Validity of arbitration agreement under section 31(2)(b) International Arbitration Act must be determined based on foreign law, not Singapore law | Practical Law

Validity of arbitration agreement under section 31(2)(b) International Arbitration Act must be determined based on foreign law, not Singapore law | Practical Law

Alvin Yeo, Senior Counsel (Senior Partner) and Andre Maniam (Head of Litigation & Dispute Resolution Department), WongPartnership LLP

Validity of arbitration agreement under section 31(2)(b) International Arbitration Act must be determined based on foreign law, not Singapore law

Law stated as at 06 May 2010International, Singapore
Alvin Yeo, Senior Counsel (Senior Partner) and Andre Maniam (Head of Litigation & Dispute Resolution Department), WongPartnership LLP
The Singapore High Court has held that the question of whether a foreign arbitral award was valid under the law to which the parties have subjected it must be decided in accordance with foreign law, not Singapore law.

Background

Under section 29 of the Singapore International Arbitration Act (IAA), a foreign award may be enforced in a court in the same manner as an award made in Singapore, namely by leave of the court.
On an application to enforce a foreign award under the IAA, the applicant must produce, among other things, the original arbitration agreement or a duly certified copy of it (section 30(b)(1), IAA). The manner of complying with section 30(b)(1) is prescribed by O69A r6 of the Rules of Court, which requires the applicant to exhibit the arbitration agreement in an affidavit, or to produce duly certified copies of the relevant documents.
Section 31 of the IAA sets out the grounds on which a court may, on the application of a party, refuse to enforce a foreign arbitral award. Those grounds include, in section 31(2)(b), where the arbitration agreement is not valid under the law to which the parties have subjected it or, in the absence of any indication in that respect, under the law of the country where the award was made.

Facts

The plaintiff (DSK) applied for leave under section 29 of the IAA to enforce a final award made by the Danish Arbitration Institute (the Tribunal) against the defendant (Ultrapolis). Ultrapolis argued that DSK had not produced the original arbitration agreement, or a certified true copy of it, as required by section 30(b)(1) of the IAA. Specifically, Ultrapolis argued that a new agreement that had been signed by the parties in respect of design services for a yacht did not contain the arbitration clause that had existed in the original agreement between the parties. In the original agreement, the plaintiff's standard conditions, which contained the arbitration agreement, had been expressly signed by the parties, whereas in the new agreement, although the standard conditions were referenced in a clause, they were not expressly signed.

Decision

The court granted DSK's application for leave to enforce the award.
The court held that the real issue was whether the standard conditions formed part of the new agreement. This needed to be considered in two contexts:
  • The first stage of enforcement under section 30(1)(b) of the IAA.
  • The second stage being the refusal of enforcement under section 31(2) of the IAA.
The court applied Aloe Vera of America, Inc v Asianic Food (S) Pte Ltd [2006] 3 SLR (R) 174, which held that the examination that the court must make of the documents under O69A r6 is a formalistic one and not a substantive one. Applying that approach to the present case, the court found that DSK had satisfied section 30(1)(b) of the IAA by producing a copy of the new agreement and a certified copy of the standard conditions: for the purposes of section 30(1)(b), all the applicant needed to produce was the arbitration agreement under which the award "purports to have been made".
In any event, the court held that the challenge to the existence of the arbitration agreement should be dealt with under section 31(2)(b) of the IAA and that to succeed, the defendant must show that the arbitration agreement was not valid under the law to which the parties had subjected it. This determination had to be based on foreign law, not Singapore law. Whilst both parties provided expert evidence on this issue, the court preferred the evidence from DSK's expert that under Danish law the arbitration clause in the standard conditions would have been incorporated into the new agreement by reference and accordingly found in favour of DSK on the balance of probabilities.