Rakna Arakshaka Lanka Ltd v Avant Garde Maritime Services (Private) Limited [2018] SGHC 78

In Originating Summons No 198 of 2017 (“OS 198/2017”), the plaintiff, Rakna Arakshaka Lanka Ltd (“RALL”), applied to set aside a final award dated 24 November 2016 made in Singapore International Arbitration Centre (“SIAC”) Arbitration No 70 of 2015 pursuant to s 24 of the International Arbitration Act (Cap 143A, 2002 Rev Ed) (“the IAA”) and Art 34 of the UNCITRAL Model Law on International Commercial Arbitration (“the Model Law”). In the arbitration, RALL was the respondent and the defendant, Avant Garde Maritime Services (Private) Limited (“AGMS”), was the claimant.

Having heard oral argument on 30 November 2017, I dismissed the application with brief oral grounds on 1 December 2017. RALL filed its notice of appeal on 27 December 2017, and I now give the full grounds of my decision.

Facts

The parties

The plaintiff, RALL, is a company incorporated in Sri Lanka, and was engaged in, inter alia, the business of providing comprehensive security services and the issuing of arms, ammunition and related manpower for such security services. RALL is described by Mr Kaluwewe Mudiyanselage Gunawathgedara Sirimevan Nalaka Kaluwewe (“Mr Kaluwewe”), Chairman of RALL since January 2017, as being owned at all material times by the Government of Sri Lanka with the Secretary to the Treasury of Sri Lanka as its sole shareholder. It is affiliated to the Ministry of Defence of the Republic of Sri Lanka (“MOD”), and its chairman and board of directors are appointees of the government of Sri Lanka.

The defendant, AGMS, is a Sri Lanka-incorporated company specialising in the provision of maritime security services to vessels transiting waters with high risk of piracy. At all material times, the sole shareholder and chairman of AGMS was Mr Yapa Hetti Pathirannehelage Nissanka Yapa Senadhipathi (“Mr Senadhipathi”).

Background

Between March 2011 and October 2013, the parties entered into six separate agreements concerning various maritime security-related projects under the auspices of a Public Private Partnership facilitated by the MOD. In its submissions, RALL additionally states that it specialises in supplying risk management services for corporate entities including the provision of unarmed marshals to merchant vessels exposed to pirate menace whilst traversing the Arabian Gulf and Indian Ocean. RALL describes AGMS as being primarily engaged in the business of providing maritime security related infrastructure facility services including related manpower for vessels transiting the Indian Ocean. These six agreements were subsequently incorporated as annexures to an umbrella Master Agreement dated 27 January 2014 (“Master Agreement”).

One such project involved the establishment of a floating armoury on the vessel MV Mahanuwara, which was operated by AGMS off the coast of Galle in Sri Lanka (“the Galle Floating Armoury Project”). The other five projects set out in Cl 1 of the Master Agreement are:

It appears there was another floating armoury on board the vessel MV Avant Garde.

Cl 3.1 of the Master Agreement stipulates that RALL would provide its “utmost assistance” to AGMS in respect of the various projects entered into:

The Master Agreement was governed by the laws of Sri Lanka and Cl 8, the dispute resolution clause, states that “any dispute, difference or question, which has risen in connection with or in relation to the agreement shall” be referred to arbitration in Singapore under the rules of the Singapore International Arbitration Centre (“SIAC”).

At the Sri Lankan presidential elections held on 8 January 2015, the incumbent, Mr Mahinda Rajapaksa (who had also concurrently held the appointment of Minister of Defence), was defeated and replaced by Mr Maithripala Sirisena. Around ten days later, on or about 18 January 2015, the MV Mahanuwara was detained by the Sri Lankan Police while docked at Galle Port, following several allegations levelled against the legality and legitimacy of the Galle Floating Armoury Project.

On 20 February 2015, AGMS demanded that RALL, pursuant to its obligation to provide its “utmost assistance” under Cl 3.1 of the Master Agreement, take all required steps to obtain a Letter of Clearance from the MOD declaring that the Public Private Partnership and the projects carried on by the parties thereunder (including the Galle Floating Armoury Project) were legitimate, and that the Sri Lankan government spokesperson release an appropriate media release confirming the same. RALL replied on 27 February 2015 that it was unable to respond to AGMS’s requests as the board of directors, who were appointees of the previous government, had resigned in late January 2015 and had yet to be replaced.

The arbitral proceedings

On 9 April 2015, AGMS commenced arbitral proceedings against RALL, alleging that RALL had breached Cl 3.1 of the Master Agreement by failing to comply with AGMS’s requests for the Letter of Clearance and a suitable press release confirming the legitimacy of the floating armoury on board the MV Mahanuwara. The Arbitration Notice, dated 8 April 2015, was sent by email to the SIAC and by courier on 13 April 2015 together with the filing fee. AGMS served the Arbitration Notice on RALL by email and courier on 9 April 2015.

