In a recent case of Nippon Catalyst Pte Ltd v PT Trans-Pacific Petrochemical Indotama  SGHC 126 (discussed below) the court dealt with the question of whether a stay ought to be granted in favour of arbitration in the circumstances of that case. The Court observed that this issue is determined under the International Arbitration Act (IAA) of Singapore. In this regard, the law on whether a stay should be granted under s 6 of the IAA is well-established. In this blog I will discuss the line of authorities in Singapore dealing with this issue. Section 6 is reproduced below:
Enforcement of international arbitration agreement
6.—(1) Notwithstanding Article 8 of the Model Law, where any party to an arbitration agreement to which this Act applies institutes any proceedings in any court against any other party to the agreement in respect of any matter which is the subject of the agreement, any party to the agreement may, at any time after appearance and before delivering any pleading or taking any other step in the proceedings, apply to that court to stay the proceedings so far as the proceedings relate to that matter.
(2) The court to which an application has been made in accordance with subsection (1) shall make an order, upon such terms or conditions as it may think fit, staying the proceedings so far as the proceedings relate to the matter, unless it is satisfied that the arbitration agreement is null and void, inoperative or incapable of being performed.
(3) Where a court makes an order under subsection (2), the court may, for the purpose of preserving the rights of parties, make such interim or supplementary orders as it may think fit in relation to any property which is the subject of the dispute to which the order under that subsection relates.
(4) Where no party to the proceedings has taken any further step in the proceedings for a period of not less than 2 years after an order staying the proceedings has been made, the court may, on its own motion, make an order discontinuing the proceedings without prejudice to the right of any of the parties to apply for the discontinued proceedings to be reinstated.
(5) For the purposes of this section and sections 7 and 11A —
(a) a reference to a party shall include a reference to any person claiming through or under such party;
(b) “court” means the High Court, District Court, Magistrate’s Court or any other court in which proceedings are instituted.
The Court of Appeal in Tomolugen Holdings Ltd and another v Silica Investors Ltd and other appeals  1 SLR 373 (Tomolugen) (and more recently reiterated in Wilson Taylor Asia Pacific Pte Ltd v Dyna-Jet Pte Ltd  2 SLR 362 (Dyna-Jet) held that the court should grant a stay in favour of arbitration if the applicant can establish a prima facie case that:
- there is a valid arbitration agreement between the parties to the court proceedings;
- the dispute in the court proceedings (or any part thereof) falls within the scope of the arbitration agreement; and
- the arbitration agreement is not null and void, inoperative or incapable of being performed.
Interpretation of Courts discretionary power under S6 AA
To discuss the issue in hand, I would like cite few cases which highlights the view taken by Singaporean courts in this regard
Tjong Very Sumito and others v Antig Investments Pte Ltd  4 SLR (R) 732
In this case (Tjong Very Sumito), the Singapore Court of Appeal discussed the operation of section 6 of the IAA, stating that the party applying for the stay has to show that:
- It is party to an arbitration agreement.
- The proceedings instituted fall within the terms of that arbitration agreement.
If the applicant can show this, the court must (in accordance with s 6 of the IAA) grant a stay of proceedings unless the party resisting the stay can show that one of the statutory grounds for refusing a stay exists, ie, that the arbitration agreement is “null and void, inoperative or incapable of being performed.”
Malini Ventura v Knight Capital Pte LTD  5 SLR 707 (Malini Ventura)
The defendant agreed to grant a loan to a Singapore company and the plaintiff’s husband agreed that he and the plaintiff would guarantee the payment of the loan. Upon the borrower’s default of the payment the defendants gave notice to the plaintiff the plaintiff and her husband. The defendant commenced arbitration against the plaintiff the plaintiffs filed a statement of defence alleging inter alia that there had been no valid arbitration agreement between her and the defendants as she did not sign the guarantee and the signature found in the guarantee form was forged. The plaintiff applied to the tribunal for the stay of proceedings which the tribunal did not grant. The plaintiff then commenced court action seeking inter alia a declaration that the plaintiff had not entered into any arbitration agreement with the defendants and the defendants sought the stay of court action invoking S6 IAA. Judith Prakash J dismissed the plaintiff’s application and allowed the stay of court action in favour of arbitration. The courts found that where the prima facie evidence existed S6(2) IAA and Art 16 of MAL read vis a vis “a court to which an application for stay has been made shall make a stay order unless it is null and void, inoperative or incapable of being performed” Prakash j took a prima facie approach in reviewing the evidence presented in court for her to determine whether an arbitration agreement existed between the parties and found that such was the case.
