articles

January 15, 2020

Rate This Article
1 Star2 Stars3 Stars4 Stars5 Stars (No Ratings Yet)
Loading...

Arbitral Award Will Not Be Granted For Wrongly-Seated Arbitration


- Tham Wei Chern, Director [ Fullerton Law Chambers ]
- Shirlene Leong, Associate [ Fullerton Law Chambers ]

Tham-Wei-Chern-&-Shirlene-Leong

An ambiguous clause can result in parties wasting precious time and resources to obtain an award which is not enforceable due to the arbitration being mistakenly commenced in the wrong seat...

In the recent Court of Appeal (“CA”) decision of ST Group Co Ltd v Sanum Investments Limited [2019] SGCA 65 (“ST Group (CA)”), the CA held that leave to enforce an arbitration award will not be granted for a wrongly seated arbitration.

Factual background

The claimant in the arbitration proceedings was Sanum Investments Limited (“Sanum”), while the respondents were ST Vegas Enterprise Ltd, ST Group Co, Ltd, ST Vegas Co, Ltd and one Mr Sithat Xaysoulivong (“Mr Sithat”) (collectively, the “Lao parties”). Sanum is also the appellant in the appeal, while the ST Group Co, Ltd (“ST Group”) was the respondent in the appeal.

The parties entered into various joint venture (“JV”) arrangements to invest in the Laotian gaming industry and correspondingly entered into various JV agreements.

Agreements

First, Sanum and ST Group entered into a Master Agreement on 30 May 2007 which contained a multi-tiered dispute resolution clause providing for, inter alia, parties to use an “internationally recognized mediation/arbitration company in Macau”. The Master Agreement also envisaged that there would be separate sub-agreements corresponding to the details of each joint venture.

Second, Sanum and ST Vegas Enterprise Ltd entered into a sub-agreement under the Master Agreement (“Participation Agreement”). The Participation Agreement also contained a dispute resolution clause which provided that parties shall arbitrate at the Singapore International Arbitration Centre (“SIAC”).

Third, Sanum and ST Group entered into a sub-agreement called the Thanaleng Agreements which do not contain any dispute resolution clause.

On or about October 2011, dispute arose between Sanum and ST Group, which eventually led to Sanum initiating arbitral proceedings on 23 September 2015 at the SIAC against ST Group, seeking damages suffered for breaches of the various agreements.

The Lao parties objected to the Award on the ground that the arbitration did not conform with the Master Agreement in relation to the seat of arbitration, amongst other things. However, Sanum argued that the breach was in relation to the Participation Agreement and thus the arbitration should be at the SIAC.

The SIAC noted the objections but was ultimately satisfied that a valid arbitration under the SIAC Rules existed (see [22] of ST Group (CA)) and thus allowed the arbitration to proceed in the SIAC. Eventually, the Tribunal rendered its final award on 22 August 2016 (“Award”). On 7 September 2016, Sanum obtained leave of court to enforce the Award in Singapore, which was challenged by Lao parties.

Decision

The CA held that since the dispute arose from the Master Agreement, thus the seat of arbitration was Macau as per the dispute resolution clause in the Master Agreement. As a result, the CA refused to grant leave to Sanum to enforce the Award against the Lao parties (at [104]).

The CA opined that with the Award being issued in Singapore instead of Macau, the Lao parties were “if not completely deprived of their rights to set aside the Award, certainly in a very difficult position” as they were at risk of accepting Singapore as the seat of arbitration.

The CA also stated it is incorrect to contend that, in so far as Model Law jurisdictions are concerned, it makes no difference whether an arbitration is seated in one or the other Model Law jurisdiction since Article 34 of the Model Law specifies the grounds on which an award may be set aside would be the same in both jurisdictions. The significance of the siting of an arbitration in the correct seat is not lessened by the fact that the choice is between two Model Law jurisdictions since each jurisdiction may augment or reduce the grounds for setting aside in their respective jurisdictions. For example, section 24 of the International Arbitration Act (Cap. 143A) provides for two additional grounds to set aside an award. This might have played a part in parties deciding on the choice of seat stated in the dispute resolution clause (see ST Group (CA) at [99]).

The CA also discussed the ambiguous nature of the arbitration clause. At [78] of ST Group (CA), three different but likely interpretations of the clause were set out. However, the interpretation that Macau is the seat of arbitration eventually prevailed after a detailed analysis by the CA of the possible interpretations of the clause.

Finally, it was held at [103] that it is “not necessary for a party who is resisting enforcement of an award arising out of a wrongly seated arbitration to demonstrate actual prejudice arising from the wrong seat”. Instead, it was sufficient that had the arbitration been correctly seated, and had court recourse been necessary, a different supervisory court would have been available to parties.

Significance of the decision

This decision highlights the importance of paying close attention to how dispute resolution clauses are worded and interact across related agreements. Failure to do so could result in vast resources and time being wasted if an award in the party’s favor ultimately cannot be enforced due to an error in proceedings.

In addition, it is crucial for the phrasing of the dispute resolution clause to be clear and unambiguous. As seen in ST Group (CA), an ambiguous clause can result in parties wasting precious time and resources to obtain an award which is not enforceable due to the arbitration being mistakenly commenced in the wrong seat.

Disclaimer – The views expressed in this article are the personal views of the authors and are purely informative in nature.

Related Post

follow us

Publication & Enquiries

phone icon  +91 8879635570/8879635571

mail icon   editor@legalera.in

shares