Bna v Bnb

• Jurisdiction: Singapore
• Court: Court of Three Judges (Singapore)
• Judge: Steven Chong JA,Sundaresh Menon CJ,Judith Prakash JA
• Judgment Date: 27 December 2019
• Docket Number: Civil Appeal No 159 of 2018
• Date: 27 December 2019

[2019] SGCA 84

Court of Appeal

Sundaresh Menon CJ, Judith Prakash JA and Steven Chong JA

Civil Appeal No 159 of 2018

BNA

and

BNB and another

Thio Shen Yi SC and Thara Rubini Gopalan (TSMP Law Corporation) for the appellant;

William Ong, Tan XeauweiandSheryl Lauren Koh Quanli (Allen & Gledhill LLP) for the respondents.

Case(s) referred to

ABB Lummus Global Ltd v Keppel Fels Ltd [1999] 2 Lloyd's Rep 24 (refd)

BCY v BCZ [2017] 3 SLR 357 (refd)

BMO v BMP [2017] SGHC 127 (refd)

BQP v BQQ [2018] 4 SLR 1364 (refd)

BXY v BXX [2019] 4 SLR 413 (refd)

Dyna-Jet Pte Ltd v Wilson Taylor Asia Pacific Pte Ltd [2017] 3 SLR 267 (refd)

Marty Ltd v Hualon Corp (Malaysia) Sdn Bhd [2018] 2 SLR 1207 (refd)

Naviera Amazonica Peruana SA v Compania Internacional de Seguros del Peru [1988] 1 Lloyd's Rep 116 (refd)

PT Garuda Indonesia v Birgen Air [2002] 1 SLR(R) 401; [2002] 1 SLR 393 (refd)

Sembcorp Marine Ltd v PPL Holdings Pte Ltd [2013] 4 SLR 193 (folld)

Shagang South-Asia (Hong Kong) Trading Co Ltd v Daewoo Logistics [2015] 1 Lloyd's Rep 504 (refd)

Sulamérica Cia Nacional de Seguros SA v Enesa Engelharia SA [2013] 1 WLR 102 (refd)

Xia Zhengyan v Geng Changqing [2015] 3 SLR 732 (folld)

Zurich Insurance (Singapore) Pte Ltd v B-Gold Interior Design & Construction Pte Ltd [2008] 3 SLR(R) 1029; [2008] 3 SLR 1029 (folld)

Legislation referred to

Evidence Act (Cap 97, 1997 Rev Ed)s 2(1) (consd); ss 94, 95, 96, 97, 98, 99

International Arbitration Act (Cap 143A, 2002 Rev Ed) ss 10, 10(3), 10(4), 10(6), 10(7), 24

Arbitration — Agreement — Governing law — Arbitration agreement integrated into contract expressly governed by laws of People's Republic of China — Arbitration agreement itself made no express provision for governing law — Arbitration agreement provided for “arbitration in Shanghai” — Arbitration agreement also incorporated arbitration rules of Singapore International Arbitration Centre — Whether governing law of arbitration agreement was law of People's Republic of China or Singapore law

Arbitration — Arbitral tribunal — Jurisdiction — Arbitration agreement provided for “arbitration in Shanghai” — Arbitration agreement also incorporated arbitration rules of Singapore International Arbitration Centre — Whether seat of arbitration was Shanghai or Singapore — Whether arbitral tribunal had jurisdiction over dispute

Facts

The dispute arose in relation to an agreement (the “Takeout Agreement”) that had been entered into by the appellant and the respondents. The appellant was the buyer, and the respondents were the sellers, of certain products under the Takeout Agreement. The dispute arose when the appellant failed to make the necessary payments under the Takeout Agreement.

The Takeout Agreement contained a dispute resolution provision in Art 14:

ARTICLE 14: DISPUTES

14.1 This Agreement shall be governed by the laws of the People's Republic of China.

14.2 With respect to any and all disputes arising out of or relating to this Agreement, the [p]arties shall initially attempt in good faith to resolve all disputes amicably between themselves. If such negotiations fail, it is agreed by both parties that such disputes shall be finally submitted to the Singapore International Arbitration Centre (SIAC) for arbitration in Shanghai, which will be conducted in accordance with its Arbitration Rules. The arbitration award shall be final and binding on both [p]arties.

The respondents initiated arbitration proceedings administered by the Singapore International Arbitration Centre (“SIAC”), which duly appointed a three-person arbitral tribunal. The appellant challenged the jurisdiction of the arbitral tribunal, on the grounds that the proper law of the arbitration agreement was the law of the People's Republic of China (“PRC”), which law rendered the arbitration agreement invalid, and entailed that the dispute had to be litigated in the PRC courts instead. This argument was mounted on the basis that the law of the substantive contract, the Takeout Agreement, was expressly chosen to be PRC law, and that the law of the seat, too, was PRC law, given that it was provided that Shanghai was to be the seat of the arbitration. PRC law, however, would have invalidated the arbitration agreement because PRC law did not allow a foreign arbitral institution such as the SIAC to administer an arbitration with the PRC as its seat or which arose from a purely domestic dispute such as this.

