130 SINGAPORE LAW REPORTS (2014) 1 SLR International Research Corp PLC v Lufthansa Systems Asia Pacific Pte Ltd and another (2013] SGCA 55 Court of Appeal — Civil Appeal No 12 of 2013 Sundaresh Menon CJ, VK Rajah JA and Quentin Loh J 16 August; 18 October 2013 Arbitration — Agreement — Incorporation — Arbitration clause contained in first agreement which supplemental agreements said to be “annexed to and made a part of’ — Party to supplemental agreements not party to first agreement — Whether arbitration clause validly incorporated by reference into supplemental agreements — Whether arbitration clause binding on party to supplemental agreements — Whether clear and express reference to arbitration clause required before arbitration clause validly incorporated Arbitration — Arbitral tribunal — Jurisdiction — Dispute resolution clauses containing preconditions to arbitration — Whether preconditions enforceable — Whether preconditions complied with — Whether substantial compliance sufficient Arbitration — Arbitral tribunal — Jurisdiction — Whether preliminary ruling on jurisdiction could be set aside — Section 10 International Arbitration Act (Cap 143A, 2002 Rev Ed) — Article 16(3) Model Law on International Commercial Arbitration in the First Schedule to International Arbitration Act (Cap 143A, 2002 Rev Ed) Facts ‘The first respondent, Lufthansa Systems Asia Pacific Pte Ltd (“the Respondent”), and the second respondent, Datamat Public Company Ltd ("Datamat”), entered into an agreement referred to as the “Cooperation Agreement for Applications and Services Implementation” (“the Cooperation Agreement”) under which the Respondent was to supply, deliver, and commission a new “maintenance, repair and overhaul system”, This system was a component of the electronic data protection system that Datamat had agreed to provide Thai Airways under another agreement. The Cooperation Agreement contained a dispute resolution mechanism which prescribed in cl 37.2 that any dispute shall first be resolved by a specified mediation procedure, failing which, in cl 37.3, that the dispute shall ‘Owing to the financial difficulties of Datamat, the Respondent threatened to cease work unless Datamat could secure another party that would settle outstanding payments due to it as well as undertake to pay all future invoices, The Respondent, Datamat and the appellant, International Research Corporation PLC (“the Appellant”), entered into Supplemental Agreement No 1 whereby Datamat undertook to transfer to the Appellant moneys it received from Thai Airways, whereupon the Appellant would use those moneys to pay the Respondent for works and services rendered by it under the Cooperation Agreement. Supplemental Agreement No 2 was entered into by the parties subsequently under which it was agreed that sums due to the Respondent from Datamat under the Cooperation Agreement would be settled58 SINGAPORE LAW REPORTS (2014) 1 SLR above (at [51]) can be overcome. . We also agreed with the Judge’s finding (see the Judgment at [100]) that the pursuan' . Significantly, the arbitration claus. cl 37.3 refers only to “disputes ... which cannot be settled by mediation pursuant to Clause 37.2”. a 5 Finally, we noted that there was no suggestion that the Appellant had waived the preconditions for arbitration in cl 37.2. Compliance ‘Actual compliance 2 6 When it came to deciding whether cl 37.2 had been satisfied on the evidence before him, the Judge referred to a table produced in an affidavit affirmed on 17 July 2012 by Oliver Marissal, who was the Respondent's chief financial officer at the material time. This table (“the Table”), the at [110]). The Judge concluded (likewise at [110] of the Judgment) that given the many rounds of meetings between the parties, “the object of 137.2” [emphasis added] had been met. q 7 We respectfully disagree with the Judge on this point. In our judgment, from a perusal of the Table, it would have been apparent that 137.2 had not been satisfied. In our judgment, what was contemplated under cl 37.2 was that any dispute would be escalated up the hierarchies of the respective parties with representatives of increasing seniority to meet to attempt resolution. The Table showed that a mix of various apparently random meetings had been held. 58 Aside from this, it was not altogether clear just what had been discussed at these meetings. The Judge did not think that this was problematic because he “[had] not seen any evidence from [the Appellant]International Research Corp PLCV (2014) 1 SLR Lufthansa Systems Asia Pacific Pte Ltd 159 that the [p]ayment (d]ispute was never discussed or sought to be resolved at these meetings” (see the Judgment at [110]). With respect, there was no basis for placing the burden of proof on this issue upon the Appellant. It Substantial compliance 59 The Judge appeared to have been persuaded that the conditions precedent in cl37.2 had been satisfied because its “object” (see the Judgment at [110]) had been met. In this regard, the Judge applied the English High Court decision of Halifax Financial Services Ltd v Intuitive Systems Ltd [1999] 1 All ER (Comm) 303 (“Halifax Financial”), which was cited to him and also to us. Mr Dhillon submitted that Halifax Financial stood for the proposition that it was sufficient for the Respondent to have complied “in substance” with the procedure set out in cl 37.2. Therefore, it was argued, despite some shortcomings in what in fact might have been done, the conditions precedent to the commencement of arbitration should be found to have been fulfilled because their object, namely, to attempt and endeavour to address the dispute between the Appellant and the Respondent at the respective parties’ senior management levels with the aim of resolving such dispute, had been satisfied. 