Orders / directions of arbitral tribunal not liable to be set aside as if they are arbitral awards

The Singapore High Court has recently reaffirmed the substance/procedure distinction for the purposes of categorising arbitral orders and arbitral awards. The High Court held that an order is not liable to be challenged and set aside as if it were an award under section 24 of the IAA or Article 34 of the UNCITRAL Model Law.

In PT Pukuafu Indah and ors v Newmont Indonesia Ltd and anor, [2012] SGHC 187, the High Court rejected an application to set aside an interlocutory order made by an arbitral tribunal on 15 October 2010 (the “Order“) pursuant to an arbitration between the parties. The application was rejected because:

  • the Singapore court’s jurisdiction to annul arbitral awards did not extend to the Order; and
  • the application to set aside the Order had been filed out of time.

The facts of the case were that the defendants in the case had initiated SIAC arbitration against the plaintiffs, which were PT Pukuafu Indah and its six shareholders. The defendants sought declaratory and other relief for alleged breaches of contract by the plaintiffs. One of the contracts in issue was a Release Agreement dated 26 November 2009. It was alleged that under the Release Agreement, all the plaintiffs were obliged to discontinue two suits which had been commenced in the Indonesian courts in 2009. However, the plaintiffs failed to discontinue the two suits and in fact commenced three more suits in the Indonesian courts in the course of 2010 (in January, March and July).

On 1 October 2010, the defendants made an application to the tribunal to issue an interim order pursuant to rule 26.1 of the SIAC Rules 2010, to restrain the plaintiffs from continuing with all the court proceedings pending in the Indonesian courts or to initiate any new proceedings against them (the defendants). None of the plaintiffs were present or represented at the hearing on 12 October 2010.

The tribunal issued the Order on 15 October 2010 and the Singapore High Court subsequently granted leave to enforce the Order on 28 March 2011. At the hearing to grant leave for enforcement of the Order, none of the plaintiffs appeared at the hearing even though the plaintiffs were served with notice of the enforcement proceedings. However, subsequently on 6 May 2011, the plaintiffs suddenly decided to file the application to set aside the Order.

Subsequent to the plaintiffs’ application, the Tribunal issued a partial award which held that the plaintiffs had breached the Release Agreement by continuing with the various suits in the Indonesian courts.

An Order is not an Award

As the High Court noted, the categorisation of a determination of the tribunal as an “award” has legal consequences” including the jurisdiction of the Singapore courts to set aside the “award” (see paragraph [13]),

…An award is “final and binding on the parties” under s 19B(1) of the IAA. The court may also set aside an award under s 24 of the IAA and Art 34 of the Model Law, and enforce an award under s[ection] 19 and the Second Schedule to the IAA. …”

However, the High Court only had jurisdiction to set aside the Order if it were an arbitral award (see paragraph [10]). The High Court emphasised that the definition of “award” under section 2 of the Singapore International Arbitration Act (Cap. 143A)excludes any orders of directions made under section 12 [of the IAA]”.

The High Court considered that the nature of the orders and directions listed in section 12 of the IAA “[were] concerned with procedural matters or protective measures and do not determine the substantive merits of the claim” (see paragraph [15]). Here, the High Court cited the Singapore Court of Appeal decision in PT Asuransi Jasa Indonesia (Persero) v Dexia Bank SA,[2007] 1 SLR 597 at [66] for the “substance-procedure distinction” wherein “a determination of an arbitral tribunal must be a decision on the substance of the dispute to be an “award” for the purposes of [setting aside under] Art[icle] 34 of the Model Law” (see paragraph [12]).

The label given to the tribunal’s determination is not dispositive of whether it is an order or an award. Instead, the court will look at the substance of the determination, see Re Arbitration Between Mohamed Ibrahim and Koshi Mohamed [1963] MLJ 32, approved by the Singapore Court of Appeal in PT Asuransi at [70] (see paragraph [14]).

Upon an examination of the Order, the High Court held (at paragraph [16]) that the Order was “in effect an interim anti-suit injunction”. The High Court also noted that even though the defendants had also sought in the arbitration for a final anti-suit injunction against the plaintiffs, the Order only had an interim effect and did not finally dispose of the merits of the dispute. As a result, the court had no powers to entertain an application to set aside the Order (see paragraph [19]).

In this respect, the High Court held that there was “no ambiguity as to whether the Order was an interim injunction made under [section] 12(1)(i) of the IAA” (see paragraph [18]) First, the substance of the Order clearly demonstrated that “the intent of the Order was to preserve the status quo until the Tribunal could hear the parties on the merits of the claim” (see paragraph [17]). Second, the defendants had applied for the Order under rule 26.1 of the SIAC Rules 2010 which is entitled “Interim and Emergency Relief” (see paragraph [17]).

Accordingly, the High Court rejected the plaintiffs’ argument that there was nothing on the face of the Order which stated that it was made pursuant to section 12 of the IAA (see paragraph [17]). In any event, the High Court held that there is no requirement for an order to state that it has been made under section 12 of the IAA for it to be an order as opposed to an award.

Rationale and Policy behind Order/Award Dichotomy

The Singapore High Court also took the opportunity to make observations about the IAA’s approach to minimal judicial intervention in respect of arbitral orders and how this translated to the order/award dichotomy for the purposes of enforcement and setting aside.

First, the High Court considered that the usual concern about interlocutory orders being excluded from the definition of “award” is the lack of enforceability by domestic courts. However, this issue is dealt with in the IAA by providing that such interlocutory orders are enforceable with leave of the Singapore courts (see paragraph [21]). While Article 17 of the UNCITRAL Model Law confers on tribunals the power to make orders for interim protection, it “is silent on the status and enforceability of such orders”. In Singapore, this situation was remedied by providing in section 12(6) of the IAA that “[all] orders or directions made or given by an arbitral tribunal in the course of an arbitration shall, by leave of the High Court or a Judge thereof, be enforceable in the same manner as if they were orders made by a court”.

