Thursday, March 13, 2014

Obituary: Pierre Lalive

Pierre Lalive, 1923-2014.
Professor Pierre Lalive, one of the founding fathers of the modern arbitration law is no more. The loss is heavy for the global arbitration community. His illustrious and elaborate professional experience is difficult to be described in few words. The International Academy of Arbitration Law on its webpage captures his professional experience as : “Expert or Counsel for several Governments before the International Court of Justice; Delegate of the Swiss Government to several international conferences. One of the 7 experts appointed by the Swiss Government to draft the new Code of Private International Law (adopted by Parliament on December 18, 1987). President of INTELSAT Group of legal experts; President of the UNIDROIT Diplomatic Conference on Stolen and Illegally Exported Cultural Property. Arbitrator or Counsel in many international arbitrations (ad hoc, ICSID, ICC, CAS, etc.) Editor-in-chief (and Founder) of the ASA Bulletin. Author of some 200 publications, mainly in the fields of private and public international law, international business law, arbitration and art law." 

A void remains after his departure. His theories and concepts will go a long way in the future to shape many successful arbitration practitioners. It was a privilege to have interacted with him during the International Academy of Arbitration Law.  May his soul Rest in Peace.

Picture Courtesy: International Academy of Arbitration Law Inaugural Lecture 2011. 

Miami Arbitration LLM Program.

This link has details about the arbitration LLM being offered by University of Miami. The course promises to be an exciting one! 

International Academy for Arbitration Law. Last Two Days to Apply!

The fourth edition of International Academy for International for Arbitration Law takes place this year in July. The Academy provides advanced Summer Courses in Paris to students and young practitioners interested in international arbitration. The Curriculum is conceived by international arbitration academics and practitioners to cover all aspects of international arbitration, and the Courses are taught by the most renowned experts in the fields of international commercial arbitration and international investment arbitration. The Curriculum includes a 15-hour General Course, alternating between international commercial arbitration and international investment arbitration, 5-hour Special Courses on specific topics, as well as Workshops on institutional arbitration offered by different arbitral institutions. The Courses will be preceded by an Inaugural Lecture given by a prominent arbitration figure. The Berthold Goldman Lecture will be an opportunity to revisit historic arbitration stories. The Academy is an initiative of the Comité français de l’arbitrage (CFA), and is chaired by Professor Emmanuel Gaillard.

More Information can be found here. The last for sending in applications is March 15, 2014!

Monday, February 17, 2014

Announcement: 4th Indian Vis Pre-moot


The National Law University, Delhi is happy to announce that the 4th Indian Pre-moot for the Willem C. Vis International Commercial Arbitration Moot will be conducted at NLU, Delhi from 7th to 9th March 2014. The Indian Vis Pre-moot has been successfully organized for the past three years by National University of Juridical Sciences, Kolkata, and NALSAR University of Law, Hyderabad. This year, NLU, Delhi is co-organizing the Pre-moot in collaboration with NALSAR and NUJS.

The Pre-moot will be held at NLU, Delhi from 7th to 9th March, 2014, with the rounds taking place on the 8th and 9th. Participation in the pre-moot is open to all teams representing their respective Universities at the Willem C. Vis Moot Court Competition, Vienna, 2014 and also the Willem C. Vis (East) Moot Court Competition, Hong Kong, 2014. The Pre-Moot will have a competitive format, with separate preliminary and knock-out rounds. The oral rounds of the competition will be judged by professional arbitrators, experts in the field of arbitration and international commercial law, and Vis alumni who have performed exceedingly well at previous editions of the moot.

NLU Delhi is charging a nominal registration fee of Rs. 1500 per team (for teams exceeding three members, an additional fee of Rs 500 shall be charged per person) to cover organisational costs. Food and accommodation for all teams is included within the registration fee and shall be provided within the campus premises.

Teams may register by filling up the Registration Form available at the following link - https://docs.google.com/forms/d/1RVFPajJ0veBrh14kuNAdhkvEaDMtk3U8JQY9R9DUMjs/viewform. The deadline for registration is 24 February, 2014. Each institution must register only once. If there are two separate teams participating in the Vienna and Hong Kong rounds and both teams are interested in participating in the pre-moot, both teams should register together within the same form. 

The aim of the Pre-moot is to provide teams with valuable practice and experience to ensure that Indian teams can improve their performance as the Vis, especially considering our stellar performances at the Moot in the last few years. So, please take advantage of this opportunity, and feel free to contact the organizers at indianpremoot@gmail.com in case of further clarifications and queries.

Punya Varma ( +919910457914)
Mini Saxena ( +919818037230) 
Divya Srinivasan (+918527389970)

National Law University Delhi

Facebook: https://www.facebook.com/vispremoot2014

[This is probably short notice to book tickets to Delhi, but Lexarbitri strongly suggests that every Indian Vis team make an attempt to participate in the Pre-moot -- it really helps in preparing for the real thing!]

