We have discussed on several occasions the scope of the proposition in paragraph 32 of Bhatia International that the parties may “expressly or impliedly” exclude the applicability of Part I of the Arbitration Act in cases in which it would be otherwise applicable. The Court has previously held that Part I is not impliedly excluded merely by choosing a foreign substantive law (Indtel Technical Services and Citation Infowares), but may be if it is coupled with the designation of a foreign seat of arbitration (Dozco India v Doosan), or if the parties expressly choose a foreign seat and a foreign lex arbitri (Videocon). The Court appears also to have impliedly rejected the proposition that the mere designation of a foreign seat of arbitration excludes Part I, because the seat in Bhatia International was Paris, and the seat in Yograj was Kuala Lumpur. Even if Bhatia can be explained on the basis that the Court relied on the language of article 23(2) of the ICC Rules, Yograj clearly found that it was the application of Rule 32 of the SIAC Rules 2007 that excluded the Indian Act, suggesting that the designation of Singapore as the seat did not of itself lead to this result.
Muralidhar, J. last week considered these issues in Indiabulls Financial Services v Amaprop Ltd. In 2005, Amaprop invested in the shares of a subsidiary company of Indiabulls and was granted a Put Option enabling it to compel Indiabulls to acquire those shares at a predetermined price. The contract contained the following provisions on governing law and dispute resolution: (a) the contract is to governed by New York law, with an exclusion of renvoi (Section 12.10(a)); (b) each party accepted the non-exclusive jurisdiction of the courts in New York (Section 12.10(b)) and (c) all disputes shall be settled by arbitration in New York in accordance with the Rules of the American Arbitration Association, without prejudice to the right of any party to make an application for injunctive relief (Section 12.11).
Amaprop exercised the Put Option in 2010 at the predetermined price, but an application filed by Indiabulls with RBI to make the transfer at this price was refused. Amaprop commenced arbitration under the contract. The Tribunal’s award directed Indiabulls to make a fresh application to the RBI to transfer at a certain price, and left open the possibility that the difference between the option at the RBI-permitted price and the Option Price would form the basis of a money award for Amaprop. Amaprop brought an action in New York to confirm the award and obtained an anti-suit injunction in respect of Indian proceedings.
Thereafter an application was filed by Indiabulls under section 34 to set aside the New York award on the ground that it was contrary to Indian public policy in ignoring the provisions of the Foreign Exchange Management Act, 2000 and RBI Circulars. Amaprop took a preliminary objection on the basis that the parties had impliedly excluded the application of Part I of the Indian Act.
There is a strong case for the view that Bhatia International itself requires reconsideration, and that the selection of a foreign seat is the clearest indication that the parties intended to exclude Part I – but these points are concluded by authority and will remain so unless the Supreme Court overrules Bhatia International and Venture Global in BALCO. Therefore the analysis is whether, as a matter of construction, it can be said that the parties intended that Part I of the Indian Act should not apply. At first sight, there is little to suggest this, beyond the selection of a foreign seat of arbitration and a foreign proper law, and Supreme Court authority in Yograj and perhaps Bhatia itself suggests that that does not suffice. There is, of course, Dozco v Doosan, since the parties here also chose a foreign proper law.
Muralidhar, J. reaches the conclusion that Part I was excluded on a different basis. First, the learned judge rejects the suggestion that giving the New York courts non-exclusive jurisdiction indicates that the parties did not intend to exclude the jurisdiction of the Indian court. For this purpose, the Court cites the well-known decision of the Court of Appeal in Deutsche Bank v Highland Crusader. However, the context in which that case was decided was the prior decision of the Court of Appeal in Sabah Shipyard v Government of Pakistan, where the court had granted an anti-suit injunction restraining certain proceedings in Pakistan even though England was the subject of a non-exclusive jurisdiction clause. Sabah was subsequently criticised, notably by Mr Rapahel, and in Deutsche Bank, Toulson LJ explained that the conclusion in that case was correct only because it could be shown, independently, that commencing proceedings in Pakistan was vexatious and oppressive. Although there is an observation in that case that bringing proceedings in a certain forum may be vexatious or oppressive even if the chosen forum was given only non-exclusive jurisdiction, the thrust of the Court’s analysis was in fact that such a finding is unusual and requires material independent of the jurisdiction clause. To the extent the Delhi High Court relies on this case to hold that giving New York non-exclusive jurisdiction is not inconsistent with excluding the jurisdiction of the Indian court, it may be correct, but it can go no further.
Secondly, Muralidhar, J. held that the contract itself indicates that the intention of the parties was that an arbitral award would be tested only in a New York court, because of the reference to the New York court in section 12.10 and the conduct of the parties when proceedings were commenced in New York. Thirdly, the Court refers to the fact that New York was the seat of arbitration, and to Rule 57(2) of Dicey and Morris, which, of course, is the correct analysis but may be contrary to what the Supreme Court has held in NTPC v Singer and Bhatia International.
Two other points are of interest. The first is the finding that it was open to Indiabulls to raise non-compliance with Indian law in the New York court under the rubric of public policy. It is not clear if this is possible, because it is ordinarily accepted public policy in the New York Convention is a reference to the public policy of the enforcing State. The second is that this case appears to implicitly accept that parties can impliedly exclude certain provisions in Part I without excluding the remainder. That is because section 9 would not have been impliedly excluded in this case, since section 12.11 of the contract allowed the parties to approach other courts for interim relief – and yet, section 34 was.