Dispute Resolution Singapore Client Alert September 2015 Singapore High Court confirms that an arbitral tribunal has the power to rule on its own jurisdiction, including where a party claims it has not signed any arbitration agreement Arbitral tribunals have the power under Singapore law to rule on their own jurisdiction, consistent with the widely recognised principle of KompetenzKompetenz. In a recent decision, the Singapore High Court has confirmed that this power extends not only to questions concerning the validity or scope of any arbitration agreement under which the tribunal has been constituted, but also questions concerning the very existence of an arbitration agreement. This includes situations where a party to the arbitration proceedings claims it has not signed the arbitration agreement under which proceedings have been commenced. See: Malini Ventura v Knight Capital Pte Ltd and others  SGHC 225. The decision enhances the attraction of choosing Singapore as the “seat” for international arbitration. The choice of seat in an arbitration agreement determines the supervisory framework under which any arbitration will operate, including the extent to which the courts may intervene in any arbitral proceedings. The Malini decision confirms that, where Singapore is the seat, the Singapore courts will be careful not to usurp a tribunal’s power to determine the dispute before it, and will not permit parties to stymie arbitral proceeding by raising vexatious challenges to the jurisdiction of the tribunal. The International Arbitration Act (Singapore) An arbitral tribunal in a Singapore seated international arbitration has broad powers, including the power to make an initial determination ahead of the Singapore courts as to whether it has jurisdiction in respect of any dispute: see s. 10 of Singapore's International Arbitration Act ("IAA") and art. 16 of the UNCITRAL Model Law on International Commercial Arbitration (the “Model Law”), which is incorporated into Singapore law under the IAA. The Singapore courts have the power to determine whether a tribunal has jurisdiction, but only after this issue has been first considered by the relevant tribunal (s. 10 of the IAA). This position is reinforced by s. 6 of the IAA. This provides that, where a party to an arbitration agreement institutes court proceedings in respect of a matter which is the subject of that agreement, the Singapore courts may stay such proceedings in favour of arbitration. The dispute The dispute concerned an arbitration clause contained in a Personal Guarantee Deed ("Deed"). The plaintiff ("V") was said to have entered into the Deed and to have thereby guaranteed a loan offered by various lenders to a Singapore incorporated company ("Borrower"), which was wholly owned by For further information please contact Chan Leng Sun, SC +65 6434 2703 [email protected] Rian Matthews +65 6434 2643 [email protected] Baker & McKenzie.Wong & Leow 8 Marina Boulevard #05-01 Marina Bay Financial Centre Tower 1 Singapore 018981 www.bakermckenzie.com 2 Client Alert September 2015 V's husband. The Borrower subsequently defaulted and the lenders called on the guarantee in the Deed. The lenders issued arbitral proceedings against V under the arbitration agreement contained in the Deed. This agreement provided for arbitration in Singapore under the Arbitration Rules of the Singapore International Arbitration Centre ("SIAC"). V’s defence was straightforward. V claimed she had never signed the Deed or otherwise agreed to guarantee the borrower’s debts, and that she was therefore not liable to the lenders. Further, V claimed she was also not bound by the arbitration agreement contained in the Deed, as she had never acceded to that agreement. V issued proceedings in the Singapore courts seeking a declaration that she had not entered into any arbitration agreement and a further declaration that the arbitration proceedings were a nullity and of no effect. V also filed an injunction to stop the lenders from continuing the arbitration. The lenders, in turn, applied under s. 6 of the IAA to stay the Singapore court proceedings until the conclusion of the SIAC arbitration. The High Court's Decision V's application was dismissed and the High Court stayed the court proceedings in favour of the arbitration. The Singapore High Court confirmed that the powers of an arbitral tribunal are "wide", and that the tribunal’s power to determine its own jurisdiction includes not only the power to determine questions about the validity of an arbitration agreement, "but also the very existence of the arbitration agreement". Furthermore, so long as a party who is seeking to enforce an arbitration agreement can show on a prima facie basis that such an agreement exists, any question as to the jurisdiction should be first remitted to the arbitral tribunal for an initial decision. If it is necessary for the Singapore courts to consider any question as to the jurisdiction, then in the normal course this should only happen after the tribunal has first had the opportunity to rule on such a question itself. In the present case, while the position was not clear cut, there was evidence that V had agreed to be bound by the terms of the Deed. For example, the signed Deed was provided to the lenders by solicitors acting for parties involved in the loan transaction; V's husband was the sole shareholder and director of the borrower and thus V would not be acting irrationally by providing a guarantee for the loan; and V had not denied the guarantee until arbitral proceedings had been commenced (suggesting the jurisdictional challenge may have been only a tactical application). Comment In short, under Singapore law, a tribunal should get the “first bite” of any jurisdictional question, except where there is clear evidence that the relevant arbitration agreement does not exist. This “prima facie approach” is consistent with the approach taken by the Court in the earlier decision of The Titan Unity  SGHCR 28, in which Baker & McKenzie. Wong & Leow successfully acted (see here). Titan Unity concerned a dispute about the existence of an arbitration agreement incorporated into shipping documents. The Singapore High Court held in that case that the applicable threshold test in Singapore courts for determining the existence of an arbitration agreement is the prima facie standard instead of a full review. The Malini Ventura decision is also consistent with how courts in a number of other jurisdictions have interpreted art. 8 of the Model Law, upon which s. 6 of the IAA is based. 3 Client Alert February 2015 If the prima facie existence of the arbitration agreement can be established, it will be up to the arbitral tribunal to make a substantive decision on the existence and validity of the arbitration agreement. This will provide a degree of certainty to parties who are contemplating arbitral proceedings. If a party is dissatisfied with the tribunal’s ruling on jurisdiction, it can appeal to the Singapore courts under s.10 of the IAA on the question of jurisdiction (including any questions on the existence or validity of the arbitration agreement). ©2015 Baker & McKenzie. 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