AJWA FOR FOOD INDUSTRIES CO (MIGOP), EGYPT v PACIFIC INTER-LINK SDN BHD [2013] MLJU 689

AJWA FOR FOOD INDUSTRIES CO (MIGOP), EGYPT v PACIFIC INTER-LINK SDN BHD [2013] MLJU 689

The Federal Court (Putrajaya)

Written Arbitration Agreement

 

Facts

1. There are two appeals before the Federal Court by the Appellant against the decision of the Court of Appeal in dismissing the Appellant’s appeal against the decision of the High Court based on common issues.

2. The Respondent initiated two arbitration proceedings against the Appellant alleging that the Appellant failed to deliver the palm oil products which the Appellant had ordered from the Respondent pursuant to the contracts entered by both parties. The contract contained arbitration clauses.

3. At the High Court, the Appellant filed two separate applications to set aside or vary two arbitration awards dated 13.4.2010 made by tribunals constituted under the Palm Oil Refiners Association of Malaysia (PORAM) Rules of Arbitration and Appeal. The said PORAM awards are-

(a)  Award in Arbitration for damages in the sum of USD 2,261,100.00 to the Respondent; and

(b)  Award in Arbitration for damages in the sum of USD 1,374,200.00 to the Respondent.

4. The Appellant and the Respondent had always dealt in an informal basis. The Appellant did not dispute purchasing the products from the Respondent and also admitted that agreements were concluded through telephone conversations and email exchanges prior to any formal documentation being exchanged for confirmation. However, the Appellant contended that never agreed to refer disputes to PORAM Arbitration to the Appellant.

5. The arbitral tribunal also assumes jurisdiction relying on the standard terms and conditions of sale which the Respondent had produced during the arbitration and in which the same Appellant alleged contained the arbitration clause that was agreed by the Appellant.

6. The Appellant also alleged that the Sales Contracts which were relied on by the Respondent did not contain any specific dispute resolution clause and in most cases, were unsigned. The Appellant further contended that the standard terms and conditions is a separate document produced during the arbitration which the Appellant claimed had never seen nor agreed to.

7. The PORAM Tribunal found there were contracts in writing between the Respondent and the Appellant, incorporating the standard terms and conditions for reference to Arbitration.  The PORAM Tribunal therefore ruled that it has the jurisdiction to hear the dispute. The Tribunal thereafter made and published its Final Award in favor of the Respondent.

8. The High Court upon examination and review of the evidence led in the PORAM Tribunal was satisfied with the findings of the PORAM Tribunal and affirmed the decisions.

9. The Court of Appeal unanimously agreed with the High Court’s findings of facts by the PORAM Tribunal.

Issue 1.Whether there is any written agreement to refer the disputes in question for arbitration under the PORAM Rules of Arbitration?

2. Whether the Sales Contracts are binding without any signature?

3. Whether there is an incorporation of the standard terms and conditions and arbitration clause into the Sales Contracts?

Ratios 1. Whether there is any written agreement to refer the disputes in question for arbitration under the PORAM Rules of Arbitration?

(a) Section 9(5) of the Arbitration Act 2005 (Act 646) provides as follows:

“A reference in an agreement to a document containing an arbitration clause shall constitute an arbitration agreement, provided that the agreement is in writing and the reference is such as to make that clause part of the agreement.”

(b) The Federal Court was in view that it is an essential question whether there is in fact a contractual relationship between the parties that contained arbitration clause or agreement and specifically stated or by imputation gathered from the materials forming part of the contract between the parties.

(c) The Federal Court further explained that the sales contracts were the restatement and confirmation of the contracts between the Appellant and the Respondent. On the question of whether there is an agreement between the parties to refer future disputes to arbitration, the Federal Court made reference to the following passage from The Law and Practice of Commercial Arbitration in England by Mustill and Boyd (2nd Ed.) at page 105:

“It is unusual to find an agreement to refer future disputes to arbitration completely isolated from any other contractual relationship. The agreement almost always forms part of or is at least ancillary to, some underlying contract”.

(d) The Federal Court found that the Respondent had shown the evidence before the arbitration tribunal that it had issued and faxed to the Appellant the said four Sales Contracts. The Appellant had not rebutted this evidence. The Federal Court further found that there were no such records supporting the Appellant’s allegation of oral contract concluded between the two parties. The specific reference to the contracts in the Appellant’s emails and its request to defer shipments all point to the sales as having been confirmed in the Sales Contracts issued by the Respondents to the Appellant.

(e) The Federal Court was also of the view the evidence does not support the formation of oral contracts but point invariably to the Sales Contracts as constituting the true and proper agreement between the parties. These findings had been affirmed by the lower courts. Hence, the Federal Court decided there is no ground to interfere with these finding of facts.

2. Whether the Sales Contracts are binding without the signature?

(a) The Federal Court also agreed with the submission of the Respondent that the Sales Contracts are not subject to any condition for the same to be signed before the coming into effect of the said sales.

(b) It is common knowledge that international agreements between parties doing business from different parts of the world ranging especially in international sales of goods and charter in which parties are concluded and performed without the requirement for signatures as long as parties agreed on the terms provided.

(c) The Sales Contracts setting out the agreed terms despite the lack of signature. It is valid and enforceable contracts.

3. Whether there is an incorporation of the standard terms and conditions and arbitration clause into the Sales Contracts?

(a) The Federal Court found that the Sales Contracts prominently incorporate the standard terms and conditions with the caption “all other terms, conditions and rules not in contradiction with the above as per  terms and conditions.”

(b) The Federal Court was in the view that there is a specific mention in the Sales Contract that all terms and conditions of the Respondent’s standard terms and conditions will be applicable. The intention of the parties is clear that arbitration clause would also be applicable.

(c)  The Federal Court further found that an arbitration agreement need not be signed as Section 9(3) and Section 9(4) of Act 646 provide that such a written agreement to arbitrate does not necessarily mean a formal agreement executed by both parties. It would be sufficient so long as the arbitration agreement is incorporated into a written document.

Decision 1. There is no requirement under the Arbitration Act (Act 646) that for a reference is said to be made to a document containing an arbitration clause in an agreement, that agreement must be signed.

2. Section 9(5) of Act 646 does not require for the standard terms and conditions that contained the arbitration agreement being attached or published. It is sufficient that the incorporation is by notice in the document.

3. The Federal Court dismissed the appeals with costs and affirmed the decision of the Court of Appeal and award costs of RM30,000.00.

Key

Take Away

It is a trite law as provided under the Arbitration Act 2005 (Act 646) that a formal agreement signed by both parties is not required or is in exchange of other means of communication such as telex or facsimile which provide for a rescind of the agreement to be arbitrated. As long as the arbitration agreement is in a written form that would be adequate.

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