Singapore High Court dismisses stay applications on basis of repudiatory breach of med-arb agreement
By Alastair Henderson and Noe Minamikata
In Heartronics Corporation v EPI Life Pte Ltd and Others [2017] SGHCR 17, the Singapore High Court considered applications to stay proceedings pursuant to arb-med-arb clauses in the relevant agreements. The defendant had argued that even if attempts at mediation had failed, the arbitration agreement nevertheless remained separate and enforceable. This decision – which rejected the stay application after finding a repudiatory breach of an integrated med-arb procedure – highlights the unitary nature of certain multi-tiered dispute resolution clauses, and provides helpful guidance on the circumstances in which an arbitration agreement may be rendered inoperative or incapable of being performed.
Background Heartronics Corporation (“Heartronics“) sued EPI Life Ptd Ltd, its sole shareholder and the latter’s two directors (“EPI“) in respect of a licensing agreement and a distribution agreement for medical devices (“Agreements“). Heartronics claimed that it had been induced into entering the Agreements as a result of EPI’s false representations, in reliance upon which Heartronics also entered into downstream distribution agreements with third parties to distribute the devices in France and India. It transpired that the devices could not be marketed in either jurisdiction, and Heartronics sought damages and rescission of the Agreements. The Agreements contained virtually identical dispute resolution clauses (“ADR Clauses“) requiring the parties to submit to the Singapore Mediation Centre (“SMC“) and Singapore International Arbitration Centre (“SIAC“) for resolution by mediation-arbitration (“med-arb“). Heartronics attempted to initiate med-arb proceedings in the SMC, but EPI persistently refused to agree on a date for mediation or to pay the requisite fees. Heartronics eventually commenced proceedings in the Singapore Courts on the basis that the ADR Clauses had been discharged due to repudiatory breaches by EPI. In response, EPI sought a stay of the proceedings pending the outcome of any med-arb proceedings between Heartronics and EPI, pursuant to section 6 of the International Arbitration Act (“IAA“). In support of its applications, EPI submitted that the ADR Clauses contained not one, but two separate dispute resolution agreements, comprising a mediation agreement and a separate agreement to arbitrate (if mediation failed). Accordingly, even if EPI had committed repudiatory breaches of the ADR Clauses, such breaches only entitled Heartronics to treat the mediation agreement as having been discharged. The arbitration agreement remained operative, and as such, court proceedings should be stayed in favour of arbitration.