IS THE INTERPRETATION OF A CONTRACTUAL CLAUSE A MATTER OF CLAIM ADMISSIBILITY OR DOES IT GO TO THE JURISDICTION OF THE TRIBUNAL?
In CYY v CYZ [2023] SGHC 101, the key issue before the Court was whether the interpretation of a contractual clause was a matter of claim admissibility or whether it went to the jurisdiction of the tribunal.
The dispute. In this matter, CYY and CYZ entered into a BIMCO Supplytime 2017 contract (the ‘Contract’) by which CYT chartered a Crane Barge from CYZ for the purpose of salvage operations in respect of a vessel. The Contract was expressly governed by Singapore law and contained an arbitration clause naming Singapore as the seat of arbitration. In addition to the standard terms of the Contract, the parties included additional clauses, including clause 39 as set out below:
“Clause 39
All Consumables, communications and medicine on the Vessel which are used or taken by Charterers shall be charged at Cost + 15%
All procurement services by Owner at the request of the Charterers shall be charged at Cost + 15%”
Throughout the salvage operation, CYY requested various services, personnel, equipment, and craft, which CYZ procured. CYZ issued contemporaneous invoices to CYZ incorporating a 15% markup pursuant to clause 39 for these items, which were signed by CYY.
On 23 June 2021, CYZ issued a letter of demand in respect of the invoices. CYY did not pay. As such, CYZ commenced arbitration proceedings against CYY on 6 July 2021 claiming that CYZ was entitled to the cost of procuring the services, personnel, equipment, and craft requested by CYY plus a 15% margin per clause 39.
In response, CYY argued that the Contract and clause 39 was limited to procurement services rendered only in relation to the charter of the Crane Barge, and not services rendered in relation to the salvage operations generally. Since the invoices related to procurement services provided in relation to the salvage operations generally, they fell outside the scope of the Contract and the Tribunal had no jurisdiction to determine CYZ’s claim (at [17]).
The Tribunal’s ruling. The Tribunal adopted a contextual interpretation of clause 39 and found that clause 39 encompassed all procurement services rendered by CYZ in relation to the entire salvage operations. Therefore, among other things, the Tribunal concluded that it had jurisdiction to determine CYZ’s claim based on clause 39 (at [20]).
Dissatisfied with the Tribunal’s positive jurisdiction ruling, CYY brought this application under s 10(3)(a) of the International Arbitration Act 1994 to seek a declaration that the Tribunal does not have jurisdiction.
Issues to be determined. Philip Jeyaretnam J distilled the key issue in the dispute as follows (at [21]):
“…the crux of the dispute as presented by the parties is the interpretation of cl 39 of the Contract. [CYY] submits that cl 39 must be strictly limited to procurement services rendered in relation to the charter of the Crane Barge, and not services rendered in relation to the Salvage Operation generally. Conversely, [CYZ] submits that cl 39 should encompass all procurement services requested by [CYY].”
CYY’s position. CYY submitted that as clause 39 was contained in a contract based on BIMCO Supplytime 2017, a standard form contract for the charter of offshore support vessels, clause 39 must be construed to apply only to procurement services rendered in relation to the charter of the Crane Barge (at [22]).
Further, as BIMCO Supplytime 2017 is a standard form contract, the background context and factual matrix should have little relevance to the interpretation of clause 39 and instead, the choice of BIMCO Supplytime 2017, a time charter, evinced the objective intention of the parties to confine the scope of clause 39 to the procurement of services relating only to the charter of the Crane Barge (at [23]). This is especially since both parties were experienced industry players familiar with the available standard forms. Hence, the choice of BIMCO Supplytime 2017 must have been a conscious decision to limit the scope of their agreement to being a time charter for the Crane Barge since the Parties did not adopt, say, the Wreckhire 2010, which is a standard form designed to govern entire salvage operations (at [25]).
CYZ’s position. CYZ’s position was that its claim fell within the ambit of clause 39 of the Contract, which encompassed all procurement services rendered by CYZ at CYY’s request. This was on the basis that:
(a) Textually, the parties did not expressly confine the scope of “procurement services” in clause 39 (at [30]);
(b) Contextually, the Contract had been concluded in the context of an emergency, where CYY had to rely on the resources of CYZ as a local operator, and in the circumstances, clause 39 was left open ended to ensure that the Crane Barge could be properly staffed and equipped as the needs of the salvage operations evolved (at [31]); and
(c) Even on a narrower interpretation of clause 39, CYZ’s claims remained linked to the charter of the Crane Barge, as they concerned procurement services requested for the purpose of properly equipping the Crane Barge to act as the offshore command centre (at [31]).
