Case Note: KVC Rice Intertrade Co Ltd v Asian Mineral Resources Pte Ltd and another  SGHC 32
As Singapore continues to promote itself as an arbitration hub, “an unequivocal judicial policy of facilitating arbitration has firmly taken root in Singapore”. This policy of “minimal curial intervention” is founded in the “need to respect party autonomy (manifested by their contractual bargain) in deciding both the method of dispute resolution (and the procedural rules to be applied)”. In line with this, Section 6 of the International Arbitration Act (“IAA”) (Singapore’s codified regime governing international arbitrations) provides that the Singapore Courts must stay proceedings in respect of matters that are the subject of a valid arbitration agreement, unless it is satisfied that the arbitration agreement is “null and void, inoperative, or incapable of being performed”. The Singapore High Court in KVC Rice Intertrade Co Ltd v Asian Mineral Resources Pte Ltd and another (“KVC v Asian Mineral”)  took a further step in advancing this pro-arbitration policy by enforcing a bare intention to arbitrate, notwithstanding that the arbitration agreement was “devoid of details”.
II. KVC v Asian Mineral
In KVC v Asian Mineral, the issue before the Singapore High Court, on appeal, was whether the bare arbitration clause in the parties’ contracts were “incapable of being performed” such that the proceedings before the High Court need not be stayed in favor of arbitration pursuant to Section 6(2) of the IAA.
The Plaintiffs (KVC Rice and Tanasan Rice) were companies incorporated in Thailand, while the Defendant (Asian Mineral) was a company incorporated in Singapore. The Plaintiffs had separate contracts for the sale of rice to the Defendant, to be delivered from Thailand to Africa (the “Contract(s)”), whereby payment was to be made in Singapore in United States Dollars. Both contracts between the Plaintiffs and the Defendant contained almost identical arbitration clauses. One stated that disputes would be “referred to and finally resolved by arbitration as per Indian Contract Rules”, while the other provided that disputes would be“referred to and finally resolved by arbitration as per Singapore Contract Rules” (collectively referred to as the “Arbitration Clause(s)”). Both Arbitration Clauses were silent as to the seat of arbitration and the law governing the arbitration procedure, including the means for constituting the arbitral tribunal. Both Contracts did not contain a clause that provided for the governing law of the Contract.
Disputes arose under the Contracts, and the Plaintiffs eventually commenced the present suits against the Defendant, which the Defendant then applied to stay in favor of arbitration. The Defendant’s case was that the arbitration clauses were not unworkable, as the details of the arbitration could be agreed between the parties. In this regard, the Defendant contended that Article 11(3) of United Nations Commission on International Trade Law Model Law on International Commercial Arbitration (the “Model Law”), as incorporated Singapore law by the IAA gave the president of the Singapore International Arbitration Centre (“SIAC”) power to intervene to break any deadlock between the parties on the appointment of arbitrators. The Plaintiffs’ case, in challenging the stay application, was that the Arbitration Clauses were “incapable of being performed”, since it did not refer to any existing or known set of procedural rules, and there was no designated seat of arbitration or governing law for the arbitration.
b. The Court’s Decision in KVC v Asian Mineral
The Court’s decision was founded on its view that “a bare arbitration clause which merely provides for submission of disputes to arbitration…remains a valid and binding agreement” even if the place of arbitration or method for establishing the arbitral tribunal are not specified, as long as “parties have evinced a clear intention to settle any dispute by arbitration”.
The Court found that these obstacles preventing the workability of the Arbitration Clauses could be removed, as a reading of Section 8 of the IAA and Article 11(3) of the Model Law would not preclude the SIAC from “step[ping] in to make the necessary appointment if parties are not able to agree on the sole arbitrator or presiding arbitrator” even where the place of arbitration was “unclear or not yet determined”. The Court also found that it retained “residual jurisdiction to assist with the appointment of arbitrators…to ensure that the parties’ intention to have their dispute settled by arbitration is not defeated” where there was “truly no other way to prevent injustice”.
III. Clothing the Bare
While the Court-constructed framework that effectuated the otherwise unworkable Arbitration Clauses may be driven by the judiciary’s pro-arbitration policy, it was not supported by sound legal reasoning.
a. Presuming the applicable law
First, the Court skipped over the critical preliminary choice-of-law analysis. It merely noted that the dispute “had some connection with Singapore”, but failed to articulate what, how, and why these connections led to its adoption of Singapore law as the legal lens for determining the validity of the Arbitration Clauses and the stay application.
An application of the prevailing choice-of-law rule in Singapore, which directs Courts to consider the “implied choice of parties as gleaned from their intentions at the time of contracting”, and the “system of law with which the arbitration agreement has the closest and most real connection” in the absence of an express choice, does not indubitably point to Singapore law as the law governing the Arbitration Clauses. As the Court acknowledged itself, “the connecting factors in both [contracts] point in different directions”. There is a compelling case, at least in the Contract that referenced “Indian contract rules”, that parties may have intended Indian law to govern that Arbitration Clause.
