Case Commentary
Anupam Mittal v Westbridge Ventures II Investment Holdings [2023] SGCA 1
By Leonard Loh (Selvam LLC)
Takeaways: Parties must properly consider and expressly provide for the law of the arbitration agreement, and not merely treat it as a given that the proper law of the arbitration agreement would invariably be the proper law of the contract as expressly chosen by the parties.
Summary
On 6 January 2023, the Singapore Court of Appeal, being the highest Court level in Singapore, issued an illuminating judgment in Anupam Mittal v Westbridge Ventures II Investment Holdings [2023] SGCA 1 (“Anupam Mittal”) on a key question that has not been dealt with definitively. The question posed to the Court of Appeal is as follows: what system of law determines, at the pre-award stage, whether a dispute is arbitrable or not.
The Singapore Court of Appeal endorsed the “composite approach”. The question of arbitrability is “in first instance, determined by the law that governs the arbitration agreement”. Notwithstanding, if the law of the seat regards a dispute as being non-arbitrable, the said law of the seat will also be applied to render the dispute non-arbitrable (at [55]). A Singapore court is allowed take cognisance of both the law of the arbitration agreement and the law of the seat because, in the Court of Appeal’s view, section 11(1) of the International Arbitration Act 1994 (the “IAA”) requires a Singapore court to have regard to local and foreign public policy.
Background facts
The facts of Anupam Mittal are fairly straightforward.
The Appellant is an Indian resident, whilst the Respondent is a company incorporated under the laws of Mauritius. The Appellant and Respondent are parties to a Shareholders’ Agreement (the “SHA”) in respect of a company incorporated under the laws of India and named People Interactive (India) Private Limited (the “Company”), which sought to regulate parties’ rights and responsibilities as shareholders. Clause 20.1 of the SHA provided for, among other things, that the SHA “and its performance shall be governed by and construed in all respects in accordance with the laws of the Republic of India” and that “[i]n the event of a dispute relating to the management of the Company or relating to any of the matters set out in th[e] Agreement, parties to the dispute”, parties shall take certain actions in good faith before referring the dispute to arbitration under the auspices of the International Chamber of Commerce. The “place of the arbitration” was specified to be Singapore.
The relationship between the Appellant and the Respondent soured, culminating in the Appellant’s commencement of Company Petition No 92 of 2021 before the National Company Law Tribunal (the “NCLT”) in Mumbai, India (the “NCLT Proceedings”). The Court of Appeal took the view that the allegations in the NCLT Proceedings relate “either to the management of the Company or to the SHA in some way” and “proof of these complaints … may justify a finding that the respondent [and other parties] have acted unfairly towards the appellant or managed the Company in such a manner as amounts to oppression” (at [96]). It is common ground between the parties that claims of corporate oppression are arbitrable under Singapore law, but not under Indian law (since they can only be resolved by the NCLT) (at [61]). The Respondent was of the view that the Appellant’s commencement of the NCLT Proceedings were in breach of the arbitration agreement contained in the SHA, and obtained in the Singapore High Court an interim and permanent injunction against the Appellant, restraining him from, among other things, prosecuting the NCLT Proceedings. The Appellant was dissatisfied with the decision and appealed to the Singapore Court of Appeal.
The Singapore Court of Appeal dismissed the appeal and upheld the permanent injunction, even though it disagreed with the Singapore High Court’s decision that the law of the seat of the arbitration should govern the question of whether the subject matter of a dispute is arbitrable.
Composite approach in determining question of arbitrability
In coming to the decision that the law of the arbitration agreement should govern the question of whether the subject matter of a dispute is arbitrable, the Singapore Court of Appeal first analysed the language of section 11(1) of the IAA, which states as follows: “Any 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”. The Singapore Court of Appeal was of the view that the term “public policy” under section 11(1) of the IAA is not limited to matters of Singapore public policy, but also of foreign public policy. In support of this decision, the Singapore Court of Appeal pointed out that, for example, section 31(4)(b) of the IAA allows a Singapore court to refuse enforcement of a foreign award if the enforcement “would be contrary to the public policy of Singapore” (emphasis added). The fact that section 11(1) of the IAA does not provide a similar restraint on the scope of the public policy to be considered meant that the Singapore court must consider both local and foreign public policy.
Having found that the Singapore court is not restraining to only considering local public policy, the Singapore Court of Appeal highlighted that the “law of the seat deal with matters of procedure but the law of the arbitration agreement deals with matters of the validity of the agreement and is, in that sense, anterior to the actual conduct of the arbitration” (at [53]). Hence, the Singapore court must first apply the law of the arbitration agreement and see if the said system of law regards the dispute as being arbitrable or non-arbitrable; if the law of the arbitration agreement renders the dispute non-arbitrable, “there can be no question of an arbitration coming into effect to deal with the non-arbitrable part of the dispute” (at [54]). Further, if an arbitration agreement does not come into effect, the law of the seat is irrelevant (at [54]).
However, the Singapore Court of Appeal made it clear that the analysis of non-arbitrability cannot stop at the law of arbitration agreement. In endorsing the abovementioned “composite approach”, a Singapore court must also consider if the dispute is arbitrable under Singapore law as the law of the seat. If it is non-arbitrable under the Singapore law, then a Singapore court is compelled by considerations of local public policy and the arbitration would not be able to proceed (at [55]).
