Australia: Singapore Court of Appeal - New ruling on active and passive remedies for challenging jurisdiction in international arbitrations


In PT First Media TBK v Astro Nusantara International BV and others [2013] SGCA 57, the Singapore Court of Appeal ruled that a party could choose to pursue either an active remedy – by challenging the preliminary award on jurisdiction – or a passive remedy – by challenging enforcement: a judgment reinforcing confidence in Singapore as an international arbitration venue.

At the heart of this case was the question of whether a party had both 'active' and 'passive' remedies where an arbitral tribunal joined additional claimants who were not party to an arbitration agreement and imposed on the defendant (which had objected to the joinder) significant liability in respect of those additional claimants.

How the dispute arose

Companies belonging to Indonesian conglomerate Lippo and Malaysian media group Astro had signed up to a joint venture whose terms were contained in a subscription and shareholders agreement to which certain Astro companies were not party. That agreement included an arbitration agreement appointing SIAC – the Singapore International Arbitration Centre – to resolve any disputes.

When a dispute arose, Astro commenced arbitration in Singapore against Lippo, including PT First Media TBK, and sought to add as additional claimants related entities which were not party to the subscription and shareholders agreement. Predictably, PT First Media contested that joinder. The tribunal determined at a preliminary hearing that it had the power to join the additional claimants to the arbitration under rule 24(b) of the SIAC Rules. As the additional claimants consented to being joined, the arbitral tribunal exercised its power to join them.

The tribunal rendered four other awards, including an interim final award on the merits which required PT First Media to pay various sums to the additional claimants and only a comparatively small sum to Astro.

The High Court in Singapore granted leave to enforce the awards, and enforcement orders were duly served. PT First Media did not apply to set aside the enforcement orders within the time allowed. Astro entered judgments in Singapore on the awards. Only then did PT First Media apply to set aside the judgments and for leave to set aside the enforcement orders, which was granted. PT First Media then applied to set aside the enforcement orders on the ground that there was no arbitration agreement between PT First Media and the additional claimants.

"article 16(3) of the Model Law was not intended to be a 'one-shot remedy'"

The High Court dismissed PT First Media's application in Astro Nusantara International BV v PT Ayunda Prima Mitra [2012] SGHC 212. It held that the exclusive route to challenge a preliminary decision on jurisdiction is contained in the UNCITRAL Model Law (article 16(3)), which is incorporated into the Singapore International Arbitration Act (Cap 143A), and PT First Media's failure to challenge the tribunal's joinder decision within the prescribed time precluded it from subsequently resisting enforcement on the basis of a jurisdictional challenge.

PT First Media appealed.

The Court of Appeal

The Singapore Court of Appeal considered in detail the purposes of the Model Law and the legislative background to the Singapore International Arbitration Act. The court found in favour of PT First Media, holding that article 16(3) of the Model Law was not intended to be a 'one-shot remedy' or to affect the availability of defences at the recognition and enforcement stages. It was intended to provide parties with an additional option: not curtail their options.

The court held that the idea of a 'choice of remedies' – active and passive – which de-emphasised the seat of arbitration was fundamental to the Model Law's philosophy. Its removal could have an impact on '... the practice and flourishing of arbitration in Singapore'. It ruled that a party which sought to challenge a preliminary ruling but did not actively initiate (i) proceedings under article 16(3) of the Model Law; or (ii) setting aside proceedings under article 34 of the Model Law, could, as an alternative, passively rely on a defence in enforcement proceedings under section 19 of the International Arbitration Act (which contains the same grounds as those set out in article 36 of the Model Law), provided it had not waived its right to do so.

The tribunal's decision to join the additional claimants to the arbitration was considered afresh by the Court of Appeal. The court ruled that only parties to an arbitration agreement can be joined to an arbitration in respect of that agreement – the SIAC Rules have been amended expressly to provide this (rule 24 (b)). Finally, the court ruled that PT First Media had not waived its right to challenge enforcement nor had it made any representation on which an estoppel case could be successfully grounded.

IMC Aviation v Altain Khuder

The Singapore Court of Appeal referred in its judgment to the decision of the Victorian Court of Appeal handed down in IMC Aviation Solutions Pty Ltd v Altain Khuder LLC [2011] 282 ALR 717. In that case, the Victorian Court of Appeal refused to enforce an arbitral award made in Mongolia. At the start of his judgment, Warren CJ emphasised that the matter was unusual and that 'in all but the most unusual cases, applications to enforce foreign arbitral awards should involve only a summary procedure'. What made that case unusual was that the arbitral tribunal issued an award which required payment by a company that was related to the defendant but which was not a party to the arbitration agreement and had not taken part in the arbitration. The award did not explain the basis on which the tribunal had determined that it had jurisdiction to make such orders against that non-party.

There was no discussion by the Victorian Court of Appeal of the active and passive remedies. However, that case did concern the question of who was a party to the arbitration agreement and whether the appellant was estopped from arguing in Australia that it was not bound by the agreement, having not raised that issue before the tribunal or the Mongolian court. The Singapore Court of Appeal noted the struggle faced by the Victorian Court of Appeal as to whether the existence of an arbitration agreement was a precondition to enforcement or whether the question should be considered under article V of the New York Convention at the enforcement stage. The Singapore Court of Appeal did not comment further on this point.

Implications of this decision

Given the current trend to consistency of court decisions on arbitrations across jurisdictions, the decision of the Singapore Court of Appeal is a welcome addition to international jurisprudence. Any reduced interest in Singapore as an arbitration venue following the Singapore High Court's decision that only 'active' remedies were available to challenge a tribunal's decision on jurisdiction will quite probably now be reversed. Following the Singapore Court of Appeal's decision, Singapore should revert to its position as a pre-eminent location for parties seeking the resolution of their dispute through arbitration.

Dylan McKimmie is a partner and Meriel Steadman a senior associate in the Norton Rose Fulbright office in Perth.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Meriel Steadman
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