Out-Law News | 30 Mar 2021 | 10:27 am | 1 min. read
The Singapore High Court has ruled that being a signatory to an underlying agreement containing an arbitration agreement does not mean a third party has consented to be joined to the arbitration itself.
The court found that under London Court of International Arbitration (LCIA) 2014 rules, express consent was required for a party to be joined as a defendant to the arbitration under the ‘forced joinder’ procedure at Article 22.1(viii). Simply being a signatory to the joint venture agreement between the parties which contained the arbitration agreement was not enough.
Arbitration expert Wynne Tay of Pinsent Masons, the law firm behind Out-Law, said: “The court’s ruling is sensible and much welcomed as it avoids the problem of third parties finding themselves unwittingly joined to an arbitration merely because they are a party to the underlying agreement containing the arbitration agreement.
“The court’s decision is also in line with the latest 2020 iteration of the LCIA rules which now provides at Article 22(x) that there must be express consent to the joinder in writing by the third party and the applicant party,” Tay said.
The arbitration arose after a dispute between two of the parties to a joint venture agreement. The defendant applied to have the third party joined to the arbitration, but the arbitral tribunal rejected the application as there was no express wording giving consent for this.
The High Court agreed with the tribunal (26 page / 243KB PDF). It found the LCIA rules made no mention of consent in writing being found simply by being a party to an arbitration agreement, however it was worded.
It said if this broad reading of “consent” was accepted, it would mean any proposed joinder party to a contract containing an arbitration agreement incorporating the LCIA 2014 rules could be joined to any arbitration involving the other parties, regardless of its views. The court said this would be problematic, and added that for the relevant rule to be triggered, the consent of the third party to be joined must be express and in writing.
The court also discussed the doctrine of “double separability”, which distinguishes between the original arbitration contract between the parties and the separate contract arising between the arbitrants to a particular dispute.
It found that merely being a party to the arbitration agreement contained in the underlying agreement was not, in and of itself, sufficient to signal consent in writing from the third party to being joined or being made party to the second contract arising out of the arbitration reference.
“It is because the third person (who may be a party to the original arbitration contract) is a stranger to the second contract that arises between the arbitrants in the arbitration reference that the third person’s consent to being joined is required, and indeed, essential,” the court said.
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