Citation(2017) 29 SAcLJ 454
Published date01 December 2017
Date01 December 2017

Preserving the Right to Arbitration

Arbitration agreements are well respected under Singapore law. A party to an arbitration agreement can usually enforce it in a Singapore court, unless he has delivered a pleading or otherwise taken any other “step” in court proceedings (see s 6 of the International Arbitration Act). The “step” is not defined in the Act, but case law has developed around the concept of such a “step”. These authorities will be examined to delineate the boundaries and characteristics of the “step”.

This article will analyse some common themes under which the right to arbitration may be lost or curtailed by taking (mis)steps in court, and seeks to identify the overarching rationale for the “step” doctrine.

I. Introduction

1 Section 6(1) of Singapore's International Arbitration Act1 (“IAA”) provides:

Notwithstanding Article 8 of the Model Law, where any party to an arbitration agreement to which this Act applies institutes any proceedings in any court against any other party to the agreement in respect of any matter which is the subject of the agreement, any party to the agreement may, at any time after appearance and before delivering any pleading or taking any other step in the proceedings, apply to that court to stay the proceedings so far as the proceedings relate to that matter. [emphasis added]

2 Although the IAA was originally enacted in Singapore in 1994,2 the words “at any time after appearance and before delivering any pleading or taking any other step in the proceedings” are of significantly older origin. In fact, they predate the UNCITRAL Model Law on

International Commercial Arbitration3 (“Model Law”) passed in 1985. The words appeared in the UK Arbitration Act 1950,4 and can be traced back to s 4 of the UK Arbitration Act 1889.5

3 Once a “step” is taken, the court's jurisdiction to grant a stay in favour of arbitration is nullified (“the step principle”).6

4 At the outset, the step principle must be distinguished from the words in Art 8 of the Model Law, which states that a request for arbitration must be made “not later than when submitting his first statement on the substance of the dispute”.

5 First, Art 8 simply provides a “long stop” date by which a request for arbitration must be made. It places a “time limit”7 or a “deadline” 8 by which a party has to submit a request for the court matter to be referred to arbitration. Failure to assert the arbitration point by this time limit would preclude raising the arbitration agreement in subsequent phases of the court proceedings.9 This time limit had not

been present in the New York Convention,10 and was introduced into the Model Law by adapting a similar time limit in the European Convention on International Commercial Arbitration.11

6 By contrast, the step principle seeks to delineate the conduct of a party, as opposed to laying down a temporal deadline, by which a party may lose his right to refer a litigation case to arbitration.

7 Second, being simply a “deadline”, the single point in time identified in Art 8 of the Model Law (submitting his first statement on the substance of the dispute) is intended to be “taken literally and applied uniformly in all legal systems”.12

8 On the other hand, for the step principle, there have been many cases deciding setting out the wide variety of circumstances under which the right to arbitration may be lost. However, as two leading authors had noted previously, “the reported cases are difficult to reconcile, and they give no clear guidance on the nature of a step in the proceedings”.13

9 Nevertheless, in recent years, there have been recent decisions clarifying important aspects of the step principle. Most notably, the recent Court of Appeal decision in L Capital Jones Ltd v Maniach Pte Ltd14 (“L Capital”) provides a good starting point for the analysis.

II. General principles

10 In L Capital, L Capital Jones and Maniach entered into a joint venture agreement containing an arbitration clause. Maniach sued L Capital Jones and its subsidiary in court for shareholder oppression. In

response, L Capital Jones applied15 for (a) Maniach's claim in court to be struck out on the merits, and (b) alternatively, for the claim to be stated in favour of arbitration.

