In granting the Anti-Suit Injunction, the Singapore High Court ruled that questions of subject matter arbitrability at the pre-award stage should be determined through the application of the law of the seat, which was Singapore law in this case. Importantly, a different decision could have been reached on the grant of the Anti-Suit Injunction, if Indian law was applied to determine the question of subject matter arbitrability at the pre-award stage as the Appellant's position was that the dispute comprised matters of oppression and mismanagement, and it was common ground between parties that matters of oppression and mismanagement are non-arbitrable under Indian law.
On appeal, the Appellant submitted, amongst others, that in determining subject matter arbitrability at the pre-award stage, regard must be had to both the non-arbitrability rules of the law of the seat and the law of the arbitration agreement, and that this could be achieved by determining a composite list of matters that are non-arbitrable under both systems of law. The Respondent's position was that the law of the seat is the only law which governs subject matter arbitrability at the pre-award stage, and the amicus curiae submitted that the law of the forum should apply to determine the question of subject matter arbitrability.
The Court of Appeal ultimately decided that the arbitrability of a dispute is to be determined by the application of the non-arbitrability rules of both systems of law ("Composite Approach"). At first instance, the court will examine if the dispute is arbitrable pursuant to the law governing the arbitration agreement. Thereafter, in the event that the dispute is arbitrable under the law of the arbitration agreement, the court will then proceed to consider if the dispute is arbitrable under the law of the seat. However, notwithstanding the Court of Appeal's decision to proceed with the Composite Approach, the Anti-Suit Injunction was ultimately upheld for other reasons.
This Judgment is significant in being the only known instance across the Commonwealth where an apex court has had occasion to consider and rationalise a legal framework for determining this difficult issue.
We explain the Composite Approach, and elaborate on key takeaways from this Judgment below.
Arbitrability and the Composite Approach
Arbitrability refers to whether a dispute is arbitrable, i.e., capable of being settled by arbitration under the applicable law(s). The implications of a dispute being found to be non-arbitrable are grave, which include consequences such as the eventual arbitral award being set aside or refused enforcement. As a matter of public policy, each jurisdiction (and its corresponding law) comprises specific subject matters which may not be submitted to arbitration.
However, and as is often the case in international arbitration, where there are multiple laws governing an arbitration, a difficult question arises as to which competing law (and by extension, which country's public policy) should apply to determine the question of subject matter arbitrability. This is especially the case where the law of the arbitration agreement, law of the seat, and law of the forum provides for different positions on whether a particular subject matter may be resolved by arbitration.
The Composite Approach ensures that an anomalous result (i.e., where the law of the arbitration agreement is applied at the pre-award stage, but the law of the seat is applied at the post-award stage) will not ensue through a 2-stage enquiry where the arbitration would not be able to proceed if the subject matter of the dispute is not arbitrable under either the law of the arbitration agreement or the law of the seat.
While the Composite Approach has received some criticism for being unnecessarily restrictive and not in line with Singapore's pro-arbitration stance, the Court of Appeal reasoned that Singapore's public policy to encourage arbitration cannot override principles of comity, or insist on the application of Singapore law to a substantive matter involving a foreign system of law expressly chosen by the parties. Moreover, the criticism that such an approach would be unnecessarily restrictive can be overcome through careful drafting of arbitration agreements.
Key takeaways
Further to the Judgment, it has become all the more important for parties to take particular care when negotiating and drafting the arbitration agreement. In particular, parties should:
- Carefully ascertain the matters that may not be arbitrable under the law of the arbitration agreement and the seat, so as to minimise the possibility of further disputes as to whether certain matters may be resolved by arbitration, or if such matters could fall within the scope of the arbitration agreement.
- Expressly state the law that governs the arbitration agreement, so as to mitigate the risk that a law which may not have been contemplated by the parties is determined by a Court or Tribunal to be the law governing the arbitration agreement.
First, the endorsement of the Composite Approach means that a potentially greater number of subject matters may likely be found to be non-arbitrable at the pre-award stage, given that both the non-arbitrability rules of the law governing the arbitration agreement and the seat would be applicable. Accordingly, if parties fail to carefully ascertain the matters that may not be arbitrable under the law of the arbitration agreement and the law of the seat, this could result in further disputes as to whether a particular matter may be resolved by arbitration, or if such a matter could fall within the scope of the arbitration agreement.
Second, the Judgment serves as a timely reminder that when drafting arbitration agreements, it is important for parties to expressly state the law of the arbitration agreement so as to mitigate the risk that a law which may not have been contemplated by parties is determined by a Court or Tribunal to be the law governing the arbitration agreement. Additionally, parties should carefully ascertain the matters that may not be arbitrable under the law of the arbitration agreement and the seat, so as to minimise the possibility of further disputes.
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