Case Details
- Citation: [2012] SGHC 166
- Title: Quarella SpA v Scelta Marble Australia Pty Ltd
- Court: High Court of the Republic of Singapore
- Decision Date: 14 August 2012
- Case Number: Originating Summons No 122 of 2012
- Coram: Judith Prakash J
- Judges: Judith Prakash J
- Plaintiff/Applicant: Quarella SpA
- Defendant/Respondent: Scelta Marble Australia Pty Ltd
- Legal Area: Arbitration — Award; Recourse against award; Setting aside
- Arbitration Instrument: International arbitration conducted under the International Arbitration Act (Cap 143A, 2002 Rev Ed) (“the Act”)
- Tribunal: Sole arbitrator, Associate Professor Gary F Bell (confirmed by ICC on 17 February 2010)
- Arbitral Awards Challenged: (i) Partial Award on All Substantive Issues in Dispute (Final as to All Matters Except Costs) dated 11 November 2011; (ii) Final Costs Award dated 22 December 2011
- Key Contract: Distributorship Agreement dated 27 January 2000
- Governing Law Clause (Clause 25): Agreement governed by the Uniform Law for International Sales under the UN Convention of 11 April 1980 (Vienna) and, where not applicable, by Italian law
- Arbitration Clause (Clause 26): Arbitration in Singapore in English under ICC Paris rules
- UNCITRAL Model Law Provisions Invoked: Articles 34(2)(a)(iii)–34(2)(a)(iv)
- Natural Justice Ground: Alleged breach of natural justice in connection with the making of the first award; abandoned at the start of the hearing
- Counsel for Plaintiff/Applicant: Ang Wee Tiong (Chris Chong & CT Ho Partnership)
- Counsel for Defendant/Respondent: Cavinder Bull SC, Woo Shu Yan and Colin Liew (Drew & Napier LLC)
- Judgment Length: 15 pages; 7,358 words
- Statutes Referenced (as stated): Arbitration Act; Arbitration Act 1996; Egyptian Civil Code; International Arbitration Act; UK Arbitration Act; UK Arbitration Act (as referenced in the extract)
- Cases Cited (as stated): [2012] SGHC 166 (metadata); plus authorities mentioned in the extract including Sui Southern Gas Company Ltd v Habibullah Coastal Power Company (Pte) Ltd [2010] 3 SLR 1; PT Asuransi Jasa Indonesia (Persero) v Dexia Bank SA [2007] 1 SLR(R) 597; Soh Beng Tee & Co Pte Ltd v Fairmount Development Pte Ltd [2007] 3 SLR(R) 86; Sheng Siong Supermarket Pte Ltd v Carilla Pte Ltd [2011] 4 SLR 1094
Summary
Quarella SpA v Scelta Marble Australia Pty Ltd [2012] SGHC 166 concerned an application to set aside two international arbitration awards made under the International Arbitration Act (Cap 143A). The High Court (Judith Prakash J) dismissed the application, holding that the applicant’s complaint—namely that the tribunal’s interpretation of the parties’ choice-of-law clause was wrong—did not fall within the limited grounds for setting aside under Article 34(2) of the UNCITRAL Model Law as adopted in Singapore.
The dispute turned on whether the tribunal correctly applied the CISG (the 1980 Vienna Convention regime) or instead applied Italian law to the distributorship agreement. The applicant argued that the tribunal failed to apply the “rules of law” agreed by the parties, and that this failure justified setting aside. The court rejected this approach, emphasising that Singapore’s supervisory jurisdiction over arbitral awards is not an appeal on the merits, and that errors of law or incorrect application of chosen substantive law are not, without more, grounds to set aside.
What Were the Facts of This Case?
Quarella SpA is an Italian manufacturer and exporter of composite stone products. Scelta Marble Australia Pty Ltd is an Australian company that supplies composite stone products in Australia. The parties entered into a distributorship agreement dated 27 January 2000, under which Scelta would distribute Quarella’s products in Australia. The agreement contained a choice-of-law clause and an arbitration clause, both of which became central to the later arbitration.
Clause 25 provided that the agreement “shall be governed by the Uniform Law for International Sales under the United Nations Convention of April 11, 1980 (Vienna) and where not applicable by Italian law.” Clause 26 required disputes to be decided by arbitration in Singapore in English under the rules of the International Chamber of Commerce (ICC) of Paris. These provisions meant that the tribunal had to determine the substantive law governing the merits, and that the arbitration would be seated in Singapore for supervisory purposes.
