INSIGHT

Arbitration Insights July 2022

By Jeremy Quan-Sing, Nick Rudge , Emily Turnbull, William Ho, William Stone
Arbitration

The latest arbitration news from Australia and abroad 6 min read

In this inaugural Arbitration Insights we look at the amended ICSID rules, recent decisions of the NSW Supreme Court and the Federal Court, and more.

ICSID: Administrative council approves amendment of ICSID rules

International Centre for Settlement of Investment Disputes (ICSID) member states have approved comprehensive amendments to the ICSID Arbitration Rules. Aimed at reducing the time and costs associated with resolving disputes and providing greater transparency, the new Rules include:

  • new procedural rules for fact-finding;
  • a new (and ongoing) obligation for parties to disclose third party funding arrangements;
  • mandatory timeframes for rendering orders and awards in arbitration and conciliation;
  • new expedited arbitration rules;
  • new jurisdiction arrangements to allow Regional Economic Integration Organisations access to ICSID arbitration and conciliation; and
  • increased public access to ICSID orders and awards.

A link to the new rules is here.

Amended rules into effect on 1 July 2022

Singapore: Legislative amendments allow for CFAs in arbitral proceedings under SIAC rules

Under amendments to the Singaporean Legal Profession Act, lawyers and registered foreign lawyers may now enter into conditional fee agreements (CFAs) with their clients, including in relation to arbitral proceedings conducted under the SIAC rules.  Previously, these fee structures had been banned in Singapore.

CFAs can provide for whole or part of legal fees and costs to be payable upon specific conditions being satisfied. For example, a CFA could stipulate what constitutes success of the client's claim or defence, or provide for uplift fees in particular circumstances. Under the amendments, specific information about the CFA must be stated in writing and agreed to by the client, in order for it to be valid and binding. Further, CFAs cannot provide for remuneration or costs to be payable as a percentage or proportion of damages awarded to the client.

A link to the Amending Act is here.

A link to the Bill's Second Reading Speech is here.

Operative provisions commenced 4 May 2022

Australia: NSW Supreme Court confirms that arbitration agreements are not 'inoperative' where parties have not completed preliminary steps in a tiered dispute resolution clause

The contractor for the WestConnex Link Tunnels project has successfully stayed proceedings in the NSW Supreme Court under s8 of the Commercial Arbitration Act 2010 (NSW) (the CAA). The underlying dispute arose under back-to-back contracts containing a multi-stage dispute resolution mechanism.

The dispute related to whether communications from the plaintiff to the contractor constituted directions to implement a solution to a contamination claim on the project. The plaintiff commenced court proceedings seeking to injunct the contractor from referring the dispute to expert determination. The contractor applied for a stay of proceedings under s8 of the CAA, on the basis that the dispute the subject of the court proceedings ought to be arbitrated.

The Court stayed the proceedings and confirmed that the parties' failure to complete the preliminary steps in a tiered dispute resolution clause does not render the arbitration agreement 'inoperative' for the purpose of s8 of the CAA. Such an interpretation prevents parties from bypassing their contractual bargain to arbitrate by commencing proceedings before all preliminary steps have been completed. A link to our previous update on this case is here

Date of judgment 29 April 2022: WCX M4-M5 Link AT Pty Ltd v Acciona Infrastructure Projects Australia Pty Ltd (No 2) [2022] NSWSC 505

Australia: Agriculture giant unsuccessful in application to maintain freezing orders against Australian businesses

The Federal Court has rejected Viterra BV's bid to extend temporary freezing orders against agricultural businesses CS Agriculture and CSTT Australia.

In 2021, an arbitral tribunal under the auspices of the International Cotton Association Ltd published an award in Viterra's favour of some A$18.7 million against Shandong Ruyi, a textiles corporation incorporated in China. It has an indirect interest in CS Agriculture and CSTT Australia through a wholly-owned Singaporean subsidiary.

