The Clarification of Governing Law vs. Procedural Law in Cross-Border Arbitration

Introduction

The Supreme Court of India’s decision in DISORTHO S.A.S. v. MERIL LIFE SCIENCES PVT. LTD. (2025 INSC 352) addresses a pivotal question in international arbitration: when a contract designates one country’s law to govern its terms but provides an arbitral venue in another country, which jurisdiction’s laws and courts hold supervisory authority over the arbitration proceedings? This landmark case arose from an International Exclusive Distributor Agreement between Disortho S.A.S., a Colombian company, and Meril Life Sciences Pvt. Ltd., an Indian company.

The principal dispute stemmed from two potentially conflicting clauses in the agreement: one clause conferred jurisdiction on Indian courts and specified Indian law as governing law, while another clause provided for disputes to be resolved under arbitration rules in Colombia (with Colombian law ostensibly applying to the award). The Supreme Court had to reconcile these clauses and determine which courts had the authority to appoint arbitrators and supervise the arbitration proceedings.

In resolving the matter, the Court navigated through multiple layers of conflict-of-law principles, ultimately clarifying that the presence of an arbitral forum outside India (Bogota, Colombia) does not, by itself, oust the supervisory jurisdiction of Indian courts if the parties have expressly or impliedly chosen Indian law and Indian courts to govern the arbitration agreement itself.

Summary of the Judgment

The Court held that the Distributor Agreement, taken as a whole, implicitly escolh Indian law and the courts in Gujarat, India, for the purposes of governing the arbitration agreement. Even though the arbitration was designated to take place in Bogota, Colombia, and was regulated by procedural rules of the local Chamber of Commerce, the Court found that Clause 16.5 of the Agreement – which explicitly stated that the “laws of India” would apply and vested jurisdiction over all matters in Gujarat, India – was decisive.

Consequently, Indian courts possessed the necessary supervisory jurisdiction, including the power to appoint the arbitral tribunal under Section 11(6) of the Arbitration and Conciliation Act, 1996 (“A&C Act”). The Supreme Court emphasized that the choice of a venue for arbitration (Bogota, Colombia) is not necessarily the same as the seat of arbitration for the purposes of judicial supervision. Ultimately, the Supreme Court appointed a sole arbitrator (a retired judge of the Delhi High Court) and, with the parties’ consent, directed that the arbitration could be seated in India pursuant to the rules of the Delhi International Arbitration Centre.

Analysis

A. Precedents Cited

In support of its reasoning, the Court canvassed a range of domestic and international precedents, including:

M/s. Arif Azim Co. Ltd. v. M/s. Micromax Informatics Fze. (2024 INSC 850), which clarified that post-2012, if the seat of arbitration is outside India or the governing law of the arbitration agreement is foreign, Part I of the A&C Act would generally not apply unless the parties expressly or impliedly chose to apply it.
Enka Insaat Ve Sanayi AS v. OOO Insurance Company Chubb (2020 UKSC 38), where the UK Supreme Court set out a structured analysis for determining the law governing arbitration agreements, emphasizing the importance of the parties’ express or implied choice, failing which the law of the seat normally applies.
Sulamérica Cia Nacional De Seguros S.A. v. Enesa Engenharia S.A. [2012] EWCA Civ 638, which introduced the “three-step test”: (1) express choice, (2) implied choice, and (3) closest and most real connection.
Melford Capital Partners (Holdings) LLP v. Frederick John Wingfield Digby [2021] EWHC 872 (Ch), which reiterated the nuances in deciding the law applicable to the arbitration agreement in multi-jurisdictional disputes.
Various other cases (notably Ace Capital Limited v. CMS Energy Corporation and Enercon (India) Ltd. v. Enercon GmbH) that outline how courts distinguish between “venue” and “seat” of arbitration, while confirming parties’ freedom to choose distinct laws for different parts of the arbitration process.

These precedents reinforced the principle that the overriding factor is the parties’ intent as gleaned from the full agreement, and that “venue” and “seat” should not be conflated without further supporting evidence that the parties intended otherwise.

B. Legal Reasoning

The Court carefully deconstructed two pivotal clauses in the Distributor Agreement:

Clause 16.5: Stated that the agreement “shall be governed by and construed in accordance with the laws of India and all matters ... subject to the jurisdiction of courts in Gujarat, India.”
Clause 18: Indicated the arbitration would be seated in Bogota, Colombia, under the Arbitration and Conciliation Center of the Chamber of Commerce of Bogota rules, and that Colombian law would govern “the matter” with respect to the substantive obligations under the award.

