Justice Philip Jeyaretnam: Speech delivered at SMU's 9th Journal of Private International Law Conference 2023

Singapore Management University

3 August 2023

"Arbitrability and Public Policy: A Discussion of Anupam Mittal v Westbridge Ventures II Investment Holdings [2023] SGCA 1"

The Honourable Justice Philip Jeyaretnam⁽¹⁾
President, Singapore International Commercial Court

1. I am honoured to have been invited to address this distinguished gathering of leading academics in the field of private international law. I have often looked to the Journal of Private International Law for topical yet scholarly insights into comparative conflicts of law. I am delighted that this edition of the biennial conference is taking place in Singapore. It brings together a glittering constellation of talent and expertise from across the globe. Because Singapore is both a hub for international financial and business transactions and because we are a centre for cross-border dispute resolution, conflicts of law issues frequently present themselves in our courts. For cases coming to the Singapore International Commercial Court (“SICC”), these are by definition international as well as commercial. For this reason, it is often the case that different laws apply to different aspects of the matter, and there may also be conflicts of law questions to resolve concerning which laws apply to which aspects. One procedural advantage of the SICC is that we can hear submissions directly on points of foreign law. Foreign law does not have to be treated as a matter of evidence to be adduced through experts in that foreign law. This has proven to be beneficial in achieving greater clarity concerning the content of foreign law that may be relevant to a dispute. In addition, judges who are members of the coram may be themselves familiar with such foreign law, as we have international judges drawn from different common law and civil traditions, such as Australia, Canada, China, France, India, Japan, the UK and the US.

2. In this keynote address I will focus on a recent decision of the Court of Appeal concerning arbitrability. Let me start by describing a domestic example of this doctrine. When a dispute arises between two parties doing business in the same country and they have entered into an arbitration agreement for disputes between them to be resolved by arbitration in that same country, the questions arise first of whether the dispute falls within the scope of the arbitration agreement and second even if it does so whether the subject matter of that dispute is one that is arbitrable or non-arbitrable. A dispute may not be arbitrable if it concerns matters that in that country are considered to be the preserve of the courts. Such matters may have been expressly precluded from arbitration by legislators or national courts may have considered that it is contrary to public policy for them to be resolved by arbitration. For example, disputes concerning status of individuals such as divorce have traditionally been considered non-arbitrable, as have disputes concerning the ancillary arrangements for children following a divorce. The same has traditionally applied to questions of insolvency, including whether a company should be wound up, given the broader implications of such a change in status. Generally, matters which involve public rights and concerns may be considered non-arbitrable. If the subject of a dispute is non-arbitrable, then the arbitral tribunal will not have jurisdiction over it and it will have to be resolved elsewhere in a court or tribunal established by the state for the purpose of hearing such types of matters.

3. Given that public policy as it applies to the types of disputes that may be arbitrated differs between different states, how the issue of arbitrability affects an arbitration becomes more complex when parties have agreed to refer the dispute to arbitration seated in a different or third country. Courts may have to consider and make orders in relation to arbitral proceedings at two different stages. One is before an award and the other is after an award is made. Under the UNCITRAL Model Law on International Commercial Arbitration, the court to which challenges to jurisdiction may properly be brought is the court at the seat of the arbitration.When this happens after an award, the Model Law explicitly states as a ground for challenge that “the [arbitration] agreement is not valid under the law to which the parties have subjected it”: see Article 34(2)(a)(i). Article 34(2)(b) also provides as a ground for challenge non-arbitrability under the law of the state where the challenge is brought. However, the Model Law is silent on the applicable law at the pre-award stage. One occasion when a seat court may have to consider arbitrability at the pre-award stage is when one party brings an action in the court or tribunal of a country over than the seat. Let’s assume that ordinarily such court or tribunal would otherwise have jurisdiction to hear the dispute. An application may then be made to the court located at the seat of the arbitration seeking an anti-suit injunction against the first party commencing or continuing such proceedings in the other country. The ground for seeking an injunction would be that commencing such proceedings is a breach of the arbitration agreement.

4. However, this in turn presupposes the existence of a valid arbitration agreement that is now being breached. As I have just noted, the validity of an arbitration agreement is determined by reference to the law that governs it when this question falls for decision in the context of a challenge to the award. One view has been that, by extension and for reasons of consistency, arbitrability at the pre-award stage, as a facet of validity and jurisdiction, should also be considered in the light of the law of the arbitration agreement, while another view has been that it should be a matter exclusively for the lex fori.

