Part B 2021 ARB21_PS03

ARB21_PS03
Discussion Points

1. Discuss the relationship between conservatory orders such as injunctions and the arbitral regime
in general. Can you obtain an injunction to assist the arbitration process?

2. What do you understand by the ‘public policy exception’ in the law of arbitration in Singapore?
Explain the elements of the ‘public policy exception’.

Practice Question 3

John Lim, a well-known orthopaedic surgeon owned several good class bungalows (GCB). He decided
to sell one of these. The particular GCB was at the posh Nassim Road area. It is a 2700 sq m property.
Although he decided to sell the property, a developer Design & Construction Pte Ltd (DCPL)
suggested that they could re-design the old mansion into something ‘excitingly new and green’.
Attracted by the idea, John decided that he will still sell the property but will lease the re-designed
property and use it for his son’s accommodation. He thought this may be a good experiment as a
kind of test for his other properties. John and DCPL duly entered into a sale and lease-back contract.
As the re-design of the ‘old mansion’ was a fundamental term of the contract, the contract ended up
being rather complex. In the result, on advice, parties provided for arbitration as the dispute
resolution mechanism. The arbitration clause was adapted from the Singapore International
Arbitration Centre (SIAC) sample arbitration clause. It reads:

“Any dispute arising out of or in connection with this contract, including any question
regarding its existence, validity or termination, shall be resolved either by litigation in
court or arbitration, at the option of the party which first commences an action,
either in court or by a reference to arbitration. In the event the dispute is referred to
arbitration, the arbitration shall be administered by the Singapore International
Arbitration Centre (“SIAC”) in accordance with the Arbitration Rules of the Singapore
International Arbitration Centre (“SIAC Rules’) for the time being in force, which rules
shall be deemed to be incorporated by reference in this clause. In that event, the seat
of the arbitration shall be Singapore and the Tribunal shall consist of a single
arbitrator. The language of the arbitration shall be English.”

Unfortunately, as the project progressed, trouble started. John was highly perturbed that the design
that DCPL came up with was totally unsatisfactory and he regretted selling the ‘old mansion’ to them
which was now gone! As he was bound to lease back the redesigned property, and the contract did
allow him a limited say as to the re-design, he did not wish to ‘let the matter go’. He immediately
consulted his lawyers. His lawyers advised and immediately obtained an injunction to stop further
work on the project. DCPL was duly served with the injunction. Simultaneously, on advice John
issued notice of arbitration under the contract.

On receipt of the injunction, DCPL quickly consulted you as their lawyer. DCPL sought your advice
and DCPL also had the following to say:

1. As a result of the urgency of the project, DCPL would rather go to court to discharge the
injunction and then litigate in court. That would avoid having to go through the ‘painful
process’ of appointing an arbitrator and having to adhere to SIAC’s processes. From DCPL’s
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experience, litigation in court would be most expeditious and expedient.

2. DCPL thought also that, perhaps, the reference by John Lim to arbitration is invalid as the
arbitration clause provides for litigation as well. Even if the clause was valid, DCPL feels that
the clause offends public policy in that it is unfair. It is unfair because it permits whichever
party acting first an unfair advantage. The matter should simply go to court.

3. As to the injunction, DCPL believed that John having sought and obtained an injunction in
court, should be considered to have waived his right to refer the dispute to arbitration.

DCPL seeks your advice on the following:

1. Whether John has waived his right to refer the dispute to arbitration by obtaining the
injunction?

2. Whether the matter should go to court for litigation.

3. Assuming, DCPL decides to go to arbitration anyway, can DCPL avoid the arbitral award (if
DCPL loses the case) on the basis that the arbitration clause is contrary to public policy?

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