Singapore Court Holds Set Aside Time Under Model Law Cannot Be Extended

Phillip Rompotis reviews the June 2019 decision in BXS v BXT [2019] SGHC(I) 10, where the Singapore International Commercial Court (SICC) dealt with two applications:

  • an application by the Plaintiff to set aside an arbitration award on the basis that (a) the Final Award was made by a sole arbitrator, instead of by a tribunal of three arbitrators, contrary to the arbitration agreement; (b) the Final Award dealt with matters outside the terms of the submission to arbitration; and (c) that the Final Award conflicts with Singapore public policy; and
  • an application by the Defendant to strike out the Plaintiff’s setting aside application as an abuse of process by reason of it being brought after the expiry of the three-month time limit for recourse against an arbitral award imposed by Article 34(3) of the UNCITRAL Model Law.

The SICC found in favour of the Defendant, allowing the Defendant’s striking out application and dismissing the Plaintiff’s application for the Final Award to be set aside. In relation to the time limit to bring a setting aside application, the SICC reviewed authorities from Singapore, Malaysia, England, New Zealand and Hong Kong, concluding that it had no power to extend time since there was no specific power under the Model Law; further, that the relevant section of the Supreme Court Judicature Act did not apply because Article 34 of the Model Law was a law “related to limitation” as it extinguished a right of action – namely, the right to challenge an award.

Facts

The case concerned the Defendant’s liability under an agreement to indemnify the Plaintiff for a tax liability. Upon demand by the Plaintiff for payment, the Defendant refused to pay, arguing that its liability had expired under the agreement. The agreement provided for all disputes to be resolved by arbitration pursuant to the SIAC Rules and by three arbitrators.

In the response to the Plaintiff’s notice of arbitration, the Defendant applied for an expedited arbitration to be conducted by a sole arbitrator on the basis that there was only one issue between the parties, namely, whether the Defendant’s liability had lapsed. The Plaintiff accepted the expedited procedure but objected to a sole arbitrator being appointed, submitting to the SIAC that:

  • It was important to have a three member tribunal, including at least one arbitrator who was familiar with Thai law, since the dispute involved a Thai law tax indemnity issue (and Thai law was the governing law of the agreement).
  • The arbitration agreement expressly provided for a tribunal of three arbitrators, and that if the expedited procedure before a sole arbitrator was followed, the enforceability of any resultant award could be challenged before the Thai court.

The SIAC President decided that the arbitration would follow the Expedited Procedure and be heard by a sole arbitrator; in response, the Plaintiff’s lawyers wrote to the SIAC stating that the Plaintiff would proceed with the arbitration but “under protest”. The sole arbitrator dismissed the Plaintiff’s claim to be indemnified by the Defendant, ordering the Plaintiff to pay the costs of the arbitration. Thereafter, the Plaintiff commenced proceedings in Thailand to set aside the award, with the Defendant applying to the Singapore Court for an injunction to restrain the Plaintiff doing so; the Plaintiff also commenced proceedings in Singapore to set aside the award.

The Issues

The two issues for determination were (1) Whether there was any merit in the Plaintiff’s application to set aside the award on the following grounds: (a) that the tribunal constituted a sole arbitrator rather than three arbitrators; (b) that the award was not within the terms of the submission; and (c) that the award was contrary to Singapore public policy; and (2) Whether the time for the Plaintiff to submit its setting aside application should be retrospectively extended or struck out.

The Setting Aside Application

Sole arbitrator instead of three arbitrators

The Plaintiff submitted that the award was made with only cursory reference to Thai law principles and should therefore be set aside by reason of Article 34(2)(a)(iv) of the Model Law, which provides that the court may set aside an award if the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties.

The SICC rejected the Plaintiff’s submissions, finding that:

  • The fact that the arbitration was heard by a sole arbitrator under the expedited procedure did not contravene the parties’ arbitration agreement. The parties agreed to the resolution of their disputes by arbitration in accordance with the SIAC Rules, without specifying which version of the rules applied. Hence, even though the provisions relating to expedited procedures did not exist when the agreement was executed, it was clear that the applicable rules were those in force at the time when the arbitration was commenced (May 2017), at which time the 2016 Rules were in force and which provide that where arbitral proceedings are conducted in accordance with the expedited procedure, the SIAC President can direct the appointment of a sole arbitrator.
  • The sole arbitrator made careful (as opposed to merely superficial) reference to Thai law in the award and that the Plaintiff’s main complaint was that it did not agree with the way in which the Arbitrator applied Thai law to the facts, which was not a valid ground for setting aside an arbitral award.

Award not within the terms of submission

The Plaintiff submitted that the award dealt with matters outside the scope of submission because the Arbitrator:

  • applied “her own notion of Thai law to interpret the contract”; and
  • awarded costs exceeding the permissible amount under the Thai Arbitration Act BE 2545 (2002).

