E-briefing: Arbitration with a “Participating” Non-Existent Company Deemed a Nullity: Singapore High Court Denies Enforcement of the Resulting Award

Why this is Important

In National Oilwell Varco v Keppel FELS Ltd [2021] SGHC 124, the Singapore High Court disallowed the enforcement of an arbitration award issued in favour of a party which had already been dissolved and struck off the company register at the time the proceedings were commenced, even if the dissolved entity actually “participated” in the arbitration. Such proceedings are considered a nullity, and so was the award which emanated from it. This decision serves as a useful reminder for parties to undertake careful due diligence on their contractual counterparties, even at the commencement of a dispute, to avoid obtaining a potentially unenforceable award.

Background Facts

The case involves a dispute over a Contract between the Defendant and Hydralift, a Norwegian company. The contract was entered into in 1996, and a dispute arose between the parties in 1999. In 2004, Hydralift merged with a company known as NOH, and was struck off the Norwegian companies register and ceased to exist. NOH later merged with the present Plaintiff. During this time, and until sometime in 2019, the Defendant was unaware that Hydralift had ceased to exist, and neither was this disclosed by the Plaintiff.

In 2007, the Defendant commenced arbitration proceedings for breach of contract against Hydralift. The Plaintiff instructed solicitors to defend the arbitration and bring counterclaims in the name of Hydralift. In September 2019, the Arbitral Tribunal issued its final award (“Final Award”), dismissing the claim and allowing Hyrdralift’s counterclaim. In January 2020, the Plaintiff obtained leave to enforce the award against the Defendant (“Leave Order”), and in the present proceedings, the Defendant sought to set aside the Leave Order.

The ruling of the Singapore High Court – the Plaintiff was not entitled to enforce the Award  

The ultimate issue before the Court was whether the Plaintiff was entitled to enforce the Final Award against the Defendant. The High Court ruled that it was not. In doing so, the Court made the following notable pronouncements:

1. Singapore courts follow a mechanical approach to enforcement – the Singapore International Arbitration Act (“IAA”) does not empower an enforcing court to vary or deviate from the dispositive terms of the award. The court may only deviate from the terms of the award in certain situations – to correct a minor clerical error, to take into account matters which have occurred after the tribunal rendered its award (e.g., a post-award assignment or change of name); with the parties’ consent; and if there is statutory basis for doing so. None of these were present in this case. The Final Award was made by the Tribunal in favour of Hydralift, not the Plaintiff, which was a separate legal entity. Thus, it is only Hydralift which has standing to apply for leave to enforce the Final Award.
2. Arbitration proceedings which are commenced by or against a non-existent legal person are a nullity, unless the use of the non-existent legal person’s name is merely a misnomer. Even if there was a misnomer, the misnomer can only be corrected within the proceedings. In this case, both the Plaintiff and the Defendant intended to refer to Hydralift, and not the Plaintiff, in using the name “Hydralift”. There was thus no mistake as to Hydralift’s name or as to its identity. The arbitration was a nullity from the start, and the award, being also a nullity, cannot be enforced under s 19 of the IAA.

The full text of the decision can be accessed here.

Key Takeaways

Prior to a dispute being commenced, proper care and background checks should be undertaken to investigate the status of each party to the contract, to ensure that the arbitration is being instituted by or against the proper entity. This is particularly relevant for parties to complex, long-term contracts, where the parties may potentially undergo corporate restructuring or reorganisations over the life of the contractual relationship. Oftentimes, the rights and obligations under the original contract may be transferred or assigned to the later corporate entities, and thus, it may not always be clear which is the proper entity to sue in case of any dispute. A party to a contract whose counterpart has undergone corporate reorganisation should also carefully review the effect that such reorganisation has on the commercial terms of the contract, and the position under the applicable law in relation to the transfer of any rights and obligations. The failure to take these into account may potentially nullify, as stated by the High Court, “all of the time, money, effort and other resources which the parties and the tribunal have expended over 12 years”, as in this case.

We understand that the case is presently under review with the Court of Appeal.

The Harry Elias Partnership International Arbitration Group

Harry Elias Partnership regularly provides advice on complex international commercial disputes. We have extensive experience in advising and successfully representing multinational entities in commercial arbitration. As a full-service Singapore law firm, we also have full rights of audience before all tiers of Singapore Courts. We are therefore well placed to advise and support our clients in any arbitration-related court applications before the Singapore Courts.

For further information, please contact:

Francis Goh

Head, International Arbitration

Partner | Harry Elias Partnership LLP

francisgoh@harryelias.com | +65 6361 9835

Janice Lee

Foreign Legal Associate | Harry Elias Partnership LLP

janicelee@harryelias.com | +65 6361 9821