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The Singapore Court of Appeal recently reversed the ruling of the Singapore High Court in BNA v BNB and Another ([2019] SGCA 84). It found that Shanghai, not Singapore, was the parties’ chosen arbitral seat and thus PRC law was the governing law of the arbitration clause. The decision of the Singapore High Court was earlier covered on Global Arbitration News, here

Brief background to the appeal

The dispute arose out of a Takeout Agreement (“TA“) between the appellant and the respondents. The appellant buyer failed to make certain payments under the TA to the respondent sellers. The TA stated that it was governed by PRC law. The arbitration clause in the TA provided for disputes to be finally “submitted to the Singapore International Arbitration Centre (“SIAC“) for arbitration in Shanghai”, but it did not include any provision specifying the proper law of the arbitration clause. The latter governs the formation, validity, effect and discharge of the agreement to arbitrate.

The High Court ruled that the parties implicitly chose Singapore as the arbitral seat and thus Singapore law governed the arbitration clause.

The Court of Appeal’s decision

The Court of Appeal disagreed with the High Court and held that “arbitration in Shanghai” should be naturally read as a reference to Shanghai as the seat of the arbitration.

In arriving at its decision, the Court of Appeal accepted that contrary indicia could displace the natural reading that “arbitration in Shanghai” meant that Shanghai was intended to be the seat of the arbitration.

The Court of Appeal considered several indicia raised by the respondent but concluded that on the facts, none of them could be taken into account. First, evidence of the parties’ pre-contractual negotiations, particularly their concern that the arbitration be seated in a neutral forum, i.e. Singapore, was inadmissible because of the parol evidence rule. The Court of Appeal confirmed that the court is bound to apply the parol evidence rule and its exceptions, even in cases arising out of an arbitration. Therefore, pre-contractual evidence that had not been admitted before an arbitral tribunal will be inadmissible in subsequent judicial proceedings.

Secondly, that the arbitration clause could potentially be invalid if governed by PRC law was also not considered, as there was no evidence that the parties were even aware that the proper law of the arbitration clause could impact its validity.

Finally, the Court of Appeal regarded the fact that Shanghai is not a law district (as compared to Singapore) as irrelevant, since the court felt that it was common for commercial parties to only specify in their arbitration clause either a city or a country as arbitral seat. Accordingly, where parties had specified only one geographical location in an arbitration clause, and particularly where the choice had been expressed as “arbitration in [that location]”, that ought most naturally to be construed as a reference to the parties’ choice of seat.

Implications of this ruling

The Court of Appeal concluded that the “parties’ manifest intention to arbitrate is not to be given effect at all costs.” If parties choose to arbitrate in a certain way, in a certain place and under the administration of a certain arbitral institution, then those choices have to be given effect by a process of construction. The words chosen have to be given their natural meaning unless there is sufficient contrary indicia to displace that reading. If the result of this process is that the arbitration clause is unworkable, then the parties will be bound by the consequences of their decision.

The Court of Appeal’s decision is yet another important reminder for parties to carefully lay out the groundwork at the contracting stage for a valid arbitration in the future by clearly stating their intention in the arbitration clause, including its proper law, the seat and arbitral institution. While properly drafted arbitration clauses will leave little room for disputes over their construction, poorly drafted arbitration clauses may result in the invalidity of the arbitration clause or unenforceability of an award. If the arbitration clause is invalid, the parties might find themselves before one or more national courts which is arguably what the parties would have sought to avoid when adopting an arbitration clause in their contract in the first place.


This ruling is an important reminder to all parties to ensure that their arbitration clauses explicitly and unambiguously specify both the arbitral seat and proper law of the arbitration clause. Lengthy litigation and the costs involved are avoidable if proper and adequate care is taken at the initial contracting stage, towards drafting an arbitration clause which expressly and unambiguously specifies the arbitral seat and proper law of the arbitration clause.


Nandakumar (Kumar) Ponniya heads the Dispute Resolution Practice of Baker McKenzie in the Asia Pacific and is a principal in Baker McKenzie's Singapore office. He has a broad focus on dispute resolution, with specialist expertise in international arbitration, commercial litigation, and corporate restructuring and insolvency. He is listed as a leading international arbitration lawyer in the Legal 500 Asia Pacific 2021 and was also named a Litigation Star in the Benchmark Litigation Asia Pacific 2020.


Ashish Chugh is an associate principal in Baker McKenzie's Singapore office. His area of practice is international arbitration and cross-border commercial litigation, with a particular focus on disputes concerning technology and telecommunications. He has represented numerous parties with respect to disputes across a wide range of industries, including technology and telecommunications as well as aviation, commodities, hospitality, investment funds, renewable energy and power. Ashish is acknowledged by Legal 500 Asia Pacific as a key practitioner in the area of international arbitration in Singapore.


Gary Seib is a partner in the Dispute Resolution team at Baker McKenzie Hong Kong. Gary previously served as the global chair of the Firm's Dispute Resolution practice (2009 - 2014) and before that as Asia Pacific chair of the practice (2006 - 2009). He is one of the first lawyers to be granted Solicitor Advocate status before the Hong Kong courts and is ranked as Eminent Practitioner and one of the leading lawyers in his field by top legal directories, including Chambers Asia, Chambers Global, Asia Pacific Legal 500 and IFLR 1000. Gary has written numerous articles for publications in Australia and Hong Kong on topics ranging from insolvency and corporate rescue, corporate compliance investigations and enforcement to fraud risk, insider trading and market misconduct. He has also written and spoken extensively on corporate compliance, risk management and cross-border dispute resolution. Gary can be reached at and +85228462112.


Philipp Hanusch is a partner in Baker McKenzie’s International Arbitration Team in Hong Kong and a member of the Firm’s Asia-Pacific International Arbitration Steering Committee. Philipp specialises in international commercial arbitration with a focus on shareholder, joint venture and M&A disputes. He has represented parties in arbitrations under various rules, including the HKIAC Rules, ICC Rules, CIETAC Rules, ICDR Rules and UNCITRAL Arbitration Rules. He is on the HKIAC List of Arbitrators and a member of the ICC-HK Standing Committee on Arbitration and ADR. He has been repeatedly appointed as arbitrator under the ICC Rules and HKIAC Rules. Philipp can be reached at and +852 2846 1665.