11 One of the key issues raised by Maniach was whether L Capital, by asking the court to strike out the claim on the merits, had taken a step in the proceedings which disqualified it from applying for a stay.16

12 The Court of Appeal held that L Capital had indeed taken such a step. First, the court held that an application to strike out the proceedings on the merits would ordinarily be a step in the proceedings.17

13 In the court's view, the general principle was set out in the earlier Court of Appeal decision of Carona Holdings Pte Ltd v Go Go Delicacy Pte Ltd18 (“Carona”):

[A] ‘step’ is deemed to have been taken if the applicant employs court procedures to enable him to defeat or defend those proceedings on their merits and/or the applicant proceeds … beyond a mere acknowledgment of service of process by evincing an unequivocal intention to participate in the court proceedings in preference to arbitration …

14 Applying the general principle, the court held that a striking out application on the merits was an affirmation of the court's jurisdiction to resolve the matter.19 Further, if the court had gone on to determine the striking out application in L Capital's favour, this would have created some form of estoppel or res judicata, precluding the matter from being relitigated before an arbitration tribunal.20 Thus, a striking out application on the merits clearly evinces an unequivocal intention to participate in the court proceedings in preference to arbitration.21

15 The Court of Appeal's general principle in Carona is based on a party's unequivocal intention to submit to the court's jurisdiction rather than seek recourse by way of arbitration.22 In other words, a party takes

a step in favour of litigation if he has made an unequivocal election to do so instead of arbitration.23

16 As a prerequisite of election, the party making the election must be aware of the facts which have given rise to the existence of the two inconsistent rights which he is choosing between.24 Applied to the step principle (which is essentially an election for litigation instead of arbitration), a defendant's application for the plaintiff to produce documents referred to in the plaintiff's statement of claim is not considered a “step” in the proceedings, if the defendant was not fully aware of all the relevant facts and, in particular, the existence of an arbitration clause. This was held by the Singapore High Court in Amoe Pte Ltd v Otto Marine Ltd.25

17 This reasoning may appear to be in conflict with an earlier decision of the English Court of Appeal in Parker, Gaines & Co Ltd v Turpin,26 which apparently rejected27 the submission that “if a party does not know the full facts he cannot take a step in the proceedings”. However, the English Court of Appeal in Eagle Star Insurance Co Ltd v Yuval Insurance Co Ltd28 subsequently adopted the waiver analysis, together with the requisite requirement of knowledge of the material circumstances. In that decision, Lord Denning MR held:29

What then is a step in the proceedings? … On principle it is a step by which the defendant evinces an election to abide by the Court proceedings and waives his right to ask for an arbitration. Like any election it must be an unequivocal act done with knowledge of the material circumstances … [emphasis added]

18 It is submitted that there cannot be a meaningful waiver, election or affirmation, unless there is full awareness of all the relevant facts relating to the two competing options of litigation and arbitration. Hence, in so far as Parker, Gaines & Co Ltd v Turpin stands for the

proposition that a step can be taken even if a party does not know the full facts, it is respectfully submitted that it was wrongly decided.30

19 In summary, under Singapore law, the Singapore courts have analysed the “step” using principles of election and waiver. First, a party takes a step when he elects to submit to the court's jurisdiction (as opposed to arbitration), and thereby waives his rights to arbitration. Second, the “step” must be a step taken in court which seeks to invoke the jurisdiction of the court. In Amoe Pte Ltd v Otto Marine Ltd, the High Court considered whether a defendant who had applied to court to compel the plaintiff to produce documents referred to in the plaintiff's statement of claim filed in court had taken a “step” in the litigation. The court held that “were [the defendant's request] in the form of a letter, it would be considered mere correspondence between the parties and, without more, would not be viewed as constituting a step in the proceedings”.31

20 This approach in England for the step principle is broadly similar. First, the conduct of the applicant must be such as to demonstrate an election to abandon his right to stay, in favour of allowing the action to proceed in court.32 Second, the act in question must have the effect of invoking the jurisdiction of the court.33 An extrajudicial proceeding in the legal action, such as obtaining by correspondence a consent to the enlargement of time for delivery of pleadings, is not sufficient.34

III. Clear steps which cause the right to arbitration to be lost

21 Various decisions on the step principle will now be examined, in an attempt to reconcile them according to the general principles discussed above.

22 The clearer areas will be covered first. There are some court procedures so closely associated with the litigation process that taking them clearly shows an intention to affirm the court proceedings.

A. Interrogatories and discovery applications

23 For example, a party who applies for interrogatories35 or discovery36 in relation to court proceedings is clearly taking a step...

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