Supreme Court of India Clarifies Governing Law in Arbitration Agreements: A Landmark Ruling

• Admin
• 2025-04-21
• Comments (121)

In a landmark judgment that reinforces India's pro-arbitration stance, the Supreme Court of India recently provided crucial clarity on the determination of governing law in arbitration agreements. The case, Disotrsah SAS vs. Meril Life Sciences Pvt Ltd, revolved around a complex cross-border dispute and conflicting interpretations of applicable laws governing arbitration clauses.

Background of the Case
The dispute arose from a contract between a French company and an Indian medical devices manufacturer. While the main contract was governed by French law, the arbitration clause provided for arbitration under the International Chamber of Commerce (ICC) rules, with the seat in India. When a dispute arose, the question became: which law governs the arbitration agreement—the law of the seat (India), or the law governing the main contract ?

The Supreme Court’s Verdict
The Court held that in the absence of a clear choice of law for the arbitration agreement itself, the law of the seat of arbitration would prevail. Since the seat was in India, Indian law was deemed to govern the arbitration agreement.
This judgment follows the principles laid down in the English case of Enka v. Chubb and aligns with international arbitration jurisprudence. The Court emphasized that the choice of a foreign law to govern the main contract does not automatically extend to the arbitration clause, especially when the seat of arbitration is India.

Key Takeaways
• Seat is Crucial: The seat of arbitration significantly influences the procedural and substantive aspects of the arbitration agreement.
• Parties Must Be Clear: The ruling highlights the importance of explicitly stating the law governing the arbitration agreement to avoid ambiguity.
• India’s Pro-Arbitration Approach: By aligning with international norms, the judgment reinforces India's image as an arbitration-friendly jurisdiction.

Conclusion
This decision provides much-needed clarity for businesses engaged in cross-border transactions and reinforces the principle that arbitration agreements are separable from the main contract. It serves as a reminder for parties to pay careful attention while drafting dispute resolution clauses, especially in international commercial contracts.
As arbitration continues to be a preferred method for resolving disputes in India, such rulings pave the way for greater predictability and consistency in the legal landscape.