Second, the Singapore Parliament made a deliberate choice in favour of minimal curial intervention to promote the efficacy of arbitration. The High Court reasoned (at paragraph [22]) that,

by insulating these orders from judicial challenge while simultaneously lending the coercive powers of the court to the enforceability of the orders – the pendulum swings between independence and interventionism, but the overarching aim is always to facilitate the efficiency of arbitration”.

Third, this deliberate choice in favour of minimal curial intervention was entirely rational. The High Court held that the rationale for limiting the court’s power in respect of “interlocutory orders dealing with procedural and administrative issues [e.g. the manner of document production] is fairly uncontroversial” (see paragraph [23]). The IAA and the Model Law “only provide a basic procedural framework, allowing the parties to flesh out this skeleton with rules of their choice. Procedural issues thus fall directly within the province of the Tribunal and should be decided solely by the Tribunal”. The supervisory powers of the court to maintain “a minimal level of procedural integrity…is only exercised at the stage where a party seeks to set aside a final award, and not with respect to each and every order made by the Tribunal”.

In this respect, the court acknowledged however that a different balance may need to be struck in respect of other interim orders. This is because “orders granting interim relief such as injunctions may have the effect of prejudging the substantive rights of one party and are often dependent on the national court for coercive effect; the quid pro quo should be some measure of judicial scrutiny” (see paragraph [24]).

However, the High Court noted that different jurisdictions have drawn the line differently. And in Singapore, Parliament has drawn the line strongly in favour of minimal curial intervention and not provided for the challenge of such orders while concurrently providing for enforcement. This is done on the basis that “[l]imiting challenges only to awards that decide the substantive merits of the case would reduce the risk of delay and prevent tactical attempts to obstruct the arbitration process by bringing challenges on interim orders”.

Fourth, unlike awards, interim orders are temporary and not final. The High Court considered that enforcement of these orders “[would] ensure that the arbitration progresses smoothly”, while allowing challenges “would have the undesirable effect of staying the arbitration while judicial determination of the issue is pending” (see paragraph [26]).

Finally, even though an order made under section 12 of the IAA cannot be set aside as an award, nevertheless, the enforcement of such orders requires the leave of the High Court. While declining to express a view as to the basis for the High Court refusing to grant leave, the learned Judge noted that Order 69A Rule 5(2) of the Rules of Court provides that “leave shall be granted only if the applicant undertakes to abide by any order the Court or the arbitral tribunal may make as to damages”.

Application was made out of time

The High Court considered that in any event the application was also bound to fail even if it had found that the order was an “award” susceptible to challenge and setting aside. This is because Article 34(3) of the Model Law (as adopted through section 3 of the IAA) provides that,

(3) An application for setting aside may not be made after three months have elapsed from the date on which the party making that application had received the award or, if a request had been made under Article 33, from the date on which that request had been disposed of by the arbitral tribunal”.

The High Court agreed with a previous High Court decision in ABC Co v XYZ Co Ltd [2003] 3 SLR(R) 546 at [9] that the phrase “may not” should be interpreted as “cannot” (see paragraphs [29] and [30]).

“… On the aspect of time, art 34(3) is brief. All it says is that the application may not be made after the lapse of three months from a specified date. Although the words used are “may not” these must be interpreted as “cannot” as it is clear that the intention is to limit the time during which an award may be challenged. This interpretation is supported by material relating to the discussions amongst the drafters of the Model Law. It appears to me that the court would not be able to entertain any application lodged after the expiry of the three-month period as art 34 has been drafted as the all-encompassing, and only, basis for challenging an award in court. It does not provide for any extension of the time period and, as the court derives its jurisdiction to hear the application from the article alone, the absence of such a provision means the court has not been conferred with the power to extend time”.

The High Court stressed that the court’s powers under the IAA ought to be construed narrowly so as to promote the policy of finality in arbitration by setting a definite time limit for challenging awards. It held at [30] that,

“The court’s powers in relation to international arbitration proceedings are limited to those conferred by the IAA and the jurisdiction to set aside an award must therefore be construed narrowly. In the absence of an express provision, the phrase “may not” cannot be read as implicitly enlarging the scope of the court’s powers by giving a discretion to extend the time limit. I add that finality is one of the fundamental principles of arbitration, and a definitive time limit for challenging an arbitral award is necessary to ensure the expeditious and effective resolution of parties’ disputes”.

In this regard, the time limit for any application to challenge expired in January 2011. Given that the plaintiffs’ application was only initiated in May 2012, this was more than 3 months out of time.

Conclusion

Parties should also note that the 2012 amendments to the IAA do not affect the substance of the High Court’s ruling (which was rendered before the amendments became effective). No amendment was made to the definition of “award” and the language that an award “excludes any orders or directions made under section 12″ remains as is. What one of the 2012 amendments does is to amend the meaning of “arbitral tribunal” so as to include “an emergency arbitrator appointed pursuant to the rules of arbitration agreed to or adopted by the parties including the rules of arbitration of an institution or organisation”.

The case highlights yet again the pro-arbitration and minimal curial stance of the Singapore courts. It demonstrates that parties can rely on the Singapore courts to refuse applications which seek to derail interlocutory proceedings and abrogate the powers of the tribunal as master of the procedure in the arbitration.

About Shaun Lee

International Dispute Resolution and Arbitration lawyer. Fellow of the Chartered Institute of Arbitration. Panel of Arbitrators and Panelist for Domain Name Dispute Resolution at the KLRCA.
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4 Responses to Orders / directions of arbitral tribunal not liable to be set aside as if they are arbitral awards

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