Singapore courts clarify the law governing arbitrability and the arbitration agreement

By way of background, Mr Mittal (the "Appellant") was founder and shareholder of the Indian company People Interactive Pte Ltd (the "Company"), while Westbridge Ventures II was an offshore private equity fund (the "Respondent" and together the "Parties"). Both were shareholders of the well-known Indian match-making site Shaadi.

The Respondent's investment was governed by a Shareholder's Agreement ("SHA") entered into between the Parties in 2006. The Parties' relationship deteriorated in 2017 and the Respondent sought to divest its interest in Shaadi by selling shares to an alleged competitor of the site. The Appellant claimed the Respondent had colluded to oppress him as the minority shareholder and consequently initiated proceedings before the National Company Law Tribunal (the "NCLT Claim") in Mumbai, seeking remedies for corporate oppression. The Respondent applied for and obtained an anti-suit injunction in Singapore restraining the Appellant from pursuing proceedings with the NCLT on the basis that the proper forum was arbitration.

The Parties' SHA contained an agreement to arbitrate (the "Arbitration Agreement"). The Arbitration Agreement provided for arbitration seated in Singapore and subject to the ICC Rules of Arbitration. The Arbitration Agreement did not, however, specify the governing law of the Arbitration Agreement. The SHA, however, provided that performance under the SHA as a whole should be governed by the laws of the Republic of India.

The Singapore High Court decision

In October 2021, the High Court in Singapore granted the anti-suit injunction in favour of the Respondent, finding that arbitration was the proper forum for the dispute (see the decision here).

In reaching their decision, the High Court heard the Respondent's argument that allowing the NCLT Claim to continue would breach the arbitration clause within the parties' SHA. The Appellant argued that, as Indian law governed the SHA, it also governed the arbitration clause, and therefore the arbitrability of the dispute should be decided pursuant to the laws of the Republic of India. He claimed therefore that, as minority oppression claims were non-arbitrable under Indian law, the dispute could not be heard in arbitration and as such the NCLT had exclusive jurisdiction in the matter.

The High Court held that the arbitrability of a dispute should be determined by the law of the seat and, as the law of the seat (Singapore) deems shareholder disputes and minority oppression claims arbitrable, the dispute should be heard in arbitration. The issue as to whether the dispute was arbitrable was therefore a procedural rather than substantive matter.

The Singapore Court of Appeal decision

On appeal of the High Court's decision, the Singapore Court of Appeal (the "SGCA") was asked to decide whether the Appellant had breached the Arbitration Agreement by bringing the NCLT Claim (Anupam Mittal v Westbridge Ventures II Investment Holdings [2023] SGCA 1). The SGCA ultimately upheld the High Court's decision – that Singapore law applied to the question of arbitrability of the dispute and therefore the dispute should be heard in arbitration.

In reaching their decision, the SGCA held that the arbitrability of a dispute in Singapore should in fact be determined in the first instance by the law governing the arbitration agreement. The SGCA also provided that if a dispute is arbitrable under the governing law of an agreement but is seated in Singapore and the dispute is not arbitrable under Singaporean law, the arbitration will not be allowed to proceed in Singapore.

In establishing the governing law of the Arbitration Agreement, the SGCA applied the three-stage test provided in BCY v BCZ [2017] 3 SLR 357. In short, this test asks:

1. Whether the parties have expressly chosen a law governing the arbitration agreement;
2. If not, have the parties made an implied choice of the same – a choice of law under the main contract will in this instance hold strong sway unless there is an agreement which indicates the contrary; alternatively
   
3. The court will look for the law with the "most real and substantial connection" to the arbitration agreement. This law will normally be the law of the seat of the arbitration agreement.
   

On applying the first stage of the test to the SHA, the SGCA found that the express choice of Indian law to govern the SHA did not meet the requirement of an expressly chosen law of the Arbitration Agreement. The parties would only have succeeded in showing an express choice of law for the arbitration agreement if they could show clear and specific language to indicate the parties' choice.

Next, looking at whether the Parties made an implied choice, the SGCA confirmed that a choice of law under the main contract will be given strong consideration, unless the contract provides sufficient indication to the contrary. In Anupam Mittal, the SGCA found such an indication to contradict the argument that the Arbitration Agreement was subject to Indian law because "the implication that Indian law was intended to govern the arbitration agreement in the SHA…would mean frustrating the parties' intention to arbitrate all their disputes," (see the SGCA's decision at [74]). Despite a clear choice of governing law under the SHA and the general rule followed by many jurisdictions, the SGCA held it was not the Parties' implied choice that Indian law should govern the Arbitration Agreement.

The SGCA found that as the law of the seat of the arbitration was Singapore, Singaporean law would govern the procedure of arbitration, including challenges to the tribunal and/or its jurisdiction, and eventually an award. The SGCA provided the law which had the most real and substantial connection with the Arbitration Agreement was therefore a "straightforward exercise", and that Singapore law was therefore the law of the Arbitration Agreement.

The SGCA concluded that the NCLT Claim had been brought in breach of the Arbitration Agreement – the majority of complaints made by the Appellant to the NCLT related to the management of the Company or the SHA and fell within the scope of the Arbitration Agreement, as they were arbitrable under Singapore law. The SGCA dismissed the Appeal and upheld the Respondent's anti-suit injunction in favour of arbitrating the dispute.

The courts in England & Wales

Guidance given by the courts of England & Wales in respect of deciding the governing law of an arbitration agreement is limited, as courts generally recognise the ability of tribunals to decide the issue of arbitrability of a dispute. The courts will, when faced with the option of deciding on arbitrability or allowing arbitrators to determine the issue, take all circumstances into account (Golden Ocean Group Ltd v Humpuss Intermoda Transportasi Tbk Ltd & Anor [2013] EWHC 1240 (Comm)).

Arbitrability is first and foremost a matter of jurisdiction as, if a dispute is not arbitrable, the tribunal will not have jurisdiction to rule on the substantive issues of the case. In determining the arbitrability of a dispute, English courts might therefore first look to "the relevant laws of different states…concerned…[including] the law governing the arbitration agreement; the law of the seat of arbitration; and the law of the ultimate place of enforcement of the award." (See commentary in Redfern & Hunter: Law and Practice of International Commercial Arbitration 7^th Ed., at para. 2.129.)

Where parties have not expressly agreed on the governing law of an arbitration agreement, English courts may favour construing the governing law of the main contract as applying also to the arbitration agreement, even if a different country or national system of laws has been nominated as the seat. Reasons for this include "legal certainty, consistency, coherence, and the avoidance of complexity and artificiality." (See Redfern & Hunter: Law and Practice of International Commercial Arbitration 7^th Ed. at para. 2.91, and Enka Insaat Ve Sanayi AS v OOO Insurance Company Chubb [2020] UKSC 38, at [54].)

Key takeaway: parties should seek to expressly specify the governing law of an arbitration agreement

The decision in Anupam Mittal should encourage those drafting arbitration agreements to give due consideration to the phrasing of the arbitration agreement and seek to agree an express choice of law governing the same. Due consideration includes clearly specifying the choice of seat and any applicable institutional rules, and should be given, if for no other reason, for the sake of certainty and to avoid unnecessary jurisdictional issues such as that in Anupam Mittal.