Although Clause 18 might suggest a Colombian venue and procedural rules, the Court found that it does not negate the clear intent in Clause 16.5 that Indian law governs the arbitration agreement and Indian courts have exclusive jurisdiction to supervise the arbitration. This reading reflects the modern approach to multi-tiered conflict-of-law clauses: where the “seat” is not explicitly fixed in a foreign country, and the contract unequivocally references Indian law and Indian judicial forums, Indian courts can still exercise supervisory powers.

Additionally, the Court adopted the principle laid down in Enka Insaat and Sulamérica Cia that if no seat is expressly stated but the contract designates a particular governing law and jurisdiction, there is a presumption that the arbitration agreement follows that law in the absence of strong evidence to the contrary. The mention of a foreign arbitral forum for procedural purposes (e.g., administration of arbitration proceedings and place of hearings) is by itself inadequate to displace that presumption.

C. Impact

This decision provides a clear roadmap for parties involved in international commercial arbitration where the contractual clauses might appear inconsistent. The DISORTHO S.A.S. v. MERIL LIFE SCIENCES PVT. LTD. ruling reaffirms:

The primacy of explicit or implied choices of law stated in the contract when deciding which system of law governs the arbitration agreement.
The mere designation of a “place” of arbitration abroad does not automatically confer foreign “seat” status, nor does it oust the Indian courts of supervisory jurisdiction when other clauses favor Indian law.
Parties must draft dispute resolution clauses with precision to avoid confusion over seat, venue, governing law of the arbitration agreement, and the law overseeing substantive contractual obligations.
Ultimately, parties are at liberty to converge on holding the arbitral proceedings in any jurisdiction (as the Court permitted in this case), but that decision must align with the expressed intention regarding the arbitration agreement’s governing law and the courts’ supervisory powers.

Henceforth, in future disputes featuring similar “conflicting” clauses, parties and courts can look to this judgment for guidance on harmonizing all parts of the contract so that no clause is rendered meaningless unless it is “incurably” inconsistent with the rest of the agreement.

Complex Concepts Simplified

In cross-border contracts, multiple legal concepts can overlap:

Lex Contractus: The law governing the substantive provisions of the contract (in this case, Indian law).
Law Governing the Arbitration Agreement: Determines its validity, scope, interpretation, and whether certain disputes are arbitrable. Courts in this judgment held that Indian law applies to the arbitration agreement.
Lex Arbitri (Law of the Seat): Governs procedures and the supervisory role of courts over the arbitration process. If the seat is determined to be in India, Indian courts exercise supervisory jurisdiction. The seat can differ from the venue – the physical location – of hearings.
Venue vs. Seat of Arbitration: “Venue” can be where arbitration hearings take place; “Seat” connotes the legal domicile of the arbitration, determining which courts have oversight. This judgment clarifies that a foreign venue (Bogota) does not necessarily override the contractual choice of Indian courts as the supervisors of the arbitration.
Part I of the A&C Act: Governs arbitrations seated in India and confers certain powers (e.g., to appoint arbitrators, grant interim measures, etc.) upon Indian courts. Despite the intention to conduct proceedings abroad, the Indian courts retain these powers if they are deemed to have jurisdiction over the arbitration agreement.

These clarifications ensure that parties better understand why the Indian courts – rather than the local courts in Bogota – will oversee important aspects of the arbitration, including arbitrator appointments and supervisory interventions.

Conclusion

The Supreme Court’s judgment in DISORTHO S.A.S. v. MERIL LIFE SCIENCES PVT. LTD. significantly advances clarity in transnational dispute resolution. It underscores the importance of parties' contractual stipulations, especially where multiple clauses might appear contradictory. When viewed holistically, the clauses confirmed Indian law as the governing law of the arbitration agreement and vested jurisdiction in Indian courts – even though the arbitration was to physically take place in Bogota, Colombia, under Colombian institutional rules.

Ultimately, this decision illustrates the Court’s commitment to harmonizing contractual provisions to respect the parties’ overarching choice of governing law. As international trade and cross-border agreements proliferate, this precedent provides a strong anchor for Indian jurisprudence, ensuring that future parties and their counsel will draft disputes clauses with greater precision and remain mindful of the interplay between substantive law, the arbitration agreement’s governing law, and the curial law at the seat of arbitration.

This ruling stands as an authoritative guide on reconciling different jurisdictions’ claims over a dispute resolution process, emphasizing that consistency and the parties’ intention are paramount, and that “venue” does not automatically determine the “seat” of arbitration or undermine the supervisory role of the courts expressly named in the agreement.