Courts and Arbitration A Question of Balance?

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1 Courts and Arbitration A Question of Balance? Recent Developments in Singapore law Sundaresh Menon Senior Partner, Rajah & Tann 11 1 Setting the scene The current economic climate and arbitration Well-functioning dispute settlement systems imperative in today s economy NY Convention and the UNCITRAL Model Law Reasons for the rise of arbitration Free-standing substantive law of arbitration? 2 1

2 Setting the scene But arbitration cannot exist in a vacuum divorced from the courts Balance Striking an appropriate balance between competing and complementary factors for and against judicial intervention The Goldilocks challenge 3 Setting the scene Key values: Fairness/Justice Certainty Expectation of the parties Finality Enforceability Promotion of arbitration as a mode of dispute resolution How does Singapore balance these competing interests? Policy of minimal judicial interference 4 2

3 Setting the scene 3 recent Singapore cases: Swift-Fortune: pre-award interim relief SBT: post-award challenge on Natural Justice PT Asuransi: post-award challenge on public policy Applicant in all three cases failed 5 Swift-Fortune v Magnifica Marine Pre-award interim relief 3

4 Recent Singapore case law Swift-Fortune v Magnifica Marine Swift-Fortune, a Liberian company, contracted to purchase a vessel from Magnifica Marine, a oneship Panamanian company. Physical delivery was to be in China but with legal completion in Singapore. The contract was governed by English law and provided for arbitration in London. Delivery was delayed and Swift-Fortune claimed it incurred damages of up to US $ 2.5 million. It applied for a Mareva injunction. 7 Recent Singapore case law Swift-Fortune v Magnifica Marine Issue: does a Singapore court have jurisdiction to grant interim relief in aid of international arbitration proceedings which are not conducted in Singapore? Two conflicting judgments High Court in Swift Fortune: no High Court in Front Carriers: yes 8 4

5 Recent Singapore case law Swift-Fortune v Magnifica Marine Court of Appeal declined jurisdiction Art 9 of the Model Law is not an empowering provision. Legislative intent behind IAA to promote arbitration in Singapore. Territorial limitation implied into powers to grant interim relief. Court must not cut across the grain of the chosen curial law and interfere with the powers of the foreign arbitral tribunal. 9 Recent Singapore case law Swift-Fortune v Magnifica Marine The case in perspective Jurisdiction to grant interim relief not per se invasive Time factor Exercise not possession of power determines whether a court assists or interferes with arbitration What really is the policy of the IAA? Judicial nationalism? Does this really help promote Singapore as an arbitration friendly jurisdiction? 10 5

6 SohBengTee v Fairmount Devt Post-award challenges: Natural Justice Recent Singapore case law SBT v Fairmount Devt Fairmount, a developer of condominium projects, engaged SBT to build and maintain apartment blocks, mock-up units and a substation. Construction was to be completed by 1 February SBT made several applications for time extensions, but was granted only 5 days. 12 6

7 Recent Singapore case law SBT v Fairmount Devt SBT failed to make the deadline and the contract was repudiated. Fairmount sued for damages. SBT argued that the termination was unlawful and invoked its right to arbitration. Issues before the Arbitrator Whether Fairmount s termination was lawful i.e. whether SBT entitled to time extensions. 13 Recent Singapore case law SBT v Fairmount Devt Arbitrator s findings Lack of evidence prevented assessment of entitlement to time extension But: some of Fairmount s acts hindered SBT s ability to perform the contract expeditiously Time for performance was at large, SBT entitled to reasonable time to complete contract 14 7

8 Recent Singapore case law SBT v Fairmount Devt Did the arbitrator exceed his jurisdiction in deciding that time was at large? If so, was there also a breach of natural justice by denying parties the right to be heard (on the issue that time was at large)? High Court: no ultra vires, but breach of natural justice Court of Appeal: no ultra vires and no breach of natural justice 15 Recent Singapore case law SBT v Fairmount Devt High Court s reasoning: Arbitrator had to decide the basis on which SBT had to complete the works. This invariably included the issue whether time was at large therefore this issue was theoretically not outside the scope of arbitration. However, neither party proceeded on the basis that time was at large and so neither party argued this position. Fairmount was deprived of its right to be heard on this issue. 16 8

