It is not uncommon for practitioners acting for claimants in an arbitration to encounter a respondent who chooses to boycott the arbitral process. In cases involving such ‘non-participating’ respondents, what are the rights and obligations of each party? Specifically, insofar as Model law jurisdictions are concerned, if a Tribunal decides on jurisdiction as a preliminary issue must the non-participating respondent apply under Article 16(3) of the Model Law to the curial court to review that decision, or otherwise lose the right to challenge any eventual award thereafter on jurisdictional grounds? Can the non-participating respondent surface at a later stage to set aside, or alternatively resist enforcement, of any eventual award based on jurisdictional grounds?
There are two Singapore High Court decisions which appear to have given differing guidance on this issue.
‘Participating Respondents’
Preliminarily, it would be helpful to remind ourselves of the position for ‘participating’ respondents.
Insofar as participating respondents are concerned, the Singapore High Court in Astro Nusantara International BV v PT Ayunda Prima Mitra [2013] 1 SLR 636 (Astro HC) had ruled that a party who does not seek curial review of a Tribunal’s decision under Article 16(3) of the Model Law cannot subsequently set aside or resist enforcement of any eventual award on the same jurisdictional objections. In so deciding, the Singapore High Court was motivated by concerns of “minimis[ing] dilatory or obstructionist tactics so as to avoid unnecessary wastage of time and money”.
However, this was reversed on appeal. The Singapore Court of Appeal in PT First Media TBK (formerly known as PT Broadband Multimedia TBK) v Astro Nusantara International BV and others [2014] 1 SLR 372 (Astro CA) opined that Article 16(3) is not a “one-shot” remedy. A party who does not seek curial review of a Tribunal’s decision under Article 16(3) of the Model Law can subsequently resist enforcement of any eventual award on the same jurisdictional objections. However, that party may be precluded from setting aside the award on the same jurisdictional objections. The Court of Appeal opined in dicta (at [130]) as follows: ‘[the Court of Appeal] would be surprised if a party retained the right to bring an application to set aside a final award on the merits under [Article 34 of the Model Law] on a ground which they could have raised via other active remedies before the supervising court at an earlier stage when the arbitration process was still ongoing’.
We turn now to address two cases which have considered the rights of ‘non-participating’ respondents.
‘Non-participating Respondents’
(1) Astro Nusantara International BV v PT Ayunda Prima Mitra [2013] 1 SLR 636
The first case is the first instance decision of Astro HC by Belinda Ang J.
Ang J took the view that a non-participating respondent who does not seek curial review of a Tribunal’s decision under Article 16(3) can subsequently seek to set aside or resist enforcement of any eventual award on jurisdictional grounds. A non-participating respondent could be a party who boycotts the arbitral process from the commencement of the arbitration, or a party who elects to leave the arbitral regime after the Tribunal renders an unfavourable decision on jurisdiction as a preliminary issue. Put simply, on Ang J’s analysis, a non-participating respondent’s rights under Articles 34 and 36 of the Model Law are not fettered by the fact that the respondent had chosen not to participate in the arbitration.
Ang J opined (at [133]) that the counterparty ‘would have ample notice of this from the boycotting party’s absolute refusal to participate’. Ang J ([133]) reasoned that “this possibility is hinted at” in the travaux préparatoires of the Model Law, namely The Analytical Commentary on Draft Text of a Model Law on International Commercial Arbitration (A/CN.9/264, 25 March 1985). The travaux suggested that, a party who fails to raise a jurisdictional objection within the time limit under Article 16(2) of the Model Law (eg, ‘not later than the submission of the statement of defence’) would be precluded from raising jurisdictional objections whether to set aside or resist enforcement of an award (subject to certain limits such as public policy and arbitrability). However, according to the travaux, the Model Law provisions on setting aside and resisting enforcement remains applicable to cases ‘where a party did not participate in the arbitration, at least not submit a statement or take part in hearings on the substance of the dispute’.
We turn next to contrast Ang J’s views against a recent decision by Quentin Loh J in Rakna Arakshaka Lanka Ltd v Avant Garde Maritime Services (Private) Limited [2018] SGHC 78.
(2) Rakna Arakshaka Lanka Ltd v Avant Garde Maritime Services (Private) Limited [2018] SGHC 78
In this case, Loh J, citing the Court of Appeal’s ruling in Astro CA, held that non-participating respondents who do not seek curial review of a Tribunal’s decision under Article 16(3) can subsequently seek to resist enforcement of any eventual award under jurisdictional grounds. However, such non-participating respondents cannot seek to set aside any eventual award on jurisdictional grounds.