RALL did not respond to the Arbitration Notice as required under the SIAC Rules. As will be seen below, RALL did not participate in the arbitration despite being given notice at various stages and having had ample opportunity to do so. Throughout the arbitration, RALL’s participation was limited to asking for extensions of time and later on, for copies of some communications and documents. RALL did not file its Response to AGMS’s Notice of Arbitration, did not file any Defence, did not file any submissions, did not pay any of the required SIAC fees and did not turn up at any of the hearings.

On 13 May 2015, RALL wrote to the SIAC and requested for an extension of 3 months to respond to the Notice of Arbitration, citing recent appointment of a new board of management and that it required further time to “study this case before arriving at any decision” and the need to secure Treasury approval through the Ministry of Defence:

On 25 May 2015, SIAC granted RALL an extension of 3 weeks to respond to the Arbitration Notice and to nominate a co-arbitrator by close of business, 9 June 2015. Before me, counsel for RALL acknowledged this extension as being quite “generous”.

On 22 July 2015, the SIAC appointed Chief Justice (Retd) Chan Sek Keong SC (“CJ (R) Chan”) as co-arbitrator in the absence of any nomination made by RALL under Rule 8.2 of the SIAC Rules. AGMS’s nominee was Dr Wickrema Weerasooria (“Dr Weerasooria”). I note there were disclosures made by Dr Weerasooria, to which AGMS stated they had no objections but no comments or objections were made by RALL despite being given an opportunity to do so by the SIAC. Dr Weerasooria was accordingly confirmed by the SIAC as AGMS’s nominated arbitrator.

On 29 July 2015, AGMS filed its Statement of Claim (dated 28 July 2015).

On 30 July 2015, almost two months after the aforementioned extended deadline had passed, RALL wrote to the SIAC requesting another three-month extension to 12 November 2015, again ostensibly because “the matter require[d] further study to ensure a successful and effective solution”:

This was strongly objected to by AGMS as RALL had not filed its Response to the Notice of Arbitration and had not paid their share of the fees.

Once again, the SIAC granted an extension by way of a letter dated 14 August 2015, stating that RALL had until 18 August 2015 to respond, failing which the SIAC would proceed with the next steps in the arbitration.

On 20 August 2015, the SIAC noted the lack of response from RALL, and on 21 August 2015 notified the parties that it was proceeding with the next steps of arbitration.

On 21 August 2015, legal counsel for RALL, Mr Radeep Ginige, sent a letter to the SIAC, which bears setting out in full:

With respect, this letter was rather difficult to decipher. It simply asserted, without any explanation or substantiation, that the arbitration involved a dispute “contemplated by falling or contains facts on matters beyond the scope of submission to arbitration” and that the arbitral proceedings were in “conflict with the Public Policy of the Republic of Sri Lanka”. The arbitral tribunal (“the Tribunal”) unanimously considered that this vaguely-worded letter did not constitute a proper objection to the Tribunal’s jurisdiction. I agree with the Tribunal.

On 15 October 2015, the Tribunal called for a Preliminary Meeting on 16 November 2015. A letter dated 20 October 2015 was duly sent by registered post, fax and email to AGMS and RALL informing them of the same and annexing a draft procedural order for their consideration.

It appears the parties entered into negotiations in an effort to resolve the matter. This resulted in an agreement dated 20 October 2015 (“the MOU”), which, inter alia, provided that AGMS would withdraw its claim against RALL in the SIAC arbitral proceedings.

On 12 November 2015, RALL unilaterally informed the SIAC that it had “reached settlement” with AGMS and that it was “no longer required to proceed” with the arbitration. RALL did not annex a copy of the MOU to its letter.

Following RALL’s letter of 12 November 2015, AGMS sent a letter to the Tribunal dated 15 November 2015, stating that in light of certain events that had recently transpired, it appeared that there was no longer any settlement and there was in fact an imminent threat that RALL would terminate the Master Agreement. AGMS therefore sought a preliminary hearing on an urgent basis for two purposes: to determine whether the arbitration ought to be proceeded with, and also to request interim relief from the Tribunal in the form of an interim injunction preventing RALL from terminating the Master Agreement.

AGMS’s requests were copied to RALL, but RALL did not give any response and did not participate in the preliminary hearing held on 16 November 2015. After the hearing, the Tribunal issued directions. RALL was directed to inform the Tribunal of its position in relation to AGMS’s two applications, and both parties were requested to tender written submissions thereon. AGMS tendered its written submissions dated 22 November 2015 on 24 November 2015 but RALL did not do so.

Having considered AGMS’s applications, the Tribunal issued an Interim Order on 19 December 2015, holding by a majority (CJ (R) Chan dissenting) that RALL had failed to ensure continuity of the Master Agreement, which went to the root of the MOU, and therefore the dispute was still alive. The Tribunal determined to proceed with the arbitration and gave directions but expressly stated that RALL was free to make objections in the procedurally proper manner in the course of the arbitration. The Tribunal unanimously declined to grant AGMS’s application for an interim injunction.

