Case Update - International Research Corp PLC v Lufthansa Systems Asia Pacific Pte Ltd and another [2013] SGCA 55

Introduction

In the landmark decision of International Research Corp PLC v Lufthansa Systems Asia Pacific Pte Ltd and another [2013] SGCA 55 [IRCP v Lufthansa] delivered on 18 October 2013, the Singapore Court of Appeal departed from the strict rule governing the incorporation of arbitration clauses from one contract into another.

The strict rule of incorporation of arbitration clauses requires a clear and express reference to an arbitration clause contained in one contract before the arbitration clause may be incorporated into a separate, albeit related, contract.

This strict rule was first established by the English House of Lords in TW Thomas & Co Limited v Portsea Steamship Company Limited [1912] AC 1. In 1996, it was imported into our jurisprudence when the Singapore Court of Appeal applied the strict rule in Star-Trans Far East Pte Ltd v Norske-Tech Ltd and others [1996] 2 SLR(R) 196 [Star Trans] at [28]. Star Trans has been, till now, the authority on the incorporation of an arbitration clause from one contract into a separate contract. The decision in IRCP v Lufthansa has now effectively reversed Star Trans on this issue.

In addition, the Court of Appeal authoritatively ruled that strict compliance with multi-tier dispute resolution clauses was required as a precondition to arbitration. The Court observed that substantial compliance with such clauses was not sufficient to discharge the obligations under the clauses.

Partner, Mr Subramanian Pillai and Associates, Ms Venetia Tan and Ms Melanie Tien from Colin Ng & Partners LLP represented the successful Appellant, International Research Corporation PLC of Thailand, before the Court of Appeal in this matter.

The Facts

International Research Corporation PLC (the "Appellant") successfully appealed to the Singapore Court of Appeal against the decision of the High Court.

The High Court had dismissed the Appellant's application to set aside an arbitral tribunal's ruling that it had jurisdiction over a dispute. This dispute had been referred to the arbitral tribunal by Lufthansa Systems Asia Pacific Pte Ltd ("the Respondent"). The Appellant had relied on Article 16(3) of the UNCITRAL Model Law 1985 ("the Model Law") read with Section 10 of the International Arbitration Act ("the IAA") in its application.

The dispute between the Appellant and the Respondent arose under the following agreements:

The Two-Party Agreements

Three two-party commercial agreements were made among the parties.

First, Datamat entered into an agreement ("the EDP System Agreement") to provide Thai Airways International PLC ("Thai Airways") with an electronic data protection system ("the EDP System").

Second, Datamat entered into an agreement with the Respondent ("the Cooperation Agreement") for the Respondent to supply Datamat with the Maintenance, Repair and Overhaul System ("the MRO System"). The MRO System was a component of the EDP System that was to be provided to Thai Airways.

Third, Datamat entered into an agreement with the Appellant ("the Sale and Purchase Agreement"). The Appellant agreed to: (1) supply hardware and software products for the EDP System; and, (2) provide a banker's guarantee on behalf of Datamat to the Respondent. The banker's guarantee would allow Datamat to meet its obligations under the EDP System Agreement.

In return, Datamat assigned its right to receive payments from Thai Airways under the EDP System Agreement to Siam Commercial Bank ("SCB"). These payments were to be deposited into an account that Datamat had opened with SCB. The Appellant would then be able to use the SCB account to deduct payments due from Datamat under the Sale and Purchase Agreement. In addition, once Thai Airways made the payments into the SCB account, the Appellant was to pay the Respondent for goods and...