What happened between the parties?
Shanghai Xinan Screenwall Building & Decoration Co., Ltd. (Xinan), a Chinese company, was awarded damages plus interest and costs in an arbitration seated in China (Award). The arbitration had been commenced against Great Wall Technology Aluminium Industry Pte Ltd (Great Wall), a Singaporean company, to resolve disputes arising out of contracts between Xinan and Great Wall (Contracts). Great Wall did not participate in the arbitration.
The Contracts contained the following arbitration clause:
“Any dispute arising from or in relation to the contract shall be settled through negotiation. If negotiation fails, the dispute shall be submitted to China International Arbitration Center for arbitration in accordance with its arbitration rules in force at the time of submission.”
Xinan applied for and obtained leave to enforce the Award under section 19 of the International Arbitration Act (Cap 143A, 2002 Rev Ed). Great Wall then applied to set aside the leave under that act on the following grounds:
(i) Under section 31(2)(c), arguing there was no proper notice of, nor the opportunity to participate in, the arbitration where notices were sent to the wrong address;
(ii) Under section 31(2)(f), arguing the Award had not become binding;
(iii) Under section 31(2)(b), arguing the arbitration agreement was invalid under Chinese law because there is no arbitral institution called “China International Arbitration Center”; and
(iv) Under section 31(2)(e), arguing the arbitral procedure did not comply with Chinese law because the Award referenced the domestic rules of the China International Economic and Trade Arbitration Commission (CIETAC) while Great Wall was Singaporean and had not agreed to CIETAC anyway.
Great Wall introduced grounds (iii) and (iv) in a reply affidavit in which it exhibited a new supporting opinion on Chinese law. The reply affidavit was filed after Xinan filed its responsive affidavit. The introduction of new evidence at the reply stage meant Xinan had no opportunity to respond.
What did the court decide and why?
Preliminary point of procedure
The court made the preliminary finding that Great Wall’s reply affidavit could not be filed in the absence of adequate reasons for the late filing. The court also found the form and content of the expert opinion to indicate that the author was engaged to advise Great Wall’s as its lawyer and not an independent expert.
Nonetheless, the court ruled it would hear submissions on the additional grounds on the evidence properly before it. As such, four issues arose to be determined:
(a) Whether Great Wall had proper notice of the arbitration;
(b) Whether the Award had become binding;
(c) Whether the arbitration agreements were valid under Chinese law; and
(d) Whether the arbitral procedure had been in accordance with the parties’ agreement.
Issue 1: Whether Great Wall had proper notice of the arbitration
The court held Great Wall had proper notice on the basis of deemed service where all documents, save the Award, were delivered to Great Wall’s (a) business address as registered with the Accounting and Corporate Regulatory Authority, (b) place of business at the time, and (c) business address given in the Contracts.
While deemed service could be rebutted by appropriate evidence of non-receipt, Great Wall adduced no such evidence.
Issue 2: Whether the Award had become binding
The court held that the Award had become binding even though it was delivered to Great Wall’s old registered address because (a) the Award was delivered to the address in the Contracts, which was good service, and (b) section 19B of the IAA makes clear that an award is binding once made, not once received.
Great Wall could have challenged the Award in China to prevent it from becoming binding, but failed to do so in time and sought no extension to file a challenge.
Issue 3: Whether the arbitration agreements were valid under Chinese law
The court held that the parties objectively intended to refer their disputes to CIETAC and the name in the arbitration agreements in the Contracts was simply a misnomer. As such, the arbitration agreements were valid under Chinese law. The court reasoned as follows:
(a) CIETAC had to decide whether it was the parties’ arbitral institution of choice and decided that was so before accepting the case.
(b) Great Wall did not challenge either CIETAC’s acceptance of the case or the tribunal’s jurisdiction.
(c) In context, “China International Arbitration Center” meant CIETAC because, having opted to resolve disputes by arbitration in China, rational parties would not choose a non-existent institution. There were five major arbitral institutions in China and only the full name of CIETAC came close to the name used in the arbitration agreements.
Issue 4: Whether the arbitral procedure complied with the parties’ agreement
The court held that the arbitral procedure was compliant even if the Award did refer to CIETAC’s domestic rules and Great Wall was a Singaporean company because Great Wall could not identify any impact or consequence that the error had on the conduct of the arbitration or the making of the Award.
What does this decision mean for you?
Contracts between parties in different jurisdictions are more susceptible to typographical errors and mistranslations than others. Most errors may well be immaterial, obvious or easily resolved in the course of business. However, errors in arbitration agreements can have serious consequences. A party may seek to exploit what might otherwise be seen as typographical errors in an arbitration agreement to its advantage, or to the other party’s disadvantage, when a dispute arises. To minimise the opportunity for errors in the arbitration agreement, the model clauses published by the arbitral institution of the parties’ choice are a helpful point of reference when drafting.
In-Depth 2022-118
