Enforcement of Arbitration Agreement

03 July 2009

Elizabeth Xue

This judgment dealt with an application made by the 2nd Defendant, Volkswagen Group Singapore Pte Ltd (“2nd Defendant”), to stay all further proceedings in the plaintiff’s action that relate to itself, in favour of arbitration.

The Plaintiff, Cars & Cars Pte Ltd, and 1st and 2nd Defendants had entered into agreements for the import of Volkswagen passenger cars in Singapore. By mutual agreement, all the parties entered into four written agreements to govern the amicable parting of ways between them. The settlement agreements set out that payments were to made by the 1st and 2nd Defendants to the Plaintiff on 1 February 2009 in settlement of all claims between the parties.

However, both Defendants’ payments were late, and the Plaintiff elected to take the late payment of the settlement sum by the 1st Defendant as repudiatory conduct, and alleged that it could now mount claims against the Defendants for loss and damage owing to their breach of the parent agreement(s).

The issue in the summons was whether the alleged repudiation, as it relates to the 2nd defendant only, should be referred to arbitration and consequently whether the proceedings in court should be stayed.

Assistant Registrar Saqib Alam based his decision on the governing regime for the Arbitration Agreement.

The Plaintiff argued that the Arbitration Act (“AA”) would apply, and that the court should not refer the matter to arbitration because it would lead to a multiplicity of proceedings and possible inconsistent findings as a result. The 2nd Defendant argued that the International Arbitration Act (“IAA”) would apply because parties had intended that this was going to be an international arbitration when they entered into the Arbitration Agreement.

Under s 6 of the AA, the court has a discretion whether or not to stay proceedings in favour of arbitration.  Under s 6 of the IAA, the court must stay proceedings in favour of arbitration as long as the Arbitration Agreement is not null and void, inoperative or incapable of being performed.

AR Alam cited VK Rajah JA’s decision in NCC International AB v Alliance Concrete Singapore Pte Ltd [2008] 2 SLR 565 and held that where the SIAC Rules 2007 are adopted, the arbitration in question will be treated as an international arbitration and the IAA will be the governing regime.  Therefore, parties who agree to adopt the SIAC Rules 2007 (without anyfurther qualifications) elect to have their arbitration treated as an international arbitration, with the IAA as the governing regime.

The Arbitration Agreement stated that the Rules to be adopted would be the SIAC Rules “for the time being in force”.  The Court of Appeal decision in Black and Veatch Singapore Pte Ltd v Jurong Engineering Ltd [2004] 4 SLR 19 was also considered and adopted, where it was held that there was a prima facie inference that if the rules contained mainly procedural provisions, then the rules in force at the time of commencement of arbitration would be the ones that applied to the arbitration. However, if the rules contained mainly substantive provisions, then those in force as at the date the contract was entered into would apply.