Departure from the UK principles
An important part of Prakash J’s analysis was a case of Nigel Peter Albon (trading as N A Carriage Co) v Naza Motor Trading Sdn Bhd and anor  2 All ER 1075 (Albon). In that case, Lightman J decided that if there was insufficient evidence before the court to decide whether an arbitration agreement had been concluded, there was no room to grant stay of the court proceedings in favour of arbitration. Prakash J read the Albon judgment as requiring the existence of the arbitration agreement to be proved on the usual civil standard of the balance of probabilities.
Prakash J declined to follow the Albon dictum because her dilemma concerned the application of the IAA, whilst Lightman J had decided Albon under the English Arbitration Act. She was cognizant of the fact that the Model Law, as incorporated in Singapore through the IAA, limits judicial intervention in arbitral proceedings to strictly defined circumstances. On the other hand, the English Arbitration Act, whilst based on the Model Law, contains significant departures therefrom. For example, Section 30 of the English Arbitration Act grants arbitral tribunals the power to rule on their jurisdiction, but it allows parties to arbitration agreements to opt out from this provision. Further, Section 32 of the English Arbitration Act allows courts to determine questions of a tribunal’s jurisdiction on the application of a party to arbitral proceedings.
Tomolugen Holdings Ltd and another v Silica Investors Ltd and other appeals  SGCA 57
In this case, a distinguished panel of the Singapore Court of Appeal considered an application to stay court proceedings in favour of arbitration under section 6 of IAA. They confirmed the appropriate standard of review to be adopted in respect of the existence and scope of the arbitration agreement as a prima facie standard. The Court of Appeal also provided guidance on determining whether the subject matter of a claim is arbitrable or not, holding that minority shareholder claims under s.216 of the Companies Act (Cap 50, 2006) are arbitrable. Finally, the Court of Appeal demonstrated flexibility in exercising its case management powers to regulate the conduct of court proceedings involving multiple parties, not all of whom are party to the arbitration agreement.
Sim Kay Choon v NTUC (Sim Kay Choon)  2 SLR 871
In a dispute in relation to employment contracts which contain an arbitration clause a representative action on behalf of individuals was brought to courts against the NTUC Income. The NTUC Income applied for stay in favour of arbitration under S6 of AA the high court granted the stay application and the plaintiffs appealed. The argument before the court of appeal was that plaintiffs agreed there is an existing arbitration agreement but sought the court to consider the circumstances that might enable the courts to ignore the existence of the arbitration agreement found therein. They proffered arguments such as higher cost of arbitration as opposed to litigation and the belief that the plaintiffs will get a better hearing in court. The court of appeal dismissed the appeal and upheld the stay of proceeding in favour of arbitration the reasoning being that there must be something substantial to be shown by the plaintiffs in order for the court not to hold the parties to an arbitration agreement.
L Capital Jones Ltd and another v Maniach Pte Ltd  SGCA 03
This was an appeal brought by a majority shareholder, L Capital against the Singapore High Court’s decision refusing a stay of court proceedings in favour of arbitration on the ground that minority oppression claims were not arbitrable. Maniach, a minority shareholder in the Jones the Grocer group of companies resisted the appeal, arguing that his minority oppression claim against L Capital Jones was not arbitrable.
