In K.V.C Rice Intertrade Co Ltd v Asian Mineral Resources Pte Ltd and another Suit  SGHC 32 ("KVC Action") the Singapore High Court discussed the extent to which the Singapore courts and the Singapore International Arbitration Centre, in its capacity as default appointing authority under the Singapore International Arbitration Act ("IAA"), are able to support and facilitate an arbitration commenced pursuant to a bare arbitration clause which specifies neither the place of arbitration nor the manner in which arbitrators are to be appointed.
The KVC Action was a consolidation of two separate actions brought by two different Thai-incorporated companies ("Thai Companies") against a Singapore company, Asian Mineral Resources Pte. Ltd. (“Asian Mineral”) arising out of outstanding payments allegedly due by Asian Mineral under rice supply contracts. Each of these contracts contained a 'bare' arbitration clause which failed to set out the place or law applicable to the arbitration, and referred to non-existent rules. They also contained no provisions specifying the number of arbitrators or the mechanism for constituting the arbitral tribunal. Asian Mineral's rejection of the Thai Companies' attempts to submit the subsequent disputes to arbitration led the Thai Companies bringing the KVC Action in the Singapore courts. The issue then arose as to whether the bare arbitration clauses should be upheld and enforced despite their deficiencies, and whether the litigation should therefore be stayed.
Singapore law gives legal force to the UNCITRAL Model Law on International Commercial Arbitration ("Model Law"), as amended and supplemented (for international arbitrations) by the International Arbitration Act, Cap. 143A ("IAA").
Article 11(3) of the Model Law provides that if the parties cannot agree on an arbitrator, or if either or both parties fail to appoint an arbitrator, either party can ask the court or other designated appointing authority to make the appointment, so that the arbitration can move forward. Section 8(2) of the IAA provides that the appointment powers under Article 11(3) will be exercised in Singapore by the President of the SIAC Court of Arbitration ("SIAC President"). However, Article 1(2) of the Model Law provides that the appointment powers under Article 11(3) (and therefore also section 8) will apply "only if the place of arbitration is in [Singapore]".
A bare arbitration clause which fails to designate the seat of arbitration therefore raises the question of whether the SIAC (and indeed, the Singapore courts) can support and facilitate an arbitration by appointing an arbitrator in case of party disagreement, bearing in mind the territorial limitations of Article 1(2) of the Model Law; and if not, whether such a clause should be considered "null and void, inoperative or incapable of being performed" for the purpose of section 6(2) of the IAA.
The arbitration clauses in both contracts here had factors pointing in different directions as regards the possible seat of arbitration. The contract involved Thai sellers, a buyer based in Singapore and performance of parts of the contracts in both Thailand and Benin, with payment occurring in Singapore. It was therefore unclear where the contract drafters intended for disputes to be arbitrated; and consequently whether the territorial requirements of Article 1(2) would be satisfied. Further, if Article 1(2) could not be satisfied, so that the appointment powers under Article 11(3) were not available, did the Singapore court have any residual power to assist under broader general principles of Singapore law?
Judicial Commissioner Pang Khang Chau considered the law to be clear that 'the SIAC President cannot act in a case where it is clear that the place of arbitration is not Singapore'. Consequently, in cases where the SIAC President is asked to make an appointment under Article 11(3) and section 8, the SIAC President must necessarily make some enquiry as to whether Article 1(2) has been satisfied.
However, Pang JC held that it is not the duty of the SIAC President to reach a definitive finding on this issue. Rather, "the standard of review to be applied is the prima facie standard". Applying this standard, the Court concluded that there were sufficient grounds in each of the cases for the SIAC President to make a prima facie finding that the place of arbitration would be Singapore, clearing the way for the SIAC President to appoint an arbitrator and for the arbitrations to proceed. Pang JC carefully noted that "the SIAC President’s prima facie enquiry is undertaken for the limited purpose of ascertaining whether he should exercise his powers of appointment and does not bind the arbitral tribunal. It remains open to the arbitral tribunal, after undertaking a full review of the matter, to come to a different view from the SIAC President on the place of arbitration".
In light of this finding it was strictly unnecessary for the court to further consider whether it had the authority to step in and to make an appointment in cases where the SIAC President was unable to act. Nevertheless, the Court proceeded to address this issue in light of the possibility that the SIAC President would eventually decide that he lacked any power to make the appointment in this case, having made a prima facie assessment that Singapore was not the likely seat of arbitration.
