ARTICLE 6 – PARALLEL APPLICATIONS OR CLAIMS
If an application or a claim relating to a settlement agreement has been made to a court, an arbitral tribunal or any other competent authority which may affect the relief being sought under article 4, the competent authority of the Party to the Convention where such relief is sought may, if it considers it proper, adjourn the decision and may also, on the request of a party, order the other party to give suitable security.
Find the introduction and context of this blog series on the Singapore Convention here.
Click here for the complete annotation in Portuguese (Anuário – Ano 3).
Andreas Rodrigues
Bruna Monteiro
Article 6 of the Singapore Convention deals with the possibility that the court or entity to which enforcement of the agreement has been requested may postpone its decision in cases where competent institutions of other countries are considering a request which may interfere with such enforcement.
On the one hand, this article aims to avoid contradictory decisions by the signatory countries. On the other hand, we can see that by using the term “if it considers it proper”, respect for the sovereignty of the signatory states is maintained.
This article is almost a literal reproduction of Article VI of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards[1], which reads as follows:
“If an application for the setting aside or suspension of the award has been made to a competent authority referred to in article V (1) (e), the authority before which the award is sought to be relied upon may, if it considers it proper, adjourn the decision on the enforcement of the award and may also, on the application of the party claiming enforcement of the award, order the other party to give suitable security.”
Article VI of the New York Convention was created to give effect to Article V(1)(e) of the Convention, which provides for the refusal of enforcement and recognition of foreign judgments where they have not yet become binding on the parties or have been set aside or suspended by a competent authority in the country where, or under the law of which, the judgment was given.
From a reading of the two articles, a difference can be seen as regards the first part of Article VI of the New York Convention. This refers to an application for annulment or suspension, whereas Article 6 does not specify what may be applied for but leaves open both the application for annulment or suspension and the application for enforcement.
The main difference between the two conventions is that the Singapore Convention does not prescribe what the court should do when the challenge is upheld in another country, whereas the New York Convention provides that if the application to set aside the award is successful, the courts before which recognition of the award was sought should refuse to recognise or enforce the award on the basis of Article V(1)(e).
Article 6 of the Singapore Convention provides that the court to which a party has applied for enforcement of the agreement has the discretion whether or not to stay the proceedings. Thus, no state court is bound by that article to stay its proceedings but must do so only if it considers such a measure to be appropriate.
In all cases it is necessary to take into account the provisions of Articles 5(1)(b)(i) and 5(1)(c)(i), which prevent the enforcement of the agreement if it has been declared null and void or has already been enforced in another country, respectively.
Regarding the first part of the article under review, with respect to the reference made to Article 4 of the Singapore Convention, we have that this concerns the requirements required by the Convention to enforce the agreement. Thus, in order to request the enforcement of the agreement in a signatory State, it is necessary to respect the terms of that article. Here, we understand that this is an assessment to be made by the court in a first moment. If the agreement does not respect the terms of Article 4, Article 6 does not apply.
To illustrate this more clearly, let us imagine two companies, both from countries which are signatories to the Singapore Convention[2]. Chromium Parts Ltd (based in China) supplies parts for the assembly of the cars of Turbo Speed Ltd (based in Singapore). Both companies have concluded a contract for the supply of such parts and, because of a shipment of defective parts, a conflict arises and the parties decide to settle it through mediation. After a few sessions, they reach an agreement which Turbo Speed Ltd. subsequently wishes to enforce.
Turbo Speed Ltd. is entitled, under the agreement entered into, to receive new replacement parts as well as compensation. It therefore brings a claim for enforcement in Singapore, where the assets of Chromium Parts Ltd. are located. Chromium Parts, for its part, decided to challenge the enforcement of that agreement, first in China, since its seat is in that country, and then in Singapore. Such challenge is based on the ground that the agreement should be declared void in view of the inappropriate conduct of the mediator during the procedure, pursuant to Article 5(1)(e). Thus, the court to which enforcement of the agreement – in Singapore – has been requested may, if it sees fit, suspend enforcement until a decision in the Chinese courts has been reached.
The question that arises is whether we have, in Article 6, an implicit basis for refusing recognition or enforcement of the agreement, outside those listed in Article 5 of the Singapore Convention.
On this question, we position ourselves with Nadja Alexander and Shou Yu Chong[3], when sustaining that this implicit defence should be restricted to agreements whose enforcement was denied due to issues related to private law, such as the incapacity of the parties, invalidity of clauses and also in cases of mediator misconduct. In cases where public law issues are involved, each State should assess the situation in accordance with its internal rules.
