A Singapore High Court recently banned the implementation of an arbitration award in favor of a non-existent company, highlighting the importance of legal person continuity in international arbitration. The importance of precise and correct party identification in any arbitration proceeding is critical as it can jeopardize the enforceability of the arbitral award. The award-winning party had ceased to exist as a result of a merger. This compelled the Singapore HC judge to set aside the leave for enforcement of such an award.
- The case involved National Oilwell Varco Norway AS (previously known as Hydralift AS) as the Plaintiff, while Keppel FELS Ltd (formerly known as Far East Levingston Shipbuilding Ltd) as the Defendant, and a company known as A/S Hydralift ("Hydralift"). Hydralift had merged with National Oilwell Varco Norway AS Company in 2004.
- In 1996, Hydralift and the defendant, in this case, had entered into a contract governed by Singapore Law. The contract contained an arbitration clause, and a dispute arose between the parties in 1999. They tried resolving the conflict but could not find an amicable ground. The parties were still negotiating in 2004, and that was when Hydralift had merged with the present plaintiff of the case (National Oilwell Varco Norway AS). Hence, as a result of the merger, Hydralift had been dissolved.
- Defendant took Hydralift to arbitration for breach of contract in 2007. The action against Hydralift was fought by Plaintiff (NOV) in the name of Hydralift.
- The arbitral panel issued its decision in September 2019, rejecting Defendant's claims and admitting Hydralift's counterclaims after an unusually long twelve years of arbitral procedures.
- In 2019, Plaintiff sought Defendant to fulfill the award that Defendant learned that Hydralift had gone out of business. Plaintiff admitted that it failed to inform Defendant that Hydralift had merged with Plaintiff and ceased to exist.
- The Singapore HC dealt with the defendants' application to set the leave aside by the plaintiff (NOV).
Issue and Decision
Whether the Plaintiff (NOV) could enforce the award against the defendant in this case?
- First, the court reasoned that the arbitral tribunal intended to award Hydralift rather than the Plaintiff because (i) the contract was made between the Defendant and Hydralift, not the Plaintiff; and (ii) the arbitral tribunal distinguished the Plaintiff and Hydralift as two separate legal entities.
- Second, the court emphasized that section 19 of the International Arbitration Act of Singapore did not give it the authority to alter or diverge from an award's dispositive provisions without the permission of the parties or a legislative justification. The dual policy imperatives of party autonomy and minimum curial interference required this ‘mechanical' approach to enforcement.
- Because the arbitral panel did not intend to make a judgment in favor of the Plaintiff, the court determined that only Hydralift may petition for leave to enforce the award under Section 19 of the Act.
The HC made stated that Hydralift had ceased to exist long before the arbitral proceedings. According to the ruling, only a legal person can establish a right to arbitrate and be bound by an obligation to arbitrate. Plaintiff was estopped from disputing that Hydralift was the Respondent in the arbitration, according to Defendant. In this regard, the court acknowledged that Plaintiff represented Hydralift as a legal entity and the respondent in the arbitration in both the arbitration and the lawsuit.
The court reached this decision after confirming that Hydralift was the entity pursuing counterclaims against Defendant in arbitration. Plaintiff stated repeatedly and unequivocally that Hydralift was the respondent. As a result, the court determined that Plaintiff was estopped from denying that Hydralift was the arbitration respondent.
In Conclusion, the Singapore HC has set aside the leave to enforce the award as the award was rightfully enforced in favor of Hydralift, which had ceased to exist in 2004. Hence, the court considered the award a nullity. The plaintiffs in the case have estopped from denying Hydralift was the respondent in arbitration.
The judgment signifies the importance of party identification in every case so that years of arbitral and legal proceedings don’t go in vain.
(This Article Does Not Intend To Hurt The Sentiments Of Any Individual Community, Sect, or Religion, Etcetera. This Article Is Based Purely On The Authors Personal Views And Opinions In The Exercise Of The Fundamental Right Guaranteed Under Article 19(1)(A) And Other Related Laws Being Force In India, For The Time Being. Further, despite all efforts made to ensure the accuracy and correctness of the information published, White Code VIA Mediation and Arbitration Centre Foundation shall not be responsible for any errors caused due to human error or otherwise.)