Arbitration in India 9789041182555, 9789041182821, 9789041182838

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(=) Wolters Kluwer

Arbitration in India

Arbitration in India

Edited by Dushyant Dave Martin Hunter

Fali Nariman Marike Paulsson

(=), Wolters Kluwer

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To the beloved and unforgettable Bapsi Nariman (née Contractor)

Editors

Dushyant Dave is Senior Advocate, practising in the Supreme Court of India. He has been at the bar for three decades during which he has appeared in several thousand matters in various High Courts and the Supreme Court. His field of practice is wide and involves varied subjects like constitutional law, administrative law, civil laws, corporate laws and arbitration law. He has appeared in many celebrated cases resulting in widely known decisions of the Supreme Court and has been appointed amicus curiae in matters involving substantial public interest. Martin Hunter is a former Barrister, Professor Emeritus of International Dispute Resolution at Nottingham Trent University, England and Visiting Professor of Law at King’s College London, England and University of Miami School of Law, USA. He has served as counsel or arbitrator in cases held under the rules of most of the principal arbitral institutions and arbitration centres. He was deputy-chairman of the UK Government's committee on the arbitration law reform and has participated in the work of the AAA,

the IBA, the ICC’s Court, the LCIA’s Court and UNCITRAL.

known for the major textbook International Arbitration.

of international

arbitration, Redfern

He is

& Hunter

on

Fali Nariman is Senior Advocate of the Supreme Court of India. He is also designated as Honorary President of ICCA and President Emeritus of India’s Bar Association. He is Honorary Member of the International Commission of Jurists; formerly President of the Law Association for Asia and the Pacific; Member of the Court of the LCIA; Vice Chairman

International Court of Arbitration

of the ICC; and Co-Chair of the Human

Rights Institute of the IBA. He was awarded the Padma Vibhushan (the second highest civilian award of the Republic of India) in recognition of distinguished service in the field of jurisprudence and the Global Medal Laurel at the International Conference of World Association of Press Councils. He is also the Chairman of the UNCITRAL National Coordination Committee for India (UNCCI). Marike Paulsson is Senior Advisor at Albright Stonebridge Group and Vice President for the Global Institute for Peace Studies. She is a member of ICCA’s Judiciary

Vil

Editors

Committee, a member of the Court of the Mauritius Arbitration and Mediation Centre and a jury member for the Princess Sabeega Bint Ebrahim Al Khalifa Global Award for Women’s Empowerment, awarded by United Nations Women. She is Visiting Professor at University of Miami School of Law, USA and the University of Sao Paolo, Brazil and the author of The 1958 New York Convention in Action and editor and co-author of ICCA’s Guide to the Interpretation of the 1988 New York Convention.

vill

Contributors

Manish Aggarwal is Partner at Three Crowns. He is a dual-qualified English solicitor and Indian advocate. He has extensive experience of commercial and investment treaty arbitrations in a broad range of sectors and is recognised in leading directories such as Who’s Who Legal and Legal 500 UK. He has served as a member of the IBA Subcommittee on Investment Treaty Arbitration and taught International and Comparative Arbitration at Queen Mary University’s School of International Arbitration and International Investment Law at King’s College London. Ashwita Ambast is Legal Counsel at the PCA. She acts as tribunal secretary in international arbitrations involving States, State entities, international organisations and private parties. She assists the PCA Secretary-General with appointing authority matters. She serves as a Co-Registrar of the Mauritius International Arbitration Centre. Ashwita obtained a BA LLB with honours from the National Law School of India University,

Bangalore,

and

an LLM

as a Goldman

Scholar

from

Yale

Law

School,

Connecticut. She previously worked in the international arbitration team of a law firm in London and is qualified to practise law in India and England & Wales. Abhinav Bhushan is the Regional Director for South Asia, ICC Arbitration & ADR, ICC International Court of Arbitration, Singapore. Abhinav focuses on helping companies, investors, and attorneys in the region understand how they can efficiently resolve international commercial disputes. Prior to serving as Regional Director as the Court's first Indian Director, he was also the first Indian Deputy Counsel of the Court, where he gained first-hand experience working on arbitrations arising out of common law jurisdictions, in particular working with parties from the UK, India, Singapore and other regions of Asia. Pranav Budihal is an India-qualified dispute resolution lawyer with two years of experience working with Keystone Partners, Bangalore on commercial and civil disputes in India. He has worked on domestic ad hoc and institutional arbitrations in the construction, services and cotton industries and also has trial experience in India. Pranav has also been nominated as a sole arbitrator by a leading Indian banking and

1X

Contributors

finance company for low-value disputes in arbitrations overseen by the Centre for Online Resolution of Disputes (CORD), India. He is currently pursuing an LLM (International Arbitration and Dispute Resolution) from the National University of singapore. Ganesh Chandru is Partner at Dua Associates. He is admitted to practise in India, England & Wales and Singapore, and is Fellow of the Chartered Institute of Arbitrators, UK and the Singapore Institute of Arbitrators. He is Honorary Overseas Member of the Commercial Bar Association of England & Wales. Ganesh advises and represents parties in arbitration matters (under rules of SIAC, ICC, LCLIA, SCMA, UNCITRAL and ad hoc). Ganesh is a member of the Panel of Arbitrators of the SIAC, the Indian Council

of Arbitration, the Nani Palkhivala Arbitration Centre and the Asian International Arbitration Centre. Brooks W. Daly is the Deputy Secretary General and Principal Legal Counsel of the PCA. He advises PCA Member States on various matters relating to arbitral procedure and international dispute resolution generally, including the role of the PCA in treaties, contracts, and national legislation. He speaks frequently on international arbitration topics and lectures at Leiden University School of Law. Prior to joining the PCA, Brooks acted as Counsel at the ICC International Court of Arbitration in Paris, France. He has

been a member of the California Bar since 1994 and previously practised with law firms in Los Angeles and London. Nakul Dewan is Senior Advocate designated by the Supreme Court of India and a Barrister at Twenty Essex, in Singapore and London. He is one of the only Indians to have rights of audience before courts in India, Singapore and England & Wales. Nakul has appeared in several leading arbitration cases before courts in India and Singapore, as well as conducted several international commercial arbitrations in all three jurisdictions as lead counsel. He has also been appointed as an arbitrator by the SIAC, ICC and LCIA. Apart from his practice of law, Nakul is Associate Adjunct Professor at the National University of Singapore. He is also Chief Editor of the book Enforcing Arbitral Awards in India. Rahul Donde specialises in international commercial and investment arbitration. He has acted as arbitrator, counsel and secretary of the arbitral tribunal under both ad hoc (UNCITRAL, Swiss PILA, Indian Arbitration Act, 1996) and institutional arbitration rules

(CEPANI,

HKIAC,

ICC,

ICSID,

LCIA,

SIAC).

Rahul

has specific experience

in

disputes relating to energy and natural resources, commercial and corporate laws in different jurisdictions in both common law and civil law systems. Rahul is empanelled as an arbitrator with the major international arbitral institutions (including HKIAC, ICC, LCIA and SIAC). He has also appeared before the Bombay High Court and the Company Law Board. Alexander G. Fessas is the Secretary General of the ICC International Court of Arbitration. He is responsible for the operational management and coordination of the ICC Court’s Secretariat and other dispute resolution services in Paris, Hong Kong, New

Contributors

York, Sao Paolo and Singapore. Prior to his appointment as Secretary General, he was the Secretariat's Managing Counsel. Previously, he practised as counsel out of Athens. During the same period, he was also the editor-in-chief of the Revue hellénique de droit international. He is admitted to the Athens Bar and speaks English, French and Greek. Shashank Garg is an arbitrator and seasoned dispute resolution practitioner skilled in international commercial arbitration, sports arbitration, construction arbitration, me-

diation, and litigation having represented clients in ad hoc and institutional arbitrations under leading institutional rules. Partner at Advani & Co., he is in charge of their Delhi office. He is the Co-Chair, Society of Constriction Law India’s Young Leaders Group; Nominated

Member

(India), ICC Commission on Arbitration and ADR; and Member,

Arbitration Committee, Delhi International Arbitration Centre. From 2017 to 2019, he was ICC YAF’s ‘Regional Chapter Coordinator (India)’. He is the Editor of Alternative Dispute Resolution: The Indian Perspective. Lim Seok Hui is the Chief Executive Officer of SIAC. She is responsible for the overall management and operations of SIAC. She formerly practised in Singapore and Hong Kong SAR as a corporate and M&A lawyer with international as well as Singapore law firms, and has also held General Counsel positions in various multinational corporations. She is called to the Singapore Bar and also admitted as a solicitor in England & Wales and Hong Kong SAR. Seok Hui previously held a concurrent role as the first Chief Executive Officer of the Singapore International Mediation Centre, and currently sits on its Board of Directors. Tejas Karia is Partner and Head of Arbitration with Shardul Amarchand Mangaldas. He is qualified to practise in India and England & Wales and has experience representing multinational and Indian corporations across sectors in ad hoc and institutional arbitrations seated in India, London and Singapore. He regularly sits as an arbitrator. He is a member of the SIAC Court of Arbitration and Governing Council of Indian Law Society. He is FCIArb and Director of ClArb — India and Indian Arbitration Forum. He is ranked or recognised by Chambers & Partners, Asialaw Profiles, Who’s Who Legal: Arbitration, Benchmark Litigation and Legal 500. Darius Khambata,

LLM

(Harvard),

is Senior

Counsel

and practises before

various

courts in India including the Supreme Court and the Bombay High Court. He is a member of One Essex Court, London. He was Advocate General for Maharashtra and Additional Solicitor General of India. He has appeared in numerous signilicant constitutional, corporate and commercial matters and domestic and international commercial arbitrations. He was part of the Law Commission of India’s Committee that in 2014-2015 recommended substantial amendments to the Arbitration & Conciliation Act 1996. He was Vice President of the LCIA and is a member of the SIAC Court. Vikas Mahendra is Partner at Keystone Partners, India. He is a specialist arbitration practitioner and has handled commercial arbitrations, both ad hoc and institutional, in India,

South-East

Asia,

Central

America,

Africa,

Europe

and

UK.

He has

acted

for

several market leaders in disputes relating to construction of power plants, highways,

Contributors

dams, metro-rail lines, multipurpose developments, etc. Vikas previously worked in the arbitration and litigation department in Herbert Smith Freehills’ London, Paris and Singapore offices. Vikas is also the Co-Founder of Centre for Online Resolution of Disputes (CORD) which aims to provide access to affordable resolution mechanisms using technological aids. James Menz is Founding Partner of rothorn legal, a dispute resolution boutique in Frankfurt and Zurich

focused on international

arbitration, litigation, and alternative

dispute resolution proceedings. James has some 15 years of experience with complex cross-border disputes. He is admitted to the New York Bar. Most recently, James worked as Senior Litigation Expert in Bombardier Transportations’ Global Litigation Group. From 2016 to 2018, he was Deputy Secretary General and Head of Case Management at the DIS. He served on the drafting committee for the 2018 DIS Arbitration Rules. He is a board member of ASA, Vice-Chair of the German Association of Company Lawyers’ Dispute Resolution Group, and has been included thrice in WWL, including among the top-10 non-partners in Europe. Manavendra Mishra is Partner in the dispute resolution practice of Khaitan & Co, Mumbai. He is on the Steering Committee of the YMCIA, Mumbai Centre for International Arbitration and the Young Leaders Group of the Society of Construction Laws, India Chapter. He has been invited as a speaker in ICC YAF biannual conferences, YMCIA, IBA Panels and various other institutions/forums. He regularly appears as counsel before various international institutional arbitrations and domestic arbitrations as well as before Indian courts in enforcement matters. Ciccu Mukhopadhaya is Senior Advocate based in New Delhi, India. Ciccu has served as Vice President of the ICC Court of Arbitration and heads the ICC Arbitration Working Group of India. He is regularly appointed as an arbitrator and as senior counsel in international arbitrations and was one of the first dedicated arbitration practitioners in India. He regularly appears as senior counsel in ICC, SIAC, LCIA and other institutional arbitrations and is on the panel of arbitrators of various institutions. Promod Nair is Advocate and Arbitrator at Arista Chambers in India. He has been appointed as arbitrator in ICC, LCIA, SIAC, LCIA India and HKIAC arbitrations and in

ad hoc proceedings. He regularly acts as counsel in arbitrations in Asia, Europe, North America and Africa. He is currently representing the Republic of India in arbitrations commenced under BITs. Promod served as a member of the LCIA Court between 2013 and 2018. He is currently Council Member of the Hong Kong International Arbitration Centre and a member of the Advisory Council of the Mumbai Centre for International Arbitration. Kevin Nash is the Deputy Registrar & Centre Director of SIAC and has overseen the administration of thousands of international cases under all versions of the SIAC Rules and the UNCITRAL Rules. He worked on the revisions to the SIAC Rules 2013, the SIAC Rules 2016, the SLAC Investment Arbitration Rules 2017, and leads the SIAC Secretariat

Sub-Committee on the drafting of the SIAC Rules 2021. Kevin is a frequent speaker on

Xll

Contributors

arbitration issues and conducts training sessions for arbitration stakeholders globally. He is a member of the Singapore delegation at UNCITRAL WG II and represents SIAC as an observer at UNCITRAL WG II. Karuna Nundy leads complex commercial litigation and arbitration for a variety of corporate and State clients. For her work in commercial dispute resolution and notably also for bringing accountability to rogue corporates, Karuna has been honoured by India's pre-eminent chambers of commerce and financial publications. In 2020 Business Today has recognised her as among the most powerful women in business. Karuna also leads litigations concerning the Bhopal gas disaster and toxic waste dumps before the Supreme Court of India. Shaneen Parikh is Partner at Cyril Amarchand Mangaldas. She is qualified to practise in India and England & Wales. She has wide-ranging experience in arbitration and has represented clients across various industries. She has represented parties in SIAC, ICC, LCIA and in ad hoc arbitrations. She is Member of the SIAC Court of Arbitration and the LCIA Users Council. She has also represented clients in various courts and tribunals across India, including the Supreme Court. She has been recommended by WWL as Future Leader in arbitration and Notable Practitioner in Dispute Resolution by Asia Law. Constantine Partasides QC is Partner at Three Crowns. He has some of the largest commercial and investor-state arbitrations has been named as one of the “top 20” individuals in the world Who Legal every year since 2011. He is a co-author of the editions of the leading textbook on international arbitration, International Arbitration. He is a solicitor-advocate (Higher appointed Queen's Counsel in 2014.

appeared as counsel in of the last decade, and of arbitration by Who’s fourth, fifth, and sixth Redfern & Hunter on Courts Civil) and was

Sherina Petit is Partner at Norton Rose Fulbright in London and heads the international arbitration practice across Asia, Europe and the Middle East and the firm’s global India practice. She also sits as an arbitrator. She has a wide range of experience in ad hoc and institutional international arbitrations in various sectors. Sherina is on the board of the LCIA and the EFILA. She is on the SIAC Users Counsel and also part of the ICC Indian Arbitration Group and the Steering Committee of the Pledge for Equal Representation for Women in Arbitration. George Pothan is Advocate practising before the Supreme Court of India and High Courts in India. He is also the Legal Consultant to the Ministry of External Affairs, Government of India and the coordinator of the UNCITRAL National Coordination Committee for India (UNCCI). He advises the Government on International law issues including treaty negotiations, international arbitrations and has represented India at UNCITRAL sessions. George did his LLM at King’s College London. He regularly delivers guest lectures on investment treaty arbitrations at institutions and has been called as an expert on the subject before various committees.

xill

Contributors

Rishabh Raheja will be joining Shearman & Sterling, Hong Kong as Associate. He focuses on international arbitration in Asia, and has gained experience in India, Singapore, and South Korea. Dr Katia Rener is an international arbitration lawyer currently based in Zurich, Switzerland. She previously worked as a counsel at the German Arbitration Institute (DIS) and served on the drafting committee for the 2018 DIS Arbitration Rules. She studied Law at the universities of Mainz (Germany), Dijon (France) and Cracow (Poland). While writing her doctoral thesis she worked as a research associate at the University of Wiirzburg (Germany) where she taught International Arbitration. Katia has acted as party counsel, arbitrator and secretary to the tribunal in numerous international arbitrations and regularly publishes and speaks on issues in international arbitration. Dipen Sabharwal QC is Partner at White & Case LLP, where he leads the international arbitration practice in Europe, Middle East and Africa. Based in London, Dipen is qualified to practise law in India, England & Wales and New York. He advises clients on complex cross-border disputes across the globe. Dipen was appointed Queen's Counsel in 2019, becoming one of the youngest solicitors to take silk. He holds law degrees from the National Law School of India, Oxford University (where he was a Radhakrishnan Chevening Scholar), and University of Michigan Law School (where he was a Graduate Fellow). Sadyant Sasiprabhu works on arbitration State arbitrations and gained experience in

is Associate at RS Prabhu & Company in New Delhi, where he and related litigation matters. He has been involved in investorcommercial arbitrations, both domestic and international. He has dispute resolution at the Permanent Court of Arbitration in The

Hague, where he assisted tribunals in investor-State matters and with a US law firm in

London. Sadyant studied Law & Business at the University of Warwick, England and has an LLM in International Dispute Resolution from King’s College London. He is admitted to practise in India and his admission to New York is pending. Cyril Shroff is the Managing Partner of Cyril Amarchand Mangaldas, India. He has over 38 years of experience in various sectors. Mr Shroff is Chairman of FICCI’s Corporate Laws Committee, and Member of CII National Council, National Committee on Financial Markets, IMC International ADR Centre, Society of Insolvency Practitioners of India and Media Legal Defence Initiative. He was a member of SEBI-constituted Uday Kotak Committee on Corporate Governance and SEB] Committee on Insider Trading. He holds board memberships/advisory positions at Krea University, Adani Institute of Infrastructure, Centre for Study of the Legal Profession, and National Institute of Securities Markets. Pallavi Shroff is the Managing Partner of Shardul Amarchand Mangaldas & Co, heads the dispute resolution practice and mentors the competition law practice. With an experience of over 38 years, Pallavi has represented several large public & private corporations and other entities before various national courts, tribunals and legal

XIV

Contributors

institutions that has earned her national and international acclaim. Under her leadership, the firm has been recognised as one of the world's leading International Arbitration Firms by Global Arbitration Review (GAR) 100, 2017-19. She is Alternate Member (India) at the ICC International Court of Arbitration and Chairperson of the CII Arbitration Law Committee. Aditya Singh is Counsel in White & Case’s international arbitration practice. Qualified to practise law in New York, England & Wales, Aditya has worked in Singapore, New York, and London offices of White & Case. He advises governments and private parties on cross-border disputes and acts as an advocate in international arbitration and public international law matters. Aditya is Adjunct Lecturer at the National University of Singapore. He is recognised as a ‘Rising Star’ in Commercial Arbitration by Expert Guide (2020), and listed as a recognised practitioner by Chambers Global (2020), Legal 500 (2020) and Chambers Asia-Pacific (2019). Shivani Singhal is an advocate at Arista Chambers in India and a solicitor of England & Wales. Shivani’s practice focuses on investment treaty arbitrations, domestic arbitrations and international commercial arbitrations administered by various institutions, including the ICC, LCIA and SIAC. Shivani also has experience of complex transactional work and regulatory investigations. Before Arista Chambers, she worked with Clifford Chance at their London and Amsterdam offices and S&R Associates in New Delhi. Supritha Suresh is International Associate at Three Crowns. She has previously worked with the Government of Bahrain and trained at ICSID (World Bank Group). She holds an LLM in International Arbitration from the University of Miami School of Law, USA, and also has a BA LLB, specialising in International Trade and Investment Law from National Law University, Jodhpur (India). Nosherwan Vakil is an India-qualified advocate, who divides his time between India

and London advising on Indian law. Nosherwan acts as counsel before various Indian courts and tribunals and in both domestic and international arbitrations. Nosherwan has published numerous articles and co-authored chapters of leading books on arbitration. Simon Weber is a Ph.D. Researcher at King’s College London. He has practised in London and Paris, and has clerked for arbitrators in investment and commercial arbitrations. Simon has experience with the ICSID, UNCITRAL, ICC and LCIA Rules, and the Energy Charter Treaty. He currently acts as Martin Hunter's Research Assistant and has assisted James Crawford in arbitrations and other projects. As of 2021, he will practise in Zurich, Switzerland. Furthermore, he is an observer-delegate at UNCITRAL WG III. Simon is a former recipient of the German Academic Scholarship Foundation (Studienstiftung des Deutschen Volkes) Fellowship.

AV

Summary of Contents

Editors

Vil

Contributors Foreword

XXXVII

Preface and Acknowledgements

XXXIX

CHAPTER | General Notes for Practitioners

Ciccu Mukhopadhaya & Manavendra Mishra CHAPTER 2

The Arbitration Agreement Dipen Sabhanval QC

15

CHAPTER 3

Multiparty and Multi-contract Arbitrations Vikas Mahendra

49

& Pranav Budihal

CHAPTER 4 Constitution and Establishment of an Arbitral Tribunal

Rahul Donde & Rishabh Raheja

73

CHAPTER 5

Jurisdiction of the Arbitral Tribunal Constantine Partasides QC & Manish Agganval CHAPTER 6 The Laws Applicable to an Arbitration Nakul Dewan

89

103

XV

Summary of Contents CHAPTER 7

The Conduct of Arbitral Proceedings in India Martin Hunter, Shashank Garg & Simon

Weber

123

CHAPTER 8 Interim Measures

Promod Nair & Shivani Singhal

145

CHAPTER 9 Arbitral Awards in Indian Arbitrations Martin Hunter, Simon Weber & Sadyant Sasiprabhu

173

CHAPTER 10

Challenge and Enforcement of Awards: The Brooding Omnipresence of Public Policy Darius Khambata

195

CHAPTER 11

Recognition and Enforcement of Foreign and Domestic Arbitral Awards: Role of National Courts

Dushyant Dave

235

CHAPTER 12

The India Resolutions for the 1958 Convention on the Recognition and Enforcement of Foreign Awards Fali Nariman, Marike Paulsson & Supritha Suresh

261

CHAPTER 13 Investor-State Dispute Settlement and India Aditya Singh

289

CHAPTER 14

Drafting Arbitration Clauses for India-Centric Agreements Pallavi Shroff

311

CHAPTER 15

Ongoing Efforts Towards Reforming the ISDS System: An Aide-Memoire

of the System’s Need Amidst Calls for Iconoclasm Marike Paulsson, George Pothan & Supritha Suresh

333

CHAPTER 16

Managing Costs and Time in Arbitration Tejas Karia

XVI

367

Summary of Contents CHAPTER

17

Arbitral Institutions James Menz, Katia Rener, Alexander G. Fessas, Abhinav Bhushan,

Sherina Petit, Nosherwan Vakil, Cyril Shroff, Shaneen Parikh, Brooks W. Daly, Ashwita Ambast, Lim Seok Hui & Kevin Nash

385

CHAPTER 18

Arbitration of Claims Relating to Environmental Damage in India Karuna Nundy

A57

CHAPTER 19 A Comparative Analysis of Arbitral Legislations: India, Singapore and

England

Ganesh Chandru

A467

Appendices

A89

Appendix I: The Arbitration and Conciliation Act, 1996 (as amended by Amending Act No. 3 of 2016 (with effect from 23 October 2015) and Amending Act No. 33 of 2019 (with effect from 9 August 2019)

49]

Appendix II: The Arbitration and Conciliation (Amendment) No. 9 of 2015

525

Ordinance 2015,

Appendix III: The Arbitration and Conciliation (Amendment) Act 2019, No. 33 of 2019

543

Table of Cases

555

Table of Awards

Rie.

Index

579

XIX

Table of Contents

Editors

Vil

Contributors Foreword

Preface and Acknowledgements

XXXVII XXXIX

CHAPTER |

Boe he fh Ww Ww WW Ww eS fe fe tn & mom =“ ~J

Ciccu Mukhopadhaya & Manavendra Mishra 1.1 Introduction i Pre-arbitration Preparation 1.2.1 Identify Governing Law and Seat 1.2.2 Ad Hoc or Institutional Arbitration 1.2.3 Document Review and Strategy 1.2.4 Need for Interim Relief from Courts under Section 9 1.2.5 Interim Relief from Emergency Arbitrators 1.2.6 Experts 1.2.7 Choice of Arbitrator 1.2.8 Limitation Period and Pre-arbitration Steps 1:3 Notice of Arbitration 1.4 Constitution of Tribunal 1:5 Preliminary Meeting 1.5.1 Witnesses 1.5.2 Foreign Counsel 1.6 Preparation for Initial Hearing/Pre-hearing Conference 1.6.1 Reaching an Agreement with the Opposing Party 1.6.2 Timelines and Procedure 1.6.3 Logistics for Proceedings

ee

General Notes for Practitioners

Table of Contents

1.7 1.8 1.9

1.10

1.11 1.12 1.13

Drafting Submissions and Collecting Evidence Discovery and Rules of Evidence Hearing 1.9.1 Opening Statement 1.9.2 Cross-Examination 1.9.2.1 Whether to Cross-Examine? 1.9.2.2 Witness Conduct and Solutions 1.9.2.3 Engaging with the Witness Written Submissions 1.10.1 Developing the Case Theory 1.10.2 General Rules for Written Advocacy 1.10.3 Structure and Presentation 1.10.4 Cost Submissions Second Chair Manoeuvring the Court System Conclusion

CHAPTER 2

The Arbitration Agreement Dipen Sabhanwal QC 2.1 Introduction 2.2 Elements of an Arbitration Agreement 2.2.1 Intention to Enter into an Arbitration Agreement Requirements for a Valid Arbitration Agreement under the 1996 2:8 Arbitration Act 24 Forms of Arbitration Agreements: Section 7(2) 2.4.1 Arbitration Clause in a Contract: Section 7(2) 2.4.2. Separate Arbitration Agreement: Section 7(2) 2.4.3 Arbitration Agreement by Incorporation: Section 7(5) 2:5 An Arbitration Agreement Must Be in Writing: Section 7(3) 2.6 Evidence That the Arbitration Agreement Is in Writing: Section 7(4) 2.6.1 Document Signed by the Parties: Section 7(4)(a) 2.6.2 Exchange of Letters and Other Communications: Section 7(4)(b) 2.6.3 Exchange of Statements of Claim and Defence: Section 7(4)(c) Specific Types of Arbitration Agreements Zee 2.8 Asymmetrical Arbitration Clauses 2.8.1 Valid Asymmetrical Clauses 2.8.2 Invalid Asymmetrical Clauses 2.9 Pathological Clauses 2.10 Multi-tier Clauses 2.11 Separability 2.12 Arbitrability 2.13 Inoperability of an Arbitration Agreement 2.14 Uncertainty in the Arbitration Agreement 2.15 Capacity of the Parties XXil

15 15 16 17 19 20 20 20 21 23 24 24 25 25 26 26 a7 27 28 30 32 33 37 37 37

Table of Contents

2.16 2.17 2.18 2.19 2.20 2.21

2.22 2.23 2.24 2.25 2.26 2.27

Parties to an Arbitration Agreement Natural Persons Companies Partnership Firms States and State Agencies Third Parties / Non-signatories to an Arbitration Agreement 2.21.1 Pre-2015 Amendment 2.21.2 Post-2015 Amendment 2.21.3. Assignment 2.21.4 Agency 2.21.5 Subcontracts 2.21.6 Transfer 2.21.7. Multiparty Agreements 2.21.7.1 Several Parties to One Contract 2.21.7.2 Several Parties to Several Contracts Laws Applicable to International Arbitrations The Law Governing the Substantive Contract The Law Governing the Arbitration Procedure The Law Governing the Arbitration Agreement The Law of the Jurisdiction(s) Where the Award May Be Enforced Points to Note When Drafting an Arbitration Agreement

CHAPTER 3 Multiparty and Multi-contract Arbitrations Vikas Mahendra & Pranav Budihal 3.1 Introduction 3.2 Legal Framework 3.3. Types of Multiparty and Multi-contract Situations 3.3.1 Two Parties Governed by Multiple Contracts 3.3.2 Multiple Parties to a Single contract 3.3.3. Related Parties and Multiple Contracts 3.3.4 Multiple Parties and Multiple Contracts 3.3.4.1 Joinder of Non-signatories 3.3.4.2 Consolidation of Disputes Arising under Different Agreements 3.3.5 Coordination 3.3.5.1 Appointment of a Common Tribunal 3.3.5.2 Stay of Proceedings 3.4 Setting Aside and Enforcement 3.5 Conclusion

38 38 38 38 39 39 39 4) A2 42 42 43 A3 A 44 Ad 45 45 45 45 46

49 49 50 51 51 56 59 63 64 65 67 67 68 68 71

CHAPTER 4

Constitution and Establishment of an Arbitral Tribunal Rahul Donde & Rishabh Raheja 4.1 Introduction

XXIil

73 73

Table of Contents

4.2

Appointment of Arbitrators 4.2.1 Number of Arbitrators 4.2.2 Nationality of Arbitrators 4.2.3 Qualifications of Arbitrators 4.2.4 Procedure for Appointment 4.2.4.1 Appointing Authority 4.2.4.2 Circumstances of Involvement of an Appointing Authority 4.2.4.3

4.3

4.4 4.5

Nature, Scope, and Extent of Involvement

4.2.4.4 Appeal and Review Disclosures, Challenges, and Ineligibility 4.3.1 Disclosures by Arbitrators 4.3.1.1 Content of Disclosure 4.3.1.2 Timing of Disclosures 4.3.1.3 Failure to Disclose 4.3.2 Challenges to Arbitrators 4.3.2.1 Grounds of Challenge 4.3.2.2 Challenge Procedure 4.3.3 Ineligibility of Arbitrators Termination of Mandate and Substitution Conclusion

74 75 75 76 ii 78

79 80 82 83 83 83 54 84 85 85 86 86 88 88

CHAPTER 5

Jurisdiction of the Arbitral Tribunal Constantine Partasides QC & Manish Agganwal 5.1 Introduction 5.2 An Arbitral Tribunal’s Competence-Competence 5.2.1 Competence-Competence and Separability 5.2.2 Allocation of Jurisdictional Competence Between Arbitral Tribunals and National Courts 5.2.2.1

Referral to Arbitration

5.2.2.2 5.2.2.3

5.2.2.1.1 Domestic Arbitrations: Section 8 5.2.2.1.2 Foreign-Seated Arbitrations: Section 45 Appointment of Arbitrators Anti-arbitration Injunctions

5.2.2.4

Review of an Arbitral Tribunal’s Jurisdictional Decision

9] 92 92 94 94 97 99

5.2.2.4.1

5.3.

5.4

Review of Decision Rejecting Jurisdictional Objection(s) 5.2.2.4.2 Review of Decision Accepting Jurisdictional Objection(s) Time Limits for the Exercise of a Tribunal’s Mandate 5.3.1 Time Limits Stipulated in Contracts 5.3.2. Time Limits under the 1996 Arbitration Act Conclusion

89 89 90 90

XXIV

99 99 100 100 100 102

Table of Contents

CHAPTER 6 The Laws Applicable to an Arbitration Nakul Dewan 6.1 Introduction 6.2 Substantive Law of the Contract 6.2.1 Indian Parties and Choice of Foreign Law 6.2.2 International Arbitration and Public Policy Considerations 6.3 Law of the Arbitration Agreement 6.3.1 Separability of the Arbitration Agreement 6.3.2 Closest Connection Test 6.4 Lex Arbitri 6.4.1 Choice of Seat and Lex Arbitri 6.4.2 Choice of Seat and Venue 6.4.3 Indian Parties and Choice of Foreign Seat 6.4.4 Judicial Intervention by Indian Courts Conclusion 6.5

103 103 105 106 107 110 111 112 115 116 117 118 119 121

CHAPTER 7

The Conduct of Arbitral Proceedings in India Martin Hunter, Shashank Garg & Simon Weber 7.1 Introduction 7.1.1 Party Autonomy 7.1.2 Failure to Comply with the Agreement of the Parties 7.2 Fast Track Procedure 7.2.1 Expedited Procedure 7.3 Preliminary Steps 7A Written Submissions 7.4.1 Statement of Claim 7.4.2 Statement of Defence 7.4.3 Further Written Pleadings 7.4.4 Extension of Time for Arbitral Proceedings and Making of Arbitral Award (a Collection of Evidence 7.5.1 Admissibility, Relevance, Materiality and Weight of Any Evidence 7.5.2 Forms of Evidence 7.5.2.1 Documentary Evidence 7.5.2.2 Witnesses of Fact 7.5.2.3 Expert Evidence 7.5.4.4 Site Inspections 7.5.3 Court Assistance in Taking Evidence 7.6 Hearings ved Proceedings after the Hearings 7.8 A Warning: Pitfalls When Conducting Arbitration in India 7.8.1 Failure to Comply with the Agreement of the Parties 7.8.2 Failure to File the Statement of Claim

123 123 124 126 126 127 128 128 129 130 131 131 132 133 134 134 135 135 136 136 138 140 14] 14] 142

Table of Contents

7.8.3 7.8.4 7.8.5

Hearsay Evidence False Witness Statement Reopening the Proceedings after Closing

CHAPTER 8 Interim Measures Promod Nair & Shivani Singhal 8.1 Introduction 8.1.1 Scope of Application of the Arbitration Act 8.1.2 Parliamentary Intervention with Respect to Arbitrations Seated Outside of India 8.2 The Power of an Arbitral Tribunal to Order Interim Measures: Section 17 8.2.1 Scope and Limits 8.2.2 Interim Order under Section 17: Interim or Partial Awards 8.2.3 Distinguishing Between Interim Orders and Interim Awards 8.2.4 Measures Against Third Parties 8.2.5 Appeals and Review 8.2.6 Enforcement of Interim Measures 8.3. The Power of a Court to Order Interim Measures: Section 9 8.3.1 Competent Court 8.3.2 Relevance of General Principles Governing Grant of Injunctions 8.3.2.1 Safeguard of the Interests of the Petitioner 8.3.2.2 The Preservation, Interim Custody or Sale of Goods 8.3.2.3 Securing the Amount in Dispute 8.3.2.4 The Detention, Preservation or Inspection of Any Property 8.3.2.5 Interim Injunction or Appointment of a Receiver 8.3.2.6 Any Other Necessary Interim Measure of Protection 8.3.3 Taking into Account the Conduct of the Disputing Parties 8.3.3.1 Ex Parte Orders 8.3.3.2 Third Parties 8.3.3.3. Limits Imposed by Institutional Rules on Indian Courts’ Intervention 8.3.4 Timing of the Application 8.3.4.1 Before the Commencement of Arbitral Proceedings 8.3.4.2 During an Arbitration 8.3.4.3 After the Making of the Arbitral Award 8.3.4.4 Appeal Against a Section 9 Interim Order 8.3.5 Enforcement

142 142 142

145 145 147 148 149 149 150 151 152 153 153 155 157 157 158 158 159 160 160 16] 161] 162 163 164 165 165 166 167 169 170

CHAPTER 9

Arbitral Awards in Indian Arbitrations Martin Hunter, Simon Weber & Sadyant Sasiprabhu 9.1 Introduction and Definition 9.2 Effects of Arbitral Awards

XXV1

173 173 175

Table of Contents

9.3.

9.4

9.5 9.6

9.2.1

Finality — Res Judicata

9.2.2

Arbitral Tribunal Becomes Functus Officio

9.2.3

Remedies Granted in Awards

Type of Awards 9.3.1 Interim Awards 9.3.2 Partial Awards 9.3.3 Fast Track Procedure Awards 9.3.4 Emergency Awards 9.3.5 Consent Award —- Award on Agreed Terms 9.3.6 Final Award 9.3.7 Additional Award Form Requirements of Arbitral Awards 9.4.1 Introduction 9.4.2. Form and Contents of Arbitral Award 9.4.3 Interest 944 Time Limits 9.4.5 Stamp Duty and Registration: An Additional Requirement Enforceability Guidelines for the Drafting of an Arbitral Award 9.6.1 Form of the Arbitral Award 9.6.2 Substance of the Arbitral Award 9.6.3 Dispositive Part of the Arbitral Award 9.6.4 Institutional Support 9.6.5 Due Process and Confidentiality

175 176 177 178 179 180 181 181 182 183 183 185 185 185 186 186 187 189 190 190 19] 192 193 194

CHAPTER 10

Challenge and Enforcement of Awards: The Brooding Omnipresence of Public Policy Darius Khambata 10.1 Introduction 10.2 Common Law Arbitration: The 1899 Act 10.3 Public Policy Before 1996 10.3.1. Enforcement of Foreign Awards: Public Policy Rears Its Head 10.3.2 Public Policy under the Domestic 1940 Act: Peripheral Yet Present 10.4 The 1996 Act 10.4.1 Public Policy under the 1996 Act 10.5 Defining Public Policy 10.5.1 The Narrow and the Broad View 10.6 The Effect of Public Policy on Arbitration 10.6.1 Public Policy and Foreign Awards 10.6.2. The Early Years: Narrow View Prevailed for Challenges to Domestic Awards 10.6.3 Saw Pipes: The Broad View Embraced for Part | Awards 10.6.4 Patent Ilegality and the Root of the Matter XXVil

195 195 197 198 198 199 201 202 204 205 207 208 210 211 213

Table of Contents

10.6.5 10.6.6 10.6.7.

Saw Pipes Perpetuated Continuing Restrictions on Review The Pre-2015 Position under Section 34: Summarised in Associate Builders 10.6.8 Wednesbury Rule as Part of Public Policy Review 10.6.9 Perversity and Irrationality: A Trojan Horse 10.6.10 Fraud, Corruption and Confidentiality 10.7. ~+Foreign Awards: Broad View Gets Extended to Enforcement, Later the Narrow View Is Restored 10.8 2015 Amendment 10.9 ~~ Application of the 2015 Amendment 10.10 2019 Amendment 10.11 Conclusion

213 216 217 219 221 222 223 227 230 231 232

CHAPTER 11

Recognition and Enforcement of Foreign and Domestic Arbitral Awards: Role of National Courts Dushyant Dave 11.1 Preface 11.2 Enforcement of Domestic Awards 11.2.1 Evolution of Law 11.2.1.1 11.2.1.2

1899 Arbitration Act 1940 Arbitration Act

11.2.1.3.

1996 Arbitration Act

11.2.1.3.1 11.2.1.3.2

11.3.

11.4

Application and Scope Scheme and Implementation of the 1996 Arbitration Act 11.2.1.4 2015 Amendment 11.2.1.5 Arbitration and Conciliation (Amendment) Act, 2019 (2019 Amendment) Enforcement of Foreign Awards 11.3.1 Evolution of Law 11.3.2 The 1937 Arbitration Act 11.3.3. The 1961 Foreign Awards Act 11.3.4 1996 Arbitration Act Conclusion 11.4.1 Guidelines for Practitioners 11.4.2 Guidelines for Judges and the Way Forward

235 235 236 236 236 236 237 237 239 242 246 247 247 247 248 251 oe 257 258

CHAPTER 12

The India Resolutions for the 1958 Convention on the Recognition and Enforcement of Foreign Awards Fali Nariman, Marike Paulsson & Supritha Suresh 12.1. — Introduction 12.2. +A Preface: The Explanatory Note

XXVIII

261 261 262

Table of Contents

Sovereignty The Convention in the National Space: Is ‘Globalisation’ a Myth? 12.2.3 The Role of the National Courts 12.2.4 The Convention in India 12.2.5 The Background of the India Resolutions The India Resolutions 12.3.1 Not to Apply Section 44(b) of the Act in a Formally Restrictive Manner 12.3.2 To Apply the New York Convention (and Implementing Legislation) in Accordance with the Purposes of the Convention, Which Is Promoting the Effectiveness of International Arbitration and International Trade 12.3.3. To Balance the Commercial Need for Valid Contracts with the Recognition That Confidence in Arbitration Requires Judicial Control of Misconduct 12.3.4 To Adopt Good Faith as the Foundation of Interpretation 12.3.5 To Enforce Arbitration Agreements (under Article II) in a Manner Consistent with the Needs and Practice of International Trade 12.3.6 To Establish the Validity of the Arbitration Agreement on the Basis of the Parties’ Mutual Intent 12.3.7. To Avoid Excessive Formalism when Enforcing Awards (Article IV) 12.3.8 To Interpret ‘Extra Evidence to Prove That the Award Is a Foreign Award’ in the Manner of a Charming Betsy Alignment (Article IV) 12.3.9 To Eschew a Review on the Merits (Article V)} 12.3.10 To Adopt A Narrow Conception of Public Policy — ‘ Ordre Public’ — in a Manner That Is Consistent with a Near-Universal Treaty Expressed in Five Official Languages (Article V(2)) How Can Courts Apply the Resolutions? Overview of the Convention: Action I: Recognition of the Arbitration Agreement 12.5.1 The Source - Article II: Survival by Court Interpretation 12.5.2. Questions and Issues Raised 12.5.3 The Dialogue 12.5.4 May Courts Rely on Section 7 as an Interpretative Tool for 12.2.1 12.2.2.

12.3

12.4 1Z.5

12.6

Article II (2)?

Overview of the Convention: Action II: The Enforcement of the Award 12.6.1 Article I 12.6.2

Article III

202 263 264 264 267 268 268

270

271 271

272 273 273

274 274

275 276

277 ate 278 280 280 281 281 282

Table of Contents

12.6.3. 12.6.4 12.6.5 12.6.6

Article Article Article Article

IV V VI VII

283 284 286 287

CHAPTER 13 Investor-State Dispute Settlement and India Aditya Singh 13.1 Introduction 13.1.1 The 1990s: The First Decade 13.1.2. The 2000s: The Second Decade 13.1.3 The 2010s: The Third Decade 13.2 Model Bilateral Investment Treaty 13.2.1 Coverage and Scope 13.2.1.1 Definition of ‘Investment’ 13.2.1.2 Definition of ‘Investor’ 13.2.1.3 Causation 13.2.2. Substantive Protections 13.2.2.1 Most-Favoured Nation (MFN) 13.2.2.2 Fair and Equitable Treatment (FET) 13.2.2.3 Expropriation 13.2.2.4 Full Protection and Security (FPS) 13.2.3. Dispute Resolution 13.2.4 Reactions to the 2016 Model BIT 13.3 Cases Instituted by Foreign Investors Against India 13.4 Cases Instituted by Indian investors 13.5 Recent Developments 13.5.1 Termination of BITs by India 13.5.2. Joint Interpretative Statements/ Joint Interpretative Notes 13.5.3. New BITs Signed on the Basis of the 2016 Model BIT 13.5.4 Investment Arbitration and Indian Courts 13.6 Conclusion

289 289 290 290 291 293 293 293 294 295 295 295 296 297 298 298 298 301 301 301 301 302 302 303 304

Annex A: List of BIT Cases Brought by Foreign Investors Against India

307

Annex B: List of BIT Cases Brought by Indian Investors Against Foreign States

310

CHAPTER 14

Drafting Arbitration Clauses for India-Centric Agreements Pallavi Shroff 14.1 Introduction 14.2 Importance of Drafting an Arbitration Agreement and Indian Perspective 14.3 Requirements of an Arbitration Agreement 14.3.1 Definition of Arbitration Agreement

311 311 312 313 313

Table of Contents

14.3.2.

14.4

14.5 14.6 14.7.

The Arbitration Agreement May Be in the Form of a Clause in a Contract or Separate Agreement 14.3.3. The Agreement Must Be in Writing 14.3.4 Incorporation of Arbitration Clause in Another Document Essential Elements 14.4.1 Scope of the Arbitration Clause 14.4.2 Ad Hoc or Institutional Arbitration 14.4.3. Seat of Arbitration 14.4.4 Applicable Law 14.4.5 Composition of an Arbitral Tribunal 14.4.5.1 Appointment of Presiding Arbitrator by the Court in International Commercial Arbitration 14.4.5.2. Appointment of Arbitrator under Contracts with Government Entities or Public Sector Undertakings 14.4.5.3 Choice of Arbitrators 14.4.6 Multi-tier Dispute Resolution Clauses 14.4.7 Language of Arbitration Arbitrability Award of Interest — Conclusion

313 314 317 318 318 319 320 323 324 325 326 327 328 329 329 330 330

CHAPTER 15

Ongoing Efforts Towards Reforming the ISDS System: An Aide-Memoire of the System’s Need Amidst Calls for Iconoclasm Marike Paulsson, George Pothan & Supritha Suresh 15.1 = Introduction 15.2. The Pushback: Recent State Conduct 15.2.1 Trade and Investment Agreements 15.2.2 Efforts to Improve the System: The Example of Transparency 15.3 Ongoing Initiative at UNCITRAL Working Group-Ill 15.3.1 Background 15.4 Concerns 15.4.1 Structural Reforms 15.4.1.1 The MIC

15.4.1.2

15.4.2

The AB

Incremental Reforms 15.4.2.1 Rosters 15.4.2.2 Multilateral Advisory Centre 15.4.2.3 Code of Conduct 15.4.2.4 Third-Party Funding 15.4.2.5 Prior Scrutiny of Awards 15.4.2.6 Improving Arbitrator Selection 15.4.2.7 Alternative Dispute Mechanisms 15.4.2.8 Expedited Procedures 15.4.2.9 Additional Case Management Tools

333 333 338 339 34] 342 342 346 347 347 354 359 359 360 360 362 363 363 363 364 364

Table of Contents

15.5

15.4.2.10 Conclusion

Tracking the Discussion

364 364

CHAPTER 16

Managing Costs and Time in Arbitration Tejas Karia 16.1 Managing Costs and Time Prior to an Arbitration 16.1.1 Using Bespoke Terms to Streamline the Arbitration Process 16.1.2 Language 16.2. — After the Initiation of Arbitration 16.2.1. Time Limits and Constitution of the Arbitral Tribunal 16.2.2 Internal Cost 16.2.3. Calderbank Offer 16.3 Evidence and Arguments 16.3.1 Taking of Evidence 16.3.2. Oral Arguments 16.3.3. Videoconferencing 16.3.3.1 Advantages of Videoconferencing 16.3.3.2 Prerequisites to Conducting Videoconferencing 16.3.3.3 Disadvantages of Videoconferencing 16.3.4 Transcript 16.3.5 Hot-Tubbing 16.3.5.1 Nature and Scope 16.3.5.2 Advantages of Hot-Tubbing 16.3.5.3. Disadvantages of Hot-Tubbing 16.3.6 Other Technological Tools and Techniques 16.3.7. Reducing Time and Costs Before Indian Courts 16.4 Conclusion

367 367 367 368 371 371 371 373 375 375 376 376 Rie 378 a7o 380 381 381 382 382 383 364 384

CHAPTER 17 Arbitral Institutions James Menz, Katia Rener, Alexander G. Fessas, Abhinav Bhushan,

Sherina Petit, Nosherwan Vakil, Cyril Shroff, Shaneen Parikh, Brooks Daly, Ashwita Ambast, Lim Seok Hui & Kevin Nash 17.1 DIS Rules James Menz & Katia Rener

17.1.1 17.1.2 17.1.3. 17.1.4 17.1.5 17.1.6 17.1.7. 17.1.8 17.1.9.

Brief Introduction Key Rules Changes and Key Reasons for Choosing the DIS Drafting the (Institutional) Arbitration Agreement Institutional Supervision Arbitral Appointments: Procedure and Issues Conduct of Proceedings Costs Calculation Flowchart: For Quick Reference Mandatory Checklist

XXXII

385 386 386 386 387 387 388 389 390 39] 391

Table of Contents

17.1.9.1 17.1.9.2 17.1.9.3. 17.1.9.4 17.1.9.5 17.2

Claimant Respondent Arbitral Tribunal Arbitration Proceedings Costs and Fees

ICC Rules

Alexander G. Fessas & Abhinav Bhushan

Lf 2-1 a eee

i725 17.2.4 17.2.5 17.2.6 17.2.7 17.2.8 17.2.9 17.3

391 392 393 393 394

Introduction Key Changes and Key Reasons 17.2.2.1 Emergency Arbitrator Rules 17.2.2.2 Expedited Procedure Rules 17.2.2.3 Other Changes 17.2.2.3.1 Providing Reasons for Certain ICC Court Decisions 17.2.2.3.2 Publication of the Awards, Names of Arbitrators, Counsels and Sector of Industry Involved 17.2.2.3.3. Guidance Note on Conflict Disclosure 17.2.2.3.4 Measures Aimed at Increasing Timeand Cost-Efficiency 17.2.2.3.5 Expeditious Determination of Manifestly Unmeritorious Claims or Defences Drafting (Institution) Arbitration Agreement Arbitral Appointments Procedure and Issues Conduct of Proceedings/Institutional Supervision Award Scrutiny Process Costs Calculation Flowchart: For Quick Reference Conclusion

395 395 395 396 396 398 398

398 399 399

399 399 400 AQ)2 A403 403 404 405

LCIA Rules

Sherina Petit & Nosherwan

Lf 1732 1733 17.3.4 17:3.5 17.3.6 173 17.3.8 17.3.9

Vakil

Brief Introduction Key Changes Introduced by the 2014 and 2020 LCIA Rules Drafting an Institution Arbitration Agreement Institutional Supervision Arbitral Appointments, Procedure and Issues Conduct of Proceedings Costs Calculation Flowchart Mandatory Checklist 17.3.9.1 Arbitration Clause 17.3.9.2 Time-Bar 17.3.9.3 Interim Measures 17.3.9.4 Evidence XXXiil

406 406 406 408 409 409 410 412 413 4]4 414 414 4]4 414

Table of Contents 17.3.9.5

ADR/Settlement

17.4. MCIA Rules Cyril Shroff & Shaneen Parikh 17.4.1 Introduction 17.4.2 Key Changes, Reasons and Features 17.4.3 The Arbitration Agreement 17.4.4 Arbitral Appointment Procedure and Issues 17.4.4.1 Appointment of Arbitrators 17.4.4.2 Challenge, Replacement and Appointment of Substitute Arbitrators 17.4.4.3 Seat and Venue 17.4.4.4 Applicable Law 17.4.4.5 Consolidation Mechanism Conduct of Proceedings 17.4.5 17.4.5.1 Commencement of Arbitration: Request and Response 17.4.5.2 Jurisdiction 17.4.5.3. Emergency Arbitrator 17.4.5.4 Interim Relief 17.4.5.5 Hearings and Proceedings 17.4.5.6 Expedited Proceedings 17.4.5.7 Orders and Awards 17.4.5.8 Confidentiality 17.4.6 Institutional Supervision 17.4.7 Fees and Costs of Proceedings 17.4.8 Flowchart: For Quick Reference 17.5 PCA Rules Brooks W. Daly & Ashwita Ambast 17.5.1 Brief Introduction 17.5.2 Key Changes and Key Reasons 17a Drafting an Arbitration Agreement 17.5.4 Institutional Supervision 17:5:5 Arbitral Appointments Procedure and Issues 17.5.6 Conduct of Proceedings 175-7 Cost Calculation 17.5.8 Flowchart 17.5.9 Mandatory Checklist 17.6

415 416 416 417 418 418 418 419 420 420 Ad] A?) 42) 421 A22 423 A23 424 425 A25 426 426 428 429 429 430 430 431 432 A32 434 436 437

SIAC Rules

Lim Seok Hui & Kevin Nash

17.6.1 17.6.2

Introduction Key Changes in the 2016 SIAC Rules 17.6.2.1 Multi-contract Arbitration 17.6.2.2 Joinder of Additional Parties 17.6.2.3 Consolidation 17.6.2.4 Early Dismissal of Claims and Defences XXXIV

439 439 440) 440 44] 44] AA?

Table of Contents 17.6.2.5

Removal of Default Seat

17.6.2.6 17.6.2.7

17.6.3 17.6.4

17.6.5

17.6.6 17.6.7 17.6.8

17.6.9

Reasoned Decision on Challenge to Arbitrators Order for Reimbursement of Costs by Non-paying Party Drafting SIAC Arbitration Agreements Institutional Supervision 17.6.4.1 Commencement of Arbitration 17.6.4.2. Appointment of Arbitrators 17.6.4.3. Scrutiny of Awards 17.6.4.4 Financial Management of the Arbitral Process Arbitral Appointments and Procedure 17.6.5.1 Nomination of Arbitrators 17.6.5.2. Appointment of a Sole Arbitrator 17.6.5.3. Appointment of Three Arbitrators 17.6.5.4 | Emergency Arbitrator 17.6.5.5 SIAC’s Panel of Arbitrators 17.6.5.6 Qualification of Arbitrators 17.6.5.7 Hurdles in Making Arbitral Appointments Conduct of the Proceedings Calculation of Costs Chronology of an SIAC Arbitration

SIAC Checklist

44d 442 443 448 449 450 450 A450 450 451 451 A51 A52 A52 A52 453 453 453 A54 454 456

CHAPTER 18

Arbitration of Claims Relating to Environmental Damage in India Karuna Nundy 18.1 Introduction 18.2 Threshold Questions 18.2.1 Scope of the Arbitration Clause 18.2.2 Parties to the Arbitration Agreement 18.2.2.1 The State 18.2.2.2 Company/Firm 18.3 Substantive Law 16.4 Investment Treaty Disputes 18.5 Enforeing the Award 18.6 Conclusion

457 457 458 A458 459 459 461 462 462 464 464

CHAPTER 19 A Comparative Analysis of Arbitral Legislations: India, Singapore and

England Ganesh 19.1 19.2. 19.3. 19.4 —

Chandru Introduction Appointment of Arbitrators Joinder and Consolidation Interim Measures

467 468 468 471 474

AAKV

Table of Contents

19.5. 19.6 19.7. 19.8 19.9 19.10 19.11 19.12 19.13

19.14 19.15

Emergency Arbitrator Independence and Impartiality of Arbitrators Fast Track Procedure Costs Third-Party Funding Interest Time Limit for Making Awards Enforcement of Award/Recourse Against Arbitration Award 19.12.1 Enforcement of Awards Recourse Against Award 19.13.1 Setting Aside Awards/Resisting Enforcement of Foreign Awards 19.13.2 Appeal Against Award Confidentiality Conclusion

476 A77 479 479 480 481 482 483 A483 484 484 486 487 488

Appendices

489

Appendix I: The Arbitration and Conciliation Act, 1996 (as amended by Amending Act No. 3 of 2016 (with effect from 23 October 2015) and Amending Act No. 33 of 2019 (with effect from 9 August 2019)

49]

Appendix II: The Arbitration and Conciliation (Amendment)

No. 9 of 2015

Ordinance 2015,

525

Appendix III: The Arbitration and Conciliation (Amendment) Act 2019, No. 33

of 2019

543

Table of Cases

555

Table of Awards

577

Index

579

XXXVI

Foreword

Humans are gregarious and their life in society entails continuous interaction with others, often producing conflicts and disputes in personal and trade and business relations. Disputes in trade and business transactions require quick resolution to maintain harmony, peace, development and progress in society. Rapid progress in trade and business within and without the country led to explosion in the number of disputes, many requiring swift resolution. The courts, already burdened with heavy caseloads, were unable to cope with them. The resultant backlog immeasurably bogged down the litigative process in India. Without a matching rate

of conflict

resolution,

there

was

veritable

blockade

of development

with

its

deleterious effect on the country’s economy. This gave impetus to devising an Alternative Dispute Resolution (ADR) mechanism. ADR consists of mediation, conciliation and arbitration. While the former two involve party-identified solutions accepted by consensus, the latter involves a neutral-identified solution made binding on the disputants. The Arbitration Act of 1940 Act was the earliest Indian response to the situation, but was found inadequate. India became signatory to international conventions and was required to domestically legislate on par with the UNCITRAL Rules on Arbitration. That led to the passing of the Arbitration and Conciliation Act, 1996 that has worked well despite some creases that were attempted to be ironed out by the amendments made in 2015 and 2019. Arbitral process commences from the agreement to arbitrate and ends with the award of the arbitral tribunal and its enforcement, basis being consensus and party autonomy. Arbitration began as an informal process, but has currently evolved into a specialised branch of law. Treading the path of arbitration today is not easy and calls for deft handling of many a tricky situation to steer the course and reach the goal of a fair, legal and enforceable award. To the unwary and inexperienced, there are pitfalls galore on the path of domestic or international commercial arbitrations and those under Bilateral Investment Treaties. This book neatly surveys the gamut of Indian arbitration law from drafting of the arbitration agreement, to constitution of the arbitral tribunal, to jurisdiction of the

XXXVI

Foreword

tribunals. It traces the nuances of the law applicable to arbitrations, the conduct of arbitral proceedings, manner of obtaining interim measures, making of arbitral awards, challenges to such awards and their enforceability. It deals with the convention on the recognition of foreign awards in its application to recognition and enforcement of foreign awards in India. The book also takes a look at how investor-state disputes are dealt with in India and discusses ways to reform the investor-state dispute resolution system, noting and commenting on India’s recent termination of existing bilateral investment treaties and putting forth the model BIT of 2016, discussing the pros and cons of drafting the BIT agreements and the dominant discourse in international fora for reform of the ISDS system. Finally, the book takes a quick look at various arbitral institutions and their rules and puts forth a comparative analysis of the arbitral legislations in India, Singapore and England. The book is a compendium of chapters written by internationally recognised experts, expounding arbitral jurisprudence and its practical application. Aptly called a “Handbook on Arbitration in India’, it encapsulates all aspects of arbitration law as applicable and practised in India. The book will be a significant addition to any library. It will help academics, students and practitioners to expand the horizons of their knowledge of this branch of law. Veritably, this is a reference book on any arbitral issue that may arise before, during, or after the arbitration process. Authors and the editors of this timely book on Indian arbitral jurisprudence are to be complimented for bringing out this excellent publication.

B.N. Srikrishna 11 October 2020

XXXVIIL1

Preface and Acknowledgements

[T]he effective judge, strives to persuade, and not to pontificate. She speaks ‘in a moderate and restrained’ voice, engaging in a dialogue with, not a diatribe against, coequal departments of government, State authorities, and even her own col-

leagues. |

This book, dear readers, finds its inception in the immediate aftermath of the passing of one of the greatest Supreme Court Justices in history: Justice Ruth Bader Ginsburg (RBG). To the world known as an advocate of human rights and women empowerment, remembered and honoured by specialists as a great, brilliant lawyer and effective justice: her style was humble and moderate and with that effective. Her quote travels to the waters and shores of India, a nation, that within the turmoil of global geopolitical events becomes more important than ever. It is a trading partner that is transforming from an importing to an exporting country. With that, its legal infrastructure and most importantly its international legal infrastructure must conform. This book aims to assist those coequal departments of governments, state authorities and members of the judiciary (in quoting RBG), in understanding the importance of further development of laws, institutions and case law to place itself on the map as a leader in compliance with international law: International law perhaps has not achieved much, but it is good that it is there.*

This book also aims to assist foreign lawyers, Indian lawyers, arbitrators and institutions in fostering their relationship with India: a country that saw the birth of arbitration centuries ago. Statutory arbitration is old in India: the Bengal Regulations of 1772 gave a taste of the system, and the Indian Arbitration Act, 1899, provided the first 1. Interview by Mary Hartnett and Wendy Williams with Martin Ginsberg, 2 August 2004, in Ruth

Bader Ginsburg, Mary Hartnett, Wendy W. Williams, ‘My Own Words’ (Simon & Schuster 2016),

p. 229.

2. Transcript of Fali Nariman’s intervention, Introduction to the New York Convention — The Convention and Sovereignty, Judicial Dialogue on the New York Convention, 23 November 2013, available at https://www_.arbitration-icca.org/media/2/13916005409590/nyc_roadshow_speech _23rd_nov_nariman.pdf.

XXXIX

Preface and Acknowledgements push. But, the culture of amicable resolution, neutral adjudication and agreed-upon procedures to guide dispute resolution predate the legislations: the panchayat system is an apt illustration. Fast-forward from several centuries to 2020 from both an Indian and an international perspective, the timing of this compilation could not be any better. The proliferation of arbitration and the efforts of India’s judiciary (both the bench and the bar), legislature and executive to promote arbitration as an alternative to domestic adjudication have materialised in the 2015 and 2019 Amendments to the 1996 Indian Arbitration Act. In parallel, fresh and young arbitral institutions have been established all over the country. India is one of the fastest-growing economies of the world and yet it is in dire need of foreign direct investment in trillions of dollars. Together with technology, it can provide the much-needed boost to faster infrastructure development. This book endeavours to make future investors feel comfortable in investing with strong ADR enforcement. Multiple developments show the turmoil ISDS faces. First, the discussions at UNCITRAL’s WG III may prompt States to rethink the system. States have been criticising the system for over a decade now: terminating and renegotiating BITs to better protect their sovereign interests. India is perhaps a classic example —- an example that is further discussed in this book with proposed solutions towards a positive attitude to international law and dispute resolution. The iconoclastic tendencies are to be seen in light of broader trends: undue nationalism acting to the determinant of multilateralism — the deadlock at WTO, trade wars between multiple players, a fall in economic growth, popular appeal of divisive tendencies and ideologies — in the face of a supposed State-led discussion at WG III may prompt hasty action. In 2013, one of the Editors, Fali Nariman,

said at the occasion

of the Judicial

Dialogue on the 1958 New York Convention by the Indian Judiciary: The real problem about an international court of arbitration was, and still is, that

it would be a creature of independent sovereign states, and independent sovereigns States act too often like billiard balls which collide, and do not co-operate.*

Set against that fluid background, this Handbook seeks to set out best practices and recommendations. The task is difficult. Every day the jurisprudence changes, every day sovereign decisions are made that have an impact on trade and investment: sometimes advancing, sometimes retreating. However, the authors have risen to the challenge. Their contributions provide guidance on the law and practice, in India and outside. They review the past with an eye towards the future and have devised guidelines to practitioners. Judges, merchants, legislators too can take inspiration from these guidelines and resolutions. The Editors believe that readers will benefit when they keep in mind the importance of a good-faith interpretation to the provisions of the Indian enactment on arbitration, just as a good-faith interpretation is warranted with regards to the New

3. Transcript of Fali Nariman’s

intervention, Introduction to the New

York Convention

— The

Convention and Sovereignty, Judicial Dialogue on the New York Convention, 23 November 2013,

available at https://www-.arbitration-icca.org/media/2/13916005409590/nyc_roadshow_speech

_23rd_nov_nariman.pdf.

xl

Preface and Acknowledgements York Convention. On the same lines, it is pivotal that any interpretation of domestic law is attuned to the standards of international law. This book is one of those undertakings that is a Herculean task and perhaps the impossible dream of the Man from La Mancha. With so many of these undertakings in international law, its shoulders are young and in no means those of the Editors: Supritha Suresh and Simon Weber signed up for the daunting task of carrying the manuscript over the finish line: the most ungrateful, complex and sleep-depriving task of all. They were in that labour assisted by Arundathi Venkataraman. The book is special in that the many young rising stars who have contributed significantly to Chapters were recognised as co-authors and rightly so. The book is equally a tribute to those who have imparted wisdom on a new generation. Leading arbitrators and the leadership of institutions such as ICSID and the PCA have contributed to Hunter’s chapter on the award, allowing for a unique understanding of ‘what makes a good award’. For that the Editors wish to thank Alan Redfern, Jan Paulsson, Karl-Heinz Bockstiegel, Antonio Parra, Justice B.N. Srikrishna, Sir Christopher Greenwood, Meg Kinnear, Brooks Daly and Toby Landau. Of course, this book would not exist for its authors, some of whom

had to bear

with this new Family for not months but years, some of whom had to take in important updates at the eve of the manuscript’s submission: the Editors thank them for their hard labour, their insights, their diligence, their patience and good spirit. The authors have undertaken the task of collecting carefully studied research, sharing analysis and insights and ensuring accuracy in their reflections and sources. However, their contributions do not substitute for and do not constitute legal advice or opinion. The views and opinions expressed do not necessarily reflect those of the Publisher and Editors. The authors’ opinions are their own and are not to be attributed to their firms, institutions or clients. For those who have developed an appetite for more or who would want to assist their clients or their firm in arbitrating in India, the old advice

stands: go local and retain counsel in India. Now you know them. The analysis and information in this book are current as of November 2020. Subsequent jurisprudence might not necessarily be reflected in the Chapters but will be over time with dialogues, stakeholder engagement and writings in blogs and journals by authors and Editors to ensure this book becomes a living and breathing document. Yet, the book looks to the future in one exceptional way: the Editors are proud to share that Chapter 17.2, on the ICC Rules, includes a review of the new 2021 ICC Rules.

We hope readers will find this book to be a natural and useful complement to Fali Nariman's 2020 Harmony Amidst Disharmony*: a detailed account of India’s arbitration journey. In this Handbook, over forty members of the international arbitration community in India and beyond complement Nariman’s treatise by giving a variety of perspectives and insights into topics on arbitration that matter in India.

4. Fali Nariman, Harmony amidst Disharmony, The Arbitration Series - Volumes House Publishers, 2020).

xli

| and 2 (Hay

Preface and Acknowledgements It is the Editors’ wish that the Handbook is an effective tool for students, practitioners, judges, and any other individual interested in the system, both within and outside India, to help navigate the system’s particularities and peculiarities. Dushyant Dave Delhi, India Martin Hunter London,

UK

Fali Nariman Delhi, India Marike Paulsson Durrat-AL-Bahrain, Kingdom of Bahrain Autumn 2020

xlii

CHAPTER

|

General Notes for Practitioners Ciccu Mukhopadhaya & Manavendra Mishra

Every

project

needs

a strategy.

It should

not come

as a surprise

that

when

commencing an arbitration, you need a strategy. This Chapter, entitled ‘General

Notes to Practitioners’ gives you an overview of the necessary thing you must take into account. These range from pre-arbitration preparation, the notice of arbitra-

tion, the selection of the arbitrators, hearing preparation, cross-examination, the

drafting of written submissions, to post-arbitration issues such as enforcement.

1.1

INTRODUCTION

The journey of arbitration — becoming the preferred dispute resolution mechanism in India for commercial matters - has been driven at all stages by the lawyers and practitioners with the support of courts. The enactment of the Arbitration and Conciliation Act, 1996 (1996 Arbitration Act or Act) brought much cheer and alignment to the procedural laws of the country and was premised on the UNCITRAL Model Law on International Commercial Arbitration. The 1996 Arbitration Act is indeed one of the few legislations which are law in itself, meaning, the procedure, as well as the substantive law, are all contained in the statute. It was the ultimate lure for many professionals who decided to become specialised arbitration practitioners instead of choosing routine court litigation. Over a period of time, with the Supreme Court, the 25 High Courts and their benches, more than 672 District Courts along with the influence of these practitioners, international precedents and scholars shaped the landscape of arbitration in India to what is today seen as one of the most lucrative, intense and dynamic careers in law. The arbitration landscape and practice in India have blossomed — in particular, after the Arbitration and Conciliation (Amendment) Act, 2015 (2015 Amendment) and the Arbitration and Conciliation (Amendment) Act, 2019, which has sought to change the approach to the practice. It is an entire ecosystem today with lawyers, experts,

Ciccu Mukhopadhaya & Manavendra Mishra arbitration institutions, experts in documentation, real-time transcription to online platforms, all webbed together. This Chapter deals with some general notes for practitioners to keep in mind for conducting a matter end to end and overcome some peculiar challenges that exist in India. 1.2

PRE-ARBITRATION PREPARATION

The most underrated, yet important, stage of any arbitration proceeding is the assessment of how prepared one is for the dispute. Once the party has ascertained that there is a valid dispute, the first thing a practitioner needs to do is to analyse the arbitration agreement. Given that some of the disputes originate from agreements concluded prior to the 1996 Arbitration Act or the 2015 or 2019 Amendment, it is important to ascertain the basic features of all proceedings, the governing law and the seat of the dispute. 1.2.1

Identify Governing Law and Seat

Usually, in domestic arbitrations, the governing law will be Indian law, but it is important to specify the seat of the arbitration. Pathological clauses often do not specily the legal seat of the arbitration. In such cases, one can rely on case law that has provided that if an exclusive jurisdiction clause is present in the agreement, the same can be construed as the seat of arbitration.’ There is still a spate of disputes in India on the interpretation of seat and venue of arbitration,” and hence, it is important to ascertain where the seat is located as the courts at the seat supervise the arbitration.” 1.2.2

Ad Hoc or Institutional Arbitration

Arbitral institutions have their own procedure, timelines and rules.* Certain preliminary fees are due as administration charges, and hence, parties should assess their financial abilities before commencing the proceedings. On the point of assessing financial capabilities, parties might also be interested in considering the advantages and disadvantages of resorting to a third-party funder. Sometimes, where the arbitration is conducted under institutional rules, the commencement of the proceedings may be determined by when the request for arbitration is submitted to the institution. That may be of importance when issues of limitation are implicated.

1. Indus Mobile Distribution Pvt. Ltd v. Datawind Innovations Pvt. Ltd. (2017) 7 SCC 678.

2. Kamachi Industries Limited, Judgment, 25 July 2019, Civil Appeal No. 5850 / 2019. 3. For a review of the jurisprudence related to the interpretation of seat and venue, see Chapter 6 of the Handbook. 4. For a review of various institutional rules and procedures, see Chapter 17 of the Handbook.

Chapter 1: General Notes for Practitioners 1.2.3

Document Review and Strategy

Assess the merits of the case (based on documents and associated testimony) prior to commencing arbitration proceedings, and ensure that findings and recommendations are communicated to the client in a clear and timely manner. 1.2.4

Need for Interim Relief from Courts under Section 9

Determine if there is a need for interim relief before arbitral proceedings are initiated. In urgent cases of bank guarantee invocation,’ removal of rigs from territorial waters,” unloading of goods and all other appropriate cases, one can approach the appropriate court of the principle jurisdiction and seek such interim relief under Section 9 of the

1996 Arbitration Act.’

£25

Interim Relief from Emergency Arbitrators

Pre-commencement interim relief can also be provided by emergency arbitrators. Practitioners should assess the option between Section 9 of the 1996 Arbitration Act vis-a-vis requesting the institution to appoint an emergency arbitrator." 1.2.6

Experts

An increasingly beneficial trend in larger disputes that require an expert for the valuation of claims and assessment of damages is to retain experts at the onset in order to get a sense of the claims to be asserted. Similarly, if a forensic audit of emails, data or documents is required for the preparation of the claim, experts can assist in doing so. 1.2.7

Choice of Arbitrator

The considerations vary, from the seat of the arbitration to the nature of the dispute. For technical disputes, arbitrators should ideally be suitably qualified. Similarly, there are procedural outlines in certain cases, and only empanelled arbitrators can be 5. Standard Chartered Bank v. Heavy Engineering Corporation Ltd. & Anr., 2019 SCC OnLine SC 1638: Halliburton Offshore Services Inc. v. Vedanta Ltd. & Anr. 2020 SCC OnLine Del 542.

6. Norscot Rig Management Pvt. Ltd. v. Essar Oilftelds Services Ltd., Bombay High Court, Order, 26 April 2019, Notice of Motion (L) No. 996 of 2019 in Commercial Arbitration Petition No. 1065 of 2018.

7. For a review of the jurisprudence related to interim measures, see Chapter 8 of the Handbook. 8. HSBC v. Avitel Post Studioz Ltd. 2014 SCC OnLine Bom 929 (court did not enforce the emergency arbitrator's order but issued its own order along the lines of relief as awarded by the emergency

arbitrator's order); Raffles Design International India Private Limited & Ors. v. Educomp Profes-

sional Education Limited & Ors. (2016) 234 DLT 349 (emergency arbitrator awards are not directly enforceable); Ashwani Minda & Ors. v. U-Shin Ltd. & Ors., 2020 SCC OnLine Del 721

(the court

stated that a Section 9 application for interim relief cannot be filed when the emergency arbitrator declined to grant the party the same relief).

Ciccu Mukhopadhaya & Manavendra Mishra appointed therein. In India, one typically sees this in engineering and infrastructure arbitrations wherein technical (non-legally qualified) experts may be sought to be appointed as arbitrators. 1.2.8

Limitation Period and Pre-arbitration Steps

Be mindful of limitation periods for the claims as well as any mandatory pre-arbitration steps (such as mediation) or informal dispute resolution. 13

NOTICE OF ARBITRATION

The notice of arbitration (NOA) is a crucial document. It provides for the initial perimeters of the dispute to be adjudicated by the tribunal and often also includes proposals for the party-appointed arbitrator. Most arbitral institutions require the claimant to provide for a summary of the dispute and the claims being sought as well as a valuation of the claims in question. This enables the institutions to choose an adequate chairman or sole arbitrator for the claims, as the case may be. An arbitration under the 1996 Arbitration Act commences when the NOA is received by the counterparty.’ Relevant documents should be annexed to the NOA. The person issuing and serving the NOA must have the necessary authority and capacity to do so."” 1.4

CONSTITUTION OF TRIBUNAL

Depending on the facts and circumstances, the opposing party or the institution can be involved in the nomination of the arbitrator(s). Upon nomination, necessary declarations and disclosures, and an absence of objection from the parties, the institution, in accordance with its rules, deems the tribunal constituted. In domestic cases, if the other party objects to the proposed nomination of an arbitrator or the formulation of the mandate of the tribunal, that party can file a petition under Section 11 of the 1996 Arbitration Act and request the court to appoint a sole arbitrator unless the institutional rules provide for the mechanism of appointment. Under the 2015

Amendment,

Section

12 has been included which provides for

grounds of challenge to the appointment of an arbitrator. The Fifth and Seventh Schedule thereof have inculcated the IBA Rules of Conflict to identify cases wherein one cannot be an arbitrator. It is important to ensure at the outset that potential arbitrators provide full disclosure of any potential conflicts, i-e., any grounds for lack of independence or impartiality. Understanding the preferences and prejudices of the arbitrator(s) can play a substantial role in ensuring that the proceedings progress in the direction most

9.

10.

Section 21,

1996 Arbitration Act.

Section 3, 1996 Arbitration Act.

Chapter 1: General Notes for Practitioners beneficial to the clients. Certain aspects usually covered in pre-appointment arbitrator due diligence are: (i) (ii) (iii) (iv)

Ls

awards/decisions, for any relevance to the immediate dispute; counsel or expert appearances and positions taken therein; publications and speeches; and current and past professional affiliations that could create a conflict with the

parties, counsel, or experts.

PRELIMINARY MEETING

The preliminary meeting is the first procedural stage in any arbitration. It typically occurs subsequent to the appointment of the tribunal and prior to the delivery of the first procedural order. If one party has to raise jurisdictional objections or challenges to the constitution of the tribunal, it would be best to do so at this stage itself (if not done earlier). The preliminary meeting presents the tribunal, the parties and the advocates with a blank canvas, giving them discretion over the procedural elements of the arbitration. Typically, at this stage, one attempts a broad roadmap of how the arbitration must proceed. An indicative list of issues typically discussed at the preliminary meeting is:"' (i) dispute resolution/choice of law clauses if required; (ii) issues of dispute between the parties; (iii) approach to documents: whether filed with submissions or later; paper versus electronic filings; translation;

(iv) a timetable of merits hearings; (v) language of proceedings; (vi) witness evidence: whether expert statements are filed with submissions or later; how many rounds; simultaneous versus sequential;

(vii) (viii) (ix) (x) (xi)

11.

timelines for pleadings and filings; time, location, and associated logistics of pre-hearing and hearings;"* counsel ethics and privilege: which rules apply; administrative secretary: whether to use; and tribunal fees in cases of ad hoc arbitrations.

International Council for Commercial Arbitration, ICCA Checklist First Procedural Order, avail-

able at https://www-.arbitrationicca.org/media/3/14314592144680/07042015_icca_checklist_ first_procedural_order_a5_qr_final.pdf.

12. In relation to this, COVID-19 has facilitated and encouraged the potential for remote hearings. For example, see Chartered Institute of Arbitrators, Guidance Note on Remote Dispute Resolution Proceedings, available at https://www.ciarb.org/media/8967 /remote-hearings-guidance-note. pdt. See also, DELOS, Resources on holding remote or virtual arbitration and mediation hearings,

for a compilations of checklists, resources-on-virtual-hearings/.

available

at

https://delosdr.org/index.php/2020/05/12/

Ciccu Mukhopadhaya & Manavendra Mishra 1.5.1

Witnesses

A key discussion in the initial hearing pertains to witnesses. Amongst other aspects of witness testimony, the submission of witness/expert statements with submissions, and whether translations are needed, are considered. If the parties have disclosed the number of witnesses they intend to produce, the tribunal may determine the scope of the witness testimony. This can be a challenge in multiparty arbitrations, and we will deal with the considerations therein later in this Chapter. 1.5.2

Foreign Counsel

In particular, in international commercial arbitrations, the disputing parties are often represented by counsels from different jurisdictions, and there may be different approaches to the procedural aspects in their respective countries. In such circumstances, a detailed initial hearing plays a crucial role in ensuring that the arbitration progresses smoothly. With respect to domestic or Indian seated hearings, it is often felt that international counsels face issues with some unique procedural requirements — e.g., marking

of documents

and affidavits of admission and denial, which

are effec-

tively an overlap of Code of Civil Procedure, 1908 (CPC) in the arbitration proceedings

in India."* 1.6

PREPARATION FOR INITIAL HEARING/PRE-HEARING CONFERENCE

This crucial step invariably involves an analysis of the strengths and weaknesses of the claimant’s legal position, evidence and important witnesses. It also involves familiarising himself/herself with the client’s ultimate objectives. In order to optimise the benefits rendered by the initial hearing and maximise the chances of an award in favour of the claimant, some relevant considerations are as follows. 1.6.1

Reaching an Agreement with the Opposing Party

Unlike national adjudication in front of a court, arbitration is based on party autonomy.'* Thus, it is best suited to agree on procedural, venue and costs aspects at the outset. A lot of discussions revolve around venues if the choice has to fluctuate from each hearing to the next, and an ascertained venue goes a long way in stabilising the same. Additionally, it is advisable for counsel to not be too aggressive or adversarial while trying to arrive at an agreement. It does not create a favourable first impression 13. Order XII (Admissions) and Order XIII (Production, Impounding and Return of Documents) of the CPC, which governs all civil court proceedings in India. 14. Hiro N. Agaraki, Arbitration: Creature of Consent, Pillar of Procedure, 8 YB of Arb. and Med 2, 3 (2016).

Chapter 1: General Notes for Practitioners of the parties or counsel if the tribunal is compelled to invest a substantial amount of time resolving procedural issues merely owing to the rigidity of the counsel. 1.6.2

Timelines and Procedure

With the introduction of Section 29A and 29B in the 2015 Amendment, domestic arbitrations have to be completed in a timely manner.’ Section 29B(3) contemplates the potential for a written phase only, without any hearing.’® As a practitioner, one’s primary objective should always be to complete an arbitration proceeding in a timely, efficient manner, without disregarding due process rights. Counsel should consider their strategy. Instead of multiple hearings spread out over time, a week of non-stop (continuous) hearings, followed by post-hearing briefs is advisable. 1.6.3

Logistics for Proceedings

Sometimes, tribunals prefer to have a pre-hearing conference to ensure that all logistics are in order for the hearing. At this stage, the tribunal determines the break-down of the schedule for the hearing. In case the hearing is held virtually, emergency contact persons for the parties are designated, and network connections for all those dialling in are checked. Unforeseen events and any other force majeure circumstances can dictate the use of technology and virtual hearings. Furthermore, international commercial arbitration often involves participants residing in different places. The latter too should encourage parties to prefer online arbitration using video conferencing facilities. Depending on several factors (such as access to technology and hardware), virtual meetings could likely save time and costs for both parties. The preliminary meeting, witness crossexamination and expert testimony are quite commonly done online these days,'” although depending on the facts, it may not be appropriate in all cases. At the same time, one also has to be careful to prevent any guerrilla tactics that may be employed in such scenarios. Given the time-bound nature of proceedings, if one disrupts a hearing because of logistical issues, or witness unavailability, it may cause more harm to the proceedings. Similarly, neutrality and no prompting of responses to the witnesses need to be ensured in such cases. It would be prudent to test run the facilities prior to the actual hearing and have a counsel from the opposite side present in the facilities during the cross-examination of the witness.

15. Sections 29A and 29B, 2015 Amendment. 16. For a discussion on managing time and costs in arbitration, and further guidelines on video conferencing, see Chapter 16 of the Handbook. 17. DELOS, Resources on holding remote or virtual arbitration and mediation hearings, for a compilations of checklists, available at https://delosdr.org/index.php/2020/05/12/resources-on -virtual-hearings/.

Ciccu Mukhopadhaya & Manavendra Mishra 1.7

DRAFTING SUBMISSIONS AND COLLECTING EVIDENCE

Arbitration proceedings are not court hearings, and the pleadings have to be drafted in a very different manner. Arbitrators appreciate crisp, to the point drafting in plain English. Delineate issues, address claims, reference exhibits and include the methodology on which basis valuation is done. Valuation by experts or basic computation of damages is necessary even in cases where liquidated damages have been provided.'* Applications and responses thereto for the request of time, submissions, the discovery of documents are often on emails. These emails will eventually form part of the arbitral record, and conflicting stances could be prejudicial. While collecting evidence, one has to only rely on the facts which are in issue before the tribunal and need to be proved. It is important to not digress and be verbose. The general principle is that denied or disputed documents need not be proved by oral evidence.’ Witnesses need to be carefully chosen depending on a variety of factors some include the role in the organisation, the role played during contract negotiations and in the alleged dispute, knowledge of relevant facts, and (arguably) personality traits. In a lot of public sector undertaking or government ventures or in companies with high attrition rates, the persons providing the evidence may not have personal knowledge, and thus if the knowledge is in the records of the case, it needs to be substantiated from the documents at hand. 1.8

DISCOVERY AND RULES OF EVIDENCE

In ad hoc proceedings, witness cross-examination may not be time-bound as stringently as it is in institutional arbitrations. However, in all such cases, one must follow

the rules, adopted or decided by the tribunal, extremely carefully. In international arbitrations, the IBA Rules of Evidence inter alia pertain to relevance, materiality and admission of documents, mode of requesting for documents, requesting documents which are in the possession and custody of the other party, etc. These may be adopted. A key tool in evidence and discovery is the ‘Redfern Schedule’ which organises the request for the production of documents.*" The Redfern Schedule contains four rows or headings that must be contributed to by the parties, their counsels and the arbitral tribunal, namely: a) request to disclose; b) reason to request; c) objecting party’s response; and d) tribunal's ruling with brief reasons for the same. This is primarily because a significant majority of these requests tend to be mere fishing expeditions, thereby needlessly increasing unnecessary work for the tribunal and with

that, the cost of arbitration.*!

18. Kailash Nath Associates v. Delhi Development Authority (2015) 4 SCC 136. 19.

Section 59 and Section 9! of the Indian Evidence Act, 1872.

21.

Arbitration (6th ed. 2015) Chapter 1, at para. 1.238 and Figure 1.1. Dominic Wong, Summary of Young-OGEMID Symposium No. 3: “Prove It! Evidence in International Arbitration (6-15 June 2016)”, 14(1) TDM 1, 9 (2017).

20. See Blackaby

Nigel,

Constantine

Partasides,

et al., Redfern

and Hunter on International

Chapter 1: General Notes for Practitioners

1.9

HEARING

1.9.1

Opening Statement

Opening statement is when the counsels make their first substantive submissions in the arbitration. This is also the stage where the party/advocate should address all jurisdictional issues and possibly seek a preliminary adjudication of the same, depending on the facts of the case. A good opening statement usually includes a brief statement of the facts and issues pertinent to the dispute, which subtly highlight that the best-case scenario and worst-case scenario work in favour of their party. This must make effective use of the evidence and documentation used to arrive at these conclusions. Furthermore, it must be followed by an elucidation of the key legal positions taken by the party, with the option of accompanying jurisprudence. At such a juncture, sector-specific and generally commercially sensible contentions are the most tenable. This may be combined with a rebuttal of the opposing counsel's arguments or pre-emption of the same.” The tribunal will have

reviewed

the parties’ submissions.

It is, therefore, not

necessary to reiterate all elements of the written phase. It is important to choose which claims to agitate, as the record at this stage includes the written pleadings, evidence and documents being relied upon. Some counsels even drop some of their claims at the outset to make a mark on the tribunal. 1.9.2

Cross-Examination

Unlike a civil suit, in an arbitration, the issues framed are extremely claim-centric and

not always declaratory or an interpretation of clauses. In such a scenario, documents form the key evidence. The idea of a suitable cross-examination in an arbitration is thus to prove that the witness statement is contrary to the records or the lack of knowledge of the relevant facts. Typically, avoid the court trial procedure of asking multiple questions on the same point if you have received a response which is favourable and can be linked to the document at hand, choose to move on. Continuing to question the witness, simply hoping to get something positive, might give the witness the opportunity to put additional damaging points on the record. It is important to thoroughly review the relevant witness statement(s) before commencing cross-examination. Try and get a sense of the witness as a person. Some additional considerations for cross-examination are the following.

22. Franz T. Schwarz, The Guide To Advocacy: Opening Submissions, Global Arbitration Review, 1, 9 (2017).

Ciccu Mukhopadhaya & Manavendra Mishra 1.9.2.1

Whether to Cross-Examine?

Contrary to popular perception, there is no rule of mandatory cross-examination of a witness by adverse counsel. In fact, cross-examining a competent and articulate opposition witness may prove very harmful when trying to build an effective case. Very often, witnesses have vested interests at stake.

Some of the factors to be considered for taking this judgment call are as under: (i) importance of the subjects covered by the witness; (ii) nature of written testimony of the witness and the extent to which it can harm the counsel; (iii) the importance of the submissions omitted by the witness and the importance of bringing these omissions to light; (iv) presence of unexplained gaps in the story as told by the witness and the relevance of these gaps thereof; and

(v) credibility of the witness.**

There might be times when cross-examination. In such cases, prepared to drop a witness from particularly true for international

enon.

1.9.2.2

witnesses of the opposing be prepared to cut short the cross-examination if time arbitration proceedings and

side stall and delay the testimony. Similarly, be is a constraint. This is is a common phenom-

Witness Conduct and Solutions

In the circumstances involving disinterested or overly arduous and verbose witnesses, it is of utmost importance that counsels refrain from letting an inkling of frustration surface. Instead, they must maintain composure and steer the difficult witness to the primary point that is trying to be made. Despite a general prohibition to do so, sometimes witnesses are prepared, and they parrot responses that they have deemed fit for each type of question. In such cases, break the chain and ask unrelated queries which are difficult to pre-empt. Similarly, when examining experts, it is important to note that they are independent experts or professionals acting on instructions. It is not helpful to badger or coax them to say something. Most of the experts today testify multiple times in a year and hence, could be and often are better prepared than the fact witnesses. Questions concerning their report, instructions received, and/or assumptions made by the experts are relevant. It is prudent to seek the assistance of one’s own experts during cross-examining or even recommend hot-tubbing as deemed fit.**

23. See Wong, supra n. 21 at p. 5. 24. For a decision of hot-tubbing, see Chapter 16 of the Handbook.

10

Chapter 1: General Notes for Practitioners 1.9.2.3

Engaging with the Witness

Cross-examination of a witness is an art, or at best, a highly subjective science. There are no pre-lixed rules to be followed for an efficient cross-examination. However, a thumb-rule to be followed is that the counsel’s approach has to be responsive to the preferences of the tribunal and the manner in which the witness is answering the questions posed to him/her. Knowing when to stop is the most important rule, and it is developed over time and with practice. 1.10

WRITTEN SUBMISSIONS

Written submissions are an essential element of the arbitration process. Written submissions essentially involve creating a narrative which is clear, putting the relevant facts in context and ensuring congruity with the documentary evidence. The essential processes involved in effective written submissions are as under. 1.10.1

Developing the Case Theory

An effective case theory works off the following checklist: (i) factual narrative; (ii) segregation of material facts; (iii)

motives for the actions of all involved parties;

(iv) legal theory and authority supporting the conclusions drawn; (v) acknowledgement and explanation for all weaknesses in the party’s case; and (vi) a concise rebuttal of the opponent's case.

1.10.2

General Rules for Written Advocacy

Some of the general rules for effective written submissions are the following: (i) do not overstate the case or the defence; (ii) refrain from using vehement or hyperbolic language; (iii) give sufficient importance to costs claimed, the quantum of compensation claimed, and methodology of valuation; (iv) be persuasive while making your argument; and (v) ensure that the language used in the written submissions is in accordance with the jurisdictional preferences and general proclivities of the tribunal.

1]

Ciccu Mukhopadhaya & Manavendra Mishra 1.10.3

Structure and Presentation

The structuring and formulation of the written submissions in an efficient and more importantly, a persuasive manner, is an extremely good trait. The written submissions have to be formulated in a manner which ensures that the tribunal is kept engaged and understands the case the counsel is trying to build. The written submissions have to ensure that the tribunal appreciates the submissions being made by the counsel and is persuaded by the arguments. Some guidelines are enunciated below: (i) submissions have to be crisp and precise; (ii) do not deviate from the case theory and the objective of persuading the tribunal to adopt it;

(iii) provide a crisp but comprehensive roadmap on how the submissions (both oral and written) will progress; (iv) give a clear and detailed conclusion of the submissions; (v) use well-defined and clearly demarcated sections and subsections which follow a logical pathway; (vi) prepare a comprehensive index or table of contents; and (vii)

1.10.4 In addition

make good use of tables, annexures, schedules, diagrams.

Cost Submissions to the above,

one also has to file cost submissions

tribunal fees, travel, accommodation

including legal fees,

and all other heads of costs which

have been

incurred as a result of the proceeding and provided under Section 31A of the 2015 Act. The proof of such expenses needs to be furnished along with the schedule of costs, and a submission as to why one is entitled to the same has to be substantiated therein. Well-drafted cost submissions can enable parties to recover substantial sums. 1.11

SECOND CHAIR

The ‘second chair’ is the member of the team who sits alongside the (first-chair) and effectively serves as second-in-command in the entire The second chair must always be ready to step in and argue the matter. function of a second chair involves being the eyes and ears of the first important traits would include:

lead counsel proceedings. The primary chair. Some

(i) be thorough with the facts and the case laws being cited in the matter; (ii) know the annexures and common core bundle very well. It is often the case that the counsels arguing remember the document, but the appropriate reference thereto should preferably be used; (iii) review the transcripts and draw attention to admissions and/or misrepresentations;

12

Chapter 1: General Notes for Practitioners (iv) note the reaction of the tribunal members, the body language of witnesses during the cross-examination and give effective feedback.

1.12

MANOEUVRING

THE COURT SYSTEM

Arbitration is interwoven with the court system. This Chapter has highlighted above the need to plan for interim orders. However, courts can be approached for other assistance as envisaged in the 1996 Arbitration Act and the 2015 Amendment thereto. Section 5 of the 1996 Arbitration Act limits the interference of the courts, only as provided for under the Act, and includes:

(i) application under Sections § or 45 of be to refer parties to the arbitration instituted by any party. Failure to do 4 of the Act; (ii) appointment of an arbitrator under (iii)

the 1996 Arbitration Act as the case may from the court or tribunal proceedings so may amount to waiver under Section Section 11(6);*

seeking court's assistance in taking evidence under Section 27;

at

(iv) application for setting aside an arbitral award under Section 34; (v) appeal from an order passed under Section 34 in Section 37. In addition

arbitration the past, necessary said order 1.13

to the above,

in an Indian

context,

one

may

be faced with

anti-

injunction suits, where one sees that interim orders have been granted in restraining arbitrations.** In such scenarios, it is important to file the applications in the appropriate court or immediately go in appeal against the to the higher forum for setting aside the same. CONCLUSION

In India, one now finds arbitration as the norm in multiple industries which range from vehicle

financing

loan

agreements,

commercial

disputes,

infrastructure,

investor-

investee disputes including call and put options, shareholder disputes to bilateral investment treaty arbitrations. There is no one size [its all approach in these cases. One has to assess on the best suitable approach basis the merits of the case. Some statutory legislations — e.g., Micro, Small and Medium Enterprises Development Act, 2006 —- have a facilitation council which becomes an arbitral tribunal if the conciliation proceedings

25. For a review of the court's powers under Section 11, see Chapter 4 of the Handbook. 26. For discussion related to Section 27, see Chapter 7 of the Handbook. 27. For a review of the court's powers under Sections 34 and 36, see Chapters 10 and 11 of the Handbook. 28.

Vikram Bakshi And Anr v. McDonalds India Pvt Ltd And Ors, IA Nos.6207/2014 in C.S.(OS)

No.962/2014 eventually set aside by the Division Bench of the Delhi High Court in McDonalds India Private Limited

v. Vikram

Bakshi

(2016) SCC

Online

Del

3949. See also The Board of

Trustees of the Port of Kolkata v. Louis Dreyfus Armatures SAS, 2014 SCC OnLine Cal 17695; Bina

Modi v. Lalit Modi, Delhi High Court, Judgment, CS(O5) 84/2020.

13

Ciccu Mukhopadhaya & Manavendra Mishra are not successtul. Similarly, dispute resolution boards conduct proceedings similar to arbitration proceedings in some cases. Advocacy

in commercial

arbitration is an art and not a science.

However,

the

above paragraphs shed light on the cardinal principles which have traditionally yielded results in arbitration proceedings, international, and domestic. The above primer gives insight into the roles and responsibilities of different participants in the arbitration proceedings and the importance of these functions thereof. Adherence to the principles that have been discussed, by counsels and other practitioners, will go a long way in internalising the fundamentals of effective persuasion. It also provides a fundamental set of rules and guidelines which are beneficial for all practitioners irrespective of the legal regimes they are trained in.

14

CHAPTER 2

The Arbitration Agreement Dipen Sabharwal QC’

The basis of any arbitration is the arbitration agreement. It constitutes the foundation of every arbitral tribunal's jurisdiction. Therefore, it must be drafted

with diligence and should not be a midnight clause. To assist in the drafting, this

Chapter sets out the elements of an arbitration agreement and discusses the specific

types of such agreements. Moreover, it explains the principles of separability and

arbitrability before it moves on to the various actors involved: the parties to the

arbitration agreement as well as third parties.

2.1

INTRODUCTION

This Chapter focuses on the bedrock of all arbitrations — the arbitration agreement. Given the consensual nature of arbitration, national courts, tribunals and scholars have

frequently underscored the critical importance of an arbitration agreement.' This is no different for arbitrations conducted in India. *

[am grateful for comments and contributions from my following colleagues in the White & Case international arbitration practice: Mona Wright, Aditya Singh, Zehaan Trivedi and Theresa Puthumana. The Editors are grateful to Anubhab Sarkar and Arundathi Venkataraman for their substantial contribution to this Chapter.

1. Marike Paulsson, The 1958 New York Convention in Action (2016) pp. 93-94. See Award in ICC

Case No. 7929, XXV Y.B. Comm. Arb. 312, 316 (2000) (‘Arbitration is a consensual process and depends upon the existence of a valid agreement to arbitrate’); Watkins-Johnson Co. v. Islamic Repub. of Iran, Award in IUSCT Case No. 429-370-1 of 28 July 1989, 22 Iran-US C.T.R. 218, 296

(1989) (Noori, J., dissenting) (‘There can be no doubt that arbitrations, whether international or

between subjects of private law, derive their mandate and competence from the consent and agreement of the parties to the arbitral agreement; therefore, it is the parties’ consent that determines the scope, limits and area of certitude of an arbitrator's authority and jurisdiction’);

Reily v. Russell, 34 Mo. 524, 528 (1864) (arbitration rests on the ‘will and consent of the parties

litigant’); Elektrim SA v. Vivendi Universal SA [2007] EWHC 571 (QB) (‘arbitrations [...] are the result of agreements between [...] parties to resolve legal disputes through a private impartial

tribunal. Such

arbitrations are, by definition, consensual’); Judgment

15

of 3 October 2000, DFT

Dipen Sabharwal QC Indian courts have consistently held that arbitration under the Arbitration and Conciliation Act, 1996 (1996 Arbitration Act or Act) is not possible in the absence of an arbitration agreement.” Accordingly, integral to a valid arbitration under the Act is an ‘arbitration agreement’ as defined — largely in line with Article 7 of the UNCITRAL Mode! Law on International Commercial Arbitration (Model Law). Section 7 states: Arbitration agreement. — (1) In this Part, ‘arbitration agreement’ means an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not.

(2) An arbitration agreement may be in the form of an arbitration clause in a

contract or in the form of a separate agreement. (3) An arbitration agreement shall be in writing. (4) An arbitration agreement is in writing if it is contained in— (a) (b)

a document signed by the parties; an exchange of letters, telex, telegrams or other means of telecommunication [including communication through electronic means] which provide a record of the agreement; or (c) an exchange of statements of claim and defence in which the existence of

(5) The

the agreement is alleged by one party and not denied by the other. reference in contract

to a document

containing an arbitration clause

constitutes an arbitration agreement if the contract is in writing and the reference is such as to make that arbitration clause part of the contract

(emphasis added).*

2.2

ELEMENTS OF AN ARBITRATION AGREEMENT

A plain reading of Section 7 of the 1996 Arbitration Act establishes four essential elements of a valid and binding arbitration agreement: (1) there must be an agreement between the parties to submit present or future disputes to arbitration; (2) such an agreement must be in writing; (3) it must be contained as a clause in a contract or is a separate agreement; and

4P.60/2000 (Swiss Federal Tribunal) para. 3 (‘Among other prerequisites, an arbitral tribunal has jurisdiction only in case the dispute is within the scope of the arbitration agreement’); Judgment of 3 July 1975, 1978 NJW 109 (German Bundesgerichtshof) p. 110 (‘While the citizen is subject to the jurisdiction of the state courts by virtue of public law set by the state, the arbitral proceedings [...] are always the consequence of a private legal act, be it -as here - an agreement, be it a final will or the articles of an association’). 2. M.P. Rural Road Development Authority v. L.G. Chaudhary, Engineers and Contractors, AIR 2012 SC 1228. 3. Inserted by the 2015 Amendment. The Supreme Court has also held that this insertion would have retrospective effect. See Board of Control for Cricket in India v. Kochi Cricket Pvt. Ltd. and Ors. (2018) 6 SCC 287, para. 57; Hindustan Construction Company Ltd. and Ors. v. Union of India and

Ors., AIR 2020 5C 122, paras 50, 51. 4. The definition in the 1940 Act was as follows: ‘In this Act, unless there is anything repugnant in the subject or context, — (a) ‘arbitration agreement’ means a written agreement to submit present or future differences to arbitration, whether an arbitrator is named therein or not{...]."

16

Chapter 2: The Arbitration Agreement (4) the dispute sought to be referred to arbitration must concern a defined legal relationship, whether contractual or not. 2.2.1

Intention to Enter into an Arbitration Agreement

Clear from the above four requirements is that central to a valid arbitration agreement is the intention of all the parties to enter into one. The intent of each party must be identical to the others; i.e., there must be consensus ad idem.” This intention of parties to enter into an arbitration agreement is to be deduced from the terms of the agreement and not from its form.® In other words, as long as the intention of the parties to submit a dispute to arbitration is clearly ascertainable from the terms of the agreement, an arbitration agreement exists,’ irrespective of the use of terms such as ‘arbitration’, ‘arbitrator’, ‘arbitral tribunal’ or ‘reference’.* The Supreme Court in Jagdish Chander v. Ramesh Chander set out key principles to be applied when reading the terms of an agreement to deduce parties’ intent:” — Ifthe terms of the agreement clearly indicate the parties’ intention to refer their disputes to a private tribunal for adjudication, and a willingness to be bound

5. Hazrat Maulana Arshad Madani

v. Maulana

Quari Mohammad

Usman,

2010 (1) Arb

LR 427

(Del), parties cannot be referred to arbitration if there is no consensus ad idem between them as to the role to be performed by a third party chosen by them to resolve their disputes. See also Rukmani Bai Gupta v. The Collector, Jabalpur, AIR 1981 5C 479. 6. Rukmanibai Gupta v. Collector, Jabalpur, AIR 1981 SC 479. The Supreme Court held that an arbitration agreement or clause need not take a particular form for it to be valid and enforceable by the parties. 7. Ram Lal Jagannath v. Punjab State, AIR 1966 Punj 436. 8. Punjab State v. Dina Nath, AIR 2007 SC 2157, the only essential requirements for an arbitration agreement are that the parties have intended to make a reference to an arbitration and treat the decision of the arbitrator as final - omission to mention the words ‘arbitrator’ and ‘arbitration’ is not material. See also Jagdish Chander v. Ramesh Chander (2007) 5 SCC 719, the absence of the words ‘arbitration’ or ‘arbitral tribunal’ or ‘arbitrator’ does not invalidate a clause/agreement if the intention of the parties can be clearly ascertained from the terms; Mohan Singh v. HP. State Forest Corpn. (1999) 1 Arb LR 183 (P&H), itis not necessary to constitute an arbitration agreement that the word ‘reference’ or ‘arbitration’ or a similar expression should actually be used — there should be an arbitration agreement in substance, and the intention of the parties is the deciding factor; Harbhajan Sarabjeet & Associates v. Maharashtra Krishna Valley Development Corporation, 2011 (1) Arb LR 560 (Bom), clauses in the agreement entered into between the parties whereby the superintending engineer of the respondent corporation was empowered to decide on issues and any grievance against such order passed could be appealed to the chief engineer and further to the Executive/Claim Committee of the respondent corporation as part of a three-tier dispute resolution mechanism. The matter before the court was whether the said clauses constituted an arbitration agreement. The court held that if parties have agreed on a special scheme for themselves to regulate dispute resolution, this scheme had to be given effect to. Furthermore, the use of words like ‘arbitrate’ or ‘arbitration’ in the dispute resolution clause is not essential. See also Dharampal Satyapal Ltd. v. Dinesh Enamelled Wire Industries (P) Ltd., 2010 (2)

Arb LR 444 (All).

9. Jagdish Chander v. Ramesh Chander (2007) 5 SCC 719. See also K.K. Modi v. K.N. Modi (1998) 3

SCC 573; Bharat Bhushan Bansal v. U.P. Small Industries Corpn. Ltd. (1999) 2 SCC 166; Wellington Associates Ltd. v. Kirit Mehta, AIR 2000 SC 1379; Bihar State Mineral Development Corporation v. Encon Builders (I)(P) Ltd., AIR 2003 SG 3688; State of Orissa v. Damodar Das, AIR 1996 SC 942.

17

Dipen Sabharwal QC by no an of

the decision of such tribunal, it is an arbitration agreement. While there is specific form of an arbitration agreement, the words used should disclose obligation to refer to arbitration and not merely contemplate the possibility referring to arbitration. An agreement that merely contemplates a possibility

of parties agreeing to arbitrate in the future is non-binding and invalid.'”

— Even if the words

‘arbitration’, and ‘arbitral tribunal’ or ‘arbitrator’ are not

explicitly used in the clause relating to the settlement of disputes, it will not prevent the clause being an arbitration agreement as long as it incorporates the essential elements of an arbitration agreement.'' They are: (a) the agreement should be in writing; (b) the parties should have agreed to refer any disputes (present or future) between them to the decision of a private tribunal; (c) the private tribunal should be empowered to adjudicate upon the disputes in an impartial manner, giving due opportunity to the parties to put forth their case before it; and (d) the parties should have agreed that the decision of the private tribunal in respect of the disputes will be binding on them.’* — The mere use of the words ‘arbitration’ or ‘arbitrator’ in a clause will not, however, make it an arbitration agreement, if it requires or contemplates a subsequent or fresh consent of the parties for reference to arbitration. For example, the use of words such as ‘parties can, if they so desire, refer their disputes to arbitration’ or ‘in the event of any dispute, the parties may also agree to refer the same to arbitration’ or ‘if any disputes arise between the parties, they should consider settlement by arbitration’ indicates that the clause is not intended to be an arbitration agreement. Such clauses merely indicate a desire to have the disputes settled by arbitration. — Where the clause provides that the disputes shall be referred to arbitration, it is an arbitration agreement. If there is a specific and direct expression of intent to have the disputes settled by arbitration, it is not necessary to set out the attributes of an arbitration agreement to make it a valid arbitration agreement. Moreover, where the clause contains words which specilically exclude any of the attributes of an arbitration agreement or contains anything that detracts from

an arbitration agreement, however,

it will not be an arbitration agree-

ment. For example, where an agreement requires the arbitrator(s) to act in the interests of only one of the parties, it cannot be termed as an arbitration agreement.

The Calcutta High Court in Slipco Constructions added to these principles by holding that parties could not disclaim the existence of an arbitration agreement when a clause demonstrates an intention to arbitrate, is not denied by the parties in their correspondence but has instead been previously admitted by the disclaiming party in

an affidavit:"*

10. Jagdish Chander v. Ramesh Chander (2007) 5 SCC 719, para. 8{i).

ll. Jagdish Chander v. Ramesh Chander (2007) 5 SCC 719, para. 8{ii).

12. Jagdish Chander v. Ramesh Chander (2007) 5 SCC 719, para. 8 (iii).

13. Slipco Constructions P. Ltd. v. Shappori Pallonji and Company Ltd., 2013 (2) Arb LR 368 (Cal), para. 16.

18

Chapter 2: The Arbitration Agreement The reason why courts must assess why parties had consented to arbitration as

they have a fundamental access to courts: Although there is a presumption of

validity, a party cannot be forced to arbitrate a dispute if it had not validly consented thereto and thus be denied its right of access to courts |...] In sum, there

is a fine balance between the Conventions presumption of the agreement's validity - a presumption based on party autonomy - and the fundamental right to access to courts.'* Intention can also be deduced only from a written concluded contract made by authorised persons. Accordingly, any pre-conclusion offers and correspondence are irrelevant in the determination of the parties’ intent alter a contract is concluded.'” Further, the offer must be duly signed by authorised personnel. When the only correspondence or agreement containing the arbitration clause is made by an unauthorised employee, no arbitration agreement exists." 2.3

REQUIREMENTS FOR A VALID ARBITRATION AGREEMENT UNDER THE 1996 ARBITRATION ACT

Aside from the intent of the parties, Section 7 of the 1996 Arbitration Act prescribes formal requirements that each valid arbitration agreement must fulfil: — the arbitration clause must be in a contract or in the form of a separate agreement (Section 7(2)). — an arbitration agreement must be in writing (Section 7(3)).'” — evidence that the arbitration agreement is in writing (Section 7(4)) such as: — adocument signed by the parties; or —

an exchange of letters; or

—

a telex, telegram or other means of telecommunication (including communication through electronic means) which provide a record of the (arbitration) agreement; or — anexchange of statements of claim and defence in which the existence of the arbitration agreement is alleged by one party and not denied by the other. - an arbitration clause may be incorporated into a contract by reference (Section

7(5)): —

that is, if a document containing an arbitration clause is referred to in a contract, then such reference will constitute an arbitration agreement if the contract is in writing and the reference is such as to make that arbitration clause part of the contract.

14. Marike Paulsson, The 1958 New York Convention in Action (2016) p. 65. 15.

Delhi Iron & Steel Go. P. Ltd. v. UPSEB

(2002) 1 RAJ 588.

16. Pyrites, Phosphate and Chemicals v. Excel Shipping Enterprises (2001) 4 RAJ 660 (Del). See, however, Engineering Development Corpn. v. MCD,

| Arb. LR 269 (Del), where there was no

formal agreement, but the tender document indicated certain conditions and also an arbitration

clause; this amounted to an arbitration agreement. Elizabeth Mathew v. S.K. Narayana, AIR 1999

Kar 291, it is the substance and not the form of the agreement which is material and relevant. 17. See also, M.M. Aqua Technologies Ltd. v. Wig Builders and Engrs. Ltd (2001) 1 Arb LR 301 (Del).

19

Dipen Sabharwal QC 24

FORMS OF ARBITRATION AGREEMENTS:

SECTION 7(2)

Neither the 1996 Arbitration Act nor the corresponding jurisprudence prescribes a form for a valid agreement.'® The Act recognises the three types of arrangements a valid arbitration agreement can be framed in: (1) arbitration clause in a contract — Section 7(2): (2) separate arbitration agreement — Section 7(2); and (3) arbitration agreement by incorporation — Section 7(5). Before addressing these three forms, however, it is pertinent to bear in mind that whatever form the arbitration agreement takes, it must be valid under Indian law. Otherwise, any invalid arbitration agreement that leads to an award might render the latter vulnerable at the enforcement stage, vide Article V(1)(a) of the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Conven-

tion).!°

This ‘validity’ of an arbitration agreement is determined in line with the requirements contained in Sections 7(3)-7(4) of the 1996 Arbitration Act, and the requirements of arbitrability and capacity of contracting parties are described later in this Chapter. 2.4.1

Arbitration Clause in a Contract: Section 7(2)

A clause in a contract can be construed as an ‘arbitration agreement’ only if an agreed intent to refer any dispute to arbitration is expressly or impliedly spelt out in the clause.*” As explained above, a court must be able to gather the intention of the parties to enter into an arbitration agreement from the terms of the agreement. 2.4.2

Separate Arbitration Agreement: Section 7(2)

The 1996 Arbitration separate agreement. agreement too should to refer their disputes 18.

Act also allows for an arbitration agreement to be recorded in a As with arbitration clauses within a contract, the arbitration either expressly or implicitly spell out the intention of the parties to arbitration.

See above, e.g., Rukmani Bai Gupta v. The Collector, Jabalpur, AIR

1981 5C 479.

19. Interestingly, in requiring a valid agreement for a valid arbitration to go forward, the 1996 Arbitration Act reverses the burden on proving a valid arbitration agreement when compared to New York Convention. While Article V(1)(a) of the New York Convention requires the party resisting enforcement of an award to prove invalidity of the underlying arbitration agreement, Section 7, read with Section 8, of the 1996 Arbitration Act requires the party seeking referral to arbitration to prove the validity of an arbitration agreement. See Marike Paulsson, Marike Paulsson, The 1958 New York Convention in Action (2016) p. 175-82 for a discussion on Article V(1)(a) of the New York Convention. 20. Jagdish Chander v. Ramesh Chander (2007) 5 SCC 719. See also Hairtha Finance Ltd. v. ATV Projects India Litd., 2 Arb LR 376 (Mad), an arbitration agreement contained in the clause of a contract was held to be a permissible mode of arbitration agreement.

20

Chapter 2: The Arbitration Agreement 2.4.3

Arbitration Agreement by Incorporation: Section 7(5)

The 1996 Arbitration Act provides that if a written contract contains the arbitration clause), then such reference is arbitration clause. The question of whether an arbitration document is incorporated in the contract is a question of The Supreme Court has summarised the scope and

M.R. Engineers as follows:*'

refers to a document (which a valid incorporation of the clause contained in another contractual interpretation. rationale of Section 7(5) in

(i) An arbitration clause in another document is deemed incorporated into a contract by reference if the following conditions are fulfilled: (a) the contract should contain a clear reference to the documents containing the arbitration clause; (b) this reference should clearly indicate an intention to incorporate the arbitration clause into the contract; and (c) the arbitration clause should be appropriate, in that it is capable of application in respect of disputes under the contract and should not be repugnant to any term of the contract.” (ii) When the parties enter into a contract which makes a general reference to another contract, such general reference would not have the effect of incorporating the arbitration clause from the referred document into the contract between the parties. The arbitration clause from one contract can be incorporated into another contract (where such reference is made), only by a specific reference to the arbitration clause.** (iii) If the contracting parties decide that a contract is to be executed according to the terms of another contract, said reference only incorporates the provisions relating to execution alone. An arbitration agreement contained in the other contract is not automatically incorporated. This goes in line with the

principle of separability.“

(iv) Where the contract provides that the standard form of terms and conditions of an independent trade or professional institution (e.g., the standard terms and conditions of a Trade Association or the Architects Association) will apply to the contract, such standard form terms, including any provision for arbitration in such standard terms and conditions, shall be deemed to be incorporated by reference. Sometimes the contract may also say that the parties are familiar with those terms and conditions or that the parties have read and understood the said terms and conditions.” (v) Where the contract between the parties stipulates that the conditions of contract of one of the parties shall form a part of their contract (as e.g. the General Conditions of Contract of the Government where the Government is

2. M.R. Engineers & Contractor (P) Ltd v. Som Dutt Builders Ltd. (2009) 7 SCC 696. See also, Duro Felguera, S. A. v. Gangavaram Port Limited (2017) 9 SCC 729. dd. M.R. Engineers & Contractor (P) Ltd v. Som Dutt Builders Ltd. (2009) 7 SCC 696, para. 24. 23. Ibid. 24. Ibid. 25. Ibid.

21

Dipen Sabharwal QC a party), the arbitration clause forming part of such general conditions of contract will apply to the contract between the parties.*° The Supreme Court in M.R. Engineers*’ also clarified: There is a difference between reference to another document in a contract and incorporation of another document in a contract, by reference. In the first case, the

parties intend to adopt only specific portions or part of the referred document for

the purposes of the contract. In the second case, the parties intend to incorporate the referred document in entirety, into the contract. Therefore when there is a reference to a document in a contract, the court has to consider whether the

reference to the document is with the intention of incorporating the contents of that document in entirety into the contract, or with the intention of adopting or

borrowing specific portions of the said document for application to the contract.

We will give a few instances of incorporation and mere reference to explain the position (illustrative and not exhaustive). If a contract refers to a document and provides that the said document shall form part and parcel of the contract, or that

all terms and conditions of the said document shall be read or treated as a part of

the contract, or that the contract will be governed by the provisions of the said document, or that the terms and conditions of the said document shall be incorporated into the contract, the terms and conditions of the document in entirety will get bodily lifted and incorporated into the contract. When there is such incorporation of the terms and conditions of a document, every term of such

document (except to the extent it is inconsistent with any specific provision in the

contract) will apply to the contract. If the document so incorporated contains a provision for settlement of disputes by arbitration, the said arbitration clause also will apply to the contract. On the other hand, where there is only a reference to a document in a contract in a particular context, the document will not get incorporated in entirety into the

contract. For example if a contract provides that the specifications of the supplies

will be as provided in an earlier contract or another purchase order, then it will be

necessary to look to that document only for the limited purpose of ascertainment

of specifications of the goods to be supplied. The referred document cannot be

looked into for any other purpose, say price or payment of price. Similarly if a contract between X and Y provides that the terms of payment to Y will be as in the contract between X and Z, then only the terms of payment from the contract between X and 7, will be read as part of the contract between X and Y. The other terms, say relating to quantity or delivery cannot be looked into.**

In summary, the position under Indian law is as follows: — Areference to the documents containing the arbitration clause that needs to be incorporated into another must be clear. — A reference to another document in a contract must clearly indicate the intention to incorporate the arbitration clause from the first document to the other document.

26. Ibid. 27.

Ibid. See also, Duro Felguera, S. A. v. Gangavaram Port Limited (2017) 9 SCC 729.

28. M.R. Engineers & Contractor (FP) Ltd v. Som Dutt Builders Ltd. (2009) 7 SCC 696. See also, Duro Felguera, S. A. v. Gangavaram Port Limited (2017) 9 SCC 729, paras 16-18.

22

Chapter 2: The Arbitration Agreement — Ageneral reference to another contract will not have the effect of incorporating the arbitration clause from the first contract into the other contract. — A specific reference intending to incorporate the first document into another document will have the effect of incorporating all the terms of the first document into the other document, including any dispute resolution provisions contained in the first document. — A specific reference to a specific aspect of a document (e.g., such as specification of goods to be supplied) will only have the limited effect of guiding only that aspect of the other document (i.e., aspects concerning specification of goods ta be supplied). The first document cannot be consulted for any other purpose (including dispute resolution).

2.0

AN ARBITRATION AGREEMENT SECTION 7(3)

MUST BE IN WRITING:

The Indian Contract Act 1872 (Contract Act) recognises oral agreements to be valid agreements. However, for an arbitration agreement to be valid and enforceable in India, it must be in writing as required by Section 7(3) of the 1996 Arbitration Act.~” Therefore, while a contract which contains an arbitration agreement may be concluded orally, the arbitration agreement by itself is valid only when written. This writing requirement is in line with the writing requirement in Article II of the New York Convention. Under the 1996 Arbitration Act, a written arbitration agreement can exist by virtue of: — documents signed by the parties; or — exchange of letters, telex, telegrams or other means of telecommunication which provide a record of the agreement; or — exchange of pleadings in which the existence of the agreement is alleged by one party and not denied by the other. Since Section 7(2) of the 1996 Act recognises exchange of correspondence and pleadings as written arbitration agreements, there is no signing requirement. Evenil a written arbitration agreement is not signed, the parties can still be contractually bound

to an arbitration agreement.*”

29.

See Indowind Energy Ltd v. Wescare (I) Ltd., AIR 2010 SC 1793 (an arbitration agreement not

30.

Chennai Container Terminal Put Ltd v. Union

signed by a company does not bind the company even if the company is described as a ‘nominee’ of a signatory, irrespective of subsequent conduct or acquiescence which does not amount to a written agreement). of India, 2007

3 Arb LR 218

(Mad),

Fisser v.

International Bank, 282 F.2d 231, 233 (2d Cir 1960), Travancore Devaswom Board v. Panchamy Pack, 2004

13 SCC 510.

23

Dipen Sabharwal QC Further, Indian courts have considered it ‘settled law’ that if there is a handwritten clause, it prevails over the printed text as being a special variation rendering the

printed text inapplicable.*!

Pertinently, the definition of agreement in writing is narrower under Part II of the 1996 Arbitration Act (based on the New York Convention) than the corresponding definition set out under Part I. The Part II provision states that an agreement in writing shall include an arbitration clause in a contract or an arbitration agreement, signed by the parties or contained in an exchange of letters or telegrams. The Part II definition does not contain the words ‘other means of telecommunication which provide a record of the agreement’ included in the corresponding definition under Part I.** The discrepancy between Part I and Part II of the 1996 Act arises from the dated nature of the New York Convention. In 1958, an ‘exchange of letters or telegrams’ was considered in line with modern trade practices. To remedy this situation, the 7 July 2006 UNCITRAL Recommendation called upon States parties to the New York Convention to apply Article II(2) by recognising that the circumstances described in the

provision ‘are not exhaustive’. 2.6

EVIDENCE THAT THE ARBITRATION AGREEMENT WRITING: SECTION 7(4)

IS IN

Section 7(4) of the 1996 Arbitration Act provides that an arbitration agreement is considered to be in writing if it is contained (1) in a document signed by the parties, (2) in an exchange of communications between the parties such as to provide a record of the agreement, or (3) in an exchange of pleadings between the parties such that the existence of an agreement is alleged by one party and not denied by the others. These three ‘evidences’ of the in writing requirement, as well as their ambit as dictated by jurisprudence, are discussed separately below. 2.6.1

Document Signed by the Parties: Section 7(4) (a)

The question of when an agreement is considered signed for the purposes of Section 7 of the 1996 Arbitration Act came up before the Supreme Court in the case of Smita Conductors.** The court held that it was not necessary for an agreement to be signed for it to be in writing. If the agreement of the parties to arbitrate is borne out of correspondence and/or affirmed by their conduct, then that is sufficient to conclude that there was an agreement in writing. Accordingly, the court emphasised the in 31.

See Bharat Lal v. Haryana Chit Pvt Ltd, 1993 RAJ 381

(Del) citing the Privy Council Decision in

Canadian and Dominion Sugar Co. Ltd. v. Camdian National (W.L) Steamships Ltd. , 1947 AC 46, p. 57. 32. Section 7(4)(b) of the 1996 Arbitration Act. 33. Recommendation regarding the interpretation of Article [Il, paragraph 2, and Article VII, paragraph, I of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 7 July 2006 available at https://uncitral.un.org/sites/uncitral.un.org,files/media-documents/ uncitral/en/a2e.pdf. 34. Smita Conductors Ltd. vy. Euro Alloys Ltd., AIR 2001 SC 3730.

24

Chapter 2: The Arbitration Agreement writing requirement of Section 7, rather than its signing requirement. This reasoning has also been followed by various Indian High Courts.** 2.6.2

Exchange of Letters and Other Communications: Section 7 (4) (b)

Exchange of letters, etc., should signify an active assent by both parties and a demonstrable meeting of minds about the arbitration agreement.*° The Supreme Court in Union of India v. A.L. Rallia Ram has clarified that it is not necessary that all the terms of the agreement should be contained in one document.*’ Such terms may be ascertained from the correspondence consisting of a number of letters. 2.6.3

Exchange of Statements of Claim and Defence: Section 7(4)(c)

Section 7(4)(c) of the 1996 Arbitration Agreement ensures that the scope of arbitration is not restricted to the scope of the dispute initially referred to arbitration, but also includes the disputes covered by the pleadings of the parties.** Consequently, this allows for the scope of arbitration to be extended or reduced depending upon the position taken by the parties before the arbitral tribunal. In case of an exchange of statements of claim and defence in which the existence of the arbitration agreement is alleged by one party and not denied by the other, an agreement in writing can be presumed. Note, however, that in response to a statement of claim, there must be a statement of defence in order for this presumption to arise. Mere delay or a failure to reply to a statement of a claim cannot be construed as an

agreement to arbitrate.”

35. See Babaji Automotive v. Indian Oil Corpm. Ltd. (2006) 1 Arb LR 566 and Wescare (India) Ltd. v. Subuthi Finance Ltd. (2008) 4 Arb LR 278. 36.

Pramod Chimanbai Patel v. Lalit Constructions (2003) 3 Arb LR 338 (Bom); Shakti Bhog Foods

Ltd. v. Kola Shipping Ltd., AIR 2009 SC 12. 37. Union of India v. A.L. Rallia Ram, AIR 1963 SC 1685. See also Imex Corporation v. Elenjikal Aquamarine Exports Ltd. (2008) 2 Arb LR 560: AIR 2008 Ker 119, an arbitration agreement was established through an exchange of letters; Home Bank Investment /ne v. MMTG Ltd. (2008)

1

Arb LR 263, 276, arbitrator appointed by each party pursuant to an exchange of letters was held to constitute an arbitration agreement. 38. Ganesh Benzoplast Ltd. v. Saf Yeast Co. Ltd., AIR 2007 (NOC) 1628: ‘the scope of arbitration is not always confined to the initial dispute referred to arbitration - by consent, either expressly or impliedly, it can be extended in the course of the proceedings before the arbitrator, firstly at the time of filing of the statement of claim and that of defence by the parties and secondly, by way of amendment’. 39. Tata Elaxsi Ltd. v. Anand Joshi, 2000 (3) KarLJ 517; Savitri Goenka v. Kanti Bhai Damani (2009) | Arb LR 320, 329 (Del), a letter not written by a party, nor marked to it, nor acknowledged by

it in any way, cannot constitute an arbitration agreement. See also Siddhi Vinayak Industries Pvt. Ltd v. Virgoz Oils & Fats Pte Ltd., 2010 (Suppl. 2) Arb LR 157 (Cal), the court found that, prima

facie, there was an arbitration agreement flowing from correspondence exchanged between the parties, even when the same was not specifically signed or affirmed by the recipient of the correspondence since there was ‘no denial of acceptance of the aforesaid communication or agreement or even arbitration agreement’.

25

Dipen Sabharwal QC It has been held that mere allegations contained in letters would not amount to statements of claim such as to trigger the rule in Section 7(4)(c)."° Bak

SPECIFIC TYPES OF ARBITRATION AGREEMENTS

Arbitration agreements can take a variety of forms. They can also be categorised based on factual aspects that apply to them. For instance, an arbitration clause (in any of the three forms) can allow for one party to have far more bargaining powers compared to the other disputing parties, leading to asymmetrical arbitration clauses. Similarly, while fulfilling all the formal requirements of an arbitration clause, the clause could still be unworkable or difficult to implement leading to pathological clauses.*! Finally, arbitration clauses can provide for a multi-tiered approach to dispute resolution. These various types of arbitration agreements are discussed below. 2.8

ASYMMETRICAL ARBITRATION CLAUSES

In some instances, particularly where one party has a superior bargaining position, the arbitration agreement may contain an asymmetrical option. Such agreements, known as asymmetrical or unilateral clauses, allow one party, but not the other, to commence either arbitration or litigation, at its option. For instance, in Bhartia Cutler Hammer v. AVN Tubes the Delhi High Court was

concerned with the below clause bestowing the power to appoint the arbitrator entirely to one party:

Without prejudice to the above Clause 17, of the contract the Company, M/s. Avn Tubes Limited, reserves its right to go in for arbitration, if any dispute so arisen is not mutually settled within 3 months of such notice given by the Company to the Contractor. And, the award of the Arbitrator, to the appointed by the Company, M/s. Avn Tubes Limited, shall be final and binding on both the Company and the

Contractor.**

Courts across many jurisdictions have considered questions around the validity and enforceability of unilateral option clauses. The English and Singaporean courts,** for instance, have found asymmetrical clauses to be enforceable. In India, however, the status of asymmetrical clauses is unclear following conflicting judgments delivered by different High Courts, namely the Calcutta and Delhi High Courts.

40. Gajulapalli Chenchu Reddy v. Koyyana Jaya Lakshmi, AIR 2009 (NOC) 1968, one party had kept silent in the face of such allegations, held not sufficient to constitute arbitration agreement when such party had disputed attempts to appoint an arbitrator. 41. For further discussion on pathological clauses and drafting arbitration clauses generally, see Chapter 14. 42. Bhartia Cutler Hammer v. AVN Tubes, 1995 (33) DRJ 672. 43. Barclays Bank ple v. Ente Nazionale di Previdenza Ed Assistenza dei Medici e Degli Odontoiatri [2015] EWHC 2857 (Comm); Dyna-Jet Pte Ltd v. Wilson Taylor Asia Pacific Pte Ltd [2017] SGCA 32.

26

Chapter 2: The Arbitration Agreement 2.8.1

Valid Asymmetrical Clauses

The Calcutta High Court has historically upheld asymmetrical clauses. In New India Assurance Co Ltd v. Central Bank of India & Ors the Calcutta High Court noted that the option given to the privileged party to refer the dispute to arbitration does not negate the ‘existence of the arbitration agreement’.** In S&D Securities v. Union of India the Calcutta High Court similarly noted that a unilateral option clause is a ‘a proper and valid clause and there is no lack of mutuality’,** and relied on the English court's decision in Pittalis and others v.

Sherefettin to uphold its validity.*° 2.8.2

Invalid Asymmetrical Clauses

In contrast to the approach taken by the Calcutta High Court, where the Delhi High Court has had occasion to consider the enforceability of asymmetrical clauses, it has deemed them invalid. In Bhartia Cutler Hammer v. AVN Tubes the Delhi High Court held that the asymmetrical clause was void as it ‘suffer[ed] for want of mutuality’.*”” In Emmsons International Ltd. v. Metal Distributors the Delhi High Court held that the asymmetrical clause was void and unenforceable in a court of law pursuant to Section 28 of the Contract Act.” This section ‘render[ed] void those agreements which 44. New India Assurance Co Ltd v. Central Bank of India & Ors AIR 1985 Cal 76.

45. S&D Securities v. Union of India, 2005 124 CompCas 340. 46. Pittalis and others v. Sherefettin [1986] 2 All ER 227. 47. 48. 49.

Bhartia Cutler Hammer v. AVN Tubes, 1995 (33) DRJ 672. Emmsons International Ltd. v. Metal Distributors, 2005 (80) DRJ 256. Section 28, Contract Act: Agreements in restraint of legal proceedings void:

{Every agreement,-

(a) by which any party thereto is restricted absolutely from enforcing his rights under or in respect of any contract, by the usual legal proceedings in the ordinary

tribunals, or which limits the time within which he may thus enforce his rights; or

(b) which extinguishes the rights of any party thereto, or discharges any party thereto, from any liability, under or in respect of any contract on the expiry of a specified period so as to restrict any party from enforcing his rights, is void to the extent.] Exception 1.- Saving of contract to refer to arbitration dispute that may arise.- This

section shall not render illegal a contract, by which two or more persons agree thal

any dispute which may arise between them in respect of any subject or class of subjects shall be referred to arbitration, and that only the amount awarded in such arbitration shall be recoverable in respect of the dispute so referred.

i

Exception 2.- Saving of contract to refer questions that have already arisen.- Nor shall this section render illegal any contract in writing, by which two or more persons agree to refer to arbitration any question between them which has already arisen, or affect any provision of any law in force for the time being as to references

to arbitration.* [Exception 3.-This section shall not render illegal a contract in writing by which

any bank or financial institution stipulate a term in a guarantee or any agreement

making a provision for guarantee for extinguishment of the rights or discharge of

any party thereto from any liability under or in respect of such guarantee or agreement on the expiry of a specified period which is not less than one year from

27

Dipen Sabharwal QC absolutely restrict a party to a contract from enforcing the rights under that contract in ordinary tribunals’. The court noted additionally that an asymmetrical clause would be void for being contrary to the public policy of India. The Delhi High Court reaffirmed its position in Lucent Technologies Inc. v. ICICI Bank Ltd. & Ors and held the asymmetrical clause was ‘not enforceable in law for lack of mutuality as well as

uncertainty’.*!

However, in 2010, the Delhi High Court in Jindal Exports Ltd. v. Fuerst Day Lawson Ltd. departed from its previous decisions and upheld the validity of the asymmetrical clause. Since this decision dealt with English law (which applied to that case), its impact on otherwise consistent precedent is unclear. The Delhi High Court decisions demonstrate that there are three potential grounds for challenging the validity of asymmetrical clauses under Indian law: (i) lack of mutuality; (ii) public policy; and (iii) restraint of a party’s right to legal proceedings. In the absence of a conclusive judgment from the Supreme Court on the validity of asymmetrical clauses, the position in law remains unsettled. 29

PATHOLOGICAL

CLAUSES

The expression pathological clauses refers to defective or poorly drafted arbitration clauses.”* Typically, dispute resolution clauses are inserted at the very end of contractual negotiations and, as a result, receive little attention. This is also why they are sometimes labelled midnight clauses. Pathological clauses are clauses which lack one or more of the essential elements of an arbitration clause, without affecting their formal validity. A few common defects found in pathological clauses are illustrated below: (1) Reference to non-existent arbitral rules: In System for International Agencies v. Rahul Coach Builders Pvt. Ltd. the parties agreed to arbitration under the ‘by-laws of Indian Company’s Act 1956’ or ‘as per International Trade Laws’.” The rules under which the arbitration had to be conducted did not exist.

the date of occurring or non-occurring of a specified event for extinguishment or

discharge of such party from the said liability.] 50.

Emmsons International Ltd. v. Metal Distributors, 2005 (80) DRJ 256.

51. Lucent Technologies Inc. v. ICICI Bank Ltd. & Ors., 2009 SCC Online Del 3213.

52. Jindal Exports Ltd. v. Fuerst Day Lawson Ltd., 2010(1) ARBLR1 (Delhi), paras 50-51.

53. Nigel Blackaby et al., Redfern and Hunter on International Arbitration (6th ed. 2015) para. 2.197 ff.; Fouchard,

Gaillard,

Goldman

on International

Commercial

Arbitration

(E. Gaillard

& J.

Savage eds., 1999), p. 262. 54. A. Redfern & M. Hunter with N. Blackaby & C. Partasides, Law and Practice of International Commercial Arbitration (6th ed. 2015), Chapter 2, p. 72 (Online Edition). 55.

System for International Agencies v. Rahul Coach Builders Pvt. Ltd. (2015) 13 SCC 436.

28

Chapter 2: The Arbitration Agreement

(2)

(3)

(4)

(5)

(6)

Reference to non-existent arbitral institutions: In Pricol Ltd. v. Johnson Controls Enterprises Ltd. the parties agreed to refer their disputes to the ‘Singapore Chamber of Commerce’.** The court found that no institution administered arbitration proceedings under that name. Unworkable arbitration clauses: In Insigma Technology Co. Ltd. v. Alstom Technology Ltd. the parties agreed to refer their disputes to arbitration before the Singapore International Arbitration Centre (SIAC) but in accordance with Rules of Arbitration of the International Chamber of Commerce (ICC).*” Here, there was an anomalous situation where one arbitral institution (i.e., the SIAC) was called upon to conduct the arbitration under the rules of a separate and distinct competing arbitral institution (i.e., the ICC). Incomplete arbitration clauses: In Wellington Associates Ltd. v. Kirit Mehta the agreement contained an exclusive jurisdiction clause and also provided that any dispute ‘may’ be referred to arbitration.** On a combined reading of both clauses, the court concluded that reference to arbitration was optional but required a mutual agreement between the parties. Reference to arbitrators who are no longer alive at the time of the dispute: In ACC Limited v. Global Cements Ltd. at the time of concluding the contract the parties had nominated two people, either of whom could act as arbitrator.”’ By the time the dispute arose, both of them had passed away. Conflicting reference to arbitration and courts: In AEZ Infratech Pvt. Ltd. v. SNG Developers Ltd. the parties agreed to refer disputes to arbitration in one clause but also included an additional (and contradictory) clause agreeing that certain courts would have exclusive jurisdiction over disputes.”

When confronted with pathological clauses, the party that would like to file a claim under the arbitration clause will file a request for arbitration with the respondent contesting jurisdiction. That same respondent will also be able to fight the validity of the arbitration clause before a national court. Where there is inconsistency or uncertainty, a court will try to make sense of the provision and give effect to parties’ mutual intentions.®! Indian courts, when requested with the dismissal, partial dismissal or recognition of pathological clauses, have generally adopted one of three approaches below:

56. 57. 58. 59. 60. 6l.

Pricol Ltd. v. Johnson Controls Enterprises Ltd. (2015) 4 SCC 177. Insigma Technology Co. Ltd. v. Alstom Technology Ltd. [2009] 1 SLR 23. Wellington Associates Ltd. v. Kirit Mehta (2000) 4 SCC 272.

ACC Limited v. Global Cements Ltd., AIR 2013 SC 3824.

See AEZ Infratech Pvt. Ltd. v. SNG Developers Ltd., 2014 (143) DRJ 616.

Nigel Blackaby, Constantine Partasides, et al., Redfern and Hunter on International Arbitration

(6th ed. 2015), pp. 135 - 138; Marike Paulsson, The 1958 New York Convention in Action (2016) p. 86:

29

Dipen Sabharwal QC (i) held the arbitration clause to be invalid or unenforceable for vagueness; (ii) severed the pathological part from the part which provides for resolution of disputes through arbitration and enforced the valid part of the arbitration

clause;™ or

(iii) rewrote the pathological part of the arbitration clause by supplying a meaning that is most reasonable in the context of the arbitration clause.™ A clause that fails to provide either for an effective method of constituting the arbitral tribunal or for the place of arbitration may turn out to be inoperable. It is likely to lead to the claimant being unable to enforce the arbitration agreement. If a claimant takes its case to a national court, it may be met by an application for a stay of the proceedings on the grounds of the existence of an arbitration clause. At best, there is considerable potential for delay. At worst, there is the possibility that the claimant may find that there is no effective remedy at all since the courts will refuse to entertain an action and the arbitration clause is defective. The pathological arbitration agreement is one that does not adequately express a commitment to arbitration, often verging on the incomprehensible. Courts may only recognise a pathological clause if there is enough evidence to establish the parties’ mutual intent to submit the dispute to arbitration. Even if the clause is not pathological, a tribunal must ascertain that the parties had a mutual intent to submit the dispute at hand to arbitration. In some instances the arbitration clause is not valid because it is impossible to determine the material scope of the arbitration agreement. For example, if the arbitration agreement is pathological, the clause cannot be enforced." 2.10

MULTI-TIER CLAUSES

Multi-tier arbitration clauses require parties to undertake certain steps prior to commencing arbitration, in an attempt to settle the dispute amicably. At the first tier, they usually require the parties to engage in good-faith negotiations, mediation or conciliation for a definite period and, if these attempts fail, at the last tier they require parties to pursue an adjudicatory process such as arbitration. 62. See System for International Agencies v. Rahul Coach Builders Pvt. Ltd. (2015) 13 SCC 436 (here the parties agreed to arbitration under the ‘by-laws of Indian Company's Act 1956' or ‘as per International Trade Laws’. The Supreme Court held that there was no arbitration clause since the language of the clause was vague and inconclusive). 63. In Lucky-Goldstar International (HK) Ltd. v. Nz Moo Kee Engineering Ltd. |1993] 1 HKC 404 (here the parties agreed to refer their disputes to arbitration under the rules of ‘procedure of the International Commercial Arbitration Association’. There was no such association. The High Court of Hong Kong severed the defective part and referred the parties to arbitration under the laws of the seat of arbitration chosen as per the arbitration clause). 64. Pricol Ltd. v. Johnson Controls Enterprises Ltd. (2015) 4 SCC 177 (here the parties had agreed to refer their disputes to the ‘Singapore Chamber of Commerce’, an arbitral institution that did not exist. Nevertheless, the Supreme Court referred the parties to arbitration under the arbitration rules of the Singapore International Arbitration Centre by construing the reference to the Singapore Chamber of Commerce in the arbitration clause to mean SIAC).

65.

Nigel Blackaby, Constantine Partasides, et al., Redfern and Hunter on International Arbitration,

66.

Marike Paulsson, The 1958 New York Convention in Action (2016), p. 86-89,

sixth edn. (Kluwer Law International; Oxford University Press 2015), p. 244.

30

Chapter 2: The Arbitration Agreement Recently, in Centrotrade Minerals & Metal Inc. v. Hindustan Copper Ltd. the Supreme Court examined the validity of an unusual multi-tiered dispute resolution clause.*’ The arbitration clause in this case required the buyer and seller to first pursue a domestic arbitration under the rules of the Indian Council of Arbitration (ICA) and, in case they were dissatisfied with the result, either of the parties could file an ‘appeal’ in a separate second arbitration conducted in London under the ICC Rules. When disputes arose between the parties, they referred the matter to a tribunal seated in India. The supplier was dissatisfied with the award issued in the Indian proceedings and instituted another set of arbitral proceedings before an ICC tribunal in London. In response, the buyer approached the Indian courts claiming that a two-tier arbitration would be contrary to Indian public policy. In the meanwhile, the ICC tribunal seated in London issued an award in favour of the supplier. The question before the Supreme Court was whether such a two-tier arbitration clause was valid and binding on the parties or whether a clause permitting the parties to ‘appeal’ the outcome of the first arbitration in a second arbitration violated Indian public policy. The Supreme Court upheld the validity of this clause and rejected arguments that such a clause violated public policy. In arriving at this conclusion, the Supreme Court underlined the importance of party autonomy in assessing the validity of arbitration agreements. The court noted that ‘[p]arty autonomy is virtually the backbone of arbitrations’ and that in its opinion ‘parties to an arbitration agreement have the autonomy to decide not only on the procedural law to be followed but also the

substantive law'.®?

The court clarified that Indian law does not preclude a private appeal to a second tribunal and highlighted that the Working Group on International Contract Practices on the Work of its Third Session (of which Working Group India was a member state) widely supports the ‘view that parties were free to agree that the award may be appealed before another arbitral tribunal (of second instance), and that the Model Law should not exclude such practice although it was not used in all countries’.”” Accordingly, the Supreme Court held that the Act is not intended to ‘throttle the autonomy of the parties or preclude them from adopting [...] appellate arbitration’.”' The Centrotrade decision, therefore, clarifies that appellate arbitration clauses per se do not violate Indian public policy. That said, as noted by at least one author, the decision in Centrotrade does expose multi-tier clauses to certain risks in light of the amendments

to the Act in 2015.”

67. Centrotrade Minerals & Metal Inc. v. Hindustan Copper Ltd., 2017 (2) SCC 228. 68. Centrotrade Minerals & Metal Inc. v. Hindustan Copper Ltd., 2017 (2) 5CC 228, para. 36.

69.

Centrotrade Minerals & Metal Inc. v. Hindustan Copper Ltd., 2017 (2) SCC 228, para. 40.

70. Working Group on International Contract Practices on the Work of its Third Session, New York, 16-26 February,

1982, A.CN.9/216

71. Centrotrade Minerals & Metal Inc. v. Hindustan Copper Ltd., 2017 (2) SCC 228 ¢ 28 72. See Shashank Chaddha, Supreme Court's Centrotrade Judgement - An Uncertain Celebration? (IndiaCorpLaw, 2 August 2017), available at https://indiacorplaw.in/2017/08/supreme-courts -centrotrade-judgemen.html.

31

Dipen Sabharwal QC The 2015 Amendment introduced Section 29A into the 1996 Arbitration Act. The Section reads as follows: 29A. Time limit for arbitral award. -

(1) The award shall be made within a period of twelve months from the date the arbitral tribunal enters upon the reference. Explanation. — For the purpose of this sub-section, an arbitral tribunal shall be deemed to have entered upon the reference on the date on which the arbitrator

or all the arbitrators, as the case may be, have received notice, in writing, of their appointment.

(2)

If the award is made within a period of six months from the date the arbitral tribunal enters upon the reference, the arbitral tribunal shall be entitled to

receive such amount of additional fees as the parties may agree.

(3) The parties may, by consent, extend the period specified in sub-section (1) for

making award for a further period not exceeding six months.

(4)

If the award is not made within the period specified in sub-section (1) or the extended period specified under sub-section (3), the mandate of the arbitrator(s) shall terminate unless the Court has, either prior to or after the expiry of

the period so specified, extended the period:

Provided that while extending the period under this sub-section, if the Court finds that the proceedings have been delayed for the reasons attributable to the

arbitral tribunal, then, it may order reduction of fees of arbitrator(s) by not exceeding five per cent for each month of such delay.

Section 29A(1) mandates an arbitral tribunal to issue the award within 12 months of being

constituted.

This

amendment

sets a common

timeline

for all arbitrations,

ignoring variance across arbitral models and practical implications. As a practical matter, it is nearly impossible to complete a two-tier-based arbitration within this time

limit.”*

The enactment of the Arbitration and Conciliation (Amendment) Act, 2019 appears to have made two-tier arbitration clauses more workable and realistic by ensuring that the 12-month time limit prescribed for completing of the arbitration will commence only after the exchange of pleadings.”

2.11

SEPARABILITY

It is settled law that an arbitration agreement is a separate and distinct agreement, which stands apart from the main contract. Section 16(1) of the 1996 Arbitration Act establishes this principle:

73. 5. Chaddha, Supreme Court’s Centrotrade Judgement — An Uncertain Celebration? (IndiaCorpLaw,

2 August

2017),

available at https://indiacorplaw.in/2017/08/supreme-courts-centro

trade-judgemen.html. 74. See Centrotrade Minerals and Metal Inc. v. Hindustan Copper Limited, 2020 SCC Online SC 479, para. 7; Shapoorji Pallonji and Co. Pvt. Ltd. v. Jindal India Thermal Power Limited, MANU/

DE/0399/2020, paras |, 4.

32

Chapter 2: The Arbitration Agreement The arbitral tribunal may rule on its own jurisdiction, including ruling on any objections with respect to the existence or validity of the arbitration agreement, and for that purpose, (i) an arbitration clause which forms pari of a contract shall be treated as an

agreement independent of the other terms of the contract; and

(ii) a decision by the arbitral tribunal that the contract is null and void shall not entail ipso jure the invalidity of the arbitration clause. In Shin Satellite, the Supreme Court has laid down

the test:

The proper test for deciding validity or otherwise of an agreement or order is ‘substantial severability’ and not ‘textual divisibility’. It is the duty of the court to sever and separate trivial or technical part by retaining the main or substantial part

and by giving effect to the latter if it is legal, lawful and otherwise enforceable. In such cases, the Court must consider the question whether the parties could have agreed on the valid terms of the agreement had they known that the other terms were invalid or unlawful. If the answer to the said question is in the affirmative, the doctrine of severability would apply and the valid terms of the agreement could

be enforced, ignoring invalid terms. To hold otherwise would be ‘to expose the covenanter to the almost inevitable risk of litigation which in nine cases out of ten

he is very ill able to afford, should he venture to act upon his own opinion as to how far the restraint upon him would be held by the court to be reasonable, while

it may give the covenantee the full benefit of unreasonable provisions if the

covenanter is unable to face litigation’.”*

The court then applied this analysis and struck down the portion of the arbitration clause which made the arbitrator’s decision ‘final and binding between the parties’ and according to which the parties had therefore ‘waived the rights of appeal or objection in any jurisdiction’.”° In sum, an arbitration agreement is separate and independent of the contract in which it is embedded. The doctrine of separability applies to an arbitration clause in a contract so that the invalidity of the underlying contract will not have an impact on the arbitration clause. Likewise, invalidity of an arbitration agreement does not affect the

validity of the underlying contract.” 2.12

ARBITRABILITY

Arbitrability means that the subject matter that is in dispute must be capable of settlement by arbitration. If the arbitration agreement stipulates that certain types of disputes shall be referred to arbitration, only such matters may be referred to arbitration. If an arbitral tribunal renders an award on matters beyond the scope of the arbitration agreement, it would be deemed to have exceeded its powers.

75. Shin Satellite Public Co. Ltd. v. Jain Studios Limited, AIR 2006 SC 963. 76.

Shin Satellite Public Co. Ltd. v. Jain Studios Limited, AIR 2006 SC 963.

77. See M/S SMS Tea Estates P.Ltd v. Chandmari Tea Co. P. Ltd (2011) 14 SCC 66. See also Premium Nafta Products Limited v. Fili Shipping Company Limited [2007] UKHL 40.

33

Dipen Sabharwal QC Not all matters are capable of being referred to arbitration because certain types of disputes are reserved for the exclusive jurisdiction of the national courts. The arbitrability of a subject matter might differ from one jurisdiction or legal system to another. This has influenced the court judgments on the enforceability of arbitration

agreements.

In Booz Allen & Hamilton v. SBI Home Finance the Supreme Court held that generally all disputes relating to rights in personam are amenable to arbitration, and all matters relating to rights in rem are to be adjudicated by courts and public tribunals.” Disputes affecting civil rights where damages are the remedy can also be referred to arbitration. As mentioned above, certain matters are reserved only for courts to decide, and if an arbitral tribunal attempts to deal with them the enforcement of such awards will face difficulties as the party resisting enforcement can invoke refusal grounds related to arbitrability. These include matters where the type of remedy sought is not one which an arbitral tribunal is empowered to give. The following is an illustrative, non-exhaustive list of matters considered inarbitrable in India: (i) disputes relating to rights and liabilities which give rise to or arise out of criminal offences (custodial sentences, imposing fines, etc.);”” (ii) matrimonial disputes relating to divorce, judicial separation, restitution of

conjugal rights, child custody;*”

(iii) guardianship rights;*"

(iv) insolvency and winding up matters;** (v) eviction or tenancy matters governed by special statutes where the tenant enjoys statutory protection against eviction and only the specified courts are conferred jurisdiction to grant eviction or decide the disputes;*” (vi) testamentary matters (grant of probate, letters of administration and succession certificate);**

(vii) questions relating to trusts;*° (viii) a dispute pertaining to withholding of wages where the arbitration agreement is entered into by the company; and*®

78.

Booz Allen & Hamilton v. SBI Home Finance (2011) 5 SCC 532, para. 22.

Sl.

Ibid.

83. 64. 85.

Ibid. Ibid. Vimal Kishor Shah and Ors. v. Jayesh Dinesh Shah and Ors, AIR 2016 SC 3889, paras 53-54.

79. Booz Allen Hamilton v. SBI Home Finance (2011) 5 SCC 532, para. 22. 80. Ibid. §2. Ibid.

86. For further discussion see Smaran

Sitaram Shetty, Arbitration of Labor Disputes tn India:

Towards a Public Policy Theory of Arbitrability, Kluwer Arbitration Blog, 26 November 2017,

available at http://arbitrationblog.kluwerarbitration.com/2017/11/26/arbitration-labor-disput es-india-towards-public-policy-theory-arbitrability /.

34

Chapter 2: The Arbitration Agreement (ix) disputes concerning the creation and management of trust under the Public

Trusts Act.®”

The issue of arbitrability is also relevant in the context of challenging the arbitral awards. If the subject matter of a dispute is not capable of being settled by arbitration, then Indian courts are empowered to set aside the underlying arbitral award in case of domestic arbitral awards — under Section 34(2)(b)(i) of the 1996 Arbitration Act — or to refuse enforcement in case of a foreign arbitral award — under Section 48(2) of the Act (implementing Article V(2)(a) of the New York Convention). In Booz Allen, the Supreme Court clarified that ‘every civil or commercial dispute, either contractual or non-contractual, which can be decided by a court, is in principle capable of being adjudicated and resolved by arbitration unless the jurisdiction of arbitral tribunals is excluded either expressly or by necessary implication’.** The express or implied exclusion stated in the decision is based on the limitation imposed due to overarching public policy considerations. In this regard, the primary test prescribed by the Supreme Court is whether the subject matter of reference relates to an: (i) action in rem (i.e. against the world at large), in which case it would fall outside the scope of powers provided to an arbitral tribunal under the Act; or (ii) action in personam (i.e. rights against specifically identifiable individuals), in which case the adjudication of a dispute would be within the powers of an arbitral tribunal. The Booz Allen test restricts adjudication of those rights which shall affect the rights of third parties who are not privy to the arbitration agreement. The underlying principle for this restriction is that such rights in rem come within the protection offered by a state as its duty towards its citizens. The sovereign duty to enforce such rights cannot be delegated to a private adjudicatory forum (such as arbitration), as such delegation would go against public policy. Hence, applying this test, only in personam rights can be referred to arbitration. On the face of it, the test appears to be a simple solution for determining the arbitrability of a subject matter of a dispute. However, the subjective nature of the test makes it a tool which can be applied rather too liberally, leaving a very wide and open scope for restricting the subject matters which can be arbitrated. The resulting ambiguity provides much leeway to remove many subjects from the scope of arbitration in India. The subjective and ambiguous nature of the test is well illustrated by the case of enforcement of intellectual property rights. Typically, an attempt to enforce an intellectual property right through arbitration can easily be rejected as a right in rem and hence incapable of being arbitrated, since all forms of intellectual property rights are recognised in rem.

87. For further discussion see Mohit Mahla, Trust Disputes Non-Arbitrable in India, Kluwer Arbitration Blog, 27 March 2017, available at http://arbitrationblog.kluwerarbitration.com/20 17/03/27 /trust-disputes-non-arbitrable-in-india/#: ~ :text = The % 20question% 200f% 20arbitra bility % 20o0f, of % 20a % 20family % 20trust % 20deed. 88.

Booz Allen Hamilton v. SBI Home Finance (2011) 5 SCC 532, para. 22.

35

Dipen Sabharwal QC However, if one were to consider the nature of the relief sought, in most cases, these can easily be distinguished from the enforcement of in rem intellectual property rights. Interestingly, in Booz Allen, the Supreme Court also observed that: Generally and traditionally all disputes relating to rights im personam are considered to be amenable to arbitration; and all disputes relating to rights in rem are required

to be adjudicated

by courts and

public

tribunals, being unsuited

for

private arbitration. This is not however a rigid or inflexible rule. Disputes relating to sub-ordinate rights in personam arising from rights in rem have always been considered to be arbitrable.*°

This shows how the Supreme Court has itself recognised that the test ought to be applied in a flexible manner and that courts applying it must show adaptability at the time of determining subject-matter arbitrability. Problems arise when a blanket assessment of the test prescribed in Booz Allen is preferred while discerning the features of subordinate rights which are derived from rights in rem. Doing so would entail too broad a proposition, according to which any dispute involving rights in rem is, due to their inherent nature, incapable of arbitration. Instead, whenever such disputes arise it would be prudent to give the widest possible interpretation to the arbitration clause to see whether the dispute falls within its scope for furthering the cause. Two recent decisions highlight the dichotomy concerning the test for arbitrability prescribed in Booz Allen. In Eros International Media Limited v. Telemax Links India Pvt. Ltd. and Ors. the Bombay High Court drew an analogy between intellectual property rights and other property rights and concluded that while intellectual property rights afford protection to an individuals’ right over a property against the whole world, the enforcement of such rights is still undertaken against individuals, making them in personam rights subordinate to rights in rem conferred upon them.” By contrast, the Supreme Court reached the opposite conclusion in Shi Vimal Kishor Shah & Ors. v. Mr. Jayesh Dinesh Shah & Ors. where it applied a wide-sweeping assessment to determine the arbitrability of disputes concerning the creation and management of a trust under the Public Trusts Act.”’ The court held that since the creation and management of the underlying trust was a right in rem, the dispute was not arbitrable. Unlike the Bombay High Court in Eros, the Supreme Court did not examine the fact that the rights in dispute were those concerning the members of a family, and thus likely to be in personam rights subordinated from the larger in rem right(s). To conclude, under Indian law, arbitrability is a nuanced issue concerning the scope and ambit of the arbitration agreement and must be dealt with necessary care and caution. 89. Booz Allen & Hamilton v. SBI Home Finance (2011) 5 SCC 532, para. 23. 90.

Eros International Media Limited v. Telemax Links India Pvt. Ltd. and Ors., 2016 (6) Arb LR 121

(Bom). 91. Vimal Kishor Shah and Ors. v. Jayesh Dinesh Shah and Ors, AIR 2016 SC 3889.

36

Chapter 2: The Arbitration Agreement 2.13

INOPERABILITY OF AN ARBITRATION AGREEMENT

An inoperative arbitration agreement is an arbitration agreement which is valid under the Act, but the performance of which is prevented. Inoperability of an arbitration agreement is also a ground for courts to refuse recognition of arbitration agreements provided by Article II(3) of the New York Convention An arbitration agreement can become inoperative as a result of the failure of parties to comply with time limits or when parties impliedly revoke the arbitration agreement by conduct. Inoperability can also be a result of a change in law which prohibits the performance of the arbitration agreement,” or as a result of dissolution of the institution named in the arbitration agreement. 2.14

UNCERTAINTY IN THE ARBITRATION AGREEMENT

An arbitration agreement is void if its terms are uncertain or there is no clear reference to arbitration.”” If the language of the arbitration clause is vague, the court will have to strike it down. The parties will thereafter have to seek redress of their grievances through court proceedings. This is derived from the contract law principle that ‘agreements, the meaning of which is not certain or capable of being certain are uncertain’.”* Thus, an arbitration agreement must be unambiguous, certain and capable of being certain.” Even if the arbitration clause is valid, disputes on the meaning of terms, their

incorporation and so forth can be costly and cause delays to the arbitral proceedings. So, care has to be taken when drafting arbitration clauses to make the terms clear, certain and unambiguous. 2.15

CAPACITY OF THE PARTIES

Parties to an arbitration agreement must have the capacity to enter into a contract. If a party was under some incapacity at the time of entering into the arbitration agreement, the arbitral award is liable to be set aside under Section 34(2) of the 1996 Arbitration Act. Thus, lack of capacity invalidates the arbitration agreement. An arbitration agreement has to comply with the general contract law requirements on capacity to enter into a contract. Sections 10 to 12 of the Contract Act deal with capacity of the parties, an analysis of which would exceed the scope of this

Chapter.”*

92. The Renu K [1970] QB 377.

93. Please refer to Section 2.1 above for the detailed analysis. 94.

Section 29, Contract Act.

95. Union of India v. Ram Iron Foundry |1987] 2 Arb LR 250 (Del); Lovelock EJR Ltd v. Exportles [1968] | Lloyd's Rep 163; Noble Engineering Works v. Himachal Pradesh State Electricity Board, AIR 1994 HP 153. 96. Section 10 of the Contract Act deals with ‘what agreements are contracts’ and Section 12 of the Contract Act describes ‘what is a sound mind for the purposes of contracting’. Section 11 of the Contract Act states as follows: ‘[w]ho are competent to contract - Every person is competent to

37

Dipen Sabharwal QC 2.16

PARTIES TO AN ARBITRATION AGREEMENT

Section 2(1)(h) of the 1996 Arbitration Act defines a party to mean ‘a party to an arbitration agreement’. The categories of persons or entities who can be a party to an arbitration agreement are set out below. 2.17

NATURAL

PERSONS

Every person who is competent to enter into a contract is competent to enter into an arbitration agreement. The person must have attained the age of majority according to the law to which she is subject. In India, the age of majority is 18. The person must be of sound mind and must not be disqualified from contracting by the law by which she

is governed.” 2.18

COMPANIES

For incorporated companies, the company or its directors or the chairman (if permitted under the articles of association) can enter into an agreement. A shareholder cannot seek appointment of an arbitrator under an arbitration agreement entered into by a

company."

For limited companies, only the person responsible for the management of the company can apply for appointment of arbitration. A single shareholder of the

company, however, is not allowed to do so.”” 2.19

PARTNERSHIP FIRMS

A single partner of a firm cannot by itself enter into an arbitration agreement to refer on behalf of the firm unless all partners join in the reference.'”’ Arbitration agreements entered into by a partner on behalf of the firm may be considered to be impliedly ratified by the subsequent acts of the partners.'! It would thus be assumed that all partners have become signatories to the arbitration agreement with the signing partner signing on behalf of them as their agent. If a sole proprietorship is not a legal entity, the sole proprietor in his name, on behalf of sole proprietorship, can seek appointment of arbitrator.'"* While the Partnership Act, 1932 prohibits claims from being brought against an unregistered

97.

contract who is of the age of majority according to the law to which he is subject, and who is of sound mind and is not disqualified from contracting by any law to which he is subject’. Sections 10-12, Contract Act.

98. Sudhir Kumar Saha v. J.N. Chemicals Pvt Ltd, AIR 1985 Cal 454; B. Gopal Das v. Kota Straw Board 99. 100. 101. 102.

P Ltd, AIR 1971 Raj 258; C.G. Thorborg v. Union of India, AIR 1968 Del 292.

Indian Mutual Diwan Chand Sanganer Dal Svapn Cons v.

General Insurance Society v. Himalaya Finance & Constr. Co, AIR 1974 Del 114. v. Punjab National Bank Ltd, AIR 1932 Lah 291. & Flour Mills v. Food Corporation of India, AIR 1992 SC 481. IDPL Employees Co-op Group Housing Society Ltd, 2006 1 RAJ 486 (Del).

38

Chapter 2: The Arbitration Agreement partnership,'”* the Supreme Court has clarified that the statutory bar against litigation does not extend to arbitration, so that arbitration proceedings can be commenced

against an unregistered partnership.'™ 2.20

STATES AND STATE AGENCIES

If a state entity has concluded a contract containing an addition to satisfying the requirements of a valid arbitration has to satisfy the mandatory requirements of Article 299 of 1950. The essentials of a Government arbitration agreement

arbitration agreement, in agreement, the agreement the Constitution of India, are:

(i) agreement must be expressed to be made by the President or the Governor; (ii) agreement must be in writing; and (iii) execution of the agreement must be by such person and in such manner as the Government might direct or authorise. Any agreement not executed in accordance with Article 299 cannot be enforced against the Government or

by the Government.’

2.21

THIRD PARTIES / NON-SIGNATORIES TO AN ARBITRATION AGREEMENT

The law in India concerning the position of non-signatories to an arbitration agreement has evolved dramatically over the last few years. In this regard, two legislative positions must be taken into account. First, the law as it stood prior to the 2015 Amendment

to the 1996 Arbitration Act, and second, the law as it stands subsequent

to the 2015 Amendment. 2214

Pre-2015

Amendment

In respect of domestic arbitration, Section § of the 1996 Arbitration Act empowered Indian courts to refer two or more disputing parties to arbitration where a valid arbitration agreement between all the parties exists. By contrast, as regards international commercial arbitration, Section 45 empowered Indian courts to refer ‘parties [to an arbitration agreement] or any person claiming through or under [them]’ to arbitration. Under this provision, Indian courts could permit both signatories as well as third parties claiming under them though not signatories themselves to be compelled to arbitration. In the pre-2015 Amendment era, the Supreme Court considered the position of non-signatories to arbitration agreements for the first time in Sukanya Holdings Pvt.

103.

Section 69(3), Partnership Act, 1932.

104. Umesh Goel v. Himachal Pradesh Cooperative Group Housing Society Ltd., AIR 2016 SC 3116. 105. K. P. Chowdhry v. State of Madhya Pradesh, AIR 1967 SC 203.

i

Dipen Sabharwal QC

Ltd. v. Jayesh H. Pandya & Anr,'°° In that case, Sukanya Holdings attempted to enforce

an arbitration agreement against non-signatories by filing an application under Section 8 of the Act before the Bombay High Court. The Bombay High Court rejected the application since not all the parties were signatories to the arbitration agreement and, while doing so, remarked that arbitration was a viable option only as against some of the parties. It added that the Act did not confer any power on the judiciary to add non-signatories to arbitration agreements. On appeal, the Supreme Court affirmed the ruling of the Bombay High Court. Consistent with the findings in Sukanya Holdings, in Indowind Energy Ltd. v. Wescare (I) Ltd. & Anr the Supreme Court also declined to appoint an arbitrator under Section 11] of the Act where a non-signatory was sought to be added as a party to the arbitration proceeding, despite the fact that the non-signatory was an alter ego of the signatory and the two shared a registered office.'"’ Applying strict rules of interpretation, the court held that the existence of an arbitration agreement between the parties to the dispute and covering the dispute was fundamental to the invocation of arbitration. In the context of international commercial arbitration, in the pre-amendment era

under Section 45, the Supreme Court initially applied the reasoning in Sukanya Holdings even to international commercial arbitration proceedings, despite the fact that, unlike Section 8, Section 45 expressly permitted the extension of an arbitration agreement to third parties (i.e. non-signatories) claiming through or under signatories. Illustratively, in Sumitomo Corporation v. CDS Financial Services the Supreme Court declined to refer non-signatories to arbitration stating that any reference to arbitration necessarily had to be between parties as defined by Section 2(1)(h) of the Act.'"® By applying the reasoning adopted in Section 8 proceedings to Section 45 proceedings, the latter of which expressly permitted the extension of an arbitration agreement to a non-signatory, in theory, the Supreme Court created an anomalous situation. Subsequently, however, a Division Bench of the Supreme Court rectified this anomaly in Chloro Controls India Pvt. Ltd. v. Severn. Trent Water Purification Inc. & Ors.'” The main question before the Supreme Court in Chloro Controls was to define the ambit of Section 45 of the Act and to determine whether a composite reference to arbitration under Section 45 was permissible under multiple arbitration agreements (some of which contained an arbitration clause) and where there was no identity of parties. The Supreme Court noted that the wording in Section 45 of the Act was consistent with Article II of the New York Convention and distinct from the wording of Section 8 of the Act. The Supreme Court explained that this was so since both Section 45 and Article II of the New York Convention permitted a reference to arbitration upon a request being made by a party or any person claiming through or under it, whereas

106. 107. 108. 109.

Sukanya Holdings Pvt. Ltd. v. Jayesh H. Pandya & Anr, AIR 2003 SC 2252. Indowind Energy Ltd v. Wescare (I) Ltd., AIR 2010 SC 1793. Sumitomo Corporation v. CDS Financial Services, AIR 2008 SC 1594. Chiore Controls India Put. Ltd. v. Severn Trent Water Purification Inc. & Ors. (2013) 1 SCC 641. For further discussion of the aforementioned case, see Chapter 3 of the Handbook.

40

Chapter 2: The Arbitration Agreement Section 8 merely referred to a party (without any reference to any person claiming through or under a party). The use of the term any person was construed as evidence of the intention of the legislature to broaden the scope of Section 45. Additionally, the Supreme Court stressed that due to the use of the word shall in Section 45, it was mandatory for courts to make a reference as requested, subject only to the arbitration agreement being ‘null and void, inoperative or incapable of being performed’ due to the use of the word.''” The Supreme Court, thereafter, applied the ‘group of companies’ doctrine,''' and examined the proximity of the relationship between the parties. By doing so, it recognised that even though multiple agreements had been entered into, they all formed part of one composite transaction and the performance of one was intrinsically linked to the others. It was for these reasons that the Supreme Court permitted a single reference to arbitration. 2.212

Post-2015 Amendment

Taking note of the Supreme Court’s decision in Chloro Controls, the 2015 Amendment amended the wording of Section 8(1) of the Act, to include any party claiming through or under such party to an arbitration agreement. Accordingly, an arbitration agreement may extend to non-signatories too in domestic or Indian-seated international arbitrations if they are claiming through or under a signatory. That said, it may also be noted that the Law Commission of India, in its 246th

Report on the Amendments to the Arbitration and Conciliation Act, 1996 (LCI Report 246) had proposed an amendment to the definition of party under Section 2(1)(h) of the Act so as to include ‘any person claiming through or under’ such party.''’ The Law Commission clarified that this was to ensure that party included any person who derives his or her interest from such party in light of the decision in Chloro Control.''* However, the 2015 Amendment omitted this proposed amendment to Section 2(1)(h) although it amended Section 8 in this regard. Lastly, the 2015 Amendment also clarified that a judicial authority tasked with assessing a request for reference to arbitration under Section 8(1) of the Act must ‘refer the parties to arbitration unless it finds that prima facie no valid arbitration agreement exists’. However, correspondingly, the 2015 Amendment does not amend Section 45 to clarify that the enquiry thereunder must be prima facie. Consequently, at present it appears that the findings and decision ol a judicial authority under Section 45 of the Act must still be made after a full trial and remain final and not amenable to subsequent

110.

Chloro Controls India Put. Ltd. v. Severn Trent Water Purification Inc. & Ors. (2013) 1 SCC 641,

para. 88. 111. See also Magic Eye Developers Pvt. Ltd. v. Green Edge Infra Pvt. Ltd. & Ors, MANU/ DE/1328/2020, noting that from the agreements and arguments before the Supreme Court it was clear that the parties had intended for non-signatories to be part of the arbitration. 112. See LCI Report 246 available at http://lawcommissionofindia.nic.in/reports/Report246. pdf. 113. Law Commission of India, Report No. 246-—Amendments to The Arbitration and Conciliation Act, 1996 (2014), available at http://lawcommissionofindia.nic.in/reports/Report246.pdf, para. 63.

4]

Dipen Sabharwal QC review by an arbitral tribunal, whereas in contrast the decision of a judicial authority under Section 8(1) must be made on a prima facie basis and is amenable to subsequent

review by the tribunal.'™* 2.21.3

Assignment

The Act is silent on whether an arbitration agreement remains valid if the contract containing the arbitration clause is assigned to another party. Courts have decided that an assignee of an arbitration agreement (where the subject matter is capable of assignment) will step into the shoes of the assignor upon assignment. Thus, an assignee can be a party to an arbitration agreement.'™ 2.21.4

Agency

A principal will generally be bound by an arbitration agreement signed by its agent. Arguments as to whether or not a non-signatory will be bound by an arbitration agreement will arise only when there is no explicit contract between the principal and its agent, and the principal challenges being bound by the arbitration agreement.''® When an agent concludes an arbitration agreement on behalf of the principal, questions of authority arise. The courts will distinguish the law governing the arbitration agreement from the laws governing the agent’s capacity to conclude an arbitration agreement on behalf of the principal and the form in which such capacity should have been conferred on him. The question of the form in which the capacity should be conferred would depend on national laws. 2.21.5

Subcontracts

The court will look at the intention of the parties to see whether the parties intended to incorporate the main contract in its entirety into the subcontract. If there is no specific indication of applicability of the arbitration clause, no intention would be inferred.''” The entire agreement in the main contract is tailor-made to meet the requirements of contract between the principal and contractor, and not the subcontractor. Thus, as a general rule, an arbitration clause in the main contract would not apply to disputes

arising in relation to a subcontract.''®

114. See Ashutosh Kumar, et al. in Recognition and Enforcement of Foreign Arbitral Awards, Interpretation and Application of the New York Convention in India (G.A. Bermann ed., 2017) pp. 445 et seq. 115. Patanjal v. Rawalpindi Theatres Pvt Ltd, AIR 1970 Del 19. See also Gujarat Water Supply and Severage Board v. S.H. Shivanani, AIR 1991 Guj. 170; Kotak Mahindra Prime Limited v. Sanjeev S/o Sadaram Chavare, Appeal Against Order No. 61 OF 2008. 116.

See Thomson-CSF, S.A. v. American Arbitration Association, 64 F.3d 773, 776 (2d Cir. 1995).

118.

M.R. Engineers and Contractors Put Ltd v. Som Datt Builders Ltd. (2009) 7 SCC 696. This is in

117. See Section 2.3(c) above.

line with the jurisprudence under the New York Convention. See Marike Paulsson, The 1958 New York Convention in Action (2016) pp. 83-84.

42

Chapter 2: The Arbitration Agreement Where a term in a subcontract provides for making of direct payment by the owner to the subcontractor, the owner is a necessary party to the reference and an award from an arbitration to which the owner is not a party is erroneous.''” However, in case of back-to-back contracts, a subcontractor cannot seek arbitration on the basis of the arbitration clause contained in the principal agreement entered into between the owner and the main contractor, unless the arbitration clause is separately and

specifically made a part of the subcontract.'*”

In relation to subcontracts, ‘[t]he US District Court for the Southern District of New York [...] decided there was no valid arbitration agreement between the parties in a case where the parties’ prior conduct pertaining to different works was not sufficient to establish the existence of a valid arbitration agreement for the current dispute’.'*' It appears that Indian jurisprudence is in line with other domestic case laws on the interpretation of arbitration clauses contained in subcontracts.

2.21.6

Transfer

A transferee cannot automatically become a party to the arbitration agreement. For instance, a transferee of a motor vehicle from a person who is a party to the contract of motor insurance containing the arbitration clause cannot be deemed to be a party to the arbitration agreement.'** However, the courts have held that upon devolution of interest, a transferee upon whom interest is devolved is entitled to be impleaded.'”* In certain cases, the courts have allowed a beneficiary to apply if the party to the agreement was unwilling to do so." 2.21.7

Multiparty Agreements

Multiparty agreements are of two types: (1) several parties to one contract and (2)

several parties to several contracts.'*°

Jsedetid

Several Parties to One Contract

When there are more than two parties to a contract bound by the arbitration agreement, several issues could arise that can delay the proceedings, increase the costs and aflect the overall efficiency of the proceedings. In order to avoid these issues, care has to be taken when drafting the arbitration clause. For instance, parties can ensure that the number of arbitrators to be appointed under the arbitration agreement is an 119. Hindustan Shipyard Ltd v. Essar Oil Ltd, 2005 RAJ 132.

120. M.R. Engineers and Contractors Pvt Ltd v. Som Datt Builders Ltd. (2009) 7 SCC 696.

121. Marike Paulsson, The 1958 New York Convention in Action (2016) p. 83 referring to Maritima De Ecologica SA de CV v. Sealion Shipping Ltd (District Court for the Southern District of New York 2011), in Yearbook Commercial Arbitration XXXVI (2011) (United States no. 741) at 467-470, para. 6.

122. Mehtab Singh v. National Fire and General Insurance Co Ltd, AIR 1963 P&H 103. 123.

Delta Distilleries Ltd v. Shaw Wallace, Arb LR 265 (Bom).

124. Mehtab Singh v. National Fire and General Insurance Co Ltd, AIR 1963 P&H 103. 125. For further discussion of multiparty contracts, see Chapter 3.

43

Dipen Sabharwal QC odd number, as this will increase the prospects of having a majority arbitral award. Choosing an institution that recognises multiparty arbitrations and would appoint the arbitrators if the parties fail to come to a consensus would help in the smooth running of the arbitral proceedings. Similarly, it is important to check if the law of the seat of arbitration permits waiver of parties’ right to appoint an arbitrator in favour of an institution in the absence of consensus. 2.24872

Several Parties to Several Contracts

The 1996 Arbitration Act is silent on the passibility of consolidating or connecting two or more related arbitrations in which a similar question of law or fact arises. Indian courts frequently deal with disputes involving multiple parties and contracts with distinct choice of law and arbitration clauses. In P.R. Shah Shares & Stock Brokers v. BHH Securities the Supreme Court held that if a party has a claim against two different parties with whom it has separate arbitration agreements, it will be just and proper to allow a single arbitration dealing with both the claims: |...] if A had a claim against B and C and if A had an arbitration agreement with B and A also had a separate arbitration agreement with C, there is no reason why A cannot have a joint arbitration against B & C. Obviously, having an arbitration between A and B and another arbitration between A and C in regard to the same claim would lead to conflicting decisions. In such a case, to deny the benefit of a single arbitration against B and C on the ground that the arbitration agreements against B and C are different, would lead to multiplicity of proceedings, conflicting decisions and cause injustice. It would be proper and just to say that when A has a claim jointly against B and C, and when there are provisions for arbitration in

respect of both B and C, there can be a single arbitration (emphasis added).'**

The Supreme Court thus approves consolidation of arbitrations when dealing with related disputes and acknowledges the risk of conflicting awards if related proceedings are conducted separately. In order to avoid such conflicting awards, the parties have to take active measures to consolidate arbitral proceedings. At the stage of drafting an arbitration clause, the parties have to assess the possibility of related or linked disputes. In order to accommodate consolidation of arbitrations under different contracts, the parties can,

at the stage of drafting, incorporate this by reference into the arbitration clause in the different contracts. 2.22

LAWS APPLICABLE TO INTERNATIONAL

In international proceedings.

126.

arbitrations,

more

than

one

set

of

ARBITRATIONS laws

can

apply

to

the

P.R. Shah Shares and Stock Brokers Private Limited v. B.H.H. Securities Private Limited and Others (2012) 1 SCC 594. For a further discussion of the case, see Chapter 3 of the Handbook.

44

Chapter 2: The Arbitration Agreement 2.23

THE LAW GOVERNING

THE SUBSTANTIVE CONTRACT

The substantive law of the contract governs the tribunal's interpretation of the parties’ rights and obligations arising out of the contract. Substantive contractual issues most often relate to the interpretation, validity, rights of parties, performances, breaches and remedies derived from a contract. 2.24

THE LAW GOVERNING

THE ARBITRATION PROCEDURE

The juridical seat of the arbitration supplies the procedural law that governs the arbitral proceedings. It governs among other things: e any formalities to be complied with; e the extent to which the arbitration agreement excludes court jurisdiction; * how much autonomy and discretion the parties have in choosing the arbitral procedure;

¢ what support the court will give to the arbitration; ¢ whether the decision of the arbitral tribunal can be appealed, timescales will apply; and e the enforceability of the award.

2.25

THE LAW GOVERNING

and

what

THE ARBITRATION AGREEMENT

The law of the arbitration agreement is the law that determines the interpretation of the arbitration agreement itself and the jurisdiction of the tribunal. In the absence of an express clause or any intention to the contrary in the arbitration agreement on the law and procedure to be followed for its implementation, the law governing the contract would ordinarily extend to the arbitration agreement.'”’ It is sometimes referred to as the applicable law, governing law or law of the contract. Generally, an arbitration agreement will set out its governing law at the outset. 2.26

THE LAW OF THE JURISDICTION(S) MAY BE ENFORCED

WHERE THE AWARD

The parties should consider the laws and practices of the jurisdiction(s) where the parties have their assets and where any arbitral awards could potentially be enforced. Parties can thus ensure that the agreement does not contain terms that are contrary to the laws governing the arbitration for enforcement of awards in a given jurisdiction and that the subject matter is arbitrable under those laws (as discussed previously in this Chapter).

127. IMAX Corporation v. M/s. E-City Entertainment (I) Pvt. Ltd (2017) 5 SCC 331. See also NTPC v. Singer Co (1992) 3 SCC 551.

45

Dipen Sabharwal QC 2.20

POINTS TO NOTE WHEN AGREEMENT

DRAFTING AN ARBITRATION

An arbitration agreement is the main basis by which the arbitral proceedings are conducted. It is imperative to draft a clear and unambiguous arbitration agreement to ensure that it specifically suits the underlying facts and circumstances. Large businesses usually have corporate structures created to promote effectiveness in allocation of costs, profits and risks between different entities. When a group entity enters into an arbitration agreement, activities of another group entity might be construed as performance under the contract. Based on this, the court could hold that

even though the entity is a non-signatory,'~* it is bound by the arbitration agreement. '~”

So, group companies need to review all transactions and associated arbitration agreements to make sure necessary express provisions are in place to indicate or clarify the intention of the parties. The decision to bind a non-signatory to an arbitration agreement is based on the role played by it in the ‘conclusion, performance, or termination of contracts’.'*” The courts also apply the principle of good faith in deciding whether a non-signatory should be bound by the arbitration agreement. '*’ In view of the issues considered in this Chapter, parties should keep in mind the following general points when drafting arbitration agreements: (1) Capacity of the parties to enter into the arbitration agreement. (2) Clear and unambiguous intent to refer existing or future disputes to arbitration (contractual or not) with clear reference to the scope of the

arbitration agreement.'*

(3) Choice of governing law of the main contract. (4) Choice of governing law of the arbitration clause / agreement. (5) Choice of procedural law governing the arbitral proceedings (i.e., juridical seat of arbitration). (6) Choice of institutional arbitration or ad hoc arbitration. (7) Existence of an appointing authority. (8) Language to be used in the arbitral proceedings. (9) Method of appointment of the tribunal - if several parties under one contract — provisions to have arbitrators in odd numbers. (10) Qualification and attributes of the arbitrators. (11) Location of the assets and laws governing the enforcement of the award.

128. Refer to Part 7 above for Supreme Court's adoption of the ‘group of companies’ doctrine. 129.

See Chloro Controls India Put. Ltd. v. Severn Trent Water Purification Inc. & Ors. (2013) 1 SCC

131.

See Case No. 4A_450/2013

641 and GMR Energy Limited v. Doosan Power Systems India Private Limited & Ors, 2017 SCC Online Del 11625. 130. The Dow Chemical Company and others v. ISOVER Saint Gobain, ICC Award No. 4131, YCA 1984, at 131 et seq. See also, Government of Pakistan, Ministry of Religious Affairs v. Dallah Real Estate and Tourism Holding Company (Case No. 09/28533). (Swiss Supreme Court Decision).

132. See Marike Paulsson, The 1958 New York Convention in Action (2016) p. 94 describing the import of the phrases ‘arising out of / under’ and ‘in relation to’, etc.

46

Chapter 2: The Arbitration Agreement (12) (13) (14) (15) (16) (17) (18)

Arbitrability of the dispute — national laws of the seat of arbitration play a major role in deciding whether or not a dispute is arbitrable. Scope of allowing third parties and non-signatories to be bound by the arbitration agreement. Multiparty agreements — provisions to accommodate consolidating arbitrations involving multiple parties and/or multiple contracts. Clear wording to restrict or allow multi-tier arbitration; If preferred institution dissolves, other preferred institutions. Waiver of appeal and applications to the courts to be excluded or not. Special provisions for confidentiality to be included or not.

(19) Waiver of sovereign immunity (if applicable).'°*

133.

For further discussion on drafting arbitration clauses see Marike Paulsson, The 1958 New York Convention in Action (2016) p. 94 f. and Chapter 14 of this Handbook.

47

CHAPTER 3

Multiparty and Multi-contract Arbitrations Vikas Mahendra

& Pranav Budi/ial

Contractual scenarios are often multifaceted. They govern complex business relationships spanning across borders with multiple actors involved. Many of these

contracts are multilateral agreements between more than two parties. Moreover,

contracts are interrelated and refer to each other. Seldom, a business relationship is focussed on one legal document. Consequently, there is a risk of multiple proceedings based on several contracts with various business partners in case of a dispute.

To avoid a multitude of proceedings arising out of one business relationship,

arbitral rules as well as the Indian Arbitration Act 1996 foresee the possibility to

have an eventual dispute heard by one single arbitral tribunal.

Fe

INTRODUCTION

Arbitration has for some time now been the preferred mode of dispute resolution, especially where there is any connection with India. Data published by official government sources indicate that the Indian court system is overburdened, making them unattractive to resolve commercial disputes.’ This is particularly true for crossborder and complex transactions. The preference is also driven by the disputing parties’ ability to choose various aspects of the dispute resolution process. This typically includes the choice of: the governing law, the courts that will exercise supervisory jurisdiction, the composition of the arbitral tribunal, the procedure to be adopted during the arbitration, etc. Enforcement mechanisms have also been built around this bedrock principle of party autonomy. Violation of this principle is among the very limited grounds recognised as being a valid basis to interfere with arbitral awards. However, this very fundamental principle poses significant challenges and difficulties when trying to keep pace with change. 1. Data published by the National Judicial Data Grid, India, available at https://njdg.ecourts.gov.

in/njdgnew/?p = main/index.

49

Vikas Mahendra & Pranav Budihal

Contractual relations are becoming more complex with time. Increase in crossborder transactions, tax structuring, complex financing transactions and specialisation are a few examples of the drivers of this change. These changes have meant that contracts, especially in more complex projects, are rarely, if ever, between only two entities. It is also increasingly rare in these relationships for all contractual obligations to be captured in a single document. These complex relationships may, in turn, have very specific dispute resolution needs. Sometimes, it may be more efficient and desirable for all disputes arising out of the entire network of contracts to be decided in a single forum. This could, for instance,

be the case where there is a string of contracts, with liability relating to one set of actions flowing down the chain. Even here, there may be multiple ways to address the situation, including: allowing affected parties to join the main arbitration (joinder); merging two separate arbitration proceedings into one (consolidation); appointing the same arbitral tribunal across different cases; staying proceedings in one or more arbitrations pending determination in others; submitting all disputes to court instead of arbitration, etc. On the other hand, there are circumstances where it may be best to permit different aspects of the relationship to be decided by different specialist fora. This could, for instance, be the case where certain actions are very closely related to a particular geography and would therefore be better resolved by either State courts or an arbitral tribunal in that jurisdiction, separate from the rest of the contractual relationship. A good example of this would be financing documents which routinely subject themselves to the jurisdiction of courts in New York, London or Hong Kong, even if the remainder of the contractual relationship is subject to different laws, dispute resolution mechanisms, and supervisory courts. The choice to keep disputes separate could also stem from a desire to: retain control over the composition of an arbitral tribunal; preventing more complex issues from delaying resolution of simpler matters; preserving confidentiality; avoid complicating procedures for conduct of an arbitration, etc. Arbitration clauses tailored for simpler transactions involving two parties and a single contractual relationship are insufficient to fully address the specific challenges that these scenarios present. In some cases, it may in fact not be possible and/or desirable for the arbitration clause to seek to address all of these questions. This Chapter will explore some issues peculiar to multiparty and multi-contract scenarios when the contract has some nexus with India and suggest steps that parties can take both at the stage of contract drafting and once a dispute has arisen — to overcome them. PP

LEGAL FRAMEWORK

Parties will need to consider the position under Indian law where: all parties to a contract are from India, India is the seat of arbitration, or where

India is a potential

jurisdiction where an arbitral award may need to be enforced. The Indian Arbitration and Conciliation Act, 1996 (1996 Arbitration Act or Act) is the most significant enactment that would apply. The 1996 Arbitration Act, as relevant to arbitration, is in two parts. Part I deals with India-seated arbitrations and Part II governs foreign-seated

50

Chapter 3: Multiparty and Multi-contract Arbitrations arbitrations. Even within Part I, certain provisions apply only to purely domestic arbitrations while certain others apply to both international arbitration* and domestic arbitrations. The treatment of multiparty and multi-contract arbitrations varies based on the nature of the arbitration. It is therefore imperative that parties pay close attention to whether their arbitration is purely domestic, international or foreign seated. In addition, where any of the underlying agreements contain a reference to institutional arbitration, parties will also need to look at the relevant rules of the institution. Most leading arbitral institutions contain specific provisions pertaining to consolidation and joinder which dictate the permissibility of such actions. a5

TYPES OF MULTIPARTY AND MULTI-CONTRACT SITUATIONS

The question of considering multiparty and multi-contract situations arises where there is an element of commonality that weaves together the relationship between the various actors/contracts involved. Such relations can be clubbed into the following broad categories. The relationship could involve (in that order of complexity): (1) (2) (3) (4)

two parties more than two parties more than

governed by multiple contracts; two parties, all of whom are signatories to a single contract; and related companies governed by multiple contracts; and two parties, whose relationship is governed by a network

contracts, connected by a common purpose.

olf

The question that parties must ask themselves when confronted with these situations is: do we want the disputes that have arisen/could potentially arise between these various parties/across various contracts to be resolved together? If so, how do we achieve that? If not, how do we prevent them from being resolved in a single forum? 313.1

Two Parties Governed by Multiple Contracts

It is not unusual for parties to enter into multiple contracts in order to effectuate a single transaction. The multiple contracts could be entered into either at the same time or over time but to further the same purpose. In such a situation, where disputes arise, they usually relate to more than one contract. Parties may have a legitimate interest to

2. Section 2(1)(f), 1996 Arbitration Act defines an international commercial arbitration as an arbitration relating to disputes arising out of legal relationship, whether contractual or not, considered as commercial under the law in force in India and where at least one of the parties is: (i) an individual who is a national of, or habitually resident in, any country other than India; or (ii) a body corporate which is incorporated in any country other than India; or {iii) an association or a body of individuals whose central management and control is exercised in any country other than India; or (iv) the government of a foreign country. Courts are reluctant to hold that corporate entity incorporated in India.

