In Nippon Catalyst Pte Ltd v PT Trans-Pacific Petrochemical Indotama and another, the Singapore High Court upheld a decision by the assistant registrar to stay court proceedings in favour of arbitration under Section 6 of the Singapore International Arbitration Act. This is the latest in a string of decisions affirming the pro-arbitration approach embraced by the Singapore courts.
Section 6 of the Singapore International Arbitration Act provides for stay of court proceedings if the court proceedings relate to any matter which is the subject of the arbitration agreement, unless the court is of the view that the arbitration agreement is null and void, inoperative, or incapable of being performed.
In arguing against a stay in favour of arbitral proceedings, Nippon contended that (1) the arbitration agreement contained in the Lease (as defined below) was invalid or inoperative and (2) the dispute did not fall within the scope of the arbitration agreement.
The parties executed a lease agreement whereby Nippon leased catalysts to PT Trans-Pacific Petrochemical Indotama (TPPI) in consideration for the payment of rent. The lease agreement expired on 15 March 2009.
In 2008, TPPI ceased operations and defaulted on the payment of rent under the lease agreement. In 2009, TPPI resumed operations, and a separate agreement was entered into which extended the lease of the catalysts to 31 December 2010. This separate agreement, which included an arbitration agreement, was stated to be valid from 16 March 2008.
In 2011, TPPI ceased operations again and entered into a composition agreement with various creditors, including Nippon.
Following the execution of the composition agreement, the parties failed to reach a new agreement for TPPI’s continued use of the catalysts. Nippon commenced legal proceedings in the Singapore High Court against TPPI and Pertamina alleging conversion in respect of the catalysts and unlawful conspiracy to take advantage of Nippon’s property (i.e., the catalysts) without providing fair value or consideration.
In response, TPPI and Pertamina successfully applied to stay the Singapore court proceedings on the basis that (1) an arbitration agreement was in place; and (2) Indonesia was the proper forum for hearing the dispute. Dissatisfied with the ruling of the assistant registrar, Nippon filed an appeal before a judge in chambers (in this case, a judicial commissioner).
In determining that the court proceedings should be stayed in favour of arbitration, the judicial commissioner applied the well-established principles set out in Tomolugen Holdings Ltd and another v Silica Investors Ltd and other appeals (subsequently reaffirmed in Wilson Taylor Asia Pacific Pte Ltd v Dyna-Jet Pte Ltd) which held that a court should grant a stay in favour of arbitration if the applicant can establish a prima facie case that
In applying a prima facie standard of review, the judicial commissioner held that the correspondence between parties was sufficient evidence that the parties treated the lease agreement and separate agreement (Lease)—and the arbitration agreement contained therein—as binding. The correspondence showed, prima facie, that the parties recognized that the Lease would continue to govern TPPI’s use of the catalysts until the parties entered into a new agreement.
As to whether the dispute fell within the scope of the arbitration agreement, the judicial commissioner applied the two-stage process set out in Tomolugen. First, the court determined what matters were in the court proceedings. Second, the court ascertained whether those matters fell within the scope of the arbitration agreement, adopting a “generous approach”.
In dismissing Nippon’s argument that the claim for conversion fell beyond the auspices of the arbitration agreement because it was a claim in tort, and the relief sought was unconnected to the Lease, the judicial commissioner held that Nippon’s actions against TPPI were “intricately tied to the Lease” and that it was “irrelevant that its causes of action [were] framed in tort rather than contract”. Citing Tomolugen, the court held that the underlying basis and true nature of the claim had to be considered, and the court was not limited solely to the manner in which the claim was pleaded.
This decision is the latest in a string of decisions consistent with and affirming the pro-arbitration approach embraced by the Singapore courts. This pro-arbitration approach is aligned with Singapore’s objective to be the preferred seat and forum for resolving international disputes. And it appears to be bearing fruit; according to the latest Queen Mary University of London International Arbitration Survey, Singapore is the most preferred seat for arbitration in Asia, and the Singapore International Arbitration Centre is the most preferred arbitral institution in Asia.
If you have any questions or would like more information on the issues discussed in this LawFlash, please contact the author, Stephen Cheong. As an added resource, Morgan Lewis has released the second edition of An Introductory Guide to Arbitration in Asia addressing questions global businesses should consider in connection with international arbitration in 14 key Asian jurisdictions.