The dispute between the Astro Group and the Lippo Group that was recently before the Singapore Courts highlights important lessons for parties with cross-border contracts and disputes as it demonstrates both the strengths as well as weakness of the enforcement regime in arbitration pursuant to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention“).
It is important to understand that the substantive dispute between the parties has already been resolved by arbitration in Singapore. Arbitration is a method of dispute resolution where parties refer their dispute to an impartial tribunal (consisting of one or more arbitrators). The parties are bound by the tribunal’s decision (known as an “award”).
Under the New York Convention, an award issued in a contracting state can generally be enforced in any other contracting state. 146 states including Singapore are party to the New York Convention. As a result, an arbitration award has near universal enforceability, at least in theory, and is often considered to be one of the biggest benefits that arbitration has over litigation.
Between 2009 and 2010, 5 awards were made by the tribunal, all in favour of Astro. The awards total approximately US$300 million to be paid by the Lippo Group. On 8 July 2011, Astro obtained a worldwide freezing (Mareva) injunction from the Singapore High Court against one of the Lippo entities. On 15 March 2012, Astro obtained a garnishee order from the Hong Kong High Court against a Lippo Group entity for a sum of US$44 million. The same Hong Kong High Court also granted a stay of Lippo Group’s application to the Hong Kong courts for a refusal to recognise and enforce the awards pending the decision of the Singapore Courts. In this regard, the 5 awards are currently being challenged by the Lippo Group before the Singapore Courts on various grounds set out in the New York Convention (as adopted by the Singapore International Arbitration Act). The decision of the Singapore Courts is very likely to have repercussions on the decisions of the foreign courts in which Astro is seeking to get the awards recognised and/or enforced (Malaysia, Hong Kong and Indonesia). This is because the awards were made in Singapore, thereby giving the Singapore courts supervisory jurisdiction over the awards.
An award which is rendered in Singapore is final and not subject to an appeal on the merits to the Singapore courts. A party who disputes the award must therefore seek to have it set aside in Singapore (which is what the Lippo Group is seeking to do in the Singapore Courts) or resist recognition and enforcement of the award in jurisdictions where the award is sought to be recognised and enforced.
Under the Singapore International Arbitration Act, an award may only be set aside on very limited grounds, namely:
- a party to the arbitration agreement was under some incapacity; or the arbitration agreement is not valid;
- the party against whom the award is invoked was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or
- the award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration, or
- the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties or, failing such agreement, was not in accordance with Singapore law; or
- the subject-matter of the dispute is not capable of settlement by arbitration under Singapore law; or
- the award is in conflict with the public policy of Singapore; or
- the making of the award was induced or affected by fraud or corruption; or
- a breach of the rules of natural justice occurred in connection with the making of the award by which the rights of any party have been prejudiced.
If the Lippo Group is successful in setting aside the 5 awards, then:
- First, the awards can have no effect in Singapore and cannot be enforced. On that basis, the worldwide freezing injunction obtained in the Singapore High Court which was on the basis of those awards would most likely have to be discharged.
- Second, Article V(1)(e) of the New York Convention and Article 36(1)(a)(v) of the Model Law states that recognition and enforcement of the award may be refused if the award has been “set aside or suspended by a court of the country in which, or under the law of which, that award was made“. In staying Lippo’s application to the Hong Kong courts for a refusal to recognise and enforce the awards, the Hong Kong High Court reasoned on the basis that some of the key issues would be determined by the Singapore courts as a matter of Singapore law as part of the hearings.
Parties often do comply with awards that are rendered and so in such cases, the issues of enforcement do not even arise. However, the Astro v Lippo dispute highlights some well known difficulties and issues regarding the enforcement of international arbitration awards. First, even after a successful party obtains an arbitration award, there is no guarantee that the losing party will pay the sum and costs awarded. In those circumstances, the successful party has to resort to obtaining recognition and enforcement of those arbitral awards in the jurisdictions where the losing party’s assets may be found. Since 2010, Lippo had refused to pay Astro the awarded sum. Hence, Astro had to take the additional steps of getting the awards recognised and enforced in various jurisdictions where Lippo has assets. All of these additional enforcement steps naturally result in additional time and costs incurred.
Furthermore, the efficiency and workability of the enforcement regime in international arbitration is still patchy, particularly within Asia, because enforcement requires the involvement of the local courts. While certain states like Singapore have developed a deserved reputation for having a robust judiciary with a pro-arbitration and pro-enforcement regime, the judicial attitudes of other countries can be more unpredictable.
Notwithstanding the challenges that parties face in seeking recognition and enforcement of arbitral awards, the international arbitration regime continues to be particularly attractive to parties from different nationalities and who may have concerns of perceived bias in litigating before one of the domestic courts. Arbitration often provides for a convenient neutral alternative and is complemented by the New York Convention in allowing parties to enforce their awards virtually world wide. The alternative, which is litigation in the domestic courts of one of the parties, gives rise to even more severe cross-border enforcement issues. Parties seeking the enforcement of foreign court judgments face more hurdles because of lack of reciprocal arrangements or treaties between most foreign countries. For example, in Singapore there are only 11 countries (UK, Hong Kong, New Zealand, Sri Lanka, Malaysia, Windward Islands, Pakistan, Brunei Darussalam, Papua New Guinea, India (except the State of Jammu and Kashmir) and Australia) from which judgments of their superior courts may be registered in Singapore under the Reciprocal Enforcement of Commonwealth Judgments Act (Cap. 264) or the Reciprocal Enforcement of Foreign Judgment Act (Cap. 265). In contrast, the New York Convention provides that an award can be recognised and enforced in its 146 signatory states.
We note that this issue of enforcement has been picked up in the July issue of Asian Legal Business (ALB). Enforcement of arbitral awards is indeed “Arbitration’s next challenge” and it will be interesting to observe the developments in other enforcement jurisdictions once the Astro-Lippo dispute fully plays out in the Singapore courts.
Update: This post has been picked up by Television Asia and published (with minor amendments) in its October 2012 issue of Television Asia Plus. An online version of the article can be found here.
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