In the case of Re Shanghai Xinan Screenwall Building & Decoration Co, Ltd  SGHC 58 the Singapore High Court recently gave effect to a potentially defective arbitration clause, wherein a non-existent institution was selected. The Court subsequently upheld the award issued by the China International Economic and Trade Arbitration Commission (“CIETAC”) Tribunal.
Shanghai Xinan, a Chinese company, obtained an arbitral award from CIETAC against Great Wall, a Singapore company, who had not participated in the arbitration proceedings.
When Xinan obtained an enforcement order from the Singapore Court, Great Wall sought to set aside the order, stating that the arbitration agreements were not valid under Chinese law, it therefore fell within s.31(2)(b) of the International Arbitration Act which provides that courts may refuse enforcement of a foreign award if the party against whom enforcement is sought proves to the court that “the arbitration agreement is not valid under the law to which the parties have subjected it or, in the absence of any indication in that respect, under the law of the country where the award was made”.
In this case, the arbitration agreements provided for the dispute to be submitted to the “China International Arbitration Center”. As no such institution exists, it is in violation of Article 18 the Arbitration Law of the People’s Republic of China which provides that where no institution is selected in the original arbitration agreement or a supplemental agreement, the arbitration agreement will be null and void. Therefore, Great Wall argued that the arbitration agreements were void under Chinese law and should not be enforced in Singapore.
High Court’s Decision
The Court rejected Great Wall’s argument. It found that the arbitration clauses showed that the parties intended to resolve their disputes by arbitration in China, and pointed out that the parties would not deliberately have chosen a non-existent institution, but must have intended to choose an existing arbitral institution. The question was therefore whether the arbitration agreements “evince a common intention that CIETAC would be that arbitral institution”.
It was noted that there were close similarities between the words used in the arbitration clause (“China International Arbitration Center”) and the name of CIETAC. This inaccuracy in the name did not nullify the parties’ consent to arbitration or their choice of institution. The Court concluded that the parties had agreed on CIETAC as the arbitral institution, despite being presented with a Chinese court decision which held that a reference to “China International Arbitration Center” was not to be read as referring to CIETAC and thus the arbitration clause was void as no institution was named. The Court had undertaken the exercise of contractual interpretation in this case and concluded the objective intention of the parties was to refer disputes to CIETAC. It reiterated that this was not a matter of choosing a non-existent arbitral institution, but rather giving an agreed arbitral institution a wrong name.
Though it is clear that Singapore Courts will deploy effective interpretation to overcome defects and give effect to parties’ agreement to arbitrate, parties to an arbitration agreement should still be mindful not to name a non-existent institution in their arbitration agreement.
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