Singapore Court of Appeal Considers Effect of New Arbitration Agreement on Pending Arbitration
Other Author Lai Yan, legal assistant
Last week, in CNA v. CNB and another [2024] SGCA(I) 2, the Singapore Court of Appeal published its grounds for dismissing an appeal against a decision of the Singapore International Commercial Court (SICC) which declined to set aside two arbitral awards for an alleged lack of jurisdiction.
The Court of Appeal affirmed the SICC’s finding that the appellant (CNA) had breached its fiduciary duties to the first respondent (CNB) by entering into a new arbitration agreement, and found that the new arbitration agreement was, in any event, incapable of affecting the jurisdiction of a tribunal in an arbitration that was already afoot.
Key Takeaways
It is a matter of construction whether a new arbitration agreement removes the jurisdiction of a tribunal in a pending arbitration, which was constituted pursuant to a previous arbitration agreement between the parties. Where the new arbitration agreement does not contain express terms removing the jurisdiction of the tribunal, it is unlikely that the tribunal will lose its jurisdiction as a result of the new arbitration agreement.
Background Facts
The parties were in a contractual relationship governed by several agreements relating to a computer game series, including a Software Licensing Agreement (the SLA) and a 2002 Supplementary Agreement. Under the 2002 Supplementary Agreement, CNB irrevocably entrusted its rights as co-licensor under the SLA to CNA.
Disputes arose and in May 2017, CNB commenced arbitration proceedings against a co-licensor and the co-licensor’s subsidiary (CNE and CND, respectively) with the International Chamber of Commerce, pursuant to the dispute resolution clause in the SLA (the 2017 ICC Arbitration). In June 2017, CNA entered into an agreement with CND and CNE (the 2017 Extension Agreement), by which it agreed that all disputes under the SLA would be submitted to arbitration before the Shanghai International Arbitration Centre (SHIAC). The 2017 Extension Agreement purported to bind CNB as well.
The tribunal in the 2017 ICC Arbitration subsequently issued two partial awards in favour of CNB. CNA applied to the SICC to set aside the awards, on the basis that the tribunal lacked jurisdiction as the ICC arbitration clause in the SLA had been superseded by the SHIAC arbitration clause in the 2017 Extension Agreement.
The SICC dismissed CNA’s application, and CNA appealed to the Singapore Court of Appeal.
The Court of Appeal’s Decision
The Court of Appeal affirmed the SICC’s finding that CNA had breached its fiduciary duties by entering into the 2017 Extension Agreement without consulting CNB. The source of CNA’s fiduciary duties to CNB was the 2002 Supplementary Agreement, by which CNB had entrusted the exercise of its rights to CNA. The haste and secrecy with which CNA acted in entering into the 2017 Extension Agreement indicated that its purpose was to fabricate a jurisdictional objection to the 2017 ICC Arbitration.1
In any event, the Court of Appeal found that, as a matter of construction, the language of the 2017 Extension Agreement was not capable of removing the jurisdictional foundation that had been established by the SLA between the parties to the 2017 ICC Arbitration. The Court observed that to affect an arbitration that was already afoot, the 2017 Extension Agreement had to be explicit in its terms.
However, as the dispute resolution provision in the 2017 Extension Agreement was not worded as such, CNA could not succeed in its jurisdictional challenge.2
The Court therefore dismissed CNA's appeal.
Conclusion
The Court of Appeal’s decision demonstrates that attempts by parties to fabricate jurisdictional objections, particularly when done in breach of fiduciary duties, will be given short shrift by the courts. Furthermore, where parties intend to alter the jurisdiction of a tribunal in an ongoing arbitration by concluding a new arbitration agreement, they should, as far as possible, ensure that the new agreement contains express language to that effect.
1 At [46].
2 At [48].
