E-briefing: Singapore High Court clarifies that the admissibility of pre-contractual negotiations is a procedural issue to be determined by the SIAC arbitral tribunal

E-briefing: Singapore High Court clarifies that the admissibility of pre-contractual negotiations is a procedural issue to be determined by the SIAC arbitral tribunal
16 Mar 2018

Singapore High Court clarifies that the admissibility of pre-contractual negotiations is a procedural issue to be determined by the SIAC arbitral tribunal

[2018] SGHC 55 BQP v BQQ

The Singapore High Court dismissed the Plaintiff’s challenge to the jurisdictional ruling of an arbitral tribunal in an SIAC arbitration where the Plaintiff was the respondent and the Defendant was the claimant, and the Plaintiff’s application for leave to appeal to the Court of Appeal under Section 10 of the International Arbitration Act (Cap 143A, 2002 Rev Ed) (the “Applications”).

Mr Hee Theng Fong, Ms Toh Wei Yi, Ms Kirsten Teo, Ms Poon Pui Yee and Ms Jaclyn Leong successfully acted for the Defendant in the Applications.

I.          Key issue in dispute

The Plaintiff is a company incorporated in the British Virgin Islands and the Defendant is a company organised under the laws of Indonesia. The Parties and their affiliates have had commercial dealings in the forestry industry since at least 2001, in the course of which various disputes arose. In 2009, to resolve their disputes, the Parties signed a Master Agreement under which the Defendant agreed to sell to the Plaintiff an Indonesian forestry licence, its interest in a 2003 Joint Operation Agreement and the entire share capital of its subsidiary for monetary consideration of US$8 million and the supply of 450,000 cubic metres of round logs over 3 years. The complex transaction structured by the Parties comprised of “offshore” agreements between their non-Indonesian companies which contained SIAC arbitration clauses and “onshore” agreements between their Indonesian companies which expressed BANI arbitration clauses. Disputes soon arose after the Master Agreement was signed.

The Defendant commenced SIAC arbitration against the Plaintiff on 3 November 2014. The Plaintiff challenged the tribunal’s jurisdiction and the tribunal issued its jurisdictional ruling in favour of the Defendant.

The Plaintiff subsequently filed an appeal against the tribunal’s jurisdictional ruling before the Singapore High Court, which was dismissed on 27 September 2017. The Plaintiff then sought leave to appeal to the Court of Appeal. Its main ground for leave was that there was a question of general principle to be decided for the first time, and upon which further argument and a decision of a higher tribunal would be to the public advantage. This question was whether pre-contractual negotiations were admissible in evidence to construe written agreements – which the Plaintiff argued was a question left open by the Court of Appeal.

In summary, the Defendant argued that (a) the law on the characterisation of admissibility of evidence as a rule of evidence or procedural law as compared to substantive law is settled under Singapore law and (b) that such principles stated by the Court of Appeal in Sembcorp Marine Ltd v PPL Holdings Pte Ltd [2013] 4 SLR 193 (“Sembcorp Marine”) in any event do not apply in Singapore-seated international arbitrations with Singapore law as the governing law of the contract.

This decision therefore elucidates the different underlying premises in international arbitration as compared to national court procedures on the admissibility and treatment of evidence.

II.         Decision

The Applications were heard in the High Court of Singapore by the Honourable Justice Quentin Loh (the “Judge”), who delivered his written grounds of decision on 14 March 2018. The Judge held that the law on the issue of the characterisation of admissibility of evidence as a rule of evidence or procedural law as compared to substantive law has been made clear by the Court of Appeal in Sembcorp Marine (see the principles summarised at [122] of the Judgment).

However, there are fundamental differences when we examine the applicability of these principles to international arbitration cases with Singapore as the seat and Singapore law as the governing law of the contract:

(a)        Part II of the Evidence Act (Cap. 97, 1997 Rev Ed), which covers the exclusion of certain kinds of oral or extrinsic evidence, does not apply to proceedings before an arbitrator (see [124]-[126] of the Judgment);

(b)        The SIAC arbitration rules, which were specifically incorporated by reference by way of the Parties’ arbitration agreement, provide that admissibility clearly lies within the sole province of the arbitral tribunal, pursuant to Rule 16.2 (see [127]-[128] of the Judgment); and

(c)        Concerns that the admission of pre-contractual negotiations could vastly expand discovery obligations and consequently the volume of evidence in common law systems are usually not valid in the arbitration context as most international arbitrations now adopt the International Bar Association Rules on the Taking of Evidence in International Arbitration.

Therefore, the Judge held that there was no general principle to be decided for the first time or question of important upon which further argument and a decision of a higher tribunal would be to the public advantage, and accordingly refused to grant the Plaintiff leave to appeal.

III.       Concluding Note

The Judge’s decision is pivotal in confirming that the admissibility of evidence is a procedural issue that falls within the sole province of SIAC arbitral tribunals in Singapore-seated international arbitrations with Singapore law as the governing law of the contract.

For more information, please contact our Business Development Manager, Ricky Soetikno at rickysoetikno@eversheds-harryelias.com

 

Contact: 

Hee Theng Fong, JP

许廷芳律师 太平绅士
Consultant
International Arbitration and Mediation
Litigation and Dispute Management
顾问
仲裁员( 新仲,贸仲,北仲,上仲,港仲,海仲,亚仲)
调解员 (新加坡国际调解中心特使及(中国) 专家)
执业领域:国际仲裁,调解,诉讼及争议管理
T: 
+65 6361 9868
F: 
+65 6438 2573
E: 
ThengfongHee@harryelias.com

Toh Wei Yi

Partner
Litigation and Dispute Management
T: 
+65 6361 9348
F: 
+65 6438 0550
E: 
TohWeiyi@harryelias.com
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