Amanda Lees, Clémence Bernard and Sarah Jones comment on a Singapore Court of Appeal decision determining that arbitrability is to be determined by the law of the arbitration agreement and the seat.

Contrary to the weight of significant authority, the Singapore Court of Appeal has decided that whether the subject matter of a dispute is one capable of resolution by arbitration[1] (i.e., whether it is ‘arbitrable’) is to be determined according to both the proper law of the parties’ arbitration agreement and the law of the seat.

The Court’s novel “composite” approach to determining subject matter arbitrability at the pre-award stage in Anupam Mittal v Westbridge Ventures II Investment Holdings[2] has highlighted the importance of specifying the proper law of the arbitration agreement and considering the interaction between the law of the arbitration agreement and the law of the seat at the time of the transaction.

Our key takeaways for the drafting of arbitration clauses are summarised at section 6 below.

1          Factual and Procedural Background

This case concerned a dispute between Anupam Mittal (Mittal), an Indian resident and co-founder of People Interactive (India) Private Limited (the Company), and Westbridge Ventures II Investment Holdings (Westbridge), a private equity fund incorporated under the laws of Mauritius. In early 2006, Westbridge purchased shares in the Company. In connection with Westbridge’s investment, the parties entered into a shareholders’ agreement (SHA) which, among other matters, provided for:

• Indian law as the governing law of the SHA; and
• submission to arbitration in Singapore in accordance with the rules of the International Chamber of Commerce in the event of a dispute “relating to the management of the Company or relating to any of the matters set out in [the SHA].”

By 2017, the parties’ relationship began to deteriorate, and Westbridge looked to exit its investment in the Company. Attempts by Westbridge to exercise certain redemption and drag along rights contained in the SHA culminated in Mittal commencing proceedings for minority oppression before the National Company Law Tribunal in Mumbai (NCLT). Westbridge successfully obtained an ex parte interim anti-suit injunction from the Singapore High Court on the ground that commencement by Mittal of the NCLT proceedings was a breach of the parties’ arbitration agreement. Mittal subsequently brought an application to set aside the interim injunction, which was the subject of the Court’s decision in Anupam Mittal.

2          Key Issues

On appeal, the ultimate issue for resolution by the Court of Appeal was whether commencement of the NCLT proceedings was a breach of the parties’ arbitration agreement. This would have only been the case if the subject matter of the NCLT proceedings, being a minority oppression claim, was (a) capable of resolution by arbitration and (b) fell within the scope of the arbitration agreement.

The Court thus needed to address two key legal issues:

• whether the question of subject matter arbitrability at the pre-award stage is to be determined according to the law of the seat or the proper law of the arbitration agreement; and
• what was the proper law of the arbitration agreement.

3          Composite approach to subject matter arbitrability

States have decided that certain subject matters can only be determined in national court systems and cannot be determined by private arbitrations. These subject matters vary from state to state. Common examples include custody of children, validity of patents and bankruptcy.

Section 11(1) of the International Arbitration Act 1994 (IAA)[3] addresses arbitrability in Singapore seated arbitrations and provides that 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 Court of Appeal found that ‘public policy’ in section 11 is not limited to the public policy of Singapore but rather extends to foreign public policy where this arises in connection with essential elements of an arbitration agreement.[4]

In the present case, the Court adopted a two-tiered approach to arbitrability, known as the ‘composite approach’:

• In the first instance, arbitrability is determined by the law that governs the arbitration agreement. If it is a foreign governing law and it provides that the subject matter cannot be arbitrated, the Singapore court will not allow the arbitration to proceed as it would be contrary to foreign public policy to permit such an arbitration to take place. In taking this approach, the Court focused on the parties’ agreement to submit their dispute to arbitration as the “fount of the tribunal’s jurisdiction” [5] and stressed that the tribunal could not have jurisdiction over disputes that were not arbitrable under the law of the arbitration agreement;
• In the second instance, where a dispute may be arbitrable under the law of the arbitration agreement but non-arbitrable under Singapore law as the law of the seat, the arbitration will not be able to proceed as this would be contrary to Singapore public policy.

This novel approach represents a departure from numerous other jurisdictions which have applied the law of the forum (which is usually the law of the seat) at the pre-award stage when considering arbitrability.[6] Further, subject matter arbitrability is now looked at differently at the pre-award and post-award stage in Singapore. Article 34(2)(b)(i) of the UNCITRAL Model Law on International Arbitration (the Model Law, which is law in Singapore) expressly selects the law of the forum as the law governing subject matter arbitrability at the post-award stage – there is no consideration of the law of the arbitration agreement. When considering the analogous but different issue as to the validity of the arbitration agreement, the UK Supreme Court noted that the same law should be applied to the validity of the arbitration agreement whether raised before or after an award has been made.[7]