Following the Interim Order, AGMS filed written submissions and a witness statement. RALL did not file any submissions, witness statements or pleadings, although it sent two letters to the SIAC dated 16 February and 26 April 2016, stating that it had not received AGMS’s written submissions and inquiring after the status of the arbitration respectively. I note that RALL’s request of 16 February 2016 erroneously referred to AGMS’s written submissions in relation to the preliminary hearing, which had already been sent to RALL in an email dated 24 November 2015. RALL must have intended to refer instead to AGMS’s witness statement for the substantive hearing (which AGMS had been directed to file pursuant to the Interim Order dated 19 December 2015), and this was subsequently sent to RALL in an email dated 25 April 2016. Although the witness statement was sent to RALL about one month after the extended deadline set by the Tribunal, nothing turns on this; AGMS explained that the delay in filing its witness statement was due to difficulties faced in obtaining instructions from the witness, Mr Senadhipathi, on account of his ill-health, and RALL raised no complaint, simply inquiring in its letter of 26 April 2016 as to the status of the arbitration; it was not RALL’s case before me that the delayed provision of the witness statement was a breach of natural justice or had resulted in it being unable to present its case.

RALL commenced the present proceedings to set aside the Final Award on 27 February 2017.

Parties’ cases

RALL relied on three grounds in support of its application to set aside the Final Award:

(a) First, the Final Award deals with a dispute not falling within the terms of the submission to arbitration, or contains decisions on matters beyond the scope of the submission to arbitration under Art 34(2)(a)(iii) of the Model Law. The thrust of RALL’s submissions on this point was that the MOU had terminated the reference to arbitration.

(b) Secondly, RALL was not given proper notice of the arbitral proceedings, or was otherwise unable to present its case pursuant to Art 34(2)(a)(ii) of the Model Law because certain pieces of correspondence and documents were not copied to it (in particular, the notes of evidence for the substantive hearing held on 21 June 2016). RALL further argued that this also gave rise to a breach of the rules of natural justice in the making of the award by which its rights had been prejudiced under s 24(b) of the IAA.

(c) Thirdly, the making of the award was induced or affected by fraud or corruption within the meaning of s 24(a) of the IAA or the award was in conflict with the public policy of Singapore under Art 34(2)(b)(ii) of the Model Law. In this regard, RALL’s main argument was that the Master Agreement – the underlying contract in the arbitral proceedings – was procured by bribes given by AGMS’s Mr Senadhipathi to the chairman of RALL at the time, Mr Waduge Palitha Piyasiri Fernando (“Mr Fernando”), noting that both men had been indicted in the Sri Lankan High Court and Magistrates’ Court on charges of bribery and corruption.

AGMS joined issue with RALL on all three grounds:

(a) On the point that the Tribunal lacked jurisdiction, AGMS made three points in reply:

(i) First, it was far too late in the day for RALL to mount a jurisdictional challenge, having failed to do so at the preliminary hearing on 16 November 2015, and after the Interim Order was issued on 19 December 2015.

(ii) Secondly, even if RALL could take objection, the MOU did not terminate the Tribunal’s jurisdiction to hear the matter.

(iii) Thirdly, in any case, the MOU had been rescinded for misrepresentation.

(b) On the natural justice point, AGMS argued that the alleged breaches complained of were of an arid, technical or trifling nature that resulted in no prejudice to RALL.

(c) On the point that the Master Agreement was procured by bribery, AGMS pointed out that corruption had not been proved. The corruption trials were still pending; all that RALL could produce were indictments, not convictions, and the relevant persons must be presumed innocent of the charges until proven guilty and convicted.

Issues to be determined

The issues to be determined track the three grounds for setting aside raised by RALL:

(a) Whether the Final Award should be set aside under Art 34(2)(a)(iii) of the Model Law on the basis that the MOU terminated the reference to arbitration (“the Jurisdiction Issue”).

(b) Whether the Final Award should be set aside under Art 34(2)(a)(ii) of the Model Law and/or s 24(b) of the IAA because certain pieces of correspondence (especially the notes of evidence for the substantive hearing) were not copied to RALL (“the Natural Justice Issue”).

(c) Whether the Final Award should be set aside under Art 34(2)(b)(ii) of the Model Law or s 24(a) of the IAA on the basis that the underlying Master Agreement upon which the arbitral proceedings were brought was procured and furthered by bribery and corruption in Sri Lanka (“the Public Policy Issue”).

My decision

The Jurisdiction Issue

RALL does not challenge AGMS’s Notice of Arbitration dated 8 April 2015 and AGMS’s Statement of Claim filed on 28 July 2015 as comprising claims or matters beyond the scope of Cl 8 of the Master Agreement.

Instead, RALL’s first submission was that in breach of Art 34(2)(a)(iii), the dispute dealt with in the award did not fall within the terms of the submission to arbitration, or that it contained decisions on matters beyond the scope of the submission to arbitration as the MOU terminated the reference to arbitration with the result that the mandate of the Tribunal to carry on with the arbitration had ceased.

In my view, RALL has not made out this ground for setting-aside on two separate grounds.

Did the MOU terminate the arbitral proceedings?

First, as noted above, RALL failed to come forward to argue its case that the reference to arbitration had been terminated as a result of the entry into the MOU despite being given the opportunity to do so. It merely wrote unilaterally to the SIAC on 12 November 2015, stating:

RALL did not annex a copy of the MOU to its letter and this was noted by the Tribunal.

