Full Steam Ahead: Singapore International Commercial Court ("SICC") issues judgment clarifying the position on what constitutes an offshore case

As we previously reported, the recently established SICC is up and running (see here).  It issued its first judgment in May 2016 (see here) and has since continued to be active in resolving ongoing disputes in a speedy manner, with two more decisions issued in June 2016. In this post, we look at one of these judgments which deals with what constitutes an 'offshore case' for the purposes of the SICC in Teras Offshore Pte Ltd v Teras Cargo Transport (America) LLC[1]. (Click here for the full judgment.)  This is important as this is a key feature of the SICC which allows users to have greater freedom as to the conduct of the case (including the appointment of international counsel).

Facts

Teras Cargo Transport (America) LLC ("Teras America") entered into a series of contracts with Bechtel Oil Gas and Chemicals Inc. and Bechtel International Inc. for the provision of services and the supply of equipment for three liquefied natural gas projects (the "Projects") in and around Queensland, Australia. Teras America sub-contracted with Teras Offshore Pte Ltd ("Teras Offshore") on a back-to-back basis for the supply of services and equipment to the Projects.

A dispute arose between the parties and Teras Offshore brought claims against Teras America under the sub-contracts. The proceedings were initiated in the Singapore High Court but were subsequently transferred to the SICC in March 2016.[2]

Declaration of the present matter as an 'offshore case'

Teras America brought an application before the SICC asking the Court to decide that the action pending before it was an offshore case.

International Justice Eder opined that an 'offshore case' is "an action which has no substantial connection with Singapore", and observed that it was not of importance whether or not the action has a substantial connection with other jurisdictions but only important if it had a 'substantial' connection with Singapore.

The Rules of Court prescribe that an action has no substantial connection to Singapore where (a) Singapore law is not the law applicable to the dispute, or (b) the only connection between the dispute and Singapore is the choice of Singapore law as the substantive law of the contract and the parties' have submitted to the jurisdiction of the Singapore Courts.

For an explanation of what was meant by the words 'substantial connection with Singapore', Justice Eder relied on the SICC Practice Directions.[3] The SICC Practice Directions list five factors, each of which will not, by itself, constitute a substantial connection between the dispute and Singapore:

• any of the witnesses in the case may be found in Singapore;
• any of the documents that are relevant to the dispute may be located in Singapore;
• funds connected with the dispute have passed through Singapore or are located in bank accounts in Singapore;
• one of the parties to the dispute has properties or assets in Singapore that are not the subject matter of the dispute;
• where one of the parties is a Singapore party, or where a party is not a Singapore party, but has Singapore shareholders.

Justice Eder held that the existence of more than one of the stipulated factors, taken either on their own or with other factors, is at least, capable of justifying a conclusion that the action has a substantial connection with Singapore.

Decision of the SICC

On an evaluation of the facts, it was held that the case did not have a 'substantial' connection with Singapore due to the following:

• the fact that the Plaintiff is a Singapore company and has assets in Singapore (which are not the subject matter of the dispute) was irrelevant;
• the fact that a sum advanced by the Plaintiff to the Defendant which formed part of the Plaintiff’s claim was paid through the Plaintiff’s account in Singapore was peripheral;
• while the presence of the Plaintiff’s witnesses and documents as well as the Defendant’s servers in Singapore suggested a connection with Singapore in a procedural sense, the connection was not a substantial one, even when taken with the other factors; and
• the vast majority of the services to be provided under the Projects was to be provided in Queensland, Australia and had nothing to do with Singapore.

Key takeaways

The decision of the SICC in this case provides welcome clarification as to the extent of the 'offshore' jurisdiction of the SICC.  By construing the relevant rules relatively narrowly, it should in future be easier for international parties to access the 'offshore' jurisdiction of the SICC, together with its benefits. This important case should assist in furthering the SICC's objective of providing a world-class international commercial court.

This case is of particular important as it will assist parties in having further freedom of choice as to their appointment of counsel as in offshore cases parties can choose to be represented by international counsel registered with the SICC.   Herbert Smith Freehills' Singapore disputes team members Alastair Henderson, Gitta Satryani, Daniel Waldek and Emmanuel Chua all have rights of audience before the SICC and can represent parties before the SICC in appropriate cases.  

For further information, please contact Alastair Henderson, Partner, Daniel Waldek, Senior Associate, Kritika Venugopal, Associate or your usual Herbert Smith Freehills contact.