Introduction
It is commonly understood that an arbitration agreement has certain formalities, such as the requirement of being in writing. However, recent amendments have extended what it means for an arbitration agreement to be ‘in writing’. The scope of this provision was examined in the recent case of AQZ v ARA [2015] SGHC 49.
The case dealt mainly with an oral agreement which imported an arbitration agreement from a separate written contract. Even though the contract was oral and not in writing, the High Court accepted the arbitration agreement as valid because it had been recorded ‘in writing’ in the separate written contract, and in a written draft of the contract (albeit an unsigned draft).
It is not uncommon for contracts to be concluded orally or by conduct. Where such contracts contain arbitration agreements, it is important to know if the arbitration argreement will be valid, and this judgment provides some insight as to when an arbitration agreement in such as instance will be found to be ‘in writing’.
Brief Facts
This case involved an application to set aside an arbitral award. The Parties had entered into a contract for the shipment of coal (the “First Shipment contract”). The Supplier disputed the existence of a further contract for a second shipment (the “Second Shipment contract”). The Buyer issued a Notice of Arbitration against the Supplier, alleging a breach of the Second Shipment contract.
The First Shipment contract was concluded in writing, and contained an arbitration agreement. However, the Second Shipment contract was not concluded in writing, having been allegedly concluded orally instead.
In spite of the Supplier’s challenge that there was no valid and binding arbitration agreement in the Second Shipment contract, the arbitrator found that the tribunal had jurisdiction and that the Supplier was liable to the Buyer (the “Award”). The Supplier then applied to the Singapore High Court to set aside the Award on the ground that the arbitrator lacked jurisdiction to hear the dispute.
Holding Of The High Court
The Court did not grant the application to set aside the Award, finding that there was a valid and binding arbitration agreement in the Second Shipment contract.
In Singapore, the requirement for arbitration agreements to be in writing is contained in the International Arbitration Act (“IAA”). Section 2A(4) of the IAA also states that an arbitration agreement is in writing if “its content is recorded in any form, whether or not the arbitration agreement or contract has been concluded orally, by conduct or by other means.”
Here, the Court found that the arbitration agreement in the Second Shipment contract had in fact been ‘recorded in any form’. The arbitration agreement was thus ‘in writing’ even though the contract itself was oral in nature.
First, the Court held that the arbitration agreement in the Second Shipment contract had been recorded in the First Shipment contract. The Court found that the terms of this Second Shipment contract were, apart from the shipment period, identical to the terms of the First Shipment contract. Therefore, since the Parties had agreed that all the terms of the First Shipment contract would apply to the Second Shipment contract, the arbitration clause in the First Shipment contract was a sufficient record of the arbitration agreement in the Second Shipment contract.
Second, the Court held that the arbitration agreement was recorded in the written draft of the Second Shipment contract. That draft contained an arbitration clause that was identical to the arbitration clause in the First Shipment contract. Although the Buyer never signed the draft, the Court found that there was no evidence that its failure to sign was related to disagreement with the terms of the arbitration clause. Therefore, the draft contract for the Second Shipment could also serve as a record of the arbitration agreement.
Interestingly, the Supplier had tried to argue that the extended definition of an arbitration agreement ‘in writing’ did not apply because the agreement had been entered into in 2009, before the 2012 amendments to the IAA took effect. However, the Court confirmed that the 2012 amendment applied to to all arbitral proceedings commenced on or after 1 June 2012, and not only to arbitration agreements entered into on or after that date.
Concluding Words
This decision highlights the practical approach taken by the Court in the recognition of a valid arbitration agreement. In allowing an arbitration agreement to be contained in an oral contract or a contract by conduct as long as it is recorded in some form, the Court has adopted a commercially oriented position which still affords a measure of certainty to arbitral parties.
Notably, the Court confirmed that the requirement in section 2A(4) would be satisfied even where one party to the arbitration agreement unilaterally records it in writing. It would not matter that the written version was neither signed nor confirmed by all the parties involved. Therefore, an arbitration agreement may be found in a written draft of a contract, or even in a previous contract between the parties containing identical terms.
Nonetheless, parties are well-advised to clearly record their arbitration agreements to prevent uncertainty as to whether a matter should proceed for arbitration.
For further information, please contact:
Kim Beng Ng, Partner, Rajah & Tann
kim.beng.ng@rajahtann.com
Avinash Pradhan, Partner, Rajah & Tann
avinash.pradhan@rajahtann.com