9 Recent Singapore case law SBT v Fairmount Devt Court of Appeal findings on judicial oversight and the parties rights in relation to natural justice - Policy of minimal intervention (a) to recognise autonomy of arbitration and encourage finality and (b) to uphold the choice of the chosen dispute resolution method. See [62] of the judgment 17 Recent Singapore case law SBT v Fairmount Devt - Relevant considerations in deciding whether or not to intervene Support effectiveness arbitration and avoid myriad unmeritorious judicial challenges Respect the expertise of the appointed arbitrator - Key test : It must be shown that reasonable arbitrant could not have foreseen the possibility of reasoning of the type found in the award 18 9

10 Recent Singapore case law SBT v Fairmount Devt - Court s function not to comb through the award in search of a fault. Awards should be read generously in order to ensure only meaningful breaches are remedied. - See [65] of the judgment 19 Recent Singapore case law SBT v Fairmount Devt The case in perspective Clear articulation of judicial philosophy Largely in line with international norms Generally the arbitrator s word will be final Great reliance of party autonomy But irrational or capricious? 20 10

11 PT Asuransi v Dexia Bank Post-award challenges: Public policy Recent Singapore case law PT Asuransi v Dexia Bank PT Asuransi was an Indonesian entity that guaranteed a series of notes. The guarantee allowed for a debt restructuring scheme. Dexia Bank was one of several holders of the notes. The notes matured in 1999 but remained unpaid. In 2000 PT Asuransi initiated a debt restructuring scheme. A Noteholders meeting in February 2000 purportedly approved that scheme

12 Recent Singapore case law PT Asuransi v Dexia Bank Dexia Bank remained opposed and commenced arbitration in March The issuer and PT Asuransi did not appear in the arbitration. In June 2001, the resolutions of the Noteholders meeting were ratified but the Tribunal was not made aware of this till later. 23 Recent Singapore case law PT Asuransi v Dexia Bank The arbitration commenced by Dexia Bank was completed in October The award held that PT Asuransi had failed to restructure its obligation and was hence still liable. [award 1] PT Asuransi then commenced arbitration in January 2002 seeking a declaration that the June 2001 meeting and scheme were valid and binding on the Noteholders. The second arbitral tribunal held that it had no jurisdiction as all the issues should have been brought up in the first arbitration. [award 2] 24 12

13 Recent Singapore case law PT Asuransi v Dexia Bank Should the second award be set aside for breach of public policy, ie conflict with the first award? Court of Appeal on the ambit of public policy Errors of law or fact do not engage the public policy of Singapore per se cf. egregious error? No necessary correlation between questions of jurisdiction and public policy Public morality is the touchstone of public policy Finality of litigation is part and parcel of the public policy of Singapore 25 Recent Singapore case law PT Asuransi v Dexia Bank Furthermore, the second award was a nullity and therefore there was nothing in substance to set aside Court of Appeal on the definition of award A negative determination is a decision not to determine the substance of the dispute, and therefore cannot be an award for the purposes of the Model Law 26 13

14 Evaluating Singapore s Judicial Philosophy Minimal judicial interference Judicial philosophy and arbitration Minimal judicial interference Recognition of the need to protect core values of arbitration Certainty and finality due to party autonomy Special expertise of arbitrator Interest of winners as well as of losers Enforceability? Cf. Swift-Fortune 28 14

15 Judicial philosophy and arbitration Public policy egregious error? Rarely engaged. Procedural norms give way to these factors 29 Conclusions Judicial attitude generally sustainable when measured against principle of minimal judicial interference and promotion of international arbitration in Singapore Less coherent when measured against value of enforceability Swift-Fortune Legal certainty supports minimal judicial interference But: pragmatic application necessary as the pendulum may have swung a little too far 30 15