The implications of failing to properly address the threshold issue of the proper law to the Arbitration Clause on a principled basis (whether by the prevailing choice-of-law approach or otherwise) are potentially far-reaching. An application of a third country’s law (whether India, or otherwise) to measure the parties’ obligations in respect of the Arbitration Clause(s) may not have tolerated the strides of judicial intervention which the Singapore High Court took to circumvent the inoperative Arbitration Clauses. In fact, there is indication, from an unrebutted legal opinion tendered by the Plaintiffs’ counsel, that the Arbitration Clause which provided for arbitration per “Indian Contract Rules” would not have been enforced under Indian law.
With the benefit of hindsight, one may speculate that the Court simply applied the lex fori to the Arbitration Clause as neither party raised the applicable law as an issue in dispute, or could arguably be said to have consented to the applicability of Singapore law and/or waived its right to object the same: (i) the Defendant had applied for a stay pursuant to Section 6(2) of the IAA; (ii) the foreign Plaintiffs had asked the Court to impose the condition that arbitration proceed on the basis of Singapore law if the Court granted the stay. Justice Vinodh Coomaraswamy recently questioned the soundness of such an approach in Dyna-Jet v Wilson Taylor Asia Pacific Ltd, where he noted that “it would be unduly parochial…to examine the parties’ arbitration agreement purely through the lens of Singapore law simply because this application is made under Singapore legislation to a Singapore court”. In any event, there was no articulation or indication from the Court’s decision in KVC v Asian Mineral if this was indeed the choice-of-law analysis the Court had applied, if at all.
b. Bending backwards to enforce bare arbitration clauses
It is trite that pathological arbitration clauses are not void ab initio. Singapore Courts have given effect to arbitration agreements on the basis of an intention to arbitrate, notwithstanding that “certain aspects of the agreement may be ambiguous, inconsistent, incomplete or lacking in certain particulars”. Yet, this exercise of “effective interpretation” has not been without its limits. As the Singapore Court of Appeal has previously held, such agreements must be “workable agreed arbitration arrangements”, and cannot result in an “arbitration that is not within the contemplation of either party” or “prejudice to the rights of either party”.
KVC v Asian Mineral was the first instance where the Singapore Courts enforced an arbitration clause that was silent on the place of arbitration and mechanics for establishing the tribunal. By presuming Singapore law as the legal lens which it relied on in finding that SIAC was not precluded from invoking its “statutory appointing authority”, the Court arguably exceeded the limits of ‘effective interpretation’, putting in effect an arbitration process which may not necessarily have been within the contemplation of the parties at the time when they agreed on the Arbitration Clauses.
While the principle of party autonomy and in favorem validitatis are the cornerstone of the Singapore judiciary’s approach to arbitration, this is no reason to exempt arbitration agreements from the substantial requirements and principles governing contractual formation and validity in Singapore. It is over-simplistic and presumptuous to rely on the mere indication of a preference for arbitration to presume the validity of an arbitration agreement. In fact, as the effect of a valid arbitration agreement in international contracts mandates the displacement of the Singapore Court’s jurisdiction in favor of the tribunal, it is imperative that Courts only enforce the arbitration clauses that meet a minimum standard of a “sufficient model of the process …to be certain and enforceable”, and are “well established as to require no further affirmation” as to how the parties have elected to depart from the default forum.
Moreover, the notion that a bare intention to arbitrate, without more, may be enforced with the Court’s assistance in constructing the mechanics for enforcing that intention, contradicts the cornerstone of party autonomy in arbitration that affords primacy to the party’s right to choose how they wish to resolve their disputes. However desirable, Courts are not in the business of rewriting contractual bargains, and cannot afford to be sympathetic to slips in drafting, especially “orphan” clauses that are entirely void of content or framework. In the long run, this will reduce the incentive for parties to be precise about their intentions in their agreements, clog the arteries of judicial administration, and open the floodgates for any semblance of an arbitration clause, from which the Court can find an intention to arbitrate, to suffice in staving off a stay application.
Rachel Chiu Li Hsien
Rachel Chiu Li Hsien is an LL.M. Candidate in the International Business Regulation, Litigation, and Arbitration Programme at the New York University School of Law, and advocate and solicitor from Singapore. She obtained her first degree in law from the University of Warwick in England and previously trained in the commercial disputes practice at PK Wong & Associates LLC (An Independent Member Firm of the EY’s Global Network) in Singapore.
 Singapore Parliamentary Debates, Official Report (31 October 1994) vol. 63, cols. 625-627. See also Harisankar, International Commercial Arbitration in Asia and the Choice of Law Determination (2013) 30 JIA 621, 625.