60 — Halifax Financial concerned an interlocutory appeal where, in respect of the claim brought by the claimant, the defendant sought a declaration that the court did not have jurisdiction because there was alleged non- compliance with a dispute resolution clause. There, the dispute resolution clause (“cl 33.1”) read as follows (see Halifax Financial at 305) 33.1 In the event of any dispute arising between the Parties in connection with this agreement, senior representatives of the Parties will, within 10 Business Days of a written notice from either Party to the other, meet in good faith and attempt to resolve the dispute without recourse to legal proceedings Meetings were held between the representatives of the parties, but these were not expressly labelled “cl 33.1 meetings”. McKinnon J held that cl 33.1 prescribed an optional contractual procedure, rather than a mandatory one which had to be complied with before legal proceedings could be brought. Clause 33.1 was thus found not to be a condition precedent to the commencement of legal proceedings. Having decided the matter on this basis, McKinnon J went on to express doubts over the enforceability of <1 33.1, although he also opined that it had been satisfied on the facts. McKinnon J thought that even though the meetings between the parties had not been labelled “cl 33.1 meetings”, both parties had been represented at those meetings by the appropriate “senior representatives” (see Halifax‘[Link] with K Williams, Damages in International Investment repared in the course of research for (BIICL, 2008) Case summary Sapphire International Petroleums Ltd. v National Iranian Oil Company Year of the award: 1963 Forum: Ad hoc Tribunal Applicable Law: General principles of law Arbitrator Pierre Cavin, Federal Judge, Lausanne, Switzerland Timeline of the dispute 28 September 1960 - request for arbitration 12 January 1961 - arbitrator appointed 15 March 1963 - arbitral award Table of contents 2 2 LL Factual Background and Claims, 3 II Findings on Merits... 4 A. Applicable Law. 4 B. Breach of Contract, 5 IV. Findings on Damages...u.c:cucseueeeucusnecest 6 A. Law Applicable to the Determination of Damages. 6 B. Standard of Compensation... a6 B. Claims. . 6 C. Quantification of Damages. 7 1. Expenses incurred before the conclusion of the contra 1 2. Expenses incurred after the conclusion of the contract. 7 3. Loss of profit. 7 4, Refund of the inder 8 D_Interest, 8 E. Costs, & V. Implications / Initial Analysis... 9drawn, specifically that the clause rejected the exclusive application of Iranian law. (35 ILR 172) = Article 38 of the contract expressed an intention to carry out the provisions of the contract according to the principles of good faith and good will, and to respect the spirit as well as the letter of the contract. It has been held in several arbitral awards’ concerning similar legal relations that such a clause is scarcely compatible with the strict application of the internal law of a particular country and it much more often calls for an application of the general principles of law ‘based upon reason and upon the common practice of civilised countries, (35 ILR 172-3) = Article 37 of the contract provided that force majeure as used in the contract would be defined according to the principles of intemational law. If Article 37 is read with Article 38 then it could reasonably be held to have a wider application and to extend to the entire contract. (35 ILR 173-4) = The contract with Sapphire was the last of several contracts made by NIOC which had the same object. In the contract of October 1954 with the International Oil Consortium, Article 41 of that contract was identical to Article 38 of the Sapphire Petroleum contract with the difference that the contract with the Consortium pointed to the general principles of law as applicable law. (35 ILR 174-5) B. Breach of Contract The validity of the contract was not contested; the dispute between the parties concemed the interpretation and performance of the contract. The arbitrator was satisfied that the plaintiff had fulfilled its obligations under the contract regarding the prospecting works at Teast until February 1960. Hé also)found that the defendant The arbitrator also observed that there was a general rule of private law that said the failure of one party to a synallagmatic contract to perform its obligations releases the other party from its obligations and gives rise to a right to pecuniary compensation in the form of damages. He further noted that this rule could not be set aside even in the case where the contract contained elements which had their origin in administrative law, such as the present case which concemed a territorial concession: Rules of public law, which might possibly differ from civil law, could only be taken into consideration if the Iranian State had relied upon its sovereign rights and had taken steps of a public law nature likely to endanger the performance of the contract.