By Wynne Tay– MPillay
Sanum Investments Limited v ST Group Co, Ltd and others [2018] SGHC 141
This case concerns one of many applications taken out in respect of the enforcement of an award dated 22 August 2016 (the "Award") issued in relation to an arbitration administered under the auspices of the Singapore International Arbitration Centre ("SIAC"). The application before the court was for the refusal of enforcement of the Award under Article 36(1) of the UNCITRAL Model Law on International Commercial Arbitration ("Model Law") contained in the First Schedule of the International Arbitration Act (the "IAA"). The Court dismissed the application as against three out of the four applicants.
The judgment is interesting not least because the facts concern a multi-party situation while involving a multi-tiered dispute resolution clause. Additionally, the Court also considered the principles relevant to the refusal of enforcement of award under Art 36(1)(a)(iv) of the Model Law where the arbitration was wrongly seated.
Background facts
Sanum Investments Limited ("Sanum") is a company incorporated in Macau and was, in 2007, looking for business opportunities in Lao. It was then that it got in touch with ST Group Co., Ltd ("ST Group"), Mr Sithat Xaysoulivong ("Mr Sithat"), ST Vegas Co. Ltd ("ST Vegas Co.") and S.T. Vegas Enterprise Ltd. ("ST Vegas Enterprise") (collectively, "the Lao disputants").
The parties negotiated and entered into a joint venture arrangement which was embodied in an agreement dated 30 May 2007 (the "Master Agreement"). The Master Agreement contemplated three joint ventures, one of which concerned the operation of slot clubs. To execute the joint venture for two slot clubs, Sanum and ST Vegas Enterprise entered into a Participation Agreement on 6 August 2007 (the "Participation Agreement").
There was a third slot club named Thanaleng Slot Club which was not treated as immediately part of the slot club joint venture as there were existing third party machine owners involved. Nonetheless, the Master Agreement envisaged that Sanum would take over the Thanaleng Slot Club when the third party machine owners' contracts terminated.
In relation to the Thanaleng Slot Club, three agreements were entered into:
- Temporary Thanaleng Participation Agreement between Sanum and ST Vegas Co;
- First Expansion Agreement between Sanum and ST Group; and
- Second Expansion Agreement between Sanum, ST Group and ST Vegas Co
(collectively, the "Thanaleng Documents").
It later transpired that ST Vegas Co did not turn over the Thanaleng Slot Club to Sanum. Sanum then commenced arbitral proceedings before the Lao Organisation of Economic Dispute Resolution ("OEDR") where Sanum's claim was dismissed. ST Vegas Co commenced proceedings against Sanum in the Vientiane People's Commercial Court afterwards, seeking inter alia, a declaration that the Temporary Thanaleng Participation Agreement had expired and that the parties no longer owed any obligations to each other in relation to the Thanaleng Slot Club. In response, Sanum filed a defence and counterclaim against ST Vegas Co, ST Group, Mr Sithat and Xaya Construction Company Ltd. Sanum's counterclaim was ultimately dismissed and ST Vegas Co's claim was affirmed.
Sanum subsequently commenced arbitration seeking damages for breaches of the Master Agreement, and the Participation Agreement (the "SIAC Arbitration"). The tribunal found in favour of Sanum.
The court proceedings
The Lao disputants applied for the refusal of enforcement of the Award arguing that:
- the Award was made pursuant to an arbitration agreement (or agreements) to which not all the Lao disputants were party (under Article 36(1)(a)(i) of the Model Law);
- the Award deals with a dispute not contemplated by or falling within the scope of the submission to arbitration (under Article 36(1)(a)(iii) of the Model Law); and
- the composition of the tribunal and the seat of the arbitration were not in accordance with the agreement of the parties (under Article 36(1)(a)(iv) of the Model Law).
The Lao disputants took the position that the underlying dispute concerned the Thanaleng Slot Club and must therefore have arisen out of the Thanaleng Documents which did not contain any arbitration agreement. However, on the facts, the court found that the underlying dispute arose out of the Master Agreement alone and Clause 2(10) of the Master Agreement was an agreement to arbitrate: [45]-[46]
The Court also found that amongst the Lao disputants, ST Vegas Enterprise was not a party to the Master Agreement: [83].
