A. What happened between the parties, and what did the tribunal decide?
(1) Background
CJD, CJE, CJF and three other parties entered into a joint venture agreement in 2014 containing an arbitration agreement requiring disputes arising from it to be resolved by arbitration in Singapore under the LCIA Rules. By 2017, disputes had arisen between CJD and CJE on the basis that the former had breached its obligations under the parties’ agreement.
In 2018, CJE commenced an arbitration against CJD under the arbitration agreement in the parties’ agreement. After the arbitration commenced, CJD applied to the tribunal to join CJF as a party to it.
(2) The tribunal rejected CJD’s application due to a lack of consent by CJF
The tribunal rejected CJD’s application on the basis that the tribunal did not have jurisdiction to allow a joinder as CJF did not consent to be joined, a requirement of article 22.1(viii).
Article 22.1(viii) empowers tribunals to “allow one or more third persons to be joined in the arbitration as a party provided any such third person and the applicant party have consented to such joinder in writing following the Commencement Date or (if earlier) in the Arbitration Agreement”, even if another party to the arbitration objects to the joinder.
CJD subsequently applied to the Singapore High Court to set aside or reverse the tribunal’s decision. The court considered the application under section 10(3)(b) of the International Arbitration Act (Cap 143A, 2002 Rev Ed), which is the only provision of the International Arbitration Act applicable to negative rulings by a tribunal on its own jurisdiction.
B. What did the court decide and why?
The court dismissed the application to join CJF to the arbitration for the following reasons:
(1) Article 22.1(viii) requires express written consent, which was not established in this case
The court noted that express written consent under article 22.1(viii) can be established in the following three ways:
(a) the third party and the applicant consent to joinder in writing, after arbitration has commenced;
(b) the third party and the applicant expressly consent to joinder in writing in the arbitration agreement; or
(c) a combination of (a) and (b) above.
In respect of scenario (b), the court held that the relevant arbitration agreement had to include express written consent to joinder and that merely signing a multi-party agreement, including an LCIA arbitration agreement, would not suffice as consent to joinder because:
(a) The plain language of article 22.1(viii) requires parties to consent “to such joinder in writing following the Commencement Date or (if earlier) in the Arbitration Agreement”. If the drafters of the LCIA Rules intended to evidence such consent by signing a generally worded arbitration agreement, they would have drafted article 22.1(viii) accordingly.
(b) Reading a lower threshold requirement into article 22.1(viii) created uncertainty for third parties as to whether they would be called to defend against, or advance, claims in an ongoing arbitration. They would also be unable to nominate arbitrator(s) or participate in arbitrator selection, which derogated from the principle of party autonomy.
(c) The idea of forced joinder is a drastic1 one and therefore, in multi-party contracts, the institutional arbitration rules and arbitration agreements must clearly and unambiguously: (i) empower a tribunal to allow forced joinder; and (ii) contain or evidence express written consent to joinder by the third party.2
In this case, it was common ground that CJF did not consent to be joined after the arbitration commenced. The parties’ arbitration agreement also did not contain or evidence express written consent to joinder.
(2) Express written consent is also required under the doctrine of double separability
The court also held that CJF’s express written consent was required due to the doctrine of double separability, under which the original arbitration agreement and the agreement arising between parties in an arbitration were separate agreements.3 Therefore, even though CJF was a party to the arbitration agreement, its consent to be joined to the arbitration was still required.
C. Why is this judgment important to you?
Multi-party contracts are common to many industries. Following this judgment, parties agreeing such contracts should carefully consider:
(a) whether to include express written consent to joinder in their agreement and/or provisions relating to arbitration; and
(b) which institutional arbitration rules they select.
In respect of (b) above, the rules of international arbitration institutions often provide for forced joinder. The requirements as to consent of a few major international arbitration institutions are as follows:
(a) The updated LCIA Rules allow joinder with the express written consent of the third party and the applicant.
(b) The current rules of the Singapore International Arbitration Centre and the Hong Kong International Arbitration Centre empower tribunals to allow forced joinder if the third party is “prima facie bound by the arbitration agreement”.
(c) The current ICC Rules of Arbitration give the tribunal wide discretion to join a third party as long as the third party accepts the constitution of the tribunal and agrees to the terms of reference.
Reed Smith LLP is licensed to operate as a foreign law practice in Singapore under the name and style, Reed Smith Pte Ltd (hereafter collectively, "Reed Smith"). Where advice on Singapore law is required, we will refer the matter to and work with Reed Smith's Formal Law Alliance partner in Singapore, Resource Law LLC, where necessary.
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PT First Media at [188] and [197].
- PT First Media at [177] and [197].
- PT First Media at [166].
Client Alert 2021-093
