LP 109/2016 Singapore: Risk of Arrest Security Being Lifted - The 2005 Hague Convention

An application of the Hague Convention on choice of court agreements in Singapore

Imagine the following scenario:
You are a vessel owner who has a claim against a time charterer for failure to pay charter hire under an amended NYPE charterparty dated 2 October 2016 which provides for all disputes to be referred to the exclusive jurisdiction of the English courts. You commence Singapore proceedings and arrest one of the vessels owned by the charterer in Singapore. The charterer then applies for a stay of the Singapore proceedings to enforce the choice of English courts agreement.

Before 1 October 2016, the Singapore courts could refuse the stay and allow you to keep the security obtained through the arrest.

After 1 October 2016, with the enactment of the Choice of Court Agreements Act (the "CCAA"), the Singapore courts must stay the Singapore proceedings and may also release the obtained security.

How did the CCAA change the outcome and what can you do to avoid a similar outcome?

The Hague Convention on Choice of Court Agreements in Singapore

•• The Hague Convention on Choice of Court Agreements (the "HCCCA") was concluded in 2005 and came into force in Singapore on 1 October 2016 with the enactment of the CCAA.

•• Under the HCCCA, contracting states must uphold exclusive choice of court agreements designating the courts of other contracting states. The current contracting states to the HCCCA are Mexico, the EU (excluding Denmark) and Singapore.

•• Not all matters fall within the HCCCA. For example, carriage of passengers and goods, marine pollution, limitation of liability for maritime claims, emergency towage and salvage and general average are expressly excluded from the scope of the HCCCA. Conversely, matters relating to ship mortgages, bareboat and time charterparties, non-emergency salvage and towage, and ship construction and repair, would fall within the scope of the HCCCA.

•• The HCCCA will also only apply to agreements that were concluded after the date the contracting state designated as the choice of court enacted the HCCCA.

•• Similar to Section 6 of the International Arbitration Act ("IAA"), Section 12 of the CCAA now makes it mandatory for the Singapore courts to stay or dismiss Singapore proceedings if the matter falls within the HCCCA and another contracting state's court has been designated.

•• However, while Section 7 of the IAA allows the Singapore courts to retain security already obtained in the Singapore proceedings to be stayed to satisfy an arbitral award, there is no similar provision in the CCAA.

•• In The 'Evmar' [1989] 1 SLR(R) 433, decided prior to the enactment of Section 7 of the IAA which granted the Singapore courts powers to retain security to satisfy an arbitral award, the Singapore court ordered the release of security when Singapore proceedings were stayed in favour of foreign arbitration. It is therefore quite possible that the Singapore courts may similarly order the release of security if Singapore proceedings are stayed pursuant to the CCAA.

What can you do?

At the time of writing, the HCCCA and the CCAA are yet to be tested by the Singapore court. In light of such uncertainties, members should consider using non-exclusive jurisdiction clauses or exclusive jurisdiction clauses that expressly exclude application of the HCCCA and the CCAA in their contracts. Alternatively, parties may incorporate arbitration agreements into all contracts until it becomes clear how the Singapore court would apply the HCCCA and the CCAA.