Huawei Tech Investment Company Ltd and Huawei International Ltd v Sampoerna Strategic Holdings Ltd
| Jurisdiction | Bermuda |
| Judge | Kawaley, C.J. |
| Judgment Date | 14 February 2014 |
| Court | Supreme Court (Bermuda) |
| Docket Number | 363 of 2013 |
| Date | 14 February 2014 |
Supreme Court
Kawaley, C.J.
363 of 2013
Mr. David Kessaram and Ms. Lilla Zuill, Cox Hallett Wilkinson Limited, for the applicants.
Mr. Saul Froomkin QC, Isis Law Ltd, for the respondent.
Civil Practice and Procedure - Application to set aside the grant of leave to enter judgment in terms of an award granted to the applicants — Whether the award dealt with matters beyond the scope of the dispute which was referred to arbitration — Whether the proceedings which resulted in the award were inconsistent with the rules of natural justice.
By Summons dated October 4, 2013, the applicants applied for leave pursuant to section 40(1) of the Bermuda International Conciliation and Arbitration Act, 1993 (“the Act”) to enter judgment in terms of Consolidated Final Award made against the respondent on June 27, 2013 and the Addendum made to it on August 19, 2013 in the Singapore International Arbitration Centre (“the Award”). As contemplated by the Act, the application was heard on an ex parte basis and on October 9, 2013, Hellman, J. granted leave to enter judgment in terms of the Award, subject to the respondents' right to apply within 14 days of service of the Order to set aside leave. Under the Award, the respondent was ordered to pay the 1st applicant nearly US$5million plus costs and the 2nd applicant approximately US$13.5 million plus costs.
By Summons dated November 14, 2013, the respondent applied to set aside the grant of leave on the following grounds:
(i) the dispute deals with disputes not contemplated by and not falling within the submission to arbitrate;
(ii) the Award contains decisions on matters beyond the scope of the submission to arbitrate;
(iii) the respondent was unable to present its case;
(iv) the enforcement of the Award would be contrary to public policy.
At the substantive hearing of the respondent's Summons on January 31, 2014, I dismissed the application and awarded costs to the applicants. I now give reasons for that decision.
The respondents sought to challenge the enforceability of the Award on essentially two related grounds. Firstly, it was submitted that the Award dealt with matters beyond the scope of the dispute which was referred to arbitration and secondly, because of this, the proceedings which resulted in the Award were inconsistent with the rules of natural justice so that it would contravene public policy to give effect to the Award.
The Award related to claims made by the applicants pursuant to (a) a letter dated April 8, 2008 attaching a Note issued to the 2nd applicant and (b) two letters dated September 9, 2008 also attaching Notes, each of which was issued by the respondent to the 1st applicant (“the claimant”). Each letter contained an arbitration agreement and each Note promised payment in respect of goods supplied by the applicants (the claimants in the arbitrations) under two Product Supply Agreements, dated December 18, 2007 and March 9, 2007 respectively (“the Contracts”).
No dispute turned on the arbitration agreement itself. It was agreed that the governing law of the contract was Indonesian law although the arbitral forum was Singapore. The respondent's complaint was not that the Award dealt with matters which fell outside the scope of the arbitration agreement. The scope of submission complaint was, in essence, a pleading point based on the central complaint that the specific provision of the Indonesian Civil Code upon which the respondent was found to be liable to pay the sums they were ordered to pay under the Award was not relied upon by the claimants in their Statement of Claim.
Nevertheless, for completeness, it is worth mentioning that the Notices of Arbitration by which the claimants referred the disputes to arbitration sought monies due under the Notes specified therein in respect of goods delivered under certain purchase orders issued pursuant to the Contracts and, inter alia, “[a]ny other reliefs as may be just and expedient.”
