Implications arising from SGCA�۪s approach in Anupam Mittal case in future arbitration proceedings

Implications arising from SGCA’s approach in Anupam Mittal case in future arbitration proceedings

Singapore Court of Appeal (“SGCA”) in the case of Mittal v. Westbridge (1) upheld the anti-suit injunction against the National Company Law Tribunal (“NCLT”) proceeding initiated by Mr. Anupam Mittal (“Mr. Mittal").

The case revolves around the oppression and mismanagement (“O&M”) grievance raised in a company petition filed by Mr. Mittal before the NCLT against Westbridge. Westbridge secured an ex-parte anti-suit injunction against the said proceedings on the grounds that the cause of action arose from the shareholder’s agreement between the parties, which contained an arbitration clause and hence the present matter was under the purview of an arbitration agreement.

Mr. Mittal challenged the said injunction in SGCA on the grounds that O&M matters are not arbitrable under the Indian Law and hence such matter does not fall under the purview of an arbitration agreement. SGCA upheld the anti-suit injunction with the reasoning that under the SIAA (2), O&M matters are arbitrable.

In the judgment, SGCA reasoned that the UNCITRAL Model Law (3) does not define what law applies in the pre-award phase and that the reference of public policy in SIAA was framed broadly enough for the Court to examine foreign countries' public policy. Further, the SGCA clarified how the arbitration agreement, in conjunction with the law that regulates it, decides what parties have agreed to arbitrate and the law of the arbitration agreement.

SGCA further states that the dispute cannot proceed to arbitration in Singapore if it is contrary to foreign public policy and reasons that the law of the state with the closest connection shall govern the arbitration agreement, even if Singaporean law considers the matter to be arbitrable.

The said decision of SGCA does impose a more onerous method for obtaining an anti-suit injunction in circumstances where arbitrability is at stake. However, based on the arbitration agreement's structure entered into between the parties, the SGCA undertook a limited investigation of the arbitrability of shareholder issues through the lens of Singaporean law.

The court failed to take into account the position of Indian arbitration law in cases of shareholders disputes. In multiple cases, the Indian courts have drawn a distinction between the O&M matters arising out of the breach of the shareholder’s agreement and those arising from the breach of shareholder’s statutory rights, where in the former, the subject matter is arbitrable and in the latter, it is not (4).

The judgment focuses on how the court determined the arbitrability of the dispute by considering both the law of the arbitration agreement and the law of the seat, which represents a departure from the commonly adopted practice of major jurisdictions. The said judgment shall create certain impacts on the Indian arbitration scenario where the seat of arbitration is Singapore and the potential impact on the Arbitration and Conciliation Act, 1996 (as amended) is as follows:

1. Shift in Approach: The judgment signifies a shift from the traditional approach followed by Indian courts, where the Arbitration and Conciliation Act, 1996 (as amended) largely adheres to the principle of "kompetenz-kompetenz," giving the arbitral tribunal the authority to determine its own jurisdiction (5). The Mittal v. Westbridge judgment introduces a more comprehensive analysis of the law governing the arbitration agreement and the law of the seat before deciding the issue of arbitrability on a mere “kompetenz-kompetenz” basis. The judgment introduces what it refers to as a "composite approach." This approach involves considering both the law of the arbitration agreement and the law of the seat when determining the arbitrability of a dispute.

The common practice was to presume that the it would be "illogical" for different systems of law to govern subject-matter arbitrability depending on the timing of the challenge to the validity of an arbitration agreement and apply the three stage test (6) i.e., (i) there is an express choice of law governing the arbitration agreement; (ii) no express choice has been made, whether there is an implied choice; and (iii) in the absence of an express and implied choice, the law with which the arbitration agreement has the “closest and most real connection” to determine the law governing the arbitrability of the subject matter.

The composite approach takes a slightly deviated route and determines the arbitrability of a dispute at the pre-award stage by (i) the arbitrability of a dispute is determined by the law governing the arbitration agreement. If the law governing the arbitration agreement is foreign law and that law provides that the subject matter of the dispute cannot be arbitrated, the Singapore court will not allow the arbitration to proceed for public policy considerations; and (ii) Even if the dispute may be arbitrable under the law of the arbitration agreement, but Singapore as the law of the seat considers the dispute to be non-arbitrable, the arbitration would also not be able to proceed in light of public policy considerations.

The composite approach effectively means that both the law of the arbitration agreement and the law of the seat are relevant in determining the issue of arbitrability at the pre-award stage.

