On 19 March 2021, the Singapore High Court issued an important decision on the concept of a “forced joinder” in CJD v CJE [2021] SGHC 61 (available here).  A forced joinder refers to a third party consenting to be joined as a party to extant arbitration proceedings on the application of one of the arbitrants despite objections to the joinder raised by the other arbitrant(s).  Accordingly, notwithstanding the impression given by the phrase, a forced joinder does not refer to forcing a third party to join an arbitration against its wishes.  Various institutional rules provide for forced joinders,¹ including Article 22.1(viii) of the London Court of International Arbitration Rules 2014 (“LCIA Rules 2014”), which was the subject of the Singapore High Court’s decision.² 

The key issue in the decision was, by virtue of the fact it was party to an underlying multi-party contract and arbitration agreement, whether or not a third party had consented to be joined to any subsequent arbitration proceedings between any of the other parties to the arbitration agreement. In summary, the Singapore High Court held that:

• First, the fact that the third party was a party to the underlying contract and therefore the arbitration agreement was not enough to establish its consent to being joined.
• Second, further to the above, while it might be possible for an arbitration agreement to be drafted in terms that clearly and unambiguously stipulate that a third person (by being a party to the contract and the arbitration agreement contained therein) also signifies its consent to being joined as a third party in any arbitral reference between any of the other parties to the arbitration agreement, any such clause must demonstrate clear and express consent in writing to the possibility of such joinder.

There is currently relatively little judicial authority on the various forced joinder provisions that are present in various institutional rules, and the Singapore High Court’s decision provides helpful guidance on how these may be interpreted by national courts.  The decision emphasizes the core value of consent in international arbitration and is a useful reminder to parties to multi-party contracts to consider at the point of formation whether it may be beneficial to have the ability to join another party to any particular arbitration reference that may arise.  If so, they will be well advised to provide their clear, written consent in the contract.

Background

The plaintiff in the case, CJD, is the respondent in the underlying arbitration and incorporated in “Narnia.”  The first defendant in the case, CJE, is the claimant in the underlying arbitration and incorporated in “Telmar.”  The second defendant in the case, CJF, is also incorporated in Telmar and is not party to the arbitration.  CJF owns 100% of the shares in CJE.  

CJD entered into a joint venture agreement (“JVA”) with CJE, CJF and three other parties for the purpose of developing a mixed-use residential/commercial tower in Narnia.  Clause 36.3 of the JVA provides in material part that:

If, after 30 (Thirty) days from the commencement of such informal negotiation, the Parties have been unable to amicably resolve any dispute, difference or disagreement, it is agreed that the same shall be referred to and finally resolved by Arbitration in accordance with the London Court of International Arbitration Rules (LCIA Rules) in force and, unless otherwise agreed, the seat of Arbitration shall be Singapore.

Cracks began forming in the parties’ relationship, and CJE alleged CJD breached several terms of the JVA including by: (a) delaying and eventually failing to seek the requisite regulatory approvals in Narnia; (b) terminating the JVA wrongfully and/or invalidly; and (c) failing to act in good faith.

CJE then commenced arbitration proceedings in Singapore against CJD, under the LCIA Rules 2014, pursuant to Clause 36.3 of the JVA.  Among other applications, CJD applied to the Tribunal to join CJF as a party to the arbitration. 

This application was denied by the Tribunal.  The Tribunal held that it did not have jurisdiction to join CJF to the arbitration.  Looking at Article 22.1(viii) of the LCIA Rules 2014, it said that a third-party may only be joined despite an objection from an existing party only if the third-party consents in writing to be joined.  The Tribunal said that the LCIA Rules 2014 make it clear that such consent may be given either in the arbitration clause itself, or in a document made after the arbitration has been commenced.

The Tribunal noted that that CJD did not contend that consent had been given after commencement of the arbitration, and so only examined whether consent had been given in the arbitration agreement.  It said:

[T]he Tribunal does not accept [CJD’s] argument that [CJF] has consented to be joined.  Merely because [CJF] signed the JVA does not mean that it has consented to be joined into the present arbitration.  The Tribunal would expect express wording to have been used if [CJF] was agreeing to be joined.  For example, a subcontract may provide that if any issue in dispute between the main contractor and the employer touches upon an issue involving the subcontractor, then the subcontractor agrees to be joined into the main contract arbitration.  There is no such express wording in the present case.

Following the Tribunal’s dismissal of CJD’s application, CJD applied to the Singapore High Court for the Tribunal’s decision to be set aside under Singapore’s International Arbitration Act (Cap 143A, 2002 Rev Ed).

The Decision of the Singapore High Court

Reviewing the Tribunal’s decision de novo,³ the High Court acknowledged first that Article 22.1(viii) of the LCIA Rules 2014 provides for what is commonly termed a forced joinder: the power to allow the joinder of a consenting third party to an ongoing arbitration, provided that one existing party consents to the joinder, even if the other parties to the arbitration proceedings object.  The High Court said that the crux of the decision was whether CJF, by virtue of having signed the JVA and being party to the arbitration agreement in Clause 36.3, had also thereby consented “in writing” to being joined as a party to the Arbitration under Article 22.1(viii).

In short, the High Court fundamentally disagreed with CJD’s contention that simply being a signatory and party to the JVA (and the arbitration agreement) was sufficient in and of itself to constitute consent by CJF “in writing to being joined” in any arbitral reference involving any of the other parties to the JVA.

