Kempinski Hotels SA v PT Prima: Setting Aside Arbitration Awards for Wrongful Termination
In Kempinski Hotels SA v PT Prima International Development, the High Court of Singapore addressed Kempinski's application to set aside three arbitration awards related to a dispute over the wrongful termination of an operating and management contract for a hotel in Jakarta. The court, presided over by Judith Prakash J, allowed the application, setting aside the Third Award, Fourth Award, and Costs Award, finding that the Tribunal had exceeded its jurisdiction by considering issues not properly pleaded and that there were breaches of natural justice. The court remitted the matter back to the original arbitrator.
1. Case Overview
1.1 Court
High Court1.2 Outcome
Application allowed with costs.
1.3 Case Type
Civil
1.4 Judgment Type
Grounds of Decision
1.5 Jurisdiction
Singapore
1.6 Description
Kempinski Hotels SA v PT Prima International Development: The court set aside arbitration awards due to issues with pleading and natural justice.
1.7 Decision Date
2. Parties and Outcomes
| Party Name | Role | Type | Outcome | Outcome Type | Counsels |
|---|---|---|---|---|---|
| PT Prima International Development | Respondent | Corporation | Application dismissed | Lost | |
| Kempinski Hotels SA | Applicant | Corporation | Application allowed with costs | Won |
3. Judges
| Judge Name | Title | Delivered Judgment |
|---|---|---|
| Judith Prakash | Judge | Yes |
4. Counsels
4. Facts
- Kempinski Hotels SA and PT Prima International Development entered into an Operating and Management Contract in 1994 for a hotel in Jakarta.
- The contract obliged Kempinski to market, operate, and manage the hotel for 20 years, with an automatic 10-year extension.
- Three decisions by the Indonesian Ministry of Tourism between 1996 and 2000 mandated that the contract be carried out by an Indonesian company.
- Disputes arose, and PT Prima purported to terminate the contract in 2002, preventing Kempinski from managing the hotel.
- Kempinski commenced arbitration proceedings, claiming wrongful termination of the contract.
- PT Prima argued that the termination was valid under Indonesian law and counterclaimed for alleged breaches of contract by Kempinski.
- PT Prima amended its defense to include supervening illegality, arguing the contract became illegal after 2000 due to the Three Decisions.
- Kempinski entered into a new management venture to provide hotel management services for another hotel located within a one mile vicinity of the Hotel.
5. Formal Citations
- Kempinski Hotels SA v PT Prima International Development, Originating Summons No 903 of 2008, [2011] SGHC 171
6. Timeline
| Date | Event |
|---|---|
| Operating and Management Contract signed | |
| First decision of the Indonesian Ministry of Tourism issued | |
| Applicant took over operation and management of the Hotel | |
| Bloch & Partners made proposal to applicant | |
| Third decision of the Indonesian Ministry of Tourism issued | |
| Respondent gave notice of material breach of contract | |
| Respondent gave written notice purporting to terminate the Contract | |
| Applicant commenced arbitration proceedings | |
| Respondent sought leave to amend Points of Defence | |
| Respondent filed Points of Re-Amended Defence and Counterclaim | |
| First hearing on illegality issue took place | |
| Tribunal published the First Award | |
| Cross-examination of experts took place | |
| New management venture made | |
| Arbitrator published the Second Award | |
| Respondent's solicitors sought clarifications of the First and Second Awards | |
| Conference held to decide how the Arbitration was to proceed | |
| Arbitrator made an order directing the applicant to disclose certain information | |
| Arbitrator ordered that the information be produced by 7 September 2007 | |
| Applicant put in its response to the order for disclosure | |
| Arbitrator issued document entitled “SIAC Arbitration [37/2002], Directions” | |
| Both sides tendered their written submissions | |
| Arbitrator informed the parties that he had reached certain decisions | |
| Applicant tendered its further submissions | |
| Applicant raised defence of waiver | |
| Arbitrator invited parties to tender further opinions from their respective legal experts | |
| Applicant’s expert, Prof Darus, issued opinion | |
| Respondent submitted opinion from Mr Tumbuan | |
| Applicant’s expert, Prof Darus, issued opinion | |
| Arbitrator wrote to the parties | |
| Arbitrator published the Third Award | |
| Applicant filed proceedings to set aside the Third Award | |
| Respondent requested that the Arbitrator proceed to make his final determination | |
| Applicant filed its submissions | |
| Arbitrator issued the Fourth Award | |
| Arbitrator issued the Costs Award | |
| Judgment reserved |
7. Legal Issues
- Jurisdiction of Tribunal
- Outcome: The court held that the Tribunal lacked jurisdiction to issue the Third and Fourth Awards because the matters determined in those awards had already been determined in the First and Second Awards.
- Category: Jurisdictional
- Sub-Issues:
- Tribunal exceeding scope of submission to arbitration
- Tribunal acting functus officio
- Breach of Natural Justice
- Outcome: The court found that there was no evidence of apparent bias on the part of the Tribunal, but that the Tribunal should have asked the parties whether they wished to cross-examine each other’s expert on the new opinions submitted before it proceeded to issue the Third Award.