Key issues before the Court. The parties agreed that the key issue was whether the CYZ’s claims fell within the scope of clause 39 of the Contract.
However, Philip Jeyaretnam J also considered that there was a preliminary issue of whether the interpretation of clause 39 of the Contract went to jurisdiction, or to the admissibility of the claims.
Preliminary issue – jurisdiction or admissibility? CYY contended that as the arbitration clause in the Contract referred to disputes arising out of or in connection with the Contract, the Tribunal’s jurisdiction depended on the scope of the Contract.
Hence, if the Tribunal erred in finding that it had jurisdiction due to its interpretation of clause 39, this was appropriate for jurisdictional review by the Court. This is because if CYZ’s claims fell outside the scope of clause 39 of the Contract, the Tribunal had no jurisdiction.
Court’s decision on preliminary issue. Philip Jeyaretnam J disagreed with CYY and held that the interpretation of clause 39 was not a matter of jurisdiction, but was one that came within the merits of the dispute referred to arbitration (at [40]).
This was because CYY had accepted that there was a binding arbitration agreement and hence the question of whether CYZ’s claims fell within the clause 39 was a matter for the Tribunal to determine as part of the dispute referred to arbitration by the parties.
In this regard, Philip Jeyaretnam J went on to find (at [41] and [42]) that:
“Interpretation of a substantive clause within the contract ordinarily concerns the admissibility of the claim made. This differs from interpretation of the arbitration agreement contained within the contract. Interpretation of the arbitration clause might go to jurisdiction where the difference between the parties relates to the scope of the arbitration agreement.
…
In my view, the interpretation of cl 39, and specifically what was meant to be covered by the phrase “all procurement services” is a matter of admissibility. The objection is directed at the claim rather than the Tribunal’s authority under the arbitration agreement. Consequently, its interpretation is not a matter for this court, even if the Tribunal reached what the court might consider to be the wrong conclusion on it.”
Court’s decision on the interpretation of Clause 39. After going through the respective affidavits filed by the parties, Philip Jeyaretnam J found that, factually (at [48]):
(a) The Contract was concluded under circumstances of urgency;
(b) CYY had to rely on the resources of CYZ for the salvage operations;
(c) There was a need for the Crane Barge to be properly staffed and equipped as the needs of the salvage operation evolved; and
(d) The parties envisaged that the Crane Barge would operate as the offshore command centre for the salvage operation.
Philip Jeyaretnam J held that these facts supported a broader reading of clause 39 in that “it would make sense to consider the Contract (which was for charter of the Crane Barge) as the key contract and thus bring ancillary and broadly related procurement services within it” (at [48]).
Also, in considering the text of clause 39, Philip Jeyaretnam J considered that the second sentence of clause 39 was drafted broadly enough that whatever procurement services were requested by CYY and supplied by CYZ had to be paid for (at [50]).
On this basis, Philip Jeyaretnam J held that even if the interpretation of clause 39 went to jurisdiction, the Tribunal had jurisdiction to determine CYZ’s claim on the basis of clause 39.
Conclusion. It is important for readers to appreciate the difference between the admissibility of a claim and the jurisdiction of an arbitral tribunal to determine the claim.
Usually, where the issue concerns the interpretation of the arbitration agreement within a contract, this is an issue that goes to the jurisdiction of the tribunal to hear the claim. In such circumstances, if the tribunal makes a ruling on its jurisdiction, either party can appeal the tribunal’s ruling under section 10 of the International Arbitration Act 1994 to the High Court for the Court to determine the matter.
However, where the issue concerns the interpretation of a substantive clause within the contract, this is usually an issue that goes to the admissibility of a claim before the tribunal. If so, parties do not have the right to appeal determinations of a tribunal as to admissibility of claims before it, unless the tribunal has, e.g., acted in breach of natural justice in making its determination.
Depending on the contract and relationship in question, when including bespoke clauses into standard form contracts, parties should consider clearly stating whether disputes in relation to those bespoke clauses fall within the arbitration agreement in the contract. This will help to avoid unnecessary jurisdictional hearings before a tribunal and/or litigation to determine the matter and will help speed up any dispute resolution proceedings in relation to those bespoke clauses.
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