5]

Vikas Mahendra & Pranav Budihal

resolve these various interrelated disputes under a single arbitration rather than initiate multiple parallel arbitration proceedings. An effective way to achieve this would be for the parties involved to incorporate suitable language in the various interrelated contracts. The decision of the Delhi High Court in the case of Astonfield Renewables Pvt. Ltd. and Ors. v. Ravinder Raina? is a good example of how this can be achieved under Indian law. In this case, the parties had entered into two interrelated contracts - an Appointment & Employment Agreement dated 17 September 2008 and a Stock Issuance Agreement dated 1 December 2008. The first contract was governed by Indian law while the second was governed by the laws of Malta. The two agreements however contained identical arbitration clauses. In addition, the Appointment & Employment Agreement specifically stated that: If a dispute arises under this Agreement as well as under the Stock Issuance Agreement entered into between you and Astonfield Renewable Resources Lim-

ited the same shall be referred to and heard by the same Arbitral Tribunal. In

accordance with rules of Arbitration of the Indian Council of Arbitration.

A challenge was raised before the arbitral tribunal constituted under the Appointment & Employment Agreement regarding the tribunal's ability to hear matters arising out of a separate contract. Relying on the specific language used by the parties, the tribunal upheld its jurisdiction to hear disputes under both contracts. A challenge to the award of the tribunal before the Delhi High Court was rejected. The court held that the two agreements form part of a single transaction and together constitute the entire agreement governing the relationship between the parties. Accordingly, a common reference to arbitration across the two agreements was considered valid. A reference to a single arbitration can be achieved even if the parties have not included specific language in their contract reflecting their intention to refer disputes across multiple contracts to a single arbitration. This could be where: (a) Parties subject all relevant contracts to a common set of institutional rules and the rules of the institution permit consolidation of proceedings: It is common practice for parties to use institutional rules to govern aspects such as consolidation, where they have not devoted specific attention to dispute resolution in a multi-contract scenario. The choice of institution has a material bearing on this issue as different institutions adopt significantly different approaches." In the limited case law available on this issue, courts in India have showed self-restraint and have deferred to the Institutions to consider issues of consolidation as per their rules. An illustration of this can be found in the case of Sterna India Oil and Gas Private Ltd. v. Nandini Impex Private Limited’ where the parties to the dispute

3. Astonfield Renewables Put. Ltd. and Ors. v. Ravinder Raina, MANU/DE/0196/2018. 4. For a review of various institutional rules, see Chapter 17 of the Handbook. 5. Sterna India Oil and Gas Private Ltd. v. Nandini Impex Private Limited, MANU/DE/1694/2020.

52

Chapter 3: Multiparty and Multi-contract Arbitrations had entered into a Memorandum of Understanding (MoU) and two subcontracts. All contracts contained identical arbitration clauses. The Delhi High Court was approached to appoint the arbitrator for the disputes. During these proceedings, parties consented to arbitrating under the rules of the Delhi International Arbitration Centre. A proposal was made by one of the parties to consolidate the arbitrations initiated under

the MoU

and the subcontracts,

respectively. The court refused to entertain this question and directed the parties to make a request for consolidation before the Delhi International Arbitration Centre in accordance with its rules. (b) A contract that lies at the heart of the transaction contains a broad arbitration clause: Under Indian law, parties may be directed to common arbitration proceedings even if they arise out of different, but interrelated contracts. In the past, courts have achieved this by looking for indicators of an implied intention on the part of the parties to make a common reference, even if such intention is not reflected in the actual contracts. The Supreme Court in the case of Chloro Controls India (P) Ltd. v. Severn Trent Water Purification Inc® has laid down the following factors that must be considered while considering consolidation in a multi-contract scenario: (i) whether there is a principal/mother agreement to which all ancillary agreements

are relatable;

(ii) is performance of one so intrinsically interlinked with the other agreements that they are incapable of being beneficially performed without performance of the others or severed from the rest; and

(iii) are there any other expressions of an intention of the parties to refer all the disputes to a common arbitral tribunal. The court went on to hold that ‘where the agreements are consequential and in the nature of a follow-up to the principal or mother agreement, the latter containing the arbitration agreement and [where] such agreements [are] so intrinsically intermingled or interdependent that it is their composite performance which shall discharge the parties of their respective mutual obligations and performances, this would be a sufficient indicator of intent of the parties’ to make a common reference. In Chloro Controls the court proceeded to refer parties to a single arbitration across multiple contracts even where the various contracts had dissimilar dispute resolution clauses, including some where the dispute resolution clauses vested jurisdiction with State courts instead of arbitration. This decision, rendered in the context of an international arbitration, has since also been adopted to domestic arbitrations.” Even if the contractual relationship between parties does not fall within the specific categories identified above, it is possible for disputes arising out of multiple

6. Chloro Controls India (P) Ltd. v. Severn Trent Water Purification Inc. & Ors.

(2013)

1 SCC 641

(2013) 1 SCC 641. For further discussion of Chloro Controls, see Chapters 2 and 5 of the Handbook. 7. Ameet Lalchand Shah and Ors. v. Rishabh Enterprises and Ors., MANU/SC/0501/2018.

53

Vikas Mahendra & Pranav Budihal

contracts to be referred to a single arbitration. However, the position of law here is ambivalent. In the case of P.R. Shah,

Shares

and

Stock Brokers

Private Limited

v. B.H.H.

Securities Private Limited and Others,® the Supreme Court held that a reference to a single arbitration would be appropriate where not making such a reference ‘would lead to multiplicity of proceedings, conflicting decisions and cause injustice’. The court in P.R. Shah went so far as to permit a single arbitration even where the underlying arbitration clauses were inconsistent with each other, including on vital aspects such as the composition of the arbitral tribunal and the finality of the award. The decision in P.R. Shah is extremely broad brushed and has been the subject of much criticism. Some courts have sought to limit the scope of its application to the particular facts of the case. Parties should therefore exercise caution while relying on this line of authority to consolidate arbitration proceedings. A reference to a single arbitration covering multiple contracts is likely to be unsuccessful in most other cases. For instance: (a) If disputes under some contracts are domestic arbitrations and under certain others are international commercial arbitrations for the purposes of the 1996 Arbitration Act: The Supreme Court in Duro Felguera S.A. v. Gangavaram Port Limited’ refused a reference to a single arbitration where there were six interrelated contracts. One of the grounds for the refusal was that two of the arbitration agreements were international commercial arbitrations, governed by aset of rules that permitted limited court intervention, while the remaining four were domestic arbitrations where more extensive court intervention was permissible. The court felt that a composite reference in such a situation is not permissible. (b) If the arbitration agreement in the contract is narrowly worded: The decision of the Supreme Court in Chloro Controls was facilitated in part because of the broad language used in the arbitration agreement which permitted all disputes arising out of or relating to the principal agreement to be submitted to arbitration under the ICC Rules. In contrast, in Duro Felguera, the arbitration

agreement was more narrowly worded. This aspect was one of the reasons stated by the Supreme Court for refusing to refer parties to a consolidated arbitration. (c) There is no single contract that is at the heart of the transaction: The Supreme Court in Duro Felguera S.A."° refused a reference to a single arbitration where there were six interrelated contracts but no one contract could be identified as a principal/main agreement.

8. P.R. Shah,

Shares and Stock Brokers Private Limited

v. B.H.H.

Securities Private Limited and

Others, (2012) 1 SCC 594, 9. Duro Felguera S.A. v. Gangavaram Port Limited, MANU/SC/1352/2017. For further discussion of Duro Felguera, see Chapter 5 of the Handbook. 10.

Ibid.

54

Chapter 3: Multiparty and Multi-contract Arbitrations (d) If some of the contracts provide for reference to a State court, while others contain arbitration clauses: The Supreme Court in the case of Sukanya Holdings (P) Ltd. v. Jayesh H. Pandya" held that a reference of such disputes to a single arbitration may be impermissible. The Chloro Controls rule set out above is an exception to this principle. In such a situation, if the contracts are interlinked, parties may in fact be relegated to the court for the entirety of their disputes, including those arising out of contracts containing an arbitration clause. In the event the parties are keen to avoid a common reference to arbitration across multiple contracts, there are certain measures that can be taken at the time of drafting contracts. For instance: (a) Parties can choose a set of institutional rules that require the specific consent of the parties after the dispute has arisen, before consolidation of different arbitrations can be ordered. It is important here for these rules to be chosen across all of the different contracts, including especially any contract that may be perceived as being at the heart of the transaction. (b) If there are certain contracts which parties would prefer to adjudicate independently of other potentially related contracts, then parties can specifically express such an intention in the contract. This could include a nonobstante provision in the dispute resolution clause in these specific contracts. For instance, it could state: ‘[n]otwithstanding the dispute resolution clause contained in [identify related agreements], all disputes arising out of or relating to this contract shall be resolved by [...]’. In summary, while there is no statutory prescription governing the field, the position under Indian law is supportive of consolidation of proceedings arising out of related contracts entered into between the same parties. Courts have actively encouraged common resolution with the aim of avoiding conilicting decisions, and achieving procedural efficiencies. Courts have been willing to consolidate proceedings themselves, and have recognised the power vested with arbitral tribunals to consolidate proceedings in appropriate cases. If the applicable rules of an arbitration institution provide for consolidation, courts have also been willing to take a step back and permit such rules to take their course. In the event parties wish to avoid consolidation, they are advised to incorporate specific language to reflect this intention. There is limited jurisprudence available in India on how arbitrations, once consolidated,

would

have

to

be

conducted.

Pursuant

to

Section

19

of the

1996

Arbitration Act, arbitral tribunals have wide procedural flexibility (subject to any overriding stipulations in the underlying contract/applicable institutional rules) to determine a procedure that is appropriate. In a situation where there are only two parties who are signatories to all of the underlying contracts, confidentiality is usually

ll.

Sukanya Holdings (P) Ltd. v. Jayesh H. Pandya, MANU/SC/0310/2003:

55

2003 (5) SCC 531.

Vikas Mahendra & Pranav Budihal

not an issue. Any procedural complications that may arise because of cross-claims across contracts can be dealt with in the same manner as counterclaims are usually dealt with. Some complications may arise if the manner of appointment of arbitrators and/or the applicable institutional rules across different contracts are different. However, even here, if it is possible to identify one agreement that is at the heart of the transaction,

courts have indicated

a preference

to use

that arbitration clause while

overriding others — including in the manner of appointment of arbitrators. If there is no parent agreement discernible, these differences can be used to show an intention of the parties not to consolidate these proceedings. 3.3.2

Multiple Parties to a Single contract

It is becoming increasingly common for multiple parties to enter into a single contract. This is particularly popular in the field of construction and energy where a number of actors, each with their respective areas of specialisation, come together to perform a contract. Such contracts are also commonplace in shareholder agreements and investment agreements. In such a case, a single contract identifies the roles and responsibilities of each of the various parties. A key question that arises in this context is whether parties to a contract can require all disputes arising out of the contract to be dealt with in one proceeding, and/or whether a party can require that its particular dispute be dealt with independently of the others. In a contract involving multiple parties a party initiating a claim may choose to only involve some of the parties to the contract in the actual arbitration if reliefs are only sought against this subset of the contracting parties. In the event a party initiates arbitration proceedings against only some of the parties to the contract, and not others, the other parties who have not been made a party to the arbitration do not have a specific right under the 1996 Arbitration Act to be joined as a party to the proceedings. However, the decision of the Supreme Court in P.R. Shah, Shares and Stock Brokers Private Limited v. B.H.H. Securities Private Limited and Others'* suggests that in such a case the court/arbitral tribunal may still allow a party to be joined in the arbitration proceedings where not making such a reference ‘would lead to multiplicity of proceedings, conflicting decisions and cause injustice’. As stated above, the decision in P.R. Shah has been the subject of much criticism. It is also unclear whether the decision on joining of non-parties will continue to hold fort even after the changes to the 1996 Arbitration Act made by the Arbitration and Conciliation (Amendment) Act, 2015 (2015 Amendment), which appears to only permit parties claiming through or under a party to the arbitration agreement, to be joined in arbitration proceedings. If parties have chosen a set of institutional rules to govern their arbitration, then the stipulations contained in the rules of the specific institution will govern circumstances when joinder of parties may be permitted.’°

12.

P.R. Shah, Shares and Stock Brokers Private Limited v. B.H.H. Securities Private Limited and Others (2012) 1 SCC 594.

13. For a review of various institutional rules, see Chapter 17 of the Handbook.

56

Chapter 3: Multiparty and Multi-contract Arbitrations Resolution of disputes falling within this category poses some unique challenges, particularly when managing procedures during the arbitration. There is limited guidance available under Indian law on the manner in which such disputes must be handled. However, based on international practice, parties, counsel, arbitrators and institutions should be mindful of some of the following issues that may arise in this

context:

(a) Appointment of Arbitrators: In contracts including several parties, the number of parties who act as a claimant when a dispute arises may not be the same as the number of parties who act as a Respondent. If the contract provides for a sole arbitrator to be agreed by all parties to a dispute to resolve such disputes, then it is unlikely to raise any complexities — either all parties agree or they do not. Complications however arise where the contract stipulates a three-member tribunal. Typically, where there is a three-member tribunal, each party appoints an arbitrator and the two party-appointed arbitrators in turn appoint a Chairman. If multiple parties involved in a dispute clearly fall within two camps, with their interests aligned, then the same approach can continue to be adopted. However, where the interests of all parties involved are not aligned, then the appointment process can pose problems. An illustration of this was presented in the case of Siemens AG and BKMI Industrienlagen GmbH v. Dutco Construction Company.'* In that case, three companies were all parties to one contract to build a cement factory. The contract stipulated resolution by arbitration by a three-member tribunal under the ICC Rules. The contract did not specifically set out the mechanism that had to be followed if there were more than two parties to a dispute. A dispute arose between all three parties. Dutco initiated arbitration against Siemens and BKMI and nominated its arbitrator. Siemens and BKMI had divergent interests and were reluctant to agree on a common arbitrator to nominate jointly. Each of them claimed to be entitled to appoint an arbitrator. Eventually they jointly nominated an arbitrator under protest to avoid the ICC doing so. Siemens and BKMI lost the arbitration. They then sought to set aside the award in the French courts on the basis that it violated the fundamental principle of equality between the parties. They argued that Siemens and BKMI did not have the same opportunity to appoint an arbitrator as Dutco. The French Cour de Cassation set aside the award and held that: ‘the principle of the equality of the parties in the appointment of the arbitrators is a matter of public policy; one cannot therefore waive it until after the dispute has arisen’. A number of arbitration institutions have since amended their rules to consider the Dutco ruling. This specific issue has not been considered by the Indian courts. However, historically, Indian courts have been willing to uphold arbitration clauses which do not provide both parties an equal opportunity to participate in the 14. Siemens AG/BKMI Industrienlagen GmbH v. Dutco Construction Company, Cour de Cassation, 7 January

1992, XVIII YBCA

140 (1993).

57

Vikas Mahendra & Pranav Budihal

constitution of an arbitral tribunal.'* In more recent times the Supreme Court in the case of Perkins Eastman Architects DPC & Anr. v. HSCC (India) Ltd. has shown an inclination to move away from this trend, including by significantly curtailing the validity of clauses that vest one party with the right to appoint the entirety of the arbitral tribunal.'® Against this background, it is likely that the court, if confronted with a case like Dutco, may follow a similar line of

(b)

reasoning. Conduct of Proceedings: The conduct of proceedings in an arbitration involving multiple parties is likely to be challenging. This is particularly the case where various parties involved in a dispute cannot easily be split into two camps. In such a situation, the arbitral tribunal must take care to ensure that parties are given a full opportunity to present their case, while also being treated with equality (Section 18 of the 1996 Arbitration Act). Traditionally accepted practices of providing the claimant and the respondent equal time to present their respective cases may not sufficiently address this requirement. For instance, if there are multiple respondents with divergent interests, each of them may have to be provided as much time as the claimant in order that the principle of equal treatment may be satisfied. There is little guidance under Indian law on how such proceedings are to be conducted.

Pursuant

to Section

19

of

the

1996

Arbitration

Act,

arbitral

tribunals have wide procedural flexibility (subject to any overriding stipulations in the underlying contract/applicable institutional rules) to determine a procedure that is appropriate. Indian courts have also extended arbitral tribunals with relatively wide latitude in the manner in which they conduct proceedings and have been slow to interfere, except where procedural lapses

(c)

are grave.

Confidentiality: Another aspect that parties must be mindful of in a multiparty arbitration is aspects surrounding confidentiality. In circumstances where all concerned parties are signatories to a single contract, these concerns are likely to be less relevant. However, if they do arise, an arbitral tribunal has sufficient powers to devise processes that preserve confidentiality.

In the event the parties are keen to avoid contracting parties against whom no specilic relief is claimed, from being joined to arbitration proceedings, there are certain measures that can be taken at the time of drafting the respective contracts. For instance, parties can choose a set of institutional rules that require the specific consent of the parties after the dispute has arisen, before a party may be joined into an arbitration. Parties may also include specific stipulations to this effect in their dispute resolution clause.'’ Since Indian law allows some latitude, parties may also be able to

15. See for instance Voestalpine Schienen GmbH v. Delhi Metro Rail Corporation Ltd. (2017) 4 SCC 665. 16. \7.

Perkins Eastman Architects DPC & Anr. v. HSCC (India) Ltd., AIR 2020 5C 59.

For further discussion on various considerations affecting the drafting of arbitration agreements, see Chapters 2 and 14 of the Handbook.

58

Chapter 3: Multiparty and Multi-contract Arbitrations resist joinder of parties to the arbitration once the dispute has arisen, on the grounds set out above. 3.3.3

Related Parties and Multiple Contracts

Over the years, businesses have taken various steps to reduce their exposure and limit liability. A common strategy employed by businesses is to find related parties or identify subsidiaries to perform distinct portions of a broader transaction. In effect this results in a transaction being performed by various entities across a “group of companies’ with each subsidiary, controlled by a common parent, performing distinct obligations while being limited in its liability to the extent of its assets/share capital. In such a situation, during the execution of a contract, related party companies tend to work together by executing multiple contracts, all relating to a single underlying transaction. Another strategy business often adopts is to identify a subsidiary or incorporate a special purposes vehicle for the specific purpose of performing obligations under a contract. In such a scenario, while the work is usually awarded on the

basis of the repute, experience and financial ability of other companies within the group, the contract itself is only performed by the identified subsidiary/specially incorporated entity. By virtue of each company being a separate legal entity, the liabilities accrued by one related party does not ordinarily fall to the account of a larger group of companies. This is an evidently favourable arrangement for the companies performing these obligations and, where done in accordance with the applicable laws, is also legally valid. The law normally recognises such structuring as it is a legitimate manner of conducting business. However, where such structuring is aimed at advancing an illegal purpose, Indian law permits piercing the corporate veil and looking at the real actors behind any action/transaction, without being limited by the legal entity performing

those actions.'*

Counterparties to such transactions usually exercise caution when dealing with such situations. Since they do not want to find themselves in a situation where substantial damages have been caused as a result of the actions of a special purpose vehicle/subsidiary with limited assets, they usually require an assurance/guarantee from a parent entity even in respect of contracts where the parent company itself does not have any performance obligations under the contract. In any of the situations described above, it is evident that there are multiple parties (albeit interrelated) involved in the transaction, and the transaction itself is affected through a multitude of contracts. If the contracts contain standard form arbitration clauses which do not account for the interconnected nature of this transaction, then applying strict principles of privity of contract would result in each contract spinning of an independent arbitration proceeding. In situations where the underlying transaction is the same and common issues of fact need to be determined in order to

18. State

of Rajasthan

MANU/SC/0058/2016.

and

Ors.

v.

Gotan

Lime

59

Stone

Khanji

Udyog

Pvt.

Ltd.

and

Ors.,

Vikas Mahendra & Pranav Budihal

ascertain the liability of various companies within a group of companies, such segregation may not be desirable. It is against this background that various courts across the world, including India, have adopted the group of companies doctrine that seeks to bring some efficiency and consistency to the process. The group of companies doctrine, in so far as arbitration agreements are concerned, refers to a scenario where different entities within a group of companies involved in the performance of a single transaction are referred to a common arbitration to resolve disputes arising out of related contracts.’ The law on this point was set down by the Supreme Court of India in the case of Chloro Controls.*" The case involved a transaction for the manufacture, distribution and sale of certain equipment. A joint venture company was formed by two groups of companies, and the respective rights and obligations of the two constituent groups were defined in a shareholders’ agreement. The rights and obligations pertaining to the performance of the transaction were set out in six other agreements, each executed by various related companies / individuals from the two groups of companies. Not all of the agreements between the parties contained an arbitration clause. The shareholders’ agreement, however, contained an arbitration clause which provided that ‘Any dispute or difference arising under or in connection with this Agreement’ was to be resolved by arbitration held under the ICC Arbitration Rules. The seat of arbitration was London and the governing law was English law. When disputes arose between the parties, injunction and declaratory suits were filed by the Appellant before the courts in India. The respondents sought for the disputes to be referred to arbitration. A question that arose was whether the entirety of the dispute, including those arising out of contracts that did not contain an arbitration clause, could be referred to arbitration.

The court considered the issue in the specific context of group of companies and held that an arbitration agreement entered into by a company, being one within a group of companies, can bind its non-signatory alliliates or sister or parent concerns if the circumstances demonstrate that the mutual intention of all the parties was to bind both the signatories and the non-signatory affiliates. The court held that ‘where the agreements are consequential and in the nature of a follow-up to the principal or mother agreement, the latter containing the arbitration agreement and such agreements being so intrinsically intermingled or interdependent that it is their composite performance which shall discharge the parties of their respective mutual obligations and performances, this would be a sufficient indicator of intent of the parties’ to make

a common reference.

In this case, the court interpreted the shareholders’ agreement as being the ‘principal or mother agreement’ without which none of the other agreements would be possible and therefore were ‘ancillary’. The court drew reference to the operation of each of the agreements as forming part of one transaction between the parties. In this context, the court also noted the broad wording of the arbitration clause in the shareholders’ agreement, i.e. ‘in connection with this Agreement [...]' as being 19.

Fernas Construction Co. Inc. v. ONGC Petro Additions Ltd., MANU /DE/1618/2019.

20. Chloro Controls India (P) Ltd. v. Severn Trent Water Purification Inc. & Ors. (2013) 1 SCC 641 (2013)

1 SCC 641.

60

Chapter 3: Multiparty and Multi-contract Arbitrations indicative of the parties’ intention to arbitrate under the ‘principal agreement’. The court accordingly referred all the parties to arbitrate the dispute in accordance with the ICC Rules. The test laid down in Chloro Controls has since been extended to a wide range of scenarios, including those not involving a group of companies.*! Decisions of the various courts indicate that even absent an express consent of the parties, related parties who have entered in multiple contracts can be referred to a single arbitration where: (a) conduct of the related parties indicates an intention to be bound by the arbitration agreement: If there is evidence to indicate that parties tacitly consented to having a consolidated arbitration then a common reference can be made.” The conduct of the related parties before and during the contract can be used to evince such an intention. An illustration of this can be found in the Supreme Court’s decision in Mahanagar Telephone Nigam Ltd. v. Canara Bank and Ors.** The case involved Mahanagar Telephone Nigam Ltd. (MTNL) entering into an MOU Agreement with Can Bank Financial Services Ltd (CANFINA), a wholly owned subsidiary of Canara Bank, wherein MTNL placed bonds as fixed deposits with CANFINA. Disputes arose as to the servicing of the bonds and it was at that time that Canara Bank purchased the bonds from CANFINA.

In this case, the Supreme Court had to decide whether

CANFINA could be a party to the arbitration between MTNL and Canara Bank. The Supreme Court held in the affirmative and observed that CANFINA was part of the original transaction with MTNL. The court reasoned that the resolution of the dispute without CANFINA would be futile as it was involved when the dispute broke out and also attended negotiations between MTNL and Canara Bank, making CANFINA a ‘proper and necessary party to the proceedings’; (b) a related company is the alter ego of a party to the arbitration agreement: If in reality a separate legal entity acts as an alter ego to the parties to the arbitration agreement, then such a party can also be joined into the arbitration proceedings. An illustration was offered by the Supreme Court in the case of Purple Medical Solutions Pvt. Ltd. v. MIV Therapeutics Inc and Ors.** where a non-signatory was joined in arbitration proceedings where it was found that acts/deeds/transactions on behalf of the signatory were in fact performed by the non-signatory; (c) there is a parent agreement governing the transaction with a broad arbitration clause: Cases under this category are typified by the facts in the Chloro Controls decision.** The court here examines the entire transaction between

41. dd. 23. 24. 25.

Bhai Manjit Singh (HUF) v. Bhai Manjit Singh and Ors., MANU/DE/4733/2018. Andal Dorairaj v. Hanudev Infopark (P) Ltd. and Ors, MANU/'TN/0242/2016. Mahanagar Telephone Nigam Ltd. v. Canara Bank and Ors, MANU/SC/1057/2019. Purple Medical Solutions Pvt. Ltd. v. MIV Therapeutics Inc and Ors., MANU/SC/0139/2015. See also Fernas Construction Co. Inc. v. ONGC Petro Additions Ltd., MANU/DE/1618/2019.

6]

Vikas Mahendra & Pranav Budihal

the related parties and the obligations that arise in the multiple contracts between them to identify one ‘principal agreement’ that forms the basis of all other contracts. The court then relies on the wording of the arbitration clause in the ‘principal agreement’ to refer all related parties to a single arbitration. Intention of the parties to be subjected to a consolidated arbitration is presumed in these circumstances;

(d) the related parties have not specifically objected to being referred to arbitration: The intention of the non-signatory related parties to arbitrate has also been gleaned by the lack of specific objection by the related parties. In Magic Eye

Developers Put. Ltd. v. Green Edge Infra Put. Ltd. and Ors.** the plaintiff had filed a suit the related specifically arbitration.

against three related parties with different claims against each of parties. The court observed that two of the related parties did not object when one of them sought for the matter to be referred to Accordingly, the court referred the dispute to arbitration.

The judicial trend post the Chloro Controls case seems to indicate that in cases where there are related parties involved in a common transaction, the courts are more

likely to refer the dispute to arbitration than permit separate arbitrations. However, it is not necessary that related parties are always relegated to a common arbitration. In the case of Reckitt Benckiser (India) Private Limited v. Reynders Label Printing India Private Limited and Ors.*’ joinder of a non-signatory related party was sought on the basis that one of the employees of the signatory involved in negotiating the contract was also an employee of the non-signatory-related party. The Supreme Court accepted an affidavit by the employee denying his actions as binding the non-signatory, as sufficient to hold that the related parties did not intend to be bound by the arbitration agreement or participate in the underlying transaction as part of a group of companies. The court held that the link between the two parties was tenuous and not one that could satisfy the threshold of an implied agreement to arbitrate disputes in a common arbitration. Despite the multiple cases on joinder of non-signatory-related parties, there is no clarity in how courts expect arbitral tribunals to adhere to notions of party autonomy in the appointment of arbitrators and in ensuring equal treatment of related parties. It would appear that concerns of party autonomy are lesser in arbitrations involving related parties, given that they are all controlled by one entity and can be classified as a single entity for the purposes of arbitration proceedings. However, where there is a divergence of interests between various entities within a group, these challenges are likely to become difficult to tackle. In such a scenario, the general guidance provided in the next part is likely to be equally applicable. In the event parties are keen to avoid related parties across different contracts being joined in consolidated arbitration proceedings, it is imperative that such an intention be reflected in the contract. A choice of institutional rules that have specific 26. Magic Eye Developers Pvt. Ltd. v. Green Edge Infra Pvt. Ltd. & Ors, MANU/DE/1328/2020. 27. Reckitt Benckiser (India) Private Limited v. Reynders Label Printing India Private Limited and Ors., MANU /SC/0859/2019.

62

Chapter 3: Multiparty and Multi-contract Arbitrations provisions pertaining to consolidation and joinder may not necessarily prevent consolidation, as most institutional rules tend to permit consolidation and joinder by consent. If Indian law were to apply, there are good grounds to argue that the requirement of consent is presumed to be satisfied if the tests set out in Chloro Controls are met. Therefore, an intention to avoid consolidation should be clear, specific and unambiguous to prevent unwarranted consolidation. Absent such a stipulation, it is likely to be extremely difficult for parties to resist consolidation once the dispute has

arisen. 3.3.4

Multiple Parties and Multiple Contracts

The most complex scenario that can be encountered in the context of joinder and consolidation in arbitration is one where the dispute involves multiple unrelated parties and arises out of multiple contracts. Transactions of this kind can frequently arise, particularly in construction and energy disputes, where multiple actors across a chain of contracts work together to perform a single transaction. In these contracts, it is not uncommon to find inconsistent dispute resolution clauses. Any attempt to harmonise arbitration proceedings across such contracts poses very significant challenges and concerns, especially where some or all of the parties are opposed to any attempt at harmonisation. It is for this reason that the question of whether to consolidate itself assumes great significance. There are valid reasons for parties to choose against consolidation, even if consolidation of proceedings can achieve procedural economy and consistency. The 1996 Arbitration Act provides some guidance on whether disputes involving multiple parties can be consolidated. Section 8 and Section 45 of the 1996 Arbitration Act, as amended by the 2015 Amendment, provide that a party who is ‘claiming through or under’ a party to the arbitration agreement is on the same footing as a party to the arbitration agreement and can be validly included as a party to an arbitration initiated pursuant to an arbitration agreement. The 1996 Arbitration Act however does not provide any guidance as to the circumstances in which disputes arising out of multiple contracts can be consolidated. The position under Indian law is therefore as set out in the cases decided on this issue. In an arbitration conducted under the rules of an arbitration institution, institu-

tional rules often contain stipulations as to the circumstances in which consolidation of arbitration and joinder of non-parties to an arbitration can be permitted. These stipulations, which are widely regarded on par with a specific agreement of the parties, normally determine the permissibility of such actions. The decision of the Supreme Court in Chloro Controls sets out the Indian position on consolidation and joinder in the context of multiparty and multi-contract disputes. In considering this issue, the court was required to consider two aspects: (1) can parties who are not signatories to an arbitration agreement be referred to arbitration? (2) can disputes arising out of agreements which are distinct from the agreement containing the arbitration clause be referred to arbitration?

63

Vikas Mahendra & Pranav Budihal

3.3.4.1

Joinder of Non-signatories

In order to laid down agreement, a party to qualifying

determine whether a non-signatory can be referred to arbitration, the court the following test: is the party who is not a signatory to the arbitration but who is sought to be referred to arbitration, claiming through or under the arbitration agreement? The court identified the following instances as such a test:

(a) The claimant was in reality always a party to the contract, although not named in it. (b) The claimant has succeeded by operation of law to the rights of the named

party.

(c) The claimant has party by virtue of (d) The original party together with the of a claim which

become a part to the contract in substitution for the named a statutory or consensual novation. has assigned to the claimant either the underlying contract, agreement to arbitrate which it incorporates, or the benefit has already come into existence.

The court held that a non-signatory or a third party could be subjected to arbitration without its prior consent (provided it satisfies the test of claiming through or under a party to the arbitration agreement), but this would only be in exceptional cases. In evaluating whether a non-signatory qualifies this test, courts have recommended looking at: (i) the relationship of such non-party to the party signatory to the arbitration agreement; (ii) direct commonality of the subject matter under consideration; and (iii) whether the agreement between the parties can be considered a composite transaction. The decision of the Supreme Court in P.R. Shah** went several steps further and permitted joinder of non-parties to the contract to be joined to an arbitration, provided there is an arbitration agreement between the claimant and the proposed Respondent. The court did not consider it appropriate to consider whether the party so sought to be joined is claiming through or under a party to the arbitration agreement. The relevant extract from the decision in P.R. Shah is illustrative: If A had a claim against B and C, and there was an arbitration agreement between A and B but there was no arbitration agreement between A and C, it might not be possible to have a joint arbitration against B and C. A cannot make a claim against C in an arbitration against B, on the ground that the claim was being made jointly against B and C, as C was not a party to the arbitration agreement. But if A hada claim against B and C and if A had an arbitration agreement with B and A also had

a separate arbitration agreement with C, there is no reason why A cannot have a

joint arbitration against B & C. Obviously, having an arbitration between A and B and another arbitration between A and C in regard to the same claim would lead

28. P.R. Shah, Shares and Stock Brokers Private Limited v. B.H.H. Securities Private Limited and

Others, (2012) | SCC 594. The decision in P.R. Shah does not consider a previous decision of the

Supreme Court in Deutsche Post Bank Home Finance Ltd. v. Taduri MANU/SC/0262/2011, where the exact opposite reasoning was adopted.

64

Sridhar and

Ors.,

Chapter 3: Multiparty and Multi-contract Arbitrations to conflicting decisions. In such a case, to deny the benefit of a single arbitration against B and C on the ground that the arbitration agreements against B and C are

different, would lead to multiplicity of proceedings, conflicting decisions and cause injustice. It would be proper and just to say that when A has a claim jointly against B and C, and when there are provisions for arbitration in respect of both B

and C, there can be a single arbitration.

As stated above, the decision in P.R. Shah has been the subject of much criticism.

It is unclear whether the decision, to arbitration agreement, will continue 1996 Arbitration Act, which appears a party to the arbitration agreement, 3.3.4.2

the extent it considers joinder of non-parties to the to hold fort even after the 2015 Amendment to the to only permit parties claiming through or under to be joined in arbitration proceedings.

Consolidation of Disputes Arising under Different Agreements

The factors that a court must consider while considering consolidation of arbitrations across multiple agreements have already been set out in Part 3.1 above. These factors continue to remain valid and applicable even where the parties involved are not identical (as is the case for the discussion under Part 3.1 above). It is clear from the discussion above that the Supreme Court has provided detailed guidance as to the circumstances in which consolidation and joinder can be permitted in a multiparty, multi-contract situation. However, while providing such guidance, key concerns that are likely to arise as a result of such consolidation have not been considered. For instance: (a) Loss of party autonomy in nominating arbitral tribunal: If there are multiple contracts, involving multiple parties, each with its own process to appoint an arbitral tribunal, then any attempt to consolidate such arbitrations would result in some or all of the parties losing their right to participate in the appointment of the arbitral tribunal. The decision in Dutco indicates that the loss of such a right is very significant, and can in fact be a ground to set aside an arbitral award. In the decisions pertaining to consolidation and joinder handed down by Indian courts, they do not specifically address this issue. In the case of P.R. Shah, even though this specific question arose, there was no discussion as to the impact of consolidating arbitrations in such a scenario. Popular institutional rules usually provide for such a situation. Several institutional rules permit the institution to constitute the entire arbitral tribunal in the event of consolidation and joinder, where parties are unable to reach an agreement between themselves as to the constitution of an arbitral tribunal.

However,

where

it is an ad hoc arbitration,

parties

may

have

to

approach the courts to constitute the arbitral tribunal. If a party objects to the court's appointment of an arbitral tribunal, this could raise issues at the stage of enforcement (Part 3.4 Setting Aside and Enforcement). (b) Determination of seat of arbitration and rules governing the arbitration: Commercial transactions involving multiple parties with multiple contracts, particularly in infrastructure and energy projects, are usually structured in

65

Vikas Mahendra & Pranav Budihal

such a manner as to accommodate the requirements of each of the parties. Parties with specialist knowledge might have agreed to perform the contract only after agreeing to arbitrate at a seat and with institutional rules that it is comfortable with. Even if the project itself is located in one country, there is a possibility of parties having chosen different seats and different institutional rules in each contract they are signatories to individually. If arbitrations arising out of multiple contracts with differing arbitration rules/seats are consolidated, it is inevitable that the choice of rules in some contracts must make way for the other. Threshold issues arise as to which agreement should be given precedence over the other and which seat should be chosen. In the decisions pertaining to consolidation and joinder handed down by Indian courts, they do not specifically address this issue. An award rendered in such a situation can be faulted for failing to adhere to the procedure agreed by the parties. Institutional rules often address this problem by only permitting consolidation and joinder where the underlying arbitration agreements are compatible. This

(c)

(d)

obviates

several

of

the

problems

identified

here.

However,

where

consolidation/joinder is the result of a determination by an arbitral tribunal in an ad hoc arbitration, or by a court, there is always a risk that the resultant arbitration award can be challenged for failing to follow the procedure prescribed by the parties. Conduct of proceedings: In disputes involving multiple parties and multiple contracts, there is a high likelihood that parties also have cross-claims. Therefore, unlike a typical arbitration where the claimants and respondents can be clubbed into two camps, and procedures set accordingly, an arbitral tribunal may have to adopt a more nuanced approach in a consolidated arbitration. This adds to the procedural complexity of conducting a consolidated arbitration and inevitably results in proceedings which are lengthier, than if the arbitrations were conducted individually. An arbitral tribunal must take great care in such situations to ensure that all parties are treated equally and are provided a full opportunity to present their case. Confidentiality: Section 42A of the 1996 Arbitration Act, as introduced by Arbitration and Conciliation (Amendment) Act, 2019 (2019 Amendment), imposes an obligation of confidentiality on the arbitrator, an arbitration institution and the parties to an arbitration. In disputes involving multiple parties to the arbitration, significant concerns of confidentiality may arise. A party who has entered into a contract may have some legitimate expectation that they may be required to disclose documents to their counterparty in a dispute scenario. However, imposing an obligation on such a party to disclose documents and/or claims to parties who are not connected with the specific transaction could potentially violate the expectation of confidentiality. This is a significant risk and one that may require some very detailed and specific procedures to be adopted by an arbitral tribunal to address. These procedures may even entail excluding some of the parties from specific segments of the hearing on the matter, to preserve confidentiality. Adoption of such measures

66

Chapter 3: Multiparty and Multi-contract Arbitrations is likely to significantly increase the time and cost of conducting proceedings. If during the process some parties are excluded from participating in some portions of the hearing, this may also provide valid grounds for challenge to the award on grounds of due process concerns. In cases where any of the concerns expressed above are sufficiently serious, parties will have legitimate grounds to resist efforts towards consolidation and joinder. In the event the parties are keen to avoid a common reference to arbitration across multiple contracts, there are certain measures that can be taken at the time of drafting contracts. For instance: (a) parties can choose a set of institutional rules that require the specific consent of the parties after the dispute has arisen, before a party may be joined into an arbitration; (b) parties may include specific stipulations in their contract that restrict joinder of unrelated parties to the contract from being joined into an arbitration; (c) parties can choose a set of institutional rules that require the specific consent of the parties after the dispute has arisen, before consolidation of different arbitrations can be ordered. It is important here for these rules to be chosen across all of the different contracts, including especially any contract that may be perceived as being at the heart of the transaction; (d) if there are certain contracts which parties would prefer to adjudicate independently of other potentially related contracts, then parties can specifically express such an intention in the contract. This could include a nonobstante provision in the dispute resolution clause in these specilic contracts. For instance, it could state: ‘Notwithstanding the dispute resolution clause contained in [identify related agreements], all disputes arising out of or relating to this contract shall be resolved by [...].

3.3.5

Coordination

It is possible that consolidation and still some benefit ways ol achieving 3.50]

there are circumstances where the requirements set out above for joinder are not satisfied in the circumstances of the case, but there is that can be derived by coordinating conduct of proceedings. Some this are as follows.

Appointment of a Common

Tribunal

Even if the arbitrations are not formally consolidated, parties, the institution or the courts can aim to achieve some degree of consistency and economy by appointing the same arbitral tribunal to adjudicate disputes arising between the various parties involved. In circumstances where parties are appointing arbitrators, this can only be achieved if the parties are cooperative. Where courts in India are called upon to make

67

Vikas Mahendra & Pranav Budihal

an appointment, in practice, they tend to favour appointing the same arbitrator(s) when similar issues arise for consideration. In these cases, parties need to demonstrate a genuine apprehension of prejudice that will result from appointing the same arbitrators to prevent such coordination. The decision of the Supreme Court in Duro Felguera is a good illustration of this approach. The approach adopted by different institutions varies, but experience indicates that in most cases they tend to adopt a position that is between what the parties themselves would have achieved and one the

courts may impose.

3.3.5.2

Stay of Proceedings

If there are multiple arbitrations that are ongoing which involve similar or identical issues, one possible way to avoid conflicting decisions is for an arbitral tribunal to defer to the view taken in the related proceedings and to stay its own proceedings pending such determination. If the parties across the two proceedings are identical, then an arbitral tribunal can consider issuing directions to the parties to stay the arbitration, on grounds of res judicata. However, where parties across the two proceedings are not identical, absent party consent, an arbitral tribunal may not be able to direct parties to stay the arbitration, as a decision rendered in proceedings involving different parties does not bind either the parties or the arbitral tribunal. In such a scenario, the parties can of course consent to a stay of proceedings. However, in each of these scenarios, parties must be mindful of the time limits imposed by the 1996 Arbitration Act (as amended by the 2015 Amendment and the 2019 Amendment). If an arbitral tribunal stays its proceedings in order to achieve procedural efficiency, experience suggests that the concerned supervisory courts will willingly extend the time limits prescribed under

statute.

3.4

SETTING ASIDE AND ENFORCEMENT

A key question parties, arbitral tribunals, institutions and courts must consider before consolidating arbitration proceedings, or joining parties to the arbitration, is whether such a process may impact the finality or enforceability of the award.~’ For instance: (a) in the event a court orders consolidation, such an order may be reconsidered by a foreign court which may be approached for setting aside the award/resisting enforcement, especially if the foreign court finds that the court ordering consolidation was not the court at the seat of arbitration. This could be the case, for instance, where an ‘ancillary agreement’ as understood under the Chloro Controls test contains an arbitration agreement providing for a different seat of arbitration to what is contained in the ‘principal agreement’;

29. For further discussion of enforcement of arbitral awards, see Chapter 11 of the Handbook.

68

Chapter 3: Multiparty and Multi-contract Arbitrations (b) in the event an such an order proached to set own motion or

arbitral tribunal or an arbitral institution orders consolidation, may be reconsidered by both the supervisory court (if apaside the arbitral award) and the enforcing court (either of its where enforcement is resisted).

The most common grounds for a challenge/resisting enforcement, joinder and consolidation are involved, include:

where issues of

(a) the tribunal passed an award that was beyond the scope of the arbitration agreement (Section 34 (2)(iv), Section 48 (1)(c) of the 1996 Arbitration Act;

Article V(1)(c) of the New York Convention);*"

(b) the composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties, or, failing such agreement, was not in accordance with the law of the country where the arbitration took place (Section 34 (2)(iv), Section 48 (1)(c) of the 1996 Arbitration Act; Article V(1)(c) of the New York Convention). Broadly speaking, courts in India have shown a greater deference to foreign arbitral awards than they have to awards rendered in domestic arbitrations seated in India. In cases of foreign awards, the courts have been hesitant to refuse enforcement,

even where the arbitral tribunal has ordered joinder of non-signatory-related parties to the dispute. For instance in the case of Integrated Sales Services Limited v. Arun Dev and Ors.*' the Bombay High Court held that a decision to refuse enforcement is inherently discretionary, and enforcement may be permitted even if one of the grounds for refusing enforcement set out in Section 45 of the 1996 Arbitration Act is satisfied. In order to refuse enforcement, the court held that it was insufficient for parties to merely show that the related parties contested jurisdiction. The court held that it was for the courts in the place of arbitration to decide on whether the joinder would form a valid ground to set aside the award. In circumstances where the courts at the place of arbitration had not set aside an award, the Bombay High Court was reluctant to exercise its jurisdiction to do so. In domestic arbitrations, where multiple parties across multiple contracts have been referred to arbitration by an order of a court in India, enforcement is unlikely to be

refused.

However,

where

an

arbitral

tribunal

reference, the treatment has been inconsistent.

or an

institution

makes

such

a

On the one hand there are decisions

which reflect a willingness on the part of courts to accept decisions of an arbitral

tribunal** and arbitration institutions** to make a determination on issues regarding

consolidation and joinder. On the other hand, there are cases which go so far as to 30. For further discussion of awards rendered beyond the scope of the arbitration agreement, see Chapter 2 of the Handbook. 31. Integrated Sales Services Limited v. Arun Dev and Ors., MANU/MH/0003/2017. 32. P.R. Shah, Shares and Stock Brokers Private Limited v. B.H.H. Securities Private Limited and Others (2012) 1 SCC 594; Jes and Ben Groupo Put. Ltd. and Ors. v. Hell Energy Magyarorzag Kft. and Ors., MANU/DE/3121/2019.

33. Sterna India Oil and Gas Private Ltd. v. Nandini Impex Private Limited, MANU/DE/ 1694/2020.

69

Vikas Mahendra & Pranav Budihal

suggest that an arbitral tribunal does not have the power to order consolidation/ joinder. A good illustration is the case of V.G. Santhosam and Ors. v. Shanthi Gnanasekaran and Ors.** where the Madras High Court set aside an award where the arbitral tribunal had allowed for the joinder of a legal heir of a party. The court held that an arbitral tribunal has no power to implead non-signatories to the arbitration agreement to the proceedings. The court's finding on the powers of an arbitral tribunal to allow joinder in proceedings appears to be incorrect as it ignores the decision of the Supreme Court in P.R. Shah, where such a power was specifically recognised, but reflects an inherent reluctance on the part of courts to recognise such broad powers. In practice, arbitrators are likely to be very conservative in allowing joinder of parties or consolidation of proceedings unless there are obvious and straightforward circumstances that justify the use of the power. The exercise of such powers by an institution is likely to be less controversial as institutions usually only exercise such powers where specifically granted to them by the applicable institutional rules. Once parties have agreed to be bound by a set of institutional rules, they are presumed to have also consented to all consequences that may arise from such a choice, including to any consolidation or joinder that may result from an application of the rules. In circumstances where an arbitral tribunal or an institution orders consolidation or joinder, the question of whether a court will uphold such an award also depends on the manner in which the question of consolidation/joinder was treated. In Campos Brothers Farms v. Matru Bhumi Supply Chain Pvt. Limited and Ors.** the Delhi High Court refused enforcement of an award involving multiple parties and multiple contracts on grounds that the award was not reasoned. The arbitral tribunal had failed to set out in detail as to why proceedings were consolidated and as to the basis on which the tribunal proceeded to lift the corporate veil of the respondents. The court found itself unable to uphold the award even in respect of signatories to the arbitration since the tribunal had failed to specifically identify damages payable by the signatories and had instead made a finding of joint and several liability across all parties across all contracts. It is therefore imperative that where an arbitral tribunal or an institution orders consolidation or joinder, a reasoned decision must be provided, absent which the award may be set aside. Another aspect that is worth considering: in India, in the context of enforcement, courts have distinguished between a non-signatory being bound by an arbitration agreement and a non-signatory being bound by an award to a dispute it was not party to. In Cheran Properties Limited v. Kasturi and Sons Limited and Ors.** The court interpreted the words ‘claim through or under’ in Section 35 of the 1996 Arbitration Act and held that an award is also enforceable against a person claiming under the party to the award, even if it was not a party to the actual arbitration proceedings. This decision

34. V.G. Santhosam and Ors. v. Shanthi Gnanasekaran and Ors., MANU/TN/1637/2020. 35. Campos Brothers Farms v. Matru Bhumi Supply Chain Pvt. Limited and Ors., MANU/DE/ 1526/2019.

36. Cheran Properties Limited v. Kasturi and Sons Limited and Ors., MANU /SC/0427/2018.

70

Chapter 3: Multiparty and Multi-contract Arbitrations in practice translates to allowing a claimant to invoke arbitration only against the party to the contract but seek enforcement against third parties as well. a5

CONCLUSION

Disputes involving multiple parties and multiple contracts are inherently complicated. There are circumstances where it is efficient and cost-effective to consolidate the various disputes and have a common tribunal consider them. Indian courts have leaned towards favouring consolidation in most cases. But parties must bear in mind that there are situations where the complexities that arise far outweigh any procedural economy that can otherwise be achieved from consolidation. Parties must therefore pay close attention to what would be suitable in their specific circumstance. Therefore, when confronted with a potential multiparty, multi-contract scenario, it is advisable for parties to seek specific input on their dispute resolution clause from arbitration specialists at the time of entering into their contract, rather than rely on standard templates. If parties are inclined to permit consolidation, it is recommended that they: (a) make specific provision for constitution of an arbitral tribunal, either by specifically contemplating an appointment procedure in the event of consolidation or by choosing a set of institutional rules that address this issue; (b) identify the contracts which are likely to be interlinked and may lend themselves to common resolution; (c) harmonise the arbitration clause across various contracts, including, in particular, by choosing a common mode of dispute resolution, a common seat for the arbitration proceedings, and a common set of institutional rules (if relevant); and (d) provide for the manner in which aspects such as confidentiality should be dealt with. In the event parties wish to avoid consolidation/joinder, it is important for parties to specifically and unambiguously set out such an intention in their respective contracts. This can also be achieved by choosing a set of institutional rules that only permits consolidation with the consent of all parties after a dispute has arisen.

71

CHAPTER 4

Constitution and Establishment of an Arbitral Tribunal Rahul Donde & Rishabh Raheja

The Chapter reviews the provisions relating to the constitution and establishment of the tribunal, tracing the evolution of the law from the 1996 enactment through the

2015 and 2019 Amendments, as well as which regime applies to arbitration, and

differences emanating therefrom. The Chapter compares the Indian regime with the Model Law and notes significant departures. The Chapter also discusses the criticisms against the 2019 Amendment

that affect the pool of arbitrators; the

changing nature and scope of courts’ involvement in making appointments; and, corrective mechanisms, such as disclosures, challenges, and ineligibility (the last being a new concept to what's in the Model Law) built into the Indian system.

4.1

INTRODUCTION

An arbitration is only as good as the arbitrators conducting it.’ This Chapter examines the rules governing the constitution and establishment of an arbitral tribunal under the Arbitration and Conciliation Act, 1996 (1996 Arbitration Act or Act). These rules are contained in Sections 10 to 15 of the Act and apply to all arbitrations seated in India,* whether domestic or international.*

1. Doak Bishop and Lucy Reed, Practical Guidelines for Interviewing, Selecting and Challenging Party-Appointed Arbitrators in International Commercial Arbitration, 14 Arb. Int'l 395, 395 (1998).

2. Section 2(2), 1996 Arbitration Act; Bharat Aluminium Co. v. Kaiser Aluminium Technical Service (2012) 9 SCC 552.

3. For a discussion of the differences in laws applicable to an arbitration (whether domestic or international Handbook.

commercial

arbitration,

seated

in India

73

or

otherwise),

see

Chapter

6 of the

Rahul Donde & Rishabh Raheja The 1996 Arbitration Act is modelled on the UNCITRAL Madel Law on International Commercial Arbitration, 1985 (Model Law).* However, the Act departs significantly from the Model Law in certain respects,” with differences in the constitution and establishment of an arbitral tribunal being the starkest.* Further, the rules governing these issues have evolved considerably, witnessing substantial modifications in 2015 and again in 2019 by the Arbitration and Conciliation (Amendment) Act, 2015 (2015 Amendment) and the Arbitration and Conciliation (Amendment) Act, 2019 (2019 Amendment). Finally, at least three different chronological regimes operate here: (i) the regime under the un-amended Act (the 1996 Regime), (ii) the regime under the 2015 Amendment (the 2015 Regime), and (iii) the regime under the 2019 Amendment (the 2019 Regime).’ Each of these three regimes is relevant in practice. The 1996 Regime applies to arbitral proceedings and court proceedings related to such arbitral proceedings commenced before the 2015 amendments

entered into force, i.e., before

23 October 2015." The 2015 Regime is relevant to arbitral proceedings and court proceedings between 23 October 2015 and the date on which the 2019 Amendment will

enter into force,’ and the 2019 Regime will be relevant thereafter.'"

In this context, this Chapter reviews the idiosyncrasies and evolutions in the law on the constitution and establishment of an arbitral tribunal under the Act in three parts: appointment of arbitrators; disclosures by, challenges to, and ineligibility of arbitrators; and termination of the mandate and substitution of arbitrators, bearing in

mind the three Regimes identified above where appropriate. 4.2

APPOINTMENT OF ARBITRATORS

For an arbitral tribunal to see the light of day, its members must be chosen and appointed. Sections 10 and 11 of the 1996 Arbitration Act contain the rules governing the appointment of arbitrators, including the number of arbitrators (4.2.1), the nationality of arbitrators (4.2.2), and the procedures for the appointment of arbitrators (4.2.4). The Eighth Schedule of the Act - introduced by the 2019 Amendment - lays out the qualifications of arbitrators (4.2.3).

4, Preamble to the Arbitration and Conciliation Act, 1996; Darius Khambata, Kick-Starting Arbitration in India,

1 NALSAR

ADR

Review 24, 26 (2012);

Nakul

Dewan,

Arbitration in India: An

Unenjoyable Litigation Jamboree, 3 Asian Int’] Arb. J. 99, 100 (2007). 5. 246th Report of the Law Commission of India (2014), para. 8. 6. Fali $. Nariman, India and International Arbitration, 41 Geo. Wash. L. Rev. 367, 371 (2010); Anirudh Wadhwa & Anirudh Krishnan, Justice RS Bachawat's Law of Arbitration & Conciliation, Arvind P. Datar’s Introduction, xvii (2010).

7. Shaneen Parikh & Shalaka Patil, The Saga Continues in 2019 - Applicability of the 2015 Amendments in light of the 2019 Amendments, available at https://corporate. cyrilamarchandblogs.com/2019/08/applicability-of-the-2015-amendments-2019-amendmentsarbitration-conciliation/ §. Section 26, 2015 Amendment. See also Aravali Power Company P. Ltd. v. M/s. Era Infra Engineering Limited, (2017)

9. Parikh, supra n. 7. 10.

15 SCC 32.

Ibid.

74

Chapter 4: Constitution and Establishment of an Arbitral Tribunal 4.2.1

Number

of Arbitrators

Section 10(1) of the 1996 Arbitration Act provides that the parties are free to choose the number of arbitrators they wish, with the caveat that this shall not be an even number. In MMTC Limited. v. Sterlite Industries (India) Ltd., however, the Supreme Court held that the validity of an arbitration agreement does not depend on the number of arbitrators specified therein, and therefore, an arbitration agreement providing for an even number of arbitrators would not be invalid on that basis.'’ Along the same lines, in Narayan Prasad Lohia v. Nikunj Kumar Lohia, the Supreme Court observed that Section 10(1) of the Act is not a mandatory provision. Parties could, therefore, agree on an even number of arbitrators.'* The court rejected the argument that allowing an arbitration with an even number of arbitrators would violate the public policy of India as the parties would have to restart the arbitration in the event of an impasse between the two arbitrators. Instead, it observed that if the two arbitrators were at an impasse on an issue, they could appoint a third arbitrator to resolve it. This would be both time and cost-efficient and would uphold party autonomy." Section 10(2) of the 1996 Arbitration Act provides that where the parties fail to determine the number of arbitrators, the tribunal shall consist of a sole arbitrator. This is distinguishable from the Model Law, which provides that if the parties fail to determine the number of arbitrators, the tribunal shall consist of three arbitrators.

4.2.2

Nationality of Arbitrators

Section 11(1) of the 1996 Arbitration Act provides that unless the parties have agreed otherwise, a person of any nationality can be appointed as an arbitrator. The Act thus reflects the Model Law position in giving primacy to party autonomy." Section 11(9) of the Act, however, provides that when a court (or arbitral institution pursuant to the 2019 Amendment discussed below) is approached to appoint an arbitrator in international commercial arbitration, the court or arbitral institution ‘may’ appoint an arbitrator of a nationality other than that of the parties.'* In Malaysian Airlines Systems Bhd Ltd. v. STIC Travels, the Supreme Court ruled on the import of the word may in Section 11(9) of the Act as follows: The word ‘may’ is not used in the sense of ‘shall’. The provision is not mandatory. In case the party who belongs to a nationality other than that of the proposed

arbitrator, has no objection, the Chief Justice of India (or his nominee) can appoint an arbitrator belonging to a nationality of one of the parties. In case, there is objection by one party to the appointment of an arbitrator belonging to the nationality of the opposite party, the Chief Justice of India (or his nominee) can

certainly consider the objection and see if an arbitrator not belonging to the

11. MMTC Limited v. Sterlite Industries (India) Ltd., AIR 1997 SC 605. See also JMC Projects (India) Limited v. South Delhi Municipal, in ARB.

P. 632/2017.

12. Narayan Prasad Lohia v. Nikunj Kumar Lohia, AIR 2002 SC 1139. 13. 14. 15.

Ibid. Article 11(1), UNCITRAL Model Law. Section 11(9), 1996 Arbitration Act.

75

Rahul Donde & Rishabh Raheja nationality of either parties can be appointed. While taking that decision, the Chief Justice of India (or his nominee) can also keep in mind [...] whether there will be

an overriding advantage to both parties if an arbitrator having knowledge of the

applicable law is appointed.'*

Thus, Section 11(9) of the 1996 Arbitration Act is considered discretionary. 4.2.3

Qualifications of Arbitrators

Neither the 1996 Regime nor the 2015 Regime stipulates any qualifications that arbitrators should possess in order to be appointed. The 2019 Regime, however, through the Eighth Schedule (the Schedule) inserted by the 2019 Amendment, provides certain qualifications and experience required for the accreditation of arbitrators, in nine categories.'’ The first four categories require an Indian qualification: an advocate, a chartered accountant, a cost accountant or a company secretary, in each case within the meaning of the relevant Indian law that regulates these professions. The remaining five categories also appear to mandate an Indian qualification, with the possible exception of appointing a non-Indian with relevant ‘scientific or technical expertise’. Almost all of these nine categories require prospective arbitrators to possess ten years of experience in their concerned profession. The Schedule also contains general norms applicable to arbitration, which include that ‘the arbitrator shall be conversant with the Constitution of India’. Thus, under the 2019 Regime, the pool of arbitrators eligible for appointment may be dramatically limited to those possessing some Indian qualifications and at least a decade of experience. As the 2019 Regime appears to exclude foreign lawyers and young Indian lawyers from

being

accredited

as

arbitrators,'®

the

2019

Amendment

has

been

criticised

heavily.'? Further, commentators have already begun to argue that these qualifications apply only to the accreditation and not to the appointment of arbitrators.*” It remains to be seen how the 2019 Amendment is implemented in practice and how it is interpreted by courts.*! In sum, the 1996 Arbitration Act imposes no strict requirement on the number of arbitrators. Under the 1996 and 2015 Regime, there are no limitations on the nationality 16. Malaysian Airlines Systems Bhd Ltd. v. STIC Travels, AIR 2001 SC 358. 17. Section 10, 2019 Amendment which provides this under Section 43J of the 1996 Arbitration Act. 18. Jack Ballantyne, India Urged to Rethink Arbitral Reforms, available at https://globalar bitrationreview’ /article/ 1 180493 /india-urged-to-rethink-arbitral-reforms. Section 14, 2019 Amendment which lays out the Eighth Schedule of the 1996 Arbitration Act.

19, Ballantyne, supra n. 18; Aditi Singh, Eighth Schedule of Arbitration Act contrary to the ethos of International Arbitration, Justice Rohinton Nariman, available at https://barandbench.com/ eighth-schedule-international-arbitration-justice-rohinton-nariman/.

20.

Abhishek Sharma, Arbitration and Conciliation (Amendment) Act, 2019 -—.A Primer, available at

21.

On 4 November

https://www.livelaw.in/columns/arbitration-and-conciliation-amendment-act-147602. 2020,

the Arbitration and

Conciliation

(Amendment)

Ordinance,

2020

was

promulgated, deleting the Eighth Schedule of the Act. The Ordinance further provides that the qualifications, experience, and norms for accreditation of arbitrators shall be specified in future regulations. While this Ordinance is presently in force, it remains to be seen whether it receives the necessary assent to become an Act of the legislature.

76

Chapter 4: Constitution and Establishment of an Arbitral Tribunal of arbitrators either. While this freedom remains under the 2019 Regime as well, it remains to be seen whether non-Indians will be excluded from appointment in light of the new Eighth Schedule to the Act. 4.2.4

Procedure for Appointment

Section 11 of the 1996 Arbitration Act provides that parties are free to agree on a procedure for appointing arbitrators, giving primacy to party autonomy.” The autonomy of the parties is however subject to due process considerations; for instance, one party to the dispute cannot unilaterally appoint a sole arbitrator.”* Where the parties have not contemplated an appointment procedure or where the procedure agreed between the parties fails, Section 11 of the 1996 Arbitration Act contains certain default rules to ensure that the arbitration commences without

delay.~* These rules are inspired by the Model Law:*"

i) In an arbitration with three arbitrators, each party is to appoint one arbitrator, and the two appointed arbitrators are to appoint the third arbitrator who will

act as the presiding arbitrator.~°

ii) In an arbitration

arbitrator.”

with

a sole arbitrator,

the

parties are

to agree on

the

iii) If the parties have not specified the number of arbitrators, there will be a sole arbitrator, and the procedure mentioned just above in item (ii) will apply.“

iv) If the default procedures in items (i) or (ii) fail, a party may request the relevant court (or arbitral institution pursuant to the 2019 Amendment) to appoint an arbitrator.*” While these provisions appear innocuous, different and often contradictory interpretations have caused considerable uncertainty.*” In the following section, we review a few relevant idiosyncratic issues that have arisen under Section 11 of the 1996 Act, once again bearing in mind the three different regimes identified above.

22. 23.

Section 11(2), 1996 Arbitration Act. For further discussion of party autonomy, see Chapter 7 of the Handbook. Perkins Eastman Architects DPC & ors. v. HSCC (India) Ltd, AIR 2020 SC 59; Proddatur Cable TV

Digi Services v. Siti Cable Network Limited, 2020 SCC Online Del 350. 24. Sections 11(3), 11(4) & 11(5), 1996 Arbitration Act. 25. Explanatory Note by the UNCITRAL Secretariat on the 1985 Model Law Commercial Arbitration as amended in 2006, paras 23, 24.

26. 27. 28. 29. 30.

Section Section Section Sections Dewan,

11(3), 11(5), 10(2), 11(4) supra

1996 Arbitration Act. 1996 Arbitration Act. 1996 Arbitration Act. & 11(5), 1996 Arbitration Act. n. 4, at 105-110.

77

on International

Rahul Donde & Rishabh Raheja 4.2.4.1

Appointing Authority

Under the 1996 Regime, the appointing authority is the Chief Justice of the concerned High Court in domestic arbitrations,*! and the Chief Justice of India in international commercial arbitrations.** As the power of appointment is considered a judicial function in this Regime (see 4.2.4.3), it cannot be delegated to an arbitral institution.** This means that, notwithstanding the subsequent amendments to Section 11 which contemplate appointments being made by arbitral institutions, for all arbitrations falling under this Regime, parties must approach the Chief Justice of the High Court (domestic arbitration) or the Supreme Court (international arbitration) to make an appointment. As the 1996 Regime applies only to arbitrations commenced prior to 23 October 2015, such cases will rarely arise in practice now. Under the 2015 Regime, the appointing authority is the concerned High Court in domestic arbitrations, and the Supreme Court in international commercial arbitrations, rather than their respective Chief Justices.** In practice, these courts have set up specialized arbitration benches comprised of one or two judges of the court to make appaintments. Thus, for arbitrations commenced after 23 October 2015 and before the 2019 Amendment comes into force, parties seeking the appointment of an arbitrator must approach the relevant High Court or the Supreme Court as the case may be. It should be noted that the 2015 Amendment allowed the courts to designate a ‘person or institution’ to appoint arbitrators.*° In Sun Pharmaceutical Industries, the Supreme Court exercised this power. Pursuant to Section 6(A) of the 1996 Arbitration Act, the court first appeared to satisfy itself of the existence of the arbitration agreement,*°

and

then

directed

International Arbitration — to The 2019 Amendment 1996 Arbitration Act. Under commercial arbitrations) and

an

arbitral

institution

— the

Mumbai

Centre

for

appoint an arbitrator.” once again revised the appointing authority under the the 2019 Regime, the Supreme Court (for international the High Court (for domestic arbitrations) are empow-

ered to designate arbitral institutions*® graded by the Arbitration Council of India*”’ to appoint arbitrators.” 31. As ageneral rule, this is usually the High Court within whose local limits the principal civil court has jurisdiction to decide the question forming the subject matter of the arbitration if the same had been the subject matter of a suit. 32. Sections 11(4)-11(6), 1996 Arbitration Act (without 2015 Amendment). 33. $.B.P. and Co. v. Patel Engineering Ltd. and Anr., (2005) 8 SCC 618.

34. Sections 11(4)-11(6), 1996 Arbitration Act (following 2015 Amendment). 35.

Section 11(6B), 1996 Arbitration Act.

39.

Section 10, 2019 Amendment, which provides this under Section 431 of the 1996 Arbitration Act.

36. The court rather cryptically observed ‘[w]e are of the view that case for reference to arbitrator is made out’. 37. Sun Pharmaceutical Industries Ltd., Mumbai v. M/S Falma Organics Limited Nigeria, 2017 SCC OnLine SC 1200. For further discussion of the MCIA, see Chapter 17.4. 38. The 2019 Amendment defines an ‘arbitral institution’ as ‘an arbitral institution designated by the Supreme Court or a High Court under this Act’. The ACI will grade arbitral institutions on criteria including infrastructure, quality of arbitrators and compliance with time limits. 40. Section 3(i), 2019 Amendment which provides this under Section | 1 (3A) of the 1996 Arbitration Act. In cases where no arbitral institution has been designated, either because there is no such

78

Chapter 4: Constitution and Establishment of an Arbitral Tribunal As mentioned above, certain provisions of the 2019 Regime are not yet in force, so it remains to be seen how the modified provisions of Section 11 of the 1996 Arbitration Act will be put into practice. 4.2.4.2

Circumstances of Involvement of an Appointing Authority

Sections 11(4) and (5) of the 1996 Arbitration Act provide the circumstances in which parties may request the court or arbitral institution to appoint an arbitrator: (i) When no appointment procedure is agreed upon by the parties:"! (a) in an arbitration with three arbitrators, and a party fails to appoint an arbitrator within 30 days of receiving a request to do so from the other party, or the two appointed arbitrators fail to agree on the third arbitrator within 30 days of their appointment;* or, b) in an arbitration with a sole arbitrator, and the parties fail to agree on an arbitrator within 30 days of receipt of a request by one party from the other party." (ii) Where the parties have agreed on an appointment procedure, but the concerned party/arbitrators/any other person entrusted with a function

under that procedure does not comply with it.“

The 2015 and 2019 Amendment have not modified these provisions. The court's role in these two sets of circumstances is different.** Where there is no appointment procedure, ‘the appointment shall be made’ by the court.*° However, where parties have agreed on a procedure for appointment — either their own ad hoc procedure’ or by referring to an existing set of arbitration rules, such as the ICC Arbitration Rules™® - and that procedure fails, a party can only request the court to ‘take the necessary measures’ unless the parties have agreed on different means for securing

institution, or because an existing institution has not been certified by the ACI, the Act provides

that the Chief Justice of the concerned High Court may maintain a panel of arbitrators to perform the functions of the arbitral institution. 41. Sections 11(4)-(5), 1996 Arbitration Act. 42. Section 11(4), 1996 Arbitration Act. 43. Section 11(5), 1996 Arbitration Act. 44.

Section 11(6), 1996 Arbitration Act.

45. Anirudh Wadhwa & Anirudh Krishnan, Justice RS Bachawat's Law of Arbitration & Conciliation, 923 (2018).

46. Sections 11(4)-11(5), 1996 Arbitration Act. 47. It is not uncommon for an arbitration agreement to contain rules on appointment of arbitrators. See, for instance, the guidance provided by the ICC Court of Arbitration in relation to the Standard ICC Arbitration Clauses: ‘Parties are free to adapt the clause to their particular circumstances. For instance, they may wish to stipulate the number of arbitrators, given that the ICC Arbitration Rules contain a presumption in favour of a sole arbitrator.’, ICC Publication 880-3 ENG, available at https://iccwbo.org/content/uploads/sites/3/2016/11/Standard-ICCArbitration-Clause-in-ENGLISH.pdf. 48. These institutional rules then contain procedures for appointment of arbitrators. See Article 12 to 15 of the ICC Arbitration Rules, 2021. For discussion of various institutional rules and their provisions, see Chapter 17 of the Handbook.

79

Rahul Donde & Rishabh Raheja the appointment in case of such failure.*” In the latter scenario, therefore, the court must give effect to the appointment procedure agreed by the parties, rather than independently and directly proceeding to appoint an arbitrator. In the words of the Supreme Court, Section 11(6) of the 1996 Arbitration Act requires the court to ‘ask the parties to do what has not been done’, and to exhaust the procedures agreed between the parties.*” It should be noted, however,

that the Supreme Court carved out certain

exceptions to this rule in North Eastern Railway v. Tripple Engineering Works where it held that it could deviate from the parties’ agreement in cases where the appointment process had been rendered futile, or where there was an inordinate delay caused by a party which had made a mockery of the process.*! Another key difference between the two sets of circumstances just mentioned is the time at which a party forfeits its right to make an appointment. In cases where the parties have not agreed on an appointment procedure, a party automatically forfeits its right of appointment if it does not exercise it within 30 days of receipt of arequest from the other party. By contrast, in cases where the parties have agreed on an appointment procedure, a party’s right to appoint an arbitrator survives as long as that party exercises it before the other party moves to the court under Section 11 of the 1996

Arbitration Act.** 4.2.4.3

Nature, Scope, and Extent of Involvement

Another idiosyncratic issue that arose under Section 11 of the 1996 Arbitration Act is the nature and consequent scope and extent of the court’s involvement in appointing an arbitrator. Several courts have held that in exercising this role, they acted in an administrative rather than judicial capacity, while others have held to the contrary.** This is a material distinction: if a court acts in a judicial capacity while appointing an arbitrator, it would fully examine all jurisdictional facts including whether the appropriate court had been seized, the existence of arbitration agreement, and other facts before proceeding to appointment. Its determination would bind the arbitral tribunal.** This would not be the case if the court were acting in an administrative capacity — the arbitral tribunal would itself determine its jurisdiction, and the determinations of the court would not bind the tribunal. Under the 1996 Regime, the Supreme Court in S.B.P. v. Patel Engineering Ltd. held that a court acted in a judicial - and not in an administrative - capacity in appointing an arbitrator.*” This decision was severely criticised*® as it caused a

49.

Sections 11(4)-(5), 1996 Arbitration Act.

50. Northern Railway Administration, Ministry of Railway, New Delhi v. Patel Engineering Company Ltd., (2008)

10 SCC 240.

51. Union of India v. Singh Builders Syndicate, (2009) 4 SCC 523. 52. Datar Switchgears Ltd. v. Tata Finance Ltd. and Ors., (2000) 8 SCC 151. 53. Justice B.N. Srikrishna, Report of the High Level Committee to Review the Institutionalisation of Arbitration Mechanism in India, 73 (2017).

54. Patel Engineering, 8 SCC 618, supra n. 33, at para. 12. 55.

Id. at para. 47(i).

80

Chapter 4: Constitution and Establishment of an Arbitral Tribunal considerable backlog in the appointment of arbitrators’ and facilitated dilatory tactics by allowing jurisdictional objections before courts at the appointment stage."* Nonetheless, it remains that for all arbitrations commenced

prior to 23 October 2015, the

determinations of the court on certain issues including the existence of the arbitration agreement and the arbitrability of the dispute would bind the arbitral tribunal. An arbitral tribunal cannot re-examine the court’s determinations on these issues. That said, it should be noted that Patel Engineering has not been followed in all cases by the Supreme Court.”” Further, in Shin-Etsu Chemical Co. v. Aksh Optifibre Ltd., a case under Section 45 of the 1996 Arbitration Act which corresponds with Section

11, the

Supreme Court held that if a court prima facie felt that an arbitration agreement was not null and void, or inoperative or incapable of being performed, it should not interdict the arbitration but leave a detailed adjudication of that question to the arbitral tribunal. The dictum of Shin-Etsu has since been gaining traction.” Recognising the unfortunate scenario created by Patel Engineering, which was also contrary to the Kompetenz-Kompetenz principle enshrined in Section 16 of the 1996 Arbitration Act,”! the 2015 Amendment, by virtue of the newly introduced Section 11(6A), sought to confine the scope of the court's involvement to ‘the examination of the existence of an arbitration agreement’. The Statement of Objects and Reasons appended to the 2015 Amendment specifies that this examination will be on a prima facie basis." Under the 2019 Regime, courts will no longer play a direct role in the appointment process, which is to be taken over by arbitral institutions. Questions remain as to whether the arbitral institutions will review the existence of the arbitration agreement before appointing an arbitrator. This does seem to be the case as a court’s express power to examine the existence of the arbitration agreement at the appointment stage has been removed,™ ostensibly leaving it to the arbitral institution to determine the existence of the arbitration agreement before appointing an arbitrator. This approach follows similar approaches taken in other countries, such as Singapore, where the President of the Singapore International Arbitration Centre, who acts as appointing

56. Dewan, supra n. 4, at 111; Pratyush Panjwani & Harshad Pathak, Assimilating the Negative Effect of Kompetenz-Kompetenz in India: Need to Revisit the Question of Judicial Intervention?, 2 Indian J. Arb. L. 24, 34 (2014).

57. Khambata, supra n. 4, at 28. 58. O.P. Malhotra, Opening the Pandora’s Box: An Analysis of the Supreme Court's Decision in SBP & Co. v. Patel Engineering Ltd., NLSIR Special Issue 69, 74 (2013). 59. See Aurohill Global Commodities v. M.S.T.C., AIR 2007 SC 2706, where the Supreme Court directed that an arbitral tribunal must decide whether there the parties had concluded a contract and whether the contract was non est, refusing to decide these issues itself.

60.

Khambata,

supra n. 4, at 29.

61. 246th Report of the Law Commission of India (2014), para. 33. Dewan, supra n. 4, at 111; Panjwani, supra n. 56, at 34.

62. Section 11(G6A), 1996 Arbitration Act.

63. 64.

Para. 6{iv), Statement of Objects and Reasons, Arbitration and Conciliation (Amendment) Bill, 2015. Section 3(v), 1996 Arbitration Act, stating that section 11(GA) of the Act shall be omitted.

81

Rahul Donde & Rishabh Raheja authority under the Singaporean Arbitration Act, examines the prima facie existence of an arbitration agreement before making an appointment. 4.2.4.4

Appeal and Review

Section 11(7) of the 1996 Arbitration Act before the 2015 and 2019 Amendments provided that an appointment made under Section 11 was final. Under the 1996 Regime, however, the Supreme Court in Patel Engineering observed that an appeal under Article 136 of the Constitution of India would lie to the Supreme Court from an order of the Chief Justice of the High Court passed under Section 11 of the Act.°° Thus, a party opposing the appointment of an arbitrator in arbitrations commenced before 23 October 2015 can contest an appointment made by the Chief Justice of the High Court in the Supreme Court. However, it is clear that such appeals are allowed only in

exceptional cases’’ and on limited grounds.”

Section 11(7) was amended by the 2015 Amendment to provide that ‘no appeal’

would lie against a decision made under section 11.°° Thus, under the 2015 Regime,

i.e., for arbitrations commenced after 23 October 2015 but prior to the entry into force of the 2019 Amendment, a party opposing the appointment of an arbitrator can no longer appeal to the Supreme Court to contest an appointment made by a High Court. Some scholars argue, however, that it is possible to seek a review of an order under

Section 11.”°

The 2019 Amendment deleted Section 11(7) of the Act.”’ As appointments are now to be made by arbitral institutions, the question of seeking an appeal (or review) of appointments made by such institutions does not arise under the 2019 Regime. Thus, in conclusion, the provisions on appointment of arbitrators have changed significantly in several respects across the 1996 Regime, the 2015 Regime, and the 2019 Regime. However, the common thread that has motivated all of these changes is that of minimising judicial intervention, embodied most emphatically by the wholesale replacement of courts by arbitral institutions in matters of appointment under Section 11 as per the 2019 Amendment.

65. K.V.C Rice Intertrade Co Ltd v. Asian Mineral Resources Pte Ltd and another Suit [2017] SGHC 32. For further discussion of appointment in Singapore, see Chapter 19 of the Handbook. 66. Patel Engineering, 8 SCC 618, supra n. 33, at para. 47(vii). 67. Badrinath Srinivasan, Appeal against the Order of the Chief Justice under Section 11 of the Arbitration and Conciliation Act, 1996: An Empirical Analysis, 1 Indian J. Arb. L. 18, 21 (2012).

68. Pritam Singh v. The State, 1950 AIR 169.

69.

Section 11(7) now reads: ‘A decision on a matter entrusted by sub-section (4) or sub-section (5)

71.

87, 87 (2016). Section 3(v), 2019 Amendment, stating that Section 11(7) of the Act shall be omitted.

or sub-section (6) to the Supreme Court or, as the case may be, the High Court or the person or institution designated by such Court is final and no appeal including Letters Patent Appeal shall lie against such decision." 70. Harshad Pathak, On the Maintainability of Review against a Section 11 Order, 4 Indian J. Arb. L.

82

Chapter 4: Constitution and Establishment of an Arbitral Tribunal 4.3

DISCLOSURES, CHALLENGES, AND INELIGIBILITY

The entire scheme of the appointment procedure in the 1996 Arbitration Act is premised on fairness.’* The Act thus contains a toolbox of pre-emptive and corrective mechanisms on the appointment of arbitrators lacking independence and impartiality. Section 12 of the Act enumerates these three mechanisms: disclosures (4.3.1), challenges (4.3.2), and ineligibility (4.3.3). Section 13 of the Act lays out the procedure for challenging an arbitrator, while the Fifth Schedule and Seventh Schedule respectively enumerate the circumstances where disclosures may be made, and where an arbitrator

is rendered ineligible. 4.3.1

Disclosures by Arbitrators

4.3.1.1

Content of Disclosure

Under the 1996 Regime, Section 12(1) of the 1996 Arbitration Act required prospective arbitrators to disclose in writing ‘any circumstances likely to give rise to justifiable doubts as to his independence or impartiality’. However, no guidance was provided as to which circumstances are likely to give rise to justifiable doubts,”* thus leading to a great deal of uncertainty and litigation over these issues - most notably, questions relating to the appointment of an employee from a department of a public sector undertaking in arbitrations involving these undertakings.” As a result, under the 2015 Regime, the circumstances giving rise to justifiable doubts were clarified by: (i) requiring prospective arbitrators to disclose circumstances ‘such as the existence either direct or indirect, of any past or present relationship with or interest in any of the parties or in relation to the subject matter in dispute, whether financial, business, professional or other kind’, which are likely to give rise to justifiable doubts as to independence or impartiality; and, (ii) introducing the Fifth Schedule, an illustrative guide’* of the circumstances that may give rise to justifiable doubts. The Fifth Schedule is inspired by the Orange and Red Lists of the IBA Guidelines on Conflict of Interests and lists 34 such circumstances.” It should also be noted that prospective arbitrators are to make disclosures of circumstances likely to affect their ability to devote sufficient time to the arbitration and

to complete it within 12 months.”

72. Yashwitha Constructions (P) Ltd. v. Simplex Concrete Piles India Ltd., (2006) 6 SCC 204. 73. 246th Report of the Law Commission of India (2014), para. 55. 74. Wadhwa, supra n. 45, at 1216. 75. 76. 77.

246th Report of the Law Commission of India (2014), para. 59. Ibid. Section 12(1)(b), 1996 Arbitration Act.

83

Rahul Donde & Rishabh Raheja This enumeration of the (non-exhaustive) circumstances warranting disclosure by incorporating the IBA Guidelines into the 1996 Arbitration Act is a novel attempt to assimilate international best practice into Indian arbitration.” Notably, this approach addresses the appointment of serving and retired employees of parties as arbitrators (considered below).”’ Section 12(1) of the 1996 Arbitration Act and the Fifth Schedule mandate disclosures from both serving and former employees of a party or its affiliate.“” The other circumstances specified in the Fifth Schedule pertain mostly to the arbitrator’s relationship with the parties, counsel, other arbitrators, and the dispute.

4.3.1.2

Timing of Disclosures

Section 12(1) of the 1996 Arbitration Act requires prospective arbitrators to make disclosures when they are approached to act as arbitrators, thus helping to preclude the appointment of unacceptable candidates. The duty to disclose is an ongoing one. If circumstances warranting disclosure arise after their appointment, arbitrators are required to disclose these circumstances ‘without delay’.”' 4.3.1.3

Failure to Disclose

While the duty to disclose is mandatory™ (‘he shall disclose in writing any circumstances’),"° Section 12 of the 1996 Arbitration Act does not stipulate the outcome of a failure to disclose.“ The question of whether a failure to disclose is sufficient for challenging an arbitrator has come up before various courts, which have observed that Section 12(3) of the Act does not contemplate a challenge to be made to the appointment of an arbitrator solely on the basis of non-disclosure.” As a result, no challenge can be advanced on the sole basis of the absence of disclosure. It is only if 78. Michael D. Schaefer, Deepshika Dutt, and Alexander Eckler, The Appearance of Justice: Independence and Impartiality of Arbitrators under Indian and Canadian Law, 5 Indian J. Arb. L. 150, 162 (2014). 79.

Wadhwa, supra n. 45, at 1232; The Asia-Pacific Arbitration Review (Global Arbitration Review,

2019), 50; Siddharth Ratho, Payel Chatterjee, & Vyapak Desai, Employees as arbitrators? No, says Delhi HC,

available

at http://www-.nishithdesai.com/information/research-and-articles/nda-

hotline/nda-hotline-single-view/article/employees-as-arbitrators-no-says-delhi-he.html?no_ca che = | &cHash = 51b3e24d32f17349c2a72a70169a86e4. 80. Section 12(1) mandates disclosures of circumstances ‘such as the existence either direct or indirect, of any past or present relationship with or interest in any of the parties or in relation to the subject-matter in dispute, whether financial, business, professional or other kind’ (emphasis added). Similarly, Entry 1 and Entry 31 of the Fifth Schedule mandate disclosures from serving or former employees of a party or its affiliate. 81. Section 12(2), 1996 Arbitration Act; Shiv Shakti Enterprises v. Union of India, MANU/UP/ 3566/2016, para. 33.

82. Wadhwa, supra n. 45, at 1220. 83.

Section 12(1), 1996 Arbitration Act.

84. Wadhwa, supra n. 45, at 1206. 85.

Yashwitha

Constructions

(P) Ltd.

v. Simplex

Concrete

Piles India

Ltd.,

(2006)

6 SCC

204;

Murlidhar Roongta v. S. Jagannath Tibrewala, 2005 57 SCL 128 Bom; Union of India v. Tolani Bulk Carriers Limited, 2002 (2) BomCR 256.

84

Chapter 4: Constitution and Establishment of an Arbitral Tribunal circumstances exist that give rise to justifiable doubts as to an arbitrator’s independence or impartiality, or if the arbitrator does not possess the qualifications agreed to by the parties, that there can be a challenge under Section 12(3) of the Act.*° In some cases, however, the disclosure that the arbitrator fails to make may give rise to justifiable doubts as to his independence or impartiality.*” Notably, the High Courts have accepted challenges on the grounds of non-disclosure where an arbitrator was being represented in several personal matters by the counsel to one of the parties," and where an arbitrator’s son was acting on behalf of one of the parties.*” 4.3.2

Challenges to Arbitrators

Section 12 of the 1996 Arbitration Act mentions the grounds on which an arbitrator may be challenged. Section 13 of the Act then elaborates the challenge procedure. These issues are addressed in turn below. As in the case of Section 11 of the Act, these provisions were modified by the 2015 and 2019 Amendments

as well, and therefore,

the three different regimes mentioned above are considered where necessary in the discussion below. 4.3.2.1

Grounds of Challenge

Section 12(3) of the 1996 Arbitration Act provides that an arbitrator may be challenged if circumstances exist giving rise to justifiable doubts as to the arbitrator’s indepen-

dence or impartiality,” or if he/she does not possess the agreed qualifications.”' The

‘justifiable doubts’ requirement is based on the Model Law™ and has been described by Indian courts as a question of reasonable apprehension from the viewpoint of the concemed party, rather than from the viewpoint of the arbitrator.”* Two of the most controversial and litigious grounds for challenging arbitrators in India have been: (i) the appointment of employees

arbitrator;”* and,

of one of the parties or their affiliates as

(ii) the relationship between arbitrators and counsel representing the parties.”° Under the 2015 Regime, detailed guidelines on both of these grounds have been provided in the Fifth Schedule (for disclosures) and Seventh Schedule (for ineligibility,

86. Yashwitha Constructions (P) Ltd. v. Simplex Concrete Piles India Ltd., (2006) 6 SCC 204. 87.

Ibid.

89. 90. 91. 92.

Union of India v. Tolani Bulk Carriers Limited, 2002 (2) BomCR 256. Section 12(3)(a), Arbitration and Conciliation Act, 1996. Section 12(3)(b), Arbitration and Conciliation Act, 1996. Article 12(2), UNCITRAL Model Law on International Commercial Arbitration, 1985.

94.

246th Report of the Law Commission of India (2014), para. 56; Indian Oil Corp. Ltd. v. Raja Transport (P) Ltd., 2009 8 SCC 520. Sheetal Maruti Kurundwade v. Metal Power Analytical (1) Put. Ltd., MANU/MH/3556/2017.

88. Murlidhar Roongta v. S. Jagannath Tibrewala, 2005 57 SCL 128 Bom.

93. Murlidhar Roongta v. 5. Jagannath Tibrewala, 2005 57 SCL 128 Bom. 95.

85

Rahul Donde & Rishabh Raheja considered below). Although those provisions are not directly applicable to challenges,”* courts have relied on them in disqualifying serving and retired employees of parties appointed as arbitrators.’ A classic example is TRF v. Energo, where the contract named the Managing Director of one of the parties as the sole arbitrator, or alternatively as the authority that would nominate the sole arbitrator. The Court relied on provisions both in the Fifth Schedule and Seventh Schedule to find that the Managing Director’s nomination of a sole arbitrator would be invalid, just as his own

appointment as a sole arbitrator would be invalid.”*

The 2019 Regime does not alter the above position.

4.3.2.2

Challenge Procedure

The 1996, 2015 and 2019 Regimes recognise party autonomy in the challenge procedure. Section 13 of the 1996 Arbitration Act provides that the parties are free to agree on a challenge procedure.” Failing such agreement, the party intending to challenge an arbitrator must make a written challenge’”’ before the arbitral tribunal itself,'"' within 15 days of becoming aware of the constitution of the tribunal or of becoming aware of the circumstances that give rise to justifiable doubts as to the arbitrator’s independence and impartiality.'"* Unless the challenged arbitrator recuses himself or the other party agrees to such challenge, the tribunal, including the challenged arbitrator, is bound to decide on the challenge.’ Where the challenge is unsuccessful, the tribunal is to continue the arbitration.'"* The unsuccessful challenging party may then apply to the court for setting aside the award.'”* This is a notable departure from the Model Law, which allows a party to request a court to decide on a challenge within 15 days of the tribunal’s rejection of that challenge.'”° 4.3.3

Ineligibility of Arbitrators

Seeking to strengthen the 1996 Arbitration Act’s commitment to the independence and impartiality of arbitrators,'’’ the legislature introduced the mechanism of rendering 96. Explanation | to Section 12{1) expressly links the Fifth Schedule to disclosures, while Section 12(5) expressly links the Seventh Schedule to ineligibility. Further, the Fifth Schedule refers to Section 12(1) and thereby invokes disclosures, while the Seventh Schedule refers to Section 12(5)

and

thereby

invokes

ineligibility.

In this manner,

neither

the Fifth nor

the Seventh

Schedule are expressly linked to challenges, provided for by Section 12(3). 97. TRF Ltd. v. Energo Engineering Projects Ltd., 2017 SCC OnLine SC 692; Assignia-Vil JV v. Rail Vikas Nigam Limited, 2016 SCC Online Del 2567. 98. 99.

TRF Ltd. v. Energo Engineering Projects Ltd., 2017 SCC OnLine SC 692. Section 13(1), 1996 Arbitration Act.

100. Section 13(2), 1996 Arbitration Act. 101.

Section

13(3),

1996 Arbitration Act.

103.

Section

13{3), 1996 Arbitration Act.

105.

Section

13(5), 1996 Arbitration Act.

107.

246th Report of the Law Commission of India (2014), para. 57.

102. Section 13(2), 1996 Arbitration Act. 104. Section 13(4), 1996 Arbitration Act. 106. Article 13(3), Model Law.

86

Chapter 4: Constitution and Establishment of an Arbitral Tribunal arbitrators ineligible for appointment in the 2015 Amendment, in addition to the existing protections examined above. Section 12(5) of the Act provides that ‘notwithstanding any prior agreement to the contrary, any person whose relationship, with the parties or counsel or the subject-matter of the dispute, falls under any of the categories specified in the Seventh Schedule shall be ineligible to be appointed as an arbitrator’. In order to balance party autonomy and procedural fairness,'" the proviso to Section 12(5) of the Act gives parties the right to waive the categories of ineligibility in the Seventh Schedule, through an express agreement to this effect subsequent to the dispute.'”” The Seventh Schedule stipulates 19 circumstances, which render an arbitrator de

jure unable to perform his functions.''” These circumstances are inspired by the Red List of the IBA Guidelines, while the circumstances listed in the Fifth Schedule in respect of disclosure are greater in number (34), and are based on the Red and Orange Lists of the IBA Guidelines.''' Thus, the grounds for ineligibility are narrower than the

grounds warranting disclosure.''”

The 1996 Arbitration Act has not provided a specific procedure for assailing the ineligibility of an arbitrator. However, parties have made applications under Section 11 of the Act to contend that an individual is ineligible to be appointed as an arbitrator and to request the court to make a new appointment.''* This is an interesting development because it extends the scope of functions under Section 11 of the Act beyond appointment to the action of determining questions of ineligibility.''* Similarly, parties have successfully invoked Section 14 of the Act to request courts to terminate the mandate of arbitrators who fall under the circumstances listed in the Seventh Schedule.''* This use of Section 14 and Section 11 of the Act is noteworthy as it serves as an alternative to challenges made before the tribunal under Section 12(3) and Section 13

of the Act, allowing the parties to approach courts instead.''®

108. 246th Report of the Law Commission of India (2014), para. 60. 109. In Bharat Broadband Network Limited v. United Telecoms Limited, (2019) 5 SCC 755, the Supreme Court determined that the agreement in writing requirement could not be met through the conduct of a party. The filing of a statement of claim in the arbitration would not be considered as a waiver of the categories of ineligibility in the Seventh Schedule. 110. It is noteworthy that the Law Commission recommended that the consequence of the ineligibility of an arbitrator shall be de jure inability to act, and that the legislature did not incorporate this recommendation. However, courts have ruled that the ineligibility of an arbitrator shall render the arbitrator de jure unable to act, see HRD Corporation (Marcus Oil and Chemical Division) v. GAIL (India) Limited, Civil Appeal No. 11126 of 2017; West Haryana Highways Projects Put. Ltd. v. NHAI, O.M.P. (T). (Comm.) 28/2017 and 1.A. No. 4598/2017. 111. 246th Report of the Law Commission of India (2014), para. 59. 112. Ibid. 113. TRF Ltd. v. Energo Engineering Projects Ltd., 2017 SCC OnLine SC 692; Assignia-Vil JV v. Rail Vikas Nigam Limited, 2016 S5CC Online Del 2567. 114. Joshua Folkard, Interlocutory judicial challenges to arbitrators in India: HRD Corporation v. GAIL and TRF v. Energo from a comparative perspective, 34 Arb. Int'l, 5-6 (2018). 115.

116.

HRD Corporation (Marcus Oil and Chemical Division) v. GAIL (India) Limited, Civil Appeal No.

11126 of 2017; West Haryana Highways Projects Pvt. Ltd. v. NHAI, O.M.P.

28/2017 and L.A. No. 4598/2017.

(T). (Comm.)

Folkard, supra n. 114, at 6; Arjun Gupta, Alipak Banerjee, & Moazzam Khan, Delhi High Court Rules on the Amended Provisions of the Arbitration and Conciliation Act, 1996, available at

87

Rahul Donde & Rishabh Raheja 4.4

TERMINATION OF MANDATE

AND SUBSTITUTION

Under the 1996 Regime, which is continued under the 2015 and 2019 Regime, Section

14 of the 1996 Arbitration Act provides grounds for termination of the mandate of an arbitrator either on the grounds of incapability to act, or withdrawal from office or if the parties agree to terminate the arbitrator’s mandate.''’ Section 15 of the 1996 Arbitration Act, which also has not been modified by the 2015 or 2019 Amendments, contains the rules governing the substitution of an arbitrator. It provides that, subject to the parties’ agreement to the contrary, a substitute arbitrator will be appointed, following the same procedure applicable to the appointment of the arbitrator being replaced.''* While these rules have been applied by the Supreme Court,''”’ the Court has, on several instances, interpreted these provisions purposively and directly appointed an arbitrator when it was in the parties’ interests to

do so.'*" This is line with the rules of leading arbitral institutions, which vest discretion with the institution on whether or not to follow the original nominating Further, any previous hearings may be repeated at the discretion constituted tribunal, unless otherwise agreed by the parties.'** Finally, ruling of the tribunal made prior to the substitution of one of its members

solely because of such substitution, unless otherwise agreed.'** 4.5

process.'*' of the newly an order or is not invalid

CONCLUSION

Thus, the Indian law on the constitution and establishment of the tribunal reflects the underlying basis of the Model Law: balancing party autonomy and procedural fairness in determining arbitral procedures. Yet, it departs from the Model Law based on its own peculiar circumstances, most notably by contemplating in the concept of ineligibility a safeguard additional to disclosures and challenges. The law on the constitution and establishment of the tribunal has also changed considerably — for the better — over time. While the 1996 Regime contemplated various windows for judicial interference in the appointment process, the 2019 Regime appears to dispense with judicial involvement at the appointment stage. Further, the law has progressed from the problematically parochial — in allowing parties to appoint their employees as arbitrators — to the unprecedentedly international, in codifying the IBA Guidelines within national law.

http://www.nishithdesai.com/information/news-storage/news-details/article/delhi-high-cou

rts-rules-on-the-amended-provisions-of-the-arbitration-and-conciliation-act-1996.html. 117. Section 14(1), 1996 Arbitration Act. 118.

Section

15(2), 1996 Arbitration Act.

121.

Article

15(4), ICC Rules of Arbitration, 2017. See also Article 5.7, 5.8, 5.9, LCLA Arbitration

119. Rajasthan Small Industries Corporation Limited v. M/s Ganesh Containers Movers Syndicate, Civil Appeal No. 1039 of 2019 arising out of SLP (C) No. 22809 of 2016. 120. Union of India (UOI) v. U.P. State Bridge Corporation Ltd, (2015) 2 SCC 52.

Rules, 2020. For a discussion of various institutions and their rules, see Chapter 17 of the

Handbook.

122. Section 15{3), 1996 Arbitration Act. 123.

Section

15(4), 1996 Arbitration Act.

88

CHAPTER 5

Jurisdiction of the Arbitral Tribunal Constantine Partasides QC & Manish Aggarwal

This Chapter examines key aspects of Indian law relating to the jurisdiction of an

arbitral tribunal. It is a fundamental principle of arbitration that an arbitral tribunal may not resolve disputes beyond its jurisdiction. A crucial aspect of the tribunal's jurisdiction is its competence to consider and decide disputes concerning its own jurisdiction. This doctrine of competence-competence is codified in the Indian Arbitration and Conciliation Act 1996, which has been amended in 2015 and 2019 so as to limit the Indian courts’ excessive intervention in matters pertaining to an arbitral tribunal's jurisdiction. The first part of this Chapter examines the status of the competence-competence doctrine under Indian law, considering specifically the evolution of Indian law with respect to the allocation of

competence between arbitral tribunals and Indian courts to consider and decide

disputes regarding arbitral jurisdiction. The second part of this Chapter considers the impact on a tribunal's jurisdiction of time limits for the completion of arbitral proceedings imposed by the parties’ agreement or under the Act.

Sal

INTRODUCTION

The jurisdiction of an arbitral tribunal refers to its power or competence to adjudicate a particular dispute. An arbitral tribunal may not resolve disputes beyond its jurisdiction. This fundamental principle of arbitration, an expression of its consensual nature,’

1. Under Indian law, courts may also refer the disputing parties to arbitration under certain circumstances. See Code of Civil Procedure 1908, Section 89(1)(a): “Where it appears to the Court that there exist elements of a settlement which may be acceptable to the parties, the Court shall formulate the terms of settlement and give them to the parties for their observations and after receiving the observations of the parties, the Court may reformulate the terms of a possible settlement and refer the same for |...] arbitration [...]." See also Section 89(2): ‘Where a dispute has been referred |...] for arbitration [...] the provisions of the Arbitration and Conciliation Act, 1996 (26 of 1996) shall apply as if the proceedings for arbitration [...] were referred for settlement under the provisions of that Act.’ See also Kerala SEB v. Kurien E. Kalathil (2018) 4SCC 793, para.

89

Constantine Partasides QC & Manish Aggarwal is given statutory recognition in India by the Arbitration and Conciliation Act 1996 (1996 Arbitration Act or Act),? which is based largely (with some variations) on the UNCITRAL Model Law on International Commercial Arbitration 1985 (Model Law). Although the Act does not define the term jurisdiction, the Supreme Court has explained the term to be a ‘word of many hues’, encompassing issues relating to the existence, validity and scope of an arbitration agreement.” This Chapter examines key aspects of Indian law relating to the jurisdiction of an arbitral tribunal.* Section 2 discusses the status of the competence-competence doctrine under Indian law and the related question of the allocation of competence to consider and decide jurisdictional disputes between arbitral tribunals and Indian courts. Section 3 examines the time limits under the Act within which an arbitral tribunal must exercise its jurisdiction. Section 4 presents a brief conclusion.

5.2

AN ARBITRAL TRIBUNAL’S COMPETENCE-COMPETENCE

5.2.1

Competence-Competence and Separability

Section 16 of the 1996 Arbitration Act is its most prominent provision dealing with the jurisdiction of an arbitral tribunal. It incorporates the two doctrinal pillars vital to uphold the autonomy of the arbitral process, competence-competence and separability,’ and provides a procedural framework for an arbitral tribunal's exercise of its authority, in the following terms: (1) The arbitral tribunal may rule on its own jurisdiction, including ruling on any objections with respect to the existence or validity of the arbitration agreement, and for that purpose -

36, holding that a reference under Section 89 of the Code of Civil Procedure 1908 can only be made if the parties agree for settlement of their dispute through arbitration, in writing, before the court. 2. The Act was originally enacted in 1996 and subsequenily amended in 2015 and 2019. The Arbitration and Conciliation (Amendment) Act 2015 (2015 Amendment) came into effect on 23 October 2015, and most of the amendments introduced by the Arbitration and Conciliation (Amendment) Act 2019 (2019 Amendment) came into effect on 30 August 2019. 3. National Thermal Power Corporation Ltd. v. Siemens Atkeingesellschaft (2007) 4 SCC 451, para. 18.

4. This Chapter does not purport to be a comprehensive examination of all relevant issues pertaining to the jurisdiction of an arbitral tribunal. In particular, this Chapter does not examine questions pertaining to arbitrability, an arbitral tribunal's jurisdiction over non-signatories to the arbitration agreement, and its power to award interim measures — all of which topics are addressed in other Chapters. 5. In general terms, the competence-competence doctrine provides that arbitral tribunals have the authority to consider and decide disputes concerning their own jurisdiction (subject to varying measures of judicial review). The separability doctrine, on the other hand, provides that an arbitration clause is a legally separate and autonomous agreement from the main contract in which it is contained, such that its validity does not depend on the validity of the main contract. See Gary Born, International Commercial Arbitration (Kluwer Law International, 2nd ed. 2014), Chapters 3 and 7.

90

Chapter 5: Jurisdiction of the Arbitral Tribunal (a)

an arbitration clause which forms part of a contract shall be treated as an agreement independent of the other terms of the contract; and (b) a decision by the arbitral tribunal that the contract is null and void shall not entail ipso jure the invalidity of the arbitration clause. (2) A plea that the arbitral tribunal does not have jurisdiction shall be raised not later than the submission of the statement of defence; however, a party shall

(3)

(4) (5)

(6)

not be precluded from raising such a plea merely because that he has appointed, or participated in the appointment of, an arbitrator. A plea that the arbitral tribunal is exceeding the scope of its authority shall be raised as soon as the matter alleged to be beyond the scope of its authority is raised during the arbitral proceedings. The arbitral tribunal may, in either of the cases referred to in sub-section (2) or sub-section (3), admit a later plea if it considers the delay justified. The arbitral tribunal shall decide on a plea referred to in sub-section (2) or sub-section (3) and, where the arbitral tribunal takes a decision rejecting the plea, continue with the arbitral proceedings and make an arbitral award. A party aggrieved by such an arbitral award may make an application for setting aside such an arbitral award in accordance with section 34.

Competence-competence and separability are complementary but analytically distinct principles. The Supreme Court has clarified that: (i) the purpose of the separability doctrine is to ‘ensure that the intention of the parties to resolve the disputes by arbitration does not evaporate into thin air with every challenge to the legality, validity, finality or breach of the underlying contract’, and (ii) an arbitral tribunal has the power — by virtue of the competence-competence doctrine enunciated in Section 16(1) — to consider and decide any such jurisdictional challenges.® Dade

Allocation of Jurisdictional Competence Between Arbitral Tribunals and National Courts

There are significant variations across different national legal systems regarding the allocation of competence to consider jurisdictional challenges between national courts and arbitral tribunals, and in particular, the time at which, and the manner in which,

any judicial consideration of jurisdictional disputes should occur. In practice, national courts are typically called upon to examine issues of an arbitral tribunal's jurisdiction at one of three stages: at the beginning of the arbitral process, during the course of the

6. Enercon (India) Ltd. v. Enercon Gmbh

(2014) 5 SCC

1, para. 83; Swiss Timing Ltd. v. Common-

wealth Games 2010 Organising Committee (2014) 6 SCC 677, para. 25. The 1996 Arbitration Act distinguishes between total and partial jurisdictional challenges, with an arbitral tribunal's authority to consider the former being recorded in Section 16(2) and the latter reflected in Section 16(3) of the Act. A party is deemed to have waived its (total or partial) jurisdictional objection, if it fails to raise the objection within the specified time period (see Act, Section 4). However, under Section 16(4) of the Act, an arbitral tribunal can condone any justified delays.

9]

Constantine Partasides QC & Manish Aggarwal arbitration, or after the tribunal has rendered its decision.’ This part examines the Indian law position regarding the judicial examination of an arbitral tribunal's jurisdiction at each of these three stages, through the examples of court proceedings concerning: (i) referrals to arbitration, (ii) appointment of arbitrators, (iii) antiarbitration injunctions, and (iv) review of an arbitral tribunal’s jurisdictional decision. 5.2.2.1

Referral to Arbitration

If a disputing party brings an action before a judicial authority in India regarding a matter that is the subject of an arbitration agreement, the other party may request the relevant authority to refer the parties to arbitration. Such referrals to arbitration can be sought under one of two provisions of the 1996 Arbitration Act: (i) Section 8, which applies to domestic arbitrations governed by Part I of the Act, and (ii) Section 45, which applies to foreign-seated arbitrations falling within the scope of Part II." Each of these provisions is discussed in turn below. SAF FF

Domestic Arbitrations: Section 8

Section 8 of the 1996 Arbitration Act, as originally enacted in 1996, did not specify whether the seized judicial authority was required to review the validity of the arbitration agreement before referring the parties to arbitration.’ In 2005, in SBP v. Patel Engineering, the Supreme Court observed: When the defendant to an action before a judicial authority raises the plea that there is an arbitration agreement and the subject matter of the claim is covered by

the agreement and the plaintiff or the person who has approached the judicial

authority disputes the same, the judicial authority, in the absence of any restriction in the Act, has necessarily to decide whether, in fact, there is in existence a valid

arbitration agreement and whether the dispute that is sought to be raised before it is covered by the arbitration clause.'"

7. See Constantine Partasides OC et al., Redfern and Hunter on International Arbitration

University Press, 6th ed. 2015), para. 5.112.

(Oxford

8. The 1996 Arbitration Act has two distinct parts relating to arbitration. Pursuant to its Section 2(2),

the provisions of Part | apply ‘where the place of arbitration is in India’, with the exception of certain provisions that also apply to international commercial arbitration ‘even if the place of arbitration is outside India’. Part I] is concerned with the recognition and enforcement in India of a ‘foreign award’ that falls within the scope of the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards and the 1927 Geneva Convention on the Execution of Foreign Arbitral Awards. 9. Section 8(1) of the 1996 Arbitration Act (as originally drafted in 1996) provided: ‘A judicial authority before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party so applies not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration.” 10. S.B.P. and Co. v. Patel Engineering Ltd. (2005) 8 SCC 618, para. 19.

92

Chapter 5: Jurisdiction of the Arbitral Tribunal Commenting further on the scope of the courts’ review of the validity of an arbitration agreement, the Supreme Court noted that a judicial authority’s determination of the validity question would be final and that the principle of competencecompetence under ‘Section 16 cannot be held to empower the arbitral tribunal to ignore the decision given by the judicial authority."'' This judgment was criticised widely for effectively eviscerating the principle of competence-competence."* In 2014, the Law Commission of India (LCI) published a Report 246'* (LCI Report 246) which recommended, among other things, that Section 8 be amended so as to empower a judicial authority to refuse a referral to arbitration if the authority found, after conducting a prima facie assessment, that the arbitration agreement does not exist or is null and void.'* This recommendation eventually culminated in an amendment to Section 8(1) in 2015, which now provides: A judicial authority, before which an action is brought in a matter which is the

subject of an arbitration agreement shall, if a party to the arbitration agreement or any person claiming through or under him, so applies not later than the date of submitting his first statement on the substance of the dispute, then, notwithstand-

ing any judgment, decree or order of the Supreme Court or any Court, refer the

parties to arbitration unless it finds that prima facie no valid arbitration agreement exists (emphasis added).

In Emaar MGF Land Limited v. Aftab Singh, the Supreme Court explained the effect of the 2015 Amendment to Section 8(1): The words ‘notwithstanding any judgment, decree or order of the Supreme Court

or any Court’ added by amendment in Section 8 were with intent to minimise the intervention of judicial authority in context of arbitration agreement. As per the amended Section 8(1), the judicial authority has only to consider the question

whether the parties have a valid arbitration agreement? The Court cannot refuse to refer the parties to arbitration ‘unless it finds that prima facie no valid arbitration agreement exists’. The amended provision, thus, limits the intervention by judicial authority to only one aspect [...] when it finds that prima facie no valid arbitration

agreement exists.'*

This scheme of minimal judicial intervention at the stage of referral to arbitration is supplemented by Section 8(3) of the 1996 Arbitration Act, which stipulates that “an arbitration may be commenced or continued and an arbitral award made’ while the issue of referral is pending before a judicial authority under Section 8(1). The amended

Section 8, however, does not address one important question: if,

following a prima facie review, a judicial authority finds the arbitration agreement to be invalid, would that determination be binding on an arbitral tribunal? The LC] Report

11. Ibid., para. 20. 12. See, e.g., Simon Greenberg et al., International Commercial Arbitration: An Asia Pacific Perspective (Cambridge University Press, Ist ed. 2011), p. 225. 13. Law Commission of India, Report No. 246, Amendments to the Arbitration and Conciliation Act 1996, August 2014. 14.

LCI Report 246, p. 43.

15. Emaar MGF Land Limited v. Aftab Singh (2019) 12 SCC 751, para. 52.

93

Constantine Partasides QC & Manish Aggarwal 246 had answered this question in the affirmative, explaining the effect of a prima facie

assessment:

If the judicial authority is of the opinion that prima facie the arbitration agreement

exists, then it shall refer the dispute to arbitration, and leave the existence of the

arbitration agreement to be finally determined by the arbitral tribunal. However, if the judicial authority concludes that the agreement does not exist, then the conclusion will be final and not prima facie (emphasis added).'*

Although the above observations by the LCI have been cited by the Supreme Court subsequently while interpreting Section 8 in the context of determining the arbitrability of consumer disputes,'” the Indian courts are yet to rule definitively on this question. 52.2012

Foreign-Seated Arbitrations: Section 45

As for agreements providing for arbitrations seated outside India, Section 45 of the 1996 Arbitration Act, as originally drafted in 1996, provided: a judicial authority, when seized of an action in a matter in respect of which the

parties have made an agreement referred to in section 44, shall, at the request of one of the parties or any person claiming through or under him, refer the parties to arbitration, unless it finds that the satd agreement is null and void, inoperative or incapable of being performed (emphasis added). The original Section 45 thus required a judicial authority to review the validity of an arbitration agreement before referring the matter to arbitration. The scope of such a review was, however, subject to much debate.'* The 2019 Amendment

to the Act has

finally settled this debate by replacing the phrase ‘unless it finds’ in Section 45 with the phrase ‘unless it prima facie finds’. This amendment thus aligns the standard of interlocutory judicial review under Sections 8 and 45. 5.2.2.2

Appointment of Arbitrators

Until the 2019 Amendment, applications to the courts for default appointment of arbitrators provided another opportunity for judicial examination of jurisdictional issues.

16. LCI Report 246, p. 43. 17.

See Emaar MGF Land Limited v. Aftab Singh, 2019 (1) SCJ 33, paras 36, 37. See also Ganware

18.

See Shin Etsu Chemicals Co. Ltd. v. Aksh Optifibre Ltd. (2005) 7 SCC 234, para. 106 (holding: ‘the

Wall Ropes Ltd. v. Coastal Marine Constructions and Engineering Ltd. (2019) 9 SCC 209.

correct approach to be adopted under Section 45 at the pre-reference stage, is one of a prima facie finding by the court as to the validity or otherwise of the arbitration agreement’); and Chioro Controls (I) Put. Ltd. v. Severn Trent Water Purification Inc. & Ors. (2013) 1 SCC 641, paras 127-129 (observing that a judicial authority acting under Section 45 of the Act may undertake a full and final review of the validity of the arbitration agreement). For further review of Chloro Controls, see Chapter 3 of the Handbook.

94

Chapter 5: Jurisdiction of the Arbitral Tribunal Section 11, as originally enacted in 1996, granted the Chief Justice (of the Supreme Court or the High Court, depending upon whether the matter arose in an ‘international commercial arbitration’) or her designate the authority to make default appointments. A series of conflicting decisions examining the scope of the Chief Justice’s powers under Section 11 culminated in the 2005 decision of Patel Engineering in which a seven-judge bench of the Supreme Court held that: (i) the Chief Justice could decide upon the validity of an arbitration agreement when examining an application to appoint an arbitrator, and (ii) in the event the Chief Justice undertook such a review, the decision would

be final and would

exclude an arbitral tribunal's

competence to determine its jurisdiction under Section 16: Section 16 is said to be the recognition of the principle of Kompetenz-Kompetenz. The fact that the arbitral tribunal has the competence to rule on its own jurisdiction

and to define the contours of its jurisdiction, only means that when such issues arise before it, the Tribunal can and possibly, ought to decide them. This can

happen when the parties have gone to the arbitral tribunal without recourse to Section 8 or 11 of the Act. But where the jurisdictional issues are decided under these Sections, before a reference is made, Section 16 cannot be held to empower the arbitral tribunal to ignore the decision given by the judicial authority or the Chief Justice before the reference to it was made. The competence to decide does

not enable the arbitral tribunal to get over the finality conferred on an order passed

prior to its entering upon the reference by the very statute that creates it. That is the

position arising out of Section 11(7) of the Act read with Section 16 thereof.”

The scope of the Chief Justice’s powers under Section 11, as interpreted in Patel Engineering, received further clarification by the Supreme Court in 2009 in National Insurance Co. v. Boghara Polyfab.*° Confirming that the Chief Justice has wide powers to examine jurisdictional issues when appointing an arbitrator, the Supreme Court held that the questions that the Chief Justice would have to decide include ‘whether there is an arbitration agreement and whether the party who has applied under Section 11 of the Act is a party to such an agreement’.*' The Court held that the Chief Justice may also choose to decide issues such as ‘[w]hether the claim is a dead (long barred) claim or a live claim’ and ‘[w]hether the parties have concluded the contract/transaction by recording satisfaction of their mutual rights and obligation or by receiving the final payment without objection’.** The Court, however, clarified that ‘whether a claim made falls within the arbitration clause’ is a matter that fell exclusively within the

arbitral tribunal's jurisdiction.**

In an attempt to curb the courts’ powers of jurisdictional review under Section 11, the LCI Report 246 recommended that the scope of such review be limited to a prima facie assessment of whether an arbitration agreement existed or was null and void.~*

19. S.B.P. and Co. v. Patel Engineering Ltd. (2005) 8 SCC 618, para. 20. For further discussion of the

20. 21. 22. 23. 24.

5.B.P. case, see Chapter 4 of the Handbook. National Insurance Co. Ltd. v. Boghara Polyfab Pvt. Ltd. (2009) 1 SCC 267. Ibid., para. 22.1. Ibid., para. 22.2. Ibid., para. 22.3. LC] Report 246, para. 33.

95

Constantine Partasides QC & Manish Aggarwal However, the 2015 Amendment to Section 11 did not fully reflect the Law Commission’s recommendations. The 2015 Amendment introduced a new Section 11(G6A) into the Act, confining the extent of a court’s enquiry to ‘the examination of the existence of an arbitration agreement’ but without clarifying whether the court should conduct a prima facie assessment or a full trial. The 2015 Amendment precipitated several cases in which the Indian courts attempted to interpret the term ‘existence of an arbitration agreement’ in Section 11(6A). By way of example: — In Duro Felguera v. Gangavaram the Supreme Court held: After

the

amendment,

all

that

the courts

need

to see is whether

an

arbitration agreement exists - nothing more, nothing less. The legislative

policy and purpose is essentially to minimise the Court's intervention at the

stage of appointing the arbitrator and this intention as incorporated in Section 11(6A) ought to be respected.*° — In United India Insurance v. Hyundai Engineering Construction Co. Ltd., the existence of an arbitration agreement was not in dispute. At issue was whether the claims made fell within the scope of the arbitration agreement and were arbitrable. Distinguishing Duro Felguera, the Supreme Court held that it had the power to examine these matters under Section 11(6A).*° — In Vidya Drolia v. Durga Trading Corporation, the Supreme Court noted that it was unclear whether the scope of the ‘examination of existence of the arbitration agreement’ is broad enough to allow a court to determine the arbitrability of a dispute, and referred the issue to a larger bench of the

Supreme Court.*’

A number of judgments also clarified that, after the inclusion of Section 11(6A) in the 1996 Arbitration Act, the ‘validity’ and ‘existence’ of an arbitration agreement were to be treated as distinct questions, with only the latter question being reviewable by courts when appointing an arbitrator and all other threshold and preliminary issues to be decided by an arbitral tribunal.**

25. Duro Felguera, SA v. Gangavaram Port Ltd. (2017) 9 SCC 729, para. 59. 26. United India Insurance Co. Ltd. v. Hyundai Engineering and Construction Co. Ltd. (2018) 17 SCC 607, paras 11, 12.

27. Vidya Drolia v. Durga Trading Corporation, 2019 SCC OnLine SC 358, paras 8, 36. As of the date of writing this Chapter, the Supreme Court has not rendered its final decision on the issue. 28. Uttarakhand Purv Sainik Kalyan Nigam Ltd. v. Northern Coal Field Ltd. (2020) 2 SCC 455, paras 7.8-7.13 (holding that all other issues except the existence of the arbitration agreement are to be decided by the tribunal, and the exceptions to this rule are: (i) where the arbitration agreement itself is impeached as being procured by fraud or deception, and (ii) where the parties in the process of negotiation, have entered into a draft agreement (with a mere proposal to arbitrate, and not an unequivocal acceptance of the terms of the agreement) as an antecedent step prior to executing the final contract); Rashid Raza v. Sadaf Akhtar (2019) 8 SCC 710, para. 4 (holding that

only

serious

allegations

of fraud

which

affect

(1)

the

entire

contract,

including

the

arbitration agreement, and (2) the public interests, as opposed to only affecting the internal affairs of the parties, are to be determined by the court).

96

Chapter 5: Jurisdiction of the Arbitral Tribunal The 2019 Amendment to the Act has struck a death knell on judicial intervention at the stage of appointing arbitrators. The revised Section 11 empowers the Supreme Court (in the case of international commercial arbitrations) and the High Courts (in the case of domestic arbitrations) to designate arbitral institutions for discharging the function of appointing arbitrators.*” As a result, Section 11(6A) now stands deleted from the 1996 Arbitration Act. Sizes

Anti-arbitration Injunctions

The extent of judicial scrutiny of jurisdictional issues when considering an application to injunct an arbitration is an area of ongoing development. In principle, such interventions are impermissible under Section 5 of the 1996 Arbitration Act, which provides: Notwithstanding anything contained in any other law for the time being in force, in matters governed by this Part, no judicial authority shall intervene except where so provided in this Part.

Notwithstanding this statutory mandate, several conflicting court decisions mean that the precise extent to which an Indian court will intervene to grant an antiarbitration injunction remains unclear. Two main lines of jurisprudence appear to have emerged. In one line of authority, courts have considered their power to grant antiarbitration injunctions in the context of a suit requesting a declaration of invalidity of an arbitration agreement. In Kvaerner Cementation v. Bajranglal Aganwal, the Supreme Court declined to injunct an arbitration on the grounds that a finding or declaration relating to the validity of an arbitration agreement is incompatible with Section 16 of the 1996 Arbitration Act: [B]earing in mind the very object with which the Arbitration and Conciliation Act,

1996 has been enacted and the provisions thereof contained in Section 16 conferring the power on the Arbitral Tribunal to rule on its own jurisdiction, including ruling on any objection with respect to existence or validity of the arbitration agreement, we have no doubt in our mind that the civil court cannot

have jurisdiction to go into that question.**

Kvaerner concerned a domestic arbitration. Nonetheless, recognising the widespread acceptance of competence-competence, some High Courts have cited the Supreme Court's dictum in Kvaerner to decline jurisdiction over suits seeking to injunct foreign-seated arbitrations on the grounds that the arbitration agreement is invalid. For example, in Bharti Tele-Ventures v. DSS Enterprises Pvt. Ltd., the Delhi High Court declined to injunct an ICC arbitration:

29.

Sections 11(4), 11(6), 1996 Arbitration Act.

30. Kvaerner Cementation India Limited v. Bajranglal Agarwal (2012) 5 SCC 214, para. 3. See also Chatterjee Petrochem Company v. Haldia Petrochemicals Limited (2014) 14 SCC 574, paras 38-41.

97

Constantine Partasides QC & Manish Aggarwal The reason which prevailed with the Supreme Court in Kvaerner Cementation

India Limited [...] for holding a suit for declaration that there does not exist any

arbitration agreement and the arbitration proceedings are without jurisdiction and for injunction restraining the arbitration proceedings to be not maintainable,

would |...] apply to the present suit as well [...] Thus even though Section 16 [...]

located in Part I of the Arbitration Act applicable to domestic arbitration, may not

be applicable to International Commercial Arbitration, as the arbitration in the

present case is, but as long as the powers of ICC are the same as under Section 16, the dicta of the Supreme Court would apply to the present situation also [...] Thus,

as far as this Court is concerned, the consistent view has been that such a suit is not maintainable.*! In the second line of cases, however, various High Courts have upheld their ability to entertain applications for anti-arbitration injunctions (against domestic and foreignseated arbitrations) under their inherent jurisdiction. For instance, in McDonalds India v. Vikram Bakshi, the Delhi High Court drew inspiration from decisions of the English courts to conclude that exceptional circumstances could warrant the issuing of anti-arbitration injunctions.*” Such exceptional circumstances can include: — the non-existence of an arbitration agreement between the parties; — the arbitration agreement being null and void, inoperative or incapable of being performed; — the party seeking an injunction lacking the capacity to do so; — reference to, or continuation of, the arbitration proceedings being oppressive, vexatious or unconscionable; or

— the arbitration proceedings being barred by res judicata or constructive res

judicata.**

The reach of this second line of jurisprudence now appears to extend to investment treaty arbitrations against India. Several recent decisions hold that Indian courts have the inherent jurisdiction to enjoin investment treaty arbitrations that are ‘oppressive, vexatious, inequitable or constitute an abuse of the legal process’.™* However, courts have been cautious to balance the exercise of this power against an arbitral tribunal's competence to rule on its jurisdiction, noting that courts will intervene only in compelling circumstances.*” Thus, in Union of India v. Vodafone, the Delhi High Court declined to consider whether multiple parallel proceedings amounted 31.

Bharti Tele-Ventures Ltd. v. DSS Enterprises Put. Ltd., 2018 SCC OnLine Del 9650, paras 27, 30.

33.

Ibid.,

See also Dr Bina Modi v. Lalit Modi, an anti-arbitration injunction suit is empowering the tribunal to rule on 32. Mcdonald’s India Private Limited v. para.

48; Board

MANU/WB/0695/2014,

of Trustees

paras

52,

MANU /WB/0314/2019, para. 53.

C5(OS) 84/2020, 3 March 2020, para. 30(N) (holding that not maintainable and that the Act is a self-contained code its own jurisdiction). Vikram Bakshi, 2016 SCC OnLine Del 3949. of the Port of Kolkata

84;

Devi Resources

v. Louis Dreyfus

Limited

v. Ambo

Armatures

Exports

SAS,

Limited,

34. Union of India v. Vodafone Group Ple United Kingdom, MANU/DE/ 1673/2018, para. 104. For further review of the case, see Chapter 15 of the Handbook. For discussion of anti-arbitration injunctions issued in the context of investment arbitration, and a general discussion of investment treaty arbitration and India, see Chapter 13 of the Handbook. 35. Ibid., paras 119, 134-140; Union of India v. Khaitan Holdings (Mauritius) Limited, MANU/

DE/0271/2019, paras 45-46.

98

Chapter 5: Jurisdiction of the Arbitral Tribunal to an abuse of process, and refused to injunct investment treaty proceedings. Likewise, in Union of India v. Khaitan Holdings the Delhi High Court reiterated that India's reasons for seeking an injunction — whether Khaitan Holdings was a bona fide investor — Was a jurisdictional question to be decided by the arbitral tribunal. 5.2.2.4

Review of an Arbitral Tribunal’s Jurisdictional Decision

§.2.2.4.1

Review of Decision Rejecting Jurisdictional Objection(s)

Review of arbitral decisions rejecting a party's jurisdictional objection(s) is an area where the 1996 Arbitration Act departs from the Model Law. The Model Law provides for a system of ‘concurrent control’ under which an arbitral tribunal's preliminary ruling rejecting jurisdictional objections may be challenged immediately in the local courts and before the tribunal has issued a final award on the merits.*° However, ifa tribunal examines its jurisdiction together with the merits of a case and renders a final award, judicial review of the tribunal's jurisdictional findings forms part of any set-aside proceedings under Article 34 of the Model Law. Unlike the Model Law, the 1996 Arbitration Act does not allow parties immediate recourse to judicial review. Section 16(5) makes clear that, should an arbitral tribunal reject a jurisdictional objection, it shall ‘continue with the arbitral proceedings and make an arbitral award’.*” In such a scenario, Section 16(6) states that the aggrieved party has only one available route — to apply to set aside the ultimate arbitral award under Section 34 of the Act.** The legislative intent behind this departure from the Model Law was to prevent the abuse of judicial recourse by a reluctant respondent as a dilatory tactic against arbitration. 5.2.2.4.2

Review of Decision Accepting Jurisdictional Objection(s)

The Madel Law also does not expressly address the availability of judicial review of an arbitral tribunal’s negative jurisdictional determination (i.e., awards holding that there is no valid arbitration agreement or that the parties’ dispute falls outside the scope of

such an agreement).*”

However, under the 1996 Arbitration Act, such negative jurisdictional rulings by arbitral tribunals are appealable before a court under Section 37(2)(a). As the Supreme Court held in National Thermal Power Corporation v. Siemens: ‘what is made directly 36. Article 16(3), Model Law. 37.

See also Glencore International AG v. Indian Potash Ltd. (2019) 263 DLT 663, para. 61 (holding

39.

See Gary Born, International Commercial Arbitration (Kluwer Law International, 2nd ed. 2014),

that arbitral tribunals have the discretion to decide jurisdictional issues along with the merits in the final award, and there is no fundamental policy in Indian law which would require a tribunal to mandatorily render a preliminary decision on jurisdictional issues before proceeding with a hearing on merits). 38. See A. Ayyasamy v. A. Paramasivam (2016) 10 SCC 386, para. 12.2. p. 1104: ‘The sensible, and better, interpretation of the Model Law is that a negative jurisdictional award can be reviewed and annulled under Article 34(2)(a)(iv).’

99

Constantine Partasides QC & Manish Aggarwal appealable by Section 37(2)(a) of the Act is only an acceptance of a plea of absence of jurisdiction, or of excessive exercise of jurisdiction and the refusal to proceed further either wholly or partly’.“" The decision of the court in such appeal is final (without prejudice to a right to appeal to the Supreme Court).*! 5.3

TIME LIMITS FOR THE EXERCISE OF A TRIBUNAL’S MANDATE

An arbitral tribunal's jurisdiction may be circumscribed by any time limits for the completion of arbitration stipulated in the parties’ agreements or by law. This part examines the Indian law position in relation to the operation of such time limits. 5.3.1

Time Limits Stipulated in Contracts

Indian courts strictly enforce contractually stipulated timelines for completion of the arbitration. In Jayesh H. Pandya v. Subhtex India, the Supreme Court held that if the award is not rendered within the time limit stipulated by the parties in the arbitration agreement, the tribunal's mandate is terminated and it is considered de jure unable to

perform its functions.*” 5.3.2

Time Limits under the 1996 Arbitration Act

At a statutory level, the 2015 Amendment introduced a strict timeline for arbitrations

seated in India by inserting a new Section 29A in the Act. Under this provision, an arbitral tribunal was required to render its award within a period of 12 months from the date of its constitution. The parties could, by agreement, extend this time limit by a further period of six months.** However, if the arbitral tribunal failed to issue an award within the maximum available period of 18 months, its mandate was to stand terminated unless the court, either prior to or after the expiry of the specified period, extended that period on a showing by a party of ‘sufficient cause’.

40. National Thermal Power Corporation Ltd. v. Siemens Atkeingesellschaft (2007) 4 SCC 451, para. 18.

41. Section 37(3), 1996 Arbitration Act. 42. Jayesh H. Pandya & Anr. v. Subhtex India Ltd., 2019 SCC OnLine 5C 1101, para. 23. See also N.B.C.C. Ltd v. J.G. Engineering Pvt. Ltd. (2010) 2 SCC 385, para. 5, holding: ‘the arbitrator had

43.

become functus officio in the absence of extension of time beyond 30th of September, 2005 to make and publish the award’ and that ‘|a]fter the said date, the arbitrator had no authority to continue with the arbitration proceedings’. Section 29A(3), 1996 Arbitration Act.

44, Section 29A(4)-(5), 1996 Arbitration Act. Some examples of sufficient cause include the presence of voluminous evidence. See, e.g., International Trenching Pvt. Ltd. v. Power Grid Corporation of India Ltd., MANU/DE/5492/2017; Puneet Solanki v. Sapsi Electronics Pvt. Ltd., 2018 SCC OnLine Del 10619.

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Chapter 5: Jurisdiction of the Arbitral Tribunal The Indian Parliament's introduction of this mandatory and one-size-fits-all time limit, in an overzealous attempt to ensure an expeditious conduct of arbitral proceedings, was widely criticised. In response to these criticisms, the 2019 Amendment seeks to temper the impact of Section 29A, by making the following changes.*” First, the 2019 Amendment removes the 12-month mandatory time limit in relation to international commercial arbitrations seated in India.*® For such arbitrations, the 2019 Amendment includes merely a hortatory provision in Section 29A(1), which states that ‘the award in the matter of international commercial arbitration may be made as expeditiously as possible and endeavour may be made to dispose of the matter within a period of twelve months from the date of completion of pleadings’. Second, following the 2019 Amendment, the 12-month time limit will commence not from the date of the arbitral tribunal’s constitution but instead from the date of completion of pleadings,*” which completion, in turn, must be achieved within a period of six months from the arbitral tribunal’s constitution.** The 2019 Amendment, however, does not expressly provide for any consequences for a failure to meet the time limit for written submissions or for a power of either the arbitral tribunal or the court to extend that time limit. Third, the 2019 Amendment seeks to preserve the arbitral tribunal's mandate during the pendency of any court consideration of an application for extending the time period.*” The Indian courts are yet to rule definitively on whether the parties may agree to shorten or extend the time limits for the completion of arbitration imposed under the Act (as amended). Where the contractual time limit is shorter than the statutory limit, the Indian courts are likely to uphold the contractual time limit and give effect to party autonomy. However, it is possible that Indian courts will treat less favourably the parties’ attempt to extend the time limit beyond that stipulated or permissible under the Act, as that might be considered as being inconsistent with the legislative scheme of permitting extensions by courts in specific circumstances.

45. Indian courts have held that the 2019 Amendment to Section 29A would apply to all pending arbitrations seated in India as on 30 August 2019 (the date on which the 2019 Amendment came into force) and commenced after 23 October 2015 (the date on which the 2015 Amendments came into force). See ONGC Petro Additions Limited v. Ferns Construction Co. Inc., MANU /DE/1396/2020, para. 26.

46. See Section 2(1)(f), 1996 Arbitration Act: ‘“international commercial arbitration” means an arbitration relating to disputes arising out of legal relationships, whether contractual or not, considered as commercial under the law in force in India and where at least one of the parties is: (i) an individual who is a national of, or habitually resident in, any country other than India; or (ii) a body corporate which is incorporated in any country other than India; or (iii) an association or a body of individuals whose central management and control is exercised in any country other than India; or (iv) the Government of a foreign country’. 47.

Section 29A(1),

1996 Arbitration Act.

49.

Section 29A(4), 1996 Arbitration Act.

48. Section 23(4), 1996 Arbitration Act.

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Constantine Partasides QC & Manish Aggarwal 5.4

CONCLUSION

It is important that the law governing the jurisdiction of arbitral tribunals not become ‘a wilderness of single instances’.°" Parties, counsel and arbitral tribunals all need clarity and predictability. As discussed above, various uncertainties in the Act, as originally enacted in 1996, provided the Indian courts with an opportunity to intervene excessively in matters of arbitral jurisdiction, thereby raising concerns about India’s suitability as a destination for arbitration. The 2015 Amendments to the Act (rightly) sought to limit this judicial intervention, in recognition of the endemic delays associated with litigation in India (which delays have,

on one occasion,

resulted in India

being held liable in an investment treaty arbitration for failing to provide prompt judicial redress to an investor involved in a commercial arbitration).*’ Yet, subsequent judicial determinations — marred by a failure to articulate and apply clear and consistent standards on important questions pertaining to an arbitral tribunal's jurisdiction — left much to be desired. The further responsive reforms introduced via the 2019 Amendment have once again given a clear indication as to the legislature’s intent to restrict judicial intervention in arbitration and to make India an arbitration-friendly destination.

50.

Lord Alfred Tennyson, Aylmer’s field (1793).

51. White Industries Australia Limited v. Republic of India, UNCITRAL, Final Award, 30 November 2011. For further review of White Industries, see Chapter 13 of the Handbook.

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CHAPTER

6

The Laws Applicable to an Arbitration Nakul Dewan

Arbitration, a realisation of party autonomy, sees an interplay of several laws. This Chapter examines the various laws that feature in an arbitration and how they

interact with one another: the substantive law governing the contract, the law governing the arbitration agreement, and the law governing the conduct of the arbitration (i.e., the law of the seat). The rules governing parties’ choice of law(s) are circumscribed by the Indian statute and courts’ interpretation thereof. The rules vary between India-seated and non-India-seated arbitrations.

6.1

INTRODUCTION

The three laws that are applicable to an arbitration are:' (1) the substantive law governing the contract (substantive law); (2) the law governing the arbitration agreement (governing law); and (3) the law governing the conduct of the arbitration (lex arbitri). In an international commercial arbitration parties are free to agree to a different law governing the substance of a dispute as compared to the law governing the arbitration agreement,* and to also choose an arbitral seat, which is determinative of

1. Nigel Blackaby, Constantine Partasides et al., Redfern and Hunter on International Arbitration

(6th ed.), Chapter 3, see Section A; Sumitomo Corporation v. CDS Financial Services, AIR 2008 5C

1594, para. 10; GMR Energy Ltd. v. Doosan Power Systems India Private Limited & Ors (2017) SCC Online Del 11625, para. 22.12. 2. Russel on Arbitration (24th ed.) Chapter 2, para. 2-113: “These three are perhaps the most commonly encountered laws applicable in the context of an arbitration, but there are others that may be relevant including the law of the particular reference to arbitration, the law applicable to the capacity of the parties to enter into the reference, the law of the place other than the seat where hearings in the arbitration are to take place, the law of the place or places where

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the lex arbitri of the arbitral proceedings. In general, the lex arbitri of the arbitration is the arbitration legislation of the arbitral seat, which provides rules governing the ‘external’ relationship between the arbitral process and the courts of the seat, as well as the ‘internal’ conduct of the arbitration.* Arbitral tribunals give effect to parties’ choice-of-law clauses, to the extent that the chosen applicable law is not in conflict with mandatory national laws or public policy.* For India-seated arbitrations, Section 28 of the Arbitration and Conciliation Act of India, 1996 (1996 Arbitration Act or Act) sets out the laws applicable to the arbitration. It draws a distinction between domestic arbitrations between Indian parties and international commercial arbitrations between an Indian and a non-Indian party, seated in India. Section 28 is as follows: 28. Rules applicable to substance of dispute. (1) Where the place of arbitration is situated in India,— (a) in an arbitration other than an international commercial arbitration, the

arbitral tribunal shall decide the dispute submitted

to arbitration in

accordance with the substantive law for the time being in force in India;

(b) in international commercial arbitration,— (i) the arbitral tribunal shall decide the dispute in accordance with the rules of law designated by the parties as applicable to the substance of the dispute; (ii) any designation by the parties of the law or legal system of a given

country shall be construed, unless otherwise expressed, as directly

referring to the substantive law of that country and not to its conflict of laws rules;

(iii) failing any designation of the law under clause (a) by the parties,

the arbitral tribunal shall apply the rules of law it considers to be appropriate given all the circumstances surrounding the dispute.

Part I of the 1996 Arbitration Act does not apply to non-India-seated arbitrations. In terms of two decisions of the Delhi High Court and the Madhya Pradesh High Court, Indian parties are free to choose a foreign seat and arbitrate in a place outside India. An award resulting from such a foreign-seated arbitration between Indian parties would be a foreign award. However, under the Act, an international commercial arbitration is distinguished from a domestic arbitration, on the basis of the nationality of the parties involved in the arbitration proceedings. This led to an anomalous situation in a case where the Rajasthan High Court was required to consider its jurisdiction to grant interim relief in a Singapore seated arbitration between two Indian parties. The High Court held that such an arbitration falls under a ‘third situation’ where the arbitration is not an international commercial arbitration, but the award arising out of such an arbitration would be a foreign award enforceable in terms of the recognition and enforcement will be sought and the law applicable to any compromise of the dispute’ (internal footnotes. omitted).

3. Gary B. Born, International Arbitration — Law and Practice (Kluwer Law International 2016), Chapter 6, see pp. 111-126. 4. Gary B. Born, International Commercial Arbitration (Kluwer Law International 2nd ed. 2014), Chapter 1, see, pp. 6-224. See also Redfern & Hunter, supra n. 1, at Chapter 3, see Section A.

5. GMR v. Doosan, supra n. 1, paras 22.7, 22.23; Sasan Power Limited, v. North American Coal Corporation India Private Limited (2015) SCC OnLine MP 7417, para. 57.

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Chapter 6: The Laws Applicable to an Arbitration New York Convention.® Arguably, the decision is incorrect because arbitration proceedings taking place outside of India could not have been classified as a domestic Indian arbitration for the purposes of granting interim relief and determining the Court which would have jurisdiction to grant such relief.’ 6.2

SUBSTANTIVE LAW OF THE CONTRACT

The substantive law of contract (or the merits of the dispute. It governs the parties’ rights and obligations arising and the consequence of breaches of

lex causae) is the law governing the subject and interpretation and validity of the contract, the out of the contract, the modes of performance contract.* The applicable substantive law also

affects the causes of action that may be advanced, the substantive remedies available,

the types of damages recoverable, limitation defences, the calculation of the quantum

of damages, as well as the burden of proof.”

Generally, parties are free to choose the law applicable to the agreement and are bound by their express choice of substantive law. This principle finds expression in international conventions and model rules, including Article 28 of the UNCITRAL Mode! Law on International Commercial Arbitration, 1985 (Model Law) which sets out that the dispute shall be decided in accordance with the parties’ chosen applicable law. Indian law resonates the right of contracting parties to agree upon a substantive law of their choice, subject to a few caveats. In

contracts

between

two

Indian

parties,

the

choice

of substantive

law

is

straightforward. It must be Indian law.'” This safeguards against Indian parties entering into commercial relations that circumvent substantive Indian law by choosing a foreign governing law. For India-seated arbitrations this has been set out in Section 28 of the 1996 Arbitration Act, whereas for non-India-seated arbitrations, this is based

on judicial precedents.'' On the other hand, where an arbitration is an international commercial arbitration seated in India, the parties are free to agree to any other substantive law, and if not so agreed, the applicable substantive law will be determined

by the tribunal.’

Oo Oe

6. Barminco Indian Underground Mining Service LLP v. Hindustan Zinc Limited (2020) SCC OnLine Raj 1190, para. 93. 7. Under the 1996 Arbitration Act, in case of an arbitration other than an international commercial arbitration (a domestic arbitration), the Court empowered to exercise jurisdiction would be the principal Civil Court of original jurisdiction in a district, and in case of an international commercial arbitration, the Court empowered to exercise jurisdiction would be the High Court of ordinary original civil jurisdiction. See Section 2(1)(e) of the Act. . Redfern & Hunter, supra n. 1, at 155-228, see para. 3.93. . Doug Jones, Choosing the Law or Rules of Law to Govern the Substantive Rights of the Parties, 26 10.

SAcLJ (2014). See Section 28(1)(a) of the Act. Section 28(1)(a) is a deviation from Article 28 of the Model Law

and reflects the Indian legislature's intention to restrain Indian parties from contracting out of Indian law. 11. TDM Infrastructure Private Limited v. UE Development India Private Ltd (2008) 14 SCC 271. 12.

Sasan Power Limited, supra n. 5, para. 45.

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6.2.1

Indian Parties and Choice of Foreign Law

It is clear that in an arbitration between Indian parties, the tribunal must necessarily apply Indian law to the contract. That is clear from the wording of Section 28(1)(a) of the 1996 Arbitration Act. This statutory mandate overrides any other contrary provision or agreement between the parties. Although the applicability of Section 28(1)(a) of the Act is limited to arbitrations seated in India, the provision is a clear reflection of the underlying legislative mandate and public policy to disallow two Indian parties from opting out of Indian law as the substantive law of their contract for performance which is to take place in India. Therefore, unless a foreign element is involved in the contractual relation between the Indian parties, the parties cannot choose a foreign law to govern their rights and obligations. The Supreme Court in Bharat Aluminium Co'* explained the scope of Section 28(1)(a) of the 1996 Arbitration Act and clarified that the applicability of Section 28 of the Act is restricted to the substantive law of the contract. That the substantive law of contract by Indian parties must be Indian law and any derogation therefrom would be a violation of public policy was also set out in TDM Infrastructure Private Ltd. v. UE Development India Pvt. Ltd (TDM Infrastructure) tor the limited purpose of determining the jurisdiction of the Court under Section 11 of the Act." Although a decision of a Single Judge of the Supreme Court in a Section 11 petition is not a binding precedent, the decision has been cited and relied upon by a number of High Courts since it was

delivered.'*

Importantly, in TDM Infrastructure the Supreme Court takes the view that an arbitration is of an international nature only when at least one of the disputing parties is incorporated outside India.'® This was statutorily recognised by the 2015 Amendment which determines the residence of a company based on its place of incorporation and not the place of central management/control.'’ In fact, the Bombay High Court in

13. Bharat Aluminium Co v. Kaiser Aluminium Technical Services Inc (2012) 9 SCC 552, para. 118. 14. TDM Infrastructure, supra n. 11, at para. 28: “The intention of the legislature appears to be clear that Indian nationals should not be permitted to derogate from Indian law. This is part of the public policy of the country.” 15. Associate Builders v. Delhi Development Authority (2015) 3 SCC 49. 16.

TDM Infrastructure, supra n. 11, at para. 19.

17. Section. 2(1), 1996 Arbitration Act:

In this part, unless the context otherwise requires,—

[.2.]

({) ‘international

commercial

arbitration’

means

an

arbitration

relating

to disputes

arising out of legal relationships, whether contractual or not, considered as commer-

cial under the law in force in India and where at least one of the parties is— (i) an individual who is a national of, or habitually resident in, any country other than India; or (ii) a body corporate which is incorporated in any country other than India; or

(iii) an association or a body of individuals whose central management control is exercised in any country other than India; or (iv) the Government of a foreign country;

106

and

Chapter 6: The Laws Applicable to an Arbitration Addhar Mercantile Private Limited v. Shree Jagdamba Agrico Exports Pvt. Ltd.'* relied on TDM Infrastructure to interpret an arbitration clause between two Indian parties which provided for ‘[a]rbitration in India or Singapore and English law to [...] apply’ and directed the parties to conduct their arbitration with Indian law as the substantive law in India. It stated that making English law applicable to the contract would make the clause pathological. To that extent the decision is correct. However, where the High Court erred was by going further and holding that two Indian parties could not arbitrate outside of India. If TDM Infrastructure had indeed gone that far, it would possibly have been per incuriam by failing to consider a previous decision of the Supreme Court in

Atlas Exports Industries v. Kotak & Company.'”

However, notwithstanding Addhar, as set out below, there is no embargo on a choice of foreign seat for two Indian parties that wish to arbitrate outside of India.~” That basically means that while the substantive law of the dispute must be Indian law, the parties can choose a different law governing the arbitration agreement. Naturally, the seat of arbitration will determine the lex arbitri, which in a foreign seat would also be non-Indian law. 6.2.2

International Arbitration and Public Policy Considerations

Where an arbitration is an international commercial arbitration,” the parties are [ree to agree on any substantive law.** This could be either the law of the State of any of the parties

or a neutral law.

International

arbitration,

unlike

its domestic

counterpart,

usually involves more than one system of law or of legal rules.7* That is perhaps because unlike in the case of persons belonging to the same legal system, contractual relationships between persons belonging to different legal systems may give rise to various private international law questions such as the identity of the applicable law and the competent forum.** Further, the parties’ choice of law may be made at any time and is not limited to the time of entering into the contract.

See also, Report No. 246, Amendments to the Arbitration and Conciliation Act 1996, Law

Commission of India, August 2014, para. 73: ‘The Commission has also proposed some amendments in order to clarify certain other provisions in the Act. An amendment has been proposed to the definition of “international commercial arbitration”, in section 2 (f) (iii) by removing

the

reference

to a “company”,

which

is already

covered

in section

2(f)(ii). The

intention behind the proposal is that the test for determining the residence of a company must be based on its place of incorporation and not the place of central management/control. This adds greater certainty to the law, and re-enforces the “place of incorporation” principle laid down by the Supreme Court in TDM Infrastructure Put Ltd v. UE Development Put Ltd (2008) 14 SCC 2717

18. Addhar Mercantile Private Limited, v. Shree Jagdamba Agrico Exports Private Limited, 2015 5CC OnLine Bom 7752.

19. Atlas Exports Industries v. Kotak & Company (1997) 7 SCC 61.

20.

Sasan Power Limited, supra 0. 5.

22.

See Section 28(1)(b), 1996 Arbitration Act.

21. Section 2(1)(f), 1996 Arbitration Act, supra n. 17. 23. Redfern & Hunter, supra n. 1, at Chapter 3, see Section D. 24. NTPC v. Singer Co. (1992) 3 SCC 551, para. 33.

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Nakul Dewan

Even though international arbitration derives its authority from the agreement of the parties, agreements creating rights and obligations cannot exist in a legal vacuum.” Like a contract, an arbitration does not exist in a legal vacuum. It is regulated, first, by

the rules of procedure that have been agreed upon or adopted by the parties, and, second, it is regulated by the place of arbitration.** Parties’ freedom to choose the substantive law of the contract is not absolute and is limited by overriding mandatory laws and public policy principles.*’ The restrictions on the parties’ freedom to choose the substantive law of the contract is designed to ensure that the choice of law is bona fide and not intended to override the mandatory rules of a law of a country.** In fact, the interplay of mandatory laws in international arbitration has the potential to create conflicting interests between the parties and the State. As set out by the Supreme Court in NTPC v. Singer’’ ‘[t]he expressed intention of the parties is generally decisive in determining the proper law of the contract. The only limitation on this rule is that the intention of the parties must be expressed bona fide and it should not be opposed to public policy’. Mandatory rules of law purport to apply irrespective of the law chosen by the parties to govern their contractual relations.*” Such rules are indicative of the nation's public policy and are often designed to protect economic, social or political interests.*' For instance, parties cannot be allowed to contract out of the boundaries of arbitrability set out by national law, as certain categories of disputes have been deliberately reserved for national courts as a matter of public policy. These include rights in rem, i.e. rights exercisable against the world at large, distinguishable from rights in personam, which may be adjudicated by arbitral tribunals. The Supreme Court has also held certain categories of disputes as non-arbitrable, such as disputes arising out of criminal offences, matrimonial issues, guardianship, testamentary matters, tenancy matters and disputes relating to insolvency and winding up.** Similarly, matters for the adjudication of which special tribunals have been statutorily constituted are not arbitrable, such as disputes under the electricity and telecom laws or competition

25.

Redfern & Hunter, supra n. |, at 155-228, see paras 3.03-3.04.

28.

See Redfern & Hunter, supra n. 1, at 189, see para. 3.105.

26. Id. at para. 3.04. 27. Guidita Cordero Moss, in International Commercial Arbitration - Party Autonomy and Mandatory Rules, Tano Ashehoug (1999), ISBN 82-518-3949-1 suggests that it may be permissible to restrict party autonomy on three different grounds: (1) the choice of a foreign law must be rejected if its application violates fundamental principle of public policy (ordre public); (2) the choice of applicable law is further inadmissible when other conflict rules apply; and (3) the application of the chosen law may be limited because of overriding mandatory rules. On the other hand, Alan Redfern and Martin Hunter argue that as long as the intention expressed by the parties when choosing the applicable law is bona fide, legal and there is no reason to reject the parties’ choice because of public policy there should be no restriction of party autonomy. 29. NTPC, supra n. 24. 30. Pierre Mayer, Mandatory Rules of Law in International Arbitration, 2 Arb. Int’]. 274, 275 (1986). 31. Marc Blessing, Impact of the Extraterritorial Application of Mandatory Rules of Law on International Contracts (1999).

32. See Booz Allen & Hamilton Inc. v. SBI Home Finance (2011) 5 SCC 532 and A. Ayyasamy v. A. Paramasivamn (2016)

10 SCC 386.

108

Chapter 6: The Laws Applicable to an Arbitration law.** Parties that would otherwise be restricted from arbitrating disputes of a non-arbitrable nature cannot choose a foreign substantive law in order to escape from those restrictions on arbitrability. Therefore, a party’s choice of law must be read in conjunction with the applicable mandatory rule of public policy.** This is derived from the principle set out in Ralli Brothers v. Compania Naviera Sota y Aznar ({1920] 2 KB 287) which held that an English law contract would not be enforceable where performance of that contract was forbidden by the law of the place of performance (the lex loci solutionis). This was approved in Regazzoni v. KC Sethia ({[1958] AC 301), where the House of Lords held that an English law contract would not be enforceable if the common intention of the parties was to perform, in a foreign country, some act which was illegal under the law of that country. In such a situation, courts tend to deviate [rom the general principle of upholding the parties’ choice of law. Indian courts will not uphold parties’ choice of law if it appears that such a choice is motivated to validate or perform contractual obligations that are otherwise illegal. The consideration of mandatory national laws is important to ensure that the arbitral award is not opposed to public policy and is ultimately valid and enforceable.** Indeed, if a foreign law has been chosen as the substantive law of the contract to circumvent a mandatory law, the choice-ol-law clause must give way to the overriding mandatory provisions to fall in line with public policy.*°

33. See Gujarat Urja Vikas Nigam Ltd. v. Essar Power Ltd. (2008) 4 SCC 755. See also Central Warehousing Corporation v. Fortpoint Automotive Pvt. Ltd., 2010 (1) Bom C. R. 560, where the Bombay High Court observed that Section 5 cannot be read in isolation. It has to be necessarily juxtaposed with Section 2(3) of the 1996 Arbitration Act which states that the provisions of the Act will not affect any other law by virtue of which certain disputes cannot be submitted to arbitration. 34. Mare Blessing, supra n. 31. 35. Pierre Mayer, supra n. 30: ‘Although arbitrators are neither guardians of the public order nor invested by the State with the mission of applying its mandatory rules, they ought nevertheless

have an incentive to do so out of a sense of duty to the survival of international arbitration as an institution [...]. Arbitrators should pay heed to the future of their award. They should consider that if they do not apply a mandatory rule of law, the award will in all likelihood be refused enforcement in the country which promulgated that rule. It often turns out that that country is the one, or at least one of several, exercising a de facto control over the situation; it is not reasonable to disregard its attitude.’ 36. Dicey, Morris & Collins on the Conflict of Laws (15th ed.), Rule 224: (1) (a4) Where all other elements relevant to the situation at the time of the choice are located in a country other than the country whose law has been chosen, the choice of the parties shall not prejudice the application of provisions of the law of that other country which cannot be derogated from by agreement.(a) [...] (2) (a) The choice of law rules in this Chapter are subject to the overriding mandatory (b)

provisions of English law.

Effect may be given to the overriding mandatory provisions of the law of the country where the obligations arising out of the contract have to be or have been performed, in so far as those overriding mandatory provisions render the performance of the contract unlawful. In considering whether to give effect to those provisions, regard shall be had to their nature and purpose and to the comsequences of their application or nonapplication.

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Nakul Dewan

In the absence of the parties’ express choice of law, the substantive law applicable would be as determined by the tribunal by the conflict of law rules which it considers applicable.*’ As a first step, the tribunal will have to determine whether there is an implied or inferred choice of law. Failing this, it would decide the dispute in accordance with the substantive law of the jurisdiction that has the ‘closest and most real connection’ to the matter in dispute.** In arriving at the applicable law, the arbitral tribunal shall consider a variety of factors including the place where the contract was made, the place of performance of contract, domicile of the parties as well as the commercial background and context in which the contract was entered into.*” That is consistent with international jurisprudence for determining choice of law, in the

absence of an express agreement.”

6.3

LAW OF THE ARBITRATION AGREEMENT

The law of the arbitration agreement determines substantive matters relating to the agreement including the validity, effect and interpretation of the arbitration agreement,’ identification of the parties to the arbitration agreement; issues relating to reference and enforcement of the award and the issue of whether a particular dispute falls within the terms of an arbitration clause.” As the arbitration agreement is a stand-alone agreement, it is possible for the law governing an arbitration agreement to differ from the substantive law of the contract. This is elaborated upon below.

(c) For the purposes of clause (2) of this Rule, overriding mandatory provisions are provisions the respect for which is regarded as crucial by a country for safeguarding its public interests, such as its political, social or economic organisation, to such an extent that they are applicable to any situation falling within their scope, irrespective of the law otherwise applicable to the contract under the Rome I Regulation (emphasis added).

37. 38. 39. 40. 41.

See also: Article 9(3) of the Rome Regulation, which sets out that effect may be given to the overriding mandatory provisions of the law of the country where the obligations arising out of the contract have to be or have been performed, in so far as these mandatory provisions render the performance of the contract unlawful. Section 28(3), 1996 Arbitration Act. NTPC, supra n. 24 noting that the vesting of the jurisdiction in the courts of a country gives rise to a rebuttable presumption that the parties intended the same law to govern their substantive relations. Harmony Innovation Shipping Ltd. v. Gupta Coal India Ltd. & Anr. (2015) 9 SCC 172, para. 46. Born 2016, supra n. 3, at Chapter 4, see pp. 472-635. For example, under Article V of the New York Convention, recognition and enforcement of an

award may be refused if the arbitration agreement is not valid under the law to which the parties have subjected it. 42. Russel on Arbitration, supra n. 2. For further discussion of the arbitration agreement, see Chapter 2 of the Handbook.

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Chapter 6: The Laws Applicable to an Arbitration 6.3.1

Separability of the Arbitration Agreement

An arbitration agreement sets out the agreement of the parties to submit their disputes to arbitration. It has an existence of its own, independent and distinct from the substantive contract, and may be governed by a different law.** This was observed by the Supreme Court in Reliance Industries Limited“ which took the following view: [t}his principle of separability permits the parties to agree that law of one country

would govern the substantive contract and laws of another country would apply to the arbitration agreement. The parties can also agree that even the conduct of the reference would be governed by the law of another country. This would be rare, as

it would lead to extremely complex problems. businessmen do not intend absurd results.

It is expected that reasonable

This principle of separability was developed to avoid a situation where the invalidity of the main contract could affect the arbitration clause and in turn the jurisdiction of the arbitrators.** Thus, even where the underlying contract is void and unenforceable for illegality, that by itself does not necessarily render the arbitration clause itself unenforceable. The doctrine of separability stems from the case of Harbour Assurance v. Kansa General International Insurance’® where the English Court of Appeal held that even where the principal contract was alleged to be void ab initio, the arbitration agreement would be preserved. Without the rule, an arbitral tribunal was precluded from hearing any dispute which raised a question about the validity or existence of the contract containing the arbitration agreement.*” The obligation to resolve disputes by arbitration continues even if the substantive contract expires or is vitiated. This was expressly set out in Article 16(1) of the Model Law. In line with this, Indian law also expressly codified the doctrine of separability under Section 16(1)(a) of the 1996 Arbitration Act, which is as follows: Section 16. Competence of arbitral Tribunal to rule on its jurisdiction

(OL--.] (a) an arbitration clause which

forms part of a contract shall be treated as an

agreement independent of the other terms of the contract; and

43. Julian D. M. Lew, Loukas A. Mistelis, et al., Comparative International Commercial Arbitration

(Kluwer Law International 2003), Chapter 6, see pp. 99-127. See also Redfern & Hunter, supra n. 1, at 158 - 159, see para. 3.10; supra n. 4, at Chapter 4.

44. Reliance Industries Limited v. Union of India (2014) 7 SCC 603, paras 60-62. For further discussion of separability, see Chapter 2 of the Handbook. 45. Phillip Landolt, The Inconvenience of Principle: Separability and Kompetenz- Kompetenz, 30(5) J. Int'l Arb. 511, 512 (2013). 46. Harbour Assurance v. Kansa General International Insurance [1993] | Lloyd's Rep 455. 47. Similarly, the English High Court in Beijing Jianlong Heavy Industry Group v. Golden Ocean Group Limited & Ors [2013] EWHC 1063 (Comm) addressed the issue of the separability of arbitration agreements and the circumstances in which public policy factors invalidating the underlying contract may also impeach an arbitration clause. In its pro-arbitration conclusion, the Court reinforced the strength of ‘powerful commercial factors’ which weigh in favour of upholding an agreement to arbitrate.

11]

Nakul Dewan (b) a decision by the arbitral tribunal that the contract is null and void shall not entail ipso jure the invalidity of the arbitration clause.

The position with respect to whether an arbitration agreement contained in a contract is separable is settled law. However, exceptions are often raised in the context of agreements claimed to be non est, i.e. which have not come into existence.*® Further,

in relation to the separability of arbitration clauses that are novated or superseded by subsequent agreements, the Supreme Court has taken the view that ‘an arbitration clause in an agreement cannot survive if the agreement containing arbitration clause has been superseded/novated by a later agreement’. The reasoning of the Supreme Court is that superseded agreements are void ab initio or non est.”” Therefore, although the validity of an arbitration agreement is almost never parasitical to the contract, in cases where the main contract either was non est or has been superseded by an agreement that does not contain an arbitration clause, the arbitration agreement will follow the contract. 6.3.2

Closest Connection Test

Parties often fail to specify the law governing the arbitration agreement, putting the onus on the tribunals to decide what the parties intended. The test to determine the law governing the arbitration agreement, in case the parties have not chosen the same expressly, was laid down in Sulamerica.*° The English Court of Appeal set out a three-stage enquiry: the first is to ascertain whether the parties have set out an express choice, the second whether in the absence of an express choice if there is an implied choice, and the third where parties have not made either an express or implied choice, to consider the law with which the arbitration agreement has its closest and most real connection. For the application of the third stage, the English Court of Appeal set out that the Court must look at the substantive law of the contract chosen by the parties as the first port of call. Therefore, in the absence of any contrary indication, there is a rebuttable presumption that the same law applies to the arbitration agreement.” However, based on the facts in Sulamerica the presumption was rebutted on the basis that the arbitration agreement was rendered ineffective if the substantive law of

48. Ashapura Mine-Chem Ltd v. Gujarat Mineral Development Corporation (2015) 8 SCC 193. 49. M/S Young Achievers v. IMS Learning Resources, 2013 (1) SCC 535.

50. Sulamerica CIA Nacional De Seguros SA & Ors v. Enesa Engenharia SA & Ors [2012] EWHC 42 (Comm); Abuja International Hotels Ltd. v. Meridien Sas [2012] EWHC 87 (Comm) at 21: ‘As the Tribunal held, the arbitration agreement provides for arbitration in London and is implicitly governed by English law. It has its closest and most real connection with England because the seat of the arbitration is here. This was recognised and acknowledged by the parties in the signed Terms of Reference which provided that “the curial law applicable to the arbitration is English law.’ 51. This line of reasoning is supported by Article V.(1)(a) of the New York Convention which provides that the recognition or enforcement of an award can be refused if the arbitration agreement was not valid under the law to which the parties subjected it to, or failing any indication thereon, under the law of the country where the award was made.

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Chapter 6: The Laws Applicable to an Arbitration the contract was applied, i.e. Brazilian law. Thus, the identification of the seat as London was considered a more persuasive factor in arriving at the conclusion that the English Arbitration Act would have the closest connection and held that the governing law would be English law. The Singapore High Court applied the closest connection test in a novel way in FirstLink Investments Corp Ltd v. GT Payment Pte Ltd.** It linked the enquiry of the closest and real connection test to the arbitral seat and not to the substantive contract and set out that: [when commercial relationships break down and parties descend into the realm of dispute resolution, parties’ desire for neutrality comes to the fore; the law

governing the performance of substantive contractual obligations prior to the breakdown of the relationship takes a backseat at this moment (it would take the main role subsequently when the time comes to determine the merits of the dispute), and primacy is accorded to the neutral law selected by parties to govern

the proceedings of dispute resolution.”

This was substituted by the Sulamerica approach in BCY v. BCZ™ where the Court confirmed that in the absence of any indication to the contrary, parties are assumed to have intended the whole of their relationship to be governed by the same system of law, and the natural inference is that the proper law of the main contract should also govern the arbitration agreement. While choice of the seat could be a mitigating factor, it would be insufficient in and of itself to negate this presumption. In a dispute where neither the substantive law nor the governing law was specified, the English Commercial Court applied the closest connection test to conclude that the law of the seat would be the law applicable to the arbitration agreement.*° Under Indian law, while the earlier decisions took a different approach, recent decisions tend to follow this principle. In the earlier decisions, Indian courts leaned towards holding that the substantive

law of the contract bears the closest and most real connection to the dispute in absence of an ‘unmistakable intention to the contrary’.°° Only when there was express choice of substantive law, the vesting of the jurisdiction in the seat of arbitration gave rise to a rebuttable presumption that the parties intended the same to govern their substantive relations and arbitration agreement as well.

52. FirstLink Investments Corp Ltd v. GT Payment Pte Ltd and others [2014] SGHCR 53. Id., at para. 13. 54.

the no the law

12.

BCY v. BCZ [2016] SGHC 249.

55. Habas Sinai v. VSC (2013) EWHC 4071; the principle of the seat of the arbitration governing the law of the arbitration agreement has been accepted in A v. B [2006] EWHC 2006 (Comm), para. 111: ‘[A]n agreement as to the seat of an arbitration is analogous to an exclusive jurisdiction clause. Any claim for a remedy going to the existence or scope of the arbitrator's jurisdiction or as to the validity of an existing interim or final award is agreed to be made only in the courts of the place designated as the seat of the arbitration.’ See also C v. D [2007] EWCA Civ 1282, para. 17: ‘|A] choice of seat for the arbitration must be a choice of forum for remedies seeking to attack the award." 56.

Dicey, supra n. 36, at para. 16-016. See also NTPC, supra n. 24, at para. 23; Shreejee Traco (I) (P)

Ltd. v. Paperline International Inc. (2012) 9 SCC 552, para. 7; Indtel Technical Services (P) Ltd. v. W.S. Atkins Rail Ltd. (2008)

10 SCC 308, para. 36.

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However, recent decisions of the Supreme Court, the Calcutta and Bombay High Courts have carved out exceptions to this principle, albeit without reference to the three-pronged Sulamerica test.°” The Supreme Court in IMAX upheld the proposition that the choice of the seat would be critical in determining the law applicable to the arbitration agreement.*® This has been justified on both the grounds of choice of institutional rules as well as the seat having a closer and more real connection with the dispute. The Supreme Court in IMAX took the following view: 35. The relationship between the seat of arbitration and the law governing arbitration is an integral one. The seat of arbitration is defined as the juridical seat

of arbitration designated by the parties, or by the arbitral institution or by the

arbitrators themselves, as the case may be. It is pertinent to refer to the following passage from Redfern and Hunter on International Arbitration [Redfern and Hunter on International Arbitration, 5th Edn. (Oxford University Press, 2009)]:

This introduction tries to make clear, the place or seat of the arbitration is not merely a matter of geography. It is the territorial link between the arbitration itself and the law of the place in which that arbitration is legally situated: When one says that London, Paris or Geneva is the place of arbitration, one does not refer solely to a geographical location. One means that the arbitration is conducted within the framework of the law of arbitration of England, France or Switzerland or, to use an English expression, under the curial law of the relevant country. The geographical place of arbitration is the factual connecting factor between that arbitration law and the arbitration proper, considered as a nexus of contractual and procedural rights and obligations between the parties and the arbitrators. The seat of arbitration is thus intended to be its centre of gravity. 37. Thus, it is clear that the place of arbitration determines the law that will apply

to the arbitration and related matters like challenges to the award, etc., see Eitzen Bulk A/S [Eitzen Bulk A/S v. Ashapura Minechem Ltd., (2016) 11 SCC 508: (2016) 4 SCC (Civ) 251].

Even in cases where the substantive law of the contract has expressly been chosen by the parties, the courts have held that the law of the seat of arbitration would be the law governing the arbitration agreement.”

57.

Bharat Aluminium Co, supra n. 13; Coal India Ltd. v. Canadian Commercial Corporation (2012)

SCC OnLine Cal 2922. Particularly, HSBC v. Avitel Post Studioz Limited 2014 SCC OnLine Bom 929, para. 22: ‘Clause 16 of 55A, provides that the seat of arbitration shall be at Singapore and the arbitration shall be in accordance with SIAC Rules. Further, Clause 16.4 of the SSA makes it clear that save and except section 9 of the Act, Part-I thereof is not to apply to the terms of the arbitration agreement. The Supreme Court in NTPC, supra n. 24 and Sumitomo, supra n. | has held that normally the law of arbitration agreement is the same as the substantive law of contract, unless a different intention is either expressed or implied. In light of categorical provisions contained in SSA and SHA, it is clear that the parties have expressly or in any case by implication agreed that the law of arbitration shall be the SIAC Rules, i.e., laws of Singapore.’ See also GMR

v. Doosan, supra n. 1.

58. IMAX Corporation v. M/s. E-City Entertainment (I) Pvt. Ltd. (2017) 5 SCC 331, paras 35-37. 59. See Indus Mobile Distribution Pvt. Ltd v. Datawind Innovations Pvt. Ltd. (2017) 7 SCC 678, paras 19, 20.

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Chapter 6: The Laws Applicable to an Arbitration 6.4

LEX ARBITRI

The lex arbitri (also known as the curial law or loi de l’arbitrage) determines the law of the arbitral procedure adopted by the tribunal, as well as the involvement which the courts exercising jurisdiction over the seat have. This includes the procedural powers and

duties

of the

arbitrators,

such

as admissibility

of oral evidence,

recording

of

evidence, cross-examination of witnesses, remedies available to parties in respect of security for costs, discovery, etc. Unlike the English Arbitration Act, 1996 that sets out a schedule of mandatory rules that take effect notwithstanding any agreement between the parties, the Indian 1996 Arbitration Act does not segregate between mandatory and non-mandatory provisions. Under the Act, the jurisdiction of Indian courts is activated when the seat of arbitration is in India. As a natural consequence, provisions such as power to grant interim relief, appointment of arbitrators, enforcement and challenge to arbitral awards would mandatorily be within the ambit of Indian courts in cases of domestic arbitration as well as international commercial arbitration under Part I of the Act. In cases of international commercial arbitration where the seat is outside India,

limited court assistance in the form of interim relief and evidence-taking under Sections 9, 27 and 37(1)(b) and 37(3) of the 1996 Arbitration Act is available, subject to the contract between the parties. The provisions of Part II are mandatorily applicable in the event enforcement of the award is sought to be done in India.” Parties can agree on the procedure for conducting the arbitration proceedings, subject to Part I of the 1996 Arbitration Act. If no such procedure is agreed by the parties, the tribunal is allowed to conduct the proceedings in such manner as it considers appropriate, and is expressly exempt [rom applying the provisions of the

Civil Procedure Code, 1908 and the Evidence Act, 1872.°' If, under the arbitration agreement,

the arbitration is to be administered by an

arbitration institution, the rules of procedure of the institution apply to the dispute. This effectively displaces the default provisions in the applicable law to the extent that 60.

Section 2(2), 1996 Arbitration Act: This Part shall apply where the place of arbitration is in India. [Provided that subject to an agreement to the contrary, the provisions of sections 9, 27 and clause (a) of sub-section (1) and sub-section (3) of section 37 shall also apply to international commercial arbitration, even if the place of arbitration is outside India,

and an arbitral award made or to be made in such place is enforceable and recognised under the provisions of Part Il of this Act.]

61.

Section 19, 1996 Arbitration Act: 19. Determination of rules of procedure.—(1)

The arbitral tribunal shall not be bound

by the Code of Civil Procedure, 1908 (5 of 1908) or the Indian Evidence Act, 1872 (1 of 1872).

(2) Subject to this Part, the parties are free to agree on the procedure to be followed by

the arbitral tribunal in conducting its proceedings.

(3) Failing any agreement referred to in sub-section (2), the arbitral tribunal may, subject to this Part, conduct the proceedings in the manner it considers appropriate. (4) The power of the arbitral tribunal under sub-section (3) includes the power to determine the admissibility, relevance, materiality and weight of any evidence.

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the law and the rules are not inconsistent, and insofar as the law is not mandatory nature.” For instance, Section 28(1)(a) of the 1996 Arbitration Act is mandatory nature and cannot be displaced by either an agreement to the contrary between parties or institutional rules that empower the tribunal to exercise powers to

contrary.

6.4.1

in in the the

Choice of Seat and Lex Arbitri

Typically, parties do not make a direct choice of the laws applicable to the arbitration, but instead choose the arbitral seat, from which the applicable lex arbitri flows. The approach of the Model Law is that the law applicable to the arbitration will be the law of the place where the arbitration takes place. This has been described by Redfern & Hunter as: To say that parties have ‘chosen’ that particular law to govern the arbitration is rather like saying that an English woman who takes her car to France has ‘chosen’ French traffic law, which will oblige her to drive on the right-side of the road/...| [bjut it would be an odd usage of language to say that this notional motorist had opted for ‘French traffic law’. What she has done is to choose to go to France. The applicability of French law then follows automatically. It is not a matter of

choice.**

Therefore the selection of the seat of arbitration ordinarily results in the curial law of arbitration being that jurisdiction's legal framework. In Dozco India Pvt. Ltd. v. Doosan Infracore Co. Ltd®* the Supreme Court observed: In the absence of express agreement, there is a strong prima facie presumption that the parties intend the curial law to be the law of the ‘seat’ of the arbitration i.e. the place at which the arbitration is to be conducted, on the ground that that is the

country most closely connected with the proceedings. So in order to determine the curial law in the absence of an express choice by the parties it is first necessary to

determine the seat of the arbitration, by construing the agreement to arbitrate.*°

In this context, the choice of seat becomes extremely important and makes the distinction between seat and venue to be of critical importance. That is because the venue simply indicates the geographical location of the arbitration proceedings and could not have been intended to have a bearing on the lex arbitri. Therefore, the term ‘venue’ should not be used as a synonym for ‘seat’. While the former has mere logistical implications, the latter has important legal implications.

62. UNCITRAL’s Analytical Commentary on Draft Text of a Model Law on International Commercial Arbitration, UN Doc A/CN.9/264 (25 March 1985) at pp. 44-45: ‘Paragraph (1) guarantees the freedom of the parties to determine the rules on how their chosen method of dispute settlement will be implemented. This allows them to tailor the rules according to their specific needs and wishes |...]. The freedom of the parties is subject only to the provisions of the model law, that 63.

is, to its mandatory provisions." Redfern & Hunter, supra n. 1, pp. 155-228, see para. 3.61.

64. Dozco India Pyt. Ltd. v. Doosan Infracore Co. Ltd (2011) 6 SCC 179. 65. Id. Relying on Mustill & Boyd: International Commercial Arbitration, at para. 14.

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Chapter 6: The Laws Applicable to an Arbitration 6.4.2

Choice of Seat and Venue

The arbitral seat is where an arbitration has its legal domicile or juridical home.“* Where parties to an international arbitration agreement choose a seat of arbitration, their choice is often determined by the desire for neutrality and convenience. The place may have no necessary connection with either themselves or their commercial relationship.”’ Where it is not possible to determine the intended seat of arbitration from the agreement, it is up to the tribunal to determine the seat. Section 20 of the 1996 Arbitration Act sets out as follows: 20. Place of arbitration.—(1) arbitration. (2)

The

parties are free to agree on the place of

Failing any agreement referred to in sub-section (1), the place of arbitration

shall be determined by the arbitral tribunal having regard to the circumstances of the case, including the convenience of the parties. (3) Notwithstanding sub-section (1) or sub-section (2), the arbitral tribunal may, unless otherwise agreed by the parties, meet at any place it considers appropriate for consultation among its members, for hearing witnesses,

experts or the parties, or for inspection of documents, goods or other property

Therefore, the 1996 Arbitration Act draws a distinction between the seat of arbitration that reflects the territorial nexus and applicable law, and the venue for hearings which may change as per parties’ convenience. In case the parties choose a ‘place’ of arbitration, the question would arise whether the choice of the seat necessarily carries with it the choice of a lex arbitri or whether the designated foreign seat would be read as only providing for a venue or place. Such cases would turn on the construction of the individual agreement. For instance, the Supreme Court applied the closest connection test in Enercon where the substantive law and governing law were expressly set out as Indian law. However,

the

dispute

resolution

clause

stated

that

the

venue

for

the

arbitration

proceedings would be London. The Court observed that the parties had expressly made the 1996 Arbitration Act applicable and on that basis concluded that parties intended New Delhi be the seat of arbitration. The court reasoned that ‘[h]aving chosen all the three applicable laws to be Indian laws, in our considered opinion, the parties would not have intended to have created an exceptionally diificult situation, of extreme complexities, by fixing the seat of arbitration in London’. The court added that since the parties had ‘deliberately chosen London as a venue, as a neutral place to hold the meetings of arbitration only, it cannot be accepted that London is the seat of

arbitration’.

In Eitzen, the Supreme Court emphasised the role of the seat in implying a choice of curial law or lex arbitri and stated in that it was ‘not [] necessary’ for the parties to expressly choose English law as the curial law given their express choice of London as 66. Supra n. 3, at 1537. 67. Redfern & Hunter, supra n. 1, at 155-228, see para. 3.39.

68.

Enercon (India) Ltd v. Enercon Gmbh (2014) 5 SCC

70.

Enercon, supra n. 69, at para.

69. Id. at para. 103.

113.

117

1, para. 107.

Nakul Dewan

a seat.”’ The Court's analysis was focused on identifying factors that demonstrate an implied exclusion of the Indian court’s concurrent supervisory jurisdiction — by expressly choosing a seat, the parties impliedly choose a curial law and it is this combination of factors that points to the parties’ implied exclusion of the Indian courts’ concurrent supervisory jurisdiction over foreign arbitrations.” 6.4.3

Indian Parties and Choice of Foreign Seat

The autonomy of Indian parties to agree on a foreign seat was implicitly recognised by the Court in Atlas Exports where the Supreme Court took the view that the situs of arbitration would not by itself be enough to nullify the arbitration agreement entered into by the parties.”* Similarly, in Reliance Industries Limited a challenge to the arbitral award arising from a foreign-seated arbitration was dismissed by the Supreme Court in a dispute between two Indian parties.” Whether two Indian parties can choose a foreign seat was considered by the Madhya Pradesh High Court in Sasan Power Limited and it was held that two Indian parties were free to arbitrate in a place outside India and an award rendered pursuant thereto would be a foreign award falling under Part II of the 1996 Arbitration Act.” The High Court noted that when two Indian parties had willingly entered into an arbitration agreement, the fact that a foreign arbitral seat was chosen would neither nullify the agreement nor be opposed to public policy. When taken up in appeal before the Supreme Court, this issue was given up and the judgment of the Madhya Pradesh High Court was upheld. That a choice of foreign seat by Indian parties is not in derogation of Indian law was also followed by the Delhi High Court in Doosan, which held that ‘an arbitration agreement is an independent self-contained agreement not dependant on the substantive agreement, therefore irrespective of the contractual rights and obligations parties can opt for an international

71.

Eitzen Bulk A/S v. Ashapura Minechem Limited (2016) 11 SCC 508.

72. This was different from Reliance Industries Limited, supra n. 44, at para. 45, stating in obiter dicta that the ‘seat of arbitration ts |] analogous to an exclusive jurisdiction clause’. 73. Atlas Exports, supra n. 19. 74. Reliance Industries Limited, supra n. 44. 75. Sasan Power Limited, supra n. 5, at para. 57: On going through the scheme of the Arbitration and Conciliation Act, 1996, we find that

based on the seat of arbitration so also the nationality of parties, an arbitration is

classified to be an “International Arbitration’, and the governing law is also determined on the basis of the seat of arbitration. Therefore, it is clear that based on the seat of arbitration, the question of permitting two Indian companies/parties to arbitrate out of India is permissible. In the case of Atlas Exports, supra n. 19 itself, the principle has

been settled that two Indians can agree to have a seat of arbitration outside India. Now, if two Indian Companies agree to have their seat of arbitration in a foreign country, the question would be as to whether the provisions of Part | or Part Il would apply. Section

44, of the Act of 1996, contemplates a foreign award to be one pertaining to difference between persons arising out of legal relationship, whether contractual or not, which is in pursuance to an agreement in writing for arbitration, to which the convention set forth in the first schedule applies (emphasis added).

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Chapter 6: The Laws Applicable to an Arbitration arbitration’.”” The Delhi High Court took the view that an award resulting from a non-Indian-seated arbitration between Indian parties would be a foreign award and attract Part II of the 1996 Arbitration Act. In fact in GMR v. Doosan the Court applied the doctrine of alter ego to bind an Indian non-signatory to arbitral proceedings seated in Singapore. In this case, GMR Energy had sought a decree of permanent injunction restraining Doosan India from continuing with an arbitration proceeding before the SIAC, asserting that it was not a signatory to the arbitration agreement entered into by GMR Chattisgarh Energy Limited and GMR Infrastructure Limited with Doosan. Initially, the Delhi High Court had granted an ex parte injunction in favour of GMR Energy. However, in the judgment passed on 14 November 2017, the Court referred GMR Energy, a non-signatory to an arbitration agreement, to submit to ongoing arbitration proceedings in Singapore governed by SIAC Rules. It ruled that the issue would be governed by the lex arbitri and in Singapore an arbitral tribunal could determine the question of alter ego. It thus relegated the parties to the arbitral tribunal for a final determination of the issue. 6.4.4

Judicial Intervention by Indian Courts

Another reason why the choice of seat is critical is that the 1996 Arbitration Act unequivocally embraces territoriality in respect of review of awards.”’ An application to set aside an arbitral award may only be brought to the courts at the seat of arbitration.”* With respect to international commercial arbitrations, the Supreme Court has repeatedly held that PartI of the Act does not apply if the parties choose a foreign

seat.””

This has been reinforced by the 2015 Amendment, whereby barring Sections 9, 27 and 37(1)(b) and 37(3) Part I of the Act has expressly been made inapplicable to international commercial arbitrations seated outside India. However, historically

76. GMR v. Doosan, supra n. 1, at para. 22.9. For further discussion on non-signatory to arbitration agreements, see Chapter 2 of the Handbook. 77.

Section 2(2),

1996 Arbitration Act:

This Part [I] shall apply where the place of arbitration is in India: PROVIDED that subject to an agreement to the contrary, the provisions of sections 9, 27 and clause (a) of sub-section (1) and sub-section (3) of section 37 shall also apply to international commercial arbitration, even if the place of arbitration is outside India, and an arbitral award made or to be made in such place is enforceable and recognized under the provisions of Part II of this Act. 78.

Loukas A. Mistelis, Seat of Arbitration and Indian Arbitration Law, IV(2) IndianJ. of Arb. L. 1-13

(2015): *it is clear that pursuant to Articles 1(2), 6 and 34(2) of the Model Law, an award may only be set aside at the place of arbitration, irrespective of where the hearings took place’. 79. Bharat Aluminium Co, supra n. 13; Videocon Industries Ltd. v. Union of India and Anr. (2011) 6 SCC 161.

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Nakul Dewan

Indian courts assumed jurisdiction for setting aside applications and have also assumed supervisory powers even if the seat of arbitration was outside India in a manner that was inconsistent with international practice.*° For instance, in an Indian contract providing for arbitration in London under the ICC Rules, the Supreme Court reasoned that the operation of lex arbitri ceased with the conclusion of the proceedings before the arbitral tribunal.*' On this basis, it was held that a challenge to set aside the arbitral award would be governed by the law governing

the arbitration agreement and not the lex arbitri.*

The olt-cited decision is Venture Global Engineering v. Satyam Computers Services Ltd. where the Supreme Court allowed a challenge to a foreign arbitral award under Section 34 of the 1996 Arbitration Act by holding that the mere selection of a foreign seat was held to be insufficient to exclude the jurisdiction of Indian courts.™ After nearly a decade of excessive intervention by Indian courts in foreign-seated arbitrations, in 2012, the Supreme Court in Bharat Aluminium Co™ held that Part I of the 1996 Arbitration Act only applied to arbitrations that took place in India and could not be extended to foreign-seated arbitrations, albeit prospectively. After engaging in an extensive review of international arbitration authorities, the Court emphasised the

exclusive jurisdiction of the seat in arbitration proceedings and set out: The legal proposition that emerges from a conspectus of all the decisions seems to be, that the choice of another country as the seat of arbitration inevitability imports

an acceptance that the law of that country relating to the conduct and supervision of arbitrations will apply to the proceedings.

It would therefore, follow that if the arbitration agreement is found or held to provide for a seat/ place of arbitration outside India, then the provision that [the Act] would govern the proceedings, would not make Part I of [the Act] applicable

or enable Indian Courts to exercise supervisory jurisdiction over the arbitration or the award (emphasis added).

In further support of the principle established in BALCO, the 2015 Amendment also clarified that Indian courts cannot review and set aside awards made outside India and awards that are deemed to be foreign.*

80.

See Bhatia International v. Bulk Trading S.A. and Anr. (2002) 4 SCC 105.

82.

Ibid.

81. Sumitomo, supra n. 1.

83. Venture Global Engineering v. Satyam Computers Services Ltd. (2008) 4 SCC 190, para. 33: ‘The very fact that the judgment holds that it would be open to the parties to exclude the application of the provisions of Part I by express or implied agreement, would mean that otherwise the whole of Part I would apply. In any event, to apply Section 34 to foreign international awards would not be inconsistent with Section 48 of the Act, or any other provision of Part II as the situation may arise, where, even in respect of properties situate in India and where the award would be invalid if opposed to the public policy of India, merely because the judgment-debtor resides abroad, the award can be enforced against properties in India through personal compliance of the judgment-debtor and by holding out a threat of contempt as is being sought to be done in the present case.” For further discussion of jurisprudence around the case, see Chapter 10 of the Handbook. 84. Bharat Aluminium Co, supra n. 13. 85. 2015 Amendment.

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Chapter 6: The Laws Applicable to an Arbitration This position has been affirmed by the case of IMAX."* In this case, the parties had not agreed upon the seat of arbitration but only set out that the agreement would be governed by the laws of Singapore and that ICC Rules would be applicable. The Supreme Court considered the choice of ICC Rules, and the consequent choice of foreign seat by ICC in consultation with parties, to operate as a clear case of exclusion of Part I of the 1996 Arbitration Act. 6.5

CONCLUSION

A choice-of-law clause provides certainty with respect to the interpretation and enforcement of parties’ contractual obligations.” Barring an express choice, the possible combination of the applicable legal rules only increases uncertainty in

commercial contracts.

Indian law has attempted to streamline this and keep an element ol certainty. The three applicable laws must mandatorily be Indian law in case of a domestic arbitration, whereas parties have the freedom to make their choice of law in international commercial arbitration. For an arbitration between two parties that is seated outside of India, the substantive law would have to be Indian law, whereas that restriction would not apply to the law of the arbitration agreement and the lex arbitri.

66. IMAX, supra n. 58. 87. Gary B. Born, International Arbitration and Forum Enforcing (Wolters Kluwer 4th ed. 2006) at p. 109.

12]

Selection Agreements

— Drafting and

CHAPTER

7

The Conduct of Arbitral Proceedings in India Martin Hunter, Shashank Garg & Simon Weber

In the past decades, a considerable increase of both arbitrations seated in India and

domestic arbitration of Indian businesses can be noticed. The use of arbitration as

preferred means of resolving a dispute has led to arbitral institutions opening up in many parts of the country, adding a wide array of arbitral rules to choose from. Said

arbitral rules generally regulate the arbitral proceedings by setting out strict rules on

the conduct of the proceedings. In addition to the institutional rules, Indian law

regulates the conduct of arbitral proceedings in Chapter V of the Arbitration & Conciliation Act 1996. This Chapter addresses the relevant provisions of the Indian

Arbitration & Conciliation Act discussing its application in practice. Moreover, it sets out pitfalls any practitioner must be aware of when engaging in arbitral proceedings in India.

7.1

INTRODUCTION

The conduct of arbitral proceedings in India is governed by the relevant provisions in Chapter V of the Arbitration and Conciliation Act (1996 Arbitration Act or Act), which was first published in 1996. The Act has been amended in 2015 by the Arbitration and Conciliation (Amendment) Act (2015 Amendment) and in 2019 by the second Arbitration and Conciliation (Amendment) Act (2019 Amendment).' The 1996 Arbitration Act and its amendments regulate the conduct of arbitral proceedings in India. Nowadays there are many international rules, treaties and conventions that try to harmonise arbitration as a means of dispute resolution and attempt to maximise the effectiveness of the arbitral process. In April 2018, the Indian Arbitration Forum 1. See the 2015 Amendment, available at hitp://lawmin.gov.in/sites/default/files/Arbitratio nandConciliation.pdf. and the 2019 Amendment, available at http://egazette.nic.in/WriteRea dData/2019/210414.pdf.

123

Martin Hunter, Shashank Garg & Simon Weber published its guidelines on the conduct of arbitrations, after taking into account several local issues faced by practitioners and tribunals.* This Chapter addresses the procedure envisaged in the conduct of an arbitration proceeding and the methodology that the parties and the arbitral tribunal may follow during the arbitral proceedings. This can be traced back to the merchants’ idea of private justice. In the early days of private dispute resolution between merchants, a merchant having a dispute with another merchant was expected to have recourse to a third —- independent — merchant to solve the dispute. Therefore, when parties opt for resolving their disputes by way olf arbitration, the State has no role in deciding the dispute and the parties have the power to model the way the dispute should be resolved. Hence, ‘arbitral proceedings are seen as an expression of the will of the parties [...]’* — which is called ‘party autonomy’. This aspect of party autonomy is of paramount significance in the conduct of arbitral proceedings. One of the authors in an earlier publication compared the process of arbitration to a ship inasmuch as although the parties are the owners af a ship, they hand over the control of the ship to the captain, i.e. the arbitral tribunal, which is now in charge and bears the responsibility to navigate the ship back to its harbour. This is even more true when it comes to the way the arbitral tribunal conducts the proceedings of an arbitration. This Chapter addresses the relevant provisions of the 1996 Arbitration Act discussing its application in practice. Moreover, it sets out pitfalls any practitioner must be aware of when engaging in arbitral proceedings in India. Tih k

Party Autonomy

One of the most fundamental characteristics in an arbitration proceeding is the parties’ freedom to agree upon the arbitral procedure. Parties to an arbitration may agree upon a procedure for the conduct of the reference either when they make the underlying contract or when they submit the dispute for adjudication to the arbitral tribunal, or on a subsequent occasion.’ As a matter of prudence, the parties should seek the arbitral tribunal’s approval on the agreed procedure. The tribunal should, also, make its views known to the parties, especially in an event when it considers that the proposed procedure may lead to delay, expense or confusion. Statutorily, however, the parties are under no obligation to abide by the tribunal's advice or suggestions. Accordingly, parties may decline the tribunal's advice in this regard; after all, an arbitral tribunal is no more than an entity created by the parties’ agreement.” Even if the parties have not expressly agreed to or provided for the way they wish the proceedings to be conducted, it may be possible to infer an agreement on one or more aspects by implication or from

Oo Po

. Indian Arbitration Forum, Guidelines for Conduct of Arbitrations (April 2018).

