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    06:00 PM Katie Chung, Norton Rose Fulbright (Asia) LLP

    Singapore High Court opines on lacuna in the law on permanent anti-suit injunction in aid of foreign seated arbitration

        

    In the recent Singapore High Court decision of R1 International Pte Ltd v Lonstroff AG [2014] 3 SLR 166; [2014] SGHC 69 (R1 International), Judith Prakash J opined on the Singapore court’s power to grant a permanent anti-suit injunction to restrain foreign court proceedings in aid of a Singapore seated arbitration under Section 4(10) of the Civil Law Act. In R1 International, Prakash J made tentative remarks on whether this statutory power may be exercised by a Singapore court to restrain foreign court proceedings to support a foreign seated arbitration. 

    Brief facts 

    The plaintiff, R1 International Pte Ltd (R1), brought an action in the Singapore High Court against the defendant, Lonstroff AG (Lonstroff), under s 12A of the International Arbitration Act (Cap. 143A) (IAA) to obtain a permanent injunction to restrain Lonstroff from continuing with an action filed in the Swiss courts in favour of arbitration. 

    R1 is a Singapore company in the business of wholesale trading and brokering of rubber. Lonstroff is a Swiss company in the business of processing natural rubber and plastics. R1 dealt with Lonstroff through its authorized agent, R1 Europe GmbH (R1 Europe) (R1 and Lonstroff are collectively referred to as the Parties). 

    In five transactions between 2012 and 2013, R1 International supplied natural rubber to Lonstroff via R1 Europe. For every transaction, negotiations took place over email between R1 Europe and Lonstroff, and sales were confirmed by telephone and email. R1 sent a sales contract which R1 had signed for Lonstroff’s signature but Lonstroff never signed the sales contract. Lonstroff accepted delivery of each order and made payment to R1. 

    The sales contract that R1 signed for each of the five consignments of natural rubber contained the following provision: 

    Subject to the terms, conditions and rules (including the arbitration clauses and rules) of the International Rubber Association Contract for technically specified rubber in force at date of contract.”

    Clause 12(C) of the index to the International Rubber Association Contract (IRAC) provides that any dispute arising out of the contract shall be settled at the designated centre of arbitration which, in respect of shipments to Europe, would be London unless the Parties agreed otherwise (the IRAC Terms). 

    The dispute in this case concerns the second order of natural rubber which Lonstroff accepted. After the acceptance of the consignment, Lonstroff sent an email to R1 to complain about the foul smell of the rubber, and alleged that R1 had breached the contract because the foul smell made the rubber unsuitable for Lonstroff’s use. The sales contract for the second order contained the following provision in addition to the IRAC Terms (the SICOM Arbitration Agreement): 

    In the event of any arbitration, it will be conducted in Singapore.”  

    The third to fifth consignments also contained the SICOM Arbitration Agreement. 

    Lonstroff commenced legal proceedings against R1 in the Swiss courts.

    Subsequently, R1 requested the Singapore Commodity Exchange (SICOM) to set up an arbitral tribunal to resolve the dispute concerning the second order. SICOM informed R1 that it would consider the request when the Swiss proceedings had been suspended and that both Parties agreed to refer the dispute to it. 

    R1 applied to the Singapore High Court for a permanent anti-suit injunction preventing Lonstroff from continuing the Swiss court proceedings in breach of the SICOM Arbitration Agreement. The Singapore court granted an interim order to this effect which Lonstroff applied to discharge. 

    Application for permanent anti-suit injunction restraining Swiss court proceedings in favour of arbitration 

    The Singapore High Court considered the following issues: 

    • whether there was an arbitration agreement between R1 and Lonstroff;
    • if there was an arbitration agreement between R1 and Lonstroff, whether the Singapore court can grant a permanent anti-suit injunction supporting international arbitration either under s 12A(2) read with s 12(1)(i) of the IAA or under any other power; and
    • if the Singapore court can grant a permanent anti-suit injunction supporting international arbitration under either the IAA or any other power, whether the power should be exercised.

    Whether there was an arbitration agreement between R1 and Lonstroff

    R1 argued that there was an arbitration agreement between R1 and Lonstroff on the following alternative bases: 

    • the SICOM Arbitration Agreement was incorporated by trade custom in the Parties’ agreement; or
    • the IRAC Terms providing for arbitration in London was incorporated in the Parties’ agreement by previous course of dealing between the Parties. 

    Prakash J held that there was no arbitration agreement between R1 and Lonstroff on the basis that R1 had not proved that the SICOM Arbitration Agreement (including the IRAC Terms) was part of the trade practice of the rubber trade. Prakash J found that the first two orders were insufficient to establish the continuity of acts required to prove incorporation by previous course of dealing. 

    Whether the Singapore court can grant a permanent anti-suit injunction restraining foreign court proceedings in support of a Singapore seated international arbitration 

    Since Prakash J held that there was no arbitration agreement between R1 and Lonstroff, there was no need to decide on whether the Singapore court can grant a permanent anti-suit injunction supporting a Singapore or foreign seated international arbitration and whether that power should be exercised. 

    Nonetheless, Prakash J addressed the Parties’ submissions on this point and  made judicial observations on this lacuna in Singapore law. 

    It is settled law that interim anti-suit injunctions may be granted by the Singapore court in favour of Singapore and foreign seated international arbitrations. The Singapore Court of Appeal in Maldives Airports Co Ltd and another v GMR Male International Airport Pte Ltd [2013] 2 SLR 449 (Maldives Airports) held (at [34]) that the Singapore court has the power to grant interim anti-suit injunctions (among other injunctive relief) under Section 12A(2) read with Section 12(1)(i) of the IAA in aid of Singapore and foreign seated international arbitrations. 

