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The pitfalls of dispute resolution in multi-party M&A

Posted on 27 June 2018

The pitfalls of dispute resolution in multi-party M&A

Disputes arising from M&A and joint venture arrangements can be complex. Multiple parties and multiple contracts create many possible dispute combinations, even in situations where the parties can be allocated to two distinct groups. Dispute resolution provisions need to be drafted carefully to cope with every possible eventuality. Where they are not, there is the risk that contractual remedies are ineffective. The Singapore High Court has recently considered such a situation in Sanum Investments Limited v ST Group Co, Ltd and others [2018] SGHC 141.

The facts

The gambling industry in Laos has grown substantially in the past decade. The casinos are located within Special Economic Zones set up by the Government and attract Thai and Chinese tourists in particular. One foreign investor, the Macau-based Sanum Investments Limited ("Sanum"), has had an especially chequered time since it first entered the industry in 2007 by way of a joint venture with a local company, ST Group Co, Ltd ("ST Group"). The main casino in the joint venture was first hit by a substantial tax bill, then confiscated and sold by the Government. There is an ongoing investment treaty arbitration about this as well as litigation in the USA.

At the same time, there has been an international commercial arbitration between Sanum and its joint venture partner about another property, a slot club at Thanaleng near the Thai border. That arbitration took place in Singapore under the SIAC Rules. Sanum alleged breach of contract because the Thanaleng slot club had not been passed to Sanum as agreed, when certain third party contracts expired in 2010 and 2011. The tribunal agreed with Sanum and in August 2016 it awarded Sanum US$ 200 million in damages, to be paid by the respondents in the arbitration, ST Group and three associated parties.

The respondents had not taken part in the arbitration. When Sanum took steps to enforce the award in Singapore, the respondents applied to the Singapore High Court to avoid enforcement on the basis that the tribunal did not have jurisdiction to render the award and the arbitration had not taken place in accordance with the parties' arbitration agreement. This led the Singapore High Court to review the joint venture arrangements.

Multiple contracts

The first issue was the relationship between the multiple contracts in the joint venture, namely, an overarching Master Agreement dated 30 May 2007, a Participation Agreement that set the term of the joint venture at 50 years, and three other agreements relating to the operation of the Thanaleng slot club. The issue here was that the five agreements treated dispute resolution differently. The Master Agreement contained a multi-tiered arbitration agreement, the wording of which was ambiguous; the Participation Agreement contained a clause specifying SIAC arbitration in Singapore; and the three other agreements did not refer to dispute resolution at all. In its award, the tribunal found it had jurisdiction under the Master Agreement and the Participation Agreement taken together, and thus SIAC arbitration in Singapore was appropriate. The judge disagreed. She concluded that the substance of the claim derived from the Master Agreement alone. Consequently, the tribunal could only derive jurisdiction from the (ambiguously worded) arbitration agreement in that contract.

Multiple parties

That finding gave rise to a number of additional questions. The first was whether the respondents were all party to the Master Agreement. If any were not party to it, the tribunal could not have jurisdiction over them. Apart from ST Group itself, which was obviously a named party, the identification of the Lao parties in the Master Agreement was unclear. The judge needed to examine the terms of the Master Agreement and concluded that two of the other respondents were parties because they owed obligations under it, but the fourth, a company called ST Vegas Enterprise Ltd. ("ST Vegas Enterprise"), was not a party. Consequently, the tribunal could only exercise jurisdiction over three of the four respondents. 

Multi-tiered dispute resolution

The next question was whether the arbitration had been properly started against all the respondents by following through the multi-tiered dispute resolution clause in the Master Agreement. That clause required negotiation, followed by an application to the Lao courts or to the Lao Organisation of Economic Dispute Resolution ("OEDR"), followed by arbitration. There had been actions in both the Lao courts and the OEDR before the arbitration was started. However, only three of the four respondents in the arbitration had been party to those previous legal proceedings. ST Vegas Enterprise had not been a party to those proceedings, and so the judge ruled that Sanum was not entitled to commence arbitration against it (even if ST Vegas Enterprise had been a party to the Master Agreement).

Ambiguous arbitration clause

Finally, the judge had to rule on the proper meaning of the arbitration clause in the Master Agreement. That clause referred disputes to arbitration "using an internationally recognized mediation/arbitration company in Macau". This could have meant (i) using an arbitration institution that was internationally recognised and located in Macau (with no reference to the seat of arbitration); (ii) using an arbitration institution that was acknowledged in Macau as being internationally recognised (again, with no reference to the seat of arbitration); or (iii) using an internationally recognised arbitration institution, with the seat of arbitration being Macau. The judge rejected the first interpretation since this would undermine the agreement to arbitrate (there being no internationally recognised arbitration institution located in Macau), and rejected the second interpretation because it required reading too much into the words that had been used.

That left the third interpretation.  However, there was a problem. While the SIAC is an internationally recognized arbitration institution, the arbitration award stated that the seat of the arbitration was Singapore, not Macau. Another problem derived from the fact that the appointment of three arbitrators had come from the Participation Agreement, while under the SIAC Rules the default position is appointment of a sole arbitrator. These problems might have meant that the arbitration award would not have been enforced. The judge, however, saw no material prejudice to the respondents as a result of the tribunal thinking the arbitration was seated in Singapore rather than Macau, and as a result of there being three arbitrators rather than one. As a result she decided not to exercise her discretion to refuse enforcement. Sanum could proceed to enforce the award against three of the respondents.


This case illustrates the point that dispute resolution provisions in multi-party M&A must be properly tied together across the transaction. In particular, it must be clear which contracts and parties the dispute resolution provisions refer to, they must be worded consistently across the transaction, and they must be unambiguous. Additionally, when a party commences dispute resolution under a multi-tiered clause, the clause must be followed carefully. Otherwise, there is a risk that the contractual remedies may be ineffective and unenforceable.

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