Scholarship Announcement for Stockholm Arbitration LL.M.

Below is a message from Stockholm University:

Scholarships to study the LL.M in International Commercial Arbitration Law (ICAL) at Stockholm University – the application deadline is 16 January 2017!

The Department of Law at Stockholm University is receiving applications to study its ICAL program for the academic year 2017-2018. The last date to apply to the program and scholarship is 16 January 2017.

There are several scholarships opportunities available, sponsored by the law firms Gernandt & Danielsson, Mannheimer Swartling and Vinge, and by the Swedish Arbitration Association (SAA). For further information, visit the ICAL program’s webpage: http://j.mp/1LDazhs or contact master@juridicum.su.se

Clearing the Air on Addhar and Sasan: Can Indian Parties arbitrate in a foreign seat under a foreign governing law?

Below is a guest post from Ritwik Bhattacharya. Ritwik is a IV year student at NLSIU, Bangalore. He has an avid interest in arbitration law, international law and competition law.

In 2015, the Bombay High Court and the Madhya Pradesh High Court gave seemingly contradictory answers to the question - whether two Indian parties could choose to conduct arbitration in a foreign seat under a foreign governing law? The Bombay High Court decision[1] seemed to answer the question in the negative, relying on the Supreme Court’s pronouncement in TDM Infrastructure (P) Ltd. v. UE Development India (P) Limited [“TDM”].[2] In contrast, the Madhya Pradesh High Court decision[3] allowed parties to arbitrate in a foreign seat under foreign law, relying on the Supreme Court’s decision in Atlas Exports Industries v. Kotak & Company [“Atlas”].[4] The researcher submits that the law as it stands today, allows Indian parties to conduct arbitration in a foreign seat under foreign law. The researcher shall first briefly summarise the position under the Arbitration and Conciliation Act, 1996 [“ACA”] as well as the decisions in Addhar and Sasan. Then, the researcher shall argue that Addhar and TDM have been misunderstood and in any event, TDM has no binding value on this point of law. Thereafter, the current position of law shall be examined. 

Setting the stage 

The ACA makes a distinction between international commercial arbitration [“ICA”] and non-international commercial arbitration [“NICA”], based upon the nationality or residence of the parties, as the case may be.[5] Furthermore, the ACA also makes a distinction between domestic and foreign arbitrations, depending on whether the seat of arbitration is located in India.[6] Part I, ACA applies only to domestic arbitrations, while Part II to foreign arbitrations. Part I also provides that in domestic arbitrations between Indian parties, the dispute shall be decided in accordance with Indian law.[7]

In Addhar, two Indian parties had agreed to arbitrate under a clause, which read “Arbitration in India or Singapore and English law to be apply.” The Court was deciding upon an application for appointment of an arbitrator and petition for interim measures. The Court determined that the seat of arbitration could be India and Indian law would apply. In doing so, the Court stated that “both the parties are Indian and cannot derogate the Indian law”. This statement seems to suggest that Indian parties cannot arbitrate in a foreign seat under a foreign governing law. 

In Sasan, two Indian parties had agreed to arbitrate in London under the governing law of England. A suit filed by the appellants was dismissed by the lower court, being barred under Section 45, ACA.[8] Section 45, ACA mandates that a dispute be referred to arbitration if an arbitration agreement exists, unless the agreement in null and void, inoperative or incapable of being performed. In appeal, it was contended that the arbitration agreement was null, void and inoperative because two Indian parties cannot agree to arbitrate in a foreign country, and therefore, the bar under Section 45 does not apply. The Court held that two Indian parties could arbitrate in a foreign country under foreign law and thereby, affirmed the lower court’s decision. 

A Tale of Misunderstood Decisions 

The researcher humbly submits that Addhar has been misunderstood and does not state that Indian parties, in no circumstance, can arbitrate in a foreign country. This misunderstanding extends to TDM, which was extensively relied on by Addhar and is erroneously considered the primary authority in support of this proposition. 

In Addhar, the respondent had argued that since Section 28(1)(a), ACA does not permit Indian parties to arbitrate under foreign law, the part of the arbitration clause that permitted arbitration in India with the application of English law was void. Therefore, it argued that the arbitration clause should be read to restrict the place of arbitration to only Singapore and not India. According to Dhanuka J., since the clause permitted arbitration in both India and Singapore and the arbitration had been initiated in India, the arbitration had to be conducted in India. Thereafter, he stated that under Section 28(1)(a) of the Act, the law applicable would be Indian law. The confusion stems from the fact that while Dhanuka J. wanted to give effect to the intention to arbitrate and continue arbitration in India, he has not explained the manner in which he reached his decision. One explanation could be that he partially severed the arbitration clause to read that when arbitration is seated in India, the clause about English law applying is severed and when arbitration is seated in Singapore, English law would apply. Another explanation could be that he interpreted the arbitration clause to comply with the Act, by inserting a comma after “India”, such that the latter part about the governing law being English law would only apply when arbitration was in Singapore. In either case, it is clear that Dhanuka J. did not state that Indian parties can never arbitrate in a foreign country under foreign law. In fact, Dhanuka J. expressly recognized that “if the seat of the arbitration would have been at Singapore, certainly English law will have to be applied.”[9]

In TDM, the Supreme Court was concerned with a petition under Section 11, the Act, seeking appointment of an arbitrator. The only question before the Court was whether this was an international commercial arbitration or not, since the manner of appointment would differ accordingly.[10] Having determined this to be a non-international commercial arbitration, the Court made the following controversial remark – “The intention of the legislature appears to be clear that Indian nationals should not be permitted to derogate from Indian law.”[11] However, this remark was made in the context of Section 28(1)(a), Part I, ACA , which the Court itself recognized would only apply to arbitrations seated in India.[12] Therefore, the Court has not provided a similar prohibition in case of foreign arbitrations. The confusion about TDM has been exacerbated by Sasan, which instead of clarifying that TDM does not support the appellant’s contentions, sought to limit the applicability of the judgement and instead, placed reliance on Atlas. 