The claimants' Consolidated Statement of Claim characterised the dispute as being a failure by the respondent to pay sums which it had admitted were due. It was alleged that under Indonesian law, either:
(a) the Notes were valid under Article 174 of the Indonesian Commercial Code;
(b) if the Notes were defective for failure to specify a maturity date, they were payable immediately under Article 175(2);
(c) if the Notes were deemed to contain conditions, by virtue of Article 1340 of the Indonesian Civil Code, the conditions were deemed not to exist;
(d) if the Notes did not fall within Article 174 of the Indonesian Commercial Code, they were in any event enforceable as promises to pay pursuant to Articles 1313 as read with 1320 and 1314 of the Indonesian Civil Code;
(e) the respondent's agreement to pay was further enforceable under the general principles (including the pacta sunt servanda and good faith principles) enshrined in Article 1338 of the Indonesian Civil Code;
(f) under Indonesian law the claimant as holder of the Notes in good faith was entitled to protection against any challenge to the Notes;
(g) if the Notes did not fall within Article 174 of the Indonesian Commercial Code, they were in any event enforceable as guarantees and strict compliance with the requirements of Article 1831 of the Indonesian Civil Code had been waived.
As Mr. Froomkin was keen to point out, there was clearly no reference in the claimants' pleading to Article 1316 of the Civil Code upon which ground the Tribunal found the payment obligations underlying the technically defective Notes were nevertheless enforceable.
At the arbitration hearing, the claimants were represented by Mr. Boey of ATMD Bird & Bird LLP and Mr. Kumarasingam of Messrs Lawrence Quahe & Woo LLC. Mr. Kessaram took the Court through the key portions of the transcript with great care. From this review it was evident that:
(a) in Mr. Boey's opening submissions he asserted a desire to rely on Article 1316, implicitly acknowledging that this was not pleaded but submitting that the respondent would not be prejudiced because its Indonesian law expert witness had already considered this legal provision in his own report;
(b) Mr. Kumarasingam in his own opening diligently objected to the claimants' entitlement to rely on the Article 1316 point on the grounds that it was not pleaded. Mr. Boey replied that it was a purely technical objection and that the Tribunal ought not to be restricted in applying Indonesian law to applying only those Code provisions which had been expressly pleaded;
(c) the Chairman implicitly rejected the objection finding (January 9, 2012, page 63): “…but since you have heard what the claimants have argued…as well as in this morning's submissions, you are free to comment as to that as a rebuttal response”;
(d) two days later Mr. Kumarasingam concluded his opening submissions on Article 1316 which he clarified to the Tribunal had two elements to it. Firstly, Article 1316 did not apply to failed promissory notes at all; secondly that the claim did not meet the requirements of the Article. The Chairman responded: “Understood” (January 11, 2011, page 135);
(e) on January 12, 2012, Mr. Kumarasingam questioned the claimants' expert for approximately 30 minutes on the Article 1316 issue after the Tribunal's intervention. The Tribunal indicated that at the end of the hearing counsel would have sufficient time to tender written submissions on the law.
The hearing concluded in January 2012. The respondent's Consolidated Closing Submissions were filed on or about May 4, 2012, almost four months later. Six pages (paragraphs 112–133) were devoted to the respondent's case on why Article 1316 could not be relied upon by the claimants. Only the first five paragraphs dealt with the point that because Article 1316 was not raised in the claimants' pleading it could not be relied upon. Prejudice was complained of in a single sentence in the following terms:
“By only evincing their intention on the first day of the hearing, the claimants have acted unfairly and have prejudiced the respondent as the respondent was not provided with any opportunity to prepare its case in relation to this point.”
This complaint must have rung somewhat hollow, not simply because the record of the arbitration hearing suggests that the respondent's counsel dealt with the point quite ably both in his opening submissions and in cross-examination of the claimants' expert. In addition, the point was actually first canvassed in his own expert's report, undermining any suggestion that the respondent's expert was taken by surprise. Article 1316 appears to have been one of several Indonesian Civil Code provisions which are designed to avoid substantive justice being defeated by a rigid adherence to highly technical formal rules. The claimants had expressly relied upon similar statutory provisions, and the additional legal basis for the existing pleaded case involved no new fact evidence whatsoever.
It is admitted that the Award was silent on the objection that Article 1316 had not been pleaded. It is obvious that in deciding that the claimant's case succeeded on the basis of Article 1316, the Tribunal implicitly rejected again the objection it had already rejected explicitly during opening speeches.
Legal findings: general principles governing the enforcement of foreign arbitral awards
It is common ground that the Award qualified for enforcement under domestic law rules giving effect in Bermuda law to the New York Convention on the Recognition and...
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