4          Singapore law was the proper law of the arbitration agreement

The Court of Appeal then determined the proper law of the arbitration agreement in accordance with the three-stage test outlined in BCY v BCZ [2017] 3 SLR 357. It found that:

• the parties had not expressly chosen the proper law of the arbitration agreement, as their choice of Indian law as the governing law of the SHA did not constitute, of itself, an express choice. Given that the governing law provision stated “This Agreement and its performance shall be governed by and construed in all respects in accordance with the laws of the Republic of India” this was surprising and shows the importance of explicitly stating that any governing law provision applies to the arbitration agreement;[8]
• the parties’ intention to settle all of their disputes by arbitration with the courts playing a supporting role was not consistent with an implied choice of Indian law, as it would negate the agreement since oppression claims are not arbitrable in India.[9] Here the Court pointed to the specific reference in the arbitration agreement to disputes relating to the management of the Company being resolved by arbitration and held that this would be frustrated if Indian law applied to the arbitration agreement;
• in the absence of an express or implied choice of law, the system of law with which the arbitration agreement has its closest and most real connection is Singapore law, which governs the procedure of the arbitration as the law of the seat;
• having come to the conclusion that the law governing the arbitration agreement is Singapore law and given that oppression claims are arbitrable in Singapore, the Court held that the disputes between the parties were arbitrable;
• accordingly, the Court agreed with the Judge of the High Court that the institution of the NCLT proceedings was a breach of the arbitration agreement and maintained the anti-suit injunction.

5          Will the composite approach be adopted by other jurisdictions?

Singapore is a leading arbitration law jurisdiction, and its decisions are often influential in other jurisdictions that have adopted the Model Law, like Hong Kong and Australia. That said the composite approach is grounded in a non-Model Law provision of Singapore’s law on international arbitration that allowed the Court to consider foreign public policy and accordingly may not be adopted elsewhere. As noted by the amicus curiae in the case Professor Chan, the composite approach is unnecessarily restrictive.[10] Other supervisory courts, at other seats, may prefer to leave the decision to the Tribunal as to arbitrability of the dispute under the foreign law governing the arbitration agreement, given that it is another facet of jurisdiction.

Further, as one commentator put it, the Court’s approach was seemingly paradoxical. Having stressed the importance of considering the non-arbitrability rules under the relevant foreign law in setting out the composite law approach, the Court then said that the foreign law couldn’t be the proper law of the arbitration agreement unless explicitly chosen by the parties as that choice would mean the disputes were non-arbitrable.[11]

6          Key Takeaways

Anupam Mittal establishes a precedent for the application of the law of the arbitration agreement to the question of subject matter arbitrability at the pre-award stage under Singapore law. When structuring an arbitration clause, parties would be prudent to consider the following key takeaways from Anupam Mittal, particularly where Singapore is chosen as the seat of arbitration:

• parties should consider whether the range of disputes that may fall within the scope of their arbitration clause will be arbitrable under both the law of the arbitration agreement and the law of the seat:
  • for Singapore seated arbitrations, the domestic Singapore courts will apply the law of the arbitration agreement in determining the question of subject matter arbitrability at the pre-award stage; and
  • the law of the seat is of overriding importance under section 11(1) of the IAA and a dispute cannot proceed to arbitration in Singapore if it is not arbitrable under national law.
• parties should include an express choice of law clause for the arbitration agreement in no uncertain terms in addition to any governing law clause that may otherwise be included in the contract. It should state words to the effect that “this agreement to arbitrate is governed by the laws of [specified national laws]”.

[1] New York Convention, Arts II(1) and V(2)(a); Model Law, Arts 34(2)(b)(i) and 36(1)(b)(i).

[2] [2023] SGCA 1 (“Anupam Mittal”).

[3] 2020 Rev Ed.

[4] Anupam Mittal (n2) [48].

[5] Anupam Mittal [53].

[6] Anupam Mittal (n 2) [43]-[44]. These jurisdictions include the United States, France, Switzerland, Holland, Belgium, Italy, Austria and Sweden.

[7] [2020] UKSC 38 [136].

[8] By contrast the UK Supreme Court in Kabab-Ji SAL (Lebanon) v Kout Food Group (Kuwait) [2021] UKSC 48 held that an English governing law provision applied expressly to the arbitration agreement when the governing law provision used the words “This Agreement” and stated elsewhere that “This Agreement consists of … the terms of agreement set forth herein below …”

[9] The presence of a governing law clause will, as a general rule, supply a presumption that the parties impliedly chose the same law as the proper law of the arbitration agreement unless there is something in the circumstances that negates that implied choice.

[10] Anupam Mittal [60].

[11] Akash Karmarkar, “Anupam Mittal v Westbridge: Potential Paradox of the Singapore Court of Appeal’s ‘Composite Approach’ on the Law Applicable to Arbitrability”, Kluwer Arbitration Blog, 26 May 2023