ATTACHMENT OF ASSETS FOR THE
PURPOSE OF FOREIGN LITIGATION –
THE SINGAPORE POSITION
By
Mr Lim Tean
Rajah & Tann
© Rajah & Tann
INTERTANKO
Mumbai,
3 October 2006
1
3 Recent Noteworthy Cases:
I.
Karaha Bodas Co LLC v Pertamina Energy Trading Ltd and Anor
[2006] 1 SLR 112;
II.
Swift Fortune Ltd v Magnifica Marine SA [2006] 2 SLR 323;
III.
Front Carriers Ltd v Atlantic & Orient Shipping Corp [2006] 3 SLR
854
© Rajah & Tann
2
Foreign Court Proceedings
The case in point here is Karaha Bodas v Pertamina
The Plaintiffs, a company incorporated in the Cayman Islands, were
attempting to enforce an arbitration award against the Indonesian
state company Pertamina by obtaining a garnishee order against
Pertamina’s subsidiary in Hong Kong, Petral, who owed Pertamina a
substantial amount of money. The Plaintiffs discovered that Petral had
transferred the money to its Singapore subsidiary PES and on the
basis of that information, sought a Mareva injunction against both
these parties.
© Rajah & Tann
3
The Court of Appeal, relying on the principle established in the
seminal case of Siskina v Distos Compania Naviera SA [1979]
AC 210, held that a court could not assume jurisdiction over a
foreign defendant simply because he had assets within the
territorial jurisdiction that could be the subject of an injunction
order. Accordingly, the Singapore Court had no in personam
jurisdiction over Petral, a Hong Kong entity with no presence
here simply because it had assets (i.e. the money) in
Singapore.
Therefore, a Singapore court could not grant Mareva relief in
respect of the Singapore assets of a foreign defendant if the
only purpose of such relief is to support foreign court
proceedings and where the only factor connecting the case with
Singapore was the presence of assets in Singapore.
© Rajah & Tann
4
II.
Foreign arbitration – the Singapore position
The case in point is Swift-Fortune Ltd v Magnifica Marine SA [2006]
SGHC 36
Facts
Defendant was a Panamanian company which owned a vessel, the
“Capas Duckling”. It entered into an MOA with the Plaintiff, a
Liberian company to sell the vessel for US$9.5million. Legal
completion was to take place in Singapore and the purchase price
paid into a Singapore bank account. The MOA provided that it was
governed by English law and that any dispute arising out of it would
be referred to Arbitration in London.
© Rajah & Tann
5
It was agreed under the MOA that the defendant would deliver the
vessel by 6 December 2004. The vessel was not delivered by 6
December 2004 and the delivery date was extended 4 times at the
request of the defendant. The plaintiff acceded to all these extensions
on the basis that such agreement was without prejudice to the
plaintiffs’ rights to make claims for compensation for late delivery of
the vessel. The ”Closing Meeting” was scheduled for 9 March 2005,
On 8 March 2005, the Plaintiff commenced action in the High Court of
Singapore against the defendant and obtained a mareva injunction to
prevent the defendant from removing US$2.5million of the purchase
price from Singapore. The plaintiff got leave to withhold service of
notice of the injunction on the defendant until after the “Closing
Meeting” was finished. The defendant applied, inter alia, for the
mareva injunction to be discharged.
© Rajah & Tann
6
The applicant contended that there was express statutory authority
that gave the court a power to grant Mareva injunctions in relation to
foreign arbitration proceedings that it does not have in relation to
foreign court proceedings. This power is found in the International
Arbitration Act, in particular S12(7), which provides that the High
Court shall have, in relation to an international arbitration, the same
power of making orders in respect of, inter alia,
(1) securing the amount in dispute;
(2) ensuring that any award which may be made in the arbitral
proceedings is not rendered ineffectual by the dissipation of assets
by a party and
(3) an interim injunction or any other interim measure as it has for the
purpose of and in relation to an action or matter in the court.
© Rajah & Tann
7
Decision of Prakash J:(1)
© Rajah & Tann
She rejected the argument that the IAA gave the Singapore court
powers to aid or support arbitration where the seat of the
arbitration was located in another jurisdiction. Instead, Prakash J
held that S 12(7) dealt only with the powers of the Court in a
“Singapore” international arbitration i.e. where the parties to
arbitration were foreign but had chosen to conduct their
arbitration in Singapore. She said that it was clear that
Parliament did not intend to give the courts general powers to
assist foreign arbitrations where the seat of the arbitration was in
another jurisdiction. The Court noted that the effect of the
applicant’s interpretation would be to allow foreign owned assets
in Singapore that have been placed here for reasons that have
8
nothing to do with any dispute between their owners and third parties
to be subject to the risk of attachment if their owners have arbitral
disputes abroad with such third parties. Accordingly, a Singapore
court did not have the power to issue a Mareva injunction over the
Singapore assets of a foreigner in support of a foreign arbitration.
(2)
She was of the view that Parliament’s intention in introducing the IAA
was to promote Singapore as an international arbitration centre.
Parliament did not appear to have considered the possible
extraterritorial ramifications of the proposed legislation during the
debate on the Bill, and there was no mention of curial support in aid
of foreign arbitration.
