Case Update: Power of the Singapore Court to grant permanent anti-suit injunction in aid of arbitration proceedings

In a previous post, we discussed the UK Supreme Court decision of Ust-Kamenogorsk Hydropower Plant JSC v AES Ust-Kamenogorsk Hydropower Plant LLP [2013] UKSC 35. The UK Supreme Court held that the English courts have the power to issue anti-suit injunctions in support of arbitration agreements where proceedings have been brought in a court forum which is outside of the EU (Brussels/Lugano regime). This is the case even where the applicant for the anti-suit injunction has not commenced, and has no intention or wish to commence, any arbitration proceedings.

In that post, we had also noted that this issue had not been directly addressed by any Singapore case or legislative position. We had written that,

“There does not appear to be any Singapore case or legislative provision which addresses this issue directly. Section 6 of the Singapore International Arbitration Act (Cap. 143A) (“IAA“) provides that the Singapore courts have the power to stay its own proceedings where the applicant is a party to an arbitration agreement with the other party which had commence proceedings. The exercise of such a power is premised on the fact that an arbitration agreement exists between the two parties.

Furthermore, the Singapore courts have also held that they have an inherent power to stay their own proceedings in support of arbitration, for example, where the applicant is a third party to an arbitration agreement and in view of intended arbitration proceedings between the parties to the arbitration agreement (see our post for such an example here).

However, those provisions/powers relate to the Singapore courts determining whether to stay their own proceedings. The first successful application to the Singapore High Court for an anti-suit injunction in support of arbitration was in WSG Nimbus Pte Ltd v Board of Control for Cricket in Sri Lanka, [2002] SGHC 104. The Singapore High Court held that its powers under section 12(6) of the IAA (see now section 12A(6) of the IAA) turned on whether the arbitration clause in a settlement agreement between the parties was an arbitration agreement for the purposes of the IAA. In that case, however, the applicant had already commenced arbitration proceedings and was seeking to restrain the respondent’s proceedings before the Sri Lankan court. It should be noted that section 12(6) of the IAA (now section 12A(6) of the IAA) makes explicit that the court’s exercise of its powers was contingent “only if or to the extent that the arbitral tribunal, and any arbitral or other institution or person vested by the parties with power in that regard, has no power or is unable for the time being to act effectively“.

Another point worth considering is whether the Model Law, and in particular the doctrine of minimal curial intervention in Article 5 of the Model Law, circumscribes the power of the (Singapore) courts to issue an anti-suit injunction except in accordance with the Model Law/IAA. As mentioned above, the UK Supreme Court considered that section 1(c) of the UK Arbitration Act 1996 was a deliberate departure from the prescriptive mandatory Article 5 of the Model (see paragraph [33]).”

A recent Singapore High Court case gives some guidance but by no means resolves this issue. In RI International Pte Ltd v Lonstroff AG[2014] SGHC 69 the Singapore High Court confirmed (albeit in obiter) that the Singapore courts have the power to grant a permanent anti-suit injunction in aid of international arbitration proceedings seated in Singapore. A tentative view was also expressed that such powers would extend to foreign arbitration proceedings as well.

Background

The parties were business entities which had dealt with each other over a series of transactions involving the sale and purchase of rubber. The Plaintiff, R1 International Pte Ltd (“R1”) was a Singapore company. The Defendant, Lonstroff AG (“Lonstroff”) was a Swiss company.

The dispute between the parties concerned a certain order of rubber which Lonstroff claimed was defective. R1 refused to offset payment against the cost of delivery and Lonstroff commenced proceedings in the Commercial Court of Canton of Aargovia (“Swiss Court”). R1 then requested the Singapore Commodity Exchange (“SICOM”) to set up an arbitration tribunal to hear the parties’ dispute. However, SICOM refused to do so until the Swiss proceedings were suspended and both parties agreed to refer the dispute to it.

R1 then commenced proceedings in the Singapore courts to obtain an anti-suit injunction to prevent Lonstroff from continuing with proceedings in the Swiss Court. R1 alleged that Lonstroff was in breach of a SICOM arbitration agreement between the parties. On that basis, R1 obtained an interim anti-suit injunction. Lonstroff sought to discharge that injunction while R1 sought to make the anti-suit injunction permanent.