Therefore, neither Addhar nor TDM actually support the prohibition on Indian parties from arbitrating in a foreign country under foreign law. The only prohibition is that if Indian parties seek to arbitrate in India, the law applicable would be Indian law by virtue of Section 28(1)(a), ACA. 

Binding value of TDM 

Even if it is assumed that TDM prohibits Indian parties from arbitrating in foreign country under foreign law, the binding value of TDM on this point of law is suspect for two reasons – first, the controversial statement was in the nature of an obiter dictum and second, TDM, being a decision on a Section 11 application, would not carry precedential value. 

It is trite law that only the ratio decidendi i.e., the principle upon which the case is decided is binding, and not casual remarks, which are passed for as obiter dicta.[13] In TDM, the primary question before the Court was who should appoint the arbitrator, which would differ depending on whether it was an ICA or NICA. Therefore, the principle upon which the case was decided concerned the nationality of a party, in order to determine the nature of arbitration. The controversial remark was therefore in the nature of an obiter and would not be binding. This aspect of the TDM judgement has been considered in Sasan, where the Court decided that TDM would have very limited applicability in the dispute before it. 

Further, the Supreme Court has clarified that the decision in a Section 11 application, being the decision of the Chief Justice, and not the High Court or Supreme Court, would have no precedential value.[14] Since TDM concerned an application to appoint an arbitrator under Section 11, it cannot serve as a precedent for this controversial position of law. 

The Position of Law 

Since neither Addhar nor TDM answer the question posed above and in the alternative, TDM is not binding on this point of law, the appropriate precedent to apply in such a situation would be Atlas. 

In Atlas, two Indian parties had agreed to London as the seat of arbitration, with Indian law governing the contract. At the stage of enforcement of the award, the appellant contended that the award was opposed to public policy under Section 23, Contract Act and restricted enforcement of rights under Section 28, Contract Act. A two judge bench of the Supreme Court considered that the case falls within the exception under Section 28, Contract Act and mere presence of arbitrators in a foreign country does not nullify the arbitration agreement. Thus, although the ground of public policy was not specifically discussed, the Court has implicitly accepted that public policy does not prevent Indian parties from arbitrating in a foreign country. 

Although Atlas was decided under the 1940 Act,[15] the Supreme Court has clarified that cases under the 1940 Act would continue to be relevant under the 1996 Act as well.[16] Further, in Union of India v. Reliance Industries,[17] the position of law as stated in Atlas was implicitly affirmed. In that case, two Indian parties had agreed to arbitrate in London with governing law being English law. The Court had to decide whether a Section 14 application could be made in such a case. Answering this question in the negative, the Court held that Part I of the Arbitration Act (which includes Section 14 and 28) would not apply to foreign-seated arbitrations and thereby, implicitly affirmed that Indian parties could deviate from Indian law, if the arbitration was seated abroad. 

Conclusion 

The researcher concludes that the correct position of law is that Indian parties can arbitrate in a foreign seat under foreign governing law. In light of the uncertainty caused by contrary interpretations of Addhar and TDM, it is imperative that the Supreme Court clarify the position of law on this matter. 

[1] Addhar Mercantile Private Limited v. Shree Jagdamba Agrico Exports Pvt Ltd , Arbitration Application No 197 of 2014 along with Arbitration Petition No 910 of 2013 (Bombay High Court) [“Addhar”]. 

[2] (2008)14 SCC 271 (Supreme Court of India). 

[3] Sasan Power Limited v. North American Coal Corporation India Pvt. Ltd., First Appeal 310 of 2015 (Madhya Pradesh High Court) https://indiankanoon.org/doc/88948563/ [“Sasan”]. 

[4] (1999) 7 SCC 61 (Supreme Court of India). 

[5] Section 2(1)(f), Arbitration and Conciliation Act, 1996. 

[6] Section 2(2), 44, Arbitration and Conciliation Act, 1996. 

[7] Section 28(1)(a), Arbitration and Conciliation Act, 1996. 

[8] Section 45, Arbitration and Conciliation Act, 1996. 

[9] Addhar, Arbitration Application No 197 of 2014 along with Arbitration Petition No 910 of 2013, paragraph 12. 

[10] Section 11(5) and (12)(a), Arbitration and Conciliation Act 

[11] TDM, (2008)14 SCC 271, paragraph 20. 

[12] TDM, (2008)14 SCC 271, paragraph 12. 

[13] Dadu Dayalu Mahasabha, Jaipur (Trust) vs Mahaant Ram Niwas and another, AIR 2008 SC 2187 (Supreme Court of India); Union of India v. Dhanwanti Devi (1996) 6 SCC 44 (Supreme Court of India). 

[14] State of West Bengal v. Associated Contractors, (2015) 1 SCC 32 (Supreme Court of India). 

[15] Arbitration and Conciliation Act, 1940. 

[16] Fuerst Day Lawson Ltd. v. Jindal Exports Ltd., (2011) 8 SCC 333 (Supreme Court of India). 

[17] AIR 2015 SC 385 (Supreme Court of India).

Survey: The Impact of the Economic Sanctions on Commercial Arbitration

Below is a survey being conducted by the Russian Arbitration Association. The post has been drafted by Mikhail Samoylov on behalf of Russian Arbitration Association. Mikhail is  currently pursuing the Geneva LL.M in International Dispute Settelment (MIDS, Geneva).

Since 2014, when economic sanctions have been imposed on Russia, a number of questions have arisen in respect of the alleged impact of sanctions on commercial arbitration. Moreover, it has been assumed that sanctions might have changed the attitude of the Russian lawyers in respect of some arbitral institutions. 

