Shanghai court refuses to enforce SIAC award

The Shanghai First Intermediate Court, in a decision on 11 August 2017, dismissed an application seeking leave to enforce an award of the Singapore International Arbitration Centre (SIAC) on the ground that the conduct of the underlying arbitration had been in disregard of the parties’ express choice of three arbitrators as set out in the contractual arbitration clause.

The relevant award was made by a sole arbitrator appointed pursuant to the expedited procedure of the 2013 SIAC rules. Enforcement was refused on the basis that “[the] composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties …” as stipulated by article 5 (1)(d) of the 1958 New York Convention on the Reciprocal Recognition and Enforcement of Foreign Arbitral Awards.

The underlying dispute arose between a Singaporean company (the seller) and a Chinese company (the buyer) over a contract for the sale of iron ore.

The contract between the parties incorporated by reference an arbitration clause that provided: “Any disputes or claims arising from, or in connection with, the transaction or this agreement, including issues relating to the existence, validity or termination thereof, must be arbitrated in Singapore in accordance with the SIAC rules of arbitration then in force. The rules must be deemed as incorporated into this clause. The tribunal must be composed of three arbitrators …”

A dispute arose between the parties and in early 2015, the seller commenced an arbitration against the buyer under the 2013 SIAC rules. The seller applied for the arbitration to be conducted under the expedited procedure of the 2013 SIAC rules under which a sole arbitrator would be appointed to conduct the arbitration. After receiving the notice of arbitration, the SIAC wrote to the parties regarding the estimated costs based on a three-member tribunal. Both parties were requested to each pay an advance of half of the estimated costs. The SIAC invited the buyer to respond to the seller’s request for the arbitration to be conducted under the expedited procedure by 6 February 2015.

On 29 January 2015, following further exchanges between the SIAC and the parties, the SIAC wrote to the parties to notify that it had accepted the seller’s proposal that pending the SIAC’s final decision on whether the expedited procedure would apply, the parties should each pay an advance for costs as if the expedited procedure would apply to the arbitration. On the same day, the buyer wrote to notify the SIAC of its objection to the expedited procedure.