Case Details
- Citation: [2012] SGHC 166
- Title: Quarella SpA v Scelta Marble Australia Pty Ltd
- Court: High Court of the Republic of Singapore
- Date of Decision: 14 August 2012
- Case Number: Originating Summons No 122 of 2012
- Judge: Judith Prakash J
- Coram: Judith Prakash J
- Plaintiff/Applicant: Quarella SpA
- Defendant/Respondent: Scelta Marble Australia Pty Ltd
- Counsel for Plaintiff/Applicant: Ang Wee Tiong (Chris Chong & CT Ho Partnership)
- Counsel for Plaintiff/Applicant: (additional) for the plaintiff: Ang Wee Tiong (Chris Chong & CT Ho Partnership)
- Counsel for Defendant/Respondent: Cavinder Bull SC, Woo Shu Yan and Colin Liew (Drew & Napier LLC)
- Legal Area: Arbitration – recourse against arbitral award; setting aside
- Arbitration Framework: International arbitration under the International Arbitration Act (Cap 143A, 2002 Rev Ed)
- Arbitral Institution/Rules: ICC arbitration (International Chamber of Commerce of Paris)
- Arbitral Tribunal: Sole arbitrator, Associate Professor Gary F Bell (confirmed by ICC Secretary General)
- Nature of Awards: Partial Award on All Substantive Issues (Final as to all matters except costs) and a separate Costs Award
- Key Procedural Posture: Application to set aside two arbitration awards in Singapore supervisory jurisdiction
- Judgment Length: 15 pages, 7,478 words
- Reported/Unreported: Reported (SGHC)
- Cases Cited (as per metadata): [2012] SGHC 166
Summary
Quarella SpA v Scelta Marble Australia Pty Ltd concerned an application to set aside two ICC arbitration awards made in an international arbitration seated in Singapore. The High Court (Judith Prakash J) dismissed Quarella’s application, holding that the gravamen of Quarella’s complaint was essentially an error in the tribunal’s interpretation and application of the parties’ chosen “rules of law” clause—an argument that, even if framed as a wrong choice-of-law outcome, did not fall within the narrow grounds for setting aside under the UNCITRAL Model Law as incorporated into Singapore law.
The central issue was whether a purportedly wrong interpretation of a contractual choice of law clause—specifically, whether the CISG (United Nations Convention on Contracts for the International Sale of Goods) applied to the parties’ distributorship agreement—could justify setting aside under Article 34(2)(a)(iii)–34(2)(a)(iv) of the Model Law. The court emphasised that Singapore does not provide a general appeal on the merits of arbitral awards, and that errors of law or misapplication of substantive law are not, without more, grounds for setting aside.
What Were the Facts of This Case?
Quarella SpA (“Quarella”) is an Italian manufacturer and exporter of composite stone products. Scelta Marble Australia Pty Ltd (“Scelta”) 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 two key provisions. Clause 25 provided that the agreement would 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 provided that disputes would be decided by arbitration in Singapore, in English, under the ICC Rules. The arbitration was therefore international in character, with Singapore as the seat and ICC rules governing procedure.
A dispute arose and Scelta commenced ICC arbitration by filing a Request for Arbitration dated 19 October 2009 with the ICC International Court of Arbitration. The parties jointly nominated Associate Professor Gary F Bell as the sole arbitrator, and the ICC Secretary General confirmed him pursuant to Article 9(2) of the ICC Rules. The tribunal later issued Terms of Reference.
On 11 November 2011, the tribunal issued a Partial Award on All Substantive Issues (final as to all matters except costs). It found in Scelta’s favour and ordered Quarella to pay damages of A$1,075,964.25 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. As at the time of the Singapore hearing, 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, invoking the supervisory jurisdiction of the seat.
What Were the Key Legal Issues?
The primary legal question was whether the tribunal’s purportedly wrong interpretation of the parties’ choice-of-law clause could justify setting aside under Article 34(2)(a)(iii)–34(2)(a)(iv) of the UNCITRAL Model Law. In particular, Quarella argued that the tribunal failed to apply the “rules of law” agreed by the parties to govern the merits of the dispute.
Quarella’s challenge focused on the tribunal’s determination that the CISG did not apply to the distributorship agreement because the agreement was characterised as a “framework agreement” rather than a contract of sale. Quarella contended that clause 25 amounted to a direct choice of CISG as the governing substantive rules, and that the tribunal’s approach deprived clause 25 of practical effect.
Although Quarella initially also alleged breach of natural justice connected with the making of the first award, it abandoned that ground at the start of the hearing. Accordingly, the court’s analysis concentrated on the choice-of-law issue and the proper scope of Article 34 recourse.
How Did the Court Analyse the Issues?
Judith Prakash J began by framing the dispute as one about the limits of supervisory review. The court noted that Quarella’s submissions effectively invited the High Court to re-examine the tribunal’s substantive reasoning on applicable law and to substitute its own conclusion. The judge observed that, in arbitration, the absence of a right of appeal is fundamental: setting aside is not a mechanism for correcting errors of law, even where the error is alleged to be significant.
In the arbitration, the tribunal had dealt with the applicable law through preliminary issues. Initially, the parties appeared aligned that Italian law would govern. Quarella’s early position, as reflected in its Answer to the Request for Arbitration, suggested that CISG had limited application because it did not expressly govern distributorship agreements, which were described as framework agreements, and that the arbitration would mostly rely on Italian law. Scelta argued that Quarella had accepted Italian law from an early stage.
However, Quarella later changed its position. In a letter dated 15 April 2011, Quarella’s Australian solicitors argued that clause 25 constituted 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 74 and 77) applied consistently with the parties’ express choice. This shift occurred shortly before a rescheduled hearing, and Scelta objected to the late introduction of the CISG argument.
