Singapore: A Model (Law) Jurisdiction - Part 2 The turnaround decision in Re PT Garuda

In Part 1 of this blog post series, we discussed the original position under the Singapore Model Law in relation to the recognition of foreign proceedings and the Court of Appeal’s decision in Re Ascentra Holdings Inc. See here for Part 1.  

In Part 2 of this blog series, we will analyse the SICCs judgement in Re PT Garuda in relation to the ambit of the public policy exception under Article 6 of the UNCITRAL Model Law.

Re PT Garuda

Article 6 of the Singapore Model Law differs from Article 6 of the UNCITRAL Model Law: Article 6 of the UNCITRAL Model Law provides that “[n]othing in this Law prevents the Court from refusing to take an action governed by this Law if the action would be manifestly contrary to the public policy of this state”. The Singapore enactment omits the word “manifestly”.

This difference was considered in the earlier High Court decision in Re Zetta Jet Pte Ltd and others [2018] 4 SLR 80 (Re Zetta Jet), where the Court reasoned that the omission of the word “manifestly” must have been deliberate and conscious, i.e. the standard of exclusion on public policy grounds must have been intended by Parliament to be lower in Singapore than in jurisdictions adopting the UNCITRAL Model Law’s precise wording.

This issue was addressed head on by a panel of three judges (comprising Justice Christoper Sontchi, IJ, Justice Anselmo Reyes, IJ and Justice Kannan Ramesh) in the Singapore International Commercial Court’s first restructuring-related decision in Re PT Garuda Indonesia (Persero) Tbk and another matter [2024] SGHC(I) 1.

The SICC chose to depart from the reasoning in Re Zetta Jet. While it accepted that the omission of the word “manifestly” was deliberate, this was, in its view, insufficient to conclude that Parliament intended a lower threshold. The SICC reasoned as follows:

1. First, the concept of “public policy” under the Model Law refers to a more restricted and narrow concept of public policy which relates only to fundamental principles of law and does not refer to “public policy” as understood in a domestic law context, which refers to mandatory rules of national law. Hence, the inclusion of the term “manifestly” was not to affect the standard of “public policy” contemplated or add any further depth to the test.
2. Second, requiring a higher threshold for finding a breach of public policy better promoted the purpose and objective of the Model Law (to advance the goal of modified universalism) and the principle of comity. In contrast, a lower threshold could potentially permit creditors to stultify recognition based on insignificant breaches of public policy, which would undermine modified universalism.
3. Third, the interpretive trend in foreign jurisdictions aligned with a restrictive interpretation of Article 6.
4. Finally, the strict interpretation of public policy would be aligned with the position in international arbitration, where Article 34(2)(b)(ii) of the UNCITRAL Model Law on International Commercial Arbitration (which permits the setting aside of a Singapore-seated international arbitral award on grounds of conflict with the public policy of Singapore) similarly omits the word “manifestly”. Despite this omission, it is accepted that any successful public policy objection to the enforcement of an arbitration award must involve either “exceptional circumstances” or a violation of “the most basic notions of morality and justice”.

Conclusion

The Singapore Courts’ emphasis on the objective purpose of the UNCITRAL Model Law and the fundamental concepts of modified universalism and international comity is highly instructive on the approach to be taken in interpreting the Singapore Model Law.

It will be interesting to see if this approach encourages Singapore’s continuing aspirations to become a global cross-border restructuring hub.

Authors

Meiyen Tan, Director, Norton Rose Fulbright Singapore

Hannah Alysha, Associate Director, Norton Rose Fulbright Singapore

Jih Shenn Foo, Trainee Solicitor, Norton Rose Fulbright Singapore