Stay of Court proceedings involving third party pending resolution of arbitration of another party

In Parastate Labs Inc v Wang Li and others [2023] SGHC 48 the High Court of Singapore had to decide if imposing a stay in favor of an arbitration procedure between the claimant and the arbitration agreement party should also affect indirectly involved third parties. In the present case, the court saw a direct link between the actions toward the different defendants and therefore the claims against all defendants stayed.

First of all, the arbitration award only binds the participating parties. Therefore, there is a ample jurisprudence concerning actions between indirectly related third parties. Guidance to the finding shall in the opinion of the court always be to aim for a balance between the "three higher-order concerns that may pull in different considerations: first, a plaintiff’s right to choose whom he wants to sue and where; second, the court’s desire to prevent a plaintiff from circumventing the operation of an arbitration clause; and third, the court’s inherent power to manage its processes to prevent an abuse of process and ensure the efficient and fair resolution of disputes", as stated in Tomolugen Holdings Ltd and another v Silica Investors Ltd and other appeals [2016] 1 SLR 373.

In the present case, the court especially based its decision on the fact that the claims against the non-arbitration agreement participating parties were based on accessory liability or personal liability. Without the contractual relationship that was subject to the arbitration clause, the present claims would never have existed.

The court also did not follow the argument of the claimant, who emphasized that the defendant of these proceedings had not offered to be part of the ongoing arbitration process and therefore could seek to “re-litigate” common issues even if the arbitration award was totally in favor of the claimant.

The court justified its decision by giving the prospect that if the defendant would disregard the arbitrational verdict that would provide strong grounds be an abuse of process. That in fact shall be sufficient safety for the claimant.