Traditionally, there has been a lack of clarity across jurisdictions over what law applies to determine whether a dispute is arbitrable. The Singapore Court of Appeal has now set out a novel "composite" approach, considering both the law governing the arbitration agreement and the law of the seat.
Background: Arbitrability and public policy
Arbitrability concerns whether a dispute can be resolved by arbitration.
Most jurisdictions generally respect the parties' freedom to submit disputes to arbitration. However, this is subject to public policy considerations. A state may decide that particular types of disputes may not be submitted to arbitration. This could be, for example, because the State views the resolution of such types of disputes to fall exclusively under public functions, or that such disputes have public interest implications that should be heard in the public domain.
Examples of non-arbitrable disputes include criminal matters, domestic relations and succession, bankruptcy, and trade sanctions.1
In dealing with arbitrability, a preliminary question may arise as to which law determines whether a dispute is arbitrable. This could be critical given the different positions across States on what is arbitrable – the answer to this question could determine whether a party could validly submit a dispute to arbitration.
This question, which appears not to have come before any other common law jurisdiction in the past, was recently placed before the Singapore High Court,2 and subsequently, the Singapore Court of Appeal (which we examine below).
Anupam Mittal v Westbridge Ventures II Investment Holdings [2023] SGCA 1
Relevant Facts
The case involved a shareholder dispute relating to a matrimonial service company in India. The parties' relationship deteriorated when Westbridge sought to sell its shares in the company to a third party, while at the same time compelling minority shareholders, including Anupam Mittal ("Mittal"), to do the same. This gave rise to claims by Mittal involving allegations of minority oppression, mismanagement and breach of fiduciary duties.
The parties' relationship was governed by a shareholder's agreement ("SHA"). The SHA was governed by Indian law. It contained an arbitration clause that provided for the arbitration of disputes "relating to the management of the Company or relating to any of the matters set out in [the SHA]".3 The seat of arbitration was Singapore, to be conducted under the ICC Rules.
In 2021, Mr Mittal brought an action before the National Company Law Tribunal in India, seeking remedies for corporate oppression. This prompted Westbridge to file an anti-suit injunction in Singapore. The proceedings eventually came before the Singapore Court of Appeal (the "Court").
Decision
Of particular interest here is the Court's "choice-of-law" analysis, ie, its approach to determine the law governing arbitrability. The Court also went on to determine what law governed the arbitration agreement here, applying the test set out in previous Singapore and English cases.
What law governs the issue of arbitrability?
Here, the Court adopted a novel, "composite" approach to deal with this question.
The Court held that the arbitrability of a dispute is, in the first instance, determined by the law governing the arbitration agreement. This is because the arbitration agreement "deals with matters of the validity of the agreement" and precedes the actual conduct of the arbitration.4
Thus, if the law governing the arbitration agreement is a law foreign to Singapore, and that law provides that the subject matter of the dispute cannot be arbitrated, the Singapore court will not allow the arbitration to proceed because it would be contrary to public policy (albeit foreign public policy) to enforce such an arbitration agreement.
The Court then went on to explain that, under Singapore law, the law of the seat would potentially be an additional obstacle. That is, a dispute may be arbitrable under the law of the arbitration agreement, but if Singapore law as the law of the seat considers that dispute to be non-arbitrable, the arbitration would not be able to proceed (in this case, because of Singapore public policy).
As such, under Singapore law, both the law governing the arbitration agreement and the law of the seat are relevant in determining whether a dispute is arbitrable.
What is the proper law of the arbitration agreement?
The Court also examined here what law governed the arbitration agreement. In doing so, it applied the three-stage test set out in BCY v BCZ5 (which followed the approach in the English case of Sulamerica6), which looks at:
- Stage 1: Whether the parties expressly chose the law governing the arbitration agreement;
- Stage 2: In the absence of an express choice, whether the parties made an implied choice of the proper law, with the starting point being the law of the contract; and
- Stage 3: If neither an express nor implied choice can be discerned, which system of law has the closest and most real connection with the arbitration agreement.
Here, the parties did not specify the governing law of the arbitration agreement.
The Court could also not find an implied choice of law. The Court considered whether the parties impliedly chose Indian law as the governing law of the arbitration agreement, in light of their choice of Indian law as the law of the contract. However, the Court found sufficient indication to displace this presumed choice of Indian law. As the Court reasoned, the parties, which are of Indian nationality, must have known that corporate management disputes are generally not arbitrable in India, yet they specifically chose to arbitrate them under Singapore law and in Singapore. An implied choice of Indian law would negate the parties' intention to arbitrate those disputes.
Finally, the Court, at the third stage of the inquiry, concluded that because the seat of arbitration is Singapore, Singapore law had the most real and substantial connection with the arbitration agreement.
Based on the above, the Court held that the claims at hand were arbitrable, and that Mittal's commencement of legal proceedings in India breached the arbitration agreement in the SHA. The Court thus maintained the anti-suit injunction against Mittal's pursuit of the Indian proceedings.
Significance
Arbitrability comes up less and less, as countries expand the scope of disputes that can be arbitrated. However, this decision highlights that arbitrability continues to be a live issue, at least in some jurisdictions.
Parties should bear in mind these three considerations to maximize the likelihood that the dispute may be successfully submitted to arbitration:
- Understand what laws are relevant: As a starting point, parties should understand what laws might apply to determine arbitrability. Under Singapore law, for example, the relevant ones are the laws governing the arbitration agreement and of the seat of arbitration. It would be prudent to take into account both these sets of laws, as other jurisdictions may or may not adopt a similar "composite"approach.
- Choose laws with the most expansive approaches to arbitrability: In considering which laws to choose, parties need to be aware of the scope of arbitrability under each option, to avoid any pitfalls (that is, for the dispute to be non-arbitrable under a particular chosen law). All things being equal, parties would generally do well to choose laws that take the most expansive approaches to arbitrability, to allow for the broadest scope of disputes to be arbitrated.
- Choose the same laws: Finally, it would be ideal to choose the same set of laws for both the law of the arbitration agreement and that of the seat. This would avoid the risk that one of them considers the dispute arbitrable, and the other does not.
1 Born, International Commercial Arbitration (Kluwer Law International, 3rd ed., 2021), section 6.01.
2 Westbridge Ventures II Investment Holdings v Anupam Mittal [2021] SGHC 244.
3 Anupam Mittal v Westbridge Ventures II Investment Holdings [2023] SGCA 1, para. 63 (citing clause 20 of the SHA).
4 [2023] SGCA 1, para. 53.
5 BCY v BCZ [2016] SGHC 249.
6 Sulamérica Cia Nacional de Seguros SA and others v Enesa Engelharia SA and others [2013] 1 WLR 102.
Nolan Lee (White & Case, Associate, Singapore) contributed to the development of this publication.
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This article is prepared for the general information of interested persons. It is not, and does not attempt to be, comprehensive in nature. Due to the general nature of its content, it should not be regarded as legal advice.
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