. Nigel Blackaby et al., Redfern and Hunter on International Arbitration (OUP, 6th ed. 2015) para.

1.53, 4. P.C. Markanda, Naresh Markanda & Rajesh Markanda, Law relating to Arbitration and Conciliation (LexisNexis, 9th ed. 2016) p. 755. 5. Ibid.

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Chapter 7: The Conduct of Arbitral Proceedings in India the way the parties conduct the reference.° It is important to note that failure to comply with the agreement of the parties would be regarded as misconduct, which may invalidate the award made by the arbitral tribunal.’ Section 19. Determination of rules of procedure. (1) The arbitral tribunal shall not be bound by the Code of Civil Procedure, 1908 (5 of 1908) or the Indian Evidence Act, 1872 (1 of 1872). (2) Subject to this Part, the parties are free to agree on the procedure to be (3)

followed by the arbitral tribunal in conducting its proceedings.

Failing any agreement referred to in sub-section (2), the arbitral tribunal may, subject to this Part, conduct the proceedings in the manner it considers appropriate.

(4) The power of the arbitral tribunal under sub-section (3) includes the power to determine dence.

the admissibility,

relevance,

materiality and weight of any evi-

Section 19 of the 1996 Arbitration Act contains three principles that need to be followed when determining the procedure of the arbitration: (i) the arbitral tribunal is not bound by any Indian law on procedure; (ii) the parties are free to agree on the procedure; (iii) failing any agreement by the parties, the arbitral tribunal has the power to decide upon the procedure. While the text of Section 19(1) of the 1996 Arbitration Act clarifies that the Code of Civil Procedure, 1908 cannot apply stricto sensu to a special statute such as the Act, the procedure prescribed in the Code of Civil Procedure, 1908 is, as a matter of practice and convenience, followed in Indian arbitrations. This is due to the fact that parties and

their counsel are familiar with the Code of Civil Procedure. Thus, an arbitral tribunal is not prohibited from having recourse to the fundamental principles underlining the provisions of either the Code of Civil Procedure, 1908 or the Indian Evidence Act, 1860.

However, the tribunal is not bound to observe such provisions with all its rigour.® Furthermore, it must be kept in mind that arbitral proceedings cannot be compared to a suit, appeal or an application before a domestic court; they are proceedings of a quasi-judicial nature. The principle of party autonomy is acknowledged in the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention) and other major international arbitration conventions: it is guaranteed by arbitration statutes in virtually all jurisdictions. Moreover, party autonomy is qualified only by the mandatory requirements of the applicable national law, which under most developed arbitration statutes are ordinarily limited in scope.’ The 1996 Arbitration Act does not prevent the parties from adopting a specific provision contained in arbitration rules or a modified version of the latter. As the parties are free to decide on their own set of rules and shape the conduct of the proceedings in a way they like, it is also possible to include specific rules on certain aspects of the procedure such as the IBA Rules on the

Oo oo =] of

. . . .

Star International Hong Kong (UK) Ltd. v. Bergbau-Handel GmbH [1966] 2 Lloyd's Rep 16. Mustill & Boyd, Handbook of Commercial Arbitration (Butterworths, 2nd ed. 2001) p. 281. Sret Infrastructure Finance Limited v. Tuff Drilling Private Limited (2018) 11 SCC 470. Gary B. Born, International Commercial Arbitration (Kluwer Law International, 2nd ed. 2014) p. 1749.

125

Martin Hunter, Shashank Garg & Simon Weber Taking of Evidence in International Arbitration.’ If the parties cannot reach an agreement, Section 19(3) of the 1996 Arbitration Act gives the power to the arbitral tribunal to determine its procedural rules. Needless to say, while doing so, the arbitral tribunal has an underlying obligation to follow the principles of natural justice also

contemplated under Section 18 of the Act."! Tile

Failure to Comply with the Agreement of the Parties

It is crucial for the arbitral tribunal to respect the agreement of the parties and, failing such agreement, the relevant rules stemming from the 1996 Arbitration Act. The reason for this is that Article V(1)(d) of the New York Convention states that one ground to refuse the recognition and enforcement of an arbitral award is the failure of the arbitral tribunal to conduct the arbitral proceedings in accordance with the agreement of the parties or, failing such agreement, if the conduct of the arbitral proceedings was not in accordance with the law of the country where the arbitration took place.'* A failure to comply with an agreement or the 1996 Arbitration Act could, therefore, lead to a refusal to recognise and enforce the award by the Indian courts.'* This Chapter addresses six parts. First, it will set out the rules of a fast track procedure in India, before it turns to the more traditional procedural steps. These are addressed in the following order: preliminary steps, written submissions, collection of evidence, hearings and finally it concludes with the proceedings after the hearings. 7.2

FAST TRACK PROCEDURE

One impact of the above-mentioned 2015 Amendment can be seen in the legislature's implementation of a fast track procedure stipulated under Section 29-B of the 1996 Arbitration Act. Parties may dispense with the requirement of holding hearings, and disputes may be decided on the basis of written pleadings and other evidence on record. Similarly, parties may opt for adjudication by a sole arbitrator, as fixing dates for arbitral proceedings before a three-member tribunal is a comparatively difficult process. Accordingly, the disputing parties may, either before the commencement of the arbitral proceedings or after, agree to have recourse to an expedited arbitration.'* Subsection (3) of the Act specifies that the parties should submit written pleadings and documents and that there will not be an oral hearing.'* If the arbitral tribunal deems it appropriate or necessary to decide the dispute, it may request further documentation 10. IBA Rules on the Taking of Evidence in International Arbitration, 2010, International Association.

Bar

ll. Bharat Heavy Electricals Limited v. Silor Associates, S.A. 2013 SCC Online Del 4135. 12. Article V, New York Convention.

13. Section 34(2)(v) of the 1996 Arbitration Act confirms the principle that an arbitral award may be set aside by the courts if the arbitral procedure was not in accordance with the agreement of the parties or, failing such agreement, with the provisions of the Act. 14. Steven P. Finizio & Duncan Speller, A Practical Guide to International Commercial Arbitration: Assessment, Planning and Strategy (Sweet & Maxwell, South Asian Edition, 2010) p. 220. 15.

Section 29B(1)(a),

1996 Arbitration Act.

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Chapter 7: The Conduct of Arbitral Proceedings in India from the parties.'° In such a scenario, and subject to the provisions of subsection (5), the arbitral award is made within a period of six months from the date the arbitral tribunal enters upon the reference. It is interesting to see that even where the fast track procedure under Section 29B of the 1996 Arbitration is not opted for, the legislature has incentivised quicker resolution of disputes under Section 29A(2) of the Act inasmuch as the arbitral tribunal would be entitled to additional fees as the parties may agree. Section 29B. Fast track procedure. (1) Notwithstanding anything contained in this Act, the parties to an arbitration agreement, may, al any stage either before or at the time of appointment of the arbitral tribunal, agree in writing to have their dispute resolved by fast track procedure specified in sub-section (3).

(2) The parties to the arbitration agreement, while agreeing for resolution of dispute by fast track procedure,

may agree that the arbitral tribunal shall

consist of a sole arbitrator who shall be chosen by the parties.

(3) The arbitral tribunal shall follow the following procedure while conducting arbitration proceedings under sub-section (1), (a) the arbitral tribunal shall decide the dispute on the basis of written

pleadings, documents and submissions filed by the parties without any oral hearing; (b) the arbitral tribunal shall have power to call for any further information or clarification from the parties in addition to the pleadings and documents

filed by them; (c) an oral hearing may be held only, if,’’ all the parties make a request or if

the arbitral tribunal considers it necessary clarifying certain issues;

to have oral hearing for

(d) the arbitral tribunal may dispense with any technical formalities, if an oral

hearing is held, and adopt such procedure as deemed appropriate for expeditious disposal of the case.

(4) The award under this section shall be made within a period of six months from (5)

the date the arbitral tribunal enters upon the reference.

If the award is not made within the period specified in subsection

(4), the

provisions of sub-sections (3) to (9) of section 29A shall apply to the proceedings. (6) The fees payable to the arbitrator and the manner of payment of the fees shall be such as may be agreed between the arbitrator and the parties.

7.2.1

Expedited Procedure

Considering that there were no timelines specified prior to the 2015 Amendment for the conclusion of arbitral proceedings — which was also a predominant reason for the failure of the alternative dispute resolution mechanism in India — parties have only recently started acclimatising to statutory 12-month timelines (brought in by way of the 2015 Amendment). In this light, the fast track procedure as envisaged under Section 29B of the 1996 Arbitration Act is, in practice, still rarely resorted to.

16. Section 29B(1)(b), 1996 Arbitration Act. 17.

Ibid.

127

Martin Hunter, Shashank Garg & Simon Weber While an ‘expedited procedure’ is similar to a ‘fast track procedure’, only latter forms part of the 1996 Arbitration Act. Parties are, however, free to request expedited procedure which would require the fixation of a strict timeline for completion of pleadings, limitations on document discovery and hearings held consecutive days. Zo

the an the on

PRELIMINARY STEPS

A preliminary meeting is usually held after the constitution of the tribunal and before the parties start to exchange statements setting out each other’s case. At this meeting, the tribunal sets out the procedural timetable to be followed during the proceedings. The purpose of the meeting is to discuss all relevant aspects of the proceedings ranging from preliminary issues such as jurisdictional objections, interim relief applications and bifurcation of proceedings, the format of the written proceedings, the timeline for filing the written pleadings, hearing dates and venue, the language,'" witness statements, other procedural and administrative matters such as the application of other rules, the appointment of an arbitral secretary and the means of communication with the arbitral tribunal.’ Finally, at the preliminary meeting, the determination of the fees of the arbitral tribunal and the stages of payment can also be determined. 7.4

WRITTEN SUBMISSIONS

Alter the arbitral tribunal has been constituted, the next step is to exchange and file submissions before the arbitral tribunal. The objective of the submissions is to enable the arbitral tribunal to understand the subject matter of the dispute, determine the material facts upon which the claims and counterclaims, if any, are based. It is important to emphasise that the written pleadings play a key factor in the decisionmaking process of the arbitral tribunal. The relevant provision in this regard is Section 23 of the 1996 Arbitration Act: 23. Statements of claim and defence. (1) Within the period of time agreed upon by the parties or determined by the arbitral tribunal, the claimant shall state the facts supporting his claim, the

points at issue and the relief or remedy sought, and the respondent shall state his defence in respect of these particulars, unless

the parties have

otherwise agreed as to the required elements of those statements.

(2) The parties may submit with their statements all documents they consider to be relevant or may add a reference to the documents or other evidence they will submit. (2)(A) The respondent, in support of his case, may also submit a counterclaim or plead a set-off, which shall be adjudicated upon by the arbitral tribunal, if

18.

See Section 22, 1996 Arbitration Act.

19. See also Bockstiegel, Party Autonomy and Case Management: Experiences and Suggestions of an Arbitrator SchiedsVZ

| (2013).

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Chapter 7: The Conduct of Arbitral Proceedings in India

(3)

such counterclaim or set-off falls within the scope of the arbitration agreement.

Unless otherwise agreed by the parties, either party may amend or supple-

ment his claim or defence during the course of the arbitral proceedings, unless the arbitral tribunal considers it inappropriate to allow the amendment or supplement having regard to the delay in making it.

In addition to Section 23 of the 1996 Arbitration Act, subsection (3) of Section 24 of the Act is of importance: Section 24. Hearings and written proceedings. (3) All statements, documents or other information supplied to, or applications made to, the arbitral tribunal by one party shall be communicated to the other

party, and any expert report or evidentiary document

on which the arbitral

tribunal may rely in making its decision shall be communicated to the parties.

Written pleadings ordinarily consist of a statement of facts, legal submissions and a prayer for relief. Additionally, the pleadings contain references to the evidence the parties have gathered at the time of submission of the written pleadings. Hence, the written pleadings set out the entire legal arguments of the parties. Written pleadings are not the same as an acrimonious exchange of allegations between the parties in the form of notices. They can take the form of a statement of claim, a statement of defence (i.e., a reply to the statement of claim) and a rejoinder (i.e., a reply to the statement of defence). In case there is a counterclaim then there is also a reply to the counterclaim and a rejoinder. In exceptional cases, the arbitral tribunal may permit the filing of a sur-rejoinder (a reply to the rejoinder). The arbitral tribunal has the implied power to order each party to focus on specific aspects of the claim and of counterclaims (if any), in order to ensure that the parties’ submissions focus on the aspects the arbitral tribunal deems important. The 1996 Arbitration Act clearly states that any statement, document or other information that is being used by one party must be shared with the other party.~° Further, if the arbitral tribunal relies upon an expert report or evidentiary documents, it needs to share the relevant documents with the parties. 7.4.1

Statement of Claim

A statement of claim contains all details of the legal and factual arguments of the claimant’s case. In accordance with Section 23 (1) of the 1996 Arbitration Act, it needs to include the facts supporting the claimant’s claim, the points at issue and the relief or remedy sought. Pursuant to Section 25(a) of the Act, the arbitral tribunal shall terminate the proceedings if the claimant fails to communicate the statement of claim in accordance with Section 23(1) of the Act and does not show sufficient cause for the delay. It is important to note that the legislature in this regard has not provided for an

20.

Section 24(3), 1996 Arbitration Act.

129

Martin Hunter, Shashank Garg & Simon Weber automatic termination of the proceedings in case of a delay caused by a party but has given the power to the arbitral tribunal to decide on the termination.”’ However, if the claimant can justify the delay, the arbitral tribunal has the power to accept the statement of claim even alter the deadline under Section 23(1) of the 1996 Arbitration Act.*7 In Wanbury Ltd v. Candid Drug Distributors the Supreme Court held that the statement of claim along with the evidence can be filed by the claimant either within the period of time agreed upon by the parties or as directed by the arbitral tribunal. This is because the arbitral tribunal has the implicit power under Section 23(1) of the 1996 Arbitration Act for determining the time period for filing a statement

of claim.**

Moreover, Section 25(a) of the 1996 Arbitration Act states in the negative that the arbitral tribunal can terminate the proceedings if the parties cannot show ‘sufficient cause’ for a delay in communicating their submissions.“ It can also grant an extension to the claimant to file its statement of claim.*° This includes the power of the arbitral tribunal to accept a statement of claim even after having issued an order terminating the proceedings. In Srei Infrastructure Finance Limited v. Tuff Drilling Private Limited the Supreme Court noted that the non-use of the phrase ‘the mandate of the arbitral tribunal shall terminate’ under Section 25(a) as found in Section 32(3) of the 1996 Arbitration Act had to be treated with a purpose and object.*° Section 25(a) of the Act provides that ‘the arbitral tribunal shall terminate the proceedings’ as opposed to the termination of the ‘mandate’ of the arbitral tribunal as envisaged under Section 32(3) of the Act. The termination of the mandate of an arbitral tribunal means that the tribunal is rendered functus officio in accordance with Section 32(1) of the Act, once the final award is issued or for the reasons stated in Section 32(2) of the Act. On the contrary, Section 25(a) of the Act constitutes a stalemate provision wherein the arbitral tribunal is precluded from continuation of the arbitral proceedings on account of the inaction of a party, i.e. upon non-submission of the statement of claim. 7.4.2

Statement of Defence

In the statement of defence, the respondent replies to the statement of claim submitted by the claimant, addressing all points raised by the claimant. The aim of the statement of defence is to give the respondent the opportunity to provide the arbitral tribunal with 21. Awasthi Construction Co. v. Govt. of NCT of Delhi & Anr. 2013 (1) Arb. LR 70 (Del) (DB); Bharat Heavy Electricals Limited v. Jyothi Turbopower Services Private Limited & Ors. 2017 (1) Arb. LR

289 (Mad).

22. Wanbury Ltd. v. Candid Drug Distributors (MANU/MH/1412/2015); Ramesh D. Shah & Ors. v. Tushar D. Thakkar & Ors (MANU/MH/3067/2017).

23. Wanbury Ltd. v. Candid Drug Distributors (MANU/MH/1412/2015), para. 38. 24. See Section 25, 1996 Arbitration Act: ‘Unless otherwise agreed by the parties, where, without showing sufficient cause, (a) The claimant fails to communicate his statement of claim in accordance with subsection (1) of section 23; the arbitral tribunal shall terminate the proceed-

ings; [...].’ 25. Aravali Power Company P. Ltd. v. M/s. Era Infra Engineering Limited (2017) 15 SCC 32; Srei Infrastructure Finance Limited v. Tuff Drilling Private Limited (2018) 11 SCC 470. 26. Srei Infrastructure Finance Limited v. Tuff Drilling Private Limited (2018) 11 SCC 470.

130

Chapter 7: The Conduct of Arbitral Proceedings in India its own version of the dispute ensuring that the most basic principles of due process are complied with. In particular, Section 18 of the 1996 Arbitration Act states that the parties shall be treated with equality and each party shall be given full opportunity to present its case. Finally, pursuant to Section 23(2-A) of the Act, the respondent also has the right to submit a counterclaim or plead a set-off in response to the initial claim of the other party, which shall be decided by the arbitral tribunal if such counterclaim or set-off falls within the scope of the arbitration agreement. This ensures that the counterclaims raised by the respondent are decided in the same arbitral proceedings. This is to avoid a multiplicity of proceedings*’ and eliminate the possibility of contradictory awards being rendered. It is important to mention that this provision was inserted in the 1996 Arbitration Act by way of the 2015 Amendment. However, this does not mean that counterclaims could not be heard and decided in the same arbitral proceedings prior to the insertion of Section 23(2-A) of the Act.** 7.4.3

Further Written Pleadings

After the hearing, the arbitral tribunal has the discretion to give the parties the opportunity to submit post-hearing briefs that address and clarify issues that have arisen during the hearing, if any. Section 23(3) of the 1996 Arbitration Act allows both parties to amend or supplement their claims and defences during the arbitral proceedings unless otherwise agreed to by the parties and unless the arbitral tribunal considers it inappropriate on account of unreasonable delay which such amendment(s) would cause. As already discussed above, party autonomy is the pre-eminent factor in an arbitration proceeding. Therefore,

if the parties have agreed that there shall be no addition, alteration,

deletion, substitution or amendment to any part of the pleadings or documents already placed before the arbitral tribunal, then any reception of material by the tribunal would be prohibited. As a result, any award by the arbitral tribunal based on such material can be set aside.”” 7.4.4

Extension of Time for Arbitral Proceedings and Making of Arbitral Award

It is also important to mention that the 2019 Amendment provides for a six-month timeline for the filing of the statement of claim and the statement of defence from the date the arbitrator or arbitral tribunal receives notice of its appointment. Moreover, the twelve-month period for the conclusion of the proceedings (extendable by a further six months and thereafter by the court) that was introduced in Section 29A(1) by way of the 2015 Amendment is now to be reckoned from the date of completion of pleadings 27.

Report No. 246, Amendments to the Arbitration and Conciliation Act, 1996, Law Commission of

28.

State of Goa v. Praveen Enterprises (2012)

India, Government of India, p. 52, see para. 13.

12 SCC 581, para. 32.

29. P.C. Markanda, Naresh Markanda & Rajesh Conciliation (LexisNexis, 9th ed. 2016) p. 802.

131

Markanda,

Law

Relating

to Arbitration

and

Martin Hunter, Shashank Garg & Simon Weber instead of the date of constitution of the arbitral tribunal (which was the position under

the 2015 Amendment).

Interestingly, the foregoing predetermined timelines are no longer applicable to international commercial arbitrations as the provision states that the ‘award in matters other than international commercial arbitration’ shall be made within twelve months.*! Furthermore, the 2019 Amendment also modifies the position when an application under Section 29A of the 1996 Arbitration Act is pending before the court. The consequence is that the mandate of the arbitral tribunal shall now continue until the disposal of the court application, thereby ensuring continuity of the arbitral proceedings until the disposal of the Section 29A application. This amendment remedies the difficulty that plagued the un-amended Section 29A(4) of the 1996 Arbitration Act. Before, the issue of docket explosion and pendency olf cases delayed the adjudication of application seeking extension of time for the completion of the arbitration proceedings. Consequently, the arbitral proceedings went in limbo which, in turn, created a rupture in the continuity of such proceedings, thereby grievously delaying the entire

process. Zo

COLLECTION OF EVIDENCE

Broadly speaking, there are two ways in which collection of evidence takes place in an arbitral proceeding in India - either the evidence is submitted by the parties or the tribunal itself collects it. This part of the Chapter lays out how the 1996 Arbitration Act addresses issues such as admissibility and the taking of evidence by different means. It is noteworthy that Section 24(3) of the Act states that all statements, documents or other information one party submits to the arbitral tribunal shall be communicated to the other party to ensure that the rules of due process are complied with. As a corollary to the foregoing provision, even when an arbitral tribunal collects evidence itself and relies upon the same to arrive at its findings, it needs to share the evidence so collected with the parties. This is particularly relevant from the perspective of Section 34 of the Act inasmuch failure to share the evidence with the parties opens the doors for the parties to set aside the arbitral award before the domestic courts. The 1996 Arbitration Act is silent on many aspects on the taking of evidence. In the absence of express provisions in the arbitration agreement as to the procedure to be adopted for the taking of evidence, the parties or the arbitral tribunal can, in accordance with the provisions of Sections 19(2) and 19(3) of the Act, adopt the IBA Rules on the Taking of Evidence in International Arbitration and the rules contained in Articles 5 and 6 thereof.

30. See Section 29A(1), 1996 Arbitration Act as amended by the 2019 Amendment. 31.

Ibid.

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Chapter 7: The Conduct of Arbitral Proceedings in India 7.5.1

Admissibility, Relevance, Materiality and Weight of Any Evidence

There are not many rules on the taking of evidence in the 1996 Arbitration Act. The only relevant provisions contained in the Act are Sections 19(1), 19(4) and 27: Section 19. Determination of rules of procedure. (1) The arbitral tribunal shall not be bound by the Cade of Civil Procedure, 1908 (5 of 1908) or the Indian Evidence Act, 1872 (1 of 1872).

(4) The power of the arbitral tribunal under sub-section (3) includes the power to determine dence.

the admissibility,

relevance,

materiality and weight of any evi-

The corollary of Section 19(1) of the 1996 Arbitration Act is that the strict exclusionary rule under the Indian Evidence Act, 1872 does not apply stricto sensu to arbitral proceedings. Consequently, hearsay evidence becomes admissible under the Act. Therefore, it follows that a denied document or documents proved by a person or persons not the author(s) of or in receipt of the documents may be admissible before the arbitral tribunal. In this context, the safeguard mechanism provided by the legislature in subsection (4) of Section 19 of the 1996 Arbitration Act is apposite inasmuch as the arbitral tribunal has to, at first, ‘determine the admissibility’ of the evidence and, if admitted, evaluate its probative value in light of its ‘relevance, materiality and weight’. The word ‘admissibility’ as used in Section 19(4) of the 1996 Arbitration Act implies that the arbitral tribunal decides whether or not to admit a document. Similarly, the purpose of the phrase ‘relevance, materiality and weight of any evidence’ as mentioned in Section 19(4) of the Act is also noteworthy. The term ‘relevance’ of evidence means the evidentiary value of a document submitted or statement made before the arbitral tribunal in the context of the issue in question and, therefore, describes the tendency to make the existence of a fact less or more probable, as the case may be, that may be of some consequence in a case.** The term ‘materiality’ on the other hand deals with the cause-and-effect equation; i.e., if some evidence has been offered by a party in support of its case, then its presence must affect an issue.** Finally, the term ‘weight’ refers to the probative value or the cogency of evidence that has been offered by a party; i-e., the arbitral tribunal determines the importance it attaches to a piece of evidence in the context of deciding the issues.” It deserves mention that the term ‘weight’ was added to the text of the UNCITRAL Rules, 1976 at 32. Pilkov Konstantin, Evidence in International Arbitration: Criteria for Admission and Evaluation. Arbitration, The International Journal of Arbitration, Mediation and Dispute Management (2014). 33. James A. Wright, The Use of Hearsay in Arbitration, available at https://naarb.org/proceedings /pdfs/1992-289.pdf. It deserves mention that while under common law the concepts of ‘relevance’ and ‘materiality’ merge, these are treated as separate for the purposes of arbitration, particularly under Section 19 of the 1996 Arbitration Act. 34. Joeseph N. McCarthy Mbadugha, Impact of Party Autonomy and Fair Hearing on Assessment of Evidence in International Arbitration (2015), available at http://zurnalai.vu.lt/teise/article/ download/9835/7824.

133

Martin Hunter, Shashank Garg & Simon Weber the final stage of the drafting process to emphasise the wide discretion given to the arbitrators.*° Therefore, the ‘weight of any evidence’ arguably becomes the most important factor with regard to the competences of the arbitral tribunal in considering the evidence during the arbitral process. 7.5.2

Forms of Evidence

Evidence may be submitted in any form including written documents, statements of witnesses and/or experts or inspection of the subject matter. 7.5.2.1

Documentary Evidence

It is also an implied rule that parties, at the time of submitting their written pleadings, are to submit all documents which are considered to be relevant and add a reference to the documents or other evidence proposed to be submitted at a later stage. It is common to submit all evidence the parties refer to in their written submissions. Section 23(2) of the 1996 Arbitration Act takes up this principle by stating that the parties may submit all documents they consider relevant at the time of filing their written submissions. Although it is advisable to do so as it facilitates the arbitral tribunal's understanding of the parties’ requests, it is not uncommon for Indian parties to submit documentary evidence at a later stage as well. This, of course, is subject to the procedure agreed upon by the parties. If the procedure is silent on this matter the arbitral tribunal may consider the relevance of the evidence and take into account the reason for the delayed submission when it decides on the admissibility of the evidence. This aspect becomes critical in light of the 2019 Amendment given that the text of Section 34(2)(a) of the 1996 Arbitration Act has been significantly modified. Whereas an aggrieved party was required to ‘furnish proof!’ before the court to justify interference with an arbitral award, the 2019 Amendment clarifies that an aggrieved party would now have to make out a case before the court — exclusively ‘on the basis of the

record of the arbitral tribunal’.*®

Further, the tribunal has the power to order document production on its own initiative. In accordance with Section 27(1) of the 1996 Arbitration Act, the arbitral tribunal may make an application to national courts to get assistance in taking evidence.*” Parties have the right, with the approval of the arbitral tribunal, to make an application to the national courts for assistance as well.

35. David D. Caron & Lee M. Caplan, UNCITRAL Arbitration Rules: A Commentary (OUP, 2nd ed.

2013), p. 573.

36. See Section 34(2)(a) of the 1996 Arbitration Act as amended by the 2019 Amendment. 37.

See Part 7.5.3 as well as Delta Distilleries Limited v. United Spirits Limited & Ors. (2014) 1 SCC

113; National Insurance Company Limited v. S.A. Enterprises (MANU /MH/2831/2015); Rasiklal Ratilal v. Fancy Corporation Ltd. & Ors. (MANU/MH/0188/2007).

134

Chapter 7: The Conduct of Arbitral Proceedings in India ree

Witnesses of Fact

If the nature of the dispute permits, it is common practice to ask witnesses for written statements to reduce time and costs. On this, the IBA Rules on the Taking of Evidence in International Arbitration provide useful guidance in Articles 4(4), (5) and (6). Based on the written statement of a witness, the arbitral tribunal and/or the parties may, if

considered relevant for the outcome of the dispute, examine a witness during a hearing. Whereas Part 7.6 of this Chapter deals more extensively with the conduct of a hearing it suffices here to state some common rules. Generally, a lot of flexibility is given to the arbitral tribunal when it comes to the examination of witnesses. It can choose between several techniques. Either the arbitral tribunal allows the witness to deliver its statement and then moves on to questions without allowing the parties to intervene or it may allow the parties to examine the witness as well. In the former case, the arbitral tribunal will do most of the work and take the lead in examining the witness in an attempt to reduce both time and costs. Yet, it is common practice for the party presenting the witness to start with a direct examination, followed by cross-examination by the other party. Finally, the presenting party is usually given an opportunity to conduct a redirect examination before the arbitral tribunal asks its own questions. The making of a false witness statement under oath as well as the submission of false documentary evidence to the arbitral tribunal can give rise to criminal proceedings.*” Under Section 193 of the Indian Penal Code 1860, a person giving false evidence under oath can ‘be punished with imprisonment of either description for a term of up to seven years’ and be ordered to pay a fine.

7.5.2.3

Expert Evidence*”

While Section 26 of the 1996 Arbitration Act does not preclude the parties from appointing expert witnesses to support their respective cases, it does grant the power to the arbitral tribunal to appoint experts unless the parties have agreed to otherwise. A direction issued by the arbitral tribunal for appointing of expert typically includes the expert's terms of reference, i.e. the nature of evidence sought from a particular expert, the form in which the expert's evidence shall be given and the maximum number of experts on whose evidence the parties may rely on. The arbitral tribunal may also specify the powers, if any, conferred upon an expert and/or the functions the expert shall perform along with a timeframe for submission of evidence/report(s) or completion of activities, as the case may be:

Section 26. Expert appointed by arbitral tribunal. (1)

38.

Unless otherwise agreed by the parties, the arbitral tribunal may (a) appoint one or more experts to report to it on specific issues determined by the arbitral tribunal, and

Section 191, Indian Penal Code,

1860.

to be

39. Guidance can be taken from the UNCITRAL Notes on Organizing Arbitral Proceedings, 2012, paras 70-73.

135

Martin Hunter, Shashank Garg & Simon Weber (b) require a party to give the expert any relevant information or to produce,

or to provide access to, any relevant documents, goods or other property for his inspection. (2) Unless otherwise agreed by the parties, if a party so requests or if the arbitral

tribunal considers it necessary, the expert shall, after delivery of his written or

oral report, participate in an oral hearing where the parties have the opportu-

nity to put questions to him and to present expert witnesses in order to testify

on the points at issue.

(3) Unless otherwise agreed by the parties, the expert shall, on the request of a

party, make available to that party for examination all documents, goods or

other property in the possession of the expert with which he was provided in

order to prepare his report.

It is interesting to note that each subsection under Section 26 of the 1996 Arbitration Act starts with the phrase ‘unless otherwise agreed by the parties’ meaning thereby that parties can agree on a procedure or modalities in relation to the appointment of an expert or expert(s) which shall be given effect to. However, in the absence of an agreement between the parties, the arbitral tribunal can exercise vast discretionary powers in respect of appointment and examination of experts. Accordingly, experts may be appointed and called upon to submit a written statement, provide an oral statement, or be examined at a hearing. Expert evidence is almost invariably presented in the form of a written report, which is produced prior to the hearing and on which the expert is examined at the hearing. 7.5.2.4

Site Inspections

Finally, another way of collecting evidence is by inspecting the subject matter of the dispute, where applicable, called ‘on-site’ inspections. This is common practice especially in construction disputes. The 1996 Arbitration Act does not contain any rules on on-site inspections. The arbitral tribunal may, therefore, exercise discretion on how such inspection is carried out subject to the provisions of Section 24(2) of the Act, which manifests that parties shall be given sufficient advance notice of any meeting of the arbitral tribunal in relation to the inspection of documents, goods or other property. It is preferable to establish clear rules on the conduct of the visit, before inspecting the site. Article 7 of the IBA Rules on the Taking of Evidence dealing with ‘inspection’ provides guidance in this context. 7.5.5

Court Assistance in Taking Evidence

Having Jaid out the different forms of evidence, it is important to note that Section 27 of the 1996 Arbitration Act provides that the arbitral tribunal on its own motion, or any of the parties with the approval of the arbitral tribunal, desirous of taking assistance of the court in recording evidence may move an application before the court. It deserves mention that the requirement of prior approval being sought from the arbitral tribunal, in case a party wishes to apply to the court under Section 27, is not a matter of mere formality. It puts an obligation on the tribunal to apply its mind before allowing an

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Chapter 7: The Conduct of Arbitral Proceedings in India application to be made before the court.*° Such recourse may be required where complex questions of law are likely to arise or to obviate a charge of misconduct or bias in allowing or disallowing a piece of evidence.*' The application must inter alia specify the details of persons sought to be heard as a witness, the evidence sought to be obtained with particular details as to the ‘subject matter of the testimony’ and/or the description of the document(s) or property in question. This, presumably, is with the intention to address the crux of the controversy, to avoid a superfluous and timeconsuming exercise and to summon a person otherwise unwilling to appear before the arbitral tribunal to give evidence: Section 27. Court assistance in taking evidence.

(1) The arbitral tribunal, or a party with the approval of the arbitral tribunal, may

apply to the Court for assistance in taking evidence. (2) The application shall specify (a) the names and addresses of the parties and the arbitrators. (b) the general nature of the claim and the relief sought; (c) the evidence to the obtained, in particular, (i) the name and address of any person to be heard as witness or expert witness and a statement of the subject-matter of the testimony required; (ii) the description of a document to be produced or property to be

inspected. (3) The Court may, within its competence and according to its rules on taking evidence, execute the request by ordering that the evidence be provided directly to the arbitral tribunal. (4) The Court may, while making or order under sub-section (3), issue the same

processes to witnesses as it may issue in suits tried before it. (5) Persons failing to attend in accordance with such process, or making any other fault, or refusing to give their evidence, or guilty of any contempt to the arbitral tribunal during the conduct of arbitral proceedings, shall be subject to the like disadvantages, penalties and punishments by order of the Court on the representation of the arbitral tribunal as they would incur for the like offences in suits tried before the Court. (6)

In this section the expression “Processes” includes summonses and commis-

sions for the examination of witnesses and summonses to produce documents.

If a national court assists the arbitral tribunal in taking evidence, it will do so in accordance with the relevant provisions of the Indian Code of Civil Procedure, 1908. Considering that arbitration proceedings are quasi-judicial in nature, the court may, pursuant to Section 27(3) of the 1996 Arbitration Act, execute the request of the party or the arbitral tribunal, as the case may be, by ordering that the evidence be provided directly to the arbitral tribunal, thereby limiting the involvement of the court to

exerting compulsion.”

40. Hindustan Petroleum Corporation v. Ashok Kumar Garg (2007) | Arb LR 268 (Del), 372-373; see also Gail (India) Ltd. v. Fibcom India Ltd. (2013) 3 Arb. LR 362 (Del).

4]. P.C.

Markanda,

Naresh

Markanda

& Rajesh

Conciliation (LexisNexis, 9th ed. 2016) p. 841.

Markanda,

Law

Relating

42. NHAI v. Oriental Structural Engineers Ltd, 2013 (1) Arb LR 362 (Del) (FB). 43.

to Arbitration

and

R.S. Bachawat, Law of Arbitration & Conciliation (LexisNexis, 6th ed. 2010) Vol. 1, p. 1555.

137

Martin Hunter, Shashank Garg & Simon Weber An interesting aspect under Section 27 of the 1996 Arbitration Act is the term ‘any person’ used under Section 27(2)(c) of the Act. It covers not only witnesses but also the parties to the proceeding. Therefore, in an event where a party fails to appear before the arbitral tribunal, the tribunal can proceed ex parte as provided under Section 25(c) of the Act. At the same time, it cannot be ignored that the tribunal is required to make an award on the merits of the claim placed before it. For that purpose, if the consideration of any evidence becomes necessary even from a party that has failed to appear before it, the arbitral tribunal ought to have the power to get such evidence. Therefore, the phrase ‘any person’ cannot be read to whittle down the powers of the arbitral tribunal to seek assistance from the court where a person is not cooperating with the tribunal or where any evidence is required from a person. The Supreme Court has clarified that Section 27(2)(c) of the Act is an enabling provision and must be read as such.” 7.6

HEARINGS

In most commercial arbitrations a hearing is organised that brings together everyone that is involved in the dispute. Even though the parties have the right to be heard this does not include the right to an oral hearing.** There are disputes that do not require a hearing due to the inherently simple nature of the dispute or because the parties have chosen to submit the dispute under a fast track or expedited procedure (see above Part 7.2). However, as a matter of practicality, most arbitral tribunals prefer to hold a hearing. In India, Section 24(1) of the 1996 Arbitration Act states that unless the parties’ agreement provides otherwise, the arbitral tribunal has the power to decide if an oral hearing will be held. The hearing is not public. Therefore, the parties need to agree if third parties have the right to be present. The date and the location of the hearings are typically decided in advance (at the preliminary meeting or via email) with the consent of the parties. According to Section 20(3) of the Act, the arbitral tribunal may, unless otherwise agreed by the parties, meet at any place it considers appropriate for consultation among its members, for hearing witnesses, experts or the parties, for inspection of documents, goods or other property."° The broad wording of the clause allows the arbitral tribunal to hold hearings outside of India too. The relevant part of Section 24 of the 1996 Arbitration Act is reproduced hereunder: Section 24. Hearings and written proceedings. (1)

Unless otherwise

agreed

by the parties, the arbitral tribunal shall decide

whether to hold oral hearings for the presentation of evidence or for oral argument, or whether the proceedings shall be conducted on the basis of documents and other materials: provided that the arbitral tribunal shall hold

44. Delta Distilleries Limited v. United Spirits Limited & Ors. (2014) 1 SCC 113. 45. Section 18, 1996 Arbitration Act: ‘|...] each party shall be given full opportunity to present his 46.

case’. Bharat Aluminium v. Kaiser Aluminium

(2012) 9 SCC 552.

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Chapter 7: The Conduct of Arbitral Proceedings in India oral hearings, at an appropriate stage of the proceedings, on a request by a

party, unless the parties have agreed that no oral hearing shall be held:

Provided further that the arbitral tribunal shall, as far as possible, hold oral

hearings for the presentation of evidence or for oral argument on day-to-day

basis, and not grant any adjournments unless sufficient cause is made out, and

may impose costs including exemplary costs on the party seeking adjournment without any sufficient cause.

(2) The parties shall be given sufficient advance notice of any hearing and of any meeting of the arbitral tribunal for the purposes of inspection of documents, goods or other property.

(3) All statements, documents or other information supplied to, or applications made to, the arbitral tribunal by one party shall be communicated to the other party, and any expert report or evidentiary document on which the arbitral

tribunal may rely in making its decision shall be communicated to the parties.

The 1996 Arbitration Act is silent on the procedural aspect of how hearings are to be held. However, there are some trends in international arbitration that deserve attention. Before we summarise the common steps that an arbitral tribunal will follow when conducting a hearing, it is important to remind the reader of Section 18 of the Act. This part makes it clear that the parties must be treated equally and should be given full opportunity to present their case. After welcoming words by the arbitral tribunal and a short introduction of the people that are present, the arbitral tribunal opens the floor for the parties’ representatives to deliver their opening statements. These are usually to be kept short as the parties submit detailed written pleadings. At the heart of the hearing stands the examination of witnesses and experts, if any, and closing arguments. Alternatively, the parties may agree that there should be no opening and/or closing statement, or that the closing statement should be replaced by post-hearing briefs. The arbitral tribunal may also put questions to the counsel, witnesses and experts. Ordinarily, the aggrieved party presents its case first. Therefore, in a hearing on jurisdiction, it is usually the respondent that argues first. If the hearing is on merits (such as breach of contract, liability, and damages), the claimant argues first. In accordance with the Backstiegel method,*” some tribunals allocate a fixed and equal amount of time to each party,” allowing the parties to allocate the time at their own discretion. The methods may vary from one dispute to another. The 2019 Amendment has inserted Section 42A in the 1996 Arbitration Act, which incorporates a requirement for the arbitral tribunal, parties and the arbitral institution to maintain the confidentiality of all arbitration proceedings except where the disclosure of the award is necessary for the purpose of its implementation and enforcement. Recent times and the impact of the COVID-19 pandemic have accelerated the trend to more technology in arbitration. Whereas the arbitration community has gotten accustomed to use modern technology such as data rooms, videoconlerences and other 47. Arbitrator’s Case Management Experiences and Suggestions by Karl-Heinz Bockstiegel, available at http://www.arbitration-icca.org/media/4/7 128933544 1280/media012277182232190bckstie gel_in_liber_amicorum_briner.pdic.

48. Jan Paulsson, The Timely Arbitrator: Reflections on the Bockstiegel Method, 22 Arbitration International

19 (2006).

139

Martin Hunter, Shashank Garg & Simon Weber ordinary but helpful tools such as screens, microphones and the like, the social distancing rules implemented in most countries around the world have made it necessary to adapt. Of course, videoconferences found their way into the practice of arbitral tribunals a while ago. Hearings, however, used to be held in person. This has changed amidst the COVID-19 pandemic as closed hearing facilities have obliged the world of arbitration to ‘go virtual’. In September 2020, the Indian Arbitration Forum published a helpful protocol on ‘Virtual Hearings for Arbitrations’ outlining how the parties to arbitral proceedings should organise an online hearing.*” Explaining all steps would exceed the scope of this Chapter but for the sake of completeness we list a few: i) the arbitral tribunal's first procedural order should set out the modalities of the hearing, ii) different time zones must be taken into account to schedule the hearing properly, iii) the technology used must be functioning and secure, iv) the software used should be managed by an independent third party, v) technical assistance should be available, vi) the disputing parties must reach an agreement as to whether the hearing is recorded, vii) the technology should be tested before the hearing to avoid any disruption, viii) a moderator (e.g., the presiding arbitrator) must coordinate the hearing and ensure a civilised etiquette of all participants. 7.2

PROCEEDINGS AFTER THE HEARINGS

After the arbitral tribunal has held a hearing, it will take every necessary step to ensure that it is in a position to render a valid and enforceable arbitral award. The 1996 Arbitration Act is silent on the proceedings after the hearings. However, it is common for the arbitrators to request post-hearing briefs in case they need further information or clarifications to resolve the dispute. They are typically referred to as further ‘written submissions’ in domestic arbitrations in India. The written submissions succinctly describe the specific legal and factual issues raised by a party, address specific questions of the arbitral tribunal, contain a short final synthesis of the evidence and facts of the case as also the parties’ conclusions from the examination of the witnesses and experts at the hearing. Further, post-hearing briefs in the form of further written submissions also present an opportunity to the parties to draw the arbitral tribunal's attention to relevant facts that have emerged during the hearing and place them in the context of the parties’ claims and defences, which can be of great value to the arbitral tribunal when drafting the award.

49. Indian Arbitration Forum, JAF Protocol on Virtual Hearings or Arbitrations, September 2020. For further readings, see also Hogan Lovells, Hogan Lovells Protocol for the Use of Technology in Virtual International Arbitration Hearing, April 2020, available at https://www.hoganlovells. com/en/publications/hogan-lovells-protocol-for-the-use-of-technology-in-virtual-internationalarbitration-hearings; Chartered Institute of Arbitrators, Guidance Note on Remote Dispute Resolution Proceedings, April 2020, available at https://www.ciarb.org/media/8967 /remotehearings-guidance-note.pdf; International Chamber of Commerce, ICC Guidance Note on Possible Measures Aimed at Mitigating the Effects of the COVID-19 Pandemic, April 2020, available at https://icewbo.org/content/uploads/sites/3/2020/04/guidance-note-possible-measures-miti gating-effects-covid-19-english. pdf.

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Chapter 7: The Conduct of Arbitral Proceedings in India Further, the arbitral tribunal has the discretion to order the submission of ‘comprehensive’ or ‘all-inclusive’ post-hearing briefs. These briefs include all claims and legal arguments put forward by the parties as well as all witness and expert testimonies. These comprehensive submissions will then constitute the only basis for the tribunal's decision. None of the earlier submissions will then be considered when the arbitral tribunal takes its decision. Finally, at the end of the proceedings, the tribunal formally declares the proceedings closed, making it impossible for the parties to file any further submissions. It is, of course, possible for the parties (or one of them) to reopen the proceedings at any stage prior to the issuance of the award, which will make the tribunal functus officio — meaning that the arbitral proceedings are terminated. The only exception to this rule is the limited jurisdiction given to the arbitral tribunal under Section 33 of the 1996 Arbitration Act, which allows the tribunal to correct or interpret the award.

7.8

A WARNING: IN INDIA

The above has laid out complement this part, planning to engage in account. These are set

PITFALLS WHEN

CONDUCTING

ARBITRATION

rather descriptively how arbitrations are conducted in India. To we make use of the final paragraphs to remind the readers an arbitration in India of several pitfalls they must take into out below and cover: i) a departure from the agreement of the

parties, ii) a failure to submit the statement of claim, iii) the use of hearsay evidence,

iv) false witness statements and v) the reopening of the proceedings. Finally, it remains to be seen how the 2019 Amendment will be implemented in practice. In this regard, COVID-19 has undoubtedly delayed its proper application. However, the 1996 Arbitration has been used for 24 years now and is constantly evolving. As such, the advice of this Chapter remains true and applicable in the near future. 7.8.1

Failure to Comply with the Agreement of the Parties

Any failure by the arbitral tribunal to comply with the agreement of the parties must be regarded as misconduct, which may invalidate the final award made by the arbitral tribunal. It is absolutely essential that the arbitral tribunal respects the agreement of the parties (or the 1996 Arbitration Act in the absence of such agreement). Failure to comply may result in the refusal of the recognition and enforcement of the award made by the arbitral tribunal on ground of ‘failure of the tribunal to conduct the arbitral proceedings as per the agreement or failing such an agreement, as per the law of the country where the arbitration took place’.°” Moreover, in domestic or India-seated arbitrations, failure to comply with an agreement or the Act could therefore lead to a

50.

Article V(1)(d), New York Convention.

14]

Martin Hunter, Shashank Garg & Simon Weber refusal to recognise and enforce the award by the Indian courts pursuant to Section 34(2)(v) of the Act. 7.8.2

Failure to File the Statement of Claim

If a statement of claim has not been communicated to the arbitral tribunal (in accordance with Section 23(1) of the 1996 Arbitration Act), the arbitral tribunal is empowered to terminate the proceedings under Section 25(a) of the Act. The legislature has not provided for an automatic termination of the proceedings in case of a delay caused by a party but has given the power to the arbitral tribunal to decide on the termination in such cases. 7.8.3 Under the the Indian given that arbitration document testimony

law.” 7.8.4

Hearsay Evidence 1996 Arbitration Act, hearsay evidence is also permissible. This is because Evidence Act 1872 is not applicable in the arbitration proceedings. Hence, the concept of hearsay (derived from the Evidence Act) is not relevant to proceedings, a person who is neither the author nor in possession of the may provide testimony regarding the document. As a consequence, such would be considered admissible by an arbitral tribunal applying Indian

False Witness Statement

The making of a false witness statement under oath as well as the submission of [alse documentary evidence to the arbitral tribunal can give rise to criminal proceedings. Under Section 193 of the Indian Penal Code 1860, a person giving false evidence under oath can ‘be punished with imprisonment of either description for a term of up to seven years’ and be ordered to pay a fine. 7.8.5

Reopening the Proceedings after Closing

Subsequent to the regular hearings, the arbitral tribunal formally declares the proceedings closed, making it impossible for the parties to file any further submissions. It is, however, possible for the parties (or one of them) to reopen the proceedings at any stage prior to the issuance of the award. Only once the award is rendered, the tribunal will be functus officio — meaning that the arbitral proceedings are terminated.” The only exception to this rule is the limited jurisdiction given to the arbitral tribunal under Section 33 of the 1996 Arbitration Act, which allows the tribunal to correct or interpret

the award.

51. 52.

See the discussion in Part 7.5.1. See Section 32(1), 1996 Arbitration Act.

142

Chapter 7: The Conduct of Arbitral Proceedings in India The Flowchart of Arbitration Proceedings in India is as follows: Source: Authors’ own.

143

CHAPTER

8

Interim Measures Promod Nair & Shivani Singhal

Interim measures of protection may be sought from an arbitral tribunal or a court of law to protect the interests of a disputing party, preserve assets or even the status quo during the pendency of an arbitration. They may also be requested in order to prevent aggravation of a dispute. Interim measures of protection may be sought before or during an arbitration and in certain cases, even after the completion of the arbitral proceedings. This Chapter addresses the relevant sections of the Arbitration

Act applicable to an application for interim measures before both an arbitral

tribunal and a court. It considers the enforceability of provisional measures made by domestic and international arbitral tribunals. It also discusses the circumstances in and the extent to which interim measures may be made against or impact third parties.

8.1

INTRODUCTION

Interim measures provide an important remedy in domestic and international arbitration. Due to the time gap between a dispute arising and the making of an arbitral award, the subject matter of the dispute or important evidence may disappear, a party may suffer irreparable harm which cannot be remedied by an award of damages, and in some cases a counterparty may seek to make enforcement of a future award impossible by transferring its assets. In these situations, interim measures play a crucial role in enabling a party to protect its rights and property and ensure that an arbitral award can be effectively enforced against an award debtor. Both State courts and arbitral tribunals are empowered to order interim measures and a party seeking such measures should carefully consider which of the two fora to approach. Section 9 and Section 17 of the Arbitration and Conciliation Act 1996 (Arbitration Act or Act) empower a court to order interim measures and a similar power is conferred on an arbitral tribunal by Section 17 of the Act:

145

Promod Nair & Shivani Singhal Section 9: Interim measures,

etc. by Court —

|) A party may, before or during arbitral proceedings or at any time after the making of the arbitral award but before it is enforced in accordance with section 36, apply to a Court -

i. for the appointment of a guardian for a minor or person of unsound mind for the purposes of arbitral proceedings; or ii. for an interim measure of protection in respect of any of the following matters, namely: -

(a) the preservation, interim custody or sale of any goods which are the

subject-matter of the arbitration agreement; (b) securing the amount in dispute in the arbitration; (c) the detention, preservation or inspection of any property or thing which is the subject-matter of the dispute in arbitration, or as to which any question may arise therein and authorising for any of the afore-

said purposes any person to enter upon any land or building in the possession of any party, or authorising any samples to be taken or any observation

to be made,

or experiment

to be tried, which

may be

necessary or expedient for the purpose of obtaining full information or

evidence; interim injunction or the appointment of a receiver;

(d) (e) such other interim measure of protection as may appear to the court to be just and convenient,

and the Court shall have the same power for making orders as it has for the purpose of, and in relation to, any proceedings before it. 2) Where, before the commencement of the arbitral proceedings, a Court passes an order for any interim measure of protection under sub-section (1), the arbitral proceedings shall be commenced within a period of ninety days irom

the date of such order or within such further time as the Court may determine. 3) Once the arbitral tribunal has been constituted, the Court shall not entertain an application under sub-section (1), unless the Court finds that circumstances exist which may not render the remedy provided under section 17 efficacious. 17. Interim measures ordered by arbitral tribunal —

1) A party may, during the arbitral proceedings, apply to the arbitral tribunal— i. for the appointment of a guardian for a minor or person of unsound mind for the purposes of arbitral proceedings; or

ii. for an interim measure of protection in respect of any of the following matters, namely:—

(a) the preservation, interim custody or sale of any goods which are the subject-matter of the arbitration agreement; (b) securing the amount in dispute in the arbitration; (c) the detention, preservation or inspection of any property or thing

which is the subject-matter of the dispute in arbitration, or as to which any question may arise therein and authorising for any of the aforesaid purposes any person to enter upon any land or building in the possession of any party, or authorising any samples to be taken, or any observation to be made, or experiment to be tried, which may be

necessary or expedient for the purpose of obtaining full information or evidence;

(d) interim injunction or the appointment of a receiver; (e) such other interim measure of protection as may appear to the arbitral tribunal to be just and convenient,

and the arbitral tribunal shall have the same power for making orders, as the court has for the purpose of, and in relation to, any proceedings before it.

146

Chapter 8: Interim Measures 2) Subject to any orders passed in an appeal under section 37, any order issued by the arbitral tribunal under this section shall be deemed to be an order of the

Court for all purposes and shall be enforceable under the Code of Civil

Procedure, 1908 (5 of 1908), in the same manner as if it were an order of the Court.

This Chapter is divided into three parts. The first part deals with the scope of application of the Act, especially in relation to arbitrations seated outside India. The second part discusses the power, and limitations, of an arbitral tribunal to order interim measures. The third part deals with the competence of courts to order interim measures and issues of practice and procedure. 8.1.1

Scope of Application of the Arbitration Act

KK

—

Both Sections 9 and 17 are contained in Part I of the Act, which provides a legal framework for domestic arbitrations and international commercial arbitrations seated in India, although some provisions in Part I are now also available in respect of international commercial arbitrations seated outside India. The extent of the application of Part I provisions to international commercial arbitrations seated outside of India has been a controversial issue and has been the subject of much debate and criticism. Bhatia International v. Bulk Trading S.A.' was the first Supreme Court decision to hold that provisions of Part I of the Arbitration Act would also apply to international commercial arbitrations held outside India. The arbitration agreement in that case provided for arbitration as per the rules of the International Chamber of Commerce, and the seat of arbitration was Paris. The petitioner filed an application under Section 9 before an Indian court seeking interim measures of protection, including an injunction restraining the respondent from alienating its assets. On behalf of the respondent, it was contended that the application under Section 9 was not maintainable because Section 2(2) of the Arbitration Act states that Part I of the Act is only applicable to India-seated arbitrations. The Supreme Court rejected this contention and interpreted Section 2(2) to mean that while Part | would compulsorily apply to arbitrations which take place in India, regardless of the agreement between the parties, it would also apply to international commercial arbitrations held outside India unless the parties had expressly or impliedly excluded its application by agreement. In other words, parties to an international commercial arbitration seated outside India were at liberty to exclude the application of Part I provisions by agreement, but if they failed to do so, Part I would apply. The ratio of Bhatia International was followed in subsequent Supreme Court decisions.* However, in 2012, a Constitution Bench of five judges of the Supreme Court in Bharat Aluminium Company (BALCO) v. Kaiser Aluminium Technical Services Inc’

3.

. Bhatia International v. Bulk Trading 8.A. and Anr. (2002) 4 SCC 105. . For example, see Venture Global Engineering v. Satyam Computer Services Limited (2008) 4 SCC 190, where the Supreme Court held that since Section 34 in Part 1 of the Arbitration Act (which related to challenge of an arbitral award) was applicable to international commercial arbitrations seated outside India, a foreign award could also be challenged under Section 34. (2012) 9 SCC 552.

147

Promod Nair & Shivani Singhal overruled the decision in Bhatia International and held that Part I would have no application to international commercial arbitrations held outside India and that no application for interim relief would be maintainable under Section 9 in such arbitrations. The Constitution Bench however held that since Bhatia International had been consistently followed since 2002, ‘to do complete justice’ the new ruling would only apply prospectively to all arbitration agreements executed after 6 September 2012. Accordingly: — if the arbitration agreement providing for international commercial arbitration outside India was executed prior to BALCO, Part I would continue to be applicable to it unless expressly or implied excluded under the agreement. — if the agreement was executed after BALCO, there would be no possibility of obtaining interim relief under Section 9 in respect of arbitrations seated outside India.

8.1.2

Parliamentary Intervention with Respect to Arbitrations Seated Outside of India

Following the decision in BALCO, in August 2014 the Law Commission of India (the ‘Law Commission’) presented its 246" Report proposing several amendments to the Arbitration Act.* The Law Commission noted that although BALCO was ‘a step in the right direction’, it could deprive parties of an efficacious interim remedy in cases where the assets were located in India. After BALCO, a party to a foreign-seated international commercial arbitration which wanted to prevent dissipation of assets located in India during the pendency ol the arbitration had limited options — although it could obtain an interim order from a competent foreign court or the arbitral tribunal and [ile a fresh suit in India, the law does not permit direct execution of such an ‘interim’ order. Further, a suit simply for interim relief pending arbitration would not be maintainable.” To address this concern, the Law Commission proposed that, first, Section 2(2) be amended to state that Part I shall apply ‘only’ where the ‘seat’ (rather than place) of arbitration is in India. This was intended to overcome the problem created due to the prospective application of BALCO. Second, it recommended that a proviso be added to Section 2(2) to allow for Sections 9, 27,° 37(1)(a)’ and 37(3)* to apply even to foreign-seated international commercial arbitrations. This would, among other things,

4. Law Commission of India, Report No. 246 -‘Amendments to the Arbitration and Conciliation Act 1996’, 5 August, 2014, available at http://lawcommissionofindia.nic.in/reports/Report246.pdf. The Law Commission is an executive body established by the government of India to function as an advisory body to the Ministry of Law and Justice and suggest proposals for law reform. 5. Bharat Aluminium Co. v. Kaiser Aluminium Technical Services (2012) 9 SCC 552, para. 172-92.

6. Section 27 permits an arbitral tribunal, or a party with the approval of the arbitral tribunal, to apply to the court for assistance in taking evidence. 7. Section 37(1)(a) allows an appeal against an order refusing to refer the parties to arbitration under Section 8.

8. Section 37(3) provides that a second appeal against an order passed under Section 37 will not be maintainable, but the right to appeal to the Supreme Court will remain.

148

Chapter 8: Interim Measures enable a party to a foreign-seated interim measures in India. 8.2

international

commercial

arbitration

to obtain

THE POWER OF AN ARBITRAL TRIBUNAL TO ORDER INTERIM MEASURES: SECTION 17

For arbitrations seated in India, Section 17 of the Act provides the applicable rules governing the power of arbitral tribunals to order interim relief. This part sets out the scope and limits of the tribunal's power, discusses the nature of the order that a tribunal may make, the distinction between interim orders and interim awards and issues relating to enforcement. It also considers the ability of a tribunal to make orders against third parties and remedies available to challenge interim measures ordered by a tribunal. 8.2.1

Scope and Limits

The power to grant interim measures is discretionary. Generally, an applicant is required to establish: (i) a prima facie case in its favour, (ii) the balance of convenience being in favour of grant of the interim measure and (iii) that irreparable injury would be caused to the plaintiff if the relief requested is not granted.’ Section 17 of the Arbitration Act empowers an arbitral tribunal to grant interim measures. This provision has been substantially amended by the 2015 Amendment Act (the ‘2015 Amendment’). Prior to the 2015 Amendment, Section 17 did not illustrate the types of interim measures that could be granted by an arbitral tribunal. It stated that the arbitral tribunal could, at the request of a party, order a party to take any interim measure of protection that the arbitral tribunal considered necessary in respect of the subject matter of the dispute. It could also require a party to provide appropriate security in connection with such a measure. Parties could however restrict the power of the tribunal (to grant interim relief) by inserting provisions to this effect in the arbitration agreement. The 2015 Amendment ensured that the powers of an arbitral tribunal under Section 17 are aligned with the powers of a court under Section 9 by empowering the tribunal to grant all the measures which a court can grant under Section 9(1). The amended provisions also expressly recognised that the arbitral tribunal shall have the same power for making orders as a court for the purpose of, and in relation to, any proceedings before it. An order made by an arbitral tribunal is also deemed to be an order of the court for all purposes and is enforceable under the CPC in the same manner as an order of the court. Correspondingly, subsection (3) has been inserted in Section 9 to provide

that once

an arbitral

tribunal has

been

constituted,

a court shall not

entertain an application for interim measures unless circumstances exist which may render the remedy under Section 17 inefficacious. This amendment reflects the legislative intention that requests for interim measures should properly be addressed to 9. Gujarat Bottling Co. Ltd v. Coca Cola and Others (1995) 5 SCC 545.

149

Promod Nair & Shivani Singhal an arbitral tribunal and interim measures would only be ordered by a court in exceptional circumstances. Party autonomy, which was recognised under Section 17 earlier, has been dispensed with under the 2015 Amendment. This means that for Part I arbitrations, the remedy under Section 17 will always remain available to the parties, regardless of an agreement to the contrary between the parties. If the parties have resolved to have their arbitration conducted in accordance with institutional rules, the powers of the arbitral tribunal under such rules would supplement the provisions of Section 17. In case of any conflict between the powers granted to the tribunal under the applicable institutional rules and Section 17, the latter would likely prevail, although this situation remains to be tested by the courts. Another significant change introduced through the 2015 Amendment was that the arbitral tribunal could grant interim measures not only during the arbitral proceedings but also at any time after the making of the award and before its enforcement. However, this amendment was inconsistent with Section 32 of the Arbitration Act which provides that the arbitral proceedings shall be terminated by the final award, and the mandate of the arbitral tribunal shall terminate with the termination of the arbitral proceedings thereby rendering the tribunal functus officio." Once its mandate had terminated under Section 32, the arbitral tribunal would therefore be unable to exercise authority to order interim measures up to the time of enforcement of the award. This anomalous position has now been addressed by the 2019 Amendment Act and the words ‘or at any time after the making of the arbitral award but before it is enforced in accordance with section 36’ have been omitted from Section 17. Section 17 is not applicable to an arbitration seated outside India. For such arbitrations, an arbitral tribunal's power to grant interim measures will be determined by the laws of the seat of arbitration supplemented by any institutional rules of arbitration agreed to by the parties, as the case may be."! 8.2.2

Interim Order under Section 17: Interim or Partial Awards

Section 17 allows an arbitral tribunal to make ‘orders’ only. An interim order made under Section 17 is distinct from an interim award made under Section 31(6) of the Arbitration Act: — Under Section 2(1)(c), the definition of arbitral award in Part I of the Arbitration Act includes an interim award. Section 31(6) provides that an arbitral tribunal may, at any time during the arbitral proceedings, make an interim arbitral award on any matter with respect to which it may make a final arbitral award. Accordingly, any interim award made under Section 31(6) can be challenged in the same manner as a final award.” 10. For further discussion of functus officio, see Chapter 9 of the Handbook. 11. For a discussion of the seat and various laws applicable to an arbitration, see Chapter 6 of the Handbook. 12. Harinarayan G. Bajaj v. Sharedeal Financial Consultants Put. Ltd., AIR 2003 Bom 296.

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Chapter 8: Interim Measures — An interim order under Section 17 is, on the other hand, only an appealable only as an order under Section 37(2)(b). — While an interim award can only be either upheld or set aside in challenge proceedings, an appealable interim order could also be modified by the court. In short, Section 17 orders are appealable under Section 37(2)(b) and can be set aside, upheld or even modified by an appellate court. However, Section 31(6) awards may be challenged in the same way as final awards made by a tribunal. 8.2.3

Distinguishing Between Interim Orders and Interim Awards

Difficulties could often arise in practice in characterising a particular decision of an arbitral tribunal as an interim order or interim award. The nomenclature used by a tribunal need not be determinative, and judicial decisions have emphasised that the effect of the decision is to be considered in identifying whether a particular decision constitutes an interim order or an interim award. In Asian Electronics Ltd., Thane v. M.P. State Electricity Board,‘* a party challenged the maintainability of an appeal filed under Section 37(2)(b) against a Section 17 order made by the arbitral tribunal! on the ground that the order was in fact in the nature of an interim award made under Section 31(6). The court held that merely simply stating that the order was made under Section 17 would not automatically qualify it as an interim award. The court proceeded to look at the nature of the order made and concluded that it was not in the nature of a protective measure. The court found that the arbitral tribunal had expressed a definite opinion regarding the lis and on that basis directed payment. Therefore, the court held that the order was an interim award under Section 31(6) and the appeal filed against it under Section 37 was not maintainable for this reason. In McDermott International Inc. v. Burn Standard Co. Ltd.“ it was held that an interim award for the purposes of Section 2(1)(c) and Section 31 (6) is not one in respect of which a final award can be made; it should be a final award on the matters covered therein, but made at an interim stage. In this case, a partial award was made by the arbitrator, and the validity of the partial award was challenged on the ground that the Arbitration Act does not use the expression ‘partial award’, and as such, the arbitrator had no jurisdiction to make such an award. The court held that although the Arbitration Act does not use the expression ‘partial award’, if the partial award is final in respect of all matters which form the subject matter of the award, it would be an award for the purposes of Section 2(1)(c). A partial award is in effect and substance an interim award. In National Thermal Power Corporation Ltd. v. Siemens Aktiengesellschaft (SAG) the court observed that there exists a distinction between an interim award and a partial award in that, an interim award involves determination of a preliminary 13. Asian Electronics Ltd., Thane v. M.P. State Electricity Board, 2007 (3) MPLJ 203.

14. McDermott International Inc. v. Burn Standard Co. Ltd. (2006) 11 SCC 181. 15. National Thermal Power Corporation Ltd. v. Siemens Atiengesellschaft (2007) 4 SCC 451.

15]

Promod Nair & Shivani Singhal issue such as the jurisdiction of the arbitral tribunal or the liability of a party while a partial award has an immediate monetary impact. However, in practice the terms ‘interim award’ and ‘partial award’ are used interchangeably. Both are final in respect of the issues they decide and are binding on the parties in the same manner as a decree of the court. In this case, the petitioner had sought to challenge the partial award made by the arbitrator under Section 37 of the Arbitration Act, which relates to appealable orders (and not awards). The court held that the appeal under Section 37 was not maintainable. Therefore,

an order relating to interim measures

under Section

17 will not be

regarded as a final or binding award under the Arbitration Act. It will be treated as an appealable order under Section 37(2)(b). 8.2.4

Measures Against Third Parties

Is it possible for an arbitral tribunal to order interim relief affecting a third party? Under Indian law, the powers of arbitral tribunals are limited as compared to the courts in this respect, and the broad consensus of judicial decisions suggests that an arbitral tribunal cannot validly make interim orders affecting the rights and interests of third parties. The scope of an arbitral tribunal's power is limited to making orders which are within the scope of the reference made to it and the arbitration agreement. After the 2015 Amendment, the scope of an arbitral tribunal's power to grant interim measures has been widened. The amended Section 17 provides that an arbitral tribunal shall have the same power that a court has in relation to any proceedings before it. However, the scope of an arbitral tribunal power to order interim measures under Section 17 is still narrower than a court’s power to order interim measures under Section 9. In contrast to the powers of a court under Section 9, an arbitral tribunal may only issue orders against a party to the arbitration, and not against third parties.'® It is doubtful that the 2015 Amendment will have the effect of conferring on arbitral tribunals the power to make orders against third parties. This is by virtue of the fundamental principle that the jurisdiction of an arbitral tribunal is based on the consent of parties and cannot be exercised in respect of a party which has not consented to the jurisdiction on an arbitral tribunal. In Shakti International Private Limited v. Excel Metal Processors Private Limited,'”

which was decided after the 2015 Amendment entered into force, the Bombay High Court held that an arbitral tribunal could not appoint a court receiver under Section 17 since a court receiver functions under the supervision and control of the High Court. While noting that the amendment to Section 17 enables an arbitral tribunal to have the same power to make interim orders as a court, the court held that an arbitral tribunal is not itself a court and cannot do everything that a court can do. A court receiver of the Bombay High Court can only be appointed by that High Court and not by an arbitral tribunal. 16. M.D., Army Welfare Housing Organisation v. Sumangal Services Put. Ltd. (2004) 9 SCC 619. 17.

Shakti International Private Limited v. Excel Metal Processors Private Limited, 2017 SCC OnLine Bom

321.

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Chapter 8: Interim Measures As in the case of Section 9 orders, an arbitral tribunal would be guided by principles of the CPC in granting interim measures, in particular the three tests existence of a prima facie case in favour of the party seeking the measure, balance convenience being in favour of the measure granted and the real likelihood irreparable injury being caused if the measure asked for is not granted. 8.2.5

the of of of

Appeals and Review

An order by an arbitral tribunal granting or refusing to grant an interim measure under Section 17 may be appealed under Section 37(2)(b). Section 37(3) provides that no second appeal shall lie from an order passed in such appeal. Although a second appeal would not be maintainable, the parties would still be able to invoke the Supreme Court’s extraordinary jurisdiction under Article 136 of the Constitution of India by filing a petition seeking special leave to appeal. An application for setting aside of an interim award may be made under Section 34, even while the arbitral proceedings in respect of issues other than those decided in the interim award are continuing. If the order made by the arbitral tribunal is neither in the nature of an interim measure of protection under Section 17 nor an interim award, it cannot be challenged under either Section 37(2)(b) or Section 34. In Arun Kapur v. Vikram Kapur'® the court held that if appeals are allowed against orders which are not appealable orders under the Arbitration Act, it would be contrary to the scheme and object of the Arbitration Act and would frustrate the fundamental objective of minimising judicial intervention. Judicial decisions have also clarified that a court could hear appeals from orders of the arbitral tribunal falling under Section 37(2)(a)'? and (b), and from no other orders of the arbitral tribunal. 8.2.6

Enforcement

of Interim Measures

Prior to the 2015 Amendment, an arbitral tribunal could not issue any directions for enforcement of its interim orders, nor was there any express provision under the Arbitration Act for enforcement of these orders by courts.*” A party seeking enforcement of the order made under Section 17 would subsequently file a Section 9 petition for the same reliefs, on the basis of the order made by the arbitral tribunal. In Gulmali Amrullah Babul v. Shabbir Salebhai Mahimwala*' it was held that even though an arbitral tribunal had no power to enforce its order as an order of the court under Section 18. Arun Kapur v. Vikram Kapur, 2002 (61) DRI 495. 19. This provision relates to an appeal against an order accepting the pleas referred to in Section 16(2)

or (3) (i-e., the pleas that the arbitral tribunal does not have jurisdiction and that the

arbitral tribunal is exceeding the scope of its authority, respectively). 20. Supra n. 16. 21. Gulmali Amrullah Babul v. Shabbir Salebhat Mahimwala, Bombay High Court, Order, Arbitra-

tion Petition No. 410 of 2015 and Arbitration Petition (L) No. 1435 of 2015, 29 October 2015. See

also Magic Properties Private Limited v. Raj Pipla Co-operative Housing Society Limited, 2015 SCC OnLine Bom 6550.

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Promod Nair & Shivani Singhal 17, this would not prevent a court from passing a similar order, or passing an order on the same basis as the order passed by the tribunal, under Section 9. While Section 9 proceedings are not proceedings for execution of an order made by an arbitral tribunal, this does not mean that an order passed by an arbitral tribunal cannot be enforced in any manner whatsoever, even if the court takes the same view in Section 9 proceedings. Otherwise no party will comply with an order made by an arbitral tribunal. In Sri Krishan v. Anand** the Delhi High Court held that the assistance of the court for enforcement of an arbitral tribunal's order could be taken under Section 27(5) of the Arbitration Act, and a petition for the same reliefs under Section 9 would not be

maintainable. Section 27(5) inter alia provides that persons making any default, or guilty of any contempt to the arbitral tribunal during the conduct of arbitral proceedings, shall be subject to the like disadvantages, penalties and punishments by order of the court on the representation of the arbitral tribunal as they would incur for the like offences in suits tried before the court. Contempt of court proceedings could therefore be initiated against a party which does not comply with an order made by an arbitral tribunal. According to the Delhi High Court, a party’s remedy against default or contempt of an arbitral tribunal's order is to apply to the arbitral tribunal for making a representation to the court to award such punishment or penalty to the guilty party, as would have been incurred for default or contempt of the court. The arbitral tribunal would make such a representation to the court only upon being satisfied that there has been such default or contempt. Once a representation is received by the court from the arbitral tribunal, the court would be competent to deal with the party in default or contempt as if it were in default or contempt of an order of the court, i.e. either under the provisions of the Contempt of Courts Act or under the provisions of Order XXXIX Rule 2A of the CPC. The Delhi High Court's ruling in Sri Krishan regarding the maintainability of a Section 9 petition in such circumstances was distinguished in a later decision of the same court.** However, the Delhi High Court's application of Section 27(5) to such circumstances has been approved by the Supreme Court in Alka

Chandewar v. Shamshul Ishrar Khan.**

In BPTP Limited v. CPI India I Limited,” it was held that an order of the arbitral tribunal under Section 17 that is upheld by the court in appeal proceedings under Section 37(2)(a) shall be enforceable as an order of the court. After the 2015 Amendment came into force, Section 17 now expressly provides that any order issued by the arbitral tribunal under that Section shall be deemed to be an order of the court for all purposes and shall be enforceable under the CPC in the same manner as if it were an order of the court. However, an arbitral tribunal cannot make all the orders that a court can normally make for enforcement of its order. In Pradeep K.N.

v. The Station House Officer, Perumbavoor Police Station”

the arbitral

tribunal ordered repossession of a vehicle as an interim measure under Section 17, and

22. Sri Krishan v. Anand, 2009 (112) DRJ 657. 23. BPTP Limited v. CPI India I Limited, 2015 (4) Arb LR 410 (Delhi). 24. Alka Chandewar v. Shamshul Ishrar Khan, 2017 (7) SCJ 15. 25. Supra n.23. 26. Pradeep K.N. v. The Station House Officer, Perumbavoor Police Station, AIR 2016 Ker 211.

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Chapter 8: Interim Measures also appointed an advocate as a commissioner to take repossession of the vehicle, directly or with the assistance of the police. The court held that an order for repossession can only be enforced through a civil court, although a commissioner or receiver can be appointed for other purposes. Conferring the power of a civil court on an arbitral tribunal for passing an interim order does not mean that the arbitral tribunal is conferred with the power of enforcement. An arbitral tribunal inherently lacks the power to deal with any sovereign function or public law since its authority is founded in a contract. As regards enforcement of an interim award, since the definition of arbitral award

under the Arbitration Act expressly includes an interim award, it is enforceable as an award under Section 36. Section 36 provides for enforcement of an award in accordance with the CPC, in the same manner as if it were a decree of the court. An application for enforcement of an award may be made after the time period for filing an application to set aside the award under Section 34 has expired.*’ Prior to the 2015 Amendment, if an application for setting aside of an award was made under Section 34, Section 36 provided for an automatic stay of the enforcement proceedings. After the 2015 Amendment, a party seeking stay of the enforcement proceedings, while the application for setting aside of the award is pending, will have to make an application for grant of stay. The stay is not automatic. While considering an application for grant of stay of an award for payment of money, the court is required to have due regard to the provisions for grant of stay of a money decree under the CPC. Order XLI Rule 5(3) of the CPC provides that stay shall not be granted unless the court is satisfied that the applicant has given security for the due performance of the decree. Accordingly, a party seeking stay of enforcement of an award for payment of money may be directed to provide security in respect of the entire amount awarded to it, or such security as the court may deem fit. 8.3

THE POWER OF A COURT TO ORDER INTERIM MEASURES: SECTION 9

Under certain circumstances, recourse to the arbitral tribunal to receive an order for interim measures may not be possible or efficacious. This could be because the tribunal has not been constituted or due to limits on its powers to grant interim relief. In such circumstances, a party is entitled to approach the competent court for interim measures. Section 9 of the Arbitration Act allows a party to an arbitration agreement to apply to a court for interim measures before or during arbitral proceedings, or at any time after the making of the arbitral award. Yet, the application must be made before it is enforced in accordance with Section 36 of the Arbitration Act. A person who is not a party to the arbitration agreement cannot apply to the court for interim measures under Section 9,*° but as discussed below interim orders may be made against third parties.

27. For further discussion, see Chapter |] of the Handbook. 28. Firm Ashok Traders v. Gurumukh Das Saluja (2004) 3 SCC 155.

155

Promod Nair & Shivani Singhal If the arbitration agreement is contained in a document that is required to be stamped under the provisions of Indian law, then no interim measure of protection can be granted in respect of such arbitration agreement until the document has been duly

stamped. In SMS Tea Estates Pvt. Ltd. v. Chandmari Tea Company Pvt. Ltd.,?° the Supreme Court held that an application under Section 11 of the Arbitration Act for appointment of an arbitrator could not be acted upon until the document containing

the arbitration agreement was duly stamped.*” The court would be duty-bound to

impound an unstamped document, and send it for payment of the stamp duty. However, if a compulsorily registrable document was found to be not registered, the court could delink the arbitration agreement from the rest of the document and act upon it. The decision in SMS Tea Estates was applied in the context of a Section 9 petition in Avantha Holding Ltd. v. Osian’s Connoisseurs of ART (P) Ltd.*' In Avantha Holding the Delhi High Court impounded the document which contained the arbitration agreement, and held that if the petitioner failed to pay the stamp duty and penalty, as determined, the agreement would not be capable of being acted upon and an application for interim measures would not be considered. The interim measures contemplated under Section 9 are the appointment of a guardian for a minor or person of unsound mind for the purposes of arbitral proceedings, or grant of an interim measure of protection in respect of any of the following matters:

(a) the preservation, interim custody or sale of any goods which are the subject matter of the arbitration agreement;

(b) securing the amount in dispute in the arbitration; (c) the detention, preservation or inspection of any property or thing which is the subject matter of the dispute in arbitration, or as to which any question may arise therein and authorising for any of the aforesaid purposes any person to enter upon any land or building in the possession of any party, or authorising any samples to be taken or any observation to be made, or experiment to be tried, which may be necessary or expedient for the purpose of obtaining full information or evidence; (d) interim injunction or the appointment of a receiver; or (e) such other interim measure of protection as may appear to the court to be just and convenient.

29. SMS Tea Estates Put. Ltd. v. Chandmari Tea Company Put. Ltd. (2011) 14 SCC 66. 30. In addition to stamp duty which is in the nature of a tax payable under the Indian Stamp Act 1999 (as modified by State enactments) on the execution of specified instruments, certain instruments

are also required to be compulsorily registered with the office of the Registrar or Sub-Registrar constituted under the Indian Registration Act 1908. 31. Avantha Holding Ltd. v. Osian’s Connoisseurs of ART (P) Ltd., Delhi High Court, OMP 266 of 2011,.

156

Chapter 8: Interim Measures 8.3.1

Competent Court

It is important for a party to correctly identify the court which is competent to consider an application for interim measures. Section 2(1)(e) of the Arbitration Act defines the term ‘court’ and this definition serves to identify the court competent to grant interim

relief:**

— In arbitrations other than international commercial arbitrations: the principal Civil Court of the original jurisdiction, which would have jurisdiction over the subject matter of the arbitration if it were the subject matter of a suit, would have jurisdiction.’ The principal Civil Court of original jurisdiction may include a High Court having ordinary original civil jurisdiction. — Ininternational commercial arbitrations, a Section 9 petition may only be filed before a High Court having ordinary original civil jurisdiction over the subject matter of the arbitration, and in other cases, a High Court having jurisdiction to hear appeals from decrees of courts subordinate to it. Section 42 of the Arbitration Act provides that once an application under Part I has been made in a particular court, that court alone shall have jurisdiction over the arbitral proceedings. All subsequent applications arising out of that arbitration agreement and the arbitral proceedings shall be made in that court ‘and in no other Court’. This would be relevant in a situation where there are two or more courts of competent jurisdiction. If the contract confers exclusive jurisdiction on one of the courts of competent jurisdiction, a Section 9 petition filed before another court would not be

maintainable.* 8.3.2

Relevance of General Principles Governing Grant of Injunctions

In Adhunik Steels Ltd. v. Orissa Manganese and Minerals Pvt. Ltd., the Supreme Court has held that the exercise of power under Section 9 must be based on the wellrecognised principles governing grant of interim injunctions and other orders of interim protection.** According to the Supreme Court, the words appearing at the end of Section 9(1), that ‘the Court shall have the same power for making orders as it has for the purpose of, and in relation to, any proceedings before it’, suggested that the normal rules for grant of interim orders were not intended to be dispensed with. Moreover, when a party is given aright to approach an ordinary Indian court under the Arbitration Act, without providing a special procedure or a special set of rules, the ordinary rules followed by that court would govern the exercise of powers conferred by the Arbitration Act. 32. D.L.F. Industries Ltd. v. Standard Chartered Bank, AIR 1999 Del 11. 33. 34.

Section 2(1)(e) (i). Supra n. 32.

35. Adhunik Steels Ltd. v. Orissa Manganese and Minerals Pvt. Ltd. (2007) 7 SCC 125; Arvind Constructions Co. Pvt. Ltd. v. Kalinga Mining Corporation (2007) 6 SCC 798. Note that the court in Arvind Constructions expressed this view on a prima facie basis.

is?

Promod Nair & Shivani Singhal 8.3.2.1

Safeguard of the Interests of the Petitioner

There are some cases, decided after Adhunik Steels, where High Courts have held that

the principles under the CPC, which normally govern the grant of interim injunctions and other measures of protection, should not be strictly applied to Section 9 proceedings, and should only serve as guiding principles. For example, in Steel Authority of India Ltd. v. AMCI Pty Lid.*° the Delhi High Court referred to two Bombay High Court decisions where it was held that the court was not bound by the provisions of Order XXXVIII Rule 5 in considering an application under Section 9 for securing the amount in dispute, and concluded that the provisions of Order XXXVIII Rule 5 would ‘at the highest’ serve as guiding principles for the court to exercise its discretion. The requirements of Order XXXVIII Rule 5 need not be strictly satislied. The essential requirement was that the court should be satisfied that the furnishing of security by the respondent (as asked for as an interim measure in this case) was essential to safeguard the interests of the petitioner. In respect of each of the interim measures in Section 9(1) there are analogous provisions in the CPC for grant of similar measures, and the principles developed for grant of such measures under the CPC would likely provide useful guidance to the courts in exercise of their discretion in Section 9 proceedings. 8.3.2.2

The Preservation, Interim Custody or Sale of Goods

Section 9(1)(ii)(a) relates to grant of an interim measure for the preservation, interim custody or sale of any goods which are the subject matter of the arbitration agreement. Similar provisions are contained in Order XXXIX Rules 6 and 7 of the CPC. Order XXXIX Rule 6 allows the court to order sale of any property which is the subject matter of the suit, if it is subject to speedy and natural decay or, if for any just and sufficient cause it is desirable to have it sold at once. Order XXXIX Rule 7 allows a court to make an order for the detention, preservation or inspection of any property which is the subject matter of the suit. While the CPC provisions use the term ‘property’ which is the subject matter of a suit, Section 9 refers to ‘goods’ which are the subject matter of the arbitration agreement. The term ‘goods’ is not defined in the Arbitration Act but a definition of ‘goods’ as provided in the Sale of Goods Act 1930 (the “Sale of Goods Act’) may be relevant. Section 2(7) of the Sale of Goods Act defines goods as every kind of movable property other than actionable claims and money, and includes stock and shares, growing crops, grass, and things attached to or forming part of the land which are agreed to be severed before sale or under the contract of sale. In Navbharat Ferro Alloys Ltd. v. M/s. Continental Float Glass Ltd.*” where a Section 9 petition was filed by the petitioner for sale of equipment supplied to the respondent, and for which the respondent had failed to make full payment, the Delhi

36. 37.

Steel Authority of India Ltd. v. AMCI Pty Ltd., 2011 (3) Arb LR 502 (Delhi). Navbharat Ferro Alloys Ltd. v. M/s. Continental Float Glass Ltd., 1998 (45) DRJ 368.

158

Chapter 8: Interim Measures High Court held that the subject matter of the arbitration agreement was the claim for unpaid amounts, and not the materials supplied to the respondent. Later, in Sagar Warehousing Corporation v. Pawan Hans Helicopters Limited, a Division Bench of the Delhi High Court took a different view in similar circumstances. It allowed a seller of helicopters, who had not received full payment for the helicopters [rom the buyer under the sale agreement, to take possession of the helicopters and retain them. In this also the claim of the seller would have been for unpaid amounts, but the court held that the helicopters were the subject matter of the arbitration agreement. The approach in Sagar Warehousing Corporation appears to be the correct approach and the meaning of the term ‘subject matter of the arbitration agreement’ should not be limited to claims made by the parties, but should extend to the subject matter of the underlying

agreement, 8.3.2.3

Securing the Amount in Dispute

Section 9(1)(ii)(b) relates to grant of an interim measure for securing the amount in dispute in the arbitration. In deciding applications for such interim measures, some High Courts have held that the principles applicable for grant of an order of attachment before judgment under Order XXXVIII Rule 5 of the CPC can be used as guiding principles, while others have held that the requirements of Order XXXVIII Rule 5 cannot be read into Section 9(1)(ii)(b) of the Arbitration Act. Under Order XXXVIII Rule 5 of the CPC, the court has to be satisfied that the respondent, with intent to obstruct

or delay the execution of any decree that may be passed against him, is about to dispose of his property or remove it from the jurisdictional limits of the court. In Delta Construction Systems Ltd v. Narmada Cement Company Ltd.,** the Bombay High Court held that the power of the court to secure the amount in dispute in an arbitration is not hedged by the conditions set out in Order XXXVIII Rule 5. The court is only required to satisfy itself on the basis of material before it that an interim measure is required, and that if the amount in dispute is not secured, the award which

the petitioner may obtain will become a mere paper decree. In National Shipping Company of Saudi Arabia v. Sentrans Industries Ltd.*” the court agreed with the view taken in Delta Construction Systems and observed that the guiding factor for the exercise of power by the court under Section 9{1)(ii)(b) has to be whether such order deserves to be passed for justice to the cause. However, since such an order can have far-reaching implications, courts have emphasised that they would make such an order only in circumstances where there exists material to show a real likelihood of the opposite party taking steps to dissipate its assets to defeat the enforcement of a future

award.”

In a more recent decision, Nimbus Communications Limited v. Board of Control for Cricket in India,*' the Bombay High Court has held that the decision of the Division 38. 39. 40. 41.

Delta Construction Systems Ltd v. Narmada Cement Company Ltd., 2002 National Shipping Company of Saudi Arabia v. Sentrans Industries Ltd., See Brand Value Communications v. Eskay Video Put Ltd, AIR 2010 Cal Nimbus Communications Limited v. Board of Control for Cricket in India,

159

(104(2)) Bom LR 225. AIR 2004 Bom 136. 166. 2012 (5) Bom CR 114.

Promod Nair & Shivani Singhal Bench in National Shipping Company of Saudi Arabia was inconsistent with the Supreme Court’s decision in Adhunik Steels. The court held that the principles laid down in the CPC for grant of interlocutory remedies should inform the decision in an application under Section 9 and the underlying basis of Order XXXVIII Rule 5 should be borne in mind by the court while deciding an application under Section 9(1) (ii)(b). The approach of the Bombay High Court in Nimbus Communications is consistent with the approach of the Delhi High Court, which has held that the provisions of Order XXXVII Rule 5 of the CPC can be used as guiding principles in deciding petitions under Section 9(1) (ii)(b).*7 8.3.2.4

The Detention, Preservation or Inspection of Any Property

Section 9(1){ii)(c) provides for the detention, preservation or inspection of any property or thing which is the subject matter of the dispute in arbitration, or as to which any question may arise therein, and authorising for such purposes any person to enter upon any land or building in the possession of any party, or authorising any samples to be taken or any observation to be made, or experiment to be tried, which may be necessary or expedient for the purpose of obtaining full information or evidence. The language of this provision is almost identical to the language of Order XXXIX Rule 7 of

the CPC. 8.3.2.5

Interim Injunction or Appointment of a Receiver

Section 9(1)(ii)(d) provides for grant of an interim injunction or appointment of a receiver. Where an interim injunction is sought, the court is usually guided by the principles applicable to grant of interim injunctions under Order XXXIX Rules 1 and 2 of the CPC, i.e. prima facie case, balance of convenience and whether irreparable injury

would be caused to either party.”

Appointment of receivers is provided for in Order XL of the CPC, and the principles relating to appointment of receivers under general law have been applied to appointment of receivers under Section 9 also.** In Firm Ashok Traders v. Gurumukh Das Saluja** the Supreme Court has held that the most basic principle governing the discretion of the court in appointing a receiver is whether it is just and convenient to do so, and that appointment of a receiver for a running business is a serious matter which could potentially affect the day-to-day activities of the business. In Shin Satellite Public Company Ltd. v. Jain Studios Ltd.“* the court has provided more detailed guidance for appointment of receivers under Section 9. It has held that a

42.

Goel Associates v. Jivan Bima Rashtriya Avas Samati Ltd., 2004 (3) Arb LR 289 Authority of India Ltd. v. AMCI Pty Ltd., 2011 (3) Arb LR 502 (Delhi).

(Del); Steel

43. Jain Housing and Constructions Limited v. Mr. V. Ramaiah and City Land Corporation (2009) 5 44. 45.

MLJ 225. Shin Satellite Public Company Ltd. v. Jain Studios Ltd., 2008 (2) Arb LR 242 (Delhi). Supra n. 28.

46. Supra n. 44.

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Chapter 8: Interim Measures receiver should be appointed when there is no other adequate remedy or means of accomplishing the desired object of the judicial proceeding. The applicant should not only show a conflicting claim to the property but must also show imminent danger of damage or loss to the property, requiring immediate action. The applicant should also be able to show that it has a prima facie case in its favour. Where the defence set up by the respondent is bona fide and the proposition of law is arguable, it is not advisable for the court to appoint a receiver to take possession of immovable property from the respondent unless the court is of the opinion that there is a well-founded fear that the property will be dissipated or that other irreparable mischief may be done unless the court grants protection. Normally a receiver will not be appointed where this has the effect of depriving a respondent of de facto possession which may cause him irreparable loss. The conduct of the parties is also relevant. 8.3.2.6

Any Other Necessary Interim Measure of Protection

Section 9(1)(ii)(e) provides for grant of any other interim measure of protection that may appear to the court to be just and convenient. In Ashok Kumar v. SBI Officers Association®’ it has been held that the term ‘just and convenient’ provides wide discretion to the court to mould the interim relief required for safeguarding the rights of the parties, but this discretion should be exercised judiciously and not capriciously or in an arbitrary manner. 8.3.3

Taking into Account the Conduct of the Disputing Parties

In deciding any Section 9 petition, the court may also take into account factors such as the conduct of the parties and delay in filing the Section 9 petition. In S. Raminder Singh v. NCT of Delhi* the petitioner had failed to disclose the fact that he had instituted other legal proceedings (including a civil suit and writ proceedings) for claiming similar reliefs and that his request for relief in these other proceedings was denied by the respective courts where the proceedings were instituted. On the contrary, the Section 9 petition contained a statement that the petitioner had not instituted any similar petition before that court or any other court. The court held that the Section 9 petition was liable to be dismissed on this ground alone since the petitioner had not approached the court with clean hands. Section 9 allows a party to apply lor interim measures of protection which may appear to the court to be just and convenient. It is a discretionary remedy, and in seeking such remedy the petitioner is bound to approach the court with clean hands and not to conceal any facts. In Uppal Eng. Co. (P) Ltd. v. Cimmeo Birla Ltd.*? where the petitioner had failed to disclose that it had filed an application under Section 17 for seeking similar reliefs from the arbitral tribunal, the court held that since

47.

Ashok Kumar v. SBI Officers Association, 2013 (3) Arb LR 246 (Delhi).

49.

Uppal Eng. Co. (P) Ltd. v. Cimmeo Birla Ltd., 2005

48. S. Raminder Singh v. NCT of Delhi, 102 (2003) DLT 511.

lol

(2) Arb LR 404 (Delhi).

Promod Nair & Shivani Singhal the petitioner had suppressed material facts, it was not entitled to relief under Section 9 on this ground alone. In Brawn Laboratories Ltd. v. Rhone Poulenc Rorer S.A.*’ the petitioner had been granted an exclusive licence by the respondent for the marketing of a certain drug. The respondent terminated the licence agreement and started marketing the drug through other companies. The petitioner filed a Section 9 petition about three years after the termination of the licence agreement seeking to restrain the respondent from marketing the drug through other companies. The court held that even assuming the petitioner had a case on merits, it was not entitled to the interim injunction sought because of the delay in making the application. 8.3.3.1

Ex Parte Orders

In considering an application for ex parte ad interim injunction, courts are generally required to adhere to the provisions of Order XXXIX Rule 3:° Order XXXIX Rule 3, Code of Civil Procedure: Rule 3- Before granting injunction, Court to direct notice to opposite party

The Court shall in all cases, except where it appears that the object of granting the injunction would be defeated by the delay, before granting an injunction, direct notice of the application for the same to be given to the opposite party:

Provided that, where it is proposed to grant an injunction without giving notice of the application to the opposite party, the Court shall record the reasons for its opinion that the object of granting the injunction would be defeated by delay, and require the applicant (a)

to deliver

to

the

opposite

party,

or to send

to him

by

registered

post,

immediately after the order granting the injunction has been made, a copy of the application for injunction together with — i. a copy of the affidavit filed in support of the application; ii. a copy of the plaint; and

iii. copies of documents oil which the applicant relies, and to file on the day on which

such injunction is granted

or on the day

immediately following, that day, an affidavit stating that the copies aforesaid have been so delivered or sent.

Order XXXIX Rule 3 provides that before granting an injunction, the court should direct that notice be given to the other party, unless it appears that the object of granting the injunction would be defeated by the delay. If the court decides to grant an injunction without first giving notice of the application to the other party, it is required to record its reasons for the opinion that the object of granting the injunction would be defeated by delay. It is also required to direct the applicant to deliver a copy of the application to the other party immediately and to file an affidavit, on the day that the

50.

Brawn Laboratories Ltd. v. Rhone Poulenc Rorer S.A.,

1999 (2) Arb LR 297 (Delhi).

51. Vascon Engineers Ltd. v. Sansara Hotels India Pvt. Ltd., 2009 (4) Bom CR 220; Tata Steel Processing & Distribution Ltd. v. Unit Construction Company Put. Ltd., 2012 (2) CHN 245.

162

Chapter 8: Interim Measures injunction is granted or the following delivered or sent to the other party. 8.3.3.2

day, stating that the application

has been

Third Parties

Section 9 does not specify whether a court may order interim measures against third parties. High Courts have generally acknowledged that interim measures may be granted against third parties if they derive their rights from, or claim under, a party to the arbitration agreement. In cases where courts have granted interim measures against third parties in Section 9 proceedings, they have generally been reluctant to lay down any general principles regarding when such interim measures may be granted. It has been held that if any general principles are laid down, this will hamper the efficacy of Section 9.°* Whether an interim measure of protection ought to be granted against a third party will therefore be determined

on the facts of each

case. However,

the trend of decision-

making by the Indian courts indicates that interim measures may be ordered against third parties if they derive their rights from, or claim under, a party to the arbitration agreement or who have an interest in property which is the subject matter of the dispute. In certain circumstances, the courts would also be prepared to make garnishee orders against third parties. In Shoney Sanil v. Coastal Foundations (P) Ltd.** the Kerala High Court held that interim measures under Section 9 can be issued only against a party to the arbitration agreement, ‘or at best, any person claiming under him’. However, in Girish Mulchand Mehta and Durga Jaishankar Mehta v. Mahesh S. Mehta and Harini Cooperative Housing Society Ltd.** the Bombay High Court adopted a more expansive approach. In this case, the application for interim relief was filed to seek appointment of a court receiver to take vacant possession of a building which was the subject of a redevelopment agreement between the petitioner and the respondent society. Since the building was occupied by third parties (who were members of the respondent society), the principal relief sought would have affected such third parties, and therefore they were also impleaded in the Section 9 petition. The court held that it could pass an order against the third-party occupants of the building since their rights were derived from the respondent society, and they did not have any independent rights; an award against the respondent society would be binding on them as well. The court also observed that the court’s jurisdiction under Section 9 is not limited to ordering interim measures against a party to the arbitral agreement or the arbitral proceedings. This suggested that the court’s powers were not confined to granting interim measures against those third parties who derived their rights from, or claimed under, a party to the arbitration

agreement.

52. Value Advisory Services v. ZTE Corporation, 2009 (3) Arb LR 315 (Delhi). 53.

Shoney Sanil v. Coastal Foundations

(P) Ltd., AIR 2006 Ker 206.

54. Girish Mulchand Mehta and Durga Jaishankar Mehta v. Mahesh §. Mehta and Harini Cooperative Housing Society Ltd., 2010 (1) Bom CR 31.

163

Promod Nair & Shivani Singhal Some High Court decisions have relied on Girish Mulchand Mehta in taking a more liberal approach to ordering interim measures against third parties even in situations other than where the third party derives its right from, or claims under, a party to the arbitration agreement. For example, in Value Advisory Services v. ZTE Corporation” the petitioner sought an interim measure against a third party which was neither a party to the arbitration agreement nor in any way concerned with the dispute between the petitioner and the respondents. The third party had a separate agreement with the respondents under which it was allegedly required to make payments to the respondents. The petitioner sought interim measures to restrain the third party from releasing the money to the respondents and to direct the third party to deposit such amounts in court. The third party disputed the payments due to the respondents, which raised questions of fact. The court held that while it could not conduct a trial to decide the disputed questions of fact, it could form a prima facie view and exercise discretion in whether to grant the interim measures sought. On facts, the court restrained the third party from releasing the money to the respondents but did not order the third party to deposit this money in court. This decision is an example of a court granting an order in the nature of a garnishee order against a third party in Section 9 proceedings. In Dorling Kindersley (India) Pvt. Ltd. v. Sanguine Technical Publishers*® the Delhi High Court referred to Girish Mulchand Mehta and Value Advisory Services and held that the law is ‘well settled’ that under Section 9 the court is not powerless to order interim measures affecting a third party. There may arise situations where the court may have to pass orders affecting third parties. One such situation is where the order is sought against a party who is claiming or deriving title through a party to the arbitration agreement. Therefore,

according to the court, there could be other situa-

tions where interim measures against Some other decisions have held interim measures against third parties its rights, or was not claiming under, 8.3.3.3

third parties may be granted. that Girish Mulchand Mehta did not contemplate in situations where the third party did not derive a party to the arbitration agreement.*’

Limits Imposed by Institutional Rules on Indian Courts’ Intervention

In cases where parties have agreed to have their disputes arbitrated in accordance with institutional rules, such as the arbitration rules of the ICC, London Court of International Arbitration (LCIA) and Singapore International Arbitration Centre (SIAC), these

55. Supra n. 52. 56.

Dorling Kindersley (India) Pvt. Ltd. v. Sanguine Technical Publishers, 2013 (3) Arb LR 52 (Delhi).

57. Jai Neptune Co-operative Housing Society Limited v. Lotus Logistics & Developers Pvt. Ltd., Bombay High Court, Order, Arbitration Petition No. 1339 of 2014, 4 September 2015; Brahmapu-

tra Realtors Put. Ltd. v. G.G. Transport (P) Ltd., 2015 (2) GLT 137; Tapadiya Construction Ltd. v. Sanjay Suganchand Kasliwal, MANU/MH/3366/2015. See also National Agricultural Cooperative Marketing Federation of India Ltd. (NAFED) v. Earthtech Enterprises Ltd., Delhi High Court, Order, OMP No. 558 of 2007, 23 April 2009, where the court did not refer to any of the

earlier decisions but held that an application under Section 9 can be made only against a party to the arbitration agreement.

164

Chapter 8: Interim Measures institutional rules may impose limitations on a national court’s power to provide interim relief.°° For example, Article 28 of the 2017 ICC Rules of Arbitration provides that parties may apply for interim measures to a competent judicial authority before the file is transmitted to the arbitral tribunal and only ‘in appropriate cases’ thereafter. Article 25 of the 2014 LCIA Arbitration Rules provides that parties may apply to a state court or other legal authority for interim measures after the formation of the arbitration tribunal only ‘in exceptional cases and with the Arbitral Tribunal’s authorisation’. Article 30 of the 2016 SIAC Rules provides that a request for interim relief may be made to a judicial authority prior to the constitution of the arbitral tribunal, or in ‘exceptional circumstances’ thereafter. Therefore, the power of the parties to approach Indian courts for interim measures under Section 9 alter the constitution of the arbitral tribunal may be circumscribed by the applicable institutional rules. 8.3.4

Timing of the Application

The amended Section 9 provides that when a court passes an order for an interim measure of protection before the commencement of arbitral proceedings, the arbitration proceedings must be commenced within 90 days from the date of such order or within such further time as the court may determine. In Paton Constructions Private Limited v. Lorven Projects Limited”? it was held that the Section 9 order shall automatically stand vacated after 90 days (or such further time as may be allowed by the court) if the arbitral proceedings are not commenced within that time. Save as above, the Arbitration Act does not specify a time limit for operation of interim orders, and the time period for which they will operate will depend on the scope of the order itself. They may sometimes continue to operate for the duration of the arbitral proceedings, and even up to the time of enforcement. 8.3.4.1

Before the Commencement of Arbitral Proceedings

Section 9 expressly provides that a party may apply to the court for interim measures of protection before the commencement of arbitral proceedings. Under Section 21 of the Arbitration Act, unless the parties have agreed otherwise, arbitration proceedings in respect of a dispute commence on the date on which a request for referring the dispute to arbitration is received by the respondent. In Sundaram Finance Limited v. NEPC India Limited“ the Supreme Court held that a party may apply for an interim measure under Section 9 even before a notice under Section 21 for referring the dispute to arbitration is issued. If such an application is made, before making an interim order pursuant to the application, the court will have to be satisfied that there exists a valid arbitration agreement and that the applicant intends to refer the dispute to arbitration.

58. For further information on the arbitral tribunals listed see Chapter 17 of this Handbook. 59. Paton Constructions Private Limited v. Lorven Projects Limited, AIR 2017 Kant 135. 60.

Sundaram Finance Limited v. NEPC India Limited (1999) 2 SCC 479.

165

Promod Nair & Shivani Singhal To ensure that effective steps are taken to commence the arbitral proceedings, the court may, while exercising jurisdiction under Section 9, pass a conditional order. Prior to the 2015 Amendment, Section 9 did not stipulate a specific time period for commencement of arbitral proceedings after an order for interim measures of protection is made by a court. In Firm Ashok Traders v. Gurumukh Das Saluja®' the Supreme Court held that arbitral proceedings ought to be commenced within a reasonable time of a court making an order of interim measures of protection. If arbitral proceedings were not commenced within a reasonable time of an order under Section 9 being passed, the order would cease to operate. The Supreme Court also noted the need for courts to make enquiries about how and when the party making the application under Section 9 intends to commence arbitral proceedings. A court is also entitled to make a conditional interim order and recall the order if the terms of the order are not complied with. Further, steps for commencement of arbitral proceedings can be taken even during the pendency of the Section 9 petition since commencement of arbitral proceedings is not dependent on whether interim relief has been granted or not.” In Chief Project Manager v. Awadh Transformers Pvt. Ltd.“ a Division Bench of the Allahabad High Court set aside an order passed under Section 9 since the applicant under Section 9 failed to take any steps to initiate arbitral proceedings lor a period of about four months. The amended Section 9 now provides that where an order for interim measures of protection has been passed before commencement of the arbitral proceedings, the arbitral proceedings shall be commenced within 90 days from the date of such order or within such further time as the court may in its discretion determine.™ Although this amendment underlines the legislative intention that interim measures of protection should not assume a more permanent character, it remains to be seen how strictly the time period will be enforced by the courts. It is also not clear whether the 90-day period should be computed from the date of the final order in the Section 9 proceedings, or from the date when the court may order interim measures on an ad interim or ex parte basis pending final disposal of the Section 9 petition. 8.3.4.2

During an Arbitration

The power of the court to order interim measures of protection during an arbitration overlaps to some extent with the power of the arbitral tribunal to order interim measures under Section 17. However, prior to the amendment of Section 17, parties were at liberty to exclude the application of Section 17 by agreement between them. Further, orders of the arbitral tribunal under Section 17 were not enforceable as orders

61. Supra n. 28.

62. 63.

Supra n. 28. Chief Project Manager v. Awadh Transformers Put. Ltd, 2011 (84) ALR 112.

64. Shanti Dey v. Sri Suvodeep Saha, 2016 SCC OnLine Cal 6251. In this judgment, the Calcutta High Court held that that the time stipulation of 90 days is directory and not mandatory.

166

Chapter 8: Interim Measures of a court.” It is for this reason that courts were empowered under Section 9 to order interim measures even during the pendency of an arbitration. After the 2015 Amendment,

the power of the arbitral tribunal under Section

17

has been enhanced and the power of the court to order interim measures during the pendency of an arbitration has been correspondingly curtailed. Section 9(3) now requires that a court should not entertain an application under Section 9 once an arbitral tribunal has been constituted unless circumstances exist which ‘may not render the remedy provided under Section 17 efficacious’. The amended Section 17 empowers the arbitral tribunal to make the full range of interim measures that a court is empowered

to order under

Section

9, and

for making

such

orders,

the arbitral

tribunal would have the same powers as a court would have in relation to any proceedings before it. Further, orders of the arbitral tribunal are now deemed to be orders of the court and are directly enforceable under the provisions of the Cade of Civil Procedure 1908 (CPC) as if they were orders of the court. There is no express guidance in the 2015 Amendment on when a remedy under Section 17 will not be considered efficacious by a court for the purposes of Section 9(3) but case law provides helpful guidance in this regard. For instance, in Energo Engineering Projects Ltd. v. TRF Ltd.,°° where a party challenged the constitution of the arbitral tribunal, a Division Bench of the Delhi High Court held that in these circumstances the remedy under Section 17 was not efficacious. Other examples of situations where the remedy under Section 17 would not be considered efficacious could be in cases where the seat of arbitration is outside India. In such circumstances, an order made by an arbitral tribunal seated outside India may not be directly enforceable as an order of an Indian court. In a scenario where the tribunal is not reconstituted after either recusal or death of a co-arbitrator, an application under Section 9 would be entertained by a court as the Delhi High Court noted in Bhubaneshwar Expressways Pvt. Ltd. v. NHAL*®’ Another situation could be where interim measures are sought against a third party. Since an arbitral tribunal derives its powers from the arbitration agreement between the parties, it is not competent to make interim measures against third parties. A court may,

however,

in certain situations order interim measures

against a third

party as is discussed in greater detail in an earlier part of this Chapter. 8.3.4.3

After the Making of the Arbitral Award

Section 9 allows a party to apply for an interim measure after the making of the arbitral award, provided such application is made before the award is enforced in accordance with Section 36 of the Arbitration Act. Prior to the 2015 Amendment, Section 36 provided that an award would become enforceable upon expiry of the time period 65.

Sundaram Finance Limited v. NEPC India Limited (1999) 2 SCC 479 at para. 11.

66. Energo Engineering Projects Ltd. v. TRF Ltd, Delhi High Court, Order, FAO (OS) (Comm) 112 of 2016, 23 December 2016.

67. Bhubaneshwar Expressways Pvt. Ltd. v. NHAI, Delhi High Court, Judgment, O.M.P.(I) (COMM.) 218/2019, 25 November 2019.

167

Promod Nair & Shivani Singhal prescribed in Section 34 for filing an application for setting aside the award, provided no such challenge was filed. If a challenge was filed under Section 34 for setting aside the award, the award would become enforceable upon the application being refused. The amended Section 36 provides that the award will become enforceable upon the expiry of the time period provided in Section 34, unless the court stays the enforcement of the award pursuant to a separate application, as contemplated in Section 36(2). The award will not automatically become unenforceable on the filing of an application

under Section 34, for the duration of the application.”

The award creditor may make an application under Section 9 even during the pendency of proceedings initiated under Section 34 to challenge the award.” Although the language of Section 9 allows any party to make an application, Indian courts have held that during the post-award period only the award creditor should be allowed to seek interim measures.” In Dirk India Private Limited v. Maharashtra State Electricity Generation Company Limited” a Division Bench of the Bombay High Court considered whether a party which had no enforceable claim under an award is entitled to seek an interim measure against the award creditor under Section 9. In this case, prior to filing an application under Section 9, the award debtor had challenged the award under Section 34 of the Arbitration Act but the proceedings under Section 34 had not concluded by the time the Section 9 petition was filed. The court held that an interim measure under Section 9 at the post-award stage is intended to be in aid of enforcement of the award. Even if the challenge to the award were to succeed, it would merely result in setting aside of the award and the court could not pass any order decreeing the claim of the award debtor. If an award debtor’s petition under Section 9 were to be allowed in such circumstances,

it would amount to granting interim relief to which the award debtor would not be entitled to even upon succeeding in the challenge to the arbitral award. On this basis, the court held that an application for interim measures at the instance of the award debtor would not be maintainable.

68. Section 34 states that an application for setting aside of the award should be made within three months of receipt of the award by the applicant. The court may extend this period by 30 days if it is satisfied that the applicant was prevented by sufficient cause from making the application within three months of the receipt of the award. 69. See Chapter 12 of this Handbook. 70. Dirk India Private Limited v. Maharashtra State Electricity Generation Company Limited, 2013 (7) Bom CR 493. 71. Nussli Switzerland Ltd. v. Organizing Committee Commonwealth Games 2010, 2014 (4) Arb LR

196 (Delhi); Denel Proprietary Ltd. v. Union of India, 2016 (1) Arb LR 514 (Delhi); Dirk India Private Limited v. Maharashtra State Electricity Generation Company Limited, 2013 (7) Bom CR 493; Wind World (India) Ltd. v. Enercon GmbH, Bombay High Court, Order, Commercial Appeal (L) No. 13 of 2017 in Commercial Arbitration Petition No.

105 of 2016, 19 April 2017.

72. Dirk India Private Limited v. Maharashtra State Electricity Generation Company Limited, 2013 (7) Bom

CR

493. The

decision

of the Division

Bench

of the Bombay

High

Court

challenged before a three-judge bench of the Supreme Court in SLP (Civil) No. which is pending as of September 2020.

168

has

been

13688/2013,

Chapter 8: Interim Measures 8.3.4.4

Appeal Against a Section 9 Interim Order

Section 37(1)(b)” allows an appeal to be filed to the appellate court against an order granting or refusing to grant any measure under Section 9. Section 37(3) provides that no second appeal shall lie from an order passed in such appeal. Although a second appeal would not be maintainable, the parties would still be able to invoke the Supreme Court's extraordinary jurisdiction under Article 136 of the Constitution of India by filing a petition seeking special leave to appeal. Moreover, a revision petition against an order made in appeal under Section 37 may also be filed. In LT.I. Ltd. v. Siemens Public Communications Network Ltd.” it has been held that the revisional jurisdiction of superior courts has not been ousted by the provisions of Part I of the Arbitration Act. The High Courts have not taken a consistent view regarding whether the appeal under Section 37(1)(b) can be only against a final order made under Section 9, or also against an ad interim order. The Karnataka High Court in Symphony Services Corp. (India) Pvt. Ltd. v. Sudip Bhattacharjee’” has held that an appeal under Section 37(1)(b) should be only against a final order made under Section 9, and not against an ad interim order. An ad interim order can be challenged in writ proceedings if the writ petition is otherwise maintainable.”” The Bombay High Court in Perin Hoshang Davierwalla v. Kobad Dorabji Davierwalla’’ has held that even an ad interim order is an order under Section 9 for the purposes of Section 37 and would be appealable. The approach of the Bombay High Court has been followed by the Andhra Pradesh Court”

and the Delhi High Court.””

Since an order under Section 9 is in the nature of a discretionary interim order, the

scope of appeal should be analogous to an appeal against a discretionary interim order made under the CPC.*° The scope of power of an appellate court in appeal proceedings against a discretionary interim order has been considered by the Supreme Court in Wander Ltd. v. Antox India Put. Ltd.*' In that case, the court held that the appellate court cannot interfere with the exercise of discretion by the Court of First Instance except where the discretion has been shown to have been exercised arbitrarily, capriciously or perversely, or where the Court of First Instance has ignored the settled principles of law regulating the grant of refusal of interim injunctions. The appellate 73. Prior to the 2015 Amendment, the provision relating to appeal against a Section 9 order was contained in Section 37(1)(a).

74. LTI. Ltd. v. Siemens Public Communications Network Ltd. (2002) 5 SCC 510; see also State of Maharashtra v. Hindustan Construction Co. Ltd., Bombay

High Court, Order, Review Petition

No. 2 of 2013 in Arbitration Appeal No. 6 of 2007 of Arbitration Application No. 44 of 2003, 4 April 2013. 75. Symphony Services Corp. (India) Pvt. Ltd. v. Sudip Bhattacharjee, 2008 (3) Arb LR 295 (Kar). 76. Ibid. 77. 78. 79.

Perin Hoshang Davierwalla v. Kobad Dorabji Davierwalla, 2014 (3) Bom CR 551. ICICI Bank Ltd. v. IVRCL Ltd., AIR 2015 AP 179. Deepak Mittal v. Geeta Sharma, Delhi High Court, Order, CM(M) 971 of 2017 and CM No. 32438

80.

Deccan Asian Infrastructure (Mauritius) Inc. v. BPL Communications Limited, 2005 (2) Arb LR

of 2017, 6 September 2017.

450 (Kar); Prajita Developers Pvt. Ltd. v. Yusuf Khan, 2016 (2) Bom CR 598. 81. Wander Ltd. v. Antox India Put. Ltd. (1990) Supp SCC 727.

169

Promod Nair & Shivani Singhal cannot reassess the material and reach a different conclusion if the conclusion reached by the Court of First Instance was reasonably possible on the basis of the material. These principles have also been applied to appeals against orders made by arbitral

tribunals under Section 17." Although makes

the Arbitration Act does not specifically provide for a court which

an order under Section 9 to review its own

orders, courts have

nevertheless

entertained review petitions against Section 9 orders. In Simplex Infrastructure Ltd. v. Energo Engineering Projects Ltd.,"* a review petition filed against a Section 9 order was allowed by the court. The review petition was filed on the ground that, in light of a decision of a larger bench of the court, the Section 9 court had lacked jurisdiction to entertain the petition at the relevant time. The standard of judicial review of orders made by an arbitral tribunal under Section 17 is the same as that for interim orders made by a court, including under Section 9. The principles enunciated in Wander Ltd. v. Antox India Put. Ltd.** regarding the scope of power of an appellate court in appeal proceedings against a discretionary interim order would apply.” While an order may be set aside for an error of law or fact, the appellate court would not generally interfere with the exercise of discretion by the arbitral tribunal except where the discretion has been shown to have been exercised arbitrarily, capriciously or perversely, or where the arbitral tribunal has ignored the settled principles of law regulating the grant or refusal of interim measures. The appellate court would not reassess the material and reach a different conclusion if the conclusion reached by the arbitral tribunal was reasonably possible on the basis of the

material.™ 8.3.5

Enforcement

The Law Commission in its 246" Report had recommended amending the definition of ‘arbitral tribunal’ in Section 2(d) of the Arbitration Act to include emergency arbitrators within its scope, but this proposal was not accepted and the 2015 Amendment made no changes to the definition of arbitral tribunal in the Arbitration Act. 82. Green Infra Wind Energy Limited v. Regen Powertech Private Limited, Delhi High Court, Order, Arb. A. (Comm.)

17 of 2018, 4 April 2018; Ascot Hotels and Resorts Put. Ltd. v. Connaught Plaza

Restaurants Pvt. Ltd., Delhi High Court, Order, Arb. A. (Comm.)

12 of 2017, 20 March 2018;

Supreme Infrastructure India Ltd. v. Central Public Works Department, Delhi High Court, Order,

Arb. A. (Comm.) 9 of 83. Simplex Infrastructure (Comm.) 55 of 2015, 84. Wander Ltd. v. Antox

2017, 28 April 2017. Ltd. v. Energo Engineering Projects Ltd., Delhi High Court, Order, OMP (I) 14 July 2017. India Pvt. Ltd. (1990) Supp SCC 727.

85. Ascot Hotels and Resorts Pvt. Ltd. v. Connaught Plaza Restaurants Pvt. Ltd., Delhi High Court,

Order, Arb. A. (Comm.) !2 of 2017, 20 March 2018; Supreme Infrastructure India Ltd. v. Central

86.

Public Works Department, Delhi High Court, Order dated 28 April 2017 in Arb. A. (Comm.) 9 of 42017. Green Infra Wind Energy Limited v. Regen Powertech Private Limited, Delhi High Court, Order,

Arb. A. (Comm.) 17 of 2018, 4 April 2018; Ascot Hotels and Resorts Pvt. Ltd. v. Connaught Plaza Restaurants Put. Ltd., Delhi High Court, Order, Arb. A. (Comm.)

12 of 2017, 20 March 2018;

Supreme Infrastructure India Ltd. v. Central Public Works Department, Delhi High Court, Order dated 28 April 2017 in Arb. A. (Comm.)

9 of 2017.

170

Chapter 8: Interim Measures If an arbitration is seated in India, provisions of Part I of the Arbitration Act, including Section 17 and Section 36 which relate to enforcement of orders and awards of arbitral tribunals, respectively, would apply to such arbitrations. Although the definition of ‘arbitral tribunal’ was not amended to include emergency arbitrators, it could be contended that the expression is broad enough to impliedly include emergency arbitrators within its scope. On this analysis, any ‘order’ made by an emergency arbitrator should be deemed to an order of an Indian court under Section 17. Moreover, since the definition of ‘arbitral award’ in Section 2(c) includes an interim award, any ‘interim award’ made by an emergency arbitrator could be enforceable under Section 36 of the Arbitration Act. Orders and interim awards made by emergency arbitrators in arbitrations seated outside India would not be directly enforceable under Indian law. Indian courts may indirectly allow enforcement of decisions of emergency arbitrators in foreign-seated arbitrations by entertaining Section 9 petitions and making orders in such cases on the basis of decisions made by an emergency arbitrator.*’ However, even in these cases, the Indian courts will independently assess whether the interim measures ordered by the emergency arbitrators are consistent with the criteria for grant of interim measures under Section 9. In HSBC v. Avitel Post Studioz Ltd.** in a Singapore seated SIAC arbitration, the petitioner filed a Section 9 petition seeking interim measures in terms of the orders made by an emergency arbitrator. The Bombay High Court allowed the Section 9 petition and granted the interim measures sought since, according to it, the petitioner had a good chance of succeeding in the arbitration proceedings, and if the interim measures were not granted, then the petitioner would not be able to recover any amount from the respondents even if it succeeded in the arbitration proceedings. The court found the balance of convenience to be in favour of the petitioner. In Raffles Design International India Private Limited v. Educomp Professional Education Limited™ the court held that recourse to Section 9 was not available for enforcing orders made by a foreign-seated arbitral tribunal, but this did not mean that the court could not independently apply its mind and grant interim measures, without being fettered by the findings or views of the arbitral tribunal. Moreover, if an order made by an emergency arbitrator qualifies as an interim award, it may also be enforced under the provisions of the New York Convention. To date, however,

there have been no Indian judicial precedents to this effect.

A Division Bench of the Delhi High Court in the recent case of Ashwani Minda and Ors, v. U-shin Limited and Ors”’ held that an application for interim relief would not be entertained when similar relief sought for by the applicant was refused by the Emergency Arbitrator appointed under the Japan Commercial Arbitration Association (JCAA) Rules. The court noted that in a petition under Section 9 of the Act, it could not

87. See the discussion of emergency arbitration awards in Chapter 9 of this Handbook. 88. HSBC v. Avitel Post Studioz Ltd. 2014 SCC OnLine Bom 929. 89. Raffles Design International India Private Limited & Ors. v. Educomp Professional Education Limited & Ors. (2016) 234 DLT 349. 90. Ashwani Minda and Ors. v. U-shin Limited and Ors., 2020 SCC OnLine Del 721.

ifl

Promod Nair & Shivani Singhal sit as a court of appeal to examine the correctness of the decision of the Emergency Arbitrator. The Division Bench also held that even when an application for interim relief before Indian courts under Section 9 of the Act in a foreign-seated arbitration is maintainable, such application would not lie after the constitution of the arbitral tribunal unless it could be established that any remedy that could be sought before the tribunal would not be efficacious. On the facts of the case before it, the Division Bench

held that there was no evidence to demonstrate that the arbitral tribunal could not order efficacious remedies. The Supreme Court refused to interfere with the judgment of the Division Bench in Ashwani Minda and dismissed the Special Leave Petition filed

by the Appellants.”'

91. Ibid.

172

CHAPTER 9

Arbitral Awards in Indian Arbitrations Martin Hunter, Simon Weber & Sadyant Sasiprabhu

Arbitral awards are the end product of an arbitration. Hence, the job of an arbitral tribunal is similar to the one of craftsmen — they are expected ta make or create

useful objects. This analogy must also be applied to the end product of the arbitral

tribunal. It must be useful — hence enforceable. The arbitrators should put all effort

into the award to comply with the trust put into them by the disputing parties. This

Chapter discusses the effects of arbitral awards, lays out the different types of awards, their form requirements and how to enforce them. It concludes with guidelines on how to draft the ‘perfect’ arbitral award.

9.1

INTRODUCTION

AND DEFINITION

Arbitral awards are the end product of the arbitral process. When agreeing to include an arbitration agreement in a contract, the contracting parties expect an arbitral tribunal to render a final and binding award, which is enforceable. In Indian law, Chapter VI of the Arbitration and Conciliation Act 1996 (1996 Arbitration Act or Act) lays down the rules applicable to the making of arbitral awards and the termination of the arbitral proceedings. Read in conjunction with Section 34, contained in Chapter VII (recourse against arbitral awards) and Sections 35-36, contained in Chapter VIII (finality and enforcement of arbitral awards), it regulates the making of final decisions of arbitral tribunals in India. As the law at the place of enforcement (and therefore the enforcing court) regulates what qualifies as an award, this Chapter is important not only to Indian parties but also to non-Indian nationals seeking to enforce against assets situated in India.’ It is important to note that the 1996 Arbitration Act makes a distinction between arbitral awards based on the seat of the arbitration. Part 1 of the 1996 Arbitration Act

l. Marike Paulsson, The 1958 New York Convention in Action (2016) p. 115.

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Martin Hunter, Simon Weber & Sadyant Sasiprabhu sets out the general provisions on domestic arbitration and awards, while Part II governs the enforcement of foreign awards. Chapter I deals with awards under the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention) and Chapter II with awards under the 1927 Convention on the Execution of Foreign Arbitral Awards. While a domestic award is treated as a decree of the court and can be executed straight away, a foreign award can become executable only if it is found to be enforceable by a court of law under Section 48.* Therefore, it is essential to note that certain types of formal requirements may be only specific to the type of award — domestic or foreign. The Arbitration Act, 1940 (1940 Arbitration Act) set out some rules on arbitral awards: they had to be signed and their making had to be notified to the disputing parties.” It gave a substantial amount of competence to the relevant court.* No other provisions were included in the 1940 Arbitration Act. This has changed in the 1996 Arbitration Act with the inclusion of Chapters VI, VII and VIII. On the international sphere, the relevant instrument is arguably the most important international text on arbitration:’ the New York Convention. It was signed in 1958 and entered into force in 1959 and has become the most often used tool in the toolkit of any arbitration lawyer in the world. It has been signed by over 166 States and has promoted international arbitration since its birth hour. The drafters of the New York Convention did not include a definition of the term ‘award’.* Before commenting on the relevant provisions, a brief discussion of the nature of an arbitral award is warranted. Generally, there is no internationally accepted and harmonised definition of the term ‘award’. Despite its importance, the authors are not aware of any international or national legal instrument defining the term. One author has attempted to define it by setting out its characteristics, which is the closest one can get: An arbitral award constitutes a final and binding decision of an arbitral tribunal, which disposes finally of a matter heard by the tribunal.’ Even the New York Convention, which takes its raison d’etre from the existence

of arbitral awards, does not define the term. Article I(2) is the ‘nearest that [...] comes to a definition”: The term ‘arbitral awards’

shall include not only awards

made

by arbitrators

appointed for each case but also those made by permanent arbitral bodies to which the parties have submitted.”

Cr

fe Guha

. Government of India v. Vedanta Limited (Civil Appeal No. 3185 of 2020). . Section 14(1),

1940 Arbitration Act.

. Section 15, 1940 Arbitration Act. . Kofi Annan, Opening address commemorating the successful conclusion of the 1958 United Nations Conference on International Commercial Arbitration, in Enforcing Arbitration Awards under the New York Convention — Experience and Prospects, | (United Nations 1999).

. Paulsson, supra n. 1. aee

. Gary B. Born, International Commercial Arbitration (2nd ed. 2014) p. 2923.

. Nigel Blackaby et al., Redfern and Hunter on International Arbitration (6th ed. 2015) para. 9.05. . Article 1(2), New York Convention.

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Chapter 9: Arbitral Awards in Indian Arbitrations In the 1980s, there was discussion to add a definition to the UNCITRAL Model Law on International Commercial Arbitration (Model Law) — the proposal was rejected.'” What was clear to all participants, however, was the fact that there is a difference between final decisions of the arbitral tribunal and non-final decisions."'

What follows is that an arbitral award is the former.'* When

an arbitral tribunal renders its award, it has the obligation to render an

enforceable award.'* Of course, it is basically impossible to ensure and guarantee that an award will be enforceable in any State in the world. However, to say it in the words of one of the authors, it is ‘an “obligation to perform”, rather than an “obligation to

achieve a defined result”’."*

Having established the general meaning olf ‘arbitral award’, a more thorough look at (9.2) the effects of arbitral awards, (9.3) the different types of arbitral awards, as well as on (9.4) the formal requirements is warranted. Finally, we conclude with a part on (9.5) the enforceability of arbitral awards as well as (9.6) recommendations for the drafting of arbitral awards. 9.2

EFFECTS OF ARBITRAL AWARDS

Why do disputing parties resort to arbitration? The advantages of arbitration have been widely discussed;'” among them, the end product of the arbitral tribunal's work (the arbitral award) finally resolves the dispute in a speedy and enforceable manner. Pursuant to Section 36(1),

1996 Arbitration Act, an award

is enforced

‘in the same

manner as if it were a decree of the Court’. Consequently, domestic arbitral awards have the same nature and ‘legal value’ as court decisions. As a result, the decisions laid out in the dispositive of the award have three main

effects, which this part discusses. First, they are final and binding and are enforceable. Hence, they produce a res judicata effect. Second, an arbitral award renders the arbitral tribunal functus officio — it has done its job and ceases to exist. Third, the award lists the remedies granted by the arbitral tribunal. 9.2.1

Finality — Res Judicata

Section 35 of the 1996 Arbitration Act expressly states that ‘an arbitral award shall be final and binding on the parties and persons claiming under them respectively’. Thus, 10. Redfern and Hunter, supra n. 8, para. 9.05. The proposed definition was as follows: ‘“Award” means a final award which disposes of all issues submitted to the arbitral tribunal and any other decision of the arbitral tribunal which finally determines any question of substance or the question of its competence or any other question of procedure but, in the latter case, only if the arbitral tribunal terms its decision an award’; Broches, Recourse against the award; Enforcement of the award — UNCITRAL’s Project for a Model Law on International Commercial Arbitration (1984) 2 ICCA Congress Series 201, p. 208. ll.

Ibid.

13.

Redfern & Hunter, supra n. 8, para. 9.04; as well as, e.g., ICC Rules, Art. 41.

15.

Redfern & Hunter, supra n. 8, para.

12. For a discussion of what has the status of an award see Redfern & Hunter, supra n. 8, para. 9.09. 14. Redfern & Hunter, supra n. 8, para. 9.14.

1.143.

i7s

Martin Hunter, Simon Weber & Sadyant Sasiprabhu an award has a final nature and res judicata effect. This effect means that once a dispute resolution forum has determined and decided an issue brought before, it ‘cannot later be put back into question as between the same parties’.'° This means that a ‘particular claim or matter [is resolved] with preclusive effect’.'” Consequently, all decisions of an arbitral tribunal that qualify as awards are final.'* Pursuant to Section 29 of the 1996 Arbitration Act, ‘any decision of the arbitral

tribunal shall be made by a majority of all its members’. The consequence of a majority is the existence of a minority. Generally, in international arbitration a majority decision inevitably leads to dissenting, separate or concurring opinions expressed by the minority. As Section 29 of the Act already hints, this does not prevent the award from being a final and enforceable award. If an arbitrator issues a dissenting, separate or concurring opinion, it can be added to the arbitral award, yet does not form part of the award. It seems to be common practice to allow for dissents — it has even been argued that permitting them contributes to the ‘deliberative process and can provide a valuable check on arbitrary or indefensible decision-making’ ."” Finally, Section 30 of the 1996 Arbitration Act states that a settlement is to be encouraged by the arbitral tribunal and, upon request by the parties, can be recorded.~” As aresult, not all disputes are finally decided by the arbitral tribunal and lead to an award. The parties can settle their dispute and request the tribunal to issue an award on the basis of the settlement. 9.2.2

Arbitral Tribunal Becomes Functus Officio

The result of a final arbitral award is that ‘the mandate of the arbitral tribunal shall terminate with the termination of the arbitral proceedings’.*' This is called rendering the arbitral tribunal functus officio — it has reached the end of its mandate and ceases to exist. The reason for this is simple. Arbitral tribunals are established on an ad hoc basis and find their reason to exist in the arbitration agreement between the disputing parties. In the agreement, the contracting parties agree to submit a dispute to an arbitral tribunal. Once a dispute arises, the arbitral tribunals’ task is the resolution of this specilic dispute(s). This materialises in its end product: a final and binding arbitral award. ‘All ‘awards’ are ‘final’ in the sense that they dispose ‘finally’ of the issues decided in them (subject to any challenge or procedure for correction or interpretation), and they are ‘binding’ on the parties." Section 32, 1996 Arbitration Act states

16. Redfern & Hunter, supra n. 8, para. 9.173 referring to the decision in Amco Asia Corporation v. Indonesia (Resubmission: Jurisdiction), ICSID Case No. ARB/81/1

17. Born, supra n. 7, p. 3013. 18. See the finality discussion in Part 9.2.1.

19. 20.

Born, supra n. 7, p. 3055. See the discussion in Part 9.3.4.

22.

Redfern & Hunter, supra n. 8, para. 9.03.

21. Section 32(3), 1996 Arbitration Act.

176

(1992) 89 ILR 552, at 560.

Chapter 9: Arbitral Awards in Indian Arbitrations that the ‘arbitral proceedings shall be terminated by the final arbitral award’. Moreover, the provision foresees three additional scenarios in which the arbitral proceedings are terminated: 1) withdrawal of the claim by the claimant, 2) an agreement of the disputing parties to discontinue and terminate the proceedings, and 3) a finding of the arbitral tribunal. For the sake of completeness, Section 33 1996 Arbitration Act must be mentioned briefly, which allows for corrections and interpretations of the arbitral award by the arbitral tribunal. This can either be done within 30 days after the issuance of the award by the arbitral tribunal itself** or requested by a disputing party.*" This does by no means mean that the arbitral tribunal ‘comes back to life’ and can revisit its decision but rather that it is given the opportunity to correct or explain its decision. Generally, requests for correction of arbitral awards frequently relate to computational errors. These are to be avoided.** 9.2.3

Remedies Granted in Awards

Various kinds of remedies can be granted by arbitral tribunals. The Act imposes no specific limitations on remedies available in arbitral proceedings. In the final award, the arbitral tribunal can grant a declaration, order the payment of a sum of money including interest, order injunctive relief, or order specific performance. In this regard, Indian law only provides for damages that are compensatory in nature —- exemplary or punitive damages are not available for breach of contract.*” Furthermore, the arbitral tribunal can grant interim relief in the form of: (1) preservation or custody of goods, (2) inspection and preservation of property, (3) maintenance of the status quo and restriction of the dissipation of assets, (4) interim injunctions, (5) order securing the amount in dispute and (6) appointment of receivers.** In interim awards the arbitral tribunal can order an injunction and order a party to engage (or not engage) in particular actions. Issues related to sovereign immunity — from jurisdiction or execution — can arise when one of the parties is a State or a State owned-entity. Section 86 of the Code of Civil Procedure states that the Government of India’s prior consent is required before instituting “a suit’ against foreign States and their organs. Under said provision, the consent will only be granted in the following circumstances: (1) if the foreign State has

23. Unless the respondent requests the continuance of the arbitration as it has an interest in a final 24. 25. 26. 27.

resolution of the matter.

See Section 33(3), 1996 Arbitration Act. See the discussion in Part 9.3.6. See the guidelines in Part 9.6. See Sections 73 and Section 74 of The Indian Contract Act, 1872. Kerala State Road Transport Corporation Rep. by the Managing Director v. Feethambaran Rep. by his Next Friends Sukhmmari, 1994 (2) KLJ 646 (para. 8); Bharat Sanchar Nigam Limited v. Reliance Communication Ltd. (2011)

1 SCC 394.

28. Arbitration procedures and practice in India: overview by Pradeep Nayak, Sulabh Rewari and Vikas Mahendra,

Keystone Partners, available at https://uk-.practicallaw.thomsonreuters.com/

9-502-0625?transitionType = Default&contextData = (sc. 162487.

177

Default) &firstPage = true#co_anchor_a

Martin Hunter, Simon Weber & Sadyant Sasiprabhu instituted ‘a suit’,~’ (2) if the foreign State or its organ trades within India or possesses immovable property in India or (3) if the State has expressly or impliedly waived its immunity.°” However, the doctrine of sovereign immunity is not absolute and as illustrated in the jurisprudence States and their organs may not be protected from judicial proceedings with respect to their commercial activities and contractual

breaches.”

In this regard, it is important to note that the Supreme Court has held that the expression ‘suit’ in Section 86 should be construed strictly and does not bar jurisdiction

under the 1996 Arbitration Act.** On the other hand, the Delhi High Court has held that

a State agreeing to an arbitration clause is not a waiver from the State’s immunity from jurisdiction.** Yet, this is not further clarified in the legislation. In its 176th Report, the Law Commission of India emphasised the need to have separate State immunity legislation in India, particularly, to address the issues arising in relation to arbitrations.** However, to date there has been no development on the issue. 9.3

TYPE OF AWARDS

In a simple world, there is only one arbitral award rendered by the arbitral tribunal. However, the world is not simple and disputing parties can expect ‘more than one award in any given dispute’.** Moreover, a final award can also record the decision of

an arbitral tribunal hearing multiple claims.*°

The English Arbitration Act 1996 provides for two basic awards, a ‘final award’ that disposes of all the issues of the claim and a ‘provisional award’ that deals with

29. See Section 86 Code of Civil Procedure. 30. See Section 86 of the Code of Civil Procedure 1908. 31. Mirza Ali Akbar Kasani v. United Arab Republic and Deautfracht Seereederei Rostock (DSR Lines) a Department New Central Jute Mills Co Ltd and Ors, 1994 AIR SC 516; India, AIR 1987 SC 9; Ethiopian Airlines Ethiopian Airlines 539;

Qatar Airways

v. Shapoorji

Pallonji

& Co., Appeal

other, 1966 SCR (1) 319. See, Veb of the German Democratic Republic v. Harbhajan Singh Dhalla v. Union of v. Ganesh Narain Saboo (2011) 8 SCC No.

387

of 2012

in Summons

for

Judgment No. 271 of 2010 in Summary Suit No. 1224 of 2010 and Notice of Motion No. 1773 of 42012.

32. Nawab Usmanali Khan v. Sagarmal, AIR 1965 SC 1798; Ethiopian Airlines v. Ganesh Narain Saboo, AIR 2011 SC 3495.

33. M/s Uttam Singh Duggal and Co. Pvt. Ltd. v. United States of America Agency for International Development, 22 (1982) DLT 25.

34. Law Commission of India, 176th Report on the ‘Arbitration and Conciliation (Amendment) Bill’, 2001, September 2001. 35. Redfern & Hunter, supra n. 8, para. 9.02. 36. The oft-cited case in this regard is Yukos. In three awards, dated 18 July 2014, the arbitral tribunal constituted under the Energy Charter Treaty unanimously held that Russia was in breach of its obligations under the Treaty and ordered it to pay in excess of USD 50 billion in compensation. The cases were heard together before identical tribunals, see Hulley Enterprises Limited (Cyprus) v. The Russian Federation (PCA Case No. AA 226), Yukos Universal Limited (Isle of Man)

v. The Russian

Federation (PCA Case No. AA 227),

Veteran Petroleum

Limited

(Cyprus) v. The Russian Federation (PCA Case No. AA 228). See also, José Manuel Alvarez, et al., Duration of Investor-State Dispute Settlement Proceedings, 21 J. of World Inv. & Trade 330-35 (2020), available at https://www.researchgate.net/publication/342445898 Duration_of_ Investor-State_Dispute_Settlement_Proceedings.

178

Chapter 9: Arbitral Awards in Indian Arbitrations issues pending a final award.” In addition, it also recognises the following awards which fall ultimately within one of the two basic awards, ‘partial award’, ‘default award’, ‘award on agreed terms’, ‘silent award’ and ‘costs award’.*®

In contrast, the 1996 Arbitration Act only expressly provides for final awards and interim awards.*” This is not surprising as the 1996 Arbitration Act is based on the Model Law which also did not provide for ‘partial award’ or ‘partial final award’.*” However, courts have expanded the narrow text of the provision by widely interpreting the expression ‘arbitral award’ in Section 2(1)(c) of the Act to encompass even partial awards.*' Below this part discusses seven types of awards. 9.3.1

Interim Awards

Arbitral tribunals have the power to render interim awards.** The 1996 Arbitration Act expressly empowers the tribunal to make interim arbitral awards at any stage of the proceedings.** There is no single definition of the term ‘interim’. An interim award can refer to at least two different types of decisions. It is advisable to clearly set out in the text of the decision what the nature of the decision is.“ First, an arbitral tribunal may want to provisionally decide a matter to grant provisional relief. This is also foreseen by the 1996 Arbitration Act. Section 31(6) allows the arbitral tribunal to ‘make an interim arbitral award on any matter with respect to which it may make a final arbitral award’ at any time during the arbitral proceedings. Hence, the award is not final but provisional. It is important to note that while tribunals have the power to make interim awards, under the Act, the finality of the award is the determining factor for the purposes of recognition and enforcement.*° If the award is intended to take effect only until the final award is rendered, it will not fulfil the finality criteria and, therefore, would not be enforceable nor considered to be

a final award.**

Second, in practice, the term is sometimes misused for awards made at an interim stage of the arbitral proceedings, which already constitute a final and binding decision of the dispute. Correctly, such an award is called a ‘partial award’. The expressions ‘interim award’ and ‘partial award’ seem to be used interchangeably, as illustrated by 37. See Section 39m English Arbitration Act 1996. For a discussion of the English Arbitration Act 1996, see Chapter 19 of the Handbook. 38.

39. 40. 41. 42. 43. 44. 45. 46.

Ibid. Similarly, Chapter 12, Swiss Private International Law Act 1987 (Swiss PIL), provides for

‘preliminary awards’ in relation to jurisdictional issues in Section 186(3), while ‘partial awards’ that finally determine the issue are provided for in Section 188: see Geisinger, International Arbitration in Switzerland: A Handbook for Practitioners (2nd ed. 2013) pp. 226-227. See Section 2(1)(c), 1996 Arbitration Act: “Arbitral award’ includes an interim award. Model Law. Aero Club v. Solar Creations Pvt Ltd., 2020 SCC OnLine Bom 115. Paulsson, supra n. |, p. 116-120. See Section 31(6), 1996 Arbitration Act. See below in Part 9.6.1. National Thermal Power Corporation Ltd. v. Siemens Aktiengesellschajt (2007) 4 SCC 451. This goes in line with other national jurisprudence on the finality of interim awards. See Paulsson, supra n. 1, p. 118 ff. See the discussion in Part 9.3.6.

i79

Martin Hunter, Simon Weber & Sadyant Sasiprabhu the Supreme Court’s judgment in McDermott International Inc. v. Burn Standard Co. Ltd. where it stated ‘[a]n interim award in terms of the said provision is not one in respect of which a final award can be made, but it may be a final award on the matters covered thereby, but made at an interim stage’.*” 9.3.2

Partial Awards

Partial awards are decisions of the arbitral tribunal that decide with finality a ‘part’ of the issues of the claim before a final award is made that addresses the rest of the issues before the arbitral tribunal. A partial award is final with respect to the specific issues it deals with. It is therefore a powerful tool to decide matters early on, which contributes to the efficiency of the arbitration.** A relevant example is the bifurcation of proceedings. Why would an arbitral tribunal hear submissions on the merits of a dispute, il it is debatable or sometimes even obvious from the outset that it will decline jurisdiction? By issuing an award on jurisdiction only, the arbitral tribunal will save the disputing

parties time and money.”

The 1996 Arbitration Act does not contain any express provisions on partial awards. However, the existence of such a power can be inlerred from a conjoined reading of Sections 2 (1)(c), 32 and 35. Section 35 of the 1996 Arbitration Act states that “an arbitral award shall be final and binding on the parties and persons claiming under them respectively’. This can be contrasted with Section 32, 1996 Arbitration Act, which states that the ‘arbitral proceedings shall be terminated by the final arbitral award’. Hence, the Act seems to accept that there are partial awards, which are final and binding. The final award of the arbitral tribunal, however, terminates the arbitral proceedings. Some international rules as well as domestic laws contain reference to partial awards such as Article 34(1) 2013 UNCITRAL Arbitration Rules.*” However, issuing partial awards is possible for India-seated arbitral tribunals and nothing in the Arbitration Act prevents arbitral tribunals from rendering partial awards. On the one hand, an arbitral tribunal has the competence to issue partial awards as this ‘authority is inherent in the arbitrators’ mandate to resolve the parties’ dispute in an efficient manner’.”' On the other hand, the arbitral tribunal is just the captain steering the ship, with the owners of the ship (the disputing parties) retaining control. The principle of

47. McDermott International Inc. v. Burn Standard Co. Ltd. (2006) 11 SCC 181, para. 68. 48. Redfern & Hunter, supra n. 8, para. 9.19. 49. See Redfern & Hunter, supra n. 8, para. 9.19; for further discussion of managing costs and time in arbitration proceedings, see Chapter 16 of the Handbook. 50. See Section 47 of the English Arbitration Act 1996, which provides: (1) Unless otherwise agreed by the parties, the tribunal may make more than one award at different times on different aspects

of the matters to be determined. (2) The tribunal may, in particular, make an award relating to:

(a) an issue affecting the whole claim, or (b) a part only of the claims or cross-claims submitted

to it for decision. (3) If the tribunal does so, it shall specify in its award the issue, or the claim 51.

or part of a claim, that is the subject matter of the award. Bom, supra n. 7, p. 2016.

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Chapter 9: Arbitral Awards in Indian Arbitrations party autonomy allows the disputing parties to mutually agree on an exclusion of partial awards, requiring the arbitral tribunal to render one single award.” 9.3.3

Fast Track Procedure Awards

The Arbitration and Conciliation (Amendment) Act, 2015 (2015 Amendment) added a provision to the 1996 Arbitration Act, which lays down rules on a ‘fast track procedure’. What sounds like a 100-meter sprint arbitration actually constitutes an option for an expedited arbitration to ensure a speedy resolution of a dispute. The fast track procedure is the Indian equivalent of a documents-only arbitration. For the sprinter to be given starting permission, the disputing parties have to agree in writing to consent to appointing a sole arbitrator who decides the dispute on the basis of written pleadings, documents and submissions filed by the parties without any oral hearing.”* An oral hearing will only be held if all the parties make a request or if the arbitral tribunal considers it necessary.” How long is the race? Section 29B(4) of the 1996 Arbitration states that a fast track award must be made within six months after the constitution of the arbitral tribunal. The provision does not clarify the exact appointment mechanisms. It is to be expected that in case a mutual

decision

cannot be reached,

the competent

court can either

appoint the sole arbitrator or select an appointing authority. An arbitral award issued through a fast track procedure arbitration is considered a ‘normal’ award under Sections 32 and 35 and can be enforced pursuant to Section 36 of the Act. As a practice tip, in case the relief is urgent, a practitioner will need to consider whether it is more efficient to go straight to the competent court, wait for the arbitral tribunal to get constituted or get an emergency award and deal with the consequences.” Under Indian law, the options of disputing parties are the following: 1) go to the court for interim relief; 2) wait for the arbitral tribunal to get constituted and get interim relief; 3) go through an emergency arbitrator and take the emergency award back to court, which could: a) enforce the emergency award, b) refuse to enforce the

award or c) order interim relief along the same lines as the arbitral tribunal. 9.3.4

Emergency Awards

In certain circumstances, parties would require an immediate award or order to maintain status quo or to prevent the other party from furthering the breach. The urgency of the situation may not allow enough time for the appointment of an arbitral tribunal, which can take a few months. To address the issues arising from such circumstances, arbitral institutions have come up with the emergency arbitrator

52. 53.

Bom, supra n. 7, p. 3017. Section 29B(2), 1996 Arbitration Act.

54. Section 29B(1), 1996 Arbitration Act. 55. See the discussion in Part 9.3.4. Emergency Awards.

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Martin Hunter, Simon Weber & Sadyant Sasiprabhu procedure which aims to provide immediate or quick arbitral relief before the substantive tribunal is formed. Arbitral institutions that have adopted emergency arbitrator mechanisms include the ICC, ICDR, SIAC, SCC, and LCIA.*°

Under most arbitral institutional rules, emergency awards are considered interim-binding, with the possibility of them being varied or suspended once the tribunal is constituted. This non-final nature of an emergency award means that the Indian courts do not enforce it. The 1996 Arbitration Act does not provide for emergency arbitrators; such relief is expected to be sought from the courts under a Section 9 application. Courts have clearly stated that foreign emergency awards are not enforceable under the Act.*” However, parties are free to approach the competent court with a Section 9 application for interim measures. The relief available for emergency awards is, therefore, the same as for interim measures.”* The Law Commission of India in its 246th Report had recommended recognising the concept of emergency arbitrator by widening the definition of arbitral tribunal under Section 2(d) of the Act to include the possibility of resorting to emergency arbitrators.°’ However, this recommendation was not incorporated in the 2015 Amendments. Following the 2015 Amendments, the subsequent Law Commission of India Report had suggested once again that emergency arbitration be allowed under the Act and proposed suitable amendments to the Act.°” However, despite the recommendation, no emergency arbitration provision was included when the Act was further amended in 2019. 9.3.5

Consent Award — Award on Agreed Terms

Even after the commencement of an arbitration, parties can explore the possibility of settling the dispute. Settling a dispute outside judicial and arbitral hearing rooms must always be an option for the party representatives to consider as a matter of case strategy. The 1996 Arbitration Act expressly states in Section 30(1) and (2) that settlement is to be encouraged and, upon request by the parties, can be recorded in a consent award. For such an award, the parties can negotiate to reach a resolution of the dispute. If they request the arbitral tribunal to then render an award, the latter must comply with the form requirements pursuant to Section 30(3). They are the same as required from ‘regular’ awards under Section 31 as discussed in Part 9.3.6. It is 56. For further discussion of institutions and their rules, see Chapter 17 of the Handbook. 57. Raffles Design International India Private Limited & Ors. v. Educomp Professional Education Limited & Ors. (2016) 234 DLT 349; HSBC PI Holdings (Mauritius) Limited v. Avitel Post Studioz Limited and Ors., Bombay High Court, Arbitration Petition No. 1062/2012; Ashwani Minda & Ors. v. U-Shin Ltd. & Ors., 2020 SCC OnLine Del 721 (the court stated that a Section 9 application

for interim relief cannot be filed when the emergency arbitrator declined to grant the party the 58. 59.

same relief). Ibid. Law Commission of India, Report No. 246-Amendments to the Arbitration and Conciliation Act,

60.

Law Commission of India, Report of the High Level Committee to Review the Institutionalisation

1996 (2014), p. 37 available at http://lawcommissionofindia.nic.in/reports/Report246.pdf.

of Arbitration Mechanisms in India (Srikrishna Report), p. 76, available at https:/ /legalaffairs. gov.in/sites/default/files/Report-HLC. pdf.

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Chapter 9: Arbitral Awards in Indian Arbitrations advisable for the arbitral tribunal to ensure that the award states that ‘it is an arbitral award’. The biggest advantage of recording a settlement in an arbitral award is the enforceability of the latter.°' From a practical perspective, it is important to note that an ‘arbitral tribunal has the authority to make a consent award only if the parties commenced an arbitration regarding an actual dispute’. Finally, Section 30(4) of the Act sets out that the consent award ‘shall have the same status and effect as any other arbitral award on the substance of the dispute’. As a consequence, the consent award constitutes a final and binding decision upon the disputing parties. It can, therefore, be enforced under the enforcement regime.” 9.3.6

Final Award

The term ‘final award’ is twofold. There is a difference between a final award resolving a matter and the final award rendering the arbitral tribunal functus officio.“ On the one hand, Section 32 of the 1996 Arbitration Act states that the ‘arbitral

proceedings shall be terminated by the final arbitral award’. In this provision the Arbitration Act refers to the ‘last’ award of the arbitral tribunal, which decides the outstanding issues the arbitral tribunal is confronted with and renders the tribunal functus

officio.

It ‘completes

the mission

of the arbitral

tribunal’.“°

Therefore,

an

arbitral tribunal must ensure that it has considered and resolved the claims brought by the disputing parties not leaving behind any gaps, which will potentially give rise to any post-award proceedings putting the recognition and enforcement at risk. This is not to be confused with a final award that decides a particular claim and which ‘disposes ‘finally’ of an issue’, may also be expressed as a ‘partial award’ or ‘partial final award’.*° This means that a ‘particular claim or matter [is resolved] with preclusive effect’.°’ Consequently, all decisions of an arbitral tribunal that qualify as awards are final.°* Section 35 of the 1996 Arbitration Act expressly states that ‘an arbitral award shall be final and binding on the parties and persons claiming under them respectively’. 9.3.7

Additional Award

In line with international practice, the 1996 Arbitration Act foresees the possibility of arbitral tribunals to render an additional award. Such additional award is supposed to remedy a lacuna of the actual final award.*’ Two scenarios can be envisaged, in which an additional award is warranted. Either it corrects or interprets the initial final award 61. 62.

Born, supra n. 7, p. 3022. Born, supra n. 7, p. 3023.

65.

Redfern & Hunter, supra n. 8, para. 9.18.

67.

Born, supra n. 7, p. 3013.

69.

Redfern & Hunter, supra n. 8, para. 9.33; Born, supra n. 7, 2028.

63. For further discussion of enforcement of arbitral awards, see Chapter 11 of this Handbook. 64. See the discussion in Born, supra n. 7, p. 3014. 66. Redfern & Hunter, supra n. 8, para. 9.03. 68. See the finality discussion in Part 9.2.1.

183

Martin Hunter, Simon Weber & Sadyant Sasiprabhu or it fills a gap of the former. Its purpose is exclusively to interpret, correct or add to a final award of the arbitral tribunal. Most arbitral rules contain provisions regulating the procedure, which is to be followed if an additional award is warranted.” This goes in line with the functus officio doctrine as described above.”! The arbitral tribunal does not revisit and change its award (and hence cannot be brought back to life) but rather explains or supplements its initial decision. Section 33 of the Act, while inspired by the UNCITRAL Model Law, is similar to Section 152 of the Code of Civil Procedure 1908. The latter provision states that judgments or decrees may be corrected in case of clerical or mathematical errors or omissions.” Relief under Section 33 can only be sought in case of errors or omissions — parties cannot use it as a tool to have the arbitral award reviewed.” If a disputing party wishes the arbitral tribunal to correct or interpret the award, Section 33(1) sets out strict time limits for the submission of such a request. The parties have 30 days (unless mutually agreed otherwise) to ask for a correction of the arbitral award. However, the arbitral tribunal has the competence to consider the request and decide whether it is justified or not.“ As a consequence, the arbitral tribunal may reject the application. One specificity contained in Section 33(4) of the 1996 Arbitration Act must be noted: if the arbitral award, as rendered by the arbitral tribunal, does not cover all the claims brought by the disputing parties, one party can request an additional award from the arbitral tribunal on the matter.” This must be requested and notified to the other party. Again, if the tribunal considers the request justified, it has the power to accept or reject the task,”° and to extend the time limit.”” Finally, the same form requirements as to all awards apply.”* The later award is considered as an additional award which is separate from and cannot be merged with the first award unlike in case of correction or interpretation of an award under Section 33(1). A party making an application under Section 33 benefits from a fresh commencement of the period of limitation for setting aside proceedings. Instead of the date of the arbitral award, the period of limitation will commence from the date of the corrected arbitral award or from the date of dismissal of the Section 33 application.”

70. 71. 72. 73. 74.

See Article 36 of the ICC Arbitration Rules 2017; Articles 37, 38, 39 PCA Arbitration Rules 2012; Article 27 LCIA Arbitration Rules 2020. See Part 9.2.2 and Born, supra n. 7, p. 2903. See Section 152 Code of Civil Procedure 1908. State of Arunachal Pradesh v. Damani Construction Co. (2007) 10 SCC 742. See Section 33(2), 1996 Arbitration Act.

76. 77.

See Section 33(5), 1996 Arbitration Act. See Section 33(6), 1996 Arbitration Act.

75. See McDermott International Inc. v. Burn Standard Co. Ltd. (2006) 11 SCC 181.

78. See Section 33(7), 1996 Arbitration Act referring to Section 34, 1996 Arbitration Act. 79. Ved Prakash Mithal & Son v. Union of India, Special Leave to Appeal (C) No. 20195/2017.

184

Chapter 9: Arbitral Awards in Indian Arbitrations 9.4

FORM

REQUIREMENTS

9.4.1

Introduction

OF ARBITRAL

AWARDS

There using before has to it goes

is no definition of the term ‘arbitral award’. Generally, the concept is defined by an award’s characteristics: final and binding resolution of the claims brought an arbitral tribunal. Moreover, to constitute an enforceable award, the award comply with certain form requirements. They are a crucial aspect in practice, as to enforceability. Generally, most international instruments do not impose detailed form requirements. Furthermore, arbitral rules include references to the form of arbitral awards.” Section 31 of the 1996 Arbitration Act sets out the required formalities. Moreover, the Indian Stamp Act and the Registration Act play a role. In practice, the following checklist should be borne in mind: the award must: 1) be made in writing, 2) be signed and dated at the place of arbitration, 3) be reasoned (others would call it ‘motivated’), 4) include a reference to interest, 5) be timely, 6) be sent to parties, 7) be stamped and registered. Below, this point follows the structure of the Act to discuss the form and the content of an arbitral award, the inclusion of interest, time limits and a crucial aspect for awards in India: stamp duties and registration. 9.4.2

Form and Contents of Arbitral Award

The 1996 Arbitration Act’s crucial provision regulating the formal requirements is Section 31 ‘[{Jorm and contents of arbitral award’. According to said provision, the arbitral award should be made in writing and must be signed by the majority of the arbitral tribunal so long as the reason for the omitted signature is stated.*' The arbitrators should state the reasons upon which it is based unless: 1) the parties have agreed that no reasons are required or 2) the award is on agreed terms under a settlement.** The arbitral award must state the date and place of arbitration as determined in accordance with Section 20 and the award shall be deemed to have been made at that place. This might cause confusion among international arbitration practitioners: according to the terminology of the Act, the place of arbitration is the term used instead of seat. Once the arbitral award is made, a signed copy must be delivered to each party.™ This requires the arbitral tribunal (with the assistance of the administering institution)

80. See Article 34(2) 2013 UNCITRAL Arbitration Rules; Article 32 Swiss Rules of International Arbitration;

81.

Article 3!

ICC

Arbitration

Rules 2017;

Article 26

LCIA

Arbitration

Rules 2020;

According to Redfern & Hunter, supra n. 8, para. 9.144, the only arbitral institution that sets out the detailed obligations for an arbitrator when writing an award is Rule 47, ICSID Rules of Procedure for Arbitration Proceedings. See Section 31(1)-(2), 1996 Arbitration Act.

82. See Section 31(3), 1996 Arbitration Act. 83.

See Section 31(4),

84.

See Section 31(5), 1996 Arbitration Act.

Handbook.

1996 Arbitration Act. For further discussion on seat, see Chapter 6 of the

185

Martin Hunter, Simon Weber & Sadyant Sasiprabhu to send a hard copy to the disputing parties. If they agree that their legal representatives receive the copy, the representatives may act as point of contact as well." 9.4.3

Interest

If the decision of the arbitral tribunal awards a payment of money, the tribunal may include in the sum for which the award is made a component of interest. This interest must be at a rate the arbitral tribunal deems reasonable, on whole or any part of the amount awarded, for the whole or any part of the period between the date on which the cause of action arose and the date on which the award is made. In Chittaranjan Maity v. Union of India the Supreme Court held that the arbitral tribunal could not have awarded pre-award interest as the parties had expressly agreed to prohibit a payment of interest on amounts payable under the contract."’ Consequently, the parties should expressly agree in the contract on the non-payment of interest on any amounts of money payable under the contract, if they intend to avoid disputing the payment of pre-award or post-award interest.” 9.4.4

Time Limits

The time limit of Section 29A 1996 Arbitration Act, which was introduced by the 2015 Amendment and discussed intensively,”’ imposes strict deadlines on the arbitral tribunal. The Act distinguishes between international awards and matters ‘other than international commercial arbitrations’. In particular,

Section

29A(1),

introduced

by the Arbitration

and

Conciliation

(Amendment) Act, 2019 (2019 Amendments), states that in domestic arbitrations (the provision states ‘in matters other than international commercial arbitrations’) the arbitral tribunal must render the award within 12 months ‘from the date of completion of pleadings under sub-section (4) of section 23’."" However, the time limit is not absolute, as Section 29A(3) allows the disputing parties to extend the period by mutual agreement by six months. If the disputing parties consent to extend the period of 12 months, the arbitral tribunal may be given a further 6 months to render the award. For any further extensions, an application must be made to the courts. If the award is not made within the specified period of 12 months or any extended period consented by parties, the mandate of the arbitrator(s) will be terminated, unless the competent court has, either prior to or after the expiry of the time limit, extended the period.”! Yet, if the court considers that the arbitral tribunal is responsible for the delay it has the power to 85. 86. 87. 88.

89.

For further discussion see Chapter 11 of the Handbook. See Section 31{7), 1996 Arbitration Act. Chittaranjan Maity v. Union of India (2017) 9 SCC 611. See Chapter 14 for further discussion. Section 29A(1),

1996 Arbitration Act. See also, Law Commission

Amendments to The Arbitration and Conciliation Act, 1996 lawcommissionofindia.nic.in/reports/Report246.pdf, para. 63. 90. See Section 29A(1), 1996 Arbitration Act. 91.

See Section 29A(1),

1996 Arbitration Act.

186

of India, Report No. 246 —

(2014),

available

at hittp://

Chapter 9: Arbitral Awards in Indian Arbitrations reduce the arbitrator fees — this serves as an incentive for the arbitral tribunal to render

its awards on time.” However,

tribunals hearing an international commercial

arbitration have more

leeway as they are not bound by the strict timeline of 12 months and, therefore, there is no question of their mandate being terminated by the passage of time.** They may act as expeditiously as possible and endeavour to pass an award within twelve months from the date of completion of pleadings (statement of claim and defence).” 9.4.5

Stamp Duty and Registration: An Additional Requirement

For an arbitral tribunal's end product to be enforceable in India, an additional formal requirement

must

be satisfied,

which

is not

found

in the

1996

Arbitration

Act.

In

accordance with the Indian Stamp Act, 1899 (1899 Indian Stamp Act), an arbitral award must be stamped. Moreover, if the award relates to immovable property, Section 17 of the Registration Act (1908 Registration Act) requires the award to be registered. These further formalities ought to be followed to ensure that there are no challenges at the enforcement stage. The fact that the Arbitration Act does not elaborate on or state whether the ‘signed copy’ of the arbitral award should be duly stamped or registered, which has been the practice in India, resulted in ambiguity as to the applicability of the provisions of the 1899 Indian Stamp Act to arbitral awards. In practice, this requirement says that the arbitral award must be printed on a non-judicial stamp paper. This is based on Schedule | of the 1899 Indian Stamp Act, which deals with award. Furthermore, Section 35 of the 1996 Arbitration Act states that an unstamped or insufficiently stamped award is inadmissible for any purpose and not acted upon, unless validated by payment of the requisite stamp duty and penalties.”° Additionally, pursuant to Section 17 of the 1908 Registration Act an award which affects immovable property requires to be compulsorily registered, failing which, it shall be rendered invalid.?° The Supreme Court in M. Anasuya Devi v. Manik Reddy stated that issues relating to the stamping and registration of an arbitral award can be raised at the stage of enforcement: ‘The question as to whether the Award is required to be stamped and registered, would be relevant only when the parties would file the Award for its enforcement under Section 36 of the Act.’’’ The Supreme Court also held that the requirement of stamping and registration of an arbitral award fell within the ambit of Section 47 of the 1908 Civil Procedure Code (CPC) instead of Section 34 of the Arbitration Act which regulates the application for setting aside arbitral award. The 1899 Stamp Act applies in respect to arbitral awards throughout India, but some States have passed separate Stamp Acts to govern stamp duties in their States. Therefore, the stamp duty to be paid may vary from State to State depending on where

92. Section 29A(4), 1996 Arbitration Act. 93.

94, 95. 96. 97.

ONGC Petro Additions Limited v. Fernas Construction Co. Inc O.M.P. (MISC) (COMM) 256/2019.

See Section 23(4), See Schedule | of Rajinder Parshad M. Anasuya Devi

1996 Arbitration Act. 1899 Stamp ActSharma v. Ashok Sharma and Ors, 2008, SCC OnLine Del 1317. and Anr v. M. Manik Reddy and Ors (2003) 8 SCC 565.

187

Martin Hunter, Simon Weber & Sadyant Sasiprabhu the arbitral award is made. According to Schedule 1A to the Stamp (Delhi Amendment) Act 2001, the stamp duty is calculated at roughly 0.1% of the value of the property to which the award relates, whereas according to the Maharashtra Stamp Act, the stamp duty for arbitral awards stands at INR 500 in Mumbai. It is advisable to check the current stamp duty charges of the specific State before signing the arbitral award. It is important to note that the stamping and registration requirements aforementioned are only applicable to domestic awards. The Supreme Court has held in M/S. Shri Ram EPC Limited v. Rioglass Solar SA that a foreign award need not be stamped.”* In subsequent judgments, High Courts have followed a similar approach in holding that issues of stamp duty cannot come in the way of deciding whether an award is enforceable or not and that foreign awards do not require to be registered and can be

enforced as a decree.”

The COVID-19 pandemic has shown a trend towards more digitalisation, which opens the debate whether signed online awards in PDF format (or other available formats) can satisfy the requirements of Section 31(4) of the 1996 Arbitration Act. Current Indian practice does not foresee such digitalisation. Whereas theoretically, it was possible: if the courts agree that ‘delivering’ a signed copy to each party may include an electronic file (which will likely become a standard in the future), there is only one step to satisfy: the electronic stamping. Recently, the Stockholding Corporation of India Ltd. has been given the competence to provide e-stamp services, which allows for the payment of stamp duties for some Indian States.'“" In Maharashtra, an e-stamping facility has been set up: the Electronic Secure Bank and Treasury Receipt.'"’ Apart from stamping arbitral awards, they must also be registered under Section 17 of the 1908 Registration Act if the award touches upon the ownership of immovable property. At the time of writing, none of the Indian States allows for electronic

registration of arbitral awards.'°* The COVID-19 pandemic has fast-forwarded the trend towards more digitalisation. In April 2020, the Supreme Court issued directions to all Indian courts to implement videoconferencing technology for further functioning of courts.'"* Hence, virtual arbitrations are likely to play an important part in the future of international arbitration.

98. M/S. Shri Ram EPC Limited v. Rioglass Solar SA (2018) SCC OnLine 147.

99. Naval Gent Maritime Ltd v. Shivnath Rai Harnarain (I) Ltd., 174 (2009) DLT 391; Vital S.A v. Bhatia International Limited, 2014 SCC OnLine Bom 1058; Narayan Trading Co. v. Abcom Trading Pvt. Ltd, 2012 SCC OnLine MP 8645.

100. See the explanation on their website, available at https://www.stockholding.com/estampindex.html.

101. See the explanation available at https://gateway.netpnb.com/mahastamp/home.html. 102. Sonal Kumar Singh, Anish Jaipuriar, Suraj Raj Kesarwani and Sayantika Ganguly, Covid-19 and E-Arbitrations: An India Perspective, Lexology, 30 July 2020, available at https://www. lexology.com/library/detail.aspx?g = 40e5 193a-22d0-41 lc-97e7-222dc434c285. 103. In re: Guidelines for Court Functioning through Video Conferencing During Covid-19 Pandemic, Suo Moto Writ (Civil) No. 05/20.

188

Chapter 9: Arbitral Awards in Indian Arbitrations oS

ENFORCEABILITY

The reader will have noticed the often-made reference to arbitral awards being the end product of a successful arbitration. For this end product to be put to good use, it must be enforceable. Above, it was already mentioned that when an arbitral tribunal renders its award,

it has

the obligation

to render

an enforceable

award.'™*

Of course,

it is

basically impossible to ensure and guarantee that an award will be enforceable in any (or all) State(s) in the world. However, the tribunal has ‘an obligation to perform’, rather than an ‘obligation to achieve a defined result'.'" It must, therefore, do anything

in its power to ensure enforceability.'"°

Of course, enforcement is unavoidably intertwined with challenges to arbitral awards (so-called setting-aside procedures). They are therefore discussed at the same time. In Indian law, Sections 35 and 36 of the 1996 Arbitration Act regulate the recourse

against arbitral awards. Additionally, Chapter VIII refers to the finality and the enforcement of arbitral awards. Moreover, the New York Convention, to which India is a State party and of which the 1996 Arbitration Act is the implementing legislation, plays a vital role in the enforcement of arbitral awards.'”’ Setting aside. The reasons for setting aside an arbitral award are set out in Section 34 of the 1996 Arbitration Act. With regards to arbitral awards, two grounds are of relevance. First, the award can be set aside if the arbitral tribunal exceeds its powers.

Section 34(2)(a)(iv) of the Act states that any part of the award going beyond the competence of the arbitral tribunal as set out in the arbitration agreement or going beyond the scope of the submission to arbitration may be set aside. Second, the provision puts an emphasis on the public policy of India.“ An arbitral award may be set aside on grounds of conflict with public policy only if the arbitral award was made by fraudulent or corrupt means, goes against the fundamental policy of India or is in conflict with the ‘most basic notions of morality or justice’.'"’ This goes in line with Article V(2)(b) of the New York Convention, which states that the enforcement may be refused if the ‘competent authority [...] finds that [...] the enforcement of the award would be contrary to the public policy of that country’. Arbitral awards arising out of arbitrations other than international commercial arbitrations may also be set aside on

grounds of the award being vitiated by patent illegality.''°

Enforcement. Sections 36 and 48 of the 1996 Arbitration Act set out the process for having an arbitral award enforced in India.''’ This becomes necessary if the unsuccessful party is not complying with the decision of the arbitral tribunal, which happens

104. Redfern & Hunter, supra n. 8, para. 9.04. See also e.g. ICC Rules 2021, Art. 42. 105.

Redfern & Hunter, supra n. 8, para. 9.14.

109.

Ibid.

106. See Chapter 11 of this Handbook. 107. In this context, note that India has made both the commercial and reciprocity reservations. An award would necessarily have to be outside the scope of the reservations to be enforceable. For further discussion on the interpretation of the reservations, see Chapter 12 of the Handbook. 108. See Section 34(2)(b) (ii), 1996 Arbitration Act. 110. See Section 34(2-A), 1996 Arbitration Act. 111. For further discussion of enforcement, see Chapter 11 of the Handbook.

189

Martin Hunter, Simon Weber & Sadyant Sasiprabhu

in the minority of cases.''* After the time limit for having the award set aside has

expired, an application for enforcement can be made to the competent court in accordance with the applicable provisions of the CPC.''* One final warning, however, is warranted here. It is important to remind the reader that once such application is filed and becomes part of the court docket, it becomes public knowledge. Whereas confidentiality is one of the advantages of arbitration (and included in Section 42A of

the Act),''* a recent trend to more transparency can be noted.'" 9.6 The

GUIDELINES FOR THE DRAFTING OF AN ARBITRAL AWARD best

awards

are short,

reasoned,

and

simply

written

in clear,

unambiguous

language. An arbitral tribunal should aim at rendering a correct, valid, and enforceable

award.''®

This is timeless advice. Such guidelines, however, are not contained in any legislation or arbitral rules. Whereas most arbitration laws contain provisions requiring arbitral awards to be in writing, signed and dated, they are silent on how to properly draft an arbitral award. Arbitrators and tribunals are left to devise arbitral awards according to their own preferences and styles. This is also a common approach of arbitral institutions such as the HKIAC or the PCA.""” This part concludes the Chapter on arbitral awards by setting out certain drafting guidelines based on the experience of prominent arbitrators and specialists.''* 9.6.1

Form of the Arbitral Award

Part 9.4.2 has already set out the requirements of form under Indian law. It is, however, necessary to go a step further when drafting an arbitral award and pay attention to the following points. Cover. The cover of the arbitral award must identify all parties to the arbitration. Therefore, include the correct names, addresses and contact numbers of the disputing parties, their representatives, the members of the arbitral tribunal and (if applicable) the administrative secretary. Furthermore, the cover must feature the date on which the award was made and what kind of award it is — interim award, partial award, final

award, agreed award by consent, by default or any other. 112.

113.

114. 115.

116. 117.

118.

Born, supra n. 7, p. 2898.

Section

36(1),

1996 Arbitration Act. For further discussion of the time limits in relation to

seeking enforcement of the award, see Chapter 11 of the Handbook. Redfern & Hunter, supra n. 8, Chapter 1. See the debate in connection with the ISDS reform at UNCITRAL Working Group III and the United Nations Convention on Transparency in Treaty-Based Investor-State Arbitration, which entered into force in 2017. For further discussion of UNCITRAL WG-III, see Chapter 15 of the Handbook, Redfern & Hunter, supra n. 8, para. 9.139. For an overview of the PCA rules, see Chapter 17.5 of the Handbook. The

authors

heartfully thank Alan

Redfern,

Antonio

Parra,

B.N.

Srikrishna,

Brooks

Daly,

Christopher Greenwood, Jan Paulsson, Karl-Heinz Bockstiegel, Meg Kinnear and Toby Landau for their invaluable comments and support with this part.

190

Chapter 9: Arbitral Awards in Indian Arbitrations Introduction and summary. The arbitral award should set out the text of the agreement to arbitrate and the choice of law clause, if any. Make references to the arbitral tribunal’s procedural orders, as this sets out the procedural history of the arbitration. However, avoid quoting verbatim (copy and paste) all past procedural decisions which would unnecessarily fill pages of the arbitral award. Some references, however, are useful to show a balanced approach by the arbitral tribunal in treating the disputing parties in a fair and equitable way. Moreover, briefly summarise relevant claims and arguments advanced by each disputing party. Again, this shows that the principle of due process was taken into account and the disputing parties were ‘heard’ by the tribunal. Time limits. The 1996 Arbitration Act prescribes that an award must be made as expeditiously as possible and in certain cases, within 12 months of filing of pleadings.''’ Time limits for making an arbitral award may be mandatory. An arbitral award made out of time may affect the validity of the arbitral award. It is good practice for arbitrators to start early with the procedure of drafting an arbitral award and keep updating it as the case progresses. For example, taking into account that most tribunals consist of arbitrators based in different countries, it is essential to provide for sufficient

time for the final draft of the arbitral award to be circulated between the arbitrators for their respective signatures. Concluding this point, the arbitral tribunal should build in deliberation time very close to (ideally immediately after) the relevant hearings so issues are fresh and timelines will be met. Clarity and writing. Valid requests for correction of arbitral awards frequently relate to computational errors. Consequently, double-checking the math is always worthwhile. Here, we must emphasise the importance of clear, unpretentious expository writing. This is all the more important when the writers or readers are working in

a non-native language. Elaborate sentence structure impresses no one because every-

one knows that more skill and effort go into setting the reasoning out clearly and accurately. Convoluted language leaves the reader confused, if not actually misled. It betrays not erudition, but very often a lack of adequate reflection which leads to unhelpful hedging and qualifications. If the award was prepared by more than one arbitrator, it needs to be harmonised for spelling, grammar and style. 9.6.2

Substance of the Arbitral Award

Summary of claims. Briefly set out the claims and arguments advanced by each party. These can be summarised, and a list of issues may be included. Issues dealt with. The question as to whether the tribunal should deal with all issues or only the dispositive ones often arises and is a tricky one. It is advisable that the attention should be concentrated on the issues the arbitral tribunal considers decisive. They are addressed by setting out a detailed reasoning regarding the substantive merits of the case and a clear statement of the arbitral tribunal's decision on each disputed issue. The tribunal should also deal with any other arguments and

119.

See Part 9.4.4.

19]

Martin Hunter, Simon Weber & Sadyant Sasiprabhu claims raised by the parties, if only to dismiss them in a few sentences — to show that none of the arguments or claims have been overlooked. This can be done through a catch-sentence such as ‘whilst all evidence and every submission has been carefully considered by the arbitral tribunal, the award does not set out every point in terms’. Interest. Arbitral awards sometimes deal with claims for interest rather perfunctorily. The sums involved are often considerable, and if interest is awarded, the arbitral

award must give it proper consideration. The award must clearly state whether it is simple or compound interest, at what rate it is to run, and from what date or dates. Finally, add the reasons behind the award of interest. tau

Costs. Another aspect the arbitral award must generally address is costs.'*' It is sometimes dealt with rather perfunctorily. Costs should be considered and dealt with in detail with reasonableness being the primary guiding factor. Whereas it might be correct that if the client has approved the expense, it should prima facie be considered reasonable, this does not apply where the client follows the ‘spend what it takes’ approach. Finally, give reasons for the decision as the disputing parties often feel costs decisions are unreasoned. Obiters. The arbitral tribunal should limit any obiter. If the arbitral tribunal decides to go beyond the disputing parties’ submissions, give them the opportunity to react. This can happen at a hearing or in post-hearing briefs. 9.6.3

Dispositive Part of the Arbitral Award

Reasoning. The tribunal's reasoning is the most important part of the arbitral award and a mandatory requirement under most arbitration laws and arbitral institution's rules. An arbitral award must contain the tribunal's ultimate findings and decisions,

which should be firmly and precisely stated to prevent any requests for correction or interpretation. A well-expounded decision will also assist courts in later recognition, enforcement, setting-aside or annulment proceedings to understand the rationale behind the tribunal’s decision-making process. Therefore, the arbitral tribunal must ensure that the dispositive part is capable of enforcement. Covering all necessary issues in clear language will contribute to enforceability. Dispositif. The dispositive part of the arbitral award should deal with all the disputing parties’ claims for relief, as finally expressed during the course of the proceedings — and of course with any counterclaims. It is also good practice to state expressly that all other claims and requests are rejected. This can be done through a catch-sentence such as “all other claims are dismissed’. In particular in India, avoid any determination that might be construed as offending public policy. Signature clause. The dispositive part of the arbitral award is followed by the signature clause, which in addition to the actual signatures should record the date and the place of arbitration. It is a fundamental requirement that an arbitral award must be

120.

Section 31(7), 1996 Arbitration Act.

121.

Section 31. A(2),

1996 Arbitration Act.

192

Chapter 9: Arbitral Awards in Indian Arbitrations signed.'~* Therefore, the tribunal should ensure that there signed originals — it is good practice to ensure that there is party, one for each of the arbitrators and one for the arbitral the case of a dissent explain why the dissenting arbitrator has include the dissenting opinion if required/allowed. 9.6.4

are sufficient number of one signed copy for each institution, if required. In not signed the award and

Institutional Support

Administrative assistance. While drafting an arbitral award is exclusively in the tribunal’s domain, as can be seen from above, it is essential for an arbitral award to be drafted in a proper manner. Arbitral institutions, in addition to assisting with the efficient administration

of arbitration, can be of great assistance

to tribunals

in the

drafting of the arbitral award as long as properly supervised. The level of scrutiny to which arbitral institutions submit awards differs widely. Under Article 33 of the 2012 ICC Arbitration Rules, the ICC International Court of Arbitration submits the award to

a considerable level of scrutiny and may even draw the arbitrators’ attention to points

of substance.'** Article 28(2) of the 2013 SIAC Arbitration Rules contains a similar provision.'** Other arbitration rules do not provide for a comparable scrutiny process.'7° If so, it remains the duty of the arbitral tribunal to ensure that the matters of

quantum are double-checked such as currency, currency conversion or the calculation of interest. Moreover, check all citations, the format of citations, the spelling of names, etc. — aspellcheck can do some unintentional changes that need to be caught before the final award is issued. Tribunal secretary. Some of the benefits of an arbitral institution or involving a tribunal secretary are the following. First, arbitral institutions may subject the arbitral award to a review/proof check wherein clerical errors, calculation mistakes and other

deficiencies that are discovered can be brought to the tribunal's notice for corrections. Second, a tribunal secretary can perform an important role in ensuring that the tribunal produces an award within the time limits, by recording the procedural history of the arbitration and preparing a framework of the arbitral award which includes all the necessary elements mentioned above. Clerical and administrative tasks can be performed at a lesser cost to the parties. No delegation. However, it is important to note that the tribunal must carefully supervise the role of the tribunal secretary and make sure that no decision-making role is delegated to the tribunal secretary. Perceived over-delegation of work to tribunal secretaries meets harsh criticism, to the extent that they have been described as the fourth arbitrator. Awards have even been challenged on grounds of the arbitral tribunal

122.

See Part 9.4.2 and Section 31, 1996 Arbitration Act.

123. For further 124. For further 125. See Article Rules; Arts

discussion of the ICC Rules, see Chapter 17.2 of the Handbook. discussion of the SIAC rules, see Chapter 17.6 of the Handbook. 27 of the 2014 LCIA Arbitration Rules; Arts 35 et seg of the 2010 SCC Arbitration 32 et seg of the HKIAC Administered Arbitration Rules.

193

Martin Hunter, Simon Weber & Sadyant Sasiprabhu not fulfilling its mandate as the tribunal secretary had drafted large parts of the arbitral

award.'*° 9.65

Due Process and Confidentiality

Finally, we must include a plea to always pay attention and respect due process and confidentiality. Due process includes strict equality between the disputing parties. For further information refer to the Bockstiegel Method on timely arbitrators and the Redfern Schedule on the production of documents.'*’ Furthermore, the arbitral tribunal must ensure the confidential treatment both of the existence of the arbitration and of all documents relating to the arbitration. Ensuring their technical equipment is sufficiently protected is the duty of the arbitrators!

126.

Dmytro Galagan, The Challenge of the Yukos Award: an Award Written by Someone Else - a Violation of the Tribunal's Mandate?, 27 February 2015, Kluwer Arbitration Blog, available at

http://arbitrationblog.kluwerarbitration.com/2015/02/27/the-challenge-of-the-yukos-award-

an-award-written-by-someone-else-a-violation-of-the-tribunals-mandate/; Veteran Petroleum Limited (Cyprus) v. The Russian Federation, PCA Case No. AA 228, Interim Award of 30 November 2009, available at https://pcacases.com/web/sendAttach/423; Veteran Petroleum Limited (Cyprus) v. The Russian Federation, Final Award of 18 July 2018, PCA Case No. AA 228, available at https://pcacases.com/web/sendAttach/422. 127. See Jan Paulsson, The Timely Arbitrator: Reflections on the Bockstiegel Method, Arbitration International:

The

Journal

of the

London

Court

of International

Arbitration,

22(1)

2006

University of Miami Legal Studies Research Paper No. 2010-28; for the origins of the ‘Redfern schedule’, see Redfern, Efficiency in arbitration: The Redfern schedule, ICCA Review, April 2013, pp. 9 and 12; Redfern & Hunter, supra n. 8, para. 6.100.; Peter Harris, Reinventing the Redfern, 33(4) J. of Int'l. Arb 353-364 (2016).

194

CHAPTER

10

Challenge and Enforcement of Awards: The Brooding Omnipresence of Public Policy Darius Khambata‘’

The situation once an award is rendered is generally very simple: there is a winning side and a losing side. If there is a possibility of avoiding having an unfavourable award enforced, the disputing party can have recourse to setting aside proceedings. In India, disputing parties have brought a multitude of setting aside proceedings before Courts for violation of public policy. There is no definition of the term ‘public policy’ in the 1996 Arbitration Act. To understand the parameters of public policy challenges to awards, and resistance to their enforcement, it becomes necessary to analyse how

Indian courts have approached pleas of public policy under contract and constitutional law. This Chapter discusses the scope of public policy and traces the evolution of the ground under Indian law.

10.1

INTRODUCTION

Alternative dispute resolution through consensual remedies of arbitration and conciliation (or mediation) provides parties with fora for adjudication and settlement of their disputes without recourse to civil litigation, which can be protracted in India. Courts in India have, at times, attempted to engage in intrusive judicial review of awards on the grounds that they are in conflict with public policy, by international scholars referred to as the unruly horse. The grounds for challenging a domestic award (in an India-seated arbitration) are provided in Section 34(2)(a) and (b) of the Arbitration and Conciliation Act, 1996 (1996 Arbitration Act or Act),’ corresponding to Article 34 of the * The author is grateful for the valuable research assistance from Mr Pheroze F. Mehta, Mr Ali Antulay, and Mr Karan Rukhana, three talented Advocates.

1. Section 34, 1996 Arbitration Act:

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UNCITRAL Model Law on International Commercial Arbitration (Model Law).* A domestic award can be set aside if it is in conflict with public policy or, if it is not made in an international commercial arbitration, on the additional ground that it is vitiated

by patent illegality on its face. Other grounds for setting aside awards include lack of jurisdiction, instances when the composition of the tribunal or the procedure followed

Application for setting aside arbitral award. (1) Recourse to a Court against an arbitral award may be made only by an application for setting aside such award in accordance with sub-section (2) and sub-section (3). (2) An arbitral award may be set aside by the Court only if (a) the party making the application furnishes proof that (i) a party was under some incapacity, or

(ii) the arbitration agreement is not valid under the law to which the parties

have subjected it or, failing any indication thereon, under the law for the

time being in force; or

(iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or {iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration: Provided that, ifthe decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or (v) the composition of the arbitral tribunal or the arbitral procedure was not

in accordance with the agreement of the parties, unless such agreement

was in conflict with a provision of this Part from which the parties cannot

derogate, or, failing such agreement, was not in accordance with this

(b)

Part; or the Court finds that (i) the subject-matter of the dispute is not capable of settlement by arbitration

under the law for the time being in force, or

(ii) the arbitral award is in conflict with the public policy of India. Explanation 1. — For the avoidance of any doubt, it is clarified that an award is in conflict with the public policy of India, only if, (i) the making of the award was induced or affected by fraud or corruption or was in violation of section 75 or section 81: or (ii) it is in contravention with the fundamental policy of Indian law; or (iii) it is in conflict with the most basic notions of morality or justice. Explanation 2. — For the avoidance of doubt, the test as to whether there is a contravention with the fundamental policy of Indian law shall not entail a review on the merits of the dispute. (2A) An arbitral award arising out of arbitrations other than international commercial arbitrations, may also be set aside by the Court, if the Court finds that the award is vitiated by patent illegality appearing on the face of the award:

Provided that an award shall not be set aside merely on the ground of an

erroneous application of the law or by re-appreciation of evidence. [...]

2. When originally enacted in 1996, Section 34 of the 1996 Arbitration Act was almost identical to Section 34 of the UNCITRAL

Model Law. Amendments

enacted with effect from 23rd October,

2015 introduced subsection (2A), (5) and (6) and a second Explanation to Section 34(2)(b). The extant first Explanation to Section 34(2)(b) was also replaced to narrowly restrict the scope of review on the ground of conflict with public policy.

196

Chapter 10: Challenge of Awards: Public Policy in arbitration is not in accordance with the arbitration agreement, and nonarbitrability. This Chapter does not cover grounds other than that of public policy. 10.2

COMMON

LAW ARBITRATION:

THE 1899 ACT

Arbitration in India has existed from antiquity.* Common law arbitration is first found in the Bengal Regulations of 1772.* However, it was the Indian Arbitration Act, 1899 (1899 Act) that was the first consolidated legislation on arbitration.” Under the 1899 Act, an award could be set aside for an arbitrator’s misconduct and where an arbitration or an award was ‘improperly procured’.® A few years later, Schedule II of the Code of Civil Procedure of 1908 (CPC) was devoted to arbitration. The CPC applied to the whole of British India. An award could be remitted to the arbitrator if among other circumstances ‘an objection to the legality of the award is apparent on the face of it’.” Paragraph 15 of Schedule II provided limited grounds for setting aside an award.* 3. Traditional forms of community and panchayat arbitration are even referred to in the Upanishads, philosophical discourses dating to earlier than 1200 BCE, that explained the Vedas, ancient Hindu religious texts. 4. The Bengal Regulations contained a provision that ‘No award of any arbitrator, or arbitrators be set aside except upon full proof, made by oath of two credible witnesses, that the arbitrators had been guilty of gross corruption or partiality in the cause in which they had made their award (emphasis added).’ The first provision that a court should ‘prevail upon the parties to submit to the arbitration of one person’ is found in Sir Elijah Impey's Regulation of 1781, the first indication of a pro arbitration bias under Indian law. This continues today in the form of Section 89 of the CPC.

