CAN A PARTY BE BOUND TO ARBITRATE BY A FORGED CONTRACT, OR BY SITTING OUT THE ARBITRATION?
In DZD v DZE [2026] SGHC 199 ("DZD"), the General Division of the High Court set aside an ad hoc demurrage arbitral award because there was no valid arbitration agreement between the shipowner and the trader. The purported charterparty was forged, and the trader's payment of freight could not cure that defect (DZD at [11], [63], [78]).
The decision holds that s 2A(6) of the International Arbitration Act 1994 cannot deem an arbitration agreement into existence where none exists (DZD at [25]). It also confirms that a forged signature is a nullity that cannot be ratified (DZD at [65]–[68]).
Background
The shipowner obtained an award for demurrage against the trader and an enforcement order attaching the trader's bank balance (DZD at [1]–[2]). The parties never dealt directly. The shipowner relied on a "Clean Recap" of charterparty terms (including an arbitration clause) naming the trader as head charterer, bearing the signature of the trader’s director, the trader’s stamp and a handwritten date (DZD at [7]).
The trader did not participate in the arbitration and applied to set aside the award under Art 34(2)(a)(i) of the Model Law, asserting that the signature, stamp and date were pasted into the PDF without its authority (DZD at [3]–[4], [9]). The shipowner argued that there was a deemed arbitration agreement under s 2A(6) IAA, or alternatively that the trader had executed or authorised the Clean Recap, ratified it by paying freight, or created a charterparty with an arbitration agreement by paying freight (DZD at [10]).
No deemed arbitration agreement against a non-participating respondent
A respondent who believes the tribunal lacks jurisdiction may sit out the arbitration and challenge the award later (DZD at [17]–[18]). Where a respondent does not participate in the arbitration, it is not obliged to dispute any assertion made in the arbitration as to the existence of an arbitration agreement (DZD at [19]).
More fundamentally, the Court of Appeal in Cheung Teck Cheong Richard v LVND Investments Pte Ltd [2021] 2 SLR 890 held that the deeming provision in s 4(6) of the Arbitration Act only deems an existing agreement formally valid despite not being in writing; it “does not have the effect of deeming there to be an arbitration agreement when there is no such agreement” (DZD at [20]–[22]). The same reasoning applies to s 2A(6) of the International Arbitration Act (DZD at [25]).
The Clean Recap was a forgery
Expert evidence showed the signature, stamp and date were three separately pasted objects, and the date was not in the trader’s director's handwriting (DZD at [29]–[30]). The shipowner did not dispute this but said the trader must have done it (DZD at [31]). The Court found that implausible: the trader’s director could simply have signed and dated the document herself (DZD at [32]). Whoever pasted the elements, there was nothing to show that person had the trader’s authority, or that the trader even knew of the Clean Recap (DZD at [44]–[45]).
The shipowner's innocence in the forgery was irrelevant: "[w]hoever forged the Clean Recap, the consequence of that forgery is that there is no valid arbitration agreement" (DZD at [80]).
A forgery cannot be ratified
A counterfeit signature "is truly a nullity" and cannot be ratified, as distinct from an agent purporting to sign on another's behalf without authority (DZD at [65]–[68]). In any event, the freight invoice identified neither the charterparty parties nor its terms, so the trader lacked the knowledge required for ratification (DZD at [72]–[73]). Nor could payment of freight create an arbitration agreement by conduct: an arbitration agreement is separable from the main contract, and nothing showed the trader knew of any arbitration stipulation (DZD at [77]).
Payment of freight did not make the trader the charterer
The shipowner argued that payment of freight showed an FOB sale and hence that the trader must have chartered the vessel, but the sale contract was not in evidence and the shipowner had not sought it or applied to cross-examine the trader’s director whose signature was borne by the “Clean Recap” (DZD at [47]–[48]). The trader paid only after the vessel had arrived at the discharge port, on an invoice forwarded by its supplier (DZD at [53]). A cargo owner may pay freight simply to get its goods released; that does not make it the charterer (DZD at [59]). Otherwise every online shopper paying shipping would be in contract with DHL or FedEx (DZD at [61]).
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