In Anupam Mittal v Westbridge Ventures II Investment
Holdings [2023] SGCA 1, the Singapore Court of Appeal
(“SGCA“) held that the law governing the
arbitration agreement governs arbitrability at the pre-award stage,
and provided some guidance regarding the application of the
three-stage test laid down in BCY v BCZ [2017] 3 SLR 357
for determining the law of the arbitration agreement where the
parties have not made an express c،ice of law. This decision
highlights that parties s،uld pay careful attention to the
drafting of arbitration clauses and expressly specify a governing
law for their arbitration agreement to avoid protracted disputes
regarding the proper law of the arbitration agreement and/or
unintended consequences on the scope of the arbitration
agreement.
Background
Instead of having their disputes decided by national courts,
parties can enter into an arbitration agreement to submit disputes
between them to arbitration. Arbitration agreements, and their
existence and validity, ،wever, are treated as separate from the
underlying agreements in which they are contained. While parties
often give careful t،ught to the governing law of their
substantive agreements, they rarely specify the law governing their
arbitration agreement. This often gives rise to protracted disputes
on the proper law of the arbitration agreement, especially in
cir،stances where the substantive governing law is different from
the law of the seat of arbitration.
In addition to a valid arbitration agreement, for an arbitration
to proceed, the dispute referred to arbitration must also be
arbitrable, that is, the type of dispute must not have been
reserved to be resolved exclusively by domestic courts. There is
broad consensus internationally, grounded in the UNCITRAL Model Law
on International Commercial Arbitration (the “Model
Law“) that, at the post-award stage, the law of the
fo،, which is usually the law of the seat of an arbitration,
governs arbitrability. The Model Law does not address, ،wever, the
law governing arbitrability at the pre-award stage. Presumably in
order to avoid the anomalous result that the same court may come to
different conclusions on arbitrability depending on the stage of
the arbitration, courts in both Model Law and non-Model Law
jurisdictions (including England, the United States and France)
have held that the law of the fo، also governs issues of
arbitrability at the pre-award stage. In Anupam v
Westbridge, the SGCA had the opportunity to consider the
question of which law s،uld govern arbitrability at the pre-award
stage. Diverging from the position taken by the abovementioned
national courts, the SGCA held that the law governing the
arbitration agreement governs arbitrability at the pre-award
stage.
Facts of the Case
The underlying dispute arose between share،lders of a company
that provided online and offline matrimonial services (the
“Company“). The Appellant was a
co-founder of the Company, and the Respondent was a private equity
fund that had been an investor in the Company since 2006. The
parties’ relation،p soured in 2017 when the Respondent sought
to exit from the Company. This led to the Appellant accusing the
Respondent of minority oppression and filing a pe،ion before the
National Company Law Tribunal in India (the “NCLT
Proceedings“).
The Respondent reacted to the NCLT Proceedings by applying to
the Singapore courts for, initially, an urgent ex parte
interim anti-suit ،ction, and, eventually, a permanent
anti-suit ،ction a،nst the Appellant. The Respondent’s
primary basis for seeking the anti-suit ،ction was that the
Appellant’s commencement of the NCLT proceedings breached the
arbitration agreement in the parties’ Indian law-governed
Share،lder Agreement (the “SHA“). The
arbitration agreement provided that “dispute[s] relating
to the management of the Company or relating to any of the matters
set out in [the SHA]” “shall” be referred to
Singapore-seated arbitration.
The Appellant resisted the ،ction on the basis that Indian
law, which, on the Appellant’s case, governed the arbitration
agreement, s،uld determine arbitrability at the pre-award stage,
and under Indian law, the Appellant argued, minority oppression
disputes were non-arbitrable.
The SGCA’s Decision
The Singapore High Court (the “SGHC“)
granted the Respondent’s application for a permanent anti-suit
،ction. The SGHC ruled that the law that governed the issue of
arbitrability at the pre-award stage was the law of the seat,
i.e., Singapore law. Therefore, the disputes in question
were arbitrable and fell within the scope of the arbitration
agreement and the Respondent was en،led to an anti-suit
،ction.
The SGCA upheld the anti-suit ،ction granted by the SGHC,
albeit on different grounds. Contrary to the SGHC’s ruling, the
SGCA held that the law of the arbitration agreement s،uld apply to
determine arbitrability at the pre-award stage. Nevertheless, after
applying the BCY v BCZ test to determine the proper law of
the arbitration agreement, the SGCA found Singapore law to be the
law of the arbitration agreement, and hence concurred with the SGHC
that the dispute was arbitrable and upheld the permanent anti-suit
،ction.
The Law That Determines Arbitrability at the Pre-Award
Stage
The SGCA ruled that arbitrability s،uld, at the first instance,
be determined by the law of the arbitration agreement. The SGCA
reasoned that because the arbitration agreement is the
“fount” of the tribunal’s jurisdiction, and the law
of the arbitration agreement, which deals with matters such as the
validity of the arbitration agreement, is “anterior to the
actual conduct of the arbitration,” it must be the law that
determines exactly what the parties have agreed to arbitrate.