5. What the applicable law is will matter especially where the types of disputes considered to be non-arbitrable differ as between the system of law governing the arbitration agreement and the system of law at the seat.

6. This question was recently considered and determined by the Singapore Court of Appeal in Anupam Mittal v Westbridge Ventures II Investment Holdings [2023] SGCA 1 (“Mittal v Westbridge”). This case concerned a shareholders’ dispute relating to an Indian company under contracts governed by Indian law with a choice of Singapore as the arbitration seat. Indian and Singapore laws differ when it comes to what types of company dispute are arbitrable. The decision is of great significance for both arbitration practitioners and scholars of private international law. For this reason, it is the subject of my address to this learned conference.

Brief facts of Mittal v Westbridge

7. The parties in Mittal v Westbridge were shareholders of an Indian-incorporated company founded by Mittal, who is a well-known Indian entrepreneur. Westbridge is a Mauritian private equity fund that had invested in the company.

8. Two contracts executed by the parties were relevant to the decision– the shareholders’ agreement (“SHA”) and the supplementary agreement. I will refer to them collectively as the “Contracts”. The Contracts contained identically worded governing law and arbitration clauses. Under these, the governing law of the Contracts was Indian law, and all disputes arising between the parties that could not be resolved by good faith discussion were to be referred to arbitration seated in Singapore. At this point I should mention two things about the wording of the governing law and arbitration clauses. The choice of Indian law expressly added the phrase ‘in all respects’. As for the arbitration clause it did not just make the typical reference of applying to disputes relating to the Contracts but specifically also made mention of disputes “relating to the management of the Company”.

9. In 2017, Westbridge expressed its wish to exit the company. The parties’ relationship soured. In 2021, Mittal commenced proceedings before the National Company Law Tribunal (“NCLT”) in Mumbai, India, seeking remedies for corporate oppression (“NCLT Proceedings”).

10. In response, Westbridge commenced proceedings in Singapore and obtained an ex parte interim anti-suit injunction against Mittal. Mittal then commenced a suit in the Bombay High Court seeking, among other things, a declaration that the NCLT was the only competent forum to hear and decide the disputes raised in the NCLT Proceedings. As of the date the Court of Appeal issued its decision, the Bombay suit had not been fixed for hearing.

11. The Singapore High Court granted a permanent anti-suit injunction against Mittal on the basis that the commencement of the NCLT Proceedings was in breach of the arbitration agreement between the parties. In so finding, the Judge held that subject matter arbitrability is governed by the law of the seat, being Singapore law, under which the dispute was arbitrable. Additionally, assuming the law of the arbitration agreement was Indian law, the Judge found that the dispute fell within the scope of the arbitration agreement.

12. On appeal, Mittal submitted that arbitrability is determined by the law of the arbitration agreement, and that this was Indian law. The disputes raised in the NCLT Proceedings related to oppression and the mismanagement of the company. Under Indian law, such disputes are not arbitrable. In any event, Mittal submitted that the disputes did not fall within the scope of the arbitration agreement.

Law governing arbitrability

13. A key issue dealt with by the Court of Appeal was which law governs the issue of arbitrability – be it the law of the seat, forum, or arbitration agreement. In the process of its determination, the Court of Appeal also commented on the relationship between arbitrability and public policy. In particular, the Court of Appeal considered that the drafters of the Model Law and past decisions of national courts in various jurisdictions had placed insufficient weight on the importance of public policy in determining questions of arbitrability. Reiterating its dicta from the earlier decision of Tomolugen Holdings Ltd and another v Silica Investors Ltd and other appeals [2016] 1 SLR 373 (“Tomolugen”) at [75], the Court of Appeal stated that “the essential criterion of non-arbitrability is whether the subject matter of the dispute is of such a nature as to make it contrary to public policy for that dispute to be resolved by arbitration” [emphasis in original].⁽²⁾ In Tomolugen, the Court of Appeal held that a dispute over minority oppression or unfairly prejudicial conduct by the majority in a company is arbitrable even though some of the relief available to a court in such matters, such as winding up, cannot be granted by an arbitrator. The fact that the relief sought might be beyond the power of the arbitral tribunal to grant did not in and of itself make the dispute non-arbitrable. There was nothing to preclude the underlying dispute from being resolved by an arbitral tribunal, with the parties remaining free to apply to the court for the grant of any specific relief which might be beyond the power of the arbitral tribunal to award. In so far as any findings had been made in the arbitration in such a case, the parties would be bound by such findings and would, at least as a general rule, be prevented from re-litigating those matters before the court.

