A Singapore local court recently prevented the enforcement of an arbitration award rendered in favour what was determined to be a non-existent company, underlining the importance of the continuity of legal persons in international arbitration.
The application before the Singapore local court involved National Oilwell Varco Norway AS (formerly known as Hydralift AS) as the Plaintiff, Keppel FELS Ltd (formerly known as Far East Levingston Shipbuilding Ltd), as the Defendant and a company known as A/S Hydralift (“Hydralift”).
The court determined that the arbitration and the award were a nullity because Hydralift ceased to exist in 2004, well before the Defendant commenced the arbitration in 2007 and “Hydralift” responded with ultimately successful counterclaims.
Factual Background of the Case
In 1996, the Defendant and Hydralift entered into a contract governed by Singapore law and containing an arbitration clause. A dispute arose between them in 1999. They attempted to resolve their dispute but failed to find an amicable solution.
While the Defendant and Hydralift were negotiating, in 2004, Hydralift merged with National Oilwell Varco Norway AS, the Plaintiff. As a result of the merger, Hydralift ceased to exist.
It was reportedly only in 2019, when the Plaintiff asked the Defendant to satisfy the award, that the Defendant became aware of the fact that Hydralift had ceased to exist. The Plaintiff recognised that it did not disclose to the Defendant the fact that Hydralift had merged with the Plaintiff and ceased to exist.
The Arbitration Proceedings
In 2007, the Defendant initiated arbitration against Hydralift for breach of contract. The Plaintiff, in the name of Hydralift, defended the claim against Hydralift.
After an unusually long twelve years of arbitral proceedings, the arbitral tribunal rendered its award in September 2019, dismissing the Defendant’s claims and allowing Hydralift’s counterclaims.
In December 2019, the Plaintiff started proceedings before the Singapore court to secure leave to enforce the award against the Defendant, which was accomplished in January 2020.
Then, the Defendant applied to set that leave aside.
Enforcement of the Award Blocked by the Court
The question asked to the Singapore court was whether the Plaintiff could enforce the award against the Defendant.
First, the court considered that the arbitral tribunal intended to issue an award in favour of Hydralift and not the Plaintiff because (i) the contract was entered into between the Defendant and Hydralift, not with the Plaintiff; and (ii) the arbitral tribunal made the distinction between the Plaintiff and Hydralift as being two different legal persons.
An award on an arbitration agreement may, by leave of the General Division of the High Court, be enforced in the same manner as a judgment or an order to the same effect and, where leave is so given, judgment may be entered in terms of the award.
The court grants the creditor leave to enforce the award and then the court enters judgment against the debtor.
According to the court, as the arbitral tribunal did not intend to issue an award in favour of the Plaintiff, only Hydralift could apply for leave under Section 19 of the Act to enforce the award.
However, Hydralift had ceased to exist before the Defendant initiated arbitration. When an arbitration is commenced by a non-existent legal person, the arbitration is a nullity unless the use of the name can be characterized as a misnomer. The court considered that the result was the same when the arbitration was commenced against a non-existent legal person, as in the case at hand.
The court refused to consider that the defendant’s use of Hydralift’s name for the respondent in the arbitration could be characterised as a mere misnomer, the arbitration was a nullity and the award was unenforceable. It noted that only a legal person can assert a right to arbitrate and be subject to an obligation to arbitrate. A finding of misnomer saves the arbitration only if the misnomer is corrected within the arbitration itself.
The Defendant submitted that the Plaintiff was estopped from denying that the Respondent in the arbitration was Hydralift. In this regard, the court recognized that the Plaintiff represented in the arbitration and in the litigation that Hydralift was a legal person and was the respondent in the arbitration.
To come to that conclusion, the court explained that the arbitration affirmed that Hydralift was the party bringing counterclaims against the Defendant. The Plaintiff made consistent and clear representations that Hydralift was the respondent.
Consequently, the court found that the Plaintiff was estopped from denying that Hydralift was the respondent in the arbitration.
The court set aside the Plaintiff’s leave to enforce the award on three grounds:
- First, the arbitral tribunal issued an award in favour of Hydralift, not the Plaintiff;
- Second, Hydralift’s name was never used to refer to the Plaintiff. Hydralift having ceased to exist, the arbitration was a nullity; and
- Third, the Plaintiff was estopped from denying that Hydralift was the respondent in the arbitration.
This case should serve as a reminder of the importance of ensuring that the parties to an international arbitration actually exist, in order for years of legal proceedings not to be ultimately in vain.
 International Arbitration Act (Chapter 143A), Section 19.