By Lee Mei Yong, Debbie & Wong Qiao Ling Sharon – Millennium Law LLC
I. INTRODUCTION
1. In BXS v BXT , the Singapore International Commercial Court (“SICC” or the “Court”) issued its first decision on the issue of setting aside an arbitral award.
2. Having considered parties’ arguments, the SICC dismissed the Plaintiff’s application to set aside an arbitral award issued under the Expedited Procedure of the Singapore International Arbitration Centre (“SIAC”) Rules and granted the Defendant’s application to strike out the Plaintiff’s setting aside application.
II. BACKGROUND FACTS
3. The Plaintiff, a Thai-listed company, commenced arbitration against the Defendant, a Mauritius-registered investment company, in relation to an agreement (the “SPA”) involving the sale of the Defendant’s shares in two companies to third-party purchasers.
4. Through novation and merger, the rights and obligations of the purchasers under the SPA came to be vested in the Plaintiff.
5. The SPA, governed by Thai law, contained the following salient clauses:
(a) Clause 10.1(f), which entitled the Plaintiff, as purchaser, to an indemnity from the Defendant against tax claims by the Thai tax authority; and
(b) Clause 8.6, which imposed a time limit on the Defendant’s liability to indemnify the Plaintiff.
6. When the SPA was being negotiated, the parties were aware of a pending case before the Thai Supreme Court, between the Thai tax authority and an unrelated company which, depending on its outcome, could result in additional taxes and accordingly, trigger the Defendant’s indemnity obligation under the SPA provision.
7. The Thai Supreme Court eventually decided the pending case against the taxpayer company and the Thai tax authority demanded that the Plaintiff pay additional taxes .As a result, the Plaintiff sought an indemnity from the Defendant, which the Defendant refused.
III. ARBITRATION PROCEEDINGS
8. The Plaintiff commenced arbitration under the auspices of SIAC against the Defendant, pursuant to Clause 19 of the SPA (the “Arbitration Agreement”).
9. The Arbitration Agreement provided inter alia that the dispute:
(a) “… shall be exclusively and definitively settled by arbitration pursuant to the rules of the Singapore International Arbitration Centre … by three arbitrators appointed according to the Rules ”;
(b) “The language of the arbitration shall be English ”; and
(c) “The place of arbitration shall be Singapore. ”
[emphasis as underlined]
10. In the interest of saving time and costs, the Defendant applied under the Expedited Procedure (the “Expedited Procedure”), pursuant to Rule 5 of the SIAC Arbitration Rules (6th Ed, 2016) (the “2016 Rules”), for the arbitration to be conducted by a sole arbitrator.
11. The Plaintiff was amenable to the Expedited Procedure but objected to the appointment of a sole arbitrator, stressing that the Arbitration Agreement expressly provided for the appointment of three arbitrators.
12. The SIAC President decided that the arbitration would follow the Expedited Procedure conducted by a sole arbitrator.
13. In light of the SIAC President’s decision, the Plaintiff stated that it would proceed with the arbitration but “under protest ”.
14. On 12 June 2018, the Arbitrator issued an award (the “Final Award”) and dismissed the Plaintiff’s claim to be indemnified by the Defendant.
IV. POST-ARBITRATION PROCEEDINGS
15. In late August 2018, the Plaintiff commenced proceedings before the Thai Central Intellectual Property and International Trade Court (the “Thai Court”) to set aside the Final Award.
16. In response, the Defendant applied to the Singapore court for an injunction to restrain the Plaintiff from continuing with the proceedings before the Thai Court.
17. On 9 November 2018, the Plaintiff applied to the Singapore High Court to set aside the Final Award. The application was subsequently transferred to SICC.
18. On 25 March 2019:
(a) The Thai Court dismissed the Plaintiff’s application, on the basis that the Thai Court lacked power to set aside the Final Award; and
(b) The Singapore court had granted a permanent injunction to prevent the Plaintiff from proceeding with its application before the Thai Court or commencing fresh court proceedings in Thailand in connection with disputes arising out of the SPA.
V. ISSUES BEFORE SICC
19. In support of its setting aside application, the Plaintiff relied on the following grounds:
(a) The Final Award was made by a sole arbitrator, instead of by a tribunal of three arbitrators, contrary to the Arbitration Agreement;
(b) The Final Award dealt with matters outside the terms of the submission to arbitration; and
(c) The Final Award is in conflict with Singapore public policy.
20. The Defendant sought to strike out the Plaintiff’s application based on the ground that the Plaintiff’s challenge to the Final Award was brought long after the expiry of the three-month time limit for recourse against an arbitral award imposed by Article 34(3) of the UNCITRAL Model Law (“Model Law”).
21. The following issues were before the SICC:
(a) Whether the Plaintiff was entitled to set aside the Final Award;
(b) Whether an extension of time could be retrospectively granted with respect to the Plaintiff’s setting aside application.
VI. SICC’S FINDINGS
A. WHETHER THE PLAINTIFF WAS ENTITLED TO SET ASIDE THE FINAL AWARD
22. The SICC held that the Plaintiff was not entitled to set aside the Final Award for the following reasons.
(i) Issue of Sole Arbitrator
23. In furtherance of the Plaintiff’s case, the Plaintiff contended that:
(a) “… it had an assurance there would at least be one arbitrator … who would have familiarity with Thai law ”; and
(b) The 2016 Rules “cannot retrospectively amend the substantive right of parties [to have three arbitrators] under the Arbitration Agreement ” as the SIAC Arbitration Rules (4th Ed, 2010) (the “2010 Rules”) were in force at the time the SPA was signed.