14. Returning to Mittal v Westbridge, the Court of Appeal in that case then elaborated that “public policy”, as stated in s 11 of the International Arbitration Act 1994 (2020 Rev Ed) (the “IAA”), refers not only to Singapore’s public policy, but also “extends to foreign public policy where this arises in connection with essential elements of an arbitration agreement”.⁽³⁾ This interpretation of “public policy” is supported by the underlying purpose of the IAA – ie, to “facilitate international commercial arbitration based on the principles embodied in the Model Law”.⁽⁴⁾ The authority of an arbitration agreement derives from parties’ consensus. Accordingly, the Court of Appeal held that subject matter arbitrability is determined first by reference to the law of the arbitration agreement.

15. Logically, the making of a valid arbitration agreement precedes the choice of seat. The seat is chosen as one of the incidents of the arbitration agreement. If the arbitration agreement is not valid, then there would be no effective choice of seat.

16. The effect of the Court of Appeal’s decision is that where a subject matter is non-arbitrable under the law of the arbitration agreement but would be arbitrable under Singapore law, the Singapore court, as the seat court, would not permit the arbitration proceedings to proceed as it would be contrary to foreign public policy to enforce the arbitration agreement.

17. Now what about if the dispute is of a type that is arbitrable under the law governing the arbitration agreement but not under the law of Singapore as the seat? This question did not arise for decision but the Court of Appeal considered that such a dispute could not proceed to arbitration in Singapore.⁽⁵⁾ This is also by virtue of s 11 of the IAA. In the Court of Appeal’s judgment, this section limits the determination of disputes by arbitration to those where it is not contrary to Singapore public policy to do so.

18. This means that for an arbitration to proceed in Singapore it must be arbitrable both under the law of the arbitration agreement and under the law of Singapore, as the law of the seat – a doctrine of “double arbitrability” if you will.

19. The Court of Appeal included a plea for more thoughtful and considered drafting iof arbitration clauses with these words:⁽⁶⁾

• [t]here is no reason why during the contract negotiation process, [the parties and their legal advisors] should not be able to investigate possible differences in 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.

Proper law of the arbitration agreement

20. Turning to the proper law of the agreement, the Court of Appeal applied the three-stage test, previously laid out in BCY v BCZ [2017] 3 SLR 357 following the English case of Sulamerica Cia Nacional da Seguros SA v Enesa Engelharia SA [2013] 1 WLR 102. At the first stage, the court considers whether there was an express choice of the law governing the arbitration agreement. At the second stage, if there was no express choice, the court then considers whether there was an implied choice. At the third stage, if there was no express or implied choice of governing law, the court considers which law has the most real and substantial connection with the arbitration agreement.

21. On the question of express choice, the Court of Appeal considered the identical governing law clauses that “[the Contracts] and [their] performance shall be governed by and construed in all respects in accordance with the laws of the Republic of India” [emphasis omitted]. The Court of Appeal found that the phrase “in all respects” was insufficient to constitute an express choice for the arbitration agreement as well as the Contracts proper. Accordingly, the parties had not expressed a choice of law to govern the arbitration agreement.

22. Turning to implied choice of law to govern the arbitration agreement, this ordinarily follows the express choice of the law governing the contract unless there are circumstances negating that conclusion. Here, the law governing the Contracts was Indian law. However, the usual inference to be drawn from this was negated by the fact that applying Indian law would have frustrated the parties’ intention to arbitrate all their disputes. The parties had clearly spelt out their desire to arbitrate disputes relating to management of the company. It was a commercial agreement for which parties had plainly given considerable thought. It would not make sense for parties to impliedly choose a law to govern their arbitration agreement that would not enable their intention to arbitrate to be fulfilled. The Court of Appeal hence moved to the third stage of the inquiry and found that Singapore law had the most real and substantial connection with the arbitration agreement, given that Singapore had been expressly chosen as the seat. Thus, the proper law of the arbitration agreement was Singapore law.

23. Under Singapore law, claims relating to mismanagement of companies and minority oppression are arbitrable: see Tomolugen. Further, the Court of Appeal found that the complaints made by Mittal in the NCLT Proceedings were related to the management of the company or to the SHA and fell within the scope of the arbitration agreement. Thus, Mittal’s commencement of the NCLT Proceedings amounted to a breach of that arbitration agreement. Consequently, the Court of Appeal dismissed the appeal and upheld the grant of the permanent anti-suit injunction on a different legal analysis to that of the court below.