5. Sections 2 and 23 of the 1899 Act confined its application to cases where had the subject matter submitted to arbitration been the subject of a suit that could have been instituted in a Presidency town of India or before the Recorder of Rangoon, Burma.

6. Section 14, 1899 Act provided that ‘Where an arbitrator or umpire has misconducted himself, or

an arbitration or award has been improperly procured, the Court may set aside the award." 7. Paragraph 14 of Schedule II to the CPC provides as follows: The Court may remit the award or any matter referred to arbitration to the reconsideration of the same arbitrator or umpire, upon such terms as it thinks fit — (a) where the award has left undetermined any of the matters referred to arbitration, or where il determines any matter not referred to arbitration, unless such matter can be

separated without affecting the determination of this matters referred;

(b) where the award is so indefinite as to be incapable of execution; (c) where an objection to the legality of the award is apparent upon the face of it.

8. Paragraph 15 of Schedule II to the CPC provided as follows: (1) An award remitted under paragraph 14 becomes void on failure of the arbitrator or umpire to reconsider it. But no award shall be set aside excep! on one of the following

prounds, namely:—

(a) corruption or misconduct of the arbitrator or umpire; (b) either party having been guilty of fraudulent concealment of any matter which he

ought to have disclosed, or of willfully misleading or deceiving the arbitrator or umpire;

(c) the award having been made after the issue of an order by the Court superseding the arbitration and proceeding with the suit or after the expiration of the period

allowed by the Court, or being otherwise invalid.

(2) Where an award becomes void or is set aside under clause (1), the Court shall make an order superseding the arbitration and in such case shall proceed with the suit.

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In what became the leading judgment on the subject, the Privy Council held that an award could be set aside if there was an error in a proposition of law incorporated in and appearing on the face of the award and which formed the basis of the award (the ‘Champsey Bhara principle’)®. The Privy Council adopted the principle of Jaw first

enunciated

(albeit with a caveat)

in Hodgkinson v. Fernie.'” Although

the Privy

Council's decision was in the context of the Rules of the Bombay Cotton Association,

the Champsey Bhara principle arbitration law thereafter.

was

consistently

applied

by

Indian

courts

under

10.3

PUBLIC POLICY BEFORE 1996

10.3.1

Enforcement of Foreign Awards: Public Policy Rears Its Head

The Arbitration (Protocol and Convention) Act, 1937 (Protocol and Convention Act) was the first statute under which public policy entered the arena of arbitration in India.'’ A foreign award would not be enforced if it was contrary to the ‘public policy’ or ‘the law’ of India.'* The Foreign Awards (Recognition and Enforcement) Act, 1961 (Foreign Awards Act)'* provided that a foreign award would not be enforced if the enforcement of the award would be contrary to the public policy of India.'* Section 7 of the Protocol and Convention Act allowed a wider ground for refusal and provided that an award would also not be enforced even if it was contrary to the law of India. This wider ground was no longer available to resist enforcement of 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention) awards as Section 7(i)(b)(ii) of the Foreign Awards Act limited the ground of 9. Champsey Bhara& Co. v. Jivraj Baloo Spinning & Weaving Co. Ltd., AIR 1923 PC 66. 10.

Hodgkinson v. Fernie (1857) 3 C.B. (N.S.)

189 in which Williams J. held that:

The law has for many years been settled, and remains so al this day, thal, where a cause or matters in difference are referred to an arbitrator, whether a lawyer or a layman, he

is constituted the sole and final judge of all questions both of law and of fact [...]. The

only exceptions to that rule, are, cases where the award is the result of corruption or

fraud, and One other, which, though it is to be regretted, is now, | think, firmly

established, viz., where the question of law necessarily arises on the face of the award, or upon some paper accompanying and forming part of the award. Though the propriety of this latter may very well be doubted, I think it may be considered as established [...].

11. It gave effect to the Protocol on Arbitration Clauses, 1923 and the Convention on the Execution of Foreign Arbitral Awards

1927 (Geneva Convention). For a discussion of enforcement under

the 1937 Act, see Chapter 11 of the Handbook. 12. Section 7, Protocol and Convention Act corresponded to Article I(2)(e) of the Geneva Convention. Article I(2)(e) used the expression ‘principles of law’.

13. It gave effect to the New York Convention. India was one of the first countries to ratify the New York Convention. 14. Section 7(1)(b)(ii), Foreign Awards (Recognition and Enforcement) Act, 1961 which corresponded

to Article

V(2)(b)

of the

New

York

Convention.

Article

V(2)(b)

provides:

‘V(2)

-Recognition and enforcement of an arbitral award may also be refused if the competent authority in the country where recognition and enforcement is sought finds that: (b) The recognition or enforcement of the award would be contrary to the public policy of that country.’ Enforcement under the 1961 statute is discussed in Chapter |! of the Handbook.

198

Chapter 10: Challenge of Awards: Public Policy non-enforcement to the stricter ‘contrary to the public policy’ ground of the New York Convention. The scope of refusal of enforcement of a foreign award was thus narrowed, but the public policy exception was firmly in place at least in respect of foreign awards. 10.3.2

Public Policy under the Domestic 1940 Act: Peripheral Yet Present

The Arbitration Act, 1940 (1940 Act) repealed the 1899 Act and Schedule II to the CPC. It governed arbitrations seated in India (Indian arbitrations). The experience under the 1940 Act was unsatisfactory and arbitration never emerged as a viable alternative to commercial litigation before courts.’* Courts narrowly construed the ground of challenge of ‘error of law apparent on the face of the award''® and steadfastly refused to assume appellate jurisdiction over the award.’ Section 30 of the 1940 Act limited the grounds on which an award could be set aside: (i) to misconduct of the arbitrator or the proceedings, (ii) to when the award was made alter the arbitration proceedings had become invalid or been superseded, (iii) where the award was improperly procured or (iv) was ‘otherwise invalid’.'® Section 16(1)(c) of the 1940 Act authorised the court to remit an award to the

15. Guru Nanak Foundation v. Rattan Singh (1981) 4 SCC 634, 635: The way in which the proceedings under the Act are conducted and without an exception challenged in Courts, has made lawyers laugh and legal philosophers weep. Experience shows and law reports bear ample testimony that the proceedings under the Act have become highly technical accompanied by unending prolixity, at every stage providing a legal trap to the unwary. Informal forum chosen by the parties for expeditious disposal of their disputes has by the decisions of the Courts been clothed with ‘legalese’ of unforeseeable complexity.

16. The Supreme Court defined ‘error of law on the face of the award’ in Union of India v. A.L. Rallia Ram, AIR 1963 SC 1685 holding: You can find in the award or a document actually incorporated thereto, as for instance, a note appended by the arbitrator stating the reasons for his judgment, some legal proposition which is the basis of the award and which you can then say is erroneous. It does not mean that if in a narrative a ‘reference is made to a contention of one party,

that opens the door to setting first what that contention is, and then going to the

contract on which the parties’ rights depend to see if that contention is sound. In Firm Madanlal Roshanlal Mahajan

v. Hukumchand

Mills Ltd., Indore, AIR

1967 SC

1030 the Supreme Court held that the court could not review an award and correct any mistake in the arbitrator's adjudication, unless an objection to the legality of the award was apparent on the face of the award. 17. Sudarshan Trading Co. v. Government of Kerala (1989) 2 SCC 38; M/s. Hind Builders v. Union of India (1990) 3 SCC 338; B. V. Radha Krishna v. Sponge Iron India Ltd. (1997) 4 SCC 693; State of Rajasthan v. Puri Construction Co. Ltd. (1994) 6 SCC 485. 18.

Section 30, 1940 Act:

Grounds for setting aside award:- An award shall not be set aside except on one or more

of the following grounds, namely:- (a) that an arbitrator or umpire has misconducted

himself or the proceedings; (b) that an award has been made after the issue of an order

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arbitral tribunal for reconsideration ‘where an objection to the legality of the award is apparent upon the face of it’. Though this power was limited to cases of remission of the award, the courts made use of it, in conjunction with the phrase ‘otherwise invalid’

used in Section 30(c), to set aside arbitral awards vitiated by errors of law apparent on

their face,'” i.e. the Champsey Bhara principle.

Public policy did not less, stray decisions under duct, were premised on the with public policy.*' In one

yet provide a basis for setting aside an award.~” Neverthethe 1940 Act, setting aside awards on grounds of misconrationale that an arbitrator was bound to act in accordance case, the Bombay High Court took the view that although

the arbitrator was not bound by the technical and strict rules of evidence, the rules of

evidence as were ‘founded on fundamental principles of justice and public policy’ were applicable to arbitral proceedings on the ground that disregard of the latter affected the substantial justice of the case.** An award could be set aside as being against public policy if an arbitrator knew or recognised that an arbitration agreement was illegal and nevertheless proceeded to render an award related to a dispute arising under that contract.** The ‘otherwise invalid’ exception as a ground of challenge of arbitral awards under Section 30(c) was steadily expanded. Awards were no longer set aside only on the Champsey Bhara principle, but also if they were inconsistent with or not in accordance with the contract.™* Principles borrowed from administrative law such as a failure to consider ‘material’ facts or evidence and consideration of ‘irrelevant’ facts

by the Court superseding the arbitration or after arbitration proceedings have become invalid under section 35; (c) that an award has been improperly procured or is otherwise invalid (emphasis added).

For a discussion of enforcement under the 1940 Act, see Chapter 11 of the Handbook. 19, A. L. Rallia Ram, supra n. 16; Alopi Parshad & Sons v. Union of India, AIR 1960 5C 588.

20. Markfed

Vanaspati

& Allied Industries

v. Union

of India

(2007)

7 SCC

679,

para.

16. This

decision affirmed a passage from Russell on Arbitration (19th ed) p. 110: ‘the paramount public policy is that freedom of contract is not lightly to be interfered with' and, upholding a non-speaking award under the 1940 Act (at para. 17), observed: ‘The endeavour of the Court should be to honour and support the award as far as possible.’ 21. HMG Engineering Pvt. Ltd. v. Union of India (2000) 1 Bom CR 221; M/S. Kochhar Construction Co. v. Union of India &Anr.ILR (1987) 1 Del 571 para. 24; Fertilizer Corporation of India Ltd. v. Bharat Painters, AIR

1986 Orissa 82, para. 6; Abhai Singh v. Sanjay Singh, AIR

1989 All 214,

para. 15. 22. Aboobaker Latif v. Reception Committee of the 48th Indian National Congress, AIR 1937 Bom 410 23.

(412).

ITC Limited v. George Joseph Fernandes & Anr.

(1989) 2 SCC

1, para. 26.

24. Associated Engineering Co. v. Government of Andhra Pradesh (1991) 4 SCC 93 wherein it was held: The umpire, in our view, acted unreasonably, irrationally and capriciously in ignoring the limits and the clear provisions of the contract. In awarding claims which are totally opposed to the provisions of the contract to which he made specific reference in

allowing them, he has misdirected and misconducted himself by manifestly disregarding the limits of his jurisdiction and the bounds of the contract from which he derived his authority thereby acting ultra finescompromissi.

See also Tarapore & Co. v. State of M.P. (1994) 3 SCC 521, paras 13, 28.

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Chapter 10: Challenge of Awards: Public Policy and evidence began to emerge as grounds of review.** This necessitated and opened the door to a merits review. 10.4

THE 1996 ACT

When globalisation affected India as it did many other nations around the world, Parliament enacted the 1996 Arbitration Act, which dealt, in one overarching statute, with the law governing Indian arbitrations and the law for recognition and enforcement of foreign awards. The 1940 Act, the Protocol and Convention Act, and the Foreign Awards Act were repealed. The purpose of the Act was to make arbitration law in India “more responsive to contemporary requirements’ by facilitating quick and fair arbitration and minimising the supervisory role of courts in the arbitration process.*° Several years later, the Act was extensively amended in 2015*” (2015 Amendment), in 2019

(2019 Amendment)** and in 2020 (2020 Amendment).”’ The Act is divided into three

parts: Part I: Arbitrations seated in India; Part II]: Recognition and enforcement of foreign awards covered by the New York Convention (Chapter I) and the Geneva

Convention (Chapter II)*’; and Part III: Conciliation.

Part I of the Act recognises two categories of arbitration seated in India (domestic arbitration), namely:

25.

K.P.

Poulose

v. State of Kerala

and

Anr.

(1975)

2 SCC

236

was

an

early

example

of the

incorporation of the Wednesbury rule into Indian arbitration law. An arbitrator was held guilty of legal misconduct if he arrived at a decision by ignoring material documents which threw light on the controversy and which would have helped him to come to a fair decision; M/s. Sikkim Suba Associates v. State of Sikkim (2001) 5 SCC 629, para.

16(e); Union of India v. Mehta Teja

Singh, AIR 1983 Del 297, para. 8; Union of India v. V. Pundarikakhsudu and Sons (2003) 8 SCC

26.

168, para. 23; State of Rajasthan v. Ferro Concrete Construction Private Ltd. (2009)

12 SCC

Objects

at

1,

paras 39 40 (court held that the arbitrator committed a legal misconduct by ignoring the terms of the contract); Pushkar Raj Wason v. Union of India, AIR 2008 Cal 255 (court held that the arbitrator committed legal misconduct by ignoring the claim admitted by the respondent); College of Vocational Studies v. 8.5. Jaitley, AIR 1987 Del 134 (DB), paras 19 and 24 (the award was liable to be set aside as the findings of the arbitrator were not based on evidence and were perverse); Sathyanarayana Bros. (P) Ltd. v. T.N. Water Supply &Drainage Board (2004) 5 SCC 314, paras 15-16 (a material document was not called for by the arbitrator. It was held that the award was vitiated); Bharat Coking Coal Ltd. v. Annapurna Constructions (2003) 8 SCC 154, para. 40 (a failure by the arbitrator to consider relevant material and clauses of the contract results in a misdirection in law). and

Reasons

to

the

Arbitration

and

Conciliation

Act,

1996,

available

http://

lawcommissionofindia.nic.in/reports/Report246-I1. pdf. 27. The 2015 Amendment which is given effect from 23 October 2015 was preceded by the promulgation on 23 October 2015 of the Arbitration and Conciliation Ordinance, 2015, available at http://www.prsindia.org/uploads/media/Ordinances/ Arbitration % 20and % 20Conciliation % 20Amendment% 200r dinance %202015.pdf. 28. The 2019 Amendment, which is given effect from 30 August 2019, is available at http://egazette nic.in/WriteReadData/2019/210414.pdf. 29. The Arbitration and Conciliation (Amendment) Ordinance 2020 is available at https:// legalaffairs.gov.in/sites/default/files/The% 20Arbitration % 20and % 20Conciliation %20% 28

Amendment % 29 % 200rdinance %202020.pdf. 30. Section 53 of the 1996 Arbitration Act provides that Chapter I of Part II, which applies to Geneva Convention Awards, shall not apply to New York Convention Awards to which ChapterI of Part II applies.

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(1) where the contesting parties are both Indian; and (2) where at least one of the contesting parties is a foreign citizen, a body corporate or entity whose central management and control is exercised from outside India or by the Government of a foreign country (‘international commercial arbitration’).*! Part I of the Act, when originally enacted, was substantially a replica (barring a few exceptions) of the Model Law. Although the 2015 Amendment made a number of changes to the Model Law, several of these were clarificatory of the restrictions on judicial interference. The pro-party autonomy~ and pro-enforcement philosophy of the 1996 Arbitration Act were exemplified by Section 5 which confined judicial intervention (such as appointment of arbitrators and recourse against awards) to only that allowed by Part [33

10.4.1

Public Policy under the 1996 Act

Section 48 of Part II of the 1996 Arbitration Act confers a right upon a party to object to the enforcement of a New York Convention foreign award on the ground that its enforcement would be contrary to the public policy of India.** Section 57 provides a

31.

Section 2(1)(f) of the 1996 Arbitration Act defines ‘international commercial arbitration’ as:

‘international commercial arbitration’ means an arbitration relating to disputes arising out of legal relationships, whether contractual or not, considered as commercial under the law in for in India and where at least one of the parties is —

i. an individual who is a national of, or habitually resident in, any country other than India; or ii. a body corporate which is incorporated in any country other than India; or iii. a company or ail association or a body of individuals whose central management and control is exercised in any country other than India; or

iv. the Government of a foreign country.

32. The working group that drafted the Model Law observed that ‘Probably the most important principle on which the Model Law should be based is the freedom of the parties in order to facilitate the proper functioning of international commercial arbitrations according to their expectations." See UN Doc A/CN.9/207, para. 17. For a discussion of party autonomy and fundamental access to courts, see Chapter 12 of the Handbook. 33. Section 5, 1996 Arbitration Act: "Extent of judicial intervention. - Notwithstanding anything contained in any other law for the time being in force, in matters governed by this Part, no judicial authority shall intervene except where so provided in this Part." 34.

Section 48, 1996 Arbitration Act:

Conditions for enforcement of foreign awards (2) Enforcement of an arbitral award may

also be refused if the Court finds that — (a) the subject-matter of the difference is not capable of setthement by arbitration under the law of India; or (b) the enforcement of the award would be contrary to the public policy of India. Explanation 1. - For the avoidance of any doubt, it is clarified that an award is in conflict with the public policy of India, only if, (i) the making of the award was induced or affected by fraud or corruption or was in violation of section 75 or section

202

Chapter 10: Challenge of Awards: Public Policy wider objection in respect of Geneva Convention Awards’ giving, in addition to public policy, the exception of the award being in conflict with the ‘law of India’ — echoing the Geneva Convention, which used the phrase ‘in conflict with the principles of law of the country’.*® This carried forward the difference that had existed between the Protocol and Convention Act and the Foreign Awards Act. To define the permissible limits of the review of awards, Article 34 of the Model Law used language identical to that of the New York Convention (the award must not be ‘in conflict with public policy’).*” This limitation was carried forward into Section 34 in Part I and Section 48 in Part II of the 81; or (ii) it is in contravention with the fundamental policy of Indian law; or (iii) it is in conflict with the most basic notions of morality or justice. Explanation 2. — For the avoidance of doubt, the test as to whether there is a contravention with the fundamental policy of Indian law shall not entail a review on the merits of the dispute (emphasis supplied). For a review of jurisprudence related to enforcement of arbitral awards under Section 48, see Chapter 11 of the Handbook. 35.

Section 57, 1996 Arbitration Act:

Conditions for enforcement of foreign awards. — In order that a foreign award may be enforceable under this Chapter, it shall be necessary that — (e) the enforcement of the award is not contrary to the public policy or the law of India. [Explanation 1, - For the avoidance of any doubt, it is clarified that an award is in conflict with the public policy of India, only if, — (i) the making of the award was induced or affected by fraud or corruption or was in violation of section 75 or section 81; or (ii) it is in contravention with the fundamental policy of Indian law; or (iii) itis in conflict with the most basic notions of morality or justice. Explanation 2. — For the avoidance of doubt, the test contravention with the fundamental policy of Indian law the merits of the dispute.] Even if the conditions laid down in sub-section (1) are the award shall be refused if the Court is satisfied that (a) the award has been annulled in the country in which

as to whether there is a shall not entail a review on fulfilled, enforcement of it was made;

(b) the party against whom it is sought to use the award was not given notice of the

arbitration proceedings in sufficient time to enable him to present his case; or that, being under a legal incapacity, he was not properly represented; (c) the award does not deal with the differences contemplated by or falling within the terms of the submission to arbitration or that it contains decisions on matters beyond the scope of the submission to arbitration: Provided that if the award has not covered all the differences submitted to the arbitral tribunal, the Court may, if it thinks fit, postpone such enforcement or grant it subject to such guarantee as the Court may decide.

(3) [...].

36. Anton G. Maurer, The Public Policy Exception under the New York Convention (2013) p. 59: ‘The omission of the term ‘principles of the law of the country’ excludes any interpretation which would include all domestic laws in the term ‘public policy’.” For a discussion of the Geneva Convention and its influence leading to the drafting of the New York Convention, see Marike Paulsson, The 1958 New York Convention in Action (Kluwer Law International 2016), pp. 3-13. 37. Available at https://www-uncitral.org/pdf/english/texts/arbitration/ml-arb/07-86998_Ebook. pdf. For a discussion of enforcement under the Act, see Chapter 11 of the Handbook. On the New York Convention and guidance for its interpretation, see Chapter 12 of the Handbook.

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1996 Arbitration Act given that they were almost replicas of the corresponding provisions of the Model Law and the New York Convention, respectively. Consequently, an identical textual interpretation providing great immunity to awards was called for. A purposive interpretation based on the Objects and Reasons for the Act would have led to the same result.** Further, the conscious difference in the language of Section 57 (reflecting the Geneva Convention), which offered an additional exception if the award was ‘contrary to the public policy or the law of India (emphasis added)’, was strongly suggestive of Parliament's intent to exclude error of law and illegality as grounds to challenge domestic awards or to resist enforcement of New York Convention Awards. 10.5

DEFINING PUBLIC POLICY

There is no definition of the term ‘public policy’ in the 1996 Arbitration Act. To understand the parameters of public policy challenges to awards, or resistance to their enforcement, it becomes necessary to analyse how Indian courts have approached pleas of public policy under contract and constitutional law. The Latin maxim underlying the public policy objection is ex dolo malo non oritur actio meaning no court of law will lend its aid to a man who founds his cause of action upon an immoral or illegal act.*” The rule finds statutory place in Section 23 of the Indian Contract Act, 1972, which renders void an agreement for which the consideration or object is unlawful. If the court regards the consideration or object as opposed to public policy, it is unlawful.*® While stating that a contract against public policy will be unlawful, the Contract Act does not define the concept of public policy or what would be opposed to public policy, but it has been understood that any contract that is

38. Providing: 3. Though

the said UNCITRAL

Model

Law and

Rules are intended

to deal with

international commercial arbitration and conciliation, they could, with appropriate

modifications, serve as a model for legislation on domestic arbitration and conciliation. The present Bill seeks to consolidate and amend the law relating to domestic arbitration, international commercial arbitration, enforcement of foreign arbitral awards and to define the law relating to conciliation, taking into account the said UNCITRAL Model Law and Rules.

4. The main objectives of the Bill are as under: — [...] (v) lo minimise the supervisory role of courts in the arbitral process.

39. Holman v. Johnson (1775) | Cowp 341 (per Lord Mansfield C.J.). 40. Section 23 of the Indian Contract Act, 1872 provides: What consideration and objects are lawful, and what not. — The consideration or object

of an agreement is lawful, unless —- The consideration or object of an agreement is lawful, defeat person policy.

unless — it is forbidden by the provisions of any law; or property of another; or In each of these cases, the

law; or is of such or is fraudulent; the Court regards consideration or

a nature that, if permitted, it would or involves or implies, injury to the it as immoral, or opposed to public object of an agreement is said to be

unlawful. Every agreement of which the object or consideration is unlawiul is void.

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Chapter 10: Challenge of Awards: Public Policy immoral

or injurious

unlawful.”

to society would

be opposed

to public policy and therefore

The concept of public policy is incapable of a precise definition and is an elusive concept that is difficult to contain.** In Gherulal the Supreme Court observed that it cannot remain static as it connotes some matter which concerns the public good, and the public interest or ideas of what is good for the public and what is in the public interest changes with time.** It is a dynamic concept.’ Whereas Indian courts have paid heed to the dangers of using public policy as an instrument to nullify contractual and other transactions,” they have at times also assumed that public policy is a concept they can control.*® Between these two imperatives lie a slew of decisions swinging between two schools of thought, popularly referred to as the narrow view and the broad view. 10.5.1

The Narrow and the Broad View

The narrow view was espoused in Gherulal and the broad view in Murlidhar Aggarwal.*” The narrow view believes that new heads of public policy ought not to be created, while courts adopting the broad view held that new heads of public policy can and should be created to adapt to the needs of the time. In an early case, Gherulal,** the Supreme Court held that the doctrine of public policy was only a branch of common Jaw and governed by precedents that had crystallised the principles under different heads. Further the court held: though the heads are not closed and though theoretically it might be permissible to evolve a new head under exceptional circumstances of a changing world it is advisable in the interest of stability of society not to make any attempt to discover new heads in these days.

Public policy should be invoked only in ‘clear and incontestable cases of harm to the public’.“” The Supreme Court held that a court is ‘not lightly to interfere with the freedom of contract |...] when it is reconciling freedom of contract with other public

41. Gherulal Parakh v. Mahadeodas Maiya & Ors., AIR 1959 SC 781. 42. State of Rajasthan v. Basant Nahata (2005) 12 SCC 77. 43. Gherulal, supra n. 41, paras 21-24; Ministry of Law, Justice and Company Affairs, Government of India, New Delhi, Legal Glossary, 1983, defines ‘public policy’ as ‘principles in accordance with which action of men and commodities need to be regulated to achieve the good of the entire community or public’. 44. Nagle v. Feilden (1966) 2 QB 633 per Danckwerts LJ: ‘[...] the winds of change blow upon it’. 45. Famously described by Burroughs J in Richardson v. Mellish (1824-34) All ER 258 in an oft cited passage: ‘Public Policy is a very unruly horse and once you get astride it you never know where it will carry you. It may lead you from sound law. It is never argued at all, but when other points fail." 46. In Enderby Town Football Club Ltd. v. Football Association Ltd. (1971) Ch. D. 591 (606) Lord Denning wryly observed: ‘With a good man in the saddle, the unruly horse can be kept in control. It can jump over obstacles.” 47. Murlidhar Aggarwal &Anr v. State of Uttar Pradesh &Ors. (1974) 2 SCC 472. 48. Gherulal, supra n. 41, para. 23. 49.

Ibid.

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interests’.”” The head of immorality was confined to sexual immorality and not extended to evolve and bring a new head of wager into its fold.*! Shortly thereafter, the Supreme Court held that it was only if the illegality went to the root of the contract, and where the plaintiff could not bring his action without relying on the illegal transaction, that the contract would be against public policy. If not, then unless the illegality was of such a gross nature as to outrage the conscience of the court, the contract would not be against public policy.” Over time, the Supreme Court began adopting the broader view, justifying its approach by stating that as time passed, what would be considered opposed to public policy in an earlier generation might not be considered opposed to public policy in a subsequent generation and therefore it was necessary to create new heads of public policy.™ In Central Inland Water Transport the Supreme Court analysed the unpredictable nature of public policy and held (at para. 92) that ‘[p]ublic policy [...] connotes some matter which concerns the public good and the public interest. The concept of what is good for the public or in public interest or what would be harmful or injurious to the public good or interest has varied from time to time’. The Supreme Court observed that if a court was giving public policy a narrow view then it could not create new heads of public policy; whereas, if a court was giving public policy a broad view then it countenanced judicial lawmaking in this area. The Supreme Court adopted the broader view.** In cases where the Supreme Court adopted the broad view of public policy, it held that there was no judicial authority which said that the categories of heads of public policy were closed, observing that ‘[p]ublic policy does not remain static in any given community. It may vary from generation to generation and even in the same generation. Public policy would be almost useless if it were to remain in fixed moulds for all time’.°- The Supreme Court also held that it was the duty of judges to discover what public policy was at any given moment and that they were not bound by precedent while doing so. It observed that while judges would not always be accurate in interpreting what public policy would be, they would still, with the assistance of the bar, be in a better position to interpret public policy than other men, particularly considering the fact that constitutionally too this function had been given to judges.*° Principles of law that ensured justice, fair play, transparency and that promote probity

50. Id. at para. 21. 51. Id. at para. 30; Gurmukh Singh v. Amar Singh (1991) 3 SCC 79, paras 2, 8; Zoroastrian Co-operative Housing Society Limited and Anr. v. District Registrar Co-operative Societies (Urban) &Ors. (2005) 5 SCC 632, para. 29. 52.

Kedar Nath Motaniv. Prahlad Rai, AIR 1960 SC 213.

53. Murlidhar Aggarwal, supra n. 47, paras 28-32; Central Inland Water Transport Corporation Ltd. v. Brojo Nath Ganguly (1986) 3 SCC 156, para. 92; Rattan Chand Hira Chand v. Aksar Nawaz Jung (1991) 3 SCC 67, para.

19.

54. Central Inland Water Transport, supra n. 53, para. 92: ‘[...] If there is no head of public policy which covers a case, then the court must in consonance with public conscience and in keeping with public good and public interest declare such practice to be opposed to public policy.’ 55. Murlidhar Aggarwal, supra n. 47, para. 31. 56. Id. para. 32; In Rattan Chand Hira Chand, supra n. 53, paras 17, 23 the Supreme Court held that what would constitute an injury to public interest or welfare would depend upon the times and climes, and any contract which had a tendency to injure public interest or public welfare or which would cause the public at large to suffer was one against public policy. Although it was

206

Chapter 10: Challenge of Awards: Public Policy in the discharge of public functions constitute public policy. Any deviation, frustration or negation of the principles of justice, fairness, good conscience and equity, would be

opposed to public policy.”

Yet reverting to the narrow view in 2005, the Supreme Court refused to interdict the formation of a society restricting membership to a particular religion by holding that the goal the Constitution had set to do away with discrimination based on religion or sex could only be achieved by legislative intervention and not by the court coining a theory that declared as opposed to public policy that which was not consistent with the scheme or a provision of the Constitution.** The Supreme Court emphasised the sanctity of contracts in reaching this conclusion.*’ This was the same basis on which it had in Gherulal founded its narrow view of public policy.*” Some decisions sought to restrict the ambit of public policy to ‘save the bargain entered into by the parties and the solemn promises made thereunder’ and held that an agreement otherwise legal could not be held to be void unless it resulted in the ‘performance of an unlawful act’.*' 10.6

THE EFFECT OF PUBLIC POLICY ON ARBITRATION

Arbitration is based on a contract to exclude the operation of Section 9 of the CPC, a provision that vests courts with jurisdiction to try all suits of a civil nature.** An arbitration agreement is specifically enforceable under Indian law if it is enforced under

57.

the duty of the legislature to keep pace with changing needs and values, it often failed to do so and therefore it was the duty of the courts to step in to fill the lacuna and to decide what they felt is against public policy. Board of Control for Cricket in India v. Cricket Association of Bihar (2015) 3 SCC 251, para. 96.

Applying this broad construct of public policy the Supreme Court held that any rule, contract or arrangement that defeated or tended to defeat the ‘high ideals of fairness and objectivity in the discharge of public functions no matter by a private non governmental body will be opposed to public policy’. 58. In Zoroastrian Co-operative Housing Society v. District Registrar, Coop. Societies (Urban) (2005) 5 SCC 632, para. 38. The narrow view was also propounded in Basant Nahata, supra n. 42, paras 39-40, 59. Zoroastrian Co-operative Housing Society, supra n. 57, paras 28-29; Markfed Vanaspati, supra n.

20, para. 16: ‘[...Jthe paramount public policy is that freedom of contract is not lightly to be interfered with’. 60. Gherulal, supra n. 41, para. 23. 61. Union of India v. Col. LSN Murthy (2012) 1 SCC 718, para. 19. As discussed in Chapter 12 of the Handbook, the International Law Association issued recommendations at a conference held in New Delhi in 2002 on international commercial arbitration, and advocated the use of narrow and international standards only, see International Law Association, New Delhi Conference (2002),

62.

Committee on International Commercial Arbitration chaired by Professor Pierre Mayer, recommendation 1(b): ‘Such exceptional circumstances [to refuse recognition and enforcement of the award] may in particular be found to exist if recognition or enforcement of the international arbitral award would be against international public policy.’ Section 9, CPC:

Courts to try all civil suits unless barred. - The Courts shall (subject to the provisions herein contained) have jurisdiction to try all Suits of a civil nature excepting suits of which their cognizance is either expressly or impliedly barred. Explanation | - As suit in which the right to property or to an office is contested is a suit of a civil nature, notwithstanding that such right may depend entirely on the

decision of questions as to religious rites or ceremonies.

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the statutory law of arbitration."* Reposed as it is in contract, it follows that the arbitral process cannot result in an award that is in conflict with public policy. Consequently, the law by which contracts are rendered void if in conflict with public policy will apply to the setting aside of awards as well. Another reason for the relevance of public policy in the enforcement of awards is the need to invoke the judicial and state machinery for

execution.™ 10.6.1

Public Policy and Foreign Awards

Under the Geneva Convention, enforcement of an arbitral award could be refused on the grounds of illegality of the contract.®° Under the New York Convention, the grounds of illegality and error of law were not enough to resist enforcement.®° Something more was required, viz. the enforcement had to be contrary to the public policy of the enforcing country.” As public policy was an exception first incorporated into Indian municipal law via the Geneva and New York Conventions, cases dealing with enforcement of foreign awards are instructive. India was a signatory to the New York

Explanation II — For the purposes of this section, itis immaterial whether or not any fees are attached to the office referred to in Explanation | or whether or not such office is attached to a particular place.

For a discussion of party autonomy and the fundamental access to courts, see Chapter 12 of the Handbook. 63. Section 14(2) Specific Relief Act, 1963. 64. The rule has been succinctly summarised (in the context of a domestic award) in London Export Corp. Ltd. v. Jubilee Coffee Roasting Co. Ltd. (1958) 1 WLR 271 (per Diplock J.).as follows: When |...] no breach of the agreed procedure found there may nevertheless arise a second and quite separate question: that is, whether, as a matter of public policy, a particular award, made pursuant to that agreed procedure, ought not to be enforced

and ought, therefore, to be set aside; for an arbitrator's award, unless set aside, entitles

the beneficiary to call on the executive power of the state to enforce it, and it is the function of the court to see that that executive power is not abused (emphasis added).

65. In David Taylor & Son v. Barnett Trading Co. (1953) 1 WLR 562 at 563 (CA), the Court of Appeal refused to enforce an award which was based on an illegal contract although neither the umpire nor the parties knew it to be illegal. 66. See supra n. 14. One of the cannons of interpreting Article V of the Convention is for courts to not undertake a review of the merits —- ‘The Court also must remain mindful of the principle that judicial review of arbitral awards is extremely limited and that this Court does not sit to hear claims of factual or legal error by an arbitrator in the same manner that an appeals court would review the decision of a lower court’, Parsons & Whittemore Overseas Co. Inc. v. Societe Generale de lindustrie du Papier (RAKTA), Bank of America (2nd Cir. 1974), in Yearbook Commercial

Arbitration I (1976) (United States no. 7), p. 205, in Marike Paulsson, The 1958 New

York

Convention in Action (Kluwer Law International 2016), pp. 165-175. For a discussion of cannons

of interpretation, see Chapter |! and 12 of the Handbook. 67. Deutsche Schachtbau- und TiefbohrgesellschaftmbH v. Ras AL-Khaimah National Oil Co. [1987] 2 All ER 769 wherein it was held that there: ‘has to be an element of illegality or that recognition or enforcement of the award would be clearly injurious to the public good, or, possibly, that recognition or enforcement would be wholly offensive to the ordinary reasonable and fully informed member of the public on whose behalf the powers of the State are exercised’.

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Chapter 10: Challenge of Awards: Public Policy Convention at its inception and was one of the first countries to ratify it and incorporate

it into its municipal law.®*

The Supreme Court applied the public policy exception to awards when it considered objections to the enforcement of a foreign award on the ground that its enforcement would be ‘in conflict with the public policy of India’. In Renusagar Power Company Ltd. v. General Electric Company the Supreme Court held that ‘public policy’ would mean the ‘doctrine of public policy as applied by the Court in India and not international public policy’.®’ Nevertheless, the Supreme Court adopted the narrow view of public policy.” This was because the Supreme Court observed that the underlying object of the Foreign Awards Act was to facilitate international trade and commerce and giving public policy a broad view would defeat this objective.”’ This rationale for adopting the narrow view is in accordance with the Model Law and the New York Convention.” The court applied the narrow view of public policy and a less intrusive judicial review on the basis that different standards applied to the use of the public policy rule when used in a domestic context and when in an international context.” The Supreme Court defined the narrow view as enabling refusal to enforce a foreign award (under Section 7(1)(b)(ii) of the Foreign Awards Act, 1961 under the following heads: (a) the fundamental policy of Indian law; (b) the interests of India; or (c) justice or morality).”* Hence to attract the bar of public policy, something more than

the violation of the law of India had to be shown.”

Moreover, a distinction was made between the award itself and its enforcement.

It was only the enforcement of the award that did not have to be ‘in conflict with the public policy of India’ and not the award itself.”° Thus no element at all of a merits review of the award itself could take place — even for the purpose of determining whether there was a conflict with the public policy of India. A merits review, it was recognised, was contrary to the New York Convention.”’ The court noted that several 68.

69. 70. 71. 72.

By the enactment of the Foreign Awards

(Recognition and Enforcement) Act, 1961. For further

discussion of this enactment, see Chapter 11 of the Handbook. Renusagar Power Company Ltd. v. General Electric Company (1994) Supp 1 SCC 644 at para. 63. The decision in Renusagar is also discussed in Chapter |! of the Handbook. Id. at para. 66. Id. at paras. 64-65. Dr. Anton G. Maurer, supra n. 36, pp. 55: ‘The Convention did not expect to have a common interpretation of public policy. It is always and only the public policy of the State where recognition and enforcement is sought [...] The convention does not even distinguish between domestic public policy or international public policy. Therefore public policy may vary from country to country, and from time to time.’ See also Dr. Anton G. Maurer, supra n. 36, pp. 19-23,

73.

55-58 who indicates that there is neither a universally applicable definition of ‘public policy’ nor a common interpretation of it shared by parties to the New York Convention. It is always and only the public policy of the State where recognition and enforcement is sought. However, it is not identical with ‘domestic law’. A proposal by India and Israel to the Ad Hoc Drafting Committee that enforcement should be refused when the award violates domestic law was not accepted. Renusagar, supra n. 69, paras 65-66.

74. Ibid.; An even narrower standard is now made applicable to enforcement of foreign awards under Part II of the 1996 Arbitration Act. See Explanations | and 2 to Section 48(2)(b). 75. Renusagar, supra n. 69, paras 65-66. 76. Id. at para. 100. 77. Id. at paras 34-36.

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jurisdictions apply a broad standard of public policy for domestic awards and a narrow standard for foreign awards.”* The term ‘public policy’ in Section 7(1)(b)(ii) of the Foreign Awards Act, 1961 was also held to refer to the ‘public policy of India’, and the Supreme Court held that the term could not be extended to include the public policy of any foreign country.” Thus the ‘narrow view’ of public policy was applied in enforcement of foreign awards. 10.6.2

The Early Years: Narrow View Prevailed for Challenges to Domestic Awards

For the first few years after 1996, the approach of courts in India was to apply the

‘narrow view’ even to domestic Part | Awards.’ In Konkan Railway Co. Ltd. v. Mehul

Construction Co.*' the Supreme Court, after referring to the adoption of the UNCITRAL Model Law and the goal of the new liberalisation policy of the Government of India, held that Parliament enacted the Act ‘to attract the confidence of the International Mercantile community’ and that ‘under the new law the grounds on which an award of an arbitration could be challenged before the Court have been severely cut down’. The Supreme Court held that ‘the statement of Objects and Reasons of the Act clearly enunciates that the main objective of the legislature was to minimise the supervisory role of Courts in the arbitral process’. In Vijaya Bank®’ a Division Bench of the Bombay High Court held that a mistake in the application of substantive law of India would not render the award in conflict with the public policy of India under Section 34(2)(b) (ii) of the 1996 Arbitration Act. The narrower concept of ‘international public policy’

78. Id. at para. 61 noted the distinction in standards of review adopted by the French Courts. The UK also applies different standards of judicial review, depending on whether the arbitral tribunal is seated in the UK or outside. For arbitrations seated in the UK, Part I of the Arbitration Act, 1996 (text available at http:/www.legislation.gov-uk/ukgpa/1996/23/contents) applies, in which Section 68 prescribes relatively broader grounds on which an arbitral award can be set aside, including ‘serious irregularity’. If the arbitration is seated outside the UK, then Part III of the UK Arbitration Act 1996 applies, in which Section 103(3) prescribes relatively limited grounds on which an arbitral award may be set aside, including the public policy exception. For a discussion of the arbitration regime in the UK, see Chapter 19 of the Handbook. Brazil too applies differing standards of judicial review to arbitral awards, depending on whether the arbitration is. seated within Brazil or outside. Under Article 34 of Brazil arbitral law [Law No. 9.307, 1996], available at http://www.jus.uio.no/lm/brazil.arbitration.law.no.9.307.1996/doc.html#155. A ‘foreign arbitral award’ is ‘an award made outside of the national territory’. Under Article 39, a foreign arbitral award can be set aside if it is ‘offensive to national policy’. By contrast, Article 32 prescribes a far broader series of grounds on which domestic awards can be challenged. 79.

Smita Conductors Ltd. v. Euro Alloys Ltd., AIR 2001 SC 3730, para. 12.

80. Part 1 of the 1996 Arbitration Act was meant to govern all arbitrations in India whether between two Indian parties or between parties of whom at least one was foreign, i.e. international

commercial arbitrations as defined in Section 2(1)(f) of the Act. See Olympus Superstructure v.

Meena Khetan (1999) 5 SCC 651; Narayan Lohia v. Nikunj Lohia (2002) 3 SCC 572.

81. Konkan Railway Co. Ltd. v. Mehul Construction Co (2000) 7 SCC 201, para. 4. 82.

Vijaya Bank v. Maker Development Services Put. Ltd. (2001) 3 Bom. CR 652, paras 17, 26. Fora

similar approach see Municipal Corporation of Greater Mumbai v. Jyoti Construction Co. (2003) 3 Arbitration Law Reporter 489, 497.

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Chapter 10: Challenge of Awards: Public Policy (enunciated in Renusagar) was thus preferred even with regard to a domestic award

that was between two Indian parties.” 10.6.3

Saw Pipes: The Broad View Embraced for Part I Awards

It was in 2004 that the Supreme Court in ONGC Ltd. v. Saw Pipes Ltd.™ distinguished the standards for challenges of domestic Part | Awards from those for enforcement of foreign awards and held that the narrower concept of public policy enunciated in Renusagar was applicable only to foreign and not domestic awards. While considering a challenge under Section 34 of the Act to a domestic award under Part I, the Supreme Court interpreted the words ‘public policy’ widely and held that, in addition to the three heads enunciated in Renusagar, an award could be set aside if it was ‘patently illegal’ and such illegality went to ‘the root of the matter’ or was so unfair and unreasonable that it shocked the conscience of the court. Patent illegality resulted if an award was based on an erroneous proposition of law or erroneous application of the law or was against the terms of the contract.*° Thus the ‘broad view’ of public policy was given recognition in respect of challenges to domestic awards. The case concerned an award of liquidated damages for delay in supply of pipes.*° The arbitral tribunal had followed the principles enunciated in a series of Supreme Court judgments, viz. that the sum specilied in the contract as liquidated damages was not payable as compensation, unless it was impossible for the court to assess compensation and the sum was a genuine pre-estimate of losses and not a penalty. The Supreme Court in Saw Pipes restated, what in its opinion was, the correct law of liquidated damages.*’ The Supreme Court then held that the award on its face was erroneous with regard to a proposition of law.** The Supreme Court referred to various judgments under the 1940 Act and before, which held that a patent error of law on the face of the award and which formed

the basis of the award could result in an award being set aside - the Champsey Bhara principle.*” The Supreme Court applied this test to the award before it, held that the law 83. A similar uniform narrow view of public policy was adopted in England for both enforcement of foreign awards under Section 103(3) of the English Arbitration Act, 1996 and challenges to domestic awards on the ground of being contrary to public policy, a species of the head of ‘serious irregularity’ under Section 68(2) (g). See Gater Assets Ltd. v. NakNaftogasUkrainty (2008) EWHC 237 (Comm) at paras 40-41. 84. ONGC Ltd. v. Saw Pipes (2003) 5 SCC 705 at paras 20-22, 28. For further review of Saw Pipes, see Chapter 11] of the Handbook. 85. Id. at paras 54-55, 64, 68. 86. ONGC wanted pipes to case the tubes of its oil well. It floated a tender. The pipes were to be supplied on or before certain dates. Liquidated damages were payable at | % of the contract price per week of delay, subject to a ceiling of 10%. ONGC was entitled to deduct this amount from the bills for price of material submitted by Saw Pipes. Saw Pipes delayed delivery of the pipes until well after the due dates. ONGC deducted large amounts from Saw Pipes’ running bills. Saw Pipes made a claim for recovery of these amounts from ONGC. ONGC opposed. The arbitral tribunal held (after evidence was led) that ONGC had failed to prove that it had suffered loss as a result of the delays in delivery. Hence ONGC was not entitled to liquidated damages and could not have made any deductions from the running bills. 67. Saw Pipes, supra n. 84, at para. 46. 88. Id. at para. 55. 89. Id. at paras 56-60.

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as to liquidated damages had not been correctly applied by the arbitral tribunal and proceeded consequently to set aside the award.” The Supreme Court thus in effect interfered with the award in Saw Pipes on the basis of a mistake (according to the Supreme Court) in the interpretation of law by the arbitral tribunal. This, it was said, was justified because the 1996 Arbitration Act contained Section 28(1)(a), a provision absent from the 1940 Act. The Supreme Court held that the meaning of the term ‘public policy’ was wide enough, in the case of domestic awards, to even incorporate a ground of ‘patent illegality’.”’ The Supreme Court in Saw Pipes misconstrued Section 28(1)(a) as a direction to decide the dispute without making any mistake in application of Indian law or without being contrary to the substantive provisions of Indian law. It overlooked that Section 28(1)(a) was only a counterpoint to Section 28(1)(b):” a provision that governed international commercial arbitration.” They were both merely choice of law provisions.” A new head of

90. In fact, as para. 67 of the judgment shows, the Supreme Court went much further and even reversed the award on findings of fact to hold that in contracts of the nature of the contract being considered, it would be difficult to prove exact loss or damage suffered by reason of the breach thereof. 91. In Saw Pipes, supra n. 84, paras 30-31 the court held that a ‘Patently illegal award is required to be set at naught, otherwise it would promote injustice |...] the award which, is on the face of it, patently in violation of statutory provisions cannot be said to be in the public interest [...]’; At para. 31 the court summarised the ratio by observing ‘[illlegality must go to the root of the matter and if the illegality is of trivial nature it cannot be held that award is against the public policy. Award could also be set aside if it is so unfair and unreasonable that it shocks the conscience of the court. Such award is opposed to public policy and is required to be adjudged void’. 92.

Section 28, 1996 Arbitration Act:

Rules applicable to substance of dispute (1) Where the place of arbitration is situate in India (a) in an arbitration other than an international commercial arbitration, the arbitral tribunal shall decide the dispute submitted to arbitration in accordance with the (b)

substantive law for the time being in force in India;

in international commercial arbitration — (i) the arbitral tribunal shall decide the dispute in accordance with the rules of law designated by the parties as applicable to the substance of the dispute; (ii) any designation by the parties of the law or legal system of a given country shall be construed, unless otherwise expressed, as directly

referring to the substantive law of that country and not to its conflict of

laws rules; (iii) failing any designation of the law under sub-clause (ii) by the parties, the arbitral tribunal shall apply the rules of law it considers to be appropriate

given all the circumstances surrounding the dispute.

(2) The arbitral tribunal shall decide ex aequo et bono or as amiable compositeur only if the parties have expressly authorised it to do so. (3)

In all cases, the arbitral tribunal

contract and transaction.

shall decide

shall take into account

in accordance

the usages

with

of the trade

the terms of the

applicable

to the

93. Supra n. 31. 94. Section 28(1)(b), 1996 Arbitration Act was statutory recognition of a standard doctrine of conflict of laws, viz. the ability of parties of different nationalities to contractually select the substantive proper law, the curial law and the law governing the arbitration agreement and award. Section 28(1)(a) is the counterpoint to that, excludes these conflict of law principles in

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Chapter 10: Challenge of Awards: Public Policy public policy was thus evolved unfettered by the need to reach any conclusion of ‘clear and incontestable harm to the public’ or that changing times required such a head to

prevent ‘injury to public interest or welfare’.”° 10.6.4

Patent Illegality and the Root of the Matter

A patent error of Jaw must be based on a clear ignorance or disregard of the provisions of law.” The expression ‘patent illegality’ means an obvious or evident illegality. Similar rules should have applied. Saw Pipes effectively first interpreted and enunciated the law under consideration therein and then found the arbitral tribunal's application of such law to be erroneous. This process is inconsistent with a ‘patent illegality’ and suggests that the Supreme Court did not exclude mere ‘error of law’ or even ‘error in application of the law’ when it referred to ‘patent illegality’. Introducing patent error of law had unforeseen consequences [or international commercial arbitration in India.” The second qualification introduced by Saw Pipes was that the illegality must go to the root of the matter and must not be of a trivial nature. Here too, the Supreme Court did not explain (and indeed even in later judgments has not explained) what is meant by an illegality going to the root of the matter. Does it mean that if the illegality forms part of the legal basis for deciding the matter, it goes to the root of the matter? What if there are several independent bases for sustaining the legal decision in the award? If the illegality affects but one of these, and that one is the primary basis, would such illegality be said to go to the root of the matter? Saw Pipes, thus, created uncertainty and vagueness in the ground of ‘patent illegality’ that it prescribed for challenge of an award. 10.6.5

Saw Pipes Perpetuated

Thereafter, in McDermott International Inc. v. Burn Standard Co. Ltd.”” the Supreme

Court noticed the ‘considerable adverse comment’ on the decision in Saw Pipes but

cases where both parties are Indian and hence does not leave the choice of the governing law to the parties but mandates that the substantive law be Indian law. 95. Gherulal, supra n. 41, para. 23. 96. Murlidhar Aggarwal, supra n. 47, paras 30-31; Rattan Chand Hira Chand, supra n. 53, paras 17, 19.

97. Prem Singh v. Deputy Custodian General Evacuee Property, AIR 1957 SC 804; Basappa v. Nagappa, AIR 1954 SC 440; Syed Yakoob v. K.S. Radhakrishnan, AIR 1964 SC 477. 98. The parties in an international commercial arbitration may provide for a foreign law to apply to the dispute. Foreign law is always a question of fact. If a patent mistake in application of foreign law will result in the award being set aside, this will in essence mean that the award is being set aside on grounds of a mistake (albeit patent) of fact! A mistake of fact has never been recognised in any jurisdiction, much less in India as constituting a ground to set aside an award. Even Saw Pipes, supra n. 84, para. 55 recognises that a mere error of fact (or law for that matter) is not an

available ground of challenge under the 1996 Arbitration Act.

99. McDermott International Inc. v. Burn Standard Co. Ltd. (2006)

213

11 SCC 181, para. 62.

Darius Khambata

observed it could not, in that matter go into the correctness of Saw Pipes.'™" It clarified that the courts had only a limited supervisory role under the Act, that intervention was to be at a minimal level, and it was to be limited to circumstances that were so unfair

and unreasonable so as to shock the conscience of the court. Not only did the Supreme Court not reconsider Saw Pipes but it also added two new heads under which an award could be set aside, viz. where the reasons given were vitiated by perversity in

evidence'’' and where the award was vitiated by internal contradictions'’* — both

merit-based reviews! Despite the clarification in McDermott that only a minimal level of intervention by courts was permissible, some courts in India gave the term ‘patent illegality’ a wide interpretation, effectively introducing the ground of ‘patent error of

law’ into the Act'’’ - even wider than the Champsey Bhara rule. In Numaligarh

Refinery Lid. v. Daelim Industrial Co. Ltd. despite accepting that the courts will generally not interfere with findings of fact and will not substitute their interpretation of the contract for that of the arbitrator, the Supreme Court, in the facts and circumstances of that case, went into the merits of the case as if it was an appellate

court.'“* The Supreme Court has repeatedly followed Saw Pipes.'*° The Saw Pipes

doctrine led to the setting aside of awards by courts in a variety of circumstances on the

ground of patent illegality, several bordering on merits review.'"°

Courts used the lack of a ‘judicial approach’ test to effectively conduct merits reviews of awards and proceed to set aside awards even in the absence of a finding that the approach of the arbitrator was arbitrary or capricious.'”’ Courts have been quick to 100. It could not have, since the Bench hearing McDermott was of equal strength to that which had decided Saw Pipes. The Supreme Court does not sit en banc but in benches which could be as small as of two judges. 101. 102.

McDermott, supra n. 99, para. 65. Ibid.

103. Jagmohan Singh Gujral v. Satish Ashok Sabnis (2004) 1 Bom CR 307; Bharat M.N. v. Satish Ashok Sabni (2003) 6 Bom CR 257; Damodar Valley Corporation v. Central Concrete & Allied Products Ltd. (2007) 3 Arb. LR 531 (Cal); Vishal Exports Overseas Ltd. v. IndAgro Synergy Ltd. (2007) 3 Arb. LR 502 (MP). Although others resisted the error of law path of review. See M.R. Power Projects v. State of Arunachal Pradesh (2009) 4 Gau LR 154; National Highways Authority

of India v. Afcons Infrastructure Ltd. (2008) 3 Arb. LR 56; Centrotrade Minerals & Metals Inc. v.

Hindustan Copper Ltd. (2006) 11 SCC 245. 104. Champsey Bhara rule. In Numaligarh Refinery Ltd. v. Daelim Industrial Co. Ltd. (2007) 8 SCC 105.

106.

466. ONGC Ltd. v. Western Geco International (2014) 9 SCC 263; McDermott, supra n. 99; Hindustan

Zinc Ltd. v. Friends Coal Carbonisation (2006) 4. SCC 445; J.G. Engineers Pvt. Ltd. v. Union of India (2011) 5 SCC 758; Associate Builders v. Delhi Development Authority (2015) 3 SCC 49, paras 19, 20; Venture Global Engineering LLC v. Tech Mahindra Limited (2018) 1 SCC 656. QNGC Ltd. v. Western Zinc, supra n. 105.

Geco International, supra n. 105; McDermott, supra n. 99; Hindustan

107. In Ogilvy & Mather Pvt. Ltd GAnr. v. Union of India, 2012 SCC OnLine Del 3364, para. 30 upon a re-appreciation of the evidence it was held that the grounds on which a certain claim was rejected was contrary to the evidence placed on the arbitral record; State of West Bengal v. Bharat Vanijya Eastern Pvt. Ltd., 2017 SCC OnLine Cal 4; in Tata Steel Limited v. Lindsay International, 2016 SCC OnLine Cal 6521 at para. 64 the court held that the only evidence before the arbitrator was that the loss of goodwill was valued on a perceived intellectual property right and on the basis of one line of evidence. There was no evidence to support the claim; in Gayatri Balaswamy v. ISG Novasoft Technologies Ltd., 2014 SCC OnLine Mad 6568 the court held that the finding of a committee set up to consider complaints of sexual harassment at work (pursuant to the judgment of the Supreme Court in Vishaka v. State of Rajasthan (1977)

214

Chapter 10: Challenge of Awards: Public Policy adopt the ‘shocking the conscience’ test to set aside awards based on a merits review, rather than restricting its application to rare cases in which the circumstances measure

up to its high threshold and warrant interference.'"® Courts have also set aside awards on

the ground

contract.'”

that

the arbitrator decided

in contravention

of the terms

of the

6 SCC 241) could not be the basis for compensation; in State Industries Promotion Corporation Tamil Nadu v. Ircon International Ltd., 2009 SCC OnLine Mad 1727 the court held that the arbitrator accepted each claim solely because the claims were held in favour of the respondent's subcontractor in the earlier proceeding. 108. Centrotrade Minerals & Metals, supra n. 103, para. 103: ‘The public policy, indisputably, should be unfair and unreasonable so as to shock the conscience of the court. Where the arbitrator however, has gone contrary to or beyond the expressed law of the contract or granted relief in the matter not in dispute would come within the purview of Section 34 of the Act’; Sky Associates v. Delhi State Civil Supply Corporation, 2014 SCC OnLine Del 7264, para. 13: ‘it shocked the conscience of the Court that as a result of findings of the Arbitrator a trespasser would be allowed to continue on a property for an indefinite period. However, this conclusion was only arrived at after the Court conducted a merits review and substituted its own view of the terms of the contract for the Arbitrator’s’; in Poysha Oxygen Pvt. Ltd. v. Sh. Ashwini Suri and Ors. (2009) 3 Arb LR 533, para. 29, the court held that the arbitrator had wrongly interpreted

a provision of law, the effect of which shocked the court’s conscience; in Damodar Valley Corporation v. Central Concrete & Allied Products Ltd. (2007) 3 Arb LR 531 (DB), para. 11, it shocked the conscience of the court that the arbitrator had awarded claims which had been abandoned by the Claimant. However, the court's determination that certain claims had been abandoned was arrived at after a re-appreciation of the evidence; in Videsh Sanchar Nigam Ltd. v. Shapoorji Pallonji & Company Ltd., 2007 SCC OnLine Cal 670, para. 41, it shocked the conscience that certain large sums had been awarded to the prejudice of a party without such suffering party being informed of the basis thereof. The court applied this onerous test in favour of setting aside the award on the ground that it was in violation of Section 31 of the 1996 Arbitration Act, i.e. no reasons; in State of Jharkhand v. Bharat Drilling & Foundation Treatment Put. Ltd., Ranchi (2004) 1 Arb LR 127, paras 27-28, the court re-appreciated the finding of fact rendered by the arbitrator that there had been a fundamental breach of the agreement, and thereafter justified setting aside the award on the basis that it shocked the conscience of the court; in Gopal Chandra Mukherjee v. Food Corporation of India, 2017 SCC OnLine Cal 67, para. 24, the arbitrator awarded damages worth INR 1,0000,000 on the basis of

a few sacks of rotting grain which were lying in a godown after the termination of the contract; in Maharashtra Maritime Board v. PNP Maritime Services Pvt. Ltd., 2017 SCC OnLine Bom 3030,

para. 46, the award was set aside since the arbitrator overlooked relevant material and took irrelevant material into consideration; Datichi Sankyo Company Limited v. Malvinder Singh & Ors., 2018 SCC OnLine Del 6869, paras 171-176 where a foreign award was held not enforceable against minors as being ‘shockingly disproportionate’. 109. See for example: Hindustan Zinc, supra n. 105, an award made contrary to the price variation formula in the contract was set aside as being in excess of the arbitrator's jurisdiction; Konkan Ratlway Corporation Limited v. M/s. Oriental Construction Company Limited (2013) 3 Bom CR 140; Maharashtra State Electricity Distribution Company Limited v. Vijai Electricals (2015) 3 Bom CR 211; M/s. Phoenix Yule Ltd. v. Neyveli Lignite Corporation Limited, 2014 SCC OnLine Mad 496; TEMA India Ltd. v. Engineers India Ltd. (2015) 221 DLT 348; in U.P. Jal Nigam v. Anuj Construction

Pvt. Ltd., 2014 SCC

OnLine

All

12931, the court

held

that the contract

required for the supply of [Sl-certified pipes and that the finding of the arbitrator that the respondents refused acceptance because the pipes were not ISI certified amounted to a breach of contract was wrong; in Union of India v. J.G. Engineering Pvt. Ltd., 2005 SCC OnLine Gau 52, para. 75, the award set aside on the ground that as per the contract the arbitrator could not decide the legality or validity of the recession of the contract, the same being an ‘excepted matter’; M/s. Shivalik Foods v. Union of India, 2018 SCC OnLine J&K 42, para.

215

15.

Darius Khambata

10.6.6

Continuing Restrictions on Review

Despite Saw Pipes certain principles of non-interference remain, viz.: (i) There can be no interference with or substitution of a finding of fact by the

arbitral tribunal.''®

(ii) The Section 34 court does not constitute an appellate court and re-appreciate the evidence.'"! (iii) Interpretation of the contract is entirely within the province of the arbitral tribunal, and as long as the interpretation is plausible and not something no

reasonable person would adopt, it will not be interfered with.'’* There is no

element of public policy involved in interpretation.''* The arbitrator's interpretation must however not render parts of the agreement otiose.’™* (iv) A possible view by the arbitrator on facts has necessarily to pass muster as the arbitrator is the ultimate master of the quantity and quality of evidence to

be relied upon when he delivers his arbitral award.''*

(v) Courts have declined to interfere with awards on the lack of judicial approach ground when the challenge to the award was in actuality a challenge to and called for the review of the merits thereof.''® 110. Saw Pipes, supra n. 84, para. 55; P.R. Shah Share & Stock Broker (P) Ltd. v. B.H.H. Securities (P) Ltd. (2012) 1 SCC 594, para. 21; Associate Builders, supra n. 105, para. 12: ‘Once it is found that the arbitrator's approach is not arbitrary or capricious, then he is the last word on facts’; Maharashtra State Electricity Distribution Company v. M/s. Datar Switchgear Limited (2018) 3 SCC 133, para. 51; Sutlej Construction Limited v. Union Territory of Chandigarh (2018) 1 $CC 718, paras 9-13. IL. P.R. Shah, supra n. 110, para. 21; Associate Builders, supra n. 110, para. 33; NHAIv. Hindustan Construction Company Ltd., 2017 SCC OnLine Del 10273, para. 36; Sutlej Construction Limited, supra n. 110, paras 12-13; Shiam Cooperative Group v. M/s. Kamal Construction Co. Ltd., 2017 SCC OnLine Del 10292, para. 30; M/s. Lifelong Meditech P. Ltd. v. M/s. United India Insurance Co., 2017 SCC OnLine Del 11904, para. 34; M/s Ogene Systems India Limited v. Technology Development Board, 2017 SCC OnLine Del 11136, paras 26-32. 112. Pure Helium India (P) Ltd. v. ONGC (2003) 8 SCC 593; D.D. Sharma v. Union of India (2004) 5 SCC 325, para. 29; McDermott, supra n. 99, para. 112; Associate Builders, supra n. 105, para.

12:

Patel Engineering v. NEEPCO, 2020 SCC OnLine SC 466, paras 22, 27; Union of India v. M/s. Jia Lall Kishori Lall Put. Ltd., 2018 SCC OnLine Del 7192, para. 20. Oil and Natural Gas Commission

Ltd. v. CGG Services, Bombay High Court, Comm. Arb. Petition No. 343 of 2018 6 January 2020, paras 35-37. However, in a case involving conflicting awards of the arbitral tribunal in respect of interpretation of the same contractual formula, both being plausible interpretations, the Supreme Court, in the interests of certainty, adopted its own interpretation. It was held that in the peculiar circumstances of the case upholding contradictory awards on the basis that each interpretation was plausible would lead to an anomalous situation. See NHAI v. Progressive mur (JV) (2018)

14 SCC 688, para. 40.

113. Parsa Kente Collieries v. Rajasthan Rajya Vidyut Utpadam Nigam Ltd. (2019) 7 SCC 236, para. 11.1.

114. Container Corporation of India Lts. v. Kandla Cargo Handlers (2019) SCC OnLine Bom 1245, para. 38. 115. Associate Builders, supra n. 105, para. 33; Union of India v. A. K. Mukherjee, 2017 SCC OnLine Cal 15473, para. 17; M/s. Fedders Electrical & Engineering Limited v. M/s. Ahluwalia Contracts Limited, 2017 SCC OnLine Del 10744, para. 17; Puravankara Projects Limited v. Galaxy Properties Put. Ltd., 2018 SCC OnLine Mad 556, para. 29. 116. Aidek Tourism Services Private Limited v. Aditya Birla Nuvo Ltd., 2016 SCC OnLine Bom 5352, para. 123: ‘award was rendered after considering the documentary as well as oral evidence and

216

Chapter 10: Challenge of Awards: Public Policy (vi) The award must be reasoned to satisfy Arbitration Act, in cases where parties reasons. In Dyna Technologies Put. Ltd. Court determined that reasons in an

the requirements of Section 31 of the have not agreed to dispense with the v. Crompton Greaves''’ the Supreme award be ‘proper, intelligible and

adequate’.''® The Supreme Court set aside an award which was in a muddled

and confused form and by which the arbitrator merely restated the parties’ contentions. The award was held to be without reasons. The Supreme Court also held that the reasoning was inadequate and unintelligible. A note of caution must be struck — the test laid down to determine adequacy of reasoning and degree of particularity required will inevitably lead to a merits-oriented appraisal of the reasons and will also operate harshly upon lay arbitrators who may not be skilled in legal writing. 10.6.7

The Pre-2015 Position under Section 34: Summarised

in

Associate Builders

In Associate Builders v. Delhi Development Authority''” the Supreme Court summarised the heads under which an award might be challenged as follows: pleadings filed by both the parties. Since such findings of fact are not perverse, the same cannot be interfered with by this Court in this petition filed under section 34 [of the 1996 Arbitration Act]’; M/s. National Highways Authority of India v. M/s. Oriental Structural Engineers Pvt. Ltd., AIR 2015

Del 79, para.

14; Shri. Sanjeev Malhotra v. B.S Promoter & Developers, 2017

SCC

OnLine Del 7688, para. 31; in Silver Resorts Hotel India Pvt. Ltd. v. Wimberly Allison Tong & Goo

(UK), 2016 SCC OnLine Del 3914, para. 44, the court held that while examining a challenge laid

on the ground of public policy of India, the court does not sit in appeal over the decision of the tribunal; Delhi Development Authority v. M/s Bhardwaj Brothers, 2014 SCC OnLine Del 1581 para. 14; National Highway Authority of India v. Gammon India Limited (2014) SCC OnLine Cal 17407, para. 28; Venture Global Engineering LLC v. Tech Mahindra Limited (2018) 1 SCC 656,

para. 121. 2. 117. Dyna Technologies Pvt. Ltd. v. Crompton Greaves (2019) SCCOnLine SC 1656. 118. Id. at para. 37: When order order award

we consider the requirement of a reasoned order three characteristics of a reasoned can be fathomed. They are: proper, intelligible and adequate. If the reasoning in the are improper, they reveal a flaw in the decision-making process. If the challenge to an is based on impropriety or perversity in the reasoning, then it can be challenged strictly

on the grounds provided under Section is based on the ground that the same providing no reasons at all. Coming to of reasons, the Court while exercising

34 of the Arbitration Act. If the challenge to an award is unintelligible, the same would be equivalent of the last aspect concerning the challenge on adequacy jurisdiction under Section 34 has to adjudicate the

validity of such an award based on the degree of particularity of reasoning required having

regard to the nature of issues falling for consideration. The degree of particularity cannot be

stated in a precise manner as the same would depend on the complexity of the issue. Even if

the Court comes to a conclusion that there were gaps in the reasoning for the conclusions

reached by the Tribunal, the Court needs to have regard to the documents submitted by the parties and the contentions raised before the Tribunal so that awards with inadequate reasons

are not set aside in casual and cavalier manner. On the other hand, ordinarily unintelligible

awards are to be set aside, subject to party autonomy to do away with the reasoned award. Therefore, the courts are required to be careful while distinguishing between inadequacy of

reasons in an award and unintelligible awards.

119. Associate Builders, supra n. 105.

217

Darius Khambata

a) Fundamental policy of Indian law: this includes compliance with statutes and following binding judgments of superior courts; the need for a judicial approach;'*" compliance with principles of natural justice; Wednesbury prin-

ciples;'*! judicial review of awards as being perverse or irrational.'**

b) Interests of India: this concerns India as a member of the world community in

its relations with foreign powers.'*°

c) Justice or morality: an award can be shocks the conscience of the court;'** under Section 23 of the Contract Act something shocks the conscience of

said to be against justice only when it morality is confined to sexual morality and if it is to go beyond must be only if the court and ‘would not be enforced

given the prevailing mores of the day*.'*°

d) Patent illegality going to the root of the matter: this comprises contravention of the substantive law of India (being a contravention of Section 28(1)(a) of the 1996 Arbitration Act), contravention of the Act or contravention of the terms

of the contract.'°

e) If the making of the award was induced or affected by fraud or corruption. The grounds at (a) have been further restricted by the 2015 amendment to the 1996 Arbitration Act.'*’ Wednesbury unreasonableness is no longer a ground available to challenge an award. Ground (b) no longer survives after the 2015 Amendment. The Supreme Court in Associate Builders cautioned that while applying the “public policy’ test, a court did not act as a Court of Appeal, could not correct errors of fact, must allow a ‘possible view’ on facts by the arbitrator to pass muster as ‘the arbitrator is the ultimate master of the quantity and quality of evidence to be relied

120. Id., paras 27-30. See also, demands that a decision whimsical would obviously objective.’ i21. See point 10.6.8. below. 122. Associate Builders, supra n.

Associate Builders, supra n. 105, para. 29: ‘Judicial approach be fair, reasonable and objective |...) anything arbitrary and not be a determination which would either be fair, reasonable or 105, para. 31:

[t]he third juristic principle is thal a decision which is perverse or so irrational that no reasonable person would have arrived at the same is important and requires some degree of explanation. It is settled law that where:

(i) a finding based on no evidence; (ii) an Arbitral Tribunal takes into account something irrelevant to the decision which it arrives at: or

(iii) ignores vital evidence in arriving al its decision. 123. 124. 125. 126.

127.

Id. at para. 34, a ground now excluded by the 2015 Amendment. Id. at para. 36. Id. at para. 39. This is said to be in effect a contravention of Section 28(3) of the 1996 Arbitration Act as it was prior to the 2015 Amendment: ‘In all cases the Arbitral Tribunal shall decide in accordance with the terms of the contract and shall take into account the usage of the trade applicable to the transactions.’

The 2015 Amendment.

218

Chapter 10: Challenge of Awards: Public Policy upon [...]’, and would not set aside an award only because it was based on little evidence or on evidence which did not measure up in quality to a trained legal mind.'** 10.6.8

Wednesbury Rule as Part of Public Policy Review

The Wednesbury rule, prevalent in administrative law decisions, was extended by the Supreme Court to the challenge of awards, in ONGC Ltd. v. Western Geco International.'*? The Supreme Court considered the principles established in Saw Pipes and later judgments and concluded that the earlier decisions had not elaborated enough on

the principles of fundamental policy of law in India.'*” ONGC Ltd. v. Western Geco

International expanded the frontiers of judicial review under that head.'*' It held that there were at least three distinct juristic principles that formed a part of this expression: (1) the adoption of a judicial approach — which the Supreme Court described as an approach that was bona fide, dealt with the subject in a fair, reasonable and objective manner and not actuated by any extraneous consideration; (2) the requirement to act in accordance with the principles of natural justice; and (3) the decision must be subject to Wednesbury principles of reasonableness.'*” Failure to adhere to these principles would render infirm an award as ‘perverse or so irrational that no reasonable person would have arrived at [...] such an award’.'** The first category could be limited to the procedural fairness of an arbitration (the decision-making process and not the decision itself). It is the third category that is worrisome. It requires a review of the merits of the decision — something that is anathema under the UNCITRAL Model Law and the New York Convention as also under most arbitration laws all over the world. In ONGC Ltd. v. Western Geco International the Supreme Court also observed that it was not exhaustively enumerating what would constitute the fundamental policy of Indian law — allowing scope for expansion of judicial review in subsequent matters. Further, by using the Wednesbury rule, administrative law principles of judicial review were imported into the Act which otherwise purports to strictly confine judicial interference with arbitration.'** Arbitration is a consensual process and party autonomy must rule.'*” Administrative law is based and developed upon the principle 128. Associate Builders, supra n. 105, para. 33. The Supreme Court observed that ‘It is with this very important caveat that the two fundamental principles which form part of the fundamental policy of Indian law (that the arbitrator must have a judicial approach and he must not act perversely) are to be understood.” 129. ONGC Ltd. v. Western Geco International, supra n. 105. 130. Le., the first head of ‘public policy’ in Renusagar, supra n. 69. See also ONGC Ltd. v. Western Geco International, supra n. 105, para. 35. 131. ONGC Ltd. v. Western Geco International, supra n. 105, paras 35-39. 132. Associated Provincial Picture Houses Ltd. v. Wednesbury Corporation (1947) 2 All ER 680 (CA). 133.

ONGC Ltd. v. Western Geco International, supra n. 105, para. 39; Associate Builders, supra n. 105, para. 31.

134, Section 5 of the 1996 Arbitration Act provides: ‘Notwithstanding anything contained in any other law for the time being in force, in matters governed by this Part, no judicial authority shall intervene except where so provided in this Part.” 135. The essence of arbitration is a contract between two or more parties to have a private tribunal conclusively adjudicate their disputes and differences. Classically defined, arbitration is ‘a

219

Darius Khambata

that tive two the Ltd.

the judiciary has the constitutional right and duty to judicially review administraorders and decisions by virtue of the fact that they have a public law element. The branches of law therefore are fundamentally divergent and principles utilised in one cannot be easily applied to the other.'*® Some courts had even before ONGC v. Western Geco International applied the Wednesbury test under Section 34 to set

aside awards.'*’ The 2015 Amendment has now added an explanation to Sections 34,

48 and 57 of the 1996 Arbitration Act clarifying that the test as to whether there had been a contravention of the fundamental policy of Indian law ‘shall not entail a review on the merits of the dispute’. The explanation was recommended by the Law Commission of India specifically for the purpose of neutralising ONGC Ltd. v. Western Geco International.'** The explanation is expected to a large extent to prevent a Wednesbury unreasonableness review.'*” This is by no means certain. In 2020, the Supreme Court set aside an award on the ground that the construction of the contract

in the award was one that no fair or reasonable person would take.'*“

private procedure established by agreement [-...]'. See Lord Frazer in Amalgamated Metal Corp. v. Khoon Seng Co. (1977) 2 Lloyds Reports 310, 317. In Ahmad Baravati v. Josepthal, Lyon & Ross Inc, 28F 3d 704, 709 (1994), the U.S. Court of Appeals (7th Circuit) held that the freedom

to stipulate the dispute resolution procedure can be near absolute ‘short of authorizing trial by battle or ordeal or, more doubtfully, by a panel of three monkeys’. The working group that drafted the Model Law observed that ‘probably the most important principle on which the Model Law should be based is the freedom of the parties in order to facilitate the proper functioning of international commercial arbitrations according to their expectations’. See UN 136.

Doc A/CN.9/207, para.

17.

In Rv. Northumberland Compensation Appeal Tribunal Exparte Shaw (1952) | All ER 122, 130, Lord Justice Denning observed: “The Court of King’s Bench never interfered by certiorari with the award of an arbitrator, because it was a private tribunal and not subject to the prerogative writs’; The Singapore High Court in Sui Southern Gas Co. Ltd. v. Habibullah Coastal Power Co. (Pte) Ltd. (2010) SGHC 62, paras 18, 21, 37 observed in the context of the Model Law that Wednesbury review was acceptable under administrative law because of the presumption that administrative discretion was not unfettered and was required to be exercised reasonably. The principle would have no application to arbitrations where parties had contractually agreed to appoint a private adjudicator. 137. Mohammed Mamdouh Matwally Ghali v. Kerala Automobiles Ltd., 2011 SCC OnLine Ker 4168, para. 41; Dr. (Mrs). Irfana Hameed v. The General Manager Department of Telecommunications

Chennai Telephones, 2016 SCC OnLine Mad 8674, paras 14-15; Municipal Corporation of Delhi v. Rakesh

Brothers

(2005)

2 Arb

LR 257,

para.

18; N. Alagarisamy

v. The National Seeds

Corporation, 2001 SCC OnLine Del 913, para. 11; Praveen Gupta v. Star Share & Stock Brokers Ltd. (2008) 2 Arb LR 131, para. 6; Municipal Corporation of Delhi v. Naresh Kumar Gupta and Company Pvt. Ltd., 2011 (2) Arb LR 390 (Del), paras 15, 17; Harinarayan Bajaj v. Madhukar Sheth (2015) 3 Bom CR 15, para. 42; M.S.J. Construction (P) Ltd. v. Delhi Development Authority, 2006 (91) DRJ 354, para. 42; in Lancor Holdings Limited v. Prem Kumar Menon, 2016 SCC OnLine Mad. 10581, paras 38, 39 and 39(1) the court set aside the award on the ground that the arbitrator did not take into account that the Joint Development Agreement had not been terminated by the respondent, despite breach by the petitioners. The court further held that the arbitration proceedings were inchoate and have thus given rise to another round of litigation. 138, See the Supplementary to Report No. 246 of the Law Commission of India dated 6th February, 2015, available at, http://lawcommissionofindia.nic.in/reports/Supplementary_to_Report_ No._246.pdf, paras 10.3-10.5. 139. Ssangyong Engineering v. National Highway Authority (2019) 15 SCC 131, para. 28. 140.

Patel Engineering v. NEEPCO, 2020 SCC OnLine SC 466.

220

Chapter 10: Challenge of Awards: Public Policy 10.6.9

Perversity and Irrationality: A Trojan Horse

While recognising ‘perversity’ and ‘irrationality’ (both concepts borrowed from administrative law) as grounds for challenge of awards as being contrary to the fundamental policy of Indian law, Associate Builders did caveat their invocation as subject to the primacy of the arbitrator on all matters of evidence and fact.'*' Despite that, the expansive ‘working test’ of perversity offered in Associate Builders'’** carries the risk of providing authority for wider judicial merit-oriented review: the test requires a subjective appraisal as to what is irrelevant to the decision and whether the evidence ignored is vital, both fact-based assessments. In its definition of ‘perversity’ and ‘irrationality’ the Supreme Court in Associate Builders qualified these grounds as

having to be unreasonable in the Wednesbury sense.'**

After the 2015 Amendments, the Supreme Court recognised that ‘perversity’ and ‘irrationality’ no longer remained available as grounds under the public policy head but nevertheless held they were part of the ground of ‘patent illegality’ that applied to domestic arbitrations that were not international commercial arbitrations (i.e., entirely

between Indian parties).'™

To some extent this negates Parliamentary intent to abolish Wednesbury unreasonableness as a ground of public policy and to restrict grounds of challenge even of such domestic awards. This finding is also inconsistent with patent illegality having to be ‘on the face of the award’.’** The ‘vital’ evidence ‘ignored’ can never be on the face of the award. Perversity and irrationality have even after 2015 been invoked to set aside an award by substitution of the courts’ preferred interpretation of a contract for that of the arbitral tribunal. The Supreme Court held that the tribunal ignored a ‘basic rule’ of interpretation, viz. that the contract be read as a whole, and held this to constitute

‘perversity’ in interpretation.'*°

There is a need to confine the grounds of perversity and irrationality to prevent them from assuming the role of a Trojan horse allowing merits review. The solution might be found in the approach adopted by the Supreme Court, albeit in a case concerning enforcement of a foreign award, in which the court qualified the ‘otherwise unable to present his case’ ground by requiring that to be in respect of something that went to the root of the case or resulted in a denial of justice.'"” These two qualifications, in addition to ‘the face of the award’ requirement, might prevent the ‘perversity and irrationality’ grounds from turning into another ‘public policy’ catch-all.

141. Associate Builders, supra n. 105, para. 34. 142. Id., paras 31-32. 143. [bid.: ‘[...] a decision which is perverse or so irrational that no reasonable person would have arrived at [...]’. 144.

Ssangyong, supra n. 139, para. 41.

147.

451, paras 34, 37-79; see also Patel Engineering v. NEEPCO, 2020 SCC OnLine SC 466. Vijay Karia v. Prysmian Cavi. E Sistemi SRL & Ors. (2020) SCC OnLine 177, para. 84.

145. Section 34 (2A), 1996 Arbitration Act. 146. South East Asia Marine Engineering & Constructions v. Oil India Ltd. (2020) SCC OnLine SC

221

Darius Khambata

10.6.10

Fraud, Corruption and Confidentiality

The Explanation to Section 34(2)(b) of the 1996 Arbitration Act deems an award to be in conflict with the public policy of India if ‘the making of the award was induced or affected by fraud or corruption or was in violation of Section 75 or Section 81’. The provision is for the avoidance of doubt.'** An award induced or affected by fraud or corruption would in any case be in contravention of the fundamental policy of Indian law and justice and morality. Fraud vitiates even the most solemn proceedings in any civilised system of jurisprudence. The Supreme Court has readily applied the principle that ‘fraud unravels all’ to hold that orders, judgments, and decrees obtained by fraud are nullities.'*” This principle is therefore well entrenched as part of the public policy of India.'*° ‘Fraud in the making of the award’ has to be widely construed as fraud in its infinite variety. Concealment of relevant and material facts from the arbitrator constitutes fraud.'*' It was held to be prima facie evidence of corruption where the arbitrators did not adjudicate upon the merits of the claim but allowed it without any reason for rejecting the defence.'"* The 2020 Amendment introduces a proviso to Section 36 by which the executing Court is required to unconditionally stay an award upon the making out of a prima facie case that: (a) the arbitration agreement or the contract which is the basis of the award; or (b) the making of the award was induced or affected by fraud or corruption.'** Section 75 of the 1996 Arbitration Act extends the cloak of confidentiality to a conciliator and the conciliating parties in relation to the conciliation proceedings.'™ Section 81 of the Act bars from evidence in arbitral or judicial proceedings the views, admissions, proposals, etc. expressed or made in

148. Government of Kerala v. Som Datt Builders Ltd., AIR 2003 Ker 61, para. 14. 149. The Supreme Court has approved of Lord Denning’s dictum in Lazarus Estates Ltd. v. Beasley (1956) 1 OB 702, 712-713: ‘No judgement of a court, no order of a Minister can be allowed to stand if it has been obtained by fraud’; 8.P Chengalvaraya Naidu v. Jagannath (1994) | SCC 1, para. |; State of A.P. v. T. Suryachandra Rao (2005) 6 SCC 149, paras 8-11; Nidhi Kaim v. State of M.P. (2017) 4 SCC 1, para. 81. 150. In S.B. Noronah v. PremKumart Khanna (1980) 1 SCC 52, para. 20 the Supreme Court, in the context of a sanction obtained from a Rent Controller by fraud, held: ‘|...] if it has been procured by fraud or collusion, cannot withstand invalidity because, otherwise, high public policy will be given as hostage to successful collusion’. 151. Venture Global Engineering v. Satyam Computer Services Ltd. (2010) 8 SCC 660, para. 40; Tech Mahindra Engineering LLC v. Tech Mahindra Limited (2018) 1 SCC 656, paras 76-83, 181-186. N.B. In view of the difference of opinion between the two judges, the matter has been referred to a larger bench.

152.

Union of India v. Rishi Engineering & Construction (P) Ltd. (2016)

154.

Section 75, 1996 Arbitration Act:

| RAJ 679 (Delhi), para. 5.

153. The Arbitration and Conciliation (Amendment) Ordinance 2020 is available at https:// legalaffairs.gov.in/sites/default/files/The % 20Arbitration% 20and % 20Conciliation% 20% 28 Amendment % 29% 200rdinance %202020.pdf. Confidentiality. Notwithstanding anything contained in any other law for the time being in force, the conciliator and the parties shall keep confidential all matters relating to the

conciliation proceedings. Confidentiality shall extend also to the settlement agreement,

except where its disclosure is necessary for purposes of implementation and enforcement.

222

Chapter 10: Challenge of Awards: Public Policy conciliation proceedings.'*” The Supreme Court has held that both the conciliator and the parties must keep all matters relating to conciliation proceedings confidential in view of the fact that ‘if there are insidious encroachments on confidentiality, a free and

fair settlement may never be arrived at, thus stultifying the object sought to be achieved

by Part III of the 1996 Arbitration Act’.'"° 10.7

FOREIGN AWARDS: BROAD VIEW GETS EXTENDED TO ENFORCEMENT, LATER THE NARROW VIEW IS RESTORED

The expression ‘contrary to the public policy of that country’ found in Article V(2)(b) of the New York Convention has been given a narrow meaning across jurisdictions.'°” However,

after Saw Pipes,

the Supreme

Court in Hindustan

Zinc'™ observed that a

foreign award may not be enforced even on grounds such as it being contrary to the terms of the contract. After the Supreme Court held that a foreign award could also be challenged before an Indian Court under Section 34 in India,'*” the broad public policy review of Saw Pipes became applicable even to foreign awards. That led in 2011 to

Phulchand Exports'®’ in which the Supreme Court held that the expression ‘public

policy of India’ appearing in Section 48(2)(b) of Part II of the 1996 Arbitration Act (a foreign award enforcement provision equivalent to Article V(2)(b) of the New York Convention) meant the same as that expression in Section 34 of Part I of the Act 155.

Section 81, 1996 Arbitration Act: Admissibility of evidence in other proceedings. The parties shall not rely on or introduce as evidence in arbitral or judicial proceedings, whether or not such proceedings relate to the dispute that is the subject of the conciliation proceedings, - (a) views expressed or suggestions made by the other Party in respect of a possible settlement of the dispute; (b) admissions made by the other party in the course of the conciliation proceedings; (c) proposals made by the conciliator;

(d) the fact that the other party had

proposal for setthkement made by the conciliator.

indicated his willingness to accept a

156. Govind Prasad Sharma & Ors. v. Doon Valley Officers Cooperative Housing Society Ltd., 2017 SCC

OnLine

5C

1001, para.

8.

157. Parsons & Whittemore Overseas Co. Inc. v. SocieteGenerale De L’industrie Du Papier & Bank of America, 508 F.2d 969 para. 8. The U.S. Court of Appeals (Second Circuit) observed: ‘(t]he general pro-enforcement bias informing the Convention and explaining its supersession of the Geneva Convention points toward a narrow reading of the public policy defense. An expansive construction of this defense would vitiate the Convention's basic effort to remove preexisting obstacles to enforcement’. For a discussion of Parsons and the objective of promotion of effectiveness of arbitration and international trade, see Marike Paulsson, The 1958 New York Convention in Action (Kluwer Law International 2016) pp. 13-16. For further discussions of Parsons, see also Chapter 12 of the Handbook. 158.

Hindustan Zinc, supra n. 105, para. 14. See C Simson, India Must Pay $477M Award in Offshore Oil Fight, Law 360, 16 September

2020, available at https://www.law360.com/governmentcontracts/articles/ 1310692 /indiamust-pay-477m-award-in-offshore-oil-fight. For publicly available extracts of the case, see http://www .legiteye.in/case/government-of-india-v-vedanta-limited-formerly-cairn-indialtdravva-oil-singapore-pte-ltdvideocon-industries-limited/1C3E95. 159. Venture Global Engg. v. Satyam Computer Services Ltd. (2008) 4 SCC 190, a decision ultimately overruled in Bharat Aluminium v. Kaiser Aluminium (2012) 9 SCC 552 albeit only prospectively in cases concerning arbitration agreements entered into post 6 September 2012.

160.

Phulchand Exports Limited v. 0.0.0. Patriot (2011)

Zoo

10 SCC 300, para.

16.

Darius Khambata

(challenge of domestic awards). Hence, the broad standard of review for domestic awards introduced by Saw Pipes was applied even to the question of enforcement of foreign awards. Illegality of the contract as a ground for refusing enforcement of a foreign award was the very proposal that India had made at the New York Convention and which has been rejected.'*' Now the Supreme Court revived that restriction ignoring the universally accepted meaning of Article (V)(2)(b) of the New York Convention. Phulchand Exports upset the dichotomy between the standards for domestic awards (Part I) and that for foreign awards (Part II). In the July 2013 decision Shri Lal Mahal v. ProgettoGrano Spa'™, in an example of self-correction by a common law court, the Supreme Court accepted that it had erred in its 2011 decision and recognised the distinction in the standards to be applied to domestic awards and to enforcement of foreign awards. It held that ‘public policy’ under Section 48(2)(b) of the 1996 Arbitration Act (qua enforcement of foreign awards) must be given a narrower meaning as in Renusagar and did not extend to the ground of patent illegality included by Saw Pipes. Renusagar therefore continues to govern the meaning of ‘public policy’ in Part II of the Act for the enforcement of foreign awards. In Shri Lal Mahal,

the Supreme

Court differed from

its view in Venture Global and

Phulchand Exports and unequivocally held that Section 48 of the 1996 Act did not permit a ‘second look’ at a foreign award akin to an appellate jurisdiction and that an error in a foreign award did not constitute a violation of ‘public policy’. Applying Shr Lal Mahal, it is clear that the expansive meaning given to the term ‘fundamental policy of Indian law’ in ONGC Ltd. v. Western Geco International will not apply when it comes to recognition and enforcement of foreign awards under Section 48(2)(b) in Part II of the 1996 Act, although that Section and Section 34(2)(b)(ii) use the identical expression ‘in conflict with the public policy of India’. The narrow view has now by the 2015 Amendments been emphatically incorporated into the statutory framework not only while considering enforcement of foreign awards but also in deciding challenges to those Part I Awards that are made in international commercial arbitrations involving a foreign party.

The Supreme Court in Vijay Karia v. Prysmian Cavi E Sistemi SRL'™ has

unequivocally reaffirmed adoption of the narrow view of public policy under Section 48 of the 1996 Arbitration Act. The Supreme Court recognised that for the ‘public policy

161. As a member of the Ad Hoc Committee India had proposed additional grounds on which a competent authority could refuse to enforce a foreign award, viz.: (1) the fact that it related to

a contract that was illegal, void, not enforceable, contrary to public policy, against morality or otherwise suffered from a material flaw; and (2) the fact that the award indefinite as to be incapable of enforcement. See also Dr. Anton G. Maurer, supra n. 18-19; U.N. DOC. E/AC.42/SR. 1, p. 7. India argued that any country which ratified the Convention and so undertook to awards made abroad would have to be satisfied that the contract to which the award was in conformity with its law. Otherwise it would be encouraging its nationals unlawful advantage of an abnormal situation. Dr. Anton G. Maurer, supra n. 36, Summary

Record of Fifth Meeting U.N. DOC. E/AC, 42/5R. 5, p. 7.

162. Shri Lal Mahal v. ProgettoGrano Spa (2014) 2 SCC 433. 163.

Vijay Karia, supra n. 147,

224

public was so 36, pp.

enforce related to take p. 20;

Chapter 10: Challenge of Awards: Public Policy of India’ ground, Section 34 and Section 48 of the 1996 Arbitration Act were identieal.'“ Grounds relating to patent illegality on the face of the award were held to be outside the scope of interference with international commercial arbitration awards made in India and enforcement of foreign awards in India.’ The court confirmed that the object of Section 48 was to enforce a foreign award subject only to certain well-defined narrow exceptions. It held that the expression ‘was otherwise unable to present his case’ in Section 48(1)(b) was not expansive’ and failure to consider a material issue was held not to fall within its rubric.'°’ However failure to determine a material issue ‘which goes to the root of the matter or fails to decide a claim or counter-claim in its entirety’ might have the result of shocking the conscience of the court; it would offend a most basic notion of justice and hence violate the public policy of India.’ The Supreme Court held that every violation of the Foreign Exchange Management Act (particularly one which was not an illegal activity) would not breach the fundamental policy of Indian law.'*’ The court narrowly defined that expression as follows: ‘Fundamental Policy’ refers to the core values of India’s public policy as a nation, which may find expression not only in statutes but also time-honoured, hallowed

principles which are followed by the Courts. Judged from this point of view, it is clear that resistance to the enforcement of a foreign award cannot be made on this

ground.'”°

The Bombay High Court in Nobel Resource Ltd. v. Dharni Sampda Private Ltd.'*' characterised fundamental policy of Indian law under Section 48 as that which ‘connotes the basic and substratal [sic] rationale, values and principles which form the bedrock of laws in India’.'”* The court held that for an award to be refused enforcement in India, its enforcement must offend India's core values of its national policy which it cannot be expected to compromise, such as ‘trading in elephant tusks from India and 164. Id. at para. 38. 165.

Ibid.

166. Id. at para. 84. The court held: A good working test for determining whether a party has been unable to present his

case is to see whether factors outside the party's control have combined to deny the party a fair hearing. Thus, where no opportunity was given to deal with an argument which goes to the root of the case or findings based on evidence which go behind the back of the party and which results in a denial of justice to the prejudice of the party; or additional or new evidence is taken which forms the basis of the award on which a party has been given no opportunity of rebuttal, would, on the facts of a given case,

render a foreign award liable to be set aside on the ground that a party has been unable

to present his case. This must, of course, be with the caveat that such breach be clearly made out on the facts of a given case, and thal awards must always be read supportively with an inclination to uphold rather than destroy, given the minimal interference

possible with foreign awards under Section 48. 167.

168. 169. 170. 171. 172.

Vijay Karia, supra n. 147, para. 85.

Id. at Id. at Id., at Nobel Id. at

paras 84, 86. para. 93. para. 91. Resource Ltd. v. Dharni Sampda Private Ltd. (2019) SCC OnLine Bom 4415. para. 27.

225

Darius Khambata

the sale of peacock meat from India’. Enforcing the award, the court held that mere improper admission of evidence by the arbitrator was not sufficient ground to refuse enforcement. In an aberration from its pro-enforcement bias, the Supreme Court recently denied enforcement to an old foreign award pending enforcement for decades under the pre-1996 regime, i.e. the Foreign Awards Act.'” Although it reiterated the narrow view of public policy, that had been adopted by it in Renusagar,'™ the Supreme Court unfathomably also referred to Saw Pipes.'’” The Supreme Court relied on Section 23 of the Indian Contract Act, a provision codifying common law on the unlawfulness of the consideration or object of a contract, including on the grounds of immorality or being opposed to public policy.'”° It then held that a foreign award enforcing an export contract made by NAFED, a Government agency, without the necessary permission of the Government, was unenforceable in India as supply under such a contract ‘would be against the fundamental public policy of India','”’ ‘the basic concept of justice’'”” and ‘ex facie illegal and in contravention of fundamental law’.'”’ The judgment contains no reasons or discussion as to why a foreign award enforcing such a contract would be against the fundament policy of Indian law even if it were illegal. The distinction between mere illegality and conflict with public policy had been made in Renusagar and was accepted in NAFED by the Supreme Court.'*” This case may have limited effect since its application can be restricted to the Foreign Awards Act, long since repealed by

the Act."*!

Apart from the NAFED decision, courts in India evince a pro-enforcement philosophy. Indeed, shortly after NAFED, the Supreme Court reiterated its proenforcement bias, rejecting a plea that a foreign award not be enforced on the basis of

reinterpretation of the contract and alleged errors of judgment.'** 173.

NAFED

v. Alimenta

(2020)

SCC OnLine SC 381, concerning an award

of 1989 made by the

Federation of Oil, Seeds and Fats Association of which enforcement in India had been sought under Section

7(1)(b)(ii)

of the Foreign

Awards

Act, a provision

corresponding

to Article

V(2)(b) of the New York Convention. 174. Id., at para. 63. See also Renusagar, supra n. 69. 175. Id., at para. 64, a decision that had adopted the wider view of public policy for deciding a challenge to a domestic award. 176. For Section 23 of the Indian Contract Act, 1872. See supra n. 39. 177.

NAFED, supra n. 173, para. 68.

178. Id. at para. 69. 179. Id. at para. 80. 180. Id. at para. 65. 181. In fact there were other more suitable grounds to refuse enforcement under the head of fundamental policy of Indian law: the arbitrator nominated by Alimenta appeared as a representative of Alimenta to defend his own award before the Board of Appeal of the Association. Although this appeared to be in consonance with the practice before the Association, such a practice would be considered unethical in India. See id. at paras 75-78. 182. Government of India v. Vedanta Ltd. & Ors., 2020 SCC OnLine SC 749. The Court held: The interpretation of the terms of the PSC lies within the domain open for the Appellant to impeach the award on merits before The court cannot re-assess or re-appreciate the evidence led in 48 does not provide a de facto appeal on the merits of the award.

exercising jurisdiction under Section 48, cannot

226

of the tribunal. It is not the enforcement court. the arbitration. Section The enforcement court

refuse enforcement by taking a

Chapter 10: Challenge of Awards: Public Policy 10.8

2015 AMENDMENT

The 2015 Amendment'*’ which extensively amended the Act in several respects also tried to curb excessive and unpredictable court intervention in arbitration by providing a narrow public policy standard for both the challenge to a Part I award under Section 34 and for questions of enforcement of foreign awards under Section 48 of the Act (corresponding to Article V of the New York Convention). Sections 34(2) and 48(2) carry an explanation that an award would be ‘in conflict with the public policy of India’ only if the following circumstances were satisfied: (i) the making of the award was induced or affected by fraud or corruption or was in violation of Section 75 or 81 of the 1996 Arbitration Act:

(ii) it is in contravention with the fundamental policy of Indian law; or (iii) it is in conflict with the most basic notions of morality or justice. Pertinently, the draft New York Convention, adopted by the Ad Hoc Committee,

had proposed in draft Article IV(h) denying recognition and enforcement to an award if this ‘would be clearly incompatible with public policy or with fundamental principles of the law of the country in which the award is sought to be relied upon’.'™ Ironically, India had, on the Ad Hoc Committee of the New York Convention, proposed deleting the word fundamental and substituting the word ‘the’ in its place.'** The expression “most basic notions of morality or justice’ was adopted in the 2015 amendment from the decision of the U.S. Court of Appeals (Second Circuit) in Parsons & Whittemore

Overseas Co. Inc.'*° The words ‘interests of India’ that had been introduced by the Supreme Court'®’ as part of the public policy exception (and confined by Associate Builders) were omitted. The Supreme Court has recently held,'** in the context of international commercial arbitration, that the wider views in the judgments in Saw Pipes and ONGC Ltd. v.

different interpretation of the terms of the contract [...] the interpretation taken by the

tribunal is a plausible view, and the challenge on this ground cannot be sustained, to refuse enforcement of the Award.”

183. Available at http://www.indiacode.nic.in/acts-in-pdf/2016/201603.pdf; the amendments were based, in part, on the 246" Report of the Law Commission and a Supplementary to Report No. 246 dated 6 February, 2015. These are available at http://lawcommissionofindia.nic.in/ reports/Report246.pdf and http://lawcommissionofindia.nic.in/reports/Supplementary_to_ Report_No._246.pdf. 184. Report of the Committee on the Enforcement of International Arbitral Awards, United Nations Economic and Social Council, U.N. DOC E/2704 Annex, at 2 referred to in Dr. Anton G. Maurer, supra n. 36. 185. Summary Record of Seventh Meeting of the Ad hoc Committee UN DOC, E/AC. 42/SR.7, p. 6 referred to in Dr. Anton G. Maurer, supra n. 36. 186. Supra n. 66, pp. 973-974 at which it was held: ‘[...] the Convention's public policy defense should be construed narrowly. Enforcement of foreign arbitral awards may be denied on this basis only where enforcement would violate the forum state’s most basic notions of morality and justice’. 187.

Renusagar, supra n. 69.

188. HRD Corporation (Marcus Oil and Chemical Division) v. GAIL (India) Limited, Civil Appeal No. 11126 of 2017, paras 18-19.

Zee

Darius Khambata

Western Geco International have been abolished by the 2015 Amendments and that ‘[bl]oth Sections 34 and 48 have been brought back to the position of law contained in Renusagar Power Plant Co. Ltd. v. General Electric Co., 1994 Supp (1) SCC 644, where public policy will now include only two of the three things set out therein, viz., fundamental policy of Indian law and justice or morality’. The Supreme Court concluded that ‘[t]hus, an award rendered in an international commercial arbitration whether in India or abroad - is subject to the same tests qua setting aside under Section 34 or enforcement under Section 48, as the case may be’. For domestic arbitrations between two Indian parties seated in India, in addition

to the narrow public policy review, subsection (2A) to Section 34 of the 1996 Arbitration Act is introduced to permit review if there is patent illegality appearing on the face of the award.'*’ There are safeguards — a prohibiting proviso is added, viz. that an award shall not be set aside merely on the ground of an erroneous application of the law or by re-appreciating evidence. There are thus different standards of review of awards in arbitrations seated in India depending on whether they are between two Indian parties or they involve at least one foreign party, i.e. international commercial arbitration.'”’ Such classification may be justifiable on the ground that international commercial arbitration constitutes a distinct and separate class which has a nexus with the object of encouraging international commercial arbitration in India. Section 34(2A) of the 1996 Arbitration Act allows the exception of ‘patent illegality’ — a clear reference to Saw Pipes. The meaning given to the term ‘patent error’ under administrative law may also be of some assistance.'”' Section 34(2A) of the Act also contains the following two safeguards that: 189. This statutorily recognised the ‘patent illegality’ challenge enunciated in Saw Pipes but combined it with the Champsey Bhara principle. 190. Section 2(1)(f) of the 1996 Arbitration Act defines ‘international commercial arbitration’ as follows: ‘international commercial arbitration’ means an arbitration relating to disputes arising

out of legal relationships, whether contractual or not, considered as commercial under the law in force in India and where at least one of the parties is —

(i) an individual who is a national of, or habitually resident in, any country other than India; or (ii) a body corporate which is incorporated in any country other than India; or (iti) an association or a body of individuals whose central management and control is exercised in any country other than India; or (iv) the Government of a foreign country.

191.

In Batuk K. Vyas v. Salim M. Merchant, AIR 1953 Bom 133 (DB) the Bombay High Court held, in the context of issuance of a Writ of Certiorari, that no error could be said to be apparent on the face of the record if it was not self-evident and if it required an examination or argument to establish it. But in Hari Vishnu Kamath v. Syed Ahmed Ishaque, AIR 1955 SC 233, para. 23 the Supreme Court observed that this test might not be adequate in every case since what one judge may consider self-evident another might not. Nevertheless in Surya Devi v. Ram Chander Rai (2003) 6 SCC 675, para. 38(6) the Supreme

Court held: ‘A patent error is an error which is

self-evident i.e. which can be perceived or demonstrated without involving into any lengthy or complicated argument or a long drawn out process of reasoning. Where two inferences are reasonably possible and the subordinate court has chosen to take one view, the error cannot be called gross or patent.’

228

Chapter 10: Challenge of Awards: Public Policy (i) the patent illegality must be ‘on the face of the award’. Adopting an administrative law approach would mean that an award cannot be reviewed by a process of extrapolation and redetermination of the issue of law involved; the illegality must be expressly found in the award and it must not be inferred from the result of the award. This is close to the Champsey Bhara principle that required the error to be in a proposition of law on the face of the award; (ii) the ‘patent illegality’ must not be found by a process of reinterpretation or redetermination of the law by the Section 34 Court since the proviso prohibits the setting aside of awards ‘merely on the ground of an erroneous application of the law’. An explanation has also been added to Sections 34, 48 and 57 of the 1996 Arbitration Act wherein it has been clarified that ‘[{or the avoidance of doubt the test as to whether there is a contravention with the fundamental policy of Indian law shall not entail a review on the merits of the dispute’. The Supreme Court has recently crystallised the effect of the 2015 Amendment on the public policy exception. In Ssangyong Engineering'”* the court confirmed that the expanded view of ‘fundamental policy of Indian law’ adopted by the court in ONGC Ltd. v. Western Geco International had been done away with.'’’ The Supreme Court held:

(i) courts cannot interfere with the merits of an award under the expanded judicial approach exception; however, the award may be interfered with in case of violation of natural justice principles as provided under Sections 18 and 34(2)(a)(iii) of the 1996 Arbitration Act;'™ (ii) Wednesbury grounds of challenge recognised in ONGC Ltd. v. Western Geco

International do not survive;'”°

(iii) the position of the ‘public policy’ exception was relegated by the amendment; ‘public policy of India’ now means a domestic award is against the fundamental policy of Indian law, as held in Renusagar and explained in

Associate Builders;'”°

(iv) the ‘interest of India’ ground recognised in Renusagar no longer obtained;'”’ (v) the ‘justice and morality’ ground now means the ‘most basic notions of

morality and justice’;'”*

(vi) what

a patent

illegality was,

remained

pre-2015 Amendment decision;'””

192. 193. 194. 195. 196. 197. 198. 199.

Ssangyong, supra n. 139.

Id. at Id. at Ibid. Ibid. Id. at Ibid. Id. at

paras 34, 36. para. 34. para. 35. paras 38-42.

229

as held in Associate Builders, a

Darius Khambata

(vii) patent illegality having to be on the face of the award, what was not subsumed within the ‘fundamental policy of Indian law’ could not be

brought in ‘by the backdoor’ as patent illegality.~""

Whether these legislative safeguards will prevent a return to a full-blown Saw Pipes review of a Part | domestic arbitration award is a matter yet undecided. There are also procedural requirements that have been added and a time limit for disposal of challenge petitions by the court, but it is doubtful whether these can realistically be achieved given the burden of arrears existing in most courts.7”! 10.9

APPLICATION OF THE 2015 AMENDMENT

The 2015 Amendment” provided that it would not apply to arbitrations commenced

prior to its effective date (23 October 2015) and will apply ‘in relation to’ arbitrations commenced thereafter. The meaning of the expression ‘in relation to’ had been decided by a judgment of the Supreme Court dealing with a transitory provision when the 1940

Act was repealed by the 1996 Arbitration Act,” as including court proceedings in relation to arbitrations, e.g. proceedings to challenge an award. In 2017, the Supreme Court affirmed that an arbitration initiated prior to 23 October 2015 would be governed by the provisions of the Act as they stood prior to their amendment.*™ In 2018 in BCCI the Supreme Court also held that the 2015 Amendment as a whole was prospectively applicable, i.e., that it would apply to arbitral proceedings commenced on or after the date that it came into force and to court proceedings commenced on or after it came into force. However, the Supreme Court held that the amended Section 36 would apply even to Section 34 applications pending on the date of commencement of the 2015

200. Id., at para. 37 followed in Kavnet Finance Ltd. v. Verona Capital Ltd. (2019) SCC OnLine Bom 1203, para. 27. In Ssangyong, however, the Supreme Court retained the expansive perversity pround of interference by holding it would amount to a patent illegality on the face of the award even if it no longer formed part of the ground of conflict with the public policy of India. See 201.

Ssangyong, supra n. 139, para. 41. Section 34, 1996 Arbitration Act:

al

(5) An application under this section shall be filed by a party only after issuing a prior notice to the other party and such application shall be accompanied by an affidavit by the applicant endorsing compliance with the said requirement. (6) An application under this section shall be disposed of expeditiously, and in any event, within a period of one year from the date on which the notice referred to in sub-section (5) is served upon other party.

202.

Section 26, 2015 Amendment: Nothing contained in this Act shall apply to the arbitral proceedings commenced, in accordance with the provisions of section 21 of the principal Act, before the commencement of this Act unless the parties otherwise agree but this Act shall apply in relation to

arbitral proceedings commenced on or after the date of commencement of this Act. 203.

Thyssen Stahlunion GmbH v. Steel Authority of India (1999) 9 SCC 334, paras 22-23, 28, 32.

204. Aravali Power Company P. Ltd. v. M/s. Era Infra Engineering Limited (2017) 15 SCC 32, para. 16. In this case the arbitrator was appointed on 19 August 2015.

230

Chapter 10: Challenge of Awards: Public Policy Amendment.” The Supreme Court did not express any opinion on whether the amendments to Section 34 were clarificatory, declaratory or procedural and observed that this was a separate and independent enquiry not undertaken by it.°°* Thus a conflict of opinion that appeared to be developing among High Courts*”’ as to the applicability of the 2015 Amendment to pending proceedings was put to rest. 10.10

2019 AMENDMENT

To negate, at least partially, the aforesaid BCCI judgment of the Supreme Court, the 2019 Amendment (which had effect from 30 August 2019), inserted a new Section 87 into the Act, effective from 23 October 2015, to provide

that the 2015

Amendment

would not apply to arbitral proceedings commenced prior thereto and to court proceedings arising out of or in relation to such arbitral proceedings, irrespective of whether the court proceedings were commenced prior to or after the commencement of the 2015 Amendment.**

205. Board of Control for Cricket in India v. Kochi Cricket Put. Ltd. (2018) 6 SCC 287, paras 58, 62, 65 and 67. The amended Section 36 did away with automatic stay of enforceability of awards merely on the filing of a challenge petition under Section 34 and required the challenger to apply to the court for a stay of the award upon consequential conditions of grant of security including deposit of part or the whole of the amount of monetary awards. 206.

Board of Control for Cricket in India, supra n. 205, para. 75.

207. The Bombay High Court had held that the amended Section 36 applied even to Section 34 petitions pending before a court on 23 October 2015 although the arbitration might have commenced prior to that date. See Rendezvous Sports World v. Board of Control for Cricket in India, 2016 SCC OnLine Bombay 6064. The Calcutta and Madras High Courts had also given immediate effect to Section 36. See Tufan Chatterjee v. Rangandhar, AIR 2016 Calcutta 213:2016 SCC OnLine Cal 483. On a parity of reasoning therefore a Section 34 petition pending on 23 October 2015 would have had to be decided under the amended Section 34. However, a Single Judge of the Bombay High Court held that the amended provisions of Section 34 did not apply to challenge an award made prior to 23 October 2015. The Board of Trustees of the Port of Mumbai v. M/s. Afcons Infrastructure Limited, Arbitration Petition 868 of 2012, 23 December 2016). Similarly, a Division Bench of the Delhi High Court held that court proceedings pending on the effective date (under both Section 34 and Section 36) are governed by these provisions as they stood prior to their amendment since the arbitration in relation thereto had commenced and the award was made prior to that date. Ardee Infrastructure Pvt. Ltd. v. Anuradha Bhatia, 2017 SCC OnLine Del 6402 (DB).

208. Section 87, 1996 Arbitration Act:

Unless the parties otherwise agree, the amendments made to this Act by the Arbitration and Conciliation (Amendment) Act, 2015 (3 of 2016) shall - (a) not apply to - {i)

arbitral proceedings commenced before the commencement of the Arbitration and

Conciliation (Amendment) Act, 2015 (3 of 2016); (ii) court proceedings arising out of or in relation to such arbitral proceedings irrespective of whether such court proceedings are commenced prior to or after the commencement of the Arbitration and Conciliation (Amendment) Act, 2015 (3 of 2016); (b) apply only to arbitral proceedings commenced on or after the commencement of the Arbitration and Conciliation (Amendment) Act,

2015 (3 of 2016) and to court proceedings arising out of or in relation to such arbitral proceedings.

231

Darius Khambata

This was a retrograde step, not in keeping with the spirit of the 2015 Amendment

Act. In Hindustan Constructions Company Limited v. Union of India*®’ the Supreme

Court struck back swiftly by holding Section 87 to be manifestly arbitrary and therefore

unconstitutional under Article 14.*'° The Supreme Court observed that in its BCCI judgment it had held that ‘introduction of Section 87 would result in delay of disposal of arbitration proceedings, and an increase in the interference of courts in arbitration matters, which defeats the very object of the Arbitration Act 1996, which was

strengthened by the 2015 Amendment Act’.*'' The Supreme Court again held that the amended Section 36 was clarificatory of the position under the unamended Section 36

and only restated the position.*'*

The 2019 Amendment did introduce a modification to Section 34 of the Act which will have a positive impact on restricting challenges of awards. This confined challenges on the grounds enumerated in Section 34(2)(a) to those that the applicant ‘establishes on the basis of the record of the arbitral tribunal’. This requirement substituted the previous language of ‘furnishes proof that’, and it intended to keep challenges within the scope of the proceedings before the tribunal rather than allowing challenges based on facts and material outside the proceedings. The 2019 Amendment sought to introduce some controversial changes to the Act such as constitution of an Arbitration Council of India and imposition of ‘qualifications’ for arbitrators (set out in the 8 Schedule), many of which are impractical and unattainable. Both these measures will result in discouraging India-seated arbitrations by intruding on party autonomy. These two changes were not notified to take effect. The 2020 Amendment deleted the 8th Schedule, leaving qualifications to be prescribed by Government regulation. These unfolding events mark a reversal of roles for the executive and the judiciary. It is now the Supreme Court that champions arbitral autonomy and, seemingly, the Government of India that is modest in expanding reform. Be that as it may, the resultant uncertainty is not for the good. 10.11

CONCLUSION

Parliament enacted the Act on the basis of the Model Law with the intention of making arbitration an autonomous and efficacious means of dispute resolution and sheltering awards from excessive judicial review.*'” However, the widening and fluid views of ‘public policy’ and the grounds of perversity and irrationality enunciated by the Supreme Court appear to have partially negated its objectives. The 2015 Amendment is a legislative attempt to salvage party autonomy, the independence of the arbitral 209. Hindustan Constructions Company Limited v. Union of India (2019) SCC OnLine SC 1520, para. 210.

57. Id.

211. Id. at para. 54. 212. Id. at para. 35. 213. India has several advantages that should have made it a popular seat: over a 150 years of recorded common law, a strong commercial bar, an innovative judiciary and good infrastructural support.

232

Chapter 10: Challenge of Awards: Public Policy process and enforceability of awards, from the abyss of widening judicial review under the broad view of public policy. Yet, Parliament and the Government of India have

given mixed signals in introducing the 2019 Amendment.*’* Whether India will

succeed in becoming a successful and coveted seat of commercial arbitration, which is the unrealised dream of the 1996 Arbitration Act, remains to be seen.

214. The Government of India has also received a report dated 30 July 2017 from a ‘High Level Committee to Review the Institutionalisation of Arbitration Mechanism in India’ headed by a former Judge of the Supreme Court constituted by it, recommending a broad range of measures to encourage institutional arbitration in India as a means of ensuring greater enforceability of awards and the reform of the arbitral process in India. The full Report is available at http://legalaffairs.gov.in/sites/default/files/Report-HLC. pdf.

233

CHAPTER

11

Recognition and Enforcement of Foreign and Domestic Arbitral Awards: National Courts

Role of

Dushyant Dave’

This Chapter seeks to provide an understanding of the jurisprudence surrounding the enforcement of foreign and domestic arbitral awards.

The Chapter reviews

provisions and the meandering jurisprudence on enforcement under enactments

issued from 1899, under Parts I and Il of the Arbitration and Conciliation Act, 1996, and the Amendment Acts of 2015 and 2019. Following a discussion of the case law,

the Chapter concludes with guidelines for counsel and recommendations for judges deciding on enforcement of arbitral awards.

FLA

PREFACE

These proceedings certainly illustrate what was said by Mr Doyne, and what has been often stated before, ‘that the difficulties of a litigant in India begin when he has obtained a Decree’' (emphasis added). This statement made by the Privy Council in 1872 is still true in respect of present-day award holders. The World Bank in its Report ‘Doing Business 2020° has ranked India at 63 out of 190 countries.* The study notices that enforcement of contracts in India takes 1,445 days at a cost of 31% of the claim as against 589.6 days in OECD countries. South Asia’s average is 1,101.6 days. In quality of judicial process

* The author is thankful to Unnayan Mishra for his able and efficient assistance. 1. General Manager of the Raj Durbhunga v. Maharajah Coomar Ramaput Sing, 1872 SCC OnLine PC 16: (1871-72)

14 Moo IA 605.

2. The World Bank, Doing Business Measuring Business Regulation, available at https://www. doingbusiness.org/en/rankings.

235

Dushyant Dave index (0-18) India scored 10.5.* These figures fully represent the status of recognition and enforcement of awards, foreign and domestic in Indian courts. Enforcement of awards receives the same treatment in national courts. Recent efforts by the Parliament, national courts, and the arbitration community have seen an endeavour to change the scenario. This Chapter constitutes a careful review and analysis of the statutory scheme and the judicial approach for the enforcement of awards. 11.2

ENFORCEMENT

OF DOMESTIC

11.2.1

Evolution of Law

11.2.1.1

1899 Arbitration Act

AWARDS

The legislative journey of arbitration in India started with the Indian Arbitration Act, 1899 (1899 Arbitration Act). Section 15 reads: Award when filed to be enforceable as a decree

(1) An award on a submission, on being filed in the Court in accordance with the foregoing provisions, shall (unless the Court remits it to the reconsideration of the arbitrators or umpire, or sets it aside) be enforceable as if it were a decree of the Court. (2) An award may be conditional or in the alternative.

In Ramshai v. Joylall the Calcutta High Court held purpose of enforcing that award.* Thus, a final award by a decree — as was later provided by Section 17 of Arbitration Act) — could be enforced, i.e. executed in 11.2.1.2

that an award is a decree for the without actually being followed the Arbitration Act, 1940 (1940 the same manner as a decree.”

1940 Arbitration Act

Under the 1940 Arbitration Act the award was required to be made a ruling of the court. Therefore, an arbitral award was followed by a judgment, which was in turn followed by a decree. Section 17 reads: Judgment in terms of award. Where the Court sees no cause to remit the award or any of the matters referred to

arbitration for reconsideration or to set aside the award, the Court shall, after the time for making an application to set aside the award has expired, or such application having been made, after refusing it, proceed to pronounce judgment according to the award, and upon the judgment so pronounced a decree shall

3. The World Bank, Doing Business Measuring Business Regulations, India, Enforcing Contracts, available at https://www.doingbusiness.org/en/data/exploreeconomies/india#DB_ec. See also, The World Bank, Doing Business Measuring Business Regulation, Enforcing Contracts methodology, available at https://www.doingbusiness.org/en/methodology/enforcing-contracts. 4. Ramshai v. Joylall, AIR 1928 Calcutta 840. 5. Order 21, CPC provides the framework for the execution of decrees.

236

Chapter 11: Enforcement of Arbitral Awards follow, and no appeal shall lie from such decree except on the ground that it is in excess of, or not otherwise in accordance with, the award.

The arbitral proceedings and the award, as the case may be, commenced and made under the 1940 Arbitration Act continued to be governed thereunder even after the coming into force of the Arbitration and Conciliation Act, 1996 (1996 Arbitration Act or Act). Section 85(2) (a) of the 1996 Arbitration Act provided a saving clause in this regard.° The Supreme Court has held that once the arbitral proceedings have commenced, the right to be governed by the older legislation for enforcement is an accrued right and not merely an inchoate right. It has held that it is not imperative for the right to have the award enforced under the older Act that some legal proceedings for its enforcement must be pending under that Act at the time of the newer Act coming into

force.’

11.2.1.3

1996 Arbitration Act

129.31

Application and Scope

This Act was based on the UNCITRAL Model Law on Arbitration (Model Law) and sought to consolidate and domestic arbitration, international commercial arbitration arbitral awards. Two of the objectives underlying this Act

International Commercial amend the law relating to and enforcement of foreign were:

(i) to minimise the supervisory role of courts in the arbitral process; and (ii) to provide that every final arbitral award is enforced in the same manner as if it were a decree of the court. Chapter VIII of the 1996 Arbitration applies to ‘finality and enforcement arbitral awards’ and provides in Sections 35 and 36:

of

Finality of arbitral awards.

Subject to this Part an arbitral award shall be final and binding on the parties and persons claiming under them respectively.

Enforcement (1) Where the time for making an application to set aside the arbitral award under

section 34 has expired, or such application having been made, it has been

refused, the award shall be enforced under the Code of Civil Procedure, 1908 (5 of 1908), in the same manner as if it were a decree of the court.

Section 36 of the 1996 Arbitration is a departure from the 1940 Arbitration Act and restores the position prevailing under the 1899 Arbitration Act. Consequently, the award is no longer required to be made a ruling of the court. Under Section 36 of the 6. Section 85(2)(a), 1940 Arbitration Act: ‘Notwithstanding such repeal, the provisions of the said

enactments shall apply in relation to arbitral proceedings which commenced before this Act came into force unless otherwise agreed by the parties but this Act shall apply in relation to arbitral proceedings which commenced on or after this Act comes into force [...].’ 7. Thyssen Stahlunion Gmbh v. Steel Authority of India Ltd (1999) 9 SCC 334, para. 22.

237

Dushyant Dave 1996 Arbitration Act, the award is enforceable without the court’s intervention once the time limit for challenge has expired or the challenge having been made has failed. The Code of Civil Procedure, 1908 (CPC) which applies to India, except Jammu and Kashmir, and Nagaland, contains detailed provisions in Sections 36 to 74 of Part Il read with Order XXI thereto. An award holder would have to wait for a period of three months after receiving the award prior to applying for enforcement and execution.* The Supreme Court has clarified that this three-month time period under Section 34(3) of the 1996 Arbitration Act is not 90 days, but three calendar months,’ which

view

has been

consistently

followed, including in a recent judgment of the Delhi High Court.'” The Supreme Court has also clarified that the delivery of the award has to be on the party and delivery to its counsel does not commence the limitation period under Section 34(3).'' Said law has been applied consistently by High Courts.'* The court may extend this time limit by 30 days if it is satisfied that the applicant was prevented by sufficient cause from making the application within the period of three months.'* Section 36 of the 1996 Arbitration states that an arbitral award can be enforced only under two circumstances: (1) after the time for filing an application under Section 34 has expired and no application is made, or (2) such application having been made has been refused. Refusal as contemplated in Section 36 relates to refusal by the Court of First

Instance and not by the appellate court.*

In Union of India v. Popular Construction Co. the Supreme Court held that by virtue of Section 34(1) of the 1996 Arbitration Act, recourse to the court against an arbitral award cannot be made beyond the period prescribed.'* The importance of the period fixed under Section 34 is emphasised by the provisions of Section 36. This is a significant departure from the provisions of the 1940 Arbitration Act. Under the 1940 Arbitration Act, after the time to set aside the award expired, the court was required to ‘proceed to pronounce judgment according to the award’ and upon the judgment so pronounced a decree shall follow. The consequence of the time expiring under Section 34 of the 1996 Arbitration Act is that the award becomes immediately enforceable without any further act of the court.

§. 9. 10. ll. 12. 13.

Section 36{1) read with Section 34(3) of the 1996 Arbitration Act. State of H.P. v. Himachal Techno Engineers (2010) 12 SCC 210. Rajnish Gupta & Anr. v. Brij Mohan Aggarwal, 2019 SCC OnLine Del 11635. Benarsi Krishna Committee v. Karmyogi Shelters (P) Ltd. (2012) 9 SCC 496. Food Corporation of India v. M/S Shiva Rice Mills & Ors (2014) 210 DLT 321 (DB) Jolly Brothers Put. Ltd v. Surendra Nath Jolly, 2016 SCC OnLine Bom 3973.

Section 34(3), 1996 Arbitration Act. Section 34 deals with setting aside of the arbitral awards. For

a review of the evolution of Section 34, the jurisprudence related thereto, and the corresponding practice tips, see Chapter 10 of the Handbook. 14. Kanpur Jal Sansthan v. Bapu Constructions (2015) 5 SCC 267. 15.

Union of India v. Popular Construction Co. (2001) 8 SCC 470.

238

Chapter 11: Enforcement of Arbitral Awards 17.2:1.3.2

Scheme and Implementation of the 1996 Arbitration Act

Subsection 2 of Section 2 of the 1996 Arbitration Act provides: ‘This part shall apply where the place of arbitration is in India." Thus, both domestic and international commercial arbitrations, with a seat in India, were governed by Part I of the Act.'® Said provision was interpreted by a Constitution Bench of the Supreme Court in Bharat Aluminium Company v. Kaiser Aluminium Technical Services wherein it was held that the provisions of Part I of the Act cannot be invoked in case of a foreign-seated arbitration,

judgment

regime.”

i.e. an arbitration having its seat outside

expressly

recognised

that

the Act

of India.

contemplates

In other words,

a localised

the

arbitration

Between 1996 and 2016 — when the Act was amended by the Arbitration and Conciliation (Amendment) Act, 2015 (2015 Amendment) - recognition and enforcement of awards made in India proved to be difficult, time-consuming and costly.'* For example, an application for setting aside under Section 34 would tantamount to a stay on the proceedings for execution, thereby delaying enforcement. National courts contributed to this situation by a series of judgments which expanded the scope of review under Section 34: In Saw Pipes Ltd, the Supreme Court expanded the expression ‘public policy of India’ in Section 34(2)(b) to include ‘patent illegality’.'” As a result, virtually every award, domestic or foreign, came to be challenged within the meaning of Section 34. Subsequently, the Supreme Court imported principles of administrative law and the Wednesbury principle of unreasonableness to sustain a challenge against an arbitral award - as per Wednesbury - a decision is unreasonable if no reasonable person acting reasonably could have made

it.” Proceedings before national courts in India are time-consuming.”' It was not

16. International commercial arbitration is defined in terms of involvement of a party whose nationality, residence, incorporation or central management belongs to another country. See Section 2{t), 1996 Arbitration Act.

17. Bharat Aluminium Company v. Kaiser Aluminium Technical Services (2012) 9 SCC 552. 18.

White

Industries Australia

Limited

v. The

Republic

of India,

UNCITRAL,

Final

Award,

30

November 201 |. See also, Report of the High Level Committee to Review the Institutionalization of Arbitration Mechanism in India, 30 July 2017, available at http://legalaffairs.gov.in/sites/

default/files/Report-HLC.pdf, p. 43 (recognising that ‘endemic delayed and ambiguities in judicial precedent |...] have prevented the Indian courts from being viewed as supportive of arbitration [and] has had an impact on the choice of India as an arbitral seat"). For further discussion of White Industries, see Chapter 13 of the Handbook. 19. ONGC Ltd. v. Saw Pipes Ltd (2003) 5 SCC 705. For a review of the case and the concept of patent illegality, see Chapter 10 of the Handbook.

20.

ONGC Ltd. v. Western Geco International Ltd. (2014) 9 SCC 263. For a review of the case and

impact of the adoption of Wednesbury principle to reviewing arbitration awards, see Chapter 10 of the Handbook. 21. See White Industries Australia Limited v. The Republic of India, UNCITRAL, Final Award, 30 November 2011. Here, the investor had spent almost nine years trying to enforce a commercial award before the Indian courts. The investor subsequently took recourse under the [ndiaAustralia BIT, pursuant to which the tribunal found India had breached its obligations under the BIT as it had failed to provide the investor with effective means of asserting claims and enforcing rights. For a review of the White Industries case, see Chapter 13 of the Handbook.

239

Dushyant Dave uncommon for challenges to consume a decade or more to be decided finally by the

Supreme Court.”

While such challenges are pending, the awards were unenforceable in any manner by virtue of Section 36 of the 1996 Arbitration Act which by its language indicates that a set-aside application would be tantamount to a stay on enforcement. Before the first instance court, there would be an automatic stay while in the appeal courts often awards would be stayed for various reasons, which were outside the dispute resolution jurisprudence (e.g., Khaleel Ahmed Dakhani v. Hatti Gold Mines).** While granting such an order of stay, the courts even took the position that the award holder was not in a position to secure the award and the losing party did not have to furnish a bank guarantee against the award.” The principle behind the grant of stay by the appellate court, i.e. the court exercising jurisdiction under Section 37 of the Act and while entertaining the challenge against the order passed by the first instance court under Section 34 of the Act, was ultimately confirmed by the Supreme Court.” The Supreme Court, while dealing with the challenge to the award in the first instance court, in 2004 held in National Aluminium Co. Ltd. that the award would be automatically stayed. It also noted that the automatic stay would result in no discretion for the courts and this would ‘defeat the very objective of the alternate dispute resolution system to which arbitration belongs’.*° It noted that a recommendation was made by the concerned Ministry to the Parliament to amend Section 34 of the 1996 Arbitration Act and expressed its hope that necessary steps would be taken by the authorities at the earliest to bring about the ‘required’ change in law.”

22.

Section 34(2) of the 1996 Arbitration Act, fashioned to some extent on Article V of the New York

23.

Khaleel Ahmed Dakhani v. Hatti Gold Mines (2000) 3 SCC 755 (the court stayed enforcement of

Convention, lists various grounds on which an award may be set aside. The grounds under Section 34(2) have been expanded upon in other Chapters of the Handbook (see, e.g., Chapter 2 which discusses arbitrability as a ground for challenge and Chapter 10 which discusses the ground of public policy).

an arbitral award due to an issue of lis pendes, captured as. an issue in an appeal before the High Court. Thus, orders allowing for enforcement of arbitral award under Section 36 were set aside by the High Court on the premise of lis pendes and not due to an objection to the award filed under Section 34).

24. NHAI v. B. Seenaiah (2012) 4 Cal LT 40 (HC) at para. 22 and Aditya Fuels Ltd. v. Bilt Chemicals Ltd. 2007 (4) ArbLR 110 (Gujarat) at para. 27. 25. In Kanpur Jal Sansthan & Anr. v. Bapu Constructions (2015) 5 SCC 267, it was held that in such proceedings, the principle of Code of Civil Procedure would be applicable; thus, the provisions of Order 41 Rule 5 CPC, which provides for stay by the appellate court, in principle became applicable. The said judgment further held that under the said provision of CPC, ordinarily execution of money decree is not stayed; a deposit of security is a condition precedent by appeal court staying the execution of the decree. In other words, discretion has been conferred on the appellate court either to direct deposit of the amount disputed in the appeal or to permit such security in respect thereof being furnished as the appellate court may think fit. 26. National

Aluminium

Co.

Ltd.

v. Presstee!

& Fabrications

{P) Ltd.

(2004)

1 SCC

540.

This

judgment was followed in National Buildings Construction v. Lloyds Insulation India Ltd (2005)

2 SCC 367. A similar view was taken in Fiza Developers & Inter-Trade (P) Ltd. v. Amci (I) (P) Ltd,(2009) 17 SCC 796. 27. Ibid.

240

Chapter 11: Enforcement of Arbitral Awards Although the 1996 Arbitration Act equated an award with a deemed decree,” in practice the scheme of the Act prevented immediate enforcement. The Supreme Court in, 2015, Associate Builders clarified the anomaly created by Saw Pipes: It must clearly be understood that when a court is applying the ‘public policy’ test

to an arbitration award, it does not act as a court of appeal and consequently errors of fact cannot be corrected. A possible view by the arbitrator on facts has necessarily to pass muster as the arbitrator is the ultimate master of the quantity and quality of evidence to be relied upon when he delivers his arbitral award. Thus

an award based on little evidence or on evidence which does not measure up in quality to a trained legal mind would not be held to be invalid on this score.” It also narrowly construed the expressions ‘interests of India’, ‘justice’, ‘morality’ and ‘patent illegality’ and has watered down the interpretations placed in the Saw Pipes

and Western Geco cases.”

At the same time, the Supreme Court in the Fiza Developers case*' rendered two crucial interpretations on the scope of Section 34 of the Act. It first interpreted the term ‘the court finds that’ in Section 34(2)(b), to mean that the court on its own initiative (i.e., sua sponte) may examine the award to find out whether it is liable to be set aside on either of the two grounds mentioned in the said provision. It even holds this power if the applicant does not rely upon said grounds, with one of them being the public policy of India. Said judgment further interpreted the term ‘furnished proof that’ in Section 34(2)(a) of the Act to mean that the applicant who has preferred an application under Section 34 of the Act is permitted to file affidavits of the witness in proof of the existence of any ground under Section 34(2), and where the case so warrants, the court can permit a cross-examination of the person. The judgment nevertheless clarified that the framing of the issues as contemplated in the CPC is not an integral part of the proceedings under Section 34 of the Act. This view was subsequently explained and made limited vis-a-vis the scope of the investigation under Section 34(2) by the Supreme Court in another judgment in Emkay Global Financial Services Ltd. v. Girdhar Sondhi (2018) 9 SCC 49 by holding that only if there are matters not contained in arbitration records and are relevant to the determination of issues arising under Section 34(2)(a), then the same can be brought on record by way of an affidavit.

28. In Paramjeet Singh Patheja v. ICDS Ltd. (2006) 13 SCC 322 and Maharashtra State Financial Corpn v. Ashok K. Aggarwal & Ors (2006) 9 SCC 617, the Supreme Court held that the use of the term ‘decree’ in Section 36 was for a very limited purpose, namely, that the procedure available and/or the steps which could be taken for execution of a decree under CPC were available for enforcing of such an arbitral award. 29. Associate Builders v. Delhi Development Authority (2015) 3 SCC 49. 30. Recall: Saw Pipes expanded public policy to include patent illegality and Western Geco imported administrative law principles into the court's review. Both cases have been discussed in Chapter 10 of the Handbook. 31.

(2019) 17 SCC 796.

241

Dushyant Dave 11.2.1.4

2015 Amendment

Parliament has stepped in with curative amendments to the 1996 Arbitration Act, particularly in respect of the recognition and enforcement of awards. The hope expressed by the Supreme Court in 2004 saw fruition with legislative amendments in 2015.** The Parliament in its Statement of Objects and Reasons for the Amending Act: 1. The Act was enacted to provide for speedy disposal of cases relating to arbitration with least court intervention. With the passage of time, some difficulties in the applicability of the Act have been the provisions of the Act by courts in some cases disposal of arbitration proceedings and increase in arbitration matters, which tend to defeat the object

noticed. Interpretation of have resulted in delay of interference of courts in of the Act [...]

[...] 4. As India has been ranked at 178 out of 189 nations in the world in contract enforcement, it is high time that urgent steps are taken to facilitate quick

enforcement of contracts, easy recovery of monetary claims and award of just

compensation for damages suffered and reduce the pendency of cases in courts and hasten the process of dispute resolution through arbitration, so as to encourage investment and economic activity.”

Under the scheme of the 1996 Arbitration Act, during and after the award was rendered and up until the decision rendered in any challenge proceedings like a setting aside procedure — including procedures relating to interim measures — the court having original civil jurisdiction to decide the questions forming the subject matter of the arbitration would have jurisdiction if the same had been subject matter of a suit. After the 2015 Amendment, in respect of international commercial arbitration, the supervisory jurisdiction of the court vests in the High Court having original jurisdiction or the High Court having supervisory jurisdiction over the court of original jurisdiction. This provision thus recognises the need for a superior court — like a High Court — to have control during and after the arbitral process up to examining the challenge against the award. Section 34 has been amended to override the decision in Saw Pipes by inserting Explanations in clause (b) of subsection (2): Explanation |. — For the avoidance of any doubt, it is clarified that an award is in

conflict with the public policy of India, only if, -

(i) the making of the award was induced or affected by fraud or corruption or was in violation of section 75 or section 81; or (ii) it is in contravention with the fundamental policy of Indian law; or

(iii) it is in conflict with the most basic notions of morality or justice.

32.

Recall the decision in National Aluminium Co. Ltd. v. Pressteel & Fabrications (P) Ltd. (2004) |

33.

Statement of Objects and Reasons, Arbitration and Conciliation (Amendment)

SCC 540, discussed above, where the Supreme Court expressed its hope that necessary steps would be taken by the authorities at the earliest to bring about the ‘required’ change in law —i.e., doing away with the automatic stay of enforcement following institution of a challenge.

242

Act 2015.

Chapter 11: Enforcement of Arbitral Awards Explanation 2. — For the avoidance of doubt, the test as to whether there is a

contravention with the fundamental policy of Indian law shall not entail a review on the merits of the dispute.

However, Subsection (2A) has been inserted in Section 34 in the following terms: An arbitral award arising out of arbitrations other than international commercial

arbitrations, may also be set aside by the Court, if the Court finds that the award

is vitiated by patent illegality appearing on the face of the award: Provided that an award shall not be set aside merely on the ground of an erroneous application of the law or by reappreciation of evidence. Thus, the 2015 Amendment introduced two regimes qua scope of interference under Section 34 of the Act, namely: i) domestic arbitral award arising out of arbitrations other than international commercial arbitration; and ii) domestic arbitral award arising out of international commercial arbitrations, as defined in Section 2(1) (1) of the Act. In the first category, the scope of public policy of India post the 2015 Amendment included three species: i) the fundamental policy of Indian law; ii) the basic notions of morality or justice; and iii) patent illegality appearing on the face of the award. In the second category only the first two species were available as grounds of challenge based on the public policy of India. Two other very interesting facets emerged from the aforesaid amendment to Section 34 of the Act. First, in the case of international commercial arbitration awards, the scope of public policy of India, for the present annulment proceedings, has been made identical to the scope of public policy of India for the purpose of resisting an enforcement of foreign awards under Section 48 of the Act. Second, in case of non-international commercial arbitration awards, even though the ground of patent illegality has been retained, but then, the scope of investigation for said purpose has been curtailed inasmuch as: i) the patent illegality has to appear on the face of the award; ii) the patent illegality will not cover a case of erroneous application of law; or iii) will not permit a re-appreciation of evidence. Significantly, the other original species of public policy of India, namely ‘interests of India’, has been done away with completely and the species, ‘morality or justice’, as was available under the original scope of public policy, has also been curtailed by addition of a prefix, namely ‘basic

notions of" .**

The aforesaid amendment to Section 34 of the Act indisputably has narrowed down the scope of challenges in annulment proceedings.** Hence, even though Explanation 1 as well as Explanation 2 as introduced in said provision by the amendment use the expression ‘avoidance of doubt’ or for that matter ‘it is clarified’, the said nomenclatures by themselves do not make the said explanation retrospective

34. See note to para. 18 (ii) (dealing with amendment to Section 34) under Chapter 3 of 246th Report of Law Commission dated August 2014. 35. HRD Corporation v. GAIL (2018) 12 SCC 471, at para. 18, while examining similar explanations introduced in Section 48(2)(b) of the Act through the 2015 Amendment, the Supreme Court has observed that the same has narrowed down the ground of challenge.

243

Dushyant Dave in operation. In other words, the operation of the amendment will clearly be prospective,”° and therefore the restricted / narrowed down version of public policy of India as brought in through the 2015 Amendment would not apply to those annulment proceedings, which were pending when the amendment was brought into force. Simultaneously, Section 34 providing for a challenge to an arbitral award has also been amended and the following two subsections have inter alia been inserted: (5) An application under this section shall be filed by a party only after issuing a

prior notice to the other party and such application shall be accompanied by an affidavit by the applicant endorsing compliance with the said requirement. (6) An application under this section shall be disposed of expeditiously, and in any event, within a period of one year from the date on which

referred to in sub-section (5) is served upon the other party.

the notice

Thus, notice to the other side and time limit of a period not exceeding one year has been prescribed. While some High Courts took the view that subsection 5 and subsection 6 were directory in nature, other High Courts took the view that the same were mandatory in nature. Ultimately, the Supreme Court in State of Bihar v. Bihar Rajya Bhumi Vikas Bank Samiti - (2018) 9 SCC 472 held said provisions to be directory and not mandatory. Section 36 has been amended, and subsections (2) and (3) thereof provide a solution to successful award holders pending challenges: (2) Where an application to set aside the arbitral award has been filed in the Court under section 34, the filing of such an application shall not by itself render that award unenforceable, unless the Court grants an order of stay of the operation

of the said arbitral award in accordance with the provisions of sub-section (3),

(3)

on a separate application made for that purpose.

Upon filing of an application under sub-section (2) for stay of the operation of the arbitral award, the Court may, subject to such conditions as it may deem fit, grant stay of the operation of such award for reasons to be recorded in

writing: provided that the Court shall, while considering the application for grant of stay in the case of an arbitral award for payment of money, have due

regard to the provisions

for grant of stay of a money

provisions of the Code of Civil Procedure, 1908 (5 of 1908).

decree under

the

The twofold protection provides a vital life to enforcement. On the one hand, the time limit for the challenge has been restricted and, on the other, even pending such restricted challenge the losing party has to honour the award unless stayed by an express order of the court. For this purpose, if the award is for payment of money, then provisions of the CPC for grant of stay of a money decree must apply. Under the CPC appellate court may grant stay of execution of a decree if the court is satisfied that: (a) substantial loss may result to the party applying for stay of execution unless the order is made; (b) the application has been made without unreasonable delay; and 36. Sedco Forex International Drill Inc. & Ors. v. CIT, Dehradurn & Ors. (2005) 12 SCC 717, para. 17; Bank of Baroda v. Anita Nandrajog (2009) 9 SCC 462, at para. 12.

244

Chapter 11: Enforcement of Arbitral Awards (c) security has been given by the applicant for the due performance of such decree or order as may ultimately be binding upon him.*’ Pertinently, the term ‘having due regard to the provisions for grant of stay of a money decree under provisions of the Code of Civil Procedure, 1908’, as brought in through the amendment in the form of proviso to subsection 3 of Section 36, has been interpreted by the Supreme Court in Pam Developments Put. Ltd. v. State of West Bengal (2019) 4 ArLR 148 (SC), to mean that the provisions of CPC are to be taken into account for the purpose of a grant of stay and not that the provisions of CPC are mandatory. The 2015 Amendment came into effect on 23 October 2015. Section 26 of that Act

states:

Nothing contained in this Act shall apply to the arbitral proceedings commenced, in accordance with the provisions of section 21 of the principal Act, before the commencement of this Act unless the parties otherwise agree but this Act shall apply in relation to arbitral proceedings commenced on or after the date of commencement of this Act. Yet, controversy has occurred in courts about the applicability of the 2015 Amendment. While the High Courts of Bombay* and Madras*” have taken the view that the Act would apply to pending challenge against an arbitral award under Section 34, the Delhi High Court has taken a contrary view.” The controversy has now been settled by the Supreme Court in Board of Control for Cricket in India v. Kochi Cricket Pvt.

Ltd. (2018) 6 SCC 287.*!

There have been few instances of hope provided by the Supreme Court in McDermott International Inc. v. Burn Standard Co. Ltd.,** Sumitomo Heavy Industries

Ltd. v. ONGC Ltd.“ and SAIL v. Gupta Brother Steel Tubes Ltd.,“ recognising and

enforcing awards in the spirit of the Act of 1996. The recent trend seems to be to grant stay subject to the condition of furnishing security of the value of 75% of the award amount,”” which deposit sometimes is of 50%

of the award amount.*° But, in some

37. Order XLI, Rule 5 CPC. 38.

BCCI v. RSW, Kochi Cricket Private Ltd, 2016 SCC OnLine Bom 6064.

42. 43, 44.

(2006) 11 SCC 181. (2010) 11 SCC 296, (2009) 10 SCC 63.

39. New Tirupur Area Development Corporation Ltd. v. M/s Hindustan Construction Co. Ltd., Application No. 7674 of 2015 in O.P. No. 931 of 2015. 40. Ardee Infrastructure Pvt. Ltd. v. Anuradha Bhatia, 2017 SCC OnLine Del 6402 (DB). 41. The Supreme Court has held that amended provision will apply to those arbitration proceedings which commenced post 2015 Amendment and will also apply to court proceedings which commenced post 2015 Amendment.

45. Order of Delhi High Court dated 7.1.2020 in NTPC v. Italian Development Public Company, OMP(COMM)

46. Order dated 431 /2019,

4/2020.

16.10.2019 of the Delhi High Court in BSNL

245

v. Teracom Ltd., OMP

(COMM)

Dushyant Dave cases depending upon the merit of the challenge, even unconditional stay has been

eranted.*” PRS

Arbitration and Conciliation (Amendment) Act, 2019 (2019 Amendment)

The 2015 Amendment made changes to the Act with a view of making arbitration speedier and more efficient, and improving India’s reputation as a seat of arbitration. However, there were certain areas where the changes brought about by the 2015 Amendment needed clarification. Additionally, certain issues, which the 2015 Amendment had failed to address, were also required to be done, particularly to improve India's perception as a seat of arbitration. Accordingly, the present Amendment made amendments in the annulment provision (Section 34), appellate provision (Section 37), as well as sought to clarify the operation / applicability of the 2015 Amendment. The 2019 Amendment was published in the official gazette on 9 August 2019. It provided for different provisions of the Amendment Act to come into force on such different dates. Such dates would be notified by the central government in the official gazette. Apart from some other provisions of the 2019 Amendment, the provisions dealing with annulment (Section 34); the appellate provision (Section 37 & Section 50) and a new provision, namely Section 87, inserted through Section 13 of the Amendment Act together with Section 15 of the Amendment Act omitting Section 26 of the Amendment Act, 2015, were notified for the same to be brought into force on 30 August

2019.

In Section 34(2)(a) the words ‘furnishes proof that’ were replaced by the words ‘establishes on the basis of the record of the Arbitral Tribunal that’. This amendment was made as the requirement of ‘furnishing of proof’ had led to inconsistent practices in some High Courts where Section 34 proceedings were being conducted in the

manner as that of a regular civil suit.*”

In Section 37 and Section 50 of the Act, the very initial words in the provision, i.e.

‘An appeal’, were substituted by the words ‘Notwithstanding anything contained in any other law for the time being in force and appeal’. The amendment was ellected as it was felt that there was inconsistency between the appellate provisions and Section 13(1) of the Commercial Courts Act, 2015 insofar as the latter provided for a wider right of appeal than that provided by the former provision under the Act.”” In fact, in a judgment,”’ a Division Bench of the Delhi High Court held that appeal in terms of

47. Pam Developments Pvt Ltd. v. State of WB (2019) 8 SCC 112; Ecopack India Paper Cup Pvt. Ltd. v. Sphere International, 2018 SCC OnLine Bom 540; Uol v. Palm Developments (Cal HC) - G.A.

No. 1903 of 2018 and A.P. No. 1121 of 2016 decided on: 05.09.2018. 48. Topic E of Chapter 6 of Part | of Report of Justice BN Srikrishna High Level Committee dated 30 July 2017. 49. Paragraph 5 of Topic E of Chapter 6 of Part | of BN Srikrishna High Level Committee Report dated 30 July 2017. 50. Paragraph 9 of Topic E of Part | of BN Srikrishna High Level Committee Report dared 30 July 2017. 51. Antrix Corporation Ltd. v. Devas Multimedia pvt. Ltd, 2018 4 ArLR 66 (Delhi).

246

Chapter 11: Enforcement of Arbitral Awards Section 13 of the Commercial Courts Act would lie in respect of a declaration made by one court about the lack of jurisdiction of another court, even though the order containing such declaration was not one of the appealable orders enumerated in Section 37 of the Act. This judgment was one such instance of interplay between Section 37 of the Act and Section 13(1) of the Commercial Courts Act, which was responsible for creating confusion about the wider scope of the right of appeal under Section 13(1) of the Commercial Courts Act. Insofar as the aforesaid Sections 13 and 15 of the Amendment Act of 2019 were concerned, said provisions have effectively been set aside.** 413

ENFORCEMENT

11.3.1

Evolution of Law

OF FOREIGN

AWARDS

Statutory frameworks have existed in India for over seven decades to provide for recognition and enforcement of foreign awards, and therefore it is helpful to have a

brief review. 11.3.2

The 1937 Arbitration Act

The Arbitration (Protocol & Convention) Act 1937 (1937 Arbitration Act) was enacted to give effect to the 1923 Protocol on Arbitration Clauses and to the 1927 Convention on the Execution of Foreign Arbitral Awards signed by India. Section 4 of the 1937 Arbitration dealt with ‘effect of foreign awards’ in Subsection (1): A foreign award shall, subject to the provisions of this Act, be enforceable in India as if ii were an award made on a matter referred to arbitration in India. Section 6 of the 1937 Arbitration dealt with ‘enforcement of foreign award’: (1) Where the Court is satisfied that the foreign award is enforceable under this Act, the Court shall order the award to be filed and shall proceed to pronounce

(2)

judgment according to the award.

Upon the judgment so pronounced a decree shall follow, and no appeal shall lie from such decree except in so far as the decree in excess of or not in accordance with award.

Section 7 of the 1937 Arbitration dealt with ‘conditions for enforcement of foreign awards’. In Francesco Corsi the Bombay High Court held: India being a State signatory to the Protocol on Arbitration Clauses set forth in the

First Schedule to the Arbitration (Protocol and Convention) Act, 1937, and to the

Convention on the Execution of Foreign Arbitral Awards set forth in the second

52. In Hindustan Construction Company v. Union of India, 2019 SCC OnLine SC 1520, it has been held by the Supreme Court that the BCCI judgment will continue to apply so as to make applicable the amendments made by 2015 Amendment Act to all court proceedings initiated after the date of such amendment act coming into force, i.e. 23 October 2015.

247

Dushyant Dave Schedule to that Act, the obligations undertaken thereunder continue to bind India after India was constituted a Dominion and they continue to bind India thereafter. The Arbitration (Protocol and Convention) Act, 1937, has been duly passed by

Indian legislature and I am bound to give effect to its provisions. It has not been

shown how the said Act has ceased to be in force after 26-1-1950. Issue No. | is answered in the affirmative.

The court was unhesitant in enforcing an award made by the London Oil and Tallow Trade Association.” The Supreme Court in its 1959 judgment in Shiva Jute Baling Ltd similarly enforced an award made by the London Jute Association rejecting the contention that the award could not be made after the Indian party had filed proceedings under Section 33 of 1940 Arbitration Act before an Indian court and that the award was unenforceable for being contrary to the laws of India since the arbitrators could not award damages which could not be awarded under the Indian Contract Act, 1872. The court held that the arbitrators could only award the maximum amount named in the contract.** 11.3.3

The 1961 Foreign Awards Act

The Foreign Awards (Recognition & Enforcement) Act, 1961 (1961 Foreign Awards Act) repealed the 1937 Arbitration Act and was enacted to give effect to the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention). Section 4 dealt with ‘effect of foreign awards’: (1) A foreign award shall, subject to the provisions of this Act, be enforceable in India as if it were an award made on a matter referred to arbitration in India. (2) Any foreign award which would be enforceable under this Act shall be treated

as binding for all purposes on the persons as between whom it was made, and

may accordingly be relied on by any of those persons by way of defence, set off or otherwise in any legal proceedings in India and any references in this Act to

enforcing a foreign award shall be construed as including references to relying on an award.

Section 6 of the 1961 Foreign Awards Act dealt with ‘enforcement of a foreign

award’:

(1) Where the Court is satisfied that the foreign award is enforceable under this Act, the court shall order the award to be filed and shall proceed to pronounce

(2)

judgment according to the award.

Upon the judgment so pronounced a decree shall follow, and no appeal shall

lie from such decree except in so far as the decree is in excess of or not in accordance with the award.

Section 3 of the 1961 Foreign Awards Act had a unique provision to stay legal proceedings in any court commenced by any person in respect of subject matter of the arbitration agreement and required the court to stay such legal proceedings unless it

53.

Francesco Corsi v. Gorakhram Gokalchand, AIR 1960 Bom 91.

54.

Shiva Jute Baling Ltd. v. Hindley and Co. Ltd.

(1960)

248

1 SCR

569: AIR

1959 SC

1357.

Chapter 11: Enforcement of Arbitral Awards was satisfied that the agreement is null and void, inoperative or incapable of being performed or that there is not, in fact, any dispute between the parties with regard to the matter agreed to be referred. Thus, far from anti-arbitration injunction, Section 3

spoke of staying legal proceedings in a court. In 1969, the Supreme Court in V.O. Tractoroexport affirmed an anti-arbitration injunction granted by the Madras High Court restraining a Russian firm from proceeding with arbitration in Moscow under the aegis of the Foreign Trade Arbitration Commission of the USSR Chamber of Commerce.” The Madras High Court had simultaneously refused an application under Section 3 by the Russian firm. The judgment, besides merits, gave an additional and a very curious reason for the injunction observing: the current restrictions imposed by the Government of India on the availability of

foreign exchange of which judicial notice can be taken will make it virtually impossible for the Indian Firm to take its witnesses to Moscow for examination before the Arbitral Tribunal and to otherwise properly conduct the proceedings there. Thus, the proceedings before that tribunal are likely to be in effect ex parte. The High Court was, therefore, right in exercising discretion in the matter of granting an interim injunction in favour of the Indian Firm.

However, in a powerful dissent, Justice Ramaswami disagreed with the majority and vacated the injunction by holding: the appellant is entitled under Section 3 of the Act for an order of stay of the proceedings in CS 118 of 1967 pending in the Madras High Court on the ground that in terms of the Contract dated 2 February 1965 the parties expressly agreed

that all disputes arising out of the contract should be settled by arbitration by the Foreign Trade Arbitration Commission of the U.S.S.R. Chamber of Commerce in Moscow.

In 1984, the Supreme Court in Renusagar reversed this legal position. It stayed the suit and allowed the arbitration to move forward. It interpreted Section 3 of the 1961 Foreign Awards Act as: On a plain reading of the section as it now stands two things become very clear. In the first place the section opens with anon obstante clause giving overriding effect

to the provision contained therein and making it prevail over anything to the contrary contained in the Arbitration Act, 1940 or the Code of Civil Procedure, 1908. Secondly, unlike Section 34 of the Arbitration Act which confers a discretion upon the court, the section uses the mandatory expression ‘shall’ and makes it

obligatory upon the court to pass the order staying the legal proceedings commenced

by

fulfilled.*®

a party

to the agreement

if the

conditions

specified

therein

are

The court observed: ‘[i]t is obvious that since the Act is calculated and designed to subserve the cause of facilitating international trade and promotion thereot by providing for speedy settlement of disputes arising in such trade through arbitration,

55. V.O. Tractoroexport v. Tarapore & Co. (1969) 3 SCC 562. 56. Renusagar Power Company Ltd. v. General Electric Company (1994) Supp | SCC 644.

249

Dushyant Dave any expression or phrase occurring therein should receive, consistent with its literal and grammatical sense, a liberal construction’. It called the 1961 Foreign Awards Act ‘a complete code by itself providing for all possible contingencies in relation to foreign awards made pursuant to agreements to which Article II of the [New York] Convention applies’.°” In 1985, the Delhi High Court dismissed the distinction between

domestic and

international notions of public policy, noting that Section 7(1)(b)(ii) of the 1961 Foreign Awards Act did not provide for such a distinction.”* In 1989, the Supreme Court in Koch Navigation Inc. while ordering enforcement of a foreign award under 1961 Act held that ‘[u]nder the Act, if an application is filed for decree in terms of the award, the Court in upholding the award ought to grant a decree in terms of the award and not subtract any portion thereof’.”” In 1992, the Supreme Court in NTPC v. Singer held that an interim award made in London by an ICC tribunal between an Indian company and a foreign company and governed by the laws of India and providing jurisdiction for courts in Delhi be treated as an award governed under domestic law, by the 1940 Arbitration Act, and not by the 1961 Foreign Awards Act.®” Relying on Conflict of Laws by Dicey and Morris, the Supreme Court held that ‘the proper law of the arbitration agreement is normally the same as the proper law of the contract’ and therefore held that ‘the validity, effect and interpretation of the Arbitration Agreement are governed by its proper law’. The court rejected the argument that the rules of procedure for the conduct of arbitration contractually chosen by the parties (the ICC Rules) or the mandatory requirements of the procedure followed in the courts of the country in which the arbitration is held cannot supersede the overriding jurisdiction and control of Indian law and the Indian courts. It concluded: An award rendered in the territory of a foreign State may be regarded as a domestic award in India where it is sought to be enforced by reason of Indian law being the proper law governing the arbitration agreement in terms of which the award was made. The Foreign Awards Act, incorporating the New York Convention, leaves

no room for doubt on the point.*'

In 1994, Renusagar again surfaced before the Supreme Court in proceedings for enforcement of award in its favour filed under Section 5 of the 1961 Foreign Awards Act. The Supreme Court judgment begins with these strong words, ‘The decision in these appeals would, we hope, mark the culmination of the protracted litigation arising out of a contract entered into by the parties on August 24, 1964 for the supply and erection of a thermal power plant at Renukoot in District Mirzapur, U.P.”** It held emphatically: 57. Ibid. 58. COSID Inc. Steel Authority of India Ltd. (High Court 1985), in Yearbook Commercial Arbitration XI (1986) (India no. 11), pp. 502-507. See also, Marike Paulsson, The 1958 New York Convention in Action (2016), pp. 228-230.

59. Koch Navigation Inc. v. Hindustan Petroleum Corpn. Ltd. (1989) 4 SCC 259.

60. 61.

NTPC v. Singer Co. (1992), 3 SCC 551. Ibid.

62. Renusagar Power Co. Ltd. v. General Electric Co., 1994 Supp (1) SCC 644.

250

Chapter 11: Enforcement of Arbitral Awards [I]n proceedings for enforcement of a foreign award under the Foreign Awards Act, 1961, the scope of enquiry before the court in which award is sought to be enforced is limited to grounds mentioned in Section 7 of the Act and does not enable a party to the said proceedings to impeach the award on merits. On public policy it was held that Section 7(1)(b)(ii) of the 1961 Foreign Awards Act referred to public policy of India and not the public policy of the State of New York in enforcement proceedings. The court rejected the argument that because the definition of ‘international public policy’ was not defined, public policy in Article V(2)(b) of the New York Convention did not mean international public policy. The court held that the doctrine of public policy must be construed to mean as applied by courts in which the foreign award is sought to be enforced. The court expressly held, relying on observations in the first Renusagar case (extracted above): This would imply that the defence of public policy which is permissible under Section 7(1)(b)(ii) should be construed

narrowly

[...| it must be held that the

enforcement of a foreign award would be refused on the ground that it is contrary

to public policy if such enforcement would be contrary to (i) fundamental policy of Indian law; or (ii) the interests of India: or (iii) justice or morality.“

Mere contravention of law alone will not attract the bar of public policy but something more was required. The court accordingly directed that the amount payable under the award be paid with interest at 18% per annum. In the same year, in RM Investment and Trading Company Pvt. Ltd. the Supreme Court while affirming the stay of the suit under Section 3 of the Act granted in favour of Boeing construed the expression ‘commercial transaction’ broadly having regard to the manifold activities which are an integral part of international trade.“ In 1995, the Supreme Court in Brace Transport Corporation of Monrovia defined the subtle distinction between recognition and enforcement of an award, leaning on Law and Practice of International Commercial Arbitration by Redfern and Hunter (1986 ed.) and observed:

An award may be recognised, without being enforced; but if it is enforced, then it is necessarily recognised. Recognition alone may be asked for as a shield against re-agitation of issues with which the award deals. Where a court is asked to enforce an award, it must recognise not only the legal effect of the award but must use legal sanctions to ensure that it is carried out.”

11.3.4

1996 Arbitration Act

The 1996 Arbitration Act is an attempt to consolidate the law of arbitrations and repeal the Act of 1937, 1940 and 1961. Part I of this Act deals with ‘arbitration’, while Part II 63.

See India No. 22, Renusagar Power Co. Ltd. v. General Electric Co., Supreme Court, 7 October

1993, in Yearbook Commercial Arbitration, Vol. XX (Albert Jan Van den Berg ed., ICCA & Kluwer Law International 1995), pp. 681-738, at paras 38-39. 64. RM Investment and Trading Company Pvt. Ltd. v. Boeing Company (1994) 4 SCC 541. 65. Brace Transport Corpn. of Monrovia v. Orient Middle East Lines Ltd., 1995 Supp (2) SCC 280.

251

Dushyant Dave deals with “Enforcement of Certain Foreign Awards’. Part II Chapter I is based on the New York Convention, while Chapter II thereof is based on the Geneva Convention. The Act is founded on the Model Law. Among the objectives underlying the Act were

to:

(i) comprehensively cover international and commercial arbitration and conciliation as also domestic arbitration and conciliation; and (ii) make provision for an arbitral procedure which is fair, efficient and capable of meeting the needs of the specific arbitration; The intention was to clearly keep Part I and Part II distinct, the former in respect of domestic arbitration and latter in respect of foreign awards and related issues. In 1999, the Supreme Court in Thyssen Stahlunion Gmbh held that the foreign award made on 25 February 1996 in London would be governed by the new Act in so far as enforcement and recognition was concerned. This was because though the 1996 Arbitration Act had come into force on 22 August 1996, the ordinance issued prior thereto and replaced by the 1996 Arbitration Act was brought into force on 25 January

1995.

But two decisions rendered by the Supreme Court in 2002 and 2008 took the following approach. In Bhatia International the Supreme Court held that Part I of the 1996 Arbitration Act would apply in respect of an arbitration held under the ICC Rules in Paris and accordingly justilied an order of interim protection under Section 9 of the Act. It was held that ‘in cases of international commercial arbitrations held outside India, provisions of Part I would apply unless the parties by agreement, express or implied exclude all or any of its provision’ rejecting that by selection of ICC Rules parties had agreed to exclude such application.” In a later decision in Venture Global Engineering the Supreme Court went even further and held that Part | would apply even in respect of an award made outside India under LCIA Rules and justified challenge to the award under Section 34 of the Act before a court in India although the successful party had filed a petition to recognise and enforce the award in Michigan,

USA.°*

In 2010, in Sumitomo Heavy Industries Ltd. wherein the foreign award dated 27 June 1995 made in London was set aside by a single judge of the Bombay High Court and affirmed by its Division Bench in appeal, the Supreme Court upturned the decisions and upheld the award holding that ‘[h]owever, we are not required to go into that issue since we are otherwise holding that the award was not only a plausible one but a well reasoned award’. The court held that the finding in an award by the umpire needed to be upheld because:

66. Thyssen Stahlunion Gmbh v. Steel Authority of India Ltd (1999) 9 SCC 334 (see the case of Western Shipbreaking Corpn. v. Clareheaven Ltd. dealt therein). 67. Bhatia International v. Bulk Trading, 2002 (4) SCC 105. For a review of the case, see Chapter 8 of the Handbook. 68. Venture Global Engineering v. Satyam Computer Services Ltd. (2008) 4 SCC 190. For the impact of this decision, and a review of the related jurisprudence, see also Chapter 10 of the Handbook.

252

Chapter 11: Enforcement of Arbitral Awards The umpire is legitimately entitled to take the view which he holds to be the correct

one after considering the material before him and after interpreting the provisions of the agreement. If he does so, the decision of the umpire has to be accepted as

final and binding.“

Subsequently, the Constitution Bench of the Supreme Court in Bharat Aluminium Co. overruled the dictum in Bhatia International’’ and Venture Global Engineering.’' It held that neither Section 9 (interim measures) nor Section 34 (annulment) could be resorted to in respect of international commercial arbitrations which are seated outside India. The court emphatically held that ‘[t]herefore such awards would only be subject to the jurisdiction of Indian Courts when the same are sought to be enforced in India in accordance with the provisions contained in Part II of

the Arbitration Act, 1996'.”

The legislature has inserted a provision into Subsection (2) of Section 2:

Provided that subject to an agreement to the contrary, the provisions of sections 9,

27 and clause (a) of sub-section (1) and sub-section (3) of section 37 shall also apply to international commercial arbitration, even if the place of arbitration is

outside India, and an arbitral award made or to be made in such place is enforceable and recognised under the provisions of Part II of this Act.

This amendment virtually reflects the decision of the Supreme Court in Bharat

Aluminium Co.”

This creates a piquant situation because the existing agreements if not containing such exclusion will attract the above provisions and in new agreements express exclusion clauses will have to be entered into by the parties. This provision requires a careful examination by all stakeholders. Conflict in judicial approach continued, and in 2011 the Supreme Court in Phulchand Exports Ltd held that a foreign award could be set aside under Section 48(2)(b) of Part Il on a new ground, namely ‘if it is patently illegal’.“ In 2014 the Supreme Court in Shri Lal Mahal Ltd expressly overruled this decision, reaffirmed the law declared in the Renusagar case and held that the ‘public policy’ ground cannot include the newly discovered ground of ‘patent illegality’.”” The High Courts of Delhi and Madras have taken the view that violation of a provision of Indian law does not fall under public policy for the purposes of the enforcement of a foreign award.”° Recently, the Supreme Court revisited the scope of the public policy of India in the context of Section 48 (2) of the Act.” It held that only in the very exceptional case of blatant disregard of provisions of Section 48 of the Act, the court would interfere with a

69, Sumitomo Heavy Industries Ltd. v. ONGC Ltd. (2010) 11 SCC 296. 70.

Bhatia International v. Bulk Trading SA, 2002 (4) SCC

105.

72. 73.

Bharat Aluminium Co. v. Kaiser Aluminium Ibid.

76.

Cruz City 1 Mauritius Holdings v. Unitech Limited, 2017 (3) ARBLR 20 (Delhi); Thaicom Public

77.

Vijay Karia & Ors. v. Prysmian Cavi E Sistemi — 2020 SCC OnLine SC 177.

71. Venture Global Engineering v. Satyam Computer Services Ltd. (2008) 4 SCC 190.

Technical Services Inc. (2012) 9 SCC 552.

74. Phulchand Exports Limited v. 0.0.0. Patriot (2011) 10 SCC 300. 75. Shri Lal Mahal v. ProgettoGrano Spa (2014) 2 SCC 433.

Company Limited v. Raj Television Network Ltd., 2017 (2) ARBLR 321 (Madras).

253

Dushyant Dave judgment of a High Court, which recognises and enforces a foreign award, however inelegantly drafted the judgment may be. The judgment also classified the grounds for resisting enforcement of a foreign award into three categories: 1) grounds affecting the jurisdiction of arbitration proceeding; 2) grounds affecting parties interest alone; and 3) ground touching upon the public policy of India. However, later on, the Supreme Court refused to enforce a foreign award on the

ground of it being opposed to public policy under Section 7(1)(b) (ii) of the Foreign Awards Act.”* While doing so, the Supreme Court while reviewing a foreign award on the grounds of merit, at the stage of enforcement, has sought to considerably expand the scope of public policy to include in it contravention of export policy of a government. However, in this judgment, the Supreme Court failed to take note of its earlier judgment in Vijay Karia & Ors. v. Prysmian Cavi E Sistemi,”’ wherein it had held that a violation of provisions of FEMA does not amount to a violation of the public policy of India. The court further observed that the Supreme Court would interfere with a judgment which recognises a foreign award only in ‘exceptional case of blatant disregard’ in the following words: ... itis important to emphasise that, unlike Section 37 of the Arbitration Act, which is contained in Part I of the said Act, and which provides an appeal against either setting aside or refusing to set aside a ‘domestic’ arbitration award, the legislative policy so far as recognition and enforcement of foreign awards is that an appeal is provided against a judgment refusing to recognise and enforce a foreign award but not the other way around (i.e. an order recognising and enforcing an award). This

is because the policy of the legislature is that there ought to be only one bite at the cherry in a case where objections are made to the foreign award on the extremely

narrow grounds contained in Section 48 of the Act and which have been rejected. This is in consonance with the fact that India is a signatory to the Convention on

the Recognition and Enforcement of Foreign Arbitral Awards, 1958 (hereinafter referred to as “New York Convention”)..... Also, it would only be in a very

exceptional case of a blatant disregard of Section 48 of the Arbitration Act that the Supreme Court would interfere with a judgment which recognises and enforces a foreign award however inelegantly drafted the judgment may be.*” The 2015 Amendment has further defined public policy of India in so far as the New York Convention and the Geneva Convention are concerned by inserting the following in Sections 48 and 57: Explanation |. —- For the avoidance of any doubt, it is clarified that an award is in conflict with the public policy of India, only if, -

(i) the making of the award was induced or affected by fraud or corruption or was in violation of section 75 or section 81; or (ii) it is in contravention with the fundamental policy of Indian law; or

(iii) it is in conflict with the most basic notions of morality or justice.

78. National Agricultural Co-operative Marketing Federation of India (NAFED) v. Alimenta S.A., 2020 SCC OnLine SC 381. 79.

Supra n. 76.

80. National Agricultural Co-operative Marketing Federation of India (NAFED) v. Alimenta S.A., 2020 SCC OnLine SC 381.

254

Chapter 11: Enforcement of Arbitral Awards Explanation 2. — For the avoidance of doubt, the test as to whether there is a

contravention with the fundamental policy of Indian law shall not entail a review on the merits of the dispute.

Like the annulment provision (Section 34), almost identical amendments were made in Section 48 vide the 2015 Amendment Act. The amendment, in fact, narrowed

down the scope of public policy of India in Section 48 as the species, namely ‘interests of India’, has been completely done away with and the species ‘morality or justice’ has also been curtailed by addition of a prefix, namely ‘basic notions of’. Interestingly, even though the 246'" Law Commission Report has discussed the reason for adding the prefix ‘most basic notions’ before the term ‘morality or justice’,”' no reason whatsoever has been given for removing the term ‘interests of India’ from the ambit of ‘public policy of India’,”’ which otherwise very much fell within the scope of public policy of India as interpreted by the Supreme Court in Renusagar.®” As discussed earlier, in the context of the amendment of the annulment provision, the amendment of Section 48 would also have to be accorded a prospective operation. Recent trends in judicial decisions by High Courts and the Supreme Court reflect leaning in support of arbitration and enforcement of awards. The Supreme Court in Eitzen Bulk took the view that a challenge under Section 34 of the 1996 Arbitration Act was not possible in respect of an international commercial arbitration award since the contract provided that the dispute is to be ‘settled and referred to arbitration in London’ and thereby making English law applicable to the contract. In BGS SGS Soma v. NHPC the Supreme Court held that the seat is akin to an exclusive jurisdiction clause, “which would then vest the Courts at the ‘seat’ with exclusive jurisdiction for purposes of regulating arbitral proceedings arising out of the agreement between the parties’.*” This view has been taken by the Supreme Court even in its earlier judgments.” In Shakti Bhog Foods Ltd., the Supreme Court interpreted the definition of ‘arbitration agreement’ to include not only a written agreement but also an agreement inferred from the conduct of the parties and the correspondence exchanged between

them.*”

Similarly, the Supreme Court has held that Section 45 in Part II of the 1996 Arbitration Act is mandatory and parties must be referred to arbitration, by decisions

81. The reason for this amendment was to further tighten the Renusagar test by limiting the scope of the term ‘morality or justice’. 82. See note to para. 18 (ii) (dealing with amendment to Section 34) under Chapter 3 of Law Commission Report No. 246.

83. Renusagar Power Co. Ltd. v. General Electric Co., 1994 Supp (1) SCC 644. 84. Eitzen Bulk A/S v. Ashapura Minechem Ltd. (2016) 11 SCC 508. 85. BGS SGS Soma JV v. NHPC Ltd., 2019 SCC OnLine SC 1585. 86.

Indus Mobile Distribution v. Datawind Innovations (2017) 7 SCC 678; Emkay Global v. Girdhar Sondhi (2018) 9 SCC 49.

87. Shakti Bhog Foods Ltd. v. Kola Shipping Ltd., AIR 2009 SC 12.

255

Dushyant Dave

in Worlds Sports Group (Mauritius Ltd)** and Sasan Power Ltd.*’ A series of decisions of the Bombay, Calcutta, Madras and Delhi High Courts also reflect this approach.””

The Supreme Court,”’ while dealing with the instance where the seat of arbitration was outside India with the governing law of the underlying contract being Indian law, observed that the validity of such an award could only be tested in the annulment proceedings in the court of the seat and that even then Part I of the Act cannot be applicable to such foreign-seated arbitration. The Supreme Court” subsequently held that in such a situation, if a challenge to the award is made in foreign jurisdiction, the said challenge has to be decided by applying Indian public policy. In a further decision, the Supreme Court while examining the scope of public policy upheld the enforcement of a foreign award, while observing that the courts uphold the foreign awards

exercising minimal interference.”

The 2015 Amendment has made one major change and that is to provide jurisdiction to the High Courts in respect of enforcement of foreign awards by providing as under: Explanation — In this section and in the sections following in this Chapter, ‘Court’

means the High Court having original jurisdiction to decide the questions forming

the subject-matter of the arbitral award if the same had been the subject matter of

a suit on its original civil jurisdiction and in other cases, in the High Court having jurisdiction to hear appeals from decrees of courts subordinate to such High Court.

88. World Sport Group (Mauritius) Ltd. v. MSM Satellite (Singapore) Pte. Ltd. (2014) 11 SCC 639. 89. Sasan Power Ltd. v. North American Coal Corp. (2016) 10 5CC 813. 90. SIMS Metal Management

Limited v. Sabari Exim Put. Ltd. (2015)

1 Arb LR 225

(Mad); E-City

Entertainment (1) Pvt. Ltd. v. Imax Corporation, 2015 (2) Arb LR 107 (Bom); Bunge London Ltd. v. R. Piyarelall Import and Export Ltd. (2015) 5 ArbLR 370 (Cal); Eitzen Bulk A/s v. Ashapura

Minechem Ltd. (2016) | Bom CR 466; Integrated Sales Services Limited v. Arun Dev and Ors, 2017 91. 92.

(2) ArbLR 290 (Bom). BALCO v. Kaiser Aluminium,(2012) 9 SCC 552, paras 160-163. Reliance Industries v. Union of India (2014) 7 SCC 603, para. 76.4.

94.

Section 47,

93. Government of India v. Vedanta Ltd., Civil Appeal September 2020. 47

No. 3185

of 2020, judgment

dated

16

1996 Arbitration Act:

(1) The party applying for the enforcement of a foreign award shall, at the time of the application, produce before the court — (a) the original award or acopy thereof, duly authenticated in the manner required by the law of the country in which it was made; (b) the original agreement for arbitration or a duly certified copy thereof; and (c) such evidence as may be necessary to prove that the award is a foreign award.

(2) If the award or agreement to be produced under sub-section (1) is in a foreign language, the party seeking to enforce the award shall produce a translation into English certified as correct by a diplomatic or consular agent of the country to which that party belongs or certified as correct in such other manner as may be sufficient

according to the law in force in India.

256

Chapter 11: Enforcement of Arbitral Awards 11.4

CONCLUSION

11.4.1

Guidelines for Practitioners

(i)

(ii)

Courts with jurisdiction: For domestic awards, the court for the purpose of enforcement, before and after the 2015 Amendment, would be the court as defined in Section 38 of the Code of Civil Procedure 1908. Consequently, the natural corollary would be that the court, which passed a decree or the court to which it is sent for execution where assets and properties of the debtor under the award are situated, is competent. But, as per the latest view,’> an execution petition for the enforcement of an award can be filed directly anywhere in the country, where such decree can be executed. There is no requirement of obtaining a transfer of the decree from the court which had jurisdiction over the arbitration proceedings or from the court of the annulment proceeding. For foreign awards, the High Court having original or appellate jurisdiction will be the competent court. Stamping of award: The 1996 Arbitration Act does not make it obligatory to register an award for the purpose of stamping. However, the Supreme Court raised the issue of validity of an arbitration agreement due to being invalidly or insufficiently stamped. Before the 2015 Amendment, this issue was raised in SMS Tea Estate v. Chandmari Tea Company in which the court held the arbitration agreement integral to the entire underlying contract, and thus, while being separable, the arbitration agreement must also be validly or adequately stamped for a Section 11 application to be valid. Post-2015 Amendment, the Bombay High Court took an approach more in line with the legislative intent of the 2015 Amendment in Gautam Landscapes v. Shailesh Shah”* to speed up initiation of arbitral proceedings by declaring any enquiry into insufficient stamping as being beyond the purview of applications under Section 11, due to the newly inserted Section 11(6A)’s call for reduction in judicial interference. However, the Supreme Court reverted to the position of the whole underlying agreement, including the arbitration agreement, to be impounded as per the Stamp Act in Ganvare Wall Ropes v. Coastal Marine Constructions.’ This is because the Indian Stamp Act, 1899 necessitates such

stamping by virtue of Section 35 read with Item 12 of Schedule I thereof. Documents inadequately stamped (or not stamped) are inadmissible in evidence for any purpose and are liable to be impounded and are subject to penal duties up to ten times of the proper stamp duty or that of the deficient portion, under Section 35’s first proviso.”* Any award has to be stamped, but the rates of stamp duty vary from State to State in India, found in the provisions, addenda or schedules of the respective Stamp Act of the relevant 95. 96. 97. 98.

Sundaram Finance Ltd. Gautam Landscapes v. Garware Wall Ropes v. First proviso to Section

v. Abdul Samad & Anr. (2018) 3 SCC 622. Shailesh Shah, AIR 2019 Bom 49. Coastal Marine Constructions and Engineering Ltd. (2019) 9 SCC 209. 35 of the Indian Stamp Act, 1999.

Zoe

Dushyant Dave State.”’ Moreover though non-stamping/deficient stamping of an award may not be a relevant ground in an annulment proceeding, the same can make a domestic award

unenforceable.”

Insofar as a foreign award is concerned,

there is no requirement for the same to be stamped under the Indian Stamp Act, 1899, for the purpose of the same being enforced within the territory of

India.""'

(iii) Registration of award: Awards, however, need not be registered under the Registration Act 1908 unless it deals with immovable property in which case it is compulsorily registrable.'"’ Again the registration fee varies from State to

State.'*

(iv) Interim awards: Enforcement of interim awards is a slightly complex evaluation. The date of the arbitration agreement and the date on which the arbitration was commenced provide for additional yardsticks. (v) Reservations to the New York Convention: Of relevance to the enforcement of foreign awards, India has opted to both the commercial and reciprocity reservations to the New York Convention. Additionally, Section 44(b) of the 1996 Act provides that only awards made in a reciprocating convention country as notified in the official gazette are enforceable. A similar caveat is provided in Section 53(c) of the 1996 Act for awards under the Geneva Convention.

11.4.2

Guidelines for Judges and the Way Forward

Industries and particularly industry’s chambers together with the Indian arbitration community on the one hand and the foreign arbitral institutions, the international arbitration community and respective governments of concerned jurisdictions on the other hand must work together to bring about the synergy required. The judiciary needs to ensure consistency in judgments by ensuring that across the courts in the country including the Supreme Court, only those judges must preside and that too for long periods who have exposure to commercial laws and litigations. The Government of India must also play a proactive role. The following recommendations could be helpful to judges:

99. State Wise Stamp Duty Schedule & Concerned Act, Institute of Company Secretaries in India available at https://www.icsi.edu/ccgrt/research/bare-acts/stamp-acts/ and https://www-.mca .2ov.in/MCA21/dca/etiling/eStamp_rate.pdf (State-wise stamp duty rules for various eForms,

MoA, AoA). 100. M. Anusuya Devi & Anr. v. M. Manik Reddy & Ors (2003) 8 SCC 565. 101. 102.

Shriram EPC Ltd. v. Rioglass Solar SA (2018) 5 ArbLR Ramesh Kumar v. Furu Ram (2011) 8 SCC 613.

161 (SC).

103. To be obtained from the respective government websites of the relevant States. For example, the stamp duty and registration fee applicable in the NCT of Delhi is available at http://revenue delhi.gov.in/wps/wem/connect/DoIT_Revenue/revenue/home/e-sub + registrar/important + information + regarding + registration + of + property.

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Chapter 11: Enforcement of Arbitral Awards

(i) the grounds for challenge to the award as exhaustive;'™

(ii) (iii) (iv) (v) (vi)

refrain from reviewing the award on its merits;'"° burden of proving the existence of a refusal ground rests on respondent; 106 construe the grounds of refusal narrowly;'"’ refuse enforcement only in serious cases;'"° and pro-enforcement attitude and contribution to the effectiveness of arbitra-

tion.’””

It must be mentioned that the journey in the development of jurisprudence on recognition and enforcement of both domestic and foreign awards is a continuing one

104. Marike Paulsson, The 1958 New York Convention in Action (Kluwer Law International, 2016) pp- 166-167; ICCA’s Guide to the Interpretations of the 1958 New York Convention — A Handbook for

Judges,

available

at

https://www.arbitration-icca.org/publications/NYC_Guide/NYC_

Guide_English.html, p. 79. . Marike Paulsson, The 1958 New York Convention in Action (Kluwer Law International, 2016) pp. 168-171; ICCA’s Guide to the Interpretations of the 1958 New York Convention —- A Handbook for Judges, available at https://www.arbitration-icca.org/publications/NYC_Guide/NYC_ Guide_English.html, p. 78.https://www.arbitration-icca.org/publications/NYC_Guide/NYC_ Guide_English.html. See also, NHAI v. Intercontinental, 251 (2018) DLT 732 (any error made by an arbitrator in the construction or interpretation of terms ought not to be corrected or interfered with by the court; merely because alternate view is possible but not taken is not ground for court’s interference or ground to set aside the award); Dyna Technologies v. Crompton

Greaves (2019) SCC OnLine SC 1656 (arbitral awards should not be interfered with

in a ‘casual and cavalier manner’ and the court cannot interfere unless it finds that the perversity of the award goes till the root of the matter and no alternative interpretation, even implied, salvages the arbitral award); South East Asta Marine Engineering and Constructions Ltd. (Seamec Ltd.) v. Oil India Limited, AIR 2020 SC 2323 (where two views are possible, court

cannot interfere in the plausible view taken by the arbitrator supported by reasoning); Government of India v. Vedanta Limited, Civil Appeal No. 3185 of 2020 (arising out of SLP (Civil) No. 7172 of 2020), Supreme Court, decided on 16 September 2020 (courts do not sit in appeal over award when undertaking the Section 48 examination); Venture Global Engineering. v. Satyam Computer Services Ltd (2008) 4 SCC 190 (the court cannot act as an appellate court

106.

107.

108.

109.

to examine the legality of an award while examining the award under Section 34 of the 1996 Arbitration Act). Marike Paulsson, The 1958 New York Convention in Action (Kluwer Law International, 2016) pp. 171-173; ICCA’s Guide to the Interpretations of the 1958 New York Convention - A Handbook for Judges, available at htips://www.arbitration-icca.org/publications/NYC_Guide/NYC_ Guide_English.html, pp. 79-80. Marike Paulsson, The 1958 New York Convention in Action (Kluwer Law International, 2016) pp. 173-174; ICCA’s Guide to the Interpretations of the 1958 New York Convention — A Handbook for Judges, available at https://www.arbitration-icca.org/publications/NYC_Guide/NYC_ Guide_English.html, pp. 80-82. See also, Lion Engg. Consultants v. State of M.P. (2018) 16 SCC 758 (plea of jurisdiction under Section 34 can be raised before the court even if it was not raised before the tribunal); Ssangyong Engineering v. National Highway Authority (2019) 15 SCC 131 (narrow interpretation and construction of public policy). Marike Paulsson, The 1958 New York Convention in Action (Kluwer Law International, 2016) pp. 174-175; ICCA's Guide to the Interpretations of the 1958 New York Convention —- A Handbook for Judges, available at https://www.arbitration-icca.org/publications/NYC_Guide/NYC_ Guide_English.html, p. 83. Marike Paulsson, The 1958 New York Convention in Action (Kluwer Law International, 2016) pp. 13-16, p. 165.

259

Dushyant Dave in Indian courts. It is not a journey which is always on a straight road, and many a times it has veered into different directions and there is no guarantee that it will not do so in future despite the existing law which is fairly well supportive of recognition and enforcement.

260

CHAPTER

12

The India Resolutions for the 1958 Convention on the Recognition and Enforcement of Foreign Awards” Fali Nariman, Marike Paulsson & Supritha Suresh

A Judicial Dialogue was held in India in November 2013. Judges expressed the desire to develop a set of core principles that would aid in applying the New York

Convention in India. This Chapter introduces the ‘India Resolutions’ (updated with the latest jurisprudential leanings and learnings) with an accompanying Explana-

tory Note. The importance of good faith and alignment of domestic law with

international law are explored. It is hoped that the recommendations act as a source of inspiration for future dialogues with the Bench, both within and outside India.

12.1

INTRODUCTION

The International Council for Commercial Arbitration (ICCA)' along with several representatives and stakeholders of India’s arbitration community embarked on the Judicial Dialogue on the 1958 New York Convention on 23 November 2013.* The

This Chapter is based on a paper of the same title authored by Fali Nariman and Marike Paulsson following the ICCA Judicial Dialogue at New Delhi on 23 November 2013. The original paper can be accessed on the ICCA website at https://www.arbitration-icca.org/media/7 /9293049359 1493 /indiaresolutions|6formatted.pdf. 1. ICCA is a non-governmental organisation devoted to promoting the use and improving the processes of arbitration, conciliation and other forms of resolving international commercial disputes. Further details about the organisation and its activities are available at https://www. arbitration-icca.org/’. 2. The Judicial Dialogue in India was part of ICCA's Roadshows, a series of colloquia for judges on the New

York Convention.

Further details on the Roadshows

arbitration-icca.org/NY_Convention_Roadshow-html.

261

can be found

at https://www.

Fali Nariman, Marike Paulsson & Supritha Suresh Dialogue, held at New Delhi, was inaugurated by Honourable Mr Justice P. Sathasivam, the (former) Chief Justice of India,’ in the presence of judges from the Supreme Court and High Courts (including the Delhi High Court), practising lawyers (by invitation), and young judicial officers receiving training in the Delhi Judicial Academy. The purpose of the Dialogue was to consider how progress might be made towards a more effective application of the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention or Convention) in India. Judges expressed the need to develop a set core of concepts to apply the Convention (and the implementing legislation) in a contemporary manner: all the more urgent as the Convention is basically informed by little, save its drafting history — which is almost entirely outdated. Even the drafting history is a source of limited use ever since the Convention entered the national space through implementing enactments. A contemporary understanding is needed rather than harkening back to observations made 60 odd years ago, for many judges impossible when interpreting a national enactment. This Chapter introduces the India Resolutions on the Convention prefaced with an Explanatory Note, which is hoped will inform future Judicial Dialogues on the Convention. The authors then make certain recommendations as to how the courts can apply the Resolutions. Those who are less familiar with the Convention will find an overview of the two principal judicial actions called for by the New York Convention: recognition of arbitral agreements and enforcement of foreign awards. This Chapter gives an analysis under the New York Convention and guidelines for future judicial interpretation in a manner that its treaty’s text can be applied over time while aligned with the Supreme Court's landmark cases. For a contemporary overview of the latter, the authors refer to the other Chapters in this book. 12.2

A PREFACE: THE EXPLANATORY NOTE

Some concepts are essential to be kept in mind in advance of discussing the Resolutions. This part, the Explanatory Note, attempts to review those concepts which act as foundation for the Resolutions. 12

Sovereignty

The drafters in 1958 created an effective instrument of international law, but accom-

modated agreements to disagree.’ At the 72"? Biennial Conference of the International Law Association in Toronto, Canada’s Governor-General

said: ‘International law has

3. On the date of the event, Mr P. Sathasivam held office as the Chief Justice of India.

4. Philip Allott once said that treaties are best understood as ‘disagreement reduced to writing’. See, Philip Allott, The Concept of International Law,

262

10 Eur. J. of Int'l. L. 31, 43 (1999).

Chapter 12: India Resolutions for the New York Convention not achieved much, but it is good that it is there.’ By contrast, the New York Convention has achieved much, and it is (also) good that it is there!” Agreements among States presume that States are willing to sacrifice some part of their sovereignty. This presumption is the prerequisite that makes international law effective. Yet, that same notion of sovereignty retains restrictions that limit the international order. It is notably expressed in the Convention by the public policy exception contained in Article V(2). In 1958, the then Secretary General of ECOSOC, after identifying the objection to Article V(2) by some governments on the grounds that that provision would create ‘an existing convenience of the system of double exequatur’,° suggested: [Wlould the Contracting States have been prepared, on a worldwide basis, to accept as conclusive and final the decisions made by authorities of another country

on the questions of the competence of arbitrators and the correctness of the arbitration procedure and whether all Contracting Parties would be willing to undertake to enforce foreign arbitral awards without retaining the right to examine themselves these aspects of the regularity of the award?’

