Singapore court confirms enforcement of Danish arbitration award

Its judgment (56-page / 715KB PDF) provides useful guidance on the operation of section 31(5) of the Singapore International Arbitration Act (IAA), which deals with applications for adjournment of enforcement proceedings for foreign arbitral awards.

There are few Singapore cases dealing with IAA section 31(5). Justice Belinda Ang's decision and analysis of English authorities dealing with section 103(5) of the English Arbitration Act, which has similar wording to IAA section 31(5), is therefore extremely instructive, according to international arbitration expert Wee Jian Ang of Pinsent Masons MPillay, the Singapore joint law venture between MPillay and Pinsent Masons, the law firm behind Out-Law.com. Importantly, the judgment sheds light on the discretionary factors that a Singapore court would consider in deciding whether to adjourn enforcement proceedings, he said.

Man Diesel & Turbo SE (Man), a German subsidiary of the Volkswagen group, was granted leave by the Singapore courts in June 2017 to enforce the April 2017 DIA award against IM Skaugen's Singapore subsidiary. The award was made as part of one of many long-running disputes between the parties, and essentially requires IM Skaugen to fulfil its outstanding contractual obligations under sale and purchase agreements for four 2-stroke marine diesel engines and propellers.

IM Skaugen sought to resist enforcement of the award, or alternatively to 'stay and/or adjourn' enforcement pending the determination of its application to set aside the award in the Danish Courts. To that end, IM Skaugen made a number of arguments: that it had a strong case in the setting aside proceedings before the Danish Courts; and that the enforcement of the award would be contrary to Singapore's public policy on the basis of allegations of fraud committed by Man during the arbitration.

Man challenged those arguments, and further applied for security amounting to the sums due to it under the DIA award if the Singapore High Court adjourned the enforcement of the DIA award. 

As a preliminary issue, the judge said that IM Skaugen had "effectively ignore[d] the language" of IAA section 31(5) by seeking a 'stay and/or adjournment' of enforcement only as an alternative if the court decided that the grounds to refuse enforcement were not made out. This is because there is a distinction between the court's powers at the foreign award enforcement stage, and, after entry of the judgment on the foreign award, such that an application for an adjournment of enforcement proceedings has to be made prior to a decision on the application to refuse enforcement, she said.

"Significantly, after a judgment on the foreign award is affirmed, the enforcing court has no power to adjourn under s31(5)(a)," Justice Ang said. "After entry of judgment, the judgment is much like any other judgment rendered by the court and the plaintiff would seek an execution order. The other party seeking a stay of the execution order would have to turn to the procedural principles of stay of execution of a civil judgment."

That said, this preliminary issue did not become material, as Justice Ang had first asked IM Sakugen to deal with the question of adjournment of the DIA award, before subsequently dealing with the issue of enforcement.

Justice Ang then went on to analyse whether an adjournment of the DIA award enforcement proceedings should be allowed.

Her starting point was the language of IAA section 31(5), in which the court "may" permit an adjournment if it "considers it proper to do so". Such language, read together with the New York Convention 1958 Article VI, leaves the decision for or against the grant of an adjournment to the enforcing court's discretion, Justice Ang said. 

This discretion is broad, and allows enforcement proceedings to be adjourned either in whole or in part. When considering the circumstances warranting adjournment, the court will "take a multi-factorial approach" and "come down on the side of an outcome that is the most just or least unjust", the judge said.

After surveying various foreign authorities, Justice Ang noted that there are generally two factors to consider.

Firstly, the adjournment applicant must be able to show at the very least that it is "demonstrably pursuing a meritorious application" to set aside the award in the seat court (in this case, the Danish Courts). The applicant cannot be attempting to "frustrat[e] or delay the enforcement of a binding foreign award", she said.

"At this stage of inquiry, the enforcing court would not engage in a detailed assessment of the facts or legal argument of the setting aside proceedings," she added. Instead, the strength of the setting aside case is "perceived on a brief consideration by the enforcing court".

"Typically, it may appear to the enforcing court at the outset or after hearing, on the strength of some of the rival arguments on the setting aside application, that one or the other side is bound to succeed. The closer the case appears to one or the other of these extremes, the less likely it is that a grant or refusal of an adjournment will represent an injustice to the other. Therefore, if the setting aside application is lacking in merits, there would be little or no tangible prejudice to the award debtor if his application for an adjournment is refused," she said.

Secondly, the enforcing court should also consider "the likely consequences of an adjournment, in particular its likely length of delay", she said.

Ultimately, Justice Ang held that IM Skaugen "had not established its case that the DIA [a]ward is impeachable" before the Danish Courts. In other words, she did not accept IM Skaugen's evidence that its setting aside application before the Danish Courts was meritorious. Notably, she observed that while there is no express requirement for a party seeking an adjournment under IAA section 31(5) to adduce expert opinion on foreign law, it is nonetheless "preferable" since the enforcing court may need "sufficient information on the foreign law in question to…assess the strength…of the arguments of the challenge before the seat-court".

Further, the adjournment sought would also prejudice Man, she said. This was for two reasons. First, it would delay final settlement of the case until 2019 or 2020. Second, there was substantial evidence that enforcement of the award would be more difficult in future if she adjourned the enforcement proceedings now, considering IM Skaugen's past conduct of appearing to dissipate its assets, she said.

Upon dismissing IM Skaugen's application to adjourn the enforcement proceedings, Justice Ang proceeded to consider its application to resist enforcement of the DIA award.

As IM Skaugen's grounds for resisting enforcement were similar to those relied upon in its application to set aside the DIA award before the Danish Courts – which Justice Ang had already considered earlier - she similarly dismissed them. She concluded this issue of enforcement by ruling that IM Skaugen had not demonstrated how enforcing this award would be contrary to Singapore's public policy. Consequently, "[a] proper order is the immediate enforcement of the DIA [a]ward", she said.