Astro Nusantara International & Others v PT Ayunda Prima Mitra & Others
DMC/Arbn/13/02
Singapore
Astro Nusantara International BV and others v. PT Ayunda Prima Mitra and others, [2012] SGHC 157: Singapore High Court: Judgment delivered by Belinda Ang Saw Ean J on 22 October 2012
ARBITRATION: INTERNATIONAL COMMERCIAL ARBITRAL AWARD MADE IN SAME TERRITORY AS FORUM IN WHICH RECOGNITION AND ENFORCEMENT SOUGHT: PARTY NOT ENTITLED TO CHALLENGE JURISDICTION OF ARBITRAL TRIBUNAL AT SETTING-ASIDE OR ENFORCEMENT STAGE OF PROCEEDINGS: PARTY WHO FAILS TO CHALLENGE AWARD ON JURISDICTION PURSUANT TO ART. 16 OF MODEL LAW DEEMED TO ACCEPT FINALITY OF AWARD ON JURISDICTION
David Joseph QC and Wong Partnership LLP for the 1st to 8th Plaintiffs (“P1” to “P8”)
Toby Landau QC and Braddell Brothers LLP for the 2nd Defendant (the 1st and 3rd Defendants not being involved in the appeals before the Court)
Summary
If a party does not appeal an award on jurisdiction, the hearing on the merits will proceed on the basis that the tribunal has jurisdiction and the party may not, at the setting-aside or enforcement stage, challenge an award on the merits on jurisdictional grounds.
This note has been contributed by Jessica Yik, LLB (Hons), Associate at Ang & Partners, and Ng Weiting, LLB (Hons), Associate at Ang & Partners, international contributors to the website for Singapore.
Facts
1. The Plaintiffs, companies in the Astro group, and the Defendants, companies in the Lippo group, sought to enter into a joint venture to provide direct-to-home multi-channel digital satellite pay television, radio and interactive multimedia services in Indonesia.
2. The parties to the intended Joint Venture, save for P6 to P8, entered into a Subscription and Shareholders Agreement (“SSA”). Although P6 to P8were not parties to the SSA, the SSA contemplated their involvement in the provision of the services envisaged under the Joint Venture.
3. Disputes subsequently arose between the Plaintiffs and Defendants and the Joint Venture was eventually abandoned. The SSA contained an arbitration clause and the Plaintiffs commenced arbitration against the Defendants with Singapore as the seat of arbitration, and in accordance with the Singapore International Arbitration Centre Rules 2007.
4. The arbitration was governed by Singapore’s International Arbitration Act (Cap. 143A) (the “IAA”), which gives force of law to the UNCITRAL Model Law on International Commercial Arbitration (the “Model Law”), with certain exclusions, and to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (the “New York Convention”).
5. After the commencement of the arbitration, the Plaintiffs sought an order from the tribunal to, inter alia, join P6 to P8 to the arbitration. The Defendants resisted the application on the ground that P6 to P8 were not parties to the SSA, and that the tribunal had no jurisdiction to join them to the arbitration.
6. The tribunal made an award that it had jurisdiction over the subject matter and had the power under r.24(b) of the SIAC Rules 2007 to join P6 to P8 (the “Jurisdiction Award”). The Defendants made a clear decision not to appeal against the Jurisdiction Award under Art.16 of the Model Law, and proceeded to defend the substantive issues in the arbitration. The Defendants did, however, qualify in their Statement of Defence that their actions were “without prejudice to the Respondents’ position that any tribunal which is constituted has and will have no jurisdiction over any of the matters, claims and reliefs …”.
7. The tribunal subsequently made four further awards in favour of the Plaintiffs. The Jurisdiction Award together with these four awards will collectively be referred to as the “Singapore Awards”. The Singapore Awards were considered “domestic international awards” in the sense that they were international commercial arbitral awards made in the same territory as the forum in which recognition and enforcement is sought, i.e. Singapore.
8. The 2nd Defendants (“FM”) did not take steps to set aside any of the other Singapore Awards under Art.34 of the Model Law.
9. The Plaintiffs obtained leave from the Singapore High Court to enforce the Singapore Awards, and purportedly served the enforcement orders on FM at their registered office in Jakarta. FM did not apply to set aside the Enforcement Orders within the prescribed 21-day period for doing so, and the Plaintiffs then entered judgments against FM (the “Judgments”) in terms of the Singapore Awards after expiry of the said period.
10. FM subsequently applied to set aside the Judgments, and for leave to apply to set aside the Enforcement Orders for improper service. At first instance, the High Court set aside the Judgments and granted leave to FM to apply to set aside the Enforcement Orders on the ground of the tribunal’s lack of jurisdiction. The Plaintiffs appealed against the High Court’s decision to set aside the Judgments.
11. It was common ground that the statutory-prescribed timelines for setting aside an award had expired prior to FM’s application.
