The Astro Group had succeeded in the Singapore High Court in enforcing the arbitral awards it had obtained against the Lippo Group. This decision has been closely watched not just by the Singapore legal circle but the general international arbitration community as well. The Grounds of Judgment have just been published and I set out below a summary of the dispute and then highlight the significance of some of the legal issues.
The Facts and Brief Legal Background
The Astro Group of companies (eight companies) had initiated arbitration proceedings against the Lippo Group of companies (three companies) in an arbitration in Singapore involving a dispute arising from the failed joint venture between the parties. The Astro Group had succeeded in obtaining five arbitral awards against the Lippo Group, totalling close to US$300 million. The Astro Group had then applied to enforce these awards in Singapore. The Singapore International Arbitration Act closely follows the UNCITRAL Model Law on International Commercial Arbitration (“the Model Law”), a legal framework under the New York Convention which has been adopted by more than 140 countries (including Malaysia). The one key advantage of adopting the Model Law (in that a country is a party to the New York Convention) is that an arbitral award made in any Convention country can be enforced as a Court Judgment in any other Convention country.
The Model Law framework sets out two different methods of ‘challenging’ an arbitral award. The first method of challenge is through an application to set aside the arbitral award within 90 days of the date of the award (equivalent to section 37 of Malaysia’s Arbitration Act 2005). The second method is that when the award is being enforced in any country, the Model Law lists out the specific grounds in which the respondent can rely on to oppose the enforcement (equivalent to section 39 of Malaysia’s Act). This dual mechanism was described as a ‘double control’ by the Counsel for the Lippo Group. However, in the Singapore context, I will deal with below on how the Singapore regime departs from this dual mechanism.
Further, the Model Law framework allows for challenges to the jurisdiction of the arbitral tribunal to be appealed to the Court within a set time frame (equivalent to section 18(8) of Malaysia’s Act). So for instance, issues on the validity of the arbitration agreement or whether the parties brought in to the arbitration are proper parties to the arbitration agreement are questions relating to the jurisdiction of the arbitral tribunal which can be determined firstly by the tribunal, and if dissatisfied with the decision, any party may appeal to the Court.
Under Singapore law, the Court can grant leave to enforce the award without the presence of the respondent (i.e. on an ex parte basis) and this Order must then be served on the respondent which provides the respondent with a set time limit to apply to set aside this leave to enforce (in effect the respondent relies on one of the specific grounds to oppose the enforcement).
In the Astro-Lippo dispute, there were two important time limits that had passed. Firstly, the Lippo Group had challenged the jurisdiction of the arbitral tribunal as three of the Astro Group companies in the arbitration was said to not have been parties to the arbitration agreement. The tribunal ruled against the Lippo Group and held that there was no jurisdiction. The Lippo Group chose not to appeal to the Singapore Court against this decision but instead continued with the arbitration under protest. The time limit for appeal had long passed. Secondly, once the five arbitral awards were issued in favour of the Astro Group, the Lippo Group chose not to apply to set aside the awards and the time limit for this setting aside application had also expired.
The Astro Group then obtained leave to enforce the awards against the Lippo Group. Upon being served with this Order in Indonesia, the Lippo Group applied to set aside this leave in order to oppose the enforcement of the awards in Singapore. The Lippo Group raised the issue of lack of jurisdiction as one of the grounds to oppose the enforcement. In the meantime, the Astro Group had also gone to the Indonesian Court to enforce the arbitral awards there but the Indonesian Court had not allowed the enforcement.
This then sets the stage in the Singapore High Court proceedings on whether the Lippo Group could oppose the enforcement of the arbitral awards or whether the Astro Group would instead be allowed to enforce these awards and they would take the form of Singapore Court Judgments.
This dispute gave rise to certain novel and complex questions of law. These issues led to the Singapore Courts allowing the ad hoc admissions of two Queen’s Counsel to argue on behalf of the two competing groups. In an interesting decision on the admission of David Joseph QC to act as Counsel for the Astro Group, Justice VK Rajah JA identified the complex questions of law which justified the admission of the English QC to argue before the Singapore High Court. I set out below two of these questions and how they were then addressed in the High Court proceedings.