On February 29, 2016 the Russian Arbitration Association launched a survey on the impact of the economic sanctions on commercial arbitration. It is an attempt to take a look at the issue from the point of view of main users of commercial arbitration, namely lawyers and arbitrators in order to have a panorama view on the issue. 

The survey has two independent sets of questions. The first set is focused on either the Russian lawyers or the foreign lawyers who have experience with Russian parties (questions are both in Russian and in English). The second one is focused on arbitrators (questions are in English only). 

Participation in the survey is not precluded when an arbitrator has not experience with Russian parties yet (questions have a hypothetical nature) as well as when a lawyer has not had any cases in commercial arbitration (there are special questions for such respondents). 

The Russian Arbitration Association welcomes you to participate in the survey. 

Completing the questionnaire should take only 5-10 minutes. 

The survey for legal counsel. Link:

https://ru.surveymonkey.com/r/RAALawyers

The survey for arbitrators. Link:

https://ru.surveymonkey.com/r/RAAArbitrators

The New Indian Model BIT, Finally Final.

After over a year long discussion on changing the Model Bilateral Investment Treaty (BIT), the Government of India finalised the new Model BIT around two weeks back. This Model BIT will form basis for entering into new BITs as well as renegotiating the existing BITs.

I have written this post for the Kluwer Arbitration Blog to give an overview of the Model BIT. The post compares the new Model BIT to the Draft Model BIT which was released last year.

The post is available here.

Quick Overview: Arbitration (Amendment) Ordinance, 2015

Below is Guest Post from Paavni Anand. Paavni is a fourth year student at the West Bengal National University of Juridical Sciences, Kolkata.

President Pranab Mukherjee has promulgated the Arbitration and Conciliation Amendment Ordinance, 2015 to amend the Arbitration and Conciliation Act 1996. The Ordinance is largely aimed at encouraging ease of doing business in India in a bid to promote foreign investment in India. The following major amendments have been proposed: 

1. A distinction has been made as regards to jurisdiction for international commercial arbitration, and for all other matters. For the former, the appropriate High Court shall have jurisdiction, whereas for the latter, the principal Civil Court of original jurisdiction or the High Court shall have jurisdiction. 

2. The following sections shall apply to international commercial arbitration even when the place of arbitration is not in India: 

• Section 9 which deals with interim measures by the Court, 
• Section 27 that deals with Court assistance in taking evidence, 
• Section 37(1)(a) which states than an appeal shall lie on orders granting or refusing to grant measures under Section 9, and 
• Section 37(3) which states that no second appeal shall apply in such cases 

3. In a case the arbitration agreement or certified copy thereof is not available to the party applying for reference for arbitration, such party can file an application praying the Court to call upon the other party to produce the same. 

4. If the court passes any interim measure under Section 9, the arbitral proceedings must commence within 90 days of the court doing so. 

5. No application for interim measure under Section 9 shall be entertained after the arbitral tribunal has been constituted unless the remedies under Section 17 have been rendered inefficacious. 

6. The High Court may frame rules for the purpose of determination of fees of the arbitral tribunal and the manner of its payment to the arbitral tribunal. However, such rules shall not apply to international commercial arbitration and in arbitrations where parties have agreed for determination of fees as per the rules of an arbitral institution. 

7. The provisions to ensure independence of arbitrators have been elaborated upon under Section 12. The Fifth Schedule has also been inserted enumerating certain grounds for the same. A potential arbitrator must disclose in writing circumstances such as the existence of direct or indirect, past or present relationship with any of the parties or in relation to the subject matter of the dispute which is likely to give doubts as to independence shall be disclosed. Further disclosures in writing with respect to circumstances which are likely to affect their ability to devote time towards the arbitration shall be made. The applicability of this sub-section can be waived by the parties in writing, subsequent to the dispute having arisen. 

8. Interim measures ordered by the arbitral tribunal have been delineated as follows: 

• Appointment of a guardian for a minor or person of unsound mind 
• Measures protecting goods, or amount of money, or property which is subject matter of the dispute 
• Interim injunction or appointment of receiver 
• Such other measures for protection 

9. A time limit of twelve months from the date of entry of the tribunal upon reference has been provided under Section 29A before which the award shall be made by the tribunal. Additional fees shall be provided to the tribunal if an award is made between six months. If the parties give consent to an extension, it shall be made for a further period up to six months. 

10. Fast track procedure has been instituted under Section 29B wherein parties may agree in writing to have their dispute resolved by a fast track procedure. The award shall be made within six months.There shall be no oral hearing, and decisions shall be made on the basis of written pleadings, documents, and submissions filed by the parties, along with any further information called for from the tribunal. Oral hearings shall be made if all the parties agree and the tribunal finds it necessary. A new Section 31A has been added giving specific provisions for costs regime. 

11. The ambit of setting aside an award for being in conflict with public policy under Section 34 has been broadened to include not only contravention with Section 75 or Section 81, but also if it is in contravention with the “fundamental policy of Indian law” or if it in conflict with the “most basic notions of morality or justice”. 

The ordinance is largely in line with the recommendations put forth in the 246th Report of the Law Commission of India. The amendments would be a step forward in making arbitration an easier, faster and more cost effective method of dispute resolution, especially to attract foreign investors to invest in India. 

The full text of the ordinance can be accessed below.

Indian Arbitration Act Amendment Ordinance by Ashutosh Ray

BREAKING: ARBITRATION ORDINANCE PROMULGATED

Two ordinances, one on  Constitution of Commercial Courts and another to amend the Arbitration and Conciliation Act 1996, have been promulgated by the President of India. Press Information Bureau of Government of India reports it here.