12. The High Court’s decision deals with the following:-
12.1. The Plaintiffs’ appeal against the decision of the High Court to set aside the Judgments for improper service of the Enforcement Orders; and
12.2. FM’s application to set aside the Enforcement Orders on the ground of lack of jurisdiction.
13. The focus of this case note is on the issues surrounding FM’s application to set aside the Enforcement Orders, and the High Court’s decision on whether service of the Enforcement Orders was proper will only be dealt with in passing.
Judgment
Plaintiffs’ appeal
1. After considering Indonesian law on service of foreign court documents and the circumstances surrounding the purported service of the Enforcement Orders, the High Court held that the service of the Enforcement Orders by the Plaintiffs on FM was improper and dismissed the Plaintiffs’ appeal .
FM’s application to set aside the Enforcement Orders
2. FM argued that, having expressly reserved its rights, it was entitled to wait until the Plaintiffs sought enforcement to invoke lack of jurisdiction as a ground to resist enforcement, rather than have to take active steps to raise their objections earlier when the Jurisdiction Award was made (pursuant to Art.16 of the Model Law), or at the setting-aside stage (pursuant to Art.34(2)(a)(i) of the Model Law). FM’s argument was based on the following:-
2.1. There ought to be no distinction between domestic international awards and foreign awards as the drafters of Art.36 of the Model Law intended a unified treatment of both types of awards.
2.2. S.19 of the IAA “imports” Art.36 of the Model Law (which sets out grounds for refusing recognition or enforcement) such that FM may invoke lack of jurisdiction as a ground for refusal of enforcement under Art.36(1)(a)(i).
2.3. Alternatively, S.19 imports Art.34 of the Model Law, since the prescribed reasons for setting aside under Art.34 are similar to those for refusing enforcement under Art.36. S.19 of the IAA provides that:-
"An award on an arbitration agreement may, by leave of the High Court or a Judge thereof, be enforced in the same manner as a judgment or an order to the same effect and, where leave is so given, judgment may be entered in terms of the award."
2.4. Since Art.34 of the Model Law mirrors Art.36, the prescribed time limit set out in Art.34(3) (namely, three months from receipt of the award) is applicable only to set aside an award, but not when a party is seeking to resist enforcement.
3. The Court discussed the recognition and enforcement of domestic awards and noted the following:-
3.1. Challenging the enforcement of a domestic international award was akin to challenging the recognition of the award.
3.2. S.19 read with S.19B of the IAA renders a domestic international award final and binding (i.e. recognised), and enforceable with the leave of court, subject to challenge by any grounds found within the IAA (and Model Law). Such grounds are found in Art.34 of the Model Law and s.24 of the IAA.
3.2.1. The material portions of S.19B of the IAA read as follows:-
"(1) An award made by an arbitral tribunal pursuant to an arbitration agreement is final and binding on the parties...
(4) This section shall not affect the right of a person to challenge the award by any available arbitral process of appeal or review or in accordance with the provisions of this Act and the Model Law.”
3.2.2. S.24 of the IAA read as follows:-
"Notwithstanding Article 34(1) of the Model Law, the High Court may, in addition to the grounds set out in Art.34(2) of the Model Law, set aside the award of the arbitral tribunal if –
(a) the making of the award was induced or affected by fraud or corruption; or
(b) a breach of the rules of natural justice occurred in connection with the making of the award by which the rights of any party have been prejudiced…"
3.3. A summary enforcement of a domestic international award which has been recognised is consistent with the pro-arbitration stance taken in the IAA which privileges party autonomy and the finality of awards and espouses limited intervention by the court.
4. The Court rejected FM’s arguments on the following grounds:-
4.1. There is no right to choose between setting aside or resisting recognition and enforcement of a domestic international award.
4.1.1. Art.36 of the Model Law has no force of law in Singapore. The intention of parliament in excluding Arts.35 and 36 of the Model Law (which deal with the recognition and enforcement of awards) was to have enforcement of foreign awards governed separately under the New York Convention, with domestic international awards governed by S.19 of the IAA. This was to enhance enforceability of foreign awards on the grounds of reciprocity for commercial interests.
4.1.2. There is therefore a distinction between international domestic awards and foreign awards under the IAA.
4.2. The effect of S.19B of the IAA, read with Art.34 of the Model Law, is that a party must take positive steps to set aside the Singapore Awards on one of the specified grounds and within the prescribed time period of 3 months.
4.3. Insofar as the ground being invoked to resist enforcement was lack of jurisdiction, the Court opined that jurisdictional challenges must be brought as early as possible in the interest of finality. It was held that the effect of failing to challenge, pursuant to Art.16, the Jurisdiction Award (which was made prior to a hearing on the merits) is that a party is taken to accept the finality of the Jurisdiction Award and cannot later challenge the award at the setting aside stage or enforcement stage. This is notwithstanding any express reservation of rights.
5. FM was given the opportunity to object to the Jurisdiction Award, was notified of their right to object to the Jurisdiction Award, had taken notice of the said rights but chose not to object and proceeded with the arbitration. The Court thus dismissed FM’s application to set aside the Enforcement Orders.