As a result, the Plaintiff argued, it was entitled to have the Final Award set aside under Article 34(2)(a)(iii) of the Model Law, which provides, inter alia, that a court may set aside an award which deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration.

The SICC reiterated its finding that the Arbitrator did not apply her own notion of Thai law and, in relation to the costs issue, the SICC found that there was nothing to reproach the Arbitrator in the way that she assessed the Defendant’s legal fees and expenses, adding that the reality was that the Plaintiff was not contending before the Arbitrator that Thai law applied in relation to costs; on the contrary, the Plaintiff expressly agreed with the Defendant that the Arbitrator should determine costs on the basis of Singapore law.

Public Policy

The Plaintiff argued that the Final Award breached Singapore public policy by reason of the grounds discussed above. Given that those grounds were rejected by the SICC, the public policy basis for setting aside the award also failed.

Extension of time or strike out

Extension of time

In light of the Court’s rejection of the Plaintiff’s grounds for setting aside the Final Award, it followed that there was no merit in its application for an extension of time in which to apply to set aside the Final Award. That application likewise failed.

Strike out

The Defendant’s summons for striking out was taken out on the sole basis that the setting aside application was brought outside of the three-month period for challenging an arbitral award, as stipulated by Article 34(3) of the Model Law. The Defendant argued that:

  • since the Final Award was issued on 12 June 2018, the Plaintiff should have applied to set aside the Final Award by 12 September 2018; it did not apply until 9 November 2018, out of time by nearly two months.
  • The Court lacked jurisdiction even to consider the merits of the Plaintiff’s setting aside application, since as a matter of Singapore law (the law of the seat of arbitration), the three-month time limit in Article 34(3) cannot be extended. In support of this proposition, the Defendant cited ABC Co v XYZ Co Ltd [2003] SLR 546, where the Singapore High Court held that “the court would not be able to entertain any application lodged after the expiry of the three-month period as art 34 has been drafted as the all-encompassing, and only, basis for challenging an award in court”, a view shared by Lee Seiu Kin J in PT Pukuafu Indah and others v Newmont Indonesia Ltd and another [2012] 4 SLR 1157.

The SICC noted that there was “no consistent international practice” in terms of whether the three-month time limit under the Model Law was capable of judicial extension – the Malaysian and Hong Kong Courts have indicated that time could be extended, while the New Zealand Courts have held that the time limit is absolute. In determining the approach to be taken under Singapore law, the SICC embarked on an analysis of the statutory language of the Model Law and relevant Singapore legislation, ultimately concluding that the three month time limit under Article 34(3) of the Model Law was a mandatory one which it had no power to extend. The SICC’s approach can be summarised as follows:

  • In interpreting Article 34(3), the SICC found that the natural and ordinary meaning of the words, ie. that a setting aside application “may not be made” after the time limit, indicated an absolute prohibition, such that a setting aside application could not be brought after the expiration of the 3-month time limit. Adopting a textual analysis of Article 34(3), the SICC stated:

“While the positive form “may be set aside” connotes permissiveness (“one may set aside, but one does not have to do so”), the negative form (“may not be made”) is indicative of absolute prohibition. It is hard to read “may not” as anything other than a mandatory restriction.”

  • The SICC considered whether it had the power to extend time under para. 7 of the First Schedule of the Supreme Court of Judicature Act, which gives the High Court the power to enlarge time prescribed by any written law for doing any act, but without prejudice to any written law relating to limitation. This meant that the SICC could extend time unless there was anything in the Model Law, including Article 34(3), that could be regarded as “relating to limitation”. The SICC found that Article 34(3) was a “written law relating to limitation” as it extinguished the right to set aside an award rather than merely imposing a deadline for a procedural step. Accordingly, one the right was extinguished, para.7 could not be used to revive the right.
  • The SICC found that Article 5 of the Model Law prohibited the courts from intervening in matters already governed by the Model Law. Since Article 34(3) expressly prescribed a time limit, a court was not free to ignore this.

Accordingly, since the time limit in Article 34(3) had lapsed, the Plaintiff had lost its right to apply to set aside the Final Award and the SICC lacked the power to extend the time for applying to set it aside.

NOTE – SUBSEQUENT CASE LAW

The judgment in BXS was delivered on 20 June 2019. On 19 July 2019, the SICC handed down its judgment in BXY & Ors v BXX & Ors [2019] SGHC (I) 11, where the court dealt with whether it had the power to extend the 30-day time period under Article 16(3) of the Model Law. The court considered [75] that the position under Article 16(3) is akin to the 3-month time limit for an application under Article 34(3) (but not identical – Article 34(3) states that an application “may not be made” after 3 months; Article 16(3) is not in similarly prohibitory terms, stating that request may be made within 3 months). The court held that Article 16(3) “related to limitation” (as also held in BXS re Article 34(3)); hence, the time period of 30 days under Article 16(3) could not be extended.