- Whether the Lippo Group is entitled to resist enforcement of the awards in the country in which the awards were made when they did not, within the statutorily prescribed period, take any steps to set aside these same awards; and
- Whether the Lippo Group have a right to revive a challenge based on the alleged lack of an arbitration agreement and a misjoinder of some of the Astro Group companies to the arbitration well after the award has been made.
Issue 1: Failure to Apply to Set Aside and Ability to Resist Enforcement
The High Court explained that in relation to the setting aside and opposition to enforcement, being the ‘double control’ mechanism, the Singapore International Arbitration Act makes a distinction between an international arbitral award rendered in Singapore (i.e. a domestic international arbitral award) and an international arbitral award rendered in a foreign New York Convention country.
For a domestic international arbitral award, an award is already deemed “final and binding” but subject to the sole and exclusive challenge through the setting aside mechanism. For such a domestic international arbitral award, Singapore’s Act specifically excludes the application of the mechanism of opposing the enforcement (since the Act specifically refers to the fact that Articles 35 and 36 of the Model Law do not apply in that situation). The grounds for opposing the enforcement is only allowed when enforcing a foreign international arbitral award (where Articles 35 and 36 of the Model Law would apply).
This difference in approach to domestic and foreign international arbitral awards is not unique to Singapore, with several civil law countries such as Germany and Quebec adopting this similar difference in treatment of domestic and foreign international arbitral awards.
Therefore, the Lippo Group’s sole line of challenge to the arbitral awards was through an application to set aside those awards (which were domestic international arbitral awards), which the Lippo Group had failed to do. Therefore, the Lippo Group could not avail itself of the remedy of opposing the enforcement of those awards.
Issue 2: Failure to Appeal on Jurisdiction Challenge
The High Court held that it should not be open to a party to hold off bringing a jurisdictional challenge (i.e. by failing to appeal to the Court within the set time limit) and, at the same time, participate in the arbitration on the merits in the expectation that it can revive its jurisdictional challenge at a later stage should it prove to be unsuccessful in the arbitration. It was held that such behaviour is bound to make a mockery of the finality and effectiveness of arbitral awards on jurisdiction.
Challenging such an award on jurisdictional grounds is thus excluded from the grounds which a party may invoke at the setting-aside or the enforcement stage if the party has chosen not to bring an appeal under Article 16(3) of the Model Law. There is no avenue under the Model Law to participate in a hearing on the merits under protest without having lodged an appeal under Article 16(3) if a party wishes to properly and effectively retain its right to raise an objection to the tribunal’s jurisdiction. There are no passive remedies when it comes to challenging jurisdiction under the Singapore Act – a party wishing to oppose a jurisdictional award must act.
As held at :
Should a losing party decide to hedge its bets as [the Lippo Group] has done in the present case, the disadvantages and risks of this tactic are dire under the IAA if the outcome is an adverse award on the merits. The time limits under Arts 16(2) and 16(3) are intended to promote the finality of a decision on jurisdiction at an early stage. As stated, should a party elect to remain within the Model Law system, it must lodge an appeal on jurisdiction under Art 16(3) within the 30-day time limit set out; otherwise, the tribunal’s award on jurisdiction will become final and binding on the parties and be taken as accepted by the parties, after which there is no possibility of further recourse at the post-award stage to challenge jurisdiction.
I would expect this decision to be appealed to the Court of Appeal and it will be interesting to see the appellate decision on these points. The dichotomy of approach for setting aside and opposition to enforcement of domestic and foreign international arbitral awards is something specific to Singapore (along with some other countries) and where Malaysia makes no such distinction. The issue of failure to appeal against jurisdiction would be relevant to the interpretation of Malaysia’s Act.
I will post up on this blog later my thoughts on how these issues relate to Malaysia’s Arbitration Act.