After the present appeal was lodged, the Singapore Court of Appeal had ruled on a separate case, (Tomolugen), that minority oppression claims were generally arbitrable. Hence, Maniach argued that while the Singapore case of Tomolugen had held that minority oppression claims were generally arbitrable, his case possessed features which raised the public policy exception to arbitrability. The gravamen of his argument was that L Capital had abused court process to place two subsidiaries owned by the group under administration in Singapore, and in Australia to transfer one of the subsidiaries’ only asset, its shares, to a third party related to L Capital for no net consideration.
The Singapore Court of Appeal found Maniach’s contention without merit and held that the question of an abuse of the judicial process was neither the essence of the present dispute nor a necessary step in proving Maniach’s claim. The issue rather was whether there was unfairness in the majority shareholder procuring the transfer of all the shares in the subsidiary to a third party in exchange for extinguishing debts. Maniach had not sought any relief for the alleged abuse of judicial process. Even if the court or tribunal adjudicating the dispute were to find that there was an abuse of process, such a finding would only be incidental to its resolution of the minority oppression dispute. Hence L Capital had succeeded in showing that the dispute was arbitratable.
In a twist of fate however, the Singapore Court of Appeal found that because L Capital’s subsidiary had taken a step in the court proceedings, it was not entitled to stay the proceedings pursuant to section 6 of the Singapore International Arbitration Act.
Maniach argued that:
- L Capital’s opposition of Maniach’s interim injunction and
- the application by L Capital’s subsidiary to strike out the minority oppression claim brought by Maniach in the Singapore Court of Appeal were steps in the court proceedings.
The Singapore Court found that opposing an interim injunction did not amount to a step in the proceedings. However, a striking out application was a step in the proceedings since it invoked the Singapore Court’s jurisdiction to dismiss the claim on the merits. Once such a step is taken, it would be irrevocable, even if the striking out application was not eventually pursued. L Capital and its subsidiary’s applications to stay the proceedings in favour of arbitration were therefore dismissed.
Wilson Taylor Asia Pacific Pte Ltd v Dyna-Jet Pte Ltd  SGCA 32 (Dyna-Jet)
In this case, the Court of Appeal reiterated the three referred above in this regard but at the same time the court also note that the fact that the court is to apply a prima facie standard of review in relation to the three requirements referred above when considering an application for a stay under s 6 of the IAA does not mean that that it must turn a blind eye to obvious drawbacks in the case put forward by an applicant, which drawbacks would not pass muster even applying an attenuated standard of review. It is also important to bear in mind that this review is to be undertaken as of the time when the stay application was filed. But this also means that the court does not go into the full merits of the parties’ cases. This flows from the “recognition and enforcement of the kompetenz-kompetenz principle”, and the court will “stay the proceedings in favour of arbitration except in cases where the arbitration clause is clearly invalid or inapplicable” (Tomolugen).
Nippon Catalyst Pte Ltd v PT Trans-Pacific Petrochemical Indotama  SGHC 126
In this recent case, two appeals were filed to stay court proceedings in favor of arbitration under s 6 of IAA. The Court while addressing the issue of whether a stay of proceedings should be granted on the basis that Singapore is not the proper forum noted the authority of Tomolugen that “the court, as the final arbiter, should take the lead in ensuring the efficient and fair resolution of the dispute as a whole”. In taking the lead, the court must strike a balance between: (a) a plaintiff’s right to choose whom and where to sue; (b) the desire to prevent a plaintiff from circumventing an arbitration clause; and (c) the court’s inherent power to manage its processes to prevent an abuse of process and to ensure the efficient and fair resolution of disputes. The Court cited the authority Spiliada Maritime Corp v Cansulex Ltd  AC 460, where a defendant seeks to stay proceedings on improper forum grounds, the burden is on him to show that Singapore is not the proper forum. That being said, in the final analysis, the court will “collapse the issue of proper forum into one question considered in the round.” Based on this reasoning the Court stayed in favour of arbitration pursuant to s 6 of the IAA and concluded that Singapore is not the proper forum for the dispute and that Indonesia is the more appropriate forum.