- Category: Procedural
- Sub-Issues:
- Apparent bias
- Failure to allow cross-examination
- Failure to consider defences raised
- Issue Estoppel
- Outcome: The court held that the respondent was not barred by issue estoppel from introducing the issue of the new management venture during the Arbitration and after the Second Award was made.
- Category: Substantive
- Failure to Plead
- Outcome: The court held that the Third Award must be set aside on the ground that failure to plead the new management venture resulted in the Tribunal making a decision that was beyond the scope of the matters submitted to it.
- Category: Procedural
8. Remedies Sought
- Setting aside of arbitration awards
- Damages
9. Cause of Actions
- Breach of Contract
- Wrongful Termination
10. Practice Areas
- Arbitration
- Commercial Litigation
11. Industries
- Hospitality
12. Cited Cases
| Case Name | Court | Affirmed | Citation | Jurisdiction | Significance |
|---|---|---|---|---|---|
| Fidelitas Shipping Co Ltd v V/O Exportchleb | N/A | Yes | [1966] 1 QB 630 | N/A | Cited for the principle of issue estoppel, stating that once an issue has been distinctly determined between the parties, neither party can be allowed to fight that issue all over again. |
| Re Shankar Alan s/o Anant Kulkarni | N/A | Yes | [2007] 1 SLR(R) 85 | Singapore | Cited for the test to establish the existence of apparent bias, which is whether there are circumstances which would give rise to a reasonable suspicion or apprehension in a fair-minded reasonable person with knowledge of the relevant facts that the tribunal was biased. |
| Turner (East Asia) Pte Ltd v Builders Federal (Hong Kong) Ltd and another | N/A | Yes | [1988] 1 SLR(R) 483 | Singapore | Cited as being on all fours with the present case, regarding the removal of an arbitrator on the ground of misconduct due to evincing a closed mind and entering into the fray. |
| Ng Chin Siau v How Kim Chuan | N/A | Yes | [2007] 2 SLR(R) 789 | Singapore | Cited for the principle that an arbitrator is bound to decide the case in accordance with the parties’ pleadings and is not entitled to go beyond the pleadings and decide on points on which the parties have not given evidence and have not made submissions. |
| Soh Beng Tee & Co Pte Ltd v Fairmount Development Pte Ltd | N/A | Yes | [2007] 3 SLR(R) 86 | Singapore | Cited for the concept of natural justice, comprising the rules that the adjudicator must be disinterested and unbiased and that the parties must be given adequate notice and opportunity to be heard. |
| Front Row Investment Holding (Singapore) Pte Ltd v Daimler South East Asia Pte Ltd | High Court | Yes | [2010] SGHC 80 | Singapore | Cited for the principle that a court or tribunal will be in breach of natural justice if, in the course of reaching its decision, it disregarded the submissions and arguments made by the parties on the issues (without considering the merits thereof). |
| SEF Construction Pte Ltd v Skoy Connected Pte Ltd | N/A | Yes | [2010] 1 SLR 733 | Singapore | Cited for the proposition that natural justice requires that the parties should be heard; it does not require that they be given responses on all submissions made. |
| Hanjin Shipping Co Ltd v Schiffahrtgeselleschaft “Lesum” mbH & Co KG | N/A | Yes | unreported, 5 November 1996 | England | Cited by the applicant, but the court found that it does not provide any assistance to the applicant. |
13. Applicable Rules
| Rule Name |
|---|
| No applicable rules |
14. Applicable Statutes
| Statute Name | Jurisdiction |
|---|---|
| International Arbitration Act (Cap 143A, 2002 Rev Ed) | Singapore |
| International Arbitration Act (Cap 143A, 2002 Rev Ed) s 19A | Singapore |
| International Arbitration Act (Cap 143A, 2002 Rev Ed) s 19B | Singapore |
| International Arbitration Act (Cap 143A, 2002 Rev Ed) s 2(1) | Singapore |
| International Arbitration Act (Cap 143A, 2002 Rev Ed) s 24(b) | Singapore |
15. Key Terms and Keywords
15.1 Key Terms
- Arbitration
- Supervening illegality
- Functus officio
- Issue estoppel
- Natural justice
- Pleadings
- New management venture
- Operating and Management Contract
- Damages
- Indonesian law
15.2 Keywords
- arbitration
- contract
- wrongful termination
- supervening illegality
- natural justice
- Singapore
17. Areas of Law
| Area Name | Relevance Score |
|---|---|
| Arbitration | 90 |
| Contract Law | 80 |
| Functus Officio | 75 |
| Breach of Contract | 70 |
| Natural justice | 60 |
| Jurisdiction | 60 |
| Estoppel | 50 |
| Interpretation of contractual terms | 40 |
| Waiver | 40 |
| Duty to Account | 30 |
| Burden of proof | 30 |
16. Subjects
- Arbitration
- Contract Law
- Civil Procedure