Saturday, January 25, 2014

Can Two Indian Parties Have a Foreign Seat for Arbitration?

Recently, during a discussion with few friends, a point came up whether two Indian parties can have arbitration seated outside India. This post is to put things in perspective as to how law stands as of today.  

In TDM Infrastructure Private Limited vs. UE Development India Private Limited, the court had in clear terms held that “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.”  Thus, two Indian parties cannot use law of a different country so as to bypass the Indian law.

The ratio of the court was that "When both the companies are incorporated in India, and have been domiciled in India, the arbitration agreement entered into by and between them would not be an international commercial arbitration agreement." Doing so would mean going against the public policy of the nation.

NTPCv Singer also stated that the choice of law could be invalidated if it was against the public policy. The judgment stated that: “The concept of party autonomy in international contracts is respected by all systems of law so far as it is not incompatible with (...) any overriding public policy.

Even the revolutionary BALCO judgment has not changed this position of law where it was in fact discussed in a detailed manner by the counsel and it was also taken into account by the bench that:

“In other words, two Indian parties involved in a purely domestic dispute cannot contractually agree to denude the Courts of this country of their jurisdictions with respect to a legal dispute arising between them in India.”

…when both the parties are Indian, the substantive law governing the dispute must necessarily be Indian irrespective of the situs of the arbitration and irrespective of any provision in the contract between the parties to the contrary….the same principle applies with equal force to the arbitration law too, that is to say, that if it is not open to two Indian parties with regard to an entirely domestic dispute to derogate from the Indian laws of contract, evidence etc., it is equally not open to them derogate from the Indian arbitrational law either.” Reliance has been placed on TDM Infrastructure.

This question also came in as recently as in 2013 in the matter of: Antrix Corporation Ltd.Vs.Devas Multimedia P. Ltd. but was resolved before court could decide on it.

Only in the following two ways can this stance be changed now:
1) A new case on this point is decided by the SC, or 2) an explanation is introduced in the Act through an amendment. 

Wednesday, January 22, 2014

A BIT of a Secret: Op-Ed in The Indian Express.

The Indian Express today carried an Op-Ed piece written by me together with Anirudh Wadhwa.  It is on increasing transparency in Investment Treaty Arbitrations which arise out of Bilateral Investment Treaties. The piece argues the case for the need of transparency and in addition discusses introduction of the UNCITRAL’s Transparency Rules in Indian BITs . These Rules are slated to take effect from the 1st of April, 2014.  It also discusses other international developments that have ensued to increase transparency worldwide, such as by USA and Canada.
The link to the piece is here: http://epaper.indianexpress.com/c/2256799

Saturday, December 7, 2013

Call for Papers: IJAL

Below is the call for papers from Indian Journal of Arbitration Law (IJAL)


The Indian Journal of Arbitration Law is pleased to announce its upcoming issue (Volume 3: Issue 1), which is to be published in March next year on the following theme. 

“The Rise of Asian Arbitral Institutions and its Impact on International Arbitration” 

We would also be happy to review papers on contemporary international arbitration law in the Asia-pacific region, which are not specifically related to the above mentioned theme. 

The Board of Editors cordially invites original, unpublished submissions for publication in the following categories: 
- Articles 
- Notes 
- Comments 
- Book Reviews 

Manuscripts may be submitted via email to editor.cartal@gmail.com latest by 31st January, 2014. 

Editorial policy and submission guidelines are available here.

Monday, November 25, 2013

Online ADR mechanism in India. Lessons from Mordia.

Below is an interesting guest post from Vaisakh Shaji online ADR mechanism. In this context, he also discusses  the Mordia model which is a virtual platform to resolve disputes. 

A recent trend in the Indian service sector has been the growth of e-commerce sites. Online retail shopping was largely restricted to eBay or Amazon, but online retailing has come a long way since then, with the rise of e-commerce companies such as Flipkart, Myntra, Jabong etc, with Flipkart being a pioneer in online shopping. 


Online Arbitration as a system of dispute resolution is largely unexplored in India, partly due to the inherent issue of judicial enforcement with respect to determining jurisdiction etc. However case studies and comparison with foreign models such as the one existing in the European Union shows online ADR mechanism getting developed into one of the preferred choices of dispute settlement as it is cost-effective and faster. 

In the Indian context, the mechanism is based on traditional Arbitration and Conciliation Act, 1996 (‘AC Act’) and some elements of the Information Technology Act 2000 (‘IT Act’). Electronic records and signatures can be submitted as evidence as is provided under sections 4 and 5 of the IT act, read with section 65 B of Indian Evidence Act. It could be initiated either through an online arbitration clause in a normal contract or in the alternative having an e-contract. This process was recognized by the Supreme Court in Shakti Bhog vs Kola Shipping Ltd and Trimex International vs Vedanta Aluminium Ltd. The essence of the agreement depends on compliance with section 7 and 12 to 18 of the AC act. The parties should be fully aware of determining the nature of dispute resolution and in selecting the governing law etc. 

