Facts
- The Union of India and McDonnell Douglas Corporation entered a 1987 launch agreement for services related to launching an Indian satellite via space shuttle.
- The contract provided that the agreement was governed by Indian law.
- The arbitration clause specified that arbitration would take place in London and would be “conducted in accordance with the procedure provided in the Indian Arbitration Act 1940.”
- A dispute was referred to arbitration, and before the tribunal proceeded the Union of India sought declaratory relief in the English Commercial Court on the law governing arbitral procedure.
- The Union of India argued that reference to the Indian Arbitration Act made Indian law the law governing the arbitration proceedings.
- McDonnell Douglas argued that London as the seat meant English law governed the arbitration proceedings, with any Indian procedural reference operating, at most, as agreed procedural rules.
Issues
- Whether the designation of London as the seat meant English law governed the arbitration’s procedural framework and court supervision (curial law), despite incorporation of procedures from the Indian Arbitration Act 1940.
- Whether, and to what extent, arbitral procedure can be divided between an “external” procedural law of the seat and “internal” procedural rules adopted by party agreement.
Decision
- The Commercial Court (Saville J) held that English law governed the arbitration proceedings as the law of the seat (London).
- The court treated the reference to the Indian Arbitration Act 1940 as an agreed set of internal procedural rules, effective only so far as consistent with an English-seated arbitration and English supervisory law.
- The court rejected the Union of India’s contention that the clause displaced the ordinary consequence of choosing London as the juridical seat.
Legal Principles
- Express designation of a juridical seat ordinarily determines the arbitration’s curial law and the courts with primary supervisory jurisdiction.
- An agreement to conduct arbitration in accordance with a foreign arbitration statute’s procedures does not, without clear language, change the seat or displace the seat’s curial law; it may operate as contractual adoption of procedural rules.
- Substantive governing law of the contract (here, Indian law) is distinct from the procedural law governing the arbitration (here, English law by reason of the seat).
- Party autonomy permits adoption of detailed procedural rules for the conduct of the arbitration, but those rules operate within, and cannot contradict, the mandatory framework of the seat’s arbitration law.
Conclusion
The court declared that the arbitration was seated in London and therefore subject to English curial law and English court supervision, while giving effect to the parties’ reference to the Indian Arbitration Act 1940 only as incorporated internal procedures compatible with an English-seated arbitration.