In the recent ruling of Orissa Metaliks Pvt. Ltd. v. SBW Electro Mechanics Import Export Corporation (2023 SCC OnLine Cal 1583), the Calcutta High Court (HC), in deciding the validity of an arbitration clause, has held that the venue of the arbitral proceedings must be considered as the seat, in the absence of any significant contrary indicia in the agreement.
In this case, the arbitration clause of the contract specified that all disputes would be settled in accordance with the provisions of “International Arbitration laws,” and the venue of the arbitration would be Singapore. In legal parlance, as there is no such thing as “International Arbitration laws,” there was ambiguity as to the seat of the arbitration.
The HC highlighted the fact that the agreement provided for arbitral proceedings to be held in Singapore, which indicated that the parties intended for the arbitral proceedings to be at a particular place. In the absence of other contrary indicia and combined with a supernational body of rules governing the arbitration, the HC took the view that the venue would also be the juridical seat of the arbitral proceedings.
The HC referred to the Supreme Court ruling in BGS SGS Soma JV v NHPC Limited ((2020) 4 SCC 234) and discussed the contrasting language of arbitration clauses.
In conclusion, the importance of clearly drafting an arbitration clause in a transactional document cannot be underscored more, and contracting parties should separately define the seat and the venue of the arbitration to avoid litigation on this issue.