Summary: India and the UK have taken opposite paths on determining the law governing arbitration agreements. India’s Supreme Court has embraced the three-stage Enka framework in Disortho S.A. v. Meril Life Sciences (2025), while the UK’s Arbitration Act 2025 establishes a bright-line rule defaulting to the law of the seat. This article examines both approaches and why precise drafting of dispute resolution clauses has become essential risk management in cross-border arbitration.
The question of which law governs an arbitration agreement, distinct from the law governing the underlying contract, has long vexed courts and practitioners alike. In our previous article, Law Governing Arbitration Agreement: Which Way are Indian Courts Headed? | Dispute Resolution Blog, we explored how England, Singapore, and India approached this critical issue, noting the divergent views among Indian High Courts on whether the law of the main contract or the law of the seat should prevail. Recent developments have dramatically reshaped this landscape, with India and the UK moving in seemingly opposite directions.
The Indian Position: Alignment with Enka
Indian High Courts had previously taken divergent views on whether the law governing the main contract[1] or the law of the seat[2] would govern the arbitration agreement. However, the Indian Supreme Court’s 2025 ruling in Disortho S.A. v. Meril Life Sciences Private Limited, 2025 INSC 352 (“Disortho“) aligned itself with the approaches prevailing in England and Singapore.
The Three-Stage Enquiry
The Supreme Court referred to the English judgments in Sulamérica Cia Nacional de Seguros SA v. Enesa Engelharia SA (2013) 1 WLR 102 and Enka Insaat Ve Sanayi AS v OOO “Insurance Company Chubb” & Ors [2020] UKSC 38, and the Singapore decisions in BYC v. BCZ (2016) SGHC 249 and BNA v. BNP (2019) SGCA 84, and held that the law governing the arbitration agreement must be determined by following a three-stage enquiry:
Stage I – Express Choice: If the parties have expressly chosen the law governing the arbitration agreement, that choice shall prevail.
Stage II – Implied Choice: If no express choice exists, the court must determine the implied choice of law governing the arbitration agreement. Generally, unless additional factors displace this presumption, the implied choice shall be the governing law of the main contract.
Stage III – Closest Connection: In the absence of both express and implied choice, the governing law shall be the system of law with which the arbitration agreement has the “closest and most real connection”.
At the second stage, certain factors may displace the presumption that the governing law of the main contract is the implied choice for the arbitration agreement, including: (a) when the law of the seat mandates that the arbitration agreement must be governed by the law of that country; or (b) where the arbitration agreement will become ineffective or the dispute will become non-arbitrable if governed by the same law as the main contract.
The third stage i.e. the closest connection test applies only when the governing law of the arbitration agreement cannot be determined after applying the first two stages. In such cases, the law of the seat of arbitration will typically have the closest connection to the arbitration agreement and shall therefore govern it.
Why Does This Matter?
Determining the governing law of the arbitration agreement is crucial because it determines the validity, scope, and interpretation of the agreement. The implications are far-reaching. For instance, disputes relating to oppression and mismanagement are not arbitrable in India but may be arbitrable in other jurisdictions. Similarly, competition law disputes, insolvency matters, and certain intellectual property disputes face varying arbitrability standards across jurisdictions.
The UK’s Legislative Departure
While India embraced the Enka framework, the UK has charted a different course. The UK recently passed the Arbitration Act 2025 (the “English Amendment Act”) to amend and bring reforms to the English Arbitration Act 1996, fundamentally changing the approach for determining the law governing the arbitration agreement.
The English Amendment Act introduces Section 6A, a new default rule on the law applicable to the arbitration agreement, which provides that the governing law of the arbitration agreement will be the law of the seat of the arbitration unless the parties expressly agree otherwise. Importantly, Section 6A further clarifies that the governing law chosen for the underlying contract does not constitute express agreement that the same law also applies to the arbitration agreement.
This approach departs from the UK Supreme Court’s test in Enka v Chubb (2020). By offering a straightforward default position, the prospect of disputes arising in relation to the law governing the arbitration agreement becomes less likely.
The reform, which came into force on 1 August 2025, reflects a policy choice prioritising certainty and efficiency over the flexibility of the Enka framework.