AGMS on the other hand had made submissions to the contrary contending (a) that the MOU was premised on the continuity of the Master Agreement, (b) the withdrawal of AGMS’s claims could only be made by AGMS and not RALL, (c) the MOU was limited to the dispute regarding the monies owed to RALL, (d) AGMS had already complied by paying Sri Lankan Rupees (“Rs”) 165 million to RALL and (e) RALL had directly and indirectly breached the said MOU.

Having considered the matters before it, the Tribunal ruled that though AGMS had, inter alia, agreed to withdraw the claim submitted to arbitration, this was agreed on the premise that RALL would ensure the continuity of the Master Agreement, which RALL had failed to do. Further, the object of the MOU was solely to resolve disputes regarding the monies owed to RALL, and in this regard AGMS had fulfilled its obligations under the MOU with the payment of Rs 165 million, whereas RALL had failed to ensure the continuity of the Master Agreement, which went to the root of the MOU. Thus the dispute referred to in AGMS’s statement of claim was still alive. The Tribunal noted RALL had not established to the Tribunal how it could resile from this scenario and it has failed to impress upon the Tribunal anything to the contrary. The Tribunal was of the view that AGMS had provided sufficient reasons as to why the arbitration should proceed and ruled that it will proceed with the arbitration in its Interim Order dated 19 December 2015.

In my view, there was ample evidence before the Tribunal that RALL had failed to maintain the continuity of the Master Agreement. I was referred to media reports dated 12 November 2015 stating that at a special cabinet meeting presided over by President Sirisena, it was decided to revoke all agreements with AGMS; there was a reference to cabinet spokesman, Dr Rajitha Senaratne, giving details of the President’s discussions with the Navy and that the Navy were fully capable of carrying out the same operations directly. There was also a reference to the government ordering the Sri Lanka Navy to take over the operations hitherto jointly run by the parties. In particular, a report carried by the state-owned Daily News dated 12 November 2015 ran the headline “Operations handed back to Navy: All agreements with Avant Garde cancelled”.

I note that the MV Mahanuwara, which had been arrested since 18 January 2015, remained under arrest and furthermore, on 6 October 2015, the Navy seized the MV Avant Garde in international waters, some 15 nautical miles off Sri Lanka, and brought the vessel into port and placed it under arrest. These two vessels, operated by AGMS as floating armouries, carried a significant amount of firearms and ammunition (the MV Avant Garde was said to carry in excess of 200 firearms and 204,674 bullets), were not released upon the conclusion of the MOU on 20 October 2015. On the contrary, on 13 November 2015, the Sri Lanka Navy seized the weapons on board the MV Mahanuwara. Before me, counsel for AGMS described these vessels as “the two prize catches”. Needless to say, as against the evidence put forward by AGMS and its submissions, RALL had chosen not to put any evidence before the Tribunal or make any submissions in spite of being given every opportunity to do so.

RALL’s contention that Cl 5 of the MOU terminated the reference to arbitration, and along with it, the Tribunal’s mandate is also not borne out by the language of Cl 5 which states:

According to RALL, the agreement to arbitrate ARB 070 of 2015 must have at this point been mutually withdrawn, thus terminating the reference to arbitration of ARB 070 of 2015. In support, reliance was placed on Chimimport plc v G D’Alesio SAS [1994] CLC 459 (“Chimimport”), a case where it was held that an arbitration in London had been terminated by a settlement agreement and the arbitrator had no jurisdiction to continue to act. The defendants were accordingly not able subsequently to seek to avoid the settlement agreement before the arbitrator. However, there are material differences between the wording of the clause in Chimimport, which clearly stated the arbitration had ceased, and Cl 5 of the MOU. The Chimimport clause provided:

Whereas the effect of the clause in Chimimport was to automatically terminate the arbitration upon the signing of the agreement, the effect of Clause 5 in the present case (see [44] above) was only to oblige AGMS to withdraw its claim in the arbitration; a point that counsel for RALL quite rightly conceded. This meant that until AGMS took the step of withdrawing the arbitration claim (and it was undisputed that AGMS took no such step), the arbitral proceedings remained live and the Tribunal’s mandate never came to an end. AGMS argued that it was no longer obliged to take that step as RALL had failed to ensure the continuity of the Master Agreement. Hence their original claims still remained.

What RALL did, instead of engaging in the arbitral process, was therefore to write an economically worded letter to the SIAC, not the Tribunal, stating that the dispute had been settled and “it is no longer required to proceed with the above matter.” Thereafter, despite being given notice that AGMS disputed the same and was asking the Tribunal to rule the arbitration was still afoot, RALL chose to stay away from the arbitration proceedings.

The MOU should also be viewed in the context of the Master Agreement and the claims brought by AGMS under its Notice of Arbitration and the Statement of Claim, which was before the Tribunal. At the hearing before the Tribunal, AGMS produced the MOU, which was in Sinhalese, and provided a translation.

