Singapore Court refuses to entertain a jurisdictional objection to the enforcement of domestic international arbitration awards

The recent case of Astro Nusantara International BV and others v PT Aunda Prima Mitra and others[2012] SGHC 212 is a further decision of the Singapore courts showing active support for arbitration (see our earlier blog piece here on PT Pukuafu Indah and others v Newmont Indonesia Ltd and another).

The case involved a challenge to the enforcement of arbitral awards on the grounds that the Tribunal lacked jurisdiction over a number of the parties to the arbitration. The Singapore High Court issued a lengthy and complex judgment, delving into the provisions of the UNCITRAL Model Law. The Court held that:

• In relation to an domestic international arbitration award, an unsuccessful party cannot just remain passive and resist recognition and enforcement only when enforcement proceedings are brought. A pro-active application to set aside the award on a prescribed ground is needed within the correct timescale.
• In relation to a ruling on jurisdiction heard as a preliminary issue, an unsuccessful party must subject the ruling to the court for review within the statutory time limit. If it does not do so and continues with the arbitration, it cannot then revive a jurisdictional objection on enforcement.

Also of interest was the court’s view that civil law jurisprudence on the Model Law would be of more relevance than English court decisions in terms of precedent value.

The decision is confined to the enforcement of domestic international arbitration awards in Singapore. However, it confirms the Singapore judiciary’s support of arbitration and party autonomy, reflecting efforts to curtail court intervention in favour of finality and certainty.

Facts

This dispute arose out of a failed joint venture between the Astro group of companies and the Lippo group of companies to provide Pay TV, radio and interactive multimedia services in Indonesia.

In March 2005, a joint venture agreement was reached, as was a Subscription and Shareholders Agreement for the joint venture. A condition precedent of the Subscription and Shareholders Agreement was the conclusion of service agreements.

From about December 2005, in anticipation of the conclusion of the service agreements and the commencement of the joint venture, at Lippo’s request Astro began to provide supporting services and funding to the Lippo Indonesian subsidiary through which the joint venture was to be operated.

By August 2007, after many failed attempts at re-negotiation and hammering out their differences, it became clear to the parties that the joint venture would not close. The parties began to explore exit options. In the meantime, Astro continued to provide supporting services and funding to the Lippo Indonesian subsidiary.

A dispute subsequently arose over the provision of the supporting services and funding. Astro claimed that it was not obliged to and would not continue to provide such services and funding. Lippo alleged the contrary, arguing that Astro was obliged to continue the provision of supporting services and funding under an oral joint venture agreement, the terms of which had been agreed upon before the Subscription and Shareholders Agreement was executed.

In August 2008, Astro invoiced Lippo for the supporting services and funding and demanded repayment of the cash advanced. Lippo refused to pay.

Astro commenced the Arbitration on 6 October 2008 with Singapore as the seat of arbitration and in accordance with the Arbitration Rules of the Singapore International Arbitration Centre, SIAC Rules, 3rd Edition, 1 July 2007 (the SIAC Rules 2007). In the Arbitration, Astro sought (among other things):

• to join two Astro companies to the Arbitration (who had provided the supporting services and funding but were not themselves parties to the Subscription and Shareholders Agreement); and
• restitutionary relief approximating US$250m in value in respect of the supporting services and funding provided.

Lippo claimed that the two Astro companies were not party to the Subscription and Shareholders Agreement and the Tribunal did not have jurisdiction to join them to the Arbitration. In an award delivered on 7 May 2009, the Tribunal held that this issue was within the Tribunal’s jurisdiction and that rule 24(b) of the SIAC Rules 2007 gave it power to join the two Astro companies with their express consent and such joinder was both desirable and necessary in the interests of justice.

Lippo did not appeal from this award on jurisdiction, although it purported to reserve its rights “on any appeal”. It proceeded to contest the substantive merits of Astro’s claims in the Arbitration.

In the period October 2009 – August 2010, the Tribunal delivered 4 further awards, in which Astro was substantially successful. Astro took steps to enforce the awards in in Singapore.

In August and September 2010, Astro obtained ex parte leave to enforce the 5 awards in Singapore. On 14 January 2011, these Singapore enforcement orders were purportedly served on an Indonesian Lippo company in Jakarta and, on 24 March 2011, Astro obtained Singapore judgments in terms of the 5 awards.