In contrast, the law of the seat alone would normally be applicable at the post-award stage in deciding whether the matters contained in the arbitration award were arbitrable or not.

1. Impact on Interpretation: The judgment highlights the importance of clearly specifying the law governing the arbitration agreement in international contracts involving Indian parties. It emphasizes the need for parties to explicitly indicate the governing law in the said arbitration agreement to avoid uncertainty and potential disputes over the arbitrability of certain issues, which differ from jurisdiction to jurisdiction. Under Indian law, the matters relating to criminal offences, testamentary matters, bribery, insolvency, anti-trust and matters involving trust deeds, patents, and trademarks are non- arbitrable whereas under Singaporean law, such matters are arbitrable unless it is contrary to public policy to do so.

The composite approach outlined in the judgment may influence discussions within India regarding how arbitrability is determined. While the immediate impact may be limited to cases wherein the seat of arbitration is Singapore, the Indian courts could consider adopting a similar approach for cases involving disputes subject to Indian law.

As of now, the courts of India have multiple views regarding the arbitrability of matters such as that the substantive law of the contract is of prime importance to determine the issue of arbitrability rather than the law of the seat or of the arbitration agreement (7) or apply the law of the seat to determine arbitrability (8). Now with this judgement, the courts have another choice to apply a ‘composite approach’ and decide the arbitrability of the matter.

In light of Mittal v. Westbridge, Indian parties agreeing on a Singapore seat should carefully consider two elements: (i) parties should expressly stipulate the law applicable to the arbitration agreement to avoid uncertainty over what a tribunal/court might determine it to be, and (ii) parties should ensure that anticipated disputes that could arise are of a subject matter that is arbitrable both under the law applicable to the arbitration agreement and the law of the seat.

1. Choice of Seat: In light of the said judgment and as a going-forward basis, for now, the Indian parties opting for arbitration with a seat with Singapore as jurisdiction, the parties to such arbitration would need to be more cautious when drafting arbitration agreement(s) (9), especially considering the difference in matter arbitrability under Indian and Singapore arbitration law. The parties must ensure that the subject matter of potential disputes is arbitrable under both the law governing the arbitration agreement and the law of the seat.

1. Pro-Arbitration Stance: The said judgment aligns with a pro-arbitration approach, which is in line with India's broader efforts to promote arbitration as an effective means of alternative dispute resolution (ADR) mechanism. While the immediate impact may be limited to cases with a Singapore seat, the principles emphasized by the judgment could have a persuasive effect on Indian courts' while considering the challenge and enforcement of a foreign arbitral award under Part II of the Arbitration and Conciliation Act, 1996 (as amended) in coming days. The Mittal v. Westbridge judgment (supra) may influence discussions within India on what constitutes the arbitrability if disputes. In light of this judgment, it is a possibility that once could see the Indian courts possibly examining the probability to consider adopting a similar "composite approach" in cases involving disputes subject to Indian law, especially if parties agree to a foreign seat.

The judgment highlights the evolving nature of international arbitration practices and the importance of considering a comprehensive range of factors when determining arbitrability. While Indian law may currently lean toward a more traditional approach of kompetenz-kompetenz, the judgment could contribute to a broader evolution of how Indian courts approach issues of jurisdiction and arbitrability.

In conclusion, while the Mittal v. Westbridge judgment originates from Singapore and applies to a facts and circumstances to a specific case, the principles being laid out by the Singaporean courts could possibly influence the broader landscape of international arbitration and especially within India, including so as to how the Indian parties approach and structure their arbitration agreements. This judgment underscores the evolving nature of international arbitration practices across the globe and the importance of considering both the law of the arbitration agreement and the law of the seat in determining arbitrability.

Endnote:

1. Anupam Mittal v. Westbridge Ventures II Investment Holdings, (2023) SCGA 1.
2. Singapore International Arbitration Act, 1994.
3. United Nations Commission on International Trade Law Model Law on International Commercial Arbitration, 2006.
4. Chatterjee Petrochem v. Haldia Petrochemicals Limited; Sidharth Gupta v. Getit Infoservces Private Limited.
5. Section 16, Arbitration and Conciliation Act, 1996.
6. Enka Case (U.K.); Sulamerica Case (U.K.); BCY v. BCZ (Singapore).
7. Reliance Industries v. Union of India.
8. Sumitomo Heavy Industries Limited v. ONGC Limited and Others.
9. PASL Wind Solutions Private Limited v. GE Power Conversion India Private Limited.