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29 December 2022

COCKETT MARINE OIL (ASIA) PTE LTD V. MISC BERHAD

In the recent Court of Appeal’s decision of Cockett Marine Oil (Asia) Pte Ltd v. Misc Berhad [2023] 1 CLJ 20 [“Misc Berhad”], the Court of Appeal reversed the decision of the High Court (see: [2022] 8 MLJ 786) to grant an anti-arbitration injunction on account of the High Court having exceeded its jurisdiction in determining that the arbitration agreement in question was not enforceable. This decision is vital as it serves to illustrate how the Court’s inherent powers to injunct arbitration proceedings are circumscribed by the Arbitration Act 2005 (in this case, section 18 of the Act).

BACKGROUND

The Respondent invited the Appellant, a Singaporean company, to tender for the supply of bunker fuel by barge to the Respondent’s vessel. This was followed by an exchange of emails between the parties. Pertinently, one of the Appellant’s emails contained a reference to its standard terms and conditions and a hyperlink to the same. Subsequently, a contract was concluded.

After the Appellant had made arrangements for supply of the first parcel of bunker fuel, the Appellant’s barge was detained by the Malaysian Maritime Enforcement Agency for potential offences under the Malaysian Customs Act 1967. The Respondent terminated the contract and commenced an action in the Malaysian High Court against the Appellant for breach of contract. The Appellant, on the other hand, commenced arbitration proceedings in London pursuant to clause 21 of the aforesaid standard terms and conditions, which provided that any dispute arising out of or in connection with the contract shall be referred to arbitration in London or elsewhere as mutually agreed in accordance with the London Maritime Arbitrations Association (LMAA) terms.

THE FIRST INSTANCE

Before the Malaysian High Court, the Appellant applied for a stay of court proceedings under section 10 of the Arbitration Act 2005 whereas the Respondent applied for an anti-arbitration injunction. In granting the anti-arbitration injunction and dismissing the stay application, the High Court held, in essence, that the Appellant had failed to demonstrate the existence of an arbitration agreement between the parties. In particular, the High Court remarked that the hyperlink in the Appellant’s email was insufficient to incorporate the Appellant’s standard terms and conditions, whereas the Respondent had made it plain in its proposal form provided to the Appellant that the Respondent’s terms and conditions, which provided that the parties submit to the exclusive jurisdiction of the Malaysian courts, were to apply.

THE APPEAL

The appeal centred on the jurisdiction of the Court to determine the existence of an arbitration agreement particularly in light of section 18 (1) of the Arbitration Act 2005, which provides that “(t)he arbitral tribunal may rule on its own jurisdiction, including any objection with respect to the existence or validity of the arbitration agreement”. The Court of Appeal stated that the correct position in law is that “where a party challenges the existence of the arbitration agreement, the jurisdiction of the Court is to consider whether prima facie there is an arbitration agreement to resolve disputes”. In this respect, “the jurisdiction of the Court is to decide if the issue on the existence of the arbitration agreement is in dispute and not merely a dubious or frivolous agreement”.

The Court of Appeal further stated that the wording of section 18 (8) of the Act, viz. “(w)here the arbitral tribunal rules on such a plea as a preliminary question that it has jurisdiction, any party may, within thirty days after having received notice of that ruling appeal to the High Court to decide the matter” implies that the High Court assumes an appellate and not an original jurisdiction.

Finally, the Court of Appeal explained that the threshold question that the Court is to answer is limited to identifying whether there is a prima facie existence of an arbitration agreement. The Court emphasised that once a prima facie determination is made, the matter is to be stayed and referred to arbitration for a full determination on whether there is in fact a binding arbitration agreement.

On the facts, the Court of Appeal held that based on the principle in Ajwa For Food Industries v. Pacific Inter-link Sdn Bhd [2013] 5 MLJ 625 (i.e. reference to a document is sufficient to incorporate an arbitration agreement for the purpose of section 9 of the Act), the hyperlink in the email to the Appellant’s standard terms and conditions constituted a reference to the arbitration clause thereunder. The Court of Appeal set aside the injunction and allowed the Appellant’s application to stay the original High Court proceedings.

CONCLUSION

The Court of Appeal’s decision in MISC Berhad affirms that the substantial determination as to the existence or validity of an arbitration agreement ought to be first made by an arbitral tribunal, whereas in the context of an anti-arbitration injunction application, the Court merely serves to answer the threshold issue of whether prima facie, there is an arbitration agreement. It is ventured that this decision represents an example of how the inherent jurisdiction of the Court to restrain proceedings in the interest of justice on the one hand, and the principle of kompetenz-kompetenz on the other, can be balanced.

 

Lam Ko Luen Partner [email protected]

Jeremy Ooi Senior Associate [email protected]

 

* This Alert is intended for general information of the clients of our Firm. It should not be regarded as legal professional advice. If you need advice based on specific facts, please feel free to contact us.