24. In other words, the question of pre-award subject matter arbitrability is determined by reference to the public policy of the jurisdictions of both the law of the arbitration agreement and seat. Notwithstanding that the Contracts concerned an Indian company, the public policy of India was not engaged, because Singapore law governed the arbitration agreement and Singapore was the chosen seat.

Commentary

25. I would now like to make some comments on the implications of the decision.

26. First, it will be immediately apparent that unless parties expressly choose a foreign law as the governing law of the arbitration agreement, the foreign public policy relevant to essential elements of the dispute may not be material for the purpose of arbitrability. This is because at the second stage it will be reasonably likely (though not necessarily so) that an inference is to be drawn that parties’ intention to arbitrate would be frustrated by choice of a foreign law that regards the dispute in question as non-arbitrable, and hence there may not be an implied choice of that foreign law. This is especially so where there are bespoke words describing the nature of the dispute that may be referred to arbitration in a way that clearly encompasses disputes that might be non-arbitrable under the law that governs the contract itself. This was the case in Mittal v Westbridge where disputes relating to management of the company were specifically identified. Once the inquiry reaches the third stage, the choice of Singapore as the seat is reasonably likely (though again not necessarily so) to be regarded as a strong and close connection between the arbitration agreement and Singapore, such that Singapore law would be the governing law of the arbitration agreement.

27. This points to the importance of parties considering the specific question of what should be the governing law of the arbitration agreement so that it is clearly and separately identified. However, that this is an important task at the drafting and negotiation stage has been noted repeatedly in the past by courts and commentators and there is no particular reason to think that drafters will necessarily be more meticulous in future in identifying the law governing the arbitration agreement specifically, especially when attention turns to dispute resolution clauses as midnight nears and deadlines for signing loom.

28. Secondly, it might be thought that international comity would require a greater weight to be placed upon foreign public policy under the law of the place where the relevant contract was to be performed or where the subject-matter of the contract is located. Some might contend that the internal governance of a company should always be subject to the public policy of the place of incorporation. There may indeed be strong political and social factors applicable in that country concerning how companies should be run. Speaking hypothetically, a state might consider it important that any dispute concerning a company’s internal governance take place in a state court or tribunal under a procedure that enables third parties to be heard, or perhaps intervention by a custodian of the public interest such as, in our system, the Attorney-General. An example of third-party concerns beyond the bilateral relationship of the contracting parties is environmental concerns. As the world grapples increasingly with the externalities of doing business, and the importance of reducing or mitigating anthropogenic climate change, such concerns grow and have even been raised in the context of reforms to international commercial arbitration. Requirements concerning how third-party concerns may be heard within the dispute resolution process would be procedural and not substantive aspects of how the dispute would be dealt with. Parties could avoid these procedural requirements by choosing arbitration and expressly choosing as the governing law of the arbitration agreement the law of the seat country.

29. This may be a valid point but its significance is greatly diminished once one notes that the principal alternative contention is that arbitrability at the pre-award stage should be determined according to the law of the court hearing the matter, the lex fori. This was the opinion of Prof Darius Chan as the friend of the court.⁽⁷⁾ The lex fori is after all brought into play at the post-award stage by both Article 34(2)(b) of the Model Law as well as Article V(2) of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. One key reason in favour of the lex fori is that it makes for a simple rule, and achieves predictability and certainty. There is no need to inquire into the governing law of the arbitration agreement. But if the lex fori determines arbitrability then there is no room for the application of foreign public policy except to the extent that consideration of foreign public policy is mandated or permitted by the lex fori in question. By contrast, the approach in Mittal v Westbridge brings foreign public policy into consideration once parties choose that foreign law as the governing law of the arbitration agreement.

30. The third practical point is that the compass of non-arbitrability is relatively narrow under Singapore law. It is quite difficult to imagine as a matter of practice a dispute that is arbitrable under a foreign law yet non-arbitrable under Singapore law. Indeed, public policy in Singapore favours party autonomy and promotes the use of alternative or appropriate dispute resolution.

Conclusion

31. In conclusion, I express the hope that this brief look at the recent decision in Mittal v Westbridge has been of value to you and may seed further discussion, especially in the session on arbitration. Let me also congratulate the organisers of this conference on what promises to be a terrific exchange of views. The topics are wide-ranging and involve deep technical analysis of matters that are of great practical importance to international commerce and business and to society generally. I wish you all a fruitful and enjoyable few days here in Singapore.