Author: Nishanth Kadur*
| Jurisdictions: | Topics: |
Introduction
Subject-matter non-arbitrability has routinely hindered the enforcement of arbitration agreements in various jurisdictions. While cases relating to criminal law, matrimonial relationships, and consumer disputes are almost universally recognized as non-arbitrable, there is variance in the treatment of subject matters such as anti-trust claims, intellectual property, fraud, and shareholder oppression. For instance, under Indian law, shareholder oppression cases are not arbitrable and must necessarily be submitted to the National Company Law Tribunal.[1] In China, antitrust claims are not arbitrable,[2] and under Pakistan law, disputes with prima facie evidence of fraud are not arbitrable and must instead be filed before national courts.[3]
A court is usually called upon to determine the arbitrability of a dispute at the pre-award stage in two situations: i) where reference to arbitration is sought in an existing court case (instituted in breach of an arbitration agreement), and ii) where an anti-suit injunction suit is filed for restraining a party from instituting or continuing legal proceedings in breach of an arbitration agreement. Although these reliefs serve slightly different functions, both are ultimately aimed at effectively enforcing an arbitration agreement. Therefore, the system of law a court chooses to determine arbitrability will play a crucial role in deciding whether the relief sought in such cases is granted.
In this post, I will critically discuss the Singapore Court of Appeal’s recent decision in the case of Anupam Mittal v. Westbridge Ventures II Investment Holdings [2023] SGCA 1, which lays down a new “composite” test for determining arbitrability at the pre-award stage. I will then examine whether this decision has made the enforcement of arbitration agreements in Singapore through anti-suit injunctions more onerous.
The Singapore Court of Appeal’s Decision
In Anupam Mittal, the Court of Appeal dealt with a request for an anti-suit injunction. Interpreting Section 11 of Singapore’s International Arbitration Act 1994 (“IAA”)[4] to include both, domestic public policy and foreign public policy, it held that a dispute that is not arbitrable under the governing law of the arbitration agreement cannot be arbitrated in Singapore. In essence, it ruled that a matter must be deemed non-arbitrable by a Singaporean Court if arbitrating such a matter would be contrary to public policy under the law chosen by the parties to govern the arbitration agreement.
Thereafter, drawing from Article 34(2)(b)(i) of UNCITRAL Model Law (“Model Law”)[5] and Section 11 of Singapore’s IAA, it held that arbitrability must also be examined under the law of the seat, since an award may be set aside if the subject matter was not arbitrable under the law of the seat. As a natural corollary, in cases where the governing law of the arbitration agreement is not explicitly stipulated, a Singaporean Court must take on the additional task of first determining such governing law before examining arbitrability.
The Court embarked on an interesting analysis to determine the governing law of the arbitration agreement in this case, keeping in mind the dicta in Sulamerica[6] and BCY.[7] In Sulamerica, the English Court of Appeal held that a court must first examine whether there is an express choice of the governing law of the arbitration agreement in the parties’ agreement, and in the absence of such an express choice, the Court must try to ascertain if there was an implied choice by the parties. If an implied choice is also not forthcoming, then it must apply the law that has the closest and most real connection with the arbitration agreement. The Court also noted that although the parties’ choice of governing law of the contract is a strong indicator of the parties’ choice of the governing law of the arbitration agreement, that indication may be displaced if the effectiveness of the arbitration agreement is negated by applying the governing law of the contract. In BCY, the Singapore High Court adopted Sulamerica’s three-stage test and clarified further that the parties’ choice of the governing law of the main contract must be presumed to also be their implied choice for governing the arbitration agreement; such a presumption is only to be displaced if it has the effect of negating the arbitration agreement itself.
