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International Arbitration Forum

BNA v. BNB and BNC

Case summary

At a glance

Parties
BNA (PRC buyer) v. BNB (Korea) and BNC (PRC)
Case no.
[2019] SGCA 84, Civil Appeal No 159 of 2018 (appeal from [2019] SGHC 142, Originating Summons No 938 of 2017)
Court
Singapore High Court (Vinodh Coomaraswamy J); Court of Appeal (Sundaresh Menon CJ, Judith Prakash JA, Steven Chong JA)
Underlying award(s)
SIAC tribunal's majority decision on jurisdiction of 18 July 2017 (Hee Theng Fong, chair, and Philip Yang; Teresa Cheng SC dissenting)
Forum and rules
Court challenge under s 10(3) of the International Arbitration Act (Cap 143A) to a decision in an SIAC arbitration under the SIAC Rules (5th Edition, 2013)
Treaty
Contract arbitration clause (Art 14.2 of the Takeout Agreement): "SIAC for arbitration in Shanghai"
Sector
Industrial gases supply
Outcome
The High Court dismissed the jurisdictional challenge. The Court of Appeal allowed the appeal only to the extent of declaring that Shanghai, not Singapore, is the seat and PRC law governs the arbitration agreement. It left the question of jurisdiction to the PRC courts.
Amount
No amounts are stated. The High Court dismissed the application with costs.

The dispute

BNA, a PRC company, agreed in a Takeout Agreement of 7 August 2012 to buy industrial gases from BNB, a Korean company. By an Addendum of 1 February 2013, BNB's rights and obligations were assigned to BNC, a PRC company. Article 14.1 chose PRC law to govern the contract. Article 14.2 referred disputes to the SIAC \"for arbitration in Shanghai\" under the SIAC Arbitration Rules. When BNA failed to pay, BNB and BNC started an SIAC arbitration on 2 March 2016, and BNA challenged the tribunal's jurisdiction. BNA argued that PRC law governs the arbitration agreement and makes it invalid, for two reasons: PRC law does not allow a foreign institution to administer a PRC-seated arbitration, or a purely domestic dispute. BNB and BNC argued that Singapore is the seat and that Singapore law governs the arbitration agreement, under which the agreement is valid.

Key holdings

  1. No express choice of law for the arbitration agreement. The choice of PRC law for the main contract in Art 14.1 is only a strong indicator, at the implied-choice stage, of the law governing the arbitration agreement in Art 14.2. CA ¶¶ 56–61
  2. Overturning the High Court, the Court of Appeal held that the natural meaning of "arbitration in Shanghai" is that Shanghai is the seat. Where only one place is named, the clause is read as choosing the seat. The default seat of Singapore in SIAC Rule 18.1 applies only where the parties have not agreed on a seat. CA ¶¶ 64–69
  3. Evidence of pre-contractual negotiations offered for the first time in court is subject to the parol evidence rule in the Evidence Act. BQP v BQQ applies only to evidence already admitted by the tribunal. Mr Kim's evidence did not meet the Zurich criteria: it was not reasonably available to all parties and did not relate to a clear and obvious context. CA ¶¶ 76–88
  4. The possibly invalidating effect of PRC law was not part of the context for construing the clause, because nothing showed the parties were aware of it. That Shanghai is a city and not a law district does not turn a clear reference to a seat into a reference to a venue. CA ¶¶ 90–93
  5. Because the seat is Shanghai, the law of the seat and the implied choice of law coincide, so PRC law is the proper law of the arbitration agreement. The Court therefore did not need to decide on the validation principle, the effective interpretation principle or the scope of separability. CA ¶¶ 94–95
  6. The Court allowed the appeal only to declare that Singapore is not the seat. It expressed no view on jurisdiction, which should be decided by the PRC seat court under PRC law. The s 10 challenge had nonetheless been properly brought in Singapore, because the tribunal majority had found Singapore to be the seat. CA ¶¶ 96–103
  7. The High Court's reasoning, later reversed: Singapore was the seat and Shanghai only the venue, because of SIAC Rule 18.1. The Court held that the likely invalidity of the agreement under PRC law displaced PRC law in favour of Singapore law at the implied-choice stage. It also rejected the validation principle as part of Singapore law. HC ¶¶ 52, 109–117

Procedural history

  1. 7 August 2012BNA and BNB conclude the Takeout Agreement.
  2. 1 February 2013BNA, BNB and BNC sign the Addendum, which assigns BNB's rights and obligations to BNC.
  3. 2 March 2016BNB and BNC file a Notice of Arbitration with the SIAC. BNA challenges the tribunal's jurisdiction.
  4. 18 July 2017The tribunal issues its decision on jurisdiction: the majority upholds jurisdiction, and Teresa Cheng SC dissents.
  5. August 2018The High Court dismisses BNA's s 10(3) IAA application with brief oral grounds and grants leave to appeal.
  6. 1 July 2019The High Court issues full written grounds of decision ([2019] SGHC 142).
  7. 15 October 2019The Court of Appeal hears the appeal and allows it to the extent of finding that Shanghai is the seat.
  8. 27 December 2019The Court of Appeal issues its grounds of decision ([2019] SGCA 84).

Tribunal, counsel and experts

Decided by
For the claimant
Allen & Gledhill LLP
For the respondent
TSMP Law Corporation

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Keywords

Summary generated with AI from the published documents — refer to the award for the authoritative text.

Case ID
Court of Appeal, No. [2019] SGCA 84 | Civil Appeal No 159 of 2018
Country
Claimant
BNA
Respondent
BNB and BNC
Section

Court: Singapore, Court of Appeal
Date of decision: 27 December 2019
Case number: [2019] SGCA 84 | Civil Appeal No 159 of 2018
Source: New York Convention case law case database.