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An Analysis of the Arbitrability of Disputes before Singapore Courts: Anupam Mittal and the Composite Approach

Summary

On 6 January 2023, to kick off the new year, the Singapore Court of Appeal rendered a decision in the matter of Anupam Mittal v Westbridge Ventures II Investment Holdings [2023] SGCA 1 (“Anupam”).

The significance of the decision stems from the Court’s establishment that both the law of the seat and the law of the arbitration agreement must allow for a dispute to be arbitrated before the arbitration agreement can be upheld in the pre-award context (anti-suit injunction, application for stay of court proceedings, etc.). This is a departure from the traditional position taken by foreign jurisdictions which call for the law of the seat to answer such questions of arbitrability.

This decision paves the way for the law of the arbitration agreement to further grow in significance. Previously, the law would govern general issues of validity, however, the decision in Anupam also calls for the law of the arbitration agreement to govern the arbitrability of the dispute.

Facts

Westbridge Ventures II Investment Holdings (“Westbridge”) is a private equity fund which sought to acquire People Interactive Pte Ltd, the owner and operator of Shaadi, a popular Mumbai-based online matchmaking website (“People Interactive”).

People Interactive was founded by Anupam Mittal and his cousins, Anand Mittal and Navin Mittal, who served as shareholders when the company was founded in 1997.

As an investor in the company, Westbridge entered into a Shareholders’ Agreement (“SHA”) with Anupam Mittal and his cousins. The SHA contained an arbitration agreement noting Singapore as the law of the seat and India as the law governing the main contract. Furthermore, the agreement stated that disputes “relating to the management of the Company [People Interactive] or relating to any of the matters set out in this Agreement” shall be settled by arbitration.

Notably, the SHA dictated that if an Initial Public Offering (“IPO”) was not completed within five (5) years from the closing date, then Westbridge would be in their right to redeem its shares and – if necessary – “drag” all other shareholders to sell their shares to a third-party.

Westbridge held 44.38% of the shares in People Interactive whilst Anupam Mittal held 30.26% of the shares. Additionally, in accordance with the SHA, Westbridge appointed its nominee director to the board of People Interactive.

After the conclusion of the five (5) year period provided for in the SHA, no IPO was completed. The relationship between the parties soured when Westbridge sought to exit People Interactive due to the lack of IPO completion.

As part of the disengagement, Westbridge sought to divest its interest in People Interactive by selling its shares to an alleged competitor of Shaadi. In addition, Westbridge refused to consent to the reappointment of Anupam Mittal and Anand Mittal as the managing and founding directors of the company, respectively. Hence, the manifestation of the dispute.

Proceedings before the Singapore High Court

In 2021, Anupam Mittal filed a petition before the National Company Law Tribunal in India to, inter alia, injunct Westbridge from interfering in the management of the company on the grounds of corporate oppression.

In response, Westbridge applied for a permanent anti-suit injunction against the founders in Singapore before the Singapore High Court based on the Singapore-seated arbitration agreement within the SHA, seeking to restrain them from continuing the claim before the National Company Law Tribunal in India.

The founders of People Interactive argued that Indian law, which governs the SHA pursuant to a general choice-of-law clause within, also governed the arbitration agreement within the SHA.

And since Indian law applied to the question of arbitrability, the founders argued the dispute would be rendered non-arbitrable because corporate oppression and claims of mismanagement are not arbitrable pursuant to Indian law; as such, the National Company Law Tribunal would have exclusive jurisdiction over disputes of such nature.

Ultimately, the Singapore High Court granted Westbridge the anti-suit injunction.

The Singapore High Court held that it is the law of the seat which governs subject-matter arbitrability. The High Court held that, as the law of the seat in this matter was Singapore, the dispute could be arbitrated as claims of corporate oppression and mismanagement are arbitrable under Singapore Law.

Accordingly, the High Court determined that the proceedings before the National Company Law Tribunal were in violation of the arbitration agreement between the parties, as the agreement required that such disputes be referred to arbitration.

In essence, the High Court found that the parties had in fact intended to refer disputes relating to the management of People Interactive to arbitration due to the arbitration agreement within the SHA (which the High Court noted as broadly worded).

Anupam Mittal appealed the decision of the High Court before the Singapore Court of Appeal.

Proceedings before the Singapore Court of Appeal

Anupam Mittal argued:

  1. That the law of the arbitration agreement is the law that governs subject-matter arbitrability. As the law in this matter was Indian law, the case of corporate oppression and mismanagement was non-arbitrable. Further, the National Company Law Tribunal would have exclusive jurisdiction over such disputes.
  • That the wording of the arbitration agreement, “relating to the management of the Company”, cannot include disputes relating to corporate oppression and mismanagement as such disputes would render the arbitration agreement itself null under Indian law due to non-arbitrability.

In turn, Westbridge argued:

  1. That the law of the seat governs the question of arbitrability. Considering the law of the seat is Singapore in this matter, the Singapore High Court was correct in imposing the anti-suit injunction since disputes of corporate oppression and mismanagement are arbitrable pursuant to Singapore law.
  • That even if it is assumed that the law of the arbitration agreement governs the question of arbitrability, the law of Singapore would be applicable to the agreement. This stems from the argument that if the law of India was applicable to the agreement, disputes would be rendered non-arbitrable, which diametrically opposes Singapore’s policy for favoring arbitration.
  • That if the law of India was assumed to be the law of the arbitration agreement, disputes would still be arbitrable since the tribunal would be prevented from imposing any relief relating to corporate oppression and instead, would adjudicate the merits of the claim itself.
  • That regardless of whether Singapore law or Indian law governs the arbitration agreement, the disputes at hand are contractual in nature and ultimately relate to the management of the company. Because of this, Westbridge argues that the wording of the arbitration agreement covers disputes of such nature.