Viterra is awaiting a ruling by a Singaporean court that it hopes will permit enforcement of the arbitral award against the Singaporean entity. However, it had simultaneously pursued the Federal Court application against the indirect, Australian-incorporated subsidiaries of the award debtor, Ruyi.

Justice Stewart, in rejecting the application, said that:

  • A freezing order is an extraordinary remedy that requires a high degree of caution. It is rare to grant one against third parties (like CS Agriculture and CSTT Australia) in which the debtor (Ruyi) does not have a beneficial entitlement.
  • The order would be onerous.
  • There is nothing to suggest that Ruyi would cause the Singaporean subsidiary to dispose of its assets to defeat the arbitral award (in circumstances where there is still a forthcoming judgment from the Singaporean courts).

Date of judgment 11 March 2022: Viterra BV v Shandong Ruyi Technology Group Co Ltd [2022] FCA 215

Singapore: Court of Appeal allows non-party to enforce award made in favour of dissolved company

In what was described by the Singaporean Court of Appeal as a 'situation of a true misnomer', the Court has held that a non-party can enforce an arbitral award made in favour of a dissolved company, where that non-party merged with the dissolved company.

In 2007, Keppel FELS Ltd (a Singaporean entity, also known as KFELS) commenced arbitration against Hydralift AS (a Norwegian entity). Unbeknown to KFELS at the time, Hydralift had merged three years before, with another Norwegian entity, NOV AS. The arbitration was commenced regarding a contract between KFELS and Hydralift, entered into in 1999, in relation to the design and supply of a turret bearing system. NOV AS had not informed KFELS about the merger, and instead defended the arbitration in Hydralift's name, including making counterclaims against KFELS.

In September 2019, an arbitral tribunal found in Hydralift's favour and ordered the applicant, KFELS, to pay US$2.8 million in damages and costs. NOV AS sought permission from the Singaporean courts to enforce the arbitral award against KFELS. KFELS resisted enforcement, arguing that since the award was made in favour of Hydralift (an entity that ceased to exist in 2004), it was not enforceable.

The Singaporean High Court agreed with KFELS, prohibiting NOV AS from being able to enforce the award against it. However, the Court of Appeal overturned the High Court's decision. It found that, among other things:

  • Hydralift's personality survived the merger in 2004, and that NOV AS 'is for all intents and purposes, the same legal entity as Hydralift'.
  • Singaporean courts have the power to enforce an arbitral ward in favour of a non-party when there is a 'misnomer' situation.  Even though NOV AS's decision to conceal the merger was 'inexplicable and unsatisfactory', prohibiting NOV AS from enforcing the award would place 'undue emphasis on form even when it is obvious what the substance of the Award entails'.

Date of judgment 16 March 2022: National Oilwell Varco Norway AS v Keppel FELS Ltd [2022] SGCA 24

US: When can use of a website bind a consumer to arbitration?

A US court has rejected an argument that website users had agreed to be bound to an arbitration clause by accessing a website. The website contained a notice that in using it, the user agreed to the website's terms and conditions, which contained a mandatory arbitration clause. The notice was a 'browsewrap' agreement. Browsewrap agreements are notices commonly found in banners or in hyperlinks, which do not require the user to click to agree (or that prohibit access to the website unless the user gives their agreement). In contrast, 'clickwrap' agreements usually require a user to click to sign or accept particular terms.

When a dispute arose between users of the website (the plaintiffs) and the website operator (the defendants), proceedings were commenced by the plaintiffs in a US District Court. However, the defendants moved to compel arbitration based on the plaintiffs' use of the website and the browsewrap notice present on the webpage. The US Court of Appeals affirmed the District Court's order denying the defendants' motion to compel arbitration, finding that the parties never formed a valid arbitration agreement, as the plaintiffs did not unambiguously manifest their assent to the terms and conditions when navigating the website.

Date of judgment 5 April 2022: Berman v Freedom Financial Network (Case number 4:18-cv-01060-YGR)