IMSML Website Article 6/2024: Cockett Marine Oil (Asia) Pte Ltd v MISC Bhd and another appeal [2022] 6 MLJ 786, An Arbitration Clause in a Hyperlink

This is a unique case where the bunker supply contract which had an arbitration clause only available in a separate document that is hyperlinked. The Appellant was a company from Singapore Called Cockett Marine Oil (Asia) Ptd Ltd. It entered into a bunker fuel supply contract to the vessel Seri Amanah, a ship owned by the Respondent, MISC Bhd. The Respondent alleged that the Appellant failed to deliver the bunkers free of claims and encumbrances. Consequently, the Respondent terminated the supply contract and filed an action against the Appellant in the High Court.

In response, the Appellant filed to stay the court proceedings under the Arbitration Act 2005, Section 10, on the basis that there was an arbitration agreement. The Respondent countered by applying for an anti-arbitration injunction against the Appellant under Order 29, Rule 1 of the Rules of Court 2012. The Appellant relied on an arbitration agreement that it contended was incorporated via a hyperlink. Further, the Appellant questioned whether the Court had the jurisdiction to determine whether a valid arbitration agreement existed.

Hence, there were two important questions that the court had to answer. First, was there a prima facie that an arbitration agreement existed? Second, if the first question was answered in the affirmative, should the court stay the civil proceedings filed by the Respondent and refer the dispute to the arbitral tribunal to determine the issue relating to arbitration? The High Court had decided in favour of the Respondent and held that there was no valid arbitration agreement and that the civil proceedings filed in court should proceed.

The Court of Appeal, with a bench consisting of Kamaludin MD Said, Hadhariah Syed Ismail and Gunalan Muniandy JJCA allowed both appeals of the Appellant, and thus set aside the decision of the High Court. The Court of Appeal made it very clear that the question whether an arbitration agreement existed was an issue for the determination of the arbitral tribunal. The jurisdiction for an arbitral tribunal to do this was provided for in the explicit provision used in the Arbitration Act 2005, Section 18. Therefore, this issue was not something that was within the jurisdiction of the High Court, see Para [42] to [43].

As soon as reference was made to an arbitration clause in any document or electronic communication that was not denied or rejected as in the facts of this case, the matter fell within the broad and wide statutory powers of the arbitral tribunal under Arbitration Act 2005, Section 18(1), to determine whether it had jurisdiction to hear the dispute. If the arbitral tribunal decided that it did indeed had the jurisdiction to hear the matter by rejecting the preliminary objections to its jurisdictions, it then had the power to decide the substantive issues (ie merits of the case) between the parties, see Para [29] and [31].

Therefore, the Court of Appeal concluded that any jurisdiction which the court had in this case was prima facie, whether an arbitration agreement existed. Once this threshold had been crossed, the matter before the court had to be stayed and referred to arbitration for a full determination there was indeed and binding arbitration agreement between the parties. This was the mandatory effect of the Arbitration Act 2005, Section 10, where the parties had to resolve the dispute by arbitration, see Para [42] to [43].

The court’s duty was only to the extent of determining whether there was an agreement to arbitrate, see Albon (trading as NA Carriage Co) v Naza Trading Sdn Bhd (No.4) [2008] 1 Lloyd’s Rep.1 (A Malaysia Arbitration), see Para [24]. This is also supported by Private Company ‘Triple V Inc’ v Star (Universal) Co Ltd and Another [1995] 3 HKC 129, see Para [28], and CMS Energy Sdn Bhd v Poscon Corp [2008] 6 MLJ 561.

If a party was dissatisfied with the decision of the arbitral tribunal in making a ruling on its jurisdiction, under the Arbitration Act 2005, Section 18(8), an appeal may be made to the High Court, against the decision of the arbitral tribunal, see Para [31].

On the issue of the hyperlink specifically, the Court of Appeal took note that the Appellant relied on the exchange of correspondence between the parties. The hyperlink was included in the correspondence and in particular confirmation of the supply of the bunker on specific terms and conditions on 30 August 2018, see Para [32]. The Appellant argued that whether the terms of the arbitration agreement incorporated via the hyperlink, was a question of fact within the purview of the arbitral tribunal, see Para [33]. The Court of Appeal agreed with this as the contract on 30 August 2018 sets out the terms and conditions by direct link (ie the hyperlink) to the ‘Standard Terms and Conditions for the Sale of Marine Bunker Fuels, Lubricants and Other Products’, see Para [34]. In effect, the correspondence which contained hyperlink was the Appellant’s offer, counter-offer and final confirmation.

The Court of Appeal held that a reference to arbitration was sufficient to incorporate an arbitration clause under the Arbitration Act 2005, Section 9. An arbitration agreement referring the dispute to arbitration, via a hyperlink was still an arbitration agreement. The Court of Appeal relied on the Federal Court decision in Ajwa for Food Industries Co (MIGOP), Egypt v Pacific Inter-Link Sdn Bhd [2013] 5 MLJ 625. Ajwa set a very low bar for incorporation of an arbitration agreement. A general incorporation clause would suffice to successfully transplant an arbitration clause from one document into another. First, there is no statutory requirement under the Arbitration Act 2005 that where a reference is said to be made to a document containing an arbitration clause in an agreement, that the agreement must be signed. Second, the Arbitration Act 2005, Section 9(5), does not require that the standard terms and conditions which contain the arbitration agreement be attached or published. Ajwa made it clear that it is sufficient that the incorporation is by notice in the document, see Para [35]. The Court of Appeal explained that a plain reading of the Federal Court decision in Ajwa is that a reference to a document is sufficient to incorporate an arbitration agreement for the purposes of the Arbitration Act 2005, Section 9, see Para [41]. At the High Court, the Judicial Commissioner made an error by disregarding the impugned hyperlink which was highlighted by the Appellant, as it was plainly a reference to an arbitration clause, see Para [41].

In conclusion, the take away from this case is that a reference to arbitration via a hyperlink easily crosses the threshold for incorporation of an arbitration clause through notice. This is very different from English Law which requires very specific words to effectively transplant an arbitration clause from a document such as a charterparty into a bill of lading, see for example, The Merak; Owners of Cargo on Board the Merak v The Merak (Owners) [1965] P 223 where the phrase ‘all the terms, conditions, clauses and exceptions …’ were used. This formula worked as an arbitration agreement was a ‘clause’. Without that word, an arbitration agreement would not fall within the words ‘terms’, ‘conditions’ or ‘exceptions’, see The Varenna [1983] 3 All ER 645; T.W. Thomas v Portsea SS Co Ltd [1912] AC 1; The Federal Bulker [1989] 1 Lloyd’s Rep.103 and The Heidberg [1994] 2 Lloyd’s Rep.287.

Thank you for reading IMSML Website Article 6/2024

Stay tuned for the next IMSML Website Article 7/2024: Langkawi Ro-Ro Ferry Services Sdn Bhd & Ors v Competition Commission [2022] MLJU 2900

Signing-off for today,

Dr Irwin Ooi Ui Joo, LL.B(Hons.)(Glamorgan); LL.M (Cardiff); Ph.D (Cardiff); CMILT

Professor of Maritime and Transport Law

Head of the Centre for Advocacy and Dispute Resolution

Faculty of Law

Universiti Teknologi MARA Shah Alam

Selangor, Malaysia

Thursday, 18 January 2024

Note that I am the corresponding author for the IMSML Website Articles. My official email address is: uijoo310@uitm.edu.my