Mitsui Engineering & Shipbuilding Co Ltd v Easton Graham Rush and Another

Woo Bih Li J:

[1] This originating summons was filed by the plaintiff, Mitsui Engineering & Shipbuilding Co Ltd (“Mitsui”), for an injunction to restrain the first defendant, Mr Graham Rush Easton, from “continuing or assisting in the prosecution or further prosecuting or taking any further step” in the arbitration between Mitsui and the second defendant, Keppel Engineering Pte Ltd (“Keppel”), and to restrain Keppel likewise, until Mitsui’s challenge of Mr Easton as arbitrator and its application to set aside the first interim award (“FIA”) from Mr Easton are determined. Mitsui also filed an ex parte summons-in-chambers application (“the Application”) for an interim injunction seeking similar relief pending the hearing of the originating summons.

[2] Although the Application was filed on an ex parte basis, counsel for Keppel also appeared before me, presumably after notice of the same had been given by Mitsui’s solicitors. In the light of the nature of the application before me, I allowed counsel for Keppel to present arguments as well. As various Counsel presented arguments, I will refer to such arguments as Mitsui’s and Keppel’s arguments respectively.

[3] Mitsui and Keppel were joint venture partners in a consortium which was awarded certain contracts by the Port of Singapore Authority. Disputes arose among various parties and the disputes between Mitsui and Keppel were referred to arbitration pursuant to an arbitration provision in the agreements between them. Mr Easton was appointed by Mitsui and Keppel as the arbitrator.

[4] It was agreed that Mr Easton was to decide on various preliminary issues which were in the form of 11 questions. After hearing evidence and receiving submissions, Mr Easton issued the FIA in relation to these questions on 26 December 2003.

[5] Mitsui was dissatisfied with the FIA. For present purposes, it is sufficient for me to say that it was dissatisfied because the FIA had allegedly dealt with matters outside the scope of what had been submitted for decision and Mr Easton had pre-judged some of the issues which were to be dealt with at subsequent hearings.[1]

[6] Keppel then made five applications on 5 January 2004 as a result of the FIA. Mitsui contended that at least one of these applications would not have been made if Mr Easton had not exceeded his mandate. Mitsui then informed Mr Easton of its concerns and challenged his position as arbitrator on 9 January 2004 and invited him to withdraw accordingly.

[7] In a letter dated 12 January 2004, Mr Easton gave his views on the FIA in response to the letter dated 9 January 2004 challenging his position as arbitrator. Mitsui says this letter is revealing but it is not necessary for me to set it out.

[8] Subsequent to that letter but also on 12 January 2004, counsel for Mitsui said at a telephone conference that the next hearing, which was fixed for three weeks from 26 January 2004, should be vacated in view of the challenge on Mr Easton. Counsel for Keppel agreed to only the first week’s hearing being vacated to accommodate Mitsui, and Mr Easton asked the parties to make their contentions whether the entire three weeks should be vacated.

[9] On 13 January 2004, Mr Easton vacated the first week’s hearing since counsel for Keppel was agreeable to this.

[10] On 15 January 2004, Mr Easton gave some directions on the conduct of the hearing for the remaining weeks.

[11] Mitsui took the position that pending an intended application to remove Mr Easton and to set aside the FIA, there should be no further hearing before Mr Easton, otherwise Mitsui “will be irrevocably prejudiced to an extent that damages cannot compensate” and, on the other hand, Keppel would suffer little prejudice in respect of the vacating of the remaining two weeks of this hearing tranche.[2]

[12] Mitsui also made a further attempt to have the remaining two weeks’ hearing vacated but as its attempt was unsuccessful, the originating summons and the Application were filed on 28 January 2004. As the hearing before Mr Easton was to continue from Tuesday, 3 February 2004, 2 February 2004 being a public holiday, the Application was heard on an urgent basis.

[14] Section 4(10) of the Civil Law Act (Cap 43, 1999 Rev Ed) states that an injunction may be granted either unconditionally or upon such terms and conditions as the court thinks just, in all cases in which it appears to the court to be just or convenient to do so. However, it was not in dispute that the arbitration between the parties is an international arbitration and is governed by the International Arbitration Act (Cap 143A, 2002 Rev Ed) (“IAA”) which incorporates the UNCITRAL Model Law on International Commercial Arbitration (“the Model Law”). It was also not in dispute that the scheme and intention behind such arbitrations is minimal court involvement, but, that is not to say that court involvement is excluded entirely.

