Garuda v. Birgen - CofA

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DMC/SandT/03/02
PT Garuda Indonesia v Birgen Air

Singapore Court of Appeal: [2002] 1 SLR 393
WHETHER AGREEMENT TO CHANGE SEAT OF ARBITRATION: WHETHER INTERNATIONAL ARBITRATION ACT 1994 OR THE MODEL LAW APPLIES: SERVICE OUT OF JURISDICTION OF ORIGINATING PROCESS UNDER O.69A, R.4 OF THE RULES OF COURT

Summary
In this case, the Singapore Court of Appeal affirmed the decision of the High Court that the UNCITRAL Model Law, which is given the force of law in Singapore by the International Arbitration Act 1994, applies only to arbitrations in Singapore except in a few specified instances. The court also pointed out the difference between the legal seat, or place, of the arbitration and a venue chosen to conduct arbitral hearings or meetings as a matter of convenience.

This case note has been supplied by Ang and Partners, the International Contributors for Singapore

DMC Rating Category: Developed

For a note on the case at first instance, see Garuda v. Birgen - I

Facts
PT Garuda Indonesia ("Garuda"), an Indonesian company, had a dispute with Birgen Air, a Turkish company, over an aircraft lease agreement. The Lease Agreement provided that any dispute should be settled by arbitration before a board of three qualified arbiters, such arbitration to be held in Jakarta, Indonesia in accordance with the ICC Rules. The law governing the arbitral procedure (if any) was to be determined by the arbitral tribunal.

A tribunal of three arbiters was appointed. The venue of the hearing of the arbitration was Singapore. The tribunal took the view that the procedural rules applicable to the arbitration were contained in the ICC Rules. There was no specific reference to any curial law in the award. The Final Award was signed by two members. The third member declined to sign it. The majority of the tribunal subsequently rendered an Addendum to Final Award and a Decision With Respect of Final Award.

Garuda filed a Notice of Originating Motion in the High Court of Singapore to set aside the Award, the Addendum and the Decision and for various other relief. Garuda applied for leave to serve the motion on Birgen Air out of Singapore and also for leave for substituted service within Singapore. The application for service out of jurisdiction relied on Order 69A, rule 4 of the Rules of Court, which provides that service out of an originating process (in relation to the International Arbitration Act 1994) "is permissible with leave of the Court whether or not the arbitration was held or the award was made within the jurisdiction."

Garudaís application was heard ex parte [namely, not in the presence of the other side] and an Order was granted for service out of jurisdiction and substituted service on Birgen Airís solicitors in Singapore. Birgen Air applied to set aside the Order and all other subsequent proceedings.

At first instance, the High Court granted Birgenís application and set aside the Order for service out and all subsequent proceedings, on the grounds that there was material non-disclosure by PT Garuda and also that this was not a proper case for service out of jurisdiction.

PT Garudaís appeal to the Court of Appeal was dismissed.

Judgment
1. The Court of Appeal agreed with the High Court that the test for what constitutes a proper case for service out of jurisdiction under O 69A r 4 is identical to the test in O 11 r 2(2) (O 11 is the general provision on service out of jurisdiction and r 2(2) states that no leave shall be granted unless it shall be made sufficiently to appear to the Court that the case is a proper one for service out of Singapore under the Order. The guide for a proper case is that the forum chosen must be the most appropriate forum in which the case can most suitably be tried in the interests of all the parties and for the ends of justice.)

2. There is a distinction between "place of arbitration" and the place where the arbitral tribunal carries on hearing witnesses, experts or the parties, namely the "venue of hearing". Where parties have agreed on the place of arbitration, it does not change even though the tribunal may need to hear witnesses or do any other things in relation to the arbitration in a different location. After considering the correspondence, the Court of Appeal rejected the argument by PT Garuda that the parties had changed the place of arbitration from Jakarta to Singapore. Singapore became the venue of the hearing but the place of arbitration remained Jakarta.

3. As the place of arbitration was Indonesia, the arbitration proceedings were subject to Indonesian law.

4. Article 34(iv) of the Model Law, which is given the force of law in Singapore by Part I of the International Arbitration Act 1994, provides grounds for setting aside of an award. It was held that Article 34 applies only if an arbitration has its "place of arbitration" in Singapore. Singapore courts can only intervene in relation to an arbitration governed by the Model Law in the limited instances set out in Articles 8, 9, 35 and 36.

5. Section 24 of the Act gives additional grounds to the High Court to set aside an award. The Court of Appeal agreed with the High Court that section 24 and Article 34 of the Model Law are closely linked, so that if Article 34 is not applicable, then section 24 will also not be applicable.

6. As there was no basis for PT Garuda to file the Originating Motion in Singapore under Article 34 or Section 24, and as Indonesian law governed both the lease agreement and the arbitration proceedings and the award was rendered in Jakarta, Indonesia was clearly the most appropriate forum. Accordingly, this was not a proper case where leave to serve the notice of Originating Motion out of jurisdiction should be granted.

7. In view of the findings above, the Court of Appeal did not consider it necessary to go into the issue of whether there had been material non-disclosure on the part of PT Garuda in their application for leave to serve out of jurisdiction.

 

Comments
The judge at first instance had held that Part II of the International Arbitration Act applies only if, amongst other things, the place of arbitration is Singapore. At the appeal, counsel for PT Garuda argued that this was too widely stated. While the Model Law would not apply, the same does not necessarily follow as regards Part II. The Court of Appeal refrained from offering any views on this issue (except section 24 which has been pronounced upon).

The Act does not clearly spell out which of its provisions apply only to arbitrations conducted in Singapore. For example, section 6 of the Act, which provides for a mandatory stay of Court proceedings where there is an arbitration agreement, and section 7, which allows security obtained in Admiralty proceedings to be retained as security for the satisfaction of an award, have been interpreted to apply to foreign arbitrations. These sections, too, fall within Part II of the Act. It remains to be seen how the other provisions in Part II which are not specifically dealt with here will be interpreted in future cases.

 

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