Watch where you seat: Singapore High Court clarifies that Law of Seat governs subject matter arbitrability at the pre‑award stage

Synopsis

Subject matter arbitrability refers to the power of an arbitrator to hear certain categories of disputes as a matter of public policy. Naturally, national laws vary in the extent to which they limit arbitrable subject matter. Generally, disputes or claims relating to commercial or contractual matters are arbitrable, whereas criminal, family, bankruptcy, and insolvency matters are not. 

In many countries with pro-arbitration policy, legislation and judicial decisions have narrowed the scope of non-arbitrable disputes to encourage and uphold arbitration. In this context, the Singapore High Court (the High Court), in Westbridge Ventures II Investment Holdings v Anupam Mittal [2021] SGHC 244 (Westbridge), issued a novel decision clarifying that when determining issues of subject matter arbitrability at the pre-award stage, the law of the seat applies as opposed to the law governing the arbitration agreement in the contract.

Article

Westbridge involved a dispute between shareholders of a company registered in Mumbai, India (the Company). The Shareholders’ Agreement provided that any dispute “relating to the management of the Company or relating to any of the matters set out in this Agreement . . .  shall be referred to arbitration.” The seat of arbitration was designated as Singapore. India law governed the arbitration agreement.

The defendant commenced court proceedings in Mumbai, India, against the plaintiff alleging, inter alia, minority oppression and mismanagement. Relying on the arbitration clause of the Shareholders’ Agreement, the plaintiff sought an anti-suit injunction in the Singapore courts against the Mumbai proceedings. The defendant opposed the injunction on the ground that it should be the law governing the arbitration agreement (ie Indian law) that determined whether the subject matter was arbitrable. In this case, Indian law did not permit arbitration of disputes relating to minority oppression and mismanagement. To the contrary, the plaintiff argued that the law of the seat of the arbitration should determine whether the issue of minority oppression was arbitrable. 

Faced with the question of the law applicable to issues of subject matter arbitrability, the High Court determined that the law of the seat applies, not the law governing the arbitration agreement.  The Court’s determination was based on the following reasoning:

First, subject matter arbitrability is essentially a question of jurisdiction. It is well-settled that the law of the seat governs questions of jurisdiction.

Second, national courts in the enforcement stage routinely apply the law of the seat on issues of arbitrability. Thus, applying the law of the seat to issues of subject matter arbitrability in the pre-award stage will ensure consistent results regardless of whether a challenge is brought in the pre-award stage or in the enforcement stage. 

Third, applying the law of the seat is consistent with the policy to promote international commercial arbitration. Singapore courts have given broad effect to international arbitration agreements and giving effect to foreign non-arbitrability rules would potentially undermine Singapore's policy of supporting international commercial arbitration.

Applying the law of the seat, the High Court granted the plaintiff’s anti-suit injunction reasoning that the court proceedings in Mumbai fell within the scope of the arbitration agreement and brought in breach of the arbitration agreement. Like all anti-suit injunctions, the High Court’s injunction applied to the particular party and is not enforceable against the court in Mumbai. 

Westbridge is the first decision by any Commonwealth court on the issue of the law applicable to arbitrability of a dispute. It's now clear that the Singapore courts will apply the law of the seat when determining whether a claim is arbitrable. This decision further reinforces Singapore’s pro-arbitration stance and reassures contracting parties that arbitration clauses in shareholder agreements will be upheld. 

In light of Westbridge, contracting parties negotiating arbitration agreements should understand the implications of and give strategic considerations to designating a seat that is different from the law of the arbitration agreement in terms of the impact on the arbitrability of a claim.