In DRL v. DRK [2026] SGHC 32, the General Division of the High Court of Singapore (Coomaraswamy J) dismissed an application to set aside an arbitral termination order issued under Article 32(2)(c) of the UNCITRAL Model Law, confirming that the obligation to terminate arbitral proceedings upon a finding of impossibility is mandatory and admits of no judicial balancing against the prejudice suffered by the affected party. The arbitration, seated in Singapore and governed by the SIAC Rules, had been rendered practically inoperable following the imposition of multilateral international sanctions against the claimant in 2022, which froze its assets, excluded it from the SWIFT payment system, and prevented it from funding the proceedings or paying its legal representatives. The tribunal’s Termination Decision of September 2024, upheld by the court, established four key principles: first, that the word ‘shall’ in Article 32(2) renders termination mandatory once impossibility is established; second, that a party’s right to a determination on the merits is not absolute and is implicitly qualified by Article 32(2) (c); third, that neither the cause of the impossibility nor the degree of prejudice to the claimant – including the permanent extinction of its claim by limitation – is a legally relevant consideration under Article 32(2)(c); and fourth, that the tribunal’s natural justice obligations under section 24 (b) of the International Arbitration Act and Article 34(2)(a)(ii) of the Model Law detach from the underlying merits and re-attach to the termination inquiry itself once a termination application is made. The decision is of immediate practical significance for advisers to sanctioned parties and their counterparties in international arbitration, and raises broader questions – left open by the court – concerning the interaction between international sanctions regimes, third-party funding markets, limitation periods, and the Model Law’s framework for the termination of arbitral proceedings.
European Investment Law and Arbitration Review