The ordinance on amendments to the Arbitration and Conciliation Act is expected to carry most of the changes recommended by the 246th Report of the Law Commission of India. See here for more information on the suggestions by the 246th  Report of the Law Commission of India.

Symposium on Arbitration Law at NLU, Delhi

Below is an announcement from NLU Delhi about their symposium on Arbitration law.

The National Law University, Delhi is organizing a Symposium on Arbitration Laws on the 16th of May, 2015. The Symposium promises to be an exciting event and will comprise of 2 sessions. 

Schedule: 

1st Session: 10.45 – 1.30 pm (Interpretation of Pre-BALCO agreements) 

Lunch: 1.30 – 2.30 pm 

2nd Session: 2.30-4 pm (Reference of non-signatory parties to arbitration) 

High Tea: 4 – 5 pm 

The First Session deals with Interpretation of Pre-BALCO agreements. Considering the string of cases from Bhatia till Reliance Industries, the panellists will provide a ring side view of the development of arbitration jurisprudence. We have 4 speakers as a part of the first panel: Mr. Gourab Banerji, Senior Advocate, Supreme Court of India & Former ASG, Mr. Ajay Thomas, Director & Registrar, LCIA (India), Mr. Daniel Mathew (Assistant Professor, NLU Delhi) and Dr. Ruhi Paul (Associate Professor, NLU Delhi). 

The Second session deals with the issue surrounding reference of Non-Signatory Parties to Arbitration. Chloro Controls applied the ‘group of companies’ doctrine’ to provide jurisdiction of the arbitral tribunal over a non-signatory. The recent 246th Law Commission Report has suggested expanding the definition of ‘party’ to include ‘persons claiming through or under such party’. The session seeks to engage a discussion about the role of prominent theories dictating jurisdiction of arbitral tribunals over a non-signatory (viz. group of companies, estoppels etc.) and their grounding in the Indian Law. The second session will have 2 speakers: Mr. Debesh Panda is a practicing lawyer who focuses on arbitration related matters before the Delhi High Court and the Supreme Court & Mr. Ashutosh Ray who serves as the Law Assistant to a Former CJI. 

Amrutanshu Dash 

+91 78389 90366 

amrutanshu.dash@gmail.com 

FB: https://www.facebook.com/events/819608151485486/

National Law University, Delhi, Sector – 14, Dwarka, New Delhi -110078

Shanghai: A Venue for International Arbitrations.

Below is a report from CIArb about assisting Shanghai in becoming an attractive arbitration destination. It is quite interesting to note that increasing number of nations are taking keen interest in developing their cities into attractive arbitration destination and are therefore seeking help from expert organisations such as CIArb.

The Chartered Institute of Arbitrators (CIArb) held a meeting early this week organised by Ruby Zhang, Economic Officer with the British Consulate-General Shanghai, to assist the Shanghai Municipal Commission in identifying what is required to make the Free Trade Zone a more attractive venue for international arbitrations. 

CIArb Member Simon Maynard (Allen & Overy), Paul Brumpton (White & Case) and Bing Yan (Skadden) provided insight into three key issues: the success of the English arbitration model, competition between key institutions and the perspective of foreign parties on arbitration in China. 

The success of the English arbitration model 

Simon Maynard initiated the discussion by considering the success factors associated with the English arbitration system. The Arbitration Act 1996 and its relationship with the UNCITRAL Model Law, autonomy of the parties, supportive courts, competitive institutions, adherence to the principles of separability and competence-competence, as well as the assurance of confidentiality throughout the arbitral process were all mentioned as key aspects which attracted users both at home and abroad. 

Competition between key institutions 

Paul Brumpton examined the role of competition between both institutions and seats (including the UK, France, Switzerland, the US and Singapore). Using interim measures as an example, healthy rivalry was put forward as a key component in developing the responsiveness of arbitration services to the needs of users. 

Perspective of foreign parties on arbitration in China 

Bing Yan considered the lack of confidence on behalf of non-Chinese parties in light of the limits on party autonomy under the Arbitration Law of the PRC, and possible amendments that could be made to the PRC Arbitration Law in order to meet the accepted international practices. Subsequently, the main conclusions touched on the need for a straightforward, liberal, confidential and transparent arbitration process to attract international arbitrations. Successful arbitration practices in Singapore and Hong Kong were listed as potential prototypes for reform. 

Members of the Delegation included: Ms. Lu Zheng, Deputy Director, Fair Trade Division, Shanghai Municipal Commission of Commerce; Ms. Yan Bei, Deputy Director, Service Trade Division, Shanghai Municipal Commission of Commerce; Mr. Xia Yongzheng, Officer, Shanghai Municipal Commission of Commerce; Ms. Zhou Jiepu, Professor, Law School, Shanghai University of Finance and Economics; Ms. Shang Shu, Executive Director, Free Trade and ADR Development Center, Shanghai University of Finance and Economics and Ms. Ruby Zhang, Economic Officer, British Consulate-General Shanghai. 

The group will be visiting other arbitral institutions in London, including the London Court of International Arbitration (LCIA) during its trip.

Obituary: Rt Hon Lord Mustill

Below is a tribute from CIArb on the sad demise of Rt Hon Lord Mustill. It is indeed a great loss to the international arbitration fraternity. His legacy will continue.

It is with great sadness that the Chartered Institute of Arbitrators (CIArb) has learned of the passing of Lord Mustill. Formerly President of CIArb, Michael Mustill has been Vice President of the Court of Arbitration of the International Chamber of Commerce and Chairman of the Departmental Committee on Law of Arbitration. As both a distinguished author and practitioner, his contributions to the development of arbitration will always be remembered by the dispute resolution community. A tribute will be paid to his memory at CIArb’s London Centenary Conference this summer.

Announcement: CIArb Appoints Head of Dispute Appointment Service.

Below is an announcement from CIArb on naming of its new Head of Dispute Appointment Service. 

