The long-running dispute between Astro, a Malaysian media giant, and Lippo, an Indonesian conglomerate, has reached the end of the latest heavily contested battle by Lippo against the enforcement of arbitral awards given in Astro’s favor.

In PT First Media TBK v Astro Nusantara International BV & others [2013] SGCA 57, the Singapore Court of Appeal has considered the ability of a losing party (Lippo) to oppose enforcement of an arbitral award on grounds of lack of jurisdiction where the losing party had not taken the previous steps available to it to challenge the award on jurisdiction. The Court of Appeal also considered the circumstances in which non-signatories to an arbitration agreement can be joined into existing arbitration proceedings.

Background

Companies belonging to the Astro group intended to enter into a joint venture arrangement with certain companies of the Lippo group for the provision of multimedia and television services in Indonesia. The terms of the joint venture (JV) were contained in a Subscription and Shareholders’ Agreement (SSA).

A dispute arose between the Astro and Lippo groups as to the funding of the JV vehicle and certain of the Lippo group companies commenced proceedings in the Indonesian courts. Astro took the position that the Indonesian court proceedings were in breach of the arbitration agreement contained in the SSA and initiated arbitration proceedings in Singapore under the 2007 SIAC Rules (the 2007 SIAC Rules) .

Astro initiated the arbitration proceedings against the members of the Lippo group who were signatories to the SSA and brought a specific application to the tribunal to allow certain Astro Companies that were not party to the SSA to be joined in the arbitration. The Lippo companies objected to the joinder of those companies.

The tribunal heard the parties’ arguments on the issue of joinder as a preliminary issue and, in a preliminary award, held that pursuant to Rule 24(b) of the 2007 SIAC Rules (which have since been replaced) they had the power to join parties who were not signatories to an arbitration agreement to the arbitration proceedings provided that the parties consented to being joined and, therefore, permitted the additional Astro companies to be joined.

Importantly, pursuant to Article 16(3) of the UNCITRAL Model Law which is incorporated into the Singapore International Arbitration Act (the IAA), the Lippo companies had the opportunity to apply to the Singapore courts to challenge the tribunal’s preliminary award on joinder. However, no such application was made. The tribunal proceeded to make a final determination of the matter on merits through a further four awards and awarded various sums in favor of the Astro group of companies.

Enforcement Proceedings

The Astro companies applied for and obtained enforcement orders against the Lippo companies in respect of the arbitral awards. Consequently, one of the Lippo companies (FM) sought to set aside the enforcement orders primarily on the grounds that there was no arbitration agreement between FM and the Astro companies that had been joined. Astro, in response, argued that FM had not made an application under Article 16(3) of the UNCITRAL Model Law to set aside the tribunal’s preliminary award, and having failed to do so, it had lost its right to object to enforcement of the award on the grounds of lack of jurisdiction. The High Court ruled in favor of Astro and refused to set aside the enforcement orders and FM appealed to the Court of Appeal.

Decision of the Court of Appeal

The key question which the Court of Appeal considered was whether an application under Article 16(3) of the Model Law to set aside an arbitral award on jurisdiction is the only route available to a party seeking to raise an objection against an arbitral award on grounds of lack of jurisdiction, or can a party also raise jurisdictional objections at the time of enforcement proceedings.

The Court of Appeal held that both avenues are available. Having considered the legislative background to the IAA and the UNCITRAL Model Law, the Court of Appeal accepted that under the scheme of the Model Law as applicable in Singapore there is a ‘choice of remedies’ available to a party seeking to raise an objection against an arbitral award on the grounds of jurisdiction:

  • An ‘active’ route which requires a party to initiate proceedings under Article 16(3) of the UNCITRAL Model Law seeking to set aside a positive award on jurisdiction in the supervisory court; and
  • A ‘passive’ route which allows a party to raise its objections to an award as a defence in enforcement proceedings initiated against the party, namely under S19 of the IAA which provides a residual/inherent jurisdiction to refuse enforcement of an international arbitration award issued in Singapore.

Consequently, the Court of Appeal allowed FM to raise objections on grounds of jurisdiction at the stage of enforcement, even though setting aside proceedings had not been initiated. Having considered FM’s objections, the Court of Appeal found that it had the ability to review the tribunal’s findings on jurisdiction de novo and, subsequently held that the tribunal had been wrong to find that it had jurisdiction over the Astro entities that were not parties to the arbitration agreement in the SAA.

The tribunal had relied on the Rule 24(b) of the 2007 SIAC Rules which allowed it to join “other parties” to the arbitration with their consent. The tribunal construed this to mean any party who may not be a party to the arbitration agreement. However, after considering the history of the applicable rule and the corresponding new rule in the SIAC Rules (which clarified that joinder may only be done in respect of “other parties” who are parties to the arbitration agreement but may not have been part of the arbitration), the Court of Appeal held that the Rule 24(b) of the 2007 SIAC Rules could not have meant to extend the power to join to non-parties to the arbitration agreement and without the consent of the parties to the arbitration agreement.

Significance

The decision is a landmark pronouncement of the key principle that a party seeking to object to an arbitral awards has a “menu” of options which it could use either at the stage of setting aside or while defending against enforcement. It is not, therefore, incumbent on parties to challenge a tribunal’s jurisdiction in the Singapore courts while the arbitration proceedings are on foot; it can do sit back and do so while resisting enforcement. The Singapore position is now more closely aligned with that in England.

While the decision also highlights the care parties and the arbitral tribunal need to take while considering extending the jurisdiction of an arbitration to non-parties to the arbitration agreement, the latest version of the SIAC rules has clarified the situation such that this should not be an issue in future SIAC arbitrations.

The decision also confirms that the Singapore courts, like the English courts, will carry out a de novo review of the tribunal’s ruling on jurisdiction when deciding whether to refuse enforcement.

For further information, please contact Alastair Henderson, Partner, Gitta Satryani, Senior Associate, Vikas Mahendra, Associate, Daniel Waldek, Associate, or your usual Herbert Smith Freehills contact.

Alastair Henderson
Alastair Henderson
Partner
+65 6 868 8000
Gitta Satryani
Gitta Satryani
Senior Associate
+44 20 7466 7450
Vikas Mahendra
Vikas Mahendra
Associate
+65 68688059

Daniel Waldek
Daniel Waldek
Associate
+65 6868 8068


Disclaimer

Herbert Smith Freehills LLP is licensed to operate as a foreign law practice in Singapore. Where advice on Singapore law is required, we will refer the matter to and work with licensed Singapore law practices where necessary.