6 minute read | March.23.2023
While it might seem to a commercial negotiator to be a point of pedantic detail in drafting an arbitration clause, the recent decision of Anupam Mittal v. Westbridge Ventures  emphasises the importance for commercial parties to carefully consider an express choice of law for the arbitration agreement itself, to ensure the parties’ intention to arbitrate is preserved and not disrupted. If nothing else, lengthy disruption and the costs of litigating a satellite issue as to jurisdiction can be avoided by front end planning.
In this case, the Singapore Court of Appeal (“SCGA”) considered what law governs the arbitrability of a dispute. The arbitrability of a dispute is an important issue for parties considering arbitration as a method of dispute resolution, as claiming a dispute is non-arbitrable can be deployed by opponents seeking to avoid arbitration.
In considering whether to grant an anti-suit injunction restraining a breach of an agreement to arbitrate, the SCGA decided that the arbitrability of a dispute is determined first by reference to the law governing the arbitration agreement and then by reference to the law of the seat. In reaching this decision the SCGA provided guidance as to how to determine the law governing the arbitration agreement.
The dispute involved a disagreement between shareholders of the popular online and offline matrimonial service company Shaadi.com. Shaadi.com was co-founded by Anupam Mittal (“Mittal”) and his cousins, who entered into a shareholders’ agreement with Westbridge Ventures II Investment Holdings (“Westbridge”), a Mauritius incorporated private equity fund.
The shareholders’ agreement included a clause that any “dispute[s] relating to the management of the Company or relating to any of the matters set out in [the SHA]” should be referred to ICC arbitration. The arbitration clause provided for: (i) Indian law as the governing law of the shareholders’ agreement; and (ii) Singapore as the seat of arbitration,but was silent as to the law governing the arbitration agreement (the point being that many jurisdictions consider arbitration agreements as ‘contracts within contracts’ – several and separable from the main contract in which they live).
Despite the arbitration agreement, Mittal commenced proceedings before the Indian courts after a dispute arose relating to the shareholders’ agreement. In response, Westbridge brought an action before the Singapore courts seeking an anti-suit injunction to stop the Indian court proceedings.
In deciding whether to grant an anti-suit injunction, the Court had to rule on whether the subject matter of the dispute was arbitrable, and which law governs this question. The Court found that arbitrability of a dispute is, in the first instance, determined by the law governing the arbitration agreement. If this law determines that the subject matter of the dispute cannot be arbitrated, then the arbitration should not proceed.
Further, the Court established that where a dispute may be arbitrable under the law of the arbitration agreement, but the law of the seat considers it to be non-arbitrable, then, again, the arbitration cannot proceed. This has been referred to as a “composite approach” to determining arbitrability at the pre-award stage as it establishes that the subject matter of the dispute must be both arbitrable under the law of the arbitration agreement and the law of the seat.
Having established that, the important question was then what law determined arbitrability?
The Court took a novel approach (for Singapore) in applying the traditional three-stage test set out in BCY v BCZ , and also used by the UK Supreme Court in Enka v. Chubb:
(1): The Court considered whether the parties had expressly chosen the law governing the arbitration agreement. The SGCA found that the language of the arbitration clause did not constitute an express choice of law.
(2): The Court then considered the rebuttable presumption that the law governing the contract is the implied choice of law, which in this case was Indian law. The Court was satisfied that there was a sufficient indication to rebut the implication that the law of the contract was intended to govern the arbitration agreement as that implication would mean frustrating the parties’ intention to arbitrate.
(3): The Court then looked at which system of law had the closest and most real connection to the arbitration agreement. The Court found that it was the law of Singapore, as the chosen law of the seat.
Ultimately, the dispute was found to be arbitrable as the subject matter of the dispute was arbitrable under Singapore law, which was both the law of the seat and the law that was found to apply to the arbitration agreement.
Whilst it can be easy to forget to give consideration to the law applicable to the arbitration agreement of a contract, this case (as well as an increasing amount of jurisprudence in common law countries) demonstrates the importance of doing so. This case also serves as a reminder to ensure the interaction between the law which govern the various parts of the contract (i.e., governing law, law of the seat and law of the arbitration agreement) is consistent or at least harmonious. In most cases, it will be best practice for parties to expressly specify the law of the arbitration agreement in order to avoid potentially protracted litigation as well as the risk a court will apply a law the parties did not intend.
As such in drafting consider either: “The law of this contract (including the arbitration agreement contained herein shall be the laws of…” or “Notwithstanding the choice of XXX law to govern this contract, this arbitration clause shall be governed by the laws of…”
In its judgment, the Singapore Court of Appeal recognised the possibility that an eventual arbitral award may not be enforceable in India despite its decision that the parties should go to arbitration. This reinforces the point that the risk of non-enforcement is inherent in cross border disputes, and parties should consider as early as possible how they intend to enforce an award if one is granted.
Cross border dispute resolution requires up front planning – early consideration can save significant time and costs down the line and make sure your agreement is worth the paper it is written on.