< Back to insights hub

Article

Sufficient connection to come within the arbitration agreement?17 February 2025

Arbitration agreements often contain the phrase “arising out of or in connection with this contract” and, whilst it is uncontroversial that this means that parties must have intended that the agreement should cover disputes beyond the terms of the contract, the extent of this coverage has been a source of dispute.

The Singapore Court of Appeal has now provided clarity as to how to determine when a non-contractual dispute might fall within the scope of an arbitration agreement with its recent judgment in COSCO Shipping Specialized Carriers Co ltd v PT OKI Pulp & Paper Mills and others [2024] SGCA 50.

Background Facts

COSCO Shipping Specialized Carriers Co, Ltd (“COSCO”), chartered a vessel (the “Vessel”) to COSCO Shipping Specialized Carriers (Europe) BV (the “Second Respondent”) pursuant to a contract of affreightment (the “Head COA”), and the Vessel was then sub-chartered to PT OKI Pulp & Paper Mills (the “First Respondent”).

The dispute arose from the contracts of carriage between COSCO and the First Respondent which were evidenced by the bills of lading (the “BLs”). The BLs each had an arbitration agreement which provided that “any dispute arising out of or in connection with this Contract, including any question regarding its existence, validity or termination shall be referred to and finally resolved by arbitration in Singapore”.

When departing from the jetty from where loading had taken place, the Vessel allided with the trestle bridge (the “Incident”). The various parties involved then commenced several different sets of proceedings:

  • COSCO brought a limitation action in Singapore seeking to limit its liability arising out of the Incident;
  • the First Respondent then commenced a tortious claim in Indonesia for losses arising out of the Incident (the “Indonesian Proceedings”);
  • COSCO followed that with arbitral proceedings against the Second Respondent in which it sought a declaration that it had not breached its obligations under the Head COA as well as various reliefs in respect of its liability arising out of the Incident;
  • COSCO then commenced a second set of arbitration proceedings against the First Respondent before the SIAC in Singapore (the “SIAC Arbitration”). COSCO alleged that the allision was caused by the First Respondent’s breach of safe port warranty (“Breach of Safe Port Warranty”) and further sought to rely on the negligent navigation defence (“Negligent Navigation Defence”) as contained in the Head COA or alternatively, pursuant to Article IV Rule 2(a) of the Hague-Visby Rules which were incorporated into the Head COA and into the BLs; and
  • COSCO also applied for an anti-suit injunction on the grounds that the Indonesian Proceedings were commenced in breach of the arbitration agreement (the “Anti-Suit Injunction”).

First Instance Decision

"the commencement of the Indonesian Proceedings was in breach of the arbitration agreement in the BLs"

The High Court of Singapore dismissed the Anti-Suit Injunction for various reasons including that:

  1. the claim was a pure tort claim, which was not a matter that was intended to be resolved by arbitration and therefore could not be said to have arisen “out of or in connection with” the contracts of carriage; and
  2. the tort claim could not be said to be “causatively connected” to any legal relationship established under the BLs between COSCO and the First Respondent.

Court of Appeal Decision

COSCO subsequently appealed to the Court of Appeal (“COA”) which ruled that the commencement of the Indonesian Proceedings was in breach of the arbitration agreement in the BLs.

< Back to insights hub

Key contacts

"a unified approach should be adopted in considering the “matters” in dispute for both types of applications"

The COA ruled that a unified approach should be taken when considering the matters in dispute. This approach should involve a two-stage test whereby the court must: (a) determine what are the matters which the parties have raised/will raise in the foreign proceedings (the “Identification Issue”); and (b) ascertain whether such matters fall within the scope of the arbitration clause (the “Scope Issue”). This two-stage test was deemed to be in line with the approach taken by the UK Supreme Court in Republic of Mozambique v Privinvest Shipbuilding SAL (Holding) [2023] UKSC 32 (“Mozambique”). The COA opined that the approach for a stay and an anti-suit injunction should be essentially the same and ultimately a unified approach should be adopted in considering the “matters” in dispute for both types of applications.

In relation to the Identification Issue, the COA found that the Indonesian Proceedings, the Negligent Navigation Defence and the Breach of Safe Port Warranty all shared a common connection i.e. the question of what caused the allision. This was, therefore, the “matter” deemed to have been raised by the parties in the Indonesian Proceedings.

Turning to the Scope Issue, the COA noted that it needed to consider the nature of the tortious claim together with the Negligent Navigation Defence, and not the contracting capacities of the parties. Therefore, whilst the tortious claim was not causatively connected to the legal relationship established under the BLs, the allision occurred in the performance of the contract of carriage which also provided for the contract defence of “errors of navigation”.

As a result, the COA held that the parties must have contemplated that a pure tort claim in relation to the Incident, which happened during the performance of the contracts of carriage and where the foreseeable lines of defence included recourse to the provisions of those contract, should be subject to the arbitration agreement. This was because the loading of the Vessel and the allocation of risk for loss caused by negligent navigation was legislated for in the contract.

The Indonesian Proceedings, the Breach of Safe Port Warranty and the Negligent Navigation Defence therefore all related to the cause of the allision and COSCO was granted an anti-suit injunction.

Key Takeaways

"generally worded and apparently useful clauses can potentially subject a party to significantly extended liability"

This decision serves as a reminder for parties to carefully consider the terms of any contract that they are entering into. In particular, to bear in mind that generally worded and apparently useful clauses can potentially subject a party to significantly extended liability. Accurate drafting and advance planning could reduce or avoid this unwitting exposure.

The general approach taken by the Singapore courts in applications for a stay pursuant to national arbitration legislation will also be applied in essentially the same way for applications for anti-suit injunctions.

The COA also made it clear that a party bringing a claim in foreign courts cannot shield itself from anti-suit relief by artificially drafting its claim to avoid express reference to matters that may fall within the scope of the arbitration agreements. This is helpful as it suggests that the court will adopt a common sense approach when considering these types of disputes.

London Trainee Fawwaz Ahmed also contributed to this article. 

< Back to insights hub

Key contacts

Follow us on