When businesses negotiate contracts they usually focus on the commercial terms and pay little attention to disputes. But what they do have to think about in advance is the so-called ‘jurisdiction clause’ stating where and how any dispute will be resolved.
Moreover, those interested in resolving a dispute through arbitration should be very careful with the issue of choosing a suitable jurisdiction. Practice shows that haste only leads to unnecessary confusion. As a result, the arbitration process is delayed for a longer period and the parties incur large additional costs.
If you intend to initiate arbitration proceedings in Singapore or another Asian country, we recommend that you carefully read this material.
The essence of the conflict
Macau-based Sanum Company decided to settle the dispute by arbitration with 4 Lao business partners. They all entered into several related agreements regarding the gambling business in Laos:
- General Agreement (MA);
- Agreement of Participation (PA).
Sanum entered into a General Agreement with one of the partners to develop several gaming businesses, and later entered into additional agreements with the others to expand the gambling club.
We would like to draw the attention of those who are planning to start an arbitration process in Asia that:
- MA contained a provision for dispute resolution using an internationally recognized arbitration institution in Macau;
- The PA contained a tiered clause with the Singapore International Arbitration Center (SIAC);
- The sub-agreements did not include any ADR clause.
The major problem was the inability of the Lao parties to transfer the gaming club within the agreed time, as stipulated in the General Agreement and sub-agreements.
As mediation proved ineffective in attempting to resolve a dispute in Laos, Sanum decided to arbitrate by referring to SIAC and specifying the jurisdiction of Macau. However, the defendants did not agree with the chosen place of arbitration.
In turn, the tribunal decided that:
- The settlement of conflicts between the plaintiff and the defendants was possible for the reason that they were all participants in MA/PA;
- The place of arbitration was Singapore.
As a result, Sanum received permission to enforce the arbitral award in Singapore. However, this was appealed to the High Court and the judge refused to authorize the enforcement of the award against the defendant. However, the court allowed the plaintiff to enforce the judgment in respect of the remaining Lao parties.
Decision of the Court of Appeal
The plaintiff and the partners have filed cross-appeals with the Singapore Court of Appeal.
Those interested in settling a dispute through arbitration in Macau or Singapore should be aware that the Court of Appeal has agreed with the High Court as follows:
- The dispute arose only within the MA, not the PA;
- The arbitration was considered wrongly because the place of arbitration under MA was Macau.
Therefore, the Lao parties' appeal was accepted.
For those deciding to arbitrate in Asia, this case should be viewed as an example of procedural technical detail that may arise in disputes involving multiple agreements containing different dispute resolution clauses.
In order to avoid unnecessary costs and a large amount of time to resolve a conflict through arbitration, it is necessary to anticipate the existence of many agreements in advance and provide for a single and unified dispute resolution procedure.
If you are interested in pre-trial dispute resolution in Asia, we recommend that you initially sign up for a personal consultation on the arbitration process from IQ Decision specialists.
We are also ready to offer you comprehensive legal assistance in arbitration proceedings in Singapore, legal assistance in international negotiations, as well as mediator services in Asia.