JURISDICTION vs ADMISSIBILITY – A NEW DICHOTOMY IN COMMERCIAL ARBITRATIONS

By Chen Mian Kuang, Partner of M.K. Chen & Leong, LL.B. (Hons) (Bristol),
Barrister-at-Law (Lincoln’s Inn), FCIArb, AIAC Panel of Arbitrators.

INTRODUCTION

 The Singapore courts recently introduced the concept of “admissibility” into commercial arbitrations, to classify a category of objections that do not go towards jurisdiction of the arbitral tribunal, nor towards the merits of the claim.

That concept was adopted from investment treaty arbitrations.  It was first utilized by the Singapore Court of Appeal in Swissbourgh Diamond Mines (Pty) Ltd v Kingdom of Lesotho [1] which concerned such an arbitration.  It was then subsequently applied by the said Court in BBA v BAZ [2] and BTN v BTP [3].  The latter two cases concerned international commercial arbitrations.

Where a party’s objection relates to the admissibility of the claim – as opposed to jurisdiction of the tribunal – the tribunal’s decision on the objection cannot be reviewed by the courts.

The courts referred to below are Singapore courts, unless otherwise stated.

SWISSBOURGH

In Swissbourgh [4], the appellants were the investors who commenced an arbitration against the respondent (Kingdom of Lesotho) under the Protocol on Finance and Investment of the Southern African Development Community (18 August 2006) (the “Protocol”) [5].  The appellants succeeded before the arbitral tribunal, but the latter’s award was subsequently set aside by the High Court.  The Court of Appeal dismissed the appellant’s appeal against the High Court decision.

One of the issues before the Court of Appeal was whether the appellants have exhausted their local remedies before submitting the dispute to arbitration, as required by the Protocol.  In considering this issue, the Court of Appeal drew a distinction between matters that go towards jurisdiction of the tribunal and those that go towards admissibility of a claim [6]:

a) Jurisdiction refers to the power of the tribunal to hear a case, whereas admissibility refers to whether it is appropriate for the tribunal to hear it.

b) Jurisdiction deals with the existence of the adjudicative power of an arbitral tribunal, whereas admissibility deals with the exercise of that power and the suitability of the claim brought pursuant to that power for adjudication.

c) Is the objection directed against the tribunal (and is hence jurisdictional) or is it directed at the claim (and is hence one of admissibility)?

d) Is the challenge related to the interpretation and application of the jurisdictional clause of the international tribunal (and hence jurisdictional), or is it related to the interpretation and application of another rule or instrument (and is hence one of admissibility)?

The distinction between jurisdiction and admissibility is important because a decision of the tribunal in respect of jurisdiction is reviewable by the supervisory courts at the seat of the arbitration (for non-ICSID arbitrations) or before an ICSID ad hoc committee pursuant to Art 52 of the ICSID Convention (for ICSID arbitrations), whereas a decision of the tribunal on admissibility is not reviewable [7].

Applying the principles above, the Court of Appeal held that the exhaustion requirement was jurisdictional; the Protocol intended for that requirement to be fulfilled as a pre-condition to arbitration.  Consequently, the arbitral tribunal’s award in respect of that requirement was reviewable by the Singapore courts (being the supervisory courts at the seat of the arbitration) [8].

BBA

BBA [9] concerned a dispute in connection with a sale and purchase agreement for shares.  The agreement contained an arbitration clause, pursuant to which the buyer commenced arbitration against the sellers.  The arbitral tribunal delivered an award in favour of the buyer, including a finding that the buyer’s claim was not barred by the limitation period (the “time bar decision”) [10].  The seller applied to set aside the award, but was unsuccessful before the High Court and Court of Appeal.

When considering whether the time bar decision can be reviewed by the courts, the Court of Appeal referred to the jurisdiction vs admissibility distinction in Swissbourgh.  The Court of Appeal also elaborated on the “tribunal versus claim” test mentioned in Swissbourgh [11]:

a) The “tribunal versus claim” test asks whether the objection is targeted at the tribunal (in the sense that the claim should not be arbitrated due to a defect in or omission to consent to arbitration), or at the claim (in that the claim itself is defective and should not be raised at all).

b) If the objection succeeds, was it the objector’s intention that the relevant claim should no longer be adjudicated in arbitration but in some other forum, or was it that the claim could no longer be raised at all? Opting for the former conclusion would mean that the objection is jurisdictional.

c) Imagine that the objection succeeds – if the reason for such an outcome would be:

i) that the claim could not be brought to the particular forum seized, the issue is ordinarily one of jurisdiction and subject to further recourse.

ii) that the claim should not be heard at all (or at least not yet), the issue is ordinarily one of admissibility and the tribunal’s decision is final.

d) Arguments as to the existence, scope and validity of the arbitration agreement are invariably regarded as jurisdictional, as are questions of the claimant’s standing to bring a claim or the possibility of binding non-signatory respondents.

e) Conversely, admissibility relates to the nature of the claim, or to particular circumstances connected with it. It asks whether a tribunal may decline to render a decision on the merits for reasons other than a lack of jurisdiction.

