WHAT NOW FOR ARTICLE 16(3)?' Dang Jones* I. Introduction On 31 October 2013 the Singapore Court of Appeal delivesed its decision, PT First Media TBK » Astro Nusantara International BV’ and others 2013] SGCA 57, in the long-running dispute between the Astro Group, a Malaysian media group, and the Lippo Group, an Indonesian conglomerate. ‘The decision concerned the enforcement of arbiteal awards that were rendered in Singapore, a Model Law jurisdiction, in which the Iniereational Arbitration Act (“IAN gives force to the UNCITRAL Model Law on Intemational Commercial Arbitration (“Model Law”) ‘The Singapore Court of Appeal provided a detailed analysis of the Model Law and its sraaux priparateires, tegasding the ability of a patty to oppose enforcement of an arbitral award on the grounds of the tribunals alleged lack of jurisdiction. In particular, the Court of Appeal considered the ‘circumstances where that party did not challenge the tribunal’s preliminary determination even though it was entitled to under Article 16(3) of the Model Law. In reaching their decision, the Court of Appeal ideatified the policy of “choice of remedies” as being central to the Model Law. Under this interpretation, the parties are free either to make an active challenge by secking judicial review or by secking to set aside an award, or to invoke a passive remedy by requesting an award to be refused only in response to enforcement proceedings. ‘This article first outlines in Section TT the background to the arbitration and the subsequent enforcement proceedings. Section TIT examines the Court of Appeal’s decision and its references to the trueaiee priparatnirs, focusing particularly on the interpretation of the Model Law and the “choice of remedies” policy. The article in Scetion IV concludes with a discussion regarding the practical implications of the decision. The decision draws attention to the competence-competence principle and the ‘compromise position adopted by the Model Law. It also ealls into question "The author geaefully acknowledges the assistance provided in preparation ofthis aie by ‘Vomoyuki Hachigo. © AO, RED, BA, LLM, FCLAR, MAMA, KAMINZ. Doug Jones i a Professorka Flow at the University of Melbourne and a Parmer at Clayton Us, Sydney. He i a door tenant at ‘Atkin Chambers, London and an Arbitrator at Arbitration Place, Toronto. 2 Intentional Aviation Ast (ap V4BA, 2002 rev ed The United! Nations Commission om International Trade Taw (UNCTTRAT) Model Lase ‘00 International Commercial Arbitration (1985). 243,244 EUROPEAN INTERNATIONAL ARBITRATION REVIEW VOL. 2:2 the continuing utility of Article 16(3), in light of an interpretation of the provision that is contrary to the demands of certainty and efficiency in international arbitration practices IL, Background Lippo and Astto entered into a joint venture for the provision of ‘multimedia and television services in Indonesia, The terms of the joint venture were contained in a Subscription and Sharcholdets’ Agreement dated 11 March 2005 (“SSA”). A dispute arose over the funding of the joint venture, and in October 2008, the Astro companies commenced arbitration in the Singapore International Asbitration Centre (“SIAC") against Lippo, pursuant to the arbitration agecement in the SSA. A three- member tribunal seated in Singapore was formed (‘the Tribunal”) and Astro requested the Tribunal to allow another three Astro companies, who were not party fo the SSA, to be joined to the arbitration proceedings. Lippo contested the joinder application. (On 7 May 2009, the ‘Tribunal rendered a preliminary award, ruling that it had the power Under the SIAC Rule 2007 to fin the three Aswo companies and exercised its discretion t0 do so, Lippo did not challenge the preliminary award in the Singapore cours as it was entitled to under Anticle 163) of the Model Law within a 30 day time limit. Rather, it continued to participate in the arbitration, but reserved its objections to the ‘Tribunal’s jurisdiction, Subsequently the Tribunal rendered four further awards on the merits of the dispute, largely in favour of Astro, Astro then sought to enforce the awards in Singapore. Lippo in response requested the courts to refuse the enforcement, claiming that there was never any arbitration agreement between Lippo and the three Astro companies, who were not party to the SSA but had been joined by 1 ‘Tribunal. “At first instance, the Singapore High Court ruled in favour of Astro, one of the grounds being that Article 16(3) of the Model Law was a “one-shot remedy”. In other words, Lippo, given that it had not made an application to the court under Article 16(3) of the Model Law within the prescribed time limit of 30 days, was precluded from ising the same jurisdictional objections at the enforcement stage. Against this background, one of the Lippo companies, PY First Media TBK, appealed to the Singapore Court of Appeal * Arbitration Rules of the Singzpore International Aebitttion Centre SLAC Rules. 