Arbitration has long established itself as the most commonly used form of alternative dispute resolution for commercial disputes. However, certain questions regarding its interaction with the court system remain at large, particularly where the two regimes overlap. In the recent case of Tomolugen Holdings Limited v Silica Investors Limited [2015] SGCA 57, the Singapore Court of Appeal shed some light on the threshold for a stay of court proceedings in favour of arbitration, and whether minority oppression actions are arbitrable at all.

While the High Court had dismissed the application for a stay of proceedings, the Court of Appeal took a different position and partially allowed the appeal. The main appellant was successfully represented by Sim Kwan Kiat, Avinash Pradhan and Chong Kah Kheng of Rajah & Tann Singapore LLP.

Stay Applications

The Plaintiff in this case had brought an action for minority oppression against the Defendants. In turn, the Defendants sought a stay of proceedings under the International Arbitration Act.

The threshold question is: what standard of review is appropriate for stay applications? In light of the fact that arbitral panels have the jurisdiction to rule on their own jurisdiction, should the court conduct a prima facie review of the existence and scope of the arbitration clause, or should it go further and  conduct an actual determination of the issue?

The Court of Appeal clarified that, in a stay application, a court need only be satisfied that there is a prima facie case that:

  1. There is a valid arbitration agreement;
  2. The dispute falls within the scope of the arbitration agreement; and
  3. The arbitration agreement is not null and void, inoperative or incapable of being performed.

This standard is in keeping with the Singapore courts’ position on achieving a balance between the jurisdiction of the court and the arbitral tribunal, and on achieving greater efficiency in the practical case management of disputes which straddle both regimes. A full examination of the arbitral tribunal’s jurisdiction is thus left to the tribunal itself, while the court maintains control over the subsequent enforcement or setting aside procedures.

Minority Oppression

The Court of Appeal also had to consider the issue of arbitrability – in particular, whether disputes over minority oppression are capable of settlement by arbitration. If the dispute is not arbitrable, then the court will not grant a stay of proceedings in favour of arbitration.

For example, the Singapore courts have demonstrated in a number of cases that the insolvency of a company or avoidance claims are not arbitrable. The insolvency regime is in place to protect the greater public interest of all creditors and members, and thus cannot be displaced by arbitration.

However, the Court of Appeal here clarified that minority oppression disputes are in fact arbitrable. Such disputes generally do not engage public policy considerations, nor does the relevant legislation suggest that the subject matter is unsuitable for arbitration.

Notably, the Court of Appeal rejected the contention that the matter was not arbitrable because an arbitral tribunal would not have the full range of remedies which a court would have in a minority oppression action, such as the ability or order the winding up of the company. The court held that this in itself would not preclude the underlying dispute from being resolved by arbitration, as the parties were still free to apply to the court for the grant of any specific relief following the tribunal’s award.

Procedural Flexibility

In issuing its eventual order in this application, the Court of Appeal demonstrated a degree of flexibility in terms of crafting a procedure which would balance the respective parts of the action which fell within the scope of arbitration and litigation.

The Plaintiff’s minority oppression claim was based on four main categories of allegations, one of which fell within the scope of an arbitration agreement with one of the Defendants. That issue was stayed mandatorily in favour of arbitration. If the Plaintiff commences arbitration on that issue, all the other issues are stayed as a matter of case management. The Plaintiff was given the option to forgo the part of the claim which is subject to arbitration, so as to avoid a stay of proceedings.

There were also a number of other Defendants who were not party to the arbitration agreement. Should the arbitrable part of the claim go to arbitration, the Plaintiff and the other Defendants were given the option to agree to submit that part of the dispute between them to arbitration as well. The court also ordered that the parties should utilise any expedited procedures available to resolve the arbitration expeditiously.

Concluding Words

The interaction between arbitration and litigation is a complex balance of jurisdiction and procedure. While the Singapore courts have taken a pro-arbitration position in terms of the recognition of arbitral awards and authority, the commercial scope of arbitration is not absolute. There remain certain matters which are not arbitrable although, as demonstrated in this decision, minority oppression is not one of these matters.

Parties should thus be aware of the limits of arbitration as well as the applicable thresholds before court proceedings may be stayed in favour of arbitration.