It is trite arbitration law that arbitration only takes place between consenting parties. One of the pitfalls of the need for consent is that it can make the joinder of third parties to an existing arbitration difficult.
Having multiple arbitrations between parties involved in the same transactions and projects is inefficient and increases the risk of inconsistent decisions. To address this, institutions have amended their arbitration rules to make it easier to join necessary parties to an existing arbitration and to allow the consolidation of related arbitrations into the one arbitration in certain circumstances. The recent Singapore case of CJD v CJE[1] illustrates the importance of understanding how those rules on joinder work and what constitutes consent.
Background to CJD v CJE
The Singapore High Court held that CJF, the 100% parent company of CJE, could not be forcibly joined to the arbitration between CJE (as claimant) and CJD (as respondent) even though it was a party to the joint venture agreement between them. This conclusion was consistent with the ruling of the Tribunal in the arbitration. Given the confidentiality of the arbitration proceedings the Singapore High Court has anonymised the names of the parties and the jurisdiction in which the joint venture project was taking place (described as Narnia in the judgment).
Background to the case:
- CJE and CJD were parties to a joint venture agreement along with CJF (the parent of CJE) and three other parties;
- Pursuant to the joint venture agreement, CJE and CJD each held 50% of the shares in the joint venture company established in Narnia to develop a mixed-use residential/ commercial/ hotel project;
- The relationship between the parties broke down with both CJE and CJD taking various actions in the courts;
- In November 2018 CJE started the arbitration against CJD under the LCIA Rules 2014 which rules were expressly incorporated into the arbitration clause in the joint venture agreement;
- In June 2019 CJD applied to join CJF as a party to the arbitration. CJF objected to being joined to the arbitration and argued that the Tribunal did not have jurisdiction to allow the joinder;
- In October 2019 the Tribunal rejected to the joinder application and held that it did not have jurisdiction to join CJF; and
- In November 2019 CJD applied to the Singapore High Court for the Tribunal’s decision to be reviewed. Under s10(3)(b) of the International Arbitration Act (Singapore) a party can appeal the decision of an arbitral tribunal that it has no jurisdiction to the Singapore High Court.
The Tribunal and the Singapore High Court decide against joinder
Joinder of third parties in arbitrations under the LCIA Rules 2014 are governed by Article 22.1(viii) which provides that the arbitral tribunal shall have the power to:
“(viii) to allow one or more third persons to be joined in the arbitration as a party provided any such third person and the applicant party have consented to such joinder in writing following the Commencement Date or (if earlier) in the Arbitration Agreement; and thereafter to make a single final award, or separate awards, in respect of all parties so implicated in the arbitration;”.
CJD argued that simply being a signatory and party to the joint venture agreement and therefore the arbitration agreement was sufficient to constitute consent by CJF in writing under Article 22.1(viii) to being joined in any arbitral reference involving any of the other parties to the joint venture agreement.
The Tribunal held that the mere fact that CJF had signed the joint venture agreement does not mean that it has consented to be joined into the present arbitration. The Tribunal would expect express wording to have been used in the arbitration clause if CJF was agreeing to be joined.
The Singapore High Court was required to consider the matter afresh. It was common ground by that stage that the law governing the arbitration agreement and the arbitration was Singapore law.
The Court agreed that CJF should not be joined for three reasons:
- First, that Article 22.1(viii) should not be interpreted so broadly. The article required that the third person consent in writing to being joined. If the drafters of the LCIA Rules 2014 had intended that the requisite consent of the third person could be found simply through the third person being a party to an arbitration agreement, the article could have been easily drafted in those terms. It was not. The Court noted that this broad reading of “consent” would lead to a situation where the third person could be joined at any point in time of the arbitration and may be deprived of the opportunity to nominate or participate in the selection of its own arbitrator.
- Second, for Article 22.1(viii) to be triggered the consent of the third person to be joined must be express and in writing. An arbitration agreement could be drafted in terms that clearly and unambiguously state that a third person (being a party to the contract and the arbitration agreement) thereby also consents in writing to being joined as a party in any arbitral reference between any of the other parties to the arbitration agreement. The arbitration clause in the joint venture agreement did not do so. Inferring or implying consent was not enough.
- Third, there is a separate contract that arises between the arbitrating parties to a dispute in a particular arbitration reference. CJF being a party to the arbitration agreement is not in itself sufficient to signal consent in writing to CJF being joined and being made a party to that separate contract between CJE and CJD arising out of the arbitration reference.
Know your rules and draft any arbitration agreement carefully when there are multiple parties and contracts
The key lesson from this case is the importance of carefully considering the suitability of any arbitration rules to be used when there are multiple parties and multiple contracts.
Other arbitration rules do make it clear that the initial threshold for joinder will be met if the additional party to be joined is simply a party to the arbitration agreement. The SIAC Rules 2016, HKIAC Rules 2018 and ACICA Rules 2021 all allow a joinder application to be made if the additional party to be joined is prima facie bound by the arbitration agreement.
By contrast the joinder provision in the current LCIA Rules 2020 (Article 22.1(x)) states that express consent is required to such joinder. If the LCIA Rules are selected in a multiple party contract, the parties should include express wording in their arbitration clause allowing for the joinder of any one party to an arbitration between any other parties to the contract to avoid the situation that arose in this case.
Parties also need to carefully consider whether to apply for consolidation or joinder under their chosen arbitration rules. Frustratingly for CJD, the Court agreed that under the LCIA Rules 2014 CJD could have issued a separate request for arbitration against CJF and applied for those arbitration proceedings to be consolidated with the existing arbitration. Query if this course is still open to CJD given the passage of time.
[1] CJD v CJE [2021] SGHC 61