The contents of the MOU are also important:

(a) It acknowledges, in what would be characterised as the recitals, the existence of the Master Agreement, the six projects and acknowledged a further agreement to operate two further projects.

(b) It also stated that the “aforesaid parties are bound by the said respective agreements to operate the aforementioned projects and whilst the aforesaid agreements are still in force, the parties hereby agree to enter this new agreement on October 20, 2015 thereby mutually agreeing to abide by the terms and conditions…”

(c) It goes on to state: “Furthermore, this agreement is limited in scope to the relevant monitory [sic] transactions specified therein.”

(d) The MOU then goes on to provide for AGMS to pay fairly significant sums of money, described as “arrears”, to RALL, provisions on computation and these clauses also appear on their face to reflect discounted sums for the payments of arrears.

(e) The only other clause not reflecting these payments of arrears, computation or reference of confirmation by way of an audit is Cl 5 (cited at [44] above) which, for completeness, also provided that RALL shall take action to terminate proceedings in relation to RALL’s letter of demand to AGMS claiming Rs 500,000,000 for damages caused to reputation and monetary losses caused to RALL and terminate legal proceedings initiated against AGMS.

At the preliminary hearing, AGMS informed the Tribunal that although they had fulfilled their obligations by making payment to RALL as stipulated in the MOU, RALL had not fulfilled their obligations under the Master Agreement and the claims and matters in the arbitration were still live. AGMS therefore wished to proceed with the arbitration. The Tribunal, after due deliberation, ruled in favour of AGMS and continued with the arbitration.

I agree with the Tribunal’s ruling that its mandate had not terminated. If there was evidence that the position was otherwise, then RALL cannot complain because it chose to stay away from the arbitration and not provide any evidence or submissions refuting AGMS’s claims and contentions. I also agree that on the facts and contentions of AGMS that were before the Tribunal and on the terms of the MOU taken in context, there is no compelling case on a balance of probabilities that all disputes between the parties had been settled and that the mandate to continue with the arbitration had ended.

Article 34(2)(a)(iii)

Secondly, in these proceedings, RALL seeks to set aside the Final Award dated 24 November 2016 pursuant to Art 34(2)(a)(iii) of the Model Law (I address its case on s 24 IAA below). It should be noted that these proceedings are therefore neither enforcement proceedings brought by AGMS nor RALL defending itself against enforcement proceedings. RALL is making an application at the seat to set aside the Final Award rendered by the Tribunal.

Counsel for RALL contends that with the execution of the MOU there was no longer any submission to arbitration or mandate to arbitrate and accordingly the Final Award is null and void for lack of jurisdiction and/or there was a withdrawal by the parties of the submission to arbitration and the Final Award should be set aside. He contends that RALL has brought its challenge within the 3 months prescribed by Art 34(3).

Leaving aside the position where a party has refused to participate in the arbitral proceedings, which I deal with below, I do not think RALL can apply to set aside the Final Award at the seat under Art 34 at this stage and certainly not on the facts of this case.

The parties agreed under Cl 8 of the Master Agreement to refer their disputes to arbitration in Singapore under the Rules of the SIAC. Rule 25.3 of the applicable SIAC Rules 2013 stipulates:

As noted above, when RALL wrote to the SIAC on 12 November 2015 stating that the dispute had been settled and it was no longer required to proceed with the arbitration, AGMS wrote to the Tribunal on 15 November 2015 disagreeing. AGMS stated that there was no longer any settlement in view of certain events that had recently transpired and sought instead a preliminary hearing on an urgent basis to determine whether the arbitration ought to be proceeded with and to request for an interim injunction to prevent RALL from terminating the Master Agreement. AGMS’s requests were copied to RALL, but RALL did not give any response and despite receiving notice of the same did not participate in the preliminary hearing that was held on 16 November 2015. After the hearing, RALL was invited to inform the Tribunal of its position in relation to AGMS’s applications, but failed to do so. The inevitable conclusion is that RALL chose this course of action (which was in itself an unorthodox challenge to the jurisdiction or mandate of the Tribunal to carry on with the arbitration), refused to comply with Rule 25.3, and is therefore in breach of its agreement to arbitrate disputes or differences or questions which have risen in connection with or in relation to the Master Agreement. More pertinently, the Tribunal then ruled on 19 December 2015 that the arbitral proceedings were not at an end and that it would continue with the arbitration. That was a ruling on jurisdiction as a preliminary issue.

Under s 10(3) IAA, if the arbitral tribunal rules that it has jurisdiction as a preliminary question or issue (or at any stage of the arbitral proceedings that it has no jurisdiction), any party may, within 30 days after having received notice of that ruling, apply to the High Court to determine the matter. RALL, in bringing this Originating Summons to set aside the Final Award for lack of jurisdiction is therefore outside the time limit set down in s 10(3).

