Joinder of third-parties to arbitration proceedings: High Court of Singapore rules on the requirements for consent 

In a recent decision, the High Court of Singapore has held that a third-party parent company of one the parties to a Singapore-seated LCIA arbitration had not consented to being joined to the arbitration, despite being a signatory to the underlying agreement between the Parties. This decision reinforces the high threshold to be met for the forced joinder of third-parties to Singapore-seated arbitrations, and provides clarity on the operation of Article 22.1(viii) of the LCIA Rules (2014) under Singaporean law.

CJD v CJE

This case concerned a Singapore-seated arbitration between two of the five parties (referred to as “CJE” and “CJD”) to a joint-venture agreement for the development of a mixed-use residential/commercial tower, hotel and/or serviced apartments complex in a jurisdiction referred to only as ‘Narnia’. A joint venture company was established pursuant to the joint-venture agreement, with CJE and CJD each holding a 50% interest in the joint-venture company. The joint-venture agreement was subject to ‘Narnian’ law and provided for disputes to be resolved by way of arbitration seated in Singapore pursuant to the LCIA Rules (2014) (the “Rules”) (the “Arbitration Agreement”).

A dispute arose between CJE and CJD, resulting in CJE commencing arbitration proceedings against CJD in 2018 pursuant to the Arbitration Agreement. In 2019, CJD filed a number of applications in the arbitration, one of which was seeking to join CJE’s parent company; CJF, to the arbitration proceedings pursuant to Article 22.1(viii) of the Rules. CJF owned 100% of the issued shares in CJE and was also a party to the joint-venture agreement.

The arbitral tribunal issued a decision rejecting the joinder application on the basis that: (i) Article 22 of the Rules provides that the party to be joined to the arbitration must consent to the joinder in writing; (ii) the mere fact that CJF was a party to the joint-venture agreement did not mean that it had consented to be joined to the present arbitration; and (iii) such consent would need to be evidenced through express wording (either in the provisions of the joint-venture agreement, or provided after the commencement of the arbitration), which was absent in this case.

As a result, CJD made an application to the High Court of Singapore for the tribunal’s decision to be reversed and/or set aside pursuant to section 10(3)(b) of the International Arbitration Act. In a judgement dated 19 March 2021, Judicial Commissioner S. Mohan upheld the tribunal’s decision.

The consent requirement

Firstly, Mohan JC reminds us that a “forced joinder” refers to a third party consenting to be joined as a party to extant arbitration proceedings on the application of one of the arbitrants, despite objections to the joinder raised by the other arbitrant(s), and that it does not in fact refer to forcing a third party to join an arbitration against its wishes.

In establishing whether CJF had consented to be joined to the extant arbitration, Mohan JC considered the operation of Article 22(viii) of the Rules, and in particular, what is required to demonstrate that a party has consented to be joined to an arbitration. In this regard, CJD argued that CJF had consented to the joinder by: (i) signing the joint-venture agreement, which by virtue of the arbitration agreement contained therein, incorporated Article 22.1(viii) of the Rules; and (ii) its conduct in “behaving as if it was already a rightful party to the Arbitration”. CJD also argued that the intention behind the joint-venture agreement was that every party to it could be joined to any arbitration arising from that agreement.

In rejecting these arguments, Mohan JC relied on three key bases of reasoning:

