Arsanovia Ltd and Others v Cruz City 1 Mauritius Holdings
| Jurisdiction | England & Wales |
| Judge | Andrew Smith J |
| Judgment Date | 20 December 2012 |
| Neutral Citation | [2012] EWHC 3702 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 20 December 2012 |
[2012] EWHC 3702 (Comm)
Andrew Smith J.
Queen's Bench Division (Commercial Court).
Arbitration — Substantive jurisdiction — Law applicable to arbitration agreements –Shareholders' agreement and keepwell agreement governed by Indian law providing for London arbitration under LCIA rules — Arbitrations under both agreements — Implied choice of Indian law to govern arbitration agreements — Whether applicant party to valid arbitration agreement — Whether claims arbitrable — Whether claims premature — Whether tribunals lacked substantive jurisdiction — Arbitration Act 1996, s. 30, 67.
These were applications under s. 67 of the Arbitration Act 1996 challenging arbitration awards on the grounds that the tribunals did not have substantive jurisdiction.
The claimant in the arbitrations was a Mauritian company, Cruz City. The arbitrations were against a Cypriot company, Arsanovia, and a Mauritian company, Burley, and against Burley and an Indian company, Unitech. Unitech was the parent company of Arsanovia and Burley, and the arbitrations arose out of a joint venture into which they entered with Cruz City for the development of slum areas in Mumbai, India.
In the first arbitration, Cruz City sought against Arsanovia and Burley damages and specific performance under a shareholders' agreement (SHA), and in the second arbitration it sought damages under a Keepwell Agreement, under which Unitech agreed to put Burley in funds to make payments due under the SHA.
The SHA and the Keepwell Agreement were governed by Indian law and provided for LCIA arbitration in London. In the arbitration clauses the parties specifically agreed that they would not seek any interim relief in India under the LCIA Rules or under the Indian Arbitration and Conciliation Act 1996 and the provisions of Part 1 of that Act were expressly excluded.
The applicants disputed the jurisdiction of the tribunals, but the tribunals determined that they had jurisdiction and made awards in favour of Cruz City.
The applicants argued that the awards were invalid because the tribunals did not have substantive jurisdiction. In respect of the first arbitration, the law applicable to the arbitration agreement in the SHA was Indian law which therefore determined whether Burley was a party to it; under Indian law Burley did not agree to be bound by the arbitration agreement in the SHA; under Indian law, because the tribunal did not have jurisdiction over Burley, it did not have jurisdiction to decide the claims against Arsanovia either. In respect of the second arbitration, under Indian law and on the proper construction of the Keepwell Agreement the claims against Unitech and Burley could be brought only after Burley's liability under the SHA had been adjudicated (if not admitted); and they were therefore premature and beyond the tribunal's jurisdiction.
Held, ruling that the tribunal in the first arbitration did not have substantive jurisdiction and that its award was of no effect, and that the tribunal in the second arbitration did have substantive jurisdiction:
1. The correct approach in respect of the applicable law of the arbitration agreement was to consider whether the parties had made an express or implied choice of law to govern the arbitration agreement and, if not, to identify the law with which the arbitration agreement had its closest and most real connection. (C v DUNK[2007] EWCA Civ 1282; [2007] 2 CLC 930considered; Sulamérica Cia Nacional de Seguros SA v Enesa Engenharia SAUNK[2012] EWCA Civ 638; [2012] 2 CLC 216applied.)
2. The choice of Indian law to govern the SHA indicated an implied choice of Indian law as the law applicable to the arbitration agreement. That was reinforced by the express exclusion of specific Indian statutory provisions; the natural inference being that the parties understood and intended that otherwise that law would apply. The governing law of the SHA was, at the least, a strong pointer to the parties' intention about the law governing the arbitration agreement and there was no contrary indication other than choice of a London seat for arbitrations. The wording of the arbitration agreement itself reinforced the conclusion that the parties intended Indian law to govern it. (Sulamerica applied.)
3. If that was wrong and there was no express or implied choice of Indian law to govern the arbitration agreement, the court would have concluded that English law was the law which had the closest and most real connection with the arbitration agreement.
4. Burley signed it to signify its agreement to be bound by certain specified clauses of the SHA, not including the arbitration clause. The clear implication was that it was not bound by the other clauses, such as the arbitration clause. Applying English law, Burley was not a party to the arbitration agreement. The position was the same under Indian law. Therefore the challenge to the first award succeeded because there was no valid arbitration agreement between Cruz City and Burley.
5. As a matter of Indian law, because the tribunal in the first arbitration did not have jurisdiction over Burley, the whole matter before it, viz the claims against Arsanovia and Burley, was not arbitrable. It followed that the tribunal did not have substantive jurisdiction over the claim against Arsanovia within the meaning of s. 67: it was not a matter “submitted to arbitration in accordance with the arbitration agreement”. (Sukanya Holdings (P) Ltd v Jayesh Pandya(2003) 5 SCC 531; [2003] INSC 223applied.)