The Chartered Institute of Arbitrators (CIArb) is pleased to announce the appointment of Keisha Williams as Head of the Institute’s Dispute Appointment Service.

Previously, Keisha Williams acted as Deputy Registrar at the London Court of International Arbitration (LCIA), entrusted with administering and/or acting as appointing authority in commercial arbitrations and ADR.  

Commenting on this recent appointment, Anthony Abrahams, CIArb Director General said “We are absolutely delighted Keisha Williams is joining us. I cannot think of a better person to drive the CIArb Dispute Appointment Service forward in 2015 and look forward to her starting with us on the 1^st June 2015.”

Waj Khan, who previously led the Dispute Appointment Service departed at the end of April 2015.  He developed the service from 15 to 142 cases during 2014.

Vacancy: LCIA-India

Below is a vacancy announcement for the position of Deputy Registrar at LCIA-India.

Deputy Registrar of LCIA India 

LCIA India are looking for an enthusiastic and motivated candidate for the demanding, challenging and rewarding role of Deputy Registrar, who will assist, and deputise for, the Registrar in the administration of disputes referred to LCIA India, and in the day-to-day management and promotion of LCIA India, as instructed by the Registrar.

About LCIA India 

LCIA India was established in 2009 as the first independent overseas office of the London Court of International Arbitration (LCIA), and has already become recognised as one of India’s foremost arbitral institutions. 

Based in New Delhi, LCIA India offers all the services offered by the LCIA, and with the same care to ensure the expeditious, cost effective and neutral administration of arbitration, mediation and other forms of ADR conducted under its auspices, for contracting parties of all nationalities.

How to Apply 

For further information and to apply for this position, please visit the LCIA India website:

http://www.lcia-india.org/News/Deputy_Registrar_of_LCIA_India.aspx. 

Closing Date for Applications 

20 March 2015

Academy on International Trade Law and Policy

Below is the announcement of the Joint Academy on International Trade Law and Policy. The course which otherwise is very expensive, is being offered to Indians interested in this area at a very reasonable cost. 

The Centre for WTO Studies, in partnership with the World Trade Institute, Berne is launching the 2nd WTI-CWS Joint Academy on International Trade Law and Policy in New Delhi, from May 25- June 19, 2015. Taught by distinguished academics and practitioners from India and abroad, the course will equip participants with theoretical and practical insights into various issues relating to international trade. The course is open to law students and legal professionals in India. 

Financial benefits include refund of the course fees to student participants successfully completing the course. 

The Call for Application and the Application Form for the can be downloaded from HERE.  Last date to apply is March 15, 2015

Period of Limitation for Enforcement of Foreign Awards in India.

Below is a guest from Vaisakh Shaji. Vaisakh, in this post discusses the unsettled position on application of limitation in enforcing foreign awards in India. 

The question of limitation for enforcement of foreign award is still an unsettled one. The High Courts of Bombay, Delhi & Madras in separate instances have dealt this issue but a different interpretation by each of the courts has added uncertainty.

The Bombay High Court in Noy Vallesina vs Jindal Drugs Limited[1] held that the provision for limitation as provided under article 136 and 137 of the Limitation Act would apply for enforcement of foreign award under Part II Chapter 1 of the Act.

The Court dealt with various contentions regarding the scope of limitation for enforcement of Foreign Award. The parties relied on section 43(1) of the Act which provides that Limitation Act will apply to proceedings made in arbitration as it applies to proceedings in a court. Further the definition of Court in various parts of the Act contemplates the Principal Civil Court of original jurisdiction in a district or the High Court exercising ordinary original civil jurisdiction. By referring to various Supreme Court cases, it was argued that when an application is contemplated by any law to a Civil Court then the provisions of the Limitation Act are applicable.

The Court drew attention to section 46 of the Act, which reads as, “Any foreign award which would be enforceable under this Chapter..[..]” And held that when a foreign award is yet to be found enforceable by a competent court, it cannot be relied on for any purpose in India. The award is not binding on the parties, until it is found to be enforceable in India for the purpose of executing it as a decree or for any other purpose such as using it as defence, set off etc.

The Court further held that, looking at the scheme of sections 47, 48 and 49 of the Act, the principal civil court as defined under explanation to section 47 records a finding that the award is enforceable, that award is deemed to be a decree of that court i.e it is at that point of time that the award becomes a decree of the civil court.

Further, in order to attract application of Article 136 of the Limitation Act, the decree or order of which execution is sought must be a decree or order of any civil court. And necessarily, section 136 would become applicable only after the foreign award is deemed to be a decree of the principal civil court which records finding that the award is enforceable in India. Therefore, once enforceability of foreign award is satisfied by the court under section 49, such decree can be enforced within twelve years.

Secondly, on the issue of making an application for execution of a foreign award, there is no provision given under the Limitation Act. Hence the Court held that, such application will be governed by the residuary Article 137 of the Limitation Act and therefore such application has to be made within a period of three years from the time the right to apply accrues to the party.

Therefore, as per the Court, first a party get a time period of three years to make an application under Article 137 of the Limitation Act, and in the second stage, once the application is determined by the civil court to be enforceable in India, such decree can be executed within a period of twelve years as provided under Article 136 of the Limitation Act.

On the other hand, the Madras High Court in Compania Naviera vs Bharat Refineries Ltd[2], held that a foreign award is already stamped as a decree and the party having a foreign award can straight away apply for enforcement and in such circumstances, the party having a foreign award has twelve years like that of a decree-holder. The Court did not address the issue of limitation for making an application to a civil court under Article 137 of the Limitation Act as decided in Noy Vallesina. Further, it did not clearly determine from what stage the period of limitation would commence.