1. That “consent” under Article 22.1(viii) of the Rules could be established in the following three ways: (i) the third party and the applicant consent to the joinder in writing, after the arbitration has commenced; (ii) the third party and the applicant expressly consent to joinder in writing earlier in the arbitration agreement; or (iii) a combination of (i) and (ii) above. It was trite that the first permutation was not applicable as the third party; CJF, actively opposed its joinder to the arbitration proceedings. Accordingly, in order for the application to succeed, the second or third options had to be met.
2. That it was not permissible to assert that simply by virtue of having signed the joint-venture agreement, (and being a party to the arbitration agreement contained therein), CJF had consented in writing to being joined to the arbitration itself. There were two bases for this decision. First, that it would require a “strained and unnatural” reading of Article 22.1(viii) of the Rules to hold that signature of a contract containing an arbitration agreement amounted to consent to joinder. This would result in the possibility of joining a signatory to a contract to an ongoing arbitration involving other parties to the contract a “at any point”. This would cause great uncertainty and could potentially result in third-parties being joined at the later stages of arbitration proceedings where they would not have had an opportunity to participate in the selection of the arbitral tribunal and/or may be deprived of the opportunity to properly respond to the positions advanced by the other parties, all of which “would represent a significant derogation from the fundamental requirement of party autonomy in international commercial arbitration.” Second, if it was intended for the arbitration agreement to operate in this way, the parties were free to draft the agreement in those terms “clearly and unambiguously”. However, the arbitration agreement in this case did not contain any such clear or unambiguous wording. It was noted that forced joinder is a “drastic” step and therefore consent to joinder should be stated clearly in the arbitration agreement and consent cannot be “implied or inferred” by the third party simply being a signatory to the arbitration agreement.
3. That, as noted by the Court of Appeal of Singapore in the oft-cited PT First Media decision, the doctrine of ‘double separability’ distinguishes between the arbitration agreement between the parties, and the separate agreement between the parties to a particular arbitration reference. The effect of this doctrine to this case is that, even though CJF was a party to the arbitration agreement, it is not a party to the second agreement between CJD and CJE arising out of their specific referral of the dispute to arbitration and must still provide further consent in writing to be joined and made a party to the separable agreement between CJD and CJE.

This decision can also be read consistently with the Article 22.1(x) of the newly released LCIA Rules (2020), which now notes that a third party must have consented “expressly” in writing to the joinder.

It is also notable that the 2020 LCIA Rules also contain expanded powers (in Article 22A) which allow the arbitral tribunal to consolidate more than one set of proceedings commenced under the same or any compatible arbitration agreement, including between different parties provided the proceedings arise out of the same transaction or series of related transactions. This potentially provides a way around the difficulties encountered by CJD in this case through the commencement of separate proceedings against CJF followed by an application for consolidation under the new provisions.

Consequences and Wider Application

Whilst dealing specifically with forced joinder pursuant to the LCIA Rules, the guidance provided on what constitutes ‘consent to joinder’ under Singaporean law has wider application for Singapore-seated arbitrations pursuant to the rules of other arbitral institutions, particularly in respect applications for joinder made under: (i) Article 7.1(b) of the current rules of the Singapore International Arbitration Centre (“SIAC”); (ii) Article 27.1(b) of the current rules of the Hong Kong International Arbitration Centre (“HKIAC”); or (iii) Article 7.1(a) of the current rules of the International Chamber of Commerce (“ICC), all of which refer to the need for ‘consent’ or ‘agreement’ of the party being joined to the arbitration.

Unlike the LCIA and HKIAC Rules, the SIAC and ICC Rules do not prescribe that consent for joinder has to be provided in writing, which does leave open the possibility of arguing that the party to be joined has consented impliedly. However, based on this decision, the mere fact that a third-party is party to an arbitration agreement is not evidence of implied consent to be joined to a specific arbitration reference between two other parties which had arisen out of that same arbitration agreement. Applying the doctrine of ‘double separability’ and the other bases of the Singapore High Court’s decision, an applicant would arguably need to show sufficient evidence demonstrating that the third-party has impliedly consented to be joined to the specific arbitration reference, even in circumstances where it is a party to the underlying arbitration agreement.

In addition, this decision also highlights the potential difficulties faced by applicants seeking to join a non-signatory third-party to Singapore-seated arbitrations. By reinforcing the applicability of the doctrine of ‘double separability’, it clarifies that the joinder of a non-signatory faces two significant hurdles. First, in establishing that the third-party has consented to be a party to the arbitration agreement and second, in then establishing that the third-party has consented to be joined to the specific arbitration reference.

For parties seeking to enter into arbitration agreements providing for arbitration seated in Singapore, this decision highlights the need to carefully consider: (i) whether there is a need for express wording in the arbitration agreement to confirm which parties (including third-parties) consent to be joined to arbitration proceedings arising out of that arbitration agreement; and/or (ii) whether the rules for joinder prescribed by the arbitral institution selected provide any basis for joinder without the consent of the party to be joined (such as Article 22A in the 2020 LCIA Rules discussed above).

References:

CJD v CJE [2021] SGHC 61

PT First Media TBK v Astro Nusantara International BV and others [2013] SGCA 57

LCIA Rules (2014)