Arsanovia Ltd & Ors v Cruz City 1 Mauritius Holdings

Under the Arbitration Act 1996, a challenge to substantive jurisdiction is determined afresh. The court first identifies any express or implied choice of law governing the arbitration agreement. Only if there is no such choice does it consider the closest and most real connection. An express choice of law for the substantive contract is a strong indication of the law governing the arbitration agreement, although other contractual terms may point elsewhere. A party signing only to accept specified obligations is not thereby party to an arbitration clause omitted from the signature page. Where a dispute includes a person outside the arbitration agreement, the whole matter may be non-arbitrable. A tribunal with jurisdiction may nevertheless determine liability under another contract where that issue is necessary to decide relief under the contract before it.

Three LCIA tribunals issued awards concerning an Indian-law joint venture agreement and a related Keepwell Agreement. The claimants challenged Awards 1 and 2 under section 67 of the Arbitration Act 1996, alleging that the tribunals lacked substantive jurisdiction.

The central issues were the law governing each arbitration agreement, whether Burley had become party to the arbitration agreement in the shareholders’ agreement, whether the claims were non-arbitrable because Burley was not bound, whether the claim under the Keepwell Agreement was premature, and whether the tribunal could determine liability under the shareholders’ agreement in resolving that claim.

1. The applications under section 67 of the Arbitration Act 1996 were granted in relation to Award 1 and refused in relation to Award 2. The court considered the jurisdiction issues afresh; the tribunal’s own conclusions did not bind it, consistently with Dallah Real Estate and Tourism Holding Co v The Ministry of Religious Affairs, Government of Pakistan ([2010] UKSC 46).

2. The law governing an arbitration agreement is distinct from the substantive law and the curial law. The court must first ask whether the parties made an express or implied choice. Only in the absence of such a choice is the closest and most real connection relevant. The Indian governing-law clause was at least a strong indication of an implied choice of Indian law. The London seat did not itself establish an implied choice of English law. The express exclusion of specified provisions of the Indian Arbitration and Conciliation Act reinforced the conclusion that Indian law otherwise governed the arbitration agreement.

3. Burley’s signature page stated that it was bound by specified direct obligations, but did not identify the arbitration clause. The clause referred to the defined Parties and did not provide reciprocal arbitration rights for Burley. Burley therefore was not party to the arbitration agreement. Under section 30 of the Arbitration Act 1996, there was no valid arbitration agreement between Cruz City and Burley.

4. The court accepted the arbitrability analysis in Sukanya Holdings (P) Ltd v Jayesh Pandya and anor ((2003) 5 SCC 531) and Booz Allen and Hamilton Inc v SBI Home Finance Ltd and ors ((2011) 5 SCC 532). Arbitrability includes whether the dispute is covered by the arbitration agreement and falls within the reference. The principle applied to international as well as domestic arbitration. Since Burley was not bound, the whole matter involving the claims against Burley and Arsanovia was not arbitrable. Award 1 therefore had no effect on the merits.

5. The contention that the Keepwell claim was premature did not go to substantive jurisdiction. The tribunal had jurisdiction to determine whether liability had accrued, even if its conclusion on that merits issue was wrong. The wide arbitration clause covered disputes arising out of or in connection with the Keepwell Agreement and permitted the tribunal to determine Burley’s liability under the shareholders’ agreement when necessary to decide Unitech’s liability. The tribunal therefore had both jurisdiction and a duty to address that issue. Award 2 was upheld.