In rejecting the submission by the amicus curiae that the composite approach “combines the disadvantages of both approaches … without offering any clear benefit”, the Singapore Court of Appeal stated that Singapore’s encouragement of arbitration cannot override “principles of comity or insist on the application of Singapore law to a substantive matter involving a foreign system of law expressly chosen by the parties” (at [60]). The Singapore Court of Appeal emphasised that it is for parties and their legal advisors to “investigate possible differences in public policy between the two systems and craft an arbitration agreement which in its choices of proper law and seat would prevent such difficulties from frustrating parties’ desire to settle disputes by arbitration” (at [60]). It is thus absolutely crucial that proper legal advice be sought at the early stages, and not leave key issues of arbitrability to chance (as is the case, in some instances, involving boilerplates clauses).
The law of the arbitration agreement is not necessarily the law of the contract
The need for early recourse to legal counsel is also emphasised in the Singapore Court of Appeal’s finding that the law of the arbitration agreement in Singapore law, despite the Appellant being an Indian resident, the Company being incorporated under the laws of India, and the SHA being expressly governed by Indian law.
The Singapore Court of Appeal first endorsed (at [62]) the three stage test to determine the proper law of an arbitration agreement in BCY v BCZ [2017] 3 SLR 357. First, the Court must consider whether parties expressly chose the proper law of the arbitration agreement. Second, in the absence of an express choice, the Court must consider whether parties made an implied choice of the proper law, with the starting point being the law of the contract. Third, if neither an express nor an implied choice can be discerned, the Court must consider which system of law the arbitration agreement has the closest and most real connection.
At the first stage, the Singapore Court of Appeal held that there was no express choice of proper law of the arbitration agreement, since “[a]n express choice of law for an arbitration agreement would only be found where there is explicit language stating so in no uncertain terms” (at [66]). It is not sufficient for parties to merely state that the SHA and its performance “shall be governed by and construed in all respects in accordance with the laws of the Republic of India”.
At the second stage, the Singapore Court of Appeal was of the view that there was no implied choice of the proper law of the arbitration agreement, despite parties’ express choice of Indian law to govern the SHA. In reaching this conclusion, the Singapore Court of Appeal made reference to issues of arbitrability. The Singapore of Court Appeal held that the facts in this case demonstrated parties’ strong desire for all disputes to be resolved by arbitration, and that they must have been aware that questions of Indian company law would generally fall to be determined by the Indian courts but yet “chose to arbitrate under Singapore law in Singapore and according to the rules of the ICC” (at [72]). Hence, there was “something in the circumstances that negated” the suggestion that parties’ implicitly chose Indian law to be the proper law of the arbitration agreement.
Having found that there was a lack of express or implied choice of the proper law of the arbitration agreement, the Singapore Court of Appeal found that the system of law that had the most real and substantial connection with the arbitration agreement was Singapore law, given that the law of the seat of the arbitration is Singapore law (at [75]). This conclusion is a cautionary tale to all parties to have early recourse to legal counsel to avoid any unintended consequences in a dispute situation.
Applying Singapore law first as the law of the arbitration agreement and subsequently as the law of the seat, no issues of non-arbitrability arise. Thereafter, the Singapore Court of Appeal concluded that the dispute which was referred to the NCLT fell within the scope of the arbitration agreement since the dispute either related to the management of the Company or to the SHA in some way (at [96]). Then, notwithstanding parties’ common ground that claims of corporate oppression are not arbitrable under Indian law, the Singapore Court of Appeal stated that it was “too speculative to conclude that it is fruitless to conduct an arbitration just because of the possibility that the award would not be enforceable in India” (emphasis added), citing that the arbitration would give parties a strong indication of the strength of their respective cases, and that determinations could give rise to res judicata and estoppel points that could be used by parties in court proceedings in India or elsewhere. The Singapore Court of Appeal thus dismissed the appeal and maintained the permanent injunction, ordering that the Appellant pay costs of S$100,000.
Implications
It is common for parties to regard dispute resolution clauses as standardised boilerplate clauses which do not require substantial input from legal counsel. However, as this case shows, there are potential pitfalls in a laissez-faire attitude towards the language of arbitration agreements, especially if there is a need to grapple local and foreign public policy issues relating to arbitrability. This case is also a reminder to parties to properly consider and expressly provide for the law of the arbitration agreement, and not merely treat it as a given that the proper law of the arbitration agreement would invariably be the proper law of the contract as expressly chosen by the parties.
About Selvam LLC
On 1 January 2011, Selvam LLC entered into a joint law venture with Philadelphia-based United States law firm Duane Morris LLP. The affiliation, formally known in Singapore as an Enhanced Joint Law Venture (JLV), was the first U.S.-Singapore joint venture to be approved by Singapore as part of the enhanced liberalisation of its legal services market in 2008. The joint venture, known as Duane Morris & Selvam LLP, enables Duane Morris to strengthen its capabilities, access and presence in Asia through Selvam LLC’s top-ranked Singapore corporate and disputes practices, and likewise helps Selvam to leverage the support of Duane Morris’ U.S. and other international offices.
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