Singapore's new International Commercial Court issues first written judgment

The recently established Singapore International Commercial Court ("SICC") has issued its first written judgment, in a case concerning a joint venture between parties in Australia and Indonesia, with associated companies in Singapore: SIC/S 1/2015 - BCBC Singapore Pte Ltd and Anor v PT Bayan Resources TBK and Anor [2016] SGHC(I) 01 (12 May 2016).

The SICC is a new division of the Singapore High Court and part of the Supreme Court of Singapore designed to deal with transnational commercial disputes. It comprises both local and international judges. The Republic's first international commercial court case makes history with two distinguished international judges sitting with a presiding local judge to hear this US$800 million (S$1.1 billion) dispute.

The Court in these proceedings comprised of Singapore Justice Quentin Loh, and International Judges Vivian Ramsey and Anselmo Reyes.  Before stepping down in 2014, Sir Vivian served for nine years as a Judge of the High Court (Queen’s Bench Division) of England and Wales, including a period as Judge in charge of the Technology and Construction Court. The Hon. Justice Anselmo Reyes was appointed as a Judge of the Court of First Instance in Hong Kong and served in that capacity from 2003 to 2012.

The significance of the first SICC case was not lost on the presiding Justice Quentin Loh, who was reported by Singapore's Strait Times in November 2015 to have remarked:

"This court signifies not only the aspirations of Singapore to establish itself as a dispute-resolution hub, but it also reflects the needs of international trade and commerce for different fora, for different kinds of dispute-resolution methodologies to resolve the many different types of disputes that can and unfortunately do arise from time to time."

Joint Venture Dispute

The case concerns a joint venture in Indonesia between publicly listed parties from Australia and Indonesia and their associated companies. The joint venture sought to exploit a patented technology, a binderless coal briquetting process (“the BCB Process”), developed in Australia, to produce and sell upgraded sub-bituminous coal from East Kalimantan.

A claim was brought by BCBC Singapore Pte Ltd (“BCBCS”) and its affiliate company in Australia against PT Bayan Resources TBK (“BR”), an Indonesian company, and its affiliate company in Singapore. BR conversely commenced a counterclaim against BCBCS and its parent company in Australia, White Energy Company Limited.

The parties’ commercial relationship began in 2006 when they signed a joint venture deed. However, due to unexpected developments and increased expenses pertaining to the joint venture, including intervening legislation in Indonesia which regulated the sale of coal, numerous agreements, memoranda and a side letter were entered into between the parties during the period 2007 to 2011, resulting in a complex contractual matrix. 

SICC Proceedings

The parties agreed to have the dispute resolved in tranches; the first tranche to ascertain the true meaning and exact nature and scope of a number of provisions in the various agreements and the parties’ obligations. The parties agreed the Court would determine (a) funding issues, (b) coal supply issues and illegality; and (c) counterclaim issues on implied duties. 

In its judgment, the Court held that BR was not obliged to provide funding to the joint venture during the period of November 2011 to March 2012 (which was the period in which the dispute between the joint venture parties came to a head). Although the parties had entered into various subsequent agreements during the course of the joint venture, on a true construction of those agreements, the parties never gave up certain core rights under the original joint venture deed which required the agreement of both parties on the funding to be contributed to the joint venture and the right to refuse to provide additional funding at their absolute discretion.  

The Court declined to decide whether BR had an obligation to supply coal during this same time period due to the lack of evidence led on this issue, preferring to decide the issue at a subsequent tranche when the parties have the opportunity to lead relevant evidence to enable findings of fact on which the issue could be properly decided. The Court further held that the arrangement between the parties regarding the supply of coal was not void for illegality as it did not contravene Indonesian law. The coal would be sold at the regulated price and the Indonesian government would receive full royalties and taxes on the coal transactions. 

As for BR's counterclaim, the Court found that BCBCS was only obliged to assist in the development of the BCB Process and that its obligations did not extend to designing, building or operating the coal upgrading plant. Given these findings, it was not strictly necessary for the Court to determine whether BCBCS had an obligation to ensure that a certain minimum amount of upgraded coal briquettes would be produced within a reasonable period of time. Nevertheless, the Court found that BCBCS did not have such an obligation. The parties were aware at all times of the risks involved in the project and that the BCB Process was an unproven technology. Accordingly, an obligation of guaranteed performance could not be justified.

The Court has accorded the parties 30 days to consider the judgment and to then decide on the future conduct of the case.

 

Dominique Hogan-Doran SC FCIArb is a member of the Australian Bar and a Registered Foreign Lawyer with the Singapore International Commercial Court.

Liability limited under a scheme approved under professional standards legislation.