The arbitral tribunal arrived at a split decision on the question of its jurisdiction to hear the dispute, with the majority holding that the tribunal had jurisdiction. The majority considered that it would have made no commercial or logical sense for parties to have intentionally selected a law to govern the arbitration agreement which would then invalidate it. It therefore took the view that Shanghai was not the seat, but merely the venue of the arbitration. Instead, Singapore was the seat, and the tribunal had jurisdiction under Singapore law. The dissenting arbitrator took the view that Shanghai was the seat of the arbitration, and thus PRC law was the law of the seat. Given that PRC law was also the law of the substantive contract, PRC law was the proper law of the arbitration agreement. PRC law did not allow this dispute to be referred to arbitration, thus the tribunal lacked jurisdiction to hear the dispute.

The appellant applied to the High Court for a declaration that the tribunal lacked jurisdiction to hear the dispute. The judge (“Judge”) dismissed the jurisdictional challenge. The Judge ruled that the parties had not made an express choice of proper law of the arbitration agreement; simply providing in Art 14.1 that the proper law of the Takeout Agreement was PRC law was insufficient to similarly render it an express choice of proper law for the arbitration agreement in Art 14.2. The Judge found, however, that the parties had made an implied choice of Singapore law as the proper law of the arbitration agreement. The Judge found that Singapore was the seat of the arbitration agreement. The parties had incorporated the Arbitration Rules of the Singapore International Arbitration Centre (5th Ed, 2013) (“the SIAC Rules”) as the relevant arbitral rules, and r 18.1 of the SIAC Rules provided that in the absence of the parties' express provision, the default seat would be Singapore. This meant that Art 14.2 made reference to two geographical locations: Singapore and Shanghai. Given that r 18.1 explicitly provided that the seat of an arbitration would, absent the parties' express selection, be Singapore, the Judge considered that the phrase “arbitration in Shanghai” referred to Shanghai as the venue of the arbitration instead. This reading was buttressed by the fact that Singapore, but not Shanghai, was a law district, and thus the reference to Singapore was better understood as a reference to Singapore being the seat of the arbitration.

The Judge accepted that PRC law, as the law of the substantive contract into which the arbitration agreement was integrated, would serve as the starting point of the parties' implied choice of proper law. But he considered that Singapore law, as the law of the seat, would displace that implied choice, because it was likely that the parties' arbitration agreement would be invalid if PRC law was its proper law. Thus, Singapore law was the proper law of the arbitration agreement. The appellant appealed.

Held, allowing the appeal:

(1) The parties had not made an express choice of law for the arbitration agreement in Art 14.2 of the Takeout Agreement. The mere fact that Art 14.2 followed Art 14.1 did not mean that the governing law specified in Art 14.1 to govern the Takeout Agreement should also be taken as the express governing law of the arbitration agreement in Art 14.2: at [56] and [59] to [61].

(2) The parties accepted that the starting point was that the governing law of the Takeout Agreement would similarly be the governing law of the arbitration agreement. However, this starting point could be displaced if the law of the seat materially differed from that starting point: at [62] and [63].

(3) The phrase “arbitration in Shanghai” in Art 14.2 was a reference to Shanghai as the seat of the arbitration, and not merely its venue. The natural meaning of the phrase “arbitration in Shanghai” was that Shanghai was the seat of the arbitration. The selection of a seat had immense legal significance to an arbitration agreement, whereas the choice of venue was far less legally important. Where parties had specified only one geographical location in an arbitration agreement, and particularly where, as here, the parties had expressed a choice for “arbitration in [that location]”, that location was most naturally construed as a reference to the parties' choice of seat. This was buttressed by a line of authorities that had interpreted similar phraseology as indicating a choice of seat, and not merely of venue: at [65] to [69].

(4) There were no contrary indicia to displace the natural reading of the phrase “arbitration in Shanghai” as referring to the seat of the arbitration. The respondent was precluded from relying on evidence of the parties' pre-contractual negotiations that allegedly pointed to the parties desiring a neutral seat that was not Shanghai. The evidence had only been sought to be admitted in the jurisdictional challenge in the High Court, and had not been admitted by the arbitral tribunal itself. The High Court and the Court of Appeal, unlike the arbitral tribunal, were both bound by the parol evidence rule and its exceptions in ss 94 to 99 of the Evidence Act (Cap 97, 1997 Rev Ed), thus the evidence was not admissible as of right. Although there was no blanket prohibition on the admissibility of such evidence, the evidence could not be admitted in this case as it was neither reasonably available to all the...