3d alton (1 July 207}. aw Nasantara Iteratonl BU and thors» PT Apands Prima Mitra [2012] SGHC 212, a LS, 157)WHAT NOW FOR ARTICLE 160)? 245 III. Decision of the Singapore Court of Appeal ‘The key ques jon considered by the Singspore Court of Appeal was whether, once a tribunal makes a preliminary ruling on its own jurisdiction, an application under Article 16(3) of the Model Law is the only route available to a patty seeking to challenge the arbitral award on grounds of lack of jurisdiction; or alternatively, whether a party can also challenge the award on the same grounds at the enforcement stage. Reversing the decision of the High Court, the Court of Appeal held that both avenues ate available. By conducting a detailed cxamination of the Model Law and its iran priparatoirs, its decision eel propositions: first, that the policy of “choice of remedies” is at the heart of the entire design of the Model Law; and secondly, that Article 16(3) is acither an exce mne-shot remedy”? ed on two jon to the “choice of remedies” not [AS The centrality of “choice of remedies? to the Model Law design the Court of Appeal found that a party secking to challenge an asbitel award on the grounds of juidietion has a “choice of remedies” under the Model Lav. On one level, the “choice of remedies” policy makes available the atin choice of taking positive steps to invalidate the tbunal’s award, such as bya jurisdictional challenge under Aricle 16(3),0€ by seeking to set maiden awatd under Avile 34. On another level, there isthe pase choice wr requesting an award to be fefused recognition or enforcement undet (rele 35 and 36, cal in tesponse to enforcement proceedings iiated by the other party ‘The Court of Appeal extracted the following passage from the Amabtical Commentary on Draft Text of a Made! Law on International Commercial Arbitration CAnahtical Commentary”), ia support of the argument for a conceptual separation between the two choices: ‘The application for setting aside constitutes. the exclusive recourse t0 a court against the award in the sense that it is the only means for actively attacking the award, ic. initiating proceedings for judicial review. A party retains, of course, the right co defend himself against the award, by requ recognition or enforcement in proceedings init pacty (articles 35 and 36) ting refusal of tated by the other SP Fn Mi TAR A Ni 8 57a 65174 PI ot Mai TAK v Au Naar neato BV an rs 2013] SA 57, 100132) S UNCHTRAL, Anata Came on Dnt Tet of Ma Lana Ikrioal mmr van UN Done ACN 97204 G5 Mach 98) atl Comet ve AJEN.9/264, p71 th Se li UNCTTRAL, Bega of vena Tae Lo Be or eet aon, UN Doc "ras Repe? phn 294 which aes sar poi ar Tertional BV alters 20 » Aaa! Commentary, UN United Nations Camnision on A/40/17 (21 August 1985) (246 EUROPEAN INTERNATIONAL ARBITRATION REVIEW VOL. 22 The Court of Appeal further enquied as to whether the two choices should be available as a ‘menu’ to the award debtor. ‘The UNCITRAL Working Group on Intemational Contract Practices (“Working Group”) hhad in fact considered this issue, as is evident feom the Report of the Working Group on Interatonal Contract Practices on the ork fits seveat session (Working Granp, Report) "There was a specific proposal put before the Working Group, which considered denying a party its passive remedy under Article 36 if the party did not make an active challenge to set aside the award under Article 34.!" Most extically, che Working Group rejected this proposal and provided the following explanation: It was pointed out that the intended preclusion unduly restricted the freedom of a party to decide on how to saise its objections. In view of the different purposes and effects of setting aside and of invoking grounds for cefusal of recognition or enforcement, a party should be free to avail itself of the altemative system of defences which was recognized by the 1958 New York Convention and should be'maintained in the model law. It was further pointed out that if the provision were limited (© recognition and enforcement of domestic awards it would not be consistent with the poliey of the model law to treat awards in a uniform manne itrespective of their place of origin.!? It is crucial to note the reference in the above passage to the defences recognised by the New York Convention. ‘The New York Convention deals only with challenges to a foreign award in the place of enforcement. contrast, the Model Law, in addition to challenges to foreign awards in the place