16 THE END THANK YOU For more information, please contact: Sundaresh Menon Tel: Website:

17 Choice Of Jurisdiction / Choice Of Law Why It Matters Chong Yee Leong Partner, Rajah & Tann 11 1 Choice Of Jurisdiction / Law Key issue where shall we hold the arbitration? Seat/place v venue Seat/place the jurisdiction in which the arbitration will have legal grounding. Venue physical location of the arbitration proceedings 2 1

18 Choice Of Jurisdiction / Law Implication of choice of jurisdiction Neutrality Lex arbitri Choice of arbitrator/counsel Attitude of Court Enforcement of Award Practical considerations 3 Choice Of Jurisdiction / Law Neutrality Psychological effect not home ground for any party Particular relevant for parties from different socio-economic background To avoid giving advantage to one party with greater familiarity with the lex arbitri 4 2

19 Choice Of Jurisdiction / Law Lex arbitri This is the different from the governing law of the contract Seat theory the concept that an arbitration is governed by the law of the place which is the seat of the arbitration is well established the lex arbitri 5 Choice Of Jurisdiction / Law Lex arbitri The lex arbitri is the law governing the procedural framework and overall conduct of the arbitration international arbitration law and statute in force in the chosen jurisdiction will usually be the lex arbitri 6 3

20 Choice Of Jurisdiction / Law Lex arbitri in theory, the courts has not rejected the idea of allowing the parties to choose a lex arbitri that is different from the law of the seat of the arbitration, that is not a good idea if the parties chose any arbitration rules, the rules still applies. 7 Choice Of Jurisdiction / Law Lex arbitri however, the international arbitration law and statute will have mandatory provisions that the parties cannot avoid. if no arbitration rules are chosen by the parties, the international arbitration law and statute will also prescribe non-mandatory default rules. 8 4

21 Mandatory Provisions Procedural - Singapore IAA - mandatory provisions arbitral tribunal has power to make order or give directions for: security for costs; discovery of documents and interrogatories; giving of evidence by affidavit; the preservation, interim custody or sale of any property which is or forms part of the subject-matter of the dispute; 9 Mandatory Provisions Singapore IAA - mandatory provisions arbitral tribunal has power to make order or give directions for: samples to be taken from, or any observation to be made of or experiment conducted upon, any property which is or forms part of the subject-matter of the dispute; the preservation and interim custody of any evidence for the purposes of the proceedings; securing the amount in dispute; 10 5

22 Mandatory Provisions Singapore IAA - mandatory provisions arbitral tribunal has power to make order or give directions for: the preservation and interim custody of any evidence for the purposes of the proceedings securing the amount in dispute 11 Mandatory Provisions Setting aside award - Singapore IAA - mandatory provisions setting aside of awards: incapacity of party or the agreement is not valid no proper notice of the appointment of an arbitrator or of the arbitral proceedings was given or a party was otherwise unable to present his case 12 6

23 Mandatory Provisions Setting aside award - Singapore IAA - mandatory provisions setting aside of awards: the dispute not within scope of arbitration agreement the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties the subject-matter of the dispute is not arbitrable 13 Mandatory Provisions Singapore IAA - mandatory provisions setting aside of awards: the award is in conflict with the public policy the making of the award was induced or affected by fraud or corruption a breach of the rules of natural justice occurred in connection with the making of the award. 14 7

24 Mandatory Provisions Setting aside awards - Indonesian Arbitration and Dispute Resolution Act - setting aside of awards: letters or documents submitted in the hearings are acknowledged to be false or forged or are declared to be forgeries after the award has been rendered after the award has been rendered documents are founded which are decisive in nature and which were deliberately concealed by the opposing party 15 Mandatory Provisions Setting aside awards - Indonesian Arbitration and Dispute Resolution Act - setting aside of awards: the award was rendered as a result of fraud committed by one of the parties to the dispute. 16 8