[15] Accordingly, cases before the advent of the Model Law and the IAA and cases which do not involve international arbitrations provided me with limited assistance, if any, in deciding the primary issue.

[16] As I have said, under Singapore law, the Model Law applies to an international arbitration. This is by virtue of s 3 IAA. The English text of the Model Law is set out in the First Schedule of the IAA. Both sides referred to Art 5 of the Model Law. It states:

[17] Mitsui argued that it was not relying on a general supervisory power of the court but a residual power of the court when an arbitrator is being challenged and when an application is being made to set aside an award. It referred to Arts 13 and 34 of the Model Law as well as s 24 IAA. As Art 13 provides the challenge procedure and Art 12(2) provides the grounds for challenge, I set out below the terms of Arts 12(2) and 13:

[18] I also set out below the terms of Arts 34(1), (2)(a) and (4):

[19] Section 24 IAA states:

[20] Under s 4(1) IAA, reference may be made to the documents of the following, where these documents relate to the Model Law, for the purpose of interpreting the Model Law:

However, both Mitsui and Keppel referred to A Guide to the UNCITRAL Model Law on International Commercial Arbitration: Legislative History and Commentary by Howard M Holtzmann and Joseph E Neuhaus (Kluwer, 1989) (“the Guide”) for assistance. The Guide includes not only commentaries of the authors but also the legislative history and reports of the Commission and its working groups in respect of the Model Law.

[21] As regards Art 5 of the Model Law, the Guide states at 216:

[22] Mitsui’s argument was that the Model Law does provide for the instances of challenging the arbitrator and the setting aside of an award. Accordingly, the court must surely have the residual power to grant the Interlocutory Injunction. To reinforce this argument, Mitsui submitted that if a decision was made to remove an arbitrator but he insisted on carrying on with the arbitration notwithstanding his removal, then, surely the court must have the power to grant an injunction to restrain him from doing so. However, I bore in mind that this illustration was in relation to a perpetual injunction after a decision had been made to remove the arbitrator and not an interlocutory injunction pending such a decision. Besides, one does not really need an injunction if an arbitrator who has been removed continues with the arbitration. All the proceedings before him thereafter will be invalid. Also, I could not imagine any bona fide arbitrant wanting to continue with an arbitrator after he is removed.

[23] It seemed to me that Mitsui’s argument went against the terms of Art 5 which states that in matters governed by the Model Law, no court shall intervene “except where so provided” in the Model Law. Since the Model Law does not provide for the Interlocutory Injunction in respect of an application under Arts 13 and 34, the court does not have the power to do so. In any event, I did not rely on this view alone.

[24] It will be recalled that the last clause of Art 13(3) allows an arbitrator to continue the arbitral proceedings and even make an award pending the outcome of the court’s ruling on the challenge. In my view, this clause hints that it is for the arbitrator, and not the court, to decide whether the arbitral proceedings should be stayed in the meantime.

[25] Moreover, the Guide has the following commentary at 406-408:

[26] At this point, there is a reference to footnote 7 which states:

[27] The Guide then continues to state at 408:

[28] Mitsui submitted that the statement in footnote 7 that a court is barred by Art 5 from issuing a stay order is merely the view of the authors of the Guide and that that view is not expressly stated in the Commission’s report. I set out paras 122 to 125 of the Commission’s report of 21 August 1985 in respect of Art 13(3):

[29] In my view, footnote 7 did accurately reflect the outcome as stated in the Commission’s report. The question of the court’s intervention by way of a stay was specifically mentioned in one of the views which advocated a more active role for the court under Art 13(3). That view was not adopted and a balance was struck. If the court is still to have the power to stay the arbitral proceedings, pending the outcome of the challenge in the court, then this would not have been considered a balance. That view would have prevailed. I would add that it was not disputed that the granting of the Interlocutory Injunction would have effected a stay of the arbitration.

[30] However, as I have mentioned, Mitsui did not rely on its intended application to challenge Mr Easton under Art 13 alone to support the Application. It also relied on its intended application to set aside the FIA under Art 34 and s 24 IAA. In particular, Mitsui relied on Art 34(2)(a)(ii) to (iv) and s 24(b) IAA.

