Case Details
- Citation: [2023] SGHC 340
- Title: JULIAN MORENO BELTRAN & Anor v TERRAFORM LABS PTE. LTD. & 3 Ors
- Court: High Court (General Division)
- Originating Claim No: 247 of 2022
- Registrar’s Appeals: HC/RA 185/2023; HC/RA 186/2023
- Judgment date (key dates): 25 September 2023; 28 September 2023; 1 November 2023; 30 November 2023
- Judge: Hri Kumar Nair J
- Parties (Claimants): Julian Moreno Beltran; Douglas Gan Yi Dong
- Parties (Defendants): Terraform Labs Pte Ltd; Kwon Do Hyeong; Nikolaos Alexandros Platias; Luna Foundation Guard Ltd
- Procedural posture: Appeals against the Assistant Registrar’s dismissal of stay applications; applications to stay court proceedings in favour of arbitration
- Key applications below: HC/SUM 235/2023; HC/SUM 1427/2023 (collectively, “Stay Applications”)
- Legal areas: Arbitration; civil procedure; representative actions; incorporation of online terms; jurisdictional challenges
- Statutes referenced: International Arbitration Act 1994 (2020 Rev Ed) (“IAA”); Rules of Court 2021 (“ROC 2021”)
- Judgment length: 83 pages; 24,268 words
Summary
In Beltran v Terraform Labs Pte Ltd, the High Court considered whether court proceedings brought as a representative action should be stayed in favour of arbitration, where the alleged contractual basis for the claims arose from representations made through online materials associated with the Terra and Anchor ecosystems. The central dispute concerned whether Terraform had taken a “step in the proceedings” such that it could not rely on an arbitration agreement, and whether the claimants had a prima facie case that a valid arbitration agreement was absent or not incorporated.
The court dismissed Terraform’s appeals and affirmed the Assistant Registrar’s decision to refuse the stay. The judge held that, on the facts and procedural history, Terraform did not take a relevant step in the proceedings that would bar it from seeking a stay under the IAA and the ROC 2021 framework. Further, the court found that the arbitration clauses in the Terra and Anchor websites were capable of being incorporated through online contracting mechanisms, and that Terraform had shown a prima facie case of an arbitration agreement at least in relation to certain categories of claimants and claims.
Although the judgment engages with the incorporation of arbitration clauses in contracts formed online and the interaction between representative actions and arbitration agreements, its practical effect is that the stay was not granted in the manner sought. The court also provided guidance on the appropriate course where a prima facie arbitration agreement exists only for some claimants in a representative action.
What Were the Facts of This Case?
The claimants were individuals who purchased algorithmic stable cryptocurrency tokens known as TerraUSD (“UST”), issued within the Terra ecosystem developed by Terraform Labs Pte Ltd (“Terraform”). Terraform is a Singapore-incorporated company that develops software and applications running on the Terra blockchain. A key feature of the Terra ecosystem is UST, and one of the ecosystem’s projects is the Anchor Protocol, a lending and borrowing platform where users could stake UST in exchange for promised returns calculated on an annualised yield basis.
The second and third defendants, Kwon Do Hyeong and Nikolaos Alexandros Platias, were described as co-founders and senior figures within Terraform and/or the Anchor Protocol. The fourth defendant, Luna Foundation Guard Ltd (“Luna”), was described as an organisation supporting the Terra ecosystem by building reserves intended to buttress UST stability. The claimants alleged that these defendants made multiple misrepresentations that induced them to purchase UST, stake UST on Anchor, and hold UST as its value later declined sharply.
The suit was commenced as a representative action on 7 September 2022 by two representative claimants, Julian Moreno Beltran and Douglas Gan Yi Dong, on behalf of themselves and 375 other individuals. The claimants sought relief for losses said to have been suffered due to misrepresentations. The pleaded representations included, among others: that UST was stable by design and pegged to a fiat currency; that the Terra protocol and token economics would maintain UST price stability regardless of market conditions through an arbitrage process involving UST’s sister token LUNA; that UST holders could protect value by exchanging UST for US$1 worth of LUNA; and that Anchor was a “principal-guaranteed” stablecoin savings product offering passive income and yields up to 20% annualised percentage yields. The claimants also alleged that Luna would act as a backstop by building substantial reserves denominated in Bitcoin.