Drawing from the wide scope of the arbitration clause and the attention given by the parties to the mechanics of the arbitration in the clause, the Court in Anupam Mittal concluded that the parties intended to arbitrate all disputes that may arise between them. Such an intention, it noted, would be frustrated if Indian Law—the governing law of the main contract—were to govern the arbitration agreement, since oppression claims are non-arbitrable in India. On this basis, it decided that Singaporean Law—the law of the seat—was the law applicable to the arbitration agreement. In essence, through rejecting the system of law that would invalidate the arbitration clause and instead applying the law that would validate it, the Court by implication applied the Validation Principle.
The English Approach to Determining Arbitrability in Anti-Suit Injunction Cases
The Singaporean High Court in Anupam Mittal rightly observed that no court in the Commonwealth had answered the question of which law applies in determining arbitrability at the pre-award stage. In two more recent cases, however, the English High Court encountered a similar set of facts: i) the seat chosen by the parties was England, ii) the governing law of the main contract was not English Law, and iii) anti-suit injunctions were sought against proceedings before a statutory court in Russia in relation to the insolvency of one of the parties—a subject matter that is non-arbitrable in Russia.
In the 2018 decision of Nori Holding,[8] the English High Court analyzed whether the dispute was arbitrable. It did not undertake a choice of law analysis and instead examined the nature of the dispute before deeming it arbitrable. However, the Court’s reference to the English Arbitration Act[9] and the English Court of Appeal’s decision in Fulham[10] indicates that it examined the question only with reference to English Law. In the 2021 decision of Riverrock Securities[11] again, the High Court applied English Law to determine arbitrability without a detailed choice of law analysis. However, it noted that the governing law of the arbitration agreement was English Law and observed that “the issues of arbitrability which arise are matters of English law as the law of both the arbitration agreements and the seat,”[12] without any further analysis. Therefore, while English Courts, much like Singaporean Courts, have readily granted anti-suit injunctions to enforce an arbitration agreement, a definitive pronouncement on the applicable law for determining pre-award arbitrability is awaited.
Analysis and Key Takeaways from Anupam Mittal
Singapore is a preferred arbitral seat for parties across the world, especially from jurisdictions, such as India, where the domestic law and concomitantly the state courts still follow an interventionist approach towards certain subject matters. While the Anupam Mittal decision has provided clarity on how a Singaporean Court will deal with the issue, it has certainly increased the level of scrutiny to be undertaken at the pre-award stage.
The test propounded in the case compels a determination on i) governing law of the arbitration agreement, and ii) the arbitrability of the dispute even before a tribunal is constituted. This militates against the principle of Kompetenz Kompetenz as, even prior to the constitution of the tribunal, the court of the seat would have already conclusively rendered a decision on these issues. Furthermore, in situations where the parties have explicitly specified a governing law that is different from the law of the seat, detailed hearings on the arbitrability of the subject matter under such a foreign law, including taking expert evidence, may be in order. Even in an efficient legal landscape such as that of Singapore, this may consume a considerable amount of time.
However, the Court’s choice of law analysis for arriving at Singaporean Law as the governing law of the arbitration agreement should assuage some concerns. Parties rarely specify the governing law of the arbitration agreement explicitly—this could in large measure be due to its non-inclusion in the model clauses of top arbitration institutions in the world such as ICC, SIAC, LCIA, and CIETAC.[13] A key takeaway from this decision is that if an intention to arbitrate can be shown from the agreement, the fact that a dispute is explicitly non-arbitrable in another jurisdiction will have no bearing in Singapore, as long as it is arbitrable in Singapore.
This can have some fascinating practical implications. By opting for a wide and generic arbitration clause and choosing Singapore as the seat of arbitration, a foreign party may not only successfully arbitrate a dispute that is evidently non-arbitrable under the laws to which it is subject, but also restrain the counterparty from approaching courts and statutory tribunals. This can be better illustrated with the following example. Most disputes falling under the jurisdiction of the Debts Recovery Tribunal (“DRT”)—a specialized tribunal with powers to attach and order the sale of property to facilitate speedy recovery of loans given by banks in India, are non-arbitrable under Indian Law. However, a borrower capable of negotiating an appropriately worded Singapore-seated arbitration clause can not only arbitrate such disputes in Singapore, but arguably also obtain an anti-suit injunction against the bank before a Singaporean Court if DRT proceedings are commenced against it in India.