By s 3 IAA, the Model Law (with the exception of Chapter VIII) has the force of law in Singapore. Under Art 16(2) a plea that the arbitral tribunal has no jurisdiction shall be raised not later than the submission of the statement of defence; also, a plea that the arbitral tribunal is exceeding the scope of its authority shall be raised as soon as possible as the matter alleged to be beyond the scope of its authority is raised during the arbitral proceedings. RALL refused to so plead but wrote the letter dated 12 November 2015 to the SIAC. Knowing the settlement as a cause of bringing the arbitral proceedings to an end was strongly disputed by AGMS, RALL nonetheless refused to attend the Preliminary Meeting on 16 November 2015 to make its case before the arbitral tribunal. I note it is not part of RALL’s case that it did not have the opportunity, whether due to the short notice or otherwise, to attend the 16 November 2015 Preliminary Meeting. This is not surprising as the 16 November 2015 Preliminary Meeting was fixed about one month earlier on 15 October 2015.

Art 16(3) states explicitly what is implicit in s 10(3) IAA; viz, the arbitral tribunal has the discretion whether to rule on a plea that it has no jurisdiction either as a preliminary question or as an award on the merits. Both s 10 IAA and Art 16(3) clearly provide that if the arbitral tribunal rules that it has jurisdiction as a preliminary issue then any party may apply, within 30 days after having received notice of that ruling, to the supervisory court at the seat to determine the matter.

In my judgment, under s 10 IAA and Art 16(3), RALL’s challenge to the jurisdiction of the Tribunal to continue with the arbitration after the MOU was executed is one that, having received an adverse ruling by the Tribunal as a preliminary question that it had jurisdiction to continue with the arbitration, required RALL, if dissatisfied, to bring that question to the supervisory court within 30 days of having received notice of that ruling from the Tribunal. Counsel for RALL contends instead that RALL’s challenge is in time because Art 34(3) gives RALL 3 months to do so. That is, with respect, not correct. As the Tribunal decided this question as a preliminary issue the applicable provision is Art 16(3) and s 10(3) IAA. Where the arbitral tribunal chooses to decide on jurisdiction in its award on the merits (which is not the case here), then Art 34(3) gives the dissatisfied party an opportunity to set aside that ruling, and any other decisions or ruling made on the merits, within 3 months of that party receiving the award.

It was therefore intended that a failure to raise a plea on jurisdiction within the 30-day limit should have a preclusive effect on subsequent setting aside proceedings at the seat (see the Report of the Working Group on the Work of its Seventh Session (A/CN 9/246, 6 March 1984) at para 51):

However, that party has not lost its passive remedy of resisting enforcement whether in another jurisdiction or as a domestic international award at the seat: see PT First Media TBK (formerly known as PT Broadband Multimedia TBK) v Astro Nusantara International BV and others and another appeal [2014] 1 SLR 372 (“PT First Media (CA)”).

The Court of Appeal in its very comprehensive judgment on the active and passive remedies open to a party under the IAA and Model Law stated, albeit obiter, in PT First Media (CA) at [130] and [132] as follows:

It will be noted that PT First Media (CA) involved enforcement proceedings of a domestic international arbitration award at the seat. Here, RALL is applying to the supervisory court at the seat under Model Law to set aside the Award.

Perhaps two counter-arguments against this construction of Art 16(3) can be made.

First, the phraseology of Art 16(2) contemplates a party that is engaged in the arbitration; hence the reference to raising the plea not later than its statement of defence and the reference to a party not being precluded from raising a plea of no jurisdiction by appointing or participating in the appointment of an arbitrator. It is therefore unsurprising that texts on Art 16 mostly proceed on the footing that the objecting party is an active participant in the arbitral proceedings (see Blackaby et al, Redfern and Hunter on International Arbitration (Oxford University Press, 6th Ed, 2015) (“Redfern and Hunter”) at para 10.30):

The authors of Redfern and Hunter referred to the English decision of Thyssen Canada Ltd v Mariana Maritime SA [2005] EWHC 219 (“Thyssen Canada”), observing in a footnote to the above-quoted paragraph (footnote 57):

These views support an argument that where a party has stayed away from the arbitral proceedings altogether or has walked out at some early stage, eg, before filing its statement of defence, then Art 16’s time limit is not binding on it. However, I note that against this, s 10 IAA does not contain such phraseology.

Secondly, there is authority that an option remains open to a party to choose to leave the arbitral proceedings in protest, in which case the time limits in Art 34 (and therefore by extension, Art 16 as well) do not apply. This can be found in the first instance decision of Astro Nusantara International BV v PT Ayunda Prima Mitra [2013] 1 SLR 636 at [133]:

The learned trial judge found support in the UNCITRAL Analytical Commentary on Draft Text of a Model Law on International Commercial Arbitration (A/CN 9/264, 25 March 1985), p 39 at paras 8–9:

This has been picked up by Gary Born in International Commercial Arbitration at p 1105:

The authors of Singapore Arbitration Legislation Annotated (Informa, 2nd Ed, 2016), Robert Merkin and Johanna Hjalmarsson, also seem to recognise the existence of an exception where a party does not participate at all in the proceedings (at pp 148–149):

This very case is a good example. RALL stayed away from the arbitration, did not file a response, did not nominate an arbitrator, refused to pay any fees, did not file a statement of defence and then raised a jurisdictional challenge by way of a terse letter and absented itself from the preliminary meeting, refused to file any submissions in support of its stand and allowed the arbitration to proceed without participation. Why should a party in RALL’s position be entitled to take up a challenge to jurisdiction at the seat in blatant disregard of Art 16 and the policy reasons behind the 30-day time limit? This amounts, in my view, to an abuse of process. It allows a party to wait till the opposing party goes through the whole arbitral process, obtains an award, only to be met by a setting aside application at the seat on the ground of a lack of jurisdiction.

