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Singapore – Arbitration Agreement Is “In Writing” Even If Recorded by One Party Only.

20 May, 2015

 

Legal News & Analysis – Asia Pacific – Singapore – Dispute Resolution

 

In the recent decision of AQZ v ARA [2015] SGHC 49, the Singapore High Court had the opportunity to consider and decide on the application of the expanded definition of “in writing” in the current version of the International Arbitration Act (“IAA”). Significantly, this is the first case in which the High Court opined on the operation of the Expedited Procedure under the SIAC Rules 2010 (“SIAC Rules 2010”) (which also feature in the current rendition of the SIAC Rules), and whether an award rendered by a sole arbitrator appointed under the Expedited Procedure should be set aside on the basis that the arbitration agreement expressly provided for three arbitrators.

 
While the Court also considered other issues (e.g., the procedural issue of the scope of de novo hearing in an application to set aside an arbitral awardon grounds of lack of jurisdiction), this case note will not deal with the Court’s decisions on these other issues.

 
Facts

 
The plaintiff-supplier is a mining and commodity trading company incorporated in Singapore (“Supplier”). The defendant-buyer is a Singapore subsidiary of an Indian trading and shipping conglomerate (“Buyer”). In or around November 2009, the parties started negotiating the possibility of entering into two separate sale and purchase agreements under which the Supplier would sell Indonesian non-coking coal to the Buyer. It was undisputed between the parties that by 7 December 2009, these negotiations culminated in a contract for the shipment of 50,000 metric tonnes of coal in January 2010 (“First Shipment Contract”) at a price of USD 56 per metric tonne. What was disputed was whether the discussions also resulted in a further contract for a second shipment of the same quantity of coal on essentially the same terms save for the shipment period and the purchase price (“Second Shipment Contract”). The Buyer’s position was that the Second Shipment Contract was concluded and the Supplier subsequently breached it. The Supplier maintained that the Second Shipment Contract never came into existence.

 
On 21 March 2013, the Buyer commenced arbitration in the SIAC against the Supplier purportedly under clause 16 of the alleged Second Shipment Contract. The following day, the Buyer applied to the SIAC for the arbitration to be conducted under the Expedited Procedure pursuant to rule 5 of the SIAC Rules 2010. On 18 April 2013, the Supplier’s solicitors wrote to the SIAC challenging the existence of an arbitration agreement and also objecting to the Expedited Procedure. By a letter dated 20 May 2013, the President of the SIAC Court of Arbitration (“SIAC President”) allowed the Buyer’s application.

 
On 8 July 2013, the SIAC President appointed a sole arbitrator (“Arbitrator”). The Arbitrator conducted a preliminary hearing from 16 to 18 October 2013 on the issue of jurisdiction and liability; and the Arbitrator subsequently issued a “Ruling and Partial Award on Preliminary Issues relating to Jurisdiction and Liability” dated 12 May 2014 (“Award”). In the Award, the Arbitrator found that he had jurisdiction and that the Supplier was liable to the Buyer for breach of contract. Dissatisfied with the Arbitrator’s ruling, the Supplier applied to the High Court to set aside the Award.

 

Requirement Of Writing
On the facts, the High Court found that the Second Shipment Contract had been concluded and that the arbitration agreement in clause 16 of the First Shipment Contract was orally imported into the Second Shipment contract. It then considered whether this arbitration agreement thus orally imported into the Second Shipment Contract was “in writing” as required by section 2A of the current version IAA (which it found to be the applicable version of the IAA).

 
The Court held that under section 2A, the requirement of writing was satisfied if one party to the agreement unilaterally recorded it in writing; it did not matter that the written version of the agreement was neither signed nor confirmed by all the parties involved. In this case, the arbitration agreement was recorded in the First Shipment Contract as the parties had orally agreed that all the terms of that contract would apply. The Court held that this was sufficient for the arbitration agreement to be “recorded in any form” as required by section 2A(4). The Court also held that the unsigned draft Second Shipment Contract, which contained an identical arbitration clause, would also satisfy the requirement for the agreement to be one “recorded in any form”.

 
Use Of The Expedited Procedure

 
The arbitration agreement as recorded in the form of clause 16 of the First Shipment Contract provided that the arbitration was to be conducted “in accordance with the rules of conciliation and arbitration of the [SIAC] by three arbitrators in English Language”. The Court held that as clause 16 did not specify a specific edition of the SIAC rules by name, there was a presumption that the SIAC Rules 2010—as the rules in force at the time the arbitration commenced—would apply. Accordingly, although the SIAC rules in force at the time the parties entered into the contract did not provide for an Expedited Procedure, it was open to the Buyer to rely on the Expedited Procedure set out in the SIAC Rules 2010.

 
The Court then held that even though the arbitration agreement specified that the arbitration be conducted by three arbitrations, this agreement could be overridden by the Expedited Procedure provision. Express assent was not necessary for this. In the view of the Court, a commercially sensible approach to interpreting the parties’ arbitration agreement would be to recognise that the SIAC President does have the discretion to appoint a sole arbitrator. In any event, the Supplier had failed to demonstrate that it had suffered any prejudice as a result of the Expedited Procedure, which was a factor the supervisory court would consider in deciding to exercise its discretion in setting aside the award.

 

Our Comments / Analysis


This decision is significant in clarifying that an arbitration agreement can be “in writing” (such as to be valid under the IAA) if it is embodied in a previous contract or an unsigned draft. Parties would thus do well to bear in mind the possibility of a prior arbitration agreement being imported into their subsequent agreement.


Further, in light of the Court’s decision, if parties wish to use a particular version of an institution’s rules, they should specifically identify the name or version of those rules in their arbitration agreement. If they do not do so but instead opt for the rules “for the time being in force”, they should be cognizant of the risk that changes in the rules may impose on them procedures which they have not bargained for (for instance, specific procedures (such as the Expedited Procedure)).

 

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For further information, please contact:

 

Lionel Leo, Partner, WongPartnership
lionel.leo@wongpartnership.com

 

Alvin Yeo, WongPartnership
alvin.yeo@wongpartnership.com

 

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