In certain instances, dispute resolution on a Business2Customer model is constructed in a two level model. With one level concentration on a mediation and conciliation platform, assisted by technology and the second model to engage a mediator at a nominal fee. However in most jurisdictions, with respect to arbitration there have been issues relating to jurisdiction as it is in an online platform. 

However in the Indian context, there are enough provisions in the IT act as well as the AC act which can assist the parties in formulating an ADR clause. In-fact, less time consuming system of technology assisted mediation system with respect online claims can be used by e-commerce companies in India. The International Chamber of Commerce (‘ICC’) has enumerated certain guidelines for conducting online arbitration. These guidelines can be used by companies while framing an online ADR model. If the admissibility of e-documents is permitted under the law, the scope of the arbitral tribunal can be determined by engaging the parties through video conferencing and such similar interface. A detailed analysis of the functional aspects of Online ADR authored by Advocate Chenoy Ceil can be found here

The Mordia example: 

The largest investment in online dispute resolution model was granted to Mordia, a start-up, started by the Online Dispute Resolution (ODR) head of eBay. This was completed by the new rules formulated by the European Commission on ODR Regulation, which encourages and promotes ODR and allows customers to place complaints online. Mordi’s business model is based on diagnosing customer issues and with the help of legal experts, engages a platform through which dialogue in the form of mediation, arbitration or conciliation is explored before it becomes a litigation matter. 

Parties are given a hierarchical system of dispute settlement models and they can have a mutual agreement to determine the same; and if it fails to find consensus, they can engage a third party arbitrator. The technology involves a client interface which provides the different dispute settlement options and clients could use customized versions such as presenting of questionnaires, transparent discussions, uploading online “evidence” etc to make their claims. 

With respect to arbitration it allows customers to making online payments, select arbitrators, manage documents; all through a virtual platform. The success of Mordia has made them expand to other parts of the EU and companies involved not only in e-commerce but tax, real estate etc are approaching them as it is considered to be the most advanced platform available for handling tax assessment appeals, especially in United States and Canada. 

Given the scope of Online ADR mechanism under the existing legal framework in India, it is a viable model that could be used by companies. The issue of judicial pronouncements can be addressed by having a comprehensive arbitration agreement which specifically stipulates the nature of documents used, the governing law of arbitration and the curial law. As much as it can be argued that scope for judicial intervention essentially counters the purpose of an online ADR mechanism, the existing platforms shows that it provides much liberty and discretion on the part of the customer and the service provider before the matter reaches the courts. 

In fact it is largely becoming a popular choice primarily due to its cost effectiveness, in bringing down litigation expenses, as well as providing a comprehensive list of claims that customers can choose from. And companies such as Mordia, SquareTrade has shown that online tools can be used with more precision than through a third-party. 

However, online ADR mechanism in India has its shortfalls with respect to not having adequate technology or infrastructure, and there is a general lack of trust in the public to such tools. Further, the lawyers themselves should be persuaded in suggesting online platform as a better alternative. Nevertheless, it is a model which has immense scope for growth, especially in light of the proliferation of e-commerce companies in India and invariably all transactions are done online.

Thursday, November 14, 2013

Young ICCA- LCIA India Workshop for Practitioners

Below is the notification for the Young ICCA-LCIA India one day Practitioners' Training Day on International Arbitration.

LCIA India will be joining hands with Young ICCA to host a training symposium for young lawyers in New Delhi. Young ICCA is a world-wide arbitration knowledge network for young practitioners, which aims to promote the use of arbitration by exposing practitioners from all corners of the globe to the international practice of arbitration.

This one-day event will be held at the India Habitat Centre, New Delhi on Friday, 22 November 2013. More information on the link here

Monday, November 4, 2013

Refusal to Mediate. When Silence is Not Golden.

Below is an interesting guest post from Vaisakh Shaji.

A recent UK Court of Appeal judgment in PGF II SA vs OMFS Company Ltd reiterated the Halsey principles, which essentially established the scope and permissible limits of court’s discretion in referring a matter to ADR mechanism. It enumerates situations under which a costs-sanction can be imposed in civil litigation by Courts, wherein a dispute which could have been settled through inexpensive and less-time consuming means was thwarted by the decree-holder.

What is The Hasley Principle?