of enforcement under Article 36, provides avenues for challenjes in the place of the seat of arbitration wader Asticle 34. ‘The “choice of remedies” is based on this distinction, It provides parties the option to challenge the award, cither actively in the place of the seat, of passively in the place of enforcement. Interestingly, the Model Law, by making both avenues available, gave rise to the possibility that the enforcement of awards in the place of the seat of arbitration could be treated differently from the enforcement of foreign awards in that same jurisdiction." ‘To do so. however, as expressed by the Working Group in the above passage, would be contrary t0 the policy of treating awards ia a uniform manner, irrespective of their place of origin." It is within this context chat the Court W UNCITRAL, Report of te Working Croup on International Coat Pros on the work ofits sweats sion, UN Doe AYCN9/246 (6 March 1984) CWarking Gryp Repo?) 1 Warking Comp Report, UN Doe AJCN.9/246,p 3821153 Working Comp Report, UN Dow A/CN.9/246,p 38a [154 © PY Fst Metis TBK + Avro Nasantare International BV and others [2013] SGCA 57, a [64 PT Ftot Media TBK « Auto NasantareTatenational BV’ and others 2013) SGCA 51, a (64WHAT NOW FOR ARTICLE 16(3)? 2aT of Appeal upheld the “choice of remedies” policy, under which parties are free to pursue either an active or a passive remedy. Under this reading of the Model Law, even if a party chooses not to actively attack an award in the place of the seat, absent any issues of waiver, that party remains able to passively defend against the enforcement proceedings initiated by the other patty.!> ‘This passive route is available to the party, regardless of whether the enforcement is sought in the seat or elsewhere. Te is important to note that Article 16(3) exists within this design of the Model Law B. Article 16(3) and “choice of remedies” If Atticle 16(3) were to be a ‘one-shot remedy’, once a tribunal makes a preliminary ruling on its own jurisdiction, the only route available to a party Seeking to challenge jurisdiction would be an application to the seat court wvithit 30 days. Such interpretation of Article 16(3) would be an exception wo the underlying system of “choice of remedies”. ‘The Court of Appeal considered that clear intention on the part of the drafters was needed to interpret Article 16(3) in this way Some participating members of the negotiations did in fact raise concerns regarding this issue. As recorded in the Amabtical Compilation of comments by Corernments and international organizations on the Draft Text of a Model Linw of International Canpmercial A itraion (“A nabtical Comp yy and IBA suggest that it should de mentioned in article 16(3) that a ruling by an arbitral ribunal that it has jurisdiction could also be contested by way of defence against recognition or enforcement of the award. It is pointed out by TBA that under article 16(3) it appears that questions of jurisdiction may only be raised in an action for setting aside, and not by way of defence to an action for recognition or enforcement of the award. ‘This ‘could lead to an absurd result if the losing party is unable to take an action for setting aside simply because the winner stepped in first with an action for enforcement.” There were also calls for clarification as to whether a party who chooses not to challenge the preliminary ruling pursuant to 16(3) may raise the same challenge in enforcement proceedings. ‘This concern was expressed in the A naistical Commentary. Mein TBK v Ast» Nasontara Internationa! BV ad epes [2013] SGCA 57, (71 le UNCITRAL, Anata! Capito of cements by Cavroments and international ongoizaions on te Dt Texs ofa Mage Law on International Comneral ciation, UN Doc S/CN.9/263 (194 March 1985) "Ania! Compilation 17 Anca Copan, UN Doc A/CN.9/263, p 30 at248 EUROPEAN INTERNATIONAL ARBITRATION REVIEW VOL. 2:2 The season for referting in acticle 16(3) only to the application for setting aside was that the thrust of this provision concerns the faculty of an objecting party to attack the arbitral tribunals ruling by initiating court proceedings for review of that ruling, However, the Commission may wish to consider the appropriateness of adding, for the sake of clarity, a reference to recognition or enforcement proceedings, which, although initiated by the other party, provide a forum for the objecting party to invoke lek of jurisdiction as a ground for refusal (under article 36(1)(a\()."