Supreme Court of India on Joinder in Arbitration.

The Supreme Court (SC) of India has given an excellent example of its maturity to deal with complex arbitration matters. In the case of P.R Shah, Shares & Stock Broker (P) Ltd. (“Appellant”) V M/s. B.H.H Securities (P) Ltd. & Ors (“Respondent”) the SC has dealt with the issue of joinder in very straight forward terms. The SC held that a joinder is possible when facts and circumstances require so, more so when the claimant has arbitration agreements with both the other parties, the claims against them cannot be separated and when the party being joined is so inextricably linked to the other party in its function and management. The Judgement of the case is available here. It was decided by SC on 14 Octoer, 2011.

Relevant Facts:
The Appellant and the Respondent, both were members of the Bombay Stock Exchange (“Exchange”). The Respondent raised and referred a dispute against the Appellant and one another party (the Other Party) under the Rules, Bye-Laws and Regulations of the Exchange seeking an award. In the arbitration reference, the Respondent alleged that Appellant and the Other Party were sister concerns with a Common Director and that the Director of the Appellant approached the Respondent for a transaction on behalf of the Other Party. In respect of the transaction the Respondent issued and delivered the contract and bill in favour of the Other Party. When the amount was due towards the Other Party the Appellant issued a Credit Slip in favour of the Respondent. The said Credit Slip was rejected by the Exchange and so the Respondent approached the Appellant and the Other Party for a cheque for the said amount. The Appellant issued a cheque accordingly on behalf of the Other Party for a lesser amount though. Further, to settle the amount, the Director asked the Respondent to issue all the bills in the name of the Other Party. The Director accepted the Bills assuring payment and that both the Appellant and the Other Company were jointly and severally liable to pay the amounts due.

After several attempts by the Respondent when the money still remained due, the Executive Director of the Exchange permitted the Respondent to file arbitration claim against both the Appellant and the Other Party. Both the Appellant and the Other Party filed objections which had several common grounds with identical wordings. The Appellant denied that the transaction was done for the Other Party and contended that arbitration reference was bad in law on account of misjoinder of parties and misjoinder of causes of action. It was submitted by the Appellant that while it was a member of Exchange, the Other Party was not and hence different set of Arbitration Rules would govern each arbitration. The Dispute was heard by three member Arbitral Tribunal consisting of Justice D.B Deshpande, Mr.Hemant V. Shah and Mr. Sharad Dalal.

While the majority view of the tribunal was that both the Appellant and the Other Party (both were respondents in the arbitration proceedings) were liable for the amounts claimed, the minority view which was of Justice Deshpande who in spite of agreeing with the other two was of the opinion that the Tribunal as appointed by the Exchange had no jurisdiction to hear Respondent’s claim against the Appellant. The award was made as per the majority view that the Other Party shall pay the Respondent and in case of failure the Appellant shall do that. The Other Party neither contested the award nor paid the amount. The Appellant on the other hand filed an application under Section 34 of the Arbitration and Conciliation Act, 1996 (the Act) challenging the award.

Single Judge Bombay High Court (HC) Bench:
The application was dismissed by the HC. The HC upon a contention placed by the Appellant held that if in a dispute between a member and non-member an identical or connected claim against another claim cannot be referred for a common arbitration and the Claimant is compelled to resort to two proceedings before different fora, then there is a possibility of multiplicity of findings at variance with each other.

Intra Court Appeal by Division Bench:

The Division Bench too dismissed the appeal filed by the Appellant.

Appeal by Special Leave to SC:
Three contentions were raised:
I. A single arbitration is not possible against both the parties because while one is a member of the Exchange, the other is not and both have different bylaws governing the arbitration.
II. The Arbitral Tribunal should have held that there was no contract between the Respondent and the Appelant.
III. The tribunal has passed the award by using their personal knowledge and not on the basis of record placed before them.
On the first contention, the SC held that it should be noticed that the arbitration was an institutional arbitration under the Exchange and not an adhoc arbitration. “As the Exchange has permitted a single arbitration against both, there could be no impediment for single arbitration.” Giving an example court held:
“If A had a claim against B and C, and there was an arbitration agreement between A and B but there was no arbitration agreement between A and C, it might not be possible to have a joint arbitration against B and C. A cannot make a claim against C in an arbitration against B, on the ground that the claim was being made jointly against B and C, as C was not a party to the arbitration agreement. But if A had a claim against B and C and if A had an arbitration agreement with B and A also had a separate arbitration agreement with C, there is no reason why A cannot have a joint arbitration against B & C. Obviously, having an arbitration between A and B and another arbitration between A and C in regard to the same claim would lead to conflicting decisions. In such a case, to deny the benefit of a single arbitration against B and C on the ground that the arbitration agreements against B and C are different, would lead to multiplicity of proceedings, conflicting decisions and cause injustice. It would be proper and just to say that when A has a claim jointly against B and C, and when there are provisions for arbitration in respect of both B and C, there can be a single arbitration.”
On second contention, the SC stated that it cannot sit in appeal over the award of an arbitral tribunal by re-assessing or re-appreciating the evidence.
On the last contention, the court held that:
“An arbitral tribunal cannot of course make use of their personal knowledge of the facts of the dispute, which is not a part of the record, to decide the dispute. But an arbitral tribunal can certainly use their expert or technical knowledge or the general knowledge about the particular trade, in deciding a matter. In fact, that is why in many arbitrations, persons with technical knowledge, are appointed as they will be well-versed with the practices and customs in the respective fields. All that the arbitrators have referred is the market practice. That cannot be considered as using some personal knowledge of facts of a transaction, to decide a dispute.”
Thus, the SC dismissed the appeal.

