June 1, 2015
Arbitration is a consensual process arising out of an agreement to arbitrate and the law relevant to the agreement. Arbitration agreements are usually brief and often refer to not only the place of arbitration but also the number of arbitrators and the procedural rules by which the arbitration is to be conducted. There is, sometimes, an overlap between the express choice made by the parties of the number of arbitrators and the provisions on the number of arbitrators in the institutional rules expressly chosen by the parties. There may, for example, be an express choice of three arbitrators on the one hand but an express selection of institutional rules that allow the institution to appoint a sole arbitrator instead of three. There may also be cases where new procedures are introduced by the arbitral institution after the arbitration agreement is concluded, and issues of whether these arbitral procedures can and should apply to the arbitration commenced after their introduction. What happens in such situations and how does a court, dealing with a complaint that arbitral procedure has not been followed, deal with this conflict?
In the recent case of AQZ v ARA  SGHC 49, a case involving contracts for the supply of Indonesian coal, the Singapore High Court considered for the first time a challenge to an award made after the arbitration had been run under the Expedited Procedure of the 2010 Singapore International Arbitration Centre (SIAC) rules. In that case, the arbitration agreement provided for arbitration in Singapore, contained an express choice of three arbitrators and also contained an express choice of the SIAC rules. At the time the arbitration agreement was concluded, the SIAC rules did not contain any provisions referring to a fast-track procedure. After the arbitration agreement was concluded, SIAC introduced the Expedited Procedure where an application could be made by one of the parties to the SIAC President. If the application was allowed, a sole arbitrator would be appointed unless the SIAC President determined otherwise.
The claimant, a mining and commodity trading company incorporated in Singapore, entered into discussions with the respondent, the Singapore subsidiary of an Indian trading and shipping conglomerate, for the supply of Indonesian non-coking coal. The parties entered into contracts pursuant to these discussions whereby the claimant was to deliver certain quantities of coal to the respondent. The claimant performed the first contract, but failed to perform the second. The claimant contended that the second contract had not in fact been concluded in that the parties had agreed on certain terms verbally, but no written contract was signed. As such, the claimant contended that it was under no obligation to deliver the coal.
The respondent commenced arbitration proceedings against the claimant in March 2013 for breach of the second contract and applied for the matter to be determined by way of the Expedited Procedure under the 2010 SIAC Rules. The claimant raised disputes as to jurisdiction as it contended that no contract and hence no arbitration agreement had been entered into. It also objected to the application of the Expedited Procedure. After hearing parties, SIAC directed that the Expedited Procedure was to apply and that a sole arbitrator be appointed to decide on all matters, including the issue of his own jurisdiction. A preliminary hearing on jurisdiction and liability was conducted and the sole arbitrator issued a partial award holding that the second contract had been concluded, that the tribunal had jurisdiction to hear and decide the matter, and that the claimant was accordingly liable for breach of contract. The claimant applied to the Singapore High Court for the partial award to be set aside. Non-conformity with arbitral procedure under Article 34(2)(a)(iv) of the Model Law was cited as the ground in relation to the complaint against the Expedited Procedure and the appointment of a sole arbitrator.
The decision of the Singapore High Court
In refusing to set aside the arbitral award, the Singapore High Court considered the words of the arbitration agreement, the material provisions of which were as follows:
“… the dispute shall be finally settled by arbitration upon the written request of either party hereto in accordance with the rules of conciliation and arbitration of the Singapore International Arbitration Centre (SIAC) by three arbitrators in English Language. The result of all such arbitration shall be final.” [emphasis added]
The Court then applied a well-established principle in the interpretation of arbitration agreements, namely that references to rules of a particular tribunal in arbitration agreements are presumed to be references to those rules that were in force at the date of commencement of the arbitration proceedings, and not those that were in force at the date of the conclusion of the arbitration agreement1. This well-established principle was supported by consideration of the possibilities that procedural provisions could easily become out of date and become incapable of implementation. In such cases, amendment of the rules would be necessary to make them workable. If an arbitration agreement referring to an arbitral institution’s rules were not construed as incorporating them in their subsequently amended form, the operation of the arbitration agreement might well be frustrated.
The Court opined that in the light of this well-established principle, parties who wished for a particular version of an arbitral institution’s rules to apply to all arbitrations whenever commenced ought to state in the arbitration agreement the specific version of the rules that was to apply. For example, if the parties wished for the 2007 SIAC rules to apply to all arbitrations whenever they were commenced, they ought to specifically state so in the arbitration agreement. Otherwise, the version of the SIAC rules that was in force in 2010, when the arbitration was commenced, would apply.
In order to reconcile the apparent inconsistency between the parties’ selection of three arbitrators and the Expedited Procedure rules stipulating a sole arbitrator (or that the President of the SIAC decides the number of arbitrators), the Court applied a purposive approach to the interpretation of the arbitration agreement. A commercially sensible interpretation of the arbitration agreement would be to recognise that the SIAC President had the discretion to appoint a sole arbitrator in appropriate cases, or else it would be impossible for a sole arbitrator to be appointed regardless of the complexity of the dispute or the quantum involved. The Court therefore found that the arbitration was conducted in accordance with the parties’ agreement and upheld the partial award.
The Singapore High Court decision in AQZ v ARA and its purposive interpretation of the arbitration agreement uses a commercial approach in which parties are presumed to wish their selected arbitral institution to review and update, on a regular basis, ways in which arbitral efficiency can be increased and to wish for such updated rules to apply in their arbitrations. The decision also makes it clear that when drafting arbitration agreements, parties should carefully consider whether they wish a particular version of arbitration rules to apply.
Arbitration has faced criticism in recent times for being protracted and expensive. Fast-track procedures such as SIAC’s Expedited Procedure aim to cut out some of this wastage of time and costs by enabling the institution, through party consent, to shorten time and control costs in appropriate cases. Under the Expedited Procedure, applications may be made by a party for the arbitration to be run under the Expedited Procedure in cases of “exceptional urgency”, or where the amount in dispute does not exceed S$5,000,000, or where the parties agree. The President of SIAC is obliged to consider the views of both parties to the arbitration, but he makes the final decision as to whether the Expedited Procedure should apply to a given arbitration. The Registrar may also shorten any time limits under the Rules and the case will be referred to a sole arbitrator, unless the President of SIAC determines otherwise. Under the Expedited Procedure, an award is to be issued within six months of the constitution of the tribunal.
1 Navigator Investment Services Ltd v Acclaim Insurance Brokers Pte Ltd  2 SLR 25 and Black & Veatch Singapore Pte Ltd v Jurong Engineering Ltd  4 SLR 19