The Court of Appeal in Halsey vs Milton Keynes General NHS Trust, for the first time addressed a situation in which it would be appropriate for the court to use its powers to encourage parties to settle their disputes outside court. The Court held that, it shall not compel the parties, rather encourage the parties to do so, in the most suitable cases. As summarized in this recent post in Herbert Smith ADR bulletin, Halsey established that:
  • the court should not compel parties to engage in ADR but may encourage them to do so in suitable cases ("robustly" where appropriate);
  • the court's power to have regard to the parties' conduct when exercising its discretion as to costs includes the power to deprive the successful party of some or all of its costs on the grounds of its unreasonable refusal to participate in ADR; and
  • for that purpose, the burden is on the unsuccessful party to show that its opponent's refusal was unreasonable (that is, there is no presumption in favour of ADR).

For further reading of the same, you can access the post here.

I decided to do a preliminary research regarding costs-sanctions or the reference to Halseys principles in India. The power of the court in this regard, is either largely unexplored or is lying in a grey area. Needless to state, judicial reforms over the last two decades gave us the Lok Adalat system, an improved Arbitration and Conciliation Act (‘AC act’), among such other amendments in the procedural laws with respect to court annexed mediation.

Reference to Supreme Court judgments and the AC act would show the permissible limits of judicial intervention in arbitration. The court’s discretion to refer parties to mediation even on its own motion under the Legal Services Act cannot be done without hearing out both the parties.

However, the emphasis here is not on the efficacy of referring parties to an ADR mechanism, rather on the costs of civil litigation. Section 35 and 35A of the Civil Procedure Code (‘CPC’) gives power to the courts to impose ‘costs’ on the parties to a civil litigation. Subject to statutory limits, and the rules framed by the respective High Courts, the SC through various judgments have reiterated that costs cannot be ‘fanciful’ or ‘whimsical’, rather it should be ‘actual’ and ‘realistic’ as was held by the Apex Court in Sanjeev Kumar Jain vs Raghubir Saran Charitable Trust.

For the present discussion, a review of SC judgments with respect to principles regarding awarding of costs is not necessary (those interested can read the Law Commission of India 240th report); rather, a situation where the Court can order a party to pay costs of litigation due to his unwillingness to enter into an ADR mechanism.

The Court of Appeal by applying the Halsey principles, held that what is paramount is the nature of the dispute, and whether an ADR mechanism would be better suited to bring finality to the dispute, among other factors. Lord Justice Briggs in PGF emphasized that, silence in the face of an invitation to participate in ADR is, as a general rule, of itself unreasonable, regardless of whether an outright refusal, or a refusal to engage in the type of ADR requested, or to do so at the time requested, might have been justified by the identification of reasonable grounds."

The refusal of a party to enter into mediation was prima facie, considered an unreasonable act by the Court. The emphasis was to show the growing support for ADR mechanism in civil disputes. In such a situation, the onus would be on the successful-party to justify his silence. Given that the nature and scope of arbitration is increasing in India, it would be hugely beneficial if the Courts in India take a more progressive stance. Most commercial agreements entered into today invariably have an arbitration clause and mediation as a tool is used only in a limited context.

The Court, within its permissible limits under CPC or under the AC Act could act in such a way that it encourages a constructive participation in the ADR process by civil litigants. Even if a dispute is not commercial and is a claim under tort, judicial precedence has shown that Courts in India are inclined to consider a matter to be resolved through arbitration; an English law proposition accepted by the SC in Renu Sagar vs General Electric. The PGF judgment is progressive in such regard, and re-emphasizes the importance of settling disputes by alternate mechanisms and a blatant refusal by a party could be at its own risk. 

Friday, November 1, 2013

Breaking: A New Treaty Claim against India. Yet Again!

This time it is Germany's Deutsche Telekom which has filed a treaty claim against India under the India-Germany Bilateral Investment Protection Agreement aka Bilateral Investment Treaty (BIT). The claim has been filed over the cancelled satellite venture which has earlier led to two separate arbitrations at ICC and PCA under the UNCITRAL Rules between Devas and Antrix which is the marketing arm of the Indian Space Research Organization. Interestingly, this latest development has not yet come to the knowledge of Indian media and hopefully shall be taken from here on. Is it lack of transparency by the government or has just been ignored by the media remains a question. The former seems to be more probable. 

Few months back Antrix had reached the Supreme Court to halt the earlier arbitration which was rejected. More on this here and here

The notice for this fresh treaty claim was filed on September 2, 2013. According to external sources, this arbitration is slated to use the ICSID additional facility rules since India is not a party to the ICSID Convention. The most intriguing point is that the India-Germany BIT does not stipulate resolving dispute through ICSID additional facility Rules at all. It is not clear how Deutsche Telekom would pursue it unless it is going to claim some sort of MFN treatment as other Indian BITs do carry a provision of dispute getting resolved through ICSID additional facility rules. Such measure, if taken would be quite interesting. 

According to an earlier report in the Mint which was released during the SC trial, Deutsche Telekom holds a 20% stake in Devas, while Columbia Capital and Telcom Ventures each hold around 17%. The rest is held by the founders of Devas including Ramachandran Vishwanathan, chief executive of the firm. 

