Singapore's Apex Court Sets Out Approach for Determining the Law Governing Subject Matter Arbitrability at the Pre-Award Stage
On January 6, 2023, the Singapore Court of Appeal released its decision in Anupam Mittal v. Westbridge Ventures II Investment Holdings [2023] SGCA 1 (“Anupam v. Westbridge (CA)”) in which it considered, for the first time, the question of what law governs subject matter arbitrability at the pre-award stage. The Singapore Court of Appeal held that the proper law governing subject matter arbitrability at the pre-award stage should be the law governing the arbitration agreement.1 This approach stands in contrast to that taken by national courts from the U.S. and various European countries, which apply the law of the forum (typically the law of the seat) to determine subject matter arbitrability at the pre-award stage. The Singapore Court of Appeal also recognised that in Singapore-seated arbitrations, Singapore law could still be an additional obstacle to subject matter arbitrability in that local public policy could bar disputes from proceeding to arbitration even if those disputes would have otherwise been arbitrable under the law of the arbitration agreement.2 Separately, the Singapore Court of Appeal also provided guidance on what law governs an arbitration agreement which does not contain an express choice of law.3
This decision highlights two key considerations for parties. First, in deciding the applicable law, parties should carefully consider how the proposed law of the arbitration agreement and the proposed law of the seat will impact the arbitrability of potential disputes arising under the underlying contract. Second, parties should expressly stipulate the governing law of the arbitration agreement, lest they risk the courts applying a system of law that the parties did not contemplate to the arbitration agreement. It is currently not common practice in arbitration clauses to state the governing law of the clause, separate from the underlying contract’s governing law clause. In light of Anupam v. Westbridge (CA), clauses that select Singapore as the seat or the Singapore International Arbitration Centre’s arbitration rules should explicitly state the governing law of the clause as well. This practice note is accordingly relevant to both arbitration practitioners and transactional lawyers.
Background
The case at hand arose from a dispute between shareholders of a company which owns and operates a matrimonial service (the “Company”). The Appellant was one of the founders of the Company.4 The Respondent is a private equity fund which had invested in the Company in early 2006. Through this investment, the Respondent and the founders of the Company (including the Appellant) executed a Shareholders’ Agreement (“SHA”),5 which included an arbitration clause that provided for, among other things: (a) Indian law as the governing law of the underlying contract; and (b) Singapore as the seat of the arbitration. The arbitration clause did not stipulate any law governing the arbitration agreement.6
By 2017, the Parties’ relationship deteriorated, culminating in a minority oppression action filed by the Appellant against the Respondent and the other founders of the Company before the Indian courts (the “NCLT Proceedings”).7 In response to the Appellant’s filing of the NCLT Proceedings, the Respondent filed an action before the Singapore courts for an anti-suit injunction over the NCLT Proceedings.8 While an urgent ex parte anti-suit injunction was granted by the Singapore courts, the Appellant subsequently moved to resist the anti-suit injunction.9
The Court of Appeal’s decision
The Singapore High Court found that it was the law of the seat which would apply to determine the issue of subject matter arbitrability at the pre-award stage, on the basis that, among other things, this was more consistent with the policy of promoting international commercial arbitration, and the overall weight of authority.10
The Court of Appeal disagreed with the High Court’s finding that the law of the seat should be applied to determine the issue of subject matter arbitrability at the pre-award stage. In its judgment, the Court of Appeal held that the “law of the seat deals with matters of procedure but the law of the arbitration agreement deals with matters of the validity of the agreement and is, in that sense, anterior to the actual conduct of the arbitration”.11 As the “fount of the tribunal’s jurisdiction”,12 the Court of Appeal considered that the governing law of the arbitration agreement was, in the first instance, the law that determined the arbitrability of the dispute.13
The “composite approach” to determining arbitrability
In coming to this decision, the Court of Appeal espoused a “composite approach” to determine the arbitrability of disputes: if the law governing the arbitration agreement is a foreign governing law, and that foreign governing law provides that the subject matter of the dispute cannot be arbitrated, the Singapore courts would not allow the arbitration to proceed because it would be contrary to foreign public policy. At the same time, by virtue of Section 11(1) of the Singapore International Arbitration Act, which provides that “[a]ny disputes 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”,14 a dispute that could be arbitrable under the law governing the arbitration agreement could still be unable to proceed if Singapore law, as the law of the seat, considered that dispute to be non-arbitrable.15 In other words, while the governing law of the arbitration agreement determines arbitrability of disputes at the pre-award stage in the first instance, Singapore public policy could pose an additional obstacle to finding the arbitrability of disputes for Singapore-seated arbitrations.