Fashioning a “Composite Approach”

The Singapore Court of Appeal (“SGCA”) disagreed with the position of the High Court and in doing so, fashioned a novel “composite approach” to determining the arbitrability in the pre-award context.

The composite approach dictates that the court must be satisfied that the subject-matter of the dispute is arbitrable under both the law of the seat and the law of the arbitration agreement.

The SGCA justified this approach vis-à-vis two elements:

  1. Whilst the UNCITRAL Model Law on International Commercial Arbitration (Model Law) specifies the law of the forum in the post-award stage, it does not specify the law governing arbitrability in the pre-award stage. In Singapore, legislative expression to the concept of arbitrability is provided for in section 11 of the International Arbitration Act 1994 (2020 Rev. Ed.) (IAA), which states that a dispute is not arbitrable if it is “contrary to public policy”. From the SGCA’s perspective, “public policy” is contextualized broadly enough for the SGCA to consider the public policies of the foreign jurisdiction. The SGCA argued that in drafting section 11 of the IAA, the drafters would have contemplated that the public policy of a foreign jurisdiction could impact the parties or the arbitration, to some extent.
  • Moreover, the SGCA held that the arbitration agreement together with the law that governs it, forms the determination for what nature of disputes the parties have agreed can be arbitrated. Whilst the arbitration agreement forms the source of the tribunal’s jurisdiction, the law of the arbitration agreement determines the validity of the agreement itself. As such, if the law which governs the arbitration agreement sets that a class of disputes is non-arbitrable, that class of disputes would ultimately be non-arbitrable. The law of the seat is triggered to determine arbitrability of a dispute only if the law of the arbitration agreement has determined that the dispute may be arbitrated. If the law of the seat determines a dispute as non-arbitrable, it would be considered an “additional obstacle” pursuant to Article 34(2)(b)(i) of the Model Law and subsequently, rendered a need for the “composite approach”.

The BCY 3-Stage Test

To determine what law governs an arbitration agreement, the Singapore courts apply the BCY 3-stage test, derived from BCY v BCZ [2017] 3 SLR 357 (“Test”).

The Test is as follows:

  • Stage 1
    • First, the court will determine whether the parties have expressly chosen a law to govern the arbitration agreement between them.
  • Stage 2
    • Second, should an express choice not have been made, the court will examine whether the parties have made an implied choice of law to govern the arbitration agreement. In most cases, the choice of law governing the main contract will indicate what the law governing the arbitration agreement is, unless the parties have expressly agreed otherwise.
  • Stage 3
    • Finally, if stages 1 and 2 are unsuccessful in determination, the court will ascertain the system of law that most closely parallels or connects with the arbitration agreement.

Applying the BCY 3-Stage Test to Anupam

With respect to stage 1 of the Test, a general and express choice of law governing the main contract would not suffice as an express choice of law governing the arbitration agreement.

Rather, in Anupam, the SGCA found that the reference to Indian law found at Clause 20.1 of the SHA does not constitute as an express choice of law. Clause 20.1 of the SHA states:

“This Agreement and its performance shall be governed by and construed in all respects and in accordance with the laws of the Republic of India”

Due to the lack of specific language within the clause, the SGCA could not consider that the parties expressly made their choice of law by selecting Indian law.

With respect to stage 2 of the Test, if the parties had failed to expressly choose a law at stage 1, uncertainty arises as to what law governs the arbitration agreement during stage 2 of the Test. In Anupam, the SGCA found that although the law governing the main contract was Indian law as per Clause 20.1 of the SHA, the Court found sufficient implication that the parties intended for a Singapore law to govern the arbitration agreement. This implication stems from the frustration that the parties would face, given that corporate oppression disputes are non-arbitrable under Indian law.

Hence, the SGCA determined that Singapore law is the law governing the arbitration agreement.

Subsequently, once Singapore law had been held as the governing law of the arbitration agreement, the SGCA analyzed whether the proceedings before the National Company Law Tribunal fell within the scope of the arbitration agreement.

The SGCA designated the disputes covered by the arbitration agreement into two categories:

  1. Disputes relating to the mismanagement of the company.
  2. Disputes relating to the provisions and interpretation of the SHA.

In doing so, it found that all of the claims detailed within Anupam Mittal’s petition before the National Company Law Tribunal fell within one of the two categories above.

Hence, the SGCA determined the proceedings were in breach of the arbitration agreement and upheld the High Court’s anti-suit injunction.

Significance

Anupam is a significant decision for any parties that have selected Singapore as their seat of arbitration, in which the issue of arbitrability is in play.

Disputes would be found arbitrable only if both the law of the seat and the law of the arbitration agreement stipulate that they are.

When choosing Singapore as the seat of arbitration, parties would benefit from specifying their choice of law for the arbitration agreement, preferably within the arbitration agreement itself. It would also be beneficial to select a choice of law which is ‘pro-arbitration’ to minimize the lack of frustration on the arbitrability of the subject-matter, such as France (Paris) or the United Kingdom (London).

Furthermore, it is prudent to note, as per Article V(2)(a) of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, the final award may still be deemed unenforceable due to non-arbitrability under the laws of the enforcing country.

This is because the “composite approach” taken by the SGCA is a departure from the standard practice of many national courts, which typically apply the law of the seat on pre-award issues of arbitrability.

It remains to be seen whether other arbitration-heavy jurisdictions will adopt the “composite approach”, but ultimately, an express selection of the choice of law governing the arbitration agreement will benefit the parties in achieving greater certainty vis-à-vis the arbitrability of the dispute.

Conclusion

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