A dispute arose after Scelta initiated arbitration. On 19 October 2009, Scelta filed a Request for Arbitration with the ICC International Court of Arbitration. On 10 December 2009, the parties jointly nominated Associate Professor Gary F Bell as sole arbitrator, and on 17 February 2010 the ICC confirmed his appointment. The tribunal and parties then agreed on the Terms of Reference.
On 11 November 2011, the tribunal issued a Partial Award on All Substantive Issues in Dispute (Final as to All Matters Except Costs). The award was in Scelta’s favour. The tribunal ordered Quarella to pay A$1,075,964.25 as damages for wrongful termination and breach of the distributorship agreement. Subsequently, on 22 December 2011, the tribunal issued a Final Award on costs, fixing Scelta’s costs at A$824,917.50. By the time of the Singapore court proceedings, Quarella had not paid either award. Scelta attempted to enforce the awards in Italy, and Quarella resisted enforcement by seeking to set aside the awards in Singapore, relying on the supervisory jurisdiction of the High Court.
What Were the Key Legal Issues?
The central issue was whether a purportedly wrong interpretation by the tribunal of the parties’ choice-of-law clause could justify setting aside an award under Articles 34(2)(a)(iii)–34(2)(a)(iv) of the UNCITRAL Model Law. Put differently, the court had to decide whether the tribunal’s alleged failure to apply the “rules of law” agreed by the parties amounted to a legally cognisable ground for setting aside, rather than a mere error in the tribunal’s reasoning on the merits.
A secondary issue concerned the scope of the court’s review. Quarella’s submissions invited the court to re-evaluate the tribunal’s interpretation of Clause 25 and its conclusion that the CISG did not apply because the agreement was characterised as a “framework agreement” rather than a contract of sale. The court therefore had to consider the boundary between permissible supervisory review and impermissible merits review.
Although Quarella initially also alleged breaches of natural justice connected with the making of the first award, that ground was abandoned at the start of the hearing. Accordingly, the court’s analysis focused on the choice-of-law complaint and the statutory grounds under the Model Law provisions invoked.
How Did the Court Analyse the Issues?
Judith Prakash J began by framing the applicant’s case as an attempt to convert an alleged error of law into a setting-aside ground. The court noted that Quarella’s complaint was essentially that the tribunal had not applied the law chosen by the parties to govern the merits. Quarella argued that Clause 25 constituted a direct choice of CISG as the “rules of law” under Article 28 of the Model Law, and that the tribunal’s interpretation deprived Clause 25 of effect. Quarella further argued that contractual interpretation principles favoured constructions that rendered the contract and its performance lawful and effective, and that Italian law was intended only to supplement the CISG where there was a lacuna, not to replace it.
The court then addressed the procedural and substantive context in which the choice-of-law issue arose. Initially, the parties appeared to accept that Italian law applied rather than the CISG. In Quarella’s Answer to the Request for Arbitration, Quarella stated that CISG had limited application because it did not expressly govern distributorship agreements, which were described as a framework agreement, and that the arbitration would “mostly refer to (and rely on) Italian law.” Scelta pointed to this early position and argued that Quarella had accepted that CISG did not apply.
However, Quarella later changed its position. In a letter dated 15 April 2011, Quarella’s Australian solicitors asserted that Clause 25 was a direct choice of CISG as the rules of law under Article 28 of the Model Law, and that CISG provisions (including Articles 7–8 and Articles 74 and 77) applied consistently with the parties’ express choice. Scelta objected to the late raising of CISG. The tribunal dealt with the issue by deciding three preliminary questions: (i) whether the late CISG argument should be heard (it allowed it and gave Scelta an opportunity to reply); (ii) whether Clause 25 had been modified by mutual agreement to exclude CISG (it found no complete exclusion); and (iii) how Clause 25 should be interpreted—whether it was a direct choice of CISG regardless of CISG’s own conditions of applicability. The tribunal concluded that Clause 25 meant CISG would apply to the extent it was applicable under its own rules, and if it did not apply in whole or in part, Italian law would apply.
After determining the interpretive approach, the tribunal considered whether CISG applied on its own terms. It concluded that CISG was not applicable because the distributorship agreement did not contain a contract of sale; it was a framework agreement. This conclusion drove the merits outcome, as the tribunal applied Italian law to award damages to Scelta.
In analysing whether this could ground a setting-aside application, the court emphasised the limited nature of recourse under Singapore’s arbitration framework. The court observed that there is no right of appeal against errors of law in arbitral awards, independent of the Act. It relied on established Court of Appeal authority, including PT Asuransi Jasa Indonesia (Persero) v Dexia Bank SA and Soh Beng Tee & Co Pte Ltd v Fairmount Development Pte Ltd, as well as Sui Southern Gas Company Ltd v Habibullah Coastal Power Company (Pte) Ltd, to underline that an “error of law” is not a ground for setting aside. While Quarella’s counsel accepted that an error of law alone was not a ground, he argued that applying the “wrong law” was distinct.
