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The Singapore Court of Appeal on Arbitrability and the Proper Law of Arbitration Agreements

In its recent judgment Mittal v Westbridge Ventures, the Singapore Court of Appeal has considered a number of important questions of arbitration law concerning the proper law of arbitration agreements and the identification of the law which determines whether a particular dispute is arbitrable. The case is likely to be of particular interest to Indian practitioners because it illustrates why in practice the identification of the proper law of the arbitration agreement matters, especially where one of the candidates is Indian law.

The case arose out of a dispute between the shareholders of a company called People Interactive (India) Pvt Ltd. This company owns and operates the well-known matrimonial website, shaadi.com. In 2006, Westbridge invested in the Company and entered into a Shareholders’ Agreement with the promoters (including Mr Mittal, the appellant in the Singapore Court of Appeal). Clause 20.2 of the SHA stated that ‘This Agreement and its performance shall be governed by and construed in all respects in accordance with the laws of the Republic of India’ but also contained an ICC arbitration clause providing for arbitration in Singapore. In 2017, disputes arose following an indication by Westbridge that it wished to sell its shares to an entity which the promoters considered was a competitor of the Company. The promoters commenced proceedings in the National Company Law Tribunal (NCLT) seeking relief for what they said was oppression and mismanagement. In response, Westbridge commenced proceedings in Singapore seeking an anti-suit injunction restraining the promoters from continuing the NCLT proceedings on the ground that the dispute fell within the arbitration agreement in clause 20.

At first instance, the Judge granted an anti-suit injunction, finding that it is the law of the seat (here Singapore law), notthe law governing the arbitration agreement, which determines whether a particular dispute is arbitrable. That finding meant that it was irrelevant that disputes relating to oppression and mismanagement are not arbitrable under Indian law, because whether this dispute was arbitrable was to be answered by reference to Singapore law as the law of the seat.

The Singapore Court of Appeal came to the same conclusion but for very different reasons. In her judgment, Judith Prakash JA began by pointing out – as had the UK Supreme Court in Enka v Chubb – that it would be anomalous if the same question (e.g. arbitrability) were to be decided by reference to one law at the pre-award stage but a different law at the post-award stage. At the post-award stage, if an award is challenged on the ground that one or more of the claims were not arbitrable, that challenge falls to be decided in accordance with the law applicable to the arbitration agreement. Judith Prakash JA ultimately concluded that both the law of the seat and the law applicable to the arbitration agreement are relevant for this purpose because if a particular dispute is not arbitrable under either law, that reflects public policy under that law. The consequence of this analysis is that a claim cannot proceed to arbitration in Singapore if it is non-arbitrable either under Singapore law as the law of the seat or under the law applicable to the arbitration agreement.

That meant that it was necessary to identify the law governing the arbitration agreement. As to that, Judith Prakash JA began by noting that the express choice of Indian law in clause 20.1 of the SHA did not constitute an express choice of law for the arbitration agreement contained in the SHA because an ‘express choice of law for an arbitration agreement would only be found where there is explicit language stating so in no uncertain terms’. Judith Prakash JA acknowledged that clause 20.1 was nonetheless capable of amounting to an implied choice of Indian law for the arbitration agreement, citing as authority for this proposition a number of Singapore and English cases, including Sulamerica v Enesa which Judith Prakash JA described as the leading case – perhaps a surprising description in view of the subsequent decision of the UK Supreme Court (largely endorsing the analysis in Sulamerica) in Enka v Chubb.

There was, however, a sting in the tail. Although an express choice of law for the main contract is normally an implied choice of law for the arbitration agreement (as both Enka and Sulamerica decide), that is not an invariable rule; and the UK Supreme Court in Enka identified the so-called ‘validation principle’ as an exception to it, namely the principle that if the application of the law chosen by the parties for the main contract would either invalidate the arbitration agreement or render it ineffective, that may be an indication that the parties did not, despite the express choice of law clause, intend that law to apply to the arbitration agreement. That was the conclusion to which Judith Prakash JA came in this case because the application of Indian law to the arbitration agreement would ‘negate the agreement since oppression claims (which are often intertwined with management disputes) are not arbitrable in India’. That was sufficient to neutralise the implication that would otherwise arise out of clause 20.1; and in the absence of any choice of law, the arbitration agreement was found to be governed by Singapore law as the law of the seat. The anti-suit injunction granted by the Court below was therefore upheld albeit on different grounds.

This case is significant for three reasons. First, it highlights the fact that a dispute may not in practice be arbitrable unless it is arbitrable under both the law of the seat and the law applicable to the arbitration agreement (and therefore the importance of choosing with care both a seat and the proper law of the arbitration agreement). Second, it confirms that the Singapore Court of Appeal – by contrast to the UK Supreme Court – generally does not treat an express choice of law clause in a contract as an express choice of law for the arbitration agreement contained in that contract (it can, at most, amount an implied choice of law). Third – and perhaps most significantly – it vividly demonstrates why the ‘validation exception’ identified by the UK Supreme Court in Enka is likely in practice to apply more frequently than is apparent from the judgment itself. Although the UK Supreme Court gave a number of reasons in Enka for treating a choice of law for the main contract as a choice of law for the arbitration agreement, this would matter in practice only if the two systems of law treat arbitrability or some other aspect of arbitration agreements differently; but it is precisely in those circumstances that the ‘validation exception’ is likely also to apply, more often than is apparent, and with the result that the general rule is narrower in its practical application than one might envisage. It tends also to reinforce Lord Hoffmann’s powerful criticisms of the reasoning of the majority in Enka.