The treaty was not expected to impinge on national judicial authority, but instead was to ensure that mandatory limitations were respected — such limitations not being static — which is precisely why they were not ‘frozen’ as of the year 1958. It was intended to be a living and breathing document. 12.2.2

The Convention in the National Space: Is ‘Globalisation’ a Myth?

Codes of procedure diverge as they are expressions of institutions and practices in the national space. The Convention's drafters had no choice but to respect sovereign legal orders. For instance, Article III defers to the ‘rules of procedure’ of the Contracting State. Article IV does not explicitly defer to the lex fort lor the assessment of certification and authentication of the documents to be submitted by the applicant, but the silence necessarily leads to deference to national rules.* Many of those who aspire to create a culture that allows for the Convention to become a true ‘global’ instrument for the enforcement of arbitral awards fail to

5. Fali Nariman, Harmony amidst Disharmony, The International Framework, The Arbitration Series - Volume 2 (Hay House Publishers, 2020), pp. 165-166.

6. In particular, the 1927 Convention on the Execution of Foreign Arbitral Awards, i.e. the Geneva Convention — specifically Article 1(d) - provided that an award could be enforced only if it had become final in the country in which it had been made. This need to prove finality in the country of its origin as a prelude to an award’s enforcement elsewhere came to be known as the ‘double exequatur requirement’, and was a great obstacle to the transborder reliability of awards — contrary to the very purpose of the treaty. 7. Drafting History of the Convention, UN DOC/E Conf.26/2, at p. 10 in a Note by the Secretary General. 8. The law of the forum where enforcement is sought is usually referred to as the lex for. The law applicable to the arbitration and chosen by the parties is usually referred to as the lex arbitri. As the two terms are commonly used in international arbitration, the two terms are also used in this Chapter. For a discussion on the various laws applicable to an arbitration, see Chapter 6 of the Handbook.

263

Fali Nariman, Marike Paulsson & Supritha Suresh appreciate the nature of the Convention and its dependence on local notions of procedure. Despite its transnational reach, the Convention is not ‘global’ but ‘glocal’, i.e. global in design and effect, but entirely reliant on local operational systems. In short, the Convention operates in the national space and only through the agency of national courts. 12.2.3

The Role of the National Courts

The Convention is designed so that its effective outcome in the national space will depend on the just application of its provisions by national courts: — The Convention contains explicit references to national rules of procedure and the application thereof by national courts. — Not all provisions of the Convention contain a choice of law, thereby deferring to the local rules of conflict of laws and the application thereof by courts. Roughly, this deference can result in either the application of the lex arbitri or the lex fort. — The Convention has left gaps to be filled by judicial interpretation. For instance, Article | does not define ‘arbitration’ or ‘award’. Articles II] and V(1)(e) do not explain the meaning of ‘binding’. In fact, the gaps were deliberate — often a conscious choice of the delegates involved in the drafting of the Convention. Yet, the Convention was not intended to become a field day for lawyers and a nightmare for the successful party to the award. What then has the Convention become for judges? It is suggested that judges must interpret the Convention in the national space and thus balance authoritative decisions reached in international business transactions - international arbitration awards — with national rules and notions ol public policy. This balance must be based on good faith and fairness, bearing in mind that the Indian enactment,’ implementing the Convention, found its origin in the international space. It is this space that this very important multilateral treaty is an expression of, and of which India is an important part. 12.2.4

The Convention in India

India ratified the Convention on 13 July 1960. It came into effect in India on 11 October 1960. It has been currently enacted by India’s Parliament in the Arbitration and Conciliation Act, 1996 (1996 Arbitration Act or Act) in Part II, Chapter I, Sections 44-52.

The Act was amended by the Arbitration and Conciliation (Amendment) Act, 2015

9. The Foreign Awards (Recognition and Enforcement) Act, 1961 has been repealed and replaced by similar provisions in the 1996 Arbitration Act. The 1996 Arbitration Act was amended in 2015 and 2019.

264

Chapter 12: India Resolutions for the New York Convention (2015 Amendment), which inserted further explanations into Sections 47 and 48.'" The Act was once again amended by the Arbitration and Conciliation (Amendment) Act, 2019 (2019 Amendment) wherein Sections 45 and 50 were amended.!! In his inaugural address at the 2013 Dialogue, the Honourable Justice Mr P. Sathasivam, former Chief Justice of India, described the launch of a healthy judicial discussion as a ‘laudable effort’, as in spirit the Convention almost entirely depends on the approach adopted by the national courts in the States where it applies: India, as a Nation, has always favored arbitration both at domestic as well as at

international levels as an established method of resolving commercial disputes. The significance of arbitration has enhanced more along with the growth of international trade and commerce and the conflicts springing from these pursuits |...] In short, this essentially private process has a public effect, implemented with

the support of the public authorities of the State and expressed through the State's national law. This interrelationship between national law and international treaties and conventions is of vital importance to the effective operation of interna-

tional arbitration [...] The [Convention] has been a multilateral instrument, possibly the most successful ever in the field of international law. While it is believed that the majority of arbitral awards are satisfied through the voluntary

compliance of the parties involved and for the few which are not, the Convention

provides the mechanism to do so [...] So long as the concept of state sovereignty

is paramount, decisions in respect of any transnational dispute can only be enforced through sovereign national courts: a fact clearly stressed in the provisions of the Convention. This is so because even a unanimous decision of an international forum has no greater force than an evocative appeal, sovereign nations still being really sovereign. Thus it will not be an exaggeration to say that the effective existence of international commercial arbitration is entirely dependent on the tolerance of obligations by member states of the Convention’? (emphasis added).

And so, the former Chief Justice (in his address) embraced the United Nations’ aim of enabling international arbitration as a means of dispute resolution. Likewise, the former Secretary General of the United Nations, Kofi Annan, commemorated the success of the Convention at the 40°" anniversary of the Convention on 10 June 1998: This landmark

instrument

has many

virtues. It nourished

respect

for binding

commitments, whether they have been entered into by private parties or governments. It has inspired confidence in the rule of law. And it has helped ensure fair treatment when disputes arise over contractual rights and obligations. As you know, international trade thrives on the rule of law: without it parties are often

10. The explanation added to Section 47 of the 1996 Arbitration Act clarified the relevant ‘court’ for enforcement of foreign awards and the explanation added to Section 48 of the Act clarified ‘public policy’. For a discussion of these explanations, see Chapters 10 and 11 of the Handbook. 11. The 2019 Amendment substituted the words ‘unless it finds’ with ‘unless it prima facie finds’ in Section 45. In Section 50, the words ‘An appeal’ was substituted with ‘Notwithstanding anything contained in any other law for the time being in force, an appeal’. 12. The full speech is available on the ICCA website and can be accessed at https://www_.arbitration -icea.org/media/2/13916004665430/nyc_roadshow_speech_23rd_nov_chief_justice_sathasiva m.pdf.

265

Fali Nariman, Marike Paulsson & Supritha Suresh reluctant to enter into cross-border commercial transactions or make international

investments. '*

The 166 Contracting States cannot make progress towards the rule of law or realise the effective outcome of the Convention - an international instrument — without judicial insight and guidance. The ICCA Guide to the Convention was prepared for judges. It was written [rom the judicial perspective focusing on the two actions that can be presented to a judge, under the New York Convention or its enactment.’* The India Resolutions are a result of discussions with judges at the 2013 Dialogue and have also been subsequently discussed with judges. And it ought to be so. Making international law work in the national space is almost exclusively the function of the judiciary. This was recognised in 1804 by Chief Justice Marshall of the Supreme Court of the United States in the case of Murray v. Schooner Charming Betsy in which he held that ‘an Act of Congress ought never be construed to violate the law of nations if any other possible construction remains’.'* This is what has come to be known as ‘the Charming Betsy alignment’ - prompting courts to interpret a national enactment of a text that found its origin in the international space in such a manner as to respect the latter. The idea of Chief Justice Marshall and the presumption he created to construe national acts to ensure compliance with international law is admirable, exemplary, and exceptionally well suited to the New York Convention. It is also in accordance with the principles of statutory interpretation in India'® and the obligations set forth in Article 51 of the Constitution of India: 13. Kofi Annan, Opening address commemorating the successful conclusion of the 1958 United Nations Conference on International Commercial Arbitration, in Enforcing Arbitration Awards under the New

York Convention — Experience and Prospects,

| (United Nations 1999).

14. ICCA’s Roadshows make use of the ICCA Guide to the Interpretation of the 1958 New York Convention. The Guide can be downloaded at https://www-.arbitration-icca.org/publications/ NYC_Guide. html. 15. Murray

v. Schooner Charming

Betsy, 6 (2 Cranch)

64,

118

(1804).

In other words,

where a

national rule allows for different interpretations, national or regional law has to be construed in accordance with international obligations. For an appraisal of Charming Betsy, see Marike Paulsson, The 1958 New York Convention in Action (Kluwer Law International 2016), pp. 57-59.

16.

In the Indian context, it appears that the Supreme Court has gone beyond consistent interpretation (as advanced by Charming Betsy) and used international law to plug in gaps in domestic law. See Vishaka v. State of Rajasthan (1997) 6 SCC 241, where the Supreme Court in the context of a public interest litigation involving obligations under the Convention on the Elimination of All Forms of Discrimination against Women which India had not yet transposed into domestic legislation said: ‘The international conventions and norms are to be read into them in the absence of enacted domestic law occupying the field when there is no inconsistency between them. It is now an accepted rule of judicial construction that regard must be had to international conventions and norms for construing domestic law when there is no inconsistency between them and there is a void in the domestic law.’ Renusagar

Power

Co. Ltd.

v. General

Electric Co., AIR

1994

SC

860:

1994 Supp.]

SCC

644

(interpretation of ‘public policy’ under the 1961 Act to take assistance from the terms of the Convention and meaning of public policy as understood in private international law) and R.M. Investment & Trading Co. Pvt. Ltd. v. Boeing & Co, AIR 1994 $C 1136: (1994) 2 SCC 406 (‘commercial’ under the 1961 Act to be liberally construed and recourse to be taken to the UNCITRAL Model Law for its interpretation). These principles must be borne in mind while interpreting the current law — i-e., the 1996 enactment with its amendments. See Fali Nariman, Harmony amidst Disharmony, The International Framework, The Arbitration Series - Volume 2 (Hay House Publishers, 2020), pp. 155-156.

266

Chapter 12: India Resolutions for the New York Convention The State shall endeavour to

(a) (b)

promote international peace and security; maintain just and honourable relations between nations;

(c) foster respect for international law and treaty obligations in the dealings of organised people with one another; and encourage settlement of international disputes by arbitration.'”

12.2.5

The Background of the India Resolutions

Guided and enlightened by the members of the Indian judiciary, it seems possible to evolve a set of resolutions by and for an optimally effective implementation of the New York Convention in India — and thus to provide inspiration elsewhere (since some examples of judicial solutions by India’s judges may commend themselves outside India as well). For instance, a part of the Convention where ‘the shoe pinches’ is the ‘in writing requirement’ in Article II: an agreement may be recognised under the Convention only if that agreement is in writing, which requires either the signature of both (or more) parties of the arbitration clause or agreement or an ‘exchange by telegrams’. UNCITRAL recommends courts to rely on Article VII (1) and opt for more favourable laws based on the UNCITRAL Model Law or to approach Article II (2) as ‘nonexhaustive’.’*

Yet,

while

UNCITRAL

has

not

legitimised

that

interpretation,

the

legislature and courts in India have. The 2015 Amendment to Section 7 (the provision which defines arbitration agreement) expressly provides for ‘electronic means’ of

communication to be recognised.'°

Further, courts in many places have struggled to understand and establish parties’ intent to ‘undertake to submit to arbitration any differences between them’ and thus validate the arbitration agreement on the basis of Article II(1), a conditio sine qua non for the recognition of the arbitration agreement under the Convention. Courts have attempted to cure pathological clauses in various ways in order to abide by the Convention and act on the basis of a pro-enforcement attitude. However, to effect the purpose of the Convention — contributing to the effectiveness of international arbitration and promoting international trade — courts also have the duty to deny the effect of an alleged arbitration agreement if there is no clear mutual intent and to protect their fundamental right to access to courts. That rejection, when justified, will increase trust in arbitration. And so, it is noted that Indian courts adopt a strict attitude: parties must

say what they mean and mean what they say!’°

17. Article 51, Constitution of India, 1950. 18. UNCITRAL, Recommendation regarding the interpretation of Article II, paragraph 2, and Article VIL, paragraph |, of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, done in New

York,

10 June

1958 (2006), Official Records of the General Assembly,

Sixty-first Session, Supplement No. 17 (A/61/17), annex II, accessible at https://uncitral.un.org /sites/uncitral.un.org/files/media-documents/uncitral/en/a2e.pdf. 19. Section 3, 2015 Amendment amending Section 7 of the 1996 Arbitration Act. For a review of Section 7 of the Act and jurisprudence related thereto, see Chapter 2 of the Handbook. 20. For a discussion of jurisprudence where reliance is placed on the terms of the arbitration agreement to identify the intention of the parties, see Chapter 2 of the Handbook.

267

Fali Nariman, Marike Paulsson & Supritha Suresh Finally, Indian courts have adopted a notion of public policy that departs from the distinction made internationally between international and national standards of public policy, the former being narrower than the latter.*' This distinction sounds apt in the ears of theorists, international practitioners, and courts that are pro-enforcement ‘biased’, but is not readily applied by most courts as their laws do not know such distinction. There is only one public policy; however, there are various interpretations of it. 12.3

THE INDIA RESOLUTIONS

With that background, in the context of the Dialogue, the authors proposed the following guidelines, which is hoped will inform practitioners and judges in India and

outside. £2.31

Not to Apply Section 44(b) of the Act in a Formally Restrictive Manner

The 1996 Arbitration Act has enacted the New York Convention in its Part II, Chapter

I, Sections 44-52. Section 44(b) provides: [I]In one of such territories as the Central Government, being satisfied that reciprocal provisions have been made may, by notification in the Official Gazette,

declare to be territories to which the said Convention applies.~*

Section 44(b) is an extension of Article I(3) of the Convention — pertaining to the reciprocity reservation — and creates a rule of evidence as to how to identify a State as a Contracting State. It gives effect to the reciprocity reservation that India has adopted. Care must be taken to see whether reciprocal provisions have been made (by the Government of India) by notification in the Official Gazette declaring that a State is a

21. In Shri Lal Mahal v. ProgettoGroup Spa (2014) 2 SCC 433, Justice R.M. Lodha (later Chief Justice of India) speaking for the court has held that the application of public policy for purposes of Section 48(2)(b) of the 1996 Arbitration Act is more limited than the application of the same expression in respect of domestic arbitral awards. The 2015 Amendment added two explanations to Section 48: the first clarifying that public policy is attracted only when: ‘(i) the making of the award was induced or affected by fraud or corruption or was in violation of Section 75 or Section 81; or (ii) it is in contravention with the fundamental policy of Indian law; or (iii) it is in conflict with the most basic notions of morality or justice’. The second explanation clarifies that the determination (of whether the fundamental policy of the country is contravened) shall not entail a review of the award on merits. For a discussion of public policy, the difference in the interpretation of the exception when dealing with domestic awards vis-a-vis awards resulting from international commercial arbitration, and a review of the explanations inserted by the 2015 Amendment, see Chapter 10 of the Handbook. 22. Section 44, 1996 Arbitration Act defines ‘foreign award’ as ‘an arbitral award on differences between persons arising out of legal relationships, whether contractual or not, considered as commercial under the law in force in India, made on or after the | 1th day of October, 1960 [...] in pursuance of an agreement in writing for arbitration to which the [New York Convention] applies, and in one of such [reciprocal] territories as the Central Government [notifies] in the Official Gazette [as a Convention country|'.

268

Chapter 12: India Resolutions for the New York Convention Convention State: a difficult task. In Swiss Singapore v. M. V. to arbitration under Section 45 was refused by the Gujarat South Africa was a party to the New York Convention there Government of India in respect of South Africa in the Official

made in Durban could not be enforced in India.”

African Traders, reference High Court since though was no notification by the Gazette. Hence, an award

At present there are only 64 countries (who are parties to the New York Convention) in respect of which notifications have been so far issued by the Government of India. They include countries/territories also previously notified under the Foreign Awards (Recognition and Enforcement) Act, 1961 — an Act now repealed by the 1996 Act.** Courts ought not to construe Section 44(b) as a deliberate impediment to enforcement. Section 44(b) of the Act ought to be interpreted on the basis of good faith. For instance: if the government has not yet been able to issue an official notification only by reason of an administrative lapse and where the State of the rendition of the award is a Contracting State, it is suggested that judges may look to the official listing of current Contracting States by UNCITRAL in order to ensure the fulfilment of the reciprocity reservation,” and then judicially recommend/direct the government to consider issuing a notification in a given case.*° 23. Swiss Singapore v M. v. African Traders, Yearbook Commercial Arbitration Vol. XXXV (Albert

Jan Van den Berg ed., ICCA & Kluwer Law International 2010), at pp. 398-400. See also, Fali

Nariman, Harmony amidst Disharmony, The Indian Framework, The Arbitration Series — Volume | (Hay House Publishers, 2020), pp. 198-199. 24. The countries include: Armenia; Australia (including Australian Antarctic Territory, Christmas Island,

Cocos

Botswana, Cuba,

(Keeling)

Islands and

Norfolk

Island),

Austria,

Azerbaijan,

Belarus,

Belgium,

Bulgaria, Canada, Central African Republic, Chile, China (including Hong Kong),

the Czech

Republic,

Island),

the Federal

Denmark

(Faeroe Islands, Greenland),

Ecuador, Estonia, Finland,

France (Comoro Islands, French Polynesia, New Caledonia, St. Pierre et Miquelon, Wallis and Futuna

Japan,

Kazakhstan,

Kuwait,

Republic

of Germany,

Kyrgyzstan,

Latvia,

Georgia,

Ghana,

Greece,

Lithuania, Moldova,

Hungary,

Mauritius,

Italy,

Malagasy

Republic (Madagascar), Malaysia, Mexico, Morocco, Nigeria, Norway, the Philippines, Poland,

the Republic of Ireland, the Republic of Korea, Romania, the Russian Federation, San Marino, Singapore, Slovakia, Spain, Sweden, Switzerland, Syrian Arab Republic, Tajikistan, Thailand, the Arab Republic of Egypt, the Netherlands, Trinidad and Tobago, Tunisia, Ukraine, United

Kingdom (including Cayman Islands, British, Virgin Islands, Belize, Bermuda, Gibraltar, Guernsey, Isle of Man, Jersey), the United

Republic of Tanzania,

USA

(including Canton Islands,

American Samoa, Enderby Islands, Guam, Puerto Rico, Virgin Island, Wake Island), Uzbekistan.

See Fali Nariman, Harmony amidst Disharmony, The Indian Framework, The Arbitration Series

— Volume | (Hay House Publishers, 2020), pp. 199-200. 25. UNCITRAL, Status: Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, 1958), at https://uncitral.un.org/en/texts/arbitration/conventions/foreign_arbitral _awards/status2. 26. In V/O Tractoroexport, Moscow v. Tarapore & Co., AIR 1971 SC 1, 8 at para. 17, the majority in a three-judge bench explained: ‘Once, the Parliament has legislated, the Court must first look at the legislation and construe the language employed in it. If the terms of the legislative enactment do not suffer from any ambiguity or lack of clarity they must be given effect to even if they do not carry out the treaty obligations. But the Treaty or the Protocol or the Convention becomes important if the meaning of the expressions used by the Parliament is not clear and can be construed in more than one way. The reason is that if one of the meanings which can be properly ascribed is in consonance with the Treaty obligations and the other meaning is not so consonant, the meaning which is consonant is to be preferred [...]." The dissenting judge (in his minority opinion at para. 42) expressed what is now the more accurate view, viz. that the section of the implementing Act ‘must be read in consonance with the State’s international obligation and any

269

Fali Nariman, Marike Paulsson & Supritha Suresh E2.5.2

To Apply the New York Convention (and Implementing Legislation) in Accordance with the Purposes of the Convention, Which Is Promoting the Effectiveness of International Arbitration and International Trade

The former Secretary General of the United Nations at the Convention’s 40" anniversary expressed his hope and wish that the Convention would enhance the rule of law; international arbitration was to be the most appropriate means of dispute resolution for international trade. The effectiveness of international arbitration requires that awards transcend borders and are accepted by all courts and nations. It is thus that the Convention might be a singularly important treaty for international trade. Today, one must confront the reality of that wish; the success of the Convention depends on the attitude towards it by courts, and this cannot be taken for granted. That attitude ought not be spoken of as one of a pro-enforcement ‘bias’ — to use the expression coined by the US courts — since that word could mean a systematic error; courts are entitled to confront international arbitration, viewing it for what it really is. If anything, the bias should be toward fulfilling the purposes of the Convention, i.e. promoting the effectiveness of international arbitration and international trade.*’ Courts are a safety net and perform a vital function of checks and balances and can prevent a ‘denial of justice in international arbitration’. If parties do not agree to arbitration and yet are forced to arbitrate, a denial of access to courts, a fundamental

right, is implied.*" Courts will reinforce and preserve trust in arbitration by all disputants, private or public, by ensuring that international arbitration is a fair means

of dispute resolution.*”

In relation to the Indian enactment and the purpose of the enactment, a few words of caution: in interpreting the 1996 Act, no provision in Part I (Sections 2 to 43) can be made to apply to Part I] (New York Convention Awards). For a decade (2002-2012) the contrary had been decided by the Supreme Court of India by a Bench decision of three judges. This decision was overruled by a Bench of five judges only in the year 2012. Today, the law is as follows: where the seat of arbitration ts outside India or where law other than Indian law governs the arbitration agreement, Part I of the Act

is excluded.*°

27.

interpretation which would restrict the obligation or impose a refinement not warranted by the Convention itself will not be justified’. See Marike Paulsson, The 1958 New York Convention in Action (Kluwer Law International 2016),

pp. 13-16. 28. In Ganghabhai v. Vijay Kumar, AIR 1974 SC 1126, Chief Justice Y. V. Chandrachud, speaking for the court said: “There is an inherent right in every person to bring a suit of a civil nature and unless the suit is barred by statute, one may at one’s peril, bring a suit of one’s choice. A suit for its maintainability requires no authority of law and it is enough that no statute bars the suit’: this as far as Indian courts have gone to express ‘the fundamental right to access to Courts’. See also, Fali Nariman, Volume

|, pp. 20-21.

29. One way in which courts ensure that the process is fair is through the appointment process. For a review of the court's appointment powers under the Act, see Chapter 4 of the Handbook. 30. Fali Nariman, Harmony amidst Disharmony, The Indian Framework, The Arbitration Series — Volume

| (Hay

House

Publishers, 2020), pp. 64-68 discussing the Bhatia International and

270

Chapter 12: India Resolutions for the New York Convention 12.3.3

To Balance the Commercial

Need for Valid Contracts with the

Recognition That Confidence in Arbitration Requires Judicial Control of Misconduct

Over the years, American and English courts have registered a shift in attitudes — moving from a hostile to a friendly attitude towards arbitration. Courts have acknowledged the value of international arbitration. These courts have been willing to step aside and let arbitrators adjudicate the dispute. Such a judicial attitude preserves arbitration and projects that the latter system is not antithetical to courts’ resolution of the dispute. But courts must be wary of the Achilles’ heel of arbitration, i.e. its relative lack of transparency and regulation. Courts must hold a mirror in front of arbitration and recognise its flaws and potential wrinkles. For instance, the tendency towards Americanisation of the arbitral process results in high costs and drawn-out proceedings and the excessive variability in the qualifications of arbitrators. But must the court always be arbitration-friendly? Here is where the drafters of the Convention — and its ‘father’, Professor Pieter Sanders — attributed a vital role to the courts, that of being a safety net and performing the function of checks and balances. It was the US delegate who emphasised the ‘utmost importance of judicial supervision, for it alone could ensure that justice was done’.*! It is the task of the courts to hold

international

arbitration

created

for the business

to its original

audience,

idea,

and

the attractiveness

i.e. a cost-effective procedure,

and leaving

that it it to

arbitrators who have been appointed by the parties for the particular dispute. 12.3.4

To Adopt Good Faith as the Foundation of Interpretation

For both international norms of treaty interpretation and national rules of interpretation, the foundation is good faith. The Vienna Convention on the Law of Treaties, to which India is a party, provides in its general Article 26 and its provisions on treaty interpretation — Article 31(1) - that one must comply with international law and interpret treaty provisions on the basis of good faith“* This foundation is equally fundamental in the national space. In India, the Convention — as reflected in the 1996 Arbitration Act — is applied as a matter of national law. The Indian courts apply national instruments of interpretation. The question then becomes a general one: how do judges interpret the Convention alter it has been implemented? On the basis of the Vienna Convention on the Law of Treaties — and the underlying notion of good faith — or on the basis of Indian statutory

Bharat Aluminium Co. (Balco) cases: Bhatia International v. Bulk Trading S.A. and Anr. (2002) 4 SCC 105; Bharat Aluminium Co. v. Kaiser Aluminium Technical Services (2012) 9 SCC 552. 31. Drafting History of the Convention, UN DOC/E Conf.26/5R.14, p. 6, a comment by Mr Becker. 32.

Vienna Convention on the Law of Treaties, 23 May

1969, United Nations, Treaty Series, vol.

1155, p. 331, available at https://treaties.un.org/doc/publication/unts/volume% 201 155/ volume-1155-i-18232-english.pdf.

wel

Fali Nariman, Marike Paulsson & Supritha Suresh rules? If the latter is the case, do judges apply the notion of good faith?** Whatever the basis, good faith should always be the overriding principle. 12.3.5

To Enforce Arbitration Agreements (under Article II) ina Manner Consistent with the Needs and Practice of International Trade

Article II] poses many problems. One of them is the impossibility of aligning the ‘in writing’ requirement with current practice in international trade. Parties often do not conclude an agreement before performance, and an exchange — in the sense olf offer and acceptance — is often expressed through conduct, a common practice in some trades which fits the current pace of international business transactions. Merchants are not as concerned with formalities as are lawyers. Instead, they are focused on the efficacy of their dealings with each other. As mentioned above, UNCITRAL issued recommendations relating to Article [I(2) of the Convention and recommended that the provision be applied ‘recognizing that the circumstances therein are not exhaustive’.“* Under the Vienna Convention on the Law olf Treaties, the status of those recommendations would be of ‘soft law’ only. In India,

the 2015

Amendment

to Section

7 of the Act

(the

provision

which

defines

arbitration agreement) expressly provides for “electronic means’ of communication to be recognised.*° This statutory amendment is perfectly in line with the Resolution, and acts as a beacon for other Contracting States.

33. India follows the doctrine of dualism and a treaty cannot become the prevailing law of the land, unless the Parliament passes a legislation giving effect to that international agreement. On the relevance and alignment of international law with municipal law, Charming Betsy and Vishaka v. State of Rajasthan have been discussed at supra n. 15. In the context of the Indian arbitration statute, domestic awards which are inadequately stamped are inadmissible as evidence. Further, awards relating to immovable property are required to be registered. For a discussion of stamping and registration requirements, see Chapter 11 of the Handbook. For foreign awards, Section 47 of the 1996 Arbitration Act simply states: the party seeking enforcement provide to the court the original or certified copies of the arbitration agreement and the award and such evidence as may be necessary to prove that the award is a foreign award. In M/S. Shri Ram EPC Limited v. Rioglass Solar SA, Supreme Court, Civil Appeal No. 9515 of 2018, 13 September 2013, the Supreme Court held that a foreign award is not liable to be stamped. 34. UNCITRAL, Recommendation regarding the interpretation of Article II, paragraph 2, and Article VIL, paragraph |, of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, done in New

York,

10 June

1958 (2006), Official Records of the General Assembly,

Sixty-first Session, Supplement No. 17 (A/61/17), annex II, accessible at https://uncitral.un.org /sites/uncitral.un.org/files/media-documents/uncitral/en/a2e.pdf. Section 3, 2015 Amendment amending Section 7 of the 1996 Arbitration Act. For a review of Section 7 and jurisprudence related thereto, see Chapter 2 of the Handbook. 35. Section 3, 2015 Amendment amending Section 7 of the 1995 Arbitration Act. For a review of Section 7 and jurisprudence related thereto, see Chapter 2 of the Handbook.

272

Chapter 12: India Resolutions for the New York Convention 12.3.6

To Establish the Validity of the Arbitration Agreement on the Basis of the Parties’ Mutual Intent

The pace of international trade has caused the birth of what lawyers call ‘pathological clauses’. These are ambiguously drafted clauses making it difficult for courts to establish the presence of a will to arbitrate. Various courts around the world have attempted to cure these pathological clauses. The developed doctrine is twofold: first, the court establishes whether there is a mutual intent to arbitrate and, second, if that is the case, further ambiguities or gaps in the arbitration agreement are supplemented by the court itself. Again, the Indian approach is simple: parties must say what they

mean and mean what they say.*°

Why is this so important? There is a need to set limits to the referring of parties

to arbitration. Because referral results in the removal of a dispute from the courts, the

will of both parties to arbitrate must be clear; this should not be performed lightly. This stance promotes arbitration because party autonomy is acknowledged as a pillar of arbitration. The intent to arbitrate must be evident; without intent, parties would be led into a forced arbitration and that results in a denial of their fundamental right to access

courts.*” 12.3.7

To Avoid Excessive Formalism when Eniorcing Awards

IV)

(Article

Article IV of the Convention sounds simple and perhaps in theory it was. Yet, in reality it has become something of a Pandora’s box: which law ought to be applied? Authentication and certification: what,

whom,

where,

and

when?

Should

the entire

award and the entire agreement be certified as to be a genuine copy of the original? Who should certify and where should that certification take place? In the country where the award was rendered or the country where the award is to be enforced? Should the award and agreement — authenticated or certified - be submitted at the time of application or can enforcement courts allow the party requesting the enforcement to cure any deflects during the proceedings? The Swiss courts have adopted an attitude of rejection of ‘excessive formalism’, especially when the authentication is not disputed. In the Indian context, Section 47 of the 1996 Arbitration Act provides that the original or certified copies of the arbitration agreement and the award and such evidence necessary to prove that the award is a foreign award ‘shall’ be produced before the court, at the time of the application for enforcement of the foreign award. The Supreme Court has interpreted ‘shall’ in Section 47 as ‘may’ at the time a party applies for enforcement of an award. It however clarified that such interpretation of the word

36. Fora discussion of pathological clauses, see Chapter 2 of the Handbook. For guidance on drafting arbitration clauses for India-centric agreement, see Chapter 14. 37. In this context, Ganghabhai v. Vijay Kumar has been discussed at supra n. 28. For a discussion of relying on the terms of the arbitration agreement to identify the intention of the parties, see Chapter 2 of the Handbook.

273

Fali Nariman, Marike Paulsson & Supritha Suresh ‘shall’ as ‘may’ is restricted “only to the initial stage of the filing of the application and not thereafter’.*® 12.3.8

To Interpret ‘Extra Evidence to Prove That the Award Is a Foreign Award’ in the Manner of a Charming Betsy

Alignment (Article ['V)*”

Section 47(c) of the 1996 Arbitration Act provides that the courts may require — other than the documents required under Article IV of the New York Convention— ‘such further evidence as may be necessary to prove that the award is a foreign award’. This extra element is derived from Article I(1), which sets out the scope of the Convention. The first type of award that can be enforced under the Convention is the foreign award. Section 47(c) of the Act enables an Indian court to require further evidence to ensure that the award falls under the scope as per Article I{1) of the Convention - on a case-to-case basis.“ 12.3.9

To Eschew a Review on the Merits (Article V)

Article V of the New York Convention protects defendants’ rights and state sovereignty. The courts may — in order to protect those rights — refuse the enforcement of awards. Caution is necessary. The losing party often argues that its ‘rights’ are violated. To this day, some judges and public officials around the world retain a certain distrust of arbitration, unenthusiastic about the Convention, and may be tempted to avoid enforcement by improperly invoking Article V(2), which can be applied ex officio, This is why canons are designed for the interpretation of Article V, and why Article V may never function (should never function) as a de facto appeal.” The heart of the New York Convention is the specification of limited grounds on which recognition and enforcement of an award may be refused. That the arbitrator has misinterpreted facts or law is not a defence to enforcement. The court's scrutiny is 38. PEC Limited v. Austbulk Shipping SDN BHD, Supreme Court (Civil Appeal No. 4834 of 2007) decided on 14 November 2018. 39. Charming Betsy and Vishaka v. State of Rajasthan have been discussed at supra n. 15. In the context of the arbitration statute in India, Section 47 of the 1996 Arbitration Act simply states: the party seeking enforcement provides to the court the original or certified copies of the arbitration agreement and the award and ‘such evidence as may be necessary to prove that the award is a foreign award’. 40. See PEC Limited v. Austbulk Shipping SDN BHD, Supreme Court (Civil Appeal No. 4834 of 2007) decided on 14 November 2018 discussed in the text preceding supra n. 34. Indian courts do not require any further evidence as long as the defendant does not contest the documents submitted under Section 47 of the 1996 Arbitration Act and thus apply Section 47 in a manner that is favourable to the enforcement of awards. See Glencore Grain Rotterdam B.V. v. Shivnath Rai Harnarain, 2008 (4) ARBLR 497 (Delhi).

41. Government of India v. Vedanta Limited, Supreme Court Civil Appeal No. 3185 of 2020, 16 September 2020 (arising out of SLP (Civil) No. 7172 of 2020), Supreme Court, decided on 16 September 2020 (courts do not sit in appeal over award when undertaking the Section 48 examination). For an appraisal of Article V's canons, see Marike Paulsson, The 1958 New York Convention in Action (Kluwer Law International 2016), pp. 165-175.

274

Chapter 12: India Resolutions for the New York Convention strictly limited to ascertaining whether the award gives rise to a possible refusal of enforcement on one of the narrow grounds mentioned in Article V, and the process of scrutiny does not involve an evaluation of the arbitrator's findings.™ Indian legislature has upheld this Resolution: one of the explanations added to Section 48 by the 2015 Amendment clarifies that the examination of whether there has been a contravention with the fundamental policy of Indian law ‘shall not entail a

review on the merits of the dispute’.** 12.3.10

To Adopt A Narrow Conception of Public Policy — ‘Ordre Public’ — in a Manner That Is Consistent with a Near-Universal Treaty Expressed in Five Official Languages (Article V(2))

Internationally, courts have embraced the so-called narrow or international notion of public policy. The leading case is well known: the Parsons & Whittemore decision rendered by the US Court of Appeals for the Second Circuit defining public policy under the New York Convention as ‘the forum state’s most basic notions of morality and justice’ and refusing to equate public policy with national policy. It is in conformity with the intent of the delegates in New York in 1958: the terms used at the time were ‘ordre public’,

‘manifestly’,

‘fundamental’.

In reality, not all national orders make

that distinction. For some, there is one notion of public policy only. Courts, in general, are recommended to accept only international standards under the Convention. The use of international standards was encouraged by one of the experts in international arbitration, Robert Briner, former Chairman of the International Court of Arbitration of the International Chamber of Commerce (ICC), emphasising that ‘there exists no real reason why the enforcement judge should apply other criteria than that of international public policy’.*° Moreover, the International Law Association issued recommendations at the conference held in New Delhi in 2002 on international commercial arbitration and advocated the use of narrow and international standards only.*° The ILA defined international public policy as follows: The international public policy of any State includes: (i) fundamental principles, pertaining to justice or morality, that the State wishes to protect even when it is not

directly concerned; (ii) rules designed to serve the essential political, social or economic interests of the State, these being known as ‘lois de police’ or ‘public

42. Fali Nariman, Harmony amidst Disharmony,

The International Framework,

Series — Volume 2 (Hay House Publishers, 2020), pp. 171-172.

The Arbitration

43. Section 22, 2015 Amendment amending Section 48 of the 1996 Arbitration Act. 44. Drafting History of the Convention, UN DOC/E/AC.42/SR.7. 45. Robert Briner, celebrating the 40'" Anniversary of the Convention in his speech ‘Philosophy and objectives of the Convention’ in Enforcing Arbitration Awards under the New York Convention. Experience and Prospects (United Nations 1999). 46. International Law Association, New Delhi Conference (2002), Committee on International Commercial

Arbitration

chaired

by

Professor

Pierre

Mayer,

recommendation

|{b):

‘Such

exceptional circumstances [to refuse recognition and enforcement of the award] may in particular be found to exist if recognition or enforcement of the international arbitral award would be against international public policy.” For a review of jurisprudence related to the interpretation of public policy, see Chapter 10 of the Handbook.

27a

Fali Nariman, Marike Paulsson & Supritha Suresh policy rules’; and (iii) the duty of the State to respect its obligations towards other

States or international organizations.”

Not all judges in the Contracting States are mentally adjusted to the limited role of the court before which a foreign award is brought for recognition and enforcement. Some judges simply do not (or would not) accept that an award that is believed to have produced an unjust result should be enforced! Accordingly, when perusing foreign awards, and the limited grounds available under the Convention for their enforcement, some judges have been known to import their own individual beliefs about the ‘justice of the case’, and then to try and fit their predilections into the ‘public-policy’ ground, contrary to the avowed intent and purpose of Article V(2)(b):** In the end, the task for judges (of national courts) under the New York Convention,

is that they must have the mental discipline to recognise the court's true role as a court of enforcement — not as a court of original decision making.*”

12.4

HOW CAN COURTS APPLY THE RESOLUTIONS?

Separation of powers means that the powers of the judiciary may not tread on the legislator’s territory. Once the Indian enactment of the New York Convention is in place, courts will apply the Convention as a matter of national law. How can courts then, for example, apply an internationally recognised narrow standard of public policy or rely on foreign judicial decisions on the Convention and recommendations for interpretation issued by international bodies such as UNCITRAL and the International Law Association? It is suggested that they can do so by treating Part Il as an instrument that originates from an international convention and by interpreting that enactment on the basis of a presumption that India’s Parliament passed this Act as giving effect to India’s international legal obligations under the Convention: which is a directive principle of state policy under India’s Constitution.” The courts should be able to rely on the following: — discretion; — good faith; — purposive interpretation; — functionalist interpretation;

— textual and contextual use of the Convention, which is reproduced in Schedule I and is a part of Indian law; and — interpretation on the basis of fairness to resolve blanks in the —- implemented — Convention such as the lack of a definition of award in Article [(1).

47. 48.

Ibid. Fali Nariman,

Harmony

amidst Disharmony,

The International

Framework,

The

Arbitration

49.

Fali Nariman,

Harmony

amidst Disharmony,

The International

Framework,

The

Arbitration

Series — Volume 2 (Hay House Publishers, 2020), pp. 171-172.

Series — Volume 2 (Hay House Publishers, 2020), p. 193. 50. Article 51, Constitution of India, 1950. See text preceding supra n. 16.

276

Chapter 12: India Resolutions for the New York Convention Thus, courts can give elfect to the Convention as concluded in 1958, making it work today under the 1996 Arbitration Act (and its subsequent amendments), setting an example for their foreign counterparts and promote an idea of fairness, which is an inherent part of the rule of law. It is the judges of national courts who drive the New York Convention-train in each Contracting State, and it is the responsibility of those long experienced in international arbitration to help them drive it in the right direction.”' 12.5

OVERVIEW OF THE CONVENTION: ACTION I: RECOGNITION OF THE ARBITRATION AGREEMENT

The recognition of the arbitration agreement forms the core of the New York Convention as its denial — if unjust — causes the premature death of the arbitration. £2.51

The Source — Article II: Survival by Court Interpretation

Article II of the New York Convention cannot function without reference to municipal norms. Indian courts will rely on national rules of statutory interpretation of the national statute and will further apply local principles of contract interpretation to establish the existence of a valid and enforceable arbitration agreement. Finally, the courts will, on the basis of the national rules on conflict of laws, apply a law, which

could be the lex arbitri or the lex fort. Thus, it is so that the text of Article II of the Convention needs judicial interpretation and moulding. Article II consists of three subsections and provides for a formal scope, a material scope and grounds to refuse. It obliges courts to recognise the arbitration agreement and to refer the parties to arbitration: — The formal scope seems very simplistic: the agreement must be in writing, which means that the arbitration clause or agreement must be either signed by both parties or concluded through an exchange of telegrams. Thus the

requirement can be met in two ways: a signed agreement or an exchange.

— The material scope requires the court's assessment of the validity of the arbitration agreement: was there a joint intent of the parties to undertake to submit a difference between them to arbitration? — The grounds to refuse either the recognition of the arbitration agreement or the referral of the parties to arbitration are: (1) the subject matter is not arbitrable; (2) the arbitration agreement is null and void; (3) the arbitration agreement is inoperative; or (4) the arbitration agreement has become incapable of being performed. Courts determine the validity of the arbitration agreement based on nationally recognised and applied principles of contract interpretation in order to establish if there was 51. Fali Nariman, Harmony amidst Disharmony,

The International Framework,

Series — Volume 2 (Hay House Publishers, 2020), p. 198.

277

The Arbitration

Fali Nariman, Marike Paulsson & Supritha Suresh a joint intent by the parties to submit a dispute to arbitration. On the one hand, courts ought to recognise the parties’ mutual consent to arbitrate on the premise of a good-faith interpretation. On the other hand, courts must be cautious not to deny a party the fundamental right of access to courts if it has not relinquished it by agreeing to arbitration. Courts have set limits to parties’ failure to say what they mean. The Federal Supreme Court of Switzerland refused to cure a pathological clause as parties had created an agreement to arbitrate but had added the unfortunate phrasing ‘or any other US court’. That addition rendered the initially clear joint intent to arbitrate ambiguously.’ Thus, judicial interpretation is based on good faith and is intended to protect either the parties’ rights to arbitrate, which is based on party autonomy, a pillar of arbitration, or their fundamental rights to access courts. 12.5.2

Questions and Issues Raised

India’s enactment refers to ‘in writing’ in Section 44(a) of the 1996 Arbitration Act without enacting Article II(2) of the New York Convention ad verbatim.** The Section refers to the First Schedule, which is the Convention. Thus, the courts are bound to test the stringent ‘in writing’ requirement created by the drafters in 1958. In relation to domestic arbitrations, Section 7 of the Act was amended by the 2015 Amendment

to

allow recognition of communication exchanged through electronic means.™ In reality, many parties intend to be bound by an agreement to arbitrate by concluding agreements, such as bills of lading and other agreements common in shipping, which subsequently incorporate standard conditions by reference. It is these conditions that contain the arbitration clause.** Is that a valid arbitration agreement in writing under Article II of the New York Convention? Further, parties, even though the agreement has not been signed by both parties, can establish their intent of wanting to arbitrate by conduct. Courts have accepted this to constitute an arbitration agreement. One must still answer the question of how exactly that liberal judicial approach can be aligned with the stringent requirement under Article II of the New York Convention. A US Court of Appeals for the Third Circuit decision provides for a fair replacement of the ‘in writing’ requirement with ‘conduct’. The basis for doing so is good faith. The arbitration clause in the case at hand was contained in the industry 52. Switzerland No. 43, X Holding AG et al. v. Y Investments NV, Bundesgerichtshof, 25 October 2010, in Yearbook Commercial Arbitration Vol. XXXVI

Kluwer Law International 1990) pp. 343-345.

(Albert Jan Van

den Berg ed., ICCA &

53. See supra n. 21.

54. Section 3, 2015 Amendment amending the 1996 Arbitration Act. For the requirements of a valid arbitration agreement, see Chapter 2 of the Handbook. 55. For instance, see Switzerland No. 27, Compagnie de Navigation et Transports SA v. MSC Mediterranean Shipping Company SA, Tribunal Fédéral [Supreme Court], 16 January 1995, in Yearbook Commercial Arbitration Vol. XXI (Albert Jan Van den Berg ed., ICCA & Kluwer Law

56.

International 1990) pp. 690-698.

United States No. 457, Standard Bent Glass Corp. (US) v. Glassrobots Oy (Finland), United States

Court of Appeals, Third Circuit, 20 June 2003, in Yearbook Commercial Arbitration Vol. XXIX (Albert Jan Van den Berg ed., ICCA & Kluwer Law International 1990) pp. 978-989.

278

Chapter 12: India Resolutions for the New York Convention guidelines. Although the receiving party, Standard Bent Glass, did not specifically acknowledge receipt of the guidelines, it did acknowledge receipt of the agreement. Even though it had not yet signed that agreement, Standard Bent Glass had commenced performance under that agreement. This conduct established a clear intent to arbitrate. It was a common deduction from the circumstances and a conclusion that was fair and based on good faith. The reason for the court to interpret Article II of the New York Convention in such a liberal fashion was the style with which contracts in international trade are commonly concluded today. Thus the court adapted the 1958 text of Article II of the Convention with the reality of today's international trade.” In another matter, the US District Court for the Southern District of New York

(applying the lex arbitri, i.e. English law) denied the existence of an arbitration agreement. It rejected the idea that the idea of an arbitration agreement was implied and that parties’ prior conduct pertaining to different works was not sufficient to establish that a valid agreement existed for the immediate dispute.” Finally, what laws will courts apply to assess, for example whether the subject matter is arbitrable? The courts must apply their rules of conflict of laws, which will then result in the application of either the lex fori or the lex arbitri. International case law on arbitrability of Article Il of the New York Convention shows that courts apply a narrow notion of arbitrability. That narrow use is equally applied under Article V(2)(a). For example, under the Convention antitrust claims have been held to be arbitrable. The US District Court for the Southern District of New York held that: [T]he Supreme Court has instructed that courts apply the statute in accordance with ordinary contract principles, with a healthy regard for the [Convention's]

underlying policy, to this end resolving any doubts concerning the scope of arbitrable issues in favor of arbitration. Whether the issue at hand is a construction

of the language of the agreement itself, or a defense to arbitrability. This bias in favor of arbitration is even stronger in the context of international business transactions.~’ Ideally, the Indian courts ought to apply the lex arbitri, as that is the law parties choose to be applicable to the dispute. In matters relating to arbitrability of a dispute there is a discernible trend in India for courts to narrow the range of disputes that are capable of being submitted to arbitration. The extent of non-judicial intervention under Section 5 of the Act has to be read along with Section 2(3) of the Act (also in Part I) which states:

57. For a discussion of the Standard Bent case, see Marike Paulsson, The 1958 New York Convention in Action (Kluwer Law International 2016), pp. 82-83. 58. United States No. 741, Maritima De Ecologica SA de CV v. Sealion Shipping Ltd, United States District Court, Southern District of New York, 15 April 2011, in Yearbook Commercial Arbitration Vol. XXXVI (Albert Jan Van den Berg ed., ICCA & Kluwer Law International 1990) pp. 467-471. For a discussion of the case, see Marike Paulsson, The 1958 New York Convention in Action (Kluwer Law International 2016) pp. 83-84.

59. United States No. 453, Peter J. DaPuzzo (US) v. Globalvest Management Company, L.P. and others, United States District Court, Southern District of New York, 12 June 2003, in Yearbook

Commercial Arbitration Vol. XXIX (Albert Jan Van den Berg ed., ICCA & Kluwer Law International 1990) pp. 900-936, see para. 2.

279

Fali Nariman, Marike Paulsson & Supritha Suresh This part shall not affect any other law for the time being force by virtue of which certain dispute may not be submitted to Arbitration.

The interpretation given by the Supreme Court of India from time to time to Section 2(3) has limited the concept of arbitrability rather than extended it.™ 12.5.3

The Dialogue

At the outset it is to be noted that, even if courts may interpret the New York Convention’s instructions very liberally, the subject matter must be commercial when the signatory state, like India, has reserved its application to commercial matters.°' 12.5.4

May Courts Rely on Section 7 as an Interpretative Tool for Article II (2)?

Furthermore, an interesting element of the 1996 Arbitration Act is Sections 7(4) and (5) which provides: (4) An arbitration agreement is in writing if it is contained in(a) a document signed by the parties; (b) an exchange of letters, telex, telegrams or other means of telecommunication {including communication through electronic means| which provide a record of the agreement; or

(c) an exchange of statements of claim and defence in which the existence of

the agreement is alleged by one party and not denied by the other.

(5) The reference in contract

to a document

containing an arbitration clause

constitutes an arbitration agreement if the contract is in writing and the reference is such as to make that arbitration clause part of the contract.”

India, as have many other states, has brought its national laws in line with contemporary usages in international trade, such as the incorporation of an arbitration agreement by reference. The 2015 Amendments have also recognised communications through electronic means. These less stringent requirements can be applied through Article VII(1) of the Convention. However, that would mean a court will no longer apply Part II of the 1996 Arbitration Act but instead the regime applicable to domestic arbitrations, contained in Part I. Courts would thus rely on Section 7 to incorporate and accept the conduct of both parties and/or an electronic communication as a substitute for a traditional signed agreement or an exchange. Application of Part I principles to Part II cases or vice versa has been a thorny issue in Indian jurisprudence. In relation to the immediate discussion, in Shivnath v. Narain the Delhi High Court considered Sections 7 and 44 of the Act to be distinct 60. Fali Nariman, Hannony amidst Disharmony, The Indian Framework, The Arbitration Series — Volume | (Hay House Publishers, 2020), pp. 71-73. 61. See supra n. 21 paraphrasing Section 44, 1996 Arbitration Act. 62. Section 7, 1996 Arbitration Act. The text in bold was inserted by Section 3 of the 2015 Amendment. 63. For a discussion of Section 7, see Chapter 2 of the Handbook.

280

Chapter 12: India Resolutions for the New York Convention provisions and part of different regimes.“ The Madras High Court refused to make use of Section 7: Unfortunately, the provision relating to definitions falls only under Part I. Section

2 (1) (b) defines ‘arbitration agreement’ to mean an agreement referred to in Section

7 |...| [T]he definition of the term arbitration agreement,

Section 7 (1) is applicable only to Part I.

as found in

At the same time, the Madras High Court created a doctrine for a possible use of Section 7 of the 1996 Arbitration Act in future cases by finding that the enactment of Article II (2) of the New York Convention is ‘an abridged version of Section 7 [of the Act]’.% When a court attempts to determine the existence of an arbitration agreement, or cure a pathological clause, it must be certain of a joint intent to arbitrate. Parties to the arbitration agreement contract out of access to court. The review must be a careful process. Protection of the parties by courts is vital to prevent parties from wrongly being assumed to have exited out of their fundamental right to access to courts. This error would be a denial of justice. Only when a court can establish a mutual intent shall a court refer parties to arbitration: the purpose of the Convention is not per se a pro-enforcement attitude but the protection or enhancement of the effectiveness of international arbitration and international trade. It is about trust. There are then two aspects to the recognition of the arbitration agreement and referral to arbitration: first, the courts will interpret the language of Article II (1) of the New York Convention as to whether parties undertook to submit a difference to arbitration and, second, the courts will interpret the arbitration agreement itself. 12.6

OVERVIEW OF THE CONVENTION: ACTION II: THE ENFORCEMENT OF THE AWARD

The fast and efficient enforcement of arbitral awards was the key objective behind the creation of the Convention. 12.6.1

Article I

Article I sets out the scope of the New enforced under the Convention:

York Convention, i.e. which

award can be

— foreign awards; — those awards considered as non-domestic; and

— the latter category may include a-national awards. 64. M/s. Shivnath Rai Har Narain v. M/s Italgrani SPA, 93 (2001) DLT222, 2002 (63) DRJ174. 65. Andritz Oy, rep. through Power of Attorney Agent, Mr. Siraj Ahmad v. Enmas Engineering Pvt. Ltd., rep. by its Director and Principal Officer and Anr., 2007 (3) ARBLR545 (Madras). 66. For a discussion of cross-pollination between Parts | and II of the 1996 Arbitration Act in relation to who is a party and extension of arbitration agreements to bind third parties, see Chapter 2 of the Handbook.

281

Fali Nariman, Marike Paulsson & Supritha Suresh Article I (3) of the Convention enables Contracting States to make two reservations: the commercial reservation and the reciprocity reservation. India has made both reservations.’ Further, Article I has not defined the terms arbitration and award. Thus,

at first glance, it is unclear whether an interim award would fall under the Convention. The US District Court of North Carolina decided that a ‘termination order’ was final and could be enforced under the Convention despite its title indicating the contrary.°* According to the US Court of Appeals for the Seventh Circuit, an ‘order’, rendered in London (instructing Publicis to provide True North with tax information), was a final order because the contents of an arbitration decision, not its nomenclature,

determine finality for purposes for enforcement under the Convention.*”’ The Australian Supreme Court of Queensland's analysis in Resort Condominiums International facilitates one’s understanding of ‘award’ under the Convention.” The award at stake was an ‘Interim Arbitration Order and Award’ rendered in the US under the rules of the American Arbitration Association and could not be enforced under the Convention.”' In India, the statute provides a reprieve. Section 2(c) of the 1996 Arbitration Act, the definition section in the Indian statute, defines arbitral award as including an

interim award.”* 12.6.2

Article Ill

Article II] of the New York Convention sets out the core obligation to courts: to treat Convention award as binding and to enforce it: (1) in accordance with its rules procedure and (2) the conditions set forth in the Convention. In short, these conditions under Articles IV and V. The pitfall has come to be ‘rules of procedure’. some

countries,

like the United

such

as forum

non

States, courts have relied on procedural principles,

conveniens

or international

comity,

to stop enforcement

67. This is recognised in Section 44 of the 1996 Arbitration Act. See supra n. 21, 68.

United

States No.

the of are In

729, Blackwater Security Consulting,

LLC et al. v. Richard

P. Nordan,

by

as

Ancillary Administrator for the Separate Estates of Stephen 5. Helveston, Mike R. Teague, Jerko Gerald Zovko, and Wesley J.K. Batalona, United States District Court, Eastern District of North

Carolina, Northern Division, 21 January 2011, in Yearbook Commercial Arbitration Vol. XXXVI (Albert Jan Van den Berg ed., ICCA & Kluwer Law International 1990) pp. 425-427. 69. United States No. 338, Publicis Communication v. Publicis $.A., True North Communications Inc., United States Court of Appeals, Seventh Circuit, 14 March 2000, in Yearbook Commercial Arbitration Vol. XXV (Albert Jan Van den Berg ed., ICCA & Kluwer Law International 1990) pp. 641-1164, see at para. 6.

70. Australia No. 11, Resort Condominiums International Inc. v. Ray Bolwell and Resort Condominiums, Pty. Ltd., Supreme Court of Queensland, 29 October 1993, in Yearbook Commercial

Arbitration Vol. XX (Albert Jan Van den Berg ed., ICCA & Kluwer Law International 1990) pp.

628-650. 71. Ibid at paragraph |: ‘These orders are clearly of an interlocutory and procedural nature and in no way purport to finally resolve the disputes [...] or to finally resolve the legal rights of the parties. They are provisional only and liable to be rescinded, suspended, varied or reopened by the tribunal which pronounced them.’ 72.

Section

2(c),

1996

Arbitration

Act.

For

a discussion

of whether

awards

by

an

emergency

arbitrator would fall within the definition in Section 2(c) of the Act, see Chapter 8 of the Handbook.

282

Chapter 12: India Resolutions for the New York Convention declaring the request for enforcement inadmissible.” Section 46 of the 1996 Arbitration Act enacts Article III of the Convention. The Supreme Court of India has said that the New York Convention was intended to allow Contracting States to impose time limits on the recognition and enforcement of foreign arbitral awards ‘if they so wished’.”* On the matter of appropriate forum, the Supreme Court has clarified that an award holder can initiate execution proceedings before any court in India where assets are located.” 12.6.3

Article IV

In the assessment, certification, and authentication of the documents to be submitted by the successful party (the agreement, award, and possibly a translation of the award), courts around the globe, including India, have been lenient and cautious of

“excessive formalism’ in dealing with the ‘Ws’ for authentication and certification: where, by whom, what, when? Where should the authentication and certification take place: in the country where the award was rendered or in the country where the enforcement is sought? Who can authenticate or certify: a public notary, or a consular agent? What should be certified: the entire award or only the essential parts and the dictum? When should the authenticated and certified documents be submitted: at the time of filing of the request for enforcement or can that be done later during the proceedings or even during the appellate proceedings? Section 47 of the 1996 Arbitration Act has enacted Article IV of the New York Convention and provides: (1) The party applying for the enforcement of a foreign award shall, at the time of the application, produce before the court: (a) the original award or a copy thereof, duly authenticated in the manner required by the law of the country in which it was made;

73. In the US, various requirements must be met for the court to accept jurisdiction: one of the parties must be a citizen of a country other than the US; personal jurisdiction must also be established under the traditional due process minimum contact test. See the US report in the ICC Bulletin, ICC Guide to National Procedures for Recognition and Enforcement of Awards under the New York Convention, Volume 23, Special Supplement 2012. In Figueiredo, the US Court of Appeals for the Second Circuit denied the request for the enforcement of an award rendered in Peru, not because one of the refusal grounds listed under Article V of the New York Convention warranted such refusal, but because of the US applicable rules of forum non conveniens and international comity as applied under US rules of procedure as referred to in Article III. See Figueiredo Ferraz Engenharia De Projecto Ltda. v. The Republic of Peru, Ministerio de Vivienda, Construccion y Saneamiento, Programa Agua Para Todos (PAPT) (successor by integration to Programa De Apoyo A La reforma Del Sector Saneamiento (PARSSA), formerly known as Proyecto Especial Programma Nacional De Agua Potable & Alcantarillado (PRONAP)) 2011 US App. Lexis 24748 (United States Court of Appeal for the Second Circuit, 14 December 2011). 74. Fali Nariman, Harmony amidst Disharmony, The Indian Framework, The Arbitration Series — Volume

| (Hay House Publishers, 2020), p. 210.

75. Sundaram Finance Lid. v. Abdul Samad and Anr (2018) 3 SCC 622. In case the subject matter of the arbitration is of a specified value, commercial courts established under the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act 2015 would have jurisdiction. See also, M/s. Fuerst Day Lawson Ltd v. Jindal Exports Ltd., 2001 (6) SCC 356

holding that in relation to foreign awards, recognition (i.e., determination of enforceability) and execution are different stages within the same proceeding.

283

Fali Nariman, Marike Paulsson & Supritha Suresh (b) the original agreement for arbitration or a duly certified copy thereof; and (c) such evidence as may be necessary to prove that the award is a foreign award.

Section 47 of the Act resolved many of the ambiguities found in Article IV of the Convention itself. It includes a choice of law. There is no need to certify the copy of the award. However, extra evidence may be required to prove that the award is foreign — which is in fact a furtherance of Article I{1) of the Convention.” India rendered a landmark decision in Renusagar in which the court held that ‘it is necessary to bear in mind that while enforcing a foreign award one should not be extremely strict and technical as to the compliance with the requirements of [Article IV(1)(a) of the Convention]’.’’ The interpretation is one based on good faith and does not allow for the losing party in arbitration, by relying on technical deficiencies of the request for enforcement, to stop the enforcement without relying on the exhaustively listed refusal grounds of Article V. However, a minimum of evidence is required to enable a judge to make that prima facie assessment as to whether there is an enforceable award that was based on an arbitration agreement. In Yukos Oil Company v. Dardana, the Court of Appeal (of England and Wales) in its judgment dated 18 April 2002 held that once a party has produced the duly authenticated award or a duly certified copy of it as well as the original arbitration agreement (or its duly certified copy), the party has a prima facie right to recognition and enforcement of the award.”* Commentators have opined that an applicant satisfies the requirements of Article IV of the New York Convention even though a dissenting opinion (which exists) is not provided (unless the applicable rules provide otherwise) since a dissenting opinion does not form part of the award.” The burden of proving that the award is not enforceable lies on the party that has raised the issue.*” 12.6.4

Article V

Article V of the New York Convention enables a court to resisting enforcement and the sovereign notions of the enforcement is sought. The first protection is essential attractive means of dispute resolution. As arbitration is

protect the rights of the party Contracting State where the to preserve arbitration as an not a regulated process, one

76. See supra nn. 34 and 36 on interpretation of Section 47 of the 1996 Arbitration Act. 77. India No. 18, General Electric Company v. Renusagar Power Company, Bombay High Court, 21 October 1988, in Yearbook Commercial Arbitration Vol. XV (Albert Jan Van den Berg ed., ICCA

& Kluwer Law International 1990) pp. 465-492, see, para. 29. For a discussion of the case, see Marike Paulsson, The 1958 New York Convention in Action (Kluwer Law International 2016), p. 147. The case was decided under the Foreign Awards (Recognition and Enforcement) Act, 1961,

and is further discussed in Chapter |] of the Handbook. 78. Yukos Oil Company v. Dardana (CA) [2002] EWCA Civ 543. 79. Fali Nariman, Hannony amidst Disharmony, The Indian Framework, The Arbitration Series — Volume

80.

| (Hay House Publishers, 2020), p. 211. For further discussion of the arbitral award, see

Chapter 9 of the Handbook. Escorts

Ltd.

v. Universal

Tractor Holding

LLC

(2013)

10 SCC

717;

see also,

Fali

Nariman,

Harmony amidst Disharmony, The Indian Framework, The Arbitration Series - Volume | (Hay House Publishers, 2020), p. 214.

284

Chapter 12: India Resolutions for the New York Convention does not always know one’s arbitrator. Parties are not always adequately protected against an unforeseen bias or partiality. Some arbitrators have found jurisdiction where they ought not have done so. Some tribunals have rendered awards that exceeded the scope of their given mandate. It is here that the Convention regulates the system of arbitration in a manner that transcends borders and in a manner that is internationally accepted by Member States of the United Nations. The other form of protection is the respect for sovereignty, and it was on that premise that States were willing to sign on to the Convention. As it was a condition to acceptance of the Convention, courts must abide by those notions of sovereignty and they are to do so on the basis of Article V(2): public policy. The courts must be careful in the protection of those rights, though, as the main aim of the Convention was to allow for the enforcement of awards abroad. The grounds under Article V are textually problematic and require a fair amount of interpretation by courts — potential deathtraps for applicants and a treasure trove for respondents. Thus, canons may assist courts to properly assess the warrant of refusal under Article V: exhaustiveness; serious cases only; burden is heavy; narrow construction; no review on the merits."’ Article V of the Convention has been enacted through Section 48 in the

1996 Arbitration Act.**

Since there were different judgments at different times by the Supreme Court of India on (foreign) awards, Explanations | and II were added to Section 48 of the Act (by Amending Act 3 of 2016) ‘for the removal of doubts’: because it was felt that interpretation of the provisions of the 1996 Act by courts (including the Supreme Court of India in some cases) had resulted in delay in disposal of arbitration proceedings, and an increased interference of courts in arbitration matters tended to defeat the object of the Act. Both subsections of Section 48 provide that enforcement ‘may’ be refused, indicating clearly that the court has an ultimate discretion to reject the defence and to refuse enforcement of the foreign award. The court may find that the party opposing the enforcement is estopped from invoking any of the grounds mentioned in Section 48. It may also find that the ‘public policy’ violation is not such as to prevent enforcement of the award. In proceedings for enforcement of a foreign award, the scope of enquiry before the court in which the award is sought to be enforced is limited to the conditions mentioned in Section 48. It is settled law that the Section does not enable a party to the said proceedings to impeach the foreign award on merits or for errors apparent on the face of the award.™

81. For an appraisal of Article V's canons, see Marike Paulsson, The 1958 New York Convention in Action (Kluwer Law International 2016), pp. 165-175. See alse, guidelines-to judges in Chapter ll.

§2. Clarificatory explanations were inserted into Section 48 by the Arbitration and Conciliation (Amendment) Act, 2015. For an elaboration of these explanations, see supra n. 20. The explanations are also discussed in Chapter 10 of the Handbook. 63. Fali Nariman, Harmony amidst Disharmony, The Indian Framework, The Arbitration Series — Volume | (Hay House Publishers, 2020), pp. 213-214.

285

Fali Nariman, Marike Paulsson & Supritha Suresh 12.6.5

Article VI

Article VI of the New York Convention is a furtherance to the possibility to refuse the enforcement of the award if the award might be set aside in the country where it had been rendered. In some instances, a setting aside procedure is still pending before the court in the country of origin and there is a realistic chance of that court setting aside the award. Enforcing the award before the decision in the setting aside procedure has been rendered can be counterproductive as that enforcement often cannot be undone. It is then that the court will have the discretion to adjourn the decision to enforce and await the outcome in the setting aside procedure. The court must make some determination as to the merit to that challenge and the court can order security to ensure the preservation of assets. The UK High Court of Justice in Dowans applied what is called the ‘sliding scale’ developed in Soleh Boneh:™ If, for example, the challenge to the validity of an award is manifestly wellfounded, it would in my opinion be quite wrong to order security until that is

demonstrated in a foreign court |...] If the award is manifestly invalid, there should be an adjournment and no order for security; if it is manifestly valid, there should

either be an order for immediate enforcement, or else an order for substantial security. In between there will be various degree of plausibility in the argument of invalidity; and the Judge must be guided by his preliminary conclusion on the point. The second point is that the Court must consider the ease of difficulty of enforcement

of the award,

and whether it will be rendered

more difficult, for

example, by movement of assets or by improvident trading, if the enforcement is

delayed. If that is likely to occur, the case for security is stronger; if, on the other hand, there are and always will be insufficient assets within the jurisdiction, the case for security must necessarily be weakened.**

The court thus identified the following elements as important for determining adjournment and ordering security: for the ordering of adjournment the court will make a limited assessment only of the chances of success of the award being set aside in the country of origin deferring to the courts of origin and with respect to the ordering of security and how much the court also considers the risk of delay and the risk of assets being moved. If setting aside might be successful and tip the balance on the sliding scale in favour of defendant, the court might still order security if the risk of assets being moved remains high. The substance of Article VI of the New York Convention can be found in Section 48(3) of the 1996 Arbitration Act.*° The Delhi High Court has found that Section 48(1) when read with Section 48(3) makes clear that enforcement proceedings may be

84. Soleh Boneh International Ltd v. Government of the Republic of Uganda {1993] 2 Lloyd's Law Rep 4208 CA at p. 212.

85. Dowans Holding S.A. v. Tanzania Electric Supply Co. Ltd [2011] EWHC 1957 (Comm) at para. 42. 86. In relation to domestic arbitrations under Part I, there was an automatic stay on enforcement pending annulment applications which was amended by the 2015 Amendment. For a discussion of jurisprudence related to the automatic stay and the 2015 Amendment, see Chapter 11 of the Handbook.

286

Chapter 12: India Resolutions for the New York Convention adjourned if a challenge has been made by the party that lost the arbitration in the country where the award has been made.*” 12.6.6

Article VII

The embodiment and purpose of the Convention are enacted in Section 51 of the 1996 Arbitration Act, enabling parties and courts to opt out of the Convention if a national law or other treaty is more favourable to the enforcement of the award. This is in furtherance of what the Convention is about: (1) Recognition of Foreign Arbitral Awards, or (2) Enforcement of Foreign Arbitral Awards. The Convention is not designed or structured to provide for non-recognition of foreign arbitral awards and non-enforcement of foreign arbitral awards. Most courts around the world have adopted the view that an interested party need not apply or request for recognition or enforcement on the basis of laws or treaties that are more favourable to enforcement. And it is said that a court will not be in breach of the New York Convention by applying more liberal rules on recognition and enforcement — even on its own motion. In India today, the Arbitration Act, 1940 having been repealed, it is under Section 9 of the Cade of Civil Procedure of 1908 that suits can be brought on a foreign award not covered by existing statute law. In all types of civil disputes, the civil courts had (and continue to have) inherent jurisdiction to entertain and try all suits of a civil nature - unless expressly or impliedly barred.**

87.

Naval Gent Maritime Limited v. Shivnath Rai Harnarain (I) Ltd., (2009) SCC OnLine Del 2961.

88. Fali Nariman, Harmony amidst Disharmony, The Indian Framework, The Arbitration Series — Volume

| (Hay House Publishers, 2020) pp. 220-221.

287

CHAPTER 13

Investor-State Dispute Settlement and India Aditya Singh

In recent years, the system of investment arbitration has come

under scrutiny.

Whereas some States are looking into holding on to the current system, others, like

India, have adopted a different approach. India's history in ISDS started around 25 years ago. It entered into its first bilateral investment treaty (BIT) in 1994. In 2016, it released a new Model BIT. Later, in 2017 it decided to terminate all BITs. The State has never been a party to the ICSID Convention. This Chapter discusses India’s approach to ISDS and examines provisions of the Model BIT. Moreaver, it addresses key developments in investment arbitration in India.

| |

INTRODUCTION

Early on, as a capital-importing country, India was a relatively late entrant into the worldwide network of Bilateral Investment Treaties (BITs), which up to then had largely been the dominant domain of capital-exporting countries. Subsequently, in the early 1990s, India’s economic liberalisation triggered a raft of foreign investment into India. Unsurprisingly, it is at this time that India entered into its first BIT, the 1994 UK-India BIT. Thereafter, it is no coincidence, as one of the world’s fastest-growing economies, India’s burgeoning economic growth led to a proliferation of BITs signed by India over the next decade. Thus, by the end of the 21* century, India ran one of the world’s most

extensive BIT programmes, which included nearly 80 BITs, 14 treaties with investment provisions and 18 investment-related instruments.' However, the 2010s saw BITs viewed with growing scepticism by scholars and commentators. The notion that these instruments drove economic expansion, by encouraging inflow of foreign investment and balancing it with investment protection, 1. See Investment Policy Hub, International Investment Agreements Navigator, available at https:/ /investmentpolicy.unctad.org/international-investment-agreements/countries/96/india.

289

Aditya Singh came to be steadily rejected by various stakeholders: third world governments, practitioners, scholars, the media and the public. India was no exception. India’s fledgeling history of its BIT programme spans three decades: (i) the 1990s; (ii) the 2000s; and (iii) the 2010s. 13.1.1

The 1990s: The First Decade

In 1994, India entered into its first BIT, the 1994 UK-India BIT. Initially, this BIT served

as a template for many other treaties negotiated and signed by India in the following decades.” Policy documents and the Government’s statements from this early period echoed the aim of attracting greater foreign investment, focusing only on that goal and not foreseeing the balance between investor protections and other legitimate objectives.” A common criticism of those so-called first generation BITs is that they were unbalanced treaties, usually emphasising investor protections over Indian regulatory space and aimed at making the prospect of investment into India more lucrative for foreign investors. 13.1.2

The 2000s: The Second Decade

The 1994 UK-India BIT, which until then had become the informal template for India's BIT negotiations, gave way to the 2003 Model BIT, which has been described as having “a capital exporting country model, even though India was still predominantly a capital importing State’.* As described by one commentator: a capital exporting country feature means a model of a treaty that capital-exporting

developed countries would prefer to protect their investments abroad. The jurisdiction and dispute resolution clauses in these treaties are broad. The foreign investor would have the right to initiate arbitration against the host State for violation of the BIT, without the need to go to domestic courts. The treatment standards were broad and would lean in favour of investor protection, rather than seeking a balance between investor protection and the protection of the regulatory freedom of the host State.*

2. This 1993 BIT (entered into with the United Kingdom), in turn, was based on the 1967 OECD Draft

Convention for Protection of Foreign Property. See, Rohini Singh Sisodia and Ramya Raman, Evolution of the Indian Model Bilateral Investment Treaty Vis-a-Vis Investor-State Dispute Settlement Mechanism — A Balancing Act, 15(2) TDM 3 (2018). 3. Prabhash Ranjan, India and Bilateral Investment Treaties—A Changing Landscape, 29 ICSID Review 428 (2014).

4. Aniruddha Rajput, ‘India’s shifting treaty practice: a comparative analysis of the 2003 and 2016 Model BITs, 7(2) Jindal Global L. R, 201-26

(2016). See also, Aniruddha

Rajput, ‘Protection of

Foreign Investment in India and Investment Treaty Arbitration (Kluwer Law International, 2017), p. 22. 5. See Aniruddha Rajput, Protection of Foreign Investment in India and Investment Treaty Arbitra-

tion (Kluwer Law International, 2017), Chapter 2, Section 2.02, citing Aniruddha Rajput, ‘India's

shifting treaty practice: a comparative analysis of the 2003 and 2016 Model BITs’, 7(2) Jindal Global L. R, 201-26 (2016).

290

Chapter 13: Investor-State Dispute Settlement and India In this backdrop, based on the 2003 Model BIT, India signed BITs with several dozen countries during this period. At the time, ‘the dominant thinking within the government was that entering into BITs would result in a greater inflow of foreign

investment’.® 13.1.3

The 2010s: The Third Decade

In the ensuing years, however, this investor-friendly BIT regime saw the initiation of nine arbitrations against India related to the Dabhol Power Plant Project,’ and the first adverse award for India in the White Industries® case. As a result, slowly yet steadily, stakeholders started seeing the Investor-State Dispute Settlement (ISDS) system as an encroachment upon the country’s judicial sovereignty.” Academics, parliamentarians and civil society organisations demanded the revisiting of the Indian BIT programme, and the Ministry of Commerce published a critical paper titled ‘International Investment Agreements Between India and Other Countries’,’” which emphasised the need for developing countries to strike a balance between investor's rights and domestic

policy."

This criticism led to ‘a fundamental rethink and review’ of the BIT system in India,'* on the premise that broader protections ultimately do not encourage inflows of foreign investment.'* In this context, in 2012, the Government assumed the task of reviewing the 2003 Model BIT.'* In 2014, India stated that the BIT regime was ‘in need

6. See Aniruddha Rajput, Protection of Foreign Investment in India and Investment Treaty Arbitration (Kluwer

Law

International,

2017),

Chapter

2, Section 2.02,

citing:

(i) the Foreword

by

Palainappan Chidambaram in India’s Bilateral Investment Promotion and Protection Agreements, Vol.

| (Government of India, Ministry of Finance ed., 1997);

(ii) the ‘Foreword’

by Yashwant

Sinha India's Bilateral Investment Promotion and Protection Agreements, Vol. 1 (Government of India, Ministry of Finance ed., 1999); and

(iii) the ‘Foreword’

by Pranab Mukherjee

in India's

Bilateral Investment Promotion and Protection Agreements, Vol. 7 (Government of India, Ministry of Finance ed., 2009).

7. See

IA

Reporter,

Looking

Back

— Dabhol

Power

Plant

saga

led

to numerous

Commercial,

Investment Treaty and Inter-State Arbitrations, and perhaps foreshadowed India's later concerns over BITs, available at https://www.iareporter.com/articles/looking-back-dabhol-power-plantsaga-led-to-numerous-commercial-investment-treaty-and-inter-state-arbitrations-and-perhapsforeshadowed-indias-later-concerns-over-bits,/’.

8. See White Industries

Australia

Limited

v. Republic of India, UNCITRAL,

Final Award,

November 2011, Arbitration, Oxford reports on International Investment Claims (2011).

9. Prabhash Ranjan, India and Bilateral Investment Treaties—A Review 445 (2014).

30

Changing Landscape, 29 ICSID

10. See Prabhash Ranjan, India and Bilateral Investment Treaties—A Changing Landscape, 29 1CSID Review (2014). ll. Prabhash Ranjan, India and Bilateral Investment Treaties—A Changing Landscape, 29 ICSID Review 440 (2014). 12. Prabhash Ranjan, Harsha Vardhana Singh, Kevin James and Ramandeep Singh, India's Model Bilateral Investment Treaty: Is India Too Risk Averse?, Brookings India IMPACT Series (2018) p. 9.

13. Prabhash Ranjan, India and Bilateral Investment Treaties—A Changing Landscape, 29 ICSID Review 440 (2014).

14. Prabhash Ranjan and Pushkar Anand, The 2016 Indian Model Bilateral Investment Treaty — A Critical Deconstruction, Northwestern J. of Int’L. L. and Bus.

291

13 (2017).

Aditya Singh of reform on account of the inconsistent interpretations adopted by arbitral tribunals’.'° Less than a year later, the Government publicised and circulated for comments a new draft Model BIT, which aroused keen interest among the community."® First, the Law

Commission of India communicated its preliminary opinion on the draft Model BIT,'’ after which a subcommittee composed of practitioners and academics was established with the objective of analysing it in detail.'* Subsequently, the Law Commission published a full report suggesting changes to the circulated draft."” Finally, the Model Text for the Indian Bilateral Investment Treaty (2016 Model BIT) was adopted on 14 January 2016.*" While it has been said that the 2016 Model BIT seeks to reduce arbitral discretion,*! the Government told the Indian Parliament that it

was aimed at providing ‘appropriate protection to foreign investors in India and Indian investors in the foreign country, [...] while maintaining a balance between the investor’s rights and the Government obligations’. This Chapter briefly discusses and analyses the 2016 Model BIT (Part 13.2), including its coverage and scope, key definitions, changes to substantive protections and the dispute resolution provisions. Thereafter, it gives the reader a high-level overview of the BIT disputes filed by foreign investors against India (Part 13.3 and Annex A), followed by a high-level overview of BIT disputes filed by Indian investors against a foreign State (Part 13.4 and Annex B). The Chapter then covers some key recent developments on investment arbitration and India (Part 13.5). Finally, the Chapter provides a few concluding thoughts on the current state of play and expectations going forward (Part 13.6).

15. Statement by India at the World Investment Forum 2014, UNCTAD, available at http://unctad -worldinvestmentforum.org/wp-content/uploads/2014/10/Mayaram.pdf. 16. See https://www.mygov.in/group-issue/draft-indian-madel-bilateral-investment-treaty-text/, where the draft received 185 commentaries and suggestions. 17. See Law Commission of India, Government of India, Report No. 246, Amendments to the Arbitration

18.

and

Conciliation

Act

1996,

dated

August

lawcommissionofindia.nic.in/reports/Report246.pdf. Law Commission

of India, Government

2014,

pp.

of India, Report No. 260,

Model Indian Bilateral Investment Treaty, 2015, p. -nic.in/reports/Report260.pdf. See also Kavaljit Bilateral Investment Treaty, in Rethinking Bilateral Choices (Singh and Ilge eds. 2016), pp. 82-83. 19. Law Commission of India, Government of India,

15-18,

available

at http://

Analysis of the 2015 Draft

4, available at http://lawcommissionofindia Singh, An Analysis of India’s New Model Investment Treaties: Critical Issues and Policy Report No. 260, Analysis of the 2015 Draft

Model Indian Bilateral Investment Treaty, 2015, p. 4, available at http://lawcommissionofindia

.nic.in/reports/Report260.pdf. For a general view on the differences between the draft and the final model, see, Grant Hanessian and Kabir Duggal, The Final 2015 Indian Model BIT: Is This the Change the World Wishes to See?, 32 ICSID Review (2017). 20. 2016 Model BIT, available at http://www.dea.gov.in/sites/default/files/ModelBIT_Annex_0. pdf. It is worth noting that the 2016 Model BIT contains two dates: (1) 28 December 2015, which is given in the letter accompanying the text; and (2) 14 January 2016, which is stated on the website of the Indian Ministry of Finance as the date of adoption of the Model BIT. 21. Prabhash Ranjan and Pushkar Anand, The 2016 Indian Model Bilateral Investment Treaty — A Critical Deconstruction, Northwestern J. of Int’L. L. and Bus. 44 (2017).

22. Press Information Bureau, Ministry of Finance, Government of India, available at https://pib.gov.in/newsite/PrintRelease.aspx?relid = 133412.

292

16 December 2015,

Chapter 13: Investor-State Dispute Settlement and India 13.2

MODEL BILATERAL INVESTMENT TREATY

The following analysis aims to non-exhaustively outline the key characteristics of the 2016 Model BIT and highlight its changes with respect to the previous model. 4352.1

Coverage and Scope

The scope of a BIT defines, inter alia, which investments and investors are protected

under it. For this reason, the definitions of both ‘investment’ and ‘investor’ are key provisions. 13.2.1.1

Definition of ‘Investment’

The definition of investment was one of the principal changes. While most previous Indian BITs provided for a broad asset-based definition of investment,”* the Government considered that such approach contradicted the purpose of foreign direct investment,

‘which is long term in nature’. The 2016 Model BIT, in consequence,

adopts an enterprise-based approach,~” where only a legally constituted enterprise carrying out business activities in India can bring claims under the BIT. This modification, while subtle, seeks to narrow down the scope of protected investments and reduce the number of BIT claims against India. It also adopts the objective approach known as the Salini test,*° requiring the investment to comply with certain characteristics ‘such as the commitment of capital or other resources, certain duration, the expectation of gain or profit, the assumption of risk and a significance for the development of the Party in whose territory the investment is made’.*” However, there is no guidance as to the content of these requirements, and it is not clear whether they are to be met by the enterprise or also by

its assets.7”

It is also relevant to note that the 2016 Model BIT introduces a legality requirement in the definition of investment in the form of an ‘in accordance with the law’ 23. An asset-based definition is broad, covering more than just capital or resources that have

crossed the borders with a view of creating an enterprise (see ISD, A Sustainability Toolkit for

Trade Negotiators: Trade and investment as vehicles for achieving the 2030 Sustainable Devel-

opment Agenda, Section 5.2).

24. Department of Economic Affairs, Ministry of Finance, Government of India, ‘Transforming the International Investment Agreement Regime: The Indian Experience’, 2015, slide 8 available at: https://worldinvestmentforum.unctad.org/wp-content/uploads/2015/03/India_side-eventWednesday_model-agreements.pdf. 25. An enterprise-based definition defines investment as the establishment or acquisition of an enterprise in the host State (see IISD, A Sustainability Toolkit for Trade Negotiators: Trade and investment as velicles for achieving the 2030 Sustainable Development Agenda, Section 5.2). 26. Salini Costruttori S.p.A. and Italstrade S.p.A. v. Kingdom of Morocco, ICSID Case No. ARB/00/4, Decision on Jurisdiction, para 52. See Article 25, Convention on the Settlement of Investment

27.

Disputes between States and Nationals of Other States (ICSID Convention). Article 1.4, 2016 Model BIT.

28. See Prabhash Ranjan and Pushkar Anand, The 2016 Indian Model Bilateral Investment Treaty — A Critical Deconstruction, Northwestern J. of Int’L. L. and Bus.

293

16 (2017).

Aditya Singh provision.” While it is well established that legality requirements refer to breaches of

national law,*” they ‘do not identify the exact sources of the domestic law in question”!

that must be complied with for an investment to enjoy BIT protection. In this sense, tribunals have proposed different limitations to their scope: some have held that legality requirements concern only the laws regulating the admission of foreign investments, while others have emphasised that they require that the investment complies with the host State’s fundamental legal principles.*” In an attempt to reduce the arbitrators’ discretion, the 2016 Model BIT further defines what the term ‘law’ covers,

i.e.

the

Constitution,

legislation,

administrative executive actions.” 13.2.1.2

every

law,

by-law,

guideline

and

even

Definition of ‘Investor’

The 2016 Mode! BIT also provides for a more restrictive definition of investor than that of the previous treaties. For instance, the 1994 India-UK BIT broadly defined ‘investors’ as ‘any national or company of a Contracting Party’.** In turn, under the 2016 Model BIT, only legal entities that have substantial business activities’ in the territory of India*® can qualify as an investor. According to India, this ‘prevents treaty shopping’,*” as shell companies would not be protected under the 2016 Model BIT.

29,

Article 1.4, 2016 Model BIT.

30. Rahim Moloo and Alex Khachaturian, The Compliance with the Law Requirement in International Investment Law, 34 Fordham Int'l L.J. 1476 (2011). See also, Christoph Schreuer, Jurisdiction and Applicable Law in Investment Treaty Arbitration, MJDR

(2014) p. 4; Panayotis

M. Protopsaltis, Compliance with the Laws of the Host Country in Bilateral Investment Treaties, 12 TDM 7 (2015) paragraph 14; Katharina Diel-Gligor and Rudolf Hennecke, Investment in

Accordance with the Law,

in International Investment Law: A Handbook

(Marc

Bungenberg,

Jorn Griebel, et al. eds, 2015) p. 571, paragraph 17. 31. Panayotis M. Protopsaltis, Compliance with the Laws of the Host Country in Bilateral Investment Treaties, 12 TDM 7 (2015) paragraph 1/4. 32. See Rahim Moloo and Alex Khachaturian, ‘The Compliance with the Law Requirement in International Investment Law, 34 Fordham Int'l L.J. 1476 (2011). 33. 34. 35.

Article 1.6, 2016 Model BIT. Article 1.C, 1994 UK-India BIT. For a comprehensive analysis on this test, see, OECD,

Definition of Investor and Investment in

International Investment Agreements (2008), Chapter |, pp. 28-32. 36. Article 1.13, 2016 Model BIT: ‘Territory means: In respect of India: the territory of the Republic of India in accordance with the Constitution of India, including its territorial waters and the airspace above it and other maritime zones including the Exclusive Economic Zone and continental shelf over which the Republic of India has sovereignty, sovereign rights, or exclusive jurisdiction in accordance with its law and the 1982 United Nations Convention on the Law of the Sea and international law.’ 37. Department of Economic Affairs, Ministry of Finance, Government of India, Transforming the International Investment Agreement Regime — The Indian Experience (2015) available at: hitps://worldinvestmentforum.unctad.org/wp-content/uploads/2015/03/India_side-eventWednesday_model-agreements.pdf, slide 9.

294

Chapter 13: Investor-State Dispute Settlement and India 13.2.1.3

Causation

It is worth mentioning that the 2016 Model BIT also regulates the standard for causation, which is an issue that brings into play consequences of the utmost relevance, yet has usually been dealt with in a superficial and heterogeneous manner.*® On the one hand,

investors need to establish causation between

the breach and the

injury to be awarded damages; on the other, causation is key for respondents to ensure that they are not held liable for a general regulation or for third parties’ actions. In an attempt to identify a clear standard and reduce arbitrators’ discretion, Article 23 provides: ‘[t]he disputing investor at all times bears the burden of establishing [...] that the investment [...] has suffered actual and non-speculative losses as a result of the breach; and that those losses were foreseeable and directly caused by the breach’.*” 43:22

Substantive Protections

13.2.2.1

Most-Favoured Nation (MFN)

The MFN clause ‘aims to create a level-playing field for all foreign investors by prohibiting the host State from discriminating against investors from different countries’.“” It has been used for importing both substantive protections and dispute resolution clauses. The MFN clause was of the utmost importance for the White Industries case.*' This was a dispute involving claims of alleged judicial delays by the Government of India, which prevented White Industries from enforcing an ICC Award for over nine years in connection with a contract that was entered into with a State-owned entity.“ The enforcement proceedings commenced by White Industries before Indian courts were mired in a nine-year delay. This led White Industries to commence an arbitration under the 1999 India-Australia BIT, where it argued that the delay violated underlying BIT provisions on FET, expropriation, free transfer of funds and MEN. The Tribunal dismissed allegations related to violation of FET, expropriation and free transfer of funds. However,

the Tribunal

provisions of the 1999 India-Australia BIT, and million for India’s failure to enforce the ICC Award. MEN clause on the basis that ‘India failed to provide means’ of asserting claims and enforcing rights’.**

held that India violated the MFN

awarded White Industries AUD 4 The Tribunal found a breach of the White Industries with an ‘effective In an effort to avoid another such

38. For a general analysis, see, Ilias Plakokefalos, Causation in the Law of State Responsibility and the Problem of OQverdetermination: In Search of Clarity, 26(2) EJIL (2015). 39, Article 23.2, 2016 Model BIT.

40.

Prabhash Ranjan, Harsha Vardhana Singh, Kevin James and Ramandeep Singh, India's Model

Bilateral Investment Treaty: Is India Too Risk Averse?, Brookings India IMPACT Series (2018) p. 20.

41. See

https://investmentpolicy.unctad.org/investment-dispute-settlement/cases/378/white-ind

ustries-v-india.

42. See e.g. https://investmentpolicy.unctad.org/investment-dispute-settlement/cases/378/white43.

industries-v-india.

White Industries Australia Limited v. Republic of India, UNCITRAL, Final Award, 30 November

2011, Arbitration, Oxford reports on International Investment Claims, 2011. See also Prabhash

295

Aditya Singh situation, the 2016 Model BIT does not include an MFN clause. Government, ‘[t]he main concern from a State’s perspective jurisprudence on MFN has developed’. In addition, they benefits granted to third countries ‘defeats the objective of [and] negotiations’.*° 13.2.2.2

According to the Indian is the manner in which argue that demanding having bilateral treaties

Fair and Equitable Treatment (FET)

The FET standard is arguably one of the most important substantial provisions of a BIT, as it has become ‘a catchall provision’.“° Regarding its content, there has been a discussion on whether the FET standard relates to the minimum standard of treatment (customary international law) or if it is an autonomous and developing standard, which protects against a broader spectrum of measures.” In any case, India considered that arbitral tribunals usually give a broad interpretation of this standard, and therefore the 2016 Model BIT does not contain such a clause.*® In its place, Article 3 of the 2016 Model

BIT addresses

the ‘treatment of

investments”’’ without using the FET wording, and it links the protection to customary international law. Article 3, in a clear effort to ‘provide normative content to the international

minimum

standard’,°*’

mentions

which

measures

would

constitute

a

violation of customary international law, i.e. denial of justice, fundamental breach of due process, targeted discrimination on manifest unjustified grounds and manilestly abusive treatment.

44.

45.

Ranjan, The White Industries Arbitration: Implications for India’s Investment Treaty Program, IISD, Investment Treaty News, dated 13 April 2012 available at: https://ct.iisd.net/itn/2012/0 4/13/the-white-industries-arbitration-implications-for-indias-investment-treaty-program/'#: ~ : text = White % 20Industries% 20argued % 20that % 20the,and % 20free % 20transfer% 200f % 20fun ds.

Department of Economic Affairs, Ministry of Finance, Government of India, “Transforming the

International Investment Agreement Regime: The Indian Experience’, 2015, slide 13 available at: https://worldinvestmentforum.unctad.org/wp-content/uploads/2015/03/India_side-event-We dnesday_model-agreements.pdf.

Department of Economic Affairs, Ministry of Finance, Government of India, “Transforming the

International Investment Agreement Regime: The Indian Experience’, 2015, available at: https://worldinvestmentforum.unctad.org/wp-content/uploads/2015/03/India_side-event-We dnesday_model-agreements. pdf. 46. Prabhash Ranjan and Pushkar Anand, “The 2016 Indian Model Bilateral Investment Treaty - A Critical Deconstruction’, Northwestern Journal of International Law and Business, 2017, p. 21. 47. See L.F.H. Neer and Pauline Neer (USA) v. United Mexican States, 15 October 1926, 4 UNRIAA, p. 60; Mondev International Ltd. v. United States of America,

48.

Award, 11 October 2002, §123.

ICSID Case No. ARB(AF)/99/2,

Prabhash Ranjan, Harsha Vardhana Singh, Kevin James and Ramandeep Singh, ‘India's Model

Bilateral Investment Treaty: Is India Too Risk Averse?", Brookings India IMPACT Series, 2018, p. 24.

49, 2016 Model BIT, Article 3. 50. Prabhash Ranjan, Harsha Vardhana Singh, Kevin James and Ramandeep Singh, ‘India’s Model Bilateral Investment Treaty: Is India Too Risk Averse?’, Brookings India IMPACT Series (2018) p. 25.

296

Chapter 13: Investor-State Dispute Settlement and India This approach has been said to be ‘an attempt to reject the evolution of the [minimum standard of treatment]’.”’ In this sense, according to the Indian Ministry of Finance, ‘[i]t is expected that tribunals will apply a deferential standard of review when assessing claims made under the new standard of the [2016 Model BIT]’ (emphasis added).** 13.2.2.3

Expropriation

Through the provision against expropriation, a State is prohibited from ‘taking privately owned property, directly or indirectly, except for public purpose, in accordance with due process and with compensation’.*’ The difficulty comes as most BITs do not provide guidance on the method to determine whether a measure amounts to expropriation or not. Article 5 of the 2016 Model BIT, in turn, adopts the sole effect approach™ when defining what an indirect expropriation is: ‘indirect expropriation occurs if a measure or series of measures of a Party has an effect equivalent to direct expropriation’.”* It clarifies that, in order to determine the existence of such ‘effect equivalent to expropriation’, an arbitral tribunal should assess the issue in ‘a case-by-case, [actbased inquiry’, taking into consideration the economic impact of the measure, its duration and character, and if it breaches a prior written commitment to the investor.”° Finally, it also broadly adopts the police power doctrine,”’ establishing that ‘nondiscriminatory regulatory measures or the awards of the judicial bodies of a host [S]tate that are designed and applied to protect legitimate public interest or public purpose objectives such as health, safety and environment shall not constitute expropriation

under this article’.**

It has been argued that such a broad provision ‘could be abused by host States by camouflaging all regulatory measures as measures aimed at pursuing some public

51. Prabhash Ranjan and Pushkar Anand, The 2016 Indian Model Bilateral Investment Treaty — A Critical Deconstruction, Northwestern J. of Int’L. L. and Bus. 23 (2017). 52.

Department of Economic Affairs, Ministry of Finance, Government

of India, Transforming the

International Investment Agreement Regime: The Indian Experience (2015) available at: https:/ /worldinvestmentforum.unctad.org/wp-content/uploads/2015/03 /India_side-event-Wednesd

ay_model-agreements.pdf, slide 12. 53. Prabhash Ranjan and Pushkar Anand, The 2016 Indian Mode! Bilateral Investment Treaty — A Critical Deconstruction, Northwestern J. of Int'L. L. and Bus. 25 (2017). Some authors add the requirement that the taking is non-discriminatory. For a general discussion, see, Rudolf Dolzer and Christoph Schreuer, Principles of International Investment Law (2012) pp. 98-129. 54. The sole effect test focuses only on the severity of the effect of the regulatory measures on foreign investment. See, Ben Mostafa, The Sole Effects Doctrine, Police Powers and Indirect Expropriation

under International Law, 15 Australian J. of Int'l. L. 267-96 (2008).

55. 56.

Article 5, 2016 Model BIT. Article 5, 2016 Model BIT.

58.

Article 5.5, 2016 Model BIT.

57. The police power doctrine establishes that State measures can considerably affect foreign interests without amounting to expropriation, as they are lawful prima facie. See, Alain Pellet, Police Powers or the State's Right to Regulate in Building International Investment Law - The First 50 Years of ICSID (Meg Kinnear et al., eds., 2015), pp. 447-462.

297

Aditya Singh welfare objectives, ment’.”” 13.2.2.4

which

again

would

compromise

protection

of foreign invest-

Full Protection and Security (FPS)

With this provision, States undertake the obligation to provide full protection and security to investors. However, one ol the most frequent discussions in investment law is whether FPS covers physical security only, or if it also includes regulatory and legal security.”” In order to avoid giving the arbitral tribunal such discretion, Article 3 of the 2016 Model BIT expressly provides that FPS is limited to physical security for investments and investors, and does not encompass ‘any other obligation whatsoever’.”! 13.2.3

Dispute Resolution

Chapter IV of the 2016 Model BIT provides for the dispute resolution regime. In particular, Article 15 contains an arbitration clause that implements a restricted approach in two manners. First, a subject-matter limitation, establishing that the arbitral tribunal can only consider disputes with respect to specific substantial clauses and not others, which could be understood as ‘takl{ing] the power to decide its jurisdiction away from the [t]ribunal’ with respect to those other substantial clauses.“ Second, the 2016 Madel BIT also imposes the exhaustion of local remedies for at least five years and adds temporal limitations, such as that not more than six years should have elapsed since the recognition of the dispute and further that where applicable 12 months should not have passed after the completion of domestic proceedings.” Finally, a notice of 90 days must be given before submitting the dispute to arbitration.™ 13.2.4

Reactions to the 2016 Model BIT

The key provisions enumerated above show that the 2016 Model BIT departs from the previous 2003 Model, incorporating several changes that seek to better protect the State's interests. Although the Government has expressed its intention to preserve the equilibrium between the State and investors, some commentators have argued that the 2016 Model BIT ‘doles] not in any way contribute to fostering an investor friendly

59. Prabhash Ranjan and Pushkar Anand, The 2016 Indian Mode! Bilateral Investment Treaty — A Critical Deconstruction, Northwestern J. of Int’L. L. and Bus. 30 (2017).

60. See Saluka Investments B.V. v. The Czech Republic, UNCITRAL, Partial Award, 17 March 2006, paragraph 484; CME Czech Republic B.B. v. The Czech Republic, UNCITRAL, Partial Award,

61.

September 2001, paragraph 613. Article 3.2, 2016 Model BIT.

13

62. Arthad Kurlekar and Leah Thomas, Reflections on Dispute Resolution Provisions of the Indian 63. 64.

2016 Model Bit - Demonstrating a Protectionist Approach, Article 15.5, 2016 Model BIT. Article 15.5, 2016 Model BIT.

298

15(2) TDM

(2018).

Chapter 13: Investor-State Dispute Settlement and India climate’, as it ‘substantially tilts the balance in favour of host [S]tate’s regulatory power’."° Similarly, it has been suggested that its obscure dispute resolution system ‘reflect[s] an undesirable hostility in India’s approach to settlement of disputes through investor-[S]tate arbitration’.®” While such assertions may or may not be agreed upon, it is clear that the 2016 Model BIT is more protectionist in nature.®® The backlash against ISDS is not limited to India.*’ Just to name a few, Bolivia,

Ecuador and Venezuela have denounced the ICSID Convention; South Africa, Indonesia, Italy and Russia have terminated several of its BITs;”' and some others have proposed new texts for their model BITs.”* The common objective that can be deduced from this new wave is the intention of States to assert their sovereign powers, reducing the risk of ‘[ISDS] misuse’.” For instance, the Ecuadorian model treaty published in 2018 restricts the definition of ‘investment’, limits the FET standard to denial of justice and discrimination, and interestingly establishes that the place of the arbitration must be a Latin American country.”* In the same vein, the 2018 Dutch Model BIT restricts the definition of ‘investor’, limits the FET and expropriation standards and highlights the State’s right to regulate.” A more drastic position seems to be the one taken by New

65. Arthad Kurlekar and Leah Thomas, Reflections on Dispute Resolution Provisions of the Indian 2016 Model Bit - Demonstrating a Protectionist Approach, 15(2) TDM 16 (2018). 66. Prabhash Ranjan and Pushkar Anand, “The 2016 Indian Model Bilateral Investment Treaty - A Critical Deconstruction’, Northwestern J. of Int'L. L. and Bus. 22 (2017). See also, Epaminontas E. Triantafilou and Jagdish Menezes, The Other Side of the Coin - India’s 2016 Model BIT and

67. 68.

Indian Investors Abroad, 15(2) TDM 21 (2018); Prabhash Ranjan, India’s Bilateral Investment Treaty Programme — Past, Present and Future in Rethinking Bilateral Investment Treaties: Critical Issues and Policy Choices (Singh and Ilge eds.), p. 112. Arthad

Kurlekar and Leah Thomas,

Reflections on Dispute Resolution Provisions of the Indian

2016 Model Bit - Demonstrating a Protectionist Approach, 15(2) TDM 2 (2018). This has been

countered,

however,

on the basis that the 2016

Model

BIT ‘would

likely be

interpreted to eliminate the possibility for any State counterclaims in arbitral proceedings’. See Eric Leikin, Stuti Gadodia and Charles Loudon, The State Doesn't Strike Back After All -— India’s

Final Model BIT Takes the Bite out of Investor Obligations and Eliminates State Counterclaims, 15(2) TDM 2 (2018). 69. See James J. Nedumpara and Aditya Laddha, India Joining the ICSID: is ita Walid Debate?, 15(2) TDM 2 (2018). See also Rohini Singh Sisodia and Ramya Raman, Evolution of the Indian Model Bilateral Investment Treaty Vis-a-Vis Investor-State Dispute Settlement Mechanism — A Balancing Act, 15(2) 3 (2018); Kavaljit Singh, An Analysis of India’s New Model Bilateral Investment Treaty in Rethinking Bilateral Investment Treaties: Critical Issues and Policy Choices (Singh and Ilge eds.), pp. 81-82. 70. See Sergey Ripinsky, Venezuela’s Withdrawal From ICSID: What it Does and Does Not Achieve (2012) available at https://cf.iisd.net/itn/2012/04/13/venezuelas-withdrawal-from-icsid-what -it-does-and-does-not-achieve/#: ~ :text = From %20a% 20purely % 20legal % 20perspective,any % 20immediate% 20benefits% 20to % 20Venezuela.&text = However% 2C % 200f % 20the % 2026 % 2OBITs, arbitral % 20venue % 20available% 20to % 20investors. 71.

See generally, Tania

72.

Rohini Singh

Yoon and Andrew D. Mitchell, Denunciation,

Termination and Survival:

The Interplay of Treaty Law and International Investment Law, 3] ICSID Review 413 (2016). Sisodia and Ramya

Raman,

Evolution of the Indian Model Bilateral Investment

Treaty Vis-a-Vis Investor-State Dispute Settlement Mechanism — A Balancing Act, 15(2) TDM 3 (2018).

73. Sefriani Sefriani, The New Model of Bilateral Investment Treaty (BIT) for Indonesia, J. of Legal, Ethical and Reg. Issues (2018).

74. Ecuador Model Investment Agreement, 8 March 2018. 75. Netherlands Model Investment Agreement, 22 March 2019.

299

Aditya Singh Zealand, ‘which makes international agreements on investment [...] without the [dispute resolution] clause’.”° In this context, it has been argued that the position taken in the Indian 2016 Model BIT should be welcomed.”’ Although India has clearly restricted the terms of its engagement, it still ‘provides appropriate protection to inward and outward investments’ and reflects ‘a balanced approach in tune with domestic as well as new realities of international investment landscape’.”* In addition, the fact that foreign investors can still challenge its measures under the BIT arguably shows ‘India’s continuous engagement with the [ISDS] system unlike [other countries]’.”” Now, well beyond both the criticism and approval that the 2016 Model BIT has raised, it remains to be seen if the current model can actually meet India’s main objective, i.e., to reduce the arbitrator’s discretion. A number of issues have been flagged, and just to name a few: (i) the ‘investment’ definition is not clear enough, (ii) neither is it clear whether an investor can use the reference to ‘customary international law’ in the ‘treatment of investments’ provision to bring other elements than those mentioned in the clause, and (iii) the expropriation provision can hardly reconcile the sole effect approach with the proportionality test.*” In this sense, some authors have argued that many provisions in the 2016 Model BIT ‘are vague and imprecise and thus, continue to grant significant discretion to [...] arbitral tribunals to determine the actual import of these provisions’ ."’ Yet, as it has been said, *[t]he Model BIT appears to mark the beginning, but not necessarily the end of a reform movement’.** India has also actively participated in discussions on the reform of the international investment framework and on the

76.

Sefriani Sefriani, The New Model of Bilateral Investment Treaty (BIT) for Indonesia, J. of Legal,

78.

Rohini Singh

Ethical and Reg. Issues (2018). 77. See generally, Prabhash Ranjan, Harsha Vardhana Singh, Kevin James and Ramandeep Singh, India’s Model Bilateral Investment Treaty: Is India Too Risk Averse?, Brookings India IMPACT Series (2018) p. 38. See also, Saurabh Garg, Ishita G. Tripathy and Sudhanshu Roy, The Indian Model Bilateral Investment Treaty: Continuity and Change in Rethinking Bilateral Investment Treaties — Critical Issues and Policy Choices (Singh and Ilge eds.), p. 80. Sisodia and Ramya

Raman, Evolution

of the Indian Model Bilateral Investment

Treaty Vis-a-Vis Investor-State Dispute Settlement Mechanism — A Balancing Act, 15(2) TDM 6,

14 (2018).

79. Prabhash Ranjan, Harsha Vardhana Singh, Kevin James and Ramandeep Singh, India’s Model

Bilateral Investment Treaty: Is India Too Risk Averse?, Brookings India IMPACT Series (2018) p.

38. See also, Saurabh Garg, Ishita G. Tripathy and Sudhanshu Roy, The Indian Model Bilateral Investment Treaty: Continuity and Change in Rethinking Bilateral Investment Treaties — Critical Issues and Policy Choices (Singh and Ilge eds.), p. 73. 80. For a more detailed critique of the 2016 Model BIT’s argued flaws, see, Prabhash Ranjan and Pushkar Anand, The 2016 Indian Model Bilateral Investment Treaty — A Critical Deconstruction,

Northwestern Journal of International Law and Business (2017). §1. Prabhash Ranjan and Pushkar Anand, “The 2016 Indian Model Bilateral Investment Treaty: A Critical Deconstruction’, Northwestern J. of Int’L. L. and Bus. | (2017) p. |. See also, Prabhash Ranjan, Harsha Vardhana Singh, Kevin James and Ramandeep Singh, India’s Model Bilateral Investment Treaty: Is India Too Risk Averse?, Brookings India IMPACT Series (2018) p. 38. 82.

Rohini Singh

Sisodia and Ramya

Raman,

Evolution

of the Indian Model Bilateral Investment

Treaty Vis-a-Vis Investor-State Dispute Settlement Mechanism — A Balancing Act, 15(2) TDM (2018).

300

13

Chapter 13: Investor-State Dispute Settlement and India current ISDS system, in order to identify its failures and recommend

tives.™* {34

better alterna-

CASES INSTITUTED BY FOREIGN INVESTORS AGAINST INDIA

Annex A to this Chapter contains a list of publicly known cases brought by foreign investors against India. These cases involve investments made by foreign investors in sectors such as oil and gas, energy and telecoms, among others. Foreign investors have invoked the India-Netherlands BIT and the India-Mauritius BIT most frequently as the basis for bringing their claims (see Annex A). 13.4

CASES INSTITUTED BY INDIAN INVESTORS

Annex 6 to this Chapter contains a list of publicly known cases brought by Indian investors against foreign States under India’s BITs with those States. As evident from the table at Annex B, Indian investors have brought far fewer cases under BITs, when

compared with the number of cases brought by foreign investors against India (see Annex B). 13.5

RECENT DEVELOPMENTS

As discussed in Part 13.2 above,

the 2016 Model

BIT forms the basis of India’s BIT

negotiations going forward. 13.5.1

Termination of BITs by India

Six months after the adoption of the 2016 Model BIT, India imposed a deadline of 31 March 2017 for terminating BITs upon itself.™* In compliance with this deadline, the Government served notices of termination to 58 countries,” with the underlying

83.

Rohini Singh

Sisodia and Ramya

Raman,

Evolution

of the Indian Model Bilateral Investment

Treaty Vis-a-Vis Investor-State Dispute Settlement Mechanism — A Balancing Act, 15(2) TDM 13 (2018). For further discussion of ISDS reforms, see Chapter 15 of the Handbook.

64. Alison Ross, India’s Termination of BITs to Begin, Global Arbitration Review, 22 March 2017, available at https://globalarbitrationreview.com/article/ 11385 10/indias-termination-of-bits-tobegin. 85. Kavaljit Singh and Burghard Ilge, India Overhauls Its Investment Treaty Regime, Financial Times, 15 July 2016, available at https://www.ft.com/content/53bd355c-8203-34af-9c27-7bf990a447 de.

301

Aditya Singh intention of renegotiating new BITs based on the 2016 Model BIT." Following India’s termination of BITs, a handful of countries agreed to renegotiate new agreements.” 13.5.2

Joint Interpretative Statements / Joint Interpretative Notes

In respect of the remaining 25 BITs that were not unilaterally terminated, the Government of India has sought to issue Joint Interpretative Statements (JIS) to clarify uncertainties and ambiguities in BITs. The strategy of issuing JIS on BITs, albeit not entirely foreign to the ISDS landscape, is admittedly rare.* Essentially, JIS seek to align the BITs in force with India’s 2016 Model BIT and impart clarity to the interpretation of its existing agreements, in order to avoid the possibility of expansive interpretations by arbitral tribunals, specially, given that a JIS must be read together with the BIT, therefore being an integral part of it. In July 2017, Bangladesh was the first country to sign a JIS with India®’ and, in October 2018, India approved the signing of a JIS with Colombia regarding its existing 2009

BIT.”’

Particularly,

these

JIS

have

restricted

the definitions

of investor

and

investment, the application of the FET, MFN and expropriation standards, and the scope of actionable claims, thereby bringing the underlying BITs closer to the 2016 Model BIT. 13.5.3

New BITs Signed on the Basis of the 2016 Model BIT

Recently, India has signed new BITs with Belarus”! and with an investment promotion organisation in Taiwan,“ respectively, and concluded - not yet signed — BITs with both

86. Prabhash Ranjan and Pushkar Anand, “The 2016 Indian Model Bilateral Investment Treaty: A Critical Deconstruction’, Northwestern J. of Int’L. L. and Bus. 14 (2017).

87. Amiti Sen, India's Bilateral Investment Pacts Under Cloud, The Hindu Business Line, 9 April 2017, available at https://www.thehindubusinessline.com/economy/indias-bilateral-invest ment-pacts-under-cloud/article9625580.ece; Pragya Srivastava, India Scaring Away Foreign Investors? What

New

Bilateral Investment

Treaty Is, and

What

It Does,

Financial Express,

2

August 2018, available at htips://www.financialexpress.com/economy/india-scaring-awayforeign-investors-what-new-bilateral-investment-treaty-is-and-what-it-does/1267124/. 88. Douglas Thomson, India’s BIT Recast Continues, Global Arbitration Review, 19 July 2017,

available at https://globalarbitrationreview.com/article/| 144746/india % E2 % 80% 99s-bitrecast-continues.

89. Press Information, Government of India Cabinet, Cabinet Approves Joint Interpretative Notes on the Agreement Between India and Bangladesh for Promotion and Protection of Investments, available at http://pib.nic.in/newsite/PrintRelease.aspx?relid = 167345. 90. See Joint Interpretative Declaration between India and Colombia regarding the Agreement for the Promotion and Protection of Investments signed on November 10, 2009, available at https://dea.gov.in/sites/default/files/JID % 20with % 20Colombia.pdf.

91. India-Belarus BIT, September 2018, available at https://investmentpolicy.unctad.org/ international-investment-agreements/treaty-files/5724/download. 92. India-Taiwan BIT, December 2018 available at https://dea.gov.in/sites/default/files/BIA %20 between % 20ITA % 20and %20TECC. pdf.

302

Chapter 13: Investor-State Dispute Settlement and India

Brazil’? and Cambodia”. Notably, the India-Taiwan BIT is not a State-State BIT. That

is, it is not a BIT between two sovereign nation-States, and instead it is a BIT between “The India Taipei Association in Taipei’ and ‘The Taipei Economic and Cultural Center in India’.’* Reportedly, India has also agreed to sign a BIT with the Kyrgyz Republic,

but its status remains unclear.”°

Further, as per India’s Department of Economic Affairs, BITs based on the 2016

Model BIT are also ‘under discussion’ with the following countries: Iran, Switzerland, Morocco, Kuwait, Ukraine, United Arab Emirates, San Marino, Hong Kong, Israel,

Mauritius and Oman.” 13.5.4

Investment Arbitration and Indian Courts

Finally, three Indian court decisions have examined issues related to arbitration under BITs. These are: (i) Board of Trustees of the Port of Kolkata v. Louis Dreyfus Armatures; (ii) Union of India v. Vodafone Group Ple;”” and (iii) Union of India v. Khaitan Holdings (Mauritius).'”° Louis Dreyfus was the first of the three cases. The Calcutta High Court decided it in 2014. It was the first Indian court case to deal with investment arbitration. In this case, the Indian party sought to get an anti-arbitration injunction from the court against arbitration proceedings commenced by Louis Dreyfus under the India-France BIT. The court granted the injunction. Notably, the application requesting an anti-arbitration injunction was brought under the Indian Arbitration and Conciliation Act, 1996 (1996 Arbitration Act or Act). The Act typically applies to commercial arbitrations. Yet, the court granted the injunction and held that it would interfere in foreign-seated arbitral proceedings (such as the underlying BIT proceedings) in rare circumstances. In sum, at the time, the Indian court granted an anti-arbitration against a BIT dispute.

93. Notably, this BIT is known to not contain any provisions for investor-State arbitration. See Arthad Kurlekar and Leah Thomas,

Reflections on Dispute Resolution Provisions of the Indian

2016 Model Bit - Demonstrating a Protectionist Approach, 15{2) TDM (2018). 94. See Department of Economic Affairs, status of ongoing BIT negotiations available at https://dea .2ov.in/bipa?page = 9. 95.

India-Taiwan BIT, December 2018, available at https://dea.gov.in/sites/detault/files/BIA % 20

between% 20ITA% 20and % 20TECC. pdf. 96. See Department of Economic Affairs, status of ongoing BIT negotiations available at https://dea .2ov.in/bipa?page = 10. 97. See Department of Economic Affairs, status of ongoing BIT negotiations available at https://dea .gov.in/bipa?page =8. 98. Board of Trustees of the Port of Kolkata v. Louis Dreyfus Armatures SAS, 2014 SCC OnLine Cal 17695 decision dated 29 September 2014 — Calcutta High Court, available at http://164.100.79 .153/judis/kolkata/index.php/casestatus/viewpdf/GA_1997_2014_29092014 J 217.pdf. 99. Union of India v. Vodafone Group Plc & Anr., Delhi High Court, C5(OS) 383/2017 decision dated 7 May 2018 — Delhi High Court, available at http://lobis.nic.in/ddir/dhe/MMH/judgement/07 100.

-05-2018/MMH0705201853832017. pdf.

Union of India v. Khaitan Holdings (Mauritius) Limited & Ors., Delhi High Court, CS (O53)

46/2019

LAs.

1235/2019

& 1238/2019 decision dated 29 January 2019 — Delhi High Court,

available at http://164.100.68.118:8080/jupload/dhe/PMS/judgement/29-01-2019/PMS29012 0195462019_pdf.

303

Aditya Singh Following this, in Vodafone the Delhi High Court decided another request for an anti-arbitration injunction. Here, the Indian Government requested that Vodafone should be restrained from proceeding with an arbitration brought under the India-UK BIT since Vodafone had already initiated a parallel arbitration under the IndiaNetherlands BIT based on the same cause of action. Unlike the decision in Louis Dreyfus, here the court rejected India’s application and declined to grant an antiarbitration injunction. In doing so, the Delhi High Court took the opposite view from the Calcutta High Court and held that a BIT arbitration is not a ‘commercial arbitration governed by the [1996 Arbitration Act]’. Consequently, the Delhi High Court created its own standard and held that it would only intervene in a BIT arbitration if the arbitration was ‘oppressive, vexatious, inequitable or constitutes an abuse of the legal process’.'"' Lastly, in Khaitan Holdings once again the Indian Government approached the Delhi High Court seeking an anti-arbitration injunction against a BIT arbitration commenced under the India-Mauritius BIT. The Government contended that Khaitan Holdings was not a genuine investor under the BIT because Indian nationals effectively controlled it. The Government also raised arguments based on ‘abuse of process’ in support of its injunction application. However, the Delhi High Court, following Vodafone, rejected the Government’s application and refused to grant an antiarbitration injunction against an ongoing BIT proceeding. The court held that the Government's arguments were jurisdictional in nature and therefore ought to be raised before the arbitral tribunal, who had the competence to decide these issues, rather than

the court. Thus, in Louis Dreyfus, even though an Indian court granted an anti-arbitration injunction against a BIT arbitration, more recently they have declined to grant similar injunctions. Accordingly, these recent decisions reflect India’s efforts towards establishing itself as an arbitration-friendly jurisdiction. 13.6

CONCLUSION

India’s approach towards investment protection and ISDS has evolved based on its ever-changing political and socio-economic standing within the world order. While India started out as a country prioritising investor protection over balancing internal policy considerations, a spate of unfavourable arbitral awards coupled with India’s growing economic capabilities forced India to rethink its overall position and strategy towards investor protection versus regulatory control.

101. See Union of India v. Vodafone Group Pic & Anr., Delhi High Court, C5(OS) 383/2017 decision dated

7

May

2018

— Delhi

High

Court,

available

at

http://lobis.nic.in/ddir/dhc/MMH/

judgement/07-05-2018/MMH0705201853832017.pdf. See also Siddharth S. Aatreya, Can Investment

available

Arbitral

at

Awards

be Enforced

in India?,

Kluwer

Arbitration

Blog,

4 April

2019,

http://arbitrationblog.kluwerarbitration.com/2019/04/04/can-investment-arbit

ral-awards-be-enforced-in-india/. In relation to the parallel proceeding, see Cosmo Sanderson,

India liable in Vodafone tax dispute, Global Arbitration Review, 25 September 2020, available at https://globalarbitrationreview.com/article/1232934/india-liable-in-vodafone-tax-dispute.

304

Chapter 13: Investor-State Dispute Settlement and India This rethink led to the conception of the 2016 Model BIT, formulated after significant stakeholder input including views of corporations, practitioners, policymakers and academics. While a number of commentators argue that this new model is excessively protectionist, when taken in context, the fuller picture that emerges is that India has gradually been shifting from a capital-importing country to a capitalexporting country — particularly in connection with its Asia-Pacific trading partners, and also its African and South-American trading partners. Additionally, even historically dominant capital-exporting countries in the developed world increasingly rely on India for their heavy industry, information technology, pharmaceuticals and general engineering expertise, among others. This has opened up a significantly high number of foreign markets for Indian investors. Similarly, India’s own dependency on developed countries has correspondingly reduced in a number of areas over time. In these

circumstances,

there

has

been

a steady

shift in

the

Government's

thinking, which believes that it is in India’s long-term interests to regain regulatory sovereignty by striking a balance between investor protection and India’s sovereign interests. The 2016 Model BIT is a fair reflection of this perspective. That said, it is not devoid of issues and it remains to be seen how effective it becomes in forming the basis of India’s future BITs. Early signs, such as the Belarus BIT and the investment promotion organisation in Taiwan, and those BITs concluded with Brazil and Cambodia are positive signs that India’s current model finds favour with some of its trading

counterparts.

Similarly, new model bilateral investment treaties released by Nepal,'”’ the

Netherlands,'”’ Belgium and Luxembourg!'™ appear to have drawn inspiration in some

respects from India's 2016 Model BIT. This is another sign that the global approach to investor and investment protection is experiencing a shift towards striking a balance in favour of the State’s regulatory powers, while correspondingly maintaining appropriate levels of investment protection. Finally, over the last few years there has also been a steady rise in disputes brought by Indian investors, which reflects: (i) India’s growing importance as a capital-exporting country; and (ii) heightened awareness among Indian investors (which may previously have been lacking) regarding the rights and remedies available to them under bilateral and multilateral instruments. Consequently, at least in the short 102. See Jarrod Hepburn, Nepal Round-Up: government releases draft model investment treaty, revealing inspiration from Indian counterpart; arbitrators issue provisional measures in pending BIT case, available at https://www-.iareporter.com/articles/nepal-round-up-governmentreleases-drait-model-investment-treaty-revealing-inspiration-from-indian-counterpart-arbitrat ors-issues-provisional-measures-in-pending-bit-case/. 103. See Luke Eric Peterson, ANALYSIS: The Netherlands unveils a vastly-revised draft investment treaty, does away with double-hatting, party-appointed arbitrators and protection for mailbox companies, available at https://www.iareporter.com/articles/analysis-the-netherlandsunveils-a-vastly-revised-draft-investment-treaty-does-away-with-two-hatting-party-appointed -arbitrators-and-protection-for-mailbox-companies/.. 104. See Damien Charlotin and Luke Eric Peterson, Belgium and Luxembourg Unveil Model Bilateral Investment Treaty Text, with Party-Appointed ISDS Mechanism Enjoying a Temporary Foothold, available at: https://www-.iareporter.com /articles/belgium-and-luxembourg-unveil-modelbilateral-investment-treaty-text-with-party-appointed-isds-mechanism-enjoying-a-temporaryfoothold/.

305

Aditya Singh term, it appears that the recent uptick in cases brought by Indian investors under BITs may continue to see a steady rise.

306

Chapter 13: Investor-State Dispute Settlement and India

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CHAPTER

14

Drafting Arbitration Clauses for India-Centric Agreements Pallavi Shroff

Party autonomy is the bedrock of arbitration and is expressed through the arbitration clause. Close attention is needed to be paid while drafting arbitration clauses. It is necessary to carefully tailor clauses to the needs of the parties and the nature of their relationship. While a ‘perfect’ clause is a myth, pathological clauses are avoidable. Drafters of India-centric agreements must bear in mind several considerations. A checklist concludes the Chapter.

14.1

INTRODUCTION

The key pillar of arbitration is party autonomy, Its main characteristic is the freedom of the disputing parties to bargain and choose the seat of arbitration, the method of appointment and the number of arbitrators, the law and the procedural rules of their arbitration. While there is no ‘one-size-fits-all’ arbitration clause, which is suitable for all situations, the parties are at liberty to appropriately draft the clause best suited for them. Ideally, an arbitration clause should be carefully tailored to the exigencies of a given situation and considering possible disputes, the needs olf the parties’ relationship

and the applicable laws.’

Since the arbitration agreement is the basis of the arbitration, any defect in the agreement may lead to a dispute over interpretation of the agreement itself.* A well-drafted arbitration clause can either reduce or remove the difficulties which 1. R. Doak Bishop, A Practical Guide for Drafting International Arbitration Clauses, | Int'l energy L. & Tax'n Rev. 16 (2000).

2. John P. DiBlasi, When Drafting an Arbitration Clause, Specificity Matters, Law.com, 28 November

2016, available at http://www-.newyorklawjournal.com/id = 1202773001042/When-Drafting-an -Arbitration-Clause-Specificity-Matters: “The last thing you want is to have disagreements over the interpretation of the arbitration provision itself’.

311

Pallavi Shroff

obfuscate arbitration proceedings and delay them, as well as in certain cases, even delay the enforcement of an award.* To avoid such a pathological arbitration clause, the parties should pay adequate attention to several factors while negotiating the clause, instead of considering it last minute, which would turn it into a ‘midnight clause’. With evolving law, the amendments to the Arbitration and Conciliation Act, 1996

(1996 Arbitration Act or Act) and judicial pronouncements, certain key factors are essential to be borne in mind while negotiating an arbitration agreement with an Indian party. This Chapter elaborates the elements to be considered for drafting an arbitration clause in India-centric agreements. 14.2

IMPORTANCE OF DRAFTING AN ARBITRATION AGREEMENT AND INDIAN PERSPECTIVE

The effectiveness of an arbitration agreement is not determined by its length or complexity, but its ability to be unambiguous. Clarity in the language of an arbitration clause is a must: an unclear clause may lead to unwanted cost and defeat the purpose of choosing arbitration as a dispute resolution mechanism.* Several authors have attempted to formulate what would be a ‘perfect’ arbitration clause and have agreed on the difficulty of formulating such clause. However, authors have identified some features that would indicate a badly drafted arbitration clause.” Laurence Craig, Rusty Park and Jan Paulsson in their book International Chamber of Commerce Arbitration have identified ‘equivocation’ as one such feature in a badly drafted arbitration clause.° By ‘equivocation’, they mean that the parties in the arbitration clause have failed to state that they have agreed to submit their dispute to binding arbitration. Apart from ‘equivocation’, John M. Townsend has identified lack of attention as another feature of a badly drafted clause.’ When drafters do not pay attention to the specifics of the particular transaction and insert an ‘off-the-shell!’ clause, problems can arise subsequently. Another loophole identified is an omission of the parties to include a complete arbitration clause in their contract. Thus, an arbitration clause should not be weak in content. Otherwise, unnecessary delays or costs can arise when a court has to decide on any issues not included in the agreement. On the other hand, over-specificity can also be a problem. Hence, too many details make a clause difficult to implement in practice. Therefore, a balanced approach is

3. Stephen R. Bond, How to Draft an Arbitration Clause, 6 J. of Int'l Arb. 2, 65-78 (1989). 4. Bond, supra n. 3; see also AVV. Aldo Frignani, Drafting Arbitration Agreements, 24 Arb. Int'l 4, 561-570 (2008); Neil Aitken & Charles Spragge, Drafting the Arbitration Agreement,

| Int. A-L.R.

4, 145-149 (1998). For a discussion of managing costs and time in arbitration, see Chapter 16 of the Handbook. 5. John M. Townsend, Drafting Arbitration Clauses: Avoiding the 7 Deadly Sins, 58 Disp. Res. J. (2003). The article discusses about seven deadly sins in drafting arbitration clauses, viz. equivocation, inattention, omission, over-specificity, unrealistic expectations, litigation envy and

cs

overreaching. . Ibid. 7. Ibid.

312

Chapter 14: Drafting Arbitration Clauses for India-Centric Agreements required while drafting. One must engage adequate and considerable thought, deliberation and negotiation into the drafting process. This Chapter dissects the essentials of an arbitration clause and deliberates on those from the perspective of Indian laws and developments.

14.3

REQUIREMENTS OF AN ARBITRATION AGREEMENT

14.3.1

Definition of Arbitration Agreement

The definition of the term ‘arbitration agreement’ is provided in section 7(1) of the 1996 Arbitration Act as ‘an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not’. The agreement can be invoked only in case of a dispute between the parties. A dispute implies an assertion of a right by one party and repudiation thereof by the other.” Where parties may agree to refer any future dispute to arbitration, actual reference cannot be made until such dispute has arisen and is still subsisting. The parties can choose to arbitrate all or only certain disputes under the agreement. However, the disputes should be arbitrable in nature. Arbitrability is discussed in Chapter 2 of the Handbook. While addressing the issue of interpretation of ‘all disputes’ contained in an arbitration agreement, the Supreme Court considered the issue of financial burden caused by the arbitration proceedings indeed being a legitimate concern. However, this issue can only be remedied by suitably amending the arbitration clause.’ Therefore, the court said: The issue of financial burden caused by the arbitration proceedings is indeed a legitimate concern but the problem can only be remedied by suitably amending the arbitration clause. In future agreements, the arbitration clause can be recast making it clear that the remedy of arbitration can be taken recourse to only once

at the conclusion of the work under the agreement or at the termination/cancellation of the agreement and at the same time expressly saving any disputes/claims from becoming stale or time-barred etc. and for that reason alone being rendered non-arbitrable.

14.3.2

The Arbitration Agreement May Be in the Form of a Clause in a Contract or Separate Agreement

An arbitration agreement can be recorded either in an arbitration clause in a contract or in a separate agreement. The arbitration agreement can also be entered into separately, after the dispute(s) has arisen, if the main contract does not contain any arbitration clause. The principle of separability also confers the competence to the 8. Salecha Cables (P) Ltd. v. HPSER (1995) 1 Arb LR 422 (HP). 9. Dolphin Drilling Ltd. v. Oil and Natural Gas Corporation Ltd. (2010) 3 SCC 267.

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arbitral tribunal to rule on its own jurisdiction.'® While considering any objection with regard to the existence or validity of the arbitration agreement, the arbitration clause is to be treated as an agreement independent of the other terms of the contract. Section 16(1)(b) of the 1996 Arbitration Act provides that even if the arbitral tribunal concludes that the contract is null and void, that shall not entail ipso jure the invalidity of the arbitration clause. This presumes the existence of a valid arbitration clause and mandates the same to be treated as an agreement independent of the other terms of the contract — the arbitration clause continues to be enforceable, notwithstanding a declaration that the contract is null and void."! In Union of India v. Kishorilal Gupta and Bros., the Supreme Court examined the question of whether an arbitration clause can be invoked in the case of a dispute under a superseded contract.'* It decided that if the contract is superseded by another, the arbitration clause, being a component

part of the earlier contract, falls with it. But,

where the dispute is whether such contract is void ab initio, the arbitration clause cannot operate on those disputes, as its operative force depends upon the existence of the contract and its validity. An arbitration clause cannot survive if the agreement containing the clause has been superseded by a later agreement.”* 14.3.3

The Agreement Must Be in Writing

Article (1) of the 1958 Convention on Recognition and Enforcement of Foreign Arbitral Awards (New York Convention) explicitly provides that the arbitration agreement should be in writing.'* The 1996 Arbitration Act, which is based on the UNCITRAL Model Law on International Commercial Arbitration (Model Law}, also provides that an ‘[...] arbitration agreement shall be in writing’.'" The arbitration

agreement is in writing if it is contained in:'®

— a document signed by parties; — an exchange olf letters, telex, telegrams or other means of telecommunication including communication through electronic means which provide a record of the agreement;!’ 10. Section 16, 1996 Arbitration Act provides that arbitral tribunal is competent to rule on its jurisdiction including ruling on any objections, with respect to the existence or validity of the arbitration agreement. ll. Today Homes and Infrastructure Pvt. Ltd. v. Ludhiana Improvement Trust and Anr. (2014) 5 $CC 68 followed in Ashapura Mine-Chem Ltd. v. Gujarat Mineral Development Corporation (2015) 8 sCC 193.

12. Union of India v. Kishorilal Gupta and Bros., AIR 1959 5C 1362. 13. M/S Young Achievers v. IMS Learning Resources, 2013 (1) SCC 535. 14. Article Il.1, New York Convention: ‘!. Each Contracting State shall recognize an agreement in writing under which the parties undertake to submit to arbitration all or any differences which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not, concerning a subject matter capable of settlement by arbitration.’ For further discussion of Article II of the New York Convention and resolutions for its interpretation, see Chapter 12 of the Handbook. 15.

Section

7(3),

1996 Arbitration Act. For further discussion

of section 7, see Chapter 2 of the

Handbook. 16. See section 7(4), 1996 Arbitration Act. 17. The 2015 Amendment inserted ‘including communication through electronic means’ in section 2 of the 1996 Arbitration Act.

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Chapter 14: Drafting Arbitration Clauses for India-Centric Agreements — an exchange of statements of claim and defence in which the existence of the agreement is alleged by one party and not denied by the other;'* and — agreement may also be incorporated by reference (reference to an agreement, which contains an arbitration clause).'" The last two requirements are not mentioned in the New York Convention though they have been provided for under the 1996 Arbitration Act. While construing an arbitration agreement or arbitration clause, the courts in India adopt a pragmatic and not a technical approach. Courts are required to ascertain whether it was the parties’ intent and whether they have agreed that if disputes arise they shall be referred to arbitration.*° In order to constitute an arbitration agreement, it need not always be signed by all the parties.*' A written document which is not signed by the parties can also be an arbitration agreement.*” An arbitration agreement can also be culled out from an exchange

of letters,

telex,

telegrams

or other

means

of telecommunication

which

provide a record of the agreement. In the absence of a signed arbitration agreement between the parties, it is possible to implicitly record an arbitration agreement in various documents

such as exchanges

means of telecommunication.~”

of e-mails, letters, telex, telegrams

and other

Additionally, section 7(4)(c) of the 1996 Arbitration Act provides that there can be an arbitration agreement in the exchange of statements of claim and defence in which the existence of the agreement is alleged by one party and not denied by the other. Thus, if it can be prima facie shown that the parties are ad idem, then the mere fact of one party not signing the agreement cannot absolve it from the liability under the agreement. In the present day of e-commerce, in cases of internet purchases, telepurchases, ticket-booking on internet and in standard forms of contract, terms and conditions are agreed upon. In such agreements, i! the identity of the parties is established, then there is a record of agreement.** As to the interpretation of the arbitration agreement, Indian courts have observed that a commercial document containing an arbitration clause has to be interpreted in such a manner as to give effect to the agreement rather than invalidate it.° When 18. Section 7(4)(c), 1996 Arbitration Act. 19.

Section 7(5),

1996 Arbitration Act.

21.

Govind Rubber Ltd. v. Louis Dreyfus Commodities Asia P. Ltd. (2015) 13 SCC 477.

24.

Govind Rubber Ltd. v. Louis Dreyfus Commodities Asia P. Ltd. (2015)

20. Rukmani Bai Gupta v. The Collector, Jabalpur, AIR 1981 SC 479.

22. In Shakti Bhog Foods Ltd. v. Kola Shipping Ltd., AIR 2009 SC 12, the Supreme Court held that it can be inferred from the provisions under section 7 of the 1996 Arbitration Act that the existence of an arbitration agreement can be inferred from a document signed by the parties, or an exchange of letters, telex, telegrams or other means of telecommunication, which provide a record of the agreement. 23. Trimex International FZE Ltd. Dubai v. Vedanta Aluminium Ltd., India (2010) 3 SCC 1. 13 SCC 477.

25. Ibid. However, where the clause in chartered party agreement provided that all disputes would be subject to Mumbai jurisdiction ‘under arbitration’, the Bombay High Court opined that it cannot be said that parties have agreed to refer the disputes to the decision of a private tribunal for adjudication and thus the clause cannot be construed as an agreement to refer disputes to arbitration. See Reshamsingh and Co. (P) Ltd. v. Dharti Dredging and Infrastructure Ltd. (2010) 5 Mah LJ 438.

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interpreting an arbitration agreement, the court must look not only at the text but also at its context, in order to fully comprehend the background and the meaning of the

clause."

The Supreme Court in Jagdish Chander v. Ramesh Chander & Ors. laid down principles to determine what constitutes an arbitration agreement/clause.*” Those principles can be summarised as follows: — The intention of parties to enter into an arbitration agreement must be gathered from the terms of the agreement. The words used should disclose a

determination and obligation to go to arbitration.**

— Aclause can still be considered as an arbitration agreement even if the words ‘arbitration’ and ‘arbitral tribunal (or arbitrator)’ are not used, provided it has the attributes or elements of an arbitration agreement. Those are: (a) the agreement should be in writing; (b) the parties should have agreed to refer any disputes (present or future) between them to a private tribunal; (c) the private tribunal should be empowered to adjudicate upon the disputes in an impartial manner, giving due opportunity to the parties to put forth their case before it; and (d) the parties should have agreed that the decision of the private tribunal in respect of the disputes will be binding on them. — Where there is a specific and direct expression of intent to have the disputes settled by arbitration, it is not necessary to set out the attributes of an arbitration agreement to make it an arbitration agreement.”” 26. The Supreme Court in Eastern Coalfields Ltd. v. Sanjay Transport Agency and Anr. (2009) 7 SCC 345 held that it is well-settled rule of interpretation that the Section heading or marginal note can be relied upon to clear any doubt or ambiguity in the interpretation of any provision and to discern the legislative intent. The Section heading constitutes an important part of the 1996 Arbitration Act itself, and may be read not only as explaining the provisions of the Section, but it also affords a better key to the constructions of the provisions of the Section which follows than might be afforded by a mere preamble. The said interpretation can well be applied to understand and construct the various clauses of an arbitration agreement also, which is in the realm of commercial contract. 27. Jagdish Chander v. Ramesh Chander (2007) 5 SCC 719. 28. Where a clause provides that in case of adjudication of disputes, decision/award by officer or authority of one of the parties shall be final, conclusive and binding on the parties, the Supreme Court held that it cannot be an arbitration clause. See International Amusement Ltd. v. India Trade Promotion Organisation (2015) 12 SCC 677. In this case, the clause provided that in case

of any dispute arising out of or in connection with the agreement, the disputes shall be referred to the sole arbitration of the Chairman, India Trade Promotion Organization or his nominee whose decision/award shall be final, conclusive and binding on the parties. In this case, the Supreme Court placed reliance on its earlier decision in P. Dasaratharama Reddy Complex v. Government of Karnataka and Anr. (2014) 2 SCC 201. Following the three-Judge Bench decision in Dasaratharama Reddy, the Supreme Court in Master Tours and Travels v. The Chairman, Shri Amarmath Ji Shrine Board and Ors. (2016) 16 SCC 661 held that the clause providing ‘any dispute the matter shall be referred to the Chief Executive Officer - Shri Amarnathji Shrine Board, whose decision in the matter shall be final’ cannot be read as an arbitration agreement. 29. The agreement provided that in case of any dispute arising out of this agreement between the parties, the same shall be referred to the arbitration under the by-laws of Indian Companies Act, 1956 as amended up to date. The Supreme Court held that the clause is quite vague and as there are no by-laws framed under the provisions of the Companies Act, no arbitrator can be appointed. See also System for International Agencies v. Rahul Coach Builders Pvt. Ltd. (2015) 13 SCC 436.

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Chapter 14: Drafting Arbitration Clauses for India-Centric Agreements — But the mere use of the word ‘arbitration’ or ‘arbitrator’ in a clause will not

make it an arbitration agreement if it requires or contemplates a further or fresh consent of the parties for reference to arbitration.

14.3.4

Incorporation of Arbitration Clause in Another Document

Section 7(5) of the 1996 Arbitration Act provides that ‘[t]he reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement if the contract is in writing and the reference is such as to make that arbitration clause part of the contract’. The scope of the above provision has been succinctly interpreted by the Supreme Court in M.R. Engineers and Contractors Pvt. Ltd. v. Som Datt Builders Ltd. as:*°

(1)

An arbitration clause in another document would get incorporated into a contract by reference if the following conditions are fulfilled: (a) the contract should contain a clear reference to the documents containing the arbitration clause; (b) the reference to the other document should clearly indicate an intention to incorporate the arbitration clause into the contract; and

(2)

(3)

(4)

(c) the arbitration clause should be appropriate, that is capable of application in respect of disputes under the contract and should not be repugnant to any term of the contract. When the parties enter into a contract making a general reference to another contract, such general reference would not have the effect of incorporating the arbitration clause from the referred document into the contract between the parties. The arbitration clause from another contract can be incorporated into the contract (where such reference is made), only by a specific reference to the arbitration clause. Where a contract between the parties provides that the execution or performance of that contract shall be in terms of another contract (which contains the terms and conditions relating to performance and a provision for settlement of disputes by arbitration), then, the terms of the referred contract in regard to execution/performance alone will apply, and not the arbitration agreement in the referred contract, unless there is special reference to the arbitration clause as well. Where the contract provides that the standard form of terms and conditions of an independent trade or professional institution (e.g., the standard terms and conditions of a trade association or architects association) will bind them or apply to the contract, such standard form of terms and conditions, including any provision for arbitration in such standard terms and conditions, shall be deemed to be incorporated by reference. Sometimes, the contract may also

30. M.R. Engineers & Contractor (P) Ltd v. Som Dutt Builders Ltd. (2009) 7 SCC 696 followed in Duro Felguera, S. A. v. Gangavaram Port Limited (2017) 9 SCC 729.

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say that the parties are familiar with those terms and conditions or that the parties have read and understood the said terms and conditions. (5) Where the contract between the parties stipulates that the conditions of contract of one of the parties to the contract shall form a part of their contract (e.g., the general conditions of contract of the Government where the Government is a party), the arbitration clause forming part of such general conditions of contract will apply to the contract between the parties. Therefore,

pursuant

to section

7(5)

of the

1996

Arbitration

Act,

even

if the

contract between the parties does not contain a provision for arbitration, an arbitration clause contained in an independent document could be imported, if the contract refers to the independent document in a manner that makes the arbitration clause a part of the contract. The provision requires a conscious acceptance of the arbitration clause from another document, as a part of their contract, before such arbitration clause could be read as a part of the contract between the parties. The question of whether the arbitration clause contained in another document was incorporated in the contract is always a question of construction of the document in reference to the intention of the

parties.”! 14.4

ESSENTIAL ELEMENTS

14.4.1

Scope of the Arbitration Clause

The terminologies such as ‘arising out of or ‘in respect of’ or ‘in connection with’ or ‘in relation of’ have a wide amplitude in an arbitration agreement. The incorporation of these terms has been the subject of interpretation in various decisions of Indian courts, and the development of the law has been towards a broad and purposive interpretation of the arbitration agreement. The landmark decision of the Supreme Court in Renusagar Power Co. Ltd. v. General Electric Co. held that expressions such as ‘arising out of" or ‘in respect of’ or ‘in connection with’ or ‘in relation to’ or ‘in consequence of’ or ‘concerning’ or ‘relating to’ the contract are of the widest amplitude and content and include even questions as to the existence, validity and effect (scope) of the arbitration agreement.** The usage of the words ‘arising out of’ or ‘in connection with’ carries the broadest connotation, taking within its sweep all disputes relating to the creation, execution, termination, performance of the agreement and all ancillary instruments, too.** By such a liberal construction of these terms, the subsequent interpretations have even included the disputes, within the ambit of an arbitration in one agreement which

31. Duro Felguera, S. A. v. Gangavaram Port Limited (2017) 9 SCC 729. 32. Renusagar Power Company Ltd. v. General Electric Company (1994) Supp | SCC 644. For further review of Renusagar, see Chapter 11 of the Handbook. 33. Raj Kumar Contractors v. Bareilly Development, 1998 SCC OnLine All 880.

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Chapter 14: Drafting Arbitration Clauses for India-Centric Agreements arose out of a different though related agreement.** The test of ‘intricate connection’ with the main agreement was used in each of these cases. 14.4.2

Ad Hoc or Institutional Arbitration

In an arbitration agreement, the parties should agree on the type of arbitration: whether it is ad hoc or institutional arbitration. If the parties agree to ad hoc arbitration, they do not have to pay the administrative fees (paid to an institution) and therefore do not benefit from administrative management provided by institutions. In the case of ad hoc arbitration, parties have to approach courts on the procedural points not agreed upon by the parties to an arbitration. Parties often incorporate the UNCITRAL Rules in ad hoc

arbitrations.**

The most significant advantage of institutional arbitration is the resolution of administrative issues and streamlined case management.*® Institutions can contribute with substantial procedural know-how which is required for an efficient working of the arbitral tribunal.*’ Stephen R. Bond says: ‘in international arbitration, the arbitration clause should provide for institutional arbitration. You pay an administrative charge, but with good institution you get value for the money’.** However, the choice of what type of arbitration is chosen often depends on the facts and circumstances of each

case.*”

If one analyses the situation from an Indian context, there are different hurdles. There are relatively few recognised arbitral institutions in India like the erstwhile International Centre for Alternative Dispute Resolution (New Delhi), the Indian Council of Arbitration (New Delhi), the Nani Palkhivala Arbitration Centre (Mumbai), the Delhi International Arbitration Centre (New Delhi) and the Mumbai Centre for International Arbitration (Mumbai).*” In order to promote institutional arbitration, the Law Commission of India suggested the inclusion of the following explanation in section 11:

34. Olympus Superstructure v. Meena Khetan (1999) 5 SCC 651; Tamil Nadu State Construction Corporation Limited v. Gardner Landscape Pvt. Ltd. and Ors, AIR 2005 Mad 236; HS Svendgaard Laboratories Ltd. v. Gillette India Ltd., 2016 SCC OnLine Bom 1046; Chaitanya Builders & Leasing (P) Ltd. v. Dr Tulsi Ram, 2013 SCC OnLine Mad 2511.

35. Aitken et al., supra n. 4. 36. International Bar Association, IBA Guidelines for Drafting International Arbitration Clauses (2010).

37. Ibid. For further discussion of the rules under various arbitral institutions, see Chapter 17 of the Handbook. 38. Bond, supra n. 3. 39. Sundra Rajoo, Institutional and Ad hoc Arbitrations: Advantages and Disadvantages, The Law Review (2010), available at https://www.extractiveshub.org/servefile/getFile/id/2612#: ~ :text = Normally %2C % 20an % 20institutional % 20arbitration % 20will % 20be % 20held % 20in % 20the % 20institution % 2Z0premises.&text = In % 20ad % 20hoc % 20arbitrations %2C % 20the, money %2 Odirectly% 20from% 20the% 20parties. 40. For a review of the MCIA, see Chapter 17.4 of the Handbook. The New Delhi International Arbitration Centre Act, 2019 inter alia envisages the New Delhi International Arbitration Centre’s takeover of the undertakings of the International Centre for Alternative Dispute Resolution.

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The High Court may take steps to encourage the parties to refer the disputes to institutionalised arbitration by a professional Indian or International Arbitral Institute [...].*! The Report of the High Level Committee to Review the Institutionalisation of Arbitration Mechanism in India dated 30 July 2017 also elaborates on measures for the

reform of institutional arbitration in India.“ 14.4.3

Seat of Arbitration

The most important feature of party autonomy is reflected from the parties’ right to choose the ‘place’ or ‘seat’ of arbitration.** The courts in India have dealt with the issue of determination of the seat in international commercial arbitrations involving an Indian party. The courts were confronted with questions on different occasions as to what is the ‘seat’ when the contract provides for the ‘venue’ of arbitration (the former leading to legal consequences, and the latter mostly chosen for geographical convenience). The jurisprudence developed by the Supreme Court from 2002 until 2017 clearly indicates a gradual departure from interference in foreign-seated arbitration. The anomaly created in 2002 by Bhatia International judgment,” which was followed in 2008 Venture Global judgment,” was finally resolved in 2012 by the five-judge Constitution Bench of the Supreme Court in the BALCO decision which had overruled Bhatia International and Venture Global prospectively.” In fact, the Supreme Court in Videocon Industries Ltd. had sowed the seed and paved the way for the BALCO decision.** In Videocon the arbitration clause provided for the ‘venue’ of arbitration as Kuala Lumpur, Malaysia, and the law governing the arbitration was English law. The court opined that since the law of England is the law

41.

42. 43. 44.

45.

46. 47. 48.

Report No. 246: Amendments

to the Arbitration and Conciliation Act 1996, Law Commission of

India (August 2014) http://lawcommissionofindia.nic.in/reports/Report246.pdf. Report: High Level Committee to Review the Institutionalization of Arbitration Mechanism in India (30 July 2017), available at http://legalaffairs.gov.in/sites/default/files/Report-HLC.pdf. Section 20 of the 1996 Arbitration Act (under Part I) provides that the parties are free to agree on the place of arbitration. For further discussion of the importance of the seat, see Chapter 6 of the Handbook. Bhatia International v. Bulk Trading S.A. and Anr. (2002) 4 SCC 105. In this case, the arbitration clause provided arbitration under ICC Rules to be held in Paris. The Supreme Court held that Part I of the 1996 Arbitration Act applies unless the parties by agreement, expressly or impliedly, exclude all or any of its provisions. For further discussion of seat and venue, see Chapter 6 of the Handbook. Venture Global Engineering v. Satyam Computer Services Ltd. (2008) 4 5CC 190. In this case, despite arbitration being under LCIA rules seated in London, the court held that a foreign award can be challenged under Part I of the 1996 Arbitration Act in India unless it was expressly or impliedly excluded by the parties. Bharat Aluminium Co. v. Kaiser Aluminium Technical Services (2012) 9 SCC 552. All the arbitration agreements entered into before BALCO judgment date would be governed by the principles laid down in Bhatia International. Videocon Industries Ltd. v. Union of India and Anr. (2011) 6 SCC

320

161.

Chapter 14: Drafting Arbitration Clauses for India-Centric Agreements governing the arbitration agreement, there is an implied exclusion of Part I of the 1996

Arbitration Act.”

Subsequently, in 2014, in Reliance Industries the Supreme Court decided that the seat of arbitration was London in an arbitration agreement providing that the law governing the arbitration was English law.*" In the same year, the Supreme Court in the Enercon judgment differentiated London as the physical venue and not the legal seat in a contract between Indian and German parties which provided that the governing law of arbitration was Indian law and the ‘venue’ was London.” It concluded that the ‘venue’ and ‘seat’ of arbitration could not be used interchangeably. In Eitzen Bulk A/S the venue of arbitration was London and curial law was English law.’ The Supreme Court held that Part I of the 1996 Arbitration Act is not applicable as there was express exclusion of Part I and therefore held that no challenge lay against the award under section 34. In Indus Mobile the Supreme Court, relying on BALCO and Enercon, held that the moment the seat is designated in an arbitration agreement, it is akin to an exclusive jurisdiction clause and a reference to seat is a concept by which a neutral venue could be chosen.™ In the Indian context, it is also pertinent that the parties sometimes confer exclusive jurisdiction on a court in the arbitration agreement or substantive contract. In Swastik Gases Put. Ltd. v. Indian Oil Corporation Ltd. the Supreme Court held that where the contract specifies the jurisdiction of the courts at a particular place and such courts have jurisdiction to deal with the matter, it can be inferred that the parties intended to exclude all other courts.™* In this light, the court also held that providing for words like ‘alone’, ‘only’, ‘exclusive’ or ‘exclusive jurisdiction’ is indecisive and makes no material difference. Hence,

such words

are not necessary in a clause to exclude

jurisdiction of other courts. Thereafter, in IMAX Corporation the governing law olf the contract was Singapore and juridical seat of arbitration was London.” The Supreme Court held that when the parties by conduct accepted the ICC tribunal's decision that London is the juridical seat of arbitration whereas the governing law of the contract was that of Singapore, the parties had excluded the application of Part I of the 1996 Arbitration Act. The Supreme Court in Roger Shashoua held that when there is an express designation of arbitration venue as London and no designation of any alternative place as the seat combined with a supranational body of rules governing the arbitration and no other significant contrary indicia, the conclusion is that London is the juridical seat and English law is the curial law.*° The above cases demonstrate the significance of recording the choice of the legal seat or place in clear and specific terms in the arbitration agreement. The 1996

49. Ibid. 50.

51. 52. 53. 54. 55. 56.

Reliance Industries Limited v. Union of India (2014) 7 SCC 603.

Enercon (India) Ltd. v. Enercon Gmbh (2014) 5 SCC 1. Eitzen Bulk A/S v. Ashapura Minechem Limited (2016) 11 SCC 508. Indus Mobile Distribution Pvt. Ltd v. Datawind Innovations Put. Ltd. (2017) 7 SCC 678. Swastik Gases Put. Ltd. v. Indian Oil Corporation Ltd. (2013) 9 SCC 32. IMAX Corporation v. M/s. E-City Entertainment (1) Put. Ltd (2017) 5 SCC 331. Roger Shashoua v. Mukesh Sharma, 2017 SCC OnLine SC 697.

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Pallavi Shroff

Arbitration Act in fact allows the parties to choose the venue for hearing witnesses, experts or the parties or for inspection of documents, goods or other properties in

arbitration where Part I applies.°’

There The parties proximity to culture and

place’.**

are various practical considerations in choosing the place of arbitration. should keep in mind the ‘neutrality, availability of hearing facilities, the witnesses and evidence, the parties’ familiarity with the language and willingness of qualified arbitrators to participate in proceedings in that

Another consideration in choosing the place of arbitration should be that the

arbitral awards issued in that place should be enforceable in other countries. Therefore,

choosing a country which has ratified the New York Convention is an important consideration while drafting such a clause. It is also important to consider the power of review exercised by the courts of the place of arbitration as they decide upon a petition

to set aside the award.””

Another significant factor to be kept in mind is the amount of judicial intervention by the national courts in the place of arbitration. The intent behind choosing a place is that there should not be unnecessary interference in an ongoing arbitration proceeding by the national courts as it leads to unwanted delays and costly disputes.“” Another point to be noted is that even if the parties designate a particular place to be the legal seat of arbitration, hearings may be conducted at other places as a matter of conve-

nience in certain situations.”'

In the context of India, it is important

Arbitration Act, which

to refer to section 2(2)

of the

was introduced by the Arbitration and Conciliation

1996

(Amend-

ment) Act, 2015 (2015 Amendment). While considering the anomalous situation leading to a plethora of decisions, the legislature has set it right to incorporate that even

if the parties agree to a foreign-seated arbitration, the provisions of sections 9,°° 27,°°

37(1)(a)™ and 37(3) shall also apply, unless there is an agreement to the contrary. Therefore, while drafting an arbitration clause involving an Indian party, one should bear in mind that having a seat outside India is not a bar to approach Indian courts for

57. Section 20{3), 1996 Arbitration Act. 58. Rukmani Bai Gupta v. The Collector, Jabalpur, supra n. 20. 59. See, e.g., Southern Pacific Properties Ltd. v. Arab Republic of Egypt, 2 Int'l Arb. Rep., No. 1, at 17 (Cass. Civ, lre) (1987) (French Court’s reversal of ICC arbitral award rendered in Paris).

60. Diana-Loredana Hogas, Considerations about Drafting Arbitration Clauses, J. of Pub. Admin., Fin. & L (Sp. Issue 2/2015).

61. Article 18.1, ICC Rules of Arbitration (‘The place of the arbitration shall be fixed by the Court, unless agreed upon by the parties’); Article 16.2, LCIA Arbitration Rules (default seat shall be London unless and until the parties agree otherwise or LCIA Court determines that another seat is more appropriate). 62. Section 9 of the 1996 Arbitration Act deals with interim relief by court for further review of section 9, see Chapter 8 of the Handbook. 63. Section 27, 1996 Arbitration Act provides for assistance from court in taking evidence. 64. Section 37(1)(a), 1996 Arbitration Act provides for appeal from an order from court refusing to refer the parties to arbitration under section 8. 65. Section 37(3), 1996 Arbitration Act provides that no second appeal shall lie from an order passed in appeal under, but nothing shall effect any right to appeal to Supreme Court.

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Chapter 14: Drafting Arbitration Clauses for India-Centric Agreements limited rights available under the 1996 Arbitration Act (i.e., sections 9, 27 and 37), unless those are excluded by the parties in the agreement. Debate has been focused on the question of whether two Indian parties can choose a ‘seat’ outside India. In the decision of Sasan Power Ltd. v. North America Coal Corporation India Pvt. Ltd. the Madhya Pradesh High Court upheld an arbitration agreement where two Indian parties had chosen a foreign-seated arbitration.“° The court followed the decision in Atlas Exports Industries v. Kotak & Company and permitted the Indian parties to arbitrate outside India, and held that if the seat is in a country which is a signatory to the New York Convention, then Part II of the 1996 Arbitration Act would be applicable.*’ The Bombay High Court in Addhar Mercantile has taken a contradictory view.™ The arbitration clause in this case provided that the arbitration could be seated in India or Singapore and English law was to be applied. The court followed TDM Infrastructure (P) Ltd. v. UE Development India (P) Ltd., and held

that Indian nationals were not allowed to derogate from Indian law and therefore the arbitration was directed to be seated in India.” It is noteworthy that the High Court did not consider the rider in TDM, which had limited its application to Atlas Exports. The Supreme Court had the opportunity to settle this issue finally in Sasan when it came up as an appeal from the Madhya Pradesh High Court decision.”” Upon examination of the facts, however, the Supreme Court found that the case pertained to a tripartite agreement between two Indian parties and an American party. The issue of two Indian parties arbitrating outside India therefore did not arise for its consideration. Accordingly, the Supreme Court did not think it necessary to discuss or rule on this point, leaving the controversy open. In GMR Energy Limited v. Doosan Power Systems India Private Limited and Ors. the Delhi High Court relied on the judgment of the Madhya Pradesh High Court in Sasan Power and held that the two Indian parties were free to arbitrate in a place outside India. An award rendered pursuant to such an arbitration is a foreign award falling under Part II of the 1996 Arbitration Act.” 14.4.4

Applicable Law

In international contracts parties can choose the following types of laws in the choice of Jaws provision in order to exercise their rights and obligations of various kinds under the agreement:

66. Sasan Power Limited, v. North American Coal Corporation India Private Limited (2015) SCC OnLine MP 7417. For further review of the debate and its jurisprudence, see Chapter 6 of the Handbook. 67. Atlas Exports Industries v. Kotak & Company (1997) 7 SCC 61. 68. Addhar Mercantile Private Limited, v. Shree Jagdamba Agrico Exports Private Limited, 2015 SCC OnLine Bom 7752.

69. TDM Infrastructure Private Limited v. UE Development India Private Ltd (2008) 14 SCC 271. 70.

Sasan Power Ltd. v. North American

Coal Corp. (2016)

10 SCC 813.

71. GMR Energy Limited v. Doosan Power Systems India Private Limited & Ors, 2017 SCC OnLine Del 11625.

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Pallavi Shroff

— the proper law of contract, which is the law governing the contract. It creates the substantive rights of the parties, in respect of which the dispute has arisen; — the proper law of the arbitration agreement, i.e. the law governing the obligations of the parties to submit the disputes to arbitration, and to honour an award; and — the curial law is determined by the seat of arbitration and governs the procedure of the arbitration, the commencement of arbitration, appointment of arbitrator(s) in exercise of default power by the court, grant of provisional measures, collection of evidence and challenge to the award.

It is important for the parties to select what would be the law governing the contract, referred to as the substantive law of the contract. As put by Stephen R. Bond, this is one of those clauses which are mostly inserted in the contract and often directly in the arbitration clause itself.“ The parties while choosing the substantive law of contract at times may agree on lex mercatoria or other a-national rules instead of choosing the national legal system as the substantive law. However, in such situations, the parties need to weigh, in detail, the uncertainties attached with such a-national rules as opposed to national laws.”* The substantive law of the contract serves a dual purpose. It needs to be clearly specified in the heading of the arbitration clause or by stating the substantive law of the contract separately. This is for the proper resolution of disputes relating to the performance of the contract other than an arbitral dispute.” Deliberation on the choice of proper law of arbitration agreement is important as it governs the validity of the arbitration agreement, the question of whether the dispute lies within the scope of arbitration, the validity of notice of arbitration, the constitution of the tribunal, the question of whether an award lies within the jurisdiction of the arbitrator, the formal validity of the award and the question of whether the parties have been discharged from any obligation to arbitrate future disputes.” As regards the curial law, it is pertinent for parties drafting an arbitration clause to keep in mind that the designation of seat of arbitration attracts the law applicable to such location to govern the arbitration proceedings. Once a seat is agreed to by the parties, it is not necessary to specify which law applies to the arbitration proceedings.” 14.4.5

Composition of an Arbitral Tribunal

The parties have to decide on the number of arbitrators that will compose the arbitral tribunal and the method of arbitrator appointment. Under the 1996 Arbitration Act, parties are free to determine the number of arbitrators, provided it is not an even

72. Bond, supra n. 3. 73. Rukmani Bai Gupta v. The Collector, Jabalpur, supra n. 20. 74, Ibid. 75.

Carzonrent India Pvt Ltd v. Hertz International Ltd, 2015

SCC OnLine

Heavy Industries Ltd v. ONGC Ltd and Ors., AIR 1998 SC 825. 76. Eitzen Bulk A/S v. Ashapura Minechem Limited (2016) 11 SCC 508.

324

Del

10085; Sumitomo

Chapter 14: Drafting Arbitration Clauses for India-Centric Agreements number.’’ The determination of the type of arbitration, i.e. ad hoc or institutional, also has a bearing upon the number of arbitrators.” This is so, because in ad hoc arbitration, it is for the parties to provide the procedure for the composition of arbitral tribunal failing which the courts can decide, while in institutional arbitration, the rules of various international institutions provide a mechanism if the parties have not agreed on the contrary. Many practitioners see appointing a sole arbitrator as an economically viable and expeditious option; however, while doing so the parties should be willing to place their dispute solely in the hands of the single arbitrator.” However, ‘the ICC’s experience has been that parties from developing countries and Eastern European countries have a strong preference for three-person arbitral tribunals. They seem to believe that even though co-arbitrators must be independent of the party proposing them, pursuant to the ICC Rules, a co-arbitrator of the same nationality can explain to his fellow arbitrators the legal, economic and business context within which the party operates’.*” This belief of the parties which was found to be present in an empirical analysis of ICC arbitrations over the year 1987 persists even today and parties often opt for an

arbitral tribunal consisting of three arbitrators.*!

In any case, parties while drafting the arbitration clause must bear in mind that they do not appoint an arbitrator who they know is disqualified or ineligible to act as one,

under

the

1996

Arbitration

Act.

The

Delhi

High

Court

in Bharat Broadband

Network Limited v. United Telecoms Limited held that a party cannot challenge the appointment of an arbitrator if it was aware of his ineligibility or disqualification at the

time of appointment.** 14.4.5.1

Appointment of Presiding Arbitrator by the Court in International Commercial Arbitration

The issue regarding nationality of the third arbitrator in case of a panel of three arbitrators in international commercial arbitration has been discussed by Indian courts. The 1996 Arbitration Act provides some guidance when such an issue is before the court by way ol a section 11 petition. This is so because section 11(9) of the 1996 Arbitration Act provides: In the case of appointment of sole or third arbitrator in an international commercial arbitration, the Supreme Court or the person or institution designated by that Court

77. Section 10, 1996 Arbitration Act. However, in Ors. (2002) 3 SCC 572 the Supreme Court arbitrators would not make the arbitration arbitrators agree and give a common award, ings. 78. southern Pacific Properties, 2 Int'l Arb. Rep. 79. DiBlasi, supra n. 2. 80. Bond, supra n. 3. 81. DiBlasi, supra n. 2. 82.

Narayan Prasad Lofia v. Nikunj Kumar Lohia and held that the appointment of even number of agreement invalid and if the even number of there is no frustration of the arbitration proceed1.

Bharat Broadband Network Limited v. United Telecoms Limited, 2017 SCC OnLine Del 11905.

325

Pallavi Shroff may appoint an arbitrator of a nationality other than the nationalities of the parties

where the parties belong to different nationalities.

The Supreme Court in Reliance Industries Ltd. & Ors. v. Union of India its previous decisions to reiterate that the term ‘may’ used in section 11(9) Arbitration Act has not been used in the sense of ‘shall’ and, therefore, the not mandatory.” Thus, the Supreme Court laid down that an arbitrator nationality of either party to the arbitration can be appointed as a presiding 14.4.5.2

relied upon of the 1996 provision is having the arbitrator.”

Appointment of Arbitrator under Contracts with Government Entities or Public Sector Undertakings

Prior to the 2015 Amendment, contracts with government entities or a public sector enterprises or undertakings (PSUs) in India ordinarily used to either name the arbitrator within the PSU entity or name the appointing authority who is a senior official of the disputing PSU. The first category, i.e. naming the person in the arbitration clause, was considered valid, provided that certain conditions were met.*’ After the 2015 Amendment, such arbitrators are effectively rendered ineligible under newly introduced provisions of section 12(5) read with Entry 1 of Schedule VII of the 1996 Arbitration Act.*° The second category of contracts (naming the appointing authority) has been held to be invalid by the Supreme Court to the effect that once an arbitrator is statutorily ineligible under section 12(5) of the 1996 Arbitration Act, he cannot nominate another person as arbitrator."” However, if the arbitrator is not employed with the disputing government entity or PSU but may be a part of a government department or some other PSU, even alter 2015 Amendment, this is still a valid procedure for appointment of arbitrators provided that such an arbitrator does not become ineligible as per other grounds under Schedules V and VII of the 1996 Arbitration Act. The position of appointment of former employees of PSUs is unclear as there are differing judgments of High Courts on this subject matter. On the one hand, the Delhi High Court has held that the appointment of past or present employees raises doubts as to their impartiality and independence.*® On the other hand, the Punjab & Haryana High Court has held that such former employees can be appointed provided they have: (a) no other past business relationship with the party, and (b) no justifiable grounds as to their impartiality exist or have been raised by the other party.®’ The Delhi High Court

83. Reliance Industries Ltd. & Ors. v. Union of India (2014) 11 SCC 576. 84. It is pertinent to mention that the Supreme Court in April 2017 while dealing with a section 11 petition has made an observation that the presiding arbitrator in international commercial arbitrations should always be from a third country or a neutral country. 85. Indian Oil Corp. Ltd. & Ors. v. Raja Transport Pvt. Ltd. (2009) 8 SCC 520. 86. Assignia-VIL JV v. Rail Vikas Nigam Limited, 2016 SCC OnLine Del 2567; Afcons Infrastructure Ltd v. Rail Vikas Nigam Limited, 2017 SCC OnLine Del 8675; West Haryana Highways Projects Pvt. Ltd. v. National Highways Authority of India, 2017 SCC OnLine Del 8378. 87. TRF Ltd. v. Energo Engineering Projects Ltd., 2017 SCC OnLine SC 692. 88. Assignia-VIL JV, 2016 SCC OnLine Del 2567.

89. Reliance Infrastructure Ltd. v. Haryana Power Generation Corp. Ltd, 2016 (6) Arb LR 480 (P&H).

326

Chapter 14: Drafting Arbitration Clauses for India-Centric Agreements in another case and the Madras High Court rendered their decisions on similar lines as

the Punjab & Haryana High Court.””

It may also happen that the PSU maintains a panel of arbitrators for selection of arbitrators and sends a list of names to the other party to select arbitrators from said list. Such method has been held to be valid by the Supreme Court.”’ However, certain guidelines must be followed, as directed by the Supreme Court; e.g., the panel must be broad, it could contain names from government departments, other PSUs, as well as private entities and the legal community. The other party should be allowed to choose from a broad panel and not a limited list provided by the PSU.” 14.4.5.3

Choice of Arbitrators

The key to satisfactory resolution of a dispute through arbitration is often the choice of a suitable panel of arbitrators. This, in turn, also ensures the success of alternative dispute resolution process. Out of various factors that are applied for the constitution of the perfect tribunal, the most deliberated one is the size of the tribunal. The question of preference between a sole arbitrator and a panel of three arbitrators, especially in the Indian context, is one worth looking closely into. The Indian experience of arbitration dictates the strong preference towards appointing retired Supreme Court or High Court judges as arbitrators.”” There are a limited number of arbitrators vis-a-vis a large number of arbitrations. Considerations of costs too lead to the choice of a sole arbitrator.” It can be observed that with the introduction of section 29A of the 1996 Arbitration Act, a sole arbitrator seems more likely to be able to close the proceedings in the limited time span and in a speedy manner. When appointment is done through the courts under section 11, the neutrality of the sole arbitrator is often safeguarded. By contrast, the appointment of a three-member panel, while trading off the advantages of expediency that a sole arbitrator guarantees, diminishes the scope of errors or oversight (given the careful consideration of three arbitrators).”* The satisfaction of having an arbitrator on the panel who resonates with the culture and background of the parties is likely to be valued in disputes between diverse parties.”° A three-member tribunal is versatile and offers the scope of having a proactive and well-rounded technical-legal balance within it. Therefore, high-stake arbitrations are 90. Afcons Infrastructure Ltd v. Rail Vikas Nigam Limited, 2017 SCC OnLine Del 8675; Offshore Infrastructure Limited v. Bharat Heavy Electricals Limited & Anr., 2016 SCC OnLine Mad 31837.

91. Voestalpine Schienen GmbH v. Delhi Metro Rail Corporation Ltd. (2017) 4 SCC 665. 92. Ibid. 93. Corporate Attitudes & Practices Towards Arbitration in India, Price WaterhouseCooper (2013), available at https://www.pwe.in/assets/pdfs/publications/2013/corporate-attributes-and-prac tices-towards-arbitration-in-india.pdf. 94, Alan Redfern, et al., Law and Practice of International Commercial Arbitration 183 (4th ed. 2004).

95. Ben

Giaretta & Akshay

Kishore, One Arbitrator or Three,

| September 2015,

available at

https://www.ashurst.com/en/news-and-insights/legal-updates/one-arbitrator-or-three/.

96. Herbert Smith Freehills LLP, India Related Commercial Governing Law Clauses (6th ed. 2017).

327

Contracts

Dispute Resolution

and

Pallavi Shroff

suited for a panel, rather than a sole arbitrator. Parties are willing to bear an additional expense for quality adjudication of their high-stake claims. Therefore, the choice of size of the tribunal is one that hinges on the nature of the

parties entering into the contract, a reasonable foresight into the magnitude of the disputes likely to come up and the technical subject matter of the dispute for adjudication, and the ideal composition varies from transaction to transaction. 14.4.6

Multi-tier Dispute Resolution Clauses

A multi-tier dispute resolution clause contains alternative dispute resolution mechanisms to provide for layered dispute resolution which could include negotiation, mediation, conciliation or expert determination,

etc. prior to arbitration. This is also

known as an escalation clause or filter clause. The parties insert such clauses with an intent to use these escalating steps to resolve the dispute, and only upon failure to resolve the dispute by means of such alternative dispute resolution methods, the parties agree to proceed with arbitration.” Some parties also employ the technique of arbitration-mediation-arbitration, which provides for mediation between the parties after the commencement of arbitration. If the parties can reach a compromise, the arbitral tribunal passes the consent award as per the compromise between the parties, whereas, if the mediation is futile,

the already initiated arbitration ensues.”

The necessity of an amicable mode of dispute resolution prior to arbitration is the reason for parties agreeing to multi-tier dispute clause. In India, the purpose of an escalation clause has not been very successful. Perhaps such clauses may conflict with the objective of a speedy resolution of disputes. However, in certain situations, the provision

for settlement or conciliation or mediation,

prior to arbitration,

has been

useful and productive. In Visa International Ltd. v. Continental Resources (USA) Ltd. the parties intended to settle the disputes amicably among themselves, and only in case of failure, the disputes were required to be settled in accordance with the provisions of the 1996 Arbitration Act.” In this case, it was contended that the precondition for amicable settlement of the dispute between the parties has not been exhausted and therefore the application seeking appointment of arbitrator is premature. After analysing the correspondence exchanged between the parties, the Supreme Court held that the letters exchanged between the parties undoubtedly disclosed that attempts were made for an amicable settlement but without any result leaving no option but to invoke the arbitration clause.

97. James H. Carter, Part I: Issues Arising from Integrated Dispute Resolution Clauses, in New Horizons in International Commercial Arbitration and Beyond, 12 ICCA Congress Series (Albert Jan Van den Berg ed., 2005) pp. 446-469. 98. The Singapore Arb-Med-Arb Clause, Singapore International Arbitration Centre, available at hitp://www.siac.org.sg/model-clauses/the-singapore-arb-med-arb-clause. 99.

Visa International Ltd. v. Continental Resources (USA) Ltd. (2009) 2 SCC 55.

328

Chapter 14: Drafting Arbitration Clauses for India-Centric Agreements As regards multi-tier arbitration clauses, the Supreme Court in its decision in Centrotrade Minerals & Metal Inc. v. Hindustan Copper Ltd. has reaffirmed the strength of the trend of courts giving weight to party autonomy in choosing their preferred means of settlement of disputes.'°’ The Supreme Court ardently lent its support to ‘two-tier arbitration clauses’ and in doing so relied upon the principle of party

autonomy. 14.4.7

Language of Arbitration

Parties have the choice to decide the language to be used in the arbitration. In India-centric contracts, the parties ordinarily prefer English as the language of arbitration and specifically incorporate the same in the arbitration clause. Section 22 of the 1996 Arbitration Act reflects such party autonomy and it also provides that if parties fail to agree upon a language, the tribunal shall determine the language or languages to be used in the arbitration. If the documentary evidence is found to be in any other language than what parties have agreed, the tribunal may direct translation of such document into the language agreed by the parties or as determined by the tribunal.” 14.5

ARBITRABILITY

The scope of arbitration refers to the type or ambit of disputes that would be subject to arbitration pursuant to an arbitration clause. The parties need to agree as to the kind of disputes they intend to cover in the arbitration clause. The intention of the parties should be explicitly mentioned in the clause. Depending upon the complexity of the contract between the parties, they can cull out certain disputes which would be outside

the scope of the arbitration clause.'”*

Not all disputes are arbitrable in India and therefore courts have held that certain arbitration agreements are unenforceable. In Sukanya Holdings (P) Ltd. v. Jayesh H. Pandya it was held by the Supreme Court that courts can refer matters to arbitration

only if the entire ‘subject matter’ is arbitrable.'"’ In this case the matter was partly

arbitrable as not all the defendants were parties to the arbitration agreement and therefore the court held that the matter cannot be referred to arbitration. The settled law by the Supreme Court in Booz Allen and Hamilton v. SBI Home Finance Limited is that all disputes relating to rights in rem are required to be adjudicated by courts and public tribunals, being unsuited for private arbitration." However, this is not a rigid or inflexible rule. Disputes relating to subordinate rights in personam arising from

100. Centrotrade Minerals & Metal Inc. v. Hindustan Copper Ltd., 2017 (2) SCC 228. 101.

Section 22(4), 1996 Arbitration Act.

102. Section 7(5), 1996 Arbitration Act. 103. Sukanya Holdings Put. Ltd. v. Jayesh H. Pandya & Anr, AIR 2003 discussion of arbitrability, see Chapter 2 of the Handbook. 104.

Booz Allen & Hamilton v. SBI Home Finance (2011) 5 SCC 532.

329

SC 2252. For further

Pallavi Shroff

rights in rem have always been considered to be arbitrable.'"” The Supreme Court in A. Ayyasamy v. A. Paramasivam held that a mere allegation of fraud in the pleadings by one party against the other cannot be a ground to hold that the matter is incapable of settlement by arbitration.'** Simple allegations of fraud touching upon the internal affairs of the party inter se and of nature which has no implication in the public domain cannot be a ground to avoid the arbitration clause. However, the Supreme Court while relying on N. Radhakrishnan v. Maestro Engineers and Ors. was of the view that allegations of serious fraud are not arbitrable.'"’ 14.6

AWARD

OF INTEREST

The Supreme Court in Chittaranjan Maity v. Union of India held that the arbitral tribunal could not have awarded pre-award interest as the parties had expressly agreed to prohibit payment of interest on amounts payable under the contract.'"® Therefore, the parties should expressly agree in the contract regarding non-payment of interest on amount payable under the contract, if they intend to avoid dispute payment of pre-award or pendente lite interest. In relation to post-award interest, the 1996 Arbitration Act provides for payment of interest at the default interest rate unless the award directs otherwise.‘ 14.7

CONCLUSION

The perception that there is a miracle clause or a model clause in arbitration is a myth. While it is correct to state that effectiveness of an arbitration clause depends on the nature of the transaction, it is advisable that a standard clause, keeping in mind the above factors in India-centric agreements, may be formulated by transacting parties which can be further negotiated to arrive at a conclusive arbitration clause. A quick checklist outlining the various considerations to be borne in mind while drafting an arbitration agreement is provided below. It is advisable to refer to this list in consonance with the checklist provided in Chapter 2:

105. As held in Booz Allen case, the well-recognised examples of non-arbitrable disputes are: (i) disputes relating to rights and liabilities which give rise to or arise out of criminal offences; (ii) matrimonial disputes relating to divorce, judicial separation, restitution of conjugal rights, child custody; (iii) guardianship matters; (iv) insolvency and winding up matters; (v) testamentary matters (grant of probate, letters of administration and succession certificate); and (vi) eviction or tenancy matters governed by special statutes where the tenant enjoys statutory protection against eviction and only the specified courts are conferred jurisdiction to grant eviction or decide the disputes. Further, the Supreme Court in Vimal Kishore Shah v. Jayesh Dinesh Shah (2016) SCC OnLine SC 825 added that disputes relating to trust and trust deeds are not arbitrable. 106. A, Ayyasanry v. A. Paramasivam (2016) 10 SCC 386. 107. N. Radhakrishnan v. Maestro Engineers and Ors (2010) 1 SCC 72. 108. Chittaranjan Maity v. Union of India (2017) 9 SCC 611. 109.

Section 31(7)(b), 1996 Arbitration Act.

330

Chapter 14: Drafting Arbitration Clauses for India-Centric Agreements agreement should be clear, unequivocal, unambiguous and complete but not overspecific; express submission of disputes to binding arbitration, disclosing a determination and obligation to go to arbitration; submission of ‘all’ or only ‘certain disputes’; dispute submitted to arbitration must be arbitrable;

agreement has to be in writing; specily the type of arbitration whether it is ad hoc arbitration or institutional arbitration and in case of latter, specify choice of arbitration centre;

specify a particular place to be the legal seat of arbitration; specily the law governing the contract; specify proper law of arbitration agreement; specify the number of arbitrators and the method of arbitrator appointment; appoint an arbitrator who is not disqualified or ineligible to act as one, under the 1996 Arbitration Act; and specily the language of arbitration.

331

CHAPTER

15

Ongoing Efforts Towards Reforming the ISDS System: An Aide-Memotire of the System’s Need Amidst Calls for Iconoclasm Marike Paulsson, George Pothan & Supritha Suresh

Investment treaty arbitration is envisaged as providing for an adjudication process

that is neutral, fair and often confidential with its very own enforcement mechanism. However, recent years have seen a growing resistance from States. Discussion

of reform has emerged under the aegis of UNCITRAL. Concerns have led to proposals which

in

turn

have

led to a plethora

of questions.

Careful

consequences is warranted before commencing a regime change.

15.1

consideration

of

INTRODUCTION

International law perhaps has not achieved much but it is good that it is there.' Over some decades States have joined forces in order to promote international trade. States were willing to sacrifice some sovereignty in exchange of international agreements that provide for protection of their investors abroad and offer protection to the investors they welcome. The system of Investor-State Dispute Settlement (ISDS) is a means to protect investors and provides for adjudication processes that are neutral, fair and often confidential with its very own enforcement mechanism. However, over time, as with any successful instrument, its actors have become sophisticated, and at

times, some opportunistic and shrewd: a toolbox of guerrilla tactics is available to those lawyers who consider international disputes to be a lucrative business. Not only that, the methodology of international adjudication between investors and States builds |. Fali Nariman, Introduction to the New York Convention: The Convention and Sovereignty, Judicial Dialogue on the New York Convention, 23 November 2013, recalling the words by Canadian (former) Governor General Adrienne Clarkson. The full transcript is available at https://www.

arbitration-icca.org/media/2/13916005409590/nyc_roadshow_speech_23rd_nov_nariman.pdf.

333

Marike Paulsson, George Pothan & Supritha Suresh upon the idea of party autonomy. It is a feature that enables parties to tailor the needed methodology to the dispute at hand. It allows parties to opt for either arbitration under the UNCITRAL

Arbitration

Rules,

the Convention

on

the Settlement

of Investment

Disputes between States and Nationals of Other States (ICSID Convention) or ad hoc arbitration.* Yet, it also allows for the parties to appoint arbitrators and that is perhaps where the shoe can pinch.* The system holds arbitrators accountable through various pathways, among others these are: (1) selection processes; (2) challenge procedures; (3) setting aside procedures; and (4) enforcement. One would argue that those pathways create accountability of arbitrators, yet, States feel that the system is not regulated enough and must offer some sovereign protection.* Another consequence of the somewhat unregulated nature of these processes, party autonomy and partyappointed adjudicators is the increased length and cost of arbitration procedures.” The pushback by States has been prompted by questions of legitimacy stemming from

2. UNCTAD has undertaken an extensive mapping of the world’s investment treaties. Their freely accessible tools allow for filtering at multiple levels, including the forum and rules chosen by the State parties. See https://investmentpolicy.unctad.org/international-investment-agreements /iiamapping. 3. For instance, see Chartered Institute of Arbitrators, CIArb at UNCITRAL Working Group II] on ISDS Reforms: Effictency, Decisions, and Decision Makers, February 2019, p. 21, available at https:// www.ciarb.org/media/3480/ciarb-uncitral_discussion-papers.pdf noting that the difference in the methods of appointment has led to pleas for party appointment of arbitrators to be abolished (and replaced by other methods) but that such a step would contravene the principle of party autonomy in arbitration; see also, Ashish Chugh, The Parties’ Right to Appoint ‘Their’ Arbitrator in an International Arbitration Proceeding, International Academy of Arbitration Law, available at https://arbitrationacademy.org/wp-content/uploads/2017/12/Honorable-Mention-AshishChugh.pdf: ‘In essence, the principal criticism meted out to this practice appears to be based on the presumption that party-appointed arbitrators are inherently incapable of being truly independent and impartial in the same way as, for example, the presiding arbitrator, who is not directly appointed by the parties. It has been argued that parties do not in reality make such appointments with the bona fide intention of appointing the most-suitably qualified arbitrators but instead anecdotal evidence suggests that their main objective is to gain a tactical advantage in the arbitration by ensuring that there is at least one arbitrator on the panel who is predisposed towards their case’.

4. UNCITRAL, at its forty-eighth session, in 2015, noted: ‘the current circumstances in relation to

investor State arbitration posed challenges and proposals for reform had been formulated by a number of organizations’. It was within this context that Working Group-Ill was established in 2017 with a broad mandate to identify concerns regarding ISDS, consider whether reform was desirable, and if yes, develop and recommend relevant solutions to UNCITRAL. See Report of Working Group III (Investor-State Dispute Settlement Reform) on the work of its thirty-fourth session,

19 December 2017, A/CN.9/930/Rev.1, available at https://undocs.org/en/A/CN.9/93

0/Rev.1; see also, Possible future work in the field of dispute settlement: Reforms of investor-State dispute settlement

(ISDS),

Note

by the Secretariat,

20 April

2017,

A/CN.9/917,

available at

https://undocs.org/en/A/CN.9/917. 5. The oft-cited case in this regard is Yukos. In three awards, dated 18 July 2014, the arbitral tribunal constituted under the Energy Charter Treaty unanimously held that Russia was in breach of its obligations under the treaty and ordered it to pay in excess of USD 50 billion in compensation. The cases were heard together before identical tribunals, see Hulley Enterprises Limited (Cyprus) v. The Russian Federation (PCA Case No. AA 226), Yukos Universal Limited (Isle of Man) v. The Russian Federation (PCA Case No. AA 227), Veteran Petroleum Limited (Cyprus) v. The Russian

Federation (PCA Case No. AA 228). See also, José Manuel Alvarez, et al., Duration of InvestorState Dispute Settlement

Proceedings,

21 J. of World

Inv. & Trade

330-335

(2020),

available

at https://www.researchgate.net/publication/342445898_ Duration_of_Investor-State_Dispute_ Settlement_Proceedings.

334

Chapter 15: Reforming the ISDS System substantive inconsistency between arbitration decisions; non-accountability of arbitrators going to repeat appointments or disclosures about potential conflicts of interest; high legal costs; and the need for diversity and transparency among other concerns.° However, one does well to remember why countries opted for these treaties providing for ISDS in the first place. Treaties create trust: they counter the sometimesconstricting notions of sovereignty by providing for neutral adjudication methods that are a good fit for international trade. One treaty referred to as perhaps one of the most important instances of international law in the history of commercial law is the 1958 United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention).’ And as the former Secretary General of the United Nations said: This landmark instrument has many virtues. It has nourished respect for binding commitments, whether they have been entered into by private parties or govern-

ments. It has inspired confidence in the rule of law. And it has helped ensure fair

treatment when disputes arise over contractual rights and obligations [...] International trade thrives on the rule of law: without it parties are often reluctant to enter into cross border commercial transactions or make international investments.

It will also be good for States to recall the financial real-world impact that the flow of foreign direct investment (FDI) has allowed for: the United Nations Conference on Trade and Development’s (UNCTAD) World Investment Report, 2019, values FDI, portlolio flows and other investment (mostly bank loans) at USD 5 trillion, or 5.9% of global Gross Domestic Product in 2018. Comparatively, it notes preliminary data for official development assistance (ODA) (bilateral and multilateral) was USD 149 billion. Figure 15.1 is the graph accompanying the report.”

6. See generally, International Bar Association Subcommittee on Investment Treaty Arbitration, Consistency, efficiency and transparency in investment treaty arbitration, November 2018. 7. Michael Mustill & Steward Boyd, Arbitration (2nd ed. 1989). 8. Kofi Annan, Opening Address Commemorating the Successful Conclusion of the 1958 United Nations Conference on International Commercial Arbitration, in Enforcing Arbitration Awards under the New York Convention — Experience and Prospects, | (United Nations 1999). 9. UNCTAD World Investment Report, 2019, available at https://unctad.org/en/PublicationsLibra ry/wir2019_en.pdf, pp. 11-12.

335

Marike Paulsson, George Pothan & Supritha Suresh Figure 15.1

Developing Economies: Sources of External Finance, 2009-2018 (Billions of Dollars)

600 FDI (directional) 600

Remittances

400

Other investment Portfolio investment

200

ODA

O

ia

2009

2010

-200

2011 :

2012

2015

2014

Oi /

2016

2017

2018

}

100

Source: UNCTAD,

based on KNOMAD

(for remittances), UNCTAD

Dataset (for portfolio investment and other investment) and OECD

(for FDI), IMF World Economic (for ODA).

Note: Remittances and ODA are approximated by flows to low- and middle income countries, as grouped by the World Bank.

An older, albeit simpler, chart was put together drawing upon Organisation for Economic Co-operation and Development (OECD) and UNCTAD data. The authors note that in 2010, FDI was approximately seven times as large as ODA, and growing much more quickly (Figure 15.2). UNCTAD’s numbers from 2019 only make clear the increasing disparity.'°

10. Andrew Schriner & Daniel Oerther, No Really, (Crowd) Work Is the Silver Bullet, 78 Procedia Eng. 224-228 (2014).

336

Chapter 15: Reforming the ISDS System Figure 15.2.

