This article was originally published in Practical Law Arbitration. Reproduced with permission. Reed Smith LLP is licensed to operate as a foreign law practice in Singapore under the name and style, Reed Smith Pte Ltd (hereafter collectively, "Reed Smith"). Where advice on Singapore law is required, we will refer the matter to and work with Reed Smith's Formal Law Alliance partner in Singapore, Resource Law LLC, where necessary.
In BNA v BNB  SGCA 84, the Singapore Court of Appeal declined to uphold an artificial interpretation of an arbitration agreement, which had found that Singapore was the seat of the arbitration and Singapore law was the proper law of the arbitration agreement. This was despite the fact that the natural construction of the wording carried with it a risk of the arbitration agreement being held to be invalid or illegal.
The decision in BCY v BCZ  3 SLR 357 (BCY) sets out the following three-stage framework for determining the proper law of an arbitration agreement:
- Have the parties expressly chosen the proper law of the arbitration agreement?
- If not, have the parties made an implied choice as to the proper law of the arbitration agreement? The starting point in determining the implied choice is the substantive law of the contract in which the arbitration agreement is contained and forms part.
- If neither an express choice nor implied choice of the proper law of the arbitration agreement can be discerned, the proper law shall be the system of law with which the arbitration agreement has its closest and most real connection.