The core issue revolves around jurisdiction and the applicable law for arbitration, given conflicting clauses in their contract: one specifying Indian law and Gujarat courts, and another mandating arbitration in Bogota, Colombia, under its rules. The court explores various conflict-of-laws principles in international arbitration, referencing prior cases and legal commentaries to distinguish between the proper law of the contract, the arbitration agreement, and the procedural rules. Ultimately, despite the stipulated arbitration venue in Bogota, the court determines that Indian law governs the arbitration agreement, granting Indian courts supervisory jurisdiction due to an implied choice of law. Consequently, the petition for the appointment of an arbitral panel is allowed, and a sole arbitrator is appointed, with the arbitration venue to be mutually decided and governed by Delhi International Arbitration Centre rules.
(A) Arbitration and Conciliation Act, 1996, Section 11(6) – Arbitration – Appointment of arbitrator for Trans-border arbitration – Jurisdiction – International Exclusive Distributor Agreement – Conflict of law principles – Learned counsel for both parties unanimously stated that, should the present application under Section 11(6) of the Arbitration and Conciliation Act, 1996, be allowed, the parties are agreeable to the arbitration being held in India – Furthermore, the parties have consented to the appointment of a sole arbitrator to adjudicate and decide the disputes in question – In view of this consensus, a retired judge of the High Court of Delhi, appointed as the sole arbitrator – The venue of the arbitration shall be decided mutually by the parties and the learned arbitrator – The arbitration shall be governed by the rules applicable to the Delhi International Arbitration Centre attached to the High Court of Delhi – The fee schedule applicable to international arbitrations shall apply.
(Para 34 and 35)
(B) Arbitration and Conciliation Act, 1996, Section 11(6) – Arbitration – Appointment of arbitrator for Trans-border arbitration – Jurisdiction – There exists a divergence of opinion, both internationally and domestically, on the appropriate test to determine jurisdiction in a case of trans-border arbitration – This divergence stems from the interaction between three distinct legal systems which come into play when a dispute occurs: (i) lex-contractus, the law governing the substantive contractual issues; (ii) lex arbitri, the law governing the arbitration agreement and the performance of this agreement; and (iii) lex-fori, the law governing the procedural aspects of arbitration – These legal systems may either differ or align, depending on the parties’ choices – Furthermore, there may be internal splits within these legal systems, such as for lex arbitri – Lex arbitri might be split into two components if the parties so desire – (i) law governing the agreement to arbitrate or the proper law of arbitration and (ii) the law governing the arbitration. While the former relates to validity, scope and interpretation of the arbitration agreement, the later refers to the supervisory jurisdiction exercised by the courts – Secondly, when contractual clauses conflict, as is the case here, the resolution becomes legalistic and complicated.
(Para 3)
(C) Arbitration and Conciliation Act, 1996, Section 11(6) – Arbitration – Appointment of arbitrator for Trans-border arbitration – Jurisdiction – International Exclusive Distributor Agreement – Conflict of law principles -There is conflict between two clauses of the Distributor Agreement – Clause 16.5 stipulates that the agreement shall be governed by and construed in accordance with laws of India – It further provides that all matters arising from the agreement shall be subject to the jurisdiction of the courts in Gujarat, India – Clause 18, which deals with the settlement of disputes, outlines both a conciliation and arbitration process – Should disputes or differences remain unresolved through conciliation, either party has the right to submit them to arbitration – The arbitration will be conducted by the Arbitration and Conciliation Centre at the Chambers of Commerce in Bogota – The arbitration will take place in Bogota, either at the Centre’s premises or at a location determined by the Director of the Centre – The award shall be in law and in the standard as per the Colombian law governing the mailer (sic matter). The costs of arbitration and conciliation will be shared equally by the parties – Held that Clause 16.5 is clear and unambiguous – It explicitly states that the entire agreement shall be governed by and construed in accordance with the laws of India, and all matters arising from the agreement shall fall under the jurisdiction of the courts in Gujarat, India – Given this, it is reasonable to assume that, when drafting this clause, the parties were fully aware of Clause 18, which provides for arbitration and conciliation under the Arbitration and Conciliation Centre of the Chambers of Commerce in Bogota – Bogota has been designated as the venue for conciliation and arbitration, while the courts in Gujarat, India, retain exclusive jurisdiction over disputes – This must, unless there is a divergence in lex arbitri, include jurisdiction over appointments and act as a conduit for the arbitration in Bogota, Colombia.
(Para 25, 26 and 28)
(D) Arbitration and Conciliation Act, 1996, Section 11(6) – Arbitration – Appointment of arbitrator for Trans-border arbitration – Jurisdiction – International Exclusive Distributor Agreement – Conflict of law principles -There is conflict between two clauses of the Distributor Agreement – Held 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 —Upon a consistent reading of the Distributor Agreement, it is clear that only the courts in Gujarat, India, are referenced – While it is acknowledged that the venue for arbitration is Bogota, Colombia, and that the procedural rules of the Arbitration and Conciliation Centre at the Chambers of Commerce in Bogota are to apply, this does not diminish the supervisory powers of Indian courts, as explicitly outlined in Clause 16.5 – Neither Clause 16.5 nor Clause 18 explicitly stipulates the governing law of the arbitration agreement – At this stage, there is a strong presumption that the lex contractus, i.e., Indian law, governs the arbitration agreement – This presumption may be displaced if the arbitration agreement is rendered non-arbitrable under Indian law – But that is not the case here – Furthermore, the mere choice of ‘place’ is not sufficient, in the absence of other relevant factors, to override the presumption in favour of the lex contractus – In this case, no seat of arbitration has been explicitly chosen.
Held that the parties have impliedly agreed that Indian law governs the arbitration agreement, and the controversy can be resolved accordingly – Use of the premises at the Centre, or any other location designated by the Director of the Centre in Bogota, does not imply that Colombian law governs the arbitration agreement – Although Clause 18 specifies that the award shall conform to Colombian law, this provision pertains solely to the arbitration proceedings or the award matters – It does not override or diminish the effect of Clause 16.5, which clearly stipulates that Indian law shall govern the agreement and the related disputes – The legal implications of this would include the applicability of the A&C Act, and the appointment jurisdiction of Indian courts – Affirm the applicability of the A&C Act under Section 11(6) of the Arbitration and Conciliation Act – In accordance with Clause 16.5 and 18, the procedural rules of the arbitration would be the rules of the Conciliation and Arbitration Centre of the Chamber of Commerce of Bogota DC, with Bogota DC as the venue of arbitration.
(Para 30 to 33)
Disorthos. A.S V. Meril Life Sciences Pvt. Ltd.
Supreme Court: 2025 INSC 352: (DoJ 18-03-2025)
