Upholding the Agreement to Arbitrate – a Singaporean perspective

Parties choose to arbitrate as an alternative to resolving their disputes in court.  Courts should respect that choice and interfere as little as possible.  While courts cannot (and should not) be excluded entirely, they should only engage with the dispute when required to support and – if necessary – enforce the choice of arbitration, and to ensure the propriety of the process.

Singapore adopts a strong policy of minimal court intervention in arbitration.  However, a recent decision of the Singapore International Commercial Court (SICC) illustrates that a policy of support for the parties' agreement to arbitrate may be precisely what justifies or even necessitates court intervention.

Summary of the case

In Frontier Holdings Limited v Petroleum Exploration (Private) Limited [2024] SGHC(I) 34 ("Frontier Holdings"), the SICC decided an application to set aside a tribunal's ruling that it lacked jurisdiction.

The dispute turned on the interpretation of an arbitration clause in concession documents. The majority of the ICC-constituted tribunal concluded that on a proper construction, the arbitration agreement provided for disputes between the parties to be resolved by domestic arbitration, so that this international tribunal lacked jurisdiction to determine the dispute. The disappointed claimant applied to the SICC to set aside that ruling.

International Judge Thomas Bathurst noted that the issue depended on the proper construction of the concession documents. Noting that there was some ambiguity in the language of the arbitration clause, it was appropriate to ascertain the parties' intention by considering the operation of other contractual provisions in context, also having regard to the surrounding circumstances. In light of this analysis, the court held that the tribunal was incorrect to conclude that it lacked jurisdiction.  The negative jurisdictional ruling was set aside.

So far, so plain vanilla: a ruling on construction of a contract.  However, the ancillary orders in consequence of the decision are of greater interest. The court ordered that the tribunal "must continue with the arbitration and make an award(s)" and "in the event that any arbitrator is unable or unwilling to continue with the arbitration, the mandate of that arbitrator will terminate and a substitute arbitrator shall be appointed in accordance with Art 15 of the UNCITRAL Model Law on International Commercial Arbitration".

The law on challenging negative jurisdictional rulings in Singapore

Singapore's International Arbitration Act 1994 ("IAA") incorporates the UNCITRAL Model Law on International Commercial Arbitration 1985 ('Model Law').  Article 16(3) of the Model Law only allows reviews by the court at the seat of arbitration if the tribunal rules that it does have jurisdiction.  There is no comparable provision for court review of negative jurisdictional rulings in the Model Law. 

When evaluating this position in 2011, Singapore's Law Reform Committee noted the view taken by the drafters of the Model Law – that "it was inappropriate to compel arbitrators who had made such a [negative jurisdictional] ruling to continue the proceedings". Nevertheless, the Committee also noted the views of those who argued that challenges to negative rulings ought to be permitted.  One of the key reasons being that this would uphold the parties' agreement to refer the dispute to arbitration.  As explained by the Law Reform Committee, "a wrong negative jurisdictional ruling which is not capable of judicial review will, in effect, shut out access to the agreed form of resolution in that neutral seat; thereby, thrusting upon parties what they intended to avoid in the first place, namely, litigation in the national court of one of the parties".

The Committee came down in favour of amending the law.  Consequently, Section 10(3) of the IAA now enables a party to refer a tribunal's ruling on jurisdiction – positive or negative – to the General Division of the High Court for judicial determination. Singapore courts have held that a section 10(3) application takes the form of a full de novo hearing of the jurisdictional challenge.

Remission to Tribunal

In AKN v ALC [2015] 3 SGCA 63 the Court of Appeal decided that a tribunal becomes definitively functus officio once an award has been issued, and consequently that if the award is subsequently set aside, it cannot be remitted to the same tribunal: 'remission is a carefully defined concept in the IAA (and Model Law), and that it operates as an alternative to setting aside ... As we have already upheld the setting aside of certain portions of the Award, the question of remission does not and, for that matter, cannot arise'. 

What is the position if a tribunal ruling on jurisdiction is set aside?  Can the matter be remitted back to the same tribunal?  In Frontier Holdings, the SICC decided – without discussion – that it could.  Indeed, the court held that the tribunal 'must' continue with the arbitration and make an award, and that if any arbitrator was unwilling or unable to continue in such circumstances, a substitute arbitrator would be appointed.

Comment

The court's power to set aside a negative jurisdictional ruling offers a robust procedural safeguard that protects the agreement to arbitrate.  Without Section 10(3) of the IAA, a claim which should properly have been resolved by arbitration will be irrecoverably excluded from that forum. This could well have been the reality if the seat of the arbitration had been in a jurisdiction which applies the UNCITRAL Model Law without similar modifications. It is worth noting that this does not mean parties are entirely without recourse in all other jurisdictions if a tribunal finds that it lacks jurisdiction to determine a dispute. For instance, the English Court in GPF GP Sàrl v The Republic of Poland [2018] EWHC 409 (Comm) set aside an investment treaty tribunal's jurisdictional award (in which it had concluded that it lacked jurisdiction to determine most of the claims) pursuant to Section 67 of the Arbitration Act 1996, which provides for "challenging the award: substantive jurisdiction". The arbitration then resumed, and the same tribunal eventually rendered a final award.

At a conceptual level, the SICC's decision in Frontier Holdings leaves complex questions unanswered.  A negative ruling on jurisdiction is in substance and effect a final order terminating the arbitration.  Article 32(3) of the Model Law is clear that 'The mandate of the arbitral tribunal terminates with the termination of the arbitral proceedings, subject to the provisions of articles 33 [correction and interpretation of an award] and 34(4) [remission instead of setting aside of an award]'.  On one hand, if the tribunal is functus following a negative ruling on jurisdiction, how could the SICC remit the matter back to the same tribunal?  This would not be considered remission of an award to the tribunal within the meaning of Article 34(4) of the Model Law because the IAA expressly defines an 'award' as "a decision of the arbitral tribunal on the substance of the dispute". On the other hand, if the tribunal is not functus, what is the basis for this and for distinguishing the case from AKN v ALC?  The SICC left these questions for attention on another occasion.

The SICC's decision also raises practical considerations.  Would the arbitrators agree to continue in such circumstances, or would they feel constrained to resign so that (in effect) a new tribunal must be constituted? If they did agree to continue, would the successful party even be content to have its matter determined by the same tribunal that had made that erroneous jurisdictional ruling? Or would that party instead have to explore creative options – such as perhaps terminating those proceedings on a without prejudice basis and then instituting fresh proceedings with a new tribunal, now armed with a court's decision on the interpretation of the arbitration agreement? That still begs the question as to the value and impact of the court's decision on the freshly constituted tribunal. After all, the principle of competence-competence is a cornerstone of arbitration, and that tribunal is entitled to rule on the question of its own jurisdiction without following, or even considering, the court's decision. These issues reaffirm the notion that disputes planning does not simply begin with the commencement of arbitration proceedings, but rather with the drafting of the arbitration agreement. It will be increasingly important for parties to carefully consider the appropriate arbitral seat, the degree to which their right to arbitrate is protected and the implications this may have on the arbitration process.

For more information, please contact Alastair Henderson, Samuel Wittberger, or your usual Herbert Smith Freehills contact.