First, the High Court said that the plain wording of Article 22.1(viii) does not lend itself to such an interpretation.  That provision refers to the consent by the third party “to such joinder in writing” being contained in “the Arbitration Agreement.”  The High Court observed there is no mention in Article 22.1(viii) of the requisite consent in writing being found simply by being a party to an arbitration agreement no matter how generally worded.  The Court said the rule could have quite easily been drafted in those terms if that was the intent of the drafters of the LCIA Rules 2014.

The High Court went on to say that the broad reading of “consent” contended for by CJD was problematic for two reasons.  First, the joinder party would be forced to live in a state of uncertainty as to whether it would be called upon to defend itself or advance claims in the ongoing arbitration from the commencement of the arbitration until its conclusion.  Second, the joinder party might well be deprived of the opportunity to nominate or participate in the selection of its own arbitrator if it was indeed joined to the arbitration.  That outcome would represent a significant derogation from the fundamental requirement of party autonomy in international commercial arbitration.

Second, while the High Court acknowledged that an arbitration agreement could be drafted in terms that clearly and unambiguously stipulate that a third person (by being party to the contract/arbitration agreement) thereby also signifies its consent in writing to being joined as a party in any arbitral reference between any of the other parties to the arbitration agreement, it said that Clause 36.3 of the JVA contains no such clear and unambiguous wording.  Even if CJF’s consent could be “inferred” on the facts, that consent needed to be express and in writing.

The High Court accordingly dismissed CJD’s application.

The Court observed, however, in obiter that there was an additional ground that would also be determinative of CJD’s application.  That ground was the doctrine of “double separability.”  The Court observed that this doctrine distinguishes between the original arbitration contract that arises between the parties, and the separate contract that arises between the arbitrants to a dispute in a particular arbitration reference.  The Court said it is because the third person (who may be a party to the original arbitration contract) is a stranger to the second contract that arises between the arbitrants in the particular arbitration reference that the third person’s consent to being joined is required and, indeed, essential.  Accordingly, merely being a party to the arbitration agreement contained in Clause 36.3 of the JVA was not, in and of itself, sufficient to signal consent in writing from CJF to being joined and being made party to the “second contract” between CJD and CJE arising out of the arbitration reference in the arbitration.

Implications

The Singapore High Court’s decision has several important implications for arbitration practitioners in Singapore and abroad, especially in other common law jurisdictions where the decision may be particularly influential.

First, there is a relative lack of judicial decisions on the interpretation of rules providing for forced joinder, and the decision constitutes useful guidance for how similar rules may be interpreted by other judicial bodies.  The decision clearly emphasizes the importance of consent in international arbitration, by requiring express, written consent to forced joinder to either be given: (a) in the arbitration agreement; or (b) in a separate document following initiation of the arbitral reference.

Second, the case reiterates the importance of the parties to a multi-party contract reflecting on the applicable arbitration provisions and turning their minds to the potential necessity of applying to join another party to the underlying contract to any particular arbitration reference that may subsequently arise.  If joinder may be considered desirable, the parties may benefit from an express statement that the parties to the contract agree to be joined to any subsequent arbitration reference arising between any combination of the other parties.

Third, it is clear that, despite the primacy of the role of consent in international arbitration, the starting point for any analysis will be the particular provision in issue.  The Singapore High Court’s first point of analysis was the particular wording of Article 22.1(viii) of the LCIA Rules 2014.  The relevant analysis may vary according to the particular wording in question.  Accordingly, a less demanding approach may be taken by other courts addressing other Rules.  The Singapore High Court’s analysis is, however, likely to be applied in respect of the successor provision to Article 22.1(viii), Article 22.1(x) of the LCIA Rules 1010, which clearly requires the third party to have “consented expressly to such joinder in writing.”

Fourth, despite the primacy of the wording of the relevant institutional rules (or national arbitration legislation), it will be interesting to see if subsequent decisions pick up on the Singapore High Court’s “double separability” analysis.  If this approach gains favour in international arbitration jurisprudence, it may provide a basis on which to deny joinder even if the provision at hand may suggest a less demanding approach to consent.

Fifth, future arbitrants in similar cases may be able to argue that Singapore High Court’s analysis placed too much weight on the requirement of explicit consent.  The Court said that consent must be express and in writing.  Accordingly, even if CJF’s consent could be “inferred” on the facts, it is clear that for the purposes of Article 22.1(viii), an express written consent is still required.  This is arguably requiring too much of parties, particularly if there is compelling extrinsic evidence of some kind showing that, by consenting to the arbitration agreement, that party intended to consent to future joinder applications.  Indeed, the Chief Justice of Singapore has remarked that “the better view is that by subscribing to these rules [which provide for forced joinder], parties have in fact consented to such joinder.”⁴  It is also worth noting that the word “express” is not actually used in Article 22.1(viii) of the LCIA Rules 2014.  Contrast Article 22.1(viii) of the 2014 Rules with its successor provision, Article 22.1(x) of the  LCIA Rules 2020, which provides that the third party and the applicant party must have “consented expressly to such joinder in writing.”  As noted above, the Singapore High Court’s analysis is even more compelling under the current LCIA Rules.

¹ See e.g. Swiss Rules of International Arbitration 2012, Article 4(2).

² Article 22.1(viii) has since been superseded by Article 22.1(x) of the LCIA Rules 2020.

³ Under Singapore law, a Tribunal’s own view of its jurisdiction has no legal or evidential value before a court that has to determine that very question: PT First Media TBK v Astro Nusantara International BV [2014] 1 SLR 372 (CA) at paras. 162-164.

⁴ Chief Justice Sundaresh Menon, “Arbitration’s Blade: International Arbitration and the Rule of Law,” address to SIAC Virtual Congress 2020, at note 31.