25 Mandatory Provisions Setting aside awards the Belgian experience: By law of March ,, a provision was added to Art 1717 of the Belgian Code Judiaciare so that a losing party was not permitted to challenge in the Belgian courts an award made in an international arbitration held in Belgian unless at least one of the parties had a place of business or other connection with Belgium.\ Law was subsequently changed because this legal provision was discouraging parties from choosing Belgium as the seat of arbitration. 17 Choice Of Arbitrator / Counsel In most countries, there are no restrictions in local law limiting choice of arbitrators and representative. There are some exceptions: In Japan and Singapore, for example, local lawyers must be engaged to appear as counsel. Happily that has changed and now, parties can be represented or assisted by persons of their choice. In some countries such as Saudi Arabia, a foreigner cannot be arbitrator. 18 9

26 Choice Of Jurisdiction / Law Attitude of Courts the court of the chosen seat will hear any application in relation to the arbitration proceedings and setting aside of the awards PT Garuda Indonesia v Birgen Air [2002] 1 SLR 393 interventionist court should be avoided the ONGC v Saw Pipes (2003) 5 SCC 705 experience 19 Choice Of Jurisdiction / Law Attitude of Courts reliability and efficiency of court is very important attitude of court on arbitrability of issues and other issues is important 20 10

27 Choice Of Jurisdiction / Law Enforcement of Award if seat is not a signatory to 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, award will not be enforceable in a convention country Award cannot be enforced if it is not enforceable at the place of arbitration 21 Choice Of Jurisdiction / Law Practical Considerations competent local bar to advise on lex arbitri availability of experts and other supporting professionals Flights connectivity, availability of meeting rooms, local support facilities, accommodations and other amenities 22 11

28 THANK YOU For more information, please contact: Chong Yee Leong Tel: Website:

29 Complex Dispute Resolution : Aspects of Managing a Complex Arbitration Sundaresh Menon Senior Partner, Rajah & Tann 11 1 Overview Complexity Defined Choosing the Tribunal Managing the Documents Multi-Party Disputes Civil Law Perspectives 2 1

30 Overview Calderbank Offers Planning and Structuring the Hearing Cases Against Public Entities Post-Award Review 3 Complexity Defined Complexity arising from one or more of the following: Large volume of documents Entails complicated factual inquiry Involves multiple parties Unfamiliar legal tradition 4 2

31 Complexity Defined Multiple legal issues for determination including jurisdictional challenges or multi-jurisdictional elements Involves a public entity Unexpected interim outcomes Unduly expensive 5 Complexity Defined Often the most important issue faced by the parties Can influence the outcome of an arbitration One or three? Essential to involve the counsel 6 3

32 Managing the Documents Most complex cases will be document intensive Volumes can be massive Key : support NOT overwhelm Hierarchy of bundles trial and core bundles 7 Managing the Documents Organise the bundles logically Document management systems Biggest dangers procrastination; lack of organisation Key features of our approach to document management 8 4

33 Multi-Party Disputes Among the more common variety of complexities The nature of the problem Multiple respondents Constitution of the Tribunal Complications in the absence of provisions 9 Multi-Party Disputes Related Disputes - Separate Arbitrations or one dispute in Court, another in arbitration * The oft-asserted risk of inconsistent findings * No procedure to compel consolidation or concurrent hearings in arbitration * Distinction between IAA and AA 10 5

34 Multi-Party Disputes * Tactical considerations ~ The Tribunal s perspective ~ The Party s perspective. Danger of annoying Tribunal. Tactical considerations may encourage one party to oppose consolidation. Challenge is to present it carefully. 11 Multi-Party Disputes * Dangers ~ Logistical difficulties inherent with multiple fronts ~ Inconsistent findings. Danger of prejudgment. Additional complexity if subtle difference in terms of contract or in governing law 12 6