Such injunctions will be effective, as violating an injunction in Singapore can have serious implications, including imprisonment and monetary fines. Since the arbitral seat in such cases will be Singapore, it is highly unlikely that a party will willfully disregard such an injunction order, unless it decides to not participate in the arbitration at all.
Is Applying the “Lex Fori” a Better Approach?
A court that is called upon to determine the arbitrability of a dispute may have no connection to the arbitral seat or the law governing the arbitration agreement. It is also probable that it has no connection to either. For instance, let us assume a party from the United States and a party from Singapore choose Paris as the arbitral seat and English Law as the law governing the arbitration agreement. If the Singaporean party commences court litigation in breach of the arbitration clause citing non-arbitrability and the party from the United States seeks a stay on court proceedings in accordance with Article 8 of the Model Law (read with Section 6 of Singapore’s IAA), which law should the Singaporean Court apply to determine arbitrability?
If the “composite approach” is adopted, the Singaporean Court must examine arbitrability under both English law and French law. Irrespective of whether a court adopts a prima facie review or a full review, if it is expected to apply some foreign law(s), the entire process will be not only cumbersome but also time-consuming, and consequently, antithetical to the idea of arbitration being a speedy dispute resolution mechanism.
In contrast, applying the lex fori (i.e., the law of the forum deciding the case) at the pre-award stage appears to be a more practical approach, as the obstacle of applying some foreign law to determine the issue will be eliminated. This approach appears to be the most favored one by courts internationally, having been adopted by courts in the United States, France, Switzerland, the Netherlands, Belgium, Austria, Italy, and Sweden.[14]
Conclusion
The Singapore Court of Appeal’s decision in Anupam Mittal does put in place a more onerous mechanism for obtaining an anti-suit injunction in cases where arbitrability is at issue. It remains to be seen how other jurisdictions deal with this question in future cases.
* Nishanth Kadur is an India-qualified dispute resolution lawyer specializing in commercial arbitration and litigation. He is currently pursuing his LL.M. in International Arbitration at the National University of Singapore.
[1] The Companies Act, 2013, §430.
[2] Shell China Co. Ltd. v Huili Hohhot Co., Ltd.], Sup. People’s Ct. Case No. 47, August. 21, 2019 (China).
[3] HUBCO Power Company v. WAPDA (2000) PLD (SC) 841 (Pak.).
[4] International Arbitration Act 1994, § 10(3) (Sing.).
[5] UNCITRAL, Model Law on International Commercial Arbitration 1985: with Amendments as Adopted in 2006 (2006).
[6] Sulamerica CIA Nacional De Seguros SA v. Enesa Engenharia SA [2012], EWCA (Civ) 638.
[7] BCY v. BCZ [2016], SGHC 249.
[8] Nori Holding Ltd. and Others v. Public Joint-Stock Company Bank Otkritie Financial Corporation [2018] EWHC (Comm) 1343.
[9] The Arbitration Act 1996, c. 27 (UK).
[10] Fulham Football Club (1987) Ltd v. Richards & Anr. [2011) EWCA (Civ) 855.
[11] Riverrock Securities Limited v. International Bank of St Petersburg (Joint Stock Company) [2020] EWHC (Comm) 2483.
[12] Ibid., Para. 31.
[13] Queen Mary University of London School of International Arbitration, 2021 International Arbitration Survey: Adapting Arbitration To A Changing World (2021), https://arbitration.qmul.ac.uk/research/2021-international-arbitration-survey/ (last accessed May 6, 2023). HKIAC’s model arbitration clause makes a provision for the law applicable to the arbitration agreement.
[14]For an analysis of the cases, see Gary Born, International Commercial Arbitration (Kluwer Law International 3) 644 (2021).