However, even if RALL was not precluded from raising its Art 34(2)(a)(iii) jurisdictional objection at this late stage, I find that the objection is not sustainable on these facts as the MOU did not terminate the Tribunal’s mandate.

I note for completeness that AGMS had argued, in the alternative, that the MOU had been rescinded for misrepresentation and therefore could not be the basis on which the arbitration was terminated. However, even if AGMS’s entry into the MOU had been induced by a misrepresentation, the MOU would only be voidable and not void. AGMS was unable to point to any clear and unequivocal act indicating that it had elected to rescind the MOU. All that AGMS did was to proceed with the arbitration, which can hardly be said to be conduct unequivocally indicating that the entire MOU (which contained other rights and obligations unrelated to the arbitral proceedings) was rescinded. Be that as it may, even if the MOU remained in force, I had previously found that it did not terminate the reference to arbitration nor the Tribunal’s mandate. Therefore my decision on the Jurisdiction Issue remains.

The Natural Justice Issue

I have little hesitation in saying this ground has no merit whatsoever. As noted above, RALL chose not to participate in the arbitration despite being given due notice of each stage and having ample opportunity to do so. RALL cannot fulfil any of the requirements of Art 34(2)(a)(ii) or s 24 of the IAA to make out its case. It will be a travesty of language and legal principle for RALL to have acted in the way that it did in this arbitration and then claim it was denied natural justice in that it was unable to present its case or it did not have an opportunity to be heard.

I also have little hesitation in dismissing RALL’s submission that the arbitration proceedings were conducted by AGMS’s counsel and the majority arbitrators in an irregular manner and that AGMS’s counsel were “deliberately not copying/sending documents/correspondence in the arbitration to [RALL] to keep it in the dark and where [RALL] did not have sufficient opportunity to prepare its defence or responses and to be heard and defend itself including as regards the notes of evidence of the merits hearing were deliberately withheld from [RALL] causing it prejudice.” This seems to be, with respect, an overly enthusiastic but nonetheless misplaced submission.

RALL’s complaint boils down to not being forwarded a copy of the notes of evidence of the substantive hearing held on 21 June 2016. RALL asserted that if the notes of evidence had been forwarded, it could have taken steps (eg, instructing counsel to put in submissions) in the five months until the award was delivered on 24 November 2016, and that it had thereby suffered prejudice.

RALL deliberately chose to absent itself from that hearing. If indeed it suffered any prejudice, something which I am constrained to doubt, it was entirely of its own doing. I do not think that the Tribunal’s omission to furnish RALL with a copy of the notes of evidence occasioned RALL any prejudice at all. Given RALL’s near-total disengagement from the arbitral proceedings, it was far from clear to me that RALL would have abruptly started participating in the proceedings upon receiving the notes of evidence. In this regard I note that RALL only saw fit to request a copy of the notes of evidence on 17 February 2017; almost five months after the Tribunal had informed the parties of the close of proceedings on 19 September 2016.

RALL was unable to cite me any authority to the effect that a failure to supply a party with a copy of the notes of evidence, much less when applied to the facts of this case, constitutes a breach of natural justice serious enough to justify setting aside the award. RALL only referred to a set of practice guidelines titled “International Arbitration Practice Guideline: Party Non-Participation” published by the Chartered Institute of Arbitrators:

These Practice Guidelines merely commend providing absent parties with the transcript as a matter of good practice; that recommendation said “may”, not “must”. On the facts of this case, I did not think it was incumbent on the Tribunal, SIAC or AGMS to send a copy of the notes of evidence to RALL. It is noteworthy that RALL had not paid any part of its share of the arbitration fees. It is also beyond argument that transcribers’ fees would have been incurred by AGMS to have notes of evidence of the proceedings drawn up. Given its conduct, RALL’s argument that it was entitled to a copy of the notes of evidence cannot on any view be sustained.

RALL also referred to a list of various pieces of correspondence between AGMS and SIAC which were not forwarded to RALL. These were in large part queries raised by AGMS to the SIAC on various matters, such as the consequences of RALL’s non-participation and the reasons for the Tribunal’s decision to grant extensions to RALL. None of these exchanges can be said to have resulted in any prejudice to RALL; the SIAC’s replies noted that RALL was not precluded from participating, and the three-week extensions granted to RALL were, as RALL’s counsel accepted, “generous”.

The Public Policy Issue

Thirdly, RALL submits that the making of the award was induced or affected by fraud or corruption within the meaning of s 24(a) of the IAA, and/or that the award is in conflict with the public policy of Singapore within the meaning of Art 34(2)(b)(ii) of the Model Law.

