Case Details
- Citation: [2002] SGHC 53
- Court: High Court of the Republic of Singapore
- Date: 2002-03-20
- Judges: Woo Bih Li JC
- Plaintiff/Applicant: Dermajaya Properties Sdn Bhd
- Defendant/Respondent: Premium Properties Sdn Bhd and Another
- Legal Areas: Arbitration — Conflict of laws, Arbitration — Arbitral tribunal
- Statutes Referenced: Interpretation Act, Arbitration Act, Arbitration Act (Cap 10), International Arbitration Act, International Arbitration Act (Cap 143A, 1995 Ed)
- Cases Cited: [2002] SGHC 53, Coop International Pte Ltd v Ebel SA [1998] 3 SLR 670
Summary
This case involves a dispute between Dermajaya Properties Sdn Bhd and Premium Properties Sdn Bhd/CFE Holdings (Malaysia) Sdn Bhd over the purchase of shares in a Malaysian company. The parties had agreed to resolve any disputes through arbitration in Singapore under the Arbitration Rules of the United Nations Commission on International Trade Law (UNCITRAL Rules). When a dispute arose, the arbitrator appointed by the parties ordered Dermajaya Properties to provide security for the respondents' costs, relying on the International Arbitration Act (IAA) of Singapore. Dermajaya Properties appealed this decision to the Singapore High Court, arguing that the IAA and its Model Law did not apply since the parties had agreed to the UNCITRAL Rules, which are incompatible with the Model Law.
What Were the Facts of This Case?
Dermajaya Properties Sdn Bhd, a Brunei company, agreed to purchase 100% of the shares in a Malaysian company, President Hotel Sdn Bhd, from Premium Properties Sdn Bhd and CFE Holdings (Malaysia) Sdn Bhd, both Malaysian companies. The agreement, dated 4 October 1996, contained an arbitration clause stating that any disputes would be referred to a sole arbitrator under the UNCITRAL Rules, with the arbitration to be held in Singapore.
Disputes subsequently arose between the parties, and Dermajaya Properties commenced an action in the High Court of Malaya in Kuala Lumpur against the respondents and President Hotel Sdn Bhd. This action was stayed by the High Court of Malaya in 1997. Around three and a half years later, in March 2001, the parties agreed to appoint Dato Mahadev Shankar as the arbitrator.
On 17 August 2001, the respondents applied for security for costs from Dermajaya Properties in the sum of RM500,000 (later reduced to RM470,000). The arbitrator made an interim award on 5 November 2001, ordering Dermajaya Properties to deposit S$200,000 as security for the respondents' costs in the arbitration. The arbitrator's decision rested on the applicability of the International Arbitration Act (IAA) of Singapore, particularly section 12 which empowers an arbitrator to order security for costs.
What Were the Key Legal Issues?
The primary issue was whether the arbitrator had jurisdiction to order security for costs against Dermajaya Properties. This depended on the interpretation of section 15 of the IAA, which deals with the circumstances under which the IAA and its Model Law can be excluded.
Dermajaya Properties argued that by agreeing to the UNCITRAL Rules, which do not empower the arbitrator to order security for costs, the parties had effectively opted out of the IAA and its Model Law. The respondents, on the other hand, contended that the IAA and Model Law still applied, giving the arbitrator the authority to order security for costs under section 12 of the IAA.
How Did the Court Analyse the Issues?
The court first noted that it was common ground that the UNCITRAL Rules do not enable the arbitrator to order security for costs, while section 12 of the IAA does provide the arbitrator with this power. The court also acknowledged that the Arbitration Act (Cap 10) of Singapore, which applies to domestic arbitrations, does not empower the arbitrator to order security for costs, though the Singapore High Court can do so.
The key issue was the interpretation of section 15 of the IAA, which states that the IAA and Model Law shall not apply if the parties have agreed to settle their dispute "otherwise than in accordance with this Part or the Model Law." The court had to determine whether the parties' agreement to the UNCITRAL Rules was sufficient to exclude the application of the IAA and Model Law.
The court considered the Claimant's argument that the UNCITRAL Rules are incompatible with the Model Law in certain respects, such as the appointment of the arbitrator. The court acknowledged that this incompatibility existed but stated that it was immaterial to the interpretation of section 15.
The court then examined the Claimant's contention that the parties had impliedly agreed to opt out of the IAA and Model Law by adopting the UNCITRAL Rules. The court considered the Claimant's arguments that the pleadings only referenced the UNCITRAL Rules, the respondents had initially relied solely on the UNCITRAL Rules, and the parties did not mention the IAA in the arbitration clause.
However, the court was not persuaded that these factors were sufficient to constitute an agreement to opt out of the IAA and Model Law under section 15. The court noted that section 15 does not appear to be limited to express agreements and can cover implied exclusions as well.
What Was the Outcome?
The court ultimately dismissed Dermajaya Properties' appeal, finding that the arbitrator had the jurisdiction to order security for costs under section 12 of the IAA. The court held that the mere adoption of the UNCITRAL Rules, which are incompatible with the Model Law, was not sufficient to exclude the application of the IAA and Model Law under section 15.
The court also found that the arbitrator did not exceed his jurisdiction by including the arbitrator's fee and Singapore International Arbitration Centre costs in the award for security for costs, as these were legitimate expenses related to the arbitration proceedings.
Why Does This Case Matter?
This case provides important guidance on the interpretation of section 15 of the IAA and the circumstances under which parties can effectively opt out of the IAA and its Model Law. The court's ruling suggests that a mere agreement to adopt a set of arbitration rules that are incompatible with the Model Law is not enough to exclude the application of the IAA and Model Law.
The decision reinforces the broad scope of section 15 and the court's willingness to interpret it as covering both express and implied exclusions of the IAA and Model Law. This is significant for practitioners, as it means that parties cannot easily circumvent the provisions of the IAA, including the arbitrator's power to order security for costs, simply by agreeing to a different set of arbitration rules.
The case also highlights the importance of carefully drafting arbitration clauses to ensure that the parties' intentions regarding the applicable law and rules are clearly expressed. Practitioners should be aware that the courts may be reluctant to find an implied exclusion of the IAA and Model Law, even in the face of apparent incompatibilities between the chosen arbitration rules and the statutory framework.
Legislation Referenced
Cases Cited
- [2002] SGHC 53
- Coop International Pte Ltd v Ebel SA [1998] 3 SLR 670
Source Documents
This article analyses [2002] SGHC 53 for legal research and educational purposes. It does not constitute legal advice. Readers should consult the full judgment for the Court's complete reasoning.