However, this finding alone was insufficient to dispose of the Lao disputant's jurisdictional challenge under grounds 1 and 2 above as Clause 2(10) was "a multi-tiered clause which not only sets out pre-requisites to the commencement of arbitration but, more importantly by its language, defines and limits the parties who may proceed to the stage of international arbitration.": [63].
Clause 2(10) of the Master Agreement stated:
"If any dispute shall arise, the Parties agree to conduct an amicable negotiation. If such dispute cannot be settled by mediation, the Parties may submit such disputes to the Resolution of Economic Dispute Organization or Courts of the Lao PDR according to the provision and law of Lao PDR in accordance with this Agreement. All proceedings of the arbitration shall be conducted in the Lao and English languages.
Before settlement by the arbitrator under the rules of the Resolution of Economic Dispute Organization, the Parties shall use all efforts to assist the dispute resolution in accordance with the laws of Lao PDR.
If one of the Parties is unsatisfied with the results of the above procedure, the Parties shall mediate and, if necessary, arbitrate such dispute using an internationally recognized mediation/arbitration company in Macau, SAR PRC." [emphasis added]
In construing Clause 2(10), the Court held that "the relevant parties of the arbitration are those who have fulfilled the 'above procedure' (ie. the OEDR procedure or Lao court proceedings)". In this regard, it noted that "[s]ave for ST Vegas Enterprise, Mr Sithat, ST Group and ST Vegas Co were involved in the pre-requisite steps necessary to commence international arbitration under Clause 2(10)." Therefore, Sanum was only entitled to commence international arbitration against the latter three entities and individual: [91].
The Court further held that the phrase "arbitrate such dispute using an internationally recognized mediation/arbitration company in Macau, SAR PRC" in Clause 2(10) was to be construed to mean that "[p]arties shall arbitrate such dispute, using an internationally recognized arbitration company, in Macau", although several plausible interpretations of the phrase were presented to it: [102].
Accordingly, the Court found that the commencement of the arbitration at SIAC was proper as SIAC was an internationally-recognised arbitration company chosen by the dissatisfied party Sanum. However, the tribunal was erroneous in finding the seat was Singapore as, by the above-mentioned interpretation, the seat of arbitration was made express ie. Macau: [104]-[106].
Having found that the correct seat of the arbitration was Macau and not Singapore, the Court considered whether this irregularity should be a ground for refusal of enforcement under Article 36(1)(a)(iv) of the Model Law.
In this regard, the Court noted that "material prejudice is ordinarily required for non-recognition (which by implication, goes towards non-enforcement)". It also applied the principle in AQZ v ARA [2015] 2 SLR 972 (a case concerning a setting-aside application) in holding that prejudice is a relevant factor the Court considers in deciding whether the breach in question is serious and thus whether to exercise its discretionary power to refuse enforcement for breach. The Court found that the Lao disputants had not produced any evidence of prejudice arising out of the procedural irregularities in the Award and had therefore not discharged their burden of demonstrating the seriousness of the breach. Consequently, the Court held that the Lao disputants' arguments to resist enforcement were insufficient for the Court to refuse enforcement under Article 36(1)(a)(iv) of the Model Law: [114].
Notably, the Court made the observation that the choice of a seat for arbitration is less important in an application to refuse enforcement (as opposed to one setting aside the award) as enforcement can be brought in any jurisdiction but only the seat court can set aside an award. Accordingly, a mere assertion of an incorrectly seated arbitration is insufficient and there must be evidence of how the law of the incorrect seat would impact the procedure adopted by the tribunal: [115].
Sinolanka Hotels & Spa (Private) Limited v Interna Contract SpA [2018] SGHC 157
This High Court decision concerns an application for a ruling on the jurisdiction of an arbitral tribunal and or, alternatively, to set aside the award issued by the arbitral tribunal on the basis that it lacked jurisdiction to hear and determine the dispute between the parties.
The Court in this case had to consider different arbitration clauses found in different contract documents in order to determine if the tribunal lacked jurisdiction for having the arbitration proceed under the auspices of the International Chamber of Commerce ("ICC") and seated in Singapore.