NOTE FOR HONG KONG PRACTITIONERS

Hong Kong practitioners should note the SICC’s criticism of Sun Tian Gang v Hong Kong & China Gas (Jilin) HCCT 46 of 2015 (21 September 2016), where Chan J analysed the time period in Article 34(3) (which has force of law in Hong Kong by s 81 of the Hong Kong Arbitration Ordinance) and stated [@90 – 92):

“When “may not” as used in Article 34 (3) is read in the context and in conjunction with Article 34 (2), I would agree … that the discretionary element interpreted by the Hong Kong courts to exist in Article 34 (2) is retained in and extended to Article 34 (3), such that the court has a discretion to decide whether or not to permit the application to set aside to be made after the period of 3 months specified. In the context, the phrase “an application for setting aside may not be made after 3 months” means that such application may not be made, without an extension of time or leave being granted by the court in the exercise of its discretion.

The decisions made by the Singapore Court, to which counsel have preferred, that the Singapore Court has no power to extend the time under the Singapore equivalent of Article 34 (3), should be distinguished on the basis that the procedural law, ie Order 69A rule 2(4) of the Rules of the High Court of Singapore 1996 current at the time of ABC v XYZ Co Ltd [2003] 3 SLR(R)546, expressly provided that an application to set aside “shall be made” to the court within 3 months, thereby making the time limit mandatory by way of the applicable domestic rules. By contrast, our Order 73 rule 5 RHC governs the procedures for applications under the Ordinance, and it makes no express reference to the time limit for applications to be made under s 81 of the Cap 609 and Article 34 of the Model Law. Implicitly, the 3 months stated in Article 34 (3) applies…

Since the time limit prescribed under Article 34 (3) is procedural, the court has the jurisdiction and discretion to extend such time, and regulate the proceedings before it.

The SICC found Chan J’s decision to be of “limited assistance” and its reasoning “problematic”, stating:

“It is correct that, when ABC Co was decided in 2003, Order 69A r 2(4) of the ROC provided that a setting aside application under Article 34 “shall be made within 3 months” from the date of the receipt of an arbitral award. The wording was amended to its current form (“may not be made more than 3 months after … the date on which the plaintiff received the award”) in 2016 in order to track the language of Article 34(3) more closely. But I do not think that it is possible to deduce anything from the change of wording from “shall be made within 3 months” to “may not be made more than 3 months”. To my mind, the amendment can be regarded as either making the deadline in Order 69A r 2(4) mandatory or permissive, depending on how one understands the expression “may not be made” in Article 34(3). I am unable to infer that the change from “shall be made within 3 months” to “may not be made more than 3 months” meant that the three-month deadline in Order 69A r 2(4) became permissive from having previously been imperative.

Further, although Mimmie Chan J refers to the “discretionary element” in Article 34(2) being “retained in and extended to” the use of “may not” in Article 34(3), it is unclear to me why that should be the case. Instead, it seems to me that the discretion conferred by the word “may” in Article 34(2) merely refers to the court’s discretion not to set aside an award even where one or more of the conditions in Article 34(2)(a)(i) to (iv) or (b)(i) to (ii) have been established. The word “may” in Article 34(2) accordingly cannot have any logical bearing on one’s understanding of the expression “may not” in Article 34(3). There is the additional problem that Mimmie Chan J appears to be using subsidiary legislation (Order 73 of the Rules of the Hong Kong Court (“RHC”)) to construe the extent to which a deadline imposed by primary legislation (Article 34(3) of the Model Law as enacted by s 81 of the HKAO) can be extended. No explanation is given as to why such a mode of interpretation is permissible.”

And:

“I cannot accept Mimmie Chan J’s suggestion that Article 34(3) means that a setting aside application may not be made “without an extension of time or leave being granted by the court in the exercise of its discretion”. That seems to me to assume what one is supposed to prove, by reading words into Article 34(3) that are just not there.”

Time will tell how the Hong Kong Court considers future applications to extend time to bring a setting aside application in light of the SICC’s decision.

See also the following reviews of this case:

About Phillip Rompotis

Phillip practices as a barrister and arbitrator in Hong Kong. He has over 25 years’ litigation and arbitration experience in commercial disputes relating to construction & engineering, financial services, joint venture & shareholders agreements, technology, trusts, property and landlord & tenant. He is a Fellow of the Chartered Institute of Arbitrators, the Singapore Institute of Arbitrators, the Malaysian Institute of Arbitrators, and a member of various lists/panels of arbitrators.

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