(35 ILR 183) Petroleum Developments Limited v Ruler of Abu Dhabi, ICLQ (1952), p.247; Ruler of Qatar v International Marine Oil Company Limited, 18 ILR (1951), p.144141m72016 Cable & Wireless Plc vISM United Kingdom Ltd. [2002] EWHC 2059 (Comm}@ttober 2002) @ ne England and Wales High Court ea" (Commercial Court) Decisions [Home] [Databases] [World Law] [Multidatabase Searc§ [Help] [Feedback] ‘You are here: BAILI>> Databases >> England and Wales High Court (Commercial Court) Decision®> Cable & Wireless Ple v IBM United Kingdom Ltd. [2002] EWHC 2059 (Comm) October 2002) URL:hap:/swww. bail. org/ew/eases/EWHC/Comm/2002/2059, html Cite as: [2002] 2 All ER (Comm) 1042003] BLR 892002] Masons CLR $8[2002] CLC 13192002] EWHC 2059 (Comm) [New search] [Contexfy] [View without highlight}(rintable REF versior [Help] Neutral Citation Number: [2002] EWHC 2089 (Comm, Case No: 2002 Folio 668 IN THE HIGH COURT OF JUSTICE QUEENS BENCH DIVISION COMMERCIAL COURT Royal Courts of Justice Strand, London, WC2A 2LL 11 October 2002 Before THE HONOURABLE MR JUSTICE COLMAN Between: CABLES & tWIRELESSPLC (“C&W”) Claimant -and- IBM UNITED KINGDOM LTD (“IBM”) Defendant Mr Timothy Dutton QC (instructed by Mayer Brwn Rowe and Maw) for the Claimaint Mr Michael Crane QC (instructed by Feshfields Bruckhaus Deringer) for the Defendants Hearing dates : 24 September 2002 HTML VERSION OF HANDED DOWN JUDGMENT. Crown Copyright © Mr Justice Colman : There are two applications before the courthe claimants’ application is under CPR Rule 8 for a declarati« as to the meaning of one provision (paragraph 5.3 of schedule 10) of a Global Framework Agreement (“t tp wana [Link] ?doc=/ewlcases/EWHC/Comn/2002/[Link]&query=(cable}¥AND+(wireless) so141m72016 Cable & Wireless Plc vISM United Kingdom Ltd. [2002] EWHC 2059 (Comm}@ttober 2002) precious horses are killed on a railway line, but which an apology from a very senior police officer is all that the claimant is really seeking and the money side of the matter fall8 away Further CPR 1.4 provides as follows: “(1) The court must further the overriding objective by actively managing cases. (2) Active ease management includes ... (e) encouraging the parties to use an alternative dispute resolution procedure if the court considers that appropriate and facilitating the use of such procedure.” Indeed, the practice in this court of making non-mandatory ADR orders substantially in the words now s in Appendix 7 to the Commercial Court Guide precedes the coming into force of the CIR. making of such orders in appropriate cases is now commonplace, even where one party objects to such an order bei made. Occasionallythe circumstances of a dispute may appear to the court so strongly to demand a refere to ADR that, even in the face of objections from both parties, such orders have been made and have led t settlements much to the surprise of the parties concerned For the courts now to decline to enforce contractual references to ADR on the grounds of intrinsic uncert would be to fly in the face of public policy as expressed in the CPR and as reflected in the judgment of th Court of Appeal isDunnett vRailtrack supra, Accordinglyin the present case I conclude that clause 41.2 includes afgaiéntly defined mutual obligation upon the parties both to go through the process of initiating a mediation, selecting a mediator and at least presenting that mediator with its case and its documents and attending upon'Biinre can be no serious difficulty in determining whether a party has complied with such requirements Reliance by C&W on the dictum of Steyn [Link] Smith VH&S Internationalsupra, at page 131L is, in my judgment, unhelpfuEhe passage in question was in these words: “The plaintif rightly conceded that the provisions that the parties shall strive to settle the matter amicablyand that a dispute shall, in the first place, be submitted for conciliation, do not create enforceable legal obligations.” Investigation of the clause entitled Settlement of Disputes in that case shows it to have been in terms whi although providing that the parties should first “strive to settle the (dispute) amicably” and, upon their fa do so, that it should be “adjudicated upon under the Rules of Conciliation and Arbitration of the Internat Chamber of Commerce,” contained nothing amounting to a reference to conciliation as distinct from [Link] ICC arbitration rules appear under the above title and have always included in addition to arbitration procedure a facility for conciliation, but the clause in that case by its use of the words “adjudi upon” could not conceivably be treated as a reference to the ICC conciliation faciligordinglythe concession by counsel on behalf of the plaifiifthat case was, in so far as it related to conciliation, entirel: irrelevant to any matter in issue and the dictum of the judge was both obiter and irrelevant. Before leaving this point of construction I would wish to add that contractual references to ADR which é include provision for an identifiable procedure would not necessarily fail to be enforceable by reason of uncertainty An important consideration would be whether the obligation to mediate was expressed in unqualified and mandatory terms or whethas is the case with the standard form of ADR orders in this court, the duty to mediate was expressed in qualified terms ~ “shall take such serious steps as they may b advised" The wording of each reference will have to be examined with these considerations in mind, principle, howeverwhere there is an unqualified reference to ADR, afseiéntly certain and definable minimum duty of participation should not be hard to find. tp wana [Link] ?doc=/ewlcases/EWHC/Comn/2002/[Link]&query=(cable}¥AND+(wireless) a0