The Threshold Issue

Lonstroff argued that there was in fact no arbitration agreement between the parties and it was therefore entitled to commence proceedings in the Swiss Court. The Singapore High Court agreed.

There were a total of 5 orders placed by Lonstroff to R1. In each of these orders, parties would negotiate commercial terms. Lonstroff would confirm their acceptance of R1’s offer by telephone and this would in turn be confirmed by R1 by email. Subsequent to that, R1 would then send a pre-signed sales contract after each confirmation. However, Lonstroff would never sign it.

In those sales contracts, there was an arbitration clause which provided that,

“Subject to the terms, conditions and rules (including the arbitration clauses and rules) of the International Rubber Association Contract for technically specified rubber in force at date of contract.”

12(C) of the Index to the International Rubber Association Contract (“IRAC terms”) provides that any dispute arising out of the contract shall be settled at the designated centre of arbitration which, in respect of shipments to Europe would be London unless the parties agreed otherwise.

However, it was only in the second and subsequent order that the sales contract further provided for arbitration in Singapore. This was done through an additional clause right after the arbitration clause. The additional clause provided that, “In the event of any arbitration, it will be conducted in Singapore”.

R1 sought to argue that there was a SICOM arbitration agreement between parties in the second order either by way of a trade custom or, alternatively, that the IRAC arbitration clause providing for arbitration in London had been incorporated into the contract by a previous course of dealing.

The Singapore High Court rejected both arguments. The High Court held that R1 had not sufficiently proved any alleged trade custom in the rubber trade that the majority of contracts concluded by international rubber traders were based on IRAC terms. Accordingly to the High Court, R1 had “neither adduced evidence on the prevalence of IRAC terms in the rubber trade nor shown that the use of IRAC terms is of an incontrovertible nature” (see paragraph [25]). Furthermore, the High Court considered that Lonstroff was “not an international rubber trader but an end user of the product so it is believable that it may not be aware of the practice of international rubber traders even if one exists” (see paragraph [24]).

The High Court also dismissed the course of dealing argument. Prior to the second order, there had only been a single dealing between parties. The High Court held that one prior transaction was “insufficient to found a course of dealing between [the parties]” (see paragraph [32]). The High Court also noted that there was “no continuity in the transactions” given that from the second order onwards, R1 modified the IRAC arbitration agreement to a SICOM arbitration agreement instead.

Furthermore, even if there had been a previous course of dealing between the parties, the High Court held that the SICOM arbitration clause would not have been incorporated by reference. This is because the sales contract with the SICOM arbitration clause had only been sent after the rubber had been delivered. The High Court held at [34],

“The SICOM arbitration agreement was not incorporated since the contract had been concluded and performed between both parties before Lonstroff was notified of the SICOM arbitration agreement. There was also no discussion pertaining to the incorporation of the SICOM arbitration agreement during negotiations between the parties. Hence, the SICOM arbitration agreement was not incorporated by reference.”

Permanent anti-suit injunction in aid of arbitration proceedings

The Honourable Justice Judith Prakash (“Prakash J”) then proceeded to give her views on the power of the Singapore courts to grant permanent anti-suit injunction in aid of arbitration proceedings.

Prakash J held that the “power to grant permanent anti-suit injunctions to assist arbitration [cannot] be derived from s[ection] 12A of the [International Arbitration Act]”. Section 12A of the International Arbitration Act (Cap. 143A) provides only for interim injunctions in aid of both domestic and foreign international arbitrations – it does not extend to permanent anti-suit injunctions (see paragraph [40]).

Instead, the power of the Singapore courts to grant permanent anti-suit injunctive relief in relation to arbitration proceedings is found in the Civil Law Act (Cap. 43, 199 Rev Ed) instead. In particular, section 4(1) of the Civil Law Act provides that,

“Injunctions and receivers granted or appointed by interlocutory orders

(10)  A Mandatory Order or an injunction may be granted or a receiver appointed by an interlocutory order of the court, either unconditionally or upon such terms and conditions as the court thinks just, in all cases in which it appears to the court to be just or convenient that such order should be made.”

The High Court explained at [43] that this was “the power that the court exercises when it grants a permanent anti-suit injunction in aid of local court proceedings”. Prakash J reasoned that,

“There is no reason why this power cannot be exercised to make permanent anti-suit injunctions in aid of domestic international arbitration proceedings especially since under s 12A(2) read with s 12(1)(i) of the IAA and the holding in [Maldives Airports Co Ltd and another v GMR Male International Airport Pte Ltd [2013] 2 SLR 449], the courts can grant interim anti-suit injunctions in such situations.”

