Disortho S.A.S. vs Meril Life Sciences Private Limited

Held: Applying the three-step test developed by Sulamérica Cia, neither Clause 16.5 nor Clause 18 explicitly stipulates the governing law of the arbitration agreement – The next step of the test involves identifying the parties' implied choice of law for the arbitration agreement – 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 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, it is found the parties have impliedly agreed that Indian law governs the arbitration agreement, and the controversy can be resolved accordingly – Applicability of the A&C Act u/s.11(6) of the Arbitration and Conciliation Act, affirmed – 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 – However, the 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 – Parties also consented to the appointment of a sole arbitrator to adjudicate and decide the disputes in question – Sole arbitrator appointed – Venue of the arbitration be decided mutually by the parties and the arbitrator – Arbitration shall be governed by the rules applicable to the Delhi International Arbitration Centre attached to the High Court of Delhi. [Paras 31-33, 35]

Arbitration and Conciliation Act, 1996 – Three-fold test to determine the law governing the arbitration agreement as laid down in Sulamérica Cia case:

Held: Sulamérica Cia observed that the law governing the arbitration agreement may differ from the law of the contract – However, it is reasonable to presume that the parties intended for their entire relationship to be governed by the same system of law throughout the contract – In this context, a distinction is made between a stand-alone arbitration agreement and one that is embedded within a contract – In the former, a choice of seat of arbitration becomes highly significant, and the law of the seat would likely govern the arbitration agreement – However, when the arbitration agreement forms part of a contract, the express choice of a lex contractus strongly indicates the parties' intention – It would generally be inferred that the arbitration is governed by the same law as the substantive contract – However, this presumption is rebuttable – Even when the arbitration agreement is part of the contract, the court must conduct a three-step inquiry: first, looking at the express choice of law; second, considering any implied choice; and third, determining the closest and most real connection – Second step is applied when the first step is negative, and the third step is applied when the first and second steps are negative. [Para 16] Trans-border arbitration – Appropriate test to determine jurisdiction – Divergence of opinion, internationally and domestically:

Held: The 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. [Para 3]