Determining the proper law of the arbitration agreement
Having found that the law of the arbitration agreement governs the question of arbitrability, the Court of Appeal proceeded to determine the proper law of the arbitration agreement, setting forth a three-stage test for its analysis:
(a) Whether parties expressly chose the proper law of the arbitration agreement.
(b) Absent an express choice, whether parties impliedly chose the proper law to govern the arbitration agreement, with the starting point for determining the implied choice of law being the law of the contract.
(c) If neither an express choice nor an implied choice can be discerned, which is the system of law with which the arbitration agreement has its closest and most real connection.16
This test is consistent with the test applied by the UK Supreme Court in Enka Insaat Ve Sanayi AS v. OOO Insurance Company Chubb [2020] 1 WLR 4117, which is summarised in this client update.
Applying the test, the Court of Appeal found that there was no express choice of governing law for the arbitration agreement, but that the Parties had made an implied choice of Indian law to be the proper law governing the arbitration agreement as that was the law of the underlying contract.17 However, this implied choice of governing law was displaced in the present case because applying Indian law to be the law governing the arbitration agreement would frustrate the parties’ intention to arbitrate their disputes relating to the management of the Company because minority oppression disputes are non-arbitrable in India. The fact that the Parties had specifically crafted an arbitration agreement in the SHA and had chosen Singapore as the seat, in the Court of Appeal’s view, indicated the Parties’ intention to settle their disputes by arbitration. This intention was inconsistent with, and thus negated, the presumption that the Parties had impliedly chosen Indian law to be the law governing the arbitration agreement.18
The Court of Appeal concluded that as the law of the seat of the arbitration, Singapore law was the law with the most real and substantial connection with the arbitration agreement in the SHA. The governing law of the arbitration agreement in this case was therefore Singapore law.19
Key takeaways
Two key takeaways arise from this decision.
First, in negotiating arbitration agreements, parties should carefully consider how the law of the arbitration agreement and the law of the seat impact the arbitrability of potential disputes arising under the underlying contract. For Singapore-seated arbitrations, both the law of the arbitration agreement and the law of the seat must be considered; while the former properly governs the question of arbitrability of disputes, the latter is still relevant as the resolution of the dispute by arbitration cannot be contrary to Singapore public policy. As a matter of best practice, parties should ensure that any potential disputes would be arbitrable under both the law of the arbitration agreement and the law of the seat.
Second, and relatedly, parties should take care to stipulate expressly the governing law of the arbitration agreement, in addition to stipulating expressly the law governing the underlying contract. This is a significant change to the current practice of not generally stating the governing law of the arbitration clause, separate from the governing law of the underlying contract. While, in most cases, courts would presume also that parties intended the law governing the underlying contract to govern the arbitration agreement, this presumption could be displaced, as in the present case, thereby leading to uncertainty over the proper governing law of the arbitration agreement.
1 Anupam v. Westbridge (CA), ¶ 55.
2 Anupam v. Westbridge (CA), ¶ 52.
3 Anupam v. Westbridge (CA), ¶¶ 70-75.
4 Anupam v. Westbridge (CA), ¶ 4.
5 Anupam v. Westbridge (CA), ¶ 5.
6 Anupam v. Westbridge (CA), ¶ 6.
7 Anupam v. Westbridge (CA), ¶ 15.
8 Anupam v. Westbridge (CA), ¶ 16.
9 Anupam v. Westbridge (CA), ¶¶ 21-22.
10 Westbridge Ventures II Investment Holdings v. Anupam Mittal [2021] SGHC 244, ¶ 23.
11 Anupam v. Westbridge (CA), ¶ 53.
12 Anupam v. Westbridge (CA), ¶ 53.
13 Anupam v. Westbridge (CA), ¶ 55.
14 International Arbitration Act 1994 (2020 Rev Ed) (Singapore), § 11(1).
15 Anupam v. Westbridge (CA), ¶ 55.
16 Anupam v. Westbridge (CA), ¶ 62.
17 Anupam v. Westbridge (CA), ¶ 70.
18 Anupam v. Westbridge (CA), ¶¶ 72-74.
19 Anupam v. Westbridge (CA), ¶ 75.
Sidley Austin LLP provides this information as a service to clients and other friends for educational purposes only. It should not be construed or relied on as legal advice or to create a lawyer-client relationship.
Attorney Advertising - For purposes of compliance with New York State Bar rules, our headquarters are Sidley Austin LLP, 787 Seventh Avenue, New York, NY 10019, 212.839.5300; One South Dearborn, Chicago, IL 60603, 312.853.7000; and 1501 K Street, N.W., Washington, D.C. 20005, 202.736.8000.
