Australia: Parties choose your remedies: the Singapore Court of Appeal has spoken

Introduction

The Singapore Court of Appeal recently handed down its eagerly awaited judgment in PT First Media TBK (formerly known as PT Broadband Multimedia TBK) v Astro Nusantara International BV and others [2013] SGCA 57. At the heart of this case was the question of whether a party had both "active" and "passive" remedies where an arbitral tribunal joined additional claimants who were not party to an arbitration agreement and imposed on the defendant (which had objected to the joinder) significant liability in respect of those additional claimants. The decision of the Singapore Court of Appeal that a party could choose to pursue either an active remedy by challenging the preliminary award on jurisdiction, or a passive remedy by challenging enforcement, and our conclusion that the courts in Australia and Hong Kong would reach the same conclusion, should come as no surprise to readers.

Background

The dispute arose out of a joint venture between companies belonging to an Indonesian conglomerate (Lippo), and companies belonging to a Malaysian media group (Astro). The terms of the joint venture were contained in a Subscription and Shareholders Agreement to which certain Astro companies were not party. That agreement contained an arbitration agreement appointing the Singapore International Arbitration Centre to resolve any disputes.

A dispute arose and Astro commenced an arbitration in Singapore against Lippo, including PT First Media TBK (FM). Astro sought to add as additional claimants related entities which consented to being joined but which were not party to the Subscription and Shareholders Agreement. Predictably, FM contested that joinder. The arbitral tribunal determined at a preliminary hearing that it had the power to join the additional claimants to the arbitration under rule 24(b) of the SIAC Rules.

The tribunal rendered further awards, including an interim final award on the merits which required FM to pay various sums to the additional claimants and only a comparatively very small sum to Astro. The High Court in Singapore granted leave to enforce the awards and enforcement orders were duly served. FM did not apply to set aside the enforcement orders. Judgment on the awards was entered, and only then did FM apply to set aside the judgments and for leave to set aside the enforcement orders on the ground (relevantly) that there was no arbitration agreement between FM and the additional claimants.

The High Court dismissed FM's application in Astro Nusantara International BV v PT Ayunda Prima Mitra [2012] SGHC 212. The Court held that Article 16(3) of the Model Law (which is incorporated into the Singapore International Arbitration Act (Cap 143A)) was the exclusive route to challenge jurisdiction. FM's failure to challenge the tribunal's joinder decision within the prescribed time precluded it from subsequently resisting enforcement of the awards.

Court of Appeal

On appeal, the Court considered in detail the purposes of the Model Law and the legislative background to the International Arbitration Act, and found in favour of FM, holding that Article 16(3) of the Model Law was not intended to be a "one-shot remedy" or to curtail the availability of defences at the recognition and enforcement stages.

The Court further held that the idea of "choice of remedies", in terms of both active and passive remedies, which de-emphasised the seat of arbitration, was fundamental to the Model Law's philosophy and its removal could impact on "... the practice and flourishing of arbitration in Singapore" (at [90]). It therefore followed that a party which did not actively initiate proceedings under Article 16(3) of the Model Law to challenge a preliminary ruling, or setting aside proceedings under Article 34 of the Model Law, was, as an alternative, able to passively rely on a defence in enforcement proceedings under section 19 of the International Arbitration Act (which contains the same grounds as those set out in Article 36 of the Model Law) if it had not waived its right to do so.

The tribunal's decision to join the additional claimants to the arbitration was considered by the Court of Appeal de novo. The Court ruled that only parties to an arbitration agreement can be joined to an arbitration in respect of that agreement (rule 24(b) of the SIAC Rules has been amended to expressly provide this). Finally, FM had not waived its right to challenge enforcement, nor had it made any representation on which an estoppel case could be successfully grounded.

Would the case be decided the same way in Australia?

The relevant Commonwealth legislation in Australia is the International Arbitration Act 1974 (Cth), which was last amended on 6 July 2010. The enforcement provisions are substantially the same as those in the Singaporean Act.

The Singapore Court of Appeal referred in its judgment to IMC Aviation Solutions Pty Ltd v Altain Khuder LLC (2011) 282 ALR 717. In that case, the Victorian Court of Appeal overturned the first instance decision by refusing to enforce an arbitral award made in Mongolia. Warren CJ emphasised (at [3]) that the matter was unusual and that "in all but the most unusual cases, applications to enforce foreign arbitral awards should involve only a summary procedure". What made the case unusual was that the award required payment by a company related to the defendant, but which was not a party to the arbitration agreement and had not taken part in the arbitration. The award did not explain the basis on which the tribunal had determined that it had jurisdiction to make such orders against that non-party.

Although there was no mention of "active" and "passive" remedies by the Victorian Court of Appeal, the Court agreed with the observations of Mance SCJ of the Supreme Court of England & Wales in Dallah Real Estate and Tourism Holding Co v Ministry of Religious Affairs of the Government of Pakistan [2011] 1 AC 763, that a party which denies being party to an arbitration agreement is not obliged to participate in the arbitration or to take any steps in the country which is the seat of the arbitration. Only when the party which initiated the arbitration seeks to enforce an award must the other party resist enforcement. This finding is consistent with the Singapore Court of Appeal's decision.

Would the case be decided the same way in Hong Kong?

In Hong Kong, section 86 of Cap 609 Arbitration Ordinance sets out the grounds on which a party can seek an order of the Court to refuse to enforce a non-Convention or non-Mainland arbitral award. The Arbitration Ordinance, which was enacted on 1 June 2011, largely adopts the Model Law, but like Singapore excludes Articles 35 and 36 in favour of Article V of the New York Convention.

Section 86(2)(c) of the Arbitration Ordinance enables a party seeking to challenge the enforcement of an arbitral award to do so on an additional ground, being "for any other reason the court considers it just to do so".

Although there is currently no case law on point in Hong Kong, section 86(2)(c) of the Arbitration Ordinance allows a party to pursue a "passive" level of review in order to resist the enforcement of an arbitral award, where that party has not previously pursued the "active" level of review of, for example, challenging a preliminary award on jurisdiction within the time specified in section 34 of the Arbitration Ordinance. In this respect, the Court of Appeal's recent decision in Singapore has brought the law in Singapore in line with the law in Hong Kong.

Conclusion

The current state of the law in Singapore, Australia and Hong Kong as to the choice of remedies available to parties, particularly at the stage of enforcement, is synonymous. Given the current move towards consistency of court decisions in respect of arbitrations across jurisdictions, the decision of the Singapore Court of Appeal is a welcome addition to the international jurisprudence.

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