In the realm of international arbitration, the interplay between different legal systems often presents complex challenges. A recent judgment by the Supreme Court in Disortho SAS v Meril Life Sciences Private Limited, decided on 18 March 2025, highlights these intricacies, particularly when contractual clauses conflict.
Disortho, 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 the Gujarat courts; and
- Clause 18, which stated that disputes must be resolved through arbitration in Bogota (Colombia’s capital), and Colombian law shall govern the proceedings.
However, disputes arose, and when Disortho petitioned Indian courts to appoint arbitrators under the Arbitration and Conciliation Act, 1996, Meril objected, arguing that Indian courts lacked jurisdiction because clause 18 stated that the arbitration shall be governed by the arbitration rules under Colombian law.
What followed was a legal tug-of-war over jurisdiction, which was adjudicated by the Supreme Court, examining 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 facts, some key considerations came to light.
- 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.
- Separability doctrine. Referencing the UK Supreme Court’s judgment in Enka Insaat Ve Sanayi AS v OOO Insurance Company Chubb, (2020), the court stated that the law governing arbitration could be entirely different from the lex fori and lex contractus.
- Supervisory jurisdiction. Drawing from the English case of Melford Capital Partners v Frederick John Wingfield Digby, (2021), the court clarified that lex arbitri determines which court exercises supervisory jurisdiction over the arbitration, including matters like removal of arbitrators.
- Party autonomy and intent. The court prioritised ascertaining the parties’ intent when interpreting conflicting clauses and avoided a rigid textual approach in reconciling them. 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.
Supreme Court’s approach
In deciding the present case, the court began by analysing 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 lex contractus and there is no explicit choice of a different law. Applying the three-step test from the English case of Sulamérica Cia Nacional De Seguros SA v Enesa Engenharia SA, (2012), the court held that there is a strong presumption in favour 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 allowed Indian law to govern 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.
The dispute digest is compiled by Numen Law Offices, a multidisciplinary law firm based in New Delhi & Mumbai. The authors can be contacted at support@numenlaw.com. Readers should not act on the basis of this information without seeking professional legal advice.
