DISORTHO S.A.S. VERSUS MERIL LIFE SCIENCES PRIVATE LIMITED (SUPREME COURT) 2025 INSC 352
| COURT: | Supreme Court |
| JUDGES: | K.V. VISWANATHAN J., SANJAY KUMAR J., SANJIV KHANNA CJI. |
| LEGISLATION(S): | Arbitration and Conciliation Act 1996, Section 11(6) of the Arbitration and Conciliation Act |
| COUNSEL: | N. A |
| FILE: | Click here to download the file in pdf format |
| Appropriate test to determine jurisdiction in a case of trans-border arbitration given 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 the agreement; and (iii) lex-fori, the law governing the procedural aspects of arbitration. | |
(i) 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 the 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. Secondly, when contractual clauses conflict, as is the case here, the resolution becomes legalistic and complicated.
(ii) For locating the law governing the arbitration agreement, we begin by applying the three-step test developed by Sulamérica Cia (supra). First, neither Clause 16.5 nor Clause 18 explicitly stipulates the governing law of the arbitration agreement. Therefore, we proceed to the next step of the test, which involves identifying the parties’ implied choice of law for the arbitration agreement. At this stage, there is a strong presumption that the lex contractus, i.e., Indian law, governs the arbitration agreement. As explained earlier, 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 favor of the lex contractus. In this case, it is important to note that no seat of arbitration has been explicitly chosen. In conclusion, at this second stage of the inquiry, we find that the parties have impliedly agreed that Indian law governs the arbitration agreement, and the controversy can be resolved accordingly.