The Court also dismissed applications to challenge the jurisdiction of an arbitral tribunal and to set aside a final award, in a case that highlights the importance of “Priority of Documents” or “Order of Precedence” clauses contained within a series of contracts.
Introduction
The Singapore High Court, in Sinolanka Hotels & Spa (Private) Limited v Interna Contract SpA [2018] SGHC 157, on 6 July 2018 dismissed an application under Section 10 (3) of the Singapore International Arbitration Act (IAA), ruling that the arbitral tribunal lacked jurisdiction to determine the dispute. The Court also dismissed the alternative application to set aside the final award under Section 34(2)(a) of the UNCITRAL Model Law.
In dismissing the first application, the Court held that the applicant had no basis to challenge the jurisdiction of the arbitral tribunal because it had accepted the arbitral tribunal’s jurisdiction pursuant to the operation of the Order of Precedence clause found in the contractual documents.
Background
The plaintiff, Sinolanka Hotels & Spa (Sinolanka) was the developer of the Grand Hyatt Colombo Project (the Project) for Hyatt International. Sinolanka contracted with the defendant, Interna Contract SpA (Interna) to provide internal fit out and furnishing works for the Project.
The tender documents included a clause which provided for all disputes to be settled by arbitration in Colombo under Sri Lankan arbitration laws (the Sri Lankan Arbitration Agreement).
Upon receipt of Interna’s tender submission, Sinolanka issued a letter of acceptance with an arbitration agreement which required disputes to be resolved by arbitration at the International Chambers of Commerce (the ICC Arbitration Agreement).
Parties subsequently entered into a contract agreement which (i) identified the tender documents and letter of agreement as forming part of the contract for the Project and (ii) set out the order of priority for interpreting the various documents that comprised the contract in circumstances where there was inconsistency or conflict. In particular, the contract agreement provided that the letter of acceptance would take priority over the tender documents.
The Dispute
Interna commenced arbitration proceedings in August 2015 in accordance with the ICC Arbitration Agreement. Following the constitution of the arbitral tribunal, Sinolanka challenged the jurisdiction of the arbitral tribunal on the basis that the arbitration should be conducted in accordance with the Sri Lankan Arbitration Agreement and not the ICC Arbitration Agreement. Sinolanka did not request for the arbitral tribunal to determine its jurisdiction as a preliminary issue.
The arbitral tribunal did not make a ruling on Sinolanka’s jurisdictional challenge as a preliminary issue or at any stage of the arbitral proceedings. Instead, it dealt with the jurisdictional challenge together with the substantive dispute in its final award and ruled against Sinolanka in both instances.
Dissatisfied with the final award, Sinolanka applied to the Singapore High Court to (i) challenge the jurisdiction of the arbitral tribunal under Section 10 of the IAA; and (ii) as an alternative, set aside the final award under Section 34 of the UNCITRAL Model Law on the basis that the arbitral tribunal had founded its jurisdiction on an invalid arbitration agreement.
The Decision
In dismissing Sinolanka’s jurisdiction challenge, the Court held that
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the terms of the contract agreement were plain and unambiguous in stating that the letter of acceptance was part of the contractual agreement between the parties; and
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where there was inconsistency or conflict between the terms set out in the contractual documents, the order of precedence clause in the contract agreement operated such that the ICC Arbitration Agreement in the letter of acceptance trumped the Sri Lankan Arbitration Agreement in the tender documents.
The Court also observed that Sinolanka had no basis for seeking relief under Section 10 (3) of the IAA because the arbitral tribunal had considered and disposed of the objections to the arbitral tribunal’s jurisdictions and the substantive merits of the disputes between the parties.
The Court held that the appropriate remedy would be to set aside the final award under Article 34 of the UNCITRAL Model Law. In dismissing Sinolanka’s alternative argument that the final award should be set aside under Article 34 (2)(a)(i) of the UNCITRAL Model Law, the Court held that parties had agreed to the ICC Arbitration Agreement in accordance with the order of precedence clause in the contract agreement.
Observations
This case highlights the importance of “Priority of Documents” or “Order of Precedence” clauses where obligations between parties are contained within a series of contracts. Parties adopting such clauses in their contracts should be familiar with their operation and consequential rights and obligations.
Users of international arbitration should also take note that an application to the Court for a ruling on the arbitral tribunal’s jurisdiction under Section 10 (3) of the IAA is only available in circumstances where the arbitral tribunal has made a positive ruling on its jurisdiction as a preliminary issue.
In circumstances where the arbitral tribunal determines its own jurisdiction together with the substantive merits of the dispute in the final award, the appropriate remedy would be to apply to set aside the final award under Article 34 of the UNCITRAL Model Law. In that regard, parties seeking a jurisdiction challenge should also consider, as part of their overall legal strategy, whether a request for the arbitral tribunal to determine its jurisdiction as a preliminary issue should be made.
