The Singapore Court of Appeal’s Important Judgment in Astro

Occasionally,
it is evident the moment one encounters a judgment that it is likely to become
a classic in its field. The recent decision of the Singapore Court of Appeal in
PT First Media TBK v Astro (“Astro”) undoubtedly belongs in this
category. The
judgment
of Sundaresh Menon CJ
is rich in scholarship and likely to become the first
port of call for a common law court seeking guidance on the legislative history
of the UNCITRAL Model Law on International Commercial Arbitration. Of the many
issues that arose, perhaps two are of central importance in India as
well: the relationship between
active and
passive remedies against decisions
made by an arbitral Tribunal at various stages in the life of a domestic
arbitration; and the underlying philosophy of the Model Law on this subject. I
do no more than offer a brief summary of the case in this post; inevitably, it
does not do justice to the complexity of the issues involved or the court’s
reasoning. For simplicity, I have omitted references to the individual members
of the groups in question but these can be found in the judgment.

This
was a dispute that arose out of a joint venture that went wrong. The joint
venture was created in 2004 between a Malaysian company (“the Astro Group”) and an Indonesian company (“the Lippo Group”) with the object of providing television and
multimedia services in Indonesia. The Shareholders Agreement contained several
conditions precedent which the parties agreed had to be fulfilled by July 2006.
As it turned out, these conditions were not fulfilled but the Astro Group continued
funding the JV. Disputes arose in 2008 when Astro indicated it would no longer do
so; proceedings were initiated by the Lippo Group in the Indonesian courts not
only against those members of the Astro Group which were parties to the SSA but
also against members which were not. The Astro Group invoked the arbitration
clause in the SSA which provided for SIAC arbitration and made an application under
Rule 24(b) of the SIAC Rules to join the other members of the Astro Group to
the arbitration. The Tribunal acceded to this application, once those members
(the 6th to 8th Respondents in the appeal) consented,
taking the view that it was empowered to do so by virtue of R 24(b) even though
those Astro members were not parties to the SSA. Lippo did not challenge
this under the equivalent of article 16(3) of the Model Law. The
Tribunal eventually passed a Final Award against Lippo, which Astro sought to
enforce in Singapore. Lippo sought to resist enforcement on the basis that the
Tribunal had no jurisdiction to add the Astro parties under R 24(b).

The
first issue that arose, therefore, was whether Lippo was entitled to challenge
jurisdiction having not availed itself of the opportunity to do so under
article 16(3). The second issue—which arose only if Lippo succeeded on the
first—was whether the Tribunal had erred in its construction of R 24(b) and
therefore lacked jurisdiction. At first instance, the judge ruled against
Lippo. In the Court of Appeal, Sundaresh Menon CJ rejected this view and
distinguished between active and passive remedies. Once again, at the
risk of doing injustice to the depth of the Court’s reasoning, it is in summary
this: (i) there are generally two
avenues of challenge open to a party who receives an adverse ruling from a
Tribunal during the arbitration; in the case of jurisdiction, it may challenge the finding immediately
(if it does so, the question whether it can again do so at the stage of
enforcement may arise, but did not on the facts of Astro) or it may choose to proceed with the arbitration, reserving
its rights with respect to its jurisdictional challenge, and raise it as a ‘defence’
at the stage of enforcement; (ii) before
the reception into Singapore of the Model Law, it was clear that the award debtor
had what Sundaresh Menon CJ calls a ‘choice of remedies’ in this respect: not ‘actively’
challenging the award did not preclude the award debtor from ‘defending’ an enforcement
on the same grounds; (iii) the
introduction of the UNCITRAL Model Law did not alter this—on the contrary, it
strengthened it. On point (ii),
Sundaresh Menon CJ demonstrates that the case law under the equivalent
provision of the English Arbitration Act recognised this choice of remedies and
although it is not easy to extract a clear principle from them, they are
consistent with the view widely held by the textbook writers of the time that
this choice did exist. On (iii),
Sundaresh Menon CJ conducts an instructive review of the legislative history of
the Model Law and demonstrates that a proposal made in the Seventh Session of
the Working Group to take away this choice for domestic international arbitrations (ie an international commercial
arbitration with a domestic seat) failed (paragraph
69-71
). This is consistent, held the Court, with the underlying philosophy
of the Model Law to ‘de-emphasise’ the seat of arbitration. The Court’s
conclusion was:

71…Thus, in our view, the travaux
make it clear beyond argument that the Model Law provides for the system of
‘choice of remedies’, and that this system applies equally to both foreign and
domestic awards which are treated uniformly under the Model Law. It follows
that under the Model Law, parties that do not actively attack a domestic
international award remain able to passively rely on defences to enforcement
absent any issues of waiver.

