BNP and another v BNR

• Jurisdiction: Singapore
• Court: High Court (Singapore)
• Judge: Belinda Ang Saw Ean J
• Judgment Date: 31 October 2017
• Neutral Citation: [2017] SGHC 269
• Citation: [2017] SGHC 269
• Published date: 10 March 2018
• Plaintiff Counsel: Andre Yeap S.C., Yap Wern-Jhien and Zhuang WenXiong (Rajah & Tann Singapore LLP)
• Defendant Counsel: Thio Shen Yi S.C., Evans Ng and Niklas Wong (TSMP Law Corporation) (Instructed) and Boey Swee Siang and Jonathan Choo (Bird & Bird ATMD LLP)
• Date: 31 October 2017
• Hearing Date: 06 September 2017,15 September 2017,26 October 2017,06 October 2017
• Docket Number: Originating Summons No 359 of 2017
• Subject Matter: Arbitral tribunal,Interpretation,Incorporation,Arbitration,Jurisdiction,Agreement

Belinda Ang Saw Ean J:

This application is made under s 10(3) of the International Arbitration Act (Cap 143A, 2002 Rev Ed) (“IAA”). The plaintiffs seek a determination by this court that the Tribunal does not have jurisdiction over the arbitration, which is administered under the Rules of Arbitration of the International Chamber of Commerce (“the ICC Rules”). The plaintiffs contend that the Tribunal is not properly composed, as the third member of the Tribunal was appointed as the president of the tribunal and not an umpire, contrary to the arbitration agreement.

The issue here concerns how the arbitral tribunal is to be constituted. The relevant arbitration clause is in a shareholders’ agreement entered into between the plaintiffs and the defendant on 7 August 2008 (“the shareholders’ agreement”). Clause 24 of the shareholders’ agreement reads as follows: 24.2 Such Dispute shall be referred to and finally resolved by arbitration under the [ICC Rules] which Rules are deemed to be incorporated by reference into this Clause 24. … 24.3 The number of arbitrators shall be one (1) provided that, if the parties to the dispute are not able to agree upon the sole arbitrator within 30 (Thirty) days of the date on which a Party initiates arbitration proceedings, the number of arbitrators shall be 3 (Three). In such event, one arbitrator shall be nominated by [the defendant] on the one hand and one arbitrator, by [the plaintiff] on the other hand as the case may be. The third arbitrator, who shall act as an umpire, shall be nominated by the 2 (two) arbitrators appointed (‘Umpire’), provided that if these two arbitrators are unable to agree on the nomination of the Umpire within 20 (Twenty) days of their appointment, the Umpire shall be appointed in accordance with the Rules.

In this case, the two party-appointed arbitrators jointly nominated the third member of the panel to act as the third arbitrator and president of the Tribunal and this was confirmed by the ICC Court. The plaintiffs filed a preliminary objection challenging the role of the third member of the panel as arbitrator and president. The Tribunal (including the third member) issued a partial award (“the Partial Award”) finding that the third member was validly confirmed as president. The plaintiffs now challenge the Tribunal’s jurisdiction before this court.

I begin with some general principles that are relevant to this application. The principle of party autonomy enables the parties to decide on how the arbitral tribunal is to be constituted and how the arbitration is to be conducted: see Bovis Lend Lease Pte Ltd v Jay-Tech Marine & Projects Pte Ltd and another application [2005] SGHC 91 at [18]. Where clauses are incorporated by reference into a written agreement, and the incorporated clauses conflict with terms in the written agreement, the latter will ordinarily prevail: see Chitty on Contracts vol 1 (Sweet & Maxwell, 31st Ed, 2012) (“Chitty on Contracts”) at [13-082]. However, the court will endeavour to give effect to both cls 24.2 and 24.3, if it is reasonably and sensibly possible to construe the two clauses so that they can sit together, ie, the court will endeavour to construe the sub-clauses harmoniously to give effect to the whole of cl 24. The indisputable fact is that the parties have agreed to incorporate the ICC Rules into their arbitration agreement and effect should be given to the ICC Rules in a manner that is consistent with the incorporation. It would not be respecting party autonomy to construe cl 24.3 by ignoring the relevant ICC Rules. If necessary, where there is express incorporation of the ICC Rules into cl 24, case law allows for some degree of verbal modification or adjustment to fit the incorporated ICC Rules into the wording of cl 24.3. A clause that is completely inconsistent with the parties’ objectively ascertained intention will not be enforced (see PT Tugu Pratama Indonesia v Magma Nusantara Ltd [2003] 4 SLR(R) 257 at [20]).

It is clear from cl 24.2 that the ICC Rules are expressly incorporated by reference into cl 24. Clause 24.2 further provides that disputes between the parties shall be referred to and finally resolved by arbitration under the ICC Rules. There is no dispute that the ICC Court of Arbitration (“the ICC Court”) is the only body authorised to administer arbitrations under the ICC Rules.

The parties have agreed on three arbitrators if the parties are unable to agree on a sole arbitrator in cl 24.3. Article 12(5) of the ICC Rules states that that where the parties agree that there are to be three arbitrators, the third arbitrator shall be appointed by the court and “will act as president of the arbitral tribunal”. The immediate question is whether the parties, by setting out a procedure for the appointment of the third arbitrator, including the selection of the “umpire” in cl 24.3, have agreed to an arbitral panel that is composed of three arbitrators or an arbitral panel of two arbitrators and one umpire (ie, the umpire is not a member of the panel). I will come to the knotty question of what “umpire” in clause 24.3 means later on in this judgment.

Counsel for the plaintiffs, Mr Andre Yeap, SC (“Mr Yeap”), argues that cl 24.3 of the shareholders’ agreement overrides the standard ICC rule for the appointment of a president in Art 12(5) of the ICC Rules. Art 12(5) states that the procedure for the third arbitrator’s appointment (as president of the tribunal) applies “unless the parties have agreed upon another procedure for such appointment”. He also cites Art 11(6) of the ICC Rules in support of his contention that Arts 12 and 13 of the ICC Rules do not apply because the parties have “provided otherwise” in cl 24.3 on how the arbitral tribunal is to be constituted. Article 11(6) of the ICC Rules reads:

Insofar as the parties have not provided otherwise, the arbitral tribunal shall be constituted in accordance with the provisions of Articles 12 and 13.

Mr Yeap says that cl 24.3 expressly states that the “third arbitrator… shall act as an umpire” and in doing so the parties have made their own arrangements by agreement on the procedure to apply for the constitution of the arbitral tribunal. He therefore argues that it is impermissible for...