Maldives Airports v GMR Male International
DMC/Arbn/13/03
Singapore
Maldives Airports Co Ltd & Anor v. GMR Male International Airport Pte Ltd, [2013] SGCA 16: Singapore Court of Appeal: Judgment delivered by Sundaresh Menon CJ, Andrew Phang Boon Leong JA and Woo Bih Li J on 6 December 2012
Arbitration: Interim Order for Injunction under Section 12A(4) of International Arbitration Act: Meaning of “asset” under Section 12A(4) of International Arbitration Act: Preservation of contractual rights and choses in action as “assets” under Section 12A(4) of International Arbitration Act
Advocatus Law LLP for the Appellants, Maldives Airports Company Limited (“MACL”) and the Republic of the Maldives (“the Maldives Government”) and their respective officers.
M Pillay for the Respondents, GMR Male International Airport Private Limited.
Summary
A contractual right which can and is ordinarily preserved by way of an order for specific performance or an injunction (which can also be characterised as a right which, if lost, cannot be adequately compensated by an award of damages) is considered an “asset” which may be preserved by interim order of the court under Section 12A(4) of the International Arbitration Act (“IAA”).
This note has been contributed by Leong Lu Yuan, LLB (Hons), Partner at Ang & Partners, international contributors to the website for Singapore.
Facts
1. The Appellants and a consortium entered into a Concession Agreement, under which the consortium was granted a 25 year concession to rehabilitate, expand, modernise and maintain the Male International Airport (“the Airport”). All of the rights and obligations under the Concession Agreement were later novated to the Respondent.
2. After the concession Agreement was entered into, the Male Civil Court granted a declaration that certain clauses of Concession Agreement allowing the Respondent to impose a fee on departing passengers were inconsistent with Maldivian legislation (“the Maldives Judgment”).
3. Following negotiations between the Appellants and the Respondents, each of the Appellants issued a letter dated 5 January 2012 consenting to a variation of the fees payable to MACL under the Concession Agreement to account for the Respondent’s expected loss of revenue arising from the Maldives Judgment.
4. On 7 February 2012, there was a change of government in the Maldives. On 19 April 2012, MACL informed the Respondents (with copy to the Maldives Government) that the letter of 5 January 2012 was issued by its former chairman without authority.
5. On 5 July 2012, the Respondent commenced arbitration proceedings against the Appellants pursuant to the arbitration agreement contained in clause 21.4 of the Concession Agreement, seeking inter alia a declaration that it was entitled to adjust the fees payable to MACL (“the 1st Arbitration”). At the time that the appeal to the Singapore Court of Appeal was heard, the arbitral tribunal had been nominated but terms of appointment had not been agreed.
6. On 27 November 2012, the Appellants informed the Respondents that following the Maldives Judgment, the Concession Agreement was void ab initio, or alternatively that it had been frustrated. The Appellants further gave the Respondent 7 days’ notice to vacate the Airport.
7. On 29 November 2012, the Appellant commenced arbitration proceedings against the Respondents pursuant to the same arbitration agreement, seeking inter alia a declaration that the Concession Agreement was void and of no effect (“the 2nd Arbitration”)
8. Clause 21.4 of the Concession Agreement provided that the seat of arbitration was Singapore. The lex arbitri for both the 1st and 2nd arbitrations was therefore Singapore law, including the IAA.
9. On 30 November 2012, the Respondent commenced the present proceedings, seeking an injunction from the Singapore High Court to restrain the Appellants and their directors, officers, servants or agents from taking any step to:
(a) Interfere either directly or indirectly with the performance by the Respondent of its obligations under the Concession Agreement; or
(b) Take possession and/or control of the Airport or its facilities pending further order by the Singapore court or an arbitral tribunal constituted to resolve the dispute.
10. A Judge of the Singapore High Court granted an injunction in respect of (a) on 3 December 2012 (“the Injunction”). The Appellants appealed against the Judge’s decision.
11. This note focuses on the Court’s consideration of the scope of “asset” under Section 12A(4) of the IAA, and only deals with other issues in the case briefly.
Judgment (Singapore Court of Appeal)
1. In deciding whether to uphold the grant of the Injunction, the Singapore Court of Appeal considered two questions:-
1.1. Whether a Singapore court has the power to grant the Injunction, particularly where the Injunction was sought against the government of a foreign sovereign State.
1.2. If the Singapore court has such power, whether the Injunction should be granted or upheld in the circumstances of this case.
a) Whether a Singapore Court has the power to grant the Injunction, particularly where the Injunction was sought against the government of a foreign sovereign State
2. The Singapore court has the power to grant the Injunction under Section 12A(4) of the IAA, read with 12A(2) and 12(1)(i) of the IAA. Section 12A(4) of the IAA reads as follows:-
"If the case is one of urgency, the High Court or a Judge thereof may, on the application of a party or proposed party to the arbitral proceedings, make such orders under subsection (2) as the High Court or Judge thinks necessary for the purpose of preserving evidence or assets."
3. While the usual order for the preservation of evidence or assets might be an Anton Piller (fn.1) order or a Mareva injunction (fn.2), the Court held that any other interim order including an injunction could be granted as long as the order was considered necessary for the preservation of evidence or assets.
4. The Respondent submitted that the term “assets” in Section 12A(4) was to be construed widely, relying on the English Court of Appeal decision in Cetelem SA v Roust Holdings Ltd [2005] 1 WLR 3555 where it was held that “assets” in Section 44(3) of the Arbitration Act 1996 included choses in action and contractual rights. It was argued that the Injunction was necessary to preserve the following rights of the Respondent:-
4.1. The contractual right to be served the appropriate notice under the Concession Agreement before termination was effected; and
4.2. The contractual right to have any dispute over the entitlements of the parties under the Concession Agreement resolved by an arbitral tribunal before those entitlements were destroyed.