On the claimants’ pleaded case, the Terra representations were said to have been made in a white paper published in April 2019 and also appeared on Terraform’s website. The Anchor representations were said to have been made on the Anchor Protocol website and in a July 2020 white paper, as well as through social media promotion by Kwon. The Luna representation was said to have been reflected in announcements published on various websites emanating from the defendants. The claimants pleaded that these representations either formed contracts with Terraform or amounted to unilateral offers accepted when the claimants purchased UST.
After UST’s value plummeted in May 2022, the claimants alleged they held onto UST in reliance on the representations and suffered losses. The suit sought damages said to be equivalent to the diminution in value between the US$1 peg and the value of UST held, and/or the price at which the claimants sold UST below the peg.
What Were the Key Legal Issues?
The appeals engaged three principal legal issues. First, the court had to determine whether Terraform had taken a “step in the proceedings” such that it would be precluded from relying on an arbitration agreement. This issue required the court to apply the concept of “step in the proceedings” under s 6(1) of the International Arbitration Act 1994 (2020 Rev Ed) (“IAA”) in the context of the procedural regime under the Rules of Court 2021 (“ROC 2021”).
Second, the court had to assess whether Terraform had shown a prima facie case for the existence of a valid arbitration agreement. This required the court to consider whether arbitration clauses contained in online terms—specifically the Terra and Anchor website terms—were incorporated into the contractual arrangements alleged by the claimants, including where the claims were framed as arising from representations and/or unilateral offers.
Third, the court had to consider the interaction between arbitration agreements and representative actions. In particular, the court addressed what the “appropriate course of action” should be where a prima facie arbitration agreement is made out only in respect of some claimants in a representative action, rather than all claimants.
How Did the Court Analyse the Issues?
Step in the proceedings. The judge began by outlining the legal framework governing stays in favour of arbitration and the procedural consequences of a party’s conduct. Under the IAA and the ROC 2021 regime, a respondent may seek a stay where there is an arbitration agreement, but the right to do so can be affected if the respondent takes a “step in the proceedings”. The court analysed what constitutes a relevant step, and how the ROC 2021 jurisdictional challenge regime interacts with arbitration-related objections.
On the facts, Terraform’s procedural conduct included filing a defence on the merits and pursuing various applications. The judge examined whether these acts amounted to taking steps that would amount to an election to proceed in court rather than arbitration. The analysis also considered the ROC 2021 regime on filing defences on jurisdiction, including the reservations built into that regime and the practical question of whether Terraform’s actions were consistent with preserving its arbitration position.
The court treated Terraform’s various acts—such as filing a defence on the merits and a counterclaim, applying for permission to file certain applications, and making further procedural motions—as matters that had to be assessed in context. The judge concluded that the relevant procedural steps did not amount to a bar to seeking a stay. In doing so, the court emphasised that the “step in the proceedings” inquiry is not mechanical; it turns on whether the party’s conduct demonstrates an unequivocal intention to submit to the court’s jurisdiction or otherwise undermines the arbitration bargain.
Prima facie arbitration agreement and online incorporation. The second issue required the court to determine whether Terraform had established a prima facie case that an arbitration agreement existed. The judge focused on the arbitration clauses in the websites. It was undisputed that the Terra and Anchor websites contained terms requiring disputes to be resolved by arbitration. The Terra website terms were accessible via a hyperlink entitled “Terms of Use”, and the Terra Terms of Use contained a clause providing that disputes involving the website or the terms would be resolved exclusively by confidential, binding arbitration seated in Singapore under SIAC rules, with a single arbitrator and final and binding effect.