 Tjong Very Sumito v Antig Investments  4 SLR(R) 732, .
 Michelle Lee, Existence of Arbitration Agreements: The Tension between Arbitral and Curial Review (2014) 10 AIAJ 67, 88.
 Supra 2.
 International Arbitration Act Cap. 134A (Revised Edition 2002).
 Id., Section 6(2). See also Article 8 of the United Nations Commission on International Trade Law (“UNCITRAL”) on International Commercial Arbitration (1985) (the “Model Law”). A copy of the Model Law may be accessed here: <https://www.uncitral.org/pdf/english/texts/arbitration/ml-arb/07-86998_Ebook.pdf> (last accessed December 1, 2017).
 KVC Rice Intertrade Co Ltd v Asian Mineral Resources Pte Ltd and another  SGHC 32.
 Id., , .
 Id., .
 Id., , , .
 Id., .
 Id., .
 A copy of the Model Law may be accessed here: <https://www.uncitral.org/pdf/english/texts/arbitration/ml-arb/07-86998_Ebook.pdf> (last accessed December 1, 2017).
 Section 3(1) of the IAA incorporates the Model Law. Section 8(2) of the IAA reads as follows: “The President of the Court of the Singapore International Arbitration Centre shall be taken to have been specified as the authority competent to perform the functions under Article 11(3) and (4) of the Model Law”. Article 11(3) of the Model Law allows for the appointment of arbitrator(s) by the “Court or other authority” as specified by the state.
 Supra 7, .
 Id., .
 Supra 7, . The Singapore High Court’s finding here is consistent with the Singapore Court of Appeal’s holding in Insigma Technology Co Ltd v Alstom Technology Ltd  3 SLR(R) 936 (“Insigma”) (at ).
 Supra 7, .
 Supra 15.
 Supra 7, ,  – , .
 Id., .
 Id., .
 Alastair Henderson, et al., ‘Bare’ arbitration clauses and the extent to which the Singapore Court may assist (March 9, 2017). A copy of the article may be accessed here: <http://hsfnotes.com/arbitration/2017/03/09/bare-arbitration-clauses-and-the-extent-to-which-the-singapore-court-may-assist/> (last accessed December 1, 2017).
 Supra 7, , .
 BCY v BCZ  3 SLR 357, . The Singapore High Court in Dyna-Jet Pte Ltd v Wilson Taylor Asia Pacific Pte Ltd  3 SLR 267 also adopted the approach of English Court of Appeal in Sulamerica Cia National de Seguros S.A. v Enesa Engeharia S.A.  EWHC 42 (Comm). But cf.: FirstLink Investment Corp v GT Payment Pte Ltd  SGHCR 12, where the Assistant Registrar of the Singapore High Court held (at ) that decisive weight should be given to the law of seat of arbitration in determining the parties’ implied choice of law.
 Supra 7, .
 Supra 26.
 See generally: Julian D.M. Lew, Loukas A. Mistelis, et al., Comparative International Commercial Arbitration (2003) Walters Kluwer, 411. See also A.F.M. Maniruzzaman, Choice of Law in International Contracts: Some Fundamental Conflict of Laws Issues (2000) 16(4) JIA 141, 150.
 Supra 7, .
 Id, .
  SGHC 238 at . But cf.: Julian D.M. Lew, Loukas A. Mistelis, Stefan M. Kroll, Comparative International Commercial Arbitration (2003) Wolters Kluwer, 415: Arbitrators have found there to be an implied choice of the law applicable where parties argue their case on the basis of the same law, even though they have not expressly agreed on its application.
 See generally: Emmanuel Galliard, John Savage, Fouchard Galliard Goldman on International Commercial Arbitration (1999) Kluwer Law International, 262, 263. But cf.: Gary B. Born, International Arbitration: Law and Practice (2nd Ed) (2015) Wolters Kluwer, 766.
 Insigma, .
 Id.,  – .
 Supra 7, .
 Nicholas Poon, Reconsidering the Enforceability of Bare Intention to Arbitrate (2017) 29 SAcLJ 540, 546.
 Stavros Brekoulakis, The Notion of the Superiority of Arbitration Agreements over Jurisdiction Agreements: Time to Abandon It? (2007) 24(4) JIA 341, 358.
 Supra 5, Section 6(2).
 Sulamerica Cia National de Seguros S.A. v Enesa Engeharia S.A.,  EWHC 42 (Comm), 10.
 Wilson Taylor Asia Pacific Pte Ltd v Dyna-Jet Pte Ltd  SGCA 32, .
 Supra 39, 359-360. See also Supra 2.
 TMT Co. Ltd v The Royal Bank of Scotland plc  SGHC 21,  – .
 Supra 7, .
 Supra 38, 549.
 Supra 2.
 Supra 38.