Comparison of the Size of Foreign Direct Investment (FDI) and Official Development Aid (ODA) over Time 800 700

es

Foreign Direct Investment

sessessseeees Official Development

$ Billions (current prices)

600 --

h

Assistance

| \

500

400

|

300

.0

Seleieed AE 555558 q

1960 1965

|

1970

std I

1975

—

“past I

1980

I

1985

T

1990

T

7

1995 2000

7

2005

T

2010

We cannot rely on foreign aid alone to feed, shelter, supply health services and educate the world’s population. Although investment flows might not depend on the existence of investment treaties (leaving aside the point that negotiators drafted investment treaties with public welfare in mind, and for the fundamental purpose to attract durable investment at lowest cost) there is a causal relationship between the availability of neutral adjudication and investment."’ Even with that background, States have continued to resist. The resistance by States was expressed by them denouncing the ICSID Convention,'’ terminating bilateral investment treaties,’” developing new models for /model BITs and agreeing to

11. See Jan Paulsson at Jindal Global University, Investor State Dispute Settlement Reforms, webinar held on 25 July 2020, recording available at https://www.youtube.com/watch?v = wrw4 mDhFZ3A.

12. Bolivia (2007), Ecuador (2009), and Venezuela (2012) are among the most notable denunciations.

13. India is an example. For a review of India’s engagement with ISDS and further discussion on the pushback by States, see Chapter 13.

337

Marike Paulsson, George Pothan & Supritha Suresh treaties whose provisions are moulded to deflect State liability,'* while arbitral centres have initiated processes to revise their procedural rules.'° In addition to unilateral and bilateral efforts, multilateral efforts have also been

formally commenced at UNCITRAL. In the UNCITRAL discussions, a routine of sorts has emerged — first, participants acknowledge that the ISDS system suffers from significant problems and needs reforms; second, following identification of the problems, the participants share their views, usually in written submissions which become publicly accessible; third, the diverse spectrum of views is condensed into Secretariat notes; fourth, pursuant to these notes, detailed negotiations assess feasibility of the

proposed reforms. As a preface, participants in the reforms process, thought leaders and readers alike should keep in mind that these actions taken to reform the process, if done with undue nationalism, could potentially deter or adversely impact the positives accompanying the multilateralism that has been built over the preceding years (e.g., structural reforms that aim to replace institutions such as the Permanent Court of Arbitration (PCA) and the ICSID need to be considered very carefully). One example of the deleterious effects of undue nationalism is the recent experience of the World Trade Organization (WTO). The dispute settlement mechanism of the WTO, often remarked as the ‘crown jewel’ of the organisation, became defunct following the actions of the United States in repeatedly blocking new appointments to the Appellate Body.'® This Chapter will begin by drawing attention to state conduct illustrating the pushback. Next, the Chapter will provide an overview of the discussions at UNCITRAL Working Group-III (UNCITRAL WG-III) and analyse certain proposals as illustrations. Two proposals will be analysed in some depth - the proposal for a multilateral investment court (MIC) and the somewhat interrelated proposal for building in an appellate mechanism into the ISDS process. The Chapter will then review the various options for incremental reforms. The last part will act as a conclusion. 152

THE PUSHBACK: RECENT STATE CONDUCT

This part examines recent state conduct displaying signs of pushback against the system. In particular, this part focuses on bilateral and multilateral agreements entered into in the past decade that show moving away from the old. 14. The limitation of States’ liability to investor claims has been done in unique ways. For example, the Brazil-UAE BIT 2019 provides for joint committees, ombudsmen and state-to-state arbitration; Korea-US Free Trade Agreement provides that the Most Favoured Nation (MFN) clause cannot be used to import ISDS provisions. ISDS has also been curbed by limiting access to investors, based on the identity of the investor. In this regard, Member States of the EU signed an agreement for the termination of intra-EU BITs. 15. In this regard, ICSID has initiated an extensive rules amendment project which is ongoing at the moment of writing. More information is available at https://icsid-worldbank.org/resources/ rules-and-regulations/icsid-rules-and-regulations-amendment-working-papers. 16. WTO settles disputes in the following way: first, a member nation can request consultations with the member it has a dispute with. Following failure of consultations, a panel is set up to hear the dispute. The panel's report can then be appealed to the Appellate Body, making the latter the final stage in the dispute settlement process in the WTO.

338

Chapter 15: Reforming the ISDS System 15.2.1

Trade and Investment Agreements

Post Achmea,'’ the European Union (EU) within the EU - 20 plus EU States agreed with the European Commission argue that pushback against ISDS within the EU has with ISDS and create a court system instead

Agreement between EU and Canada.'”

continued its journey to terminate ISDS to terminate intra-EU BITs.'* Stakeholders intra-EU BITs violate European law. That led to some regional treaties that do away — e.g., the Comprehensive Economic Trade

The pushback was — and is — not restricted to Europe alone. Waves have been felt across the globe. Some agreements have replaced ISDS with joint committees, ombuds-

men and state-to-state arbitration — e.g., 2020 Brazil-India BIT.*" Some agreements do

away with ISDS and further negotiations between the United through other legal

17.

provide for an alternative only in case needed, and that too upon (e.g., Australia-US FTA).*! The ‘new NAFTA’ provides for no ISDS States and Canada.** In some cases, ISDS may still be available instruments, such as the Trans-Pacilic Partnership to which both

Slowakische Republik v. Achmea BV, Case C-284/16, 6 March 2018.

18. Agreement for the termination of Bilateral Investment Treaties between the Member States of the European Union, 5 May 2020, available at https://eur-lex.europa.eu/legal-content/EN/TXT/? uri = CELEX:22020A0529(01).

19. European Court of Justice confirms compatibility of Investment Court System with EU Treaties https://ec.europa.eu/commission/presscorner/detail/en/IP_19_2334. See also, EU-Singapore FTA, signed on 19 October 2018, available at https://eur-lex.europa.eu/legal-content/EN/TXT /PDF/?uri= CELEX:22019A1114(01)&from= EN#page= 106; EU-Vietnam FTA, signed on 30 June 2019, available at https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri = 0J:L:2020 :186:FULL&from = EN#page= 145; EU-China Comprehensive Agreement on Investment, signed on 13 February 2020, available at https://trade.ec.europa.eu/doclib/press/index.cfmfid = 2115. 20. Signed on 25 January 2020, available at https://investmentpolicy.unctad.org/internationalinvestment-agreements/treaty-files/5912/download. 21.

Article 11.16(1):

If a Party considers that there has been a change in circumstances affecting the

settlement of disputes on matters within the scope of this Chapter and that, in light of

such change, the Parties should consider allowing an investor of a Party to submit to

arbitration with the other Party a claim regarding a matter within the scope of this Chapter, the Party may request consultations with the other Party on the subject, including the development of procedures that may be appropriate. On such a request, the Parties shall promptly enter into consultations with a view towards allowing such

a claim and establishing such procedures.

Article 11.16(2) provides little by way of clarification: For greater certainty, nothing in this Article prevents a Party from raising any matter arising under this Chapter pursuant to the procedures set out in Chapter 21 (Institutional Arrangements and Dispute Settlement). Nor does anything in this Article prevent

an investor of a Party from submitting to arbitration a claim against the other Party to the extent permitted under that Party's law.

Available at https://ustr.gov/sites/default/files/uploads/agreements/fta/australia/asset _upload_file248_5155.pdf. 22. Article 14.2(4), Canada-United States-Mexico Agreement: For greater certainty, an investor may only submit a claim to arbitration under this Chapter as provided under Annex 14-C (Legacy Investment Claims and Pending

339

Marike Paulsson, George Pothan & Supritha Suresh Mexico and Canada are a party. In other cases, investors may need to turn to the domestic courts of the host party for resolution of their disputes or seek the intervention of their home State government. While the above have been some relatively drastic measures by States, practice has shown attempts to retain the ISDS system, but limit access to it, or curtail the scope of protections offered. For instance, access to ISDS has been curbed depending on the identity of the parties;~* restricted by procedural requirements like exhaustion of local remedies, clarifications going to definition of investment and investor thereby raising the threshold to attain standing before an investment treaty tribunal;** prohibiting double hatting;** limiting scope of substantive protections;** broadening the scope of non-precluded measures;”’ or limiting enforcement by way of domestic legislation (the reciprocity and commercial requirement reservations under the New York Convention can be said to be examples of this; although these reservations have today become generally accepted as standard practice, the reservations have limited automatic enforceability of arbitral decisions). But not all aspects of the pushback have been worrisome. Some steps have been commendable. For example, the Dutch Model BIT prioritises gender, diversity, and the sustainability goals of the United Nations.** The new Indian Model BIT in its preamble recognises the ‘promotion of sustainable development’ and Article 12 introduces the obligation of corporate social responsibility.*’

Claims), Annex 14-D (Mexico-United States Investment Disputes), or Annex 14-E (Mexico-United States Investment Disputes Related to Covered Government Contracts).

Available at https://www.international.gc.ca/trade-commerce/ assets/pdfs/agreements-

accords/cusma-aceum/r2-cusma-14.pdf.

23. In this context, see Achmea following which EU investors’ access to ISDS is curtailed. See also, Marike Paulsson, Revisiting the Idea of ISDS Within the EU and an Arbitration Court: The Effect on Party Autonomy as the Main Pillar of Arbitration and the Enforceability of Arbitral Awards, 21 May

2018, Kluwer

Arbitration Blog, available at http://arbitrationblog.kluwerarbitration.

com/2018/05/2 1 /revisiting-idea-isds-within-eu-arbitration-court-effect-party-autonomy-mainpillar-arbitration-enforceability-arbitral-awards/. 24. An illustration is the Indian Model BIT, 2015. For further discussion of the Model BIT’s provisions, see Chapter 13 of the Handbook. 25. For example, see Marike Paulsson, The 2019 Dutch Model BIT: Its Remarkable Traits and the Impact on FDI, 18 May 2020, Kluwer Arbitration Blog, available at http://arbitrationblog. kluwerarbitration.com/2020/05/18/the-2019-dutch-model-bit-its-remarkable-traits-and-theimpact-on-fdi/. 26.

For

example,

under

the Korea-U.S.

FTA,

minimum

standard

treatment

and

MFN

are

not

applicable for ISDS. 27. For example, Japan-Israel BIT. 28. Marike Paulsson, The 2019 Dutch Model BIT: Its Remarkable Traits and the Impact on FDI, 18 May 2020, Kluwer Arbitration Blog, available at http://arbitrationblog.kluwerarbitration.com/ 2020/05/18/the-2019-dutch-model-bit-its-remarkable-traits-and-the-impact-on-fdi/. 29. For further discussion of the Indian Model BIT, see Chapter 13 of the Handbook.

340

Chapter 15: Reforming the ISDS System 15.2.2

Efforts to Improve the System: The Example of Transparency

At the multilateral level, in 2015, the UNCITRAL Commission recognised the concerns

related to transparency or arguably the lack thereof. Discussion surrounded the excessive confidentiality and concerns of justice administered ‘behind closed doors’ in the ISDS system, and as an oft-cited study published in 2016 observes: What

began as a rather academic or at least discrete controversy has recently

gained substantial media interest and public scrutiny and, in some instances, has spilled over into general politics. Over the last decade, leading newspapers around the world have turned their attention to investor-State arbitration with headings speaking of ‘obscure tribunals’, ‘secret trade courts’, entailing a ‘real threat to the national interest from the rich and powerful’.*° The concern was not new in 2015. It had been recognised earlier, and attempts were even made to rectify the failings. In 2013, UNCITRAL adopted the Rules on Transparency in Treaty-Based Investor-State Arbitration (Transparency Rules) together with a new Article 1(4) of the UNCITRAL Arbitration Rules (as revised in 2010). The Transparency Rules provide for public disclosure of awards and pleadings,*'

submissions by non-disputing parties’ and open hearings.** To extend the application

of the Transparency Rules to the treaties (and related disputes) signed before 1 April 2014, the General Assembly of the United Nations adopted the United Nations Convention on Transparency in Treaty-Based Investor-State Arbitration (Mauritius Convention) on 10 December 2014.** The Mauritius Convention sidestepped the need for 190+ countries to amend 3,000+ treaties and ‘thus imports transparency into the fragmented treaty-by-treaty regime by way of one single multilateral instrument’.*° Interacting with the Mauritius Convention, the Transparency Rules will apply: — automatically to arbitrations conducted under treaties which are concluded on or after 1 April 2014, unless treaty parties have agreed otherwise;*

30.

Gabrielle Kaufmann Kohler & Michele Potesta, Can the Mauritius Convention Serve as a Model

31.

Articles 2 and 3, Transparency Rules, 2013, available at https://www.uncitral.org/pdf/english

32.

33. 34. 35.

36.

for the Reform of Investor-State Arbitration in Connection with the Introduction of a Permanent Investment Tribunal or an Appeal Mechanism? Analysis and Roadmap, CIDS Research Paper, para. 16. /texts/arbitration/rules-on-transparency/Rules-on-Transparency-E. pdf. Article

5,

Transparency

Rules,

available

at

https://www.uncitral.org/pdf/english/texts/

arbitration/rules-on-transparency/Rules-on-Transparency-E. pdf. Article 6, Transparency Rules, 2013, available at https://www.uncitral.org/pdf/english/texts/ arbitration/rules-on-transparency/Rules-on-Transparency-E.pdf. The Mauritius Convention, available at https://uncitral.un.org/sites/uncitral.un.org/files/ media-documents/uncitral/en/transparency-convention-e. pdf. Gabrielle Kaufmann Kohler & Michele Potesta, Can the Mauritius Convention Serve as a Model for the Reform of Investor-State Arbitration in Connection with the Introduction of a Permanent Investment Tribunal or an Appeal Mechanism? Analysis and Roadmap, CIDS Research Paper, paras 67-68. Article 1(1), Mauritius Convention, available at https://uncitral.un.org/sites/uncitral.un.org/ files/media-documents/uncitral/en/transparency-convention-e.pdf.

341

Marike Paulsson, George Pothan & Supritha Suresh — for arbitrations under pre-existing treaties: parties to the treaty or parties to the dispute would have to agree to their application.*” One possibility to reach such agreement is for the home and host States to become parties to the Mauritius Convention or for host State to be a party to the Mauritius Convention and the claimant investor accepts the ‘general offer to use the transpar-

ency Rules’.**

The Mauritius Convention entered into force on 18 October 2017, and together

with the UNCITRAL Rules has been a source of inspiration for several treaties negotiated subsequently.*” India has incorporated several principles of transparency in its 2015 Model BIT.”

15.3

ONGOING INITIATIVE AT UNCITRAL WORKING

$53.1

Background

GROUP-III

From the efforts towards transparency was born the idea of a wider-scale reform of the investment arbitration regime: At its forty-eighth

session,

in 2015,

the Commission

noted

that

the current

circumstances in relation to investor-State arbitration posed challenges and proposals for reform had been formulated by a number of organizations. In that context, the Commission was informed that the Secretariat was conducting a study on whether the United Nations Convention on Transparency in Treaty-based

Investor-State Arbitration could provide a useful model for possible reforms in the field of investor-State arbitration, in conjunction with interested organizations.*'

37.

Articles

1(2)(a) and

1(2)(b), Transparency Rules, available at https://www-.uncitral.org/pdf/

english/texts/arbitration/rules-on-transparency/Rules-on-Transparency-E. pdf.

38. Articles 2(1) and 2(2), Mauritius Convention, available at https://uncitral.un.org/sites/uncitral .un.org/files/media-documents/uncitral/en/transparency-convention-e.pdf. 39. UNCITRAL, United Nations Convention on Transparency in Treaty-Based Investor State Arbitration https://uncitral.un.org/en/texts/arbitration/conventions/transparency. See also, UNCITRAL, Status: UNCITRAL Rules on Transparency in Treaty-Based Investor-State Arbitration

https://uncitral.un.org/en/texts/arbitration/conventions/foreign_arbitral_awards/status. 40. Note also that among the treaties listed in the Status table (listing treaties concluded after | April 2014 where the Rules on Transparency, or provisions modelled thereupon, are applicable) is the India-Belarus BIT, signed on 24 September 2018 and the India-Kyrgyz Republic BIT, signed on 14 June 2019. For further discussion of India’s BIT regime, see Chapter 13 of the Handbook. 4). See Report of Working Group III (Investor-State Dispute Settlement Reform) on the work of its thirty-fourth session, 19 December 2017, A/CN.9/930/Rev.1, available at https://undocs.org/ en/A/CN.9/930/Rev.1. The study referred to is Gabrielle Kaufmann Kohler & Michele Potesta, Can the Mauritius Convention Serve as a Model for the Reform of Investor-State Arbitration in Connection with the Introduction of a Permanent Investment Tribunal or an Appeal Mechanism? Analysis and Roadmap, CIDS Research Paper.

342

Chapter 15: Reforming the ISDS System Although UNCITRAL WG-III is government led,” the task force allows other observers,** and aims to find agreement by consensus. Institutional perspectives are also welcomed, and pertinently ICSID and UNCITRAL Secretariats have helped with preparing working papers.** UNCITRAL formulates its mandate as follows: The Working Group would proceed to: (i) first, identify and consider concerns regarding ISDS; (ii) second, consider whether reform was desirable in light of any identified concerns; and (iii) third, if the Working Group were to conclude that

reform was desirable, develop any relevant solutions to be recommended to the Commission. The Commission agreed that broad discretion should be left to the Working Group in discharging its mandate, and that any solutions devised would be designed taking into account the ongoing work of relevant international organizations and with a view of allowing each State the choice of whether and to what extent it wishes to adopt the relevant solution(s).*° UNCITRAL WG-III's mandate was solely limited to procedural aspects of ISDS. It was spelled out in clear terms that the ‘mandate given to the working group focused on the procedural aspects of dispute settlement rather than on the substantive provisions’ .“° But at the same time broad discretion was conferred with regard to solutions it would devise, after taking into account the view of all States.*”

The UNCITRAL WG_III while considering its mandate created two pathways: (1) incremental reforms and (2) structural reforms. The first would preserve the current system of ISDS. The second could replace the system but to date that has not been confirmed by delegations in the UNCITRAL WG-III. The structural reforms consist of two innovations: (1) the MIC and (2) the Appellate Body (AB). When considering ISDS reforms and potential new pathways and processes to adjudicate disputes between States and investors, one must look at the current main pillars of ISDS that have helped promote FDI and international trade. As such:

42.

Ibid.

43. Notably, a submission was made by the Corporate Counsel International Arbitration Group (CCIAG) to UNCITRAL WG-III, 18 December 2019, outlining the concerns of the investor community.

The submission is available at https://uncitral-un.org/sites/uncitral.un.org/files/

cciag_isds_reform_O.pdf. 44. See Draft Code of Conduct, released by ICSID and UNCITRAL, 1 May 2020, available at https://uncitral.un.org/en/codeofconduct. 45. Report of Working Group III (Investor-State Dispute Settlement Reform) on the work of its thirty-fourth session, 19 December 2017, A/CN.9/930/Rev.1, available at https://undocs.org/ en/A/CN.9/930/Rev.1.

46. Report of Working Group III (Investor-State Dispute Settlement Reform) on the work of its thirty-fourth session, 19 December 2017, A/CN.9/930/Rev.1,

available at https://undocs.org/

en/A/CN.9/930/Rev.1, para. 20: ‘Tt was also recalled that ISDS provided a method to enforce the substantive obligations of States. It was noted that critical questions on possible ISDS reform involved the underlying substantive rules. Nonetheless, it was clarified that the mandate given to the Working Group focused on the procedural aspects of dispute settlement rather than on the substantive provisions’. 47. Official Records of the General Assembly, seventy-second session, Supplement No. 17, A/72/17, available at https://undocs.org/A/72/17, para. 264: ‘The Commission agreed that broad discretion should be left to the Working Group in discharging its mandate, and that any solutions devised would be designed taking into account the ongoing work of relevant international organizations and with a view to allowing each State the choice of whether and to what extent it wished to adopt the relevant solution(s)’.

343

Marike Paulsson, George Pothan & Supritha Suresh Early in the first Development

Decade,

which

spanned

the

1969s, it became

increasingly clear that if the plans established for the growth in the economies of the developing countries were to be realized, it would be necessary to supplement

the resources flowing to these countries from bilateral and multilateral governmental sources by additional investments originating in the private sector. To encourage such investments, the competent international organizations consid-

ered several schemes designed to remove some of the uncertainties and obstacles that faced investors in any foreign country.** First,

equality

of arms.

In the absence

of ISDS,

or diplomatic

remedies,

an

investor be left with the jurisdiction of the courts of the country it aims to confront. An arbitral tribunal provides the parties with neutrality. Parties will have the ability to nominate and appoint the party-appointed arbitrator. Often those two co-arbitrators will appoint the president. This is an expression of party autonomy.*” However, even if it might be the investors predominantly benefitting from this type of ISDS, it is States who sign and create these bilateral treaties. These treaties will bring down the price of investment and political risk insurance. Second, finality. Unlike many national court proceedings with appeal and cassation, arbitrations are, in principle, final in the sense that recourse is limited to setting aside and annulment mechanism. These post-award proceedings were envisaged as limited to procedure and a prohibition against undertaking a review on the merits. While reality might differ from the ideal, the idea of finality appeals to investors and those in international trade. Merchants often do not profit from prolonged abeyance of their claims. Third, enforceability. Court judgments, through treaties like the Hague Conventions, might enable an efficient enforcement in other jurisdictions.*” However, these treaties often have several jurisdictional gateways and grounds for rejection of enforcement. In the context of enforcing arbitration awards, the New York Convention

(with 166 Contracting States) has been heralded as a ‘landmark instrument’.*! In India, the legal position on the applicability of the New York Convention to investment treaty arbitration awards still remains unclear. 48. ICSID, Analysis of Documents Concerning the Origin and Formulation of the Convention, Vols 1, 2 (1970). See also, Marike Paulsson, UNCITRAL Working Group Ill: Reforms in the Realm of Investor-State Disputes: UNCITRAL's Proposals for an Appellate Mechanism and Its Impact on Duration and Cast, 26 March 2020, Kluwer Arbitration Blog, available at http://arbitrationblog

49.

.kluwerarbitration.com/2020/03 /26/uncitral-working-group-iii-reforms-in-the-realm-ot-invest or-state-disputes-uncitrals-proposals-for-an-appellate-mechanism-and-its-impact-on-durationand-cost/.

Nigel Blackaby et al., Redfern and Hunter on International Arbitration (6th ed. 2015) para. 1.53.

For further discussion of party autonomy, see Chapter 7 of the Handbook. 50. Convention on the Recognition and Enforcement of Foreign Judgments in Civil or Commercial

Matters, 2 July 2019, available at https://www-hech.net/en/instruments/conventions/full-text

/?cid = 137; Convention on Choice of Court Agreements, 30 June 2005, available at https://www -hech.net/en/instruments/conventions/full-text/?cid = 98. See also, Riyadh-Arab Agreement for Judicial Co-operation, 1983, and Gulf Co-operation Council Convention for the Execution of Judgments, Delegations and Judicial Notifications, 1996. 51. Kofi Annan, Opening Address Commemorating the Successful Conclusion of the 1958 United Nations Conference on International Commercial Arbitration, in Enforcing Arbitration Awards under the New York Convention: Experience and Prospects, | (United Nations 1999). For further discussion of the New York Convention, see Chapter 12 of the Handbook.

344

Chapter 15: Reforming the ISDS System The Delhi High Court in the anti-arbitration injunction filed in Vodafone under the India-United Kingdom (UK) treaty held that the Arbitration & Conciliation Act, 1996 (1996 Arbitration Act) and in particular sections 5 and 45 do not apply proprio vigore to proceedings commenced under an investment treaty as it is neither an international commercial arbitration governed by the Act nor a domestic arbitration.” Further, in the anti-arbitration injunction filed in Khaitan the Delhi High Court reiterated the position taken in Vodafone: the 1996 Arbitration Act was inapplicable to investment arbitrations since they are not ‘commercial’ in nature.”* However, the court also went on to emphasise that as a matter of public policy, India was required to honour its treaty obligation to arbitrate and that interfering with an investor's right to arbitrate would be inconsistent with India’s treaty obligations and could even ‘lead to erosion of investor confidence’ and undermine the fundamental purpose of such treaties. The 1996 Arbitration Act implements the New York Convention. However, despite the two judgments of the Delhi High Court stating that the Act would not apply to investment treaty arbitrations, India in its 2015 Model BIT has stated that any awards under the treaty would be treated as a commercial award under the New York Convention (three BITs that India was party to and subsequently terminated had a similar provision)..“ The judgment in Vodafone is under appeal before the division bench of the Delhi High Court at the time of writing this Chapter. In the past, the only known enforcement proceedings of an investment treaty award in India was when the Yukos shareholders sought enforcement against the Russian Federation.” However, during the course of the enforcement proceedings, the award was set aside by the court at the seat of arbitration, following which the proceedings were withdrawn as dismissed in the Indian courts. Although the position of enforcement of ISDS awards under the 1996 Arbitration Act is unclear, the Delhi High Court in Vodafone and Khaitan observed that India has

an obligation to respect commitments under its treaties, including arbitration. But even with the New York Convention, awards are not automatically recognised; they see challenges to enforcement. In contrast, the ICSID Convention provides that an award is ‘binding’ and Contracting States ‘shall’ recognise such awards. Hence, the award is automatically recognised:”° Article 53 (1) The award shall be binding on the parties and shall not be subject to any appeal or to any other remedy except those provided for in this Convention. Each party shall abide by and comply with the terms of the award except to the

52. Union of India v. Vodafone Group Pie United Kingdom, MANU/DE/1673/2018. 53. Union of India v. Khaitan Holdings (Mauritius) Limited & Ors., Delhi High Court, CS (OS) 46/2019 LAs.

1235/2019 & 1238/2019, 29 January 2019.

54. India-Austria BIT, India-Kuwait BIT, India-Mexico BIT, each of which were terminated by India. For a further discussion of India’s termination of its BITs, see Chapter 13 of the Handbook. 55. Delhi High Court, O.M.P. (EFA)(COMM.) 2/2016. 56. See Christoph Schreuer, The ICSID Convention: A Commentary (2nd ed. 2009) pp. 1115-1150 noting on p. 1118: ‘The basic idea of an automatic recognition of ICS1D awards was modelled on Art. 192 of the Treaty of Rome establishing the European Economic Community’.

345

Marike Paulsson, George Pothan & Supritha Suresh extent that enforcement shall have been stayed pursuant to the relevant provisions of this Convention.

[...]

Article 54 (1) Each Contracting State shall recognize an award rendered pursuant to this Convention as binding and enforce the pecuniary obligations imposed by that award within its territories as ifit were a final judgment of a court in that State. A Contracting State with a federal constitution may enforce such an award in or through its federal courts and may provide that such courts shall treat the award as if it were a final judgment of the courts of a constituent state. (2) A party seeking recognition or enforcement in the territories of a Contracting State shall furnish to a competent court or other authority which such State

shall have designated for this purpose a copy of the award certified by the Secretary-General. Each Contracting State shall notify the Secretary-General of the designation of the competent court or other authority for this purpose and

(3)

of any subsequent change in such designation. Execution

of the

award

shall

be governed

by

the

laws

concerning

the

execution of judgments in force in the State in whose territories such execution is sought.

Although Member States must recognise and enforce the award, each State's laws relating to sovereign immunity from execution continue to apply.’’ Article 55 only applies to immunity from execution. It does not apply to immunity from jurisdiction. The question of immunity from jurisdiction does not arise in the context of the Convention: jurisdiction is governed by Article 25 of the Convention and is determined by the tribunal under Article 41. Domestic courts have no role to play in the determination of jurisdiction.” With any reforms, it will be important to protect those three traits somehow.” A reform that replaces the system with a process that eliminates any of these traits could increase the costs of FDI and political risk insurance and create concern in the mind of investors. At that point, would foreign aid be a sufficient substitute? 15.4

CONCERNS

States have been proactively making submissions to UNCITRAL WG-III and discussions have identified a plethora of issues: concerns have been raised about the lack of consistency, coherence,

predictability and correctness of arbitral decisions;

the neu-

trality of arbitrators and their method of appointment; costs and duration of ISDS proceedings; and about third-party funding.”

57. Article 55, ICSID Convention. The Federal Court of Australia had an opportunity to test this when faced with an application to enforce an ICSID award, see Eiser Infrastructure v. Kingdom of Spain [2020] FCA 157, available at https://www.italaw.com/sites/default/files/casedocuments/italaw11276.pdf58. See Christoph Schreuer, The ICSID Convention: A Commentary (2nd ed. 2009) pp. 1151-1185. 59. See above the description in Part 15.3.1. 60. Possible reform of investor-State dispute settlement (ISDS), Note by the Secretariat, 5 September 2018,

A/CN.9/WG.IL/WP.

149, available at https://undocs.org/en/A/CN.9/WG_IIL/WP. 149.

346

Chapter 15: Reforming the ISDS System Several other ISDS concerns were flagged: these included the calculation of damages, exhaustion of local remedies, counterclaims, non-disputing party participation and other methods

of dispute resolution. UNCITRAL

that there was no need to specifically address any of these many of them fall under one or more of the existing broad UNCITRAL WG-III has been sensitive to the broader Development Goals, and has expressed the following as its

WG-III,

however,

decided

concerns on their own, as issues. objectives of Sustainable guiding principles:

The Working Group may also wish to note the consideration expressed by States

that (i) investment policies should provide legal certainty, as well as effective and equal protection to investors and investments, tangible and intangible; (ii) access to effective mechanisms for the prevention and settlement of disputes, as well as to enforcement procedures; and (iii) dispute settlement procedures should be fair,

open and transparent, with appropriate safeguards to prevent abuse, and decisions-makers should reflect the geographical, cultural and gender diversity."!

15.4.1

Structural Reforms

15.4,1.1

The MIC

The submission of the EU is based Working Group are intertwined and a piecemeal approach would leave standing mechanism with full-time instance tribunal, and an appellate - The

first instance

tribunal

on the view that the concerns identified by the systemic, and that addressing specilic concerns in some unaddressed.“* The submission calls for a adjudicators and two levels of adjudication: a first tribunal, organised as follows: would

conduct,

as arbitral

tribunals

do

today,

fact-finding and application of law to the facts. It would also deal with cases remanded to it by the appellate tribunal. — The appellate tribunal would hear appeals, which grounds would be error of law (including serious procedural shortcomings) or manifest errors in the appreciation of the facts. It would not undertake a de novo review of the facts. Mechanisms for ensuring that the possibility to appeal is not abused would be

included, such as security for cast."

Most stakeholders in international arbitration and international law as well as the participants in the process and its users — both investors and States have for years both

61.

See also, possible reform of investor-State dispute settlement (ISDS), Note by the Secretariat, 30 July 2019, A/CN.9/WG.III/WP.166, available at https://undocs.org/en/A/CN.9/WG.III/WP. 166. Possible reform of investor-State dispute settlement

(ISDS), Note by the Secretariat, 30 July

2019, A/CN.9/WG.II/WP.166, available at https://undocs.org/en/A/CN.9/WG.III/WP.166, para. 11. 62. A/CN.9/WG.I0/WP.185, available at https://undocs.org/en/A/CN.9/WG.IIL/WP.185. 63. Possible reform of investor-State dispute settlement (ISDS), Submission from the European Union and its Member States, 24 January 2019, A/CN.9/EG.II/WP.159/Add.1, available at https://undocs.org/A/CN.9/WG.III/WP.159/Add.1.

347

Marike Paulsson, George Pothan & Supritha Suresh criticised arbitration as it has evolved and advocated for changes. The core of these criticisms as well as the object of reform appears to focus on the arbitrator and the basis of his or her appointment. The MIC, as it is envisaged by the EU (and other MIC proponents), seems to do away with the mechanism of party-appointments and the ad hoc nature of such appointments: the MIC is to be established with a permanent tribunal or roster of adjudicators/members to be appointed by States that are parties to the multilateral instrument.™ However, seemingly this would not be at the cost of independence and accountability: |al]djudicators would be employed full-time. They would not have any outside activities. The number of adjudicators should be based on projections of the

workload of the permanent body. They would be paid salaries comparable to those paid to adjudicators in other international courts. Independence from governments would be ensured through a long-term non-renewable term of office, combined with a transparent appointment process.”

The objective of the MIC is to create neutrality and impartiality. The proposal is aimed to increase consistency and harmonise the outcome in decisions. Reducing cost and time is also one of its goals. Adjudicators would be permanent, would not be able to moonlight, double hat or have any other function: this should reduce conflict of interest. Depending on the set-up and competencies, the MIC would also create precedent and would allow parties to understand how certain legal principles are to be interpreted. This would in theory improve the processes for adjudication of disputes with respect to transparency and harmonious and consistent interpretation and application of the law. With respect to the appointment of the MIC’s adjudicators and their roles, the Secretariat has reminded the delegations to consider the following elements: — full-time employment; — no outside activities; — the processes for appointment should be designed such that the selected adjudicators are independent and impartial; — the members of the MIC would be subject to strict ethical requirements; — the number of adjudicators can be based on the projected workload; — the profile of the adjudicators would be compared to those of international courts;

64. The submission by EU and Member States, in addition to candidate proposals by contracting parties, observes that candidates could also apply directly for appointment, see Possible reform of investor-State dispute settlement (ISDS), Submission from the European Union and its Member States, 24 January 2019, A/CN.9/WG.II/WP.159/Add.1, para. 22, available at https: //undocs.org/en/A/CN.9/WG.1I/WP.159/Add.1.

See also, Possible reform of investor-State

dispute settlement (ISDS), Selection and appointment of ISDS tribunal members, Note by the Secretariat, 31 July 2019, A/CN.9/WG.II/WP.169, available at https://undocs.org/en/A/CN.9 /WG.IL/WP.169. 65. Possible reform of investor-State dispute settlement (ISDS), Appellate and multilateral court mechanism, Note by the Secretariat, 29 November 2019, A/CN.9/WG.III/WP.185, para. 55, available at https://undocs.org/en/A/CN.9/WG.IIL/WP.185.

348

Chapter 15: Reforming the ISDS System — the salaries would be comparable to the salaries paid to adjudicators of other international courts; — the appointments are long term and non-renewable (this would give some reassurance that these adjudicators are independent from governments); — the appointment processes would be transparent; and — the Contracting States appointing these adjudicators will focus on geographi-

cal and gender diversity.°°

However, there are many technical questions left unanswered. In addition, the sequencing of the reforms at the time of this writing might be reconsidered. These questions will be addressed below. First, the MIC aims to improve diversity. However, it seems that the MIC is being pushed for and will perhaps be funded by the Contracting States in the developed part of the world. If so, how would the adjudicators or members of the court be appointed and by whom? Where would the court be located? Would it be a physical court or a virtual court? Second, questions remain about the MIC’s composition. Do the Contracting States appoint the adjudicators? Which Contracting States would be appointing the adjudicators? How many will be appointed? Often, in the immediate years following the conclusion of a treaty, States will ratify the treaty, but this can take time (e.g., see the 1958 New York Convention and the recently concluded Mauritius and Singapore Conventions).°” Would the States ratifying the treaty after other States have the right to appoint an adjudicator? Must States reach consensus or should appointments be approved by the other Contracting States? The UNCITRAL WG-III’s submissions have looked to the International Court of Justice (ICJ) for inspiration." However, the Secretariat too acknowledges the challenge: For the creation of an ISDS standing mechanism, it may be noted that the larger the multilateral basis, the more difficult it would be to ensure that each State can

appoint one member. Indeed, a permanent body with a high number of members maybe expensive and complex to manage.*”

The composition of the court/tribunal should ensure adequate representation from all geographical regions and legal systems. One should be mindful of the recent 66. Possible reform of investor-State dispute settlement (ISDS), Appellate and multilateral court mechanism, Note by the Secretariat, 29 November 2019, A/CN.9/WG.III/WP.185, available at https://undocs.org/en/A/CN.9/WG.II/WP. 185. 67. See Status of the New York, Mauritius and Singapore Conventions at https://uncitral.un.org/ en/texts/arbitration/conventions/foreign_arbitral_awards/status2, and https://uncitral.un.org /en/texts/arbitration/conventions/transparency/status, and https://uncitral.un.org/en/texts/ mediation/conventions/international_settlement_agreements/status.

68. In addition to the International Court of Justice, UNCITRAL WGC-III has also looked at the WTO's Appellate Body and the European Court of Human Rights, see Possible reform of investor-State dispute settlement (ISDS), Selection and appointment of ISDS tribunal members, Note by the Secretariat, 31 July 2019, A/CN.9/WG.III/WP.169, para. 42, available at https://undocs.org/en

69.

/A/CN.9/WG.II/WP.169. Possible reform of investor-State dispute settlement (ISDS), Selection and appointment of ISDS tribunal members, Note by the Secretariat, 31 July 2019, A/CN.9/WG.III/WP.169, para. 45, available at https://undocs.org/en/A/CN.9/WG_IIL/WP.169.

349

Marike Paulsson, George Pothan & Supritha Suresh fiasco in the ICJ where it resulted in a run-off between India and UK for one spot and thereby shifting the unwritten rule of regional representation to include one additional judge from Asia and one less from Europe. Hence it is important to ensure that representations are geographically divided. Discussions have taken place about how such a MIC would be established: a multilateral instrument signed and ratified by Contracting States, now delegations of UNCITRAL WG-III. In the summer of 2020, while countries were scrambling to fight COVID-19 with many going into full lockdown, the UNCITRAL Secretariat — having been forced to cancel the April 2020 UNCITRAL WG-III sessions — proceeded to hold virtual — informative - webinars. Some of them were devoted to this multilateral instrument.”” The models for that instrument were not drafted by State delegations but by members of the UNCITRAL WG-III’s Academic Forum.”' Proposals ranged from framework wheels to docking stations that would house a variety of reforms. Third, the MIC raises questions about fragmentation. Above we discussed the question of States signing up later than other States. A more troubling question is what happens when only a few States sign this instrument that would encompass the creation, not only of a MIC but also an appellate mechanism, an advisory centre, state-to-state dispute settlement mechanisms, etc. The framework could allow for opt-ins or reservations. Nonetheless,

the

idea

for structural

reforms

was

born

out

of the

desire

to

harmonise the outcomes in ISDS and to offer a process that would be less costly and more efficient. To create a situation with the availability of the current system with institutions such as PCA and ICSID for those States who decided not to sign a multilateral instrument along with a new system created by the multilateral instrument giving jurisdiction to the MIC and another to the AB, along with the creation of an advisory body, would lead to different decisions by different institutions involving different adjudicators: all creating a patchwork of precedents and parallel tracks of arbitration based on each inkling of sovereignty, party autonomy and adjudication that would be more State driven. The question then becomes whether this will increase trust by investors and whether it would have a favourable impact on FDI. Fourth, questions arise about the MIC’s adjudicators. Apart from the questions related to the how, when, and where of the creation of the MIC, a quintessential aspect of the MIC is the appointment of its adjudicators. This would impact the first element about balance and equality that had drawn investors to ISDS: for a MIC, the appointments would be sovereign appointments. Sovereignty poses challenges:

70.

UNCITRAL,

Multilateral

Instrument

on

ISDS

Reform

Webinar,

14 May

hitps://uncitral.un.org/en/multilateralinstrumentwebinar_20200514. 71. https://www.cids.ch/academic-forum.

350

2020,

available

at

Chapter 15: Reforming the ISDS System States act too often like billiard balls which collide, and do not co-operate.” To say that States are not only respondents but also treaty negotiators falls on deaf

ears. So the sovereigns appoint adjudicators who would be asked to resolve disputes based on treaties that they have negotiated?”*

That change is a significant departure from the current ISDS system or arbitration in general which is built on party autonomy: [I]n a standing mechanism,

the disputing parties would

have no role in the

appointment of the individuals composing the panels and the tribunal would be composed of tenured members, appointed by the Parties to the multilateral investment court statute for a specific term, to whom disputes would be assigned in a ‘random and unpredictable way’.”*

This design brings us back to the era that predates international arbitration, marked by gunboat diplomacy and courts of sovereigns unwilling to render judgments against their governments. Durable and quality foreign investment would be deterred.”* With that developing countries would be left to rely on foreign aid. After 2020 - a year that was marked by a global pandemic and unprecedented recession — developing countries are not the only ones in a dire economic situation. It is very likely that most governments will want to increase foreign investment and international trade as much as they can. Fifth, questions arise about enforcement. The MIC’s most pressing concern is the enforcement of its decisions and the applicability of the 1958 New York Convention to MIC decisions.” Decisions of ICJ and International Tribunal for the Law of the Sea and many international tribunals unlike the decisions of tribunals for investment treaty arbitration can be enforced only by the will of the State. Experts have focused on Article I(2) of the New York Convention that could arguably allow for its applicability to MIC decisions:

72. Fali Nariman, Introduction to the New York Convention, The Convention and Sovereignty, Judicial Dialogue on the New York Convention, 23 November 2013, transcript available at https://www.arbitration-icca.org/media/2/13916005409590/nyc_roadshow_speech_23rd_nov _hariman.pdf. 73. Marike Paulsson, Revisiting the Idea of ISDS Within the EU and an Arbitration Court: The Effect on Party Autonomy as the Main Pillar of Arbitration and the Enforceability of Arbitral Awards, Kluwer Arbitration Blog, 21 May 2018, available at http://arbitrationblog.kluwerarbitration. com/2018/05/21/revisiting-idea-isds-within-eu-arbitration-court-effect-party-autonomy-mainpillar-arbitration-enforceability-arbitral-awards/. 74. Possible reform of investor-State dispute settlement (ISDS), Appellate and multilateral court mechanism,

Note

by the Secretariat, 29 November

2019, A/CN.9/WG.III/WP.185,

para. 67,

available at https://undocs.org/en/A/CN.9/WG.IIL/WP. 185. 75. In this context, there have been several claims that so long as there is something to gain, foreign investment will continue. However, the point made by Jan Paulsson remains — yes, there will be investment, but would it be durable? Would it be the kind of investment a country would like to attract? See Jindal Global University, Investor State Dispute Settlement Reforms, webinar held on 25 July 2020, recording available at https://www-.youtube.com/watch?v = wrw4mDhFZ3A. 76. For further discussion on the New York Convention and its application, see Chapter 12 of the Handbook.

351

Marike Paulsson, George Pothan & Supritha Suresh The term

‘arbitral awards’

shall include not only awards

made by arbitrators

appointed for each case but also those made by permanent arbitral bodies to which the parties have submitted.

Article | of the New York Convention sets out the scope of the New York Convention: which awards — which decisions — fall under the New York Convention? But, the New York Convention does not define awards and arbitration. There is no preamble as one normally sees in treaties. To not define these important concepts was perhaps a conscious choice: the delegates felt it was clear what is meant by arbitration, and in the alternative,

it should be left to the Contracting

States and

the courts of

enforcement to define those concepts. Article I, its drafting history, and judicial application also provide further guidance on the definition and taxonomy of an ‘award’. However, the New York Convention does address the territorial and material

scope: it sets out which awards can be enforced under the New York Convention: (1) foreign awards rendered in another country; and (2) non-domestic awards rendered in the country where enforcement is sought. It also sets out the material scope: awards that are commercial in nature if the commercial reservation is applicable; awards arising out of differences between persons, whether physical or legal. And then Article I(2) answers the question by stating that both ad hoc awards and awards rendered under the auspices of permanent arbitral institutions (‘to which the parties have submitted’) can be enforced under the New York Convention. The MIC would create uncertainty as to whether its decisions are covered by the second prong of Article I. The drafting history of that prong might provide clarity: It was the Czechoslovakian delegate that proposed Article I(2). The debate then focused on adding the phrase ‘to which parties have voluntarily submitted’.

Awards rendered by permanent arbitral bodies would only fall under the Convention if those bodies were not really courts of justice - exercising compulsory jurisdiction — irrespective of whether they were called arbitral bodies or not. If a dispute came to a permanent arbitration court on the basis of mandatory law, then

the proceedings were not arbitral but judicial in nature. The delegates agreed that

the test was whether the submission was voluntary and a consequence of real

freedom of contract: the autonomy of the will. The Belgian representative proposed

the insertion

of the word

‘voluntary’

- an addition

that was

regarded

superfluous by the other delegates — and it was ultimately not included for want of necessity.” 77.

Marike

Paulsson,

The

1958 New

York

Convention

in Action

(2016)

pp.

120-121;

see also,

Convention on the Recognition and Enforcement of Foreign Awards, Travaux Preparatoires — Czechoslovakia: amendment to the draft Convention, at 1, U.N. Doc. E/Conf.26/L.10 (22 May

1958); Convention on the Recognition and Enforcement of Foreign Awards, Travaux Preparatoires - Belgium, Czechoslovakia, United Kingdom: additional provision to be included in the draft Convention, at 1, U.N. Doc. E/Conf.26/L.10 (22 May 1958); Convention on the Recognition

and Enforcement of Foreign Awards, Travaux Preparatoires - Summary Record of the Eighth Meeting, at 2, U.N. Doc. E/Conf.26/5R.8 (12 September

1958) (Comment of Mr Cohn (Israel)

(Belgium),

and

and Mr Koral (Turkey)); Convention on the Recognition and Enforcement of Foreign Awards, Travaux Preparatoires - Summary Record of the Eighth Meeting, at 3, U.N. Doc. E/Conf.26/SR.8 (12 September 1958) (Comment of Mr Maloles (Philippines)); Convention on the Recognition and Enforcement of Foreign Awards, Travaux Preparatoires - Summary Record of the Eighth Meeting, at 5-7, U.N. Doc. E/Conf.26/SR.8 (12 September 1958) (Comment of Mr Herment Mr

Pointet

(Belgium),

Mr

Koral

(Turkey)

352

Mr

Kanakaratne

(Ceylon))

and

Chapter 15: Reforming the ISDS System This drafting history underlines the importance of party autonomy as one of the main pillars of international arbitration: arbitration that is, in fact, of a mandatory nature is not truly arbitration and the New York Convention does not cover it. Both the parties in a dispute lose the ability to appoint an arbitrator. Instead, the adjudicators mirror judges in that they are on the bench permanently and appointed by the State. With that, the MIC is more of a judicial nature. The most important question that must be addressed and resolved by the UNCITRAL WG-III is: is the MIC comprised of State-appointed adjudicators, who sit on a permanent court rendering quasi-judicial decisions but potentially using as its nomenclature ‘arbitral decisions’ and ‘awards’?”* The EU's submission has fleetingly considered this: It is suggested that the instrument creating a standing mechanism should create its own enforcement regime, which would not provide for review at domestic level |...] It would also be the case that awards under a future standing mechanism

could additionally be capable of enforcement under the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. Enforcement is possible for awards made by ‘permanent arbitral bodies’ (see Article 1(2) of the Convention). There is no reason to consider that awards of a standing mechanism

could not be regarded as such of a ‘permanent arbitral body’ and hence enforceable, provided of course that the disputing parties had given their consent, which

by definition they would have done. It might be necessary to include mechanisms

to prevent the disputing parties activating set-aside procedures at a later stage.””

Creation of its own enforcement regime would create its own unique problems. Relying on the New York Convention is alluring as it would be easier as a matter of practicality. In any event, at this juncture, the MIC is called a multilateral investment court not a “Permanent Arbitration Court’. The alternative and perhaps a more practical approach would be for the PCA to have a regional presence on a floating basis with a permanent secretariat located in one place. This could be done by entering into host country agreements or the option of tying up with the PCA could be explored. The PCA has host country agreements with various States, and if the PCA can host the Secretariat, the possibility of having the cases heard at the regional facility could be explored. This could also be cost-effective as construction of a new structure can be avoided and the PCA already has numerous host country agreements including the Agreement with India concluded in 2008 and which came into force in 2013. The PCA and the Ministry of External Affairs assisted by

Convention on the Recognition and Enforcement of Foreign Awards, Travaux Preparatoires — Summary Record of the Twenty-Third Meeting, at 6, U.N. Doc. E/Conf.26/SR.23 (12 September 1958) (Comment of Mr Cohn (Israel)) - who proposed the deletion of the word ‘voluntarily’ which was adopted by twenty-four votes to two, with seven abstentions. 78. Marike Paulsson, Revisiting the Idea of ISDS Within the EU and an Arbitration Court: The Effect on Party Autonomy as the Main Pillar of Arbitration and the Enforceability of Arbitral Awards, Kluwer Arbitration Blog, 21 May 2018, available at http://arbitrationblog.kluwerarbitration. com/2018/05/21 /revisiting-idea-isds-within-eu-arbitration-court-effect-party-autonomy-mainpillar-arbitration-enforceability-arbitral-awards/. 79.

Possible reform

of investor-State

dispute

settlement

(ISDS), Submission

from

the European

Union and its Member States, 24 January 2019, A/CN.9/WG.II[/W.P.159/Add.1, available at https://undocs.org/A/CN.9/WG.IIl/WP.159/Add.1, paras 31-32.

353

Marike Paulsson, George Pothan & Supritha Suresh the PCA-India Committee have been pursuing it and have hosted three successful conferences under the aegis of this Agreement. 15.4.1.2

The AB

In its Notes, the UNCITRAL Secretariat identifies that the creation of an appellate body would ensure procedural and substantive correctness of decisions; rectify errors in decisions by ISDS tribunals; improve consistency, coherence and predictability in decisions; and promote accountability and legitimacy. The impact on costs and length of proceedings would need to be taken into account while devising the AB:*” The method of selection and appointment of members of the appellate body or

panels would need to be considered. This question is closely connected to the form of the appellate mechanism: consideration of issues would vary depending on whether the appellate mechanism would be modelled on the current arbitration

model, where parties select and appoint the arbitrators, whether a system of roster

would be established; or whether permanent adjudicators would compose the

chambers of an appellate mechanism.”!

The Notes detail the elements of the AB and include the following suggestions: — States would appoint permanent adjudicators. — An appeal before the AB could allow for the adjournment of enforcement proceedings. — The AB would be able to review the merits of a decision (that would include reconsiderations of findings of fact and law). — The UNCITRAL WG-III could develop the procedural rules for the AB appeal procedures. — Provisions would be created for the losing party in an arbitration to rely on, for any arbitration rendered worldwide (which could create serious bottleneck issues). In the proposals, the AB is designed such that it can review de novo arbitral decisions rendered within the current system of ISDS with an eye towards the legal reasoning. The AB could also be able to review factual determinations for manifest errors. The review on merits would be novel in the realm of adjudication of disputes between investors and States. Careful consideration is warranted as to the scope of such review and tools to curtain such review in order to prevent abuse. It seems an AB is to harmonise outcomes in ISDS, not open the floodgates to a de facto appeal. As with

80. See Possible reform of investor-State dispute settlement (ISDS), Appellate and multilateral court mechanism,

Note by the Secretariat, 29 November 2019, A/CN.9/WG.III/WP.185, available at

hitps://undocs.org/en/A/CN.9/WG.III/WP.185; see also, Draft Note on Appellate mechanism and enforcement issues, available at https://uncitral.un.org/en/working_groups/3/investorstate. 81. Possible reform of investor-State dispute settlement (ISDS), Appellate and multilateral court mechanism, Note by the Secretariat, 29 November 2019, A/CN.9/WG.III/WP.185, available at https://undocs.org/en/A/CN.9/WG.II/WP.185, para. 34.

354

Chapter 15: Reforming the ISDS System the MIC, the AB too raises some questions that the delegations in the UNCITRAL WG-III must address. First, the AB risks tilting the balance of the dispute settlement system against investors as the current model of the AB too is sovereign controlled. Questions are still to be addressed: where and how would the AB be established? How would it be funded? How are the adjudicators appointed? How would parties be dissuaded from disguising questions of facts as questions of law? How would the AB interact with ICSID, given that Article 53 of the ICSID Convention provides that ICSID awards ‘shall not be subject to any appeal or to any other remedy except those provided for in the Convention’? This last question prompts recollection: in 2004, the ICSID Secretariat had briefly considered the creation of an appeals facility: the appeal mechanism would be intended to foster coherence and consistency in

the case law emerging under investment treaties. Significant inconsistencies have not to date been a general feature of the jurisprudence of ICSID. It might also be argued that providing an appeal mechanism could fragment the ICSID arbitral regimes: ICSID arbitrations would in some instances be subject to the mechanism and in other cases remain free of the mechanism. Subjecting ICSID arbitral awards to an appeal mechanism might also detract from the finality of the awards and open opportunities for delays in their enforcement. On the other hand, there clearly is scope for inconsistencies to develop in the case law, given the increased number of cases, as well as the fact that under many investment treaties disputes

may be submitted to different, ICSID and non-ICSID, forms of arbitration. As to the question of fragmentation, it may be pointed out that there already are different forms of ICSID arbitration (ICSID Convention arbitration and Additional Facility Rules arbitration). |...] It would in this context seem to run counter to the

objectives of coherence and consistency for different appeal mechanisms to be set up under each treaty concerned. Efficiency and economy, as well as coherence and

consistency, might best be served by ICSID offering a single appeal mechanism as an alternative to multiple mechanisms. It would be on this assumption that the Centre might pursue the creation of such an ICSID Appeals Facility at this stage.** A year later, in 2005, the ICSID Secretariat abandoned the idea for lack of positive response.” All the concerns raised by ICSID in 2004 are valid today and the questions

remain unanswered.

Second, the AB makes erroneous decisions permanent. Its decisions on legal issues would be de facto or de jure binding in future cases. Criticism has been raised with respect to ISDS in that there are around three thousand BITs in addition to regional treaties and multilateral treaties concluded between States. Those treaties provide for much more than ISDS mechanisms and investor protection alone. The treaties bear elements of public policy and public international law. The argument has been made that the decisions of private tribunals affect more than just the two parties involved and impacts the sovereignty and domestic governance of States. Therefore, 82. ICSID Secretariat, Possible Improvements of the Framework for ICSID Arbitration, Discussion Paper, 22 October 2004, available at https://icsid.worldbank.org/sites/default/files/Possible%

20Improvements % 20o0f% 20the % 20Framework% 200f % 20ICSID % 20Arbitration.pdf, -23.

paras 21

83. Antonio Parra, The History of ICSID (1st ed. 2012) pp. 251-254: “Many doubted the wisdom; most considered it premature at best’.

355

Marike Paulsson, George Pothan & Supritha Suresh the adjudication based on those treaties should take place in full transparency in a manner that promises consistency and considers these public traits. One can question the extent to which an AB will produce more consistent case law across the universe of around three thousand investment agreements that are in force. However, an AB could produce more consistent case law in some instances. In ISDS, awards can be corrected on limited grounds (e.g., due process violations) by an ICSID annulment committee (in the case of ICSID awards) or by domestic courts in the arbitral seat or in the jurisdiction in which enforcement of an award is sought (in the case of non-ICSID awards). Other basic errors may not be corrected, but critically, the damage is limited to that one case. By contrast, an AB can make flawed arbitral awards binding in future cases. States created the current ISDS system to achieve a balance between consistency, correctness, and finality. An AB could disrupt this balance by putting consistency above all other considerations. Third, an AB could, in fact, increase the cost and duration of proceedings. Something delegations aim to avoid. Adding an appellate function to ISDS will mean automatically that disputes will be lengthier and more costly for both States and investors. At the time of writing this Chapter, UNCITRAL WG-III has not specified how an AB would be funded.™ A history of decisions in ISDS but also a track record of setting aside proceedings related to awards in international commercial arbitration has taught that the losing party will often (and sometimes with steadfast determination) resist the enforcement

of an award.

Today,

setting aside mechanisms,

challenges,

grounds for refusal of enforcement, sovereign immunity issues are often used by counsel instructed by the losing party to avoid compliance under an award. An AB that allows for a review on the merits could open the floodgates further — the current tools to resist awards do not allow for such review on the merits. In addition, the current submissions related to the AB do not address how one AB with its adjudicators would handle appeals on all ISDS awards rendered at a given time: there is real risk of backlog which would cause additional delays. The same delays exist in national courts. Yet, another reason why many States promote arbitration is in order to relieve courts from an ever-increasing caseload. Requests for review by States and investors would significantly increase due to the AB’s broader review power. Naturally, this review option will itself significantly increase the cost and duration of proceedings. But the greatest source of added time and cost will come from the higher success rate to be expected in appeals versus annulments. The best available data suggests that the WTO AB modifies or reverses portions of approximately 85% of panel reports, which is dramatically higher than the 3% ICSID annulment success rate this decade.*° But the consequences for the length

84. Susan Franck, Observations on Costs: A Response and Implications for UNCITRAL

and ISDS

Reforms, EJIL:Talk, | May 2019, available at https://www.ejiltalk.org/uncitral-isds-reforms-a-

85.

response-on-costs/. See also Academic Forum on ISDS, Excessive Costs & Insufficient Recoverability of Costs Award, 14 March 2019, available at https://www-jus.uio.no/pluricourts/english /projects/leginvest/academic-forum/papers/papers/1_costs_-_wgl.pdf. For further discussion see Jindal Global University, Investor State Dispute Settlement Reforms,

webinar held on 25 July 2020, recording available at hitps://www.youtube.com/watch?v = wrw 4mDhFZ3A.

356

Chapter 15: Reforming the ISDS System and cost of the dispute will be much greater for investment disputes. If the system allows for remand, this will be used often due to the fact-intensive nature of investment disputes. Any remand procedures — the details of the current proposal are unclear — will produce untold delays and increased costs. Fourth, there is a concern about finality, or the potential lack thereol. The WTO Appellate Body has (rather, had) the authority to uphold, modify or reverse the legal findings and conclusions of the panel."° When commending appellate authority and finality, consider this explanation provided by the WTO: Where, for instance, the Appellate Body has reversed the panel's conclusion of a

violation of a certain provision, the respondent's measure might instead be inconsistent with another WTO provision. Often, the complainant has also claimed an inconsistency with this other provision, either in the alternative, or cumulatively. However, often the panel, given its finding of a violation of the former provision, did not address this other alternative claim or it chose not to address the other cumulative claim for reasons of judicial economy.

In such a case, if the

Appellate Body has limited itself to reversing the panel's erroneous findings and

conclusion, the dispute would not be fully resolved. The complainant would then

have to start all over again by initiating a new dispute settlement proceeding.”

Learning from this, in case the mandate of the proposed AB constricts review at the cost of resolution, investors will have to restart the arbitration from the beginning. Add to this, any treaties that provide a statute of limitations, and an investor’s claim could likely never be adjudicated upon. Fifth, how does the AB interact with existing regimes? As was noted by the ICSID Secretariat in 2004, fragmentation is best tackled by a single appeals mechanism. With that, automatically, one asks the question as to how the AB will exist in parallel with the ICSID annulment function or the national setting aside regimes: the States ratifying the instrument creating the AB would have to contemplate repelling or limiting national setting aside regimes and exclude their applicability for these ISDS awards. National laws must be amended so that full jurisdiction is given to the AB for the review of awards rendered under any of the investment agreements the country is party to. Sixth, what is the interaction with the Vienna Convention on the Law of Treaties (VCLT)? The Secretariat suggests that the AB can be used by the Contracting States on treaty interpretation or could join with other Contracting States to the treaty to seek rejection of decisions of the AC through joint statements.** How would this fit within

86. Article 17.13, Understanding on Rules and Procedures Governing the Settlement of Disputes. 87. WTO, The Process — Stages in a Typical WTO Dispute Settlement Case, Appellate Review, available at https://www.wto.org/english/tratop_e/dispu_e/disp_settlement_cbt_e/c6s5p4_e.

htm. 88. Marike Paulsson, UNCITRAL Working Group III: Reforms in the Realm of Investor-State Disputes — UNCITRAL’s Proposals for an Appellate Mechanism and Its Impact on Duration and Cost, Kluwer Arbitration Blog, 26 March 2020, available at http://arbitrationblog.kluwerarbitration.

com/2020/03/26/uncitral-working-group-iii-reforms-in-the-realm-of-investor-state-disputesuncitrals-proposals-for-an-appellate-mechanism-and-its-impact-on-duration-and-cost/.

357

Marike Paulsson, George Pothan & Supritha Suresh the framework of the VCLT - Articles 31-33." Such treaty interpretation is not a source under Article 31 of the VCLT: A unilateral interpretation by a Contracting State during a pending procedure would violate the due process rights of the investor and would create an inherent imbalance between the disputing parties.”” Going forward, with respect to these structural AB reforms or any reforms that can take place within the space of investor-State disputes — for the stakeholders — below is a snapshot of issues to be contemplated: — the interplay between national courts and the AB in relation to timing, statute of limitation and jurisdiction for prevalent court practices like setting aside and enforcement; — the interplay between ICSID and the AB in relation to timing, statute ol limitation with respect to annulment challenges within ICSID, and the semantics used in the ICSID Convention:

— the requirement and text of Contracting States’ changes to national law - e.g., if the AB is granted power to annul decisions; — incase the AB’s procedures will lead to adjournment of enforcement decisions, how that could risk opening the floodgates to dilatory tactics, something the drafters of the New York Convention aimed to prevent,”' and something that would counter the original premise of reforms: reduce cost and duration; — if the New York Convention is to apply: how would AB decisions fall under Article [(2) of the New York Convention? The above indicates that there is a fair amount of uncertainty and quite some questions the user is left with: uncertainty tends to have a chilling effect on investment. That is another impact that delegations must be mindful of.

89.

United Nations, Vienna Convention on the Law of Treaties, 23 May 1969, United Nations, Treaty

Series, vol. 1155, p. 331. 90. Marike Paulsson, UNCITRAL Working Group II: Reforms in the Realm of Investor-State Disputes — UNCITRAL’s Proposals for an Appellate Mechanism and Its Impact on Duration and Cost, Kluwer Arbitration Blog, 26 March 2020, available at http://arbitrationblog.kluwerarbitration.

com/2020/03 /26/uncitral-working-group-iii-reforms-in-the-realm-of-investor-state-disputesuncitrals-proposals-for-an-appellate-mechanism-and-its-impact-on-duration-and-cost/. 91. For example, see drafting history in the context of review of merits leading to dilatory tactics, Convention on the Recognition and Enforcement of Foreign Awards, Travaux Preparatoires — Report of the Secretary-General at 17, U.N. Doc. E/2822, Annex II (31 January 1956): comments

by the delegation for the International Chamber of Commerce and see for example Convention on the Recognition and Enforcement of Foreign Awards, Travaux Preparatoires — Report of the Secretary-General at 25-26, U.N. Doc. E/2822, Annex II (31 January 1956): ‘[It is] likely to be a fresh source of contention, for it would enable the losing party to resort to all kinds of delaying tactics and maneuvers.’ See also, Marike Paulsson, The 1958 New York Convention in Action (2016) pp. 120-121, 168-169.

358

Chapter 15: Reforming the ISDS System 15.4.2

Incremental Reforms

15.4.2.1

Rosters

Various delegations — Chile, Israel, Japan and Thailand — have proposed rosters: a selection and appointment method would be based on a pre-established list or roster

used by an appointing authority.”

A roster could be used as part of either the current ISDS regime or the establishment of a semi-permanent mechanism (as opposed to a permanent mechanism, where cases would be assigned to adjudicators with no involvement of the

disputing parties) .”*

The following elements are to be considered: independence; impartiality; competence; expertise and experience necessary to discharge their functions, and also special expertise requirements for certain claims (e.g., financial services); gender balance; geographical distribution; and balancing between arbitrators from developed

and developing countries.”

Some of these elements — e.g., independence, impartiality, and competence — are self-regulating: parties would not appoint an arbitrator again if these qualities are not apparent nor would any institutions keep their names on its list.°” However, the Secretariat appreciates that a roster would not necessarily address the question of repeat appointments, unless it is coupled with greater institutional involvement.”° Usually, the existing rules on conflict of interest address issues of independence and impartiality. Protecting the above elements and guarding for unacceptable repeat appointments is best addressed through reforms that focus on conflict of interest and code of conduct rather than a broad ban on double hatting, which could come at the expense of diversity and excellence.

92.

Possible reform of investor-State dispute settlement (ISDS), Selection and appointment of ISDS

tribunal members, Note by the Secretariat, 3] July 2019, A/CN.9/WG.III/WP.169, available at https://undocs.org/en/A/CN.9/WG.II/WP.169, para. 11.

93. Possible reform of investor-State dispute settlement (ISDS), Selection and appointment of ISDS tribunal members, Note by the Secretariat, 31 July 2019, A/CN.9/WG.III/WP.169, available at https://undocs.org/en/A/CN.9/WG.II/WP.169, para. 23. 94. Possible reform of investor-State dispute settlement (ISD5), Selection and appointment of ISDS tribunal members, Note by the Secretariat, 31 July 2019, A/CN.9/WG_II/WP.169, paras 26, 37, 54, available at https://undocs.org/en/A/CN.9/WG.III/WP.169, paras 26, 37, 54. 95. Possible reform of investor-State dispute settlement (ISDS), Selection and appointment of ISDS tribunal members, Note by the Secretariat, 31 July 2019, A/CN.9/WG.III/WP.169, available at https://undocs.org/en/A/CN.9/WG.III/WP.169,

96.

para. 20: ‘It is also outlined that the mecha-

nism for constituting arbitral tribunals allows parties to choose the arbitrators that they consider most qualified for solving their disputes and that such features ensured the flexibility and attractiveness of arbitration’. Possible reform of investor-State dispute settlement (ISDS), Selection and appointment of ISDS

tribunal members, Note by the Secretariat, 31 July 2019, A/CN.9/WG.III/WP. 169, available at https://undocs.org/en/A/CN.9/WG.II/WP.169, para. 37.

359

Marike Paulsson, George Pothan & Supritha Suresh 15.4.2.2

Multilateral Advisory Centre

The multilateral advisory centre was proposed to complement efforts by international organisations and academic institutions to assist developing States. This centre would also work towards preventing disputes and spearhead creation of guidelines on dispute prevention.” Morocco and Thailand, in their submission, pointed out that many countries are hampered by a lack of knowledge, experience and institutional capacity to prevent investment disputes.” This advisory centre could play a key role in knowledge sharing among States: the more States are informed about dispute prevention and actively engaged with stakeholders, the better they will be equipped when confronted with a looming dispute. The Centre could also assist in the promotion of the Singapore Convention and could help UNCITRAL in the distribution of its policy materials on this treaty. In addition, the Centre could help ICSID in the promotion of a better understanding of mediation, and what parties desire out of the process. It will be important, though, to avoid a scenario in which members of the Centre act as counsel for States in investment

disputes.”” 15.4.2.3

Code of Conduct

ICSID and UNCITRAL have presented a Draft Code of Conduct open to comments by delegations until fall 2020.'"’ The Code of Conduct would be one for adjudicators in

ISDS.

97. Submission

from the Republic of Korea

A/CN.9/WG.III/WP.

179,

available

to UNCITRAL

Working

Group

III, 31 July 2019,

at https://uncitral.un.org/sites/uncitral.un.org/files/wp

179, at section III(2), noting that an advisory centre ‘could become a hub for collecting and disseminating best practices and institutional information’, including ‘education on dispute prevention’. 98. See Submission from the Government of Morocco to UNCITRAL Working Group III, 4 March 2019,

A/CN.9/WG.II/WP.161,

available

at

http://undocs.org/en/A/CN.9/WG_IIl/WP.161,

para. 18: ‘Owing to their limited financial resources and lack of legal professionals with significant experience in ISDS, developing countries need assistance in that area’; Submission from the Government of Thailand to UNCITRAL Working Group III, 8 March 2019, A/CN.9/WG .162, available at https://undocs.org/en/A/CN.9/WG.II/WP.162, para. 11: ‘Government agen-

cies responsible for ISDS issues in many developing countries still lack the know-how to recognize a looming dispute, and more crucially, how to manage them. In addition, a knowledge gap exists between the government legal experts and the officials directly responsible for measures potentially breaching treaty obligation’. 99. Report of UNCITRAL Working Group III on the work if its thirty-eighth session (advance copy), 23 October 2019, A/'CN.0/1004, available at https://uncitral.un.org/sites/uncitral.un.org/files /draft, para. 33: ‘While support was expressed for the advisory centre providing support during the proceedings particularly for States with limited resources, doubt were expressed as regards the role that the advisory center could play in representing States, in particular in light of the potential resources that it would require, and the potential liabilities and conflicts that it might incur’. 100. UNCITRAL, Code of Conduct, draft released on 1 May 2020, available at https://uncitral.un. org/en/codeofconduct.

360

Chapter 15: Reforming the ISDS System It would regulate the conduct of ‘all adjudicators’ involved in ISDS, including arbitrators, members of annulment committees, members of a potential appeal mechanism, or judges on a multilateral standing body. Adjudicators are also required to ensure that their ‘assistants’ comply with the rules. This Code would be State driven as opposed to, for example, the International Bar Association Guidelines on Conflict of Interest. Practitioners have mostly drafted the latter. The question that is currently left unanswered is how the Code would be implemented and how it can be applied in ISDS. Would it be an instrument of solt law or form part of another multilateral instrument?'’’ The Code focuses on protecting independence, impartiality, integrity of arbitrators, efficiency and confidentially of procedures, and helpful tools to ensure the competence and right qualifications of arbitrators. Among its disclosure obligations, candidates and adjudicators are required to disclose all ISDS (and other international arbitration) cases in which they are or have been involved in any capacity, without indicating any time limit. The duty to disclosure is continuing. An extensive disclosure allows for a full assessment by all parties and avoids problematic situations at a later stage, and in addition to disclosing business relationships and financial interests, the Draft Code also requires disclosure of involvement in cases: 1. Candidates and adjudicators shall avoid any direct or indirect conflict of interest. They shall disclose any interest, relationship or matter that could

reasonably be considered to affect their independence or impartiality. To this end, candidates and adjudicators shall make all reasonable efforts to become

aware of such interests, relationships and matters. 2. Disclosures made pursuant to paragraph (1) shall include the following:

[...] (c)

All ISDS [and other [international] arbitration] cases in which the candidate or adjudicator has been or is currently involved as counsel, arbitrator, annulment committee member, expert, [conciliator and mediator].'°*

The debate to date has revealed the Code’s Achilles heel, which is the provision on double hatting. Double hatting is particularly sore in ISDS because it involves the interpretation and application of similar legal instruments. The Draft Code provides: Adjudicators shall [refrain from acting] /[disclose that they act] as counsel, expert witness, judge, agent or in any other relevant role at the same time as they are | within X years of] acting on matters that involve the same parties, [the same facts]

fand/ or] [the same treaty].'”

101.

For comments

UNCITRAL

by State delegations, see Submission

Working

Group

Ill,

17

July

2019,

from the Government

A/CN.9/WGL_III/WP.175,

of Ecuador to available

at

hitps:/undocs.org/en/A/CN.9/WG.III/WP.175, at paras 20-2) (noting, e.g., that ICSID and UNCITRAL Rules diverge on standards for arbitrator disqualification). 102. Article 5, Conflicts of Interest: Disclosure Obligations, Draft Code of Conduct for Adjudicators in Investor-State Dispute Settlement, available at https://uncitral.um.org/en/codeofconduct.

103. Article 6, Limit on Multiple Roles, Draft Code of Conduct for Adjudicators in Investor-State Dispute Settlement, available at https://uncitral.un.org/en/codeofconduct.

361

Marike Paulsson, George Pothan & Supritha Suresh The reactions focus on the chilling impact this provision would have on diversity. With respect to the Draft Article 6, the State delegations to the UNCITRAL WG-III would have to confront some policy issues: What is double hatting and how is it different from conflict of interest issues? What are the elements of double hatting: a ban to act as counsel and arbitrator? To act as counsel in investment disputes and as arbitrator in investment disputes? Or also commercial arbitration? To act as expert and arbitrator? To act as witness and arbitrator? Or is it limited to the latter prong of Article 6: same treaty and parties? If the latter, would not that be covered by conflict of interest rules? Would there be an absolute double hatting ban? Or would the ban only apply if there is a concrete conflict of interest? If the latter, again, would not rule on conflict of interest suffice? Which rules would prevail in the event of a conflict among applicable rules? Are sanctions desirable? To what extent would monetary, disciplinary, or reputational sanctions be enforced? Would they add value to ISDS? Would they help with accountability and legitimacy of the system? A double hatting ban will very likely have a negative impact on new arbitrators, those who have recently joined the arbitrator pool. Would parties be left with only former judges and academics to appoint? Those who have no experience as counsel nor an affinity with FDI, and a sensitivity to counsel's tactics or client’s objectives?

15.4.2.4

Third-Party Funding

Many delegations are of the view that third-party funding should not be prohibited as it has been an important tool for investors in the Small and medium sized enterprise (SME) category and those who lack adequate resources to invoke the protection that is offered to them under international law and also for respondent states who might otherwise not be able to defend the cases adequately. The option to receiving financing helps both investors and States. There is also a consensus within the UNCITRAL WG-III and beyond UNCITRAL that it must be regulated. Third-party funding can create issues with respect to conflict of interest and this must be addresse di™

104. See Submission from the Government of China to UNCITRAL Working Group III, 19 July 2019, A/CN.9/WG.III/WP.177

https://undocs.org/en/A/CN.9/WG.II/WP.177,

section II, para.

4

(noting that third-party funding ‘may lead to convergence of interests among arbitrators and

sponsors, or even conflicts of interest’).

362

Chapter 15: Reforming the ISDS System 15.4.2.5

Prior Scrutiny of Awards

The Moroccan delegation has pointed out that ISDS lacks a mechanism that focuses on quality control that allows for review of the award before it becomes final.'"* This does now happen, for example, with ICC arbitrations.'°° The technical question that must be addressed is whether this would be an independent body or a function within institutions such as ICSID and PCA. The question then comes up: who would perform that scrutiny role within that body? What is the scope and level of review of this scrutiny? How would this relate in terms of timing and statute of limitations to setting aside regimes and annulment committees? 15.4.2.6

Improving Arbitrator Selection

Several delegations have made proposals focused on improving the mechanism by which parties can select their arbitrators and ensure that the ultimate appointment would help resolve the dispute in a satisfactory manner. The Turkish delegation has proposed for UNCITRAL’s Secretariat to maintain a list of potential arbitrators. This list would give information about their workload and availability. This is similar to the efforts of the ICC. In a joint submission, Chile, Israel, Japan, Mexico and Peru suggest

that arbitrators should have specialised knowledge and experience tailored to a specific subject matter that is either very technical or, for example, rooted in financial services. |””

15.4.2.7

Alternative Dispute Mechanisms

There are several delegations that have proposed for the UNCITRAL WG-III to explore alternative dispute resolution mechanisms as a solution to the current issues that led to UNCITRAL WG-III. The suggested mechanisms are mediation and conciliation. The Chinese delegation pointed out that conciliation can assist investors and States ‘adopt creative and forward-looking methods to promote the settlement of investment disputes’ and that as a result the parties can avoid contentious litigation and ‘maintain

long-term cooperative relationships’ .'”*

With the recently concluded Singapore Convention, the timing for promotion of

mediation is right.'"’ Delegations must address the matter of optionality of dispute

prevention or amicable resolution. Many hybrid or multi-tiered clauses that require the 105. Submission from the Government of Morocco to UNCITRAL Working Group III, 4 March 2019, 106.

107.

A/CN.9/WG.III/WP.161

https://undocs.org/en/A/CN.9/WG_III/WP.161, para. 21.

For a discussion of the ICC Rules, see Chapter 17.2 of the Handbook.

Submission

from the Governments

of Chile, Israel, Japan, Mexico,

and Peru to UNCITRAL

Working Group III, 2 October 2019, A/CN.9/WG.III/WP.182 https://undocs.org/en/A/CN.9/ WG.IIL/WP.182, p. 6.

108. See Submission from the Government of China to UNCITRAL Working Group III, 19 July 2019, A/N.9/WG_II/WP.177

https://undocs.org/en/A/CN.9/WG_IlI/WP.177, section III, para. 4.

109. Note also that several of the BITs discussed at the initial parts of this Chapter encourage dispute prevention and introduce ombudsmen.

363

Marike Paulsson, George Pothan & Supritha Suresh parties to mediate first have caused problems as it is used by respondent to contest the jurisdiction of a tribunal. 15.4.2.8

Expedited Procedures

SMEs and developing countries would profit from expedited procedures. It would help reduce cost and duration. It allows for investors and States to focus on the day-to-day management of their business and their domestic and foreign governance, respectively. This has been recognised by State delegations.''’ Within the current system of international arbitration, arbitral institutions have introduced processes for expedited procedures. 15.4.2.9

Additional Case Management

Tools

One aspect of arbitration is that it is flexible. Arbitrators in to use flexibility in how procedures are planned in order rights of the parties. The Thai delegation has proposed that with the parties to discuss the budget of the proceedings.''' curtailing the cost of an arbitration. 15.4.2.10

ISDS are and must be able to protect the due process the tribunal should consult This too will contribute to

Tracking the Discussion

Discussion at UNCITRAL WG-III is ongoing. New submissions flow in from States (individually or in the form of joint submissions) and Non-governmental organisations. Draft Working Papers are released, and comments are welcomed. All the information is publicly available and regularly updated.''* The developments are also

covered in databases and blogs.''* 15.5

CONCLUSION

Power of a judicial body is to apply the law, but inevitably some amount of policy creation space is embedded within. When designing any new system, the progress and advancements of the past should not be forgotten. Lessons too should not be forgotten. And we have learnt a lot. 110. Submission from the Government of Thailand to UNCITRAL Working Group III, 8 March 2019, A/CN.9/WG.III/WP.162 https://undocs.org/en/A/CN.9/WG.III/WP.162, at para. 17; Submis-

111.

112. 113.

sion from the Government of Turkey to UNCITRAL Working Group Ill, 11 July 2019, A/CN.9/WG.II/WP.174 https://undocs.org/en/A/CN.9/WG.IIl/WP.174, section III.

Submission from the Government of Thailand to UNCITRAL Working Group III, 8 March 2019, A/CN.9/WG.III/WP.162 https://undocs.org/en/A/CN.9/WG.III/WP.162, para. 16.

UNCITRAL, Working Group III: Investor-State Dispute Settlement Reform https://uncitral.un .org/en/ working_groups/3/investor-state.

See UNCITRAL

Working

Group-Ill:

tracker,

by Thomson

Reuters

Practical

Law;

see also,

Kluwer Arbitration Blog, dedicated tag available at http://arbitrationblog.kluwerarbitration. com/category/working-group-iii/.

364

Chapter 15: Reforming the ISDS System One lesson from the past that has not featured in UNCITRAL WG_III discussion is sanctions for non-compliance. What if a Contracting State decides not to follow the decision of the MIC or the AB. States will get away with non-compliance so long as they can. UNCITRAL WG-III continually makes reference to the ICJ, but the open defiance of the United States in Nicaragua has not been discussed. Punishing the State for non-compliance is one side, the other is compensating the investor who has made use of the system. Both are needed to ensure legitimacy and increase trust in the system. New regimes, howsoever idealistic, bring their own unique set of challenges. For example,

the MIC

and

traditional ISDS

will coexist unless

all countries

to all BITs

containing ISDS decide to sign up for the new system. We need to be prepared for issues like parallel proceedings, res judicata, forum non conveniens and forum shopping; a beautiful kaleidoscope that takes us down the rabbit hole. Nationalism

has

made

waves.

Protectionist

tendencies

have

emerged.

But,

discussion is ongoing and that is good. So long as countries do not reach a stalemate or react overzealously, we are still making progress.

365

CHAPTER 16

Managing Costs and Time in Arbitration Tejas Karia

Arbitration has emerged as the most efficient option for determination of commer-

cial disputes for contractual relationships across the globe. Arbitration has an edge

over litigation given the advantages of cost-effectiveness, limited ambit of challenge to the award,

confidentiality and simplified procedures among

others.

Though

arbitration as a means of dispute settlement is expected to have lesser associated

costs and speedier resolution, the very same pros can translate into cons if the process is not managed efficiently.

16.1

MANAGING COSTS AND TIME PRIOR TO AN ARBITRATION

16.1.1

Using Bespoke Terms to Streamline the Arbitration Process

Arbitration offers the flexibility to parties to tailor the process according to their needs. Stakeholders involved in arbitration have the collective responsibility to mould the process in a way that it becomes more efficient. This can be achieved by using bespoke terms. Parties who enter into agreements can anticipate the types of disputes, which may arise given their vast experience in their own respective fields. Hence, they can decide on the terms of arbitration, which may be useful in achieving an efficient solution. Agreeing to such bespoke terms can be done ex post or ex ante. However, it is much easier and more useful when a dispute has not arisen,’ rather than assuming that arbitration or institutional rules would suffice in all cases.* Parties to the arbitration can decide what type of arbitration they want to pursue. They can choose between ad hoc arbitration and institutional arbitration rules. However, while ad hoc arbitration provides more flexibility to the parties, the process 1. David A. Hoffman, Whither Bespoke Procedure, 5 U. Ill. L.R. 389 (2014).

2. Jerome Falk, In Practice: Bespoke Arbitration, Law.com, 18 October 2013, available at https:// www.law.com/therecorder/almID/ 12026237023 16/?slreturn = 20171028060041.

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Tejas Karia

can be effective only when there is adequate cooperation between the parties. Furthermore, the disputing parties should understand the conduct of arbitration procedures.” Parties may decide to adopt rules such as the UNCITRAL Rules.” On the other hand, institutional arbitration allows arbitral institutions to administer their own rules from the beginning to the end. Institutional arbitration can lend political or moral weight to awards.* Moreover, the fees and expenses of the arbitration are mostly regulated. However, the additional layer of administrative processes in institutional arbitration may cause some delay and result in additional fees.° Parties should choose the arbitral institution cautiously taking into account which institution is the most suitable in terms of their rules, costs and mutual convenience to the parties.

Moreover, the disputing parties should choose a seat of arbitration taking into account their preferred jurisdiction to enlorce the award. The arbitration agreement may stipulate a pre-arbitral reference hearing between the parties to reach an amicable settlement. It could also stipulate mandatory mediation or conciliation before arbitration. However, such clauses can delay the process further in case the pre-arbitration stages are unsuccessful.’ Parties may choose the terms of reference before a request for arbitration is made. They may find common ground on most issues and focus on the contentious issues throughout the arbitral process.* This could include a monetary value cut-off, belaw which disputes are not settled by arbitration, but by another mutually agreed method. 16.1.2

Language

The language of the arbitration proceedings, if chosen suitably, can lend enormous efficiency to the entire arbitral process. Unfortunately, this concern is mostly of a secondary nature for most of the parties. Usage of multiple languages carries heavy costs and delay in arbitration proceedings since it involves having multiple translations and interpretations, which also run the risk of not being entirely accurate. Accordingly, a cost-benelit analysis must be conducted beforehand, to evaluate if employing more than one language will truly justify the associated increase in budget. It is preferable to have the arbitral proceedings to be conducted in one language that enables parties to save time and money while drafting pleadings and attending 3. Institutional v. ad hoc arbitration, Pinsent Masons Out-Law Guide, 12 August 2011, available at https://www.pinsentmasons.com/out-law/guides/institutional-vs-ad-hoc-arbitration. 4. UNCITRAL Model Rules, 2010, available at http://www.uncitral.org/uncitral/en/uncitral_texts /arbitration/2010Arbitration_rules.html.

5. Ashurst, International Arbitration Clauses — Quickguides, 30 January 2017, available at https:// www.ashurst.com/en/news-and-insights/legal-updates/quickguide-international-arbitrationclauses/#. 6. Ibid. 7. Jessica Stephens, Multi-tiered Dispute Resolution Clauses. What Are They? Why Include Them? Are They Enforceable?, Construction Blog, 22 October 2014, available at hitp://constructionblog -practicallaw.com/multi-tiered-dispute-resolution-clauses-what-are-they-why-include-them-arethey-enforceable/. §. Jean-Claude

Goldsmith,

How

to Draft

Terms of Reference,

3 Arb.Int'l.

298,

308

(1987)

n. 4;

Andrew de Lotbiniére et al., Mandatory Time Limit for Rendering Awards under Indian Law: How Good Intentions Can Lead to Bad Outcomes, 5 Indian J. Arb. L. (2017) n. 2.

368

Chapter 16: Managing Costs and Time in Arbitration hearings. The issue arises when, at times, parties do not wish that arbitration proceedings be conducted in one language. One of the most commonly used languages in international arbitration and international commercial community is English.” Certain parties do not consent easily to English being the single language of the arbitration. For instance, some Chinese parties do not agree to English as the sole language of arbitration.'" In certain cases, the arbitral award needs to be submitted in the official language of the country of origin or of the country where enforcement is sought. This is due to court review or enforcement procedures, such as in some countries in the Middle East and North Africa region." Section 22(1) of the Indian Arbitration and Conciliation Act, 1996 (1996 Arbitration Act or Act) provides that ‘the parties are free to agree upon the language or languages to be used in the arbitral proceedings’. Section 22(2) of the 1996 Arbitration Act provides that ‘failing any agreement referred to in sub-section (1), the arbitral tribunal shall determine the language or languages to be used in the arbitral proceedings’. This provision is reflective of the principle of party autonomy. In India-centric contracts, the parties ordinarily prefer English as the language of arbitration and specifically incorporate the same in the arbitration clause. If the documentary evidence is found to be in any other language than what parties have agreed, the tribunal may direct translation of such document into the language agreed by the parties or as determined by the tribunal. At times, parties sign agreements or submit relevant documents although they may not be adept in the English language.'* In such cases, when the arbitration reaches its stage of document review, one realises that the parties signatory to the contracts have abridged language skills; they may at times even be unable to explain how certain clauses of the agreement need to be interpreted.'* Consequently, there is an overall lack of clarity and understanding, misconstructions and erroneous interpretations in the entire process, leading to further increase of costs and time involved in arbitration. The significance of the language of arbitration is also apparent during the cross-examination of witnesses where the witnesses are not proficient in the language agreed upon. If the principle of equal treatment of parties in an arbitration is respected, each witness should effectively get examined during a proportionately similar amount of time during cross-examination. However, cross-examination of a witness in a language he/she is not well versed in increases the time and costs. Interpreters will have to be used, increasing the potential for misunderstanding and confusion. Interpreters’ capability and manner differ, being contingent on knowledge, approach, familiarity and experience. An ideal interpreter should have substantial experience,

9. Stephan Wilske, Linguistic and Language Issues in International Arbitration: Problems, Pitfalls and Paranoia, 9 Contemp, Asia Arb. J. 159, 196 (2016) n. 2.

10. Chinese Arbitration - A Selection of Pitfalls, Association for International Arbitration (2009), p. Sl. 11. Petar Saréevié ed., Essays on International Commercial Arbitration (1989) p. 177.

12. Irene Welser & Christian Klaussegger, Fast-Track Arbitration: Just Fast or Something Different? Austrian Y.B. on Int'l. Arb 1282 (2009).

13. Joseph Tirado et al., Chapter 23: Factual Evidence, in Arbitration in England 483 et seq. (Julian D. M. Lew et al. eds., 2013).

369

Tejas Karia

amiable attitude, recollection, smooth delivery, express no views on the merits: such an interpreter will automatically be more beneficial." In the

Indian

context,

Rule

56 of the Indian

Council

of Arbitration

Rules

of

Domestic Commercial Arbitration, 2016 (ICA Rules) provides: ‘[t]he Registrar may make arrangements for the service of an interpreter at the request of one or more of the parties and costs thereof shall form part of the costs of the reference’. It is arguable that it may be rare for a party to choose an unsuitable language for arbitration, but practically, such a scenario may not be very farfetched. Consider a situation where an Indian party and a French party are drafting their arbitration clause. The French entity insists on having the arbitration carried out in French, and the Indian party in order to come to a quick consensus agrees with the proposal (since some of its senior employees involved in the transaction are well versed in French). Alter some years, a dispute arises between the parties. The dispute is referred to arbitration. Perhaps, in the meantime, the employees who were proficient in French have quit the company. In such a case, at the cost of efficiency, the Indian party will have to meet the challenge to effectively participate in the arbitration. In order to resolve the aforementioned issues, parties could come up with hands-on solutions for the conduct of the arbitration in multiple languages. Each party could be permitted to partake in the arbitration in its own language when the opposite party has only passive knowledge of the same. Parties should stick to the language used in their business for arbitration proceedings to add efficiency and speed to the arbitral

process.'* Furthermore, parties can come to an agreement that not every document

needs to be translated; they may selectively opt for the ‘core bundle’ to be translated into multiple languages. Parties can also agree that documents, legal resources and witness testimony in a particular language need not be translated into the language of the arbitration.'® Further,

if the

tribunal

members

are

well

versed

in the

relevant

languages,

requirement to have all the documents translated may not be necessary.'” When parties are not able to exercise their freedom to express themselves present their case in their own language, it takes away from a legitimate opportunity being heard. Accordingly, if a party insists on using its own language as a matter necessity, then such party must be entitled to express itself in such language as long

it is done at its own expense.'®

the

or of of as

14. Examining Witnesses through an Interpreter, Court Interpreters Office, Southern District of New York, available at https://sdnyinterpreters.org/best-practices/with-witnesses. 15. Welser & Klaussegger, supra n. 12. 16. ICC Commission Report on Controlling Time and Costs in Arbitration, International Chamber of Commerce (2014), available at https://cdn.iccwbo.org/content/uploads/sites/3/2015/11/1CCArbitration-Commission-Report-on-Techniques-for-Controlling-Time-and-Costs-in-Arbitration17.

2012.pdf. Ibid.

18. Saréevié, supra n. 11.

370

Chapter 16: Managing Costs and Time in Arbitration 16.2

AFTER

THE INITIATION

OF ARBITRATION

16.2.1

Time Limits and Constitution of the Arbitral Tribunal

Parties may choose to impose time limits on the arbitral process.'’ Section 11(13) of the 1996 Arbitration Act provides: An application made

under

this section for appointment of an arbitrator or

arbitrators shall be disposed of by the arbitral institution within a period of thirty days from the date of service of notice on the opposite party.

Further, the 1996 Arbitration Act under section 29A aims to reduce the timeline of an arbitration, by prescribing an outer limit of 12 months from date of completion of pleadings, for making the arbitral award, in matters other than international commercial arbitration (extendable by another 6 months by parties’ consent). The section empowers the court to extend the time beyond 18 months, deduct fees of the arbitral tribunal if the delay is attributable to the arbitrators and/or replace the arbitrators.” 16.2.2

Internal Cost

According to the ICC Arbitration Commission Report on Techniques for Controlling Time and Costs in Arbitration, 2007, 2% of the costs of an ICC Arbitration are attributable to administrative expenses of ICC, 16% are attributable to arbitrators’ fees and expenses and 82% of the costs are actually costs borne by the parties (including lawyers’ fees and expenses, expenses related to witness and expert evidence and other party costs).*' These statistics are significant: the majority of the expenses of parties are due to their internal costs. From a managerial point of view, time spent by company officials, in-house counsels, in-house experts, managers and other staff cannot be used

for usual business activities and amounts to an additional opportunity cost.~* Most arbitration laws and rules are silent on the recoverability of the parties’ costs, which may be left to the choice of the tribunal.’ Usually, expenses unconnected with the parties’ representation include the following: (1) executive time and disbursements and (2) administrative costs, i.e. salary costs, fees, and out-of-pocket expenses for: (a) factual research, (b) in-house

19.

Michael Pryles, Limits to Party Autonomy in Arbitral Procedure, 24 J. Int'l Arb. 8 (2007).

20. Sanjeevi Seshadri, S. 29A of the New Indian Arbitration Act: An Attempt at Slaying Hydra, Kluwer Arbitration Blog, 2 February 2016, available at http://arbitrationblog.kluwerarbitration .com/2016/02/02/s-29a-of-the-new-indian-arbitration-act-an-attempt-at-slaying-hydra/. 21. ICC Commission Report on Techniques for Controlling Time and Costs in Arbitration, International Chamber of Commerce (2007), available at http://gjpi.org/wp-content/uploads/icccontrolling-time-and-cost.pdf. 22. ICC Commission Report on Decisions on Costs in International Arbitration, International Chamber of Commerce (2015), available at https://cdn.iccwbo.org/content/uploads/sites/3/2 015/12/Decisions-on-Costs-in-International-Arbitration.pdf.

23. Mika Savola, Awarding Costs in International Commercial Arbitration, 63 Sc St L 276, 318 (2017).

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legal advice, (c) outside experts on factual or non-legal issues, (d) processing the arbitration, and (e) witnesses who are employees.” Recoverable party costs rarely account for the time and effort spent on the matter by senior officials, directors, managers or employees of the parties, or the consequent indirect costs of disruption of their regular commercial activities.2° The primary means of controlling internal cost is by augmenting the role of in-house counsels and other client representatives and making their contribution integral to the arbitral process instead of a secondary or ancillary one. Improving the in-house team will improve communication and result in better case management. Tasks of in-house counsel may be compartmentalised into the following three categories: (1) follow and disseminate legal knowledge, (2) provide appropriate advice and assistance, and (3) assist in litigation.“° But first, in-house counsel must have a comprehensive understanding of the client's business structure and objectives, competitive settings, opportunities and risks.*” This must be accompanied by a cost-riskbenefit analysis of initiating or defending an arbitral procedure and preliminary legal research.** There must be a thorough assessment carried out by the in-house counsels so as to examine the client’s legal strengths and weaknesses on both merit and procedure, and further to determine if arbitration really is best suited in the given case. They should make a conscious choice of the team members who will represent the party in the arbitration, giving appropriate weightage to their aptitude, calibre and accessibility.

After

the

initiation

of an

arbitration,

in-house

counsels

are also

the

coordinators between the several departments of the company.”” Paralegals could help ease administrative burdens, and an information technology service provider could be

engaged to host and manage documents.”

The team must scrutinise the entire case so as to make informed choices, take educated risks and provide instructions.*’ They must review pleadings with utmost care and diligence and provide considerable and concrete suggestions and must also employ the most apposite method for document review and production.** Thorough efforts must also be demonstrated at the stage of witness examination where they must inter alia provide the number and names of witnesses and assist in drafting witness statements. They must also consider whether there is a risk that an individual being a potential witness may not be part of the organisation (at a time when testimony is 24, J. Gillis Wetter & Charl Priem, Costs and Their Allocation in International Commercial Arbitrations, 2 Am. Rev. of Intl. Arb. 249 (1991).

25. Savola, supra n. 23. 26.

Nicolas David, Le Directeur Juridique, Quelle Place et Quel Role? Le Manuscrit 259 (2006).

31.

ICC Commission Report on Decisions on Costs, supra n. 22.

27. International Arbitration and the Role of In-House Counsel, Winston & Strawn LLP (2014), available at https://www-.winston.com/images/content/7/8/v2/78546/lAandInHouseCounsel. pdf. 28. Ibid. 29. Philippe Cavalieros, In-House Counsel Costs and Other Internal Party Costs in International Commercial Arbitration, 30 Arb. Int'l 1 (2014) n. 147. 30. Hannah Ambrose & Vanessa Naish, Managing an Arbitration: Top Tips for In-House Counsel, Herbert Smith Freehills (2 August 2017), available at https://www-herbertsmithfreehills.com/ latest-thinking/managing-an-arbitration-top-tips-for-in-house-counsel. 32. Savola, supra n. 23.

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Chapter 16: Managing Costs and Time in Arbitration needed), or the potential for both parties witness.** Clients should deliberate on the enforcement of the award — if they win, costs fees must be taken into account; if they enforcement challenge and possible grounds

ciently understood.”

seeking to rely on a same third-party costs associated with a challenge or of enforcement along with local counsel lose, costs and time involved in the for resisting enforcement must be suffi-

If well documented by bills, reasonable hourly rates, proof of when and why certain hours were related to the arbitration, internal costs could be accepted by the tribunal.** Generally, arbitral tribunals pay close attention to the justification provided, and proof given, for parties’ claims for internal legal and management costs when considering whether they shall be awarded.*° In-house counsels should, therefore, keep a steady track of their and other officials’ participation in an arbitral process.*” 16.2.3

Calderbank Offer

The essence of alternative dispute resolution is the speedy disposal of the disputes by unequivocal facilitation of interest of the parties without administrative or judicial impediments. Given that the disputes that arise in international commercial arbitration are time and investment sensitive, prolonging the disputes raises costs for both the parties. The allocation and award of costs by the arbitrators remains to be not only an important but also a challenging task.** The tribunal has expansive discretion in allocation of costs, unless faced with an agreement of the parties for allocation of

costs.*”

A sealed offer/Calderbank offer is an outcome of party autonomy to settle the dispute by making a sealed offer of compromise expressed to be ‘without prejudice’ to the rights of the party making it, to refer the document for allocation of costs.*” The use of a ‘Calderbank' offers as it later came to be referred as, was initially restricted to matrimonial disputes, which thereafter, in the decision in Cutts v. Head*' was approved

33. Cavalieros, supra n. 29. 34. Ibid. For further discussion of enforcement, see Chapter 11 of the Handbook. 35, Héléne van Lith, In-House Costs in International Arbitration, International Chamber of Commerce

(4 April 2017)

http://www.-sloarbitration.eu/Portals/en-EN/UNCITRAL-LAC/Van %20

Lith.pdf. 36. ICC Commission Report on Decisions on Costs, supra n. 22. 37.

Cavalieros, supra n. 29.

38. Guidelines for Arbitrators on Making Orders Relating to the Costs of the Arbitration, Chartered Institute

of Arbitrators

(2016)

https://www.yumpu.com/en/document/read/32239951 /guid

eline-for-arbitrators-on-making-orders-relating-to-the-costs-of-. 39. Anne Veronique Schlaepfer & Alexandre Mazuranic, Offers in International Arbitrations and Their Impact on the Allocation of Costs: A Focus on Sealed and Final Offers, 80 Int'l J. on Arb., Med., and Disp. Mgmt. 405, 412 (2014) n. 4.

40. Calderbank v. Calderbank [1975] 3 WLR 586; [1975] 3 All ER 333. 41. Cutts v. Head [1984] Ch 290.

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for all manner of cases where the alternative of making a payment into court was

inapt.*

The practice of making compromise offers in Calderbank terms has traversed into various realms and is firmly rooted in international arbitration practice.** A Calderbank offer facilitates a malleable means for settlement between the parties prior to an arbitration where a formal offer is unavailable or detrimental to the arbitration

proceedings."

The form in respect of a Calderbank offer is the substance as well. It would be advisable to mark the offers as ‘without prejudice save as to costs’. It must state clearly the time period within which the offer must be accepted. The offer should also be clear, precise and certain in its terms and state clearly that the offeror reserves its right to tender the offer on application for costs if the offer is rejected and provide reasons why the offer should be accepted.” It is advisable that the offer should also have a provision for costs separate from the principal offer and state the cost advantage that the offeror would like to achieve. The Calderbank offer’s defining feature is that it is ‘without prejudice’ to the rights of the parties in arbitration proceeding for adjudication of disputes.** It is only resorted to for the allocation of costs.*” Where the award that is made by the arbitral tribunal is not beyond what was envisaged in the Calderbank offer, the mere rejection of the offer will not ipso facto bind the order of costs by the tribunal but it becomes a

powerful factor in allocation of costs.**

It is pertinent to note that rejection of an offer by the offeree cannot be plainly presumed to be an unreasonable rejection if the award is not bettered by the tribunal qua the Calderbank offer.*? The rejection of the offer should be adjudged to be reasonable or unreasonable as per the circumstances of each case.*” Other factors such as genuineness of the compromise offered, timing of the offer qua the initiation of the arbitration proceedings, time allowed to the offeree to accept the offer and clarity of the terms of the offer must be considered for adjudging whether the rejection was ‘unreasonable’ rather than adjudging to be ‘plainly reasonable’. The burden to prove that the rejection of the offer was unreasonable is on the applicant seeking indemnification of the costs.*! The Calderbank offer is an approach

42.

Daniel L. Ward, New Carrots and Sticks: Proposals for Reform of CPR, 70 Mod. L. Rev. 2 (2007) n. 278.

43. See Poupak Anjomshoaa, Costs Awards in International Arbitration and the Use of: Sealed Offers to Limited Liability for Costs, 10 Int'l Arb. L. Rev. 2 (2007) n. 38. 44. Ward, supra n. 42. 45. Jones v. Bradley (No. 2) |2003] NSWCA 258. 46. Andreas Reiner, Final Offers and Sealed Offers as Means of Reducing the Time and Cost of Arbitration, 62 Zbornik Pravnog Faculteta u Zagrebu

1-2 (2012) n. 437, 456.

47. Oliver LJ in Cutts v. Head [1984] Ch 290. 48. Giles JA. in SMEC Testing Services Pty Ltd v. Campbelltown City Council [2000] NSWCA 323 opined that while a successful Calderbank offer does not entitle a party to costs on an indemnity basis, the court has the discretion to order costs on that basis if the unsuccessful party's failure to accept the offer was unreasonable. 49. MGICA

(1992) Pty Ltd. v. Kenny & Good Pty Ltd. (1996) 70 FCR 236 (Lingren J).

50. Seven Network Lts. v. News Ltd. [2007] FCA 1489, [63] (Sackville J). 51. MGICA (1992) Pty Ltd. v. Kenny & Good Pty Ltd., supra n. 49.

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Chapter 16: Managing Costs and Time in Arbitration of ‘carrot’ and ‘stick’ expediting settlement between the parties through costs sanctions which are resultant of unreasonable rejection of the offer. Moreover, a Calderbank offer has in effect precipitated and encouraged compromise with respect to disputes, which are cost and time sensitive.” The offer also provides for a flexible alternative to the formal procedure provided under various rules to pitch a compromise proposal. A possible disadvantage of Calderbank offers is that it precludes the parties to settle the dispute through determination of liability of the parties through sanctions of costs.” In the Indian context, reference may be made to section 31A(3)(d) of the 1996 Arbitration Act, which provides: In determining the costs, the Court or arbitral tribunal shall have regard to all the circumstances, including whether any reasonable offer to settle the dispute is made by a party and refused by the other party.

The situation becomes more precarious where considerable difference exists between the financial stability of the parties, thereby, paving way for strong-arming a compromise.

16.3

EVIDENCE AND ARGUMENTS

16.3.1

Taking of Evidence

The parties can agree upon the scope of discovery, the number of witnesses and depositions, and the involvement of relevant expert witnesses. Parties may set time limits for these, and courts are enforcing terms which curtail parties’ right to discovery

by agreement.”

Parties may agree on e-discovery of evidence. The use of digital data storage media has become common practice for the creation, storage and transmission of information. Moreover, the costs associated with storage and production of electronically stored information, as well as the physical space required to retain it, are now quite low.*” However, safeguards must be incorporated to penalise data destruction.

52. The ‘stick’ and ‘carrot’ approach was explained by the New South Wales Court of Appeal in Maitland Hospital v. Fisher (No 2) (1992) 27 NSWLR 721 at page 724 in the following terms: relevantly, the ‘carrot’ is the promise of indemnity costs to a plaintiff in the event that the defendant is found unreasonably to have refused an offer of compromise. The ‘stick’ is the threat of the penalty of the imposition of an indemnity costs order against a defendant in such circumstances.

53. See section 31A(3)(d), 1996 Arbitration Act which provides that in determining the costs, the court or arbitral tribunal shall have regard to whether any reasonable offer to settle the dispute is made by a party and refused by the other party. 54.

Walzer v. Muriel Siebert & Co., 2010 WL 4366197, p. 13.

55. Aécio Filipe Coelho Fraga de Oliveira, E-discovery in International Arbitrations: Can It Be a Barrier to a Cost-Effective Procedure?,

Financier Worldwide

(2016), available at https://www.

financierworldwide.com/e-discovery-in-international-arbitrations-can-it-be-a-barrier-to-a-costeffective-procedure/#.Wh6OwLsUncs.

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Parties must ensure e-discovery does not make the arbitration more expensive. The needs of the parties have to be balanced with the nature and accessibility of the data.*° Further, exchanging exhibits and other submissions

ensures convenience,

reli-

ability and speed, especially if the parties are already managing their files in electronic format. If information or any submission is communicated electronically, then the date of service can be tracked and verified. 16.3.2

Oral Arguments

Usually, there is scope for streamlining the arbitration process through bespoke provisions in arbitration disputes, during arguments or after arguments. Contentious issues are usually formulated by the tribunal after an initial meeting or casemanagement conference in terms of reference or a procedural order, in addition to the arbitration agreement and the request for arbitration. Parties argue their case accordingly. 16.3.3

Videoconferencing

One of the most fundamental features of resolving disputes through arbitration is that the parties are in a position to customise most parts of the entire process based on their own requirements. One of the growing trends in arbitration has been the increasing use of Skype, FaceTime, Zoom and related videoconferencing services which has resultantly made videoconferencing as a preferred option to conduct arbitration. Use of these services has increased exponentially during COVID-19. It is recommended, however, to not use any ‘social media’ like services but rather rely on commercial hearing technology providers. The Supreme Court has dealt with the relevance of videoconferencing (or virtual or online hearings) in as early as 2000, though in the context of a criminal trial.°’ The question was whether an accused needs to be physically present in court to answer the questions put to him by the court while recording his statement. The court held that it was not necessary that in all cases the accused must answer by personally remaining present in the court. If a person residing in a remote area is required to appear in the court for giving evidence, then he should not be called from that place; instead the medium of videoconferencing should be used. In that case, the requirements olf justice are practically harmonised with the ease and comfort of the witnesses, which can drastically improve the justice delivery system. The relevance of videoconferencing was again reiterated by the Supreme Court in 2003,°° when the court emphasised that ‘evidence, even in criminal matters, can also be by way of electronic records. This would include video-conferencing’. The Calcutta High Court discussed the growing need for videoconferencing as follows: 56. Robert H. Smit & Tyler B. Robinson, E-disclosure in International Arbitration, 24 Arb. Int'l | (2008) n. 113.

57. Basavaraj R. Patil v. State of Karnataka (2000) § SCC 740. 58. State of Maharashtra v. Dr Praful B. Desat (2003) 4 5CC 601.

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Chapter 16: Managing Costs and Time in Arbitration The essential requirement of advancement of technology and its application is to

make things easier and flexible [...] it is required for the Court to give reasonable

and appropriate facility to the people |...] Video conferencing is one such facility |...] there is no bar of examination of witness by way of Video Conferencing being essential part of electronic method [...] If it appears that electronic video confer-

encing is not only much cheaper but also facilitates the Court and avoids delay of

justice, a practical outlook is to be taken by the Court.”

The Delhi High Court observed that if a facility is available for recording evidence through videoconferencing, which avoids any delay or inconvenience to the parties as well as to the witnesses, such facilities should be resorted to.“ In April 2020, the Supreme Court issued directions to all Indian courts to implement videoconferencing technology for further functioning of courts.°’ The court observed the benefits of transitioning to videoconferencing for virtual court hearings, e-filing and mentioning, submissions, etc., particularly during the COVID-19 pandemic

as:

Technology has facilitated advances in speed, accessibility and connectivity which enable the dispensation of justice to take place in diverse settings and situations without compromising the core legal principles of adjudication. Indian courts have been proactive in embracing advancement in technology in judicial proceedings. This is in line with the Law Commission of India’s observations: ‘a conscious use of technology, like tele-conferencing, video-conferencing etc., should [...] be encouraged and the same can easily replace the need for purely formal sittings and thereby aid in a smoother and more efficient conduct of arbitral proceedings’. 16.3.3.1

Advantages of Videoconferencing

Videoconferencing saves the travel time and costs of meeting in person, be it for initial conferences or later hearings including evidentiary and final hearings. It also makes the arbitration immune to the political climate of the place of arbitration. It eliminates the fear of any unfamiliar forum and ensures quicker and simpler recording and storage of proceedings. It essentially unites various jurisdictions. Videoconferencing also leaves parties to opt from an even wider range of arbitrators based on their expertise since the obstacles created by physical barriers are avoided.

59. Amitabh Bagchi v. Ena Bagchi, AIR 2005 Cal 11.

60.

International Planned Parenthood Federation v. Madhu Bala Nath, 2016 SCC OnLine Del 85.

61. Imre: Guidelines for Court Functioning Through Video Conferencing During COVID-19 Pandemic, Suo Moto Writ (Civil) No. 05/20.

62. Report No. 246: Amendments to the Arbitration and Conciliation Act 1996, Law Commission of India (2014), available at http://lawcommissionofindia-nic.in/reports/Report246. pdf.

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Tejas Karia

16.3.3.2

Prerequisites to Conducting Videoconferencing

It is essential to ensure that procedural requirements to conduct virtual arbitration have been laid down in clear and unequivocal terms. The ICC has framed certain standards

for online arbitration, including:

— Tules for naming files with the unique identifier for each electronic document so as to be able to identify the author/originator, the class and kind of document; — the file name and date of the document to appear on the first page of such document;

— mode of transmission and storage of emails; and — file format for sending attachment, for example PDF, DOC, HTML. ICCA/IBA’s Joint Task Force on Data Protection in International Arbitration Proceedings aims to: (i) provide a roadmap on data protection in international arbitration proceedings, practical guidance on the potential impact of data protection principles in international arbitration proceedings; and (ii) assist practitioners in identifying the ways in which data protection needs to be taken into account during the course of arbitration proceedings.™ Furthermore, the ICC Guidance Note on Possible Measures Aimed at Mitigating the Effects of the COVID-19 Pandemic, dated 9 April 2020, provides that any virtual hearing requires a consultation between the tribunal and the parties with the aim of implementing measures — often called a cyber-protocol, sufficient to comply with any applicable data privacy regulations. Such measures shall also deal with the privacy of the hearing and the protection of the confidentiality of electronic communications within the arbitration proceeding and any electronic document platform.” The ICCA-NYC Bar-CPR Cybersecurity Protocol for International Arbitration, 2020 provides that in considering the specific information security measures to be applied in an arbitration, consideration should be given to the following categories: (1) asset management; (2) access controls; (3) encryption and communications security; 63. Operating Standards Commerce

for Using

IT in International

Arbitration,

International

Chamber

of

(2004), available at http://library.iccwbo.org/content/dr/COMMISSION_REPORTS

/CR_0029.htm?1]1 = Supplements&l2 = Using + Technology + to + Resolve + Business + Disputes. 64. Andreas Respondek & Tasha Lim, Should the ICCA/IBA's Task Force on Data Protection ‘Roadmap’ Address the Impact of the GDPR on Video Conferencing in International Arbitration Proceedings?, Kluwer Arbitration Blog, 18 July 2020, available at http://arbitrationblog. kluwerarbitration.com/2020/07/18/should-the-icca-ibas-task-force-on-data-protection-roadm

ap-address-the-impact-of-the-gdpr-on-video-conferencing-in-international-arbitration-proceedi ngs/. 65. ICC Guidance Note on Possible Measures Aimed at Mitigating the Effects of the COVID-19 Pandemic, International Chamber of Commerce, 9 April 2020, available at https://iccwbo.org/

content/uploads/sites/3/2020/04/guidance-note-possible-measures-mitigating-effects-covid-| 9-english.pdf.

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Chapter 16: Managing Costs and Time in Arbitration (4) physical and environmental security; (5) operations security; and

(6) information security incident management.” While conducting arbitration through videoconferencing, various logistical issues come into play which include the role, presence and availability of the examining counsel of the witness. Furthermore, the manner of conducting such examination and the volume of documentation must be taken into account. The system or equipment for videoconferencing must ensure that the video and sound is of high quality and definition. The audio and video should have high and consistent speed and should be clear. Participants must be able to read facial expressions and mannerisms and to also hear and comprehend the speaker. Further, since there are likely to be time zone differences among participants, it is of utmost importance to plan for test runs in advance. The technical compatibility of the equipment in use, including the software and hardware, contributes to an efficient process. Do not forget to coordinate communication lines. While focusing on the equipment, one might face the trouble that it does not provide for a three-way vision meaning that one party can only see another party but not all parties. This may not be suitable for the preliminary meeting. Therefore, the features and model of the equipment must be ascertained beforehand.” The participants must be instructed to look directly into the camera and its monitor light while speaking; it should also be ensured that full-body image of each speaker gets reflected to signify hand movements and other vital aspects of body

language. 16.3.3.3

Disadvantages of Videoconferencing

A live and direct cross-examination poses problems if the witness is living in a jurisdiction prohibiting such deposition. Therefore, before deciding to have recourse to videoconference for the arbitral process, particularly for cross-examinations, it must be determined if the witness’ examination — under oath to be conducted for the foreign legal process — is valid or allowed in the country the witness resides in. Indian law does not prohibit any such deposition. The role of witness statements must also be scrutinised. On the one hand, written statements allow a concise record of the central points the witness wishes to convey, unalfected by the discrepancies of translation while significantly also saving time. However, on the other hand, they lack the intensity and immediacy of live testimony and at times also reflect the statements of the counsel as opposed to that of witness 66.

The ICCA-NYC Bar-CPR Cybersecurity Protocol for International Arbitration, International Council for Commercial Arbitration (2020), available at https://www.arbitration-icca.org/media/ 14 /76788479244 143 /icca-nyc_bar-cpr_cybersecurity_protocol_for_international_arbitration_—_

print_version.pdf. 67. Paul E. Mason et al., International Commercial Arbitration Practice: 21st Century Perspectives 68.

(2010) § 53.05. Ibid.

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itself. Finally, it also poses a risk of breaches of the confidentiality requirement in arbitration by unauthorised eavesdropping. 16.3.4

Transcript

In international arbitration, the use of information technology could include hearing room technologies (e.g., multimedia presentations, translations and ‘real time’ electronic transcripts) .® The process of a real-time transcript typically involves recording spoken words and streaming them through a computer or another screen with the use of cables or a wireless internet connection; such a computer is typically equipped with software that can translate stenographic symbols into words.” A transcript is the official record of a hearing. The disputing parties must agree to the transcript if the applicable law or regulation so provides.”' In this regard, Rule 55 of the ICA Rules provides: The Registrar shall make necessary arrangements for a stenographic record of evidence whenever such record is required by a Party. The cost of the stenographic record and all transcripts thereof, if any, shall form part of the costs of the reference. Normally, the party requesting the recording of proceedings bears the cost of the court reporter and is under no duty to share a copy of the transcript with the other party.” Parties could choose to incorporate the use of transcript in the arbitration agreement itself. If the parties do not agree, the arbitrator could permit a party to take a transcript at its own cost.”? Often, both parties and the tribunal prefer to have a transcript — in such cases, the costs are shared equally by the parties. Moreover, real-time transcription allows a counsel to read the testimony as it is spoken which could assist him/her in ensuring that the desired testimony is produced and apposite oppositions can be made to the testimony in time. Some portions of the transcript could become crucial in subsequent proceedings. Hence, transcripts ensure in maintaining the veracity and coherence of the arbitral process. If there is more than one language of the arbitration, transcripts of each language can be prepared. The parties are generally provided with the opportunity to suggest rectifications to the transcript after the arbitration hearing.“ 69. ICC Report on Information Technology in International Arbitration, International Chamber of Commerce (2017), available at https://cdn.iccwbo.org/content/uploads/sites/3/2017/03/iccinformation-technology-in-international-arbitration-icc-arbitration-adr-commission.pdf. 70. Real Time Transcription, Thomson Reuters Practical Law, available at https://uk.practicallaw. thomsonreuters.com/7-520-4550?transitionType = Default&contextData = (sc.Default) &firstPa gpe= true.

71. Dennis R. Nolan, Labor and Employment Arbitration in a Nutshell (2nd ed. 2006) § 505. 72.

B.J. Krintzman,

If You're

Going

to Include an Arbitration Clause, Make

It a Good

One!,

BJ

Krintzmann Law (2000), available at http://www.bjkrintzmanlaw.com/CM/Articles/ADR_-_

DRAFTING_ARBITRATION_CLAUSES. pdf.

73. ICC Report on Information Technology, supra n. 69. 74.

Oral Procedure — ICSID Convention Arbitration, International Centre for Settlement of Invest-

ment

Disputes,

available

at https://icsid-worldbank.org/en/Pages/process/Oral-Procedure-

Convention-Arbitration. aspx.

380

Chapter 16: Managing Costs and Time in Arbitration One must coordinate and plan in advance to organise for the mechanical and logistical arrangements required to produce a real-time transcript, while at the same time, accounting for the inherent higher cost involved in the said process, as opposed to old-style transcription. The court reporter must ensure accurate and precise transcription lest the transcript should become of restricted use. The transcript must remain confidential, and the basis for the same is found in

section 42A of the 1996 Arbitration Act which provides: Notwithstanding anything contained in any other law for the time being in force, the arbitrator, the arbitral institution and the parties to the arbitration agreement shall maintain confidentiality of all arbitral proceedings except award where its disclosure is necessary for the purpose of implementation and enforcement of award. Various arbitral institutions too stipulate this requirement of confidentiality, e.g. Rule 26.5 of the Mumbai Centre for International! Arbitration Rules, 2016 and Rule 26.5

of the Delhi International Arbitration Centre (Arbitration Proceedings) Rules. Hot-Tubbing

16.3.5

Witness conferencing or hot-tubbing of expert witnesses is rapidly gaining momentum: it allows for concurrent evidence where the experts give their respective evidence simultaneously before the tribunal. The arbitrators effectively act as a chair of the ensuing debate and lead the discussion between the experts. The experts involved in this process may be from the same discipline, or, at times, more than one discipline. 16.3.5.1

Nature and Scope

In hot-tubbing, experts typically pose questions to each other giving way to a fluid and coherent flow of direct dialogue between experts and the arbitrator. The advocate’s involvement is restricted to stating objections. However, in a different kind of hot-tubbing, experts may meet before the hearing to narrow down the areas of disagreement, analyse the relevant issues and come up with a joint report. The idea behind hot-tubbing is more focussed on the experts’ collective ‘search for the truth’ and not so much as propounding theories adopted by the counsel who hired them. The purpose of hot-tubbing is to get to the root of the issues between the parties in a constructive, but not combative manner.” This way the various experts effectively engage with each other as to the accuracy of their claims. Questions by the tribunal are often open-ended. Hence, it is more like an active panel discussion than traditional cross-examination. The Delhi High Court in Micromax Informatics Limited v. Telefonaktiebolget L.M. Ericsson” discussed the possibility of using hot-tubbing to facilitate the appreciation of 75.

Kristina

H.,

The

Rules

of the Court,

CSI

Accounting,

13

May

2016,

available

at https://

csiaccounting.wordpress.com/2016/05/13/the-rules-of-the-court/. 76. Micromax Informatics Limited v. Telefonaktiebolget L.M. Ericsson, 2017 SCC OnLine Del 12702.

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Tejas Karia

expert technical evidence. It was observed that the modified hot tub procedure, given the realities of the case and the progress of the suit therein, may be suitably devised and utilised.’ The recognition of hot-tubbing by the court shows recognition and appreciation of international practices. 16.3.5.2

Advantages of Hot-Tubbing

Hot-tubbing allows arbitrators to consider a wide range of expertise, skills and know-how at the same time in order to address issues that have arisen between the parties. As hot-tubbing gives experts a definite role in a trial by enabling them to ask each other questions and respond to each other's opinions, this may fully assist the court in understanding and appreciating the technicalities.” It also encourages open and frank discussions that may assist in resolving disputes.”” This process allows an issue to be scrutinised to the last detail to achieve greater clarity and conclusiveness. Since every expert is aware of the fact that other experts may call upon any inappropriate or incorrect response immediately, and can also reinstate an appropriate response, evidence primarily proceeds to the most fundamental and crucial points of difference, which helps in reducing the timeline involved in this process. Additionally, there are more chances for experts to exchange their honest opinions with their professional colleagues in the same discipline during challenges.™” It is easier for a judge to recall and understand the positions of both the experts by hearing the evidence simultaneously and sequentially, instead of separately.*' After the process, both parties understand more clearly the strengths and weaknesses of their positions, which may be conducive to a more amicable and earlier settlement.* Furthermore, the arbitrator is in a much better position to comprehend the evidence since the fallacies and discrepancies in experts’ testimony or convoluted areas of disagreement can be ironed out and even resolved in one go. Unlike in traditional expert evidence, experts’ testimony in hot-tubbing is not sequential. This makes it easier for an arbitrator to retain in his mind freshly the discussions, testimonies and areas of disagreement among the experts. 16.3.5.3

Disadvantages of Hot-Tubbing

An expert may find it tough to concentrate on his testimony, opinions and views while partaking in this process. An issue that may be regarded as significant by one expert but not the others may be side-lined, and key evidence may be missed out on.

77. Ibid.

78. Martin Burns, Hot-tubbing, RICS, 2012. 79. Kristina, supra n. 75. 80. Hot-tubbing in Australia, the United Kingdom, Canada and the United States, Smith International Law (2011).

81. Andrew Stephenson & Andrew Barraclough, Experts Ease Their Tensions in the Hot Tub (2005). §2.

Ibid.

382

Chapter 16: Managing Costs and Time in Arbitration Besides, an expert with better advocacy skills and who is more confident, assertive and persuasive (which factors should ideally not be considered during witness testimony) may end up dominating the discussion. The weight given by the arbitrator to an expert's testimony, may, therefore, be inspired by factors other than the merits of the evidence per se. Hot-tubbing also puts fetters on the parties’ and their advocates’ chances of examining the experts on their respective opinions. Further, if experts do not have mutual respect and are not acting bona fide, then the hot-tubbing process may not be as fruitful as expected. Further, if the subject matter is of a nature, which can give rise to extremely divergent views, then it poses limitations on the utility that could be derived from this method. 16.3.6

Other Technological Tools and Techniques

Information technology in international arbitration could inter alia include: (1) email and other electronic communications,

between

and among

the parties, the tribunal,

and the administering body; (2) software and media used to present the parties’ respective cases in an electronic format, rather than a paper format;** (3) document storage databases that parties could use when document review is expansive. Planning and organisation with the assistance of latest technology eases the process of arbitration management. Certain steps such as preparing exhibits with electronic pagination along with hyperlinked citations or references add to efficiency and help locate

documents with ease.™

Parties could sign up for alerts: meaning, any activity such as document/folder adding,

deleting,

editing,

sharing

is undertaken,

selected users are notified

to the

parties, which makes it easy for all the stakeholders to be on the same page, to be able to monitor the progress of the matter, to take appropriate steps on a real-time basis avoiding any delay and confusion and also to ensure confidentiality is respected. Software, embedded within Outlook, has also helped file emails in a secure and

central place: from where the entire team can review communication based on the client or matter. Additionally, software enabling intuitive and powerful search based on the keywords, tags, metadata helps document review.*” An American law firm began using an artificial intelligent researcher that can conduct legal research faster and cheaper than a human.” In the future, artificial intelligence has the potential to renovate legal practice.*”

§3. The ICCA-NYC Bar-CPR Cybersecurity Protocol, supra n. 66. 84. Knovos, Arbicomm — Easily Manage & Share Documents & Communications of Arbitration, available at https://www.knovos.com/products/arbicomm. 85.

Ibid.

86. Jack Wright Nelson, Machine Arbitration and Machine Arbitrators, Young ICCA Blog, 28 July 2016, available at http://www-.youngicca-blog.com/machine-arbitration-and-machine-arbitra tors/.

87. P. Mohan Chandran, Use of Machines in Arbitration: Are We Ready? [Pleaders Blog, 19 October 2017, available at https://blog.ipleaders.in/machine-arbitration/.

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Tejas Karia

16.3.7

Reducing Time and Costs Before Indian Courts

There is a perception that proceedings, particularly for challenge to, or enforcement of arbitral awards before Indian courts is largely delayed. The 1996 Arbitration Act has been amended in 2015 and 2019 to inter alia reduce the time and costs in proceedings before Indian courts, and the following provisions of the 1996 Arbitration Act are an attempt to reduce the time and costs for arbitration-related matters before Indian

courts:

— Section 9(2) of the 1996 Arbitration Act provides that arbitral proceedings shall commence within ninety days from the date of an interim measure granted by the court. — Section 9(3) of the 1996 Arbitration Act requires the court not to entertain interim relief application once the arbitral tribunal is constituted unless that is inefficacious. — Section 34(6) of the 1996 Arbitration Act provides that an application to set aside an arbitral award under section 34 has to be disposed within one year from the date on which notice of such application is served upon the other

party.

— On an application to stay the operation of an arbitral award made under section 36(2) of the 1996 Arbitration Act, the court may grant such stay conditional upon deposit of whole or part of the awarded amount. In case such stay is not granted, the challenge and execution proceedings can proceed simultaneously.

16.4

CONCLUSION

Managing time and costs associated with arbitration is paramount for the success of an arbitration and is one of the primary concerns of the arbitration world. There are many ways to achieve it: keeping arbitration clauses simple, fast track procedures, setting a timeline for rendering arbitral award, selection of experienced and skilled counsels and arbitrators, strict adherence to procedural timetable, minimising length and number of hearings, among others.” Parties must appreciate the mounting urgency to focus on managing such costs and time to maintain the sanctity as well as to effectively enjoy the benefits of the arbitral process. With a systematic approach and utilisation of effective tools to minimise time and costs, the users of arbitration will be able to achieve the much-desired results.

88. ICC Commission Report on Controlling Time and Costs, supra n. 16.

384

CHAPTER

17

Arbitral Institutions James Menz, Katia Rener, Alexander G. Fessas, Abhinav Bhushan,

Sherina Petit,

Nosherwan Vakil, Cyril Shroff, Shaneen Parikh, Brooks W. Daly, Ashwita Ambast, Lim Seok Hui & Kevin Nash

In the early days of international and domestic arbitration, all tribunals were established on an ad hoc basis. With the proliferation of arbitration, arbitral

tribunals recognised the need for institutional support during the proceedings.

There are many arbitral institutions on this planet and often various centres in one country. Prominent institutions include the ICC, the PCA, ICSID, the LCIA, the DIS, and the SIAC.

385

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17.1

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& Katia Rener

DIS RULES

James Menz & Katia Rener 17.11

Brief Introduction

The DIS (German Arbitration Institute) is a private and independent institution with historical roots in the 1920s and a leading institution for the resolution of commercial disputes. The DIS administers hundreds of arbitration and alternative dispute resolution (ADR) proceedings. Offering a complete set of conflict management, ADR, sports and commercial arbitration rules tailored to the needs of the business community, the DIS is one of the most diversified dispute resolution providers in the world. Based in Germany, the DIS enjoys an international reputation for excellence and neutrality. The DIS Secretariat's multinational and multilingual staff is committed to serving its users efficiently and professionally. 17.1.2

Key Rules Changes and Key Reasons for Choosing the DIS

The DIS has been continuously updating its offering of administered rules to respond to current developments and user needs. In the last decade, the DIS has introduced an extensive portfolio of ADR Rules, such as Mediation, Conciliation, Expert Determination and Dispute Management Rules as well as Rules for Corporate Disputes. It also hosts a Court of Arbitration for Sports whose rules were last modernised in 2016. Following an extensive, 15-month revision process, the new DIS Arbitration Rules have entered into force on 1 March 2018 (2018 DIS Rules). The 2018 Rules are a modern and innovative toolbox for time- and cost-efficient dispute resolution. They reflect international best practice while containing several continental European elements that will appeal to parties and practitioners from both the civil and the common law traditions. Innovations in the 2018 Rules fall into four general categories: enhancing trust in the process, increasing efficiency, expediting the arbitration, and facilitating combining arbitration with ADR. Below, some of these changes will be addressed when discussing the relevant provisions in the new DIS Rules. The DIS is an independent, neutral, and highly trusted institution that has experienced a steady growth in caseload, reaching some 151 cases in 2019. Approximately 30% of the caseload involves at least one foreign party. The DIS offers a ‘light’ administration with a system of fixed ad valorem institutional and arbitrator fees that ranks among the most affordable in the world.' Given the depth of the economic relationship between the two countries, the DIS is a particularly attractive option for contracts between Indian and German parties. Germany ranks among India’s top ten global trade partners. Bilateral trade in 2019 was

1. Louis Flannery, Gautham Chandrakumar & Alastair Kwan, Arbitration Costs Compared: 2017 Edition (Global Arbitration Review,

14 September 2017).

386

Chapter 17: Arbitral Institutions valued at EUR 21.2 billion.* Germany is India’s seventh-largest foreign direct investor and there are over six hundred Indian-German Joint Ventures. More than two hundred Indian companies are currently operating in Germany, the main sectors being IT, automotive, pharma and biotechnology, which are also among the mast frequently represented industry sectors in DIS arbitrations. DIS arbitrations may be seated anywhere in the world. Germany is a frequently chosen seat, among other things due to its excellent infrastructure and central location in Europe. The German arbitration law, which generally follows the UNCITRAL Model Law on International Commercial Arbitration, places a strong emphasis on party autonomy and flexibility. German courts respect and enforce arbitral agreements and provide assistance to arbitral tribunals where necessary. 17.1.3

Drafting the (Institutional) Arbitration Agreement

The DIS advises all parties wishing to make use of its Arbitration Rules to use the following arbitration clause: (1) All disputes arising out of or in connection with this contract or its validity

shall be finally settled in accordance with the Arbitration Rules of the German Arbitration Institute (DIS) without recourse to the ordinary courts of law. (2) The arbitral tribunal shall be comprised of [please enter ‘a sole arbitrator’ or ‘three arbitrators’}. (3) The seat of the arbitration shall be [please enter city and country].

(4) The language of the arbitration shall be [please enter language of the arbitration]. (5) The law applicable to the merits shall be [please enter law or rules of law].

17.1.4

Institutional Supervision

Regarding institutional supervision, the DIS has traditionally practised a nonbureaucratic approach. Notwithstanding changes in the 2018 Rules, the DIS’ supervisory role will continue to be ‘light’, leaving the conduct of the proceedings to the arbitral tribunal. The DIS Secretariat assists the parties and arbitrators with any questions or issues concerning the administration and efficient conduct of the arbitration within the framework of the Rules (Article 2.1). It also administers the institutional costs and the arbitrators’ fees and expenses, and monitors the efficient conduct of the arbitration by the arbitral tribunal. The DIS has two distinct decision-making bodies consisting of different individuals to exercise certain important institutional powers delineated in the DIS Rules: the ‘Arbitration Council’ decides upon major procedural questions such as the number of

2. See the report ‘Wirtschaftsdaten

kompakt

— Indien’, GTAI

(Germany

Trade and Invest), May

2020, p. 3 available at https://www.gtai.de/resource/blob/14914/21a7ffb6e31822a626e2c1c9e9 Oded3d/GTAI-Wirtschaftsdaten_Mai_2020_Indien.pdf.

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& Katia Rener

arbitrators (Article 10.2), the challenge (Article 15.4) or removal (Article 16.2) of arbitrators, as well as the amount of reduction of the arbitrator fees if the arbitration ends early. Upon application by any party, the Arbitration Council may also review the amount in dispute established by the arbitral tribunal (Article 36.3). The Appointing Committee selects and appoints arbitrators where there has been a failure to make a nomination, and decides on any objection to the nomination of an arbitrator (Articles 11-13 and 20). E7:LS

Arbitral Appointments: Procedure and Issues

The The but will

DIS Rules respect party autonomy in the parties choosing their arbitral tribunal. parties may ask the DIS for proposals regarding suitable candidates (Article 9.2) are otherwise free in their selection. In the event of a failure of nomination, the DIS promptly make a substitute appointment (Article 13). The parties may agree on the number of arbitrators. If there is no agreement on the number of arbitrators, the DIS may upon request of one of the parties appoint one or three arbitrators, based on the matter and amount in dispute as well as any circumstances of the case it considers relevant (Article 10.2). If no request for the appointment of a sole arbitrator has been made, or if a request was made but not granted, the arbitral tribunal is comprised of three arbitrators. In a three-member tribunal, each party nominates an arbitrator and the president of the arbitral tribunal is subsequently nominated by the co-arbitrators (Article 12). Where the dispute is to be decided by a sole arbitrator, both parties jointly nominate the sole arbitrator (Article 11). Any arbitrator must be, and remain, independent and impartial, must have any qualifications agreed upon by the parties, and must confirm his or her availability to conduct the arbitration in a timely manner (Articles 9.4 and 9.6). The Appointing Committee will make substitute arbitrator appointments in the following cases: the parties fail to jointly nominate a sole arbitrator; the respondent fails to nominate a co-arbitrator; the co-arbitrators fail to nominate the president;

or

multiple claimants or respondents fail to jointly nominate a co-arbitrator (Articles 11, 12.1, 12.3 and 20). When making such appointments, the Appointing Committee will ensure that the sole arbitrator or the president is of a different nationality than the parties unless the parties have otherwise agreed or have the same nationality. The DIS is able to identify appropriate candidates from all over the world based on its extensive expertise and knowledge of local jurisdictions. The DIS is not limited to a list of arbitrators. For reasons of integrity, members of organs or other officials of the DIS may

not be appointed.*

If a party objects to the nomination of an arbitrator before the constitution of the arbitral tribunal, the Appointing Committee will decide on the appointment (Article

13.2).

3. DlS-Integrity Principles, available at http://www.disarb.org/en/7 1! /content/integrity-princplesid68.

388

Chapter 17: Arbitral Institutions 17.1.6

Conduct of Proceedings

The arbitration commences with the receipt of the Request for Arbitration (‘Request’) by a DIS Secretariat (Article 6.1) provided that it contains certain minimum requirements. Receipt via email or other electronic means is sufficient to commence the arbitration, provided a paper copy is also transmitted. For the purpose of efficient communication, especially in an international context, the DIS will communicate only electronically with the parties and arbitrators, unless that is not possible for some

reason.

Reflecting the goal of expediting the constitution of the arbitral tribunal, within 21 days of receipt of the Request, the respondent must provide a first ‘Notification’ containing the name of the respondent's arbitrator, a statement regarding the seat and language of the arbitration and the applicable law, and, if applicable, a request to extend the time limit for the Answer to the Request for Arbitration (‘Answer’) (Article 7.1). The time limit for the Answer is 45 days after receipt of the Request (Article 7.2) which may be extended by the DIS by up to 30 days. Any counterclaim shall be submitted together with the Answer (Article 7.5). The Dispute Management Rules (Annex G6) constitute a particular innovation. Before or after commencement of the arbitration, the parties may request the DIS to appoint a Dispute Manager (Article 2.2). The Dispute Manager has no decision-making power, but assists the parties in selecting the dispute resolution mechanism that is most appropriate to their particular dispute. For example, the parties may decide with the assistance of such a Dispute Manager to suspend the arbitration to conduct a mediation. The 2018 DIS Rules make it easy for the parties to codify the result of such a mediation or other agreements or decisions resulting from a DIS-ADR proceeding in an arbitral award (Article 41.2). Responding to the needs of its users in a multifaceted business environment, the new DIS Rules now provide for rules on consolidation (Article 8), as well as multicontract (Article 17) and multiparty (Article 18) arbitrations. Upon constitution, the proceedings are conducted by the arbitral tribunal (Article 14.1). The tribunal has broad discretion in conducting the arbitration (Article 21.3). Within 21 days, an initial Case Management Conference (CMC) will be held. Compared to similar case management meetings in other institutional rules, the 2018 DIS Rules on the CMC in Article 27 contain several innovative features: the parties themselves ought to attend; the parties and the arbitral tribunal must discuss not only the applicable procedural rules and the procedural calendar but also certain efficiencyenhancing measures specified in Annex 3. Annex 3 is a non-exhaustive list of procedural techniques, such as limiting the number of written submissions, limiting or excluding document production, and the tribunal providing a preliminary assessment of the dispute. Other mandatory agenda items at the CMC include the question whether to apply the supplemental rules on expedited proceedings in Annex 4 (which provides for an award to be rendered within six months of the CMC), and whether a consensual

resolution of the dispute may be achieved by way of an ADR mechanism. Another change in the 2018 DIS Rules concerns interim measures. Pursuant to Article 25.2, the arbitral tribunal may now, in narrowly defined circumstances, order

389

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interim measures on an ex parte basis. Under the 2018 DIS Rules, interim relief continues to be available from either a DIS arbitral tribunal or an ordinary state court. The final award shall be made as a rule within three months after the last submission on the merits or the last hearing. To ensure certain quality standards, the arbitral tribunal shall send the text of the award to the DIS for a non-binding review that may concern formal issues or other matters that might be relevant for the enforcement of the award (Article 39.3). The DIS will perform this review typically within 48-72 hours. The DIS then transmits the final award to the parties (Article 39.6). The 2018 DIS Rules impose strict confidentiality obligation upon all persons involved in a DIS arbitration (Article 44). The DIS may only publish anonymised information on proceedings for statistical reasons. Awards may only be published with the consent of the parties. 71.7

Costs Calculation

The costs of the arbitration include: the arbitrators’ fees and expenses,

the fees and

expenses of any expert appointed by the arbitral tribunal, the costs of the parties that were reasonably incurred in connection with the arbitration, including reasonable legal fees and expenses of any witnesses, and the DIS-Administrative Fees (Article 32). The DIS does not have a registration fee. Upon receipt of the Request for Arbitration, the DIS will invoice an administrative fee which covers all costs and services of the institution. In addition, it will request a deposit for the arbitrators’ fees (Articles 5.3, 35.1). Ata later stage of the proceedings, the DIS may request one or more additional deposits to cover the full fees of the arbitral tribunal (Article 35.3). All sums are calculated on the basis of the amount in dispute in accordance with the Schedule of Costs (Annex 2) and administered exclusively by the DIS. No separate fee agreements between the parties and the arbitrators shall be made or performed (Article 34.2). The arbitral tribunal fixes the amount in dispute alter consultation with the parties (Article 36.2). Upon request by one of the parties, the DIS may confirm or modify the amount in dispute fixed by the tribunal (Article 36.6) for the purpose of the calculation of the fees and deposits. The 2018 DIS Rules contain financial incentives for arbitral tribunals to act efficiently: if the arbitral tribunal does not provide the DIS with the final award within the three months set forth in Article 37.1, or if the arbitration or the mandate of an arbitrator is terminated before a final award is made, the DIS will fix the arbitrators’ fees (Articles 34.4 and 34.5) taking into account the circumstances and complexity of the case as well as the efficiency of the conduct of the proceedings. The arbitral tribunal decides on the allocation of costs between the parties. It may take into account the outcome of the case (‘loser-pays-principle’) as well as the extent to which the parties have contributed to the efficient conduct of the arbitration.

390

Chapter 17: Arbitral Institutions 17.1.8

Flowchart:

For Quick

Reference

Receipt of Request for Arbiitation by DNS. (Article 6.1)

First confinmation of receipt (within 24

hours), First DIS-letter and invoice (Article 5,3)

Notice of Service (Article 3.5) to Respondent

Failure of nomination of any arbitrator

Ps

Respondent's first notice (21 days).

me

ae

| ~.-7"

(Anticle 7.1) z

“a

=)

r

Notification 10 nominated arbitrator

(atthe* sametime ee as a Service)

.

»

Appointment by Appointing Committee

Declarati een HS

[~~ ~~ *

Ty riche

1 i

Answer to the Request (Anicle 7.2) and Counterclaim

|| +

1 '

Panics comments (Article 9.5)

'

Service of Answer to

A

i

Claimant and transmission of case file to arbitrators

|

Case eee

~~ te

|

|

Objection i ¥

¥

Nomination of president by coHl - 4 arbitrators (Anticle 12.2)

(Articles 13.4, 14.1)

=

No objection

' '

Constitution of Arbitral Tibunal

UB

4.

~

ee

Caanrienine (Article 13.1) 4

=

Pa

wi

en We

&

Comments by panties and arbitratar

-

*

ad

es

¥ Appointing

*{

Committee decides ¥

oo

No appointment and

niche 27. Procedural Calendar and Procedural Order(s)} (Anicles 27.5, 27.6)

inati new nomination b party or ae ck

Oral Hearing (Article 29.1)

T

Closing of proceedings (Anicle 31)

VV

Source: Authors’ own.

L719

Mandatory Checklist

17.1.9.1

Claimant

Preliminary steps: — Arbitration clause refers to DIS — Claims fall within scope of arbitration clause

391]

Award (37 et seq.)

James

Menz

& Katia Rener

Request for arbitration (Article 5.2): — Mandatory requirements: names and addresses of the parties names and addresses of any legal representatives request for the specific relief sought amount in dispute statement of facts specification of relevant arbitration agreement(s) nomination of an arbitrator if so required particulars or proposals regarding seat and language of the arbitration and rules of law applicable to the merits — Number of copies: ¢ one hard copy including attachments for each respondent and one hard copy without attachments and one electronic copy including attachments for the

DIS (Article 4.2)

e service to respondent may be made dependent on receipt of appropriate number of copies (Article 5.5)

Payment of fees: — DIS fees and initial deposit may be paid in advance of submission of Request for Arbitration using the calculator on the DIS website — DIS will send an invoice to the claimant with a time limit for payment — DIS may make service of the Request to the respondent dependent on payment of requested fees (Article 5.5)

17.1.9.2

Respondent

Notification (Article 7.1): — Nomination of an arbitrator Particulars or proposals regarding seat and language of the arbitration and rules of law applicable to the merits Any request for extension of the time limit for the Answer if 45 days is not sufficient

Answer to the Request (Article 7.2): — Time limit 45 days after receipt of Request (may be extended by 30 days) — Mandatory requirements:

392

Chapter 17: Arbitral Institutions names and addresses of the parties names and addresses of any legal representatives request for the specific relief sought statement of facts particulars or proposals regarding seat and language of the arbitration and rules of law applicable to the merits — Counterclaim: e shall be filed together with Answer (Article 7.5) * must contain analogous mandatory requirements of Article 5.2 « must be filed in a sufficient number of hard and electronic copies (Article

4.2)

¢ payment of DIS administrative fee required (Article 7.6)

17.1.9.3

Arbitral Tribunal

— Parties may ask the DIS for proposals regarding any suitable candidates (Article 9.2) — Arbitration Council may upon request decide on the number of arbitrators failing an agreement by the parties (Article 10.2) — In case of multiple parties or a sole arbitrator, any nomination must be made jointly (Articles 11, 20) — Ifa party, multiple parties, or the co-arbitrators [ail to make a timely nomination, the Appointing Committee will appoint an arbitrator (Articles 11 and 12) — Arbitrator’s declarations of independence are sent to the parties for comments within a set time limit (Article 9.5) — DIS may make constitution of the arbitral tribunal dependent on whether all requested fees and deposits have been paid (Article 13.5)

17.1.9,4

Arbitration Proceedings

Case Management Conference: — Shall be held within 21 days of constitution (Article 27.2) — Application of the Expedited Procedure (Annex 4), of any other measures to increase procedural efficiency (Annex 3) or any amicable resolution of the dispute (Article 27.4) must be discussed and accepted or rejected; arbitral tribunal may order Annex 3-measures if no agreement by the parties — Procedural timetable and first procedural order (Article 27.5) to be issued during or shortly after CMC

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Evidence and hearing: The arbitral tribunal shall establish the facts of the dispute (Article 28) The arbitral tribunal shall conduct an oral hearing if so agreed by the parties or upon request of any party (Article 29.1) A record of all oral hearings shall be kept (Article 29.2) After the last hearing or the last authorised submission, the arbitral tribunal

shall close the proceedings by procedural order (Article 31) No evidence may be submitted after closing of the proceedings, explicitly authorised by the tribunal (Article 31)

unless

Challenge: Must be made no later than 14 days after the circumstances upon which the challenge is based first became known

(Article 15.2)

Arbitration Council decides on the challenge (Article 15.4)

Award:

Any final award should be made within three months after the last hearing or the last authorised submission (Article 37) Before making of the award, the arbitral tribunal shall send the text of the award to the DIS for review (Article 39.3) DIS transmits an original copy of the award to each party, provided that all fees and deposits have been paid (Article 39.6) Any request for correction or interpretation of the award must be made within 30 days after receipt (Article 40.3) 17.1.9.5

Costs and Fees

The costs of the arbitration include the DIS administrative fees, the fees and

expenses of the arbitrators and any experts and any reasonable legal and other costs incurred by the parties (Article 32) No range for arbitrators’ fees (calculation ad valorem on a fixed scale), no separate fee agreements with the parties may be made or performed (Article

34.2)

The arbitral tribunal decides on the allocation of costs between the parties, taking into account the outcome of the case and the conduct of the parties (Article 33.3) In case of early termination of the arbitration or the arbitrator’s mandate, or if the final award has not been made

within the time limit of Article 37.1, the

Arbitration Council fixes the arbitrators’ fees (Article 34.4)

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Chapter 17: Arbitral Institutions E72

ICC RULES

Alexander G. Fessas & Abhinav Bhushan 17.2.1

Introduction

According to a study conducted in 2013, 47% of Indian parties selecting arbitration opt for ad hoc arbitration as opposed to 40% preferring institutional arbitration.* A 2017 report by the High-Level Committee to Review Institutionalisation of Arbitration Mechanism in India (the Report) has revealed the same tendency.” This Chapter will include a brief discussion on some provisions of the newly adopted ICC Rules of Arbitration (2021 ICC Rules) with a view to better inform Indian parties and arbitrators in conducting ICC arbitrations. In doing so, the authors hope to challenge some common misconceptions of institutional arbitration, especially ICC arbitration. The ICC was founded in 1919. The ICC International Court of Arbitration (the ICC Court) was founded in 1923 and has since been helping resolve difficulties in international commercial and business disputes to support trade and investment. This Chapter will include a brief discussion of the most recent updates to the ICC Rules, several drafting tips for ICC arbitration agreements, a discussion of arbitral appointments from the ICC perspective, and the case management facilities offered by the ICC.

17.2.2

Key Changes and Key Reasons

The Court has constantly strived to meet the parties’ expectations in recent times. As one of the oldest arbitral institutions, the Court has responded to the growing popularity of international arbitration by enhancing its efficiency, transparency, and accountability to the parties. In this regard, the ICC Court has made several changes to the Rules. In the last ten years, the Court has made innovative changes in its rules on three occasions.

First,

the ICC had

amended

its Rules

in 2012

and,

among

others,

introduced the Emergency Arbitration Provision. Second, the ICC amended its Rules in 2017 and introduced the Expedited Procedure Rules (EPR) for amounts in dispute of less than USD 2 million.® Third, most recently, the Court amended its Rules on 6 October 2020 (the 2021 ICC Rules),” which Rules have come into force with effect from | January 2021. Additionally, the Court has also periodically amended its Note to the Parties and Arbitral Tribunal on the Conduct of Arbitration (the Note).*

4. PWC, Corporate Attitudes & Practices Towards Arbitration in India (2013), available at https:// www.pwce.in/assets/pdfs/publications/2013/corporate-attributes-and-practices-towards-arbitra tion-in-india.pdf. 5. Report of the High-Level Committee to Review Institutionalisation of Arbitration Mechanism in India, available at http://legalaffairs.gov.in/sites/detault/files/Report-HLC. pdf, p. 27. 6. Article 30, 2017 ICC Rules. oo =]

. Appendix VI, 2021 ICC Rules. . See hitps://iccwbo.org/publication/note-parties-arbitral-tribunals-conduct-arbitration/.

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Alexander G. Fessas & Abhinav Bhushan

17.2.2.1

Emergency Arbitrator Rules

The Indian Arbitration and Conciliation Act, 1996 (1996 Arbitration Act or Act) is silent on emergency arbitrations. The Act was amended on 23 October 2015 by the Arbitration and Conciliation (Amendment) Act, 2015 (2015 Amendment) and on 9 August 2019 by the Arbitration and Conciliation (Amendment) Act, 2019 (2019 Amendment). The Law Commission of India in its 246th Report had recommended recognising the concept of emergency arbitrator by widening the definition of arbitral tribunal under section 2(d) of the 1996 Arbitration Act to include emergency arbitrator. However, this recommendation was not incorporated in the 2015 Amendment. Following the 2015 Amendment, the Report had suggested that Emergency Arbitration be allowed under the Act and proposed suitable amendments to the Act.’ However, despite the recommendation, Emergency Arbitration Provision was once again not included when the Act was further amended in 2019. In this regard, the ICC Rules of Arbitration present an interesting alternative for Indian parties. The 2012 update of the Rules introduced Emergency Arbitrator Provisions, which allow parties to lodge interim relief applications prior to the submission of the Request for Arbitration. Parties are able to receive interim relief in the form of an order in 15 days from the transmission of the file to the emergency arbitrator. Under the 2021 ICC Rules, the revised Article 29 excludes the application of Emergency Arbitrator Provisions where the arbitration agreement upon which the application is based arises from a treaty.'” In relation to arbitration arising out of a treaty, it also prohibits arbitrators from being of the same nationality as that of any of the parties, unless the parties agree otherwise." The use of ICC Emergency Arbitration has grown exponentially since its introduction in 2012. The ICC Secretariat received ten Emergency Arbitration applications between 1 January 2012 and 31 May 2014, rising to 25 applications in 2016 alone. By the end of 2019, the ICC received 117 Emergency Arbitration applications. As such, the ICC Emergency Arbitrator system is rapidly growing into an internationally recognised venue for obtaining pre-arbitral interim relief. 17.2.2.2

Expedited Procedure Rules

In March 2017, the Rules were updated to include EPR. Applicable to all ICC arbitration agreements entered into after 1 March 2017 (with a possibility for other parties to opt in), the EPR provides for fast track arbitration for all cases with an amount in dispute below USD 2 million.'* The 2021 Rules have revised the pecuniary threshold for EPR and increased it from USD 2 million to USD 3 million if the arbitration agreement was

9. See Report of the High-Level Committee to Review Institutionalisation of Arbitration Mechanism in India, available at http:/ /legalaffairs.gov.in/sites/default/files/Report-HLC. pdf, p. 76 at para. 16. 10.

Article 29(6)(c}, 2021 ICC Rules.

11. Article 13(6), 2021 ICC Rules. 12. Parties can opt into the Expedited Procedure Rules where the amount in dispute exceed USD 2 million. Following the 2021 ICC Rules, the USD 2 million threshold is applicable to all arbitration agreements concluded on or after | March 2017 and before | January 2021.

396

Chapter 17: Arbitral Institutions concluded on or after 1 January 2021.'* In a nutshell, the EPR simplifies the arbitral process and provides that smaller disputes should be decided by a sole arbitrator rather than a three-person arbitral tribunal. This development reflects a broader consensus in the arbitral community that parties should be able to obtain fast track resolution of smaller or less complicated commercial disputes. This rationale is also reflected in the amended 1996 Arbitration Act. Aside from setting a general 12-month time limit for rendering awards for purely domestic awards (the time limit is now removed [or international commercial! arbitrations),'* the Amended Act allows for the parties to opt into a fast track procedure that provides for a correspondingly shorter six-month deadline. The EPR provides a comprehensive framework for arbitrators to comply with the time limit provided by the 2015 Amendment. Pursuant to the EPR, the sole arbitrator has six months from the date of the CMC to render a final award. This almost directly corresponds to the six-month time limit provided for in section 29B of the 1996 Arbitration Act, which begins running from the date of the constitution of the tribunal. Quite crucially, the expiration of the time limit under the 2015 Amendment results in the expiration of the arbitrator’s mandate to decide the dispute, creating a danger of additional uncertainty and delay. However, while the exact operation of the time limits for the rendering of the final award under Indian law is still untested, the ICC EPR can assist arbitrators in realistically meeting these strict deadlines. Under the EPR, the sole arbitrator and parties are not required to sign a terms of reference, setting out procedure to date and outlining issues to be put to the arbitral tribunal. In lieu of this, the arbitrator is only obligated to hold a CMC. The removal of the terms of reference requirement significantly expedites the early stage of proceedings, allowing the sole arbitrator to consider the merits of the case as soon as possible. The EPR encourages arbitrators to forgo the requirement of holding a hearing in favour of deciding the case based on written submissions and documentary evidence." Furthermore, case managers monitor the progress of EPR proceedings throughout to ensure compliance with the accelerated procedural timetable. At the time of writing this Chapter, the ICC has administered 171 arbitrations under the EPR. A special case of fees will apply to expedited procedures providing for a reduction in the cost of arbitrations by 20% on average. The new expedited procedures are a strong answer by the ICC Court to the demand by the users of arbitration for more expeditious and cost-elfective arbitration procedures to deal with limited value disputes in that they will contribute to make arbitration a more effective dispute resolution mechanism for the benefit of the business community, especially in a developing jurisdiction like India.

13. Article 1(2) of Appendix VI, 2021 ICC Rules. 14. Section 29A, 1996 Arbitration Act. For further discussion of section 29A, see Chapter 9 of the Handbook.

15. The same direction is contained in section 29B, 1996 Arbitration Act. For further discussion of section 29B, see Chapter 9 of the Handbook.

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The rationale of the amendments to the 1996 Arbitration Act is clear: to enable parties to obtain quick resolution of smaller disputes. The ICC EPR, combined with the Secretariat's case management facilities, provide an effective means to that end. 7223

Other Changes

722.201

Providing Reasons for Certain ICC Court Decisions

A recently adopted amendment which was earlier reflected in the Note'® has now been formally incorporated in the 2021 ICC Rules. The ICC Court will provide reasons for its decisions, not only on challenges, decisions to initiate replacement proceedings of an arbitrator (and subsequently to replace an arbitrator pursuant to Article 15(2)) and consolidation but also on its prima facie decisions on jurisdiction. The Court will also provide reasons when it constitutes the arbitral tribunal under Article 12(8) and the newly inserted Article 12(9).'” 17.2.2.3.2

Publication of the Awards, Names of Arbitrators, Counsels and Sector of Industry Involved

The ICC Court has decided that parties and arbitrators in ICC arbitrations accept that all ICC awards made after 1 January 2019 may be published. The Note provides that at the time of the notification of the final award, the ICC Secretariat will inform the parties that such a final award (and any other award, or separate or dissenting opinion) may be published in its entirety, two years after such a notification. The parties may agree for a shorter or longer time period for such a publication. The parties have an option to object to the publication of any award. Parties may also require that the award fully or partially redacted. The Note further provides that if a confidentiality agreement governs the arbitration or award, then the publication would take place only upon the parties’ specific consent.'® The ICC Court has also decided to publish on its website the composition of all ICC arbitral tribunals constituted in cases registered from 1 January 2016 which is a strong message of transparency and accountability to the market. The names are published after the establishment of the terms of reference.'” Furthermore, for arbitrations registered as from 1 July 2019, the Court will also publish on the ICC website the sector of industry involved and counsel representing the parties in the case.~”

16. 17. 18. 19. 20.

Section |.D of the Note. Article 5, Appendix II - Internal Rules of the International Court of Arbitration, 2021 ICC Rules. Section II.D of the Note. Section III-C, para. 35 of the Note. The link of the published names is available at https://iccwbo .org/dispute-resolution-services/arbitration/icc-arbitral-tribunals/. Section III.C, para. 36, of the Note.

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Chapter 17: Arbitral Institutions 172233

Guidance Note on Conflict Disclosure

The ICC Court aims at establishing the highest level of ethical standards in its procedure and to that effect has recently published a guidance note on conflict disclosure which is now incorporated into the Note and aims at ensuring that conflict disclosure by ICC arbitrators is made in a transparent and forthcoming fashion.”’ 17.2.2.3.4

Measures Aimed at Increasing Time- and Cost-Efficiency

The ICC Court has adopted measures aimed at increasing time and cost efficiency of its arbitrations. A recent measure adopted in the Note by the ICC Court is to establish a time limit for the submission of awards submitted to the ICC Court” as well as financial penalties resulting in fee reductions, in case of unjustified delays.** The ICC Court will also apply the same financial sanction to itself in case of unjustified delays in case of scrutiny of awards.” In an additional effort to reduce the time of our arbitrations, the ICC Rules have been amended

to the effect of reducing two months to one month, the

time granted to arbitral tribunals and parties to establish terms of reference.” 17.2.2.3.5

Expeditious Determination of Manifestly Unmeritorious Claims or Defences

While an ICC arbitral tribunal could have always expeditiously determined manilestly unmeritorious claims, the ICC Court has recently amended the Note to provide guidance on summary disposal of claims in ICC arbitration. The Note provides that any party may make an application for the expeditious determination of manifestly unmeritorious claims or defences to the arbitral tribunal.** The arbitral tribunal may (or not) allow the application, and in so doing, it shall take into consideration any circumstances it considers to be relevant, including the stage of the proceedings and the need to ensure time and cost-elficiency. 17 .2:3

Drafting (Institution) Arbitration Agreement

All disputes arising out of or in connection with the present contract shall be finally settled under the Rules of Arbitration of the ICC by one or more arbitrators appointed in accordance with the said Rules. Parties are strongly recommended to include an indication of: (i) a place of arbitration, (ii) the governing law, (iii) language of arbitration and (iv) number of arbitrators. Should the parties decide to have a three-member tribunal, they are further 21. 22. 23. 24.

Section Section Section Section

III of the Note. VIII of the Note. VIII.A of the Note. IX.D of the Note.

26.

Section VI.C of the Note.

25. Section VIE, para. 92(a) of the Note.

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Alexander G. Fessas & Abhinav Bhushan

invited to specify the procedure for nominating the president of the arbitral tribunal. The default position under Article 12(5) of the Rules is that, should the parties fail in agreeing upon the procedure to nominate the president, the ICC Court will appoint the president. All ICC arbitration agreements entered into after 1 March 2017 will be deemed to opt into the EPR for all disputes below USD 2 million. As such, parties are required to expressly opt out of the Expedited Procedure provisions, as well as the Emergency Arbitrator Provisions. A complete list of model arbitration coupled with mediation clauses is available in the ICC Rules booklet.*’ 17.2.4

Arbitral Appointments Procedure and Issues

While parties in India habitually express a preference for the flexibility offered by ad hoc arbitration, the Report of the High-Level Committee revealed that Indian litigants look for the advantages offered by ICC arbitration prior to the constitution of the arbitral tribunal.** In particular, the Report highlighted that Indian parties struggle to gain access to sector-specific industry experts to fit the needs of their arbitration.*’ The Report, in the authors’ view, rightly highlights that litigants in India prefer institutional arbitration, although this preference is not actually reflected in practice.*° In this regard, the ICC has an internationally established network of national committees,*' capable of making an appropriate candidate recommendation considering the origin of the parties, nature and value of the dispute and any qualifications sought by the parties or provided in the arbitration agreement. As it is often said that an arbitration is only as good as the arbitrator, access to such a wide pool of candidates is vital. The 2021 ICC Rules also provide for direct appointment in appropriate circumstances.** In cases, where the ICC Court directly appoints an arbitrator, it does not make a reference to the National Committee. Choosing institutional arbitration also expedites the constitution of the arbitral tribunal. The ICC Rules of Arbitration set out a timetable for the prompt constitution of the arbitral tribunal. In the event the parties have selected a three-member

tribunal,

each party should nominate a co-arbitrator in the Request for Arbitration and Answer,

respectively.** If a party fails to nominate or obtain an extension from the Secretariat,“

the ICC Court will appoint an arbitrator on behalf of the defaulting party/parties. Equally, a 30-day time limit begins running from the date of the confirmation of the co-arbitrators for either the co-arbitrators or parties to nominate the president of the

27. Pages 76-77 of the ICC Rules of Arbitration booklet. 28. Report of the High-Level Committee to Review Institutionalisation of Arbitration Mechanism in India, available at http://legalaftairs.gov.in/sites/default/files/Report-HLC.pdf, p. 26. 29. Ibid., at p. 29, para. 4(b). 30. Ibid., at p. 29, para. 2. 31. This network includes India. 32.

Article 13, 2021 ICC Rules.

33. Article 12(4), 2021 ICC Rules. 34. This applies particularly to respondents. It is worth noting that Article 5(2) of the 2017 ICC Rules only allows the Secretariat to extend the time limit for submitting the Answer if Respondent has commented on the constitution of the tribunal or nominated an arbitrator.

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Chapter 17: Arbitral Institutions tribunal.*” A new paragraph 9 has been added in Article 12 which gives the ICC Court the power, in exceptional circumstances, and notwithstanding any agreement by the parties on the method of constitution of the arbitral tribunal, to appoint each member of the tribunal to avoid a significant risk of unequal treatment and unfairness that may affect the validity of an award. Once more, if the time limit is not met, the ICC Court will appoint directly. These measures have been put in place to ensure that a recalcitrant or non-participating party cannot delay the constitution of the tribunal. The Report further notes that while there appears to be in theory a preference for institutional arbitration, a different picture emerges as far as practice is concerned and ad hoc

arbitration is the more used option in India.**

The ICC Rules of Arbitration also provide a framework for the disclosure and examination of potential conflicts of interest by arbitrators. As opposed to ad hoc arbitration, the parties’ candidates are scrutinised by a neutral third party to ensure that all essential procedural safeguards are followed.*” By requiring nominated arbitrators to put forward a statement of acceptance, availability, independence and impartiality, the ICC ensures arbitrators have complied with their duty to disclose. It is worth noting that in India, failure to follow this seemingly simple process creates a risk

of setting aside of the award in of itself.**

The standards applied by the ICC Court in examining potential conflicts are articulated in paragraph 23 of the Note, largely in line with the disclosure obligations suggested in the internationally recognised IBA Guidelines on Conflicts of Interest in International Arbitration. Additionally, the 2021 Rules oblige the parties to promptly inform the Secretariat, the arbitral tribunal and the other parties of any changes in its representation*’ and empower the arbitral tribunal (after it has afforded an opportunity to the parties to comment) to take any measure necessary to avoid a conflict of interest of an arbitrator arising from a change in party representation, including the exclusion of new party representatives from participating in whole or in part in the arbitral proceedings.*” Finally, in order to assist prospective arbitrators and arbitrators in complying with their duties of impartiality and independence, a new paragraph 7 under Article 11 has been added which mandates the parties to inform the arbitral tribunal and the other parties, of the existence and identity of any non-party which has entered into an arrangement for the funding of claims or defences and under which it has an economic interest in the outcome of the arbitration.”'

35. Article 12(5), 2021 ICC Rules. 36. Report of the High-Level Committee to Review Institutionalisation of Arbitration Mechanism in India, available at http://legalaffairs.gov.in/sites/default/files/Report-HLC.pdf, p. 27. 37. EY, Emerging Trends in arbitration in India, available at https://www.ey.com/Publication/ vwLUAssets/EY-FIDS-Emerging-trends-in-arbitration-in-India/ % 24FILE/EY-Emerging-trendsin-arbitration-in-India.pdf, p. 10. 38. Murlidar Eongta v. Jagannath Tibrewala, 2005(1)ArbR103(Bom).

39. 40. 4].

Article 17(1), 2021 ICC Rules. Article 17(2), 2021 ICC Rules. Article |1(7), 2021 ICC Rules.

40]

Alexander G. Fessas & Abhinav Bhushan

17.2.5

Conduct of Proceedings/Institutional Supervision

Another key innovation introduced to the ICC Rules of Arbitration in 2012 is the obligation on the arbitral tribunal to hold a CMC and establish a procedural timetable. The Secretariat creates a bespoke time limit for the rendering of the final award based on the indications included in the procedural timetable.** These measures allow the case Management teams to monitor the work of the arbitral tribunal throughout the course of the proceedings, keeping the arbitrators accountable to the deadlines set. While the Rules previously did not prohibit virtual hearings, the 2021 Rules now explicitly allow the arbitral tribunal to conduct a hearing by physical attendance or remotely by videoconference, telephone or other appropriate means of communica-

tion.”

Such case management facilities are crucial for the arbitral tribunal to comply with section 29A of the 1996 Arbitration Act, which sets a 12-month time limit for the rendering of the final award running fram the completion of the pleadings under section 23(4) of the Act. This time limit, however, applies only to domestic arbitrations in India. Failure to comply with this time limit results in the arbitrators losing their mandate to decide the dispute. While the possibility of a six-month extension is envisaged by the statute,”* the fact remains that Indian parties will need effective case management to keep the resolution of their dispute on schedule. The ICC Court's relationship with India dates to the pre-independence era. The ICC Court has ample experience managing cases in India, arguably placing it as the most used international arbitral institutions in the country.*” The ICC has administered 76 cases with a place of arbitration in India between 2010 and 2019. Indian cases are now predominantly managed by newly established Secretariat of the International Court of Arbitration Singapore, Singapore. The year 2019 saw a significant 57% increase in the number of parties from South and East Asia and the Pacific that reached 484 parties (from 309 in 2018). The number of Indian parties tripled and reached 147 in 2019. Ranked 15th in 2018 with just 47 parties, India now ranks second on the overall number of parties worldwide. India also ranked first in the number of arbitrators appointed in Asia at 34 appointments and 13th worldwide (not counting Australia, which saw 38 appointments and stood ninth worldwide) and now accounts for 40% of all arbitrators from South and East Asia. The ICC Court is vastly familiar with the needs of Indian parties and the legal culture in India more generally. 42. Jason Fry & Simon Greenberg, The New ICC Rules of Arbitration: How Have They Fared after the First 18 Months?,

16(6) Int'l Arb. L. Rev.

171 (2013).

43. Article 26, 2021 ICC Rules. 44. This extension may be granted by making an application to the relevant Indian court. See section 29A(4), 1996 Arbitration Act. 45. Report of the High-Level Committee to Review Institutionalisation of Arbitration Mechanism in India, available at http://legalatfairs.gov.in/sites/default/files/Report-HLC.pdf, p. 28; PWC, Corporate Attitudes & Practices towards Arbitration in India (2013), available at https://www.

pwe.in/assets/pdfs/publications/2013 /corporate-attributes-and-practices-towards-arbitrationin-india.pdf.

A402

Chapter 17: Arbitral Institutions 17.2.6

Award Scrutiny Process

The scrutiny process carried out by the ICC Court with the assistance of its Secretariat is a unique and thorough procedure designed to ensure that all awards are of the best possible quality and are more likely to be enforced by state courts. All draft awards undergo a three-step review process, starting with the counsel of the team in charge of the arbitration who has followed the proceedings since the inception of the arbitration, followed by review by the Secretary General, the Deputy Secretary General or the Managing Counsel, before being submitted for the ICC Court's scrutiny. All

draft

awards

are

scrutinised

at a Committee

Session

of

the

ICC

Court,

composed of three ICC Court members, or at a Plenary Session of the ICC Court. Draft awards scrutinised at a Plenary Session include, but are not limited to, matters involving a state or a state entity, matters in which one or more arbitrators have dissented, matters raising issues of policy, and matters in which a Committee Session has been unable to reach a unanimous decision or otherwise makes a referral to the Plenary. 472-7

Costs Calculation

The Report highlights that one of the several reasons for the prevalence of ad hoc arbitration in India is the perception related to the cost of institutional arbitration. Parties consider institutional arbitration to be substantially more expensive than ad hoc arbitration, primarily because of the administrative fees payable to arbitral institutions.*° In the context of the ICC, this perception is largely a myth due to several reasons. First, the ICC administers a wide range of disputes with varied amounts in dispute. In fact, more than 23% of the ICC’s caseload amounts to cases where the value

of the dispute is less than USD 2 million in 2019. Furthermore, the ICC cost scale caps its administrative expenses to the maximum of USD 150,000. This feature contrasts with the expenses that the parties may incur in an ad hoc arbitration as there is no capping of expenses in such proceedings. Furthermore, the ICC helps avoid disputes over procedural matters, avoiding multiplicity of proceedings and legal issues which correlated to the fact that costs of an ad hoc arbitration can easily exceed the costs of an institutional arbitration in case of additional procedural hearings, adjournments, use of per-hearing fees, litigation arising from procedural infirmities in ad hoc

arbitrations, etc.*”

Finally, the use of EPR is an additional tool under the ICC mechanism to reduce costs, as the EPR scales provide a reduction of an average of 20% when compared to the normal cost scales.

46. Report of the High-Level Committee to Review Institutionalisation of Arbitration Mechanism in India, available at http://legalaffairs.gov.in/sites/default/files/Report-HLC.pdf, p. 17 at para. b.

47.

Ibid.

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Alexander G. Fessas & Abhinav Bhushan 17.2.8

Flowchart: For Quick Reference

PIPE EOE ATTA Ahab aT ee ce km Wes

THE ICC ARBITRATION PROCESS AT A GLANCE

Provisions, unless the parties have expressly excluded their application.

the arbitration may submit a Request for Joinder.

The Secretary General may confirm arbitrators and reports them to the Court. If the Secretary General considers a person should not be

: =] =|

S|=

A party seeking urgent interim relief may request emergency measures under the ICC Emergency Arbitrator

wishing to join an additional party to

isa mal Sin mei

a

Clammant submits a Request for Arbitration. The Secretariat transmits it to Respondent. Respondent has 30 days to submit an Answer. A party

5=|

The Court takes decisions, where Hecessary, on the:

* arbitration agreement

confirmed, the matter is submitted to the Court. After receiving the Request for

r=] z

* constitution of the arbitral tribunal * place of arbitration. As soon as practicable, the Court fixes the advance on costs for the

Arbitration, the Secretary General normally asks Claimant to pay a provisional advance.

entire proceedings.

Ae eh ek Raich eich RO ican

couRT The arbitral tnbunal draws up its Terms of Reference, which it signs with the parties, and holds a case management

conference to discuss with the parties how to conduct the proceedings as

to the Court for approval.

efficiently as possible. A procedural timetable is established and communicated to the Court.

Ef

rete es F4 a

hb

If one of the parities refuses to sign the Terms of Reference or participate in drawing them up, they are submitted

%

The arbitral tibunal establishes the facts of the case, after which it declares the proceedings closed, and prepares a draft award. ay PAU The Court scrutinizes the draft award. Once approved, the award 1s transmitted to the parties.

qi

Source: Authors’ Own.

404

y

Chapter 17: Arbitral Institutions 17.2.9

Conclusion

The purpose of this Chapter is to provide a whistle-stop tour of the key features of the ICC Rules of Arbitration, with emphasis on elements that are particularly attractive for Indian parties. With the evolving legal landscape for arbitration in India, it will be increasingly important for parties to select institutions with the capability to effectively manage dispute. In this regard, the ICC has introduced innovative solutions in its rules, comprehensive case management facilities and experience administering arbitrations in India.

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Sherina Petit & Nosherwan 17.5

Vakil

LCIA RULES

Sherina Petit & Noshenwan Vakil® 17.3.1

Brief Introduction

Founded in 1892, the London Court of International Arbitration (LCIA) provides comprehensive international dispute resolution services. The LCIA Arbitration Rules (LCIA Rules) are widely regarded as the world’s leading arbitration rules. As one of the most established arbitral institutions, the LCIA has undergone a number of significant

structural changes."

On 1 October 2014, the LCIA introduced its revised arbitration rules (2014 LCIA Rules). The LCIA Rules replaced the previous 1998 Rules and implemented a number of solutions designed to provide a more effective, impartial and globalised administration of arbitration. Thereafter, on 11 August 2020, the LCIA announced a further update to the Rules (2020 LCIA Rules). The 2020 LCIA Rules became effective on 1 October 2020 and apply to all arbitrations commenced from that date onwards. The next part summarises the key changes introduced by the 2014 and 2020 LCIA Rules. It is important to note that the changes introduced by the two updates are cumulative. That is, although the 2020 LCIA Rules supersede the 2014 LCIA Rules, they retain the changes previously introduced and seek to build on them. Unless specified otherwise, references in this Chapter to Articles are to Articles of the 2014 LCIA Rules.

E7.3.2

Key Changes Introduced by the 2014 and 2020 LCIA Rules

The principal changes made to the 1998 edition of the LCIA Rules by the 2014 LCIA Rules can be described under three headings as developments concerning: (i) efficiency; (ii) ethics; and (iii) administration. The first involved instruments directed at improving the efficiency of the arbitral process. Key developments in this area entailed the introduction of an emergency arbitrator and express powers of the tribunal on consolidation. The parties can apply for the appointment of an emergency arbitrator in order to seek urgent relief before the tribunal is constituted (Article 9B).*” If the case merits the appointment of an emergency arbitrator, the LCIA Court appoints a candidate within three days of receipt

* The authors would like to thank Ewelina Kajkowska and Nimoy Kher, Associates at Norton Rose Fulbright LLP, for their assistance in the preparation of this Chapter. 48. In 2009 the LCIA introduced the LCIA India in Delhi. This operationally independent body of the LCIA ceased to continue its services in 2016, with the exception of administering arbitrations where the contract between the parties for arbitration under LCIA India Rules was concluded before | June 2016. Following the closure of the LCIA India, all Indian-related arbitrations are administered from London. 49. The power supplements an already existing mechanism for the expedited formation of the tribunal (Article 9A) which offers the parties a possibility to seek interim or conservatory measures from the tribunal that will ultimately be called upon to decide the dispute. Including the emergency arbitrator provisions puts the LCIA Rules in line with the rules of other major arbitration centres such as the ICC, HKIAC or SLAC.

406

Chapter 17: Arbitral Institutions of the application. An emergency arbitrator should make a decision as soon as possible but in any event no later than 14 days following the appointment. The decision is temporary in nature and can be confirmed, varied, discharged or revoked by the tribunal once constituted. In addition to an emergency arbitrator procedure, the 2014 LCIA Rules introduced solutions dealing with multiparty arbitrations (Article 22). Where the parties have agreed to consolidation, the tribunal may make an order to that effect with the approval of the LCIA Court. The LCIA Court can also consolidate two or more actions before the appointment of the tribunal, and without consent of all the parties, if the actions were commenced under the same arbitration agreement and between the same parties. Finally, the tribunal (with the approval of the LCIA Court but without the parties’ consent) can order consolidation of multiple arbitrations involving the same parties under the same or compatible arbitration agreements where only one tribunal has been appointed or the tribunal is the same for all of the claims. The second area of development in the 2014 LCIA Rules concerned the codification of certain ethical standards. The tribunal is empowered to sanction poor conduct of the parties’ counsel (Article 18).°° The sanctions are awarded at the tribunal's discretion and entail a reprimand, written caution as to future conduct in the arbitration or ‘any other measure’ necessary for the tribunal to fulfil its general duties under the Rules (Article 18.6). In addition to that power, when taking decisions on costs, the tribunal is expressly entitled to take into account the parties’ behaviour, including any non-cooperation causing unnecessary delay and expense. Notably, the LCIA was the first arbitral institution to ‘give teeth’ to counsel professional conduct requirements in their Arbitration Rules. The third area of development included changes of a technical or administrative character, the most important of which was modilication of a number of time limits. These include the time limits for filing of the Response to the Request for Arbitration (reduced from 30 to 28 days of the receipt by the Registrar of the Request), challenge to an arbitrator (reduced from 15 to 14 days of the party becoming aware of grounds giving rise to justifiable doubts as to the arbitrator’s impartiality or independence), request for the correction of an award (reduced from 30 to 28 days olf receipt of the award) and written statements (reduced from 30 to 28 days of receipt of the relevant document from the LCIA Registrar/counterparty). Furthermore, the 2014 LCIA Rules contained certain modifications to the provisions governing the default seat of arbitration. In the absence of parties’ choice, the 2014 LCIA Rules maintain London as a seat

of arbitration unless the tribunal (not the LCIA Court as was the case under the Rules introduced in 1998) decides otherwise. In addition, the parties can agree on the seat after the appointment of the arbitrators, subject to the tribunal’s approval. In comparison to the 2014 update, the changes that will be introduced by the 2020 LCIA Rules are relatively ‘light touch’. They will introduce changes mainly in relation to: (i) summary assessment ol claims; (ii) broader powers for consolidation of multiple proceedings; and (iii) data protection and electronic communications. 50. The conduct requirements are set out in Annex | — General Guidelines for the Parties’ Legal Representatives of the Rules.

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Sherina Petit & Nosherwan

Vakil

With regard to the first change, under the 2014 LCIA Rules, tribunals have an implicit power of early dismissal in relation to claims which are manilestly outside their jurisdiction or without merit.?’ The 2020 LCIA Rules make this power explicit and grant tribunals the power to make an early determination and dismiss any claim or defence which is manifestly without merit, inadmissible or outside the tribunal's jurisdiction

(Article 22.1 (viii)).

Second, the 2020 LCIA Rules expand the powers of the LCIA Court and of individual tribunals to order the consolidation and concurrent conduct of multiple arbitrations. At present, tribunals may (with the approval of the LCIA Court) order the consolidation of multiple arbitration proceedings in the following circumstances: (i) with the written agreement o!f the parties to the arbitrations; or (ii) where the arbitrations were commenced under the same arbitration agreement or any compatible arbitration agreements between the same disputing parties (Articles 22.1(ix) and (x)).°* Under Article 22.7 of the 2020 LCIA Rules, tribunals will additionally be empowered to order the consolidation of arbitrations commenced under the same arbitration agreement or any compatible arbitration agreements ‘arising out of the same transaction or series of related transactions’ (i.e., even if the parties in dispute are not the same). Lastly, the 2020 LCIA Rules introduce various changes to address the evolving technological landscape. In particular, they contain new requirements in relation to data protection (Articles 24A and 30A). The 2020 LCIA Rules also implement measures aimed at reducing the impact of the COVID-19 pandemic on arbitration, addressing virtual hearings in far greater depth than the 2014 Rules and making electronic filings/communications the new ‘default’. The 2020 LCIA Rules allow arbitrators to sign awards electronically and state: ‘Unless the parties agree otherwise, or the Arbitral Tribunal or LCIA Court directs otherwise, any award may be signed electronically and/or in counterparts and assembled into a single instrument’ (Article 26.2). Was

Drafting an Institution Arbitration Agreement

The LCIA published two main standard arbitration clauses: for future disputes*’ and for existing disputes.’ An arbitration clause of the first type is entered into in advance of the dispute and most frequently constitutes a part of the main contract. The parties

51. This is a generally accepted power under Articles 14.4(ii) and 14.5 of the 2014 Rules. 52. Provided that no tribunal has yet been formed for such other arbitration(s) or, if already formed, that such tribunal(s) was composed of the same arbitrators.

53. ‘Any dispute arising out of or in connection with this contract, including any question regarding its existence, validity or termination, shall be referred to and finally resolved by arbitration under the LCIA Rules, which Rules are deemed to be incorporated by reference into this clause. The number of arbitrators shall be [one/three]. The seat, or legal place, of arbitration shall be [City and/or Country]. The language to be used in the arbitral proceedings shall be [*]. The governing law of the contract shall be the substantive law of [*]’. 54. ‘A dispute having arisen between the parties concerning [*], the parties hereby agree that the dispute shall be referred to and finally resolved by arbitration under the LCLA Rules. The number of arbitrators shall be [one/three]. The seat, or legal place, of arbitration shall be [City and/or Country]. The language to be used in the arbitral proceedings shall be [*|. The governing law of the contract [is/shall be] the substantive law of [#]’.

408

Chapter 17: Arbitral Institutions should tailor the standard clause to suit their particular circumstances, having regard inter alia to the nationality or domicile of the parties and the subject matter of the arbitration. Input required from the parties includes specifying the language and seat of arbitration. In default of any agreement to that effect, the arbitration seat will be London unless and until the tribunal orders that another seat is more appropriate, as described above. The parties also commonly include provisions regarding the number of arbitrators. In the absence of parties’ choice, the default position under the LCIA Rules is a sole arbitrator. It must be emphasised that the LCIA model clause does not contain any express choice of the law governing the arbitration agreement. Consequently, the parties should consider specifying this matter to avoid uncertainty.” A clause of the second type is for use in case the parties have not entered into an agreement to arbitrate in advance of the dispute. The drafting considerations set out above apply to this type of clauses with additional challenges associated with entering into a clause after the dispute has arisen. In consequence, the parties must carefully scope the clause by clearly defining the existing dispute to which it relates. The LCIA Secretariat offers advice on drafting an arbitration clause in such circumstances. Other than pure arbitration clauses, the LCIA published a hybrid mediationarbitration clause. The Secretariat also provides, on request, recommended clauses for mediation, expert determination, adjudication, and other forms of ADR, to be administered by the LCIA or in which the LCIA is to act as appointing authority.~ 17.3.4

Institutional Supervision

The LCIA structure is two tiered and comprises of the Secretariat and the LCIA Court. The Secretariat is responsible for matters of an administrative nature, while the role of

the LCIA Court entails making certain procedural decisions regarding the conduct of arbitration. Its key prerogatives include: appointing arbitrators to a dispute (Article 5), making determinations upon parties’ challenge to those appointments (Article 10), ordering the parties to pay deposits (Article 24) and fixing the arbitration costs (Article 28). The LCIA Court is also generally responsible for the proper application of the LCIA Rules. Article 3 of the Rules specifies the competent bodies through which these

functions are to be performed.”’ Was

Arbitral Appointments, Procedure and Issues

The LCIA Court has an exclusive power to appoint arbitrators. This power overrides the parties’ agreement that an arbitrator is to be appointed by the parties or a third person. 55. See Sulameérica Cia Nacional De Seguros §.A. and others v. Enesa Engenharia $.A [2012] EWCA Civ 638 [2013] | WLR 102 dealing with a question which law should govern an arbitration agreement where the parties have not selected any applicable law. 56. The LCLA’s Recommended Clauses are available at https://www-lcia.org/Dispute_Resolution_ Services/LCIA_Recommended_Clauses.aspx. 57. These include the President of the LCIA Court (or any of its Vice Presidents, Honorary Vice Presidents or former Vice Presidents) or by a division of three or more members of the LCIA Court appointed by its President or any Vice President.

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Any such agreement is treated under the Rules as an agreement to nominate an arbitrator. The LCIA Court will appoint an arbitrator pursuant to the parties’ nomination subject to the candidate’s compliance with Articles 5.2-5.5 containing requirements as to the independence, impartiality and qualifications of arbitrators. In addition, the LCIA Court has a general power to refuse to appoint a nominee who it considers unsuitable (Article 7.1). Prior to the appointment and at the Registrar’s request, each candidate must provide a brief résumé, agreement to the fee rates in the LCIA Schedule of Costs and a written statement with regards to their impartiality or independence, as well as the declaration as to their capacity to devote sufficient time, diligence and industry to ensure the expeditious and efficient conduct of the arbitration (Article 5.4). There is a continuing duty on arbitrators to disclose any circumstances that may give rise to any justifiable doubt as to their impartiality and independence. The LCIA Rules exhaustively set out grounds for removal of an arbitrator in Article 10.1. They include: (i) resignation of the arbitrator concerned; (ii) serious illness, refusal, unfitness or inability to act; or (iii) justifiable doubts as to the arbitrator’s impartiality or independence. Article 10.2 clarifies unfitness to act which involves deliberate violation of the arbitration agreement, failure to act fairly or impartially and failure to conduct or participate in the arbitration with reasonable efficiency, diligence and industry.** In order to challenge an arbitrator, the party must file its application within 14 days of either the formation of the tribunal or the time at which it becomes aware of the grounds for the challenge. Under Article 10.4, the LCIA must give the other parties and the challenged arbitrator a reasonable opportunity to comment on the application. Decisions on challenge applications are reasoned. The LCIA publishes these decisions on its “Challenge Decision Database’.”” 17.3.6

Conduct of Proceedings

Once the tribunal has been appointed, it will determine the conduct of the proceedings. Notably, the 2014 LCIA Rules do not allow the parties to agree on the conduct of arbitration without the consent of the tribunal. Under Article 14.2 any such agreement is treated merely as a proposal for consideration by the arbitrators. It follows that even if the parties agree on how the arbitration should be conducted, their agreement may be disregarded or modified by the tribunal. Article 14.4 prescribes general duties of the tribunal with regards to the conduct of arbitral proceedings. These include a duty to act fairly and impartially as between all parties, giving each party a reasonable opportunity of presenting its case and a duty to adopt procedures suitable to the circumstances of the arbitration, avoiding unnecessary delay and expense, so as to provide a fair, efficient and expeditious means for the final resolution of the parties’ dispute. To discharge these duties the Rules provide the 58. This last ground is a useful measure for the LCIA Court to discipline inactive or inefficient arbitrators. 59. The LCIA’s Challenge Decision Database is available at https://www.lcia.org/challengedecision-database.aspx.

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Chapter 17: Arbitral Institutions tribunal with the ‘widest discretion’ subject only to mandatory or other applicable laws (Article 14.5). The Rules contain a number of provisions designed to improve the efficiency of the conduct of arbitration. First, the Rules encourage the parties and the tribunal to make contact (whether by a hearing in person, telephone conference-call, videoconference or exchange of correspondence) as soon as practicable but no later than 21 days from receipt of the Registrar’s written notification of the formation of the tribunal (Article 14.1). This was a new requirement introduced under the 2014 Rules to ensure that the parties and the tribunal begin the process of determining the conduct of arbitration without unnecessary delay. Second, Article 14.6 gives the presiding arbitrator an authority to make procedural decisions alone. This power is subject to the prior consent of the parties and the remaining arbitrators. Finally, the Rules set out a default structure for the written stage of the arbitration and include a set timetable for exchange of submissions (Article 15). While the Rules do not provide for the appointment of tribunal secretaries, the LCIA’s Notes for Arbitrators set out a process by which arbitrators are able to propose to the parties that a tribunal secretary be appointed. There are a variety of opinions regarding the tribunal secretary role, most significantly regarding which tasks are permissible for a tribunal secretary to perform. To accommodate this range of opinions, in October 2017 the Notes for Arbitrators were updated. The updated Notes require arbitrators to propose a set of tasks, remuneration, and an individual to act as tribunal

secretary. Parties are then able to comment on, and where satisfied, provide consent to, each of these aspects, ensuring that they are comfortable with the key elements of the tribunal secretary role. The 2020 LCIA Rules introduce further certainty in relation to the role of tribunal secretaries, along the lines of the 2017 Notes for Arbitrators. They explicitly permit the use of a tribunal secretary, but clarify that the tribunal cannot delegate its decision-making powers. Tribunals are now also able to deal more effectively with non-participating parties. Under the updated Notes for Arbitrators, a tribunal is able to set a time by which the parties must provide or refuse consent to a tribunal secretary. If at the end of that time period a party has not responded, they will be deemed to have consented. In the pattern of a typical arbitration the following key steps can be identified: (i) preliminary issues (jurisdiction); (ii) directions as to the conduct of the proceedings; (iii) written submissions; (iv) hearing; (v) award; and (vi) post-award procedure. The primary means of presenting the parties’ case to the tribunal is through written submissions.°' The submissions must be filed in accordance with the timetable and should be accompanied by documentary evidence, written statements of expert and fact witnesses. The parties may make joint proposals to extend or shorten the time limits prescribed for the written stage as well as introduce additional rounds of

60.

