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Whether a claim falls within the scope of a substantive clause of the contract: admissibility of claim or tribunal’s jurisdiction? 

1 June 2023

In CYY v CYZ [2023] SGHC 101, the Singapore High Court held that whether a claim fell within the scope of a substantive clause of a contract goes to the admissibility of the claim, not the tribunal’s jurisdiction.  This case serves as a reminder on the distinction between admissibility and jurisdiction in arbitration.  When faced with a jurisdictional objection, one should evaluate whether it is a genuine challenge or masks an objection on the merits of the claim.

Summary

CYY (“Charterer”) entered into an agreement to charter a Crane Barge from CYZ (“Owner”) for a Salvage Operation.  The contract was governed by Singapore law and provided for arbitration in Singapore.  Clause 39 of the contract provided that, among others: “all procurement services by Owner at the request of the Charterers shall be charged at Cost + 15%”.  The Owner provided various services, personnel, equipment, and craft at the Charterer’s request during the Salvage Operation (“Disputed Claims”).  As the Charterer did not pay for the Disputed Claims, the Owner commenced arbitration.

The Charterer objected to the tribunal’s jurisdiction, arguing that Clause 39 was limited to procurement services for only the charter of the Crane Barge, and not services rendered in relation to the Salvage Operation generally.  They contended that the Disputed Claims fell outside the scope of the contract and the tribunal had no jurisdiction to determine them. 

The tribunal found that it had jurisdiction to determine the Disputed Claims, as it interpreted Clause 39 to encompass all procurement services rendered by the Owner in relation to the entire Salvage Operation.  Dissatisfied, the Charterer filed an application to challenge the tribunal’s ruling.  The Singapore High Court dismissed the Charterer’s jurisdictional challenge but disagreed with the tribunal’s approach. 

The Singapore High Court held that the interpretation of Clause 39, a substantive clause within the contract, came within the merits of the dispute referred to arbitration.  As the Charterer accepted that there was a binding arbitration agreement, it was for the tribunal to determine whether the Disputed Claims fell within Clause 39.  Typically, interpretation of a substantive clause within the contract concerns the admissibility of the claim made, while interpretation of the arbitration clause may go to jurisdiction when parties disagree on its scope.

Significance

This case highlights the importance of differentiating true jurisdictional challenges from disguised objections that relate to the merits of the claim.  Such a distinction is significant, since a tribunal’s jurisdictional ruling is subject to appeal before the court, while a tribunal’s decision on the merits of a claim is not.

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Chua & Partners LLP (UEN: T23LL0552L)

 

 

 

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