The project was to give Devas bandwidth to offer broadband services to consumers in India. The newspaper reported that “The cabinet committee on security called off the deal in 2011 after questions arose on whether the procedure followed by Antrix to allocate the air waves was the most economically favourable possible for the exchequer. The committee scrapped the deal on the grounds that it was not in the security interest of the country.” 

Deutsche Telekom had written to India’s Prime Minister Manmohan Singh last year threatening arbitration but the amount was not disclosed. An indication of Deutsche Telekom filing an investment treaty claim before it actually did was reported in April (See here). 

Int' Arbitrations Hijacking Domestic Judicial System, Says FM.

According to this report  in Business Standard earlier this month, India’s finance minister P Chidambaram gave a statement to a very well-known think tank in the USA that international arbitration was hijacking the domestic judicial system.  He told that this opinion was also shared by the Australian Treasurer, Joe Hockey who he met during the annual plenary meeting of the International Monetary Fund and the World Bank. 

Following are the excerpts of what he said:

"We think that international arbitration is hijacking the domestic judicial system. There are two major concerns. Commercial arbitrations between Party A and Party B, sovereign is being dragged into quite unnecessarily and unjustified,"

"The second concern is that the judgments of the highest court in the country are being made subject to international arbitration,"

“We believe in efficacy of bilateral investment protection agreements. We want such international agreements. But we want to guard against the ingeniously interpreted to enlarge the jurisdiction of international arbitrations. And you would agree with me that there are numerous cases of jurisdiction hopping and jurisdiction shopping in international arbitration today"

I understand his statements are more in context of the White Industries Case where a commercial arbitration eventually turned into an investment arbitration. The worried tone also refers to the deluge of investment treaty claims that India faces today.  However, “hijacking the domestic judicial system” is not quite an apt phrase which should be used in this context.  On a policy level it only shows that the government is turning obstinate and defensive rather than taking active corrective measures. Anyone wanting to read my detailed analysis of White Industries Case in Kluwer's Journal of International Arbitration can let me know and I will be happy to share it. The abstract of the article at the end of this post

Thursday, October 31, 2013

China Reluctant as Philippines Pushes for Arbitration.

Below is a guest post from Vaisakh Shaji, a final year student of West Bengal National University of Juridical Sciences. Vaisakh is enthusiastic about the subject and has earlier interned with maritime arbitration team of a Mumbai based law firm. 

The West Philippine Sea arbitration claim which Philippines has initiated against China in January this year has been at a stalemate due to China’s reluctance to take part in arbitration. 

This sea route is one of the largest trading routes and roughly around 5.3 trillion $ worth of trade pass through it annually.[1] Burdened with several maritime claims over the years, the disputes of the recent past have been mostly settled through diplomatic channel or by following procedure under International Law. In 2002 ASEAN and China agreed to develop a Code of Conduct, which has failed to materialize till date. 

The legal framework: 

The United Nations Convention on the Law of the Sea (UNCLOS) in Part XV contains provisions for compulsory arbitral proceedings over dispute arising under the convention. The choice of procedure is left to the discretion of the States and the parties may choose either the International Tribunal for the Law of the Sea or the International Court of Justice. However vide article 298, a State may decline to accept compulsory jurisdiction over specific kind of disputes on issues relating to sea boundary delimitations. 

Background: 

The China-Philippine conflict gathered momentum around April 2012, when Philippine navy found multiple Chinese vessels at Scarborough Shoal, which is one of the disputed islands in West Philippine Sea.[2] China on the other hand claims that the entire West Philippines Sea is party of its territory. Manila initiated arbitration under UNCLOS provision for arbitration under Annexure VII. Article 288 in Part XV of the Annexure sets out its jurisdiction “over any dispute concerning the interpretation or application of this Convention which is submitted to it in accordance with this Part.” The matter was brought before the UN Arbitral Tribunal by Philippines over the alleged incursions into its Exclusive Economic Zones (EEZ) by China and to seek clarifications regarding maritime boundaries in West Philippine Sea. China has however decided not to cooperate with the arbitration proceeding and had sent two Note Verbale to Manila and the Permanent Court of Arbitration[3], which is the registry for the proceedings. The Tribunal has however gone ahead with the proceedings and via a recent press release; it has set March 30th, 2014 as the deadline for Philippines to submit its memorial fully addressing all its claims and issues arising out of the arbitration. 

