Primacy of the seat – Singapore court refuses claimant’s set aside application in telecoms dispute

In Sacofa Sdn Bhd v Super Sea Cable Networks Pte Ltd and SEAX Malaysia Sdn Bhd [2024] SGHC 54, the Singapore High Court considered an application to set aside a Singapore-seated SIAC award. The relevant dispute arose after the claimant had contracted the first respondent to build and operate a telecommunications cable system to be landed in Malaysia, pursuant to a Strategic Alliance Agreement (SAA), which contained an arbitration agreement.

Pursuant to the SAA, the parties also entered into a lease agreement (LA) for the claimant to lease a portion of the land where the system was to be built to the first respondent. The LA contained an agreement to submit to the exclusive jurisdiction of the Malaysian courts.

After the parties’ relationship deteriorated, the respondents commenced arbitration pursuant to the SAA, seeking conversion of the facilities on the leased land, and the tribunal found in their favour. Upon application from the first respondent, the Kuala Lumpur High Court (KLHC) made an order registering and enforcing the award (the KLHC decision). The claimant then sought to set aside the award in Singapore.

Issues

The claimant argued that the award should be set aside on the following two grounds:

• The tribunal had exceeded its jurisdiction by dealing with issues in dispute which fell to be governed by the LA, which contemplated the exclusive jurisdiction of the Malaysian courts (the Excess of Jurisdiction Ground); and
• The award violated Malaysian law, which was contrary to the public policy of Malaysia, and in turn contrary to Singapore’s public policy (the Public Policy Ground).

The respondents argued that the tribunal did not exceed its jurisdiction and that there was no breach of public policy. Notably the respondents also argued that transnational issue estoppel applied to estop the claimant from raising these objections: both grounds had already been raised before, and rejected by, the KLHC enforcement court.

Both grounds were dismissed.

The Excess of Jurisdiction Ground

This issue arose primarily because the two interconnected contracts governing the parties’ relationship (the SAA and the LA) contained two competing dispute resolution clauses. Where a dispute potentially falls within the ambit of either dispute resolution clause, Alex Wong Li Kok JC said the court’s task “is to determine where the centre of gravity of the dispute lies.”

The court said that here, the SAA “was the governing heart of the commercial relationship between the parties” and therefore the dispute was more closely connected with the SAA – which contained the arbitration agreement – than the LA: the tribunal had not exceeded its jurisdiction. (The same “centre of gravity” principle was recently applied by the Hong Kong courts in AAA v DDD [2024] HKFCI 513 – see Hogan Lovells alert Competence queried – Hong Kong court sets aside tribunal ruling on jurisdiction.)

Obiter, the court said that whilst the objective intention of the parties was to resolve issues “of any kind whatsoever” relating to the strategic alliance through arbitration, the narrower issues of “validity, construction and performances” of the LA had been carved out of the more generally applicable arbitration agreement, for determination before the Malaysian courts.

Alex Wong JC said such an arrangement was common in commercial transactions of this nature. It made “perfect commercial sense to deal with matters relating to the LA before the Malaysian courts” given that the LA attracted territory-specific matters such as land registration and taxes which would be best resolved by the Malaysian courts. This was despite the risk that the disputes would be fragmented, which was merely a product of the parties’ agreed arrangements.

The Public Policy Ground

The court found that there was no evidence that the remedy ordered by the award was an illegal act under Malaysian law. In any event, it did not automatically follow that this would be a conflict against Singapore’s public policy. The claimant submitted that Singapore’s public policy entails upholding similar foreign laws and that it would “shock the conscience” of the public if the Singapore courts were to uphold an award that circumvented similar laws pertaining to the protection of network facilities.

The court noted that a violation of public policy will only justify the setting‑aside of an arbitral award in exceptional circumstances, and where it would “violate the forum’s most basic notions of morality and justice”, an approach consistent with recent Hong Kong authority (see for example Song Lihua v Lee Chee Hon [2023] HKCFI 2540 – see Hogan Lovells alert Arbitration Highlights in the Year of the Dragon). Where the Public Policy Ground is invoked on the basis of a contravention of foreign law (in this case, Malaysian law), a “minor illegality or regulatory infringement by a contract is insufficient”. 

Whilst the claimant made the point there was “commonality in public policy sensitivities in the telecommunications industries in Singapore and Malaysia”, the court said that nothing turned on this in the present case, as the claimant had failed to establish an illegality. The Public Policy Ground was rejected.

Transnational issue estoppel

Finally, the court considered whether, in any event, transnational issue estoppel applied to preclude the claimant from raising its two set-aside grounds before the Singapore courts. The issue arose because the same two grounds had already been rejected in the KLHC decision.

Transnational issue estoppel is a doctrine under which a party in a domestic court is prevented from re‑litigating (i) the same issue that has been previously decided by a foreign court in (ii) a valid, conclusive decision involving (iii) the same parties. As held in the recent Court of Appeal case of The Republic of India v Deutsche Telekom AG [2023] SCGA(I) 10 (India v DT), this doctrine generally applies where the Singapore enforcement court is faced with a prior decision of a foreign seat court.

The present case was the reverse scenario, where the Singapore seat court was being faced with the prior decision of the KLHC Malaysian enforcement court, which had dismissed the claimant’s objections to the validity of the award. In this scenario, the court observed that that any departure from the position that transnational issue estoppel did apply would need to be grounded in principle.