Loh J reasoned that where a tribunal has chosen ‘to decide jurisdiction as a preliminary issue, considerations of finality, certainty, practicality, cost, preventing dilatory tactics and settling the position at an early stage at the seat militate against allowing a [non-participating] respondent to reserve its objections to the last minute and indulge in tactics which result in immense delays and costs’. In Loh J’s view, it is an ‘abuse of process’ for ‘a [non-participating] 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’.
It is interesting to note that, even though concerns with dilatory, obstructionist tactics as well as time and costs had played central roles in both cases described above, the Judges appeared to reach differing conclusions on the rights of the non-participating respondent. Four points can be made.
First, in reaching his conclusion, Loh J purported to adopt the Court of Appeal’s ruling in Astro CA described above. However, it is not clear that the Court of Appeal in Astro had in mind the specific situation of a non-participating respondent. Loh J did not specifically engage the views of the travaux cited by Ang J.
The travaux speaks of another situation where a party ought to be precluded from raising objections at the setting aside or enforcement stage: under Article 4 of the Model Law, a party is taken to have impliedly waived any objection to another party’s non-compliance with certain procedural requirements if that first party knew about the non-compliance, but proceeds with the arbitration without making a timely objection. A corollary to the travaux is that any party that does not ‘proceed with the arbitration’ arguably has not waived its objection(s) to jurisdiction; in other words, it should be permitted to raise that objection in a future setting.
Second, taking a step back, assume an arbitral tribunal does not decide jurisdiction as a preliminary issue, but in a final merits award instead. In that scenario, it appears to be currently accepted (and which finds support from the travaux cited above) that a non-participating respondent may seek to set aside and resist enforcement of any eventual award on jurisdictional grounds. It is not intuitively obvious why the rights of the same non-participating respondent should automatically be diminished (by losing the right to set aside any eventual award on jurisdictional grounds) if the tribunal chooses instead to decide the issue of jurisdiction as a preliminary issue. The practical implication of Loh J’s decision is that there may be tactical advantage for a claimant facing a non-participating respondent to press a tribunal to decide the issue of jurisdiction as a preliminary issue. If the tribunal agrees, that places the respondent under pressure: if the respondent continues not to participate in the arbitration, it loses the right to seek a setting aside of any eventual award on jurisdictional grounds.
Third, insofar as Loh J’s decision was motivated by concerns of finality, certainty, time and costs, those same concerns arguably ought to lead to an outcome where, in addition to losing its rights to set aside any eventual award on jurisdictional grounds, a non-participating party should not be permitted to resist enforcement of any eventual award on jurisdictional grounds. It is therefore not intuitive why concerns of abuse of process, finality, and certainty should justify barring the non-participating respondent from setting aside the award, but not preclude the same respondent from resisting enforcement of the same award. This observation has led some commentators to question the correctness of Astro CA, and led to calls that the Singapore legislature should consider the stance adopted by section 73(2) of the English Arbitration Act by precluding a party, who could have but did not object to the tribunal’s ruling on its jurisdiction, from raising those objections in a future setting. According to these commentators, this is justifiable on the policy bases of preventing an abuse of process, good faith and efficiency.
However, such arguments by commentators are not without problems.
First, in Astro CA the Court of Appeal had signaled (at [117]) that the architecture of Art 16(3) is not certainty-centric; concerns of certainty, time and cost efficiency are not paramount objectives. In fact, English Arbitration Act itself in section 72 preserves the rights of persons who take no part in arbitral proceedings, including the right to challenge any ultimate award on jurisdictional grounds. The Model Law is therefore not alone in giving similar rights to a non-participating party. In court proceedings in common law jurisdictions, a non-participating defendant is, generally speaking, not precluded from applying to set aside a judgment obtained in default of appearance simply because the defendant was non-participating.
