19 ReSolution | Nov 2017
Background
Internationally, commercial arbitration is the predominant means by which commercial parties resolve their disputes. Banks and financial institutions have appeared to resist this trend, however, historically reverting to national courts to resolve disputes with their clients and each other. Whether there is aversion to change, “stickiness” of boilerplate dispute resolution clauses in financing documents, or misconceptions around the arbitration process, in recent years there has been increasing use of arbitration by financial institutions. Against this background, the ICC recognised the need to study financial institutions’ perceptions and experience of arbitration and how arbitration procedures can be used and adapted to meet their needs.
The Report
The Report’s findings and recommendations are based on input from approximately 50 financial institutions globally, banking counsel, data from 13 arbitral institutions, arbitral awards, relevant literature, and lawyers experienced in banking and finance disputes. The Task Force examined a wide range of banking and financial activities, whether by licensed banks or by funds, including lending activities, derivatives, sovereign lending, regulatory matters, international financing, trade finance, Islamic finance, advisory matters, asset management and interbank disputes. Based on this research, the Report addresses usage of arbitration by financial institutions, the potential benefits of commercial arbitration for banks and financial institutions (e.g., efficiency, expert decision-makers, global enforceability of arbitral awards, confidentiality, and finality) and some common misconceptions about the process.
The Task Force's recommendations
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As the Report makes clear, these points (and various other important practical matters) need to be considered in the circumstances in each case.
ICC Report on Financial Institutions and Arbitration will be of interest to banks and financial institutions throughout Asia-Pacific
Late last year the ICC Commission on Arbitration released its multidisciplinary report Financial Institutions and Arbitration (the Report). The Report addresses how banks, financial institutions and their clients, who have historically resorted to traditional litigation to resolve disputes arising out of their dealings, can use arbitration for efficient and effective resolution of what can be complex disputes. Lowndes Jordan litigation partner Timothy Lindsay was one of the leaders of the Task Force, and comments on why the Report will be of interest to banks and financial institutions in New Zealand and throughout the Asia-Pacific region.
...Singapore courts have recognized a tribunal's authority to join shareholders to an arbitration by piercing the corporate veil. .
Aggrieved claimants may sometimes seek to extend their claims not only to the company that agreed to arbitrate disputes – but also to that company's shareholders or ultimate controlling person(s). Such efforts are usually driven by commercial realities – while the company may be insolvent, or asset-light and liability-heavy, the shareholders or ultimate controlling person(s) may have substantial assets. Even if these parties have not signed the arbitration agreement in question, it may still be possible to join them by "piercing the corporate veil" of the signatory company.
Singapore courts have recognized a tribunal's authority to join shareholders to an arbitration by piercing the corporate veil. In fact, Singapore courts have already enforced awards against parties who did not expressly sign the arbitration agreement. However, these cases have only involved awards rendered by tribunals seated outside of Singapore. Nonetheless, the Singapore courts reasoned that so long as the supervisory court of the seat has not set aside the award, Singapore courts will be inclined to enforcing the award.
However, insofar as arbitrations seated in Singapore are concerned, there appears to be no reported decision where the Singapore courts considered the issue of whether to set aside an award in which the arbitral tribunal had exercised its power to pierce the corporate veil. Recently, the Delhi High Court in Sudhir Gopi vs Indira Gandhi National Open University O.M.P. (COMM) 22/2016, engaged in this analysis – ultimately deciding to set aside an arbitration award because the Delhi High Court found that the tribunal did not have sufficient grounds to pierce the corporate veil in order to join the shareholders in question.
Below, we discuss the factors a Singapore court may consider when deciding whether to set aside an award in which the arbitral tribunal had exercised its power to pierce the corporate veil. Notably, the Singapore court's considerations may differ in cases where the tribunal has joined shareholders (on the grounds of the "alter ego" doctrine) versus when it has joined a company (on the grounds that the company is part of a "group of companies").
Ultimately, while a Singapore court may uphold an award against a non-signatory shareholder, it may choose to set aside an award against a non-signatory company.
A. Joining non-signatory shareholders or individuals
Subject to the precise terms of the arbitration agreement, Singapore courts recognize that tribunals have jurisdiction to "pierce the corporate veil" and join parties who have not explicitly signed an arbitration agreement, on the basis of the alter ego doctrine.
Extending Your Reach To The "Invisible Parties" To The Arbitration Agreement
Kia Jeng Koh
- Singapore -
...Singapore courts have recognized a tribunal's authority to join shareholders to an arbitration by piercing the corporate veil...