© Rajah & Tann
9
To the criticism that her approach was insular the judge had this to say:
“Thus, having considered the various authorities cited by the plaintiff, it
does not appear to me that there is a marked trend among foreign
jurisdictions to permit their courts to issue injunctive orders to assist
proceedings taking place elsewhere. The courts that are most in favour
of extending such help are the English courts but, even there, it has been
noted that the ability to assist is limited by the necessity of the dispute or
disputants having such connection with England that the English courts
would be able to exercise a residual jurisdiction over it. I do not consider
therefore that the conclusion that I have come to on the inability of the
Singapore courts to help in such situations would point to the Singapore
courts being insular in their approach as the plaintiff has suggested.”
© Rajah & Tann
10
Different approach taken in Front Carriers Ltd v Atlantic & Orient
Shipping Corp [2006] 3 SLR 854
In this case, a former employee of the Defendant, a West Indies company,
negotiated with the Plaintiff, a Liberian company, for the charter of a
Panamax newbuilding. It was later alleged that the former employee had
no authority to fix the charter.
The Plaintiff argued that the
correspondence between its representatives and that of the Defendant’s
former employee resulted in the perfection of the time charter. The
Plaintiff commenced arbitration against the Defendant in London for
breach of time charter and thereafter, applied for Mareva relief against the
Defendant in Singapore to restrain it from removing any of its’ assets
within Singapore.
© Rajah & Tann
11
Ang J disagreed with the decision of Prakash J in the Swift-Fortune case
and held that the Court had the power under the IAA to issue an interim
injunction in aid of foreign arbitration proceedings. She held that the
framework of the IAA recognizes that parties to an international arbitration
may require curial support by way of interim measures from the High
Court even though the seat of the arbitration is outside Singapore.
According to her, there is nothing in the IAA which limits the definition of
“international arbitration” to arbitrations which take place only in
Singapore.
© Rajah & Tann
12
Ang J relied heavily on Art 9 of the Model Law, which has the force of
law in Singapore, pursuant to the IAA. Art 9 states as follows:“Arbitration agreement and interim measures by court
It is not incompatible with an arbitration agreement for a party to
request, before or during arbitral proceedings, from a court an interim
measure of protection and for a court to grant such measure.”
© Rajah & Tann
13
1.
Ang J said that Art 9 is in effect the lawful basis on which a “court”
may order interim measures applying its own domestic law.
2.
Ang J was of the view that the ruling in Swift Fortune means that the
High Court has no power to grant Mareva relief when its assistance
for interim relief is sought in cases where the parties have observed
their agreement to arbitrate abroad. In her own words – “That
cannot be right. It is illogical, given the purpose of Art 9 that the
High Court should be powerless to entertain a request for interim
relief in that situation.”
3.
She cited the observations of Lord Mustill in the English case of
Channel Tunnel Group Ltd v Balfour Beatty Construction Ltd [1993]
AC 334 (HL) on why the court’s powers to grant interim relief are not
affected when proceedings are stayed for arbitration. The reasons
© Rajah & Tann
14
are grounded on the following:
“Common sense, because it cannot be right that by starting the action
the plaintiff automatically forfeits any right to ancillary relief to which he
would otherwise be entitled. Logic, because the purpose of the stay is
to remove from the court the task of deciding the substantive dispute,
so that it can be entrusted to the chosen tribunal… But neither the
arbitration agreement nor [the United Nations Convention on the
Recognition and Enforcement of Foreign Arbitral Awards] contemplate
that by transferring to the arbitrators the substance of the dispute, the
court also divests itself of the right to use the sanctions of the
municipal law, which are not available to the arbitrators, in order to
ensure that the arbitration is carried forward to the best advantage.
© Rajah & Tann
15
And
“The purpose of interim measures of protection, by contrast, is not to
encroach on the procedural powers of the arbitrators but to reinforce
them, and to render more effective the decision at which the arbitrators
will ultimately arrive on the substance of the dispute. Provided that this
and no more is what such measures aim to do, there is nothing in them
contrary to the spirit of international arbitration.
…. I prefer the view that when properly used such measures serve to
reinforce the agreed method, not to bypass it.” per Lord Mustill
© Rajah & Tann
16
Conclusion
There is obviously a difference of opinion in the decisions rendered by two
courts of coordinate jurisdiction in Singapore. This difference will be resolved
by the Court of Appeal, which heard the Swift-Fortune case in June 2006 but
reserved judgment. It therefore remains to be seen which approach the
Singapore Court of Appeal will adopt. The Court of Appeal may be
persuaded by the fact that the interests of justice as well as Singapore’s
national interest in developing itself as an international legal centre, may
require assets to be preserved by an order made in one jurisdiction whilst the
substantive merits are determined in another jurisdiction. Further as was
pointed out by the applicant in Swift-Fortune, an interpretation of the
International Arbitration Act which denies a court the power to grant freestanding Mareva relief is not consistent with the position taken in other
Commonwealth jurisdictions. For example, in England, S44 of the Arbitration
Act 1996 enables the English court to grant free-standing Mareva relief in
relation to the arbitral proceedings wherever the seat of the arbitration, or
© Rajah & Tann
17
even if no seat has been designated or determined. Moreover, in the case
of Channel Tunnel Group Ltd v. Balfour Beatty Construction Ltd [1993] AC
334, the House of Lords recognized the advantage in granting interlocutory
relief to assist foreign proceedings because of the international character of
contemporary litigation and the need to promote mutual assistance between
the courts of the various jurisdictions.
© Rajah & Tann
18
THE END