Arbitral awards can still apply despite unsigned contract, says Singapore High Court

The Singapore High Court has dismissed applications to set aside arbitral awards on the ground that there was no contract between the parties. The court also noted that a party that allowed the arbitration to proceed without a contract should not be allowed to use that fact to apply for oral testimony to be given and cross-examined in challenge proceedings.

Observers say the decision highlights the role of conduct in concluding arbitration agreements; the validity of a choice of law clause; and the danger of losing the right to cross-examine witnesses by failing to appear at an arbitration to challenge jurisdiction.

In Jiangsu Overseas Group Co Ltd v Concord Energy Pte Ltd and another matter [2016] SGHC 153, the plaintiff applied to have two related arbitral awards made in favour of the defendant set aside.

Contracts not signed

The defendant made an agreement for the sale and shipment of green petroleum coke to the plaintiff, but the contract was split into two: a spot contract for one shipment and a term contract for another five shipments. Both contained an arbitration clause indicating Singapore International Arbitration Centre (SIAC) arbitration in case of dispute. The plaintiff received two shipments but allegedly failed to pay for them and then refused to take delivery of the other four. The defendant started arbitration proceedings. The plaintiff argued that it did not enter into either of the contracts and therefore it was not bound by any arbitration agreement. Though the contracts were not signed, the court found that a contract is still formed if there is performance of the contract by the parties’ conduct.

Benedict Teo

“The Court affirmed the general position that an arbitration agreement can be concluded by conduct,” says Benedict Teo, director, dispute resolution at Drew & Napier. “In other words, the absence of a signed arbitration agreement would not preclude the Court from finding that there is a valid and binding arbitration agreement for the purposes of upholding an award.”
Validity of a choice of law clause
The Court decided that since Singapore was the chosen law in the dispute resolution clause in the contracts in question, it should be the law that is applied to the validity of the arbitration agreement. “The Court emphasised that a choice of law clause may continue to be valid and the Court may therefore apply the chosen law to determine whether the arbitration agreement was validly formed, notwithstanding an allegation that the main contract containing the choice of law clause and the arbitration agreement was never formed,” says Teo. “What this means, therefore, is that parties challenging the formation of the main contract containing the arbitration agreement and any choice of law clause must concurrently dispute the validity of the choice of law clause.  Failure to do so may be construed as an acceptance that the choice of law clause applies and should be given effect to by the Court.”

Failure to appear at an arbitration

The decision also shows that counsel need to be prepared to face the consequences when deciding whether to appear at arbitral hearings. “The Court cautioned that a party which chooses not to appear at the arbitration to raise their jurisdictional objections, and thereby surrendering the chance to cross-examine material witnesses, would have to “stand or fall by that strategy”. The fact that they were not present at the arbitration hearing is not a “sufficient reason” for the Court to allow the taking of oral evidence with cross-examination of witnesses at the stage of setting aside proceedings. While the Court did not state this as a categorical principle, parties would be well-advised to consider whether the taking of evidence orally and cross-examination of witnesses will be crucial to establishing their case for setting aside,” says Teo.

The case highlights the attitude that Singapore courts take towards arbitral decisions and proceedings. “The courts [are reluctant] to investigate or intervene in arbitrations, and [the case] adds to the jurisprudence supporting the doctrine of minimal curial intervention by the Singapore Courts in arbitral proceedings,” says Teo. ”The Court’s observation that a party having deliberately chosen not to participate in arbitral proceedings should stand or fall by that strategy, is likely to influence how parties treat arbitral proceedings. This case serves as a reminder that parties’ decision not to appear or participate in arbitral proceedings may preclude the party from seeking Court orders for the taking or production of further evidence in challenge proceedings before the Court.”