Brokered diplomacy: 

Manila has consistently held the view that a fastidious resolution to the dispute would best serve international peace and cooperation over trade and commerce. India’s Foreign Ministry Salman Kurshid recently echoed Manila’s claims in the recently concluded visit to Manila. He emphasized that compulsory arbitration proceedings provided under UNCLOS should be adhered to order to maintain peace over international waters.[4] In fact Indian Prime Minister Manmohan Singh recently stated that regional forums should have a greater say in trying to find peaceful resolution and to develop maritime norms.[5] This was at the displeasure of China which criticized India’s joint maritime operations with Vietnam in disputed waters between Hanoi and Beijing.[6] Though India has made that its stand merely reflects its foreign policy and is not willingly interfering in a bilateral issue between China and Philippines, Manila is keen on garnering a larger global opinion supporting its claim. 

The legal issue has revolved around enforcement of one-party arbitration. Professor Myron Nordquist is of the view that, “For one thing, it is doomed to failure because if the party won’t consent to the arbitration there is then no room for enforcement”. This however is a misunderstanding over the nature of arbitration under Annexure VII. If there is a non-consenting party, the tribunal would continue to give notice to the boycotting party, and would develop its own independent assessment based on law and facts and by not solely relying on the claims of the participating party.[7]However Julian Ku argues in this post[8] that even though China has agreed to constitute a tribunal and establish its jurisdiction, consent to arbitration would not necessary guarantee enforcement. UNCLOS is absent of any sanction regime if any party fails to comply with its award. For the award to have any sanction, it should be coupled with diplomatic pressure, either from neighboring countries or through regional bodies. 

Drawing parallel from the sphere of investor-state arbitration, Luke Eric Peterson, Editor of the Investment Arbitration Reporter, is of the view that even if the respondent state has refused to participate in arbitration, arbitrations have managed to proceed to final resolution and the non-participating country had ended up paying the adjudged amount.[9] 

It will be pertinent to see whether China would change its stance if Philippine is able to garner enough international support for its cause. Sean Mirski writes[10] that, President Obama’s last minute cancellation of his Asian diplomatic tour was a big blow to Manila and has lead to an increase in anxiety around the region. However a recent notable development is the statement by Philippines, Department of Foreign Affairs that it is shifting the focus to the establishment of a code of conduct in West Philippine Sea.[11] 



Monday, October 14, 2013

Call for Papers: Special Issue of Trade, Law and Development.

Below is the call for papers for the special issue of Trade, Law and Development journal:

The Board of Editors of the Trade, Law and Development journal is pleased to announce Trade and Climate Change as the theme of the special issue 6.1, due to be published in May, 2014. Climate Change is the foremost challenge facing the global community today. The issue intersects with international trade in numerous ways. The deliberations at the ongoing Doha Round as well as the recent COP-15, Rio+20 and Earth Summit negotiations lent impetus to a global solution to climate change. At the end of 2012 UNFCC Conference, an agreement was reached to draw up a successor agreement by 2015 to the Kyoto Protocol. An effective successor agreement to Kyoto Protocol shall necessarily resolve the various conflicts that dissuaded States, particularly from the global south, from undertaking certain obligations and being parties to the Protocol. The issue is gradually gaining significance due to the initiatives taken by States to promote Renewable Energy use to which often have domestic content requirements and involve the imposition of subsidies which are in conflict with WTO law. More information here.

Monday, October 7, 2013

Oral Evidence for Written Arbitration Agreement Not Possible, says the Bom HC.

In the judgment of  Yashvant Chunilal Mody,Applicant v Yusuf Karmali Kerwala & Ors. delivered on September 19, 2013, a single bench of the Bombay High Court has decided on the issue of an arbitration agreement being in writing. 

With respect, the very first sentence of the single bench judgment has an error in it where the Act is wrongly attributed to the year 1997 whereas it is actually of 1996.This may be an inadvertent or a typographical error and needs to be corrected. 

The real issue however is with the regards to interpretation of Sections 7(3) and 7(4) in deciding a matter under Section 11 of the Act which relates to appointment of arbitrator. Section 7(3) of the Act mandates an arbitration agreement to be in writing and Section 7(4) elucidates what constitutes “writing”. 

With all due respect, the learned single bench has in its judgment gone overboard in interpreting Section 7(4) of the Arbitration and Conciliation act, 1996. The issue with regard to the arbitration agreement was that although the Applicant contended that the agreement is in writing, it did not have any copy of the same. On this the Applicant offered to lead evidence and be cross examined. While the learned judge recognized that normally a written agreement can be proved by secondary evidence of the oral account of the contents of the document given under Section 63 (5) of the Indian Evidence Act, 1872, he decided that such oral account of a written document is not contemplated to be allowed for invoking arbitration. The single bench was of the view that this goes outside the mandate of the Arbitration and Conciliation Act,1996 as S.7(4) is exhaustive and accepting such oral evidence would be going beyond the legislative command. This understanding seems to be misplaced. It is a possibility that in the given factual scene, even after giving the Appellant a chance to be examined, the bench would have found that no arbitration agreement existed but not allowing oral evidence to prove that arbitration agreement existed in writing is not the most appropriate way and sets a blurred precedence which may have to be reconsidered and cleared sooner or later. 