35 Civil Law Perspectives Increasingly common given cross-border trade Important differences Relative significance of written statements and contemporary documents Parole evidence rule may be inapplicable Approach to discovery Approach to interlocutories such as particulars etc 13 Civil Law Perspectives Approach to cross examination Time allowed is more limited Tribunal will be more involved Focus will be on contemporary documents and not on written statements Approach to pre-hearing written briefs Need to adapt styles working with civil law counsel and arbitrators 14 7

36 Calderbank Offers Can be important cost protection method No uniform practice to the significance of such offers Discretionary factor only May not be applicable depending on nature of relief In some jurisdictions significance is rather limited 15 Calderbank Offers In some jurisdictions that do not recognise without prejudice privilege danger that offer may be disclosed which can be disastrous Nonetheless should be routine consideration because of potential protection especially in Singapore/UK etc Can also be a significant factor in promoting settlement talks 16 8

37 Calderbank Offers Crucial issues Timing Amount 17 Planning and Structuring the Hearing Object to win in the most efficient manner Look for issues that allow an attack on the jugular Critical in a complex case which can otherwise end up being heard for too long, costing too much and losing the interest or attention of the Tribunal 18 9

38 Planning and Structuring the Hearing - First step avoid clutter Easier to manage Easier for arbitrators to make a decision Look for alternatives such as documents only submissions for smaller claims that add to clutter 19 Planning and Structuring the Hearing - Case study Project Twin Towers Range of complex disputes including adequacy of construction of foundations, compliance with specifications in construction of floors and termination for non-payment Restless alliance with sub-contractors 20 10

39 Planning and Structuring the Hearing One sub-contractor had refused to participate in joint alliance and was independently seeking award for its work that was not affected. Application for trial of termination for non-payment. 21 Planning and Structuring the Hearing Case study Project Steel Fabrication Factually very complex case Numerous claims and sub-claims Hundreds of variation claims accounted for 50% of disputes were these variations and if so, how were they to be valued? 22 11

40 Planning and Structuring the Hearing Indemnity issue accounted for another 25% Extension of time issue accounted for only 15% but involved the most complex factual disputes Expert evidence ~ Experts must be allowed to be independent and be clearly instructed as to scope 23 Planning and Structuring the Hearing ~ Joint reports ~ Figures as figures agreements ~ Explanation of disagreement ~ Ensure the Tribunal understands the point 24 12

41 Claims against Public Entities Sensitivity is critical Mediation or negotiation can be useful In some jurisdictions mediation may afford sufficient basis to justify settlement In other jurisdictions it can be an important step in managing the relationship postarbitration Patience is key 25 Claims against Public Entities Need to be flexible and understand that public entities do not operate as corporations do Arbitration is very effective because of the privacy it affords Avoid suggestions of bad faith Focus on the merits and present a sound technical/legal basis for the claim 26 13

42 Post-Award Grounds for recourse is limited and for appeal non-existent Key issue here is unexpected unfavourable interim outcome May have a crucial impact on overall strategy if unexpected. Be realistic 27 Post-Award Be innovative There will never be a simple solution because finality is a key objective in arbitration Any solution is likely to be controversial Almost always advisable to get a fresh opinion from an uninvolved source Need to overcome inertia 28 14

43 Post-Award Fresh perspective is needed because an unexpected unfavourable outcome can be devastating Advisors begin to take the situation personally History of the case will be inherently unfavourable to a fresh approach Problem may relate to difficulties with counsel 29 THE END 30 15

44 THANK YOU For more information, please contact: Sundaresh Menon Tel: Website:

Courts and Arbitration A Question of Balance?

Courts and Arbitration A Question of Balance? Recent Developments in Singapore law Chong Yee Leong Partner, Rajah & Tann LLP 24 April 2008 1 Setting The Scene The current economic climate and arbitration