The Court of Appeal held that the issue of the time bar goes towards admissibility, as it attacks the claim [12].  As such, the arbitral tribunal’s time bar decision is not subject to review by the courts [13].

BTN

BTN [14] is another case relating to a share transaction dispute.  The share purchase agreement between the respondents (sellers) and appellants (buyers) contained an arbitration clause, pursuant to which the respondents initiated an arbitration against the appellants.  An issue that arose before the arbitral tribunal was whether the respondents were terminated with, or without, cause from their employment in a company related to the appellants.  If the termination was without cause, the respondents would be entitled to their claims, as stipulated in the said agreement.

By a partial award, the arbitral tribunal found that res judicata applied to prevent the appellants from arguing that the respondents were terminated with cause.  This was because of previous Malaysian Industrial Court awards which found that the respondents were dismissed from their employment without just cause [15].

The appellants applied to set aside the partial award, but was unsuccessful before the High Court and Court of Appeal.

The appellants contended that the tribunal’s res judicata finding was contrary to public policy.  In considering this challenge, the Court of Appeal relied on the distinction between jurisdiction and admissibility, and applied the “tribunal versus claim” test to hold that [16]:

a) Res judicata operates against the litigants, and not against the tribunal.

b) Consequently, the tribunal’s finding on res judicata is not a decision on its jurisdiction, but on admissibility of the claim concerned. As such, that finding is not subject to review by the courts.

The Court of Appeal also made a general observation that a tribunal’s decisions on objections regarding preconditions to arbitration, like time limits, the fulfilment of conditions precedent such as conciliation provisions before arbitration may be pursued, mootness, and ripeness are matters of admissibility, not jurisdiction [17].

CONCLUSION

Traditionally in commercial (i.e. non-investment treaty) arbitrations, the distinction made in jurisdictional challenges has been whether the objection goes towards jurisdiction of the tribunal or merits of the claim.  The introduction of “admissibility” covers a category of challenges that perhaps do not fit comfortably into either of the foregoing classifications.  Per BBA, the objection goes towards admissibility if it asks whether a tribunal may decline to render a decision on the merits for reasons other than a lack of jurisdiction.

However, the exact parameters of admissibility vis-à-vis the neighboring concepts of jurisdiction and merits are still fluid.  For example, the Court of Appeal in BTN mentioned that preconditions to arbitration, like fulfilment of conditions precedent such as conciliation provisions before arbitration may be pursued, are matters of admissibility, not jurisdiction [18].  In contrast, the Court of Appeal had previously in International Research Corp PLC v Lufthansa Systems Asia Pacific Pte Ltd [19] held that non-compliance with the pre-conditions to arbitration (referral to parties’ committees [20]) resulted in the arbitral tribunal lacking jurisdiction over the dispute concerned [21].

The jurisdiction vs admissibility distinction is not limited to only jurisdictional challenges, but is also relevant when an award is challenged as being contrary to public policy.  As shown in BTN, it appears that a tribunal finding on an admissibility objection does not contravene public policy.

The jurisdiction vs admissibility dichotomy has not been applied in any reported Malaysian case to date.  It remains to be seen whether, and how, it will be applied here.

[1] [2019] 1 SLR 263.

[2] [2020] 2 SLR 453.

[3] [2021] 1 SLR 276.

[4] [2019] 1 SLR 263.

[5] Para 2.

[6] Paras 205 – 209.

[7] Para 208.

[8] Para 209.

[9] [2020] 2 SLR 453.

[10] Para 16.

[11] Paras 76 to 79.

[12] Para 80.

[13] Para 84.

[14] [2021] 1 SLR 276

[15] Paras 19, 33.

[16] Paras 68 – 71.

[17] Para 70.

[18] Para 70.

[19] [2014] 1 SLR 130.

[20] Para 7.

[21] Para 63.