Hat-tip to Veena Kolachina for the case alert. 

Using RTI for Production of Documents in an Arbitration? No Problem.

As per this report in ET, the Central Information Commission ruled that pendency of an arbitration proceeding is not a valid reason for denial of information by a government department under the Right to Information (RTI) Act. The Central Information Commissioner in his order held that: 

“The only exemption in sub-judice matters is regarding what has been expressly forbidden by a court or a tribunal and what may constitute contempt of court," 

In the instant case, the petitioner who has an arbitration matter going on with MTNL, had filed 34 applications to seek information from MTNL regarding the expenditure already being inquired into by the authorities. The Information officer had refused to disclose the information citing section 8(1)(h) of the RTI which states that: 

“Exemption from disclosure of information.- 

(1) Notwithstanding anything contained in this Act, there shall be no obligation to give any citizen,-(h) information which would impede the process of investigation or apprehension or prosecution of offenders” 

The Central Information Commissioner did not find this explanation of the Information officer valid and passed the order in favour of the appellant. 

This method seems to be an interesting way to seek production of documents/discovery from government departments, bypassing the usual procedure of asking the tribunal to do so.

Saturday, October 5, 2013

As India and Italy Investigate, Arbitration Ensues.

The infamous chopper gate scam which the Indian and Italian government authorities have been investigating is going to have new twist to it. According to this report from the Reuters, AgustaWestland, the seller of Helicopters to India has invoked the arbitration clause. The dispute is on non-payment in a contract worth 560 million euro ($762.91 million) involving sale of 12 Helicopters by the company to India. India had stopped the payment over allegation of bribery. Arrest of the then CEO of Finmeccanica was also much in news after he allegedly paid bribe to officials in India to secure the deal.

In a statement to Reuters, the company said:

"The need to resolve this issue has left AgustaWestland with no other option but to invoke arbitration; the next step prescribed by the contract. This is not a step we take lightly,"

According to the report, the law governing the arbitration agreement is the Indian Arbitration and Conciliation Act, 1996.

It would be very interesting to see how the arbitration proceeds under the Indian arbitration Act. This is because in N Radhakrishnan v Maestro Engineering, a case decided in 2009, the Supreme Court of India had held that issues involving criminality, serious fraud and financial malpractices can only be resolved by court. Although, this is not in conformity with the international standards, it stands valid where the seat is India.

A report on this from Economic Times is also available here. Picture taken from here.


Thursday, October 3, 2013

An Indian Company Goes Treaty Shopping…

The following is a guest post by Shashank P. Kumar, originally published on the International Law Curry blog. 

Amidst reports of yet another investment treaty arbitration against India over the cancellation of 2G licenses by the Indian supreme court (ToI, IE, Also see this post), the ICSID has registered an arbitration that may well represent the first time an Indian TNC has gone treaty shopping.

According to its website, on 27 September 2013, the ICSID registered an arbitration proceeding initiated by Spentex Netherlands, B.V., against the Republic of Uzbekistan (ICSID Case No. ARB/13/26). A quick Google search reveals that the Claimant in this case, Spentex Netherlands, B.V., is actually a subsidiary of Spentex Industries Ltd., a textile company registered and incorporated in New Delhi and managed by Indian nationals. The 2012-13 Annual Report of Spentex Industries Ltd. provides some insight on the relationship between the Indian parent and the Dutch and Uzbek subsidiaries. Note 42 of the Financial Statement states that:

The Company [Spentex Industries Ltd.] has an investment of Rs. 56,10,11,339 [approx. USD 89,83,362] and Rs. 93,23,779 [USD 1,49,301] in its subsidiary Spentex Netherlands B. V. (SNBV) and its step down subsidiary Spentex Tashkent Toytepa LLC (STTL) respectively. Further it has Rs. 7,00,12,404 as export receivable from STTL and advances of Rs. 9,50,70,902 in SNBV as on March 31, 2013.



The ICSID website does not yet give any further details about the arbitration, except that its subject matter relates to the “Textile Industry.” Spentex India’s statements provide some insight on the details of the dispute. Spentex India describes its version of the developments in Uzbekistan in a press release (apparently) dated 31 May 2012:

An Indian investor SIl (Spentex) through its project company STTL invested and commenced its business in Uzbekistan in right earnest and made investment vide Investment Agreement dated 26th September 2006 entered between the Government of Uzbekistan and Spentex (investor). However, in the midst of term of the Investment Agreement certain changes in legal provisions, economic and business conditions and policies were adversely changed by the authorities in Uzbekistan. These changes being contrary to the provisions of Investment Agreement jeopardized the legal stability of its project company and its business became completely unviable. Spentex made many representations to Uzbek authorities and its financers for rectifying the situation but the same went unheard and ultimately project company was forced to shut down all its factories in Uzbekistan and bankruptcy was thrust upon it. Harassment by tax authorities and prosecutors was another reason which never allowed STTL to function normally as arbitrary penalties were imposed and pressure from the prosecutor was a common feature

The arbitration proceeding also finds a mention in Spentex India’s 2012-13 Annual Report:

During the period of investment Government of Uzbekistan changed certain laws and policies by breaching the investment agreement and rendered operation of STTL unviable. Since treaties entered between the Governments of India and Uzbekistan and the Investment agreement entered between Govt. of Uzbekistan and STTL were breached, company has issued notice claiming in excess of USD 100 Mn. towards protection of investment and payment of dues & compensation for the losses suffered by the company.

