A LOOK AT VARIOUS CHALLENGES AT THE ENFORCEMENT OF ARBITRAL AWARD STAGE
The case of Medipas LLC and Ors v Erdenet Mining Corp SOE (“Medipas”) concerned an attempt to resist enforcement of a Singapore-seated SIAC award on the basis that there was no valid arbitration agreement, that the dispute was non-arbitrable, and that enforcement would be contrary to Singapore public policy.
The Court’s decision reaffirms Singapore’s pro-enforcement approach to arbitral awards: where parties have objectively agreed to arbitrate, the court will not allow technical drafting imperfections, foreign law objections, or unproven allegations of criminality to derail enforcement.
Background. The dispute arose out of a series of agreements relating to the operations and management of a hospital in Mongolia. The applicants were the prospective operators of the hospital. The respondent, a Mongolian state-owned entity, owned the hospital.
Under the agreements, the respondent was to transfer certain immovable property, medical equipment and other assets to the first applicant, in return for which the applicants were to provide hospital-related services.
Notably, the agreements were executed in two languages – Mongolian and Japanese. In the arbitration proceedings, the parties focused on the Mongolian version, and so did the tribunal (see [27] of Medipas).
The relevant dispute resolution clause (i.e., Clause 10.3) in the Mongolian version provided that disputes “shall be resolved by the International Arbitration Court of Singapore, pursuant to international laws and regulations”.
The applicants commenced SIAC arbitration in Singapore. The tribunal found in their favour and ordered the respondent to payUS$17.5 million and MNT10,875,436,308, together with interest and costs.
The applicants obtained leave from the Singapore High Court to enforce the award. The respondent then applied to set aside the enforcement order.
The respondent’s grounds for resisting enforcement. The respondent advanced various arguments as to why the arbitral award should be set aside. For present purposes, this article will focus on the invalidity of the arbitration agreement and public policy grounds of challenge made by respondent.
The Court’s decision. The High Court dismissed the respondent’s application and upheld the enforcement order.
The Court’s finding on the invalidity of the arbitration agreement challenge. The Court sought to address this issue primarily by determining the governing law of the arbitration agreement.
Applying the three-stage framework in BCY v BCZ [2017] 3 SLR 357 as affirmed in Anupam Mittal v Westbridge Ventures II Investment Holdings [2023] 1 SLR 349, the Court held that Singapore law governed the arbitration agreement (see [41] of Medipas).
First, the Court observed that there was no express choice of law for the arbitration agreement (see [29] of Medipas). Notably, the Court held that reference to “international laws and regulations” in Clause 10.3 is not a valid expression of express choice of law under Singapore law, which requires choosing a national system of law (see [30] of Medipas).
Second, with regards to implied choice of law, the Court held that the starting point for such implication is the governing law of the main contract (see [30] of Medipas). Interestingly, the Court’s reasoning indicates that it will not imply a choice of law to the arbitration agreement, where the underlying agreement is either equivocal or lacks any express selection on the governing law (see [33]-[34] of Medipas).
On a related note, the Court clarified an important limitation on the validation principle under Singapore law. By way of recap, the principle provides that an arbitration agreement’s putative invalidity under a particular system of law negates the inference that the parties intended that system of law to govern the arbitration agreement.
The Court confirmed that this principle applies only where the parties were, at the very least, aware that their choice of law could impact its validity (see [36] of Medipas). In other words, the validation principle will not be engaged if there is no evidence suggesting that the parties addressed their minds to question of the governing law of the arbitration agreement and its impact on the validity of the arbitration agreement.
In the absence of either an express or implied choice, the Court then considered which system of law had the closest and most real connection with the arbitration agreement. The answer was Singapore law. This is because Singapore was the only jurisdiction specifically identified in the context of dispute resolution (Mongolian version “International Arbitration Court of Singapore”; Japanese version: “Dispute Resolution and Commercial Arbitration of Singapore”). Therefore, since “… Singapore as the dispute resolution forum has the closest and most real connection to the function of dispute resolution, parties objectively intended the procedural aspects of their dispute resolution, whether in the form of litigation or arbitration, to be governed by Singapore law.” (see [41] of Medipas).
After determining that Singapore law was the governing law of the arbitration agreement, the Court addressed whether Clause 10.3 was a valid arbitration agreement. The Court held that it was (see [61] of Medipas).
In particular, the clause objectively evinced an intention to arbitrate (see [48] and [59] Medipas). And given that “… three out of four key words in “International Arbitration Court of Singapore” mirror the full name of the SIAC, with the only difference being that the word “Court” was used instead of “Centre”, applying the approach in Shanghai Xinan, I find that parties intended to submit their dispute to the SIAC.” (see [59] Medipas).
The Court’s finding on the public policy challenge. The respondent argued that enforcement should be refused because the agreements were allegedly tainted by criminality in Mongolia. In particular, the respondent relied on criminal proceedings involving its former general director and an Interpol Blue Notice concerning one of the applicants’ representatives.
The Court emphasised that enforcement will only be refused where upholding the award would “shock the conscience”, be “clearly injurious to the public good”, or where it “violates the forum’s most basic notions of morality and justice”: (see [83] of Medipas). That threshold was not met.
The Court noted that neither individual had been convicted in Mongolia. The Interpol Blue Notice was not proof of criminality; it was aimed at gathering information and locating the individual concerned. The respondent had therefore overstated the alleged criminality.
More importantly, the Court held that an enforcement court should not readily reopen the tribunal’s findings. The tribunal had already considered the relevant allegations and found that the agreements were not invalid. A party resisting enforcement on public policy grounds cannot simply reargue the merits. Where illegality under foreign law is alleged, the court will only intervene where there is “palpable and indisputable illegality” on the face of the award (see [99(b)] of Medipas).
There was no such illegality. The new material relied on by the respondent did not undermine the tribunal’s findings. Nor did it show that enforcement would violate Singapore’s most basic notions of morality and justice.
Key takeaway. Medipas is a reminder that the Singapore courts will give effect to arbitration agreements where the parties’ intention to arbitrate can be objectively ascertained, even if the clause is not drafted with technical precision.
The decision is also a useful illustration of the limits of public policy challenges. Allegations of foreign criminality, without conviction or clear proof of illegality, will not be enough. Nor will the Singapore court lightly reopen findings already made by the tribunal.
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