Commercial Court upholds challenge to the jurisdiction of an international arbitral tribunal

14/01/13

Arsanovia Ltd & Ors v Cruz City 1 Mauritius Holdings [2012] EWHC 3702 (Comm) (20 December 2012, released 11 January 2013)

The claimants challenged under s.67 of the Arbitration Act 1996 the jurisdiction of a panel of international arbitrators sitting in two related LCIA arbitrations. The arbitrators had determined that they had jurisdiction and made awards against the claimants.

In the first arbitration, Unitech had entered into a shareholders' agreement with Cruz on terms which included an agreement to arbitrate in London under the LCIA rules. The SHA was governed by Indian law. Burley subscribed to the SHA "to be bound by the direct obligations under [four] clauses" - the arbitration clause was not one of those clauses. The first issue was whether the arbitration clause was governed by English law or Indian law. After considering a number of authorities, including C v. D and Sulamerica, Andrew Smith J. held that the parties were to be taken to have evinced an implied intention that the arbitration agreement in the SHA was to be governed by Indian law. Indeed he indicated that he might have been prepared to hold that the express choice of Indian law applied to the agreement to arbitrate in London. Having decided that the arbitration agreement was governed by Indian law, the Judge determined that Burley was not party to the arbitration agreement (he would have reached the same decision in English law). Following the decision of the Indian Supreme Court in Sukanya Holdings, he went on to hold that, because the dispute concerned a person who was not party to the arbitration agreement, the dispute was not arbitrable against either Burley or Unitech (although Unitech was party to the arbitration agreement). He declared that the arbitrators lacked substantive jurisdiction and set aside the award.

In the second arbitration, involving a Keepwell Agreement, the Judge held that the London arbitration clause was also governed by Indian law, but he rejected the claimants' contentions that the arbitrators lacked substantive jurisdiction in Indian law.

The judgment is here.