See also the flowchart below for reference.

61. The written stage is codified in Article 15 and consists of the following rounds: Statement of the Case (Article

15.2); Statement of Defence and, if applicable, Statement of Cross-Claim (Article

15.3); Statement of Reply and, if applicable, Statement of Defence to Cross-Claim (Article 15.4);

and Statement of Reply to the Defence to Cross-Claim (Article 15.5).

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submissions. The tribunal retains the power to give additional directions as to any part of this written stage of the arbitration (including witness statements, submissions and evidence). 17.3.7

Costs Calculation

The LCIA Rules distinguish between the arbitration costs and legal costs (Article 28). The former include tribunal's fees and expenses as well as the LCIA’s administrative charges. The latter comprise costs incurred by a party individually in respect of the arbitration (such as legal representation fees). The costs incurred by the arbitral tribunal and the LCIA are determined by the LCIA Court pursuant to the Schedule of Costs. With regards to the arbitrators’ fees, the LCIA operates on an hourly rate system, the maximum rate being set in the Schedule of Costs at GBP 450.°° The LCIA’s fees are calculated on a similar basis at the rates set out in the Schedule. The parties are jointly and severally liable to the tribunal and the LCIA for the arbitration costs (Article 28.1), and the tribunal can decide the proportions in which the parties shall bear such costs (Article 28.2). With regards to the parties’ legal costs, the tribunal has discretion in deciding whether or not to deal with this issue in an award. The tribunal decides the amount of these costs on such reasonable basis as it thinks appropriate (Article 28.3). In terms of cost apportionment, Article 28.4 requires the tribunal to make the decision ‘on the general principle that costs should reflect the parties’ relative success and failure’.”’ The provision gives the tribunal discretion to depart from the general rule ‘where it appears to the Arbitral Tribunal that in the circumstances the application of such a general principle would be inappropriate under the Arbitration Agreement or otherwise’. Under the LCIA Rules the parties are also required to lodge deposits on account of costs incurred in arbitration (Article 24). The LCIA has been at the forefront of costs transparency in international arbitration. In 2015, the LCIA was the first leading arbitral institution to provide an analysis of the costs and duration of its cases. In October 2017, the LCIA released an

even more detailed report, setting out the costs and duration of all LCIA cases that reached an award from 2013 to 2016. This report revealed emerging trends towards lower arbitration costs at the LCIA, despite a significant increase in the average amount in dispute. The median arbitration costs over the four year period were only USD 97,000 — on average 40% lower than the estimated costs of the LCIA’s cases at other institutions. The report also showed the duration of LCIA cases to be low: an average LCIA arbitration has a duration of only 16 months from request to final award, with over 70% of cases with an amount in dispute under USD 1 million decided within 12 months. Measures taken by the LCIA since 2017 have in all likelihood further expedited proceedings and reduced costs. 62.

Increased to GBP 500 from | October 2020, with the introduction of the 2020 Schedule of Costs.

63. The Rules adopt the ‘costs follow the event’ principle expressed under section 61(2) of the English Arbitration Act 1996. 64. The costs of the LCIA's cases at other institutions were estimated using costs schedules and arbitration costs calculators made publicly available by the compared institutions.

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Chapter 17: Arbitral Institutions 17.3.8

Flowchart SET

Vt te

eeere

ee

meatier

Formation of the Tribunal |

Peeed

flere oT)

Conduct of Proceedings (Article 14)

Preliminary Issues

interim Measures (Article 25)

|

fe oe eter

ne et ee eee terre ee)

Claimant (Articles 15.2, 15.4)

Respondent (Articles 15.3, 15.5)

Se i) Pett Cm Put etie ewes ed

yer

cass Source: Authors’ Own.

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ee tire erg

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17.3.9

Mandatory Checklist

17.3.9:1

Arbitration Clause

Prior to commencement of arbitration, an arbitration clause must be closely scrutinised (including any amendments). The wording of an arbitration clause will determine matters such as the scope of the arbitrators’ mandate, number of arbitrators, arbitral seat, law governing the contract or law governing the arbitration clause. If an arbitration clause is not in a standard form recommended by the LCIA, challenges to tribunal's jurisdiction are more likely. Under the LCIA Rules (Article 23.3) an objection to jurisdiction must be raised as soon as possible and in any event not later than the time for the Statement of Defence. 17-3.9.2

Time-Bar

It is essential from both the claimant’s and the respondent's perspective to consider whether the claims in dispute are brought within the limitation period. A time-bar can be of a statutory or contractual nature. Under English arbitration law, contractual time-bar can be extended by the court under section 12 of the English Arbitration Act 1996 which applies to arbitrations seated in London. 17.3.9.3

Interim Measures

The parties should consider whether interim measures are appropriate to protect their position at the outset of the proceedings. Under the LCIA Rules (Article 25) the tribunal has various powers to grant interim relief. Where interim measures are urgently required, the parties may apply for expedited formation of the tribunal in accordance with Article 9A, or apply for an emergency arbitrator under Article 9B. The parties may also apply to the state court for interim relief, as permitted under Article 25.3 of the Rules, either before the formation of the tribunal or, in exceptional cases, alter the tribunal has been constituted. 17.3.9.4

Evidence

In order to bring or defend a claim in arbitration, factual aspects of the case need to be considered. This entails locating, and in appropriate cases preserving, any relevant evidence. Under the LCIA Rules the tribunal has wide powers to award conservatory measures for the preservation of any documents, goods, samples, property, site or any object under the control of any party and relating to the subject matter of the arbitration (Article 25.1(ii)). These powers are complementary to any relief available in court.

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Chapter 17: Arbitral Institutions 17.3.9.5

ADR/Settlement

At all stages of the proceedings the parties should consider amicable resolution of the dispute. As part of its ADR offer, the LCIA publishes the Mediation Rules which the parties may avail themselves of to facilitate settlement negotiations. In ADR proceedings other than mediation (such as expert determination, early neutral evaluation, or adjudication) the LCIA can act as appointing authority and administrator. The LCIA Secretariat advises on model clauses pursuant to which the LCIA Court is to perform these functions.

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Cyril Shroff & Shaneen Parikh 17.4 MCIA RULES Cyril Shroff & Shaneen Parikh 17.4.1

Introduction

The Mumbai Centre for International Arbitration (MCIA) was established in October 2016, as a joint initiative between the Government of Maharashtra and the domestic and international business and legal communities. The fact that the MCIA has the support of the Government ties in with the Government's policy to ease the process of doing business in India and establish India as an arbitration-friendly jurisdiction. Indeed it is for this very purpose that certain critical amendments were also made in 2015 (2015 Amendment), and thereafter in 2019 (2019 Amendment), to India’s Arbitration and Conciliation Act, 1996 (1996 Arbitration Act or Act), in an attempt to make India a robust centre for international and domestic arbitration, on par with developed arbitration jurisdictions. As a result of far-reaching amendments and new legislations, India’s ranking for ‘Enforcing Contracts’ improved several positions in the World Bank's Report on Doing Business from

172 in 2016 to 163 in 2019 and 2020."

The MCIA Rules, which apply to arbitrations commenced after 15 June 2016, have been drafted keeping in mind best practices in international arbitration, as also flexibility, simplicity and adaptability to party requirements. The Maharashtra Government in fact framed an ‘Institutional Arbitration Policy’ that makes it mandatory for all commercial contracts executed by it and other government entities with a value of INR 50 million and above, to provide for institutional arbitration.*° The Policy recommends a standard institutional arbitration clause, which

is MCIA’s

model clause, making it

currently the sole arbitral institution to be referred to by the Policy. Over the last four years and at the time of writing this Chapter, the MCIA has seen its facilities used regularly in both domestic and international arbitration, and administered eight arbitrations under its Rules valued at over INR 1.3 billion.*’ Giving a fillip to institutional arbitration and specifically the MCIA, the Supreme Court referred a matter (filed under section 11 of the 1996 Arbitration Act, for appointment of an

arbitrator) to the MCIA for the requisite appointment. In that respect, one of the amendments

to the 1996 Arbitration Act, the 2019

Amendment gives the power to the courts to perform functions in aid of arbitration. Institutions have a prominent role to play in arbitration as a result of the 2019 Amendment. For example, under the 2019 Amendment under section 11, the Supreme Court (for international commercial arbitrations) and the High Court (for other

65.

World

Bank

66.

Government

Group

Report

on

Doing

Business

in India

(2020)

available

doingbusiness.org/content/dam/doingBusiness/country/i/india/IND.pdf. Resolution No. Misc.-2016/M No. 20/S-19,

16 October 2016.

at https://www.

67. MCIA, The MCIA Report (4th ed.) available at https://mcia.org.in/wp-content/uploads/2016/0 5/MCIA-4th-Edition-Book-compressed.pdf. 68. Sun Pharmaceutical Industries Ltd., Mumbai v. M/S Falma Organics Limited Nigeria, 2017 SCC OnLine SC 1200, Supreme Court Arbitration Case No. 33 of 2014 (Order of 3 May 2017).

416

Chapter 17: Arbitral Institutions arbitrations) have been empowered to designate arbitral institutions for the appointment of arbitrators (thus taking over the load of the court). These institutions are to be graded by a yet to be set up ‘Arbitration Council of India’ under various criteria.” It is expected that this provision will further increase the involvement of arbitral institutions (especially the MCIA) in the arbitral process. The MCIA is governed by a council of domestic and international arbitration practitioners, and a Secretariat, which handles the caseload. The Council includes a Committee (of not less than two members), which may be delegated with making various decisions in an ongoing arbitration, including appointment of arbitrators, where the MCIA is specified as an appointing authority. The Registrar of the Council is the point of contact for parties in respect of all administrative matters in an ongoing arbitration. The Secretariat (comprised of a Chief Executive Officer and Registrar/ Secretary General) is responsive and available to answer any questions pertaining to proposed and ongoing arbitrations. The Secretariat exercises overall supervision over the arbitral proceedings to ensure expedient completion of the process and passing of the award. Where parties agree to arbitrate under the MCIA Rules, the Rules are deemed to have been incorporated by reference into the arbitration agreement, subject to any mandatory and non-derogable provision of law.”” In matters not expressly provided for by the Rules, the Council and the arbitral tribunal are required to make every effort to ensure the award is enforceable and is made in accordance with applicable curial law.”' 17.4.2

Key Changes, Reasons and Features

The MCIA Rules which came into force on 15 January 2017 contain certain notable provisions in relation to: — consolidation of claims and arbitrations; — emergency arbitrator; — expedited procedure; — confidentiality; and

— scrutiny of the award.

69. 2019 Amendment. The proposed Arbitration Council is also discussed briefly in Chapter 19 of the Handbook. 70.

Rule 1.1, MCIA Rules.

71. Rule 21.8, MCIA Rules. For further discussion of the various laws applicable to an arbitration, see Chapter 6 of the Handbook.

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Cyril Shroff & Shaneen Parikh 17.4.3

The Arbitration Agreement

The MCIA’s model clause is simple, although parties are free to draft an arbitration clause to suit their specific requirements.” A separate clause is set out for expedited

procedure.” 17.4.4

Arbitral Appointment Procedure and Issues

17.4.4.1

Appointment of Arbitrators

Unless otherwise specified by the arbitration agreement or the parties, or when the Registrar is of the opinion that the dispute warrants the appointment of three arbitrators, a sole arbitrator shall be appointed by the MCIA.”™ While the claimant(s) and the respondent(s) may nominate arbitrators, the Council makes the actual appointment.”” Should the requisite nominations not be made within 28 days, the Council will appoint all three arbitrators and designate one of them as the presiding arbitrator.”° The third arbitrator acts as the presiding arbitrator -—

72.

MCIA Standard Model Clause: Any dispute arising out of or in connection with this contract, including any question

regarding its existence, validity or termination, shall be referred to and finally resolved

by arbitration in accordance with the Arbitration Rules of the Mumbai Centre for International Arbitration (“MCIA Rules’), which rules are deemed to be incorporated by reference in this clause. The seat of the arbitration shall be : The tribunal shall consist of [one/three] arbitrator(s).

The language of the arbitration shall be The law governing this arbitration agreement shall be The law governing the contract shall be

:

The original text of the MCIA model clause is available at https://mcia.org.in/mcia-rules

/model-clauses/.

73. MCIA Expedited Procedure Model Clause: Any dispute arising out of or in connection with this contract, including any question

regarding its existence, validity or termination, shall be referred to and finally resolved

by arbitration in Mumbai in accordance with the Arbitration Rules of the Mumbai Centre for International Arbitration (“MCIA Rules’), which rules are deemed to be incorporated by reference in this clause. The parties agree that any arbitration commenced pursuant to this clause shall be conducted in accordance with the Expedited Procedure set out in Rule 12.3 of the MCIA Rules. The seat of the arbitration shall be The tribunal shall consist of one arbitrator. The language of the arbitration shall be :

The law governing this arbitration agreement shall be The law governing the contract shall be

74.

The original text of the MCIA model clause is available at https://mcia.org.in/mcia-rules /model-clauses/. Rule 7.1, MCIA Rules.

75. Rules 7.2-7.3, MCIA Rules, 76.

Rule 9.3, MCIA Rules.

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Chapter 17: Arbitral Institutions notwithstanding anything to the contrary in the arbitration agreement.’” Notably, there is no similar preclusion in the 1996 Arbitration Act, which provides only that decisions shall be made by majority.”* The Registrar fixes the terms of appointment of each arbitrator, ‘in its discretion’, in accordance with the Rules and the Practice Notes released by the MCIA, or in accordance with the agreement of the parties.” Parties may also nominate the MCIA as an appointing authority,"’ thus obviating the need to approach a court for appointment under the 1996 Arbitration Act,"' and thus speeding up the process. It is expected that when the 2019 Amendment to section 11 of the 1996 Arbitration Act comes into effect, courts will routinely refer matters to

arbitral institutions for appointment of arbitrators, as the Supreme Court directed three years ago in an international commercial arbitration.” 17.4.4.2

Challenge, Replacement and Appointment of Substitute Arbitrators

An arbitrator may be challenged on the same grounds as specified by the 1996 Arbitration Act,’ i.e. circumstances indicating lack of impartiality or independence, or lack of requisite qualifications agreed upon by the parties." The Council decides the challenge (the tribunal decides the challenge under the 1996 Arbitration Act),*° and may request submissions from the parties and the arbitrator.*° The Council's decision is stated to be final and binding on the parties.*” Under the 1996 Arbitration Act, where the tribunal rejects the challenge and goes on to pass an award, such an award is open

to challenge.**

An arbitrator may be replaced and a substitute arbitrator appointed in case of death, resignation, parties’ written request for removal, proven inability to effectively

discharge functions,*” or acceptance of a challenge by the Council.” Although the

effect of such replacement is determined by the tribunal, generally and unless parties agree to the contrary, where a sole arbitrator or presiding arbitrator has been replaced, hearings are held again. However, as also provided under the 1996 Arbitration Act,”’ all

77. 78. 79.

Rules 9.4-9.5, MCIA Rules. Section 29, 1996 Arbitration Act. Rule 7.7, MCIA Rules.

80. Rule 7.8, MCIA Rules. 81. Section 11, 1996 Arbitration Act. For further discussion Handbook. §2. Sun Pharmaceutical Industries Ltd., Mumbai v. M/S Falma OnLine 5C 1200, Supreme Court Arbitration Case No. 33 further discussion of Sun Pharmaceutical, see Chapter 4 of 83.

Section

12, 1996 Arbitration Act.

85.

Section 13, 1996 Arbitration Act.

87.

Rule 10.11, MCIA Rules.

89.

Rules 11.1-11.2, MCIA Rules.

91.

Sections 14-15, 1996 Arbitration Act.

of section 11, see Chapter 4 of the Organics Limited Nigeria, 2017 SCC of 2014 (Order of 3 May 2017). For the Handbook.

84. Rule 10.1, MCIA Rules. 86. Rule 10.7, MCIA Rules.

88. Section 13 read with section 34 of the 1996 Arbitration Act. 90. Rule 10.8 read with Rule 11 of the MCIA Rules.

419

Cyril Shroff & Shaneen Parikh interim and partial awards issued by the replaced tribunal shall remain in effect and hearings in connection with such awards are not required to be held again.” The Rules confer immunity on arbitrators, as also key members and employees of

the MCIA.”* 17.4.4.3

Seat and Venue

The seat of arbitration is the legal or juridical place of the proceedings, and normally carries with it the choice of that country’s arbitration/curial law (if not otherwise

expressly specified by the parties).”*

The venue of arbitration is the physical location where the hearing may take place based on the convenience of the parties and the tribunal. It has no legal or juridical consequence other than practical convenience.”* Hence it may be possible for an arbitration to have its seat in one country and have its hearings split among one or more countries. However, it is only the courts of the seat that would have jurisdiction over the arbitration and in relation to any challenge to the award. The MCIA Rules provide that the default seat of arbitration shall be Mumbai, India, unless otherwise agreed by the parties or determined by the tribunal. Notwithstanding the designation of a specific seat, the tribunal and the parties may choose a different venue for hearings and meetings.”° Notably, the Rules and the Model Clauses use the word ‘seat’, as opposed to the word ‘place’, which is used in the 1996 Arbitration Act,’’ so as to avoid any confusion and connote specifically the legal and geographical location of the arbitration, as also by consequence, and unless otherwise specified, the curial law of the arbitration. 17.4.4.4

Applicable Law

The tribunal will apply the law designated by the parties as applicable to the substance of the dispute, failing which, the tribunal will determine the law and/or rules which it determines to be appropriate, taking into account the facts and circumstances of each case.”* These provisions are similar to those under the 1996 Arbitration Act.” Note, however, that under the 1996 Arbitration Act, in a domestic arbitration seated in India,

the dispute must be decided in accordance with the substantive Indian law.'"”

92. 93. 94.

Rule 11.6, MCIA Rules. Rule 34, MCIA Rules. Enercon (India) Ltd. v. Enercon GMBH

(2014) 5 SCC

1.

95. For further discussion of seat and venue, see Chapter 6 of the Handbook. 96. 97. 98. 99.

Rule 23, MCIA Rules. Section 20, 1996 Arbitration Act. Rule 24.1, MCIA Rules. Section 28, 1996 Arbitration Act. For further discussion Handbook. 100. Section 28(1)(a), 1996 Arbitration Act.

420

of section 28, see Chapter 6 of the

Chapter 17: Arbitral Institutions 17.4.4.5

Consolidation Mechanism

The Council has the power to consolidate two or more arbitrations, on the application of a party, where the parties agree to the consolidation, or if all claims in the pending

arbitrations are made under the same arbitration agreement,'”' and also if one or more

arbitrators are common to the pending arbitrations.'"* Once consolidated, the parties are deemed to have waived their right to designate an arbitrator(s), and the Council may appoint new arbitrators for the consolidated proceedings.'"* The Council's decision in this regard is stated to be final and binding on the parties.'™ 17.4.5

Conduct of Proceedings

17.4.5.1

Commencement

of Arbitration: Request and Response

An arbitration is commenced with the claimant filing a request for arbitration with the Registrar, including relevant details in relation to the arbitration agreement, nomina-

tion of an arbitrator,” facts of the dispute, claim and relief sought'”® and may also

include a statement of claim to speed up the process.'”” The respondent is required to file a response containing the requisite details and documents,'”* and also its statement of defence and counterclaim, if any, should it so chose, failing which, the statement of claim/defence and counterclaim are filed as directed by the tribunal in its first procedural meeting.” Further pleadings and amendments may be filed with discretion of the tribunal, which may also disallow such requests based on considerations including the scope of the agreement, delay or prejudice caused. 17.4.5.2

Jurisdiction

In case of any objection, prior to constitution of the tribunal, as to the existence or validity of an arbitration agreement or the competence of the MCIA to administer an arbitration, the Registrar will determine whether such objection should be referred to the Council. Upon a reference, the Council will decide whether it is prima facie satisfied of the existence of a valid arbitration agreement, and if so satisfied, the tribunal will be constituted and the objection referred to the tribunal. The Registrar’s decision is

101. Rule 5.1, MCIA Rules. 102.

Rule 5.3, MCIA Rules.

104.

Rule 5.8, MCIA Rules.

103.

Rule 5.6, MCIA Rules.

105. Rule 3.3, MCIA Rules provides that the date of receipt of a complete request (or substantial compliance thereof) is deemed to be the date of commencement of the arbitration. 106. Rule 3.1, MCIA Rules. 107.

Rule 3.2, MCIA Rules.

109.

Rule 17.1, MCIA Rules.

108. Rule 4.1, MCIA Rules.

42]

Cyril Shroff & Shaneen Parikh without prejudice to the tribunal's power to rule on its own jurisdiction.''’ If on such a referral the Council is not satisfied as to the existence of a valid arbitration agreement under the MCIA Rules, the proceedings shall terminate.''' There is no provision for an appeal from such a decision; and the possible result would be that the arbitration is conducted under an ad hoc procedure if it is found that there is a valid arbitration agreement but that the MCIA cannot administer it. Once constituted, a plea that the tribunal does not have jurisdiction shall be raised, as under the 1996 Arbitration Act,''* no later than in the statement of defence or as soon as the matter alleged to be beyond the scope of its jurisdiction is raised, failing which, such objection shall be treated as expressly waived. A late plea may,

however, be admitted if the tribunal considers the delay to be justified.''* The tribunal

may rule on the objection either as a preliminary question or an award on the merits.''* Under the 1996 Arbitration Act, should the tribunal rule that it has jurisdiction, it may

continue with the arbitration and pass an award,'’” although a party aggrieved with such an award may challenge it.''® In case the tribunal holds that it does not have jurisdiction, proceedings are terminated. Such an order is appealable under the 1996

Arbitration Act.'!” 17.4.5.3

Emergency Arbitrator

Should interim relief be required prior to constitution of a tribunal, a party may apply to the Registrar for emergency interim reliel, along with supporting documents and an explanation of facts and reasons why relief is required on an emergency basis.''® Such relief cannot ordinarily be sought on an ex parte basis (as one may be able to seek before a court), as the applicant is also required to certify that other parties have been notified, or that steps have been taken in good faith to so notify them.''’ The chairman decides whether or not to appoint an emergency arbitrator within one day of receiving

such application.'*"

The emergency an order (or award), relief is deemed to be probably inserted to

110. 111. 112.

arbitrator shall, within fourteen days of his appointment, make granting or refusing to grant the interim relief sought.'?’ Such an interim measure ordered/awarded by a tribunal,'** a provision overcome the fact that there is no provision for emergency

113. 114.

Rules 20.1-20.2, Rule 20.1, MCIA Section 16, 1996 Handbook. Rule 20.3, MCIA Rule 20.4, MCIA

MCIA Rules. Rules. Arbitration Act. For further discussion

116. 117. 118.

Section 16(6) read with section 34 of the 1996 Arbitration Act. Section 37(2)(a), 1996 Arbitration Act. Rule 14.1, MCIA Rules.

120. 121. 122.

Rule 14.2, MCIA Rules. Rules 14.6-14.7, MCIA Rules. Rule 14.8, MCIA Rules.

Rules. Rules.

115. Section 16(5), 1996 Arbitration Act.

119.

of section

Rule 14.1(c), MCIA Rules.

422

16, see Chapter

5 of the

Chapter 17: Arbitral Institutions arbitrators in the 1996 Arbitration Act. As an alternative to an emergency arbitrator, if not approaching a court under the 1996 Arbitration Act,'** a party may also apply to the Council for expedited formation of the tribunal, for which purpose, the Council may

abridge timelines specified in the arbitration agreement.'** 17.4.5.4

Interim Relief

The tribunal may, at the request of a party, grant such interim relief as it deems appropriate, and also require the applicant to provide security in connection therewith.'** An application for interim relief may be made to a court only to the extent that the tribunal does not have the power to grant the relief sought or is otherwise unable to act effectively. The rules in this regard are based on the provisions under the 1996 Arbitration Act, which provides that once the arbitral tribunal has been constituted, the Court shall not entertain an application for interim relief unless it finds that circumstances exist which may not render the remedy provided under section 17 effica-

cious. '*° 17.4.5.5

Hearings and Proceedings

The tribunal may conduct the arbitration in any manner it deems appropriate, considering factors such as expediency, costs, complexity of issues, and the amount in dispute. The overriding consideration is that each party is given a fair and equal

opportunity of presenting its case.!*”

Once constituted, the tribunal conducts a preliminary meeting with the parties to set out a procedural timetable for effective case management of the arbitration. Timelines may be extended or shortened as may be required.'** Notwithstanding any failure or refusal of a party to adhere to timelines or participate/appear in the proceedings without sufficient cause, the tribunal may continue with the arbitration

and make an award based on the pleadings and evidence before it.'*” The tribunal may

also impose costs or sanctions on parties for non-adherence.'*” The MCIA Rules reflect the original time limit mandated by new section 29A introduced into the 1996 Arbitration Act in 2015, for passing an award in an Indian-

seated arbitration.'*' To that intent, the MCIA Rules state that (if required by any applicable law), the tribunal shall endeavour to render its final award within 12 months (from entering upon the reference), subject to an extension up to six months if agreed 123.

Section 9, 1996 Arbitration Act. For further discussion of interim measures and section 9, see

124. 125. 126. 127. 128. 129. 130. 131.

Rule 13, MCIA Rules. Rule 15.1, MCIA Rules. Section 9(3) read with section 17 of the 1996 Arbitration Act. Rule 21.1, MCIA Rules. Rule 21.4, MCIA Rules. Rule 26.4, MCIA Rules. Rule 21.6, MCIA Rules. Section 29A, 2015 Amendment.

Chapter 8 of the Handbook.

423

Cyril Shroff & Shaneen Parikh by the parties.'** This provision would not apply to a foreign-seated arbitration, and hence the caveat for the time limit being a requirement under any applicable law. Section 29A was further amended in 2019, to provide that in a purely domestic arbitration, i.e. between Indian parties (and not international commercial arbitra-

tion),'** the tribunal must render its award within a period of 12 months from the date

of completion of pleadings, extendable by up to six months by mutual consent of parties. Insofar as international commercial arbitrations are concerned, amended section 29A provides that the award shall be rendered as expeditiously as possible and ‘endeavour’ be made to do so within 12 months of the date of completion of pleadings. Under the 1996 Arbitration Act, should the tribunal be unable to pass an award

within 18 months, any party may seek an extension from the court, which may be granted for sufficient cause and on such terms and conditions (including imposition of costs on a party, or reduction of up to 5% of the fees of an arbitrator, if the court finds that the proceedings have been delayed for reasons attributable to a party or the arbitral tribunal).'** The arbitrator must be given the opportunity to be heard before any action is taken against them in relation to reduction of their fees. The tribunal is not bound by the strict rules of evidence and may determine the admissibility, relevance, materiality and weight of any evidence.'** Apart from this, the tribunal has other powers, such as the conducting of enquiries, ordering production of witnesses or evidence,'*® for which, under the 1996 Arbitration Act, the tribunal may

seek court assistance if required.'°” 17.4.5.6

Expedited Proceedings

Parties may avail of MCIA’s expedited procedure where the anticipated amount in dispute does not exceed INR 100 million, or parties agree in writing.'“* The expedited procedure may be applied once the chairman (whose decision on the matter is final and binding) approves the same.'*” In such an event, the dispute will generally be referred 132.

Rule 21.7, MCIA Rules.

133. Section 2(1)(f) of the 1996 Arbitration Act defines (f) ‘international commercial arbitration’ as: An arbitration relating to disputes arising out of legal relationships, whether contractual

or not, considered as commercial under the law in force in India and where at least one of the parties is— (i) an individual who is a national of, or habitually resident in, any country other than India; or (ii) a body corporate which is incorporated in any country other than India; or (iii) [a company or]* an association or a body of individuals whose central management and control is exercised in any country other than India; or (iv)

134. 135. 136. 137. 138. 139.

the Government of a foreign country;

Section 29A, 2019 Amendment. Rule 25.1, MCIA Rules. Rule 25.2, MCIA Rules. Section 27, 1996 Arbitration Act. Rule 12.1, MCIA Rules. Rule 12.2, MCIA Rules.

424

Chapter 17: Arbitral Institutions to a sole arbitrator, barring an agreement to the contrary or chairman deciding otherwise.'*® The award, which should be reasoned (unless the parties have agreed otherwise), but in summary

form, must be made within six months

or shortened by the Registrar).'*!

(unless extended

The parties may also agree to a document-only arbitration, in which case the

tribunal shall not conduct oral hearings.'* 17:4.5:7

Orders and Awards

In addition to granting interim relief, the tribunal also has the power to pass other orders to facilitate the proceedings, including for provision of security, preservation of the subject matter of the dispute, to ensure that an award is not rendered ineffectual by virtue of dissipation of assets by a party, and also deciding issues not expressly raised in pleadings — provided parties are given adequate opportunity to respond.'** The tribunal may also order the correction of any contract to rectify a mistake made by all parties thereto (subject to the proper law of the contract permitting rectification).'™ Awards are submitted by the tribunal in draft form, for scrutiny by the Registrar (within 90 days from the date on which it declares the proceedings closed), who may suggest modifications to the draft award and also point out issues of substance for the final consideration of the tribunal, based on which the tribunal may make such changes as it deems [it and issue the final award.'** The Rules are, however, careful to clarify that this function of the Registrar is not to prejudice the independence of the

tribunal vis-a-vis the decision-making process.'*°

The award will be transmitted to the parties only upon full payment of all costs

of the arbitration.'*’ 17.4.5.8

Confidentiality

The parties and the tribunal are required to treat all matters relating to the arbitration (including deliberations of the tribunal), and any award passed, as confidential. A breach of confidentiality may result in sanctions or costs being imposed by the tribunal

against the breaching party.'**

140. 141. 142. 143. 144. 145. 146. 147. 148.

Rule Rule Rule Rule Rule Rule Rule Rule Rule

12.3, MCIA Rules. 12.3, MCIA Rules. 26.1, MCIA Rules. 29, MCIA Rules. 29(a), MCIA Rules. 30, MCIA Rules. 30.2, MCIA Rules. 30.9, MCIA Rules. 35, MCIA Rules.

425

Cyril Shroff & Shaneen Parikh The 2019 Amendment introduced express obligations of confidentiality by the arbitrator(s), arbitral institution, and the parties. The obligation extends to all arbitration proceedings, except the award insofar as disclosure is required for registration and

enforcement.'*°

The MCIA Rules, however, provide that the MCIA may publish any award or part thereof, after redacting the names of parties and other identifying information.'*” If strictly read, this provision appears to militate against the strict requirement for confidentiality in the 1996 Arbitration Act. 17.4.6

Institutional Supervision

The MCIA provides institutional supervision to ensure that the arbitral proceedings are conducted efficiently and in accordance with the MCIA Rules. The Secretariat is available to answer any questions and facilitates administration of the matter. 17.4.7

Fees and Costs of Proceedings

The Schedule of Fees for administration of the arbitration and arbitrators’ fees includes a non-refundable and fixed case filing fee and a variable component based on the amount in dispute and the number of arbitrators. Additional fees are payable for emergency arbitrators. The MCIA’s fees are lower than the fees of most international arbitral institutions.

149. 150.

Section 42.4, 1996 Arbitration Act. Rule 30.13, MCLA Rules.

426

Chapter 17: Arbitral Institutions

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Chapter 17: Arbitral Institutions 17.5 PCA RULES Brooks W. Daly & Ashwita Ambast 17.5.1

Brief Introduction!”

The Permanent Court of Arbitration (PCA) was created by the 1899 Convention for the Pacific Settlement of International Disputes (‘1899 Convention’)'™ as an intergovernmental organisation based in The Hague that would facilitate the ‘immediate recourse to arbitration for international differences’.'“* The 1907 Convention for the Pacific Settlement of International Disputes (1907 Convention, referred together with the 1899 Convention as the ‘Conventions’) adopted at the second Hague Peace Conference refined the procedural provisions set out in the 1899 Convention.’*° The structure of the PCA is comprised of: (i) the Administrative Council, constituted by the diplomatic representatives of the contracting parties to the Conventions, which meets biannually to discuss policy matters;'*® (ii) the Members of the Court, a panel of potential arbitrators nominated by the PCA’s contracting parties who are ‘of known competency in questions of international law, of the highest moral reputation, and disposed to accept the duties of arbitrator’;'*’ and (iii) the International Bureau, a secretariat that provides administrative support to international tribunals.'** Thus, the PCA is ‘un cadre permanent de tribunaux éphéméres’,'*’ or, a permanent framework of temporary tribunals. The PCA is headquartered at the Peace Palace in The Hague, which was built in 1913 to house the PCA

152. For a detailed history of the PCA, see Hans Jonkman, The Role of the Permanent Court of Arbitration in International Dispute Resolution, 279 Recueil des cours (1999). 153.

Hans Jonkman,

The Role of the Secretary-General of the PCA, 8 Leiden J. of Int'l. L. 185, 187

(2005). 154. Article 20, 1899 Convention. For a summary of states’ views aired at the 1899 Peace Conference on the establishment of a permanent dispute resolution body, see Hans Jonkman, The Role of the Permanent Court of Arbitration in International Dispute Resolution, 279 Recueil des cours

(1999), pp. 18-19.

155. As at the date of this Chapter, there are 122 contracting parties to the 1899 Convention and/or the 1907 Convention. See list of contracting parties available at https://pca-cpa.org/en/about /introduction/contracting-parties/.

156. Article 49, 157. Article 44, nominate 158. Article 43, 159.

Louis

1907 1907 up to 1907

Renault,

Convention. Convention. Each contracting party to either or both of the Conventions can four members of the Court. Convention. quoted

in Claude-Albert

Colliard,

Institutions

des

relations

internationales

(1985) para. 334; Brooks William Daly, Permanent Court of Arbitration, in The Rules, Practice

and Jurisprudence of International Courts and Tribunals (Chiara Georgetti ed., 2012), pp. 37, 160.

39.

Hans Jonkman,

The Role of the Secretary-General of the PCA, 8 Leiden J. of Int'l. L. 185, 187

(2005); Hans Jonkman, The Role of the Permanent Court of Arbitration in International Dispute

Resolution, 279 Recueil des cours 23 (1999).

A29

Brooks W. Daly & Ashwita Ambast 17.5.2

Key Changes and Key Reasons

The PCA has adopted modern rules of procedure to be available in place of the rules set out in the Conventions.'®' In the 1990s, the PCA adopted four separate procedural rules that were tailored for disputes between two states, between two parties of which only one is a state, between

international organisations

and states, and between

interna-

tional organisations and private parties.'°° These rules were consolidated in the PCA

Arbitration Rules published in 2012 (2012 PCA Rules).'®? The 2012 PCA Rules also take inspiration from the rules published by the United Nations Commission on Interna-

tional Trade Law (UNCITRAL Rules).'™

The 2012 PCA Rules are intended for use in disputes involving at least one state, state-controlled entity, or intergovernmental organisation.'*’ Accordingly, the rules contain provisions (described below) that cater to the needs of arbitrations to which states, state-controlled entities, or intergovernmental organisations are a party.

17.5.3

Drafting an Arbitration Agreement’

The PCA proposes the following model arbitration agreement under the 2012 PCA Rules: Model Arbitration clause for contracts

Any dispute, controversy or claim arising out of or relating to this contract, or the breach, termination or invalidity thereof, shall be settled by arbitration in accor-

dance with the PCA Arbitration Rules 2012.

Model arbitration clause for treaties and other agreements Any dispute, controversy or claim arising out of or in relation to this [agreement] [treaty], or the existence, interpretation, application, breach, termination, or invalidity thereof, shall be settled in accordance with the PCA Arbitration Rules 2012.7°"

161. Although the Conventions’ rules appear from time to time in old agreements, they should now be considered out of date, lacking in a number of the generally accepted improvements in arbitration procedure adopted over the last century. 162. See a complete list of PCA procedural rules available at https://pca-cpa.org/en/services/ arbitration-services/pca-arbitration-rules-2012/. 163. The 2012 PCA Rules were adopted by the PCA Administrative Council on 17 December 2012. 164.

Brooks William Daly et. al., A Guide to the PCA Arbitration Rules (2014) pp. 5-6 (‘Guide to the 2012 PCA Rules’).

165. Article 1, 2012 PCA Rules. The intended use of the 2012 PCA Rules in cases involving such parties is not however a jurisdictional threshold. That is, cases between purely private parties may be submitted to arbitration in accordance with the 2012 Rules, but they may not be offered certain PCA resources, such as free hearing space which would normally be available to cases involving a state, state-controlled entity, or an intergovernmental organisation. See, Article 1(4), 2012 PCA Rules.

166. Annex, 2012 PCA Rules. 167.

Parties should consider adding: (a) the number of arbitrators shall be |...] (one, three, or five);

(b) the place of arbitration shall be [...] (town and country); (c) the language to be used in the arbitral proceedings shall be [...].

430

Chapter 17: Arbitral Institutions 17.5.4

Institutional Supervision

The PCA International Bureau serves as the registry for proceedings under the 2012

PCA Rules.'®* The PCA receives copies of party submissions'®’ and acts as a channel of communication between a party and the opposing party and the tribunal.'” Certain rules of procedure explicitly stipulate that decisions on challenges to

arbitrators will not be reasoned,'”’ while other rules are silent on this point.'’* The

2012 PCA Rules state that in resolving arbitrator challenges, ‘the appointing authority may indicate the reasons for the decision, unless the parties agree that no reasons shall be given’.'’* Thus, while there is a presumption in favour of reasoned arbitrator challenge decisions, the PCA Secretary General, as appointing authority under the 2012 PCA Rules, can choose not to provide reasons, if appropriate.” The 2012 PCA Rules leave the financial management of the case to the PCA rather than the tribunal. The parties’ deposits are requested by and held by the PCA.'” Entrusted with the deposits, the PCA also has ‘an enhanced ability to safeguard the disbursement of the parties’ funds’ by regulating the fees demanded by arbitrators.'”° The PCA Secretary General is empowered under the 2012 PCA Rules to review and adjust a tribunal's fee proposal if so requested to by a party.'”’ Further, the PCA International Bureau is under a continuous responsibility to ensure that any disbursements made are reasonable and in accordance with the fee agreements reached with the tribunal.'’® The 2012 PCA Rules also provide for an automatic review of the fees of the arbitrators and arbitrator-appointed experts by the PCA Secretary General before

the tribunal has fixed costs.'” 168.

Article 1(3), 2012 PCA Rules.

169. Such as the notice of arbitration, statement of claim, statement of defence, and notice of challenge to an arbitrator. See Articles 3, 20(1), 21(1), 13(2), 2012 PCA Rules.

170. Article 17(4), 2012 PCA Rules; see, Arctic Sunrise Arbitration (Netherlands v. Russia), PCA Case No. 2014-02, Procedural Order No. | (Terms of Appointment),

17 March 2014, section 6.1.1.

171. See, Article 14, 2017 ICC Rules (cf. Articles 28(1) and 32(2) of the 2017 ICC Rules which specifically require that orders granting interim measures and awards be reasoned), Article 11.4 of the 2012 ICC Rules. But see Article 11(4), 2017 ICC Rules: “The decisions of the Court

as to the appointment, confirmation, challenge or replacement of an arbitrator shall be final’; Article 10.6 LCIA Rules: ‘The LCIA Court's decision shall be made in writing, with reasons; and

a copy shall be transmitted by the Registrar to the parties.’ For a discussion of ICC Rules and LCIA Rules, see Chapters 17.2 and 17.3 of the Handbook. 172. See, e.g., Articles 12, 13, 2010 UNCITRAL Rules. 173. The PCA Secretary General as appointing authority under the UNCITRAL Rules has rendered a number of reasoned decisions on challenges. See, e.g., ICS Inspection and Control Services Limited (United Kingdom) v. The Republic of Argentina, Decision on Challenge to Arbitrator, PCA Case No. 2010-09, 17 December 2009; Merck Sharpe & Dohme (I.A.) Corporation v. The Republic of Ecuador, PCA Case No. 2012-10, Decision on Challenge to Arbitrator Judge Stephen M. Schwebel,

12 April 2012; Guide to the 2012 PCA Rules, p. 56.

174. Guide to the 2012 PCA Rules, p. 56. 175.

Article 43(1), 2012 PCA Rules.

178.

Article 43(1), 2012 PCA Rules.

176. Guide to the 2012 PCA Rules, p. 153. 177. Article 41 (2), 2012 PCA Rules. The PCA Secretary General has experience in assisting parties in reaching fee agreements with arbitrators and in coordinating fee arrangements between arbitrators where these are disparate. See PCA Secretary-General’s Report, para. 18. 179. Guide to the 2012 PCA Rules, p. 155.

43]

Brooks W. Daly & Ashwita Ambast The PCA’s role in tailoring fee arrangements to meet the demands of a particular case is discussed below in the part entitled “Cost Calculation’. 17.55

Arbitral Appointments Procedure and Issues

The 2012 PCA Rules envisage and set out the method of appointment of tribunals comprised of sole arbitrators, three arbitrators, and five arbitrators.'*’ Sole arbitrators are appointed by party consent; for a three-member tribunal, the two party-appointed arbitrators select the third, presiding arbitrator; and lor a five-member tribunal, the two party-appointed arbitrators select three arbitrators and designate one of them as the presiding arbitrator.'*' The PCA’s institutional experience indicates that five-member tribunals (as against smaller tribunals) may be well suited to the complexity of issues

in disputes between states.'**

Where a sole arbitrator cannot be agreed upon by parties, or where the respondents have failed to appoint a second arbitrator of a three- or five-member tribunal, or the two party-appointed arbitrators are unable to agree upon the remaining members of a five-member tribunal and/or the president of a three- or five-member tribunal, the remaining members of the tribunal or the presiding arbitrator might be appointed by the PCA Secretary General as the appointing authority under the 2012 PCA Rules.'™ The PCA Secretary General receives approximately 50 requests per year to assist in the constitution of an arbitral tribunal, mainly in cases involving one private party and one state or state-controlled entity.'™ 17.5.6

Conduct of Proceedings

The manner in which arbitral proceedings are to be conducted is described in section III] of the 2012 PCA Rules. Article 17 emphasises the importance of parties being treated equally and being given an opportunity to be heard. It states that proceedings must be conducted in a cost and time-efficient manner.'"’ Bearing in mind that states and state-controlled entities might require longer time periods to make their submissions, the 2012 PCA Rules prioritise procedural flexibility. The tribunal is empowered to, at any time, after inviting the views of the parties, ‘extend or abridge any period of time’

180. 181.

Article 9, 2012 PCA Rules. Articles 8(1), 9, 2012 PCA Rules.

184.

For more information on the appointing authority function under the UNCITRAL framework, see Sarah Grimmer, The Expanded Role of the Appointing Authority under the UNCITRAL Arbitration Rules 2010, 28(5) J. of Int'l. Arb. 501 (2011).

182. Guide to the 2012 PCA Rules, p. 36. 183. Articles 6, 8(1), 9(2), 9(3), 2012 PCA Rules; UNCITRAL Arbitration Rules: Report of the Secretary-General of the PCA on its activities under the UNCITRAL Arbitration Rules since 1976: Note by the Secretariat (Vienna, 25 June-12 July 2007), A/CN.9/634, 7 December 2006, para. 2 (‘PCA Secretary-General's Report’); Hans Jonkman, The Role of the Secretary-General of the PCA, 8 Leiden J. of Int'l. L. 185, 188 (2005); Article 6, 2010 UNCITRAL Rules; Articles 6, 7,

185.

1976 UNCITRAL Rules.

Article 17(2), 2012 PCA Rules.

432

Chapter 17: Arbitral Institutions prescribed under the 2012 PCA Rules.'*° A provisional procedural timetable is to be established at the outset by the parties, which sets deadlines for the parties’ written submissions.'*’ As a general rule, the periods of time fixed for the submission of

written statements should not exceed 45 days.'™

To account for the international nature of the disputes it administers, the 2012 PCA Rules do not contain a default place (or venue) of arbitration. In the absence of agreement between the parties, the tribunal has the power to determine the place of arbitration having regard to the circumstances of the case.'*’ The PCA has, in the past, administered proceedings in a variety of jurisdictions.'”’ Similarly, the language of arbitration is left to the discretion of the tribunal,'”' as the use of more than one language has not been uncommon in PCA-administered proceedings.'”” Challenges to the jurisdiction of the tribunal may be brought under Article 23 of the 2012 PCA Rules. The tribunal might decide these matters with the merits of the case or bifurcate the proceedings and decide jurisdiction as a preliminary matter.'”* Article 26 of the 2012 PCA Rules empowers the tribunal to grant interim measures in cases where the applicant can establish that irreparable harm will be caused to it without the measure (that outweighs the harm caused to the other party against whom the measure is directed) and there is a possibility that the applicant will succeed on the

merits of the case.'”*

Evidentiary matters are dealt with in Articles 27 and 28 of the 2012 PCA Rules. In addition to explaining each party's burden to prove the facts it relies on, allowing the parties use of factual and expert witnesses to support their arguments, and empowering the tribunal to order parties to produce documents, the 2012 PCA Rules also

186. Article 17(2), 2012 PCA Rules. See also, Articles 4(1), 25, 2012 PCA Rules. 187. 188.

Article 17(2), 2012 PCA Rules. Article 25, 2012 PCA Rules.

189. Articles 18(1), 2012 PCA Rules cf. Article 23.1, 2017 MCIA Rules; Article 16.2, 2014 LCIA Rules. For a discussion of LCIA Rules and MCIA Rules, see Chapters 17.3 and 17.4 of the Handbook.

190. Guide to the 2012 organised

(Guyana),

PCA Rules, para. 5.24. Recent PCA meetings and hearings have been

in Dar es Salaam

Hong

(Tanzania),

Kong, Houston

(United Kingdom), Mumbai

Delhi

(India), Geneva

(Switzerland),

(United States of America), Kathmandu

Georgetown

(Nepal), London

(India), New York (United States of America), Paris (France), San

José (Costa Rica), Singapore, Stockholm (Sweden), Washington DC (United States.of America), Windhoek (Namibia), and Zagreb

(Croatia), among other locations.

191. Article 19(1), 2012 PCA Rules. Recent PCA cases have been conducted in English, French, Spanish, Arabic, Russian, Portuguese, and German.

192. Guide to the 2012 PCA Rules, para. 5.27. The PCA has administered several bilingual cases. For example, the Eurotunnel case was a bilingual French/English PCA-administered arbitration (see Treaty between the French Republic and the United Kingdom of Great Britain and Northern Ireland Concerning the Construction and Operation by Private Concessionaries of a Channel Fixed Link,

193. 194.

12 February

1986,

1497 UNTS 335, Annex to the Exchange

of Letters of 29 July

Relating to the Arbitration Rules Concerning the Channel Fixed Link Agreed by Parties, 29 July 1987, Article VII). The PCA is currently administering Chevron Corporation and Texaco Petroleum Corporation v. The Republic of Ecuador, UNCITRAL, PCA Case No. 2009-23, which is one of the PCA’s bilingual Spanish/English arbitrations. Article 23, 2012 PCA Rules. Article 26, 2012 PCA Rules.

433

Brooks W. Daly & Ashwita Ambast empower a tribunal to conduct a site visit.'”* A site visit may be conducted to allow the tribunal to gather evidence or to inspect the subject matter of the dispute.'”° Tribunals in past PCA-administered cases have augmented the applicable procedural rules with more detailed procedural orders on evidence.'*’ For example, parties have agreed to apply the IBA’s Rules on the Taking of Evidence in International Arbitration as guidelines.'°* The tribunal, under Article 28, might decide the manner in which witnesses are examined at the hearing. Hearings are to be held in camera unless

decided otherwise.'”’ 17.5.7

Cost Calculation

The PCA International Bureau charges fees at an hourly rate for its registry services.” The PCA charges a fixed fee for the services of the PCA Secretary General in acting as

the appointing authority or designating an appointing authority.*”’

The 2012 PCA Rules do not prescribe any preconceived fee arrangement for arbitrators, leaving fees to be agreed on a case-by-case basis. In the PCA’s experience, this has better allowed the PCA and parties to disputes to tailor arbitrator fees according to the needs of the particular dispute. While the PCA is known for handling some of the largest and most complex cases, the PCA also handles small cases, where fixed fees, fee

caps, reduced fees, or pro bono arrangements have been agreed with the arbitrators. Parties may also agree that the PCA apply the fee schedules of another institution for arbitrator fees.°”” The costs of the arbitration (limited to arbitrator fees, reasonable travel expenses of arbitrators and witnesses, reasonable costs of expert and other assistance to the tribunal, the fees and expenses of the PCA International Bureau, and ‘legal and other

costs incurred by parties in relation to the arbitration’) are fixed in the final award or in a separate costs award.*”* The costs are in principle borne by the unsuccessful party; however, the tribunal may decide to apportion costs between parties.*™ Parties, as a general principle, must bear an equal share of the advance on costs, and might be 195. Article 27, 2012 PCA Rules; Judith Levine & Nicola Peart, Procedural Issues and Innovations in Environmental-Related Investor-State Disputes, in Research Handbook on Investment Law and the Environment (Kate Miles ed., forthcoming), pp. 19-20. 196. A site visit was conducted in the PCA-administered Indus Waters Kishenganga Case (Indus Waters Kishenganga Arbitration, Pakistan v. India, PCA Case No. 2011-01, Procedural Order No.

1, 2] January 2011, Article 8.1; Indus Waters Kishenganga Arbitration, Pakistan v. India,

PCA Case No. 2011-1, Procedural Order No. 3, 10 May 2011). 197. Guide to the 2012 PCA Rules, para. 5.109. 198. See Bilcon of Delaware v. Canada, PCA Case No. 2009-04 (NAFTA) (1976 UNCITRAL Rules), Procedural Order No. 2, 3 June 2009, para. 2.1. 199.

Article 28, 2012 PCA Rules cf. Abyei Arbitration, The Government of Sudan/the Sudan People’s

Liberation Movement/Army, PCA Case No. 2008-7 (PCA State/Non-State Rules), Arbitration

Agreement,

Article 8(6). See also, Brooks

William

Daly, The Abyet Arbitration: Procedural

Aspects of an Intra-State Border Arbitration, 22 Leiden J. Intl. L. 801, 819 (2010). 200. Guide to the 2012 PCA Rules, p. 151. 201. A schedule of the PCA’s fees is available at https://pca-cpa.org/en/fees-and-costs/. 202. Guide to the 2012 PCA Rules, pp. 152-153.

203. 204.

Article 40, 2012 PCA Rules. Article 42, 2012 PCA Rules.

434

Chapter 17: Arbitral Institutions required to make supplementary deposits over the course of the arbitration. If one party is unable to pay its deposit, the other party might be requested to make substitute payment, failing which, the arbitration might be suspended?” The 2012 PCA Rules contain cost-saving mechanisms. The PCA Secretary General’s ability to moderate arbitrator fees has been discussed above. In addition, hearing and meeting space at the Peace Palace in The Hague can be made available free of cost for PCA-administered arbitrations.*”° Parties to a PCA-administered arbitration can use meeting and hearing space available to the PCA across the world at no cost, or at affordable costs, pursuant to a series of Host Country Agreements between the PCA and its contracting parties*”’ and cooperation agreements between the PCA and international arbitral institutions.*”* Certain contracting parties to the Conventions can access the PCA’s Financial Assistance Fund, which was created to assist developing countries in meeting the costs of arbitration proceedings.*”

205.

Article 43, 2012 PCA Rules.

207.

See

206. Guide to the 2012 PCA Rules, pp. 73-74.

208.

https://pca-cpa.org/en/relations/host-country-agreements/.

Host

Country

Agreements

(HCAs) contain provisions for the arrangement of hearing space and meeting space as well as provisions that accord necessary privileges and immunities to participants in arbitrations. Cooperation agreements allow the PCA to hold hearings and events in the facilities of the other institution. Through HCAs and cooperation agreements, the PCA has created a system under which PCA-administered proceedings can be hosted in venues outside The Hague at no cost, or at affordable costs on an ad hoc basis if so agreed by parties to a dispute. For an example of a PCA-administered case conducted in a jurisdiction in which the PCA has a host country agreement and cooperation agreement, see Philipp Morris Asia Limited v. Australia, PCA Case No. 2012-12, Procedural Order No. 3 (Regarding the Place of Arbitration), 26 October 2012, paras 21, 40. See https://pca-cpa.org/en/relations/cooperation-agreements/.

209. See https://pca-cpa.org/en/about/structure/faf/.

A35

Brooks W. Daly & Ashwita Ambast 17.5.8

Flowchart Claimant — Articles 2, 3

Notice of Arbitration

Respondent — Article 4 PN

Oar eeianieteyrmey mete) Tribunal

Cee

hee Tt Coat

Tribunal Composition — Articles 7-10 Dire eM) eee el ee ee of arbitrators - Articles 11-13

Vv

Soe Preliminary Issues

Bey

ieee ee Me

ter

arbitration - Articles 17-19, 35 Jurisdiction - Article 23

iteaniM itachi

Vv

itt

tea tele eelcl

ieee Vette eee

Tribunal-Appointed Experts - Article 29

Conduct of Proceedings

OSE

e e heii

eet)

Claimant - Articles 20, 22, 24, 25

Submissions

Respondent - Articles 21, 22, 24, 25

Hearing — Article 28

Closure of Proceedings — Vile ae

The Award — Articles 33a4, 37, 38, 39

v Costs — Articles 40-43

v

Providing Evidence of

AN Emini Platteoie COPMin caps

festa)hg

Source: Authors’

lied

own.

436

eee|

Chapter 17: Arbitral Institutions 17.5.9

Mandatory Checklist ¢ Receipt by the International Bureau of a notice of arbitration (NOA) that has been transmitted to the respondent,7'" which includes:*"' (i) a demand that the dispute be referred to arbitration; (ii) the names and contact details of parties;

(iii) identification of the arbitration agreement that is invoked:*’* (iv) identi-

fication of any instrument in relation to which the dispute arises; (v) a brief description of the claim; (vi) the relief sought; and (vii) a proposal as to the number of arbitrators, language, and place of arbitration (if not previously agreed upon).

¢ Receipt by the International Bureau and claimant within 30 days of the NOA*"*

of respondent's response to the NOA, which includes the name and contact

details of the respondent.*"*

e If applicable, receipt by the International Bureau of a request to appoint an arbitrator accompanied by: (i) a copy of the arbitration agreement, the NOA; (ii) an indication of the nationalities of parties; (iii) the names and nationalities of the arbitrators already appointed (if any); (iv) a power of attorney evidencing the authority of the person making the request; and (v) payment of the non-refundable appointing authority fee.*'° ¢ Payment by parties of an initial deposit (and any later supplementary deposits) requested by the International Bureau towards the costs of the arbitration.*'® e If applicable, receipt by the other party and the International Bureau of a party’s reasoned notice of challenge of an arbitrator within 30 days of such party becoming aware of the appointment of the challenged arbitrator. * Receipt by the respondent, International Bureau, and each of the arbitrators of the claimant’s statement of claim: * containing:*'’ the names and contact details of the parties, a statement of facts supporting the claim, the points at issue, the relief or remedy sought, and the legal grounds or arguments supporting the claim. * enclosing:*'" a copy of the instrument out of or in relation to which the dispute arises.

210. Article 2, 2012 PCA Rules. 211. Article 3, 2012 PCA Rules. 212. Such agreement must be a valid agreement between parties that refers to the 2012 PCA Rules. The dispute must involve at least one state, state-controlled entity, or intergovernmental organisation in the dispute. As discussed above, this is not a jurisdictional threshold. Private parties may use the PCA, but they may not be offered certain PCA resources, such as free hearing space which would normally be available to cases involving a state, state-controlled entity, or an intergovernmental organisation. 213. Or other such period as may be set by the International Bureau. 214. Article 4, 2012 PCA Rules. 215. See https://pca-cpa.org/en/services/appointing-authority/pca-secretary-general-as-appointi ng-authority/. 216. Article 43, 2012 PCA Rules. al?. Article 20(2), 2012 PCA Rules. 218. Article 20(3), 2012 PCA Rules.

437

Brooks W. Daly & Ashwita Ambast ¢ Receipt by the claimant, International Bureau, and each of the arbitrators of respondent’s statement of defence responding to the statement of claim.*'” Objections to the tribunal’s jurisdiction shall be raised no later than in the

statement of defence.**°

* If applicable, receipt by the tribunal of a party’s request for interim measures establishing that irreparable damage might result if the measure is not ordered and a reasonable possibility of the applicant succeeding on the merits of the

case.**"

* If applicable, within 30 days of the making of the award, a request by a party for the correction of the award or for an additional award.***

219. 220. 221. 222.

Article Article Article Articles

21, 2012 PCA Rules. 21(2), 2012 PCA Rules. 26(3), 2012 PCA Rules. 38-39, 2012 PCA Rules.

438

Chapter 17: Arbitral Institutions 17.6

SIAC RULES

Lim Seok Hui & Kevin Nash 17.6.1

Introduction

The Singapore International Arbitration Centre (SIAC) commenced operations in July 1991 as an independent not-for-profit organisation. Over the years, it has gained a reputation for providing quality, efficient, and neutral arbitration services to the global business community. SIAC’s management structure is comprised of a Board of Directors (SIAC Board) which is led by a Chairman, and the SIAC Court of Arbitration (SIAC Court) which is headed by a President. The SIAC Board consists of well-respected lawyers and corporate leaders from China, Hong Kong, India and Singapore. The Board is responsible for overseeing SIAC’s operations, business strategy and development, and corporate governance matters. The SIAC Court is comprised of thirty-two eminent arbitration practitioners

from

around

the world,

including Belgium,

China,

France,

India, Indonesia, Japan, Malaysia, Singapore, South Korea, Switzerland, UAE, UK, the USA and Vietnam. The SIAC Court is responsible for the overall supervision of case administration, and its functions include determining jurisdictional objections, applications for consolidation and joinder, challenges to arbitrators and assisting, where necessary, with the scrutiny of awards. The day-to-day administration of all cases filed with SIAC is handled by the SIAC Secretariat (Secretariat). The Secretariat supervises and monitors the progress of cases, manages the financial aspects of the arbitration and scrutinises arbitral awards. The Secretariat is headed by the Registrar and is comprised of multinational and multilingual arbitration lawyers who are qualified in both civil and common law legal systems, including Canada, China, England and Wales, India, Indonesia, Malaysia, the Philippines, Singapore and the USA. The SIAC Rules are efficient, cost-effective and flexible, and incorporate features

from common law and civil law legal systems. Since the release of the first set of international rules in September 1991, the SIAC Rules were updated in 1997, 2007, 2010, 2013 and 2016. These updates have been made to meet the changing needs of users and to improve the duration and cost-elfectiveness of arbitration proceedings. On 1 January 2017, SIAC released the first edition of the SIAC Investment Arbitration Rules (IA Rules). The IA Rules are a specialised set of rules to address the unique issues present in international investment arbitration. SIAC recently announced the formal commencement of the process of reviewing the SIAC Rules. SIAC plans to release the

seventh edition of the SIAC Rules in the third quarter of 2021.°**

SIAC has one of the highest administered caseloads in the world, and an excellent track record of enforcement of its awards in many jurisdictions including Australia,

223.

See SIAC,

2020,

SIAC Announces

accessible

Commencement

of Revisions

for SLAC Arbitration Rules, 7 July

at https://www.siac.org.sg/component/content/article/69-siac-news/669-

siac-announces-commencement-of-revisions-for-siac-arbitration-rules.

439

Lim Seok Hui & Kevin Nash

China, Hong Kong, India, Indonesia, Jordan, Thailand, UK, USA and Vietnam, among other New York Convention countries. Recognising the significant role played by India towards its success as an international arbitral institution, SIAC established its first overseas representative office in Mumbai, India, in 2013 (Mumbai Office).*** In 2017, SLAC opened its second Indian representative office in the International Financial Services Centre in Gujarat International Finance Tec-City (GIFT IFSC), Gujarat to promote arbitration, mediation and other forms of ADR. As a result of these efforts, the popularity of SIAC with Indian users has grown exponentially, and India was SIAC’s top foreign user in 2013, 2015, 2016, 2017 and 2019. The two representative offices in India will ensure that SIAC is

able to tailor its outreach and services to this large and growing Indian user base. SIAC also maintains representative offices in Shanghai and Seoul. Case management services, however, continue to be performed by the SIAC Secretariat in Singapore. 17.6.2

Key Changes in the 2016 SIAC Rules

SIAC’s commitment to enhance its arbitral services resulted in the Arbitration Rules of the Singapore International Arbitration Centre (Sixth Edition, 1 August 2016) (2016 SIAC Rules). The 2016 SIAC Rules have been widely lauded by the international arbitration community and places SIAC at the cutting edge of the international

arbitration practice.*” Before

finalising the rules,

SIAC

released

a draft for public consultation,

and

received a great deal of feedback from users around the world.*“° Thus, the 2016 SIAC Rules not only reflect current best practices in international arbitration but also incorporate user input. The 2016 SIAC Rules update and enhance existing provisions in the 2013 SIAC Rules and also introduce innovative new provisions. This part briefly discusses these notable additions and enhancements. 17.6.2.1

Multi-contract Arbitration

Rule 6 of the 2016 SIAC Rules sets out a streamlined procedure for parties to file an arbitration for disputes arising out of or in connection with more than one contract. There are two options for parties to proceed with a multi-contract arbitration. The Claimant may file a NOA in respect of each arbitration agreement invoked along with an application to consolidate the arbitrations. This method would require Claimant to take a two-pronged approach — file the NOAs pursuant to each of the

224. Singapore International Arbitration Centre, SIAC India Representative Offices, available at http://www.siac.org.sg/2014-1 1-03-13-33-43 /about-us/siac-india-representative-offices. 225. Singapore International Arbitration Centre, SIAC Announces Commencement of Revisions for SIAC Arbitration Rules, available at http://www.siac.org.sg/69-siac-news/436-siac-announces

226.

-commencement-of-revisions-for-siacarbitration-rules. Ibid.

440

Chapter 17: Arbitral Institutions arbitration agreements and concurrently submit an application to consolidate the arbitrations. Alternatively, the Claimant may simply file a single NOA that covers the relevant arbitration agreements. The NOA must be accompanied by a statement that identifies each contract and arbitration agreement invoked. In this scenario, the Claimant is deemed to have commenced multiple arbitrations and the NOA is deemed to be an application to consolidate the arbitrations. Under either option, the Claimant is only required to pay one filing fee pending the SIAC Court's decision on the application for consolidation. In cases where the SIAC Court rejects the application for consolidation, wholly or in part, the Claimant is required to pay the requisite filing fee for each arbitration that has not been consolidated. 17.6.2.2

Joinder of Additional Parties

Rule 7 of the 2016 SIAC Rules provides stand-alone joinder provisions as opposed to the joinder provisions that appear in Rule 24.1(b) of the 2013 SIAC Rules (Additional Powers of the Tribunal). Under the 2016 SIAC Rules, an application for joinder may be made by either parties or non-parties. An important addition made by Rule 7 is that an application for joinder may be made to the SIAC Court prior to the constitution of the tribunal, thereby giving all parties, including the additional party to be joined, the opportunity to participate in the nomination of arbitrators. The SIAC Court's decision to grant or reject the application is without prejudice to the tribunal's power to decide on the application for joinder. A party may also bring an application for joinder to the tribunal after its constitution. Specifically, an application for joinder may be made if any of the following criteria is satisfied: (i) the additional party to be joined is prima facie bound

agreement; or

by the arbitration

(ii) with the consent of all parties, including the additional party to be joined.

17.6.2.3

Consolidation

Rule 8 provides a mechanism for the consolidation of arbitrations. It is used where a party wishes to combine two or more separate but substantially similar arbitrations to save time, costs, and to avoid divergent decisions on related claims.**’ A consolidation

application may be made if any of the following criteria is satisfied: (i) all parties have agreed to the consolidation; (ii) all claims are made under the same arbitration agreement; or

227.

Elodie Dulac & Alex Lo, The SIAC Rules 2016; New Features, 5 Indian J. Arb. Law (2017).

44]

129, 137

Lim Seok Hui & Kevin Nash

(iii) the arbitration agreements are compatible and there exist additional connecting factors. Prior to the constitution of the tribunal, an application for consolidation is made to the SIAC Court. Post-constitution, an application for consolidation is made to the tribunal in any of the arbitrations sought to be consolidated. 17.6.2.4

Early Dismissal of Claims and Defences

SIAC is the first major commercial arbitration institution to introduce a procedure for the early dismissal of a claim or a defence. Embodied under Rule 29 of the 2016 SIAC Rules, the early dismissal procedure offers parties an early avenue to respond to a claim or a defence that is manifestly without legal merit or manifestly outside the jurisdiction of the tribunal, and has the potential to provide significant savings of time and costs. The two-stage process under Rule 29 whereby the tribunal must first decide whether the application is allowed to proceed ensures that parties have the right to be heard and the efficiencies of this procedure will not be disrupted by unmeritorious applications. 17.6.2.5

Removal of Default Seat

Pursuant to Rule 21 of the 2016 SIAC Rules, Singapore is no longer the default seat of arbitration where the parties have failed to agree on a seat. Instead, the seat is to be determined by the tribunal having regard to all the circumstances of the case. This update aligns well with SIAC’s position as a global arbitral institution and the increasingly international nature of SIAC cases and its users.**" More than 80% of SIAC’s caseload is international and about half of the cases have no connection with Singapore. Where parties have not agreed on the seat of arbitration, Singapore continues to

be the default seat in the case of Emergency Arbitration proceedings.*~”

Singapore, however, continues to be one of the five most preferred seats in the world.**° 17.6.2.6

Reasoned Decision on Challenge to Arbitrators

Rule 16.4 of the 2016 SIAC Rules provides that the SIAC Court will issue a reasoned decision on any challenge to an arbitrator. This Rule ensures consistency and transparency in the challenge process, and codifies SIAC’s general practice of issuing

228. Singapore International Arbitration Centre, Highlights of the SIAC Rules 2016, available at hitp://siac.org.sg/images/stories/articles/rules/SIAC% 20Rules % 202016_Cheat % 20Sheet_30 June2016.pdf. 229. Paragraph 4, Schedule | of 2016 SIAC Rules. 230. Queen Mary University of London and White and Case, 2015 International Arbitration Survey: Improvements and Innovations in International Arbitration. Singapore is also featured as the most preferred seat in the survey in 2010.

442

Chapter 17: Arbitral Institutions reasoned

decisions on challenges into a definitive rule.**'

challenge procedure by imposing a fixed challenge fee.**” 17.6.2.7

Rule

15.3 regulates

the

Order for Reimbursement of Costs by Non-paying Party

Rule 27(g) of the 2016 SIAC Rules clarifies that the tribunal has the power to issue an order or award reimbursing unpaid deposits by the non-paying party. This allows a party that has made payment on behalf of a non-paying party to recover these deposits prior to the conclusion of the arbitration. This is a powerful tool for the effective financial management of a dispute. An overview of the main amendments to the SIAC Rules is provided below: 2013 SIAC Rules

2016 SIAC Rules

Rule 1.1

Rule 1.1

Where parties have agreed to refer their disputes to SIAC for arbitration, the parties shall be deemed to have agreed that the arbitration shall be conducted and administered in accordance with these Rules.

Where the parties have agreed to refer their disputes to SIAC for arbitration or to

Rule 5.1 (a)

Rule 5.1 (a)

(t)yhe amount in dispute does not exceed the equivalent amount of [SGD]5,000,000,

(t)he amount in dispute does not exceed the equivalent amount of [SGD] 6,000,000,

counterclaim and any set-off defence.

counterclaim and any defence of set-off.

arbitration in accordance with the SIAC Rules, the parties shall be deemed to have

agreed that the arbitration shall be

conducted pursuant to and administered by SIAC in accordance with these Rules

(emphasis added).

representing the aggregate of the claim,

representing the aggregate of the claim,

Rule 5.2 (c)

Rule 5.2 (c)

Unless the parties agree that the dispute shall be decided on the basis of documentary evidence only, the Tribunal

the parties, decide if the dispute is to be

shall hold a hearing for the examination of all witnesses and experi witnesses as well

as for any argument.

The 2013 SIAC Rules did not contain

provisions corresponding to Rule 5.3 and

(t)he Tribunal may, in consultation with

decided on the basis of documentary evidence only, or if a hearing is required for the examination of any witness and expert

witness as well as for any oral argument (emphasis added).

Rule 5.4 of the 2016 SIAC Rules.

231. Jonathan Choo, Improving Efficiency, Convenience, and Certainty in Arbitration — SIAC Rules 2016 launch on 1 August 2016 https://www.twobirds.com/en/news/articles/2016/singapore /siac-rules-2016-launch-on-!-august-2016. 232. The scheduled fee for a challenge under Rule 15.3 is SGD 8,000 for overseas parties and SGD 8,560 for Singapore parties. See http://www.siac.org.sg/estimate-your-fees/siac-schedule-offees.

443

Lim Seok Hui & Kevin Nash 2013 SIAC Rules

2016 SIAC Rules Rule 5.3

By agreeing to arbitration under these

Rules, the parties agree that, where arbitral

proceedings are conducted in accordance with the Expedited Procedure under this

Rule 5, the rules and procedures set forth in Rule 5.2 shall apply even in cases where the

arbitration agreement contains contrary terms (emphasis added). Rule 5.4 Upon application by a party, and after

giving the parties the apportunity to be heard, the Tribunal may, having regard to any further information as may subsequently become available, and in consultation with the Registrar, order that

the arbitral proceedings shall no longer be conducted in accordance with the Expedited Procedure. Where the Tribunal decides to

grant an application under this Rule S.4,

the arbitration shall continue to be conducted by the same Tribunal that was constituted to conduct the arbitration in accordance with the Expedited Procedure (emphasis added). No comparable provision

Rule 6 Multiple Contracts This provision has been introduced in the 2016 SIAC Rules.

Rule 24.1 (b)

Rule 7

(U)pon the application of a party, allow one or more third parties to be joined in

Joinder of Additional Parties

This provision has been introduced in the

the arbitration, provided that such person is a party to the arbitration agreement, with the written consent of such third party, and thereafter make a single final award or separate awards in respect of all

2016 SIAC Rules. Rule 7.1

Prior to the constitution of the Tribunal, a

parties.

party or non-party to the arbitration may

file an application with the Registrar for one or more additional parties to be joined in an arbitration pending under these Rules as a Claimant or a Respondent, provided

that any of the following criteria is satisfied:

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Chapter 17: Arbitral Institutions 2013 SIAC Rules

2016 SIAC Rules a. the additional party to be joined is prima facie bound by the arbitration agreement; or

b. all parties, including the additional party to be joined, have consented to the joinder of the additional party. No comparable provision

Rule 8 Consolidation

This provision has been introduced in the 2016 SIAC Rules. Rule 10.6

No comparable provision

If the parties have agreed on any qualifications required of an arbitrator, the arbitrator shall be deemed to meet such

Rule 15.1 A party that intends to challenge an arbitrator shall file a notice of challenge with the Registrar in accordance with the requirements of Rule 15.2 within 14 days after receipt of the notice of appointment of the arbitrator who is being challenged or

qualifications unless a party states that the

arbitrator is not so qualified within 14 days after receipt by that party of the notification of the nomination of the arbitrator. In the event of such a challenge, the procedure for challenge and replacement of an arbitrator in Rules 11 to

within 14 days after the circumstances specified in rule 14.1 or Rule 14.2 become known or should have reasonably been known to that party (emphasis added).

14 shall apply.

Rule 12.1 Subject to Rule 10.6, a party who intends

to challenge an arbitrator shall send a notice of challenge within 14 days after

receipt of the notice of appointment of the

arbitrator who is being challenged or

within 14 days after the circumstances mentioned in Rule 11.1 or 11.2 became

known to that party. Rule 12 of the 2013 SIAC Rules which deals with ‘Notice of Challenge’ does not contain

Rule 15.3

is left to the Registrar's discretion.

the requisite challenge fee under these Rules in accordance with the applicable Schedule

this express provision and the challenge fee

The party making the challenge shall pay of Fees. If the party making the challenge

fails to pay the challenge fee within the time

limit set by the Registrar, the challenge shall be considered as withdrawn (emphasis added).

445

Lim Seok Hui & Kevin Nash 2013 SIAC Rules

2016 SIAC Rules

Rule 14.3

Rule 17.3

After consulting with the parties, the

The President may, at fis own initiative and in his discretion, remove an arbitrator

President may in his discretion remove an arbitrator who refuses or fails to act, or in the event of a de jure or de facto

who refuses or fails to act or to perform his functions in accordance with the Rules or

impossibility of him performing his functions, or if he is not fulfilling his

within prescribed time limits, or in the

event of a de jure or de facto impossibility of an arbitrator to act or perform his functions, or if the arbitrator does not

functions in accordance with the Rules or within the prescribed time limits.

conduct or participate in the arbitration

with due diligence and/or in a manner that ensures the fair, expeditious, economical and final resolution of the dispute. The

President shall consult the parties and the members of the Tribunal, including the

arbitrator to be removed (or if the Tribunal has not yet been constituted, any appointed arbitrator) prior to the removal of an arbitrator under this Rule (emphasis added). No comparable provision

Rule 19.7 The President may, at any stage of the

proceedings, request the parties and the Tribunal to convene a meeting to discuss the procedures that will be most appropriate

and efficient for the case. Such meeting may be conducted in person or by any other means (emphasis added). Rule 18

Rule 21.1

The parties may agree on the seat of

The parties may agree on the seat of the arbitration. Failing such an agreement, the

arbitration. Failing such an agreement, the seat of arbitration shall be Singapore, unless the Tribunal determines, having regard to all the circumstances of the case,

seat of the arbitration shall be determined

that another seat is more appropriate.

by the Tribunal, having regard to all the circumstances of the case (emphasis added).

Rule 20.1

Rule 23.1

Any party may be represented by legal practitioners or any other representatives.

Any party may be represented by legal

practitioners or any other authorised representatives. The Registrar and/or the

No comparable provision

Tribunal may require proof of authority of

any party representatives (emphasis added).

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Chapter 17: Arbitral Institutions 2013 SIAC Rules

2016 SIAC Rules Rule 23.2 After the constitution of the Tribunal, any change or addition by a party to its

representatives shall be promptly communicated in writing to the parties, the Tribunal and the Registrar (emphasis added). Rule 25.1

Rule 28.1

If a party objects to the existence or

If a party objects to the existence or

reference of such an objection is to be

such objection shall be referred to the Court. If the Registrar so determines, the

validity of the arbitration agreement or to the competence of SIAC to administer an arbitration before the Tribunal is appointed, the Registrar shall determine if made to the Court. If the Registrar so

determines, the Court shall decide if it is

prima facie satisfied that a valid arbitration agreement under the Rules may exist. The proceedings shall be terminated if the

validity of the arbitration agreement or to the competence of SIAC to administer an arbitration, before the Tribunal is constituted, the Registrar shall determine if Court shall decide if it is prima facie satisfied that the arbitration shall proceed. The arbitration shall be terminated if the Court is not so satisfied. Any decision by

the Registrar or the Court is without prejudice to the power of the Tribunal to

the Registrar or the Court that the arbitration shall proceed is without prejudice to the power of the Tribunal to

No comparable provision

Rule 29

Court is not so satisfied. Any decision by

rule on its own jurisdiction.

rule on its own jurisdiction (emphasis added).

Early Dismissal of Claims and Defences This provision has been introduced in the 2016 SLAC Rules.

Rule 24.1 (h)

Rule 27 (g)

issue an award for unpaid costs of the arbitration.

issue an order or Award for the reimbursement of unpaid deposits towards the costs of the arbitration (emphasis added).

Schedule 1 (2)

Schedule | (3)

The President shall, if he determines that

The President shall, if he determines that

SIAC should accept the application, seek to appoint an Emergency Arbitrator within one business day of receipt by the Registrar of such application and payment of any

required fee.

SIAC should accept the application for

emergency interim relief, seek to appoint an Emergency Arbitrator within one day of

receipt by the Registrar of such application and payment of the administration fee and deposits (emphasis added).

447

Lim Seok Hui & Kevin Nash

2013 SIAC Rules

2016 SIAC Rules

Schedule | (9)

Schedule | (9)

An order or award pursuant to this The Emergency Arbitrator shall make his Schedule | shall be binding on the parties | interim order or Award within 14 days

when rendered. By agreeing to arbitration | from the date of his appointment unless, in under these Rules, the parties undertake to | exceptional circumstances, the Registrar

comply with such an order or award

extends the time. No interim order or

without delay.

17.6.3

Award shall be made by the Emergency Arbitrator until it has been approved by the Registrar as to its form (emphasis added).

Drafting SIAC Arbitration Agreements

A clearly drafted arbitration agreement is the starting point for an efficient dispute resolution process. A poorly drafted arbitration agreement is commonly referred to as a ‘pathological clause’. Pathological clauses are ambiguous and may result in uncertainty about the parties’ agreement to arbitrate. As per the IBA Guidelines for Drafting International Arbitration Clauses,” parties should select a set of arbitration rules and use the model clause recommended

for these arbitration rules as a starting point."

The SIAC Model Clause is reproduced below:

Any

dispute arising out of or in connection with this contract, including any

question regarding its existence, validity or termination, shall be referred to and

finally resolved by arbitration administered by the Singapore International Arbi-

tration Centre (‘SIAC’) in accordance with the Arbitration Rules of the Singapore International Arbitration Centre (“SIAC Rules’) for the time being in force, which rules are deemed to be incorporated by reference in this clause. The seat of the arbitration shall be [Singapore].*

The Tribunal shall consist of

** arbitrator(s).

The language of the arbitration shall be APPLICABLE LAW This contract is governed by the laws of

78

*Parties should specify the seat of arbitration of their choice. If the parties wish to select an alternative seat to Singapore, please replace ‘[Singapore]’ with the city and country of choice (e.g., “[City, Country]’). ** State an odd number. Either state one, or state three. *** State the country or jurisdiction.

233. International Bar Association, IBA Guidelines for Drafting International Arbitration Clauses 234.

(2010).

Ibid.

448

Chapter 17: Arbitral Institutions Parties may modify the above model clause to suit their needs. However, it has been suggested that the parties can add to the model clause, but should rarely subtract from it.*** The model clause referred ta above embodies all essential elements of a valid arbitration clause. These are explained below:

(1) (2)

(3)

(4)

(5)

Any dispute arising out of or in connection with this contract: This formulation avoids undue limitation on the scope of disputes subject to arbitration. Administered by the Singapore International Arbitration Centre in accordance with the SIAC Rules: It is important for parties to clearly reflect their intention to arbitrate at SIAC under the SIAC Rules. The term ‘for the time being in force’ ensures parties benefit from the application of the latest edition of the SIAC Rules. The seat of the arbitration: Although the model clause mentions ‘[Singapore]' as the seat of the arbitration, parties enjoy full freedom to change the seat to any place of their choice.**° An arbitration proceeding seated anywhere in India can be administered by SIAC. Number of arbitrators: Parties should specify whether the disputes will be decided by a sole arbitrator or a three-member tribunal. If the arbitration clause is silent on the number of arbitrators to be appointed, a sole arbitrator will be appointed by default unless the Registrar determines otherwise. Language of the Arbitration: The parties should specify the language in which the arbitration is to be conducted. The SIAC Secretariat is multilingual and its team members are conversant in, among other languages, English, Bahasa Indonesia, Chinese, French, Lithuanian, Hindi, Malay, Tagalog and Russian.

The language ability of the SIAC Secretariat, the SIAC Court and arbitrators on the SIAC Panel of Arbitrators positions SIAC to administer cases in languages

(6)

17.6.4

other than English.**”

Applicable Law: The arbitration clause is separate and distinct from the main contract. Thus, the parties may wish to specify the law governing substantive contract and the law governing the arbitration agreement.

Institutional Supervision

The 2016 SIAC Rules expert and enforceable involving parties from work is complemented

provide a state-of-the-art procedural framework for efficient, resolution of international disputes of all sizes and complexities diverse legal systems and cultures.*** This procedural frameby the supervision and assistance offered by SIAC at every stage

235. Ibid. 236. The clause states ‘Singapore’ within square brackets to indicate that it is optional and parties are free to select their preferred seat of arbitration when drafting an arbitration clause. 237. Singapore International Arbitration Centre, Frequently Asked questions, available at http://siac .org.sg/faqs#iaq09. 238. Singapore International Arbitration Centre, SIAC Highlights, available at http://siac.org.sg/64 -why-siac.

449

Lim Seok Hui & Kevin Nash

of the arbitral proceedings. Institutional supervision begins at the time the NOA is received by the Registrar and continues until the conclusion of the arbitration. SIAC's supervisory functions are discussed below. 17.6.4. 1

Commencement

The Registrar records deemed to commence Pursuant to Rule 3.3, with the requirements 17.6.4,2

the on the of

of Arbitration

receipt of an NOA filed as per Rule 3.1. The arbitration is the date on which the Registrar receives the complete NOA. Registrar is empowered to decide on substantial compliance Rule 3.1.

Appointment of Arbitrators

All arbitrators in SIAC arbitrations, including arbitrators nominated by the parties and by the arbitrators already appointed, are subject to appointment by the President. This ensures that SIAC has a degree of supervision in the constitution of the tribunal. SIAC requires every arbitrator, before each appointment, to give a continuing written undertaking that: — he/she is able to discharge his/her duties as an arbitrator without bias; — he/she will disclose all facts or circumstances that may give rise to justifiable doubts as to his/her impartiality or independence; and — he/she will devote sufficient time to the case throughout the process. All arbitrators appointed by SIAC are required to sign the SIAC Code of Ethics for

an Arbitrator.**” 17.6.4.3

Scrutiny of Awards

The tribunal is required to submit the draft award to the Registrar not later than 45 days from the date of closure of the proceedings. The Registrar may suggest modifications as to the form of the award and, without affecting the tribunal’s liberty to decide the dispute, draw the tribunal's attention to points of substance.**° Scrutiny of draft awards helps to avoid errors and improves the enforceability of awards. 17.6.4.4

Financial Management of the Arbitral Process

SIAC performs the following administrative functions for the financial management of an arbitration: — determining the total costs of the arbitration; — fixing the tribunal's fees; 239. See SIAC Code of Ethics for an Arbitrator, available at http://www.siac.org.sg/our-rules/code -of-ethics-for-an-arbitrator. 240.

Rule 32.3, 2016 SIAC Rules.

450

Chapter 17: Arbitral Institutions

— rendering accounts; — collecting deposits towards the costs of arbitration; and — processing the tribunal’s fees and expenses. 17.6.5

Arbitral Appointments and Procedure

The parties’ agreement in the arbitration clause is the first port of call in the arbitral appointment process. If the parties have not agreed on the number of arbitrators, a sole arbitrator will be appointed as per Rule 9.1. Three arbitrators will be appointed in the following situations: — where the parties have expressly agreed to three arbitrators clause; — where the parties have not agreed upon the number of arbitration clause, but it appears to the Registrar that the stances, quantum and complexity of the case warrant the three-member tribunal.

in the arbitration arbitrators in the relevant circumappointment of a

The general rule favours a sole arbitrator since proceedings before a threemember tribunal will almost inevitably be lengthier and more expensive than those

before a sole arbitrator.*”’ 17.6.5.1

Nomination of Arbitrators

The next step in the process of appointment of arbitrators is the method of appointment. Under the 2016 SIAC Rules, parties are provided with a full opportunity to participate in the nomination of arbitrators. In certain industry-specific contracts, the parties may agree that a third person will appoint the arbitrator. For example, the parties may agree that the chairman of a maritime board will appoint the arbitrator. Rule 9.2 deems such agreements between the parties as an agreement to nominate an arbitrator under the 2016 SIAC Rules. Parties cannot ‘appoint’ arbitrators directly to a tribunal, even if they purport to do so in their agreement. The parties have the right to nominate a candidate and the President would make the formal appointment.*** This allows SIAC to supervise the appointment process, ensuring that the party-nominated arbitrators are independent and impartial, qualified to hear the dispute, and possess sulficient time to devote to the arbitration. 17.6.5.2

Appointment of a Sole Arbitrator

Pursuant to Rule 10.1, the parties may propose to each other names of one or more persons to serve as the sole arbitrator. In cases where the parties agree on the sole arbitrator, such joint nomination is subject to confirmation by the President. 241. IBA Guidelines for Drafting International Arbitration Clauses, supra n. 232, at p. 14. 242.

Mark Mangan, Lucy Reed & John. Choong, A Guide to the SIAC Arbitration Rules (2014) p. 92.

45]

Lim Seok Hui & Kevin Nash

The President appoints a sole arbitrator in the following situations: — where the parties cannot agree on the sole arbitrator within 21 days from the date of commencement of the arbitration or within the period agreed upon by the parties or as determined by the Registrar. — where either party requests the President to make such an appointment.

17.6.5.3

Appointment of Three Arbitrators

Each party nominates one arbitrator in cases where three arbitrators are to be appointed. These nominations are subject to confirmation by the President. Where a three-member tribunal is to be appointed and a party fails to make its nomination within 14 days from the receipt of the other party’s nomination or the period otherwise agreed by the parties or determined by the Registrar, the President will appoint an arbitrator on behalf of the party. In cases where the procedure mentioned in the agreement between the parties does not result in the appointment of a presiding arbitrator, the presiding arbitrator will be appointed by the President. Rule 12 also provides for multiparty appointment of arbitrators in cases where there are more than two parties to the arbitration. In such cases the Claimant(s) can jointly nominate one arbitrator and the Respondent(s), as the case may be, can jointly nominate one arbitrator. The presiding arbitrator is appointed in the same manner as reflected in Rule 11.3. 17.6.5.4

Emergency Arbitrator

SIAC endeavours to appoint an emergency arbitrator within one day of the receipt of an application for emergency interim relief. However, such an appointment is made only if the President is of the view that the application for emergency interim relief should be accepted. 17.6.5.5

SIAC’s Panel of Arbitrators

Parties may choose arbitrators from SIAC’s extensive panel of arbitrators (SIAC Panel). SIAC has an experienced international panel of over five hundred expert arbitrators from over 40 jurisdictions.*** SIAC also has a specialised panel of arbitrators for intellectual property disputes. Parties have broad discretion as to whom they nominate as arbitrator. They are not obliged to nominate an arbitrator listed on the SIAC Panel.

243. See Singapore International Arbitration Centre, SIAC Panel, available at http://www.siac.org. sg/our-arbitrators/siac-panel.

452

Chapter 17: Arbitral Institutions 17.6.5.6

Qualification of Arbitrators

SIAC arbitrators are required to possess should be independent and impartial, have of the language of the arbitration, and any Rule 13.2 provides that the President must arbitrator is required to have pursuant to 17.6.5.7

certain qualities. Principally, an arbitrator integrity, competence, adequate knowledge skills or knowledge agreed by the parties.“ give due regard to any qualifications that an the parties’ agreement.

Hurdles in Making Arbitral Appointments

Appointments are made on the basis of SIAC’s specialist knowledge of an arbitrator's expertise, experience, and track record.

The appointment of arbitrators is an integral part of the arbitral process. In certain cases, the parties’ agreement requires arbitrators who possess certain niche skills or expertise. For instance, the parties may agree that the tribunal must be comprised of arbitrators who have experience in a particular field (construction, hospitality, engineering, shipping, etc.), language ability or legal qualifications. Arbitrators nominated by the parties may also face conflicts of interest that could prevent their appointment upon the requisite disclosure of any conflict. In situations of conflict, after inviting and considering the views of the parties, the President exercising his discretion may nonetheless proceed with the appointment. This robust appointment mechanism ensures that the proceedings will not be delayed by frivolous or unmeritorious challenges to arbitrator nominees. 17.6.6

Conduct of the Proceedings

Arbitral autonomy provides parties with broad freedom to agree and decide on the procedure to be followed in the arbitration proceedings. The Indian Arbitration and Conciliation Act, 1996°*° (1996 Arbitration Act) recognises such autonomy. Section 19(2) of the Indian Act allows parties to agree on the manner and procedure for conducting arbitral proceedings. This can be achieved in several ways, such as agreeing on a set of rules, or by using the standard rules of an arbitral institution, with

or without modification.*“*

Rule 19.1 of the 2016 SIAC Rules empowers the tribunal to conduct the arbitration as it considers appropriate after consultation with the parties. The tribunal is thus required to consult the parties in determining the course of the proceedings. Rule 19.3 requires the tribunal (upon its constitution) to conduct a preliminary meeting with the

244.

Ibid.,

at

100;

see also

Singapore

International

Arbitration

Centre,

SIAC

Practice

Note on

Administered Cases (2014), available at http://siac.org.sg/our-rules/practice-notes/practicenote-for-administered-cases. 245. Amended in 2015 via The Arbitration and Conciliation (Amendment) Act, No. 9 of 2015. 246. Chakrapani Misra & Sanjeev Kapoor, Arbitration in India, available at https://eguides.cmslegal .com/pdf/arbitration_volume_I/CMS%20GtA_Vol%201LINDIA.pdf. For a discussion on the conduct of arbitration proceedings, see Chapter 7 of the Handbook.

453

Lim Seok Hui & Kevin Nash

parties. The tribunal along with the parties may sketch out the contentious issues and discuss procedures that would be most efficient for the case. Under the 2016 SIAC Rules, the President may also request the parties and the tribunal to convene such a meeting in order to ensure expediency and efficiency in the proceedings.**” Matters of evidence are decided by the tribunal, depending on its relevance, materiality and admissibility. In doing so, the tribunal is not required to apply the rules of evidence of any applicable law. The tribunal is empowered to make decisions related to evidence at its discretion. 17.6.7

Calculation of Costs

The costs payable towards the arbitration proceedings are determined on an ad valorem basis based on the amount in dispute in accordance with the SIAC Schedule of Fees. There are separate maximum costs for administration fees and arbitrator’s fees. For instance, in a case before a sole arbitrator where the sum in dispute is less than SGD 50,000, SIAC’s administration fees would be capped at SGD 3,800 and the arbitrator’s

fees would be capped at SGD 6,250.7"

Arbitrator’s fees are determined based on a proportion of the maximum set out in the SIAC Schedule of Fees in consideration of factors such as the time spent by the tribunal, complexity of the matter, number of procedural issues adjudicated upon, overall efficiency of the proceedings and the quality of the award. The Costs and Duration study conducted by SIAC in 2016 showed that the mean duration of disputes

is 13.8 months, and the median duration is 11.7 months.** The SIAC cost calculator

gives parties a fee estimate payable to the institution and the tribunal.**° For additional flexibility, under Rule 34.1 of the 2016 SIAC Rules, the parties may agree on an alternate form of remuneration for the arbitrators prior to the constitution of the tribunal. For instance, parties may agree to pay the arbitrator(s) on an hourly basis at a rate mutually agreed upon. 17.6.8

Chronology of an SIAC Arbitration

The flowchart below sets out the typical process for an SIAC arbitration that proceeds

to a final award.”

247.

See Rule 19.7 of the 2016 SIAC Rules.

248. See SIAC Schedule of Fees http://www.siac.org.sg/estimate-your-fees/siac-schedule-of-fees. 249. Singapore International Arbitration centre, Costs and duration study http://www.siac.org.sg/ images/stories/press_release/SIAC% 20Releases% 20Costs % 20and % 20Duration % 20Study_1 0% 200ct%202016.pdf.

250. See also SIAC Cost Calculator http://www.siac.org.sg/component/siaccalculator/?]temid= 448.

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Chapter 17: Arbitral Institutions

Filing of NOA (Rule 3) Copy of NOA sent to the Respondent simultaneously (Rule 3.4)

I

|

Requirements of Rule 3.1 are

There is a deficiency,/inadequacy

view that there is substantial compliance with Rule 3.1

notifies Claimant to rectify the deficiencies. Claimant subsequently complies

satisfied or the Registrar is of the

Sg

in terms of Rule 3.1. Registrar

Arbitration is deemed commenced

7

to have

Respondent files a Response to NOA

Constitution of Arbitral Tribunal

OR

OR

Determination of a timetable and suitable procedures by tribunal and parties

Award Scrutiny

Submissions by the parties + Hearing on merits

Transmission of award to

parties

Draft award submitted by the tribunal to the Registrar

Source: Author's own.

455

Lim Seok Hui & Kevin Nash * Please note that this flowchart does not take into consideration any applications for interim relief, expedited procedure, consolidation or joinder and early dismissal.

17.6.9

SIAC Checklist

The arbitration agreement contains an accurate reference to the Singapore International Arbitration Centre and/or the SIAC Rules

¥v

The number of arbitrators (sole arbitrator, three arbitrators or otherwise) is specified

a

The NOA is in compliance with Rule 3 of the 2016 SIAC Rules, and

“

includes the following:

— A demand to refer the dispute to arbitration — Contact details such as names, addresses, telephone numbers, facsimile numbers of the parties to the arbitration, if known to the parties — Acopy of the arbitration agreement — Acopy of the contract or other instrument out of or in relation to

which the dispute arises — A brief statement containing a description of the nature and circumstances of the dispute and the relief claimed — Any statement regarding an agreement of the parties with respect to the conduct of the arbitration — Nomination of an arbitrator where the arbitration clause provides for three arbitrators or a proposal for a sole arbitrator where the

arbitration clause provides for a sole arbitrator — Comment as to the applicable rules of law — Comment as to the language of arbitration — Payment of the requisite filing fees

If the dispute arises out of more than one contract, file a statement

¥Y

Whether to file an application for emergency interim relief Whether to file an application for moving under the Expedited Procedure as per Rule 5

Yes/No Yes/No

that identifies each such contract as per Rule 6.1

456

CHAPTER

18

Arbitration of Claims Relating to Environmental Damage in India Karuna Nundy’

Would a broadly worded arbitration clause allow for claims to be brought in relation to environmental damage? This Chapter explores Indian jurisprudence on the scope of the arbitration clause, tort law principles, and its arbitrability. It argues that there is potential for a party to make a claim in relation to environmental

damage that has a significant connection to the arbitration agreement.

18.1

INTRODUCTION

Indian environmental law is particularly strong on substance, but it is weak on process. Remedy for environmental damage is generally sought in civil proceedings or under the writ jurisdiction of the High Courts and Supreme Court. But Indian litigation takes time. Arbitration clauses generally provide that disputes ‘arising out of’ or ‘in connection with’ the contract can proceed to arbitration. A claim that could fall within the scope of these phrases is one related to damage to the environment. Arbitration can be faster, and awards are enforced and executed far more easily in jurisdictions in which the respondent owns assets. The MOX Plant dispute’ and the Southern Bluefin Tuna*

cases are some

recent examples of environmental

disputes,

where the parties are both States or State-owned entities that have initiated arbitration, and where arbitrability of such disputes has been discussed. The Permanent Court of Arbitration (PCA) has come up with the Permanent Court of Arbitration Optional Rules for Arbitration of Disputes Relating to Natural Resources and/or the Environment,

* The author is grateful to Ishaan Karki for his assistance.

1. MOX Plant Case, Ireland v. United Kingdom, 126 ILR 310 (PCA 2003). 2. Southern Bluefin Tuna, New Zealand v. Japan, 38 ILM 1624 (ITLOS 1999).

457

Karuna Nundy 2001 (2001 PCA Environment Arbitration Rules).* This is a set of rules focused on concerns that arise specifically in environmental disputes. The 2001 PCA Environment Arbitration Rules make provisions for intergovernmental organisations, nongovernment organisations, multinational corporations and individuals to submit disputes under the auspices of the PCA for adjudication of environmental claims:* The Rules, and the services of the Secretary-General and the International Bureau

of the PCA, are available for use by private parties, other entities existing under national or international law, international organizations, and State. Despite this, resort to the PCA for breach of bilateral or multilateral treaties in

order to resolve environmental disputes is still relatively rare. This Chapter demonstrates that there are unexplored opportunities through the process of arbitral proceedings to address concerns stemming from the effluents in rivers, the air pollution and the annihilation of entire ecosystems. This Chapter discusses the ability of governments, affected individuals, companies and firms, to claim damages and bring about behavioural change through domestic and international commercial arbitration under the Indian arbitration law. It explores a relatively untapped potential of providing speedy redressal against companies and State Entities that damage the environment, requiring them to remediate that damage and resulting injury to peoples’ health and property. India’s Arbitration & Conciliation Act, 1996 (1996 Arbitration Act or Act) is based on the UNCITRAL Model Law on International Commercial Arbitration (Model Law). The use of India’s 1996 Arbitration Act to make environmental claims in the manner set out below, therefore, may apply also to other jurisdictions that have based their national arbitration law on the Model Law. The Chapter will first explore the threshold questions: the scope of the arbitration clause and whether it may cover environmental claims, also which parties may bring such a claim. The second part will provide an overview of the substantive law in India governing classic environmental disputes. The third part will review India’s position relating to the environment taken in its Bilateral Investment Treaties (BITs). Next, the Chapter will consider how environmental claims, successfully arbitrated, may be enforced. The last part provides concluding remarks. 18.2

THRESHOLD

QUESTIONS

18.2.1

Scope of the Arbitration Clause

When two parties already have a defined legal relationship (whether contractual or not) and have expressly decided that the procedural law of the arbitration would be

3. Permanent Court of Arbitration, Optional Rules for Arbitration of Disputes Relating to Natural Resources and/or the Environment, Introduction, 19 June 2001, available at https://docs.pcacpa.org/2016/01/Optional-Rules-for-Arbitration-of-Disputes-Relating-to-the-Environment-and_ or-Natural-Resources.pdf.

4. Ibid.

458

Chapter 18: Claims Related to Environmental Damage Indian, i.e. the 1996 Arbitration Act, they necessarily agree to submit to arbitration disputes which ‘have arisen or may arise’ between them in respect of that defined legal relationship. Section 7(1) of the Act says: In this Part, arbitration agreement means an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not.

The phrases ‘have have been expressly used commercial arbitration. tortious nature, it would

arisen or may arise’ or ‘arising out of’ are significant. They in the delinitions of arbitration agreements and international The Supreme Court has stated that even if a claim is of a be arbitrable if the:

Claim is directly, closely and inextricably connected with the terms and conditions

of the contract, the payments to be made thereunder and the breaches thereof and as such will have to be regarded as a claim ‘arising out of or ‘related to’ the coniract |...| the test for determining the question in such cases and the test is whether recourse to the contract, by which both the parties are bound, would be necessary for the purpose of determining whether the claim in question was

justified or otherwise.®

The Supreme Court of India arrived at this conclusion by relying upon judgments where the arbitral tribunals’ ruling upon tortious acts such as defamation,’ civil negligence® and validity of the enforcement of a charter party by way of arrest was

upheld.”

Therefore, when

there exists a claim in tort that has its basis in a contractual

relationship between parties, such tortious claim can be subjected to arbitration. In M.C. Mehta v. Kamal Nath the Supreme Court held: ‘pollution is a civil wrong. By its very nature, it is a tort committed against the community as a whole’.'” Quite clearly then, environmental damage that has a nexus with a contract that contains an arbitration clause is arbitrable. 18.2.2

Parties to the Arbitration Agreement

18.2.2.1

The State

When the State has an agreement with a company that damages the air, land or water, and when that environmental damage has a close enough nexus with that agreement, then the State has an affirmative duty to act against private parties for such damage."'

ooo

oy WA

. For further discussion of the arbitration agreement, see Chapter 2 of the Handbook. . Renusagar Power Company Ltd. v. General Electric Company (1994) Supp 1 SCC 644. See also Union of India v. Salween Timber Construction, 2 S.C.R. 224 (S.C. 1969). . Alliance Jute Mills Company Limited v. Lalchand Dharamchand, A.1.R. (Cal.) 19, 28 (Cal. 1978). . Woolfv. Collis Removal Service, 2 All E.R. 260 (K.B. 1947).

. Astro Vencedor Compania Naviera SA of Panama v. Mabanaft Gmbh, 2 All E.R. 1301 (Q.B. 1971).

10.

M.C. Mehta v. Kamal Nath and Others, 6 5.C.C., 213, 224 (5.C. 2000).

ll. Fomento Resorts and Hotels Limited and Another v. Minguel Martins and Others, 3 $.C.C. 571

(S.C. 2009).

459

Karuna Nundy Arguably, if the environmental damage has a close nexus with an agreement between the State and a company, then this duty may require the State to pursue the most effective remedy. In some cases, the quickest remedy, the cheapest and the most easily executed, would be to initiate arbitral proceedings against the company. The Supreme Court has held under the ‘public trust’ doctrine that the State is the default

trustee

of natural resources

— of land,

forests

and

rivers — and

is under

a

fiduciary legal duty to take care of such resources for the benefit of the general public. '* The doctrine goes beyond the constitutional duty to protect these resources. As a public trustee, the State is required to take greater affirmative action to nurture the environment.'*

Where,

in a scenario,

there

is an arbitrable claim

to remediate

the site of

damage or indeed to claim for the health damage to citizens which was foreseeable, the State as public trustee must bring that claim in the most effective manner so that it is the polluter that cleans the river, the mining company that pays for afforestation and

damage to ecosystems, not the taxpayer."

Let us examine a hypothetical scenario: a private company has a contract with the State for the supply of certain products. The contract specifies that the company would establish a factory that would

utilise a limited area of forest, a certain level of

groundwater and a specified area of land. Subsequently, this factory proceeds to violate the terms of the contract by utilising and destroying a larger amount of forest area as well as using and contaminating groundwater beyond the limits prescribed by the contract. In expanding its area, the factory encroaches upon the lands owned by tribes in the forest region. Although there is no decline in the supply of the products agreed upon, since the State holds the resources (such as the groundwater and forest areas) in public trust, it could be said to have an affirmative duty to initiate proceedings against the private company. In such proceedings, the State could seek — in a tort claim — to recover compensation for the damage caused to forests and groundwater, beyond what was agreed upon in the contract. It may also claim compensation as a representative of the tribals affected. Such claims would be in tort, but arising out of a contract, thus under the holding of the M.C. Mehta decision and the public trust doctrine, the State can initiate arbitration under the scope ol the arbitration agreement. The State may then use the damages acquired from the private entity in the form of compensation to the tribals and to remediate the parts of the forests destroyed. If the arbitral remedy in the above scenario is available and the most effective, the tribals and/or other petitioners in the public interest may institute writ proceedings against the State - to compel the State to initiate arbitral proceedings against the polluting company.'* In the above scenario, for example, when the State fails to initiate arbitral proceedings, the beneficiaries of the public trust — affected citizens — may ask a writ court to direct the State to arbitrate on their behalf. The ambit of India’s public

12. M.C. Mehta v. Kamal Nath, 1 §.C.C., 388, 413 (5.C. 1997). 13.

Association of Unified Tele Services Providers v. Union of India, 6 $.C.C., 110, 120 (S.C.C 2014).

14. M.C. Mehta v. Kamal Nath, supra n. 12. 15. Director of Settlements, A.P. and Ors. v. M.R. Apparao and Another, 45.C.C.638, 659 (S.C. 2002).

460

Chapter 18: Claims Related to Environmental Damage interest litigation is still wide. As such, a party that is not directly affected may also

bring such a writ in the public interest.'®

So (arguably) a State could initiate a claim for environmental damages via arbitration, and courts would (arguably) be amenable to compel the respondent to participate in the proceedings as the claim ‘arises out of’ the contract - which contains the relevant arbitration clause. At the moment of writing this Chapter, this remains untested. 18.2.2.2

Company/Firm

The ability to claim tortious damage in arbitration is underexplored even in purely commercial arbitration. In addition to a State or State-owned entity party to an arbitration agreement, a business entity may also file a claim under an arbitration agreement against another business entity. When the claimant is an individual company - say a company that has an agreement with another to set up a chemical plant — it may arguably claim for a drop in share prices because its erstwhile partner breached environmental norms while executing the contract, and caused enough reputational damage to the claimant to lead directly to a drop in share price. While such a claim may seem remote, let us establish the ingredients. A company may bring a claim for reputational damage in arbitration. Reputational damage, such as defamation, was held to be arbitrable in the Calcutta High Court

case of Woolf v. Collis Removal Services.'’ Stock drop claims, a species of securities fraud, have precedent in the United States.'* In such a scenario, the claimant would have to first establish that the arbitration agreement is phrased in such a manner so as to include within its ambit claims relating to the environment. The claimant would then have to establish that there is a sufficient link between the damage caused to him and the clauses of the contract. Then accordingly demonstrate causation and calculate the loss suffered by him on account of fall in share price and loss of reputation. Such causation may be established by, say, a proximate temporal relationship between the price drop and an accurate article about the environmental damage: large traders who sold the claimant's stock on the same day might depose; this could be compared to the change in stock price index of a basket of similar stocks.’ In another scenario, if Company A has a contract that includes an arbitral clause to run a power plant with Company B, and negligently causes mass environmental and health damage, Company B may arguably be able to claim for such damage from Company A, to indemnify itself from foreseeable claims by government and individuals, even if there is no such indemnity clause in the contract.

16. State of Himachal Pradesh v. A Parent of Student of a Medical College, 3 $.C.C. 169 (S.C. 1985). 17.

Woolf v. Collis Removal Service, 2 All E.R. 260 (K.B.

19.

Ibid.

1947).

18. Halliburton Co. v. Erica P. John Fund, Inc.573 U.S. 13 (Supreme Court of the United States, 2014).

46]

Karuna Nundy

18.3

SUBSTANTIVE LAW

The Supreme Court has evolved principles of ‘absolute liability’*” and the ‘polluter pays principle’*’ for determining the liability of enterprises engaged in inherently dangerous activities. The principle of ‘absolute liability’ mandates that an enterprise engaged in an industry which is inherently dangerous and hazardous, which poses a potential threat to the health and safety of its employees as well as people who live in the surrounding areas, Must conduct its operations with the highest standards of safety. Should harm result on account of the inherently dangerous activity of such an industry, the enterprise would be liable to compensate for such harm. The defence of reasonable care and lack of negligence cannot be taken. This provided for a more inflexible and unerring rule than the earlier principle of ‘strict liability’* which stated that any person who kept hazardous substances on his premises would be liable for the damage caused by the escape of such substances from his premises subject to certain exceptions such as an ‘act of God’, the act of a third party, the act of the person bringing action for damages caused by himself or the consent of the person bringing an action. This principle of ‘absolute liability’ was evolved by the Supreme Court to rule out such exceptions in order to prevent large enterprises from escaping liability. The Supreme Court has evolved the ‘polluter pays principle’ which places absolute liability on the enterprise not only of remediation or restoration of the environment for the damage caused but also to compensate the individual victims of the environment. Reiterating the ‘precautionary principle’, the Supreme Court has said: When there is a state of uncertainty due to lack of data or material about the extent

of damage or pollution likely to be caused then, in order to maintain the ecological

balance, the burden of proof that the said balance will be maintained must necessarily be on the industry or the unit which is likely to cause pollution. On the

other hand, where the effect on ecology or environment of setting up of an industry

is known, what has to be seen is that if the environment is likely to suffer, then

what miltigative steps can be taken to offset the same.**

18.4

INVESTMENT TREATY DISPUTES

The BITs that India had entered into with countries such as the Netherlands™ and Germany,” though terminated in 2016 and 2017, respectively, provided that in case of a dispute between an investor of one Contracting Party and the other Contracting Party ‘in connection with’ an investment in the territory of the other Contracting Party shall be resolved through arbitration provided that amicable settlement by negotiations and

20. M.C. Mehta and Another v. Union of India and Others, 1 $.C.C., 395, 419, 420 (S.C. 1987). 21.

Vellore Citizens’ Welfare Forum v. Union of India, 5 §.C.C., 647, 658 (8.C. 1996).

23. 24. 25.

Narmada Bachao Andolan v. Union of India and Others, Article 9, India-Netherlands BIT, 1995. Article 9, India~-Germany BIT, 1998.

22. Rylands v. Fletcher, 3 L.R., 330 (H.L. 1868).

462

10 5.C.C., 664, 727, 728 (S.C. 2000).

Chapter 18: Claims Related to Environmental Damage conciliation fails. The BIT between India and the United Kingdom,** which was terminated in 2017, provided a similar procedure but with regard to disputes ‘in relation to’ an investment made by the investor of one Contracting Party. India has

entered into BITs with Myanmar,*’ Bangladesh,”* and Lithuania,*? which currently

subsist, and have similar provisions referred to provides: 1. Any

dispute

between

for dispute settlement.

an investor of one Contracting

Article 9 of the BITs

Party

and

the other

Contracting Party in relation to an investment of the former under this Agreement shall, as far as possible, be settled amicably through negotiations between the parties to the dispute. In the event of a dispute the Contracting

Party in whose territory the investment was made shall be notified in writing by the investor. 2. In case of any such dispute which has not been amicably settled within a

period of six months from the date of the written notification under paragraph 1, the investor may choose to submit the dispute for settlement:

|...] (C) to arbitration in accordance with |...] (emphasis added). The phrases ‘in relation to’ and ‘in connection with’,”” as discussed above, have

wide connotations so as to include within its scope tortious claims rendering them arbitrable. Thus, it may be argued that it is possible for the Indian government to raise tortious claims for damage to the environment, under the BIT, against an investor from the aforementioned nations during the subsistence of the obligations under the treaty. It would be appropriate at this point to make reference to an award rendered by a tribunal of the International Centre for Settlement of Investor Disputes (ICSID), ruling on counterclaims raised by Ecuador against Burlington Incorporated, a company with its headquarters in the Texas, USA, which had acquired ownership interests in Production Sharing Contracts for the exploration and expansion of oilfields in Ecuador.*' The Arbitral Tribunal applied the strict liability regime under the domestic tort law of Ecuador in furtherance of Article 42(1) of the ICSID Convention to find Burlington liable for groundwater remediation, soil remediation and abandonment of wells causing mud pits.** Article 42(1) of the ICSID Convention allows the tribunal to apply the law of the Host State, absent any agreement between the parties with regard to applicable rules. It has the discretion to apply either domestic law or international law depending upon the type of dispute that is to be resolved.** The strict liability regime for environmental harm under the laws of Ecuador requires the plaintiff to prove that the harm caused was connected with the defendant's activities; the fault of

the defendant is not required to be proven (no-fault liability) and the causation of the

26. Article 9, India-UK BIT, 1995. 27.

Article 9, India-Myanmar BIT, 2008.

29.

Article 9, India-Lithuania BIT, 2011.

31.

Burlington v. Ecuador (Decision on Counter Claims), 1CSID Case No. ARB/O8/5

28. Article 9, Bangladesh-India BIT, 2009. 30. Alliance Jute Mills Company Limited v. Lalchand Dharamchand, A.I.R. (Cal.) 19, 28 (Cal. 1978). 32. Ibid., at paras 889, 1075. 33. Ibid., at para. 74.

463

(2017).

Karuna Nundy harm is presumed.” The tribunal placed reliance purely on the Ecuadorian case law and constitutional provisions which provided the relevant tort principles to determine the liability and disregarded reliance placed upon the contractual terms of Production

Sharing Contracts.**

India is not a party to the ICSID Convention, but the above decision is significant. It is an illustration of a tribunal relying on domestic law to apply principles such as strict liability while adjudicating BIT claims. 18.5

ENFORCING THE AWARD

Chapter 1 of Part Il of the 1996 Arbitration Act provides the mechanism for the enforcement of a foreign award rendered pursuant to the 1958 Convention on Recognition and Enforcement of Foreign Arbitral Awards (New York Convention).*° For the purposes of this chapter, a ‘foreign award’ has been defined to mean an arbitral award on disputes which are arising out of legal relationships, whether contractual or not, considered as commercial under the law in force in India.*” The above discussion

suggests that foreign awards (under the New York Convention) on claims based in tort but arising out of a contract can be enforced in India. The Arbitration and Conciliation (Amendment) Act, 2015 (2015 Amendment) has greatly reduced the scope of public policy as a bar against the enforcement of foreign awards.** Generally now, foreign awards sought to be enforced in India can no longer be challenged on the grounds of patent illegality or be subjected to a thorough review on the merits on the grounds of violation of the provisions of Indian law that fall short of a public policy violation.*” Therefore, with enforcement becoming easier, automatically enforcement of an award rendered in relation to environmental torts (arising out of the terms of a contract) would arguably be easier too. 18.6

CONCLUSION

Since the Supreme Court's decision in Renusagar Power Company Limited v. General Electric Company“ rendered in 1984, there has not been any substantial development in Indian jurisprudence on whether tortious claims are arbitrable. But, there is potential for a party to make a claim in relation to environmental damage that has a significant connection to the arbitration agreement. Further, an attempt can be made, at the drafting stage, to widen the terms of dispute resolution clauses so as to expressly include tortious claims within their ambit. 34. Ibid., at para. 238. 35. Ibid., at para. 262. 36. Convention on the Recognition and Enforcement of Foreign Arbitral Awards, Article I (10 June 37.

1958), 330 U.N.T.S. 38. Section 7(1), 1996 Arbitration Act.

39.

Section 22, 2015 Amendment. For further discussion of enforcement of awards, see Chapter 11

38. For further review of public policy, see Chapter 10 of the Handbook.

of the Handbook. 40. Renusagar Power Company Ltd. v. General Electric Company (1994) Supp | SCC 644.

464

Chapter 18: Claims Related to Environmental Damage The mere presence of an arbitration clause, in the form of an alternative remedy, would by itself not take away the jurisdiction of writ courts, which provide a public law remedy. Nonetheless, arbitration, being a form of alternative dispute resolution, offers

a much simpler and swifter method of resolution. Those aggrieved or directly impacted by the damage caused to the environment (for instance, the tribals in the fore mentioned illustration) would be barred by privity of contract from filing a claim against the tortfeasor as they are not the party to the agreement. Their recourse in arbitration would be through the State party. Although arguably, the M.C. Mehta decision with the public trust doctrine might overcome the privity requirement. In the international context, the PCA Environment Arbitration Rules’ now make provisions even for non-State actors to approach the PCA for adjudication of environmental disputes. Regard is also being paid to sustainable development goals at UNCITRAL's Working Group-III discussions.” In this digital age consumers are better placed than ever before to pressure corporations to comply with their demands, and it may take no more than an effective social media campaign for a corporation to invoke the arbitration clause in its agreement against a counterparty causing damage to the environment or itself suffer the commercial consequences of ignoring consumer demands. Affected parties are better placed as citizens, to force the State to bring a claim on their behalf for health or property damage caused by environmental destruction. However, to the extent that the environmental policy gap between developing and developed countries widens, more capital investment associated with polluting industries can be expected to flow faster to countries with lax environmental regulation.** Corporations could then very well choose India more frequently for production due to its lax environmental norms. The more arbitral claims that are brought, and swiftly executed, the more corporations can be held accountable and thus motivated to change their actions related to environmental challenges.

41. PCA Environment Arbitration Rules available at https://docs.pca-cpa.org/2016/01/OptionalRules-for-Arbitration-of-Disputes-Relating-to-the-Environment-and_or-Natural-Resources.pdf. 42. In this context, India’s 2016 Model BIT recognises ‘sustainable development’ in its preamble, and the damage to the environment considered a mitigating factor affecting the calculation of monetary damages. For further discussion of the Model BIT, or the discussions at UNCITRAL WG-IIl, see Chapters 13 and 15 of the Handbook. 43. Yuging Zing & Charles Kolstad, Do Lax Environmental Regulations Attract Foreign Investment?, 2000, available at https://escholarship.org/content/qt3268z4rx/qt3268z4rx.pdf?t = Inpsso&v= lg.

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CHAPTER

19

A Comparative Analysis of Arbitral

Legislations: India, Singapore and England Ganesh Chandru

This Chapter analyses the legislative landscape of arbitration in India, Singapore and England. Traditionally, Indian parties often chose London whenever they had to choose a seat of arbitration outside India. While London is still chosen as a seat for arbitration involving Indian parties, Singapore has increasingly become a popular choice among Indian parties to locale their international arbitration matters, especially in the last decade. A comparative study of some of the key aspects of the arbitration framework of these three jurisdictions would give an idea of how India and Singapore, which follow the English common law tradition, have developed an arbitration regime that caters to the needs of the users in these jurisdictions. India ratified the 1958 U.N. Convention on the Recognition and Enforcement of Foreign Arbitral Awards

(New York Convention)

in 1960, while England ratified it in 1975

and Singapore in 1986. During the nineteenth and twentieth centuries, the arbitration legislation in India and Singapore was based on the English arbitration legislation that was en vogue in England then. The current arbitration framework in India and Singapore is based on the UNCITRAL Model Law on International Commercial Arbitration, 1985 (Model Law). While the English Arbitration Act is not based on the Model Law, it draws inspiration from it. India has recently made some significant amendments to its arbitration legislation with a view to making it an arbitrationfriendly seat. While it is likely to take some more years for major cities in India to emerge as popular seats for international arbitration, London and Singapore will always be looked upon as favourable arbitration seats for commercial contracts involving Indian parties. It is therefore all the more important for legal practitioners and international arbitrators to have knowledge of the lex arbitri that would apply to arbitrations seated in these three jurisdictions. This Chapter is an endeavour to achieve this objective.

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Ganesh Chandru

19.1

INTRODUCTION

India and England have one legislation for arbitration which governs both international and domestic arbitration. Singapore has a dual-track arbitration regime for international and domestic arbitration. India legislated the Arbitration and Conciliation Act in 1996 (1996 Arbitration Act or Act), Singapore enacted the International Arbitration Act (Chapter 143A of the Statutes of the Republic of Singapore) (IAA) in 1994 (which came into force in January 1995) and England enacted the Arbitration Act in 1996 (English Arbitration Act) (which came into force in January 1997, except sections 85-87). In Singapore, section 3 of the IAA provides that the Model Law (except Chapter VIII) shall have the force of law in Singapore. The IAA is to be read in conjunction with the Model Law, which is reproduced in the First Schedule of the IAA. The current legislation in these three jurisdictions was enacted around the same time period. They have been used by the parties and interpreted by the courts for more than two decades now. While it is interesting to note that the provisions of the arbitral legislations in these three jurisdictions are quite similar, there are subtle and sometimes unique differences. This is mainly because of the amendments brought about to these legislations. For example, the 1996 Arbitration Act in India was quite extensively amended by the Arbitration and Conciliation (Amendment) Act, 2015 (2015 Amendment), which came into effect on 23 October 2015. These amendments were largely based on the recommendations made in the 246th Report of the Law Commission of India (LCI Report 246). There were recommendations for tweaks to be made to the amendments that came into force in 2015 by a High-Level Committee headed by Retired Justice B.N. Srikrishna which submitted its Report on 30 July 2017. Pursuant to the said recommendations of the Srikrishna Committee, the Arbitration and Conciliation (Amendment) Act, 2019 (2019 Amendment) was enacted and came into force on 30 August 2019, with the exception of some of the provisions, which were not notified. 19,2

APPOINTMENT OF ARBITRATORS

In India, section 10(1) of the 1996 Arbitration Act provides that the parties are free to determine the number of arbitrators, provided that such number is not an even number.

In case the parties fail to determine the number

of arbitrators, the arbitral

tribunal shall consist of a sole arbitrator. Under amended section 11 of the 1996 Arbitration Act, the parties are free to agree on the procedure for appointing the arbitrator(s). If the parties fail to appoint an arbitrator or the selection mechanism has failed, the parties can directly approach the Supreme Court for the appointment of arbitrator(s) in case of international commercial arbitration, and an application for appointment can be made to the High Court, in case of domestic arbitration.’ The 2019 Amendment has introduced further amendments to section 11 of the 1996 Arbitration Act to the effect that the Supreme Court and the High

l. Section 11(6) read with section 11(12) of the 1996 Arbitration Act. appointment under sections 10 and 11, see Chapter4 of the Handbook.

468

For

a discussion

of

Chapter 19: Arbitral Regimes in India, Singapore and England Court shall have the power to designate arbitral institutions, from time to time for the purpose of the 1996 Arbitration Act.* Additionally, the appointment shall be made, on an application of the party, by the arbitral institution designated by the Supreme Court, in case of international commercial arbitration, or by the High Court, in case of arbitrations other than international commercial arbitration, as the case may be.* The 2019 Amendment has also introduced a new Part 1A to the 1996 Arbitration Act for the establishment and incorporation of an independent body namely, the Arbitration Council of India (ACI) whose functions are, among other things, to grade arbitral institutions and accredit arbitrators. However, Part 1A has not come into force and the

ACI is yet to be established. Prior to the amendment of section 11 of the 1996 Arbitration Act, the courts debated whether the function of appointment of the arbitrator by the court is an administrative function or a judicial function. A seven-judge constitution bench of the Supreme Court in S.B.P v. Patel Engineering’ held this to be a judicial function. The court went a step further and categorised the issues which the court had to decide, issues which it may decide and issues which should be left to the arbitrator. This position of law was not well received by the users of arbitration as it conferred wide powers on the courts in deciding the existence and validity of the arbitration agree-

ment.

The 2015 Amendment rectified this position by adding a new section 11(6A) which states that while considering an application for appointment of an arbitrator, the Supreme Court or the High Court, as appropriate, shall confine itself to the examination of existence of an arbitration agreement; however, the said provision has been omitted

by the 2019 Amendment. Further, section 11(6B) of the 1996 Arbitration Act provides that designation of any person or institution by the Supreme Court or High Court for the purpose of appointment of arbitrator(s) shall not be regarded as delegation of judicial power by the Supreme Court or High Court. In an international commercial arbitration between Sun Pharmaceuticals Industries Ltd.. Mumbai and M/s. Falma Organics Limited Nigeria’ the Supreme Court delegated its power of appointment of arbitrator under section 11(6) of the 1996 Arbitration Act to the Mumbai Centre for International Arbitration (MCIA). In order to curb delays, the amended section 11(13) of the 1996 Arbitration Act provides that the arbitral institution designated by the court shall dispose of applications for appointment of arbitrators within 30 days from the date of service of notice on the opposite party. In Singapore, parties are free to agree on a procedure to appoint the arbitrators. In an arbitration with three arbitrators, each party shall appoint one arbitrator, and the

fi

2. Section 11(3A), 1996 Arbitration Act. . Section 11(4), 1996 Arbitration Act.

4, (2005) 8 5CC 618, para. 47. For a discussion of the S.B.P. case and jurisprudence related thereto, see Chapter 4 of the Handbook. 5. Sun Pharmaceuticals Industries Ltd., Mumbai and M/s. Falma Organics Limited Nigeria, Supreme Court, Order, Arbitration Case No. 33 of 2014, 3 May 2017. For a discussion of Sun Pharmaceu-

ticals, see Chapter 4 of the Handbook. For a discussion of the MCIA, see Chapter 17.4 of the Handbook.

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Ganesh Chandru

parties shall by agreement appoint the third arbitrator.® It also provides that where the parties fail to agree on the appointment of the third arbitrator within 30 days of the receipt of the first request by either party to do so, the appointment shall be made, upon the request of a party, by the appointing authority. Pursuant to section 8(2) of the IAA, the appointing authority is the President of the Court of Arbitration of the Singapore International Arbitration Centre (SIAC). In an arbitration with a sole arbitrator, if the parties are unable to agree on the arbitrator, he shall be appointed, upon the request of a party, by the President of the Court of Arbitration of SIAC.’ In England, section 15 of the English Arbitration Act provides that the parties are free to agree on the number of arbitrators to form the tribunal and whether there is to be a chairman or umpire. It further provides that unless the parties agree otherwise, an agreement that the number of arbitrators shall be two or any other even number shall be understood as requiring the appointment of an additional arbitrator as chairman of the tribunal. In case there is no agreement as to the number of arbitrators, the tribunal shall consist of a sole arbitrator. Section 16 of the English Arbitration Act provides that the parties are free to agree on the procedure for appointing the arbitrator or arbitrators, including the procedure for appointing any chairman or umpire. In case there is no such agreement, if the tribunal is to consist of a sole arbitrator, the parties shall jointly appoint the arbitrator not later than 28 days after service of a request in writing by either party. In addition, if the tribunal is to consist of two arbitrators, each party shall appoint one arbitrator not later than 14 days after service of a request in writing by either party to do so. If the tribunal is to consist of three arbitrators, each party shall appoint one arbitrator not later than 14 days after service of a request in writing by either party to do so and the two so appointed shall appoint a third arbitrator as the chairman. If the tribunal is to consist of two arbitrators and an umpire, each party shall appoint one arbitrator not later than 14 days after service of a request in writing by either party to do so and the two so appointed may appoint an umpire at any time after they themselves are appointed before any substantive hearing or forthwith if they cannot agree on a matter relating to the arbitration. Section 17 of the English Arbitration Act provides that unless agreed by the parties, where each of the two parties to an arbitration agreement is to appoint an arbitrator, and one party reluses or fails to do so within a specified time, the other party, having duly appointed his arbitrator, may give notice by writing to the party in default that he proposes to appoint his arbitrator to act as sole arbitrator. If the party in default does not make the required appointment and notify the other party that he has done so within seven days, the other party may appoint his arbitrator as a sole arbitrator, whose award shall be binding on both parties. In such a case of appointment of sole arbitrator, the party in default may apply to the court which may set aside the appointment.

6. Section 9A, LAA. 7. Article 11(3)(b), Model

Law

Chapter 17.6 of the Handbook.

read with section 8(2) of the IAA.

470

For a discussion

of SIAC, see

Chapter 19: Arbitral Regimes in India, Singapore and England Under section 18 of the English Arbitration Act, in case of failure of the appointment procedure, any party to the arbitration agreement may apply to the court to exercise its powers under this Section. An appointment made by the court under this Section shall have the same effect as if made with the agreement of the parties. As per section 18(5) any decision relating to the appointment of arbitrators made by the court under this Section is appealable with the leave of the court. In Silver Dry Bulk Company Limited v. Homer Hulbert Maritime Company Limited" the English High Court considered and clarified the principles which apply to an application under section 18 of the English Arbitration Act. The court stated that the party making an application must establish a ‘good arguable case’ that a tribunal would have jurisdiction to hear the case, and emphasised that any jurisdictional arguments remain matters for the tribunal to decide in accordance with the principle of

competence-competence.’ 1933

JOINDER AND CONSOLIDATION

The 1996 Arbitration Act does not contain any provision for joinder of third parties and consolidation of arbitrations. However, court decisions in this regard are instructive. The Supreme Court has analysed the issue of joinder of third parties in Chloro Controls (I) Pvt. Ltd. v. Severn Trent Water Purification Inc. & Ors.'" and held that the expression, ‘person claiming through or under’, as provided under section 45 of the 1996 Arbitration Act, means and includes within its ambit multiple and multiparty agreements. This enables even the non-signatory parties to some of the agreements to be made parties to the arbitration. The court further held: In

the

cases

of group

companies

or where

various

agreements

constitute

a

composite transaction like mother agreement and all other agreements being ancillary to and for effective and complete implementations of the mother agreement, the court may have to make reference to arbitration even of the disputes

existing between signatory or even non-signatory. However, the discretion of the court has to be exercised in exceptional, limiting, befitting and cases of necessity and very cautiously,"! As regards consolidation, the decision of the Supreme Court in Olympus Superstructures Put. Ltd v. Meena Vijay Khetan and Ors.'* is very useful. It was held that, where there are disputes and differences in connection with the main agreement and also disputes in regard to ‘other matters’ ‘connected’ with the subject matter of the main agreement, arbitration shall be governed by the general arbitration clause of the 8. Silver Dry Bulk Company Limited v. Homer Hulbert Maritime Company Limited [2017] EWHC 44 (Comm), para. 26. 9. Competence-Competence is the power of an arbitral tribunal to decide on its own jurisdiction, See Nigel Blackaby et al., Redfern & Hunter on International Arbitration (6th ed. 2015) p. 340. 10.

Chlore Controls India Pvt. Ltd. v. Severn Trent Water Purification Inc. & Ors. (2013)

1 SCC 641,

para. 165.1. For a review of the jurisprudence related to non-signatories to an arbitration agreement, see Chapter 2 of the Handbook. 11. Ibid., at para. 165.2. 12. Olympus Superstructure v. Meena Khetan (1999) 5 SCC 651.

47]

Ganesh Chandru

main agreement. The disputes under the main agreement and disputes connected therewith can be referred to the same arbitral tribunal." In P.R Shah, Shares and Stock Brokers Private Limited v. B.H.H Securities Private

Limited and Others’ the Supreme Court dealt with the issue as to whether a single arbitration is permissible in respect of a member and a non-member under the bye-laws and regulations of the Bombay Stock Exchange. The Supreme Court held that when A has a claim against B and C, and A has a separate arbitration agreement with both B and C, there can be a single arbitration. The case of Duro Felguera S.A. v. Gangavaram Port Limited’ involved mullticontracts, multiparties and had contracts between a foreign party and a domestic party and contracts between two domestic parties. This brought the disputes under the domain of international arbitration as well as domestic arbitration. The Supreme Court held

that since

there

is a mix

of domestic

as well

as international

arbitrations,

a

“composite reference’ of disputes will not be proper. The court constituted six separate arbitral tribunals: two tribunals to arbitrate disputes as international arbitral tribunals and other four as domestic arbitral tribunals. In appropriate cases, joinder of parties and consolidation of arbitrations is possible in India. The MCIA Rules also provides for consolidation of arbitrations. Under Rule 5 of the MCIA Rules, which states that at the request of a party, and after consulting with the parties and any confirmed arbitrators, the Council of the MCIA shall have the power to consolidate two or more arbitrations pending under these Rules where the parties agree to the consolidation, or all of the claims in the arbitrations are made under the same arbitration agreement. In Singapore, the IAA is silent on the aspect of joinder of third parties. However, the SIAC Rules 2016 have express provisions for joinder of additional parties. Rule 7 of the SIAC Rules 2016 provides that an application to join one or more additional parties may be made by an existing party to the arbitration, or a non-party seeking to be joined. The criteria for such an application are that the additional party to be joined is prima facie bound by the arbitration agreement and the parties (including the additional party to be joined) have consented to the joinder of the additional party. The issue of joinder of third parties was analysed by the Singapore Court of Appeal in PT First Media TBK v. Astro Nusantara International BV.'° The court held that if the tribunal is allowed to join non-parties to the arbitration, it might enable a tribunal to exercise unlimited jurisdiction over any dispute which any non-party could have with the parties to the arbitration agreement.’ The subject matter of the arbitration in this case was governed by the SIAC Rules 2007. This decision led to some changes in the SIAC Rules. Rule 24(b) of the SIAC Rules 2013 introduced the phrase third party instead of other party as was provided in the SIAC Rules 2007, but 13. Ibid., at para. 30. 14, P.R. Shah, Shares and Stock Brokers Private Limited v. B.H.H. Securities Private Limited and Others (2012) 1 SCC 594, para. 19.

15. Duro Felguera, 16. PT First Media joinder under 17. Ibid., at paras

5. A. v. Gangavaram Port Limited (2017) 9 SCC 729, paras 43-44. TBK v. Astro Nusantara International BV [2014] 1 SLR 372. For a discussion of the SIAC Rules, see Chapter 17.6 of the Handbook. 180-181.

A72

Chapter 19: Arbitral Regimes in India, Singapore and England nevertheless limited the scope of any joinder, as a tribunal under the SIAC Rules 2013 was only empowered to issue directions for joinder upon the application of a party, provided that such person was a party to the arbitration agreement and with the written consent of such third party. The IAA is silent on the aspect of consolidation of arbitrations. However, the SIAC Rules 2016 provide for consolidation of arbitrations. Rule 8 of the SIAC Rules provides that prior to the constitution of any tribunal in the arbitrations sought to be consolidated, a party may file an application with the Registrar of SIAC to consolidate two or more arbitrations pending under the SIAC Rules into a single arbitration. The arbitrations may be consolidated, if all parties agree to the consolidation; all the claims in the arbitrations are made under the same arbitration agreement; or the arbitration agreements are compatible, and: (i) the disputes arise out of the same legal relationship(s); (ii) the disputes arise out of contracts consisting of a principal contract and its ancillary contract(s); or (iii) the disputes arise out of the same transaction or series of transactions. The SIAC announced its proposal on cross-institution cooperation for the consolidation of international arbitral proceedings. The proposal, which was initiated by the President of the SIAC Court of Arbitration, has been sent to other international

arbitral institutions together with a memorandum. The memorandum proposes the adoption of a protocol by arbitral institutions permitting the cross-institution consolidation of arbitral proceedings subject to different institutional arbitration rules.'" In Singapore, under the (Domestic) Arbitration Act (Chapter 10 of the Statutes of the Republic of Singapore), section 26 provides for consolidation of arbitration proceedings or for concurrent hearings of arbitrations only where the parties agree to confer such power on the arbitral tribunal. The English Arbitration Act does not have any provision regarding joinder of

third parties. The House of Lords in Lafarge Redland v. Shepard Hill'’ noted that Party

A could not be asked mandatorily to be part of the arbitration proceedings between Party B and C, even though all the parties had entered into contracts with each other regarding the same economic transaction, unless the arbitration clause imposed such an obligation on Party A. It is pertinent to note that Article 22.1(viii) of the London Court of International Arbitration (LCIA) Rules of 2014 permits joinder of a third party to an arbitration upon the application of a party. In such a case, the consent of the third party is required. In England, section 35 of the English Arbitration Act provides for the consolidation of proceedings, and it states that the parties are free to agree that the arbitral proceedings shall be consolidated with other arbitral proceedings, or that concurrent hearings shall be held on such terms as may be agreed. It further provides that in the absence of an explicit agreement, the tribunal shall not have the power to consolidate

or hold concurrent hearings.~"

18. The memorandum is available institution-consolidation-protocol.

at

19.

Lafarge Redland v. Shepard Hill [2000]

20.

Section 35(2), English Arbitration Act.

see Chapter 17.3 of the Handbook.

hitp://siac.org.sg/69-siac-news/551-proposal-on-cross1 W.L.R.

473

1621 (UK). For a discussion of the LCIA Rules,

Ganesh Chandru

19,4

INTERIM MEASURES

In India, section 9 of the 1996 Arbitration Act empowers the courts to grant interim measures of protection, such as orders for preservation, interim custody, sale of any goods, securing the amount in dispute, preservation or inspection of any property and interim injunction. Under section 17 of the 1996 Arbitration Act, the arbitral tribunal

has the same power for making orders, as the court has for the purpose of, and in relation to any proceedings before it. Before the 2015 Amendment came into force, the parties could have approached the courts for seeking interim relief any time before the arbitration proceedings commenced, during arbitral proceedings or any time after the making of the award but before it was enforced. Further, while the arbitral tribunal had powers to order interim

measures, parties preferred to go to court as the power to grant such interim measures

was available with both the courts and the arbitral tribunal. This trend overburdened the courts with applications for interim measures under section 9 of the 1996 Arbitration Act. This situation has now been remedied by the recent amendments. Under the new section 9(3) of the 1996 Arbitration Act, once the arbitral tribunal has been constituted, the courts shall not entertain an application seeking interim relief under section 9 of the 1996 Arbitration Act, unless the court finds that circumstances exist which may render

the remedy under section 17 inefficacious. To facilitate the operation of this change, an order passed by the arbitral tribunal under section 17 shall now be deemed to be an order of the court and shall be enforceable under the Civil Procedure Code in the same manner as an order of court.?! The 2015 Amendment has also reduced the scope of exploitation of the remedy of court-ordered interim reliefs by providing that if a court passes an order for an interim measure before the commencement of arbitral proceedings, the arbitral proceedings shall be commenced within 90 days of such order, or

within such time as the court may determine.”

The issue as to whether an Indian court can grant interim relief in aid of a foreign-seated arbitration under section 9 of the 1996 Arbitration Act has led to a lot of debate. In Bhatia International v. Bulk Trading $.A. and Anr,** the courts interpreted section 2(2) of the 1996 Arbitration Act to mean that Part I of the Act applied to arbitrations held in India and also to arbitrations conducted outside India, unless it was expressly or impliedly excluded. This led to parties using this judgment to make an application for setting aside foreign awards under Part I of the 1996 Arbitration Act (which contains section 34 — the set-aside provision). This led to a lot of criticism of

21. Section 17(2), 1996 Arbitration Act. For a review of the jurisprudence measures under sections 9 and 17, see Chapter 8 of the Handbook. 22.

Section 9(2), 1996 Arbitration Act.

related to interim

23. Bhatia International v. Bulk Trading S.A. and Anr. (2002) 4 SCC 105, para. 32. For further discussion of Bhatia International in the context of interim measures, see Chapter 4 of the Handbook. 24. See Venture Global Engineering v. Satyam Computers Services Ltd. (2008) 4 SCC 190. For further discussion of Bhatia International and Venture Global in the context of enforcement of awards, see Chapter || of the Handbook.

474

Chapter 19: Arbitral Regimes in India, Singapore and England Indian arbitration in the international legal circles. The Supreme Court in Bharat Aluminium v. Kaiser Aluminium Technical Services** overruled Bhatia International and held that Part I of the 1996 Arbitration Act will not be applicable to arbitrations seated outside India. However, this led to a situation where parties could not get interim relief from Indian courts against possible dissipation of assets where the seat of arbitration was outside India. To overcome this lacuna, section 2(2) of the 1996 Arbitration Act has been amended in 2015 to clarify that provisions for interim measures provided under section 9, which falls under Part | of the 1996 Arbitration Act, shall apply to international commercial arbitrations even if the seat of arbitration is outside India. In Singapore, section 12 of the IAA provides for powers of the arbitral tribunal to grant interim relief, including the power to grant interim injunctions or any other interim measures. Section 12(6) of the [AA provides that all interim orders or directions made by the arbitral tribunal shall, by leave of the High Court, be enforceable in the same manner as if they were orders of the court. Section 12A of the IAA deals with court-ordered interim measures. While the powers to grant interim relief may be exercised by the High Court under section 12A of the IAA or by the arbitral tribunal under section 12, the High Court shall make an order only if or to the extent that the arbitral tribunal has no power or is unable for the time being to act effectively.*® In addition, as per section 12A(7) of the IAA, if the court has ordered certain interim reliefs and subsequently the tribunal makes an order which relates to the order made by the court, then the court's order shall cease to have effect. In Singapore, in the case of Swift-Fortune Ltd v. Magnifica Marine SA,’ the Singapore Court of Appeal held that it had no power under the IAA to grant interim injunction to support arbitrations that were not seated in Singapore. This led to a legislative change. Section 12A(1)(b) now, in effect, empowers the court to grant interim measures irrespective of whether the place or seat of arbitration is in Singapore

or not.**

In Five Ocean Corp v. Cingler Ship Pte Ltd.*” the Singapore High Court held that if the seat of arbitration is in Singapore and the assets are overseas, the court would have the power to protect or preserve assets and evidence situated outside Singapore. In the court's view, the language of section 12A was wide enough and was not unlike the exercise of the court's powers and jurisdiction in granting an injunction that covered assets outside Singapore provided that the court has in personam jurisdiction over the

parties to the local proceedings.*”

In England, section 38 of the English Arbitration Act provides that the parties are free to agree on the powers exercisable by the arbitral tribunal for the purpose of and in relation to the proceedings. The arbitral tribunal may give directions in relation to 25. 26.

Bharat Aluminium Co. v. Kaiser Aluminium 195-196, Section 12A(6), LAA.

Technical Services

(2012)

28.

See Lawrence Boo, Annual Review of Singapore Cases, 16 SAL Ann. Rev.

109 (2015).

30.

See Lawrence

110 (2015).

27. Swift-Fortune Ltd v. Magnifica Marine SA |2007) 1 SLR 629. 29. Five Ocean Corp v. Cingler Ship Pte Ltd [2016] 1 SLR 1159.

Boo, Annual Review of Singapore Cases, 16 SAL Ann. Rev.

A75

9 SCC 552,

paras 89,

Ganesh Chandru

any property which is the subject of the proceedings or is in the possession of a party

(section 38(4)); order security for costs (section 38(3)); or order preservation of

evidence (section 38(6)). Section 44 of the English Arbitration Act provides for ‘Courts power exercisable in support of arbitral proceedings’. The courts can grant interim measures as provided under section 44(2) of the English Arbitration Act, including in relation to the preservation of evidence and granting injunction. Under section 44(3) of the English Arbitration Act, an application for the purpose of preservation of evidence or assets may be considered by the court in case of urgent matters. If the case is not of urgency, then as per section 44(4) of the English Arbitration Act, the court shall only entertain an application made with the permission of the arbitral tribunal or the agreement in writing of the other parties. In the case of Cetelem v. Roust Holdings Ltd.*' the English Court of Appeal deliberated on the role of courts in arbitral proceedings. The court held that: The whole purpose of giving the court power to make such orders is to assist the arbitral process in cases of urgency before there is an arbitration on foot. Otherwise itis all too easy for a party who is bent on a policy of non-cooperation to frustrate

the arbitral process. Of course, in any case where the court is called upon to exercise the power, it must take great care not to usurp the arbitral process and to ensure, by exacting appropriate undertakings from the claimant, that the substantive questions are reserved for the arbitrator or arbitrators.

In the case of Gerald Metals SA v. The Trustees of the Timis Trust & others** the English High Court, in effect, noted that a case that was not sufficiently urgent to satisfy the requirements of Article 9A or 9B of the LCIA Rules (expedited formation of arbitral tribunal and emergency arbitrator, respectively) could not be urgent enough for the court to grant relief under section 44(3) of the English Arbitration Act. It is relevant to note that this option contained in section 44 is available even if the seat of arbitration is abroad, or no seat has been designated or determined, but in that case the court may refuse to exercise the powers if it considers that it would be inappropriate to do so (section 2(3) of English Arbitration Act). 19.5

EMERGENCY ARBITRATOR

In India, the 1996 Arbitration Act does not recognise the concept of ‘Emergency Arbitrator’. The LCI in its 246th Report had recommended that the definition of ‘arbitral tribunal’ under the 1996 Arbitration Act be expanded to include ‘Emergency Arbitrator’.** This was aimed at according legislative support to Rules of arbitration institutions which provide for appointment of an emergency arbitrator. However, the proposed amendment was not taken on board. The Srikrishna Committee also recommended amendments to section 2 of the 1996 Arbitration Act so as to enable the

31. Cetelem v. Roust Holdings Ltd [2005] 4 All ER 52, para. 71. 32. Gerald Metals SA v. The Trustees of the Timis Trust & others [2016] EWHC 2327. 33.

LC] Report 246, p. 36.

476

Chapter 19: Arbitral Regimes in India, Singapore and England recognition of awards made by emergency arbitrators.“* However, the 2019 Amendment did not adopt this recommendation. In practice, after obtaining an emergency arbitrator’s decision under institutional rules, parties tend to apply to the court for an interim measure under section 9 of the 1996 Arbitration Act for similar relief as granted by the emergency arbitrator. The MCIA Rule recognises the concept of ‘Emergency Arbitrator’. Rule 14 of the MCIA Rules consists of a detailed procedure for the appointment of an ‘Emergency Arbitrator’. As per Rule 14.1, in cases of exceptional urgency, any party may apply to the Registrar in writing for emergency interim relief prior to the constitution of the

tribunal.*°

In Singapore, amendments were made to the IAA in 2012, pursuant to which section 2 of the [AA was amended to include an emergency arbitrator in the definition of ‘arbitral tribunal’. Pursuant to the amendment, the emergency arbitrator has been given the same legal status as that of any other arbitral tribunal, and the orders and awards made by emergency arbitrators are enforceable under the IAA. The SIAC Rules also provide for an emergency arbitrator. Rule 30, read with Schedule 1 of the SIAC Rules 2016, contains a detailed procedure for the appointment of an emergency arbitrator. As per Rule 1.3 of the said Rules, an ‘award’ includes a partial, interim or final award and an award of an emergency arbitrator. While the English Arbitration Act does not recognise the concept of ‘Emergency Arbitrator’, many of the arbitrations seated in England pursuant to institutional rules such as LCIA or the ICC contain emergency arbitrator provisions (Article 9B of the LCIA Rules 2014 and Article 29 of the ICC Arbitration Rules 2017).*° 19.6

INDEPENDENCE AND IMPARTIALITY OF ARBITRATORS

As per section 12(1) of the 1996 Arbitration Act, when a person is approached to act as an arbitrator, he shall disclose in writing if there are circumstances which give rise to justifiable doubts as to his independence and impartiality.*” The 2015 Amendment has incorporated the Fifth and Seventh Schedules in the 1996 Arbitration Act which have been drawn from the Orange and Red lists of the IBA Guidelines on Conflicts of Interest in International Arbitration.** The grounds stated in the Fifth Schedule act as a guide in determining whether any circumstances exist that give rise to justifiable doubts as to the arbitrator’s independence or impartiality. Section 12(5) of the Act, in effect, provides that if any of the grounds mentioned in the Seventh Schedule are attracted, then a person shall be ineligible to be appointed as an arbitrator 34. 35. 36. 37.

Ibid., at p. 77. For further discussion on emergency arbitrator under the MCIA Rules, see Chapter 17.4. For a review of the rules of various institutions, see Chapter 17 generally. Explanation 2 to section 12(1) mandates an arbitrator to make disclosure in the form specified in the Sixth Schedule regarding potential Conflict of Interest as well as confirm his ability to devote sufficient time to the arbitration and to declare that he can make an award within 12 months. For further discussion on disclosures by and challenges to an arbitrator, see Chapter 4 of the Handbook. 38. LC] Report 246, p. 30 at para. 59.

477

Ganesh Chandru

unless the parties expressly agree in writing to waive the applicability of the provision. In HRD Corporation (Marcus Oil and Chemical Division) v. GAIL (India) Limited (Formerly Gas Authority of India Ltd.)°° it was held that for grounds listed under the Fifth Schedule, the arbitral tribunal is empowered to adjudicate the challenge and its decision can only be challenged in a setting aside petition after the award is made. However, in case of a challenge on the grounds mentioned under any of the categories listed in the Seventh Schedule, the arbitrator is ineligible to continue his duties and an application to terminate his mandate can be filed directly before the court, pursuant to section 14(2) of the Act. In TRF Ltd. v. Energo Engineering Projects Ltd*" the Supreme Court held that the Managing Director of a company (which was a party to the arbitration) who was himself ineligible to act as arbitrator could not appoint an arbitrator, and any such appointment would have to be held to be null and void. In Perkins Eastman Architects DPC and Another v. HSCC (India) Ltd*' the Supreme Court following the TRF Case held that a person who has an interest in the outcome or decision of the dispute must not have the power to appoint a sole arbitrator. That has to be taken as the essence of the amendments brought in by the 2015 Amendment and recognised by the decision of the Supreme Court in the TRF Case. In Voestalpine Schienen Gmbh v. Delhi Metro Rail Corpn. Ltd.** the issue was whether the arbitration clause providing for appointment of arbitrators from a panel of serving or retired officers of government departments or public sector undertakings was contrary to the parameters of independence and impartiality in accordance with amended section 12 of the 1996 Arbitration Act. The court, after analysing the relevant provisions, held that merely because the persons proposed were government employees or ex-government employees and in no way connected to the Respondent that by itself would not make them ineligible to act as arbitrators. The court further stated that bias or even real likelihood of bias cannot be attributed to such highly qualified and experienced persons, simply on the ground that they served the central government or public sector undertakings. However, the court ordered Delhi Metro to do away with the five-person list as it was too restrictive for the other party to choose from and directed Delhi Metro to prepare a broad-based panel. In Government of Haryana PWD Haryana (B and R) Branch v. G.F. Toll Road Private Limited and Others the Supreme Court while dealing with the issue as to whether the appointment of a retired employee of a party to the agreement as an arbitrator is valid held that the 1996 Arbitration Act does not disqualify a former employee from acting as an arbitrator, provided that there are no justifiable doubts as to his independence and impartiality. The fact that the arbitrator was in the employment of the State of Haryana over ten years ago would make the allegation of bias clearly untenable. 39. HRD Corporation (Marcus Oil and Chemical Division) v. GAIL (India) Limited, Civil Appeal No. 11126 of 2017, para. 12.

40.

TRF Ltd. v. Energo Engineering Projects Ltd., 2017 SCC OnLine SC 692, para. 57.

41. Perkins Eastman Architects DPC & Anr. v. HSCC (India) Ltd., AIR 2020 5C 59, para. 21. 42. Voestalpine Schienen GmbH v. Delhi Metro Rail Corporation Ltd. (2017) 4 SCC 665. 43. Government of Haryana PWD Haryana (8 and R) Branch v. G.F. Toll Road Private Limited and Others (2019) 3 SCC 505, para. 21.

478

Chapter 19: Arbitral Regimes in India, Singapore and England In Singapore, an arbitrator may be challenged as per the provisions contained in Article 12(2) of the Model Law, which provides that an arbitrator may be challenged only if circumstances exist which give rise to justifiable doubts as to his impartiality or independence, or if he does not possess qualifications agreed to by the parties. The arbitrators are required to disclose all such circumstances that are likely to give rise to justifiable doubts as regards the independence and impartiality of arbitrators. It is to be noted that such duty runs throughout the course of arbitration. In England, section 24 of the English Arbitration Act provides that a party to the arbitration proceedings may apply to the court to remove an arbitrator because circumstances exist that give rise to justifiable doubts as to his impartiality (section 24(1)(a)) or because he does not possess the qualifications required by the arbitration agreement (section 24(1)(b)). There are also other grounds in section 24(1) on which

a court can remove an arbitrator.

Section 33 of the English Arbitration Act provides that the tribunal has the duty to act ‘fairly’ and ‘impartially’. The English High Court in Tonicstar Limited and Ors. v. Allianz Insurance Ple and Anr.*° was considering an application under section 24 of the English Arbitration Act for the removal of the arbitrator on the ground that he did not possess the necessary qualification as per the parties’ agreement. The court removed the arbitrator as he had experience of insurance and reinsurance law, rather than the experience in the business of insurance and reinsurance as required under the arbitration agreement. 19.7

FAST TRACK PROCEDURE

In India, the Amended 1996 Arbitration Act provides for a fast track procedure under section 29B, which contemplates a ‘documents-only’ arbitration unless the parties or the tribunal considers an oral hearing necessary. The tribunal is to render an award within six months from the date the tribunal enters reference, unless extended for a further period of six months by the parties or the court grants extension of time on application by a party. There is no similar provision under the Singapore and English arbitral legislations. However, Rules of arbitral institutions often chosen by parties for their arbitrations in these jurisdictions provide for fast track/expedited procedures. For example, the SIAC Rules 2016 (Rule 5) and the ICC Rules 2017 (Article 30) provide for expedited procedures, while the LCIA Rules 2014 provide for expedited procedure for formation of arbitral tribunal (Article 9A). 19.8

COSTS

In India, arbitrators used to typically award very little costs or no casts. The 2015 Amendment introduced section 31A, which envisages a more progressive regime of costs. The general rule is that the unsuccessful party will be ordered to pay the costs of 44. Article 12(1), Model Law. 45. Tonicstar Limited and Ors. v. Allianz Insurance Ple and Amr. [2017] EWHC 2753 (Comm).

479

Ganesh Chandru

the successful party unless the arbitral tribunal or court makes a different order for reasons to be recorded in writing. The position in Singapore is that unless the parties agree to the contrary, the arbitrators are entitled to award costs, and cost follows the event. Section 21 of the IAA provides that any costs directed by an award to be paid shall, unless the award otherwise directs, be determined by the Registrar of the SIAC. It also provides that unless the fees of the arbitral tribunal have been fixed by a written agreement or such agreement has provided for determination of the fees by a person or an institution agreed by the parties, any party to the arbitration may require that such fees be determined by the Registrar of SIAC. In case of institutional arbitration in Singapore, for example the SIAC or ICC, the costs of arbitration (arbitrator’s fee, institutional fee and expenses) are determined by the arbitral institution and is ad valorem to the amount in dispute. The costs of arbitration are to be mentioned in the award. The legal costs (costs of lawyers and party-appointed experts) are to be determined by the arbitral tribunal after considering parties’ submissions on costs, and the legal costs are to be mentioned in the award. In England, the English Arbitration Act (sections 59-65) deals with the issues of costs. It should be noted that these sections are non-mandatory (with the exception of section 60), and so the parties are free to agree on how costs are to be dealt with.*° Section 60 of the English Arbitration Act is a mandatory provision that negates any pre-dispute agreement between the parties allocating costs between them by requiring one or more of the parties to pay all or part of their own costs. The purpose of this Section is to prevent the situation in which a party who wishes to pursue his claim in arbitration finds that he is unable to do so (or that there is no point in doing so) because, whatever the result, he has agreed to bear some or all of his own costs.*’ 19,9

THIRD-PARTY FUNDING

Third-party funding for arbitrations has been recognised in England under the Jackson Reforms.** In Singapore, third-party funding is recognised for international arbitrations by virtue of section 5B(1) of the Civil Law Act (Chapter 43 of the Statutes of Republic of Singapore) read with Regulation 3 of the Civil Law (Third-Party Funding) Regulations 2017." In India, while there is no specific legislation recognising third-party funding, the Supreme Court in Bar Council of India v. A.K. Balaji & Ors.°" has observed that there appears to be no restriction on third parties (non-lawyers) funding the litigation and getting repaid after the outcome of the litigation. This was however only an obiter. The position is likely to be clear when a court makes an express ruling on third-party

46.

Robert Merkin & Louis Flannery, Arbitration Act 1996 (Sth ed. 2014) p. 245.

48. 49.

Review of Civil Litigation Costs, Final Report (December 2009). Came into effect on 1 March 2017.

47, Ibid., at p. 247.

50. Bar Council of India v. A.K. Balaji & Ors. (2018) 5 SCC 379, para. 38.

480

Chapter 19: Arbitral Regimes in India, Singapore and England funding in a matter involving an application for recourse against an award made in an arbitration where there was third-party funding. 19.10

INTEREST

In India, the 1996 Arbitration Act grants discretion to the arbitral tribunal on matters relating to the award of interest, subject to any agreement between the parties. Section 31(7) of the 1996 Arbitration Act provides that the arbitral tribunal may award interest at such rate as it deems reasonable on the whole or part of the amount, for the whole or part of the period between the date on which the cause of action arose and the date of the award. As regards post-award interest, section 31(7)(b) of the 1996 Arbitration Act (introduced by the 2015 Amendment) provides that, unless the award otherwise directs, any sum directed to be paid in an arbitral award shall carry interest at a rate of 2% higher than the current rate of interest prevalent on the date of award, from the date of the award to the date of payment. ‘Current rate of Interest’ means the highest of the maximum rates at which interest may be paid on different classes of deposits (other than those maintained in savings accounts or those maintained by charitable or religious institutions) by different classes of scheduled banks, in accordance with the directions given or issued to banking companies generally by the Reserve Bank of India (RBI) under the Banking Regulation Act 1949.°' For example, if the maximum rate of interest to be paid by any Scheduled Bank as directed by the RBI at any given period is say 7%, then the post-award interest would be 9% (i.e., 7% + 2%). Prior to the amendment, the 1996 Arbitration Act provided for post-award interest at 18% per

annum.

In Singapore, section 12(5) read with section 20(1) of the IAA provides that unless otherwise agreed by the parties a tribunal may award simple or compound interest from such date and at such rate that an arbitral tribunal considers appropriate. Section 20(3) of the IAA provides for post-award interest and states that unless the award otherwise directs, it shall carry interest at the same rate as a judgment debt. The current rate of interest on a judgment debt in Singapore is 5.33%. In England, as per section 49 of the English Arbitration Act, the parties are free to agree on the powers of the tribunal as regards the award of interest. Unless otherwise agreed by the parties, the tribunal may award simple or compound interest at such rates as it considers fair. In addition to the interest on the sum awarded, the interest can be awarded on costs as well as on any sum representing interest awarded in the substantive part of the award.”

51.

Section 2(b), Interest Act, 1978.

52. Section 49(4), English Arbitration Act. See also, Robert Merkin & Louis Flannery, Arbitration Act 1996 (5th ed. 2015) p. 220.

4$]

Ganesh Chandru

19.11

TIME LIMIT FOR MAKING

AWARDS

As the majority of arbitrations in India were held on an ad hoc basis without any institutional oversight, there was a tendency for arbitration proceedings to be protracted for years, resulting in delay in the rendering of awards. To rectify this problem, the 2015

Amendment

introduced

section

29A

to the

1996

Arbitration

Act,

which

provided that the award shall be made within a period of 12 months from the date the arbitral tribunal enters upon the reference. The parties may agree to an extension of not more than six months.** If the award is not made within a period of 12 months or the extended period, the mandate of the arbitrator(s) shall terminate unless the court has,

on an application in writing made before it, extended the period for making the award, either prior to or after the expiry of the period of 12 or 18 months, as the case may be. The 2019 Amendment has introduced an amendment to exclude international arbitrations from the purview of section 29A. Further, the 2019 Amendment also provides that the period of 12 months to make an award shall commence from the date of completion of the pleadings by the parties. It further provides that this time period would only apply to domestic arbitrations, although, the arbitral tribunal in an international arbitration should endeavour to make its award within the said 12 months (though not mandatory). The introduction of section 29A has certainly aided in improving the speed within which arbitrations seated in India are completed. The courts in India have also been supportive by granting extensions of time where there are genuine requests. However, as regards international arbitrations which have recently been excluded from the strict timeline, it can only be gleaned in the coming years as to whether arbitral tribunals in such matters have endeavoured to make awards within the recommended time limit. In Singapore, there is no express provision in the IAA providing for time limits within

which

an

award

needs

to

be

made

by

the

arbitral

tribunal.

However,

if

institutional rules are chosen, then there might be a provision which could stipulate time limit for awards. For example, under the SIAC Rules, if the Expedited Procedure is adopted, then the award shall be made within six months from the date when the arbitral tribunal is constituted unless extended by the Registrar in exceptional circumstances (Rule 5.2(d) of the SIAC Rules 2016). Under the ICC Rules, an award has to be made within six months from the date the terms of reference is signed, unless extended by the ICC Court of Arbitration (Article 31 of the ICC Arbitration Rules 2017). In England, section 50 of the English Arbitration Act confers upon the court the power to extend the time for making the award where the arbitrators are under some time limit. It is ararely used provision, as any ad hoc arbitration will be highly unlikely to have a time limit, and the only arbitral institution with any time limit is the ICC, which

also

has

a

self-contained

mechanism

for

extensions.“

In

any

event,

the

provision is non-mandatory, and the parties are free to contract out of its provisions (although such an agreement may have unusual consequences, particularly if the 53.

Section

2A(3),

1996 Arbitration Act.

For further discussion

54.

Robert Merkin & Louis Flannery, Arbitration Act 1996 (5th ed. 2014) p. 222.

arbitration, see Chapter 16 of the Handbook.

482

on managing

time and

costs

in

Chapter 19: Arbitral Regimes in India, Singapore and England result is a so-called dead arbitration, but still within the limitation period, so that the claimant may be free to recommence the arbitration).”” 19.12

ENFORCEMENT OF AWARD/RECOURSE ARBITRATION AWARD

19,12.1

Enforcement

AGAINST

of Awards

In India, section 36 of the 1996 Arbitration Act provides that an award shall be enforced in accordance with the provisions of the Code of Civil Procedure, 1908, in the same manner as a decree of the court, once the time to set aside the award

(three months

after receipt of award by a party) has expired. In order to facilitate enforcement of awards, the 2015 Amendment introduced new section 36(2), which has done away with an automatic stay of an award upon filing of an application to set aside the award. Mere filing of an application to set aside the arbitral award will not render the award unenforceable, unless the court stays the operation of the award. Further, a separate application requesting for a stay of operation of the award would have to be filed along with the application to set aside the award. The court can, while considering an application for stay, order the award debtor to furnish security.*° The Arbitration and Conciliation (Amendment) Ordinance 2020, which was promulgated on 4 November 2020, further provides under section 36(3) that where a prima facie case is made out that the arbitration agreement or the contract which formed the basis of the award, or

the making of the award was induced or effected by fraud or corruption, the court shall stay the award unconditionally pending disposal of the challenge to the award under section 34. As regards the enforcement of foreign awards, India is a signatory to the New York Convention and the Geneva Convention on the Execution of Foreign Arbitral Awards 1927 (Geneva Convention). Part II of the 1996 Arbitration Act provides for enforcement of foreign awards under both the conventions. Only those foreign awards that

arise

out

of

legal

relationships,

whether

contractual

or

not,

considered

as

commercial under the law in force in India, are enforceable. Further, India follows the reciprocity principle and limits the enforcement of arbitral awards to those made in other New York Convention and Geneva Convention countries. The awards that are recognised are those that have been made at a seat in a country notified by the central government of India under section 44 and section 53 of the 1996 Arbitration Act,

respectively.”

In Singapore, an award may, by the leave of the High Court, be enforced in the same Manner as a judgment or an order and, where leave is so given, judgment may be entered in terms of the award.”* 55.

Ibid.

58.

Section 19, LAA.

56. Section 36(3), 1996 Arbitration Act. For further discussion on jurisprudence related to enforcement of awards under the Indian statute, see Chapter |1 of the Handbook. 57. In the context of reciprocity and notification, see Chapter 12 of the Handbook.

483

Ganesh Chandru

Section 29 of the IAA deals with the recognition and enforcement of foreign awards. It provides that a foreign award may be enforced in a court either by action or in the same manner as an award of an arbitrator made in Singapore is enforceable under section 19 of the IAA. In England, section 66 of the English Arbitration Act provides that an award may, by leave of the court, be enforced in the same manner as a judgment or order of the court. Where leave is so given, judgment may be entered in terms of the award. Pursuant to section 2(2)(b) of the English Arbitration Act, section 66 is applicable even if the seat of the arbitration is outside England or where no seat has been designated or determined. $9.13

RECOURSE

AGAINST

AWARD

19.13.1

Setting Aside Awards/Resisting Enforcement of Foreign Awards

In India, section 34 of the 1996 Arbitration Act lists the grounds on which a domestic

award can be set aside. The grounds include: — party was under some incapacity; — invalid arbitration agreement;

— party was not given proper notice of appointment of arbitrator or arbitral proceedings or was unable to present his case; — the award deals with a dispute not falling within the terms of submission to arbitration:

— composition of the arbitral tribunal was not in accordance with the parties’ agreement;

— the dispute was not capable of being settled by arbitration; and — the award is in conflict with the public policy of India. The scope of judicial interference while adjudicating the issue of setting aside an award has been held to be narrow and limited. However, the ground of ‘public policy’ has often been used to challenge awards and this attracted some negative views about India’s arbitration landscape.” The term ‘public policy’ was given a wide interpretation in Oil and Natural Gas Corporation Lid. v. Saw Pipes Ltd.,°"" where the Supreme Court brought ‘patent illegality’ within the ambit of public policy. While this was followed in subsequent judgments, attempts were also made to restrict the scope of the interpretation. The recent amendment is a step forward in this regard as it clarifies the scope ol ‘public policy’ in the dictum in the Saw Pipes Case and broadly follows the law expounded in Renusagar Power Co. Ltd. v. General Electric Co.°' Explanation 1 to

59. See Chapter 10 of the Handbook. 60. Oil and Natural Gas Corporation Ltd. v. Saw Pipes Ltd (2003) 5 SCC 705. For further discussion of public policy and case law related thereto, see Chapter 10 of the Handbook. 61. Renusagar Power Company Ltd. v. General Electric Company (1994) Supp | SCC 644.

484

Chapter 19: Arbitral Regimes in India, Singapore and England section 34(2)(b) of the A&C Act clarifies that an award will now be in conflict with the public policy of India only if the making of the award: — was induced or affected by fraud or corruption or was in violation of section 75 (confidentiality as regards conciliation proceedings) or section 81 (matters discussed in conciliation proceedings used as evidence in arbitral and judicial proceedings); — is in contravention with the fundamental policy of Indian law; or — is in conflict with the most basic notions of morality or justice. The Supreme Court in ONGC v. Western Geco™ interpreted the words ‘fundamental policy of Indian law’ broadly and went on to modify the quantum of damages awarded to ONGC. To address this, the 2015 Amendment introduced Explanation 2 to

section 34(2)(b) of the 1996 Arbitration Act which provides that no review on merits can be done by a court for determining whether the award is in contravention with the fundamental policy of Indian law. Enforcement of a foreign award may be refused under section 48 of the 1996 Arbitration Act on broadly similar grounds as provided for in section 34 of the 1996 Arbitration Act, except that an application to resist enforcement of a foreign award under section 48 cannot be made on the ground that the award was patently illegal and therefore against the public policy of India. In the case of Shri Lal Mahal v. Progetto Grano Spa™ the Supreme Court held that the wider meaning given to the expression ‘public policy’ in the Saw Pipes would not be applicable in the case of enforcement under section 48 of the 1996 Arbitration Act. The court applied the decision of Renusagar and held that the expression ‘public policy of India’ must be given a narrow meaning. Therefore, an award cannot be refused enforcement under section 48 of the 1996 Arbitration Act if it is ‘patently illegal’. The issue of interpretation of ‘public policy’ with respect to enforcement of foreign awards was dealt with by the Delhi High Court in Daiichi Sankyo Company Ltd. v. Malvinder Mohan Singh and Ors™ and the court ruled in favour of enforcement of the award. Taking a pro-arbitration approach, the court followed the ratio laid down by the Supreme Court in Shri Lal Mahal and held that the scope of ‘public policy’ under section 48(2)(b) of the 1996 Arbitration Act is narrow in comparison to section 34(2)(b) (ii) of the 1996 Arbitration Act. ‘Fundamental Policy of Indian Law’ does not mean provisions of the statute, but substratal principles on which Indian law is founded. A special leave petition filed before the Supreme Court seeking permission to appeal against the above decision of the Delhi High Court was dismissed. Therefore, the judgment of the Delhi High Court in favour of enforcement of the foreign award stands good. It is pertinent to note that the Singapore High Court also dismissed an application that was filed to set aside the award at the seat of arbitration. 62. ONGC Ltd. v. Western Geco International (2014) 9 SCC 263. 63. See Chapter 10 of the Handbook.

64.

Shri Lal Mahal v. ProgettoGrano Spa (2014) 2 SCC 433, para. 29.

65. Daiichi Sankyo Company Ltd. v. Malvinder Mohan Singh and Ors, 2018 SCC OnLine Del 6869, paras 61, 96-97.

485

Ganesh Chandru

In Singapore, an award may be set aside under Article 34 of the Model Law. In addition to the grounds mentioned under Article 34(2) of the Model Law, section 24 of the IAA provides that an award may also be set aside if the making of the award was induced or affected by fraud or corruption or there was a breach of the rules of natural justice in connection with the making of the award. Article 34(2) of the Model Law lists the grounds on which an international arbitral award can be set aside. One of the grounds on which an award can be set aside is that the award is in conflict with the public policy of the state. In PT Asuransi Jasa Indonesia (Persero) v. Dexia Bank® the Singapore Court of Appeal, in effect, noted that errors of law or fact on the part of the arbitral tribunal in making the arbitral award generally do not amount to contraventions of public policy for the purpose of refusing to enforce an arbitral award. While discussing this, the court observed that violations of public policy include instances where upholding an arbitral award would ‘shock the conscience’ or that would violate Singapore's ‘most basic notion of morality and justice’. As regards resisting enforcement of foreign award, section 31(2) of the IAA (based on Article V of the New York Convention) lists grounds on which a court so requested may refuse the enforcement of a foreign award. In England, section 67 deals with challenge of award on the ground that the tribunal did not have substantial jurisdiction. Section 68 of the English Arbitration Act deals with the challenge of the award on the ground of serious irregularity affecting the tribunal, the proceedings or the award. Serious irregularity means failure of the tribunal to comply with its general duties; tribunal exceeding its powers; failure to conduct proceedings in accordance with the procedure agreed by the parties, failure to deal with all issues; uncertainty or ambiguity relating to the award, award being obtained by fraud, failure to comply with the requirements as to the form of the award or any irregularity in the conduct of the proceedings. 19,13.2

Appeal Against Award

In India, the 1996 Arbitration Act does not contain any provision for appeal against award. Prior to the amendment to the 1996 Arbitration Act, parties were often challenging awards on the ground of patent illegality (and therefore against the public policy of India), which was almost akin to an appeal against an award. However, with the amendments to section 34(2) of the 1996 Arbitration Act (as discussed earlier), this has now been curtailed except for domestic awards. Under section 69 of the English Arbitration Act, a party can file an appeal against the arbitral award on points of law with the agreement of all the other parties or with the leave of the court. Leave of the court shall be given only if the court is satisfied that the determination of the question will substantially affect the right of one or more of the parties; the question is one which the tribunal was asked to determine; on the basis of

the finding of fact in the award, the decision of the tribunal on the question is obviously

66. Asuransi Jasa Indonesia (Persero) v. Dexia Bank [2007] | SLR 597, paras 57-59.

486

Chapter 19: Arbitral Regimes in India, Singapore and England wrong; or the question is one of general public importance and the decision of the tribunal is at least open to serious doubt; and despite the agreement of the parties to resolve the matter by arbitration, it is just and proper in all the circumstances for the court to determine the question.*’ In Singapore, the IAA does not contain any provision for appeal against an award. However, under the (Domestic) Arbitration Act of Singapore, section 49 provides for an appeal against an award on a question of law. Section 49 of the (Domestic) Arbitration Act of Singapore is very similar to section 69 of the English Arbitration Act (discussed in the previous paragraph). 19.14

CONFIDENTIALITY

In India, until 2019 there was no provision in the 1996 Arbitration Act that specifically provided for arbitration proceedings or evidence to be kept confidential. The Srikrishna Committee recommended that a new provision be added in the 1996 Arbitration Act providing for confidentiality of arbitral proceedings unless disclosure is required by legal duty, to protect or enforce a legal right, or to enforce or challenge an award before a court or judicial authority.“* The 2019 Amendment has now introduced a new section 42A to the 1996 Arbitration Act which provides that the arbitrator and arbitral institutions shall maintain confidentiality of all arbitral proceedings except the

award.”

In Singapore, arbitration proceedings are confidential. Rule 39 of the SIAC Rules 2016 provides for confidentiality of arbitration proceedings. Section 22 of the IAA provides that proceedings under the IAA in any court shall, on the application of any party to the proceedings, be heard otherwise than in open court. Section 23 of the IAA, that applies to proceedings heard otherwise than in open court, provides that on the application of any party to the proceedings the court shall give directions as to whether any and, if so, what information relating to the proceedings may be published (including the identity of any party to the proceedings). In England, the English Arbitration Act makes no express reference to the obligation of confidentiality. However, it is widely believed that the point of view under English law, as was implemented by the courts, is that the parties to arbitration are subject to an implied duty of confidentiality as decided and confirmed in Ali Shipping Corporation v. Shipyard Trogir”’ and in Emmott v. Michael Wilson & Partners Lid.’' The court held that the duty of confidentiality in relation to arbitration awards and documents used in arbitrations takes effect as a term implied in the arbitration agreement as a matter of law, and not on the basis of the presumed intention of the parties, although it is subject to exceptions. The implied term precludes the parties 67.

Section 69(3), English Arbitration Act. See David Wolfson & Susanna Charlwood, Chapter 25 —

68. 69.

Ireland (Julian David Mathew Lew, Harris Bor, et al. eds., 2013) §25-90. LCI Report 246, pp. 71-72. See Indu Malhotra, Commentary on the Law of Arbitration (4th ed. 2020) p. 1076.

Challenges to Arbitration Awards, in Arbitration in England — With Chapters on Scotland and

70. Ali Shipping Corporation v. Shipyard Trogir [1998] 2 Lloyd's Rep 643. 71. Emmott v. Michael Wilson & Partners Ltd. [2008] | Lloyd's Rep 616.

487

Ganesh Chandru

from using or disclosing for any other purpose documents prepared for or disclosed in the arbitration, including evidence or the award. That classification is important, because, if the question of the scope of the duty arises while the arbitration is still in existence, the arbitrators alone have jurisdiction to resolve that question.” 19,15

CONCLUSION

The above analysis is not exhaustive and covers only significant aspects of the arbitral legislation in India, Singapore and England. There is also a reference to Rules of arbitral institutions in these jurisdictions, where appropriate. The bird's eye view of the arbitration regime in these three jurisdictions aims to provide a comparative ready reference for arbitrators, legal practitioners and students of international arbitration.

72. The view of Thomas LJ in Emmott v. Michael Wilson & Partners Ltd. [2008] 1 Lloyd's Rep 616, referred to in Robert Merkin & Louis Flannery, Arbitration Act 1996 (5th ed. 2014) p. 14.

488

Appendices

APPENDIX |

The Arbitration and Conciliation Act, 1996

(as amended by Amending Act No. 3 of

2016 (with effect from 23 October 2015)

and Amending Act No. 33 of 2019 (with

effect from 9 August 2019)’

An Act to consolidate and amend the law relating to domestic arbitration, international commercial arbitration and enforcement of foreign arbitral awards as also to define the law relating to conciliation and for matters connected therewith or incidental thereto. Preamble

WHEREAS the United Nations Commission on International Trade Law (UNCITRAL) has adopted the UNCITRAL Model Law on International Commercial Arbitration in 1985; AND WHEREAS the General Assembly of the United Nations has recommended that all countries give due consideration to the said Model Law, in view of the desirability of uniformity of the law of arbitral procedures and the specific needs of international commercial arbitration practice;

1980;

AND WHEREAS the UNCITRAL has adopted the UNCITRAL Conciliation Rules in

AND WHEREAS the General Assembly of the United Nations has recommended the use of the said Rules in cases where a dispute arises in the context of international commercial relations and the parties seek an amicable settlement of that dispute by recourse to conciliation;

*

16 August 1996.

49]

Appendix I AND WHEREAS the said Model Law and Rules make significant contribution to the establishment of a unified legal framework for the fair and efficient settlement of disputes arising in international commercial relations; AND WHEREAS it is expedient to make law respecting arbitration and conciliation, taking into account the aforesaid Model Law and Rules; Be it enacted by Parliament in the forty seventh year of the Republic as follows: Preliminary 1. Short title, extent and commencement

(1) This Act may be called the Arbitration and Conciliation Act, 1996. (2) It extends to the whole of India: Provided that Parts I, II] and IV shall extend to the State of Jammu and

Kashmir only in so far as they relate to international commercial arbitration or, as the case may be, international commercial conciliation. (3) Explanation. — In this sub-section, the expression “international commercial conciliation” shall have the same meaning as the expression “international commercial arbitration” in clause (f) of sub-section (1) of section 2, subject to the modification that for the word “arbitration” occurring therein, the word “conciliation” shall be substituted. (4) It shall be deemed to have come into force on the 25th day of January, 1996. Part IV Arbitration ChapterI General Provisions 2. Definitions (1)

In this Part, unless the context otherwise requires, —

(a) (b) (c) (d) (e)

(f)

“arbitration” means any arbitration whether or not administered by permanent arbitral institution; “arbitration agreement” means an agreement referred to in section 7; “arbitral award” includes an interim award; “arbitral tribunal” means a sole arbitrator or a panel of arbitrators; “Court” means the principal Civil Court of original jurisdiction in a district, and includes the High Court in exercise of its ordinary original civil jurisdiction, having jurisdiction to decide the questions forming the subject-matter of the arbitration if the same had been the subject-matter of a suit, but does not include any civil court of a grade inferior to such principal Civil Court, or any Court of Small Causes; “international commercial arbitration” means an arbitration relating to disputes arising out of legal relationships, whether contractual or not,

A92

Appendix I considered as commercial under the law in force in India and where at least one of the parties is — (i) an individual

who

is a national

of, or habitually resident in, any

country other than India; or (ii) a body corporate which is incorporated in any country other than India; or

(iii) a company or an association or a body of individuals whose central management and control is exercised in any country other than India; or

(iv) the Government of a foreign country; “legal representative” means a person who in law represents the estate of a deceased person, and includes any person who intermeddles with the estate of the deceased, and, where a party acts in a representative character, the person on whom the estate devolves on the death of the party so acting; (h) “party” means a party to an arbitration agreement. (g)

Scope

(2) (3) (4)

(5)

This Part shall apply where the place of arbitration is in India. This Part shall not affect any other law for the time being in force by virtue of which certain disputes may not be submitted to arbitration. This Part except sub-section (1) of section 40, sections 41 and 43 shall apply to every arbitration under any other enactment for the time being in force, as if the arbitration were pursuant to an arbitration agreement and as if that other enactment were an arbitration agreement, except in so far as the provisions of this Part are inconsistent with that other enactment or with any rules made thereunder. Subject to the provisions of sub-section (4), and save in so far as is otherwise provided by any law for the time being in force or in any agreement in force between India and any other country or countries, this Part shall apply to all arbitrations and to all proceedings relating thereto.

Construction of References

(6) (7) (8)

Where this Part, except section 28, leaves the parties free to determine a certain issue, that freedom shall include the right of the parties to authorise any person including an institution, to determine that issue. An arbitral award made under this Part shall be considered as a domestic award, Where this Part — (a) refers to the fact that the parties have agreed or that they may agree, or (b) in any other way refers to an agreement of the parties,

493

Appendix I that agreement shall include any arbitration rules referred to in that agree-

ment.

(9) Where this Part, other than clause (a) of section 25 or clause (a) of sub-section (2) of section 32, refers to a claim, it shall also apply to a counter-claim, and where it refers to a defence, it shall also apply to a defence to that counterclaim. 3. Receipt of written communications (1) Unless otherwise agreed by the parties, — (a) any written communication is deemed to have been received if it is delivered to the addressee personally or at his place of business, habitual residence or mailing address, and (b) if none of the places referred to in clause (a) can be found after making a reasonable inquiry, a written communication is deemed to have been received if it is sent to the addressee’s last known place of business, habitual residence or mailing address by registered letter or by any other means which provides a record of the attempt to deliver it. (2) The communication is deemed to have been received on the day it is so delivered. (3) This Section does not apply to written communications in respect of proceedings of any judicial authority. Waiver of right to object 4. A party who knows that — (a) any provision of this Part from which the parties may derogate, or (b) any requirement under the arbitration agreement, has not been complied with and yet proceeds with the arbitration without stating his objection to such non-compliance without undue delay or, if a time limit is provided for stating that objection, within that period of time, shall be deemed to have waived his right to so object. Extent of judicial intervention 5. Notwithstanding anything contained in any other law for the time being in force, in matters governed by this Part, no judicial authority shall intervene except where so provided in this Part.

494

Appendix I Administrative assistance

6. In order to facilitate the conduct of the arbitral proceedings, the parties, or the arbitral tribunal with the consent of the parties, may arrange for administrative assistance by a suitable institution or person. Chapter II Arbitration Agreement 7. Arbitration agreement

(1)

(2)

(3) (4)

(5)

In this Part, “arbitration agreement” means an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not. An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement. An arbitration agreement shall be in writing. An arbitration agreement is in writing if it is contained in — (a) a document signed by the parties; (b) an exchange of letters, telex, telegrams or other means of telecommunication which provide a record of the agreement; or (c) an exchange of statements of claim and defence in which the existence of the agreement is alleged by one party and not denied by the other. The reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement if the contract is in writing and the reference is such as to make that arbitration clause part of the contract.

8. Power to refer parties to arbitration where there is an arbitration agreement

(1)

(2) (3)

A judicial authority before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party so applies not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration. The application referred to in sub-section (1) shall not be entertained unless it is accompanied by the original arbitration agreement or a duly certified copy thereof. Notwithstanding that an application has been made under sub-section (1) and that the issue is pending before the judicial authority, an arbitration may be commenced or continued and an arbitral award made.

495

Appendix I Interim measures by court 9. A party may, before or during arbitral proceedings or at any time alter the making of the arbitral award but before it is enforced in accordance with section 36, apply to a Court, (i) for the appointment of a guardian for a minor or a person of unsound mind for the purposes of arbitral proceedings; or (ii) for an interim measure of protection in respect of any of the following matters, namely: — (a) the preservation, interim custody or sale of any goods which are the subject-matter of the arbitration agreement; (b) securing the amount in dispute in the arbitration; (c) the detention, preservation or inspection of any property or thing which is the subject-matter of the dispute in arbitration, or as to which any question may arise therein and authorising for any of the aforesaid purposes any person to enter upon any land or building in the possession of any party, or authorising any samples to be taken or any observation to be made, or experiment to be tried, which may be necessary or expedient for the purpose of obtaining full information or evidence; (d) interim injunction or the appointment of a receiver; (e) such other interim measure of protection as may appear to the Court to be just and convenient, and the Court shall have the same power for making orders as it has for the purpose of, and in relation to, any proceedings before it. Chapter IIT Composition of Arbitral Tribunal 10. Number of arbitrators

(1) The parties are free to determine the number of arbitrators, provided that such number shall not be an even number. (2) Failing the determination referred to in sub-section (1), the arbitral tribunal shall consist of a sole arbitrator. 11. Appointment of arbitrators (1) A person of any nationality may be an arbitrator, unless otherwise agreed by the parties. (2) Subject to sub-section (6), the parties are free to agree on a procedure for appointing the arbitrator or arbitrators. (3) Failing any agreement referred to in sub-section (2), in an arbitration with three arbitrators, each party shall appoint one arbitrator, and the two

A496

Appendix I

(4)

(5) (6)

(7)

(8)

(9) (10)

appointed arbitrators shall appoint the third arbitrator who shall act as the presiding arbitrator. If the appointment procedure in sub-section (3) applies and — (a) a party fails to appoint an arbitrator within thirty days from the receipt of a request to do so from the other party; or (b) the two appointed arbitrators fail to agree on the third arbitrator within thirty days from the date of their appointment, the appointment shall be made, upon request of a party, by the Chief Justice or any person or institution designated by him. Failing any agreement referred to in sub-section (2), in an arbitration with a sole arbitrator, if the parties fail to agree on the arbitrator within thirty days from receipt of a request by one party from the other party to so agree the appointment shall be made, upon request of a party, by the Chief Justice or any person or institution designated by him. Where, under an appointment procedure agreed upon by the parties, — (a) a party fails to act as required under that procedure; or (b) the parties, or the two appointed arbitrators, fail to reach an agreement expected of them under that procedure; or (c) a person, including an institution, fails to perform any function entrusted to him or it under that procedure,

a party may request the Chief Justice or any person or institution designated by him to take the necessary measure, unless the agreement on the appointment procedure provides other means for securing the appoint-

ment.

A decision on a matter entrusted by sub-section (4) or sub-section (5) or sub-section (6) to the Chief Justice or the person or institution designated by him is final. The Chief Justice or the person or institution designated by him, in appointing an arbitrator, shall have due regard to — (a) any qualifications required of the arbitrator by the agreement ol the parties; and

(11)

(12) (13)

(b) other considerations as are likely to secure the appointment of an independent and impartial arbitrator. In the case of appointment of sole or third arbitrator in an international commercial arbitration, the Chief Justice of India or the person or institu-

tion designated by him may appoint an arbitrator of a nationality other than the nationalities of the parties where the parties belong to different nationalities. The Chief Justice may make such scheme as he may deem appropriate for dealing with matters entrusted by sub-section (4) or sub-section (5) or sub-section (6) to him. Where more than one request has been made under sub-section (4) or sub-section (5) or sub-section (6) to the Chief Justices of different High Courts or their designates, the Chief Justice or his designate to whom the

497

Appendix I

(14)

request has been first made under the relevant sub-section shall alone be competent to decide on the request. (a) Where the matters referred to in sub-sections (4), (5), (6), (7), (8) and (10) arise in an international commercial arbitration, the reference to “Chief Justice” in those sub-sections shall be construed as a reference to the “Chief Justice of India”. (b) Where the matters referred to in sub-sections (4), (5), (6), (7), (8) and (10) arise in any other arbitration, the reference to “Chief Justice” in those sub-sections shall be construed as a reference to the Chief Justice of the High Court within whose local limits the principal Civil Court referred to in clause (e) of sub-section (1) of section 2 is situate and, where the High Court itself is the Court referred to in that clause, to the Chief Justice of that High Court.

