Reliance Infrastructure Ltd v Shanghai Electric Group

Jurisdictional challenges and SIAC arbitrations: the Singapore International Commercial Court’s latest ruling.

In the case of Reliance Infrastructure Limited v Shanghai Electric Group Co Ltd 2024 SGHC (I) 3, which involved an application to set aside a Singapore-seated SIAC arbitration award, the Singapore International Commercial Court (SICC) considered several issues in relation to the waiver of jurisdictional objections on the grounds of fraud and/or the want of authority. In dismissing the setting aside application, the court has emphasised the importance of raising jurisdictional objections in a timely and unambiguous manner and, in the process, made further clarifications on the principle of separability in relation to challenges to the validity of an arbitration agreement and the underlying contract.

Summary of the facts and procedural history

The dispute involved a Singapore-seated arbitration award arising out of a guarantee letter between Reliance Infrastructure Ltd (RIL) and Shanghai Electric Group (SEG) under which RIL had purportedly guaranteed the performance of another Reliance entity’s payment obligations under a contract where SEG was to procure equipment and services for a power plant in India (Guarantee Letter). RIL sought to set aside the award on the grounds that the Tribunal lacked jurisdiction due to the invalidity of the arbitration agreement in the Guarantee Letter. The two principal grounds of RIL’s application were: (i) the Guarantee Letter and, by extension, the arbitration agreement in it, was a forgery (Forgery Objection); and/or (ii) the person who signed the Guarantee Letter on behalf of RIL (Mr Agrawal) did not have the authority to do so (Authority Objection). Neither of these objections was specifically raised as an objection to the Tribunal’s jurisdiction during the arbitration proceedings.

Summary of the Court’s findings

The SICC disposed of RIL’s application on the grounds that RIL had waived its right to challenge the tribunal’s jurisdiction on the above two grounds. The Court observed that the RIL was aware of the facts and matters relating to the Forgery Objection even before the commencement of the arbitration, and this became more evident as the arbitration progressed. After reviewing RIL’s conduct during the arbitration proceedings, the SICC concluded that RIL “had made a conscious choice not to pursue its [Forgery Objection] because it was very confident that […] its other challenges to the validity of the Guarantee Letter would prevail” and that it was only reviving this objection “because the outcome differed from its expectation” (see paragraph 83).

As for the Authority Objection, the SICC noted that whilst RIL had “put in issue” Mr Agrawal’s purported lack of authority to enter into the Guarantee Agreement during the arbitration proceedings, it “did not at any time seek a ruling from the Tribunal that it had no jurisdiction to rule on the Parties’ dispute, based on [the Authority Objection].” It concluded that as RIL had failed to, “so it is precluded by waiver from raising that objection now.”

In arriving at this conclusion, the SICC brought further clarity to a frequently disputed, and occasionally difficult area of arbitration law, namely, the relationship between a dispute on the validity of the substantive contract and an arbitration agreement in the underlying contract. The SICC rejected RIL’s attempts to conflate its objection to the validity of the Guarantee Agreement and the arbitration agreement in the Guarantee Agreement.

The Court observed that the relevant question was whether RIL “did not pursue its jurisdictional objection, on the grounds of Mr Agrawal’s want of authority to make an arbitration agreement, during the arbitral process itself” (paragraph 94). This was “conceptually separate” to whether Mr Agrawal had the authority to enter into the Guarantee Agreement (paragraph 92). Whilst the SICC recognised that, in certain circumstances, an allegation that a contract was entered into without authority “‘may well be an attack’ on the arbitration agreement [in that contract]”, a situation contemplated in the Singapore Court of Appeal case of Founder Group (Hong Kong) Ltd (in liquidation) v Singapore JHC Co Pte Ltd [2023] SGCA 40 which observed that “[t]he principle of separability cannot guarantee the survival of the arbitration clause in all circumstances”, the SICC cautioned that the applicability of these observations is fact specific. Whilst the facts and evidence used to invalidate both agreements could be identical in certain circumstances, an arbitration agreement and the underlying contract “remain distinct agreements” (paragraph 93). The SICC concluded that, on the facts, Mr Agarwal did have the requisite authority to enter into arbitration agreements on behalf of RIL generally because he entered into another contract (unchallenged) contract with SEG that contained an arbitration agreement (paragraph 91).

Key takeaways

The SICC’s findings in this case have reinforced the “pro-arbitration” attitudes of the Singapore Courts. The SICC was unimpressed at RIL’s attempts to, in the case of the Forgery Objection, revive an argument that it had initially not pursued for tactical reasons and, in the case of the Authority Objection, belatedly “recast its merits defence as a jurisdictional objection for which it seeks de novo review.”

These observations underscore the importance of making timely and precisely framed jurisdictional objections in Singapore-seated arbitration proceedings, and to carefully consider the tactical and legal implications of not choosing to pursue certain claims/objections. The outcome of this case has emphasised the limited scope of doing so at subsequent stages of the arbitration proceedings and/or during the enforcement of the final award.