6. The arbitration agreement in the Keepwell Agreement was governed by Indian law.
7. Even if the tribunal in the second arbitration should have concluded that no liability of Unitech had accrued because there had been no valid finding that anything was due from Burley under the SHA, that did not go to the tribunal's substantive jurisdiction. The tribunal needed to determine whether Burley was liable under the SHA in order to determine whether Unitech was liable under the Keepwell Agreement, and it had the jurisdiction to do so. That was a question that needed to be determined in order to resolve a “dispute arising out of or in connection with the provisions of [the] Keepwell Agreement”; that dispute was referred to it and the question was within the tribunal's substantive jurisdiction.
The following cases were referred to in the judgment:
Aughton Ltd v M F Kent Services LtdUNK (1991) 57 BLR 1.
Bharat Aluminium Co v Kaiser Aluminium Technical Service Inc [2012] INSC 500.
Bharat Sanchar Nigam Ltd v Motorola India Pvt Ltd (2009) 2 SCC 337.
Bhatia International v Bulk Trading SA (2002) 4 SCC 105.
Black Clawson International Ltd v Papierwerke Waldhof-Aschaffenburg SAUNK [1981] 2 Ll Rep 446.
Booz Allen and Hamilton Inc v SBI Home Finance Ltd (2011) 5 SCC 532.
C v DUNK [2007] EWHC 1541 (Comm); [2007] 1 CLC 1038; [2007] EWCA Civ 1282; [2007] 2 CLC 930.
Channel Tunnel Group Ltd v Balfour Beatty Construction LtdELR [1993] AC 334.
Custodian General of Evacuee Property, New Delhi v Harnam Singh AIR 1957 P&H 58. Dallah Real Estate and Tourism Holding Co v Ministry of Religious Affairs, Government of Pakistan[2010] UKSC 46; [2010] 2 CLC 793.
Emirates Grains Products Co LLC v LMJ International Ltd (23 July 2009, Kolkata High Court).
Fiona Trust & Holding Corp v PrivalovUNK [2007] UKHL 40; [2007] 2 CLC 553.
Global Market Direct Ltd v GTL 2004 (3) Arb LR 56.
HM Kamaluddin Ansari & Co v Union of India (1983) 4 SCC 417.
Indian Organic Chemicals Ltd v Chemtex Fibres Inc AIR (1978) Bain 106.
JSC Zestafoni G Nikoladze Ferroalloy Plant v Ronly Holdings Ltd [2004] 1 CLC 1146.
Kensoft Infotech Limited v Sundaram BNP Paribas Home Finance Ltd MIPR 2010 (1) 301.
Marwar Tent Factory v Union of India, AIR 1975 Del 27.
Olympus Superstructures Pvt Ltd v Meena Vijay Khetan (1999) 5 SCC 651.
Severn Trent Water Purification Inc v Chloro Controls India Pvt Ltd (2010) (2) Bom CR 712.
Sukanya Holdings (P) Ltd v Jayesh Pandya (2003) 5 SCC 531; [2003] INSC 223.
Sulamérica Cia Nacional de Seguros SA v Enesa Engenharia SAUNK [2012] EWCA Civ 638; [2012] 2 CLC 216.
Union of India v Raman Iron FoundryENR [1974] AIR SC 1265.
Jonathan Hirst QC and Craig Morrison (instructed by Skadden Arps Slate Meagher & Flom LLP) for the claimants.
David Wolfson QC and Nehali Shah (instructed by White & Case LLP) for the defendants.
Andrew Smith J:
1. On 6 July 2012 three awards were issued by tribunals appointed by the London Court of International Arbitration comprising the same three members, Mr Salim Moolan, Mr Paul Hannon and Mr J William Rowley:
(i) An award in an arbitration between Cruz City 1 Mauritius Holdings (“Cruz City”), a Mauritian company, as claimants and Arsanovia Limited (“Arsanovia”), a Cypriot company, and Burley Holdings Limited (“Burley”), a Mauritian company, as respondents (“Arbitration 1” and “Award 1”).
(ii) An award in an arbitration between Cruz City as claimants and Burley and Unitech Limited, (Unitech'), an Indian company, as respondents (“Arbitration 2” and “Award 2”).
(iii) An award in an arbitration between Arsanovia and Burley as claimants and Cruz City as respondents, in which Cruz City made a counterclaim against Arsanovia (“Arbitration 3” and “Award 3”). H
On these applications under section 67 of the Arbitration Act 1996 Arsanovia, Burley and Unitech challenge Awards 1 and 2 on the grounds that the tribunals did not have substantive jurisdiction. The tribunals have determined that they had substantive jurisdiction, but their decisions do not bind me in any way and I must consider the matter de novo: Dallah Real Estate and Tourism Holding Co v Ministry of Religious Affairs, Government of Pakistan[2010] UKSC 46; [2010] 2 CLC 793, paras 26 and 96. The claim form also made applications under section 68 but they were not pursued.
2. Unitech is the parent company of Arsanovia and Burley, and the...
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