The Delhi High Court in Hindustan Petroleum vs M/s Videocon Industries Ltd[3] took a different view. The Court held that no limitation period is provided under section 48 of the Act. It stated that the period of limitation provided under Section 34 of the Act in Part I come under the chapter Recourse against Arbitral Award. A similar provision is not provided for under Part II.

Secondly, section 34 provides for a mandatory period of limitation to challenge a domestic award and no such period of limitation is provided for an application under section 48 of the Act. Hence a proceeding is to be launched under section 34 to assail the limitation period, whereas under section 48 it can only be initiated once its enforcement is sought. The Court therefore held that, section 34 is proactive whereas section 48 is reactionary in nature. Further the Court held that the language of section 48 shows that it provides for initiation of independent proceedings for assailing a foreign award before a competent authority/ court and as such proceedings under section 48 cannot be one to assail the foreign award, i.e. to seek the setting aside of the award.

In each of the cases discussed above, the courts have taken different interpretations. The Supreme Court has not specifically dealt with this issue yet. It would be interesting to see if this issue is settled in the near future. Or else, will remain unsettled; similar to the issue regarding multi-tier arbitration as decided by the Supreme Court in Centrotrade Minerals vs Hindustan Cooper Ltd[4] in which a reference to a larger bench is still pending due to difference of opinion by the two-judge bench.

In Conclusion, it can be stated that, as the issue stands today, it will be open to parties to adopt a reasoning which they find suitable based on facts and circumstances.

---

[1] 2006 (3) ARBLR 510 (Bom)

[2] AIR 2007 Mad 251.

[3] 2012 (3) ARBLR 194 (Delhi)

[4] 2006 (4) ALT 18 (SC) 

What the New Indian Model BIT Might Look Like?

I have written a post for Kluwer Arbitration Blog on the prospects of the new Indian model Bilateral Investment Treaty (BIT).  It can be accessed here.

The post evaluates the possible modifications that are being considered in the new model BIT. While some stipulated modifications are well thought, others may be dwelled into with fresh view. While only the final BIT will clear the clouds, I hope the drafters, after reading the post are able to consider the views as well as the implications of the stipulated modifications. Have a look.

Arbitration Amendments: Through Ordinance or Parliament Debate?

Many newspapers, here, here, here, here  and here have reported that the ordinance for change in arbitration law has been passed. The reports also mention that most of the recommendations of the Law Commission of India submitted in its 246^th Report have been incorporated. The ordinance however, is not yet publicly available.

I have learnt that the ordinance has not yet been passed as the President has not yet signed it. There is a new report stating that the amendment Bill might now be tabled in the Parliament.

Happy New Year!!

Wishing all our readers a great year. Thank you for your support and trust. May the year be eventful for all of you! Let 2015 begin! 

Image from here.

Call for Papers: Indian Journal of Arbitration Law

Below is the Call for papers for the Indian Journal of Arbitration Law:

The Indian Journal of Arbitration Law is a biannual, student reviewed Journal by the Centre for Advanced Research and Training in Arbitration Law of National Law University, Jodhpur.

National Law University, Jodhpur, one of the premier law schools in India, is taking successful initiatives for the promotion of areas related to the specialized fields of law. To strengthen the promotion of knowledge, research and legal interaction in the subject of arbitration law, it has established the Centre for Advanced Research and Training in Arbitration Law. The Indian Journal of Arbitration Law is one such initiative of this centre towards the development of this expert legal arena.

The Journal strives to inculcate the prevalent theories in the field of arbitration with their practical relevance. The editorial board seeks to achieve this feat by including contributions from individuals with varied expertise of practicing arbitration and by focusing on developing trends. In this regard, the board would give due emphasis to the rich thought processes of students of law, who bring to the forefront the innovative academic research currently underway in most law schools all over the world. Inclusion of changing regional trends will play a vital part in understanding the scope and extant of this discipline and would therefore find due importance in the Journal.

The Indian Journal of Arbitration Law is pleased to announce its upcoming issue (Volume 4: Issue 1), which is to be published in April, next year.

Theme: UNCITRAL Model Law’s 30^th Anniversary. We also welcome notes on the 246^th Law Commission Report.

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 5^th February, 2015.

For further details regarding Editorial policy and submission guidelines please visit the website here.

Substitution of Arbitrator(s) by Indian Courts: Aiding, not Intervening

Below is a guest post from Bharatendu Agarwal. Bharatendu did his Bachelors from NLU, Jodhpur and Masters in International Arbitration from Stockholm University. He is currently interning at SIAC.

An earlier post on this blog discussed the Bombay High Court’s decision dealing with the issue of delay in rendering an arbitral award. Here, the Delhi High Court’s decision of terminating a tribunal’s mandate on account of delay in the arbitral proceedings had been highlighted.

In the recent decision of Union of India (UOI) v. U.P. State Bridge Corporation Ltd.[1] the Supreme Court addressed a similar issues with primary focus on the issue of appointing substitute arbitrator(s)/tribunal. This post aims to briefly map out the relevant issues, arguments and legal nuances involved, followed by a short analysis on the case.

Brief Facts and Procedural History

The case revolves around an agreement entered into between the Railway Authority of India (the ‘Railway Authority’) and a Contractor (collectively referred to as the ‘Parties’) for the construction of a railway bridge across river Ganges. This agreement was subject to certain terms and conditions, which provided for an arbitration agreement. The relevant portion of the arbitration agreement reads as follows:-

64.(1)(i) Demand for Arbitration - In the event of any dispute or difference between the parties as to the construction or operation of this contract, or the respective rights and liabilities of the parties on any matter in question, dispute or difference on any account or as to the withholding by the Railway of any certificate to which the contractor may claim to be entitled to, or if the Railway fails to make a decision within 120 days, then and in any such case, but except in any of the expected matters referred to in Clause 63 of these conditions, the contractor, after 120 days but within 180 days of his presenting his final claim on disputed matters, shall demand in writing the dispute or difference be referred to arbitration.

