The claimant commenced a SIAC arbitration for breach of contract against the respondents. The tribunal made an award in favour of the claimant finding the three respondents jointly and severally liable.

The respondents (appellants) raised three discrete bases to challenge the award – there was no valid arbitration agreement between the parties, the tribunal exceeded the scope of its jurisdiction and there was a breach of natural justice. The common thread in each was the existence or lack of a contract containing an arbitration agreement.

The claimant produced and supplied a type of technologically advanced and high-value industrial product referred to as "modules" in the judgment. The respondents were members of the same multinational group of companies. The subject matter of the arbitration was the appellants' liability to the claimant for a debt owed to the claimant by a procurement company within the group.

Deliveries of the modules began but the claimant received payment on only some of its invoices. Negotiations took place in 2016 to resolve the issue during which the parties entered into a partly written, partly oral "Modules Delivery Agreement" (MDA), which included a non-disposal undertaking. Four versions of this undertaking were produced, but only the third of the four (NDU-3) was signed and executed. The claimant eventually commenced arbitration seeking payment of its outstanding invoices.

The tribunal made an award in favour of the claimant, finding that NDU-3 did contain a valid arbitration agreement and that the appellants had agreed to pay the unpaid invoices in consideration of the claimant releasing the remaining modules.

The appellants sought to set aside the award on the basis that there was no valid arbitration agreement between the parties, that the tribunal acted outside the scope of its jurisdiction and that it had breached the rules of natural justice. At first instance, the judge found that none of the appellants had established any grounds for setting aside the award.

Principles

The Court of Appeal noted that it was "well established that the seat court, in discharging its supervisory role, strives to uphold arbitral awards". The general approach was "guided by the policy of minimal curial intervention” and was consistent with international practice, being grounded in a desire to "support, and not to displace, the arbitral process".

The Court of Appeal noted that courts of the seat "do not and must not interfere in the merits of an arbitral award and, in the process, bail out parties who have made choices that they might come to regret, or offer them a second chance to canvass the merits of their respective cases".

The court must be "mindful not to do more than necessary" yet where the existence or absence of a contract containing an arbitration clause is the central issue in dispute in the arbitration, the seat court undertakes a de novo review. The seat court then "faces the challenge of navigating the thin line between a merits examination and the policy of minimal intervention".

The Court of Appeal said that a court hearing a setting aside application "premised on the absence of a binding contract need only concern itself with whether such a contract existed." In answering this question, the court may consider "whether the parties conducted themselves in a manner which shows they considered themselves bound."

Valid and binding

In Singapore, an application to set aside an award on the basis that no valid arbitration agreement was formed can be brought under Article 34(2)(a)(i) of the UNCITRAL Model Law. In determining whether a binding contract was concluded between the parties, the court adopts an objective approach towards the question of contractual formation.

The primary test, which is an objective one, is whether there was an intention to enter into a binding contract. The court will look at the entire course of negotiations to see "whether there was a single point in time" when the requisite consensus was reached. The fact that services were rendered, work undertaken or payment made were all relevant factors in deciding whether a binding contract was concluded.

Here, it was clear that the intention of the parties was to enter into a binding contract and that a binding agreement had indeed been reached. The purpose for entering into the NDU was to secure the claimant’s agreement to release the modules. The exchange of correspondence and the parties’ conduct during the negotiations also led to the necessary inference that a valid contract had been concluded. Without a binding agreement, "there would be no commercially sensible explanation" to account for the claimant’s decision to release the modules.

The Court of Appeal dismissed the suggestion that the tribunal had acted in excess of the parties’ submission to arbitration in finding that the parties had concluded a part-oral, part‑written MDA. The finding by the tribunal was well within the terms of the submission to arbitration. The Court of Appeal similarly dismissed the appellants’ claim that the tribunal had breached natural justice in arriving at its conclusion, and rejected the appellants’ argument that they had been unable to present their case.

Reflections

The Court of Appeal’s decision is a reminder of the narrow grounds on which the courts in Singapore may overturn an award, applying a generous interpretation of the agreement that had been reached.

In examining the tension between the principles that the court of the seat should not interfere with an award yet that it should decide whether or not the tribunal even had jurisdiction, the Court of Appeal noted that it may have no option but to conduct a limited review of the merits when taking a view on such a jurisdictional challenge to an award.

At the heart of the dispute, however, was the recognition that the parties’ bargain should be respected, once the court was satisfied that a binding contract had been concluded in the first place.

Authored by Hugo Petit and Nigel Sharman.