Compelling Unwilling Parties to Arbitration (part 1)

In practice, the team from our Specialised Arbitration Practice ("SAP") had been engaged in matters where a respondent is unwilling to take part in the arbitration proceedings, contrary to the contractual terms. In part 1 of the series, we examine what a claimant could do when the respondent refuses to appoint the Tribunal.

Issue: What happens when a party refuse to appoint a Tribunal pursuant to the contract?

If parties had evinced a clear intention to arbitrate their dispute in the contract, the Court would generally give effect to such intention and parties may seek the assistance of the SIAC President to administer an ad hoc arbitration pursuant to section 13 of the Arbitration Act (provided the seat of the arbitration is Singapore.

Issue: What happens when arbitral clause refers to non-existent institution and rules?

As a starting point, when parties have evinced a clear intention to settle a dispute by arbitration, the Court should give effect to such intention as far as possible so long as it does not result in an arbitration that “is not within the contemplation of either party”. (Insigma Technology Co Ltd v Alstom Technology Ltd [2009] 3 SLR(R) 936) (SGCA))

In that case, arbitration clause provided that disputes would be resolved under the SIAC but under the ICC rules (at [4]). Court held that it was possible for a hybrid arbitration to be conducted with the SICC as administrator (see [43]) given that section 15A of the IAA allows parties to choose the rules of arbitration provided that such rules are not inconsistent with a non-derogable provision of the Model Law. For a similar provision, see section 23 of the AA.

With regard to saving a pathological arbitration clause, the High Court in HKL Group Co Ltd v Rizq International Holdings Pte Ltd [2013] SGHCR 5 noted (at [17]) that the nature and extent of the pathology should be assessed with reference to its deviation from the essential terms of an arbitral clause, namely: (1) to produce mandatory consequences for both the parties; (2) to exclude the intervention of state courts in the settlement in the settlement of the dispute; (3) to give powers to arbitrators to resolve the disputes likely to arise between the parties; and (4) to permit the putting in place of a procedure leading under the best conditions of efficiency and rapidity to the rendering of an award that is susceptible of judicial enforcement.

In that case, the arbitration clause referred arbitration to the non-existent “Arbitration Committee at Singapore under the rules of the International Chamber of Commerce”. (at [1]). Court noted (at [29]) that though the clause referred to a non-existent institution, it would be open for parties to approach any arbitration institution in Singapore which would be able to administer the arbitration, applying the ICC rules. To that extent, the arbitral clause was not inoperative or incapable of being performed.

However, when the Court finds that parties had intended to refer to a non-existent institution and rules, then the arbitral clause could be declared to be of no effect (TMT Co Ltd v Royal Bank of Scotland plc [2018] 3 SLR 70).

When pathological arbitral clause has connecting factors that point to Singapore, SIAC President has the power to conclude that prima facie place of arbitration was Singapore and appoint a tribunal in aid of arbitration pursuant to section 8 of the IAA read with Article 11(3) of the Model Law (KVC Rice Intertrade Co Ltd v Asian Mineral Resources Pte Ltd [2017] 4 SLR 182) (Note: The Model Law has no effect to arbitrations conducted under the Arbitration Act unless parties agree otherwise – see section 5(1) of the IAA; however, note that the wording of section 13 of the AA mirrors that of Article 11 of the Model Law in respect of the appointment of arbitrators).

In that case, the arbitration clauses in question were bare provisions which state that parties agree that the dispute “shall be referred to and finally resolved by arbitration as per Indian [or Singapore] Contract Rules”. No institution, place or venue of arbitration was specified. The plaintiff attempted to commence arbitration on an ad hoc basis in Singapore but the defendants refused to do so. Nevertheless, as the authority with the statutory duty to appoint a tribunal in aid of arbitration in Singapore under Article 11(3) of the Model Law, the SIAC President arguably needs to ascertain whether the duty applies in any case coming before him. (see [44]).

This inquiry was carried out on a prima facie basis, given that the constituted tribunal may still rule on its own jurisdiction (see [47] – [48]). Based on the wording of the arbitration clauses, the court found that there was ample room for the SIAC President to conclude that the prima facie place of arbitration was Singapore, even if the words “as per Indian/Singapore contract rules” were deemed to be unintelligible and disregarded, since the Defendant was incorporated in Singapore, the likely place of enforcement (see [55(c)], [56]).

Even if the SIAC President concluded that he had no power to act, the Court held that it nonetheless had the residual jurisdiction to assist with the appointment of arbitrators as a last resort (see [67]), as a means of ensuring access to justice, provided the dispute had some connection with Singapore (see [71]). This power was justified on the basis of contract law or as an exercise of the court’s inherent jurisdiction to prevent injustice.

For queries on arbitration, you may contact our Head of the Specialised Arbitration Practice at wilbur.lim@wmhlaw.com.sg or 6514 6351.

Disclaimer: The content of this article does not constitute legal advice and should not be relied on as such. Specific advice should be sought about your specific circumstances.