HKL Group Co Ltd v Rizq International Holdings Pte Ltd

Jordan Tan AR:

[1] In HKL Group Co Ltd v Rizq International Holdings Pte Ltd [2013] SGHCR 5 (“the Judgment”), I granted a stay of these proceedings in favour of arbitration on the following condition:

I had also stated (at [37] of the Judgment) that I would hear parties on the issue of the imposition of any other conditions and on the issue of costs.

[4] I should also note that at the hearing, the parties informed me that they had accepted the suggestion I had made (at [38] of the Judgment) to resolve the dispute in a more practical manner by agreeing to submit the dispute to a straightforward SIAC arbitration. The parties asked that I record their agreement and I did.

[5] That being so, HKL has nonetheless filed an appeal. I now set out the reasons for my decision at the 4 March 2013 hearing.

[6] HKL argued against the condition I had imposed on the ground that Art 1(2) of the ICC Rules, which took effect on 1 January 2012, provided that only the International Court of Arbitration of the ICC may administer an ICC arbitration. Art 1(2) reads as follows:

[7] I noted also that Article 6(1) of the ICC Rules, which was continued in the 2012 version of the rules, provided that:

[8] In other words, although the arbitration clause in the present case was concluded before 1 January 2012, Art 1(2) of the ICC Rules applies.

[9] Nonetheless, I retained the condition I had imposed as it encompassed, by the use of the words “any arbitral institution”, the option of parties procuring an ICC arbitration in Singapore. I did not truncate the condition to exclude all other arbitral institutions, and therefore did not preclude the option of a hybrid arbitration for one reason. Pathological arbitration clauses create problems for parties and do not represent the majority of arbitration clauses under which arbitration may be initiated with minimal fuss. The path to dispute resolution is fraught with the obstacles generated by the pathology. This being so, the parties should be offered more options for the resolution of the pathology, where these options are within the bounds of consistency with the wording of the arbitration clause.

[10] Where the words “Arbitration Committee” used in the arbitration clause do not refer to any particular arbitral institution, it was in my view, unnecessary to limit the options of the parties in resolving the dispute. Although Art 1(2) of the ICC Rules claims for the International Court of Arbitration the sole authority to administer ICC arbitrations, the power of the rules to bind emanates from the consent of the parties. Art 1(2) cannot curtail the freedom of parties to agree to be bound by the result of an arbitration administered by a different arbitral institution applying the ICC Rules, neither can it curtail the power of the court to give an interpretation to a pathological arbitration clause, where that clause uses language which admits the possibility of different arbitral institutions, which provides a wider range of solutions to the parties.

[11] I must emphasise, however, that leaving open this possibility of a hybrid arbitration as part of a range of solutions to resolve the problems created by the pathological arbitration clause is in no way a judicial endorsement of a hybrid arbitration. I had noted the inconvenience associated with a hybrid arbitration (at [38] of the Judgment). In the ordinary course of things, hybrid arbitrations should be avoided. In fact, it is inconceivable that commercial parties with the benefit of legal advice will deliberately choose to resolve disputes by way of a hybrid arbitration. But, in this particular context, where parties are faced with the difficulty of overcoming a pathological arbitration clause, it is, in my view, appropriate to avail to them as part of a range of solutions, this solution of a hybrid arbitration, inelegant as it may be.

[12] Therefore, if either party were able to procure a straightforward ICC arbitration in Singapore, the condition would be satisfied as would be the case if either party were to procure a hybrid arbitration administered by any other arbitral institution in Singapore.

[13] HKL had sought the provision of security for the entire sum claimed. I note that the court has an unfettered discretion to impose terms and conditions upon granting a stay of proceedings in favour of arbitration under s 6(2) of the International Arbitration Act (Cap 143A, 2002 Rev Ed), although this discretionary power has to be exercised judiciously (see The “Duden” [2008] 4 SLR(R) 984 at [12] to [16]).