Shagang South -Asia (Hong Kong) Trading Co Ltd v Daewoo Logistics

An agreement that an arbitration is to be held in a named country ordinarily implies that the country is the arbitral seat and that its law is the curial law. Clear words or significant contrary indicia are required to displace that implication. A separate choice of substantive law does not, without more, select a different curial law. A standard-form arbitration clause cannot be incorporated where it is inconsistent with the parties’ express dispute-resolution provision. Where the contract does not specify the number of arbitrators, the applicable statutory default and appointment procedures govern; an appointment made under an inapplicable contractual clause is invalid.

Shagang applied under section 67 of the Arbitration Act 1996 to set aside an arbitral award and obtain a declaration that the tribunal was improperly constituted. The parties’ fixture note provided for arbitration to be held in Hong Kong, with English law to be applied, and stated that the charterparty was otherwise based on the Gencon 1994 form. The arbitrator concluded that the English Act applied and that Gencon clause 19(a), providing for London arbitration and an English-law procedure, governed his appointment as sole arbitrator.

The central questions were whether the arbitration was subject to Hong Kong or English curial law and, if English law applied, whether the arbitrator had been validly appointed.

1. Application allowed in substance. The court found for Shagang on both issues. The appropriate consequential orders were left for further submissions.

2. The natural meaning of the fixture note was that the arbitration was to be held in Hong Kong and that English law governed the disputes in the substantive sense. An agreement that arbitration is to be held in a named country ordinarily carries an implied choice of that country as the seat and of its law as the curial law. Clear words or significant contrary indicia are required to establish a different seat or curial law.

3. The words “English law to be applied” did not provide the necessary contrary indication. They were most naturally read as selecting the substantive law. The fact that bifurcation between substantive and curial law may be inconvenient did not alter the construction, since such bifurcation is by no means uncommon. Bifurcation between the place of arbitration and the law governing the arbitral procedure is less usual and requires particularly clear wording.

4. Gencon clause 19 was not incorporated. Its alternatives operated as unitary “one shop” options linking place, curial law and substantive law. The Hong Kong arbitration provision did not fit clause 19(a), (b), (c) or (d), and clause 23 was therefore inconsistent with clause 19. Clause 24 could not make an inapplicable provision part of the parties’ agreement.

5. The arbitration was consequently subject to Hong Kong, rather than English, curial law. Alternatively, if the English Act applied, clause 23 contained no agreement on the number of arbitrators. The statutory default of a sole arbitrator under section 15(3) applied, but the appointment procedure in section 16(3) had not been followed and the court’s appointment power under section 18 had not been invoked. Mr Rayment had therefore not been validly appointed.