    The relevant parts of Sections 12(1)(i) and 12A of the IAA read:

     “Powers of arbitral tribunal 

    12. – (1) Without prejudice to the powers set out in any other provision of this Act and in the Model Law, an arbitral tribunal shall have powers to make orders or give directions to any party for – 

    (i) an interim injunction or any other interim measure.”

    Court-ordered interim measures 

    12A.- (1) This section shall apply in relation to an arbitration – 

    (a) to which this Part applies; and 

    (b) irrespective of whether the place of arbitration is in the territory of Singapore. 

    (2) Subject to subsections (3) to (6), for the purpose of and in relation to an arbitration referred to in subsection (1), the High Court or a Judge thereof shall have the same power of making an order in respect of any of the matters set out in section 12(1)(c) to (i) as it has for the purpose of and in relation to an action or a matter in the court.”

    Prakash J in the present case (at [42]) opined that the powers under Section 12(1)(i) read with Section 12A of the IAA are to be exercised on an interim basis only, and that the power of the Singapore court to grant permanent anti-suit injunctions did not derive from the IAA. Prakash J considered that the source of the court’s permanent injunctive power in aid of Singapore seated arbitrations is Section 4(10) of the Civil Law Act (Cap. 43), which is the statutory power that the court exercises when it grants an anti-suit injunction in aid of local court proceedings.  

    Section 4(10) of the Civil Law Act  reads: 

    Injunctions and receivers granted or appointed by interlocutory orders 

    (10) A Mandatory Order or an injunction may be granted or a receiver appointed by an interlocutory order of the court, either unconditionally or upon such terms and conditions as the court thinks just, in all cases in which it appears to the court to be just or convenient that such order should be made.” 

    English law position on the court’s injunctive powers

    Section 4(10) of the Civil Law Act is broadly similar to Sections 37(1) and (2) of the English Senior Courts Act 1981. In  AES Ust-Kamenogorsk Hydropower Plant LLP v Ust-Kamenogorsk Hydropower Plant JSC [2013] 1 WLR 1889 (AESUK), the English Supreme Court unanimously held that the English court has the power under Section 37 of the Senior Courts Act 1981 to order a permanent anti-suit injunction against the commencement or continuation of foreign proceedings outside the Brussels/Lugano regime brought in breach of an English-seated arbitration agreement.

    The relevant parts of Section 37 of the Senior Courts Act 1981 read: 

    37    Powers of High Court with respect to injunctions and receivers.

    (1) The High Court may by order (whether interlocutory or final) grant an injunction or appoint a receiver in all cases in which it appears to the court to be just and convenient to do so. 

    (2) Any such order may be made either unconditionally or on such terms and conditions as the court thinks just.”

    In AESUK, the owner of hydroelectric facilities in Kazakhstan entered into a 25-year concession agreement governed by Kazakh law with the operator of the facilities which provided for arbitration in England under English law. The Kazakh Supreme Court held that the arbitration clause was invalid and contrary to Kazakh public policy. The defendant in AESUK, Ust-Kamenogorsk JSC (JSC), brought proceedings in the Kazakh Economic Court  against the claimant, AES Ust-Kamenogorsk Hydropower Plant LLP (AES Ust-Kamenogorsk), the current operator, for information on the value of the concession assets. AES Ust-Kamenogorsk obtained an ex parte interlocutory anti-suit injunction in the English High Court to restrain the Kazakh court proceedings. The English Court of Appeal dismissed JSC’s appeal against the decision at first instance. 

    On appeal by JSC to the English Supreme Court, the Court unanimously upheld the decision at first instance to grant the permanent anti-suit injunction. Lord Mance, giving the judgment of the Supreme Court, held that Section 37 of the Senior Courts Act 1981 provides the general power of the English court to grant an interim or permanent injunction in aid of English-seated arbitrations where no arbitration proceedings have been commenced and the Arbitration Act 1996 did not apply. 

    Lord Mance held (at [54] and [60]) that the English court’s general injunctive power under Section 37 of the Senior Courts Act 1981 complements the power to stay domestic legal proceedings under Section 9 of the Arbitration Act 1996, which is consistent with Article II(3) of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958. 

    The Supreme Court did not consider if Section 37 of the Senior Courts Act 1981 empowers the English court to grant a permanent anti-suit injunction to restrain foreign proceedings outside the Brussels/Lugano regime in aid of a foreign seated arbitration.  

    Testing the waters of the Singapore court’s general injunctive power under Section 4(10) of the Civil Law Act 

    The Supreme Court in AESUK confirmed that the English court can grant a permanent anti-suit injunction to restrain foreign proceedings outside the Brussels/Lugano regime in aid of an English seated arbitration agreement. 

    Prakash J’s observations in R1 International thus goes further than the English Supreme Court in AESUK in considering that, in addition to the Singapore court’s general injunctive power under Section 4(10) of the Civil Law Act to restrain foreign proceedings in aid of Singapore seated international arbitrations, the same power could in an appropriate case be exercised to restrain foreign proceedings in aid of foreign seated international arbitrations. Prakash J cautioned that she did not express a concluded opinion on this point and noted that policy considerations would be relevant in such a case.

    Given that Prakash J’s remarks were obiter, it remains to be seen whether the Singapore court indeed has the general power under s 4(10) of the Civil Law Act to grant a permanent anti-suit injunction to restrain foreign proceedings in aid of foreign seated international arbitrations.

    * This blog entry may be cited as: Katie Chung, "Singapore High Court opines on lacuna in the law on permanent anti-suit injunction in aid of foreign seated arbitration" Singapore Law Blog (23 September 2014) (http://www.singaporelawblog.sg/blog/article/49)

    ** A PDF version of this entry may be downloaded here

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