Singapore Court of Appeal allows winding-up in spite of arbitration agreement

In  Founder Group (Hong Kong) Limited (in liquidation) v Singapore JHC Co Pte Ltd [2023] SGCH 159 the Court of Appeal overturned the High Court’s decision and allowed winding-up in spite of an existing arbitration agreement.

The Singapore High Court had relied on the test developed in the AnAn case (AnAn Group (Singapore) Pte Ltd v VTB Bank (Public Joint Stock Co) [2020] 1 SLR 1158) and examined the scope of an arbitration agreement by using three criteria. I.e. the High Court considered (i) whether there was an arbitration agreement that was prima facie valid, (ii) whether the dispute was covered by the arbitration agreement; and (iii) whether raising such a dispute was not an abuse of process.

On appeal, the Singapore Court of Appeal overturned the High Court’s decision, by holding that despite there being an arbitration agreement between the parties, the debtor was not entitled to mount a case that the disputed debt was covered by the arbitration agreement. The Court of Appeal held the test set out in AnAn Group (Singapore) Pte Ltd v VTB Bank (Public Joint Stock Co) [2020] 1 SLR 1158 (AnAn) did not apply here.

The Court of Appeal opined that JHC's position was that the underlying contracts were null and void, so the arbitration agreements must logically also be null and void, on JHC's own case. The Court of Appeal therefore disagreed with the High Court's finding that the doctrine of separability prevented a party from evading an obligation to arbitrate by denying the existence or validity of the underlying contract, and held that the High Court erred in its application of the doctrine of separability.