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Copyright © International Chamber of Commerce (ICC). All rights reserved.
( Source of the document: ICC Digital Library )
Kenny Lau Hui Ming
Associate, WongPartnership LLP.
In a decision handed down in March 2017, the Singapore High Court held that only in ‘special circumstances’ can the court order a stay of arbitral proceedings pending the outcome of a challenge against an arbitral tribunal’s ruling on jurisdiction, and set out non-exhaustive guidelines for determining whether such ‘special circumstances’ exist.
On 27 March 2017, the Singapore High Court (the ‘High Court’) rendered its decision in BLY v BLZ and another  SGHC 59 (‘BLY v BLZ’), addressing a question that has hitherto received little attention in local judgments. That question is what test should be applied to determine whether arbitral proceedings should be stayed pending a challenge on an arbitral tribunal’s ruling on jurisdiction under section 10(9)(a) of Singapore’s International Arbitration Act (Cap 143A, 2002 Rev Ed) (the ‘IAA’)?
Section 10 of the IAA implements Article 16(3) of the UNCITRAL Model Law on International Commercial Arbitration (the ‘Model Law’), which sets forth the conditions under which a preliminary ruling of an arbitration tribunal on its jurisdiction may be appealed. Section 10(9)(a) of the IAA provides specifically that an application for such a challenge shall not operate as a stay of the arbitral proceedings or the execution of any award/order made in the arbitral proceedings unless so ordered by the High Court. The effect of this provision is that an arbitral tribunal is not required to hold its proceedings in abeyance while a jurisdictional challenge is pending before the courts. This mirrors Article 16(3) of the Model Law, which states that while a challenge is pending, ‘the arbitral tribunal may continue the proceedings and make an award’.
Prior to BLY v BLZ, there had been only one Singapore authority on this issue, where an Assistant Registrar had found that a stay would be ordered only where the refusal of the stay would result in prejudice or detriment that could not be adequately compensated with costs (see AYY v AYZ and another  SGHCR 22).
The plaintiff in BLY v BLZ challenged an arbitral tribunal’s positive ruling on jurisdiction and, at the same time, applied for a stay of the arbitral proceedings. In deciding against ordering a stay, the High Court held that such a stay should be ordered only where ‘special circumstances’ exist (the ‘Special Circumstances Test’) (see BLY v BLZ at  and ). Two reasons were given in support of adopting this test.
First, since the default starting position under section 10(9)(a) of the IAA is that a challenge against a jurisdictional ruling does not operate automatically as a stay, the statutory discretion to order a stay must be exercised ‘judicially’ and ‘must not be so easily exercised as to render the default position meaningless’ (see BLY v BLZ at ).
Second, recognising that section 10(9)(a) of the IAA is based upon Article 16(3) of the Model Law, the High Court took into account the drafting history of Article 16(3) and the fact that Article 16(3) is intended to reflect the balance between the ‘countervailing considerations of allowing courts to have control over a tribunal’s decision on jurisdiction on the one hand, and the need to ward against the abuse of such recourse as a dilatory tactic to hold up the arbitration on the other’ (see BLY v BLZ at ). The High Court observed that the drafters of the Model Law struck this balance by according the tribunal the discretion to continue with the arbitral proceedings. Consequently, there had to be special circumstances before the High Court would exercise its own discretion to stay the arbitral proceedings (see BLY v BLZ at –).
The High Court then went on to provide non-exhaustive guidelines on what may or may not amount to special circumstances justifying the granting of a stay (see BLY v BLZ at –):
The determination of whether there are ‘special circumstances’ includes taking into account the conduct of the other party in relation to the arbitral proceedings.
Prejudice or detriment derived from the wasted cost of what would be a potentially useless arbitration cannot, in and of itself, justify a stay.
Prejudice or detriment stemming from the rendering of an arbitral award on the merits before the jurisdictional challenge is determined cannot, in and of itself, justify a stay.
The strength of the jurisdictional challenge cannot, in and of itself, be a reason to grant a stay.
The Special Circumstances Test looks beyond whether irreparable prejudice or detriment will be caused to the plaintiff. There may be situations where irreparable prejudice will be caused, but this would not amount to ‘special circumstances’. For example, if a tribunal directs a party to disclose confidential documents in furtherance of arbitral proceedings, this would not amount to ‘special circumstances’ justifying a stay as it is to be expected in the usual course of arbitral proceedings (unless the confidential information is of an extremely sensitive nature). Conversely, there may be situations where, although there is no irreparable prejudice, there would be ‘special circumstances’—for example, where a hearing in the arbitral proceedings on the merits is slated to take place far later than the scheduled hearing for the jurisdictional challenge in the courts (although it was noted that in such circumstances, practically speaking, a stay would not normally be required).
The decision in BLY v BLZ is a welcome addition to the corpus of jurisprudence pertaining to the stay of arbitral proceedings pending a jurisdictional challenge, and should be lauded as such. Further, in setting a stringent standard of having to prove ‘special circumstances’ before a stay will be ordered, the High Court has affirmed Singapore’s pro-arbitration stance.
Difficult questions, however, remain over the Special Circumstances Test and its application. The High Court has signalled its intent to accord significant deference to a tribunal’s decision on whether to stay proceedings, although one may query whether this should be so, especially considering that the underlying challenge against a tribunal’s jurisdictional ruling, which drives the application for the stay, is ultimately determined de novo (see e.g., Sanum Investments Ltd v Government of the Lao People’s Democratic Republic  5 SLR 536 at ). Further, the High Court appears to have downplayed the relevance of the prejudice or effect caused by a denial of a stay to ascertaining whether ‘special circumstances’ exist. This begs the question of how one can meaningfully establish such ‘special circumstances’ apart from, perhaps, by showing that the arbitral tribunal had acted in a manner that is ‘manifestly or egregiously improper’ (see BLY v BLZ at ).
While BLY v BLZ is unlikely to be the final word on this matter, the decision provides invaluable guidance, and indeed food for thought, for future litigants when seeking a stay of arbitral proceedings before the Singapore courts on the basis of a pending jurisdictional challenge.