The Respondent had standing to independently commence the arbitration against the Applicant
The Court held that the word “severally” in the phrase “jointly and severally” meant that the Respondent and Co A could each act individually. This is especially because the Contract provided for separate invoicing for the Respondent’s and Co A’s respective scope of works.
The ability of the Respondent to commence an arbitration independently of Co A would depend on the “nature” of the dispute referred. If the dispute was between the Consortium as a whole and the Applicant, the Respondent would have to bring an arbitration jointly with Co A. However, because the claim involved only onshore works, the Respondent could act alone because the dispute was only between it and the Applicant. This was despite the Applicant claiming that it had envisaged a two-party contracting regime (i.e. itself and the Consortium).
The clause that provided for both the Respondent and Co A to be “jointly and severally liable” for the performance of the Contract was irrelevant to whether the Respondent could commence the Arbitration by itself.
As to the other issue, the Court first considered whether failure to comply with a pre-arbitration condition is a matter of jurisdiction or admissibility. Drawing on both Singapore and international authorities, the Court concluded that preconditions to (arbitration (such as escalation clauses) are generally matters of admissibility, not jurisdiction. The prevailing view in international arbitration, supported by the Singapore Court of Appeal’s reasoning in BTN v BTP, is that such preconditions are procedural requirements affecting the claim, not the tribunal’s power to hear the dispute. Whilst earlier Singapore case law (Lufthansa) had treated such preconditions as jurisdictional, this was obiter and not binding.
The Court then examined whether clause 25.7, which required disputes to be escalated to project management and then to senior management for resolution, was drafted as a true condition precedent to arbitration. It was held that clear words are required to create a condition precedent, and that the language in clause 25.7 was not sufficiently clear to make compliance mandatory before arbitration could be commenced. The clause did not expressly state that arbitration could only be invoked only if the escalation process was followed, and the phrase “which cannot be settled amicably” was not defined or tied specifically to the escalation procedure. The Court compared the clause to those in other cases where conditions precedent were found, and concluded that clause 25.7 imposed a procedural obligation, breach of which might result in damages, but did not bar commencement of an arbitration.
In any case, the Court found that the Applicant had waived its right to insist on compliance with clause 25.7. The meetings held between the parties (on 31 May and 16 August 2023) were found to have not complied with the escalation procedure, as the first meeting was not stated to be a project management level meeting and there was no escalation in the seniority of attendees at the second meeting. However, given that the Applicant agreed to the meetings after being informed of the Respondent’s intended representatives, did not object to the absence of escalation or the identity of the attendees, and proceeded with its meetings, it was found to have waived compliance of clause 25.7 by the Respondent. The Court also held that Co A did not have to be involved in the meetings.
Accordingly, the application was dismissed and costs were awarded to the Respondent.
It is not in the least uncommon to see unincorporated joint ventures undertaking major projects under a single contract.
- It is crucial to scrutinise the contract’s definitions, the allocation of obligations and rights, and the specific terms of the dispute resolution clause, in order to assess whether a consortium member may initiate arbitration or litigation independently. Should the parties wish to prevent this, clear and express wording is necessary.
- This outcome also reinforces the principle that escalation clauses, unless drafted in clear and mandatory terms, are unlikely to prevent parties from proceeding to arbitration, and that conduct may amount to a waiver of procedural objection.
