ARSANOVIA LTD V CRUZ CITY 1 MAURITIUS HOLDINGS

[2012] EWHC 3702 (Comm), Queen's Bench Division, Commercial Court, Mr Justice Andrew Smith, 20 December 2012

Arbitration - Jurisdiction - Law applicable to arbitration agreement - Arbitration Act 1996, section 67

Arsanovia and Burley, subsidiaries of Unitech, entered into a joint venture with Cruz City for slum clearance in Mumbai. A company, Kerrush, was formed, with Arsanovia and Cruz City as shareholders under a shareholders' agreement (SHA) to which Burley was also a party. Under a separate agreement entered into by Unitech, Burley and Cruz City, the Keepwell Agreement, Unitech agreed to put Burley in funds so that it could make payments under the SHA. Both the SHA and Keepwell Agreements were governed by the law of India, but each contained arbitration clauses providing for arbitration in London under the rules of the London Court of International Arbitration. The parties specifically agreed that they would not seek any interim relief in India under the LCIA Rules or under the Arbitration and Conciliation Act 1996 of India, and that the provisions of Part I the Indian Act were excluded. Even though the seat of the arbitration was England, both the SHA and Keepwell Agreements were stated to be governed by Indian law. It will be noted that there was no choice of the law governing the arbitration agreement. On 14 July 2010 Arsanovia served a notice under the SHA triggering buy-out provisions as against Cruz City on the basis that the controller of Cruz City - Lehman Brothers - had filed for Chapter 11 bankruptcy protection in the US. By way of response, on 13 September 2010 Cruz City purported to exercise a put option under the SHA, whereby Arsanovia was required to buy out Cruz City by reason of the fact that the project had not been completed, but on terms much more favourable to Cruz City than under the bankruptcy buy-out. Two arbitrations followed, the arbitrators ruling in favour of Cruz City. Arsanovia, Burley and Unitech appealed. They argued in respect of the award in respect of the SHA that the arbitration agreement was governed by Indian law, and that under Indian law Burley was not a party and the award was void because the arbitration had been commenced against both Arsanovia and Burley, a non-party. As regards the Keepwell award, Unitech argued that it was not possible to determine its own liability until liability under the SHA had been resolved.