Singapore Court Upholds Arbitral Tribunal’s Jurisdiction Despite Competing Arbitration Clauses

The decision: In Sinolanka Hotels & Spa (Private) Limited v Interna Contract SpA [2018] SGHC 157, the Singapore High Court determined the applicable arbitration clause in a situation where the contract contained competing arbitration clauses. In doing so, the Court dismissed the plaintiff’s application for a ruling that the arbitral tribunal lacked jurisdiction to hear and determine the dispute. This decision is important as it shows the fact-based approach of the courts in resolving conflicting arbitration clauses. Further, this case underscores the need for clients to obtain timely legal advice when drafting dispute resolution clauses in commercial contracts, especially those which involve multiple parties across multiple jurisdictions. The decision also provides a cautionary reminder to parties to be aware of the remedies available at different stages of the dispute when objecting to the arbitral tribunal’s jurisdiction.

The background: The plaintiff was the developer of the first Hyatt-branded luxury hotel in Sri Lanka, while the defendant is a furnishing and finishing specialist in the luxury market. After a tender-bid process and negotiations, the parties entered into a contract where the defendant was to provide the furnishings for the luxury hotel to the plaintiff.

Negotiations between the parties leading to the contract: The plaintiff initially sent an Invitation to Tender to the defendant. The Invitation included the Particular Conditions, which provided for all disputes to be settled by arbitration in Colombo under Sri Lankan arbitration laws (the “Sri Lankan Arbitration Clause”). Thereafter, the defendant made its tender submission to the project, and later sent plaintiff a letter setting out its final offer. The plaintiff then issued a Letter of Acceptance, which included a clause providing for the arbitration of all disputes in Singapore under the ICC Rules of Arbitration (the “ICC Arbitration Clause”). In response, the defendant wrote the plaintiff, expressing its thanks “for the acceptance of our tender and final negotiated offer”. The parties thereafter signed a Contract Agreement. Significantly, the Contract Agreement provided the order of priority for purposes of interpretation of the documents which were to form part of the contract.

The arbitration: After disputes arose between the parties, the defendant initiated arbitration with the ICC pursuant to the ICC Arbitration Clause. After the tribunal was appointed, the plaintiff raised objections as to its jurisdiction, insisting upon the Sri Lankan Arbitration Clause. The tribunal did not make a preliminary ruling on the jurisdictional issue and the issue was instead dealt with in the final award, where the tribunal ruled against the plaintiff on both jurisdiction and merits.

Contract terms and the order of priority provided for the interpretation of the contract can be used to resolve competing clauses. The Court found that the terms of the Contract Agreement were plain and unambiguous in stating that the Letter of Acceptance, which included the ICC Arbitration Clause, was part of the agreement between the parties. Moreover, as there was an inconsistency or conflict between two or more contractual terms, the Court used the list of contractual documents provided in the order of priority to answer questions of interpretation. As the Letter of Acceptance (containing the ICC Arbitration Clause) was of a higher priority in the list, this prevailed over the Particular Conditions (containing the Sri Lankan Arbitration Clause).

Determination of jurisdiction by the court under s10 of IAA available when tribunal has made a positive jurisdictional finding as a preliminary question. The Court noted that when a tribunal has made a positive jurisdictional finding, a party may only apply for a jurisdictional ruling before the court pursuant to s10(3) of the Singapore International Arbitration Act (Cap 143A, 2002 Rev Ed) and Art 16(3) of the Model Law when the finding was made as a preliminary question. Here, however, the tribunal positively ruled on its jurisdiction as part of the final award, together with the substantive merits, and so the Court rightly dismissed its application for the first remedy sought. In this situation, the appropriate remedy would have been for the plaintiff to seek recourse against the final award, in the form of setting aside the award pursuant to Art 34(2)(a)(i) of the Model Law.

Points to Remember for Parties:

Clients who engage in tender-bid processes for construction or other projects should remain mindful of potentially inconsistent provisions in the tender documents and subsequent contract agreements, especially when there are protracted negotiations and the contractual agreements are spread over several documents. As can be seen here, decisions on the applicable clause often turn on the particular facts. As an additional safeguard, clients may wish to consider including clauses to determine precedence in case of ambiguity or inconsistency. To minimise risk and costly delays, timely legal advice is often encouraged to avoid defective or pathological arbitration clauses.

Clients who find themselves in an arbitration and wish to object to the tribunal’s jurisdiction should likewise be aware of the remedies available before both the arbitral tribunal and the court, and include these as part of their overall legal strategy.

Eversheds Harry Elias regularly provides advice on drafting different types of dispute resolution clauses and supplementary provisions, depending on the client’s needs. We have extensive experience advising and successfully representing commercial enterprises with respect to international dispute resolution and the conduct of commercial and investment arbitration both in South East Asia and throughout the world.

Author:

Francis Goh

Partner & Head of International Arbitration, Eversheds Harry Elias LLP