The High Court also rejected the argument that the court’s power to grant such relief was limited or circumscribed by the International Arbitration Act. In this respect, the High Court adopted the holding in AES Ust-Kamenogorsk that “clear words would be needed to abrogate the court’s general jurisdiction to grant anti-suit injunctions”. In this respect, there was “no clear language in the IAA which would cut down the breadth and scope of the court’s powers under s 4(10) of the CLA” (see paragraph [44]).

Whether it would be appropriate to grant a permanent anti-suit injunction in aid of foreign arbitration proceedings

The High Court held that the position under Singapore law with respect to international arbitrations seated in Singapore was clear. Where there was an arbitration clause providing for international arbitration in Singapore, the innocent party could seek a permanent anti-suit injunction under the court’s general power to grant an injunction (see paragraph [48] to [50]).

In this respect, in Maldives Airports Co Ltd and another v GMR Male International Airport Pte Ltd [2013] 2 SLR 449, the Singapore Court of Appeal confirmed that the Singapore courts had the power to issue an interim anti-suit injunction in aid of foreign arbitration. For a detailed analysis of the Maldives Airport case, see here.

However, the same may not be applicable to the Singapore court’s powers to grant permanent anti-suit injunctions in aid of foreign arbitration proceedings. Prakash J considered that it would be “logical and consistent” that the Singapore courts’ powers under the “more wide-ranging law” in CLA enabled it to issue a permanent anti-suit injunction in aid of foreign arbitration proceedings (See paragraph [54]). However, she also accepted that logic alone may not be a sufficient condition to form a definitive view as to whether the Singapore courts had such a power in the first place. The learned judge reasoned at paragraph [54] as follows,

“Logic alone, however, may not be a sufficient basis to extend the court’s powers beyond what is in the IAA to parties who have agreed to arbitrate abroad especially since the interim orders made should be sufficient to put matters on the right track. Any such extension of power would have the potential to affect more situations than simply those concerned with arbitration and therefore policy considerations would come into play. Since this point was not fully argued and, in the event, it is not necessary to decide it, I do not express a concluded opinion.”

The learned judge also adopted the views of an earlier Singapore High Court judgment in which the court had warned that “Singapore should not be an international busybody; it is only when strong reasons are present that the courts would intervene with a permanent anti-suit injunction to support foreign international arbitration” (see paragraph [55]).

Conclusion and Takeaways

Commercial parties should ensure that all terms have been agreed to before the performance and completion of a contract. Parties otherwise take the risk that certain terms (like the arbitration clause) are not incorporated into the agreement between parties or certain implied terms are not excluded as a result.

In this respect, arbitration clauses are a form of jurisdiction clauses. However, there are not the default jurisdictional ones – litigation before national courts is. A party who wishes to have the benefit of an arbitration clause should ensure that the clause is present, incorporated or agreed to by the counterparty.

Finally, the confirmation by the Singapore High Court of its power to grant permanent anti-suit injunctions in the context of an international arbitration seated in Singapore once again reinforces Singapore’s pro-arbitration stance. Parties who have a binding arbitration clause will not be permitted to breach that arbitration agreement by commencing proceedings in a foreign (non-Singapore) court and must instead do so through arbitration instead.

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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7 Responses to Case Update: Power of the Singapore Court to grant permanent anti-suit injunction in aid of arbitration proceedings

  1. It is definitely one of the strengths of Singapore that there is a coherent approach between the government promoting international arbitration out of Singapore and the High Court’s support of said policy reflected by its interpretation of its power to grant permanent anti-suit injunctions in the context of an international arbitration seated in Singapore.

    For the parties involved in an international dispute it is of great value to be able to rely on such a coordinated approach even beyond Singapore’s borders, and this with decisions rendered within a reasonable period of time, which is another key factor in international arbitration.

    From that point of view it is very unfortunate that the French government undermines international arbitration under the auspices of the ICC by interfering sometimes in the process and delaying for purely political reasons the possibility to serve sentences once rendered by the arbitrators. The French and the Singapore approach to international arbitration could not be more different.

    Eric Fiechter

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