Singapore‘s dual arbitration regime

Singapore has a dual arbitration regime with the Singapore Arbitration Act (Cap. 10) governing domestic arbitrations and the Singapore International Arbitration Act (Cap. 143A) governing international arbitrations whether seated in Singapore or abroad.

There are a number of differences between domestic arbitration (arbitration between two Singapore parties in Singapore) and international arbitration in Singapore. For example, unlike in international arbitrations under the International Arbitration Act where parties do not have any right of appeal to the Singapore courts, parties in a domestic arbitration under the Arbitration Act have a residual right of appeal to the Singapore courts. However, this right is only exercisable with the leave of the court and on very limited grounds. Parties can contract out of the Arbitration Act and stipulate, for example, that the International Arbitration Act should apply instead. They can also contract out of and exclude the parties’ right of appeal pursuant to section 49(2) of the Arbitration Act.

Excluding parties’ right of appeal

In the recent Singapore High Court case of Daimler South East Asia Pte Ltd v Front Row Investment Holdings (Singapore) Pte Ltd, [2012] SGHC 157 which concerns an arbitration under the Arbitration Act, the court held that a reference to the ICC Arbitration Rules in the arbitration clause i.e. that the arbitration would be conducted under the auspices of the ICC, was sufficient to exclude the right of the parties under the Arbitration Act to appeal a question of law to the Singapore courts.

Daimler South East Asia (“DSEA“) made four arguments in support of its position as to why it had not excluded its right to appeal a question of law to the Singapore courts.

1. The relevant article of the arbitration institution’s rule governing the arbitration did not specifically exclude the parties’ right of appeal.

2. There was case law to suggest that the right of appeal must be explicitly excluded. The Singapore courts had also previously considered that a party’s right of appeal had not been excluded notwithstanding a clause with apparent wording to the contrary.

3. DSEA sought to distinguish the English courts’ interpretation of the same ICC rule on the basis that the English had a single arbitration regime as opposed to Singapore’s dual arbitration regime.

4. The court should not assume that parties had applied their mind to the situation and had sought by simple reference to the arbitration rules to waive their right to appeal the award.

Application of ICC Rules

Parties were in agreement that under Singapore law, if parties to an arbitration agreed to adopt institutional rules that excluded parties’ right to appeal an award then parties could be regarded as having excluded their right to appeal to the Singapore courts under the Arbitration Act.

The issue before the High Court was that the applicable rules to the arbitration (the ICC Rules 1998) did not appear to explicitly exclude theright of parties to appeal an award. Article 28(6) of the ICC Rules 1998 (which is now Article 34(6)) states,

“Every Award shall be binding on the parties. By submitting the dispute to arbitration under these Rules, the parties undertake to carry out any Award without delay and shall be deemed to have waived their right to any form of recourse insofar as such waiver can validly be made”.

(emphasis added)

By way of contrast, the predecessor clause which was Article 24 under the pre-1998 ICC Rules stated that,

“1. The arbitral award shall be final.

2. By submitting the dispute to arbitration by the International Chamber of Commerce, the parties shall be deemed to have undertaken to carry out the resulting award without delay and to have waived their right to any forms of appeal insofar as such waiver can be validly made.”

            (emphasis added)

The defendant, Front Row Investment Holdings (Singapore) Pte Ltd (“Front Row“), submitted that the use of the word “recourse” (as opposed to the word “appeal“) was sufficient to exclude the parties’ right to appeal the award to the Singapore courts.

The High Court agreed. It held that the use of the word “recourse” in Article 28(6) “was to widen the scope of the previous Art[icle] 24. It was also quite clear that, by adopting the ICC Rules 1998, the parties had agreed to exclude the right of appeal under s 49(1) of the [Singapore Arbitration Act]“.

Case Law

The High Court also distinguished DSEA’s reliance on 2 cases. The first case was American Diagnostica Inc v Gradipore Ltd [1998] 44 NSWLR 312 which held that it was insufficient to exclude a right of appeal by having a clause which stipulated that “an arbitration award should be final, conclusive and binding” (see paragraph [21]). The High Court dismissed the point simply on the basis that Article 28(6) went further than simply stating that the arbitral award would be binding and final and conclusive (see paragraph [23]).

The second case was that of Holland Leedon Pte Ltd v Metalform Asia Pte Ltd [2011] 1 SLR 517. DSEA submitted that that Singapore High Court had granted leave to appeal even though the relevant contractual clauses would appear to have excluded the right of appeal under section 49(1) of the Singapore Arbitration Act (see paragraph [22]).

