Parties should clearly specify the seat of arbitration as this can be a hotbed of contention when international disputes emerge, writes Tata Capital’s Rohan Thacker
The seat or situs of arbitration has long been a pivotal point steering the course of arbitration. In international arbitration, where multiple countries, laws, legal systems, procedures and questions of conflict of laws are involved, the seat assumes an even more pronounced role and becomes the deciding factor for many issues that are closely tied to the seat. Some of these are questions as to arbitrability of a dispute, the law governing the procedure of arbitration, interpretation of the arbitration agreement, costs, challenges to awards, etc.
The law governing the arbitration process, or the curial law, is generally the law of the seat of arbitration. This can be different from the law that governs the substance of the dispute, which is generally the law applicable to the contract from which the dispute has arisen, and the law governing the agreement to arbitrate, which too can be agreed upon by the parties or determined based on other factors.
It is also a settled position that “seat” is not necessarily the same as “venue”, which merely connotes the physical location where the arbitral proceedings are conducted. Two recent and significant decisions from the courts in Singapore have further underlined the importance of seat.
Determining arbitrability pre-award
In a decision of the High Court of Singapore on 26 October, 2021 in Westbridge Ventures II Investment Holdings v Anupam Mittal, the court declared that the law of the seat, and not the proper law of the arbitration agreement, would determine subject matter arbitrability at the pre-award stage.
In this case the plaintiff held 30.96% of the share capital of People Interactive, a private limited company registered in Mumbai, and the defendant, Anupam Mittal, who was the managing director, held 43.85%, and his cousins, Anand Mittal and Navin Mittal, also held some shares. The plaintiff, the defendant People Interactive, Anand and Navin entered into a shareholders’ agreement.
The arbitration clause in question specified Indian law as the law governing the agreement and its performance. It further provided for disputes relating to the management of the company or any of the matters set out in the agreement to be referred to arbitration if negotiations failed. The arbitration was to be carried out in accordance with the rules laid down by the International Chamber of Commerce (ICC), with Singapore stipulated as the place of arbitration. Disputes arose between the parties regarding the management of the company concerned, and appointment of nominee directors to the board of directors.
The relevant portions of the arbitration clause are extracted below:
“This agreement and its performance shall be governed by and construed in all respects in accordance with the laws of the Republic of India … The arbitration proceedings shall be carried out in accordance with the rules laid down by International Chambers of Commerce and the place of arbitration shall be Singapore.”
The high court was primarily concerned with whether the disputes between the parties were arbitrable. Related to this was the question as to whether the bringing of claims by the defendant before the National Company Law Tribunal was in breach of the arbitration agreement.
In determining the first issue, the court went into the question of what law would apply to determine the question of subject matter arbitrability at the pre-award stage – the law of the seat (i.e. Singapore law) or the law governing the arbitration agreement. In the case in question, if the law of the seat were to be applied, the disputes between the parties would be arbitrable, since shareholder disputes and minority oppression claims are arbitrable.
The court relied on four propositions for arriving at this conclusion:
(1) Subject matter arbitrability, when raised at the pre-award stage before the seat court, is essentially an issue of jurisdiction;
(2) The same law should be applicable to arbitrability issues at both the pre-award and post award stages;
(3) Applying the law of the seat at the pre-award stage is more consistent with the policy to promote international commercial arbitration; and
(4) The weight of authority leans in favour of the law of the seat being applied.
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Rohan Thacker is deputy vice president at Tata Capital.