The court then analysed the applicable law on incorporation of arbitration clauses in contracts formed online. This involved considering how online terms can become part of the contract between parties, including through mechanisms such as notice, acceptance, and the contractual structure of website terms. The judge’s approach reflected the reality that modern contracting often occurs through digital interfaces, where users may accept terms by using the service or by clicking through or otherwise acknowledging terms.
Applying these principles, the court found that there was a prima facie case of an arbitration agreement in respect of the Terra Terms of Use. The judge also found a prima facie case of an arbitration agreement in respect of the Anchor Terms of Service. These findings were significant because they supported the existence of arbitration clauses capable of binding the claimants, at least prima facie, depending on the claimants’ relationship to the relevant online terms and the nature of the claims.
Representative action and partial arbitration coverage. The third analytical strand addressed the representative nature of the suit. The claimants pleaded that different groups of claimants were induced by different sets of representations: some were induced only by Terra representations; others by Terra and Anchor representations; and the representative claimants (including Beltran and Gan) were induced by all representations. The judge observed that, even if arbitration clauses were incorporated for some claims or some claimants, it did not necessarily follow that all claimants could be compelled to arbitrate.
Accordingly, the court addressed the “appropriate course of action” where a prima facie arbitration agreement is made out only for some claimants. While the judgment’s excerpt indicates that the court provided closing observations on this point, the key takeaway is that courts must calibrate the procedural response to reflect the scope of the arbitration agreement and the structure of representative proceedings. This is particularly important to avoid either undermining the arbitration bargain by refusing a stay where it clearly applies, or disrupting the representative action unfairly by forcing partial arbitration without a coherent procedural mechanism.
What Was the Outcome?
The High Court dismissed the appeals. The judge affirmed the Assistant Registrar’s dismissal of the stay applications, thereby refusing to stay the suit in the manner sought by Terraform. The court’s decision upheld the procedural and substantive conclusions reached below, including the conclusion that Terraform had not taken a relevant step in the proceedings that would preclude reliance on arbitration.
Although the court found that Terraform had established a prima facie case of arbitration agreements in relation to the Terra Terms of Use and the Anchor Terms of Service, the overall outcome remained that the stay was not granted on the appealed basis. The judgment therefore leaves the representative action to proceed in court, while signalling that arbitration-related arguments may still be relevant depending on how claims and claimants fall within the scope of the arbitration clauses.
Why Does This Case Matter?
This decision is significant for practitioners dealing with arbitration clauses embedded in online platforms and for litigants seeking to stay court proceedings in favour of arbitration. It demonstrates that Singapore courts will engage carefully with both (i) procedural conduct under the IAA/ROC 2021 framework (including what counts as a “step in the proceedings”) and (ii) the incorporation of arbitration clauses in contracts formed online.
From a doctrinal perspective, the case reinforces that the “step in the proceedings” analysis is contextual and tied to the procedural architecture of the ROC 2021 jurisdictional challenge regime. Parties seeking arbitration stays should still be cautious: they must preserve arbitration objections early and avoid conduct that could be characterised as submitting to the court’s jurisdiction. However, the judgment also indicates that not every procedural step taken in the course of litigation will necessarily amount to a bar.
From a practical standpoint, the judgment is also useful for representative actions. Where arbitration clauses exist in online terms, courts may need to consider whether arbitration coverage applies uniformly across all representative claimants or only to subsets. The court’s observations on the “appropriate course of action” for partial arbitration coverage provide a framework for future procedural planning, including how parties might structure stay applications and how courts might manage representative proceedings to respect arbitration agreements without undermining fairness or efficiency.
Legislation Referenced
- International Arbitration Act 1994 (2020 Rev Ed) (including s 6(1))
- Rules of Court 2021 (ROC 2021)
Cases Cited
- (Not provided in the supplied extract.)
Source Documents
This article analyses [2023] SGHC 340 for legal research and educational purposes. It does not constitute legal advice. Readers should consult the full judgment for the Court's complete reasoning.