Applying this to the two set‑aside grounds:

1. The court was comfortable applying the doctrine of transnational issue estoppel to the prior KLHC decision regarding the Public Policy Ground, “because the claimant’s illegality objections [were] premised upon issues of Malaysian law and Malaysian public policy which the Malaysian courts [were] best placed to deal with”.

2. However, the court decided that transnational issue estoppel should not apply to the Excess of Jurisdiction Ground. The principle of primary of the seat court which underpins the scheme for recognition and enforcement of awards, “was a principled basis to justify a departure from the general position”.

The court considered that to give preclusive effect to the KLHC decision with respect to the Excess of Jurisdiction Ground would undermine the role of the Singapore seat court and therefore undermine the scheme underlying the New York Convention, which recognises the special role of the seat court’s primary and supervisory jurisdiction.

The choice of a seat was an important component of the principle of party autonomy in international arbitration, and that principle must be given due weight. Ultimately however, given that that claimant failed in convincing the court of its Excess of Jurisdiction Ground, this had no impact on the outcome of the case.

Takeaway

Estoppel is a familiar concept to common law jurists, is highly relevant in international arbitration and the doctrine of transnational issue estoppel set out by the court builds on a comprehensive review of past authorities, conducted by the Court of Appeal in India v DT.  For example, transnational issue estoppel – or similar doctrines according primacy to the seat courts – have been previously used by enforcement courts to dismiss applications for refusal of enforcement if an application to set aside the award at the seat of arbitration has been rejected. 

In Coeclerici Asia (Pte) Ltd v Gujarat NRE Coke Ltd [2013] FCA 882, the Honourable Justice Foster of the Federal Court of Australia (upheld on appeal to the Full Court of the Federal Court of Australia, see Gujarat NRE Coke Limited v. Coeclerci Asia (Pte) Ltd (2013) 304 ALR 468), when considering the enforcement of an English award which was challenged due to alleged failure to provide a reasonable opportunity to be heard, held there was an issue estoppel regarding the reasonable opportunity to be heard as this had already been determined by the court of the seat, the English High Court.  He found that, even if there were no issue estoppel or res judicata, it would generally be inappropriate for an enforcement court of a New York Convention country to reach a different conclusion on the same question as a court at the seat of the arbitration.   

This decision emphasises the importance of the losing party’s selection of where to challenge the award – in the seat of arbitration or wait until enforcement before the enforcement court.  For the winning party, the selection of a pro‑enforcement court is important as grounds to refuse enforcement if rejected by an enforcement court could give rise to issue estoppel in other jurisdictions – in this case (unusually) in the seat of arbitration, and not vice versa.  Issue estoppel has also been applied previously to refuse enforcement in a Convention State where other Convention States have refused enforcement (see below). 

The decision further highlights the importance of the law of the seat of arbitration in cross-border disputes. As recognised in the judgment, the choice of a seat is an important component of the principle of party autonomy in international arbitration, and the principle must be weighed against that of international comity when taking into account the prior decision of a foreign enforcement court.

It is interesting that the Singapore court applied transnational issue estoppel on the question of public policy.  In Diag Human SE v Czech Republic [2014] EWHC 1639 (Comm), arbitral proceedings took place in the Czech Republic.  Following the publication of the award, both parties sought to invoke the review process set out in the arbitration agreement.  The parties provided in their arbitration agreement (rather unusually) that they may submit the first award for review to a newly‑constituted second arbitral tribunal. 

The award was refused enforcement in Austria.  When it came to enforcement in the U.K., Justice Eder concluded that the Austrian Supreme Court’s decision that the final award was not binding created an issue estoppel.  There was no doubt in the view of Mr Justice Eder that issue estoppel could arise from decisions on enforcement under the New York Convention in other states, although he accepted that questions of arbitrability and public policy may be different in different states and that a decision in a foreign court not to enforce an award under the New York Convention on public policy grounds will not ordinarily give rise to an issue estoppel in England. Considering this precedent, the decision in the instant case appears closely linked to the specificity of the claimant’s position with respect to the Public Policy Ground: it was an alleged Malaysian illegality that was said to violate, in turn, Singapore public policy.     

The Singapore court did not apply transnational issue estoppel to the Excess of Jurisdiction Ground. The choice of remedies doctrine entitles a party to choose between the active remedy of setting aside the award at the seat, and the passive remedy of resisting enforcement before the enforcement court. 

This doctrine was notably defined in the Singapore Court of Appeal decision of PT First Media TBK (formerly known as PT Broadband Multimedia TBK) v Astro Nusantara International BV and others and another appeal [2014] 1 SLR 372, and in Hong Kong the Court of Final Appeal confirmed in the same dispute (see Astro Nusantara International B.V. and Others v. PT First Media TBK [2018] HKCFA 12) that this doctrine was also a part of Hong Kong law.  A party can resist enforcement on the basis of lack of jurisdiction having applied to set aside in the seat of arbitration and failed to do so. The doctrine makes clear that those are options which are independently available, although it still recognises the primacy of the seat of arbitration.

The courts will no doubt have the opportunity in the future to further refine the application of transnational issue estoppel when faced with different factual circumstances: it will be key for parties to arbitration to keep abreast of such developments, when considering potential recourses against awards across various jurisdictions.

Authored by James Kwan, Shi Jin Chia, Hugo Petit, Paris Buti, and Nigel Sharman.