In Gannon Int'l, Ltd. v Blocker, (Jan. 13, 2011), the plaintiffs (Gannon International and Gannon Pacific (both Missouri corporations), Gannon Hong Kong, and Gannon Vietnam) are the parent corporations of the nominal defendant corporation, the Gannon Brewery Joint Stock Company (Gannon Brewery), a Vietnamese joint stock company. The defendant, Walter Blocker, is the former CEO, General Director, and legal representative of Gannon Vietnam. Part of the parties' dispute centred on an agreement that Blocker signed on behalf of Gannon Brewery and Gannon Vietnam to sell an interest in Gannon Brewery to fellow defendants Ignition and Sandalwood. The Gannon parent corporations alleged that this was an attempt to dilute their interest in Gannon Brewery.

Based on various alleged fraudulent actions and breaches of fiduciary duty by Blocker, the Gannon parent corporations filed an eleven-count complaint, which sought in part a court declaration that the agreement was invalid and that the arbitration clause in the agreement was fraudulently authorised. In response, Blocker asked the court to compel arbitration for all claims relating to the agreement.

The agreement contained an arbitration clause requiring "any question regarding its interpretation, existence, validity or termination" to be decided by arbitration in Singapore under the SIAC Rules. The Gannon parent corporations argued that because only Gannon Vietnam signed the agreement and the agreement's formation is central to the dispute, the arbitration clause is unenforceable and the court should decide the matter.

The court examined the agreement and the SIAC Rules. The SIAC rules allow arbitral tribunals to decide their own jurisdiction, including claims about the validity of the arbitration agreement. Thus, the arbitral tribunal had jurisdiction to decide whether the Gannon parent corporations were bound by Gannon Vietnam's signature on the agreement and whether the agreement was valid. The agreement itself required arbitration to decide claims about the validity of the agreement. Thus, the court dismissed the Gannon parent corporations' claims relating to the agreement and granted Blocker's motion to dismiss in favour of arbitration.

This decision illustrates the implications of agreements giving broad powers to arbitrators to decide the validity of arbitration agreements. The plaintiffs in this case used court action to challenge an agreement, which they did not sign, based on a wide array of fraudulent activity. Despite the breadth of claims raised in court, all claims relating to the agreement were handed over to arbitration. If parties wish to avoid any court ruling on their agreements, this case serves as an example of the broad language needed in the arbitration agreement and arbitral rules.

Notably, there is tension between this decision and the Second Circuit's recent decision in Dedon GmbH and Dedon Inc., v. Janus et Cie (see Legal update, Second Circuit upholds SDNY ruling that courts must decide issues of contract formation), where the court held that it, and not the arbitrators, must decide issues related to the existence of the contract. It is not immediately clear as to whether and on what basis the cases may be distinguished.

Case: Gannon Int'l, Ltd. v Blocker, (Jan. 13, 2011).