Case Note: Anupam Mittal v Westbridge Ventures II Investment Holdings [2023] SGCA 1 – Examining the law governing arbitrability at the pre-award stage

The Court of Appeal ("CA") in the case of Anupam Mittal v Westbridge Ventures II Investment Holdings [2023] SGCA 1 ("Anupam Mittal") had to determine a previously undecided point of law in Singapore: which system of law governs the arbitrability of a dispute at the pre-award stage, i.e., the law of the seat of the arbitration (lex fori) or the law governing the arbitration agreement.  It is noteworthy that the CA departed from the position adopted by other jurisdictions and applied a new two-tiered approach to determine the arbitrability of a dispute at the pre-award stage.

Background Facts

The Appellant was the founder of a company known as People Interactive (India) Private Limited (the "Company"). The Respondent was a private equity fund which invested in the Company. The Company owned and operated a well-known matrimonial service co-founded by the Appellant and his two cousins, both of which were shareholders of the Company. Thereafter, the Respondent entered into two agreements with the Appellant and his cousins – a Share Subscription and Share Purchase Agreement, and a Shareholders' Agreement (the "SHA"). Both agreements have identically worded governing law and arbitration clauses identifying Indian law as the law of the contract, and Singapore as the seat of the arbitration in accordance with the rules laid down by the International Chambers of Commerce.

The parties' relationship broke down in 2017 when the Respondent sought to exit from the Company. Amongst other things, it is alleged that the Respondent had colluded with other shareholders of the Company to oppress the Appellant who is a minority shareholder.

(i)         National Company Law Tribunal ("NCLT") Proceedings

The Appellant proceeded to file an application with the NCLT in Mumbai, and obtained remedies for corporate oppression which included, amongst other things, an injunction to restrain the Respondent and its related persons from disrupting the management of the Company and/or conducting the Company's affairs in a manner that is prejudicial or oppressive.

(ii)        Originating Summons 242 ("OS 242")

In response to the NCLT Proceedings, the Respondent filed an application in the High Court of Singapore coming under OS 242 and obtained, amongst other reliefs, an urgent ex parte interim anti-suit injunction against the Appellant. In granting the injunction, the High Court found that:-

1. The law that governed the issue of arbitrability at the pre-award stage was the law of the seat, i.e., Singapore;
   
   
2. The parties' disputes fell within the broad language of the arbitration agreement; and
   
   
3. The breach of the arbitration agreement in the SHA (due to the commencement of the NCLT Proceedings) prima facie entitled the Respondents to the anti-suit injunction.

(iii)        The Appeal

The Appellant appealed against the High Court's aforementioned decision in OS 242. One of the issues the CA had to consider was whether questions of arbitrability are to be determined according to the law of the seat or the law of the arbitration agreement.

Arbitrability Law Issue: Which system of law governs the issue of subject-matter arbitrability at the pre-award stage?

The issue of subject-matter arbitrability had to be determined in this case as the disputes between the Appellant and the Respondent related to oppression and mismanagement. Under Indian law, such disputes would not be arbitrable because the NCLT has exclusive jurisdiction to adjudicate them. On the other hand, oppression and mismanagement claims are arbitrable under Singapore law.

Jurisdictions such as the United Kingdom, United States, France, Switzerland, Holland, Belgium, Italy, Austria and Sweden have applied the lex fori. In particular, the UK Supreme Court in Enka Insaat Ve Sanayi AS v. OOO Insurance Company Chubb [2020] 1 WLR 4117 considered that it would be "illogical" for different systems of law to govern subject-matter arbitrability depending on the timing of the challenge to the validly of the arbitration agreement, i.e., whether the challenge was raised before or after an award has been made.

The CA adopted a different reasoning. It considered that the other jurisdictions had not placed sufficient weight on "the importance of public policy in relation to issues of arbitrability". The CA interpreted Section 11(1) of Singapore's International Arbitration Act to mean that "if it is contrary to local or relevant foreign public policy to determine an arbitration agreement by arbitration, that dispute cannot proceed to arbitration in Singapore".

The CA went on to hold that the law of the seat of the arbitration governs the procedural matters of the arbitration and will only apply if the arbitration agreement is valid in the first place. The validity of the arbitration agreement (i.e., whether the dispute is arbitrable) must in turn be governed by the law of the arbitration agreement.

In the premises, the CA formulated a "composite approach" to determine the arbitrability of a dispute at the pre-award stage:-

1. At the first instance, the arbitrability of a dispute is determined by the law governing the arbitration agreement. If the law governing the arbitration agreement is foreign law (i.e., other than Singapore law) and that law provides that the subject matter of the dispute cannot be arbitrated, the Singapore court will not allow the arbitration to proceed for public policy considerations; and
2. Even if the dispute may be arbitrable under the law of the arbitration agreement, but Singapore as the law of the seat considers the dispute to be non-arbitrable, the arbitration would also not be able to proceed in light of public policy considerations.

The composite approach effectively means that both the law of the arbitration agreement and the law of the seat are relevant in determining the issue of arbitrability at the pre-award stage.

In contrast, the law of the seat alone would normally be applicable at the post-award stage in deciding whether the matters contained in the arbitration award were arbitrable or not.

The CA went on to hold that the law of the arbitration agreement was in fact Singapore law and the dispute was therefore arbitrable. In coming to its decision, the CA referred to the three-stage test set out in BCY v BCZ [2017] 3 SLR 357 and found that: (i) the parties did not make an express choice of law for the arbitration agreement; (ii) it was unlikely that Indian law was the implied choice of law for the arbitration agreement given that corporate management disputes are generally not arbitrable in India; and (iii) Singapore law had the most real and substantial connection with the arbitration agreement.

Practical Considerations

The CA's composite approach in Anupam Mittal in determining the arbitrability of a matter at the pre-award stage stands in stark juxtaposition from the established practice of many other national courts which have applied the law of the seat at both the pre- and post-award stages.

The composite approach places the onus on contracting parties to make the necessary inquiries to satisfy themselves that any potential disputes will be arbitrable under the laws governing the arbitration agreement as well as the laws of the seat of arbitration. As the CA observed, "[t]here is no reason why during the contract negotiation process, they should not be able to investigate possible differences in the 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 the parties' desire to settle disputes by arbitration."

While the governing law of the substantive contract is a strong indicator of the governing law of the arbitration agreement, Anupam Mittal also serves as a cautionary tale that such a presumption could possibly be displaced by the facts of the case.

To minimise any ambiguity as to whether a dispute is arbitrable and to give full effect to parties' intention to refer their disputes to arbitration, the following precautionary steps are recommended:

1. in addition to providing for the governing law of the substantive contract, expressly provide for the governing law of the arbitration agreement;

    

2. in selecting the law of the arbitration agreement and the seat of the arbitration, seek legal advice and be mindful of public policy considerations in various jurisdictions which may render certain subject-matter disputes incapable of being determined by arbitration; and

    

3. consider the jurisdictions where any arbitral award is likely to be enforced and be mindful of the risk that the award may not be enforceable if the subject-matter of the dispute is not capable of being arbitrated under the laws of that jurisdiction.