Sundaresh
Menon CJ also noticed—but did not express a concluded view on—the controversy
about the enforceability of an award that is set aside by the competent court
of the country of the seat of arbitration and tentatively doubted the French
view that such awards are nevertheless enforceable (para 77). The Court agreed with the conclusion of the judge below
that Germany had rejected the choice of remedies but pointed out that this was
because it has an enforcement regime ‘that is distinctly different from that of
the Model Law’.

It
was also suggested that since section 19B of the Singapore International
Arbitration Act provides that an arbitral award is ‘final and binding’ on the
parties, the award debtor may not resist enforcement (obviously, in that
country) unless it has sought to have the award set aside. This argument is
naturally unavailable for a ‘foreign’ award because, ex hypothesi, it is not made under the law of the country of
enforcement. The equivalent provision in the Indian Arbitration Act is
section 35. But Sundaresh Menon CJ held, endorsing the view of Gloster J in Shell v Dana Gas
that all this provision does is make the award res judicata as between the parties: it does not prevent a defence
to its enforcement on grounds available under the law governing the enforcement
action:

The
point of s 19B(4) is a negative one. As Gloster J
pointed out, although issues determined under the award are res judicata, it
was important to dispel the misconception that the award then becomes
unimpeachable. On the contrary, it may still be challenged in accordance with
the available processes of appeal or review of the award permitted by the law
governing the arbitration. In short, s 19B(4) in fact clarifies what “final and
binding” does not amount to.

This
led the Court to the conclusion that a jurisdiction challenge was available to the Lippo Group. It was
still necessary to ‘characterise’ Lippo’s jurisdictional objection for the
purposes of section 19 of the Singapore Act, and here the Court makes some interesting
observations on the distinction between denying the existence of an arbitration agreement and denying its validity, notes the authorities to which this question has given
rise in the parallel field of conflict of laws and considers the relationship
between Article 36(1)(a)(i) and Article 36(1)(a)(iii) (para 152). In considering the jurisdictional challenge, the Court agreed
with Lord Mance’s view in Dallah,
followed by Andrew Smith J in Arsanovia, that it must conduct a de novo review of jurisdiction: the
arbitral Tribunal’s view “of its own
jurisdiction has no legal or evidential value before a court that has to
determine that question
”. On the merits of the challenge, the Court agreed
with the Lippo Group that Rule 24(b) was a procedural
power and not a jurisdictional provision: it followed that the Tribunal had
erred in acceding to the application to add the other Astro members to the
arbitration but the award was still enforceable with respect to those companies
that were actually parties to the SSA.

In
sum,
Astro will undoubtedly generate
much commentary and close analysis in the common law world in the months ahead.
This post is no more than an initial reaction to the judgment and readers’
views are welcome.

About the author

V. Niranjan

1 comment

  • Some Thoughts to Share:
    What appears to have been covered at some length is the view the domestic court has taken.In doing so, the impression given is that some of the rules on international arbitration; which , to one's understanding are to be found in what is referred to as the Model Law. Even so, one is not clear, hence requires to be elaborated, as to how far / to what extent any such view of a domestic court could be effectively and finally enforced against a disputing party who is an alien to the country over which the domestic court has jurisdiction. In other words, the grave doubt is centered on the more serious issue often faced with; that is, to be precise, the concept , replete with complicity- comprehensively referred to as "extra territorial jurisdiction".
    May be, any law expert well /reasonably versed and exposed to principles governing international arbitration, more particularly with personal experience of practice in international court (s) should could offhand throw some light, even though not any firm opinion.
    Believe to have made self clear on the point of genuine doubt likely to arise in the mind of anyone else similarly placed.

Subscribe to Blog via Email

Enter your email address to subscribe to this blog and receive notifications of new posts by email.

Recent Posts

Topics

Recent Comments

Archives

web analytics