Singapore Court refuses to enforce international arbitration award

In its recent decision in ST Group Co. Ltd. v. Sanum Investments Limited [2018] SGHC 141¹, the Court of Appeal in Singapore refused to enforce an award for the reason that the award incorrectly decided to seat the arbitration in Singapore.

Background to the dispute

The dispute related to Sanum Investments Limited (Sanum) on the one hand and four related parties – ST Group Co., Ltd (ST Group), Mr Sithat Xaysoulivong (Mr. Xaysoulivong), ST Vegas Co., Ltd. (ST Vegas), and ST Vegas Enterprise Ltd. (STV Enterprise) (collectively, the Lao Parties or the Respondents) –on the other.

The parties entered into several related agreements involving gaming businesses in Laos:

• The Master Agreement (MA)
  • Sanum entered into an MA with ST Group (it was disputed whether the other Respondents were party to the MA) for the development of several gaming businesses in Laos.
  • The MA also envisaged further agreements in relation to the joint ventures.
  • It contained a multi-tiered dispute resolution clause as per which, as a final recourse, parties could arbitrate their differences “using an internationally recognized mediation/arbitration company in Macau, SAR PRC.”
• The Participation Agreement (PA)
  • One of the sub-agreements, as per the MA, was the PA, entered into in 2007 between STV Enterprises and Sanum regarding two slot clubs run by STV Enterprises.
• The PA also contained a multi-tiered dispute resolution clause, where the parties’ final available recourse was Singapore International Arbitration Centre (SIAC) arbitration.
• Thanaleng Slot Club sub-agreements
  • Between 2008 and 2010, Sanum entered into further agreements with ST Vegas and ST Group in relation to the expansion of the Thanaleng Slot Club. These agreements did not contain a dispute resolution clause.

The crux of the dispute was the failure of the Lao Parties to handover the Thanaleng Slot Club on 11 October 2011, as envisaged under the MA and sub-agreements.

The SIAC arbitration

After Sanum failed to obtain relief before the courts in Laos and the mediation between the parties failed (both a pre-requisite to arbitration under the multi-tiered dispute resolution clauses), it commenced a SIAC arbitration.

In its notice of arbitration, Sanum stated that the seat of arbitration was Macau. The Lao Parties objected to the SIAC arbitration on several grounds, including that some of the Lao Parties had not agreed to arbitration and that the MA required that the arbitration be conducted “using an internationally recognized mediation/arbitration company in Macau, SAR PRC.”

In its award, the tribunal decided that –

• The PA supplemented the dispute resolution procedure under the MA. Therefore it could decide disputes between Sanum and ST Group, Mr Sithat, ST Vegas and STV Enterprise, who were all party to either the MA or the PA.
• The seat of the arbitration was Singapore, since the PA provided for SIAC arbitration in Singapore.

Following the award, Sanum obtained leave to enforce the award in Singapore. This was challenged before the High Court in Singapore, and the judge denied the leave to enforce against STV Enterprise. However, she allowed Sanum to enforce the award against the remaining Lao Parties.

The Court of Appeal’s decision

Sanum and the Lao Parties, against whom the award was allowed to be enforced, filed cross-appeals before the Singapore Court of Appeal.

The Court of Appeal agreed with the High Court that the dispute arose only under the MA, not the PA.

On the issue of seat, the Court agreed with the High Court on the finding that the arbitration had been wrongly seated since the seat under the MA was Macau. However, while the High Court did not refuse enforcement on this ground, the Court of Appeal held otherwise.

The Lao Parties’ appeal was allowed and it was held that it was not necessary for a party resisting enforcement of an award based on a wrong seat to demonstrate actual prejudice arising out of the wrongful determination of the seat.

Key takeaways

This case is an example of a procedural technicality that has the potential to arise in disputes involving multiple agreements containing different dispute resolution clauses.

The expense and time involved in litigating such a dispute can be avoided by anticipating the multiple agreements early on, and providing for a single and uniform procedure to resolve disputes. In the present case, this provision should ideally have been placed in the MA and any other related contractual documents with signatories not party to the MA.

For more information on this or related issues, please get in touch with the authors of this briefing or your usual HFW contact:

Sadhvi Mohindru
Associate, Singapore
T+65 6411 5357
M+65 9839 6536
E sadhvi.mohindru@hfw.com

Footnotes

1. The judgment is available here.