Thus, we are of the opinion that an implicit cause for refusal of enforcement or recognition of the agreement made between the parties can be found in Article 6, if we are dealing with private law issues.
In situations under Article 5(2), the possibility of suspension will not apply, since in cases where the conflict is not capable of settlement by mediation under the law of the country of enforcement and in cases where the agreement offends the country’s public policy, the courts will not need to wait for a decision of the foreign court to rule on the invalidity of the agreement, as this concerns their domestic rules. Thus, even if China’s courts decide that the agreement does not violate their country’s public policy, Singaporean courts may see the agreement as a violation of their public policy, as this only concerns their domestic norms. As can be seen in this case, each state retains its autonomy to decide differently.
Even if the Chinese courts find that the agreement is void due to the mediator’s misconduct, the Singapore courts will not be bound to rule in the same way.
Another point that is discussed here is whether the Singapore courts could simply use the foreign decision as a ground and cause of annulment of the agreement in their country. Generally, such a decision cannot be used outright as each country has its own rules for receiving and enforcing foreign judgments. The courts may look at the terms of the decision to assess whether the agreement falls under any of the paragraphs and subparagraphs of Article 5 of the Singapore Convention.
Article 6 makes clear that a stay of proceedings is not mandatory. Therefore, proceedings may proceed simultaneously if the courts consider this to be the best option.
The last part of Article 6 of the Singapore Convention refers to the fact that the procedure may be postponed if, at the request of one of the parties, the other party provides adequate security. This rule provides security for the party which has not alleged the existence of parallel claims, ensuring that, in case such an allegation is only a delaying tactic, there are means to ensure the conditions for the execution of the agreement.
The Convention offers little guidance on how this provision should be applied, providing courts with wide latitude in determining when to require the guarantee and in what amount and form.
Regarding the interpretation of the latter part, we are guided by the annotations made to Article VI of the New York Convention, in which it is essentially held that the purpose of this provision is three-dimensional.
First, it seeks to prevent the dissipation and concealment of the executed party’s assets pending the process of challenging the enforcement of the agreement and therefore ensures that the agreement can be successfully enforced if the challenge action is dismissed.
Secondly, it provides an incentive for the party opposing enforcement to pursue its claim for annulment or suspension of enforcement of the agreement ‘as soon as possible’, thus avoiding delay.
Third, it provides the party seeking to enforce the agreement with adequate guarantees of prompt payment once the dispute is resolved[4].
We should also be mindful of the language used in the last part of the article, which states that the courts may, within the scope of their discretion, decide whether or not to postpone the decision depending on the provision of security, and may either postpone with the provision of security or also postpone without the provision of security.
It seems clear to us that the Convention has again chosen to preserve the powers of States with regard to the possibility of requiring guarantees or not, as well as choosing the form among the existing options. Such guarantees may be bank guarantees, real estate guarantees or any other guarantees that the court considers appropriate.
In determining the amount of collateral, courts may take different approaches, taking into account the expected value from enforcement of the agreement, the solvency of the party opposing enforcement or the disincentive the measure would mean for the other party[5].
In deciding whether or not to order the party opposing enforcement to give security, courts must take into account various factors such as the likelihood of success of the application to challenge enforcement of the agreement and the likelihood of there being available assets if enforcement of the agreement is postponed.
In conclusion, we note that Article 6 of the Singapore Convention is strongly based on Article VI of the New York Convention. In addition, we perceive a clear intention to preserve the autonomy of the signatory States, to the extent that the suspension of action, as well as the provision of collateral, are discretionary decisions.
[1] Nadja Alexander and Shouyu Chong, “Article 6. Parallel Applications or Claims”, in The Singapore Convention on Mediation: A Commentary, Global Trends in Dispute Resolution, volume 8, 2019, p. 150.
[2] This case was inspired by Nadja Alexander and Shouyu Chong, “An Implied Ground for Refusal to Enforce iMSAs under the Singapore Convention on Mediation: The Effect of Article 6”, Research Collection School of Law, 2019, pp. 1-3.
[3] Nadja Alexander and Shouyu Chong, “An Implied Ground for Refusal to Enforce iMSAs under the Singapore Convention on Mediation: The Effect of Article 6”, 2019, p. 3.
[4] UNCITRAL, “UNCITRAL Secretariat Guide on the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, 1958)”, 2016, p. 280, available at: http://newyorkconvention1958.org/index.php?lvl=cmspage&pageid=10&menu=627&opac_view=-1#null.
[5] UNCITRAL, “UNCITRAL Secretariat Guide on the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, 1958)”, 2016, p. 285.