4 August, 2012
Legal News & Analysis – Asia Pacific – Singapore – Dispute Resolution
What are the options available to a party which is unsuccessful in an arbitration? Should it apply to set aside the award at the seat? Or should it resist enforcement of the award in the enforcement forum? Can it do both?
These are some of the questions that a recent Singapore High Court decision throws up: Galsworthy Ltd of the Republic of Liberia v Glory of Wealth Shipping Pte Ltd [2011] 1 SLR 727.
The facts of Galsworthy are straightforward. There were disputes over a charter-party. The disputes were referred to arbitration in London. Galsworthy’s claim against Glory of Wealth Shipping (“GWS”) for damages was allowed by the tribunal. GWS later applied to set aside that award in the English courts. Galsworthy applied for security for costs, and that application was granted; GWS was ordered to pay security within a fixed period of time. It did not do so, and its application to set aside the award was dismissed. Galsworthy then sought and obtained leave from the Singapore courts to enforce the award against GWS. GWS applied to set aside the order granting leave to enforce. That application was dismissed by the Assistant Registrar. GWS appealed. GWS’ appeal was dismissed by the Singapore High Court.
The issue that has caused somewhat of a stir in the arbitration circuit relates to a preliminary point of law that arose both before the Assistant Registrar and, on appeal, the Judge. That issue was whether, having applied to challenge the award in the English courts, and having then withdrawn that challenge for tactical reasons, GWS was still entitled to resist enforcement in the Singapore courts.
The Judge held that GWS was not entitled to do so. His Honour reviewed the relevant authorities and held that the options available to an unsuccessful party in an arbitration were “alternatives and not cumulative”. The Judge reasoned that GWS had the opportunity to choose either the supervisory (curial) or enforcement court to advance its challenge against the award. According to the Judge, GWS had “elected” to proceed in the former (ie in the English courts). Having done so, the Judge held that GWS’ application to set aside the order granting Galsworthy leave to enforce amounted to an “abuse of process” because it was a “considered decision on [its] part to avoid the need to furnish security to the English court.”
Much of the debate that has been generated in the aftermath of this decision relates to the use of the phrase “alternatives and not cumulative.” Some writers and commentators have suggested that an unsuccessful party to an arbitration is not required to choose between setting aside the award at the seat and resisting enforcement.
This writer can understand why the Judge came to the view His Honour did, given that the Judge found on the facts that GWS’ decision not to proceed with its application to set aside and to instead resist enforcement was taken purely to circumvent the order made by the English courts directing GWS to furnish security, especially in circumstances where GWS could have but chose not to appeal that order: Galsworthy, at [9]. According to the Judge, that was an “abuse of process” which precluded it from challenging enforcement.
In the writer’s view, however, Galsworthy does not address the larger issue of whether an unsuccessful party can resist enforcement if it has already made a challenge in the curial court.
The writer is of the view that there is much to be said about the proposition that an unsuccessful party to an arbitration is not required to choose between those options. The best argument in support of this view can be found in the language of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (also known as the New York Convention) itself. Article VI of the New York Convention specifically provides that an enforcement court can stay enforcement proceedings if setting aside proceedings are pending in the supervisory (curial) court. In this writer’s view, that provision would make sense only if a challenge to the enforcement of an award and an application to set aside the award at the seat can run in parallel. That does not mean that an unsuccessful party’s right to pursue both options is without limitation. At the very least in those jurisdictions where the doctrine of estoppel is well-established, it has been suggested that a decision of the curial court can possibly create an issue estoppel that will preclude a party from raising the same argument before the enforcement court: see for example Dallah Real Estate and Tourism Holding Company v The Ministry of Religious Affairs, Government of Pakistan [2010] UKSC 46, per Lord Collins. This is likely to be the position in a number of common law jurisdictions, especially in those jurisdictions where the grounds for setting aside and the grounds for resisting enforcement are largely the same. In some civil law jurisdictions however, it is not clear if this principle has any application. For example, the French Courts have held that they would be prepared to enforce awards that have already been set aside at the seat: see for example Hilmarton Ltd v OTV, Cour de cassation, 23 March 1994 (1995) 20 Yb Comm Arb 663.
It is not clear if the Judge in Galsworthy had the benefit of these arguments. It must also be kept in mind that the phrase “alternatives and not cumulative” was not coined by the Judge in Galsworthy. It was first used in a much earlier High Court decision (Newspeed International Ltd v Citus Trading Pte Ltd [2003] 3 SLR(R) 1) and was later cited with approval in yet another High Court decision (Aloe Vera America, Inc v Asianic Food (S) Pte Ltd [2006] 3 SLR(R) 174).
Further, the Judge in Galsworthy observed that if GWS’ application to set aside the award was heard on the merits and failed, it would be entitled to challenge the enforcement of the award in the enforcement court if the grounds and standards between the supervising and enforcement jurisdiction were different: Galsworthy, at [9]. That appears to this writer to be a recognition by the Judge in Galsworthy that the two options are not absolute alternatives and that an unsuccessful party would at least in certain circumstances have the benefit of both options.
The unanswered questions that arise out of Galsworthy have highly significant practical consequences. Parties to an arbitration would no doubt benefit from clarity about what they can or cannot do when they are faced with an adverse arbitral award.