Furthermore, these arguments are premised on the assumption that a non-participating party is an abuser of process out to obstruct a process that it had earlier signed up for. Whilst that may be often the case, that assumption may not always be true. Arguably, the claimant needs to go through the process, any way, to obtain an award. Second, in many cases, the non-participating respondent would already have made known to the claimant and the tribunal its views as to the tribunal’s lack of jurisdiction. In that sense, the non-participating respondent cannot be said to be inducing the claimant to proceed on a false or misleading basis. Finally, as the commentators themselves have recognized, the curial review mechanism under Article 16(3) is as much for the claimant as it is for the respondent, whereby the right to curial review is available to “any party”, not “party in whose favour the ruling is made”, and the power of the court is to “decide any matter”, not “set aside the ruling”. The claimant itself arguably has the opportunity to avoid the risk of wasting time and resources; the claimant itself can go to the court to obtain a declaration that the tribunal’s preliminary ruling on jurisdiction is valid. This forces the non-participating respondent to decide whether to appear before the court to fight the declaration sought. Commentators have argued that such a “self-help” mechanism for claimants may be limited in scope because a declaration from the Singapore court may not be easily enforceable in other jurisdictions. But enforcement of the declaration itself is not the point: the court ruling will bind the tribunal, and it is likely foreign enforcement courts will at least consider the court ruling when considering whether to enforce any eventual award.
Finally, coming back to the fundamental issue, how should courts apply Article 16(3) to different types of respondents? Given the silence from the text of the Model Law (see [110] and [131] of Astro CA), this is a difficult issue worthy of a separate discussion. Preliminarily, it is suggested one would have to consider distinctions between:
(a) a fully participating respondent, who continues to participate in the arbitration after receiving an unfavourable award on jurisdiction decided as a preliminary issue;
(b) a partially participating respondent, who boycotts the arbitral process after receiving an unfavourable award on jurisdiction decided as a preliminary issue; and
(c) a fully non-participating respondent, who does not participate in the tribunal’s determination of jurisdiction as a preliminary issue.
For the first two categories, Astro CA has indicated an inclination towards precluding the respondent from raising jurisdictional objections at the setting aside stage. If one had to support this position, one could formulate a waiver argument along the lines of Article 4 of the Model Law, namely, by electing to participate in the arbitration – whether fully or partially – without invoking a curial challenge under Article 16(3), that respondent has waived its rights to set aside any eventual award on jurisdictional grounds. This would have a similar effect as section 73(2) of the English Arbitration Act.
For the third category, as a matter of principle, these respondents ought to be no worse off than a non-participating respondent in an arbitration where the tribunal decides the issue of jurisdiction alongside the merits. Since it currently appears the latter has unfettered rights to set aside or resist enforcement of any eventual award on jurisdictional grounds, the third category of respondents should enjoy the same unfettered rights. This would have a similar effect as section 72 of the English Arbitration Act.
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Interesting article on the interesting legal issue.
Under the Polish Arbitration Law (Part V of the Polish Code of Civil Procedure which largely implements the Model Law), as a principle the arbitral tribunal may issue a preliminary award on jurisdiction only upon the challenge raised by the defendent questioning its jurisdiction in a timely manner (Art. 1180 sect. 2-3 CCP). Therefore, at least at this stage, the problem of a non-participating party does not exist since the respondents’ jurisdictional challenge triggering issuance of the preliminary award declaring existance of jurisdictiona obviously amounts to an active participation in proceedings. Importantly, pursuant to the Polish Supreme Courts’ jurisprudence respondents’ failure to request judicial review of the preliminary award confirming existance of the arbitral tribunal’s jurisdiction precludes respondent from subsequent petioning for setting aside the final award based on the jurisidictional objection. At the same time, unlike under the Article 16 sect. 3 of the Model Law decision of the state court on the jurisdicional challenge is subject to appeal (immediate complaint to the court of II instance).
Having said that though, the issue of the position of a non-participating party with regard to its right to challenge the final award on juridsictional grounds in state courts does exist. While the article 1180 sect. 2 CCP largely repeats the Article 16 sect. 2 of the Model Law, it is a prevailing view that it does not apply to a party refusing to participate in the arbitral proceedings in its entirity. Such party may avail itself of its right to request setting aside of the award on the jurisdictional grounds.
Moreover, many scholars hold that the Art. 1180 sect. 2 CCP pertains only to the arbitration proceedings and as a result, the party which has failed to raise jurisdictional objection in due time during the arbitration proceedings, shall, nevertheless, retain its right to invoke argument of the lack of jurisdiction in the annulement proceedings before the state court. This is however highly contentious and far from resolved issue as other scholars argue that the preclusion under the Article 1180 par. 2 CCP extends to post-arbitral judicial proceedings and thus bars defaulting respodent from raising jurisdicitional objection both in the annulement and recognition / enforcement proceedings. The latter position seems more convincing and in line with “the spirit” of the Model Law.