12. Grounds for challenge (1) When a person is approached in connection with his possible appointment as an arbitrator, he shall disclose in writing any circumstances likely to give rise to justifiable doubts as to his independence or impartiality. (2) An arbitrator, from the time of his appointment and throughout the arbitral proceedings, shall, without delay, disclose to the parties in writing any circumstances referred to in sub-section (1) unless they have already been informed of them by him. (3) An arbitrator may be challenged only if — (a) circumstances exist that give rise to justifiable doubts as to his independence or impartiality, or (b) he does not possess the qualifications agreed to by the parties. (4) A party may challenge an arbitrator appointed by him, or in whose appointment he has participated, only for reasons of which he becomes aware after the appointment has been made. 13. Challenge procedure (1) Subject to sub-section (4), the parties are free to agree on a procedure for challenging an arbitrator. (2) Failing any agreement referred to in sub-section (1), a party who intends to challenge an arbitrator shall, within fifteen days after becoming aware of the constitution of the arbitral tribunal or after becoming aware of any circumstances referred to in sub-section (3) of section 12, send a written statement of the reasons for the challenge to the arbitral tribunal. (3) Unless the arbitrator challenged under sub-section (2) withdraws from his office or the other party agrees to the challenge, the arbitral tribunal shall decide on the challenge.

A498

Appendix I (4) If a challenge under any procedure agreed upon by the parties or under the procedure under sub-section (2) is not successful, the arbitral tribunal shall continue the arbitral proceedings and make an arbitral award. (5) Where an arbitral award is made under sub-section (4), the party challenging the arbitrator may make an application for setting aside such an arbitral award in accordance with section 34. (6) Where an arbitral award is set aside on an application made under subsection (5), the Court may decide as to whether the arbitrator who is challenged is entitled to any fees. 14. Failure or impossibility to act (1) The mandate of an arbitrator shall terminate if — (a) he becomes de jure or de facto unable to perform his functions or for other reasons fails to act without undue delay; and

(b)

he withdraws from his office or the parties agree to the termination of his mandate. (2) If a controversy remains concerning any of the grounds referred to in clause (a) of sub-section (1), a party may, unless otherwise agreed by the parties, apply to the Court to decide on the termination of the mandate. (3) If, under this section or sub-section (3) of section 13, an arbitrator withdraws from his office or a party agrees to the termination of the mandate of an arbitrator, it shall not imply acceptance of the validity of any ground referred to in this section or sub-section (3) of section 12. 15. Termination of mandate and substitution of arbitrator

(1) In addition to the circumstances referred to in section 13 or section 14, the mandate of an arbitrator shall terminate — (a) where he withdraws from office for any reason; or (b) by or pursuant to agreement of the parties. (2) Where the mandate of an arbitrator terminates, a substitute arbitrator shall be appointed according to the rules that were applicable to the appointment of the arbitrator being replaced. (3) Unless otherwise agreed by the parties, where an arbitrator is replaced under sub-section (2), any hearings previously held may be repeated at the discretion of the arbitral tribunal. (4) Unless otherwise agreed by the parties, an order or ruling of the arbitral tribunal made prior to the replacement of an arbitrator under this section shall not be invalid solely because there has been a change in the composition of the arbitral tribunal.

499

Appendix I Chapter IV Jurisdiction of Arbitral Tribunals 16. Competence of arbitral tribunal to rule on its jurisdiction

(1)

(2)

(3) (4) (5) (6)

The arbitral tribunal may rule on its own jurisdiction, including ruling on any objections with respect to the existence or validity of the arbitration agreement, and for that purpose, — (a) an arbitration clause which forms part of a contract shall be treated as an agreement independent of the other terms of the contract; and (b) a decision by the arbitral tribunal that the contract is null and void shall not entail ipso jure the invalidity of the arbitration clause. A plea that the arbitral tribunal does not have jurisdiction shall be raised not later than the submission of the statement of defence; however, a party shall not be precluded from raising such a plea merely because that [sic] he has appointed, or participated in the appointment of, an arbitrator. A plea that the arbitral tribunal is exceeding the scope of its authority shall be raised as soon as the matter alleged to be beyond the scope of its authority is raised during the arbitral proceedings. The arbitral tribunal may, in either of the cases referred to in sub-section (2) or sub-section (3), admit a later plea if it considers the delay justified. The arbitral tribunal shall decide on a plea referred to in sub-section (2) or sub-section (3) and, where the arbitral tribunal takes a decision rejecting the plea, continue with the arbitral proceedings and make an arbitral award. A party aggrieved by such an arbitral award may make an application for setting aside such an arbitral award in accordance with section 34.

17. Interim measures ordered by arbitral tribunal

(1)

(2)

Unless otherwise agreed by the parties, the arbitral tribunal may, at the request of a party, order a party to take any interim measure of protection as the arbitral tribunal may consider necessary in respect of the subject-matter of the dispute. The arbitral tribunal may require a party to provide appropriate security in connection with a measure ordered under sub-section (1).

Chapter V Conduct of Arbitral Proceedings 18. Equal treatment of parties The parties shall be treated with opportunity to present his case.

equality

500

and

each

party shall

be given

a full

Appendix I 19. Determination of rules of procedure (1) The arbitral tribunal shall not be bound by the Code of Civil Procedure, 1908 or the Indian Evidence Act, 1872. (2) Subject to this Part, the parties are free to agree on the procedure to be followed by the arbitral tribunal in conducting its proceedings. (3) Failing any agreement referred to in sub-section (2), the arbitral tribunal may, subject to this Part, conduct the proceedings in the manner it considers appropriate. (4) The power of the arbitral tribunal under sub-section (3) includes the power to determine the admissibility, relevance, materiality and weight of any evidence. 20. Place of arbitration

(1) The parties are free to agree on the place of arbitration. (2) Failing any agreement referred to in sub-section (1), the place of arbitration shall be determined by the arbitral tribunal having regard to the circumstances of the case, including the convenience of the parties. (3) Notwithstanding sub-section (1) or sub-section (2), the arbitral tribunal may, unless otherwise agreed by the parties, meet at any place it considers appropriate for consultation among its members, for hearing witnesses, experts or the parties, or for inspection of documents, goods or other property. 21. Commencement of arbitral proceedings Unless otherwise agreed by the parties, the arbitral proceedings in respect of a particular dispute commence on the date on which a request for that dispute to be referred to arbitration is received by the respondent. 22. Language (1) The parties are free to agree upon the language or languages to be used in the arbitral proceedings. (2) Failing any agreement referred to in sub-section (1), the arbitral tribunal shall determine the language or languages to be used in the arbitral proceedings. (3) The agreement or determination, unless otherwise specified, shall apply to any written statement by a party, any hearing and any arbitral award, decision or other communication by the arbitral tribunal. (4) The arbitral tribunal may order that any documentary evidence shall be accompanied by a translation into the language or languages agreed upon by the parties or determined by the arbitral tribunal.

501

Appendix I 23. Statements of claim and defence

(1)

(2) (3)

Within the period of time agreed upon by the parties or determined by the arbitral tribunal, the claimant shall state the facts supporting his claim, the points at issue and the relief or remedy sought, and the respondent shall state his defence in respect of these particulars, unless the parties have otherwise agreed as to the required elements of those statements. The parties may submit with their statements all documents they consider to be relevant or may add a reference to the documents or other evidence they will submit. Unless otherwise agreed by the parties, either party may amend or supplement his claim or defence during the course of the arbitral proceedings, unless the arbitral tribunal considers it inappropriate to allow the amendment or supplement having regard to the delay in making it.

24. Hearings and written proceedings

(1)

(2) (3)

Unless otherwise agreed by the parties, the arbitral tribunal shall decide whether to hold oral hearings for the presentation of evidence or for oral argument, or whether the proceedings shall be conducted on the basis of documents and other materials: Provided that the arbitral tribunal shall hold oral hearings, at an appropriate stage of the proceedings, on a request by a party, unless the parties have agreed that no oral hearing shall be held. The parties shall be given sufficient advance notice of any hearing and of any meeting of the arbitral tribunal for the purposes of inspection of documents, goods or other property. All statements, documents or other information supplied to, or applications made to the arbitral tribunal by one party shall be communicated to the other party, and any expert report or evidentiary document on which the arbitral tribunal may rely in making its decision shall be communicated to the parties.

25. Default of a party Unless otherwise agreed by the parties, where, without showing sufficient cause, -

(a) (b)

the claimant fails to communicate his statement of claim in accordance with sub-section (1) of section 23, the arbitral tribunal shall terminate the proceedings; the respondent fails to communicate his statement of defence in accordance with sub-section (1) of section 23, the arbitral tribunal shall continue the proceedings without treating that failure in itself as an admission of the allegations by the claimant;

502

Appendix I (c) a party fails to appear at an oral hearing or to produce documentary evidence, the arbitral tribunal may continue the proceedings and make the arbitral award on the evidence before it. 26. Expert appointed by arbitral tribunal (1) Unless otherwise agreed by the parties, the arbitral tribunal may (a) appoint one or more experts to report to it on specilic issues to be determined by the arbitral tribunal, and (b) require a party to give the expert any relevant information or to produce, ar to provide access to, any relevant documents, goods or other property for his inspection. (2) Unless otherwise agreed by the parties, if a party so requests or if the arbitral tribunal considers it necessary, the expert shall, after delivery of his written or oral report, participate in an oral hearing where the parties have the opportunity to put questions to him and to present expert witnesses in order to testify on the points at issue. (3) Unless otherwise agreed by the parties, the expert shall, on the request of a party, make available to that party for examination all documents, goods or other property in the possession of the expert with which he was provided in order to prepare his report. 27. Court assistance in taking evidence (1) The arbitral tribunal, or a party with apply to the Court for assistance in (2) The application shall specify — (a) the names and addresses of the (b) the general nature of the claim (c)

the approval of the arbitral tribunal, may taking evidence. parties and the arbitrators; and the relief sought;

the evidence to be obtained, in particular,-

(i) the name and address of any person to be heard as witness or expert witness and a statement of the subject-matter of the testimony required;

(ii) the description of any document to be produced or property to be inspected. (3) The Court may, within its competence and according to its rules on taking evidence, execute the request by ordering that the evidence be provided directly to the arbitral tribunal. (4) The Court may, while making an order under sub-section (3), issue the same processes to witnesses as it may issue in suits tried before it. (5) Persons failing to attend in accordance with such process, or making any other default, or refusing to give their evidence, or guilty of any contempt to the arbitral tribunal during the conduct of arbitral proceedings, shall be subject to the like disadvantages, penalties and punishments by order of the

503

Appendix I Court on the representation of the arbitral tribunal as they would incur for the like offences in suits tried before the Court. (6) In this section the expression “Processes” includes summonses and commissions for the examination of witnesses and summonses to produce docu-

ments.

Chapter VI Making of Arbitral Award and Termination of Proceedings 28. Rules applicable to substance of dispute (1) Where the place of arbitration is situate in India, — (a) in an arbitration other than an international commercial arbitration, the arbitral tribunal shall decide the dispute submitted to arbitration in accordance with the substantive law for the time being in force in India; (b) in international commercial arbitration, (i) the arbitral tribunal shall decide the dispute in accordance with the rules of law designated by the parties as applicable to the substance of the dispute; (ii) any designation by the parties of the law or legal system of a given country shall be construed, unless otherwise expressed, as directly referring to the substantive law of that country and not to its conflict of laws rules; (iii) failing any designation of the law under sub-clause (ii) by the parties, the arbitral tribunal shall apply the rules of law it considers to be appropriate given all the circumstances surrounding the dispute. (2) The arbitral tribunal shall decide ex aequo et bono or as amiable compositeur only if the parties have expressly authorised it to do so. (3) In all cases, the arbitral tribunal shall decide in accordance with the terms of the contract and shall take into account the usages of the trade applicable to the transaction. 29. Decision making by panel of arbitrators (1) Unless otherwise agreed by the parties, in arbitral proceedings with more than one arbitrator, any decision of the arbitral tribunal shall be made by a majority of all its members. (2) Notwithstanding sub-section (1), if authorised by the parties or all the members of the arbitral tribunal, questions of procedure may be decided by the presiding arbitrator.

504

Appendix I 30. Settlement

(1) It is not incompatible with an arbitration agreement for an arbitral tribunal to encourage settlement of the dispute, and, with the agreement of the parties, the arbitral tribunal may use mediation, conciliation or other procedures at any time during the arbitral proceedings to encourage settlement. (2) If, during arbitral proceedings, the parties settle the dispute, the arbitral tribunal shall terminate the proceedings and, if requested by the parties and not objected to by the arbitral tribunal, record the settlement in the form of an arbitral award on agreed terms. (3) An arbitral award on agreed terms shall be made in accordance with section 31 and shall state that it is an arbitral award. (4) An arbitral award on agreed terms shall have the same status and effect as any other arbitral award on the substance of the dispute. 31. Form and contents of arbitral award

(1) An arbitral award shall be made in writing and shall be signed by the members of the arbitral tribunal. (2) For the purposes of sub-section (1), in arbitral proceedings with more than one arbitrator, the signatures of the majority of all the members of the arbitral tribunal shall be sufficient so long as the reason for any omitted signature is stated. (3) The arbitral award shall state the reasons upon which it is based, unless (a) the parties have agreed that no reasons are to be given, or (b) the award is an arbitral award on agreed terms under section 30. (4) The arbitral award shall state its date and the place of arbitration as determined in accordance with section 20 and the award shall be deemed to have been made at that place. (5) After the arbitral award is made, a signed copy shall be delivered to each

party.

(6) The arbitral tribunal may, at any time during the arbitral proceedings, make an interim arbitral award on any matter with respect to which it may make a final arbitral award. (7) (a) Unless otherwise agreed by the parties, where and in so far as an arbitral award is for the payment of money, the arbitral tribunal may include in the sum for which the award is made interest, at such rate as it deems reasonable, on the whole or any part of the money, for the whole or any part of the period between the date on which the cause of action arose and the date on which the award is made. (b) A sum directed to be paid by an arbitral award shall, unless the award otherwise directs, carry interest at the rate of eighteen per centum per annum from the date of the award to the date of payment.

505

Appendix I (8) Unless otherwise agreed by the parties, — (a) the costs of an arbitration shall be fixed by the arbitral tribunal; (b) the arbitral tribunal shall specify (i) the party entitled to costs, (ii) the party who shall pay the costs, (iii) the amount of costs or method of determining that amount, and (iv) the manner in which the costs shall be paid. Explanation. — For the purpose of clause (a), “costs” means reasonable costs relating to -

(i) (ii) (iii) (iv)

the fees and expenses of the arbitrators and witnesses, legal fees and expenses, any administration fees of the institution supervising the arbitration, and any other expenses incurred in connection with the arbitral proceedings and the arbitral award.

32. Termination of proceedings (1) The arbitral proceedings shall be terminated by the final arbitral award or by an order of the arbitral tribunal under sub-section (2). (2) The arbitral tribunal shall issue an order for the termination of the arbitral proceedings where (a) the claimant withdraws his claim, unless the respondent objects to the order and the arbitral tribunal recognises a legitimate interest on his part in obtaining a final settlement of the dispute, (b) the parties agree on the termination of the proceedings, or (c) the arbitral tribunal finds that the continuation of the proceedings has for any other reason become unnecessary or impossible. (3) Subject to section 33 and sub-section (4) of section 34, the mandate of the arbitral tribunal shall terminate with the termination of the arbitral proceed-

ings.

33. Correction and interpretation of award; additional award (1) Within thirty days from the receipt of the arbitral award, unless another period of time has been agreed upon by the parties (a) aparty, with notice to the other party, may request the arbitral tribunal to correct any computation errors, any clerical or typographical errors or any other errors of a similar nature occurring in the award; (b) if so agreed by the parties, a party, with notice to the other party, may request the arbitral tribunal to give an interpretation of a specific point or part of the award.

506

Appendix I (2) If the arbitral tribunal considers the request made under sub-section (1) to be justified, it shall make the correction or give the interpretation within thirty days from the receipt of the request and the interpretation shall form part of the arbitral award. (3) The arbitral tribunal may correct any error of the type referred to in clause (a) of sub-section (1), on its own initiative, within thirty days from the date of the

(4)

(5)

(6)

(7)

arbitral award. Unless otherwise agreed by the parties, a party with notice to the other party, may request, within thirty days from the receipt of the arbitral award, the arbitral tribunal to make an additional arbitral award as to claims presented in the arbitral proceedings but omitted from the arbitral award. If the arbitral tribunal considers the request made under sub-section (4) to be justified, it shall make the additional arbitral award within sixty days from the receipt of such request. The arbitral tribunal may extend, if necessary, the period of time within which it shall make a correction, give an interpretation or make an additional arbitral award under sub-section (2) or sub-section (5). Section 31 shall apply to a correction or interpretation of the arbitral award or to an additional arbitral award made under this section.

Chapter VII Recourse Against Arbitral Award 34. Application for setting aside arbitral award (1) Recourse to a Court against an arbitral award may be made only by an application for setting aside such award in accordance with sub-section (2) and sub-section (3). (2) An arbitral award may be set aside by the Court only if (a) the party making the application furnishes proof that — (i) a party was under some incapacity; or (ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or (iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or (iv) the arbitral award deals with a dispute not contemplated by or not falling

within

the

terms

of the

submission

to

arbitration,

or it

contains decisions on matters beyond the scope of the submission to arbitration: Provided that, if the decisions on matters submitted to arbitration

can be separated from those not so submitted, only that part of the

arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or

507

Appendix I

(3)

(4)

(v) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part; or (b) the Court finds that — (i) the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or (ii) the arbitral award is in conflict with the public policy of India. Explanation. — Without prejudice to the generality of sub-clause (ii) of clause (b), it is hereby declared, for the avoidance of any doubt, that an award is in conflict with the public policy of India if the making of the award was induced or affected by fraud or corruption or was in violation of section 75 or section 81. An application for setting side may not be made after three months have elapsed from the date on which the party making that application had received the arbitral award or, if a request had been made under section 33,

from the date on which tribunal:

that request had been disposed of by the arbitral

Provided that if the Court is satisfied that the applicant was prevented by

sufficient cause from making the application within the said period of three

months it may entertain the application within a further period of thirty days, but not thereafter.

(5)

On receipt of an application under sub-section (1), the Court may, where it is appropriate and it is so requested by a party, adjourn the proceedings for a period of time determined by it in order to give the arbitral tribunal an opportunity to resume the arbitral proceedings or to take such other action as in the opinion of [the] arbitral tribunal will eliminate the grounds for setting aside the arbitral award.

Chapter VIII Finality and Enforcement of Arbitral Awards 35. Finality of arbitral awards Subject to this Part an arbitral award shall be final and binding on the parties and persons claiming under them respectively. 36. Enforcement

Where the time for making an application to set aside the arbitral award under section 34 has expired, or such application having been made, it has been refused, the award shall be enforced under the Code of Civil Procedure,

were a decree of the Court.

508

1908 in the same manner as if it

Appendix I Chapter IX Appeals 37. Appealable orders (1) An appeal shall lie from the following orders (and from no others) to the Court authorised by law to hear appeals from original decrees of the Court passing the order, namely: (a) granting or refusing to grant any measure under section 9; (b) setting aside or refusing to set aside an arbitral award under section 34. (2) An appeal shall also lie to a court from an order of the arbitral tribunal (a) accepting the plea referred to in sub-section (2) or sub-section (3) or section 16: or

(b) granting or refusing to grant an interim measure under section 17. (3) No second appeal shall lie from an order passed in appeal under this section, but nothing in this Section shall alfect or take away any right to appeal to the Supreme Court. Chapter X Miscellaneous 38. Deposits (1) The arbitral tribunal may fix the amount of the deposit or supplementary deposit,

as the case

may

be,

as

an

advance

for the costs

referred

to in

sub-section (8) of section 31, which it expects will be incurred in respect of the claim submitted to it: Provided that where, apart from the claim, a counter-claim has been submit-

ted to the arbitral tribunal, it may fix separate amount of deposit for the claim and counter-claim. (2) The deposit referred to in sub-section (1) shall be payable in equal shares by the parties: Provided that where one party fails to pay his share of the deposit, the other party may pay that share: Provided further that where the other party also does not pay the aforesaid share in respect of the claim or the counter-claim, the arbitral tribunal may suspend or terminate the arbitral proceedings in respect of such claim or counter-claim, as the case may be. (3) Upon termination of the arbitral proceedings, the arbitral tribunal shall render an accounting to the parties of the deposits received and shall return any unexpended balance to the party or parties, as the case may be. 39. Lien on arbitral award and deposits as to costs (1) Subject to the provisions of sub-section (2) and to any provision to the contrary in the arbitration agreement, the arbitral tribunal shall have a lien on the arbitral award for any unpaid costs of the arbitration.

509

Appendix I

(2)

If in any case an arbitral tribunal refuses to deliver its award except on payment of the costs demanded by it, the Court may, on an application in this behalf, order that the arbitral tribunal shall deliver the arbitral award to the

(3)

(4)

applicant on payment into Court by the applicant of the costs demanded, and shall, after such inquiry, if any, as it thinks fit, further order that out of the money so paid into Court there shall be paid to the arbitral tribunal by way of costs such sum as the Court may consider reasonable and that the balance of the money, if any, shall be refunded to the applicant. An application under sub-section (2) may be made by any party unless the fees demanded have been fixed by written agreement between him and the arbitral tribunal, and the arbitral tribunal shall be entitled to appear and be heard on any such application. The Court may make such orders as it thinks fit respecting the costs of the arbitration where any question arises respecting such costs and the arbitral award contains no sufficient provision concerning them.

AQ. Arbitration agreement not to be discharged by death of party thereto

(1)

(2) (3)

An arbitration agreement shall not be discharged by the death of any party thereto either as respects the deceased or as respects any other party, but shall in such event be enforceable by or against the legal representative of the deceased. The mandate of an arbitrator shall not be terminated by the death of any party by whom he was appointed. Nothing in this section shall affect the operation of any law by virtue of which any right of action is extinguished by the death of a person.

41. Provisions in case of insolvency

(1)

(2)

Where it is provided by a term in a contract to which an insolvent is a party that any dispute arising thereout or in connection therewith shall be submitted to arbitration, the said term shall, if the receiver adopts the contract, be enforceable by or against him so far as it relates to any such dispute. Where a person who has been adjudged an insolvent had, before the commencement of the insolvency proceedings, become a party to an arbitration agreement, and any matter to which the agreement applies is required to be determined in connection with, or for the purposes of, the insolvency proceedings, then, if the case is one to which sub-section (1) does not apply, any other party or the receiver may apply to the judicial authority having jurisdiction in the insolvency proceedings for an order directing that the matter in question shall be submitted to arbitration in accordance with the arbitration agreement, and the judicial authority may, if it is of opinion that,

510

Appendix I

(3)

having regard to all the circumstances of the case, the matter ought to be determined by arbitration, make an order accordingly. In this section, the expression “receiver” includes an Official Assignee.

42. Jurisdiction

Notwithstanding anything contained elsewhere in this Part or in any other law for the time being in force, where with respect to an arbitration agreement any application under this Part has been made in a Court, that Court alone shall have jurisdiction over the arbitral proceedings and all subsequent applications arising out of that agreement and the arbitral proceedings shall be made in that Court and in no other Court. 43. Limitations

(1) (2) (3)

(4)

The Limitation Act, 1963, shall apply to arbitrations as it applies to proceedings in court. For the purposes of this section and the Limitation Act, 1963, an arbitration shall be deemed to have commenced on the date referred in section 21. Where an arbitration agreement to submit future disputes to arbitration provides that any claim to which the agreement applies shall be barred unless some step to commence arbitral proceedings is taken within a time fixed by the agreement, and a dispute arises to which the agreement applies, the Court, if it is of opinion that in the circumstances of the case undue hardship would otherwise be caused, and notwithstanding that the time so fixed has expired, may on such terms, if any, as the justice of the case may require, extend the time for such period as it thinks proper. Where the Court orders that an arbitral award be set aside, the period between the commencement of the arbitration and the date of the order of the Court shall be excluded in computing the time prescribed by the Limitation Act, 1963, for the commencement of the proceedings (including arbitration) with respect to the dispute so submitted.

Part II Enforcement of Certain Foreign Awards Chapter I New York Convention Awards 44. Definition

In this Chapter, unless the context otherwise requires, “foreign award” means an arbitral award on differences between persons arising out of legal relationships,

51]

Appendix I whether contractual or not, considered as commercial under the law in [orce in India,

made on or after the 11th day of October, 1960 (a) in pursuance of an agreement in writing for arbitration to which the Convention set forth in the First Schedule applies,' and (b) in one of such territories as the Central Government, being satisfied that reciprocal provisions have been made may, by notification in the Official Gazette, declare to be territories to which the said Convention applies. 45. Power of judicial authority to refer parties to arbitration Notwithstanding anything contained in Part I or in the Code of Civil Procedure, 1908, a judicial authority, when seized of an action in a matter in respect of which the parties have made an agreement referred to in section 44, shall, at the request of one of the parties or any person claiming through or under him, refer the parties to arbitration, unless it finds that the said agreement is null and void, inoperative or incapable of being performed. 46, When foreign award binding Any foreign award which would be enforceable under this Chapter shall be treated as binding for all purposes on the persons as between whom it was made, and may accordingly be relied on by any of those persons by way of defence, set off or otherwise in any legal proceedings in India and any relerences in this Chapter to enforcing a foreign award shall be construed as including references to relying on an award. 47. Evidence

(1) The party applying for the enforcement of a foreign award shall, at the time of the application, produce before the Court — (a) the original award or a copy thereof, duly authenticated in the manner required by the law of the country in which it was made; (b) the original agreement for arbitration or a duly certified copy thereof; and (c) such evidence as may be necessary to prove that the award is a foreign award. (2) Ifthe award or agreement to be produced under sub-section (1) is in a foreign language, the party seeking to enforce the award shall produce a translation into English certified as correct by a diplomatic or consular agent of the country to which that party belongs or certified as correct in such other manner as may be sufficient according to the law in force in India. Explanation. — In this Section and all the following sections of this Chapter, “Court” means the principal Civil Court of original jurisdiction in a district,

l.

The First Schedule is not reproduced here. The text of the 1958 New York Convention has been reproduced in the International Handbook under New York Convention.

512

Appendix I and includes the High Court in exercise of its ordinary original civil jurisdiction, having jurisdiction over the subject-matter of the award if the same had been the subject-matter of a suit, but does not include any civil court of a grade inferior to such principal Civil Court, or any Court of Small Causes. 48, Conditions for enforcement of foreign awards

(1)

Enforcement of a foreign award may be refused, at the request of the party against whom it is invoked, only if that party furnishes to the Court proof that (a) the parties to the agreement referred to in section 44 were, under the law applicable to them, under some incapacity, or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of the country where the award

was

made; or

(b)

the party against whom the award is invoked was not given proper notice of the appointment of the arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or

(c) the award deals with a difference not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration: Provided that, if the decisions on matters submitted to arbitration can

be separated from those not so submitted, that part of the award which contains decisions forced; or

(d)

on matters submitted

to arbitration

may

be en-

the composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties, or, failing such agreement,

was

not in accordance

with

the law

of the country

where

the

arbitration took place; or

(e)

(2)

(3)

(4)

the award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made.

Enforcement of an arbitral award may also be refused if the Court finds that (a) the subject-matter of the difference is not capable of settlement by arbitration under the law of India; or (b) the enforcement of the award would be contrary to the public policy of India. Explanation. — Without prejudice to the generality of clause (b) of this [sub-]section, it is hereby declared,

for the avoidance of any doubt,

that an

award is in conflict with the public policy of India if the making of the award was induced or affected by fraud or corruption. If an application for the setting aside or suspension of the award has been made to a competent authority referred to in clause (e) of sub-section (1) the Court may, if it considers it proper, adjourn the decision on the enforcement

513

Appendix I of the award and may also, on the application of the party claiming enforcement of the award, order the other party to give suitable security. 49. Enforcement of foreign awards Where the Court is satisfied that the foreign award is enforceable under this Chapter, the award shall be deemed to be a decree of that Court. 50. Appealable orders (1) An appeal shall lie from the order refusing to (a) refer the parties to arbitration under section 45; (b) enforce a foreign award under section 48, (2) to the Court authorised by law to hear appeals from such order. (3) No second appeal shall lie from an order passed in appeal under this section, but nothing in this section shall affect or take away any right to appeal to the supreme Court. 51. Saving Nothing in this Chapter shall prejudice any rights which any person would have had of enforcing in India of any award or of availing himself in India of any award if this Chapter had not been enacted. 52. Chapter II not to apply Chapter II of this Part shall not apply in relation to foreign awards to which this Chapter applies. Chapter II Geneva Convention Awards 53. Interpretation In this Chapter “foreign award” means an arbitral award on differences relating to matters considered as commercial under the law in force in India made after the 28th day of July, 1924, -

(a) in pursuance of an agreement for arbitration to which the Protocol set forth in the Second Schedule applies,* and (b) between persons of whom one is subject to the jurisdiction of some one of such Powers as the Central Government, being satisfied that reciprocal provisions have been made, may, by notification in the Official Gazette, declare to be parties to the Convention set forth in the Third Schedule,’ and of 2.

3.

The Second Schedule, which contains the text of the Geneva Protocol, 1928, is not reproduced.

The Third Schedule, which contains the text of the Geneva Convention, 1927, is not reproduced.

514

Appendix I whom the other is subject to the jurisdiction of some other of the Powers aforesaid, and (c) in one of such territories as the Central Government, being satisfied that reciprocal provisions have been made, may, by like notification, declare to be territories to which the said Convention applies, and for the purposes of this Chapter an award shall not be deemed to be final if any proceedings for the purpose of contesting the validity of the award are pending in the country in which it was made. 54. Power of judicial authority to refer parties to arbitration Notwithstanding anything contained in Part I or in the Code of Civil Procedure, 1908, a judicial authority, on being seized of a dispute regarding a contract made between persons to whom section 53 applies and including an arbitration agreement, whether referring to present or future differences, which is valid under that section and capable of being carried into effect, shall refer the parties on the application of either of them or any person claiming through or under him to the decision of the arbitrators and such reference shall not prejudice the competence of the judicial authority in case the agreement or the arbitration cannot proceed or becomes inoperative. 55. Foreign awards when binding Any foreign award which would be enforceable under this Chapter shall be treated as binding for all purposes on the persons as between whom it was made, and may accordingly be relied on by any of those persons by way of defence, set off or otherwise in any legal proceedings in India and any references in this Chapter to enforcing a foreign award shall be construed as including references to relying on an award. 56. Evidence

(1) The party applying for the enforcement of a foreign award shall, at the time of application produce before the Court (a) the original award or a copy thereof duly authenticated in the manner required by the law of the country in which it was made; (b) evidence proving that the award has become final; and (c) such evidence as may be necessary to prove that the conditions mentioned in clauses (a) and (c) of sub-section (1) of section 57 are satisfied. (2) Where any document requiring to be produced under sub-section (1) is in a foreign language, the party seeking to enforce the award shall produce a translation into English certified as correct by a diplomatic or consular agent of the country to which that party belongs or certified as correct in such other manner as may be sufficient according to the law in force in India. Explanation. — In this section and all the following sections of this Chapter, “Court” means the principal Civil Court of original jurisdiction in a district, and includes the High Court in exercise of its ordinary original civil jurisdiction, having jurisdiction over the subject-matter of the award if the same had

515

Appendix I been the subject-matter of a suit, but does not include any civil court of a grade inferior to such principal Civil Court, or any Court of Small Causes. 57. Conditions for enforcement of foreign awards

(1)

In order that a foreign award may be enforceable under this Chapter, it shall be necessary that (a) the award has been made in pursuance of submission to arbitration which is valid under the law applicable thereto; (b) the subject-matter of the award is capable of settlement by arbitration under the law of India:

(c) the award has been made by the arbitral tribunal provided for in the submission to arbitration or constituted in the manner agreed upon by the parties and in conformity with the law governing the arbitration procedure;

(d)

(2)

(3)

the award has become [inal in the country in which it has been made, in the sense that it will not be considered as such if it is open to opposition or appeal or if it is proved that any proceedings for the purpose of contesting the validity of the award are pending; (e) the enforcement of the award is not contrary to the public policy or the law of India. Explanation. — Without prejudice to the generality of clause (e), it is hereby declared, for the avoidance of any doubt, that an award is in conflict with the public policy of India if the making of the award was induced or affected by fraud or corruption. Even if the conditions laid down in sub-section (1) are fulfilled, enforcement of the award shall be refused if the Court is satisfied that — (a) the award has been annulled in the country in which it was made; (b) the party against whom it is sought to use the award was not given notice of the arbitration proceedings in sufficient time to enable him to present his case; or that, being under a legal incapacity, he was not properly represented;

(4)

(c) the award does not deal with the differences contemplated by or falling within the terms of the submission to arbitration or that it contains decisions on matters beyond the scope of the submission to arbitration: Provided that if the award has not covered all the differences submitted to the arbitral tribunal, the Court may, if it thinks fit, postpone such enforcement or srant it subject to such guarantee as the Court may decide. If the party against whom the award has been made proves that under the law governing the arbitration procedure there is a ground, other than the grounds referred to in clauses (a) and (c) of sub-section (1) and clauses (b) and (c) of sub-section (2) entitling him to contest the validity of the award, the Court may,

if it thinks fit, either refuse enforcement

516

of the award

or adjourn the

Appendix I consideration thereof, giving such party a reasonable time within which to have the award annulled by the competent tribunal. 58. Enforcement of foreign awards Where the Court is satisfied that the foreign award is enforceable under this Chapter, the award shall be deemed to be a decree of the Court. 59. Appealable orders (1) An appeal shall lie from the order refusing (a) to refer the parties to arbitration under section 54; and (b) to enforce a foreign award under section 57, (2) to the court authorised by law to hear appeals from such order. (3) No second appeal shall lie from an order passed in appeal under this section, but nothing in this section shall affect or take away any right to appeal to the supreme Court. 60. Saving Nothing in this Chapter shall prejudice any rights which any person would have had of enforcing in India of any award or of availing himself in India of any award if this Chapter had not been enacted. Part III Conciliation

61. Application and scope (1) Save as otherwise provided by any law for the time being in force and unless the parties have otherwise agreed, this Part shall apply to conciliation of disputes arising out of legal relationship, whether contractual or not and to all proceedings relating thereto. (2) This Part shall not apply where by virtue of any law for the time being in force certain disputes may not be submitted to conciliation. 62. Commencement of conciliation proceedings (1) The party initiating conciliation shall send to the other party a written invitation to conciliate under this Part, briefly identifying the subject of the dispute. (2) Conciliation proceedings shall commence when the other party accepts in writing the invitation to conciliate. (3) If the other party rejects the invitation, there will be no conciliation proceed-

ings.

517

Appendix I

(4)

If the party initiating conciliation does not receive a reply within thirty days from the date on which he sends the invitation, or within such other period of time as specified in the invitation, he may elect to treat this as a rejection of the invitation to conciliate and if he so elects, he shall inform in writing the other party accordingly.

63. Number of conciliators

(1) (2)

There shall be one conciliator unless the parties agree that there shall be two or three conciliators. Where there is more than one conciliator, they ought, as a general rule, to act

jointly.

64. Appointment of conciliators

(1)

Subject to sub-section (2), (a) in conciliation proceedings with one conciliator, the parties may agree on the name of a sole conciliator; (b) in conciliation proceedings with two conciliators, each party may appoint one conciliator:

(2)

(c) in conciliation proceedings with three conciliators, each party may appoint one conciliator and the parties may agree on the name o! the third conciliator who shall act as the presiding conciliator. Parties may enlist the assistance of a suitable institution or person in connection with the appointment of conciliators, and in particular, (a) a party may request such an institution or person to recommend the names of suitable individuals to act as conciliator; or (b) the parties may agree that the appointment of one or more conciliators be made directly by such an institution or person: Provided that in recommending or appointing individuals to act as conciliator, the institution or person shall have regard to such considerations as are likely to secure the appointment of an independent and impartial conciliator and, with

respect

to

a sole

or

third

conciliator,

shall

take

into

account

the

advisability of appointing a conciliator of a nationality other than the nationalities of the parties. 65. Submission of statements to conciliator

(1)

The conciliator, upon his appointment, may request each party to submit to him a brief written statement describing the general nature of the dispute and the points at issue. Each party shall send a copy of such statement to the other party.

518

Appendix I

(2)

The conciliator may request each party to submit to him a further written statement of his position and the facts and grounds in support thereof, supplemented by any documents and other evidence that such party deems appropriate. The party shall send a copy of such statement, documents and other evidence to the other party. At any stage of the conciliation proceedings, the conciliator may request a party to submit to him such additional information as he deems appropriate. Explanation. — In this section and all the following sections of this Part, the

(3)

term “conciliator” applies to a sole conciliator, two or three conciliators, as

the case may be. 66. Conciliator not bound by certain enactments The conciliator is bound by the Code of Civil Procedure, 1908 or the Indian Evidence

Act, 1872.

67. Role of conciliator

(1) (2)

(3)

(4)

The conciliator shall assist the parties in an independent and impartial manner in their attempt to reach an amicable settlement of their dispute. The conciliator shall be guided by principles of objectivity, fairness and justice, giving consideration to, among other things, the rights and obligations of the parties, the usages of the trade concerned and the circumstances surrounding the dispute, including any previous business practices between the parties. The conciliator may conduct the conciliation proceedings in such a manner as he considers appropriate, taking into account the circumstances ol the case, the wishes the parties may express, including any request by a party that the conciliator hear oral statements, and the need for a speedy settlement of the dispute. The conciliator may, at any stage of the conciliation proceedings, make proposals for a settlement of the dispute. Such proposals need not be in writing and need not be accompanied by a statement of the reasons therefor.

68. Administrative assistance

In order to facilitate the conduct of the conciliation proceedings, the parties, or the conciliator with the consent of the parties, may arrange for administrative assistance by a suitable institution or person.

519

Appendix I 69. Communication between conciliator and parties (1) The conciliator may invite the parties to meet him or may communicate with them orally or in writing. He may meet or communicate with the parties together or with each of them separately. (2) Unless the parties have agreed upon the place where meetings with the conciliator are to be held, such place shall be determined by the conciliator, alter consultation with the parties, having regard to the circumstances of the conciliation proceedings. 70. Disclosure of information

When the conciliator receives factual information concerning the dispute from a party, he shall disclose the substance of that information to the other party in order that the other party may have the opportunity to present any explanation which he considers appropriate: Provided that when a party gives any information to the conciliator subject to a specific condition that it be kept confidential, the conciliator shall not disclose that information to the other party. 71. Co-operation of parties with conciliator The parties shall in good faith co-operate with the conciliator and, in particular, shall endeavour to comply with requests by the conciliator to submit written materials, provide evidence and attend meetings. 72. Suggestions by parties for settlement of dispute Each party may, on his own initiate or at the invitation of the conciliator, submit to the conciliator suggestions for the settlement of the dispute. 73. Settlement agreement (1) When it appears to the conciliator that there exist elements of a settlement which may be acceptable to the parties, he shall formulate the terms of a possible settlement and submit them to the parties for their observations. After receiving the observations of the parties, the conciliator may reformulate the terms of a possible settlement in the light of such observations. (2) If the parties reach agreement on a settlement of the dispute, they may draw up and sign a written settlement agreement. If requested by the parties, the conciliator may draw up, or assist the parties in drawing up, the settlement

agreement.

(3) When the parties sign the settlement agreement, it shall be final and binding on the parties and persons claiming under them respectively.

520

Appendix I (4) The conciliator shall authenticate the settlement agreement and furnish a copy thereof to each of the parties. 74. Status and effect of settlement agreement The settlement agreement shall have the same status and effect as if it is an arbitral award on agreed terms on the substance of the dispute rendered by an arbitral tribunal under section 30. 75. Confidentiality Notwithstanding anything contained in any other law for the time being in force, the conciliator and the parties shall keep confidential all matters relating to the conciliation proceedings. Confidentiality shall extend also to the settlement agreement, except where its disclosure is necessary for purposes of implementation and enforcement. 76. Termination of conciliation proceedings The conciliation proceedings shall be terminated — (a) by the signing of the settlement agreement by the parties, on the date of the

agreement; or

(b) by a written declaration of the conciliator, after consultation with the parties, to the effect that further efforts at conciliation are no longer justified, on the date of the declaration; or (c) by a written declaration of the parties addressed to the conciliator to the effect that the conciliation proceedings are terminated, on the date of the declaration; or

(d) by a written declaration of a party to the other party and the conciliator, if appointed, to the effect that the conciliation proceedings are terminated, on the date of the declaration. 77. Resort to arbitral or judicial proceedings The parties shall not initiate, during the conciliation proceedings, any arbitral or judicial proceedings in respect of a dispute that is the subject matter of the conciliation proceedings except that a party may initiate arbitral or judicial proceedings where, in his opinion, such proceedings are necessary for preserving his rights. 78. Costs

(1) Upon termination of the conciliation proceedings, the conciliator shall fix the costs of the conciliation and give written notice thereof to the parties.

521

Appendix I (2) For the purpose of sub-section (1), “costs” means reasonable costs relating to -

(a)

the fee and expenses of the conciliator and witnesses requested by the conciliator with the consent of the parties; (b) any expert advice requested by the conciliator with the consent of the parties;

(c) any assistance provided pursuant to clause (b) of sub-section (2) of section 64 and section 68; (d) any other expenses incurred in connection with the conciliation proceedings and the settlement agreement. (3) The costs shall be borne equally by the parties unless the settlement agreement provides for a different apportionment. All other expenses incurred by a party shall be borne by that party. 79. Deposits (1) The conciliator may direct each party to deposit an equal amount as an advance for the costs referred to in sub-section (2) of section 78 which he expects will be incurred. (2) During the course of the conciliation proceedings, the conciliator may direct supplementary deposits in an equal amount from each party. (3) If the required deposits under sub-sections (1) and (2) are not paid in full by both parties within thirty days, the conciliator may suspend the proceedings or may make a written declaration of termination of the proceedings to the parties, effective on the date of that declaration.

(4) Upon termination of the conciliation proceedings, the conciliator shall render an accounting to the parties of the deposits received and shall return any unexpended balance to the parties. 80. Role of conciliator in other proceedings Unless otherwise agreed by the parties, — (a) the conciliator shall not act as an arbitrator or as a representative or counsel of a party in any arbitral or judicial proceeding in respect of a dispute that is the subject of the conciliation proceedings; (b) the conciliator shall not be presented by the parties as a witness in any arbitral or judicial proceedings.

522

Appendix I 81. Admissibility of evidence in other proceedings The parties shall not rely on or introduce as evidence in arbitral or judicial proceedings, whether or not such proceedings relate to the dispute that is the subject of the conciliation proceedings, (a) views expressed or suggestions made by the other party in respect of a possible settlement of the dispute; (b) admissions made by the other party in the course of the conciliation proceedings; (c) proposals made by the conciliator; (d) the fact that the other party had indicated his willingness to accept a proposal for settlement made by the conciliator. Part IV Supplementary Provisions $2. Power of High Court to make rules The High Court may make rules consistent with this Act as to all proceedings before the

Court under this Act.

83. Removal of difficulties

(1) If any difficulty arises in giving effect to the provisions of this Act, the Central Government may, by order published in the Official Gazette, make such provisions, not inconsistent with the provisions of this Act as appear to it to be necessary or expedient for removing the difficulty: Provided that no such order shall be made after the expiry of a period of two years from the date of commencement of this Act. (2)

Every order made under this Section shall, as soon as may be alter it is made,

be laid before each House of Parliament. 84. Power to make rules (1)

The Central Government may, by notilication in the Official Gazette,

make

rules for carrying out the provisions of this Act. (2) Every rule made by the Central Government under this Act shall be laid, as soon as may be, after it is made before each House of Parliament while it is in session, for a total period of thirty days which may be comprised in one session or in two or more successive sessions, and if, before the expiry of the

session immediately following the session or the successive sessions aloresaid, both Houses agree in making any modification in the rule or both Houses agree that the rule should not be made, the rule shall thereafter have effect

only in such modified form or be of no effect, as the case may be; so, however, that any such modification or annulment shall be without prejudice to the validity of anything previously done under that rule.

523

Appendix I 85. Repeal and saving (1) The Arbitration (Protocol and Convention) Act, 1937, the Arbitration Act, 1940 and the Foreign Awards (Recognition and Enforcement) Act, 1961 are hereby repealed. (2) Notwithstanding such repeal, (a) the provisions of the said enactments shall apply in relation to arbitral proceedings which commenced before this Act came into force unless otherwise agreed by the parties but this Act shall apply in relation to arbitral proceedings which commenced on or after this Act comes into force; (b) all rules made and notifications published, under the said enactments shall, to the extent to which they are not repugnant to this Act, be deemed respectively to have been made or issued under this Act. 86. Repeal and saving (1) The Arbitration and Conciliation (Third) Ordinance, 1996 is hereby repealed. (2) Notwithstanding such repeal, and order, rule, notification or scheme made or anything done or any action taken in pursuance of any provision of the said Ordinance shall be deemed to have been made, done or taken under the corresponding provisions of this Act.

524

APPENDIX II

The Arbitration and Conciliation (Amendment) Ordinance 2015, No. 9 of 2015"

Promulgated by the President in the Sixty-sixth Year of the Republic of India. An Ordinance to amend the Arbitration and Conciliation Act, 1996. Whereas Parliament is not in session and the President is satisfied that circumstances exist which render it necessary for him to take immediate action;

Now, Therefore, in exercise of the powers conferred by clause (1) of article 123 of the Constitution, the President is pleased to promulgate the following Ordinance:— 1 Short title and commencement

(1) This Ordinance may be called the Arbitration and Conciliation (Amendment) Ordinance, 2015. (2) It shall come into force at once. 2 Amendment

of section 2

In the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the principal Act), in section 2,— (I) in sub-section (1)— (A) for clause (e), the following clause shall be substituted, namely:— (i) in the case of an arbitration other than international commercial arbitration, the principal Civil Court of original jurisdiction in a district, and includes the High Court in exercise of its ordinary

*

Published in The Gazette of India, 23 October 2015.

525

Appendix II original civil jurisdiction, having jurisdiction to decide the questions forming the subject-matter of the arbitration if the same had been the subject-matter of a suit, but does not include any civil court of a grade inferior to such principal Civil Court, or any Court of Small Causes; (ii) in the case of international commercial arbitration, the High Court in exercise of its ordinary original civil jurisdiction, having jurisdiction to decide the questions forming the subject-matter of the arbitration if the same had been the subject-matter of a suit, and in

other cases, a High Court having jurisdiction to hear appeals from decrees of courts subordinate to that High Court;’; ‘(e) “Court” means— (B) in clause (f), in sub-clause (iii), the words “a company or” shall be omitted; (II) in sub-section (2), the following proviso shall be inserted, namely:— “Provided that subject to an agreement to the contrary, the provisions of sections 9, 27, and clause (a) of sub-section (1) and sub-section (3) of section 37 shall also apply to international commercial arbitration, even if

the place of arbitration is outside India, and an arbitral award made or to be

made in such place is enforceable and recognised under the provisions of Part II of this Ordinance.”. 3 Amendment

of section 7

In section 7 of the principal Act, in sub-section (4), in clause (b), after the words “or other means of telecommunication”, the words “including communication through electronic means” shall be inserted. 4 Amendment

of section §

In section 8 of the principal Act,— (i) for sub-section (1), the following sub-section shall be substituted, namely:— “(1) A judicial authority, before which an action is brought in a matter

which is the subject of an arbitration agreement shall, if a party to the arbitration agreement or any person claiming through or under him, so applies not later than the date of submitting his first statement on the substance of the dispute, then, notwithstanding any judgment,

decree or

order of the Supreme Court or any Court, refer the parties to arbitration unless it finds that prima facie no valid arbitration agreement exists.” (ii) in sub-section (2), the following proviso shall be inserted, namely:— “Provided that where the original arbitration agreement or a certified copy

thereof is not available with the party applying for reference to arbitration under sub-section (1), and the said agreement or certified copy is retained by the other party to that agreement, then, the party so applying shall file

such application along with a copy of the arbitration agreement and a

526

Appendix II petition praying

the Court

to call upon

the other party

to produce

the

original arbitration agreement or its duly certified copy before that Court.” 5 Amendment

of section 9

Section 9 of the principal Act shall be re-numbered as sub-section (1) thereof, and after sub-section (1) as so re-numbered, the following sub-sections shall be inserted, namely:— “2() Where, before the commencement of the arbitral proceedings, a Court passes

an order for any interim measure of protection under sub-section (1), the arbitral proceedings shall be commenced within a period of ninety days from the date of such order or within such further time as the Court may determine. “3() Once the arbitral tribunal has been constituted, the Court shall not entertain an application under sub-section (1), unless the Court finds that circumstances exist which may not render the remedy provided under section 17 efficacious.”. G Amendment

of section 11

In section 11 of the principal Act,— (i) in sub-sections (4), (5) and (6), for the words “the Chief Justice or any person or institution designated by him” wherever they occur, the words “the Supreme Court or, as the case may be, the High Court or any person or institution designated by such Court” shall be substituted; (ii) after sub-section (6), the following sub-sections shall be inserted, namely:— “(6A) The Supreme

Court or, as the case may be, the High Court,

while considering any application under sub-section (4) or subsection (5) or sub-section (6), shall, notwithstanding any judgment, decree

or order

of any

court,

confine

to the examination

of the

existence of an arbitration agreement. (6B) The designation of any person or institution by the Supreme Court or, as the case may be, the High Court, for the purposes of this section shall not be regarded as a delegation of judicial power by the Supreme Court or the High Court.”; (iii) in sub-section (7), for the words “the Chief Justice or the person institution designated by him is final”, the words “the Supreme Court or, the case may be, the High Court or the person or institution designated such Court is final and no appeal including Letters Patent Appeal shall

or as by lie

against such decision” shall be substituted;

(iv) for sub-section (8), the following sub-section shall be substituted, namely:— (a) any qualifications required for the arbitrator by the agreement of the parties; and (b) the contents of the disclosure and other considerations as are likely to secure the appointment of an independent and impartial arbitrator.”; 527

Appendix II “(8) The Supreme Court or, as the case may be, the High Court or the person or institution designated by such Court, before appointing an arbitrator, shall seek a disclosure in writing from the prospective arbitrator in terms of sub-section (1) of section 12, and have due regard

(v) (vi)

to—

in sub-section (9), for the words “the Chief Justice of India or the person or institution designated by him”, the words “the Supreme Court or the person or institution designated by that Court” shall be substituted; for

sub-section

(10),

the

following

sub-section

shall

be

substituted,

namely:— “(10) The Supreme Court or, as the case may be, the High Court, may make

such scheme as the said Court may deem appropriate for dealing with

matters entrusted by sub-section (4) or sub-section (5) or sub-section (6), to 13

(vii) in sub-section (11), for the words “the Chief Justices of different High Courts or their designates, the Chief Justice or his designate to whom the request has been first made”, the words “different High Courts or their designates, the High Court or its designate to whom the request has been first made” shall be substituted;

(viii)

(ix)

for

sub-section

(12),

the

following

sub-section

shall

be

substituted,

namely:— (a) Where the matters referred to in sub-sections (4), (5), (6), (7), (8) and sub-section (10) arise in an international commercial arbitration, the reference to the “Supreme Court or, as the case may be, the High Court” in those sub-sections shall be construed as a reference to the “Supreme Court”; and (b) where the matters referred to in sub-sections (4), (5), (6), (7), (8) and sub-section (10) arise in any other arbitration, the reference to “the Supreme Court or, as the case may be, the High Court” in those sub-sections shall be construed as a reference to the “High Court” within whose local limits the principal Civil Court referred to in clause (e) of sub-section (1) of section 2 is situate, and where the High Court itself is the Court referred to in that clause, to that High Court.’; after

*(12)

sub-section

(12),

the

following

sub-sections

shall

be

inserted,

namely:— (a) An application made under this section for appointment of an arbitrator or arbitrators shall be disposed of by the Supreme Court or the High Court or the person or institution designated by such Court, as the case may be, as expeditiously as possible and an endeavor shall be made to dispose of the matter within a period of sixty days from the date of service of notice on the opposite party. (b) For the purpose of determination of the fees of the arbitral tribunal and the manner of its payment to the arbitral tribunal, the High Court may

528

Appendix II frame such rules as may be necessary, after taking into consideration the rates specified in the Fourth Schedule. Explanation.—For the removal of doubts, it is hereby clarified that this sub-section shall not apply to international commercial arbitration and in arbitrations (other than international commercial arbitration) in case where parties have agreed for determination of fees as per the rules of an arbitral institution.”. 7 Insertion of new section 11A After section

11 of the principal Act, the following new

section shall be inserted,

namely:— “LIA,

(1) Ifthe Central Government is satisfied that it is necessary or expedient so to do, it may, by notification in the Official Gazette, amend the Fourth Schedule and

thereupon the Fourth Schedule shall be deemed accordingly.

to have been amended

(2) A copy of every notification proposed to be issued under sub-section (7), shall be laid in draft before each House of Parliament, while it is in session, for a total period of thirty days which may be comprised in one session or in two or more successive sessions, and if, before the expiry of the session immediately

following the session or the successive sessions aforesaid, both Houses agree in disapproving the issue of the notification or both Houses agree in making

any modification in the notification, the notification shall not be issued or as the case may be, shall be issued only in such modified form as may be agreed

upon by both the Houses of Parliament.”. 8 Amendment

of section 12

In section 12 of the principal Act,— (i) for sub-section (1), the following sub-section shall be substituted, namely:— (a) such as the existence either direct or indirect, of any past or present relationship with or interest in any of the parties or in relation to the subject matter in dispute, whether financial, business, professional or

other kind, which is likely to give rise to justifiable doubts as to his independence or impartiality; and which are likely to affect his ability to devote sufficient time to the arbitration and in particular his ability to complete the entire arbitration within a period of twelve months. Explanation 1.—The grounds stated in the Fifth Schedule shall guide in determining whether circumstances exist which give rise to justifiable doubts as to the independence or impartiality of an arbitrator. Explanation 2.—The disclosure shall be made by such person in the form specified in the Sixth Schedule.”;

529

Appendix II “(1) When a person is approached in connection with his possible appointment as an arbitrator, he shall disclose in writing any circumstances ,—

(ii) after sub-section (4), the following sub-section shall be inserted, namely:— “(5) Notwithstanding any prior agreement to the contrary, any person whose

relationship, with the parties or counsel or the subject matter of the dispute, falls

under any of the categories specified in the Seventh Schedule shall be ineligible to be appointed as an arbitrator:

Provided that parties may, subsequent to disputes having arisen between them, waive the applicability of this sub-section by an express agreement in writing: Provided further that this sub-section shall not apply to cases where an arbitrator has already been appointed on or before the commencement of the Arbitration and Conciliation (Amendment) Ordinance, 2015.” 9 Amendment

of section 14

In section 14 of the principal Act, in sub-section (1), in the opening portion, for the words “The mandate of an arbitrator shall terminate if, the words “The mandate of an arbitrator shall terminate and he shall be substituted by another arbitrator, if shall be substituted. 10 Substitution of new section for section 17 For section 17 of the principal Act, the following section shall be substituted, namely:— "Lis

(1) A party may, during the arbitral proceedings or at any time after the making of the arbitral award but before it is enforced in accordance with section 36, apply to the arbitral tribunal—

(i) for the appointment of a guardian for a minor or person of unsound mind for the purposes of arbitral proceedings; or

(ii) for an interim measure of protection in respect of any of the following matters, namely:—

(a) the preservation, interim custody or sale of any goods which are the subject matter of the arbitration agreement; (b) securing the amount in dispute in the arbitration; (c)

the detention, preservation or inspection of any property or thing

which is the subject-matter of the dispute in arbitration, or as to

which any question may arise therein and authorising for any of

the aforesaid purposes any person to enter upon any land or

building in the possession of any party, or authorising any samples to be taken, or any observation to be made, or experiment to be tried, which may be necessary or expedient for the purpose of

obtaining full information or evidence;

(d) interim injunction or the appointment of a receiver;

(e) such other interim measure of protection as may appear to the arbitral tribunal to be just and convenient,

530

Appendix II and the arbitral tribunal shall have the same power for making orders,

as the court has for the purpose of, and in relation to, any proceedings

before it. (2) Subject to any orders passed in an appeal under section 37, any issued by the arbitral tribunal under this section shall be deemed to order of the Court for all purposes and shall be enforceable under the of Civil Procedure, 1908, in the same manner as if it were an order Court.”. 11 Amendment

order be an Code of the

of section 23

In section 23 of the principal Act, after sub-section (2), the following sub-section shall

be inserted, namely:— “(2 A) The respondent, in support of his case, may also submit a counter claim or plead a set-off, which shall be adjudicated upon by the arbitral tribunal, if such

counterclaim or set-off falls within the scope of the arbitration agreement.”. 12 Amendment

of section 24

In section 24 of the principal Act, after the proviso to sub-section (1), the following proviso shall be inserted, namely:— “Provided

further that the arbitral tribunal

shall, as far as possible, hold oral

hearings for the presentation of evidence or for oral argument on day-to-day basis,

and not grant any adjournments unless sufficient cause is made out, and may impose costs including exemplary costs on the party seeking adjournment without any sufficient cause.” 13 Amendment

of section 25

In section 25 of the principal Act, in clause (b), at the end, after the words “allegations

by the claimant”, the words “and shall have the discretion to treat the right of the respondent to file such statement of defence as having been forfeited” shall be inserted. 14 Amendment of section 28 In section 28 of the principal Act, for sub-section (3), the following sub-section shall be substituted, namely:—

“(3) While deciding and making an award, the arbitral tribunal shall, in all cases, take into account the terms of the contract and trade usages applicable to the transaction.”

15 Insertion of new sections 29A and 29B

Alter section 29 of the principal Act, the following new sections shall be inserted, namely:— “29A, (1) The award shall be made within a period of twelve months from the date the arbitral tribunal enters upon. Explanation.—For the purpose of this sub-section, an arbitral tribunal shall be deemed to have entered upon the reference on the date on which

531

Appendix II the arbitrator or all the arbitrators, as the case may be, have received notice, in writing, of their appointment. (2) If the award is made within a period of six months from the date the arbitral tribunal enters upon the reference, the arbitral tribunal shall be

entitled to receive such amount of additional fees as the parties may agree. (3) The parties may, by consent, extend the period specified in sub-section (1) for making award for a further period not exceeding six months. (4) If the award is not made within the period specified in sub-section (1) or the extended period specified under sub-section (3), the mandate of the

arbitrator(s) shall terminate unless the Court has, either prior to or after the expiry of the period so specified, extended the period:

(4) Provided that while extending the period under this sub-section, if the Court finds that the proceedings have been delayed for the reasons

altributable to the arbitral tribunal, then, it may order reduction of fees of arbitrator(s) by not exceeding five per cent, for each month of such delay. (5) The extension of period referred to in sub-section (4) may be on the

application of any of the parties and may be granted only for sufficient

cause and on such terms and conditions as may be imposed by the Court. (6) While extending the period referred to in sub-section (4), it shall be open to the Court to substitute one or all of the arbitrators and if one or all of the

arbitrators are substituted, the arbitral proceedings shall continue from the stage already reached and on the basis of the evidence and material already on record, and the arbitrator(s) appointed under this section shall be deemed to have received the said evidence and material. (7) In the event of arbitrator(s) being appointed under this section, the arbitral tribunal thus reconstituted shall be deemed to be in continuation of the previously appointed arbitral tribunal. (8)

It shall be open to the Court to impose actual or exemplary costs upon any of the parties under this section. (9) An application filed under sub-section (5) shall be disposed of by the

Court as expeditiously as possible and endeavour shall be made to dispose

of the matter within a period of sixty days from the date of service of notice “S0A.

on the opposite party.

(1) Notwithstanding anything contained in this Act, the parties to an arbitration agreement, may, at any stage either before or at the time of appointment of the arbitral tribunal, agree in writing to have their dispute resolved by fast track procedure specified in sub-section (3).

(2) The parties to the arbitration agreement, while agreeing for resolution of dispute by fast track procedure, may agree that the arbitral tribunal shall

consist of a sole arbitrator who shall be chosen by the parties. (3) The arbitral tribunal shall follow the following procedure while conducting arbitration proceedings under sub-section (1):

(a) The arbitral tribunal shall decide the dispute on the basis of written pleadings, documents and submissions filed by the parties without any oral hearing; (b) The arbitral tribunal shall have power to call for any further information or clarification from the parties in addition to the pleadings and documents filed by them; (c) An oral hearing may be held only, if, all the parties make a request or

if the arbitral tribunal considers it necessary to have oral hearing for clarifying certain issues;

532

Appendix II (d) The arbitral tribunal may dispense with any technical formalities, if

an oral hearing is held, and adopt such procedure as deemed appro-

priate for expeditious disposal of the case. (4) The award under this section shall be made within a period of six months from the date the arbitral tribunal enters upon the reference.

(5) Ifthe award is not made within the period specified in sub-section (4), the provisions of sub-sections

proceedings.

(3) to (9) of section 29A shall apply to the

(6) The fees payable to the arbitrator and the manner of payment of the fees

shall be such as may be agreed between the arbitrator and the parties.”.

16 Amendment

of section 31

In section 31 of the principal Act,— (i) in sub-section namely:—

(7),

for clause

(b),

the

following

shall

be

substituted,

‘(b) A sum directed to be paid by an arbitral award shall, unless the award

otherwise directs, carry interest at the rate of two per cent, higher than the current rate of interest prevalent on the date of award, award to the date of payment.

from the date of

Explanation.—The expression “current rate of interest” shall have the same meaning as assigned to it under clause (b) of section 2 of the Interest Act, 1978.":

(ii) for sub-section (8), the following sub-section shall be substituted, namely:— “(8) The costs of an arbitration shall be fixed by the arbitral tribunal in accordance with section 31 A.”. 17 Insertion of new section 31A

After section 31 of the principal Act, the following new namely:—

section shall be inserted,

“SLA. (1) In relation to any arbitration proceeding or a Regime for costs proceeding under any of the provisions of this Act pertaining to the arbitration, the Court or arbitral tribunal, notwithstanding anything contained in the Code of Civil Procedure, 1908, shall (a) whether costs are payable (b) the amount of such costs; (c) when such costs are to be (2) Explanation.—For the purpose

have the discretion to determine— by one party to another; and paid. of this sub-section, “costs” means reason-

able costs relating to— (a) the fees and expenses of the arbitrators, Courts and witnesses; (b) legal fees and expenses; (c) any administration fees of the institution supervising the arbitration; and (d) any other expenses incurred in connection with the arbitral or Court proceedings and the arbitral award.

533

Appendix II (3) Ifthe Court or arbitral tribunal decides to make an order as to payment of

costs,— (a)

the general rule is that the unsuccessful party will be ordered to pay the costs of the successful party; or (b) the Court or arbitral tribunal may make a different order for reasons to

be recorded in writing. (4) In determining the costs, the Court or arbitral tribunal shall have regard to all the circumstances, including— (a) the conduct of all the parties; (b) whether a party has succeeded partly in the case; (c) whether the party had made a frivolous counter claim leading to delay (d)

in the disposal of the arbitral proceedings; and

whether any reasonable offer to settle the dispute is made by a party and refused by the other party. (5) The Court or arbitral tribunal may make any order under this section

including the order that a party shall pay—

(a) a proportion of another party's costs; (b) a stated amount in respect of another party's costs; (c) costs from or until a certain date only;

(d) (e) (f) (g) (6) An

costs incurred before proceedings have begun; costs relating to particular steps taken in the proceedings; costs relating only to a distinct part of the proceedings; and interest on costs from or until a certain date. agreement which has the effect that a party is to pay the whole or part

of the costs of the arbitration in any event shall be only valid if such

agreement is made after the dispute in question has arisen.”. 18 Amendment of section 34 In section 34 of the principal Act,—

(I) in sub-section (2), in clause (b), for the Explanation, the following Explanations shall be substituted, namely:—

(i) the making of the award was induced or affected by fraud or corruption or was in violation of section 75 or section 81; or (ii) it is in contravention with the fundamental policy of Indian law; or (iii) it is in conflict with the most basic notions of morality or justice. “Explanation 1.—For the avoidance of any doubt, it is clarified that an award is in conflict with the public policy of India, only if,— Explanation

2.—For

the avoidance of doubt,

the test as to whether

there is a contravention with the fundamental policy of Indian law shall not entail a review on the merits of the dispute.”; (II) after sub-section (2), the following sub-section shall be inserted, namely:— “(2.A) An arbitral award arising out of arbitrations other than international commercial arbitrations, may also be set aside by the Court, if

the Court finds that the award is vitiated by patent illegality appearing on the face of the award: Provided that an award shall not be set aside merely on the ground of an erroneous application of the law or by re-appreciation of evidence.”;

534

Appendix II (III) after sub-section (4), the following sub-sections shall be inserted, namely:— (i) An application under this section shall be filed by a party only after issuing a prior notice to the other party and such application shall be accompanied by an affidavit by the applicant endorsing compliance with the said requirement. (ii) An application under this section shall be disposed of expeditiously, and in any event, within a period of one year from the date on which the notice referred to in sub-section (5) is served upon the other party.”. 19 Substitution of new section for section 36

For section 36 of the principal Act, the following section shall be substituted, namely:— “36.

(1) Where the time for making an application to set aside the arbitral award under section 34 has expired, then, subject to the provisions of sub-section (2), such

award shall be enforced in accordance with the provisions of the Code of Civil Procedure, 1908, in the same manner as if it were a decree of the court. (2) Where an application to set aside the arbitral award has been filed in the Court

under section 34, the filing of such an application shall not by itself render that

award unenforceable, unless the Court grants an order of stay of the operation

of the said arbitral award in accordance with the provisions of sub-section (3), (3)

on a separate application made for that purpose.

Upon filing of an application under sub-section (2) for stay of the operation of the arbitral award, the Court may, subject to such conditions as it may deem

fit, grant stay of the operation of such award for reasons to be recorded in

writing:

Provided that the Court shall, while considering the application for grant of

stay in the case of an arbitral award for payment of money, have due regard to the provisions for grant of stay of a money decree under the provisions of the Code of Civil Procedure, 1908.”. 20 Amendment

of section 37

In section 37 of the principal Act, in sub-section following clauses shall be substituted, namely:—

(1), for clauses

(a) and

(b), the

(a) refusing to refer the parties to arbitration under section 8; (b) granting or refusing to grant any measure under section 9; (c) setting aside or refusing to set aside an arbitral award under section 34.”. 21 Amendment

of section 47

In section 47 of the principal Act, for the Explanation, the following Explanation shall be substituted, namely:—

535

Appendix II ‘Explanation.—In this section and in the sections following in this Chapter, “Court” means the High Court having original jurisdiction to decide the questions

forming the subject-matter of the arbitral award if the same had been the subject

matter of a suit on its original civil jurisdiction and in other cases, in the High Court having jurisdiction to hear appeals from decrees of courts subordinate to such High Court.". 22 Amendment

of section 48

In section 48 of the principal Act, for the Explanation to sub-section (2), the following Explanations shall be substituted, namely:— “Explanation 1.—For the avoidance of any doubt, it is clarified that an award is in conflict with the public policy of India, only if,— (i) the making of the award was induced or affected by fraud or corruption or was in violation of section 75 or section 81; or (ii) it is in contravention with the fundamental policy of Indian law; or

(iii) it is in conflict with the most basic notions of morality or justice.

Explanation 2.—For the avoidance of doubt, the test as to whether there is a contravention with the fundamental policy of Indian law shall not entail a review on the merits of the dispute.”. 23 Amendment

of section 56

In section 56 of the principal Act, the Explanation shall be renumbered as Explanation I thereof, and after the Explanation 7 as so renumbered, the following Explanation shall be inserted, namely:—

‘Explanation 2.—In this section and in the sections following in this Chapter, “Court” means the High Court having original jurisdiction to decide the questions

forming the subject-matter of the arbitral award if the same had been the subject

matter of a suit on its original civil jurisdiction and in other cases, in the High Court

having jurisdiction to hear appeals from decrees of courts subordinate to such High Court.’. 24 Amendment

of section 57

In section 57 of the principal Act, in sub-section (1), for the Explanation, the following Explanations shall be substituted, namely:— “Explanation 1.—For the avoidance of any doubt, it is clarified that an award is in conflict with the public policy of India, only if,— (i) the was (ii) itis (iii) it is

making of the award was induced or affected by fraud or corruption or in violation of section 75 or section 81; or in contravention with the fundamental policy of Indian law; or in conflict with the most basic notions of morality or justice.

Explanation 2.—For the avoidance of doubt, the test as to whether there is a contravention with the fundamental policy of Indian law shall not entail a review on the merits of the dispute.”.

536

Appendix II 25 Insertion of new Fourth Schedule, Fifth Schedule, Sixth Schedule and Seventh Schedule

After the Third Schedule to the principal Act, the following new Schedules shall be inserted, namely:— THE FOURTH SCHEDULE [See section 11{14)] Sum in dispute

Model fee

Note:— In the event, the arbitral tribunal is a sole arbitrator, he shall be entitled to an additional amount of twenty-five per cent, on the fee payable as per the table set out above. Up to Rs. 5,00,000/-

Rs. 45,000/-

Above Rs. 5,00,000/- and up to Rs. 20,00,000/-

Rs. 45,000/- plus 3.5 per cent of the claim amount over

Above Rs. 20,00,000/- and up to Rs. 1,00,00,000/-

Rs. 97,500/- plus 3 per cent of the claim amount over and above Rs. 20,00,000/-

Above Rs. 1,00,00,000/- and up to Rs. 10,00,00,000/-

Rs. 3,37,500/- plus 1 per cent of the claim amount over and above Rs. 1,00,00,000/-

Above Rs. 10,00,00,000/and up to Rs. 20,00,00,000/-

Rs. 12,37,500/- plus 0.75 per cent of the claim amount over and above Rs. 1,00,00,000/-

Above Rs. 20,00,00,000/-

Rs. 19,87,500/- plus 0.5 per cent of the claim amount over and above Rs. 20,00,00,000/-with a ceiling of Rs.

and above Rs. 5,00,000/-

30,00,000/THE FIFTH SCHEDULE [See section 12(1)(b)]

The following grounds give rise to justifiable doubts impartiality of arbitrators:

as to the independence

or

Arbitrator’s relationship with the parties or counsel 1. The arbitrator is an employee, consultant, advisor or has any other past or present business relationship with a party. 2. The arbitrator currently represents or advises one of the parties or an affiliate of one of the parties. 3. The arbitrator currently represents the lawyer or law firm acting as counsel for one of the parties. 4, The arbitrator is a lawyer in the same law firm which is representing one ol the parties. 5. The arbitrator is a manager, director or part of the management, or has a similar controlling influence, in an affiliate of one of the parties if the affiliate is directly involved in the matters in dispute in the arbitration.

537

Appendix II 6. The arbitrator’s law firm had a previous but terminated involvement in the case without the arbitrator being involved himself or herself. The arbitrator’s law firm currently has a significant commercial relationship with one of the parties or an affiliate of one of the parties. . The arbitrator regularly advises the appointing party or an affiliate of the appointing party even though neither the arbitrator nor his or her firm derives a significant financial income therefrom. . The arbitrator has a close family relationship with one of the parties and in the case of companies with the persons in the management and controlling the company. 10. A close family member of the arbitrator has a significant financial interest in one of the parties or an affiliate of one of the parties. ll. The arbitrator is a legal representative of an entity that is a party in the arbitration. 12. The arbitrator is a manager, director or part of the management, or has a similar controlling influence in one of the parties. 13. The arbitrator has a significant financial interest in one of the parties or the outcome of the case. 14. The arbitrator regularly advises the appointing party or an affiliate of the appointing party, and the arbitrator or his or her firm derives a significant financial income therefrom. Relationship of the arbitrator to the dispute 15. The arbitrator has given legal advice or provided an expert opinion on the dispute to a party or an affiliate of one of the parties. 16. The arbitrator has previous involvement in the case. Arbitrator’s direct or indirect interest in the dispute 17.

The

arbitrator

holds

shares,

either

directly

or indirectly,

in one

of the

parties or an affiliate of one of the parties that is privately held. 18. A close family member of the arbitrator has a significant financial interest in the outcome of the dispute. 19. The arbitrator or a close family member of the arbitrator has a close relationship with a third party who may be liable to recourse on the part of the unsuccessful party in the dispute. Previous services for one of the parties or other involvement in the case 20. The arbitrator has within the past three years served as counsel for one of the parties or an affiliate of one of the parties or has previously advised or been consulted by the party or an affiliate of the party making the appointment in an unrelated matter, but the arbitrator and the party or the affiliate of the party have no ongoing relationship. ai. The arbitrator has within the past three years served as counsel against one of the parties or an affiliate of one of the parties in an unrelated matter. De The arbitrator has within the past three years been appointed as arbitrator on two or more occasions by one of the parties or an affiliate of one of the parties.

538

Appendix II a3

The arbitrator’s law firm has within the past three years acted for one of the parties or an affiliate of one of the parties in an unrelated matter without the involvement of the arbitrator. 24, The arbitrator currently serves, or has served within the past three years, as arbitrator in an-other arbitration on a related issue involving one of the parties or an affiliate of one of the parties. Relationship between an arbitrator and another arbitrator or counsel 25; The arbitrator and another arbitrator are lawyers in the same law firm. 26. The arbitrator was within the past three years a partner of, or otherwise affiliated

ai 28. 29.

30. #1.

32.

33. 34.

with,

another

arbitrator

or

any

of the

counsel

in

the

same

arbitration. A lawyer in the arbitrator’s law firm is an arbitrator in another dispute involving the same party or parties or an affiliate of one of the parties. A close family member of the arbitrator is a partner or employee of the law firm representing one of the parties, but is not assisting with the dispute. The arbitrator has within the past three years received more than three appointments by the same counsel or the same law firm. Relationship between arbitrator and party and others involved in the arbitration The arbitrator’s law firm is currently acting adverse to one of the parties or an affiliate of one of the parties. The arbitrator had been associated within the past three years with a party or an affiliate of one of the parties in a professional capacity, such as a former employee or partner. Other circumstances The arbitrator holds shares, either directly or indirectly, which by reason of number or de-nomination constitute a material holding in one of the parties or an affiliate of one of the parties that is publicly listed. The arbitrator holds a position in an arbitration institution with appointing authority over the dispute. The arbitrator is a manager, director or part of the management, or has a similar controlling influence, in an affiliate of one of the parties, where the affiliate is not directly involved in the matters in dispute in the arbitration.

Explanation 1.—The term “close family member” refers to a spouse, sibling, child, parent or life partner. Explanation 2.—The term “affiliate” encompasses all companies in one group of companies including the parent company. Explanation 3.—For the removal of doubts, it is clarified that it may be the practice in certain specific kinds of arbitration, such as maritime or commodities arbitration, to draw arbitrators from a small, specialised pool. If in such fields it is the custom and practice for parties frequently to appoint the same arbitrator in different cases, this is a relevant fact to be taken into account while applying the rules set out above.

539

Appendix II THE SIXTH SCHEDULE [See section 12(1)(b)] NAME: CONTACT DETAILS: PRIOR EXPERIENCE (INCLUDING EXPERIENCE WITH ARBITRATIONS): NUMBER OF ON-GOING ARBITRATIONS: CIRCUMSTANCES DISCLOSING ANY PAST OR PRESENT RELATIONSHIP WITH OR INTEREST IN ANY OF THE PARTIES OR IN RELATION TO THE SUBJECT MATTER IN DISPUTE, WHETHER FINANCIAL, BUSINESS, PROFESSIONAL OR OTHER KIND, WHICH IS LIKELY TO GIVE RISE TO JUSTIFIABLE DOUBTS AS TO YOUR INDEPENDENCE OR IMPARTIALITY (LIST OUT): CIRCUMSTANCES WHICH ARE LIKELY TO AFFECT YOUR ABILITY TO DEVOTE SUF-FICIENT TIME TO THE ARBITRATION AND IN PARTICULAR YOUR ABILITY TO FINISH THE ENTIRE ARBITRATION WITHIN TWENTY-FOUR MONTHS AND RENDER AN AWARD WITHIN THREE MONTHS (LIST OUT): THE SEVENTH SCHEDULE [See section 12(5)] Arbitrator's relationship with the parties or counsel 1. The arbitrator is an employee, consultant, advisor or has any other past or present business relationship with a party. 2. The arbitrator currently represents or advises one of the parties or an affiliate of one of the parties. 3. The arbitrator currently represents the lawyer or law firm acting as counsel for one of the parties. 4. The arbitrator is a lawyer in the same law firm which is representing one of the parties. 5. The arbitrator is a manager, director or part of the management, or has a similar controlling influence, in an affiliate of one of the parties if the affiliate is directly involved in the matters in dispute in the arbitration. 6. The arbitrator’s law firm had a previous but terminated involvement in the case without the arbitrator being involved himself or herself. 7. The arbitrator's law firm currently has a significant commercial relationship with one of the parties or an affiliate of one of the parties. 8. The arbitrator regularly advises the appointing party or an affiliate of the appointing party even though neither the arbitrator nor his or her firm derives a significant financial income therefrom. 9. The arbitrator has a close family relationship with one of the parties and in the case of companies with the persons in the management and controlling the company. 10. A close family member of the arbitrator has a significant financial interest in one of the parties or an affiliate of one of the parties.

540

Appendix II ll. The arbitrator is a legal representative of an entity that is a party in the arbitration. 12. The arbitrator is a manager, director or part of the management, or has a similar controlling influence in one of the parties. 13. The arbitrator has a significant financial interest in one of the parties or the outcome of the case. 14. The arbitrator regularly advises the appointing party or an affiliate of the appointing party, and the arbitrator or his or her firm derives a significant financial income therefrom. Relationship of the arbitrator to the dispute 15. The arbitrator has given legal advice or provided an expert opinion on the dispute to a party or an affiliate of one of the parties. 16. The arbitrator has previous involvement in the case. Arbitrator’s direct or indirect interest in the dispute 17. The arbitrator holds shares, either directly or indirectly, in one of the parties or an affiliate of one of the parties that is privately held. 18. A close family member of the arbitrator has a significant financial interest in the outcome of the dispute. 19. The arbitrator or a close family member of the arbitrator has a close relationship with a third party who may be liable to recourse on the part of the unsuccessful party in the dispute. Explanation 1.—The term “close family member” refers to a spouse, sibling, child, parent or life partner. Explanation 2.—The term “affiliate” encompasses all companies.in one group of companies including the parent company. Explanation 3.—For the removal of doubts, it is clarified that it may be the practice in certain specific kinds of arbitration, such as maritime or commodities arbitration, to draw arbitrators from a small, specialised pool. If in such fields it is the custom and practice for parties frequently to appoint the same arbitrator in different cases, this is a relevant fact to be taken into account while applying the rules set out above.

541

APPENDIX III

The Arbitration and Conciliation

(Amendment)

Act 2019, No. 33 of 2019

An Act further to amend the Arbitration and Conciliation Act, 1996.

BE it enacted by Parliament in the Seventieth Year of the Republic of India as follows:— 1. Short title and commencement

(1) This Act may be called the Arbitration and Conciliation (Amendment) Act, 2019. (2) Save as otherwise provided in this Act, it shall come into force on such date as

the

Central

Government

may,

by

notification

in

the

Official

Gazette,

appoint and different dates may be appointed for different provisions of this Act and any reference in any such provision to the commencement of this Act shall be construed as a reference to the coming into force of that provision. 2. Amendment

of section 2

In the Arbitration and Conciliation Act, 1996 [Ed: 26 of 1996] (hereinafter referred to as the principal Act), in section 2,— (i) in sub-section (1),— (A) after clause (c), the following clause shall be inserted, namely:— ‘(ca) “arbitral institution” means an arbitral institution designated by the Supreme Court or a High Court under this Act;’;

(B)

after clause (h), the following clauses shall be inserted, namely:— ‘iQ “prescribed” means prescribed by rules made under this Act; ‘ii() “regulations” means the regulations made by the Council under this Act.’;

543

Appendix III (ii) in sub-section (2), in the proviso, for the word, brackets and letter “clause (a)”, the word, brackets and letter “clause (b)” shall be substituted. 3. Amendment

of section 11

In section 11 of the principal Act,—

(i)

after sub-section (3), the following sub-section shall be inserted, namely:— “(3A) The Supreme Court and the High Court shall have the power to designate, arbitral institutions, from time to time, which have been graded by the Council under section 43-1, for the purposes of this Act: Provided that in respect of those High Court jurisdictions, where no graded arbitral institution are available, then, the Chief Justice of the concerned High Court may maintain a panel of arbitrators for discharging the functions and duties of arbitral institution and any reference to the arbitrator shall be deemed to be an arbitral institution for the purposes of this section and the arbitrator appointed by a party shall be entitled to such fee at the rate as specified in the Fourth Schedule: Provided further that the Chief Justice of the concerned High Court may, from time to time, review the panel of arbitrators.”;

(ii)

in sub-section (4), in the long line, for the portion beginning with “the appointment shall be made” and ending with “designated by such Court”, the following shall be substituted, namely:— “the appointment shall be made, on an application of the party, by the

arbitral institution designated by the Supreme Court, in case of international

commercial arbitration, or by the High Court, in case of arbitrations other than international commercial arbitration, as the case may be”;

(iii) in sub-section (5), for the portion beginning with “the appointment shall be made” and ending with “designated by such Court”, the following shall be substituted, namely:—

“the appointment shall be made on an application of the party in accordance

with the provisions contained in sub-section (4)”;

(iv)

in sub-section (6), in the long line, for the portion beginning with “party may request” and ending with “designated by such Court”, the following shall be substituted, namely:—

“the appointment shall be made, on an application of the party, by the

arbitral institution designated by the Supreme Court, in case of international commercial arbitration, or by the High Court, in case of arbitrations other than international commercial arbitration, as the case may be”;

(v) sub-sections (6A) and (7) shall be omitted;

544

Appendix III (vi) in sub-section (8), for the words “The Supreme Court or, as the case may be, the High Court or the person or institution designated by such Court”, the words,

brackets

and

figures

“The

arbitral

institution

referred

to in

sub-sections (4), (5) and (6)” shall be substituted; (vii) in sub-section (9), for the words “the Supreme Court or the person or institution designated by that Court”, the words “the arbitral institution designated by the Supreme Court” shall be substituted; (viii) sub-section (10) shall be omitted; (ix) for sub-sections (11) to (14), the following sub-sections shall be substituted, namely:—

“11() Where more than one request has been made under sub-section (4) or

sub-section

(5)

or sub-section

(6) to different

arbitral institutions,

the

arbitral institution to which the request has been first made under the relevant sub-section shall be competent to appoint. “12() Where the matter referred to in sub-sections (4), (5), (6) and (8) arise in an international commercial arbitration or any other arbitration, the reference to the arbitral institution in those sub-sections shall be construed as a reference to the arbitral institution designated under sub-section (3A).

“13() An

application made

under

this section for appointment

of an

arbitrator or arbitrators shall be disposed of by the arbitral institution within a period of thirty days from the date of service of notice on the opposite party. “14() The arbitral institution shall determine the fees of the arbitral tribunal and the manner of its payment to the arbitral tribunal subject to the rates

specified in the Fourth Schedule.

Explanation.—For the removal of doubts, it is hereby clarified that this sub-section shall not apply to international commercial arbitration and in arbitrations (other than international commercial arbitration) where par-

ties have agreed for determination of fees as per the rules of an arbitral

institution.”.

4. Amendment

of section 17

In section 17 of the principal Act, in sub-section (1), the words and figures “or at any time after the making of the arbitral award but before it is enforced in accordance with section 36” shall be omitted. 5. Amendment

of section 23

In section 23 of the principal Act, alter sub-section (3), the following sub-section shall be inserted, namely:—

“(4) The statement of claim and defence under this section shall be completed within a period of six months from the date the arbitrator or all the arbitrators, as the case may be, received notice, in writing, of their appointment.”.

545

Appendix III 6. Amendment

of section 29A

In section 29A of the principal Act,— (a) for sub-section (1), the following sub-section shall be substituted, namely:— “(1) The award in matters other than international commercial arbitration shall be made by the arbitral tribunal within a period of twelve months from the date of completion of pleadings under sub-section (4) of section 23: Provided that the award in the matter of international commercial arbitration may be made as expeditiously as possible and endeavour may be made to dispose of the matter within a period of twelve months from the date of completion of pleadings under sub-section (4) of section 23."; (b) in sub-section (4), after the proviso, the following provisos shall be inserted, namely:— “Provided further that where an application under sub-section (5) is pending, the mandate of the arbitrator shall continue till the disposal of the said application: Provided also that the arbitrator shall be given an opportunity of being heard

before the fees is reduced.” 7. Amendment In section

of section 34

34 of the principal Act,

in sub-section

(2), in clause

(a),

for the words

“furnishes proof that”, the words “establishes on the basis of the record of the arbitral tribunal that” shall be substituted. 8. Amendment

of section 37

In section 37 of the principal Act, in sub-section (1), for the words “An appeal”, the words “Notwithstanding anything contained in any other law for the time being in force, an appeal” shall be substituted.

9. Insertion of new sections 42A and 42B After section 42 of the principal Act, the following sections shall be inserted, namely:— Confidentiality of information.

“42.4. Notwithstanding anything contained in any other law for the time being in force, the arbitrator, the arbitral institution and the parties to the arbitration agreement shall maintain confidentiality of all arbitral proceedings except award where its disclosure is necessary for the purpose of implementation and enforcement of award.

546

Appendix III Protection of action taken in good faith 42B. No suit or other legal proceedings shall lie against the arbitrator for anything which is in good faith done or intended to be done under this Act or the rules or regulations made thereunder.”. 10. Insertion of new Part

After Part I of the principal Act, the following Part shall be inserted, namely:— ‘PART IA ARBITRATION COUNCIL OF INDIA Definitions.

43A. In this Part, unless the context otherwise requires,—

(a) “Chairperson” means the Chairperson of the Arbitration Council of India

(b) (c)

appointed under clause (a) of sub-section (1) of section 43C; “Council” means the Arbitration Council of India established under section 43B; “Member” means a Member of the Council and includes the Chairperson.

43B. Establishment and incorporation of Arbitration Council of India.

(1)

(2)

(3) (4)

The Central Government shall, by notification in the Official Gazette, establish, for the purposes of this Act, a Council to be known

as the Arbitration

Council of India to perform the duties and discharge the functions under this Act. The Council shall be a body corporate by the name aforesaid, having perpetual succession and a common seal, with power, subject to the provisions of this Act, to acquire, hold and dispose of property, both movable and immovable, and to enter into contract, and shall, by the said name, sue or be sued. The head office of the Council shall be at Delhi. The Council may, with the prior approval of the Central Government, establish offices at other places in India.

43C. Composition of Council. (1) The Council shall consist of the following Members, namely:— (a) a person, who has been, a Judge of the Supreme Court or, Chief Justice of a High Court or, a Judge of a High Court or an eminent person, having special knowledge and experience in the conduct or administration of arbitration, to be appointed by the Central Government in consultation with the Chief Justice of India—Chairperson;

547

Appendix III (b)

an eminent arbitration practitioner having substantial knowledge and experience in institutional arbitration, both domestic and international, to be nominated by the Central Government-Member;

(c) an eminent academician having experience in research and teaching in the field of arbitration and alternative dispute resolution laws, to be appointed by the Central Government in consultation with the Chairperson—Member; (d) Secretary to the Government of India in the Department of Legal Affairs, Ministry of Law and Justice or his representative not below the rank of Joint Secretary-Member, ex officio;

(e) Secretary to the Government of India in the Department of Expenditure, Ministry of Finance or his representative not below the rank of Joint Secretary— Member, ex officio;

(2)

(f) one representative of a recognised body of commerce and industry, chosen on rotational basis by the Central Government-—Part-time Member; and (g) Chief Executive Officer-Member-Secretary, ex officio. The Chairperson and Members of the Council, other than ex officio Members, shall hold office as such, for a term of three years from the date on which they enter upon their office: Provided that no Chairperson or Member, other than ex officio Member, shall

(3) (4)

hold office as such after he has attained the age of seventy years in the case of Chairperson and sixty-seven years in the case of Member. The salaries, allowances and other terms and conditions of the Chairperson

and Members referred to in clauses (b) and (c) of sub-section (1) shall be such as may be prescribed by the Central Government. The Part-time Member shall be entitled to such travelling and other allowances as may be prescribed by the Central Government.

43D. Duties and functions of Council.

(1) It shall be the duty of the Council to take all such measures as may be

(2)

necessary to promote and encourage arbitration, mediation, conciliation or other alternative dispute resolution mechanism and for that purpose to frame policy and guidelines for the establishment, operation and maintenance of uniform professional standards in respect of all matters relating to arbitration. For the purposes of performing the duties and discharging the functions under this Act, the Council may— (a) frame policies governing the grading of arbitral institutions; (b) recognise professional institutes providing accreditation of arbitrators; (c) review the grading of arbitral institutions and arbitrators; (d) hold training, workshops and courses in the area of arbitration in collaboration of law firms, law universities and arbitral institutes:

548

Appendix III (e) (f})

(g)

(h) (i) (j) (k) (1)

frame, review and update norms to ensure satisfactory level of arbitration and conciliation; act as a forum for exchange of views and techniques to be adopted for creating a platform to make India a robust centre for domestic and international arbitration and conciliation; make recommendations to the Central Government on various measures to be adopted to make provision for easy resolution of commercial disputes; promote institutional arbitration by strengthening arbitral institutions; conduct examination and training on various subjects relating to arbitration and conciliation and award certificates thereof; establish and maintain depository of arbitral awards made in India; make recommendations regarding personnel, training and infrastructure of arbitral institutions; and such other functions as may be decided by the Central Government.

A3E. Vacancies, etc., not to invalidate proceedings of Council. No act or proceeding of the Council shall be invalid merely by reason of— (a) any vacancy or any defect, in the constitution of the Council; (b) any defect in the appointment of a person acting as a Member of the Council;

or

(c) any irregularity in the procedure of the Council not affecting the merits of the

case.

43F. Resignation of Members. The Chairperson or the Full-time or Part-time Member may, by notice in writing, under his hand addressed to the Central Government, resign his office: Provided

that the Chairperson

or the Full-time Member

shall, unless

he is

permitted by the Central Government to relinquish his office sooner, continue to hold office until the expiry of three months from the date of receipt of such notice or until a person duly appointed as his successor enters upon his office or until the expiry of his term of office, whichever is earlier. 43G. Removal of Member.

(1) The Central Government may, remove a Member from his office if he— (a) is an undischarged insolvent; or (b) has engaged at any time (except Part-time Member), during his term of office, in any paid employment; or (c) has been convicted of an offence which, in the opinion of the Central Government, involves moral turpitude; or

549

Appendix III (d)

has acquired such financial or other interest as is likely to affect prejudicially his functions as a Member; or (e) has so abused his position as to render his continuance in office prejudicial to the public interest; or (f) has become physically or mentally incapable of acting as a Member. (2) Notwithstanding anything contained in sub-section (1), no Member shall be removed from his office on the grounds specified in clauses (d) and (e) of that sub-section unless the Supreme Court, on a reference being made to it in this behalf by the Central Government, has, on an inquiry, held by it in accordance with such procedure as may be prescribed in this behalf by the Supreme Court, reported that the Member, ought on such ground or grounds to be removed. 43H. Appointment of experts and constitution of Committees thereof. The Council may, appoint such experts and constitute such Committees of experts as it may consider necessary to discharge its functions on such terms and conditions as may be specified by the regulations. 43]. General norms for grading of arbitral institutions. The Council shall make grading of arbitral institutions on the basis of criteria relating to infrastructure, quality and calibre of arbitrators, performance and compliance of time limits for disposal of domestic or international commercial arbitrations, in such manner as may be specified by the regulations. Norms for accreditation. 43J. The qualifications, experience and norms for accreditation of arbitrators shall be such as specified in the Eighth Schedule: Provided

that the Central Government

may,

after consultation with the Council,

by

notification in the Official Gazette, amend the Eighth Schedule and thereupon, the Eighth Schedule shall be deemed to have been amended accordingly. 43K. Depository of awards. The Council shall maintain an electronic depository of arbitral awards made in India and such other records related thereto in such manner as may be specified by the regulations. 43L. Power to make regulations by Council. The

Council

may,

in consultation

with the Central Government,

consistent with the provisions of this Act and the rules made discharge of its functions and perform its duties under this Act.

550

make

regulations,

thereunder,

for the

Appendix III 43M. Chief Executive Officer.

(1) There shall be a Chief Executive Officer of the Council, who shall be responsible for day-to-day administration of the Council. (2) The qualifications, appointment and other terms and conditions of the service of the Chief Executive Officer shall be such as may be prescribed by the Central Government. (3) The Chief Executive Officer shall discharge such functions and perform such duties as may be specified by the regulations. (4) There shall be a Secretariat to the Council consisting of such number of officers and employees as may be prescribed by the Central Government. (5) The qualifications, appointment and other terms and conditions of the service of the employees and other officers of the Council shall be such as may be prescribed by the Central Government.’ 11. Amendment

of section 45

In section 45 of the principal Act, for the words “unless it finds”, the words “unless it prima facie finds”, shall be substituted. 12. Amendment

of section 50

In section 50 of the principal Act, in sub-section (1), for the words “An appeal”, the words “Notwithstanding anything contained in any other law for the time being in force, an appeal” shall be substituted. 13. Insertion of new section 87

After section 86 of the principal Act, the following section shall be inserted and shall be deemed to have been inserted with effect from the 23rd October, 2015, namely:— Effect of arbitral and related court proceedings commenced prior to 23rd October, 2015. “87. Unless the parties otherwise agree, the amendments made to this Act by the Arbitration and Conciliation (Amendment) Act, 2015 [Ed: 3 of 2016.] shall— (a) not apply to—

(i) arbitral proceedings commenced before the commencement of the Arbitration and Conciliation (Amendment) Act, 2015 [Ed: 3 of 2016];

(ii) court proceedings arising out of or in relation to such arbitral proceedings irrespective of whether such court proceedings are commenced prior to or after the commencement of the Arbitration and Conciliation (Amendment) Act, 2015 [Ed: 3 of 2016];

(b) apply only to arbitral proceedings commenced on or after the commencement of the Arbitration and Conciliation (Amendment) Act, 2015 and to court proceedings arising out of or in relation to such arbitral proceedings [Ed: 3 of 2016).”.

551

Appendix III 14. Insertion of new

After the Seventh

Schedule

Schedule

to the principal Act, the following

Schedule shall be

inserted, namely: — “THE EIGHTH

SCHEDULE

(See section 43J) Qualifications and Experience of Arbitrator A person shall not be qualified to be an arbitrator unless he—

(i) (ii) (iii) (iv)

is an advocate within the meaning of the Advocates Act, 1961 [Ed: 25 of 1961] having ten years of practice experience as an advocate; or is a chartered accountant within the meaning of the Chartered Accountants Act, 1949 [Ed: 38 of 1949] having ten years of practice experience as a chartered accountant; or

is a cost accountant within the meaning of the Cost and Works Accountants Act, 1959 [Ed: 23 of 1959] having ten years of practice experience as a cost

accountant; or

is a company secretary within the meaning of the Company Secretaries Act, 1980 [Ed: 56 of 1980] having ten years of practice experience as a company

secretary; or

(v) has been an officer of the Indian Legal Service; or

(vi) has been an officer with law degree having ten years of experience in the

legal matters in the Government, Autonomous Body, Public Sector Undertaking or at a senior level managerial position in private sector; or (vii) has been an officer with engineering degree having ten years of experience as an engineer in the Government, Autonomous Body, Public Sector Undertaking or at a senior level managerial position in private sector or self-employed; or (viii) has been an officer having senior level experience of administration in the Central Government or State Government or having experience of senior level management of a Public Sector Undertaking or a Government com-

pany or a private company of repute;

is a person, in any other case, having educational qualification at degree level with ten years of experience in scientific or technical stream in the fields of telecom, information technology, Intellectual Property Rights or other

specialised

areas

in the Government,

Autonomous

Body,

Public

Sector Undertaking or a senior level managerial position in a private sector, as the case may be. General norms applicable to Arbitrator

(i) (ii)

The arbitrator shall be a person of general reputation of fairness, integrity and capable to apply objectivity in arriving at settlement of disputes; the arbitrator must be impartial and neutral and avoid entering into any financial business or other relationship that is likely to affect impartiality or

552

Appendix III might reasonably create an appearance of partiality or bias amongst the parties; (iii) the arbitrator should not involve in any legal proceeding and avoid any potential conflict connected with any dispute to be arbitrated by him; (iv) the arbitrator should not have been convicted of an offence involving moral turpitude or economic offence;

(v)

the arbitrator shall be conversant with the Constitution of India, principles of natural justice, equity, common and customary laws, commercial laws, labour laws, law of torts, making and enforcing the arbitral awards;

(vi)

the arbitrator should possess robust understanding of the domestic and international legal system on arbitration and international best practices in regard thereto; (vii) the arbitrator should be able to understand key elements of contractual obligations in civil and commercial disputes and be able to apply legal principles to a situation under dispute and also to apply judicial decisions on a given matter relating to arbitration; and (viii) the arbitrator should be capable of suggesting, recommending or writing a reasoned and enforceable arbitral award in any dispute which comes before him for adjudication.”. 15. Amendment

to Act 3 of 2016

Section 26 of the Arbitration and Conciliation (Amendment) Act, 2015 shall be omitted and shall be deemed to have been omitted with effect from the 23rd October, 2015. 16. Amendment

to Fourth Schedule

In the Fourth Schedule to the principal Act, for the brackets, words and figures “[See section 11 (14)]”, the brackets, words, figures and letter “[See section 11 (3A)]” shall be substituted.

553

Table of Cases

England & Wales A v. B, [2006] EWHC 2006 (Comm), 113 Abuja International Hotels Ltd. v. Meridien Sas, [2012] EWHC 87 (Comm), 112 Ali Shipping Corporation v. Shipyard Trogir, [1998] 2 Lloyd’s Rep 643, 487 Associated Provincial Picture Houses Ltd. v. Wednesbury Corporation, (1947) 2 All ER 680 (CA), 219 Astro Vencedor Compania Naviera SA of Panama v. Mabanaft Gmbh, 2 All E.R. 1301 (Q.B. 1971), 459 Barclays Bank ple v. Ente Nazionale di Previdenza Ed Assistenza det Medici e Degli Odontoiatri [2015] EWHC 2857 (Comm), 26 Beijing Jianlong Heavy Industry Group v. Golden Ocean Group Limited & Ors, [2013] EWHC 1063 (Comm), 111 Calderbank v. Calderbank, [1975] 3 WLR 586, [1975] 3 All ER 333, 373 Canadian and Dominion Sugar Co. Ltd. v. Camdian National (W.L) Steamships Ltd.,

1947 AC 46, 24 Cetelem v. Roust Holdings Ltd, [2005] 4 All ER 52, 476 Cutts v. Head, [1984] Ch 290, 373, 374

David Taylor & Son v. Barnett Trading Co., (1953) 1 WLR 562, 208 Deutsche Schachtbau- und TiefbohrgesellschaftmbH v. Ras Al-Khaimah National Oil Co., [1987] 2 All ER 769, 208 Dowans Holding S.A. v. Tanzania Electric Supply Co. Ltd, [2011] EWHC 1957 (Comm), 286 Elektrim SA v. Vivendi Universal SA, [2007] EWHC 571 (QB), 15 Emmott v. Michael Wilson & Partners Ltd. [2008] 1 Lloyd’s Rep 616, 487, 488 Emmott v. Michael Wilson & Partners Ltd., [2008] 1 Lloyd's Rep 616, 487, 488

Enderby Town Football Club Ltd. v. Football Association Ltd., (1971) Ch. D. 591 (606), 205 Gater Assets Ltd. v. NakNaftogasUkrainiy, (2008) EWHC 237 (Comm), 211 Gerald Metals SA v. The Trustees of the Timis Trust & others, [2016] EWHC 2327, 476

555

Table of Cases

Habas Sinai v. VSC [(2013) EWHC 4071, 113 Harbour Assurance v. Kansa General International Insurance, [1993] 1 Lloyd’s Rep 455, lil

Hodgkinson v. Fernie, (1857) 3 C.B. (N.S.) 189, 198 Holman v. Johnson, (1775) 1 Cowp 341, 204 Jones v. Bradley (No. 2), [2003] NSWCA

258, 374

Lafarge Redland v. Shepard Hill, [2000] 1 W.L.R. 1621 (UK), 473 London Export Corp. Ltd. v. Jubilee Coffee Roasting Co. Ltd., (1958) 1 WLR 271, 208 Lovelock EJR Ltd v. Exportles [1968] 1 Lloyd’s Rep 163, 37

MGICA (1992) Pty Ltd. v. Kenny & Good Pty Ltd., (1996) 70 FCR 236, 374

Nagle v. Feilden, (1966) 2 QB 633, 205 Pittalis and others v. Sherefettin [1986] 2 All ER 227, 27 Premium Nafta Products Limited v. Fili Shipping Company Limited, [2007] UKHL 40, 33 R v. Northumberland Compensation Appeal Tribunal Exparte Shaw, (1952) 1 All ER 122, 220 Richardson v. Mellish (1824-34) All ER 258, 205 Rylands v. Fletcher, 3 L.R., 330, (H.L. 1868), 462

Seven Network Lts. v. News Ltd., [2007] FCA 1489, 374 Silver Dry Bulk Company Limited v. Homer Hulbert Maritime Company Limited, [2017]

EWHC 44 (Comm), 471

SMEC Testing Services Pty Ltd v. Campbelltown City Council, [2000] NSWCA 323, 374 Soleh Boneh International Ltd v. Government of the Republic of Uganda, [1993] 2 Lloyd's Law Rep 208 CA, 286 Star International Hong Kong (UK) Ltd. v. Bergbau-Handel GmbH, [1966] 2 Lloyd’s Rep 16, 125 Sulamérica Cia Nacional De Seguros S.A. and others v. Enesa Engenharia S.A [2012] EWCA

Civ 638, [2013]

1 WLR

102, 409

Sulamerica CIA Nacional De Seguros SA & Ors v. Enesa Engenharia SA & Ors, [2012] EWHC 42 (Comm), 112 The Renu K, [1970] QB 377, 57 Tonicstar Limited and Ors. v. Allianz Insurance Plc and Anr., [2017] EWHC 2753 (Comm), 479 Walzer v. Muriel Siebert & Co., 2010 WL 4366197, 375 Woolfv. Collis Removal Service, 2 All E.R. 260 (K.B. 1947), 459, 461 India

A. Ayyasamy v. A. Paramasivam, (2016) 10 SCC 386, 99, 108, 330 A. L. Rallia Ram, supra n. 16; Alopi Parshad & Sons v. Union of India, AIR 1960 SC 588, 200 Abhai Singh v. Sanjay Singh, AIR 1989 All 214, 200 Aboobaker Latif v. Reception Committee of the 48th Indian National Congress, AIR 1937

Bom 410 (412), 200

ACC Limited v. Global Cements Ltd., AIR 2013 SC 3824, 29

556

Table of Cases

Addhar Mercantile Private Limited, v. Shree Jagdamba Agrico Exports Private Limited, 2015 SCC OnLine Bom 7752, 107, 323 Adhunik Steels Ltd. v. Orissa Manganese and Minerals Pvt. Ltd., (2007) 7 SCC 125, 157

Aditya Fuels Ltd. v. Bilt Chemicals Ltd. 2007 (4) ArbLR 110 (Gujarat), 240 Aero Club v. Solar Creations Pvt Ltd., 2020 SCC Online Bom 115, 179 AEZ Infratech Pvt. Ltd. v. SNG Developers Ltd., 2014 (143) DRJ 616, 29 Afcons Infrastructure Ltd v. Rail Vikas Nigam Limited, 2017 SCC Online Del 8675, 326, 327 Aidek Tourism Services Private Limited v. Aditya Birla Nuvo Ltd., 2016 SCC OnLine Bom

5352, 216

Alka Chandewar v. Shamshul Ishrar Khan, 2017 (7) SCJ 15, 154 Alliance Jute Mills Company Limited v. Lalchand Dharamchand, A.1.R. (Cal.) 19, 28

(Cal. 1978), 459, 463

Amalgamated Metal Corp. v. Khoon Seng Co., (1977) 2 Lloyds Reports 310, 220 Ameet Lalchand Shah and Ors. v. Rishabh Enterprises and Ors., MANU/SC/0501/2018, 53 Amitabh Bagchi v. Ena Bagchi, AIR 2005 Cal 11, 377

Andal Dorairaj v. Hanudev Infopark (P) Ltd. and Ors, MANU/TN/0242/2016, 61 Andritz Oy, rep. through Power of Attorney Agent, Mr. Siraj Ahmad v. Enmas Engineering Put. Ltd., rep. by its Director and Principal Officer and Anr., 2007 (3)

ARBLRS45 (Madras), 281

Antrix Corporation Ltd. v. Devas Multimedia pvt. Ltd - 2018 4 ArLR 66 (Delhi), 246 Aravali Power Company P. Ltd. v. M/s. Era Infra Engineering Limited, (2017) 15 SCC 32, 74, 130, 230

Ardee Infrastructure Pvt. Ltd. v. Anuradha Bhatia, 2017 SCC Online Del 6402 (DB), 231, 245 Arun Kapur v. Vikram Kapur, 2002 (61) DRJ 495, 153

Arvind Constructions Co. Put. Ltd. v. Kalinga Mining Corporation, (2007) 6 SCC 798, 157

Ascot Hotels and Resorts Pvt. Ltd. v. Connaught Plaza Restaurants Pvt. Ltd., Delhi High Court, Order, Arb. A. (Comm.)

12 of 2017, 20 March 2018, 170

Ashapura Mine-Chem Ltd v. Gujarat Mineral Development Corporation, (2015) 8 SCC 193, 112, 314 Ashok Kumar v. SBI Officers Association, 2013 (3) Arb LR 246 (Delhi), 161 Ashwani Minda & Ors. v. U-Shin Ltd. & Ors., 2020 SCC OnLine Del 721, 3, 182

Asian Electronics Ltd., Thane v. M.P. State Electricity Board, 2007 (3) MPLJ 203, 151 Assignia-VIL JV v. Rail Vikas Nigam Limited, 2016 SCC Online Del 2567, 86, 87, 326 Associate Builders v. Delhi Development Authority, (2015) 3 SCC 49, 106, 214, 241

Associated Engineering Co. v. Government of Andhra Pradesh, (1991) 4 SCC 93, 200 Association of Unified Tele Services Providers v. Union of India, 6 $.C.C., 110, 120, (S.C.C 2014), 460 Astonfield Renewables Pvt. Ltd. and Ors. v. Ravinder Raina, MANU/DE/0196/2018, 52 Atlas Exports Industries v. Kotak & Company, (1997) 7 SCC 61, 107, 323 Avantha Holding Ltd. v. Osian’s Connoisseurs of ART (P) Ltd., Delhi High Court, Order, OMP 266 of 2011,

11 April 2012, 156

557

Table of Cases

Awasthi Construction Co. v. Govt. of NCT of Delhi & Anr. 2013 (1) Arb. LR 70 (Del) (DB), 130 B. Gopal Das v. Kota Straw Board P Ltd, AIR 1971 Raj 258, 38

B. V. Radha Krishna v. Sponge Iron India Ltd., (1997) 4 SCC 693, 199 Babaji Automotive v. Indian Oil Corpn. Ltd., (2006) 1 Arb LR 566, 25 Bank of Baroda v. Anita Nandrajog, (2009) 9 SCC 462, 244 Bar Council of India v. A.K. Balaji & Ors., (2018) 5 SCC 379, 480 Barminco Indian Underground Mining Service LLP v. Hindustan Zinc Limited, (2020) SCC OnLine Raj 1190, 105

Basappa v. Nagappa, AIR 1954 SC 440, 213 Basavaraj R. Patil v. State of Karnataka, (2000) 8 SCC 740, 376 Batuk K. Vyas v. Salim M. Merchant, AIR 1953 Bom 133 (DB), 228 BCCI v. RSW, Kochi Cricket Private Ltd, 2016 SCC Online Bom 6064, 245

Benarsi Krishna Committee v. Karmyogi Shelters (P) Ltd., (2012) 9 SCC 496, 238 BGS SGS Soma JV v. NHPC Ltd., 2019 SCC OnLine SC 1585, 255 Bhai Manjit Singh (HUF) v. Bhai Manjit Singh and Ors., MANU/DE/4733/2018, 61 Bharat Aluminium

Co. v. Kaiser Aluminium

Technical Services, (2012) 9 SCC 552, 73,

106, 113, 138, 147, 148, 223, 239, 253, 256, 271, 320, 475 Bharat Bhushan Bansal v. U.P. Small Industries Corpn. Ltd., (1999) 2 SCC 166, 17 Bharat Broadband Network Limited v. United Telecoms Limited, 2017 SCC Online Del 11905, 325

Bharat Broadband Network Limited. v. United Telecoms Limited (2019) 5 SCC 755, 87 Bharat Coking Coal Ltd. v. Annapurna

Constructions,

(2003) 8 SCC 154, 201

Bharat Heavy Electricals Limited v. Jyothi Turbopower Services Private Limited & Ors. 2017 (1) Arb. LR 289 (Mad), 130 Bharat Heavy Electricals Limited v. Silor Associates, S.A. 2013 SCC Online Del 4135, 126 Bharat Lal v. Haryana Chit Put Lid, 1993 RAJ 381

(Del), 24

Bharat M.N. v. Satish Ashok Sabni, (2003) 6 Bom CR 257, 214 Bharat Sanchar Nigam Limited v. Reliance Communication Ltd., (2011) 1 SCC 394, 177 Bharti Tele-Ventures Ltd. v. DSS Enterprises Put. Ltd., 2018 SCC OnLine Del 9650, 98 Bhartia Cutler Hammer v. AVN Tubes,

1995 (33) DRJ 672, 26, 27

Bhatia International v. Bulk Trading S.A. and Anr., (2002) 4 SCC 105, 120, 147, 271, 320, 474 Bhubaneshwar Expressways Put. Ltd. v. NHAI, Delhi High Court, Judgment, O.M.P.(I) (COMM.)

218/2019, 25 November 2019, 167

Bihar State Mineral Development Corporation v. Encon Builders (I)(P) Ltd., AIR 2003 SG 3688, 17 Bina Modi v. Lalit Modi, Delhi High Court, Judgment, CS5(OS) 84/2020,

13, 98

Board of Control for Cricket in India v. Cricket Association of Bihar, (2015) 3 SCC 251, 207 Board of Control for Cricket in India v. Kochi Cricket Pvt. Ltd. and Ors., (2018) 6 SCC 287, 16, 231, 245

Booz Allen & Hamilton v. SBI Home Finance, (2011) 5 SCC 532, 34-36, 108, 329 BPTP Limited v. CPI India I Limited, 2015 (4) Arb LR 410 (Delhi), 154

558

Table of Cases

Brace Transport Corpn. of Monrovia v. Orient Middle East Lines Ltd., 1995 Supp (2) SCC 280, 251 Brahmaputra Realtors Pvt. Ltd. v. G.G. Transport (P) Ltd., 2015

(2) GLT 137, 164

Brand Value Communications v. Eskay Video Put Ltd, AIR 2010 Cal 166, 159 Brawn Laboratories Ltd. v. Rhone Poulenc Rorer S.A., 1999 (2) Arb LR 297 (Delhi), 162 BSNL v. Teracom Ltd., OMP

(COMM)

431/2019, 245

Bunge London Ltd. v. R. Piyarelall Import and Export Ltd., (2015) 5 ArbLR 370 (Cal), 256 C.G. Thorborg v. Union of India, AIR 1968 Del 292, 38

Campos Brothers Farms v. Matru Bhumi Supply Chain Pvt. Limited and Ors., MANU /DE/1526/2019, 70 Carzonrent India Pvt Ltd v. Hertz International Ltd, 2015 SCC Online Del 10085, 324 Central Inland Water Transport Corporation Ltd. v. Brojo Nath Ganguly, (1986) 3 SCC 156, 206

Central Warehousing Corporation v. Fortpoint Automotive Put. Ltd., 2010 (1) Bom C. R. 560, 109 Centrotrade Minerals & Metal Inc. v. Hindustan Copper Ltd., 2017 (2) SCC 228, 31, 329

Centrotrade Minerals & Metals Inc. v. Hindustan Copper Ltd., (2006) 11 SCC 245, 214 Chaitanya Builders & Leasing (P) Ltd. v. Dr Tulsi Ram, 2013 SCC OnLine Mad 2511, 319 Champsey Bhara& Co. v. Jivraj Baloo Spinning& Weaving Co. Lid., AIR 1923 PC 66, 198 Chatterjee Petrochem Company v. Haldia Petrochemicals Limited, (2014) 14 SCC 574, 97 Chennai Container Terminal Pvt Ltd v. Union of India, 2007 3 Arb LR 218 (Mad), 23 Cheran Properties Limited v. Kasturi and Sons Limited and Ors., MANU/SC/0427/2018, 70

Chief Project Manager v. Awadh Transformers Pvt. Ltd, 2011 (84) ALR 112, 166 Chittaranjan Maity v. Union of India, (2017) 9 SCC 611, 186, 330 Chloro Controls India Put. Ltd. v. Severn Trent Water Purification Inc. & Ors., (2013) 1 SCC 641, 40, 41, 46, 53, 60, 94, 471

College of Vocational Studies v. S.S. Jaitley, AIR 1987 Del 134 (DB), 201 Container Corporation of India Lts. v. Kandla Cargo Handlers, (2019) SCC Online Bom 1245, 216

COSID Inc. Steel Authority of India Ltd. (High Court 1985), in Yearbook Commercial Arbitration XI (1986) (India no. 11), 250 Cruz City 1 Mauritius Holdings v. Unitech Limited, 2017 (3)ARBLR 20 (Delhi), 253 D.D. Sharma v. Union of India, (2004) 5 SCC 325, 216 D.L.F. Industries Ltd. v. Standard Chartered Bank, AIR 1999 Del 11, 157 Daiichi Sankyo Company Limited v. Malvinder Singh & Ors., 2018 SCC OnLine Del 6869, 215, 485

Daiichi Sankyo Company Ltd. v. Malvinder Mohan Singh and Ors, 2018 SCC OnLine Del 6869, 215, 485 Damodar Valley Corporation v. Central Concrete & Allied Products Ltd., (2007) 3 Arb LR

531 (DB), 215

Damodar Valley Corporation v. Central Concrete & Allied Products Ltd., (2007) 3 Arb. LR 531 (Cal), 214 Datar Switchgears Ltd. v. Tata Finance Ltd. and Ors., (2000) 8 SCC 151, 80

559

Table of Cases

Deccan Asian Infrastructure (Mauritius) Inc. v. BPL Communications Limited, 2005 (2) Arb LR 450 (Kar), 169 Deepak Mittal v. Geeta Sharma, Delhi High Court, Order, CM(M)

971 of 2017 and CM

No, 32438 of 2017, 6 September 2017, 169 Delhi Development Authority v. M/s Bhardwaj Brothers, 2014 SCC OnLine Del 1581, 217 Delhi Iron & Steel Go. P. Ltd. v. UPSEB, (2002) 1 RAJ 588, 19

Delta Construction Systems Ltd v. Narmada Cement Company Ltd., 2002 (104(2)) Bom LR 225, 159 Delta Distilleries Limited v. United Spirits Limited & Ors. (2014) 1 SCC 113, 134, 138 Delta Distilleries Ltd v. Shaw Wallace, Arb LR 265 (Bom), 43

Denel Proprietary Ltd. v. Union of India, 2016 (1) Arb LR 514 (Delhi), 168 Deutsche Post Bank Home Finance Ltd. v. Taduri Sridhar and

Ors.

MANU /SC/0262/2011, 64 Devi Resources Limited v. Ambo Exports Limited, MANU/WB/0314/2019,

98

Dharampal Satyapal Lid. v. Dinesh Enamelled Wire Industries (P) Ltd., 2010 (2) Arb LR 444 (All), 17 Director of Settlements, A.P. and Ors. v. M.R. Apparao and Another, 4 $.C.C.638, 659

Dirk

(S.C. 2002), 460 India Private Limited Limited, 2013

v. Maharashtra

State Electricity

Generation

Company

(7) Bom CR 493, 168

Diwan Chand v. Punjab National Bank Ltd, AIR 1932 Lah 291, 38

Dolphin Drilling Ltd. v. Oil and Natural Gas Corporation Ltd., (2010) 3 SCC 267, 313 Dorling Kindersley (India) Pvt. Ltd. v. Sanguine Technical Publishers, 2013 (3) Arb LR

52 (Delhi), 164

Dozco India Pvt. Ltd. v. Doosan Infracore Co. Ltd, (2011) 6 SCC 179, 116 Dr Bina Modi v. Lalit Modi, CS(OS) 84/2020, 13, 98 Dr. (Mrs). Irfana Hameed v. The General Manager Department of Telecommunications Chennai Telephones, 2016 SCC OnLine Mad 8674, 220 Duro Felguera, S. A. v. Gangavaram Port Limited, (2017) 9 SCC 729, 21, 22, 96, 317, 318, 472 Dyna Technologies Pvt. Ltd. v. Crompton Greaves, (2019) SCC Online SC 1656, 217, 259

Eastern Coalfields Ltd. v. Sanjay Transport Agency and Anr., (2009) 7 SCC 345, 316 E-City Entertainment (I) Pvt. Ltd. v. Imax Corporation, 2015 (2) Arb LR 107 (Bom), 256 Ecopack India Paper Cup Pvt. Ltd. v. Sphere International - 2018 SCC OnLine Bom 540, 246

Eitzen Bulk A/s v. Ashapura Minechem Ltd., (2016) 1 Bom CR 466, 256 Eitzen Bulk A/S v. Ashapura Minechem Limited, (2016) 11 SCC 508, 114, 118, 255, 321, 324 Elizabeth Mathew v. S.K. Narayana,

AIR 1999 Kar 291, 19

Emaar MGF Land Limited v. Aftab Singh, (2019) 12 SCC 751, 93 Emkay Global v. Girdhar Sondhi (2018) 9 SCC 49, 241, 255 Emmsons International Ltd. v. Metal Distributors, 2005 (80) DRJ 256, 27, 28

Enercon (India) Ltd. v. Enercon Gmbh, (2014) 5 SCC 1, 91, 117, 321, 420 Energo Engineering Projects Ltd. v. TRF Ltd, Delhi High Court, Order, (Comm)

112 of 2016, 23 December 2016, 167

560

FAO

(OS)

Table of Cases

Engineering Development Corpn. v. MCD, 1 Arb.LR 269 (Del), 19 Eros International Media Limited v. Telemax Links India Pvt. Ltd. and Ors., 2016 (6)

Arb LR 121 (Bom), 36

Ethiopian Airlines Ethiopian Airlines v. Ganesh Narain Saboo, (2011) 8 SCC 539, 178 Fernas Construction Co. Inc. v. ONGC Petro Additions Ltd., MANU/DE/1618/2019, 60, 61

Fertilizer Corporation of India Ltd. v. Bharat Painters, AIR 1986 Orissa 82, 200 Firm Ashok Traders v. Gurumukh Das Saluja, (2004) 3 SCC 155, 155, 160, 166 Firm Madanlal Roshanlal Mahajan

v. Hukumchand

Mills Ltd., Indore, AIR

1967 SC

1030, 199

Fiza Developers & Inter-Trade (P) Ltd. v. Amci (I) (P) Ltd, (2009) 17 SCC 796, 240 Fomento Resorts and Hotels Limited and Another v. Minguel Martins and Others, 3 S.C.C. 571

(S.C. 2009), 459

Food Corporation of India v. M/S Shiva Rice Mills & Ors — (2014) 210 DLT 321 (DB), 238 Francesco Corsi v. Gorakhram Gokalchand, AIR 1960 Bom 91, 248 Gail (India) Ltd. v. Fibcom India Ltd. (2013) 3 Arb. LR 362 (Del), 137 Gajulapalli Chenchu Reddy v. Koyyana Jaya Lakshmi, AIR 2009 (NOC) 1968, 26 Ganesh Benzoplast Ltd. v. Saf Yeast Co. Ltd, AIR 2007 (NOC) 1628, 25 Ganghabhai v. Vijay Kumar, AIR 1974 SC 1126, 270, 273 Ganvare Wall Ropes Ltd. v. Coastal Marine Constructions and Engineering Ltd., (2019) 9 SCC 209, 94, 257

Gautam Landscapes v. Shailesh Shah, AIR 2019 Bom 49, 257 General Manager of the Raj Durbhunga v. Maharajah Coomar Ramaput Sing, 1872 SCC OnLine PC 16: (1871-72)

14 Moo IA 605, 235

Gherulal Parakh v. Mahadeodas Maiya & Ors., AIR 1959 SC 781, 205 Girish Mulchand Mehta and Durga Jaishankar Mehta v. Mahesh S. Mehta and Harini Cooperative Housing Society Ltd., 2010 (1) Bom CR 31, 163 Glencore International AG v. Indian Potash Ltd., (2019) 263 DLT 663, 99 GMR Energy Limited v. Doosan Power Systems India Private Limited & Ors, 2017 SCC Online Del 11625, 46, 103, 323 Goel Associates v. Jivan Bima Rashtriya Avas Samati Ltd., 2004 (3) Arb LR 289 (Del), 160 Gopal Chandra Mukherjee v. Food Corporation of India, 2017 SCC OnLine Cal 67, 215 Government of Haryana PWD Haryana (B and R) Branch v. G.F. Toll Road Private Limited and Others, (2019) 3 SCC 505, 478

Government of India v. Vedanta Limited, Supreme Court Civil Appeal No. 3185 of 2020, 16 September 2020, 174, 256, 259, 274 Government of Kerala v. Som Datt Builders Ltd., AIR 2003 Ker 61, 222

Govind Prasad Sharma &Ors. v. Doon Valley Officers Cooperative Housing Society Ltd., 2017 SCC OnLine SC 1001, 223 Govind Rubber Ltd. v. Louis Dreyfus Commodities Asia P. Ltd., (2015) 13 SCC 477, 315 Green Infra Wind Energy Limited v. Regen Powertech Private Limited, Delhi High Court, Order, Arb. A. (Comm.) 17 of 2018, 4 April 2018, 170 Gujarat Bottling Co. Ltd v. Coca Cola and Others, (1995) 5 SCC 545, 149 Gujarat Urja Vikas Nigam Ltd. v. Essar Power Ltd., (2008) 4 SCC 755, 109

561

Table of Cases

Gujarat Water Supply and Severage Board v. 5.H. Shivanani, AIR 1991 Guj. 170, 42 Gulmali Amrullah Babul v. Shabbir Salebhat Mahimwala, Bombay High Court, Order, Arbitration Petition No. 410 of 2015 and Arbitration Petition (L) No. 1435 of 2015, 29 October 2015, 153 Gurmukh Singh v. Amar Singh, (1991) 3 SCC 79, 206 Guru Nanak Foundation v. Rattan Singh, (1981) 4 SCC 634, 199

Hairtha Finance Ltd. v. ATV Projects India Ltd., 2 Arb LR 376 (Mad), 20 Halliburton Offshore Services Inc. v. Vedanta Ltd. & Anr. 2020 SCC OnLine Del 542, 3 Harbhajan Sarabjeet & Associates v. Maharashtra Krishna Valley Development Corporation, 2011 (1) Arb LR 560 (Bom), 17 Harbhajan Singh Dhalla v. Union of India, AIR 1987 SC 9, 178 Hari Vishnu Kamath v. Syed Ahmed Ishaque, AIR 1955 SC 233, 228 Harinarayan Bajaj v. Madhukar Sheth, (2015) 3 Bom CR 15, 220 Harinarayan G. Bajaj v. Sharedeal Financial Consultants Pvt. Ltd., AIR 2003 Bom 296, 150 Harmony Innovation Shipping Ltd. v. Gupta Coal India Ltd. & Anr., (2015) 9 SCC 172, 110

Hazrat Maulana Arshad Madani v. Maulana Quari Mohammad Usman, 2010 (1) Arb LR 427 (Del), 17 Hindustan Construction Company Ltd. and Ors. v. Union of India and Ors., AIR 2020 SC 122, 16

Hindustan Constructions Company Limited v. Union of India, (2019) SCC Online SC 1520, 232, 247

Hindustan Petroleum Corporation v. Ashok Kumar Garg (2007) 1 Arb LR 268 (Del), 137 Hindustan Shipyard Ltd v. Essar Oil Ltd, 2005 RAJ 132, 43 Hindustan Zinc Ltd. v. Friends Coal Carbonisation, (2006) 4 SCC 445, 214 HMG Engineering Pvt. Ltd. v. Union of India, (2000) 1 Bom CR 221, 200

Home Bank Investment /ne v. MMTG Ltd., (2008) 1 Arb LR 263, 25 HRD Corporation (Marcus Oil and Chemical Division) v. GAIL (India) Limited, Civil Appeal No. 11126 of 2017, 87, 227, 478 HRD Corporation v. GAIL (2018) 12 SCC 471, 243

HS Svendgaard Laboratories Ltd. v. Gillette India Ltd., 2016 SCC OnLine Bom 1046, 319 HSBC v. Avitel Post Studioz Ltd. 2014 SCC OnLine Bom 929, 3, 114, 171 LT.I. Ltd. v. Stemens Public Communications Network Ltd., (2002) 5 SCC 510, 169 ICICI Bank Ltd. v. IVRCL Ltd., AIR 2015 AP 179, 169

IMAX Corporation v. M/s. ECity Entertainment (I) Pvt. Ltd, (2017) 5 SCC 331, 45, 114, 321 Imex Corporation v. Elenjikal Aquamarine Exports Ltd., (2008) 2 Arb LR 560: AIR 2008 Ker 119, 25

In re: Guidelines for Court Functioning through Video Conferencing During Covid-19 Pandemic, Suo Moto Writ (Civil) No. 05/20, 188, 377 Indian Mutual General Insurance Society v. Himalaya Finance & Constr. Co, AIR 1974 Del 114, 38

562

Table of Cases

India No. 18, General Electric Company v. Renusagar Power Company, Bombay High Court, 21 October 1988, in Yearbook Commercial Arbitration Vol. XV (Albert Jan Van den Berg ed., ICCA & Kluwer Law International 1990), 284

Indian Oil Carp. Ltd. & Ors. v. Raja Transport Pvt. Ltd., (2009) 8 SCC 520, 326 Indowind Energy Ltd v. Wescare (I) Ltd., AIR 2010 SC 1793, 23, 40 Indtel Technical Services (P) Ltd. v. W.S. Atkins Rail Ltd., (2008)

10 SCC 308, 113

Indus Mobile Distribution Pvt. Ltd v. Datawind Innovations Pvt. Ltd. (2017) 7 SCC 678, 2, 114, 255, 321 Integrated Sales Services Limited v. Arun Dev and Ors, 2017 (2) ArbLR 290 (Bom), 256 International Amusement Ltd. v. India Trade Promotion Organisation, (2015) 12 SCC 677, 316 International Planned Parenthood Federation v. Madhu Bala Nath, 2016 SCC OnLine Del 85, 377

International Trenching Pvt. Ltd. v. Power Grid Corporation of India Ltd., MANU/DE/5492/2017, 100 ITC Limited v. George Joseph Fernandes &Anr., (1989) 2 SCC 1, 200 J.G. Engineers Pvt. Ltd. v. Union of India, (2011) 5 SCC 758, 214 Jagdish Chander v. Ramesh Chander (2007) 5 SCC 719, 17, 18, 20, 316 Jagmohan Singh Gujral v. Satish Ashok Sabnis, (2004) 1 Bom CR 307, 214 Jai Neptune Co-operative Housing Society Limited v. Lotus Logistics & Developers Pvt. Ltd.,

Bombay

High

Court,

Order,

Arbitration

Petition

No.

1339

of 2014,

4

September 2015, 164 Jain Housing and Constructions Limited v. Mr. V. Ramaiah and City Land Corporation, (2009) 5 MLJ 225, 160

Jayesh H. Pandya & Anr. v. Subhtex India Ltd., 2019 SCC OnLine SC 1101, 100 Jes and Ben Groupo Pvt. Ltd. and Ors. v. Hell Energy Magyarorzag Kft. and Ors., MANU /DE/3121/2019,

69

Jindal Exports Ltd. v. Fuerst Day Lawson Ltd., 2010(1) ARBLR1 (Delhi), 28 Jolly Brothers Put. Ltd v. Surendra Nath Jolly, 2016 SCC OnLine Bom 3973, 238 IMC Projects (India) Limited v. South Delhi Municipal in ARB. P. 632/2017, 75 K. P. Chowdhry v. State of Madhya Pradesh, AIR 1967 SC 203, 39

K.K. Modi v. K.N. Modi, (1998) 3 SCC 573, 17 K.P. Poulose v. State of Kerala and Anr., (1975) 2 SCC 236, 201 Kailash Nath Associates v. Delhi Development Authority,

(2015) 4 SCC 136, 8

Kamachi Industries Limited, Judgement, 25 July 2019, Civil Appeal No. 5850 / 2019, 2

Kanpur Jal Sansthan v. Bapu Constructions, (2015) 5 SCC 267, 238, 240 Kavnet Finance Ltd. v. Verona Capital Ltd., (2019) SCC Online Bom 1203, 230 Kedar Nath Motantv. Prahlad Rai, AJR 1960 SC 213, 206 Kerala SEB v. Kurien E. Kalathil, (2018) 4 SCC 793, 89

Kerala State Road Transport Corporation Rep. by the Managing Director v. Feethambaran Rep. by his Next Friends Sukhmmari, 1994 (2) KL] 646, 177 Khaleel Ahmed

Dakhani v. Hatti Gold Mines,

(2000) 3 SCC 755, 240

Koch Navigation Inc. v. Hindustan Petroleum Corpn. Ltd., (1989) 4 SCC 259, 250 Konkan Railway Co. Ltd. v. Mehul Construction Co, (2000) 7 SCC 201, 210

563

Table of Cases

Konkan Railway Corporation Limited v. M/s. Oriental Construction Company Limited, (2013) 3 Bom CR 140, 215 Kotak Mahindra Prime Limited v. Sanjeev S/o Sadaram Chavare, Appeal Against Order No. 61 OF 2008, 42 Kvaerner Cementation India Limited v. Bajranglal Agarwal, (2012) 5 SCC 214, 97 Lucent Technologies Inc. v. ICICI Bank Ltd. & Ors., 2009 SCC Online Del 3213, 28

M. Anasuya Devi and Anr v. M. Manik Reddy and Ors, (2003) 8 SCC 565, 187, 258 M.C. Mehta and Another v. Union of India and Others, 1 $.C.C., 395, 419, 420, (S.C.

1987), 462

M.C. Mehta v. Kamal Nath and Others, 6 §.C.C., 213, 224, (S.C. 2000), 459

M.C. Mehta v. Kamal Nath, 1 $.C.C., 388, 413, (S.C. 1997), 460 M.D., Army Welfare Housing Organisation v. Sumangal Services Pvt. Ltd., (2004) 9 SCC 619, 152

M.M. Aqua Technologies Ltd. v. Wig Builders and Engrs. Ltd (2001) 1 Arb LR 301 (Del), 19 M.P. Rural Road Development Authority v. L.G. Chaudhary, Engineers and Contractors, AIR 2012 SC 1228, 16

M.R. Engineers & Contractor (P) Ltd v. Som Dutt Builders Ltd., (2009) 7 SCC 696, 21, 22, 42,43, 317 M.R. Power Projects v. State of Arunachal Pradesh, (2009) 4 Gau LR 154, 214 M.S.J. Construction (P) Ltd. v. Delhi Development Authority, 2006 (91) DRJ 354, 220

M/s Ogene Systems India Limited v. Technology Development Board, 2017 SCC OnLine Del 11136, 216 M/S SMS Tea Estates P.Ltd v. Chandmari Tea Co. P. Ltd, (2011) 14 SCC 66, 33, 156

M/s Uttam Singh Duggal and Co. Put. Ltd. v. United States of America Agency for International Development, 22 (1982) DLT 25, 178 M/S Young Achievers v. IMS Learning Resources, 2013

(1) SCC 535, 112, 314

M/s. Fedders Electrical & Engineering Limited v. M/s. Ahluwalia Contracts Limited, 2017 SCC OnLine Del 10744, 216 M/s. Fuerst Day Lawson Ltd v. Jindal Exports Ltd., 2001 (6) SCC 356, 283 M/s. Hind Builders v. Union of India, (1990) 3 SCC 338, 199 M/S. Kochhar Construction Co. v. Union of India &Anr.ILR, (1987) 1 Del 571, 200 M/s. Lifelong Meditech P. Ltd. v. M/s. United India Insurance Co., 2017 SCC OnLine Del 11904, 216

M/s. National Highways Authority of India v. M/s. Oriental Structural Engineers Pvt. Ltd., AIR 2015 Del 79, 217 M/s. Phoenix Yule Ltd. v. Neyveli Lignite Corporation Limited, 2014 SCC OnLine Mad 496, 215 M/s. Shivalik Foods v. Union of India, 2018 SCC OnLine J&K 42, 215

M/s. Shivnath Rai Har Narain v. M/s Italgrani SPA, 93 (2001) DRJ174, 281

DLT222,

2002

(63)

M/S. Shri Ram EPC Limited v. Rioglass Solar SA, (2018) SCC Online 147, 188,

M/S. Shri Ram EPC Limited v. Rioglass Solar SA, Supreme Court, Civil Appeal No. 9515 of 2018, 13 September 2013, 272 M/s. Sikkim Suba Associates v. State of Sikkim, (2001) 5 SCC 629, 201

564

Table of Cases

Magic

Eye Developers Pvt. Ltd. v. Green Edge Infra Pvt. Ltd. & Ors, MANU/DE/1328/2020, 41, 62 Magic Properties Private Limited v. Raj Pipla Co-operative Housing Society Limited, 2015 SCC OnLine Bom 6550, 153 Mahanagar Telephone Nigam Ltd. v. Canara Bank and Ors, MANU/SC/1057/2019, 61 Maharashtra Maritime Board v. PNP Maritime Services Pvt. Ltd., 2017 SCC OnLineBom

3030, 215 Maharashtra State Electricity Distribution Company Limited v. Vijai Electricals, (2015) 3 Bom CR 211, 215

Maharashtra State Electricity Distribution Company v. M/s. Datar Switchgear Limited, (2018) 3 SCC 133, 216 Maharashtra State Financial Corpn v. Ashok K. Aggarwal & Ors, (2006) 9 SCC 617, 241 Malaysian Airlines Systems Bhd Ltd. v. STIC Travels, AIR 2001 SC 358, 76

Markfed Vanaspati & Allied Industries v. Union of India, (2007) 7 SCC 679, 200 Master Tours and Travels v. The Chairman, Shri Amarnath Ji Shrine Board and Ors., (2016) 16 SCC 661, 316 McDermott International Inc. v. Burn Standard Co. Ltd., (2006) 11 SCC 181, 151, 180,

184, 213, 245 Mcdonald's India Private Limited v. Vikram Bakshi, (2016) SCC Online Del 3949, 98 Mehtab Singh v. National Fire and General Insurance Co Ltd, AIR 1963 P&H

103, 43

Mirza Ali Akbar Kasani v. United Arab Republicand other, 1966 SCR (1) 319, 178

MMTC Limited. v. Sterlite Industries (India) Ltd., AIR 1997 SC 605, 75 Mohammed

Mamdouh

Matwally Ghali v. Kerala Automobiles Ltd., 2011 SCC OnLine

Ker 4168, 220

Mohan Singh v. HP. State Forest Corpn., (1999) 1 Arb LR 183 (P&H), 17 Municipal Corporation of Delhi v. Naresh Kumar Gupta and Company Pvt. Ltd., 2011

(2) Arb LR 390 (Del), 220

Municipal Corporation of Delhi v. Rakesh Brothers, (2005) 2 Arb LR 257, 220 Municipal Corporation of Greater Mumbai v. Jyoti Construction Co., (2003) 3 Arbitration Law Reporter 489, 210 Murlidhar Aggarwal &Anr v. State of Uttar Pradesh &Ors., (1974) 2 SCC 472, 205 Murlidhar Roongta v. S. Jagannath Tibrewala, 2005 57 SCL 128 Bom, 84, 85 N. Alagarisamy v. The National Seeds Corporation, 2001 SCC OnLine Del 913, 220 N. Radhakrishnan v. Maestro Engineers and Ors, (2010) 1 SCC 72, 330 N.B.C.C. Ltd v. J.G. Engineering Put. Ltd., (2010) 2 SCC 385, 100

NAFED v. Alimenta, (2020) SCC Online SC 381, 226, 381, 254 Narayan Lohia v. Nikunj Lohia, (2002) 3 SCC 572, 210, 325 Narayan Prasad Lohia v. Nikunj Kumar Lohia, AIR 2002 SC 1139, 75

Narayan Trading Co. v. Abcom Trading Put. Ltd, 2012 SCCOnLine MP 8645, 188 Narmada Bachao Andolan v. Union of India and Others, 10 $.C.C., 664, 727, 728, (S.C. 2000), 462 National Agricultural Co-operative Marketing Federation of India (NAFED) v. Alimenta S.A., 2020 SCC OnLine SC 381, 254

565

Table of Cases

National Agricultural Co-operative Marketing Federation of India Ltd. (NAFED) v. Earthtech Enterprises Ltd., Delhi High Court, Order, OMP No. 558 of 2007, 23 April 2009, 164

National Aluminium Co. Ltd. v. Pressteel & Fabrications (P) Ltd., (2004) 1 SCC 540, 240, 242 National Buildings Construction v. Lloyds Insulation India Limited, (2005) 2 SCC 367, 240 National Highway Authority of India v. Gammon India Limited, (2014) SCC OnLine Cal 17407, 217

National Highways Authority of India v. Afcons Infrastructure Ltd., (2008) 3 Arb. LR 56, 214 National Insurance Co. Ltd. v. Boghara Polyfab Pvt. Ltd., (2009) 1 SCC 267, 95 National Insurance Company Limited v. S.A. Enterprises (MANU/MH/2831/2015), 134 National Shipping Company of Saudi Arabia v. Sentrans Industries Ltd., AIR 2004 Bom 136, 159 National Thermal Power Corporation Ltd. v. Siemens Atkeingesellschaft, (2007) 4 SCC 451, 90, 100, 151, 179

Naval Gent Maritime Limited v. Shivnath Rai Harnarain (I) Ltd., (2009) SCC OnLine Del 2961, 287 Naval Gent Maritime Ltd v. Shivnath Rai Harnarain {I) Ltd., 174 (2009) DLT 391, 188

Navbharat Ferro Alloys Ltd. v. M/s. Continental Float Glass Ltd. , 1998 (45) DRJ 368, 158 Nawab Usmanali Khan v. Sagarmal, AIR 1965 SC 1798, 178 New India Assurance Co Ltd v. Central Bank of India & Ors AIR 1985 Cal 76, 27

New Tirupur Area Development Corporation Ltd. v. M/s Hindustan Construction Co. Ltd., Application No. 7674 of 2015 in O.P. No. 931 of 2015, 245 NHAI v. B. Seenaiah (2012) 4 Cal LT 40 (HC), 240 NHAI v. Oriental Structural Engineers Ltd, 2013 (1) Arb LR 362 (Del) (FB), 137 NHAI v. Progressive mur (JV), (2018) 14 SCC 688, 216 Nidhi Kaim v. State of M.P., (2017) 4 SCC 1, 222 Nimbus Communications Limited v. Board of Control for Cricket in India, 2012 (5) Bom CR 114, 159

Nobel Resource Ltd. v. Dharni Sampda Private Ltd., (2019) SCCOnline Bom 4415, 225 Noble Engineering Works v. Himachal Pradesh State Electricity Board, AIR 1994 HP 153, 37

Norscot Rig Management Pvt. Ltd. v. Essar Oilfields Services Ltd., Bombay High Court, Order, 26 April 2019, Notice of Motion (L) No. 996 of 2019 in Commercial Arbitration Petition No. 1065 of 2018, 3 Northern Railway Administration, Ministry of Railway, New Delhi v. Patel Engineering Company Ltd., (2008) 10 SCC 240, 80

NTPC v. Italian Development Public Company, OMP(COMM) 4/2020, 245 NTPC v. Singer Co, (1992) 3 SCC 551, 45, 107, 250 Numaligarh Refinery Ltd. v. Daelim Industrial Co. Ltd., (2007) 8 SCC 466, 214 Nussli Switzerland Ltd. v. Organizing Committee Commonwealth Games 2010, 2014 (4) Arb LR 196 (Delhi), 168

566

Table of Cases

Offshore Infrastructure Limited v. Bharat Heavy Electricals Limited & Anr., 2016 SCC Online Mad 31837, 327 Ogilvy & Mather Put. Ltd &Anr. v. Union of India, 2012 SCC OnLine Del 3364, 214

Oil and Natural Gas Commission Ltd. v. CGG Services, Bombay High Court, Comm. Arb. Petition No. 343 of 2018, 6 January 2020, 216 Olympus Superstructure v. Meena Khetan, (1999) 5 SCC 651, 210, 319, 471

ONGC Ltd. v. Saw Pipes, (2003) 5 SCC 705, 211, 239, 484 ONGC Ltd. v. Western Geco International, (2014) 9 SCC 263, 214, 219, 220, 239, 485 ONGC Petro Additions Limited v. Ferns Construction Co. Inc., MANU/DE/1396/2020, 101

P. Dasaratharama Reddy Complex v. Government of Karnataka and Anr., (2014) 2 SCC 201, 316 P_R. Shah, Shares and Stock Brokers Private Limited v. B.H.H. Securities Private Limited and Others, (2012)

1 SCC 594, 54, 56, 64, 69, 472

Pam Developments Pvt Ltd. v. State of WB (2019) 8 SCC 112, 246 Paramjeet Singh Patheja v. ICDS Ltd., (2006) 13 SCC 322, 241 Parsa Kente Collieries v. Rajasthan Rajya Vidyut Utpadam Nigam Ltd., (2019) 7 SCC 236, 216 Patanjal v. Rawalpindi Theatres Pvt Ltd, AIR 1970 Del 19, 42 Patel Engineering v. NEEPCO, 2020 SCC Online SC 466, 216, 220, 221 Paton Constructions Private Limited v. Lorven Projects Limited, AIR 2017 Kant 135, 165

PEC Limited v. Austbulk Shipping SDN BHD, Supreme Court, Civil Appeal No. 4834 of 2007, 14 November 2018, 274 Perin Hoshang Davierwalla v. Kobad Dorabji Davierwalla, 2014 (3) Bom CR 551, 169

Perkins Eastman Architects DPC & Anr. v. HSCC (India) Ltd., AIR 2020 SC 59, 58, 478 Phulchand Exports Limited v. O.0.0. Patriot, (2011) 10 SCC 300, 223, 253 Poysha Oxygen Put. Ltd. v, Sh. Ashwini Suri and Ors., (2009) 3 Arb LR 533, 215

Pradeep K.N. v. The Station House Officer, Perumbavoor Police Station, AIR 2016 Ker 211, 154 Prajita Developers Pvt. Ltd. v. Yusuf Khan, 2016 (2) Bom CR 598, 169 Pramod Chimanbai Patel v. Lalit Constructions, (2003) 3 Arb LR 338 (Bom), 25 Praveen Gupta v. Star Share & Stock Brokers Ltd., (2008) 2 Arb LR 131, 220 Prem Singh v. Deputy Custodian General Evacuee Property, AIR 1957 SC 804, 213 Pricol Ltd. v. Johnson Controls Enterprises Ltd., (2015) 4 SCC 177, 29, 30 Pritam Singh v. The State, 1950 AIR 169, 82

Proddatur Cable TV Digi Services v. Siti Cable Network Limited, 2020 SCC Online Del 350, 77 PT First Media TBK v. Astro Nusantara International BV, [2014]

1 SLR 372, 472

Puneet Solanki v. Sapsi Electronics Pvt. Ltd., 2018 SCC OnLine Del 10619,

100

Punjab State v. Dina Nath, AIR 2007 SC 2157, 17 Puravankara Projects Limited v. Galaxy Properties Pvt. Ltd., 2018 SCC OnLine Mad 556, 216

Pure Helium India (P) Ltd. v. ONGC, (2003) 8 SCC 593, 216 Purple Medical Solutions Pvt. Ltd. v. MIV Therapeutics

MANU/SG/0139/2015, 61

567

Inc

and

Ors.,

Table of Cases

Pushkar Raj Wason v. Union of India, AIR 2008 Cal 255, 201 Pyrites, Phosphate and Chemicals v. Excel Shipping Enterprises, (2001) 4 RAJ 660 (Del), 19

Qatar Airways v. Shapoorji Pallonji & Co., Appeal No. 387 of 2012 in Summons for Judgment No. 271 of 2010 in Summary Suit No. 1224 of 2010 and Notice of Motion No. 1773 of 2012, 178

Raffles Design International India Private Limited & Ors. v. Educomp Education Limited & Ors. (2016) 234 DLT 349, 3, 171, 182 Raj Kumar Contractors v. Bareilly Development,

Professional

1998 SCC OnLine All 880, 318

Rajasthan Small Industries Corporation Limited v. M/s Ganesh Containers Movers Syndicate, Civil Appeal No. 1039 of 2019 arising out of SLP (C) No. 22809 of 2016, 88 Rajinder Parshad Sharma v. Ashok Sharma and Ors, 2008, SCC Online Del 1317, 187

Rajnish Gupta & Anr. v. Brij Mohan Aggarwal, 2019 SCC OnLine Del 11635, 238 Ram Lal Jagannath v. Punjab State, AIR 1966 Punj 436, 17 Ramesh D. Shah & Ors. v. Tushar D. Thakkar & Ors (MANU/MH/3067/2017), 130 Ramesh Kumar v. Furu Ram,

(2011) 8 SCC 613, 258

Ramshai v. Joylall, AIR 1928 Calcutta 840, 236 Rashid Raza v. Sadaf Akhtar, (2019) 8 SCC 710, 96 Rasiklal Ratilal v. Fancy Corporation Ltd. & Ors. (MANU/MH/0188/2007),

134

Rattan Chand Hira Chand v. Aksar Nawaz Jung, (1991) 3 SCC 67, 206

Reckitt Benckiser (India) Private Limited v. Reynders Label Printing India Private Limited and Ors., MANU/SC/0859/2019,

62

Reliance Industries Limited v. Union of India, (2014) 7 SCC 603, 111, 256, 321

Reliance Industries Ltd. & Ors. v. Union of India, (2014) 11 SCC 576 Reliance Infrastructure Ltd. v. Haryana Power Generation Corp. Ltd, 2016 (6) Arb LR

480 (P&H), 326

Rendezvous Sports World v. Board of Control for Cricket in India, 2016 SCC Online Bombay 6064, 231 Renusagar Power Company Ltd. v. General Electric Company, (1994) Supp 1 SCC 644, 209, 249, 250, 255, 266, 318, 459, 464, 484

Reshamsingh and Co. (P) Ltd. v. Dharti Dredging and Infrastructure Ltd., (2010) 5 Mah LJ 438, 315 RM Investment and Trading Company Put. Ltd. v. Boeing Company, (1994) 4 SCC 541, 251

Rukmani Bai Gupta v. The Collector, Jabalpur, AIR 1981 SC 479, 17, 20, 315 S&D Securities v. Union of India, 2005 124 CompCas 340, 27 S. Raminder Singh v. NCT of Delhi,

102 (2003) DLT 511, 161

S.B. Noronah v. PremKumari Khanna,

(1980) 1 SCC 52, 222

S.B.P. and Co. v. Patel Engineering Ltd., (2005) 8 SCC 618, 78, 92, 95 S.P Chengalvaraya Naidu v. Jagannath, (1994) 1 SCC 1, 222 SAIL v. Gupta Brother Steel Tubes Ltd., (2009) 10 SCC 63, 245

Salecha Cables (P) Ltd. v. HPSER, (1995) 1 Arb LR 422 (HP), 313 Sanganer Dal & Flour Mills v. Food Corporation of India, AIR 1992 SC 481, 38

568

Table of Cases

Sasan Power Limited, v. North American Coal Corporation India Private Limited, (2015) SCC Online MP 7417, 104, 323 Sasan Power Ltd. v. North American Coal Corp., (2016)

10 SCC 813, 256, 323

Sathyanarayana Bros. (P) Ltd. v. T.N. Water Supply &Drainage Board, (2004) 5 SCC 314, 201 Savitri Goenka v. Kanti Bhai Damani, (2009) 1 Arb LR 320, 329 (Del), 25 Sedco Forex International Drill Inc. & Ors. v. CIT, Dehradurn & Ors., (2005) 12 SCC 717, 244 Shakti Bhog Foods Ltd. v. Kola Shipping Ltd., AIR 2009 SC 12, 25, 255, 315 Shakti International Private Limited v. Excel Metal Processors Private Limited, 2017 SCC

OnLine Bom 321, 152 Shanti Dey v. Srt Suvodeep Saha, 2016 SCC OnLine Cal 6251, 166 Shapoori Pallonji and Co. Pvt. Ltd. v. Jindal India Thermal MANU /DE/0399/2020,

Power

Limited,

32

Sheetal Maruti Kurundwade v. Metal Power Analytical (I) Pvt. Ltd., MANU/MH/3556/2017, 85 Shiam Cooperative Group v. M/s. Kamal Construction Co. Ltd., 2017 SCC OnLine Del 10292, 216 Shin Satellite Public Co. Ltd. v. Jain Studios Limited, AIR 2006 SC 963, 33 Shin Satellite Public Company Ltd. v. Jain Studios Ltd., 2008 (2) Arb LR 242 (Delhi), 160 Shiv Shakti Enterprises v. Union of India, MANU/UP/3566/2016, 84 Shiva Jute Baling Ltd. v. Hindley and Co. Ltd., (1960) 1 SCR 569: AIR 1959 SC 1357, 248 Shoney Sanil v. Coastal Foundations (P) Ltd., AIR 2006 Ker 206, 163 Shreejee Traco (I) (P) Ltd. v. Paperline International Inc., (2012) 9 SCC 552, 113

Shri Lal Mahal v. ProgettoGrano Spa, (2014) 2 SCC 433, 224, 253, 485 Shriram EPC Ltd. v. Rioglass Solar SA, (2018) 5 ArbLR 161 (SC), 258 Shri. Sanjeev Malhotra v. B.S Promoter & Developers, 2017 SCC OnLine

Del 7688, 217

Siddhi Vinayak Industries Pvt. Ltd v. Virgoz Oils & Fats Pte Ltd., 2010 (Suppl. 2) Arb LR 157 (Cal), 25 Silver Resorts Hotel India Pvt. Ltd. v. Wimberly Allison Tong & Goo (UK), 2016 SCC OnLine Del 3914, 217

Simplex Infrastructure Ltd. v. Energo Engineering Projects Ltd., Delhi High Court, Order, OMP (I) (Comm.) 55 of 2015, 14 July 2017, 170 SIMS Metal Management Limited v. Sabari Exim Pvt. Ltd., (2015) 1 ArbLR 225 (Mad), 256

Sky Associates v. Delhi State Civil Supply Corporation, 2014 SCC OnLine Del 7264, 215 Slipco Constructions P. Ltd. v. Shapporji Pallonji and Company Ltd., 2013 (2) Arb LR

368 (Cal), 18

Smita Conductors Ltd. v. Euro Alloys Ltd., AIR 2001 SC 3730, 24, 210

SMS Tea Estates Put. Ltd. v. Chandmari Tea Company Pvt. Ltd., (2011) 14 SCC 66, 156 South East Asia Marine Engineering & Constructions v. Oil India Ltd., (2020) SCC Online SC 451, 221

South East Asia Marine Engineering and Constructions Ltd. (Seamec Ltd.) v. Oil India Limited, AIR 2020 SC 2323, 259

569

Table of Cases

Srei Infrastructure Finance Limited v. Tuff Drilling Private Limited (2018) 11 SCC 470, 125, 130 Sri Krishan v. Anand, 2009 (112) DRJ 657, 154

Ssangyong Engineering v. National Highway Authority, (2019) 15 SCC 131, 220, 259 Standard Chartered Bank v. Heavy Engineering Corporation Ltd. & Anr., 2019 SCC OnLine SC 1638, 3

State State State State State

of A.P. v. T. Suryachandra Rao, (2005) 6 SCC 149, 222 of Arunachal Pradesh v. Damani Construction Co., (2007) 10 SCC 742, 184 of Goa v. Praveen Enterprises (2012) 12 SCC 581, 131 of H.P. v. Himachal Techno Engineers, (2010) 12 SCC 210, 238 of Himachal Pradesh v. A Parent of Student of a Medical College, 3 $.C.C. 169 (S.C. 1985), 461 State of Jharkhand v. Bharat Drilling & Foundation Treatment Pvt. Ltd., Ranchi, (2004) 1 Arb LR 127, 215

State of Maharashtra v. Dr Praful B. Desai, (2003) 4 SCC 601, 376 State of Maharashtra v. Hindustan Construction Co, Ltd., Bombay High Court, Order, Review Petition No. 2 of 2013 in Arbitration Appeal No. 6 of 2007 of Arbitration Application No. 44 of 2003, 4 April 2013, 169 State of Orissa v. Damodar Das, AIR 1996 SC 942, 17 State of Rajasthan and Ors. v. Gotan Lime Stone Khanji Udyog Put. Ltd. and Ors., MANU /SC/0058/2016,

State State State State Steel

59

of Rajasthan v. Basant Nahata, (2005) 12 SCC 77, 205 of Rajasthan v. Ferro Concrete Construction Private Ltd., of Rajasthan v. Puri Construction Co. Ltd., (1994) 6 SCC of West Bengal v. Bharat Vanijya Eastern Put. Ltd., 2017 Authority of India Ltd. v. AMCI Pty Ltd., 2011 (3) Arb LR

Sterna

India

Oil

and

Gas

MANU /DE/1694/2020,

Private

Ltd.

v.

Nandini

(2009) 12 SCC 1, 201 485, 199 SCC OnLine Cal 4, 214 502 (Delhi), 158, 160

Impex

Private

Limited,

52, 69

Sudarshan Trading Co. v. Government of Kerala, (1989) 2 SCC 38, 199 Sudhir Kumar Saha v. J.N. Chemicals Pvt Ltd, AIR 1985 Cal 454, 38 Sukanya Holdings Pvt, Lid. v. Jayesh H. Pandya & Anr, AIR 2003 SC 2252, 40, 329

Sumitomo Corporation v. CDS Financial Services, AIR 2008 SC 1594, 40, 103 Sumitomo Heavy Industries Ltd v. ONGC Ltd and Ors., AIR 1998 SC 825, 324 Sumitomo Heavy Industries Ltd. v. ONGC Ltd., (2010) Sun Pharmaceutical Industries Ltd., Mumbai

11 SCC 296, 253

v. M/S Falma Organics Limited Nigeria,

2017 SCC OnLine SC 1200, 78, 416, 419 Sundaram Finance Limited v. NEPC India Limited, (1999) 2 SCC 479, 165, 167 Sundaram Finance Ltd. v. Abdul Samad and Anr, (2018) 3 SCC 622, 257, 283

Supreme Infrastructure India Ltd. v. Central Public Works Department, Delhi High Court, Order, Arb. A. (Comm.) 9 of 2017, 28 April 2017, 170 Surya Devi v. Ram Chander Rai, (2003) 6 SCC 675, 228 Sutlej Construction Limited v. Union Territory of Chandigarh, (2018) 1 SCC 718, 216 Svapn Cons v. IDPL Employees Co-op Group Housing Society Ltd, 2006 1 RAJ 486 (Del), 38 Swastik Gases Put. Ltd. v. Indian Oil Corporation Ltd., (2013) 9 SCC 32, 321

570

Table of Cases

Swiss Timing Ltd. v. Commonwealth Games 2010 Organising Committee, (2014) 6 SCC 677, 91 Syed Yakoob v. K.S. Radhakrishnan, AIR 1964 SC 477, 213

Symphony Services Corp. (India) Pvt. Ltd. v. Sudip Bhattacharjee, 2008 (3) Arb LR 295 (Kar), 169 System for International Agencies v. Rahul Coach Builders Pvt. Ltd., (2015) 13 SCC 436, 28, 30, 316 Tamil Nadu State Construction Corporation Limited v. Gardner Landscape Pvt. Ltd. and Ors, AIR 2005 Mad 236, 319

Tapadiya Construction Ltd. v. Sanjay Suganchand Kasliwal, MANU/MH/3366/2015, 164 Tarapore& Co. v. State of M.P., (1994) 3 SCC 521, 200 Tata Elaxsi Ltd. v. Anand

Joshi, 2000 (3) KarLJ 517, 25

Tata Steel Limited v. Lindsay International, 2016 SCC OnLine Cal 6521, 214 Tata Steel Processing & Distribution Ltd. v. Unit Construction Company Pvt. Lid., 2012 (2) CHN 245, 162 TDM Infrastructure Private Limited v. UE Development India Private Ltd, (2008) 14 SCC 271, 105, 107, 323 Tech Mahindra Engineering LLC v. Tech Mahindra Limited, (2018) 1 SCC 656, 222 TEMA

India Ltd. v. Engineers India Ltd., (2015) 221 DLT 348, 215

Thaicom Public Company Limited v. Raj Television Network Ltd., 2017 (2)ARBLR 321 (Madras), 253 The Board of Trustees of the Port of Kolkata v. Louis Dreyfus Armatures SAS, 2014 SCC OnLine Cal 17695,

13

The Board of Trustees of the Port of Mumbai v. M/s. Afcons Infrastructure Limited, Arbitration Petition 868 of 2012, 23 December, 2016, 231 Thyssen Stahlunion Gmbh v. Steel Authority of India, (1999) 9 SCC 334, 230, 237, 252

Today Homes and Infrastructure Pvt. Ltd. v. Ludhiana Improvement Trust and Anr., (2014) 5 SCC 68, 314 Travancore Devaswom Board v. Panchamy Pack, 2004 13 SCC 510, 23 TRF Ltd. v. Energo Engineering Projects Ltd., 2017 SCC OnLine SC 692, 86, 87, 326, 478

Trimex International FZE Ltd. Dubai v. Vedanta Aluminium Ltd., India, (2010) 3 SCC 1,315 Tufan Chatterjee v. Rangandhar, AIR 2016 Calcutta 213:2016 SCC Online Cal 483, 231 U.P. Jal Nigam v. Anuj Construction Pvt. Ltd., 2014 SCC OnLine All 12931, 216

Umesh Goel v. Himachal Pradesh Cooperative Group Housing Society Ltd., AIR 2016 SC 3116, 39 Union of India (UOI) v. U.P. State Bridge Corporation Ltd, (2015) 2 SCC 52, 88 Union of India v. A. K. Mukherjee, 2017 SCC OnLine Cal 15473, 216

Union of India v. A.L. Rallia Ram, AIR 1963 SC 1685, 25, 199 Union of India v. Col. LSN Murthy, (2012) 1 SCC 718, 207 Union of India v. J.G. Engineering Pvt. Ltd., 2005 SCC OnLine Gau 52, 215

Union of India v. Khaitan Holdings (Mauritius) Limited & Ors., Delhi High Court, CS (OS) 46/2019 IAs. 1235/2019 & 1238/2019, 29 January 2019, 303, 345 Union of India v. Kishorilal Gupta and Bros., AIR 1959 SC 1362, 314

571

Table of Cases

Union of India v. M/s. Jia Lall Kishori Lall Pvt. Ltd., 2018 SCC OnLine Del 7192, 216 Union of India v. Mehta Teja Singh, AIR 1983 Del 297, 201 Union of India v. Popular Construction Co., (2001) 8 SCC 470, 238

Union of India v. Ram Iron Foundry, [1987] 2 Arb LR 250 (Del), 37 Union of India v. Rishi Engineering & Construction ({P) Ltd., (2016) 1 RAJ 679 (Delhi), 222

Union of India v. Salween Timber Construction, 2'$.C.R. 224 (S.C. 1969), 459 Union of India v. Singh Builders Syndicate, (2009) 4 SCC 523, 80 Union Of India v. Tolani Bulk Carriers Limited, 2002 (2) BomCR

256, 84, 85

Union of India v. V. Pundarikakhsudu and Sons, (2003) 8 SCC 168, 201 Union of India v. Vodafone Group Ple & Anr., Delhi High Court, CS(OS) 383/2017, 7 May 2018, 303, 304 Union of India v. Vodafone Group Ple United Kingdom, MANU/DE/1673/2018, 98, 346 United India Insurance Co. Ltd. v. Hyundat Engineering and Construction Co. Ltd., (2018) 17 SCC 607, 96 Union of India v. Palm Developments, (Cal HC) — G.A. No. 1903 of 2018 and A.P. No. 1121 of 2016 decided on: 05.09.2018, 246

Uppal Eng. Co. (P) Ltd. v. Cimmeo Birla Lid., 2005 (2) Arb LR 404 (Delhi), 161 Uttarakhand Purv Sainik Kalyan Nigam Ltd. v. Northern Coal Field Ltd., (2020) 2 SCC A455, 96

V.G. Santhosam and Ors. v. Shanthi Gnanasekaran and Ors., MANU/TN/1637/2020, 70 V.O. Tractoroexport v. Tarapore & Co., (1969) 3 SCC 562, 249 V/O Tractoroexport, Moscow v. Tarapore & Co., AIR 1971 SC 1, 269

Value Advisory Services v. ZTE Corporation, 2009 (3) Arb LR 315 (Delhi), 163, 164 Vascon Engineers Ltd. v. Sansara Hotels India Pvt. Ltd., 2009 (4) Bom CR 220, 162 Veb Deautfracht Seereederei Rostock (DSR Lines) a Department of the German Democratic Republic v. New Central Jute Mills Co Ltd and Ors, 1994 AIR SC 516, 178 Ved Prakash Mithal & Son v. Union of India, (Special Leave to Appeal (C) No. 20195/2017, 184 Vellore Citizens’ Welfare Forum v. Union of India, 5 §.C.C., 647, 658, (S.C. 1996), 462

Venture Global Engineering LLC v. Tech Mahindra Limited, (2018) 1 SCC 656, 214, 217 Venture Global Engineering v. Satyam Computer Services Ltd., (2010) 8 SCC 660, 222 Venture Global Engineering v. Satyam Computers Services Ltd., (2008) 4 SCC 190, 120, 147, 474, 252, 253, 259, 320, 474

Videocon Industries Ltd. v. Union of India and Anr., (2011) 6 SCC 161, 119, 320 Videsh Sanchar Nigam Ltd. v. Shapoorji Pallonji & Company Ltd., 2007 SCC OnLine Cal 670, 215

Vidya Drolia v. Durga Trading Corporation, 2019 SCC OnLine SC 358, 96 Vijay Karia v. Prysmian Cavi. E Sistemi SRL & Ors., (2020) SCC Online 177, 221 Vijaya Bank v. Maker Development Services Pvt. Ltd., (2001) 3 Bom. CR 652, 210 Vikram Bakshi And Anr v. Mc Donalds India Pvt Ltd And

Ors, LA Nos.6207/2014

in

C.S.(OS) No.962/2014, 13 Vimal Kishor Shah and Ors. v. Jayesh Dinesh Shah and Ors, AIR 2016 SC 3889, 34, 36 Visa International Ltd. v. Continental Resources (USA) Ltd., (2009) 2 SCC 55, 328

572

Table of Cases

Vishaka v. State of Rajasthan, (1997) 6 SCC 241, 214-215, 266, 272, 274 Vishal Exports Overseas Ltd. v. IndAgro Synergy Ltd., (2007) 3 Arb. LR 502 (MP), 214 Vitol S.A v. Bhatia International Limited, 2014 SCCOnLine Bom

1058, 188

Voestalpine Schienen GmbH v. Delhi Metro Rail Corporation Ltd., (2017) 4 SCC 665, 58,

327, 478

Wanbury Ltd. v. Candid Drug Distributors (MANU/MH/1412/2015), 130 Wander Ltd. v. Antox India Pvt. Ltd., (1990) Supp SCC 727, 169, 170 Wellington Associates Ltd. v. Kirit Mehta, (2000) 4 SCC 272, 29

Wescare (India) Ltd. v. Subuthi Finance Ltd., (2008) 4 Arb LR 278, 25

West Haryana Highways Projects Pvt. Ltd. v. National Highways Authority of India,

2017 SCC Online Del 8378, 326

Wind World (India) Ltd. v. Enercon GmbH, Bombay High Court, Order, Commercial Appeal (L) No. 13 of 2017 in Commercial Arbitration Petition No. 105 of 2016, 19 April 2017, 168

World Sport Group (Mauritius) Ltd. v. MSM Satellite (Singapore) Pte. Ltd., (2014) 11

SCC 639, 256

Yashwitha Constructions (P) Ltd. v. Simplex Concrete Piles India Ltd., (2006) 6 SCC 204,

83-85

Zoroastrian. Co-operative Housing Society Limited and Anr. v. District Registrar Cooperative Societies (Urban) &Ors., (2005)5 SCC 632, 206

Singapore Asuransi Jasa Indonesia (Persero) v. Dexia Bank, |2007] 1 SLR 597, 486 BCY v. BCZ, [2016] SGHC 249, 113 Dyna-Jet Pte Ltd v. Wilson Taylor Asia Pacific Pte Ltd {2017] SGCA 32, 26 FirstLink Investments Corp Ltd v. GT Payment Pte Ltd and others, [2014] SGHCR 12, 113 Five Ocean Corp v. Cingler Ship Pte Ltd, [2016] 1 SLR 1159, 475 Insigma Technology Co. Ltd. v. Alstom Technology Ltd., [2009] 1 SLR 23, 29 K.V.C Rice Intertrade Co Ltd v. Asian Mineral Resources Pte Ltd and another Suit, [2017] SGHC 32, 82 Sui Southern Gas Co. Ltd. v. Habibullah Coastal Power Co. (Pte) Ltd., (2010) SGHC 62, 220

Swift-Fortune Ltd v. Magnifica Marine SA, [2007] 1 SLR 629, 475 Other

Ahmad Baravati v. Josepthal, Lyon & Ross Inc, 28F 3d 704, 709 (1994), the U.S. Court of Appeals (7th Circuit), 220 Australia No.

11, Resort Condominiums

International Inc.

v. Ray Bolwell and Resort

Condominiums, Pty. Ltd., Supreme Court of Queensland, 29 October 1993, in Yearbook Commercial Arbitration Vol. XX (Albert Jan Van den Berg ed., ICCA & Kluwer Law International 1990), 282

Figueiredo Ferraz Engenharia De Projecto Ltda. v. The Republic of Peru, Ministerio de Vivienda, Construccion y Saneamiento, Programa Agua Para Todos (PAPT) (successor by intergration to Programa De Apoyo A La reforma Del Sector

573

Table of Cases

Saneamiento (PARSSA), formerly known as Proyecto Especial Programma Nacional De Agua Potable & Alcantarillado (PRONAP)) 2011 US App. Lexis 24748 (United States Court of Appeal for the Second Circuit, 14 December 2011), 283

Fisser v. International Bank, 282 F.2d 231, 233 (2d Cir 1960), 23 Halliburton Co. v. Erica P. John Fund, Inc. 573 U.S. 13 (Supreme Court of the United States, 2014), 461

Judgment of 3 July 1975, 1978 NJW 109 (German Bundesgerichtshof), 16 Judgment of 3 October 2000, DFT 4P.60/2000, (Swiss Federal Tribunal), 16 Lueky-Goldstar International (HK) Ltd. v. Ng Moo Kee Engineering Ltd. [1993] 1 HKC 404m 30

Murray v. Schooner Charming Betsy, 6 (2 Cranch) 64 (1804), 266 Parsons & Whittemore Overseas Co. Inc. v. Societe Generale de ('industrie du Papier (RAKTA), Bank of America (2nd Cir. 1974), 208 Parsons & Whittemore Overseas Co. Inc. v. SocieteGenerale De L’industrie Du Papier & Bank of America, 508 F.2d 969 para. 8. The U.S. Court of Appeals (Second Circuit), 223 Reily v. Russell, 34 Mo. 524, 528 (1864), 15

Siemens AG/BKMI Industrienlagen GmbH v. Dutco Construction Company, Cassation, 7 January 1992, XVIII YBCA 140 (1993), 57 Southern Bluefin Tuna, New Zealand v. Japan,

38 ILM

1624, (ITLOS

Southern Pacific Properties Ltd. v. Arab Republic of Egypt, 2 Int'l Arb. (Cass. Civ. Ire) (1987), 322 Switzerland No. 27, Compagnie de Navigation et Transports SA v. MSC Shipping Company SA, Tribunal Fédéral [Supreme Court], 16 Yearbook Commercial Arbitration Vol. XXI (Albert Jan Van den Kluwer Law International 1990), 278

Cour de

1999), 457

Rep., No. 1, at 17 - Mediterranean January 1995, in Berg ed., ICCA &

Switzerland No. 43, X Holding AG et al. v. Y Investments NV, Bundesgerichtshof, 25

October 2010, in Yearbook Commercial Arbitration Vol. XXXVI (Albert Jan Van den Berg ed., ICCA & Kluwer Law International 1990), 278 Thomson-CSF, S.A. v. American Arbitration Association, 64 F.3d 773, 776 (2d Cir.

1995), 42

United States No. 338, Publicis Communication v. Publicis S.A., True North Communications Inc., United States Court of Appeals, Seventh Circuit, 14 March 2000, in Yearbook Commercial Arbitration Vol. XXV (Albert Jan Van den Berg ed., ICCA & Kluwer Law International 1990), 282

United States No. 453, Peter J. DaPuzzo (US) v. Globalvest Management Company, L.P. and others, United States District Court, Southern District of New York, 12 June 2003, in Yearbook Commercial Arbitration Vol. XXIX (Albert Jan Van den Berg ed., ICCA & Kluwer Law International

1990), 279

United States No. 457, Standard Bent Glass Corp. (US) v. Glassrobots Oy (Finland), United States Court of Appeals, Third Circuit, 20 June 2003, in Yearbook Commercial Arbitration Vol. XXIX (Albert Jan Van den Berg ed., ICCA & Kluwer

Law International 1990), 278 United States No. 729, Blackwater Security Consulting, LLC et al. v. Richard P. Nordan, as Ancillary Administrator for the Separate Estates of Stephen S. Helveston, Mike 574

Table of Cases

R. Teague, Jerko Gerald Zovko, and Wesley J.K. Batalona, United States District Court, Eastern District of North Carolina, Northern Division, 21 January 2011, in Yearbook Commercial Arbitration Vol. XXXVI (Albert Jan Van den Berg ed., ICCA

& Kluwer Law International 1990), 282 United States No. 741, Maritima De Ecologica SA de CV v. Sealion Shipping Ltd, United States District Court, Southern District of New York, 15 April 2011, in Yearbook

Commercial Arbitration Vol. XXXVI (Albert Jan Van den Berg ed., ICCA & Kluwer Law International 1990), 279

575

Table of Awards

Abyei

Arbitration, The Government of Sudan/the Sudan People’s Liberation Movement/Army, PCA Case No. 2008-7, 434 Amco Asia Corporation v. Indonesia (Resubmission: Jurisdiction), ICSID Case No. ARB/81/1, (1992) 89 ILR 552, 176 Bilcon of Delaware v. Canada, PCA Case No. 2009-04 (NAFTA) (1976 UNCITRAL Rules), Procedural Order No. 2, 3 June 2009, 434 Burlington v. Ecuador (Decision on Counter Claims), ICSID Case No. ARB/08/5, (2017),

463 Case No. 4A_450/2013

(Swiss Supreme Court Decision), 46

Chevron Corporation and Texaco Petroleum Corporation v. The Republic of Ecuador, UNCITRAL, PCA Case No. 2009-23, 433 CME Czech Republic B.B. v. The Czech Republic, UNCITRAL, Partial Award, 13 September 2001, 298

Government of Pakistan, Ministry of Religious Affairs v. Dallah Real Estate and Tourism Holding Company, (Case No. 09/28533), 46 Hulley Enterprises Limited (Cyprus) v. The Russian Federation, (PCA Case No. AA 226), 178, 334

ICC Case No. 12913/MS, Final Award, 27 April 2005, 307 ICS Inspection and Control Services Limited (United Kingdom) Argentina,

Decision

on

Challenge

to

Arbitrator,

PCA

Case

v. The Republic of No.

2010-09,

17

December 2009, 431

Indus

Waters Kishenganga Arbitration, Pakistan v. India, PCA Case No. 2011-1, Procedural Order No. 3, 10 May 2011), 434 Indus Waters Kishenganga Case (Indus Waters Kishenganga Arbitration, Pakistan v. India, PCA Case No. 2011-01, Procedural Order No. 1, 21 January 2011, 434 Merck Sharpe & Dohme (I.A.) Corporation v. The Republic of Ecuador, PCA Case No. 2012-10, Decision on Challenge to Arbitrator Judge Stephen M. Schwebel, 12 April 2012, 431

Mondev International Ltd. v. United States of America, ICSID Case No. ARB(AF)/99/2, Award, 11 October 2002, §123, 296

577

Table of Awards

MOX Plant Case, Ireland v. United Kingdom, 126 ILR 310, (PCA 2003), 457 Philipp Morris Asia Limited v. Australia, PCA Case No. 2012-12, Procedural Order No. 3 (Regarding the Place of Arbitration), 26 October 2012, 435

Salini Costruttori S.p.A. and Italstrade S.p.A. v. Kingdom of Morocco, ICSID Case No. ARB/00/4,

Decision on Jurisdiction, 293

Saluka Investments B.V. v. The Czech Republic, UNCITRAL,

2006, 298 L.F.H. Neer and Pauline Neer (USA)

Partial Award,

17 March

v. United Mexican States, 15 October 1926, 4

UNRIAA, 296 Slowakische Republik v. Achmea BV, Case C-284/16, 6 March 2018, 339

The Dow Chemical Company and others v. ISOVER Saint Gobain, ICC Award No. 4131, YCA 1984, 46 Veteran Petroleum Limited (Cyprus) v. The Russian Federation (PCA Case No. AA 228), 178, 334

Veteran Petroleum Limited (Cyprus) v. The Russian Federation, Final Award of 18 July 2018, PCA Case No. AA 228, 194 Veteran Petroleum Limited (Cyprus) v. The Russian Federation, PCA Case No. AA 228,

Interim Award of 30 November 2009, 194 Watkins-Johnson Co. v. Islamic Repub. of Iran, Award in IUSCT Case No. 429-370-1 of 28 July 1989, 22 Iran-US C.T.R. 218, 296 (1989) (Noori, J., dissenting), White Industries Australia Limited v. Republic of India, UNCITRAL, November

2011, 102, 291, 295

15

Final Award,

30

Yukos Universal Limited (Isle of Man) v. The Russian Federation (PCA Case No. AA 227), 178, 334

578

Index A

B

Absolute liability, 462 Additional award,

Bilateral investment treaty (BITs), 13,

183-184, 438

289, 292-301, 305, 337,

Administration, 2, 34, 193, 386, 406,

426, 439, 447, 453 Advocacy, 11, 14, 383 Annulment, 192, 243, 244, 246, 253-258, 344, 356-3583, 361, 363, 525 Anti-arbitration injunctions, 97-99, 249,

303, 304, 345 Appellate body, 338, 343, 354, 357

Appointment, 67-68, 74-82, 94-97,

160-161, 325-327, 400-401, 409-410, 432, 449-450-453, Arbitrability, 33-36, 81, 94, 109, 279, 280, 313,

388, 418-421, 468-471 96, 108, 329-330,

458

Burlington, 463 Cc Case strategy, 182 Challenges to awards, 204 Challenges, 85-86,

Common

167-168,

173-194, 235-260, Arbitral institutions, 385-456 Arbitration agreement, 15-47, 110-114, 272-273, 277-281, 312-318, 387, 399-400, 408-409, 418, 430, 447-449, 459-461 Arbitration clauses, 20, 26-28, 311-331,

414, 458-459 Automatic stay, 155, 240, 483

tribunal, 67-68, 71

Comparative, 126, 335, 467-488 Competence-competence, 90-100,

471

Confidentiality, 50, 55, 58, 66, 71, 139,

190, 194, 222-223, 341, 378, 380, 381, 383, 390, 398, 417,

457 Arbitral awards, 131-132,

195-233, 419-420,

44)-443 Charming Betsy, 266, 274 Closest connection, 112-114, 117

425-426, 485, 487-488, 522, 549 Consolidation, 65-67, 421, 441-442,

471-473

Costs, 12, 367-384, 390, 394, 399, 403, 412, 426, 434-435, 443-447,

453-454, 479-480

D DIS, 386-394

579

Index Disclosure, 4, 74, 83-88,

139, 335, 341,

361, 381, 399, 401, 426, 453, 487, 521, 522, 529, 530, 531,

549 Disputes, 65-67, 159-160, 289-310, 328-329, 363-364, 462-464,

Domestic awards, 174, 188, 195, 196, 204, 210-212, 221, 224, 229,

Final award, 99, 130, 141, 150, 151, 177-180, 183, 184, 190, 193, 236, 390, 394, 397, 398, 402, A412, 423, 425, 434, 454, 477 Foreign awards, 198-199, 208-210, 223-226, 247-256, 261-287, 484-486 Foreign law, 106-107, 109

236-247, 250, 257, 258, 397,

Form requirements, 182, 184-188

484, 486, 494

Full protection and security (FPS), 298

Drafting, 8, 46-47, 190-194, 311-331, 387, 399-400, 408-409, 430, 447-449

Functus officio, 130, 141, 142, 150,

175-177, 183, 184 G

E

Good

faith, 30, 46, 264, 269, 271-272,

Effect of public policy, 207-223

276, 278, 279, 284, 422, 521,

Effects of awards, 247, 248, 251

549

Efficiency, 43, 55, 60, 68, 180, 355, 361, 368, 370, 383, 386, 389, 390, 393, 395, 399, 406, 410, 411, AA), 453 Emergency arbitrator, 3, 170-172, 181, 182, 396, 400, 406, 407, 414, 422-423, 426, 452, 476-477 Emergency award, 181-182 Enforcement of arbitral awards, 173, 189, 235-260, 263, 281, 384, 483, 509

England, 114, 284, 320, 439, 467-488 Environment, 297, 379, 389, 457-465

Essential elements of an arbitration agreement,

18

Evidence, 8, 24-26, 132-138, 142, 274, 375-384, 414

Governing law, 2, 45, 46, 49, 60, 103, 105, 113, 117, 256, 321, 399

H Hearing preparation, 6-7 Hearing, 6-7, 9-11, 138-141, 423-424 Hot-tubbing,

ICC, 395-405

ICCA judicial dialogue, 261 ICSID, 299, 334, 337, 338, 343, 345, 350, 355-358, 360, 363, 463, 464

Incremental reforms, 338, 343, 359-364 India, 106-107,

123-143,

164-165,

173-194,

261-331, 384, 457-488

Interim award, 149-153, 155, 171, 177, 179, 180, 190, 250, 258, 282,

F Fair and equitable treatment (FET), 295-297, 299, 302 Fast-Track Procedure, 126-128, 181, 384, 397, 479, 534 FDI, 335-337, 343, 346, 350, 362

118-121,

148-149,

Experts, 3, 135-136

Expropriation, 295, 297-300, 302

10, 381-383

292 Interim measures,

145-172, 414,

474-476 Interpretation, 271-272, 277-278 Investment arbitration, 292, 303-304, 342, 345, 439 Investment protection, 289, 304, 305

580

Index

190, 420

ISDS, 333-365

Party autonomy, 6, 19, 31, 49, 62, 65,

J

75, 77, 86-88,

101, 103,

124-126, 131, 150, 181, 202, 219,232,273, 278, 311, 320;

Joinder, 64-65, 441, 471-473 Jurisdiction, 45, 89-102, 421-422

329, 334, 344, 350, 351, 353,

369, 373, 387, 388 PCA, 429-438

L

Pleadings, 5, 8, 9, 23-25, 32, 101,

LCIA, 406-415

126-129,

Lex Arbitri, 103, 104, 107, 115-121, 264, 277, 279, 467 Lex Causae,

131, 134, 139, 181,

186, 187, 191, 330, 341, 368, 371, 372, 402, 421, 423, 424,

105-110

425, 482, 534, 535, 548

Polluter pays principle, 462 Preliminary meeting, 5-7, 128, 138, 379,

M

423, 453

Mandate, 4, 32, 74, 76, 84, 87, 88, 97, 100-101,

106, 130, 132, 150,

Preparation, 2-4, 6-7

Protection of assets, 475, 475 Public policy, 107-110, 195-233,

176, 180, 186, 187, 194, 285, 314, 343, 357, 390, 394, 397, 401, 402, 414, 423, 462, 478,

275-276

482, 499, 500, 507, 511, 532,

R

534, 548 Measures against third parties, 152-153,

Recognition of arbitral awards, 287, 477

163, 164, 167

Reference, 391, 404, 428

Midnight clause, 15, 28, 312 Model BIT, 289-291, 297-303, 305, 337,

Remedies, 24, 30, 34, 45, 105, 115, 128, 129, 132, 145, 146, 148-150, 154, 160, 161, 167, 172, 175,

340, 342, 345

Most Favoured Nation (MFN) Clause, 295-296, 302 Multi-contract, 49-71, 440-441

177-178,

183, 195, 298, 305,

313, 340, 344, 345, 347, 355, 423, 437, 457, 460, 465, 474,

Multi-Party Arbitration, 49-71, 389, 407,

502, 529

45] S

N

Saw Pipes, 211-216, 219, 223, 224,

New York Convention, 270

226-228, 230, 239, 241, 242,

Non-signatories, 39-44, 46, 47, 60-62, 64-65, 69, 70, 119, 471

484, 485 Seat, 2, 116-119, 320-323, 420, 442

O

Section 9, 3, 155-172

ODA, 335-337

Section 11, 4, 13, 40, 75-82, 85, 87,

Section 10, 75, 468 95-97, 106, 143, 156, 257, 319,

P Partial award, 150-152,

325-327, 371, 416, 419, 468, 469, 529-531, 546-547

179-181, 183,

581

Index

Section 12, 4, 83, 84, 85, 87, 326, 414, 475, 477, 478, 481, 499, 530-532

Sovereignty, 262-263, 265, 274, 285, 291, 305, 333, 335, 350, 355 Stay of enforcement,

155

Section 13, 83, 85-87, 246, 247, 499, 500 Section 14, 87, 88, 478, 500, 532

Strict liability, 462-464 Structural reforms, 343, 347-358

Section 15, 88, 236, 246, 470

Substantive law, 1, 31, 45, 103-110,

112-114, 117, 121, 210, 218, 324, 458, 462

Section 17, 145, 146, 149-155, 161, 166, 167, 170, 171, 187, 188, 236, 423, 470, 474, 510, 529, 532-533, 547

Section 19, 55, 58, 125, 126, 133, 453, 484 Section 23, 128-131,

134, 142, 186, 187,

204, 218, 226, 402, 487, 503,

533, 547, 548 Section 24, 129, 132, 136, 138, 479, 486, 533

Section 26, 135, 136, 245, 246, 473, 554 Section 27, 13, 134, 136-138, 154 Section 28, 27, 104-106,

116, 212, 218,

494, 533

Section 29B, 7, 127, 181, 397, 479 Section 34, 217-219 Section 36, 146, 150, 155, 167, 168, 171,

175, 181, 187, 222, 230, 232, 237, 238, 240, 244, 245, 384, 483, 496, 532, 537, 547 Section 45, 39-4], 63, 69, 81, 92, 94,

255, 269, 471, 515 Section 48, 35, 69, 174, 202, 203, 223-228, 243, 253-255, 275,

285, 286, 485 Separability, 15, 21, 32-33, 90-91, 111, 112, 313

ir Taking of evidence, 132, 133, 135, 136, 375-376, 434 Technology, 7, 29, 139, 140, 188, 305, 372, 376, 377, 380, 383

Termination of BITs, 301-302 Third party funding, 346, 362, 480-481 Time and costs, 7, 67, 75, 135, 356, 369, 371, 377, 384, 386, 399, 442

Time limits, 32, 100-101, 186-187, 371, 482-483 Tribunal secretaries, 193, 194, 411 Tort, 459, 460, 463, 464

U UNCITRAL WG-III, 338, 343, 346, 347, 349, 350, 353-356, 362-365 V Venue, 2, 6, 16, 117-118, 128, 320-322,

396, 420

Video conferencing, 7, 188, 376-380

Setting aside proceedings, 184, 195, 356

WwW

Setting aside, 13, 65, 68-71, 86, 91, 120, 153, 155, 168, 184, 187, 189,

Wednesbury rule, 219-220

192, 196, 197, 200, 208, 214, 228, 279, 239, 242, 254, 286,

334, 344, 356, 357, 358, 363, 401, 474, 484-486 SIAC, 29, 119, 164, 165, 171, 182, 193,

439-456, 472, 473, 477, 479, 480, 482, 487

Witness cross-examination, 8, 11

Writing requirement, 23, 24, 25, 267, 272, 278 Written and oral submissions, 11-12, 101, 126, 128-132, 134, 140, 338, 389, 397, 411, 433

582