[31] Mitsui submitted that these provisions do not have the last clause of Art 13(3) which states that while the request to the court to decide on the challenge is pending, the arbitrator may continue the arbitral proceedings. Accordingly, even if this clause gave rise to the comment in footnote 7 which I have mentioned above, the omission of the clause in Art 34 and s 24 IAA means that the court does have power to stay arbitral proceedings when these provisions are invoked.

[32] Mitsui also submitted that the court’s power to set aside an award is on grounds no less serious than the power to remove an arbitrator. It went further to argue that the court’s power to set aside is the ultimate power and hence the court should have the residual power to grant the Interlocutory Injunction under Art 34 and s 24 IAA, if not under Art 13. Furthermore, the fact that Parliament enacted s 24 IAA means that the setting aside of an award is a different situation from that of challenging an arbitrator. If the court does not have such a power it will render the court’s eventual decision on the application to set aside an award nugatory.

[33] Mitsui had another illustration. It submitted that if the court has no power to grant the Interlocutory Injunction pending the determination of the challenge or a setting aside application, then even in the most extreme of cases, for example, where the court is satisfied that an arbitrator is corrupt or biased or insane, the court is powerless to act until the challenge procedure is worked through or the setting aside application is heard. The argument was that the court should not be so powerless.

[34] I did not accept Mitsui’s arguments.

[35] First, as Keppel submitted, and I accepted, Art 34 and s 24 IAA are aimed at challenging the result of an arbitrator’s decision (by way of an award) and not the arbitrator himself. Accordingly, there was no need for a similar clause as in Art 13(3) to be included in the Model Law. In Art 16 which deals with a challenge on an arbitrator’s jurisdiction, there is a similar clause.

[36] Secondly, Art 34 does in fact have a provision which seems to hint that it is for the arbitrator, and not the court, to decide whether to stay arbitral proceedings. This is Art 34(4) which I have set out above. It allows the court to suspend the setting aside proceedings in order to give the arbitrator an opportunity to resume arbitral proceedings. I did not agree with Mitsui’s submission that “to resume” in Art 34(4) does not mean “to continue”. Clearly, it refers to the continuation of arbitral proceedings.

[37] Thirdly, although Mitsui suggested that its grounds for setting aside were just as serious as those for challenging an arbitrator, an application to set aside an award can be made on less serious grounds than those for challenging an arbitrator. I was of the view that it is incongruous for the court to have the power to grant the Interlocutory Injunction under Art 34 if it does not have the power to do so under Art 13. On this point, Keppel pointed out that there was no discussion among the members of the Commission about the court’s power to stay proceedings when Art 34 was discussed, unlike the situation in respect of Art 13 as well as Art 16. Keppel submitted, and I accepted, that this demonstrated that the court’s power to stay proceedings under Art 34 was not even contemplated.

[38] Fourthly, as Keppel pointed out, Art 34(1) states that recourse to a court against an arbitral award may be made “only” by an application for setting aside. It seemed to me that it would be contrary to Art 34(1) if the court has the power to order a stay of arbitral proceedings in respect of an award given.

[39] As for Mitsui’s reliance on s 24(b) IAA, I was of the view that it did not help Mitsui to argue that s 24 IAA applies to a different situation from Art 13. Of course it does. However, that does not mean that the concept of non-intervention by the court on an interlocutory basis was changed to one of intervention under s 24 IAA. What s 24 IAA did was to add additional grounds to set aside an award, leaving the concept of such non-intervention intact.

[41] As for the illustration about a corrupt or biased arbitrator, these grounds are already covered under the grounds for challenge in Art 12(2) relating to impartiality and independence. Also, s 24(a) IAA relates to fraud or corruption and s 24(b) IAA relates to a breach of the rules of natural justice which can be the result of bias, although not necessarily so. In my view, the illustration about a corrupt or biased arbitrator did not add anything to Mitsui’s arguments.

[42] As for insanity, this is probably covered under Art 14 of the Model Law. As Mitsui was not making its application for the Interlocutory Injunction under that provision, it was not necessary for me to reach a view thereon.

[1]See paras 31 and 35 of Melvin See’s affidavit of 28 January 2004.

[2]See paras 55 and 56 of Melvin See’s affidavit.