4.3. The Respondents’ interest in the land on which the Airport is situated (“the Site”).
5. The Court considered extrinsic evidence of the Singapore Parliament’s intention with regards to the scope of the term “assets”, and held that this evidence strongly suggested that the holding in Cetelem governed the proper interpretation of Section 12A(4) of the IAA, in particular the scope of “assets”.
6. The Court was, however, of the view that the contractual rights contemplated in Cetelem and encompassed by the term “assets” in Section 12A(4) were confined to such rights that can and are ordinarily preserved by way of an order for specific performance or an injunction. Such rights could also be characterised as rights which, if lost, would not be adequately compensated by damages, and included the right to have disputes resolved before a particular court or pursuant to an arbitration agreement.
7. The Court held that, of the three rights which the Respondent was seeking to preserve, only the Respondents’ interest in the Site could be preserved by the Injunction.
7.1. The Respondents’ contractual right to be served the appropriate notice under the Concession Agreement before termination.
7.1.1. The terms of the injunction sought by the Respondents would not preserve the contractual right to be served the appropriate notice under the Concession Agreement before termination was effected.
7.2. The Respondent’s contractual right to have any dispute over the entitlements of the parties under the Concession Agreement resolved by an arbitral tribunal before those entitlements were destroyed.
7.2.1. As there was nothing to suggest that the Concession Agreement was specifically enforceable, or that its breach could not be adequately remedied by an award of damages, the Injunction was not necessary to preserve the Respondent’s contractual right to have any dispute over the entitlements of the parties under the Concession Agreement resolved by an arbitral tribunal before those entitlements were destroyed. This right was in fact observed and given effect to by the Appellants when the Appellants commenced the 2nd Arbitration.
7.2.2. Clause 21.5 of the Concession Agreement, which provided that “during the pendency of any Dispute and the resolution thereof, both Parties shall continue to perform all their respective obligations under this Agreement”, did not change the position. The Clause expressly excluded obligations which “constitute the subject matter of [the] Dispute”.
7.2.3. The Court opined that very clear language was required to sustain a construction that parties were obliged to continue performing their respective obligations under the contract (including disputed obligations) despite the existence of a dispute that went to the very root and foundation of the contract, and despite the exclusion of obligations constituting the “subject matter of [the] Dispute.”
7.3. The Respondents’ interest in the Site.
7.3.1. The Court held that a lessee’s interest in land, including a right to occupy, use and enjoy land for a term, was precisely the sort of contractual right that is capable of coming within the meaning of “asset” for the purposes of Section 12A(4) – if the Injunction were set aside and the Appellants took over the Airport, the Respondent’s rights in respect of the Site would be destroyed.
b. Balance of Convenience – If the Singapore court has such power, whether the Injunction should be granted / upheld in the circumstances of this case.
8. While the Court was satisfied that the Injunction would be necessary for the preservation of the Respondents’ interest in the Site, the Court was of the view that the balance of convenience did not lie in favour of granting or upholding the Injunction.
8.1. The Respondent was unable to satisfy the Court that there would be no adequate remedy in damages if the Appellants were not entitled to take over the Airport.
8.2. If the Appellants took over the Airport, the Respondents’ direct losses were calculable, even if there might be difficulties in calculating the said losses. On the other hand, the difficulties inherent in assessing the damages accruing to the Appellants if the Injunction turned out to be unjustified were not to be underestimated.
8.3. The reach and extent of the Injunction was uncertain and presented considerable practical difficulties to the Appellants in complying with the Injunction. The Court applied the principles that:-
8.3.1. The court would not usually grant an injunction requiring parties to a complex contract to continue working together once it was shown that there had been a serious breakdown of mutual trust and confidence such that there was no longer any willingness to cooperate; and
8.3.2. The court would not grant injunctions which would result in numerous follow-up applications to determine compliance or non-compliance with the injunctions granted, particularly where the underlying events were taking place in another jurisdiction.
8.4. The Respondents expressed willingness to provide a cross-undertaking for damages which might be awarded to the Appellant if it was later found that the Injunction should not have been granted. However, the Respondents did not propose to provide security to back up its’ cross-undertaking to the Appellants in respect of damages, on the ground that it would plainly be able to satisfy any adverse award of damages. The lack of evidence to substantiate the Respondents’ assertion that it would plainly be able to satisfy any adverse award of damages was a factor that weighed against the grant of the Injunction.
Jurisdictional Objections
9. The Court rejected the Appellants’ jurisdictional objection that an injunction could not be granted to the Appellants, namely the Maldives Government.
9.1. The Court held that State Immunity Act did not apply, as the Maldivian government had, by Clause 23 of the Concession Agreement consented in writing to the giving of relief and/or issue of process against it.
Comment
The Court further expressed the view that if the subject of the injunction is a possible future act of a sovereign State, this would be one of the factors to be taken into account in deciding whether the injunction should be granted. As the point was not canvassed and Court’s decision did not turn on this point, the Court left open the question of whether the principle of judicial abstention or restraint in respect of acts of State should apply and the court should refrain from adjudicating on the matter.
Fn.1 An Anton Piller order is an order allowing a party to enter and search premises and to seize evidence without any prior notice. It is intended to prevent evidence from being destroyed.
Fn.2 A Mareva Injunction is an order for a party’s assets to be frozen, in order to prevent a party from disposing of or dissipating assets in order to frustrate the enforcement of an order or judgment given by the Court.