Interestingly, although the above quote from the Annual Report refers to the the bilateral investment treaty (BIT) between India and Uzbekistan being breached, the claimant in the arbitration proceeding is the Dutch subsidiary of Spentex India, suggesting that the claimant has sought protection under the Netherlands-Uzbekistan BIT. This is not unusual, as transnational corporations investing in foreign countries often structure their investments through a subsidiary in The Netherlands in order to avail the benefits of the vast network of Dutch BITs. The IISD, in a critical piece, notes that Dutch BITs “invite[] ‘treaty shopping,’ – i.e. routing investments through third countries to acquire the protection of investment treaties that investors would not, otherwise, have in their home state jurisdiction.” Even though the merits of the practice continue to be debated, there is no general international legal rule prohibiting investors from structuring their investments in a manner that allows them to avail of the greater protection available under certain treaties.

This development is interesting because it, once again, shows the blurring of the traditional capital-importing/capital-exporting dichotomy in the discussions on investment treaties and investment arbitration. While investment treaties and investment arbitration may initially have emerged in a world where capital exporting countries primarily sought to protect their investors operating in capital importing countries, the scenario today does not allow for such a clear and easy distinction to be drawn as traditional capital exporting countries gradually find themselves fending off claims by foreign investors today. This, for example, is reflected in the evolution of the United States BIT program, which was focused mainly at investment protection abroad in its early days. In recent times, however, as the flow of investments into the United States has increased, its BITs have evolved to take into account not just the need for protecting investments abroad, but also the impact of such treaties and claims by foreign investors on the domestic regulatory space available to the government.

Faced with several claims by foreign investors under different BITs, there has been widespread criticism of the Indian BIT program as being too “pro-investor.” The Indian government has gone back to the drawing board and is currently reviewing its BITs. Cornered by the many treaty claims it faces, the government may well see BITs and investment arbitration as liabilities that expose it to unnecessary international litigation. However, as the Spentex case well illustrates, Indian investors are also increasingly investing abroad. Given the reciprocal basis of BITs generally, if India dilutes the standards of substantive and procedural protection in its BITs in immediate response to the claims filed against it, this would also weaken the protection available to Indian investors abroad. Therefore, as India undertakes to review and rationalize its BIT program, it must strike a careful balance between its domestic regulatory interests, on the one hand, and the interests of the Indian investor abroad, on the other. In its attempt to shield itself from claims by foreign investors, India should not deprive its own investors the benefits and protection promised by BITs.

Hat-tip to Aditya Singh for the alert about the Spentex arbitration.

Tuesday, October 1, 2013

India in Investment Arbitration LOOP.

A news report in the Indian Express here reports that Khaitan Holdings (Mauritius) Limited (KHML), a Mauritius based investor in Loop Telecom has initiated investment arbitration under the India-Mauritius BIT seeking damages over USD 1 billion for cancellation of its investment in 2G licenses which were cancelled by the Supreme Court of India.  To quote from the report: 

“KHML in the notice said that Supreme Court judgement has held Indian government process to issue licence "seriously flawed and legally untenable, as well as its policy being inherently arbitrary," and neither KHML nor Loop were blamed for this. ‘Despite this, neither adequate or any compensation has been paid to KHML and the spectrum has been subsequently re-bid,’ the notice said.”   

India now features as one of the top nations against which investment treaties claims lie. It all began with the success of White industries’ investment claim against India. Readers who wish to have a detailed analysis of the White Industries’ case may read my article in Kluwer’s Journal of International Arbitration. The abstract along with the citation is: 

“The Indian arbitration landscape is set for a completely new twist in the wake of the first investment arbitration award rendered against India. The decision was rendered in the matter between White Industries Australia Ltd. and the Republic of India in an United Nations Commission on International Trade Law (UNCITRAL) arbitration. This article examines the case, observes the questions which were considered by the tribunal, and discusses the rationale of the tribunal in arriving at its decision. Apart from an analysis of the case, the article also discusses its ripple effect which has already set in.
Ashutosh Ray, 'White Industries Australia Ltd. v. Republic of India: A New Lesson for India' (2012) 29 Journal of International Arbitration, Issue 5, pp. 623–635”

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