Introduction

By a judgment dated 9 April 2010, the Singapore High Court granted leave to a Danish company to enforce a Danish arbitral award against a Singapore company. This case reaffirms the Singapore judiciary's pro-arbitration stance. However, the case is also instructive for certain delay tactics that were employed by the losing party during the arbitration process.

Case facts

DSK provided consultant services for ship design. Ultrapolis 3000 Investments Ltd ("Ultrapolis") engaged DSK to design a 90m yacht (the "First Agreement"). Enclosed in the First Agreement were DSK's standard terms and conditions ("Standard Conditions"). These included an arbitration clause (clause 19) stating that disputes that could not be settled amicably be settled in accordance with the Rules of the General Court of Arbitration in Denmark.

Subsequently, the parties rescinded the First Agreement in favour of a new agreement for the design of a 100m yacht (the "New Agreement"). Both parties signed the New Agreement which referred to but did not enclose the Standard Conditions. Clause 13 of the New Agreement incorporated the Standard Conditions that would be applicable only if the matters were not regulated between the parties by the contract.
After completing and delivering 95% of the contracted work to Ultrapolis, DSK claimed for 95% of the remuneration but Ultrapolis refused to pay. DSK referred the matter to arbitration at the Danish Arbitration Institute in Denmark. After a contested hearing on the preliminary issue of jurisdiction, the Danish Arbitral Tribunal (the "Tribunal") concluded that it had jurisdiction to hear the dispute, there being an arbitration agreement which clearly referred to the Danish Arbitration Institute.

It then passed its interim award in favour of DSK. That interim award on jurisdiction was not challenged in the supervising court, i.e. the Danish court.

Thereafter, Ultrapolis refused to participate in the arbitral proceedings and a final award on the merits was awarded against it. Ultrapolis also issued proceedings in the Singapore court in April 2008, alleging defective performance in the design. Those proceedings were set aside for material nondisclosure. Subsequently, another action was commenced on 20 October 2009 but to date has not been served on DSK.

DSK applied for leave to enforce the award in Singapore under section 29 of the International Arbitration Act ("IAA"). This was challenged by Ultrapolis under section 30(1)(b) and section 31(2)(b) and (e) of the IAA.

Issues before the High Court

Ultrapolis challenged the enforcement of the award on four grounds.
Firstly, it argued that DSK failed to produce the requisite evidence of an arbitration agreement under section 30(1)(b) of the IAA. The court disagreed and found that DSK had done so, having produced a copy of the New Agreement and a certified true copy of the Standard Conditions under which the Corrected Award 'purports to have been made'. There were other circumstances relied on. The court based its reasoning on the mechanistic approach advocated by DSK as reasoned by Prakash J in the case of Aloe Vera of America, Inc v Asianic Food (S) Pte Ltd [2006] 3 SLR(R) 174 ("Aloe Vera").

Secondly, it was argued that enforcement should be refused under section 31(2)(b) because the award was founded on a non-existent arbitration agreement. The issue of whether there was a valid arbitration agreement had to be determined based on foreign law being the law of the place of the arbitration and not Singapore law, following the clear wording of section 31(2)(b) and Aloe Vera.

The court held that Ultrapolis failed to prove on a balance of probabilities that the arbitration agreement did not form part of the New Agreement. The court accepted DSK's expert evidence which concluded that, under Danish law, both the governing law clause and the arbitration clause in the Standard Conditions would have been incorporated into the contract by reference to clause 13 and the other circumstances of the case. In addition, DSK's expert was independent of the proceedings before the Tribunal whereas Ultrapolis tried to rely on the opinion of its own Danish lawyers who argued the jurisdiction issue before the Tribunal.

Thirdly, Ultrapolis argued that the composition of the arbitral authority was not in accordance with the arbitration agreement and therefore the enforcement of the award should be refused under section 31(2)(e) of the IAA. The court agreed with DSK's contention that it was for Ultrapolis to prove that section 31(2)(e) applied and found that Ultrapolis failed to establish that the Tribunal was not the proper tribunal to hear the dispute in Denmark.

Fourthly, it was argued that the enforcement of the award should be refused under section 31(2)(e) since the Tribunal was functus officio at the time the award was made and passed. The court held that this was to be decided in accordance with Danish law. As Ultrapolis had failed to adduce evidence of Danish law to the contrary, the position that it was within the Tribunal's power to issue the award was not rebutted.
Conclusion

The steps taken by Ultrapolis which led to delay (in both the arbitral and enforcement process) were as follows:

1. It contested the jurisdiction of the Arbitral Tribunal on the grounds that the arbitration clause did not form part of the New Agreement and that the reference to "the General Court of Arbitration in Denmark" was not sufficiently clear.
2. When that failed, Ultrapolis chose not to participate in the hearing by the Tribunal on the merits and not to challenge the finding of jurisdiction before the Danish court.
3. Ultrapolis chose instead to commence proceedings in the Singapore High Court for defective work in the yacht design. Those proceedings were set aside.
4. Ultrapolis then sought to raise the question of the non-existence of the arbitration agreement in the Singapore court during the enforcement of the arbitral award and the various arguments above which all failed.
5. Notwithstanding that outcome, Ultrapolis has not withdrawn a second action that it commenced in December 2009 for the same alleged defective works claim.
6. Ultrapolis has since filed their Notice of Appeal.

This case illustrates how a losing party can still take steps to delay and keep the winning party out of the money despite the best efforts of the successful party. On the other hand, the Singapore High Court's decision to enforce the Danish arbitration award is a welcome one as it reaffirms the pro-arbitration stance advocated by the Singapore courts.

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