CNA v CNB & Anor

Facts

CNA and CNB, two Korean companies, co-owned the intellectual property in an online role-playing game series, the game [X2]. In 2001 CNA alone licensed the Chinese-language version to CNE (and later CND) under a Software Licensing Agreement (SLA) governed by Singapore law with an ICC arbitration clause seated in Singapore. A 2002 Supplementary Agreement added CNB as co-licensor and recited that CNB irrevocably entrusted CNA with the exercise of its rights as co-licensor. CNB's rights later passed to its subsidiary CNC, and CNE came to hold a majority of CNA's shares.

After disputes over alleged breaches of the licence, CNB began an ICC arbitration against CND and CNE on 18 May 2017. While CND and CNE had an extension of time to file their Answer, CNA signed the 2017 Extension Agreement with them on 30 June 2017. It extended the licence, raised the upfront fee to US$11 million, and switched the governing law to PRC law and the forum to SHIAC arbitration in Shanghai. CND and CNE then argued that the tribunal had lost jurisdiction. The tribunal rejected this, finding the extension had been made in breach of CNA's fiduciary duties, and went on to find CNA, CND and CNE liable in a First Partial Award, followed by a costs award (the Second Partial Award).

CNA (SIC/OS 2/2022 and SIC/OS 5/2022) and CND and CNE (SIC/OS 3/2022 and SIC/OS 4/2022) applied to the Singapore International Commercial Court to set aside both awards under Art 34(2)(a)(i) and (iii) of the Model Law, mainly on the ground that the tribunal lacked jurisdiction.

Issues

1. Whether the separability doctrine meant that only a SHIAC tribunal could decide whether the 2017 Extension Agreement was valid.
2. Whether CNA's authority to extend or amend the SLA on CNB's behalf came from the 2002 Supplementary Agreement (Singapore law) or from the Korean agreements and the 2004 Settlement Record (Korean law).
3. Whether CNA breached duties owed to CNB and CNC in signing the 2017 Extension Agreement, and whether that bound CNB.
4. Whether the tribunal exceeded the scope of the ICC Clause on particular findings, such as the duty to consult, post-extension claims and mobile games.

Holding

The court dismissed all four applications. It held that CNA's authority to bind CNB came from the 2002 Supplementary Agreement and was governed by Singapore law; that CNA owed fiduciary duties in exercising that power and breached them; and that CNB was entitled to and did avoid the 2017 Extension Agreement. The ICC Clause therefore remained operative and the tribunal kept its jurisdiction. The challenges to the Second Partial Award fell with the challenges to the First. Directions were given for written submissions on costs.

Reasoning

On a de novo review, the question was whether CNA's later act had ended an arbitration validly started under the ICC Clause. That required deciding whether CNB was bound by CNA's act, so separability did not shift the question to a SHIAC tribunal. In any event, one of CNA's main breaches lay in agreeing to the SHIAC clause itself.

On the source of authority, the 2005 interim award in an earlier ICC arbitration did not create an issue estoppel. The court preferred the translation of the Overseas Agreement that used "dealership" rather than "entrustment", and read the Korean agreements as mutual consent for each co-owner to license separately abroad, not as an entrustment. The entrustment was found in the recital of the tripartite 2002 Supplementary Agreement, which the 2017 Extension Agreement itself named as the source of CNA's authority.

Co-owners do not owe each other fiduciary duties merely as co-owners, but CNA, as CNB's agent with power to alter CNB's legal relations with the licensee, had to act in the joint interest, in good faith and for proper purposes. The court found that CNA signed the extension in haste and secrecy within hours, knowing CNB objected, without consulting it, and at the instigation of CND and CNE, who wanted the forum change to object to jurisdiction. Because CND and CNE knew of and prompted the breach, they could not rely on CNA's authority. Even under Korean law, the failure to consult would have let CNB avoid the agreement.

The narrower challenges also failed. The duty-to-consult finding concerned renewal of the SLA and so arose under it; the added claims stayed under the ICC Clause because the extension did not bind CNB; orders in favour of the "Claimants" were understood to mean CNC; the finding on the game [Y] answered a defence; and the mobile-game claim rested on an implied term of the SLA.

From the judgment