In the realm of international arbitration, the interplay between different legal systems often presents complex challenges. A recent judgment by the Supreme Court of India in the case of Disortho S.A.S. v. Meril Life Sciences Private Limited, 2025 SCC OnLine SC 570 decided on March 18, 2025, highlights these intricacies, particularly when contractual clauses conflict.

Factual Background
In brief, two companies from opposite ends of the globe, Disortho S.A.S., a Colombian distributor, and Meril Life Sciences, an Indian medical products manufacturer, had signed an international distributorship agreement in 2016 for the distribution of medical products in Colombia. Their contract included two seemingly straightforward clauses:

Clause 16.5 which stated that Indian law governs the agreement, and disputes fall under the jurisdiction of Gujarat courts and Clause 18 which stated that disputes must be resolved through arbitration with proceedings held in Bogota and Colombian Law shall govern the same.

However, disputes arose and when Disortho petitioned Indian courts to appoint arbitrators under the Arbitration and Conciliation Act, 1996. Meril objected to the same. arguing that Indian courts lacked jurisdiction because Clause 18 stated that the arbitration shall be governed by the arbitration rules under the Colombian Law.

What followed was a legal tug-of-war over jurisdiction which was adjudicated by the Hon’ble Apex Court, examining into the divergence of lex-contractus (the law governing the substantive contractual issues); lex arbitri (the law governing the arbitration agreement and its performance) and lex-fori (the law governing the procedural aspects of arbitration).

Key Considerations
While analysing the present facts in light of various Indian and International precedents, some key considerations that came to light were as follows:

1. Importance of chosen law: Citing Redfern and Hunter's Commentary on International Arbitration, the court emphasised the cardinal importance of the parties' chosen law in determining the validity, scope, and interpretation of the arbitration agreement.
2. Separability Doctrine: Referencing the UK Supreme Court’s judgment in Enka Insaat Ve Sanayi AS v. OOO Insurance Company Chubb, 2020 UK SC 38, the Court stated that the law governing arbitration could be entirely different from the lex fori and the lex contractus.
3. Supervisory Jurisdiction: Drawing from the English case of Melford Capital Partners v. Frederick John Wingfield Digby, [2021] EWHC 872 (Ch), the Court clarified that the lex arbitri determines which court exercises supervisory jurisdiction over the arbitration, including matters like removal of arbitrators.
4. Party Autonomy and Intent: The Court prioritized ascertaining the parties’ intent when interpreting conflicting clauses and to avoid a rigid textual approach to reconcile clauses. It also noted that jurisdiction clauses and arbitration clauses can coexist, with the former governing pre-arbitration steps and the latter governing the arbitration itself.

The Supreme Court’s Approach & Conclusion
In deciding the present case, the Court began by analyzing Clause 16.5 of the agreement, which clearly stated that the entire agreement is governed by Indian law and falls under the jurisdiction of Gujarat courts. Despite Clause 18 specifying Bogota as the venue for arbitration and conciliation, the Court concluded that Indian courts retain exclusive jurisdiction over disputes, including appointments for the arbitration in Bogota. This interpretation relies on the assumption that the parties were aware of both clauses when drafting the agreement, and made a deliberate choice to maintain Indian jurisdiction alongside Colombian procedural rules for arbitration.

The Court further clarified that the law governing the arbitration agreement is Indian law, as it is the lex contractus and there is no explicit choice of a different law. Applying the three-step test from the English case of Sulamerica Cia Nacional De Seguros S.A. v. Enesa Engenharia S.A., [2012] EWCA Civ 638, the Court held that there is a strong presumption in favor of Indian law governing the arbitration agreement, which is not displaced by the choice of Bogota as the arbitration venue. This meant that Indian courts can exercise supervisory jurisdiction over the arbitration proceedings, even though the procedural rules of the Arbitration and Conciliation Centre in Bogota apply. The absence of an explicitly chosen seat of arbitration supported this and gave way to the role of Indian law in governing the arbitration agreement.

The Court also highlighted that consistency and uniformity in applying legal principles is crucial to ensure fairness and comity in international commerce and dispute resolution mechanisms.

By - Sayjal Deshpande