24. The SICC found that the Arbitrator Agreement allowed for a sole arbitrator to conduct the arbitration as the 2016 Rules were incorporated by reference into the Arbitration Agreement, which inter alia allowed the parties to avail themselves to the Expedited Procedure and the appointment of a sole arbitrator.
25. As the parties did not indicate any explicit intention for three arbitrators to preside over the dispute in any case, the parties were deemed to have accepted that they would be bound by whatever modifications were made to the SIAC Rules subsequently in force.
26. The fact that the 2010 Rules were in force at the time of the signing of the SPA was immaterial, as the 2016 Rules applied when the arbitration was commenced.
(ii) Issue of Arbitrator’s Jurisdiction
27. The Plaintiff also argued that the Arbitrator was not familiar with Thai law, the Final Award was made “without reference to Thai law principles ”, and the Arbitrator erroneously awarded costs in favour of the Defendant.
28. The SICC found that the Arbitrator “made careful (as opposed to merely superficial) reference to Thai law in the Final Award .”
29. In fact, the only point of contention between the Thai law experts respectively appointed by parties was regarding the extent to which pre-contractual negotiations were relevant in interpreting a contract.
30. The Arbitrator preferred the Defendant’s expert evidence and found against the Plaintiff.
31. In this regard, the SICC noted that the Plaintiff was not entitled to challenge the Final Award simply because it disagreed with “the way in which the Arbitrator applied Thai law to the facts.”
32. With reference to the issue of costs, SICC found that:
(a) The Defendant’s claim for “costs ” was covered under the relief pleaded in the Defendant’s Response to Notice of Arbitration, which in any case was lower than what was incurred by the Plaintiff’s lawyers;
(b) During costs submissions, the Plaintiff previously expressly agreed with the Defendant that “the Arbitrator should determine costs on the basis of Singapore law. ”
33. Accordingly, the Plaintiff was prohibited from now alleging that the costs awarded to the Defendant were not claimed and were in excess of the limit permitted by Thai laws.
(iii) Issue of Contravention of Public Policy
34. The Plaintiff relied on the two earlier grounds to allege that the Final Award breached Singapore public policy.
35. As the two earlier grounds were not made out, the SICC dismissed this alleged ground.
B. WHETHER AN EXTENSION OF TIME COULD BE RETROSPECTIVELY GRANTED WITH RESPECT TO THE SETTING ASIDE APPLICATION
36. In considering the issue of whether the Plaintiff’s application was time-barred, the SICC refused to grant the extension of time.
37. While the SICC noted that there was “no consistent international practice as far as the extension of time for setting aside arbitral awards ” was concerned, the SICC was of the view that Article 34(3) of the Model Law prohibited any extension of time.
38. Based on the natural and ordinary meaning of the words contained in Article 34(4) of the Model Law, it is obvious that the phrase in its negative form – “may not be made ” – is indicative of absolute prohibition.
39. Under Section 18 of the Supreme Court of Judicature Act (“SCJA”) and Paragraph 7 of the First Schedule to the SCJA, the SICC possessed the general power to extend procedural timelines.
40. However, the general power was not applicable to the present situation, as Article 34(3) provided a substantive right of action, rather than merely imposing a procedural timeline.
41. In this regard, Paragraph 7 of the First Schedule to the SCJA could not be used “to extend a right of action which has been extinguished by a 'limitation' in some written law.”
42. Additionally, Article 5 of the Model Law, read together with Section 3 of the International Arbitration Act, supports the SICC’s conclusion as the cited provisions expressly prohibit intervention by courts on matters governed by the Model Law. This means that the court could only intervene in arbitration-related matters in limited circumstances permitted by the Model Law.
43. Even if the SICC did possess the power to extend the time limit, the SICC opined that it would not have granted the extension for the following reasons.
(i) Inordinate Delay
44. The Final Award was issued on 12 June 2018. Based on the date of the Final Award, the Plaintiff’s application to set aside should be taken out by 12 September 2018.
45. However, the Plaintiff only made such an application around 9 November 2018, close to two months after the Final Award was issued.
46. The Plaintiff was also unable to provide any good reason for the delay, which further contributed to the SICC ruling against the Plaintiff.
(ii) Prejudice to Defendant
47. While the Defendant did not strongly complain of prejudice, the SICC noted that “a mere lack of prejudice would not by itself justify the grant of an extension ”.
VII. IMPLICATIONS OF BXS v BXT
48. In arriving at its decision, the SICC observed that parties should clearly evince their intention with respect to arbitration rules.
49. In the absence of explicit or express wording to the contrary, institutional arbitration rules are taken to be incorporated by reference into the parties’ arbitration agreement and parties are not allowed to argue otherwise.
50. The present case also elucidated the Singapore position on the nature of time bars with respect to setting aside of arbitral awards and confirmed that time bars should be strictly observed and complied with.
51. This proposition is consistent with Singapore’s position on the finality and conclusiveness of the arbitral process, which is espoused in various previous High Court decisions declining to set aside arbitral awards.