By Gan Kam Yuin - Partner, Bih Li & Lee LLP and Timothy Quek - Associate, Bih Li & Lee LLP
1. Wilson Taylor Asia Pacific Pte Ltd (“WT”) engaged Dyna-Jet Pte Ltd (“Dyna-Jet”) to install underwater anodes. The contract contained a clause which stated that, “…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…”
2. A dispute arose which could not be amicably resolved. Dyna-Jet sued WT in the High Court and WT applied for a stay of proceedings in favour of arbitration.
3. The Court of Appeal reiterated the 3 requirements for a stay of proceedings, namely,(1) a valid arbitration agreement between the parties, (2) that the dispute falls within the scope of the arbitration agreement, and (3) that the arbitration agreement is not null and void, inoperative or incapable of being performed1 .
4. On the first requirement, the Court of Appeal held that the arbitration clause was a valid arbitration agreement even though it was one-sided (giving only Dyna-Jet the right to compel WT to arbitrate a dispute) and even though it made arbitration optional2 .
5. However, the second requirement was not met. The Court of Appeal construed the arbitration clause to mean that Dyna-Jet alone had the right to choose the forum by which any dispute with WT would be tried. It was not a choice between commencing proceedings and not commencing proceedings, but a choice between commencing litigation and commencing arbitration . Since Dyna-Jet had filed the suit in the High Court, the dispute never fell within the scope of the arbitration clause. This was a consequence of the fact that the arbitration clause was optional at the election of Dyna-Jet4 .
6. The Court of Appeal therefore did not find it necessary to consider the third requirement5 . Interestingly, both the Assistant Registrar who heard the application for a stay at first instance, and the Judge who heard the appeal from that decision, had found that Dyna-Jet’s act of filing the suit in the High Court rendered the arbitration clause ‘inoperative or incapable of being performed’6 ie. that it was the third requirement rather than the second requirement that had not been met.
7. Notably, the argument that a one-sided (or asymmetric) arbitration clause is not a valid arbitration agreement, was not accepted by the Assistant Registrar, the Judge or the Court of Appeal. The only debate (and perhaps in most situations it will be an academic debate as the end result will be the same) is whether that one-sidedness also means that the party with the right of election can thereby put a dispute out of the scope of the arbitration clause (as the Court of Appeal held) or that the party’s election for litigation renders the arbitration clause incapable of being performed (as the 2 lower fora held).
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[1] At [11] [2] At [13] [3] At [23] [4] At [24] [5] At [25] [6] At [6][9]
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