One of the most significant aspects of arbitration proceedings is identifying the seat of arbitration, which further defines the law under which the arbitration proceedings must operate. There has been a debate at large, question the difference between “venue” and “seat” of arbitration in disputes. While some judgements have opined that choosing a place means assigning a seat of arbitration, there are also some judgements delivered by apex court claiming that the venue of the arbitration proceedings does not amount to the seat of arbitration.
The recent dispute between Mankatsu Impex v. Airvisual Ltd. has added to the ambiguity of the difference between the two, not arresting the assisting debate in the legal society.
Facts of the Case
Mankatsu Impex Pvt. Ltd. (MIPL) and Airvisual Ltd. (AVL) were two companies that agreed to enter into a Memorandum of Understanding (MOU) regarding distribution rights of the concerned products supplied by Airvisual Ltd back in 2016, the agreement the concerned agreement was signed for five years, which also entailed a clause for resolution of any future dispute by the method of arbitration, and the seat for which was decided to be Hong Kong.
Shortly after a while, the respondent company was acquired by another entity called IQAir AG. This company informed all the associated companies of the previous company that it had taken over all technology and associated assets of it. Further, it informed Mankatsu Impex Private Limited that they would not continue the legal obligations that fell upon them as per the contract signed by AVL.
Such a declaration ended up causing chaos, resulting from which MIPL invoked the terms of the Memorandum of Understanding. They would not be able to hold exclusive rights of sale as per the original agreement and called for arbitration per the agreed terms of the contract.
The main point of dispute between the two parties following this particular incident was the agreement or, rather, disagreement on the seat of arbitration.
Initially, IQAir AG did not accept the charges for the enforceability of the arbitration proceedings, as they claimed that the previously signed contracts and legal obligations were not to be shouldered by the now acquired company. In contrast, AVL accepted the notice of arbitration and argued that the agreed-upon seat of arbitration was set in Hong Kong. In response to this claim, MIPL filed a counter-petition under Section 11 of the arbitration and Conciliation Act, 1996 before the Apex Court, to appoint an arbitrator and have the proceedings follow Indian rules MIPL believed that the arbitration was seated in India.
Judgement of the Case
The Supreme Court made notice of the fact that the memorandum of understanding between the two parties in this particular case made a clause for Indian law to be only applied in those situations that dealt with the enforcement of the law of contracts, for the highlighting the fact that clause 17 specifically made provisions for the arbitration to be administered in Hong Kong in case of any future dispute, the court opined that such language of the MO you, only pointed fingers towards the fact that since Hong Kong was chosen as the seat of arbitration, the law of Hong Kong would govern the arbitration.
In totality, this judgement has been one which has been contrary to the precedents available, but at the same time, is justified in its delivery, as the case at hand has specific terms laid down regarding the seat of arbitration.
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