The tribunal nonetheless allowed Quarella to raise the argument and gave Scelta an opportunity to reply. It then decided that clause 25 had not been modified by mutual agreement to exclude CISG. The tribunal further interpreted clause 25 as intending CISG to apply to the extent it was applicable under its own rules on applicability; if CISG did not apply in whole or in part, Italian law would apply. On the tribunal’s final step, it held that CISG was not applicable because the distributorship agreement did not contain a contract of sale and therefore did not fall within CISG’s scope.
In the setting-aside proceedings, Quarella advanced three main arguments. First, it argued that clause 26 and ICC Rule 17 (as to party autonomy in selecting rules of law) supported the proposition that parties could choose not only national law but also other rules, including non-binding principles or conventions such as CISG even where CISG’s own conditions might not be met. Second, Quarella relied on principles of contractual interpretation, submitting that a construction that renders a contract and its performance lawful and effective should be preferred; it argued that the tribunal’s “framework agreement” characterisation effectively nullified clause 25. Third, Quarella argued that Italian law should supplement CISG in the event of a lacuna, rather than replace CISG.
Crucially, the court treated these arguments as inviting a merits review. The judge noted that Quarella’s expert opinion from Professor Torsello was also directed to whether the tribunal’s finding on applicable law was correct, which CISG provisions should have applied, and what difference CISG would have made to the award. The court made clear that even if the tribunal had erred, that would not automatically translate into a ground for setting aside.
In support of this approach, the court referred to the established principle that there is no right of appeal against errors of law in arbitration, and that the supervisory jurisdiction under the Model Law is not intended to correct substantive mistakes. The judge cited authority including Sui Southern Gas Company Ltd v Habibullah Coastal Power Company (Pte) Ltd and the Court of Appeal decisions in PT Asuransi Jasa Indonesia (Persero) v Dexia Bank SA and Soh Beng Tee & Co Pte Ltd v Fairmount Development Pte Ltd. The court’s reasoning was that an error of law, even if characterised as a wrong application of the chosen law, does not necessarily fall within Article 34’s limited grounds.
Quarella attempted to draw a distinction: it accepted that an “error of law” was not a ground for setting aside, but argued that “application of the wrong law” was distinct. The court’s analysis indicates that it did not accept this as a meaningful re-characterisation. The judge effectively treated the dispute as one about how the tribunal interpreted and applied the parties’ clause 25—precisely the kind of issue that, if wrong, would amount to an error in the tribunal’s substantive reasoning rather than a jurisdictional or procedural defect within Article 34(2)(a)(iii)–(a)(iv).
Although the excerpt provided is truncated, the court’s core approach can be understood from the framing of the central issue and the judge’s conclusion to dismiss the application. The court’s reasoning aligns with the Model Law’s structure: Article 34(2)(a)(iii) concerns failure to conduct the arbitration in accordance with the agreement of the parties, and Article 34(2)(a)(iv) concerns failure to decide matters in accordance with the terms of submission to arbitration. Quarella’s complaint, however, was not that the tribunal decided matters outside the submission or failed to follow the parties’ agreement in a procedural sense; rather, it was that the tribunal interpreted the choice-of-law clause incorrectly and therefore applied the wrong substantive regime. The court treated that as a merits complaint, not a supervisory ground.
What Was the Outcome?
The High Court dismissed Quarella’s application to set aside both the Partial Award on substantive issues and the Costs Award. The practical effect was that the arbitration awards remained enforceable, and Quarella’s attempt to resist enforcement in Italy by relying on Singapore supervisory review failed.
Because the court dismissed the application, Scelta retained the benefit of the tribunal’s findings and the monetary orders, including damages of A$1,075,964.25 and costs fixed at A$824,917.50, subject only to any further procedural steps available under the applicable arbitration framework.
Why Does This Case Matter?
Quarella SpA v Scelta Marble Australia Pty Ltd is a useful illustration of the narrow scope of Singapore’s setting-aside jurisdiction under the UNCITRAL Model Law. It reinforces that parties cannot use Article 34 as a substitute for an appeal on the merits. Even where a tribunal’s interpretation of a choice-of-law clause is alleged to be wrong, the supervisory court will generally be reluctant to intervene unless the complaint fits squarely within the Model Law’s limited grounds.
For practitioners, the case highlights the importance of distinguishing between (i) a tribunal’s substantive interpretation and application of chosen rules of law and (ii) a failure to conduct the arbitration in accordance with the parties’ agreement or to decide matters within the scope of submission. Drafting and litigation strategy should therefore focus on procedural and jurisdictional defects rather than substantive disagreements about how the tribunal should have applied CISG or other legal instruments.
The case also underscores the practical consequences of late changes in legal position during arbitration. While the court’s decision in the excerpted portion focuses on setting-aside grounds, the arbitration record shows that Quarella changed its stance shortly before a rescheduled hearing, prompting objections. Parties should ensure that their choice-of-law arguments are raised consistently and early, because tribunals may treat late shifts as tactical and may proceed to determine applicable law based on their interpretation of the contract and the parties’ submissions.
Legislation Referenced
- International Arbitration Act (Cap 143A, 2002 Rev Ed)
- UNCITRAL Model Law on International Commercial Arbitration (Article 34(2)(a)(iii) and Article 34(2)(a)(iv))
- ICC Rules of Arbitration (including Article 17 as referenced in the judgment excerpt)
Cases Cited
- 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
- [2012] SGHC 166 (Quarella SpA v Scelta Marble Australia Pty Ltd)
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.