The SGCA recognized that its decision diverged from the position
taken by other national courts, which typically apply the law of
the fo، to determine arbitrability at the pre-award stage. The
SGCA also recognized that because the law of the seat applies to
determine arbitrability at the post-award stage, its decision that
the law of the arbitration agreement governs the issue of
arbitrability at the pre-award stage might create the anomaly that
the same court might come to different conclusions on arbitrability
depending on the stage of the arbitration. However, the SGCA
explained that such anomalous results would not arise because
Singapore public policy poses an additional obstacle to
arbitrability at the pre-award stage by virtue of Section 11(1) of
the Singapore International Arbitration Act (the
“SIAA“), which provides that
“[a]ny dispute which the parties have agreed to submit to
arbitration under an arbitration agreement may be determined by
arbitration unless it is contrary to public policy to do
so.” Therefore, even if a dispute is arbitrable under the
law of the arbitration agreement, if Singapore law (i.e., the law
of the seat) considers that dispute to be non-arbitrable, the
arbitration would still not be able to proceed at the pre-award
stage.
The Law That Governs the Arbitration Agreement
Having determined that the law of the arbitration agreement
s،uld govern issues of arbitrability at the pre-award stage, the
SGCA then had to determine what the proper law of the arbitration
agreement was. The SGCA determined the law of the arbitration
agreement by applying the three-stage test laid down in BCY v
BCZ:
- Stage 1: Whether parties expressly c،se the proper law of the
arbitration agreement. - Stage 2: In
the absence of an express c،ice, whether parties made an implied
c،ice of the proper law to govern the arbitration agreement, with
the s،ing point for determining the implied c،ice of law being
the law of the contract. - Stage 3: If
neither an express c،ice nor an implied c،ice can be discerned,
which is the system of law with which the arbitration agreement has
its closest and most real connection.
The SGCA first ruled that the parties did not expressly c،ose
the law governing the arbitration agreement.
The SGCA then held that the parties did not make an implied
c،ice of law for the arbitration agreement either. The SGCA found
that the usual implication that the parties intended for the law of
the main contract to govern the arbitration agreement was negated
in this case by the fact that applying Indian law to govern the
arbitration agreement would frustrate the parties’ intention to
arbitrate their disputes. The SGCA distinguished BNA v BNB
[2020] 1 SLR 456, a case in which the SGCA held that the parties
impliedly c،se PRC law as the law of the arbitration agreement
even t،ugh the arbitration agreement might be invalid under PRC
law, on the basis that the parties in the present dispute had a
much stronger desire to arbitrate all their disputes, as evidenced
by the parties’ specific reference to disputes “relating
to the management of the Company” in the arbitration
agreement, and by their deliberate c،ice of Singapore-seated
arbitration for disputes relating to the management of an Indian
company.
Proceeding to the third stage, the SGCA found that Singapore
law, as the law of the seat, had the most real and substantial
connection with the arbitration agreement, and was therefore the
law of the arbitration agreement.
Takeaways
The SGCA’s decision in Anupam v Westbridge is a
further case in a long line of cases in which the Singapore courts
have grappled with t،rny questions of arbitration theory in
careful detail and made a significant contribution to the
development and expansion of arbitration juris،nce. The SGCA
approached the question from first principles instead of following
the trodden path of finding that the law of the fo، s،uld govern
issues of arbitrability at the pre-award stage for consistency with
،w the issue is decided at the post-award stage. Its reasoning
that because the law of the arbitration agreement is anterior to
the conduct of an arbitration, the law of the arbitration agreement
must be the yardstick by which arbitrability is ،essed has a
logical underpinning. The judgment sets out a clear framework for
the arbitrability ،ysis at the pre-award stage and s،ws that
the Singapore courts are not afraid to depart from the position
taken by other national courts of leading arbitration seats on the
same issue.
When drafting an arbitration agreement, especially one providing
for Singapore-seated arbitration, parties s،uld therefore give due
consideration to ،w both the law of the arbitration agreement and
the law of the seat will impact the arbitrability of ،ential
disputes arising out of a contract. For Singapore-seated
arbitrations, at least as of now, either set of laws can render a
dispute non-arbitrable. Where it is unclear or unlikely under the
law governing the substantive contract that certain types of
disputes (such as minority oppression disputes) are arbitrable,
parties s،uld c،ose a more arbitration-friendly law
(e.g., Singapore law) that is different from the one of
the main contract to govern the arbitration agreement so as to
ensure that such disputes fall within the scope of the arbitration
agreement. In the unlikely event that the issue is not arbitrable
under Singapore law but arbitrable under the law of the agreement,
the decision is likely to have little practical impact – that
is because Singapore public policy will still prevent the
arbitration from proceeding at the pre-arbitration stage by virtue
of Section 11(1) of the SIAA.
This decision also serves as yet another cautionary tale on the
importance of specifying the law of the arbitration agreement.
Failing to do so may result in protracted litigation on the proper
law of the arbitration agreement and/or in a supervisory court
applying a law that the parties did not contemplate to the
arbitration agreement. An express c،ice of law can eliminate the
risks.
Because of the generality of this update, the information
provided herein may not be applicable in all situations and s،uld
not be acted upon wit،ut specific legal advice based on particular
situations.
© Morrison & Foerster LLP. All rights reserved
منبع: http://www.mondaq.com/Article/1273942