singapore High Court examines its approach towards interim orders in arbitral proceedings

The Singapore High Court (the “Court”) has refused to set aside an interim anti-suit injunction ordered by an arbitral tribunal (the “Tribunal”) in the case of PT Pukuafu Indah and others v Newmont Indonesia Ltd and another [2012] SGHC 187.  It rejected the application on the grounds that, in contrast to its ability to set aside awards, it did not have jurisdiction to set aside interlocutory orders. The Court discussed, amongst other things, the scope of the Singapore courts’ powers to set aside arbitral orders and awards and the policy considerations behind the act of balancing judicial intervention with arbitral independence.

This case is a useful reminder of the Singapore courts' concerns in deciding upon their jurisdiction and power to interfere with arbitral proceedings and sets out the policy considerations behind the balancing exercise undertaken. Further, this case confirms that the Singapore courts' attitude is inclined towards minimal intervention. The balancing exercise between fairness and efficiency demonstrates the courts' understanding of parties' needs in arbitration, and confirms Singapore's successful establishment as an arbitration hub in the Asia region.

Background

Section 3 of the Singapore International Arbitration Act (the "IAA") provides that the UNCITRAL Model Law on International Commercial Arbitration (the "Model Law") shall have the force of law in Singapore.  Article 34 of the Model Law sets out the grounds upon which the Singapore courts may set aside an award of an arbitral tribunal, supplemented by certain additional grounds set out in s. 24 of the IAA.

Article 34 of the Model Law and s. 24 of the IAA are both expressed in terms of setting aside an 'award'.  An award is defined under s. 2 of the IAA as "a decision of the arbitral tribunal on the substance of the dispute and includes any interim, interlocutory or partial award, but excludes any orders or directions made under section 12."

Section 12(1) of the IAA sets out the types of 'orders and directions' an arbitral tribunal has the power to make.  Section 12(1)(i) gives an arbitral tribunal the power to make "an interim injunction or any other interim measure."  Under s. 12(6) of the IAA, "[all] orders or directions made or given by an arbitral tribunal in the course of an arbitration shall, by leave of the High Court or a Judge thereof, be enforceable in the same manner as if they were orders made by a court."

Facts

PT Pukuafu Indah and others (the “Claimants”) and Newmont Indonesia and another (the “Defendants”) were shareholders of an Indonesian company operating a copper and gold mine in Indonesia. The Defendants alleged that the Claimants were in breach of a release agreement (the "Release Agreement"), under which the Claimants were bound to discontinue two suits which they had commenced in the Indonesian courts. In breach of the Release Agreement, the Claimants took no steps to discontinue the proceedings. Instead the Claimants began further proceedings in the Indonesian courts.

The Defendants began arbitral proceedings under the Singapore International Arbitration Centre Rules 2010 (the “SIAC Rules”) seeking an interim order pursuant to Rule 26.1 of the SIAC Rules, attempting to restrain the Claimants from continuing with all court proceedings or commencing new court proceedings. An interim anti-suit injunction (the "Order") was issued by the Tribunal, further to which the Singapore High Court granted leave for enforcement of the Order.

The Claimants applied to the Court to have the Order set aside.

Decision of the Court

The Defendants submitted that the interim measure was an Order and not an Award, therefore the Court did not have jurisdiction to review and annul the Order pursuant to the IAA and the Model Law. The Court had to determine the meaning of award under the IAA and whether the Order, notwithstanding its interim nature, was an award for the purpose of the applicable legislation.

The distinction between awards and orders or directions

The Court accepted the validity of the Defendants' argument as to jurisdiction. It discussed the distinction between awards and orders or directions as defined in the IAA.

The Court first applied the principle in PT Asuransi Jasa Indonesia (Persero) v Dexia Bank SA [2007] 1 SLR 597, noting that the underlying distinction in s. 2 of the IAA between an "award" and an "order or direction made under s12" mirrors the distinction between substance and procedure. Orders or directions listed in s. 12 of the IAA concern procedural matters or protective measures which do not determine the substantive merits of a claim. 

The Court stated that the substance of an order is decisive in determining if it is an order or an award, not the label given to it by an arbitral tribunal (PT Asuransi Jasa Indonesia (Persero) v Dexia Bank SA). Applying the above distinction to the Order, the Court concluded that if the Order for interim relief was made pursuant to s. 12 of the IAA, it would not be included in the definition of award under s. 2 of the IAA and would therefore not be within the scope of the Court's powers to set aside.

Applying the distinction to the Facts

Looking closely at the substance of the Order, the Court determined that in restraining the Claimants from continuing and/or commencing proceedings in Indonesia, the Order contained the substantive relief sought by the Defendants.

However, the Order had interim effect, and was only intended to maintain the status quo until the Tribunal could hold a full hearing on the merits.  It was clear that the Order was made under s. 12(1)(i) of the IAA, which excluded the Order from the definition of award under s. 2 of the IAA.  Therefore, the Court did not have jurisdiction to consider an application for the setting aside of the Order under s. 24 of the IAA as those powers only extended to an "award".

The Court held that a nuanced approach to its intervention powers was required in relation to interim measures such as this Order, relating both to substance and to procedure. The Court confirmed that its jurisdiction was confined to awards on substance.

Further, the Court considered that interim orders are temporary in nature. They may be modified or terminated during the course of the arbitral proceedings. Allowing parties to challenge interim orders would have the undesirable effect of staying the arbitration while judicial determination of the issue is pending.

The Court concluded that notwithstanding the link between the interim injunction and the substance of the arbitration, it should nevertheless tip the balance in favour of minimal curial intervention, and exclude its jurisdiction in relation to the Order.  In the Court's own words, "the pendulum swings between independence and interventionism, but the overarching aim is always to facilitate the efficiency of arbitration. (…) The issue  of whether interlocutory orders may be subject to judicial challenge is simply another manifestation of the perennial debate over the role that courts should play in arbitration; and under the IAA, the scales have come down firmly in favour of independence in the ongoing conduct of arbitral proceedings."

Interlocutory orders are enforceable but not reviewable by the courts

The Court noted that Article 17 of the Model Law gives an arbitral tribunal powers to make interim orders. It is silent however on the status and enforceability of such orders. It is therefore left for the member states to determine their courts' powers of intervention. As the Court noted, had the IAA simply broadened the definition of "award” to include interim orders, this would have given the Singapore courts jurisdiction to set aside interim orders. Instead the IAA filled the Model Law's lacuna with a sui generis enforcement provision, so as to preserve a balance.  As noted above, s. 12(6) of the IAA allows orders and directions made by arbitral tribunals to be enforceable in the same manner as if they were orders made by the court, subject to leave of the court.

The Court briefly explored, obiter, the possible safeguard for an aggrieved party facing an interim order in that leave of the High Court is required for an order to be enforced. In the Court's own words, "I express no concluded view as to the grounds for refusing leave for enforcement but venture to suggest that the possibility of refusing leave could provide some measure of residual protection for the rights of both parties."

This article has been produced from material provided by Herbert Smith Freehills for publication by the Practical Law Company.