Lippo sought to set aside the Singapore enforcement orders on the ground that the Tribunal lacked jurisdiction to make the awards underpinning them.

Decision of the Court

Lippo argued that it was entitled to rely on the jurisdictional point in order to resist enforcement because s 19 of the IAA “imports” art 36 or, alternatively, art 34 of the Model Law. The Court said that this line of argument “resonates with English arbitration law’s notion that passive remedies exist after an arbitral award has been made and are available to a losing party to defend enforcement proceedings.”

Lippo drew support for this argument from the drafting history of the Model Law, where the possibility of a party raising defences both at the setting-aside stage (i.e. under Art 34) and at the recognition and enforcement stage (i.e. under Art 36) was specifically contemplated, debated and finally concluded on the note that a party should be able to choose between the two remedies in Art 34 and Art 36 respectively. This has been referred to as dual control or double control of an arbitral award.

However, the Court held that s 19 imported neither Art 36, nor Art 34 of the Model Law and there was no other basis upon which Lippo could be entitled to raise a jurisdictional point to resist enforcement in circumstances where time limits under Arts 16 and 34 of the Model Law had long since expired.

It was implicit in s 3(1) of the IAA that Art 36 did not have the force of law in Singapore.  While Art 34 does have the force of law in Singapore, it is subject to a strict three-month time limit which had long since expired.

The Court held that the Tribunal addressed jurisdiction in its ruling dated 7 May 2009 as a preliminary question under Art 16(3) of the Model Law, a consequence of which being that Lippo could only request the Court to rule on the question of the Tribunal’s jurisdiction within 30 days after having received notice of the Tribunal’s ruling on jurisdiction (ie by 6 June 2009).

The Court ruled at paragraph 151 that:

"… if a party fails to appeal or decides not to appeal an award on jurisdiction, the award will be treated as final between the parties and the hearing on the merits will proceed on the basis (and not simply the assumption) that the tribunal has jurisdiction. Challenging such an award on jurisdictional grounds is thus excluded from the grounds which a party may invoke at the setting-aside or the enforcement stage if the party has chosen not to bring an appeal under Art 16(3) of the Model Law. There is no avenue under the Model Law to participate in a hearing on the merits under protest without having lodged an appeal under Art 16(3) if a party wishes to properly and effectively retain its right to raise an objection to the tribunal’s jurisdiction. There are no passive remedies when it comes to challenging jurisdiction under the IAA – a party wishing to oppose a jurisdictional award must act."

The Court dismissed as irrelevant the UK Supreme Court decision of Dallah Real Estate and Tourism Holding Company v The Ministry of Religious Affairs, Government of Pakistan [2011] 1 AC 763. The important distinction is that Dallah involved an application to enforce not a domestic international arbitration award but instead a foreign international arbitration award. Accordingly, in Dallah the clear legislative avenue for jurisdictional objection lay in Art V(I)(a) of the New York Convention, as enacted by s 103(2)(b) of the Arbitration Act 1996 (UK).

Lippo has indicated that it will appeal.

Comment

The decision on Lippo’s jurisdictional objection was dictated by an orthodox interpretation of the reasonably plain terms of the IAA and the Model Law as enacted (and modified) by the IAA. The decision reflects a deliberate decision on the part of the Singapore legislature to curtail curial intervention in favour of finality, certainty and efficiency – all important objectives of international arbitration.

This decision is confined to the enforcement of domestic international arbitration awards in Singapore (that is international awards which are made in Singapore and sought to be enforced in Singapore), as award debtors may resist the enforcement of foreign international arbitration awards in Singapore (and elsewhere) pursuant to Art V of the New York Convention. However, as paragraph 86 of the decision and cases cited therein warn, an enforcement court may not permit a party to revive a jurisdictional objection at the enforcement stage because of its conduct and failure to raise the jurisdictional objection before the curial court.

At paragraphs 85 and 86 of the decision, the Court recognised that the Model Law is not a creature typical of the statutes emanating from common law jurisdictions; it more properly resembles civil law drafting. As such, any sensible discussion of the Model Law must draw from arbitration law in civil law jurisdictions. In this regard, the Court drew assistance from the law and decisions of Germany, Quebec, and other Model Law and civil law countries (see paragraphs 81 – 3; 105).

Case

Astro Nusantara International BV and others v PT Ayunda Prima Mitra and others [2012] SGHC 212

Sean Izor, Associate, Herbert Smith Freehills, Bangkok