Institutional Rules: A Comparative Snapshot
The UK’s new approach aligns with the LCIA Rules, which have long favoured the law of the seat as the default position for the law governing arbitration agreements.
The LCIA Rules 2020 (Article 16.4) provide that “unless and to the extent that the parties have agreed in writing on the application of other laws or rules of law” (and “such agreement is not prohibited by the law applicable at the arbitral seat”), the law of the arbitration agreement shall be the law applicable at the seat of the arbitration.
The SIAC Rules 2025 do not mandate a specific provision on the law governing the arbitration agreement within the procedural rules themselves; however, to avoid uncertainty and potential disputes, SIAC’s model clauses strongly recommend the inclusion of an express choice of law clause for the arbitration agreement.
Similarly, the ICC Rules 2021do not contain a specific provision that directly addresses the law governing the arbitration agreement, leaving the matter to be determined by applicable conflict of laws principles or party agreement.
Supervisory Jurisdiction: The Disortho Innovation
What is particularly noteworthy in Disortho is the Supreme Court’s approach to determining supervisory jurisdiction by reference to the law governing the arbitration agreement.
Under Indian law, the law of the seat generally determines the supervisory jurisdiction of the courts, and once the seat is determined, it operates akin to an exclusive jurisdiction clause.[3]
However, in Disortho, the law governing the arbitration agreement was used to determine supervisory jurisdiction. Since Indian law governed the main contract, the Supreme Court applied the Stage II of the three-stage enquiry and held that Indian law also governed the arbitration agreement. As a sequitur, in view of the law governing the arbitration agreement read with Clause 16.5 (which provided for the jurisdiction of Gujarat courts), the Supreme Court held that Indian courts had supervisory jurisdiction and exercised its powers under Section 11(6) of the Arbitration and Conciliation Act, 1996, to appoint an arbitrator.
Whether this novel approach of determining supervisory jurisdiction through the back door of the law governing the arbitration agreement rather than the front door of the seat will withstand scrutiny remains to be seen.
Conclusion: Charting Different Courses
While India has embraced the nuanced, three-stage Enka framework of express choice, implied choice, and closest connection, the UK has opted for legislative clarity through a bright-line rule favouring the law of the seat as the default position.
By eliminating the need to imply choice and establishing the law of the seat as the default position (absent express agreement to the contrary), the Arbitration Act 2025 reduces the scope for preliminary jurisdictional skirmishes that can delay and complicate arbitral proceedings.
Whether India will follow the new English suit remains to be seen.
Practical Takeaway
The judgment in Disortho once again highlights the critical importance of drafting clear and comprehensive dispute resolution clauses, particularly in cross-border agreements. For practitioners, the lesson is unequivocal: draft with precision.
In cross-border agreements, the dispute resolution clause must expressly address three distinct elements:
- the law governing the main contract;
- the law governing the arbitration agreement; and
- the seat (and, if different, the venue) of arbitration.
Such specificity in drafting will significantly reduce the likelihood of jurisdictional disputes and enhance the enforceability of arbitration agreements. Failure to do so will invite the very jurisdictional disputes that arbitration is designed to avoid. As Disortho illustrates, even sophisticated commercial parties can find themselves embroiled in preliminary battles over which courts have supervisory jurisdiction—battles that consume time, costs, and goodwill.
For further information, please contact:
Kapil Arora, Partner, Cyril Amarchand Mangaldas
kapil.arora@cyrilshroff.com
[1] Carzonrent India v. Hertz International, 2015 SCC OnLine Del 10085; Sakuma Exports Ltd v. Louis Dreyfus Commodities Suisse SA, 2013 SCC OnLine Bom 986
[2] Katra Holdings Ltd v. Corsair Investments Ltd, 2018 SCC OnLine Bom 4031; HSBC PI Holdings (Mauritius) Ltd v. Avitel Post Studioz Ltd, 2014 SCC OnLine Bom 102
[3] Indus Mobile Distribution (P) Ltd. v. Datawind Innovations (P) Ltd. (2017) 7 SCC 678, BGS SGS SOMA JV v. NHPC Ltd, CIVIL APPEAL NO. 9307 OF 2019 and Arif Azim v. M/s. APTECH Ltd. 2024 INSC 155