...

64.(3)(a)(ii) In cases not covered by Clause 64(3)(a)(i), the Arbitral Tribunal shall consist of a panel of three Gazetted Railway Officers not below JA grade, as the arbitrators. For this purpose, the Railway will send a panel of more than 3 names of Gazetted Railway Officers of one or more departments of the Railway to the contractor who will be asked to suggest to General Manager upto 2 names out of the panel for appointment as contractor's nominee. The General Manager shall appoint at least one out of them as the contractor's nominee and will, also simultaneously appoint the balance number of arbitrators either from the panel or from outside the panel, duly indicating the presiding arbitrator from amongst the 3 arbitrators so appointed. While nominating the arbitrators it will be necessary to ensure that one of them is from the Accounts department.

...

64.(3)(a)(iii) If one or more of the arbitrators appointed as above refuses to act as arbitrator, withdraws from his office as arbitrator, or vacates his/their office/offices or is/are unable or unwilling to perform his functions as arbitrator for any reason whatsoever or dies or in the opinion of the General Manager fails to act without undue delay, the General Manager shall appoint new arbitrator/arbitrators to act in his/their place in the same manner in which the earlier arbitrator/arbitrators had been appointed. Such re-constituted Tribunal may, at its discretion, proceed with the reference from the stage at which it was left by the previous arbitrator(s).

After a while some dispute arose between the Parties and pursuant to the arbitration agreement an arbitral tribunal (the ‘Tribunal’) was constituted in 2007. After the Tribunal’s constitution, four years passed, however the arbitral proceedings were still pending on account of transfers, retirements and adjournments. Frustrated by the delay the Contractor, in accordance with Section 14(2) of the Arbitration and Conciliation Act, 1996 (the ‘Act’), approached the Patna High Court (the ‘High Court’) so as to seek fulfilment of a vacancy in the Tribunal. By the time the Contractor’s application was taken up by the High Court the said vacancy was filled up by the Railway Authority. In light of the developments, the High Court issued an order by which it gave the Tribunal a lifeline and ordered for the arbitral proceedings to be completed within three months from the date of receipt of the order. The High Court, however, also stated that in case the proceedings were not completed within the stipulated duration, the Contractor would be at liberty to approach the High Court again which would then be forced to pass appropriate orders in accordance with the Act.

Despite the High Court’s direction, the proceedings were not completed within the stipulated three month duration and the Contractor again approached the High Court alleging non-cooperative attitude of the Tribunal members. The Railway Authority disputed this contention by stating that the proceedings could not be completed within time due the extreme urgency of the members of the Tribunal. After considering the Parties respective arguments and materials on record the High Court concluded that the delay in the proceeding was intentional and the Tribunal members continued their dilatory tactics regardless of the Court’s order. Most of the times one or the other member of the Tribunal were not available and they saw to it that the three month time expired. The Court went on to state that:-

“these facts also disclose a very sorry state of affairs that the members of the arbitral tribunal are inept and ineffectual by any standard, completely negligent towards their duties and having no sanctity for any law or for the orders of the High Court, which are binding upon them.”[2]

Based on these findings the High Court terminated the mandate of Tribunal and appointed a sole arbitrator to conduct the arbitration expeditiously.

Proceedings before the Supreme Court

The Railway Authority appealed against the High Court’s decision in the Supreme Court arguing that the High Court could not appoint the sole arbitrator as it was not empowered to constitute a tribunal of its own, that too, contrary to the arbitration agreement. Even if the tribunal’s mandate was to be terminated, a fresh tribunal could only be constituted in accordance with the arbitration agreement, i.e. in accordance with Clause 64(3)(a)(iii).

On the other hand, the Contractor defended the High Court’s decision arguing that in circumstances where the very purpose of arbitration was frustrated by the Tribunal members, who were dragging the proceedings, the Court was not powerless to travel beyond the framework of the arbitration agreement and appoint an arbitrator. The Contractor supported its argument by reliance on North Eastern Railway v. Tripple Engineering Works, (the ‘Tripple Engineering’ case) another recent Supreme Court decision.

The Issue

Based on the Parties’ arguments the Supreme Court categorized the issue as follows:-

“[w]hether .. a course of action has to be necessarily adopted by the High Court in all cases, while dealing with an application [u]nder Section 11 of the Act or there is a room for play in the joints and the High Court is not divested of exercising discretion under some circumstances?”[3]

Deliberations by the Supreme Court

At the outset, the Supreme Court highlighted that to decipher the answer to the issue Sections 11(6) & (8) (appointment of arbitrators), 14 (failure or impossibility to act), 15 (termination of mandate and substitution of arbitrator) & 32 (termination of proceedings) of the Act were the relevant sections.

The Supreme Court mentioned that Section 14(2) allowed a party to approach the Court to seek termination of mandate ‘when there is a failure on the part of the Arbitral Tribunal to act and it is unable to perform its function either de jure or de fact’.^[4] Accordingly, the decision of the High Court to terminate the Tribunal’s mandate, on account of its ‘cavalier manner’, was flawless.[5]

Moving on to Section 15, the Supreme Court acknowledged that ordinarily, pursuant to Section 15(2), substitute arbitrators have to be appointed according to the rules that were applicable to the appointment of the arbitrator being replaced.[6] At this point, however, the Court raised the question as to whether there could arise circumstances in which there would be deviation from this approach. This led the Court to the case of the Tripple Engineering case, which it discussed in length.

The Tripple Engineering case had facts very similar to the case at hand and the Supreme Court in that case had made reference to a series of judgements before stating that:-

“[t]he power of the Court under the Act has to be exercised to effectuate the remedy provided thereunder and to facilitate the mechanism contemplated therein. In a situation where the procedure and process under the Act has been rendered futile, the power of the Court to depart from the agreed terms of appointment of arbitrators must be acknowledged in the light of the several decisions noticed by us.”

