The moment ‘seat’ is determined, it would be akin to an exclusive jurisdiction clause: SC settles International Arbitration Jurisdiction dispute, Read Judgment

"Where in an arbitration agreement there is an express designation of a place of arbitration, anchoring the arbitral proceedings to such place, and there being no other significant contrary indicia to show otherwise, such place would be the ‘seat’ of arbitration," the Supreme Court observed while resolving a jurisdictional dispute in an international arbitration. The case involved a disagreement between Disortho S.A.S, a Colombian company, and Meril Life Science Private Limited, an Indian entity, regarding the interpretation of arbitration clauses in their distribution agreement. While Disortho invoked Indian jurisdiction for the appointment of an arbitrator, Meril argued that arbitration should proceed under Colombian rules. The Court examined conflicting contractual provisions, international precedents, and the principles of lex arbitri and lex contractus to determine the applicable laws.

Disortho S.A.S, a company incorporated in Bogota, Colombia, entered into an International Exclusive Distributor Agreement with Meril Life Science Private Limited, an Indian company based in Gujarat, on May 16, 2016, for the distribution of medical products in Colombia. Disputes later arose between the parties, leading Disortho to file a petition under Section 11(6) of the Arbitration and Conciliation Act, 1996, seeking the appointment of an arbitral tribunal. Meril opposed the petition on jurisdictional grounds, arguing that the arbitration clauses in the agreement mandated arbitration under the rules of the Chamber of Commerce of Bogota, Colombia, rather than granting Indian courts the power to appoint arbitrators.

The Supreme Court addressed the complexities of jurisdiction in trans-border arbitration, emphasizing the correlation between "lex-contractus, the law governing the substantive contractual issues; lex arbitri, the law governing the arbitration agreement and its performance; and lex fori, the law governing procedural aspects of arbitration." It noted that conflicting contractual clauses add to this complexity.

Referring to Redfern and Hunter, the Court observed that "the law governing the arbitration agreement sets the rules and norms that determine the validity, scope, and interpretation of the agreement." Citing Melford Capital Partners (Holdings) LLP and Others v. Frederick John Wingfield Digby (2021, it distinguished four choices of law: "(i) the law governing the arbitration, (ii) the proper law of the arbitration agreement, (iii) the proper law of contract, and (iv) the procedural rules which apply in the arbitration."

The Court cautioned against separating components of lex arbitri unless explicitly intended, stating that "these concepts are subsumed in each other. They are inherently intertwined as a part and parcel of the lex arbitri." It clarified that in the absence of a specific mechanism, "matters such as filling vacancies on arbitral tribunals and the removal of an arbitrator should be normally governed by the law applicable to the arbitration agreement itself."

Analyzing the governing law of arbitration agreements, the Court referred to Enka Insaat Ve Sanayi AS v. OOO Insurance Company Chubb (2020), affirming that "where a contract contains an agreement to resolve disputes arising from it by arbitration, the law applicable to the arbitration agreement may not be the same as the law applicable to the other parts of the contract." It agreed with the principles in Enka but noted deviations in Indian jurisprudence. Referring to Sulamérica Cia Nacional De Seguros S.A. and Others v. Enesa Engenharia S.A. and Others (2012), it asserted that "even if the agreement forms part of a substantive contract, its proper law may not be the same as that of the substantive contract" and reiterated the three-stage test: "(i) express choice, (ii) implied choice, and (iii) closest and most real connection."

The Court maintained that "parties may agree to hold arbitration in a particular place or country (Country X), but subject it to the procedural laws of another country (Country Y)." It distinguished venue from the seat of arbitration, asserting that "the seat of arbitration was not necessarily London" even if arbitration occurred there.

Citing M/s. Arif Azim Co. Ltd. v. M/s. Micromax Informatics Fze (2024), the Court clarified that "Part I of the Act, 1996 and the provisions thereunder only applies where the arbitration takes place in India," either when "the seat of arbitration is in India OR the law governing the arbitration agreement are the laws of India." It rejected concurrent jurisdiction, stating that "the moment ‘seat’ is determined, it would be akin to an exclusive jurisdiction clause" and that "the notional doctrine of concurrent jurisdiction has been expressly rejected."

In Mankastu Impex Private Limited v. Airvisual Limited (2020), the Court reiterated the distinction between lex contractus and lex arbitri, ruling that "the Indian Courts lacked jurisdiction" as "lex contractus, being different from lex arbitri." Reaffirming Roger Shashoua v. Mukesh Sharma (2009), it held that "where in an arbitration agreement there is an express designation of a place of arbitration anchoring the arbitral proceedings to such place, and there being no other significant contrary indicia to show otherwise, such place would be the ‘seat’ of arbitration even if it is designated in the nomenclature of ‘venue’ in the arbitration agreement."

Examining the Distributor Agreement, the Court noted the conflict between Clause 16.5 and Clause 18, stating that "one clause may influence the content of another, and a clause should not be rejected unless it is clearly inconsistent or repugnant to the rest of the agreement." It concluded that "Bogota has been designated as the venue for conciliation and arbitration, while the courts in Gujarat, India, retain exclusive jurisdiction over disputes," and that "the law governing the arbitration agreement, being Indian law, means that its validity, scope, and interpretation will be determined in accordance with Indian law."

The Court affirmed that "Indian law shall govern the agreement and the related disputes" and that "the applicability of the A&C Act under Section 11(6) of the Arbitration and Conciliation Act" remains intact. It noted that "the parties are agreeable to the arbitration being held in India" and have "consented to the appointment of a sole arbitrator."

Mr. Justice S.P. Garg, retired judge of the High Court of Delhi, was appointed as the sole arbitrator. The venue of arbitration was left to be decided mutually by the parties and the learned arbitrator. The arbitration was directed to be governed by the rules of the Delhi International Arbitration Centre attached to the High Court of Delhi. The fee schedule applicable to international arbitrations was made applicable. The arbitration petition was allowed and disposed of accordingly.

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