* Furthermore, the Summary Record for meetings devoted to the preparation of the UNCITRAL Made! Law on International Commersial Arbitration (“Summary Rewer”)? also recorded a number of concerns voiced by the participating members, querying the availability of both active and passive remedies following a failure to raise objections under Article 16(3) In response to these concerns, the Summary Records do not revi al conclusion as to the availability of further recourse if parties do not seek judicial review within 30 days. Of one occasion it was suggested that these concerns “would be more appropriately discussed ,in conjunction with article 36.2 When the issue was raised again, the Chairman noted that it ould be a question of national procednral law on the ansboriy of judicial decivons (ces judicata)”. Given this ambivalence, the Court of Appeal concluded that Anticle 16(3) was not intended to preclude subsequent recourse to passive remedies. ‘The Court of Appeal inferred that, if such were the intentions behind Article 16), the drafiers of the Model Law would have dealt with the issue there and then The Court of Appeal also considered the competing jolicy considerations of certainty and efficiency, which undoubtedly could be achieved if Article 16(3) were to be the one and only route for jurisdictional objections. It observed that certainty and efficiency, though ising Anaya! Commentan, UN Doe A/CN.9/264,p 40 at [12] 0 57. Summary Records of the United Nations Commission on Intemational Trade Law meetings devoted tc the preparition of the UNCTTRAL Model ional United Nations Comision on Intrnaional Commercial rath Lam 399 CSammory Ree 2 PI First Media TBK v Astro Nasontand International BV and eters [2013] SGCA 57, at [110 Sammary Recor, p 440 at [51] (Me Borel, aly representative, 315th mtg) p 440 at (55) (St Michael Mustil, UK. tepres 315th mig), p 441 at [9] (Mr Holtzmann, US representative, 316th mig), p 443 at [33] (Me Holizennn, USA represeneative, 316th mtg) p 4459 at [16] (Me Broches, observer for the International Council for Commercial Arbitration, 310th mig) 2 Summary Rosrd p43 at [54 (Me Loewe, Chairman, 316 mig mmary Rese, 459 at [17] (Mr Loewe, Chairman, 320th en) 23 PI Bint Media TBK v Astro Nui tara Tvtenatioal BV and thers 2013] SGCA 51, at [11]WHAT NOW FOR ARTICLE 16(3)? 249 important, were not the paramount objectives in Article 16(3). In so fat the tribunal exercises its discretion and a party chooses to challenge that decision instantly before the courts, certainty sussounding the tribunals jurisdiction could be achieved at an eatlier stage under Article 1663). However, given the centrality of the “choice of remedies” policy 10 the Model Law, these considerations did not extend to precluding subsequent recousse to passive remedies policy, the Court of Appeal held that the failure to chall preliminary ruling pursuant ro Article 16(3) does aot deny the pa ‘option to later raise a challenge at the place of enforcement, regardless of ‘whether enforcement is sought in the place of the seat or elsewhere. Consistent with the “choice of cemedie: C. Outcome of the jurisdicti al challenge As a result, Lippo was able to pursue the passive route of resisting enfofeement in Singapore, even though it did not actively challenge the Tribunal’s preliminary ruling on jurisdiction as it was entitled to under Anticle 16(3)._In reviewing the ‘Tribunal’s decision to join the three Astro parties, the Court of Appeal found that the ‘Tribunal erred in allowing, the joinder. Consequently, the awards could not be enforced against Lippo by the three Astro companies who were not party to the SSA. Although the awards were still enforceable by the Astro companies that were party to the SSA, Astro lost most of the damages initially awarded in its favour by the High Court . IV. What Now for Art 16(3)? A number of interesting points can be taken from the decision of the gapore Court of Appeal. First, the decision draws attention to the application of the competence-competence principle in the Model Law. In particular, it revisits the policy considerations of balancing the rights of the patties to course in circumstances where there is real question over a tribunal’s jurisdiction, against che need to prevent the opportunity for the parties to engage in delay tactics. It serves asa reminder that the position under the Model Law represents a compromise between these competing, policy consideration: a interpretation of Ar policy calls into question the continuing utlity of this provision, An interpretation which permits pasties to make jurisdictional challenges at the enforcement stage, even though it had an eater opportunity to do so, is contsary to demands for efficiency and certainty that is sought after in international arbitration proceedings today as evident from the Manan preparatoier. Secondly, Je 16(3) which prioritises the “choice of remedies” 1 PT Ft Media TBK v Astro Nona Ttrational BV and thr (20 SGCA 57, a¢ [117