The High Court distinguished DSEA’s reliance on the Holland Leedon case. In the Holland Leedon case, the learned judge had determined that the relevant contractual provision was referring to section 45(1) of the Arbitration Act, which provides for a party’s right to apply to court to “determine any question of law arising in the course of the proceedings“. Insofar as the provision sought to exclude section 45(1), it was therefore “insufficient to exclude the right of appeal in [section] 49(1)” which dealt with arbitral awards post-conclusion of proceedings (see paragraph [24]). In contrast, the ICC Rules explicitly refer to the parties’ waiver of any form of recourse against an award.

The English Approach and the English Arbitration Act 1996

Instead, the High Court preferred the House of Lords case of Lesotho Highlands Development Authority v Impregilo SpA and others [2006] 1 AC 221 at [3], in which Lord Steyn held, “[t]he parties are free to exclude this right of appeal by agreement. They did so by ICC Rules, article 28.6 in the case before the House” (see paragraph [27]).

In this respect, the High Court noted that sections 49(1) and 49(2) of the Singapore Arbitration Act were modelled on section 69(1) of the English Arbitration Act 1996 (see paragraph [25] and [26] referring to the Parliamentary Reports of 5 October 2001 and Robert Merkin and Johanna Hjalmarsson, Singapore Arbitration Legislation Annotated by (Informa London, 2009)).

The High Court also rejected as being immaterial DSEA’s argument which sought to draw a distinction between the single arbitration regime of the English Arbitration Act 1996 (which applies to both domestic and international arbitration) and the dual arbitration regime in Singapore. DSEA had argued that,

“…in England, the avenue for appeal is available to both international and domestic arbitration, whereas in Singapore, it is only available to the latter, which is governed by the AA. The submission was that because the avenue for appeal was also available to international arbitration and because the regime for such an arbitration generally eschewed intervention by the courts, the English courts were more likely to conclude that there was an agreement to exclude the avenue for appeal to the courts there than if the avenue was restricted to domestic arbitration.”

The High Court considered DSEA’s argument “[un]persuasive” (see paragraph [29]) for two reasons. First, the holding of the House of Lords was meant to be a general principle applicable to both domestic and international arbitration (see paragraph [29]). Second, “the background leading to the drafting of the terms of Art[icle] 28(6)…made it clear that adopting Art[icle] 28(6) meant an agreement to exclude the right of appeal. It was not a question of distinguishing between international and domestic arbitration” (see paragraph [31]).

Parties did not apply their minds to the issue

Finally, DSEA sought to argue that such a general principle would entail curtailing the right of appeal of every party in a domestic arbitration even where they had not applied their minds to this specific issue (see paragraph [31]).

The High Court rejected that argument on the basis that it was “not a legal argument…[and that it was] trite law that parties are bound by the terms of their contract, regardless of whether they had addressed their minds specifically to each and every term” (see paragraph [32]). Furthermore a contrary ruling would lead to a same result i.e. the contrary ruling “would equally bind all parties even if they had not addressed their minds to the specific issue” (see paragraph [33]).

Conclusion

Parties should be aware that domestic and international arbitration in Singapore are governed by different statutes.

If both parties are Singapore entities with their place of business in Singapore and where the subject matter of the underlying agreement is in Singapore or to be performed in Singapore, then the arbitration is likely to be one in which the Singapore Arbitration Act applies instead of the International Arbitration Act.

As mentioned, such parties can choose to contract out of the Singapore Arbitration Act and into the International Arbitration Act instead. Parties may, however, prefer a domestic arbitration governed by the Singapore Arbitration Act and for the Singapore courts to adopt a greater supervisory role over the conduct of the arbitration and the award. For example under the Singapore Arbitration Act, aside from the (limited) right of appeal, the Singapore courts also retain a discretion not to stay court proceedings even where there is a valid arbitration agreement between parties. In contrast, such a stay is mandatory under the International Arbitration Act.

Parties should note that an arbitration, whether domestic or international, governed by the SIAC Rules 2010 (the applicable rules for the time being in force) automatically excludes a party’s right of appeal to the courts. Rule 28.9 provides that,

“By agreeing to arbitration under these Rules, the parties undertake to carry out the award immediately and without delay (subject to Rule 29), and they also irrevocably waive their rights to any form of appeal, review or recourse to any state court or other judicial authority, insofar as such waiver may be validly made. An award shall be final and binding on the parties from the date it is made”.

Accordingly, if parties to an SIAC arbitration do in fact wish to preserve their right of appeal to the Singapore courts under the Arbitration Act, they would be well advised to state so clearly in their arbitration agreement. This is particularly since parties can no longer can adopt the Domestic Arbitration Rules of the Singapore International Arbitration Centre (2nd Edition) which has ceased to have effect with the advent of the SIAC Rules 2010.

And conversely, where parties do not wish to have a domestic arbitration, it would be advisable for them to make their desire clear by stipulating that the International Arbitration Act or the Model Law applies.