Note: the decision in this case has been upheld on appeal - see Garuda v. Birgen CofA
DMC/S&T/20/01
PT Garuda Indonesia v. Birgen Air
High Court of Singapore: Woo Bih Li, Judicial Commissioner: Unreported:
September 2001
Case Note provided by Ang & Partners, International Contributors for
Singapore
SEAT OF ARBITRATION – CURIAL LAW – 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 - SUBSTITUTED SERVICE INSIDE SINGAPORE
Summary
In this case, the Singapore High Court clarified that certain provisions of
the International Arbitration Act 1994 and the UNCITRAL Model Law, to which the
Act gives the force of law, are applicable only to arbitrations which take place
in Singapore. 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 or convenience.
DMC Rating Category: Developed
Facts
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 (law governing the arbitration proceedings) 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 Ad
dendum 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 the jurisdiction 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." Garuda’s application
was heard without Birgen being represented and an Order was granted for
service out of jurisdiction and substituted service on Birgen Air’s solicitors
in Singapore.
Birgen Air applied to set aside the Order and all other subsequent proceedings.
Decision
1. It was accepted by both parties’ counsel that Garuda had a duty to make
full and frank disclosure of material facts in its application for leave under O
69A r 4, and that the leave granted for service out of jurisdiction could
be set aside even if the non-disclosure was innocent. However, the Court had
a discretion not to set aside the leave if there was material, but innocent,
non-disclosure.
2. What constitutes a proper case for service out of jurisdiction under O 11 r 2(2) is persuasive as to what constitutes a proper case under O 69A r 4 as the requirement of a proper case is identical in both provisions (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.
3. There was material non-disclosure by Garuda of relevant facts and documents, giving the impression that all along the place of arbitration was Singapore. That was in itself sufficient ground for setting aside the leave given for service outside the jurisdiction.
4. There is a difference between the place or legal seat of the arbitration, and the venue of the hearing. The seat of the arbitration can remain the place initially agreed even though the tribunal holds meetings or even hearings in a place other than the designated place of arbitration, either for its own convenience or for the convenience of the parties or their witnesses. After considering the correspondence, the High Court held that the parties had not changed the place of arbitration. Singapore became the venue of the hearing but the place of arbitration remained Jakarta.
5. The place of arbitration determines which law governs the arbitration. This is known as the lex arbitri or curial law and is not the same as the law governing the substantive dispute or what is known as the proper law of the contract. The adoption of the ICC Rules does not displace the curial law. If the ICC Rules do not cover a point, then the parties may look to the curial law. Reliance by one party on the ICC Rules is therefore a neutral factor on the place of arbitration.
6. As the place of arbitration remained at Jakarta, Singapore’s connection
with the arbitration became tenuo
us.
Neither of the parties was Singaporean,
and neither the purpose of the lease of the aircraft (the Hajj term) nor the
currency of payment (the US dollar) had any substantial connection with
Singapore. Singapore was not therefore the appropriate forum to
challenge and set aside the Award.
7. Article 34 which is given the force of law by Part II of the International Arbitration Act 1994 of Singapore, provides grounds for setting aside of an award. Section 24 of the Act gives additional grounds to the High Court to set aside an award. However, Part II of the Act applies only if (a) the arbitration is an international arbitration within the meaning of section 5 of the Act, (b) the place of arbitration is Singapore, and (c) the parties have not excluded its application by agreement. As the place of arbitration was not Singapore, neither Article 34 of the Model Law nor Part II of the Act applied. Section 24 of the Act is linked to Article 34(1) in that, if Article 34(1) is not applicable because the place of arbitration was not Singapore, then section 24 would likewise not be applicable.
8. In a situation where the defendant was never within the jurisdi
ction,
leave must first be obtained to serve the writ out of jurisdiction before an
application for substituted service is made. The leave for substituted service
was granted in this case as an ancillary relief to the main part of the
Order granting leave to effect service out of Singapore. Had the application for
substituted service in Singapore been made alone, it would have failed.
9. The Order granting leave and all other subsequent proceedings were set aside.
Comments
Although the court held that Part II of the International Arbitration Act applies only if, amongst other things, the place of arbitration is Singapore, its ruling ought to be read in the context of the cited provisions on setting aside of an arbitral award (namely, s. 24 of the Act and Article 34(1) of the Model Law). 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 clearly and rightly 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 are interpreted in future cases.Garuda have appealed to the Court of Appeal against the court’s decision. The appeal is expected to be heard in January 2002.