Comments:

This judgment is a welcome decision by the SC given with a very simple and crisp rational. This case also shows the benefit of an institutional arbitration which can be useful to overcome issues which might be problematic in adhoc arbitrations.
With regard to complex issues regarding multi-party arbitration and multi-contract arbitration involving issues of joinder, the New ICC Rules of Arbitration which come into effect from January 2012 are worth having a look at. I shall soon be posting about the New ICC Arbitration Rules, the Asia launch of which I had a chance to attend in Singapore.

Supreme Court on Implied Exclusion of Part I of the Arbitration and Conciliation Act

On September 1, 2011, a two judge bench of the Supreme Court (Cyriac Joseph and Altamas Kabir) in Yograj Infrastructure Ltd v. Ssang Yong Engineering & Construction Co. Ltd., ruled that where the seat of arbitration was Singapore, rules governing the arbitration were of the Singapore International Arbitration Centre ("SIAC") and the substantive law of contract was Indian law, then Part I of the Arbitration and Conciliation Act, 1996 (the "1996 Act") was excluded by implication. 

Background

The Appellant was an Indian company while the Respondent was a company incorporated in Seoul, South Korea with its registered office at Seoul and its project office at New Delhi. In 2006, the National Highways Authority of India ("NHAI") awarded a contract to the Respondent, for a project in the State of Madhya Pradesh.  The Respondent entered into a Sub-Contract with the Appellant Company for carrying out the work in question.

Arbitration Clause

Clauses 27 and 28 of the Agreement provided for arbitration and the governing law agreed to was the the 1996 Act. 

The arbitration clause contained in the Agreement in Clause 27 read as follows:

"27.1 All disputes, differences arising out of or in connection with the Agreement shall be referred to arbitration. The arbitration proceedings shall be conducted in English in Singapore in accordance with the Singapore International Arbitration Centre (SIAC) Rules as in force at the time of signing of this Agreement. The arbitration shall be final and binding.

27.2 The arbitration shall take place in Singapore and be conducted in English language.

27.3 None of the Party shall be entitled to suspend the performance of the Agreement merely by reason of a dispute and/or a dispute referred to arbitration."

Clause 28 of the Agreement described the governing law and provided:

"This agreement shall be subject to the laws of India. During the period of arbitration, the performance of this agreement shall be carried on without interruption and in accordance with its terms and provisions."

Issues

The issues involved in the instant case were:

(i) whether Indian Courts would have jurisdiction to entertain an appeal under Section 37 of the Arbitration and Conciliation Act, 1996, against an interim order passed by the Arbitral Tribunal with its seat in Singapore; 

(ii) Whether the "law of arbitration" would be the International Arbitration Act, 2002, of Singapore; and 

(iii) whether the "Curial law" would be the laws of Singapore.

Dispute

In 2009, Respondent issued a notice of termination of the Agreement, inter alia, on the ground of delay in performing the work under the Agreement. Settlement talks having failed, the Respondent/claimant, invoked Clause 27 of the Agreement for reference of the disputes to arbitration in accordance with the SIAC Rules. Both the parties filed applications before the Sole Arbitrator seeking interim relief under Rule 24 of the SIAC Rules in June, 2010. The Arbitrator passed an interim order on 29th June, 2010 in favour of Respondent.

Before the lower courts

The appeal filed by the Appellant before the District Court, Narasinghpur, under Section 37(2)(b) of the 1996 Act, against the order of the Sole Arbitrator, was dismissed on the ground of maintainability and lack of jurisdiction, since the seat of the arbitration proceedings was in Singapore and the said proceedings were governed by the laws of Singapore. 

The Civil Revision filed against the said order was dismissed by the Madhya Pradesh High Court in August, 2010. The High Court observed that under Clause 27.1 of the Agreement, the parties had agreed to resolve their dispute under the provisions of SIAC Rules which expressly or, in any case, impliedly also adopted Rule 32 of the said Rules which categorically indicates that the law of arbitration under the said Rules would be the International Arbitration Act, 2002, of Singapore. Against this decision of the High Court, the Appellant filed this Special Leave Petition. 