RALL’s submissions on this issue rests on two grounds:

(a) First, the Master Agreement was procured by and was a means of furthering bribery and corruption in Sri Lanka, and an arbitral award enforcing the terms of such a contract would be in conflict with public policy of Singapore and should be set aside under Art 34(2)(b)(ii) of the Model Law read with s 24 of the IAA.

(b) Secondly, Cl 3.1 of the Master Agreement requires the performance of an act which is illegal by the law of the place of performance (ie, Sri Lanka), and therefore an arbitral award enforcing the terms of such contract would be in conflict with public policy of Singapore and should be set aside under Art 34(2)(b)(ii) of the Model Law read with s 24 of the IAA.

Here, RALL alleges that Mr Senadhipathi had bribed the then-chairman of RALL, who was also a government servant, to cause RALL to enter into various contracts including the Master Agreement. Counsel for RALL then makes a great leap, with respect, bereft of any logic, and submits that the Final Award was tainted “by fraud/corruption” and its being challenged. These allegations do not fall within s 24(a) of the IAA, which contemplates a situation where the award itself (rather than the contract between the parties) is tainted or induced by fraud or corruption.

I note that RALL had, in its written submissions, made assertions that the majority’s decision was “farcical”, “devoid of proper legal reasoning” and “highly suspicious”. To the extent that this amounted to an allegation that the Award had been fraudulently obtained, I had no hesitation in dismissing it. These were very serious allegations for which RALL did not present a shred of evidence.

Whether the Master Agreement was procured by bribery

The basis of RALL’s allegations of bribery and corruption were the pending trials of Mr Fernando and Mr Senadhipathi (the chairpersons of RALL and AGMS respectively at the material time) on charges of corruption in the Sri Lankan courts. It was not disputed that at the time of the proceedings before me, the trials had not yet commenced, much less resulted in any convictions. Neither was it disputed that under Sri Lankan law, Mr Fernando and Mr Senadhipathi must be presumed innocent until proven guilty. Until they have been convicted and their avenues for appeal exhausted, there is no basis for me to find that the award would perpetuate or enable corruption or bribery in Sri Lanka. The allegations of corruption and bribery on the evidence before me are only allegations.

Counsel for RALL then suggested that even if the evidence was insufficient for a finding of corruption, it was at least sufficient to justify an adjournment of the present proceedings until the determination of the criminal proceedings in Sri Lanka. However, counsel was unable to give me any indication as to when the proceedings would likely be concluded. The Magistrate’s Court indictments, comprising 19 corruption charges against eight persons, were fixed for trial on 26 February and 26 March 2018. The High Court indictments, comprising 47 charges against two persons, were fixed for trial on 19–22 March 2018. It is highly unlikely that such important and numerous criminal charges can be determined within such a short of period of time (not to mention the prospect of appeals). I therefore did not think it would be appropriate for me to adjourn these proceedings indefinitely. I note, however, that in the event convictions are eventually secured, RALL may be able to invoke public policy as a ground to resist the enforcement of the arbitral award (for example under s 31(4)(b) of the IAA).

Whether Cl 3.1 of the Master Agreement required the performance of an illegal act

Cl 3.1 of the Master Agreement required that RALL “provide its utmost assistance” to AGMS in respect of the various projects they had jointly undertaken, such as the Galle Floating Armoury Project. RALL argued that AGMS’s request for assistance – for RALL to obtain a declaration from the MOD confirming the legitimacy of the Galle Floating Armour Project – would be a “direct interference with the dispensation of justice, law and order” as RALL did not have the power or authority to procure from the Sri Lankan government AGMS’s requested assurances. Since the performance of Cl 3.1 of the Master Agreement would be illegal by the place of performance (ie, Sri Lanka), an award which enforced the performance of such an agreement would be contrary to the public policy of Singapore.

Importantly, the Tribunal considered this very issue and found that the Master Agreement “clearly show[ed] no sign of illegality or even in the slightest, indicate[d] that such Agreement and/or Agreements are contrary to public policy”. This finding of fact is binding on the parties and cannot be reopened by a supervisory court (AJU v AJT [2011] 4 SLR 739 at [65]).

I find it is also quite telling that both RALL and AGMS are still presently engaged in joint ventures on the maintenance of armouries in the littoral states in the Indian Ocean. Indeed, RALL itself stated that the Master Agreement “[has] not been terminated and still operates today”. As noted above, Mr Kulawewe, in his affidavit affirmed on 21 April 2017, confirmed that at all material times RALL was owned by the Government of Sri Lanka and confirmed its businesses set out at [3] above. If these agreements and the Master Agreement were entered into or induced by corruption or as a result of corruption, or tainted with (unspecified) illegality, it seems quite startling to me that they have not taken any steps to repudiate or terminate these agreements.

Given that RALL had affirmed the Master Agreement, and on their own evidence continues the business described above, I do not see how RALL can seriously take the position that its performance of the Master Agreement was illegal.

Conclusion

For the foregoing reasons, I found that none of the grounds relied on by RALL warranted a setting aside of the Final Award. I therefore dismissed OS 198/2017 in its entirety.