Whilst it was clear that the Model Law and the IAA would not confer any such power on the court in light of the territorial restriction in Article 1(2), it was nevertheless relevant to consider whether such a power could be found in broader general principles of Singapore law.
The court first considered whether the Model Law precluded any such residual power. The court reviewed the minutes of UNCITRAL's meeting held on 19 June 1985 (shortly before the Model Law was adopted on 21 June 1985), from which it appeared that the draftsmen of the Model Law had not taken a firm policy position against allowing the courts to appoint arbitrators in such instances. On the contrary, the court found that the preparatory materials recorded the preference of the working committee members for such powers to be available in such cases. The reason why an express permissive provision was ultimately not included in the Model Law was because the drafters could not agree on the connecting factors that should be used in determining which court or statutory appointing authority should exercise such powers. This notwithstanding, the court found that the clear intention of the draftsmen was that the Model Law should not be regarded as precluding the courts or statutory appointing authority from exercising any available powers under domestic law to assist the arbitration by appointing an arbitrator.
The court concluded that it had the requisite power and authority under general principles of Singapore law, provided that the dispute had some connection (undefined) with Singapore. It observed that in any jurisdiction with a strong policy in favour of arbitration, the courts should be able to assist with the appointment of arbitrators as a last resort in order to make sure that the parties' intention to have their dispute settled by arbitration is not defeated. The court considered that "such a decision could be justified either on the basis of contract law (by applying the principles of interpretation articulated by the Court of Appeal in Insigma Technology Co Ltd v Alstom Technology Ltd  3SLR(R) 936, with the appropriate use of implied terms, if needed) or as an exercise of the court’s inherent jurisdiction to prevent injustice". The Court took comfort from and followed the Hong Kong High Court’s decision in Comtec Components Ltd v Interquip Ltd  HKCFI 803, which had similarly held that the courts retain 'a residuary jurisdiction to make an appointment to implement the intention of the parties that their disputes should be resolved by arbitration'.
Practical guidance and commentary
As a practical matter, this decision underscores the need to ensure that arbitration clauses are drafted with care, and clearly set out the parties' intentions in the event of an arbitration. As far as possible, a well-drafted and effective arbitration clause should define the possible disputes to be arbitrated, specify the governing law of the arbitration agreement, provide for the place of arbitration, the number of arbitrators and the method for establishing the arbitral tribunal. This will ensure that parties avoid unnecessary and time-consuming disputes about the intent, ambit and application of an arbitration clause, and focus instead on resolving their dispute through arbitration quickly and effectively.
As a policy matter, the drivers underlying the decision were clearly articulated and understandable. It would be unfortunate if a clear agreement to arbitrate should be frustrated by the parties' failure to designate a seat of arbitration. Bare arbitration clauses are nonetheless agreements to arbitrate disputes, and it is not surprising that the court would want to uphold and enforce them if possible.
There are however some points arising out of the judgment worth keeping an eye on.
Whilst either or both legal foundations for the ruling may be justified in principle (i.e. that the power derives from an implied term in the parties' agreement, or from a residual inherent jurisdiction to prevent injustice and to implement the intentions of the parties), that could leave the door wide open for courts to intervene in a very wide and ill-defined range of scenarios, ostensibly in support of arbitration but potentially inspiring vexatious and wasteful applications. Further clarity might be desirable as to the basis on which this power is founded, and as to the circumstances in which it may be exercised.
It is also noted that the judgment does not (and did not need to) address a theoretical and technical but nonetheless conceivable scenario where the SIAC President's or the court's appointment of an arbitrator could be problematic. If, in a case with a bare arbitration clause, the SIAC President finds a prima facie case that Singapore is the seat of arbitration, and proceeds to make an appointment, or if the Singapore court does so under its 'last resort' residual powers, problems could arise if the arbitral tribunal later concludes that the seat of arbitration is in fact in a different territory. In that scenario, the arbitration will be subject to procedural laws other than the laws of Singapore, and those laws could then hold that Singapore's purported appointment of the tribunal was not proper or permissible. This after-the-event conflict of laws and resulting uncertainty about the validity of the appointment would create a difficult situation for a tribunal seeking to move the case forward and to render a valid award. The present case did not need to address that complex hypothetical, but it may one day be necessary to address it as a consequence of this judgment.