Judith Prakash J rejected the attempt to recharacterise the complaint as something more than an error. The court treated the alleged wrong interpretation of Clause 25 as, at its core, a dispute about the tribunal’s determination of the applicable substantive law. Even if the tribunal’s interpretation was wrong, the court considered that such a mistake did not automatically translate into a breach of the specific Model Law grounds invoked. The court’s reasoning proceeded on the principle that Article 34 is not designed to provide a forum for re-litigating the merits or correcting errors in the tribunal’s legal reasoning. Instead, it targets procedural and jurisdictional defects, or failures that fall within the enumerated grounds.
Accordingly, the court’s analysis focused on whether the tribunal’s approach could be said to have failed to apply the “rules of law” chosen by the parties in a way that fits within Articles 34(2)(a)(iii)–(a)(iv). Those provisions concern, respectively, the tribunal’s failure to decide in accordance with the parties’ agreement (as to procedure or applicable law, depending on the precise framing) and the tribunal’s composition or procedure not conforming to the agreement of the parties or the Model Law. The court concluded that Quarella’s argument did not establish a qualifying defect. It was, rather, an argument that the tribunal reached the wrong conclusion on interpretation and applicability.
In practical terms, the court treated the tribunal’s reasoning as an exercise of contractual interpretation and legal characterisation (framework agreement versus contract of sale), followed by an application of CISG’s internal rules on applicability. That is the kind of merits determination that the supervisory court does not revisit. The court therefore dismissed the setting-aside application.
What Was the Outcome?
The High Court dismissed Quarella’s Originating Summons seeking to set aside both the Partial Award on substantive issues and the Final Costs Award. The dismissal meant that the tribunal’s awards remained enforceable, subject only to any further rights of recourse that might exist under the applicable legal framework.
Practically, Scelta retained the benefit of the damages and costs awarded by the tribunal, and Quarella’s attempt to resist enforcement in Italy by invoking Singapore supervisory jurisdiction failed.
Why Does This Case Matter?
Quarella SpA v Scelta Marble Australia Pty Ltd is significant for its reaffirmation of the narrow scope of judicial review of arbitral awards in Singapore. For practitioners, the case illustrates that arguments framed as “wrong law” or “failure to apply the chosen rules of law” will often be treated as merits complaints unless they can be anchored to the specific statutory grounds for setting aside under Article 34 of the Model Law.
The decision also highlights the importance of how parties draft and litigate choice-of-law clauses in international arbitration. Clause 25’s reference to the CISG “and where not applicable by Italian law” created a two-stage question: first, what the parties intended by the clause (direct choice versus conditional choice), and second, whether CISG was applicable under its own criteria. The tribunal’s characterisation of the distributorship agreement as a framework agreement was decisive. The supervisory court would not correct that characterisation simply because the applicant disagreed with the tribunal’s interpretation.
For law students and counsel, the case is a useful study in the boundary between permissible supervisory review and impermissible merits review. It also serves as a reminder that attempts to repackage errors of law as jurisdictional or procedural defects are unlikely to succeed where the complaint is essentially that the tribunal’s legal reasoning was incorrect.
Legislation Referenced
- International Arbitration Act (Cap 143A, 2002 Rev Ed) (Singapore)
- UNCITRAL Model Law on International Commercial Arbitration, Article 34(2)(a)(iii) and Article 34(2)(a)(iv)
- Arbitration Act (Singapore) (as referenced in metadata)
- Arbitration Act 1996 (UK) (as referenced in metadata)
- International Arbitration Act (as referenced in metadata)
- Egyptian Civil Code (as referenced in metadata)
- UK Arbitration Act (as referenced in metadata)
Cases Cited
- [2012] SGHC 166 (Quarella SpA v Scelta Marble Australia Pty Ltd)
- Sui Southern Gas Company Ltd v Habibullah Coastal Power Company (Pte) Ltd [2010] 3 SLR 1
- PT Asuransi Jasa Indonesia (Persero) v Dexia Bank SA [2007] 1 SLR(R) 597
- Soh Beng Tee & Co Pte Ltd v Fairmount Development Pte Ltd [2007] 3 SLR(R) 86
- Sheng Siong Supermarket Pte Ltd v Carilla Pte Ltd [2011] 4 SLR 1094
Source Documents
This article analyses [2012] SGHC 166 for legal research and educational purposes. It does not constitute legal advice. Readers should consult the full judgment for the Court's complete reasoning.