CZQ & Anor v CZS

Facts

CZS, the Employer under a construction contract, began two arbitrations on 3 February 2020, one against the Contractor (CZQ) and one against the Contractor's parent company (CZR), which had guaranteed the Contractor's performance. The arbitrations were consolidated before a three-member tribunal. The contract incorporated the 1999 FIDIC Plant and Design Build conditions, amended so that the Dispute Adjudication Board procedure no longer applied and disputes went through an amicable settlement procedure in Sub-Clause 20.5: notice of a formal dispute, a meeting of representatives, then a meeting of senior officers, and a notice that the dispute would be submitted to arbitration. Sub-Clause 20.6 provided that unless settled amicably, any dispute would be finally settled by arbitration.

CZQ and CZR argued that the tribunal lacked jurisdiction because the Sub-Clause 20.5 procedure had not been followed. The tribunal ruled as a preliminary question that it had jurisdiction: the procedure was not a condition precedent to arbitration, and although it had not been complied with, that was caused by the respondents. CZQ and CZR then applied to the Singapore International Commercial Court under s 10 of the International Arbitration Act 1994 in Originating Application No 4 of 2023.

Issues

1. Whether compliance with the amicable settlement procedure in Sub-Clause 20.5 was a condition precedent to arbitration.
2. Whether the words unless settled amicably in Sub-Clause 20.6 referred to the Sub-Clause 20.5 procedure.
3. Whether Sub-Clause 20.2, raised for the first time before the court, required all disputes first to pass through Sub-Clause 20.5.

Holding

The court, with Andre Maniam J delivering its judgment, dismissed the application and agreed with the tribunal that it had jurisdiction. Clause 20 did not make compliance with Sub-Clause 20.5 a condition precedent to arbitration, so the court did not need to address the respondents' other submissions. Costs were reserved to the tribunal.

Reasoning

The court read Clause 20 as a whole. It started from the principle that clear words are needed to create a condition precedent to arbitration, and noted counsel's concession that no such words appeared in Sub-Clauses 20.5 or 20.6. Requiring clarity promotes the efficacy of arbitration agreements by sparing parties a separate fight over preconditions.

Sub-Clause 20.6 made no reference to Sub-Clause 20.5. The phrase about amicable settlement meant only that a dispute already settled could not be arbitrated; disputes could be settled in many ways, and one not settled, for whatever reason, could go to arbitration. Reliance on the heading of Sub-Clause 20.5 was barred by Sub-Clause 1.2, which excludes headings from interpretation. The clause differed from the Lufthansa clause, which expressly tied arbitration to mediation under a named clause, and from the Emirates and Ohpen clauses, which required parties to try a procedure first.

Sub-Clause 20.5 let either party start the procedure but did not oblige anyone to do so, and the final notice it described was separate from a notice of arbitration. Nothing was unworkable about applying it where arbitration had already begun.

The Sub-Clause 20.2 argument, not run before the tribunal, carried less weight and added nothing: it merely pointed to Sub-Clause 20.5. Comparing the original FIDIC scheme showed that the only restriction the parties kept was that settled disputes cannot be arbitrated. The court remarked on the irony that the respondents relied on a procedure for which their counsel admitted there was almost no enthusiasm, and noted that the challenge had made the arbitration slow and costly.

From the judgment