Singapore & China: Case Note: BXS v BXT  SGHC(I)10:
1. The recent case of BXS v BXT  SGHC(I) 10 was the first judgment issued by the SICC on arbitral proceedings and raises, amongst others, some interesting questions as to the appointment of a sole arbitrator under the Expedited Procedure pursuant to Rule 5 of the SIAC Arbitration Rules (6th Ed, 1 August 2016) (the “2016 Rules”).
2. The case arises out of an application commenced by the Plaintiff to set aside an arbitral award (the “Final Award”) issued in a Singapore-seated arbitration (the “setting aside application”). The Defendant applied to strike out the setting aside application on the grounds of abuse of process.
3. Before coming to this conclusion, however, the Court considered the merits of the three grounds which the Plaintiff relied on in its setting aside application, namely:
a. That contrary to the arbitration agreement, the Final Award was made by a sole arbitrator instead of by a tribunal of three arbitrators (“the first ground”);
b. That the Final Award deals with matters outside the terms of the submission to arbitration; and
c. That the Final Award conflicts with Singapore public policy.
4. This article will solely focus on the Court’s finding in relation to the first ground, as highlighted in bold above.
5. The Plaintiff commenced arbitration at the Singapore International Arbitration Centre (“SIAC”) pursuant to clause 19 of the contract, following a dispute between the parties over the Defendant’s liability to indemnify the Plaintiff for taxes of approximately SGD 3,737,280.52 under a contract.
6. Clause 19 of the contract provided that:
“…all disputes arising out of or in connection with this agreement (including a dispute relating to any non-contractual obligations arising out of or in connection with this agreement) shall be exclusively and definitively settled by arbitration pursuant to the rules of the Singapore International Arbitration Centre (the Rules), by three arbitrators appointed according to the Rules…”
7. Although the clause provided for disputes to be settled by arbitration before three arbitrators, the dispute was heard by a sole arbitrator pursuant to the Defendant’s Response to the Plaintiff’s Notice of Arbitration (the “Response”).
8. In the Response, the Defendant had applied for arbitration to be conducted by a sole arbitrator under the Expedited Procedure provided for in Rule 5 of the 2016 Rules.
9. Rule 5 of the 2016 Rules provided that prior to the constitution of the Tribunal, a party may file an application with the Registrar for the arbitral proceedings to be conducted in accordance with the Expedited Procedure in three circumstances: (i) where the quantum of the dispute was not more than SGD 6,000,000; (ii) where parties agree; or (iii) in cases of exceptional urgency.
10. The application will then be considered by the President of the SIAC. If the President decides that the arbitral proceedings shall be conducted in accordance with the Expedited Procedure, Rule 5.2 provides that the case “shall be referred to a sole arbitrator, unless the President determines otherwise”.
11. Pertinent also is Rule 5.3, a new addition in the 2016 Rules, which provide as follows:
“By agreeing to arbitration under these Rules, the parties agree that, where arbitral proceedings are conducted in accordance with the Expedited Procedure under this Rule 5, the rules and procedures set forth in Rule 5.2 shall apply even in cases where the arbitration agreement contains contrary terms.”
12. In the case, although the Plaintiff was amenable to adopting the Expedited Procedure, it objected to a sole arbitrator being appointed. The Plaintiff stressed that the arbitration agreement at clause 19 of the contract provided expressly for three arbitrators to constitute the Tribunal and argued that the President’s decision to appoint a sole arbitrator was contrary to the express terms of the arbitration agreement.
13. The Court found that there was no merit to the Plaintiff’s contention that having a sole arbitrator rather than three arbitrators conduct the arbitration was contrary to the parties’ arbitration agreement. Instead, it found that parties had agreed to adopt the 2016 Rules by virtue of clause 19 of the contract.
14. The Court further stated that the express words used in clause 19 were insufficient to oust the application of Rule 5.3 of the 2016 Rules, The use of the words “arbitration pursuant to the rules of the Singapore International Arbitration Centre” and no more was taken to reflect the Plaintiff’s acceptance to be bound by any modifications made to SIAC’s rules subsequent to the contract.
Enforcement of award under 2013 SIAC rules refused in earlier Shanghai case
15. The Plaintiff had referred to a case of Noble Resources International Pte Ltd v Shanghai Xintai International Trade Co Ltd (2016) Hu 01 Xie Wai Ren No. 1 to support its argument for three arbitrators to be appointed.
16. In that case, the Shanghai Court refused to enforce a Singapore award which was decided by a sole arbitrator pursuant to the Expedited Procedure in a case where the SIAC Rules 2013 applied. It is pertinent to note that SIAC Rules 2013 did not include Rule 5.3.
17. It is interesting to note that a comment was made in passing by the Court in BXS v BXT that the Singapore Court had concluded in a 2015 case of AQZ v ARA  2 SLR 972 that even under the SIAC Rules 2013, the President was empowered by Rule 5.2 of the SIAC Rules 2013 to override a contractual stipulation for three arbitrators in favour of the Expedited Procedure.
18. In this regard, we invited Mr. Feng Wang, the Senior Partner of our ADVOC member firm, Shanghai United Law Firm, and also senior arbitrator active in both CIETAC (China International Economic and Trade Arbitration Commission) and the SAC (Shanghai Arbitration Commission), to express his view as to whether the Shanghai Courts would have reached the same conclusion in this case.
Feng Wang, Senior Partner of Shanghai United Law Firm:
19. The Shanghai Court places paramount emphasis on the intention of the contractual parties. While the Shanghai Court did recognize the application of the Expedited Procedure, it raised objections to the composition of the tribunal. The Shanghai Court clearly pointed out that “unless the President determines otherwise” of Rule 5.2(b) should not be construed as the President’s discretion on the composition of the tribunal. On the contrary, the President should fully respect the parties’ autonomy of will. Since the arbitration clause has clearly stipulated that the tribunal shall be composed of three arbitrators, and had not excluded such composition arrangement in the Expedited Procedure, the application of the Expedited Procedure shall not adversely affect the parties’ procedural right that the case to be examined by three arbitrators in accordance with the arbitration clause.
20. And it is also important to note that that Shanghai Court is not free from supervision to take this position, and as matter of fact, it is subjected to the “Report System” established by the Supreme People’s Court for purpose of better implementation of New York Convention. The final decision rendered by the Shanghai Court therefore also represents the attitude of highest judicial authority of China.
21. The case draws a good balance between party autonomy and institutional control over proceedings. Adopting an “opt-out” approach where parties have subjected themselves to the institutional rules put in place places the onus on parties to consider carefully its dispute resolution mechanisms.
22. This case also serves as a warning against a loose formulation of arbitration clauses in contracts and agreements. Where a party intends for any disputes to be heard by a tribunal of three arbitrators under all circumstances, it appears, at least under Singapore law, insufficient to simply state so under the 2016 Rules.
23. As such, clear language should be provided in the contract as to which arbitration rules are to apply. Further, where a client has specific intentions as to how the arbitration is to be carried out, the arbitration clause in the contracts should explicitly state such an intention and specifically exclude the application of any institutional rules future and present which may contradict such intention.
For Further Information, please contact:
Partner, JTJB, Singapore
(65) 9062 8575
Partner, Shanghai United Law Firm, China
Associate, JTJB, Singapore
(65) 6220 9388
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This update is for general information only and is not intended to constitute legal advice. JTJB has made all reasonable efforts to ensure the information provided is accurate at the time of publication.
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