A few of the decisions so noted in the case were:-

• Ace Pipeline Contracts (P) Ltd. v. Bharat Petroleum Corporation Ltd. where the Supreme Court had taken the view that typically the contract between the parties must be adhered to, however deviations from it would be permissible in exceptional circumstances.
• Union of India v. Bharat Battery Manufacturing Co. (P) Ltd. where the Supreme Court had held that once an aggrieved party files an application under Section 11(6) of the Act to the High Court, the opposite party loses its right of appointment of the arbitrator(s) as per the terms of the contract.
• Northern Railway Administration, Ministry of Railway, New Delhi v. Patel Engineering Co. Limited where the Supreme Court emphasized on the expression ‘to take the necessary measure’ in Section 11(6) and stated that the expression has to be read along with the requirements of Section 11(8).
• Indian Oil Corporation Limited and Ors. v.Raja Transport Private Limited where the Supreme Court stated that while exercising power under Section 11(6) all efforts should be made to give effect to the appointment procedure prescribed in the arbitration agreement, however, if circumstances warrant ignoring the procedure prescribed, the Chief Justice or his designate may, for reasons to be recorded ignore such procedure.
• Union of India v. Singh Builders Syndicate where the Supreme Court upheld the appointment of an arbitrator contrary to the arbitration agreement on the grounds that the arbitration proceedings had not concluded for over a decade making a mockery of the process.[7]

The Supreme Court particularly quoted some paragraphs from Union of India v. Singh Builders Syndicate, the relevant parts for our discussion are:-

“The object of the alternative dispute resolution process of arbitration is to have expeditious and effective disposal of the disputes through a private forum of the parties' choice. If the Arbitral Tribunal ... is made non-functional on account of the action or inaction or delay ... the Chief Justice or his designate, required to exercise power Under Section 11 of the Act, can step in and pass appropriate orders ... [T]he matter has now been pending for nearly ten years from the date when the demand for arbitration was first made with virtually no progress ... The delays and frequent changes in the Arbitral Tribunal make a mockery of the process of arbitration.”

Findings of the Supreme Court

Taking a note of the case laws mentioned above the Court pointed out that the classical notion that the respective authority while exercising its power under Section 11 of the Act must appoint the arbitrator as per the agreement between the parties has seen a significant erosion in recent past. The provisions of the Act have to be applied purposively and hence the appointment of arbitrator by the court, of its own choice, departing from the arbitration clause, has become an acceptable proposition of law which can be termed as a legal principle established by a series of judgments.[8]

Concluding it findings the Supreme Court stated that courts were not powerless under Section 11 and could spring into action to constitute an arbitral tribunal so as to ensure that interest of parties were equally protected.[9]

Analysis

This decision of the Supreme Court is a welcoming decision in the context of the arbitral regime in India. Indian courts of late have been very particular not to repeat their mistakes by poorly interpreting the provisions of the Act and interfering in the arbitral proceedings. This decision, in fact, is a very informed one because the Supreme Court realized that the issue of delay in arbitral proceedings on account of the tribunal itself was often encountered in arbitration in India, particularly where the arbitration clause provided for appointment of serving officers. Although the same issue had been dealt with in bits and pieces before, with this decision the Supreme Court has set the record straight once and for all.

With its decision the Supreme Court in fact brings the position of the Act akin to the position taken by leading arbitral institutions of the world, for example, the International Chamber of Commerce (the ‘ICC’) and the London Court of International Arbitration (the ‘LCIA’). Article 15(4) ICC Rules 2012 and Article 11(1) LCIA Rules 2014 both state that in situations where replacements have to be made, discretion vests with the institution as to decide whether or not to follow the original nominating process. Similar provisions can be found in the Stockholm Chamber of Commerce Rules[10] and the UNCITRAL Rules.[11]

The most direct implication of this decision will be that arbitration proceedings will no longer suffer because of an irresponsible or lackadaisical tribunal. In general, proceedings will be completed within a reasonable time frame. Besides, the decision will also push those who are not full time arbitrators or arbitration practitioner to adopt a professional approach. Additionally, it would discourage counsels to indulge in dilatory tactics by seeking outrageous extensions under the patronage of the tribunal. All in all the Supreme Court has sought to ensure that one of the fundamental features of arbitration, i.e. expeditiousness, remains intact.

The decision indicates a continuing trend on the part of Indian courts to develop and project India as an arbitration friendly jurisdiction. Despite being modelled on the UNCITRAL Model Law on International Commercial Arbitration (the ‘Model Law’), in the past there had been instances where interpretation of the Act’s provisions were far from what was envisioned by its drafters (there is, however, an interesting post by Advocate Sujoy Chatterjee on the extent of making reference the Model Law to interpret the provision of the Act).  Therefore, in conclusion, it can be said that unlike several earlier instances, this time when the court took the matter in its own hands it was too aid, and not intervene in the arbitration.

[1] Civil Appeal No. 8860 of 2014 (Arising out of Special Leave Petition (Civil) No. 20183 of 2012) decided on 16.09.2014

[2] U.P. State Bridge Corporation Ltd.v. The Union of India, 2012(1)ARBLR390(Patna) at paragraph 11

[3] Supra note 1, paragraph 15

[4] Ibid, paragraph 13

[5] Ibid

[6] Ibid, paragraphs 14, 15

[7] In this case the Supreme Court also recommended to the government that they should consider phasing out arbitration clauses providing for appointment of serving officers and encourage professionalism in arbitration.

[8] Supra note 1, paragraph 21

[9] Ibid, paragraph 22

[10] Article 17(1) SCC 2010 Rules

[11] Article 14(2) UNCITRAL Rules 2010