In the recent Singapore Court of Appeal decision of Wilson Taylor Asia Pacific Pte Ltd v Dyna-Jet Pte Ltd  SGCA 32, the Court of Appeal conclusively held that an asymmetric arbitration agreement, i.e. an arbitration agreement which provides only one party with the right to elect whether to refer disputes between the parties to arbitration, is valid and enforceable.
Facts of the case
Wilson Taylor Asia Pacific Pte Ltd ("Wilson") engaged Dyna-Jet Pte Ltd ("Dyna-Jet") to install under water anodes on the island of Diego Garcia in the Indian Ocean. The dispute resolution clause in the contract between the parties contained an arbitration agreement which gave only Dyna-Jet the right to elect to arbitrate a dispute arising in connection with the Contract ("the Dispute Clause" and "the Arbitration Agreement" respectively):
"…Any claim or dispute of terms of the Contract shall be settled amicably between the parties by mutual consultation. If no amicable settlement is reached through discussions, at the election of Dyna-Jet, the dispute may be referred to and personally settled by means of arbitration proceedings, which shall be conducted under English Law; and held in Singapore."
A dispute arose under the contract, and Dyna-Jet commenced proceedings in the Singapore Courts in respect of the same ("the Singapore Proceedings"). By doing so, Dyna-Jet in effect elected not to refer the dispute to arbitration. Wilson applied for a stay of the Singapore Proceedings pursuant to section 6 of Singapore's International Arbitration Act ("the IAA").
Decision of the Court of Appeal
The Court of Appeal affirmed the decisions of the lower courts and dismissed Wilson's stay application. The Court of Appeal affirmed its previous decision in Tomulgen Holdings Ltd and another v Silica Investors Ltd  1 SLR 373 ("Tomulgen") that in order for a stay of proceedings to be granted under section 6 of the IAA, the following 3 requirements would have to be fulfilled:
- First - there is a valid arbitration agreement between the parties to the court proceedings; and
- Second - the dispute in the court proceedings (or any part thereof) falls within the scope of the arbitration agreement; and
- Third - the arbitration agreement is not null and void, inoperative, or incapable of being performed.
In respect of the first requirement, Dyna-Jet argued that the Dispute Clause did not contain a valid arbitration agreement as the same lacked the "characteristic of mutuality" as only Dyna-Jet had the right to elect to put Wilson under an obligation to arbitrate, while Wilson had no such corresponding right against Dyna-Jet.
It also raised an argument based on the "optionality characteristic" of the Dispute Clause. Dyna-Jet argued that for an arbitration agreement to be valid, it must amongst other things, create a present obligation to arbitrate should a dispute arise. Dyna-Jet argued that the Dispute Clause fell short of this requirement by merely conferring on Dyna-Jet, the option to elect to arbitrate.
The Court of Appeal affirmed the lower court's decision to reject Dyna-Jet's arguments. The lower court relied on the overwhelming weight of modern Commonwealth authority which supports the validity of arbitration agreements that are optional and/or asymmetric in nature.
In respect of the second requirement, i.e. whether the dispute before the Court fell within the scope of the Arbitration Agreement, the Court of Appeal held that since Dyna-Jet had chosen to refer the dispute to litigation by commencing the Singapore Proceedings, the dispute would not fall within the scope of the Arbitration Agreement, thereby releasing Dyna-Jet from any obligation to arbitrate.
As the second requirement was not satisfied by Wilson, the Court of Appeal did not consider it necessary to analyse whether the third requirement as set out above was satisfied.
This is a significant decision by the Court of Appeal as it provides parties to asymmetric arbitration agreements with certainty as to what their legal positions and rights are under Singapore law. In affirming the validity and enforceability of asymmetric arbitration agreements, the Court of Appeal further upholds the parties' freedom to contract for dispute resolution mechanisms even if the agreed mechanism results in one party losing its rights to refer any dispute to arbitration.
This article is produced by our Singapore office, Bird & Bird ATMD LLP, and does not constitute legal advice. It is intended to provide general information only. Please contact our lawyers if you have any specific queries.