Singapore Court Rejects Application To Set Aside Award

In BXH v BXI [2019] SGHC 141, the Singapore High Court dismissed the Plaintiff’s application to set aside an arbitration award in the Defendant’s favour pursuant to Article 34 of the Model Law. The Plaintiff argued that:

  • the award should be set aside under Art 34(2)(a)(i) of the Model Law because the tribunal lacked jurisdiction to determine the dispute between the parties since the contract which contained the arbitration agreement was not a contract between the plaintiff and the defendant but rather one between the Plaintiff and the Defendant’s parent company;
  • alternatively, and pursuant to Art 34(2)(a)(iv) of the Model Law, that even if the tribunal had jurisdiction, the composition of the tribunal was not in accordance with the agreement of the parties since the dispute was determined by a tribunal comprising a sole arbitrator when the arbitration agreement stipulated that it should comprise three arbitrators.

The court rejected both arguments.

In relation to Article 34(2)(a)(i), after an exhaustive review of a number of contracts, the Court found [100] that by reason of their conduct, there was an implied contract between the Plaintiff and the parent company:

“In my view, the conduct of the plaintiff and the Parent Company puts it beyond doubt that they considered themselves to be bound by a contract on the terms set out in the Distributor Agreement after its expiry on 26 December 2012. Similarly, the conduct of the plaintiff and the defendant after entering into the Assignment and Novation Agreement puts it beyond doubt that they considered themselves to be bound by a contract on the terms set out in the Distributor Agreement on and after 25 January 2013. The inference is even more compelling than that in Bramble v Wail because there was more than conduct in this case to evidence the parties’ intention. They not only carried on with the sale and purchase of goods and invoicing as normal, they expressly affirmed in words that they considered the Distributor Agreement to continue to bind them at various points in 2013 and 2014. I therefore find that there was an implied contract on identical terms as the Distributor Agreement that arose between the plaintiff and the Parent Company parties after 26 December 2012, which was then novated to the defendant on 25 January 2013 and which continued thereafter until the defendant terminate it by notice in September 2015.”

In reaching this conclusion, the Court considered whether an arbitration agreement contained in an implied contract satisfied the requirement of being “in writing” under s 2A(3) of the IAA. The Court found it did, stating [101-102]:

“Section 2A(4) of the IAA, however, states that an arbitration agreement is “in writing if its content is recorded in any form, whether or not the arbitration agreement or contract has been concluded orally, by conduct or by other means” [emphasis added]. In AQZ v ARA [2015] 2 SLR 972 at [119]–[120], Judith Prakash J (as she then was) held that the arbitration agreement in an oral contract satisfied the statutory requirement of writing because it was on terms identical to an arbitration agreement contained in an earlier written contract between the parties. The arbitration agreement between the plaintiff and defendant is, in all but the most formal or technical of senses, cl 25.9 of the Distributor Agreement.
The defendant is therefore entitled to rely on the arbitration agreement in cl 25.9 of the Distributor Agreement to found the tribunal’s jurisdiction.”

As to the Plaintiff’s further argument, that the contract contained both an arbitration clause and jurisdiction clause in favour of a specified court, the Court considered, relying on Paul Smith Ltd v H&S International Holding Inc [1991] 2 Lloyd’s Rep 127, that the parties intended for both clauses to have some contractual effect and that the only practical though not entirely satisfactory solution was to adopt this approach and hold that the parties intended to resolve their substantive disputes in arbitration and to resolve disputes arising out of any such arbitration in the Singapore courts in the exercise of their supervisory jurisdiction. The Court considered that this approach was:

“…consistent with the underlying trend in Singapore arbitration jurisprudence that a clear intent to arbitrate disputes manifested in an international commercial contract should, as far as possible, be upheld.”

In relation to Article 34((2)(a)(iv), the Court found that the parties had expressly agreed that if one party failed to nominate an arbitrator within the stipulated thirty-day time limit, the first-appointed arbitrator shall be the sole arbitrator, which is precisely how the tribunal in this arbitration was constituted.

The court rejected the Plaintiff’s reliance on a number of decisions from the US – which upheld the right of a party to have its nominee on an arbitral tribunal despite that party’s failure to nominate an arbitrator within the period stipulated in the parties’ arbitration agreement – on the basis that those cases dealt with applications for relief in the nature of specific performance and were of no relevance to an application to set aside an award under Article 34 of the Model Law. The Court stated [277]:

“An application to set aside an award under any of the grounds set out in Art 34 of the Model Law is of a wholly different nature to an application under s 4 of the USAA. An applicant who seeks relief under Article 34 is not asking the court to grant relief in the nature of specific performance of the arbitration agreement. If the criteria underlying one of the grounds for setting aside an award which are set out in Article 34 are established, the application succeeds. Otherwise, the application fails. Whatever may be the position of a court hearing an application under s 4 of the USAA, there is no scope for a court hearing an application under Article 34 of the Model Law to try and reach a “fair and equitable interpretation” of the parties’ arbitration agreement.”

And further [278]:

“There is also no principle of general application which justifies construing an arbitration agreement in “a fair and equitable” manner in order to determine whether a ground for setting aside an arbitration award under Article 34 has been established. An arbitration agreement is to be construed like any other contract: by applying a contextual interpretation to the words chosen by the parties to ascertain objectively what the parties intended.”

See also the review of this case by Bird & Bird.

About Phillip Rompotis

Phillip practices as a barrister and arbitrator in Hong Kong. He has over 25 years’ litigation and arbitration experience in commercial disputes relating to construction & engineering, financial services, joint venture & shareholders agreements, technology, trusts, property and landlord & tenant. He is a Fellow of the Chartered Institute of Arbitrators, the Singapore Institute of Arbitrators, the Malaysian Institute of Arbitrators, and a member of various lists/panels of arbitrators.

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