Background facts
The plaintiff is the developer of the Grand Hyatt Colombo Project for Hyatt International (Europe Africa Middle East) LLC who awarded the contract to provide interior fit out and furnishing works for the Grand Hyatt Colombo Project to the defendant. In this connection, the parties executed documents entitled "Contract Agreement" and "Memorandum of Understanding" on 7 January 2015.
Following a wholesale change in the board of directors of the plaintiff, the plaintiff purported to terminate the contract with the defendant. By this time, the defendant had completed part of the works and incurred significant expenditure in relation to those works.
Subsequently, the defendant referred the disputes with the plaintiff to ICC for arbitration in accordance with the arbitration clause (the "ICC Arbitration Clause") contained in a letter entitled "Letter of Acceptance" issued by the Plaintiff dated 22 December 2014. A three-man arbitral tribunal was constituted and the ICC International Court of Arbitration determined the seat of the arbitration to be Singapore following the parties' failure to agree on the seat.
The plaintiff raised objections to the jurisdiction of the tribunal at an early stage of the arbitral proceedings on the basis that the ICC Arbitration Clause was not agreed upon by the parties. Rather, the plaintiff alleged that the parties had agreed to the arbitration clause found in the particular conditions providing for disputes to be "finally settled as per the Arbitration Act No. 11 of 1995 of Sri Lanka and the place of Arbitration shall be Colombo" (the "Sri Lankan Arbitration Clause").
Despite these objections, the tribunal did not make a preliminary ruling on its jurisdiction at any stage of the proceedings and the parties proceeded with the hearing.
In the tribunal's final award, the tribunal ruled against the plaintiff on both jurisdiction and the merits and awarded the defendant damages, legal costs and costs of the arbitration.
The court proceedings
In the court proceedings, the plaintiff sought the following remedies:
- an order that the tribunal lacked jurisdiction to hear and determine the dispute between the parties pursuant to s 10 of the International Arbitration Act (the "IAA") read with Art 16(3) of the Model Law; and, or alternatively,
- a setting-aside order on the arbitral award pursuant to s 3 of the IAA read with Art 34(2)(a)(i) of the Model Law because the tribunal had founded its jurisdiction on an invalid arbitration agreement.
The plaintiff argued that the operative arbitration agreement was the Sri Lankan Arbitration Clause because it was found in the particular conditions that came with the tender package, the basis on which the defendant had made its offer to contract. The Letter of Acceptance, which came later in time than the particular conditions, was legally a counter-offer by the plaintiff which had not been accepted by the defendant: [15]. Consequently, in having the arbitration proceed on the basis of the ICC Arbitration Clause, the tribunal lacked jurisdiction.
The Court found that the proper starting point in the analysis was the Contract Agreement which was executed after the tender process, exchange of letters and negotiations. The Contract Agreement was plain and unambiguous in stating that the Letter of Acceptance was a part of the agreement between the parties: [42].
Further, the priority of the contractual documents in the interpretation of the contract as set out in Clause 2 of the Contract Agreement confirmed that the ICC Arbitration Clause in the Letter of Acceptance prevailed over the Sri Lankan Arbitration Clause in the Particular Conditions: [43]-[44].
The Court also found that the conduct of the parties in the lead-up to the Letter of Acceptance confirmed that during negotiations, the parties had differing views as to the appropriate arbitration rules and venue. The plaintiff's subsequent inclusion of the ICC Arbitration Clause in the Letter of Acceptance was an acknowledgement of the defendant's wishes of having the arbitration proceed under ICC rules in Singapore. Consequently, there had been an acceptance by the plaintiff of the same: [47] and [49].
Separately, in affirming the holding in AQZ v ARA [2015] 2 SLR 972, the Court went on to observe that the plaintiff had no basis to seek relief under s 10(3) of the IAA and Art 16(3) of the Model Law given that there was no preliminary ruling by the tribunal on its jurisdiction and that the final award disposed of the jurisdictional challenge and the substantive merits of the dispute. Accordingly, the appropriate remedy sought should have been to set aside the award pursuant to Art 34(2)(a)(i) of the Model Law: [77]-[80].
In view of the above, the Court refused the remedies sought by the plaintiff.