Before the Supreme Court

Contentions of Appellant

Appellant contended that Indian law is the applicable law of arbitration, in terms of the agreement arrived at between the parties. This explicit agreement is evident from the wording of clause 28 of the Agreement, which provided that the Agreement would be subject to the laws of India and that during the period of arbitration, the performance of the Agreement would be carried out without interruption and in accordance with its terms and provisions. In other words, all interim measures sought to be enforced would necessarily have to be in accordance with Sections 9 and 37(2)(b) of the Act.

As per clause 27.1, SIAC Rules would apply only to the arbitration proceedings, but not to appeals from such proceedings. It was submitted that the right to appeal from an interim order under Section 37(2)(b) is a substantive right provided under the Act and was not governed by the SIAC Rules.

Reliance was also placed on Rule 1.1 of the SIAC Rules which provides:

"Where parties have agreed to refer their disputes to the SIAC for arbitration, the parties shall be deemed to have agreed that the arbitration shall be conducted and administered in accordance with these Rules. If any of these Rules is in conflict with a mandatory provision of the applicable law of the arbitration from which the parties cannot derogate, that provision shall prevail."

Rule 32 (of the 2007 Rules) provides: 

"Where the seat of arbitration is Singapore, the law of the arbitration under these Rules shall be the International Arbitration Act (Chapter 143A, 2002 Ed, Statutes of the Republic of Singapore ) or its modification or re-enactment thereof." 

However, Section 37(2)(b) of the 1996 Act being a substantive and non-derogable provision, providing a right of appeal to parties from a denial of an interim measure, such a provision protects the interest of parties during the continuance of arbitration and as a consequence, Rule 32 of the SIAC Rules which does not provide for an appeal, is in direct conflict with a mandatory non-derogable provision contained in Section 37(2)(b) of the 1996 Act.

It was then submitted that Part I of the 1996 Act was applicable in this case, since: 

(i) it had not been excluded by Clause 27 of the Agreement (the Bhatia International and Venture Global decisions were relied on, as well as Citation Infowares Ltd. v. Equinox Corporation, wherein it was clearly held that where the operation of Part I of the 1996 Act is not expressly excluded by the arbitration clause, the said Act would apply); (ii) Clause 28 of the Agreement expressly provided that the Agreement would be subject to the laws of India and that during the period of arbitration the parties to the Agreement would carry on in accordance with the terms and conditions contained therein. 

The International Arbitration Act of Singapore would have no application to this case, though the conduct of the proceedings of arbitration would be governed by the SIAC Rules.

It was thus argued that the High Court had made an error in its decision by not considering Clause 28 of the Agreement while arriving at such a conclusion. Moreover, the very fact that the Respondents had approached the District Court, Narsinghpur, in India and had filed an application under Section 9 of the 1996 Act,  and even mentioned that the contract was within the jurisdiction of the court, indicated that the Respondent also accepted the applicability of the 1996 Act. 

The Appellant further relied on section 42 in Part I of the 1996 Act, which states: 

"Notwithstanding anything contained elsewhere in this Part or in any other law for the time being in force, where with respect to an arbitration agreement any application under this Part has been made in a Court, that Court alone shall have jurisdiction over the arbitral proceedings and all subsequent applications arising out of that agreement and the arbitral proceedings shall be made in that Court and in no other Court."

The concepts of 'proper law' of an arbitration agreement and 'curial law' were explained and distinguished. The proper law is the law which would be applicable in deciding the disputes referred to arbitration, it governs most aspects of the main contract, and the curial law governs the procedural aspect of the conduct of the arbitration proceedings. 

Thus, the appellant argued, the proper law of the arbitration would be the 1996 Act, the curial law would be the SIAC Rules. This difference in the two concepts had been considered by the Apex Court in Sumitomo Heavy Industries Ltd. v. ONGC and NTPC v. Singer, in which the question for decision was what would be the law governing the arbitration when the proper law of the contract and the curial law were agreed upon between the parties. 

Appellant contended that absent any express choice, the proper law of the contract would be the proper law of the Arbitration Agreement. In the instant case, admittedly the proper law of contract was the law of India and since the parties had not expressly made any choice regarding the law governing the Arbitration Agreement, the proper law of contract, namely, the 1996 Act, would be the proper law of the Arbitration Agreement.

The right to appeal, a substantive right under the 1996 Act would be governed by the said Act and the present appeal, was therefore, liable to be allowed, and the order of the High Court, impugned in the appeal, was liable to be set aside.

Contentions of Respondent

Respondent submitted that the parties had agreed that the seat of arbitration would be Singapore and that the arbitration proceedings would be continued in accordance with SIAC Rules, as per Clause 27.1 of the Agreement. It was also agreed that the proper law of the contract would be Indian law and the proper law of the arbitration would be Singapore law.

Respondent contended that an application under Section 9 of the 1996 Act was filed before the District Court prior to the date of invocation of the arbitration proceedings and before the curial law, Singapore law, became operative.The District Judge  directed the applicant to submit its case before the Arbitrator in Singapore. The parties had expressly chosen the proper law of the contract to be Indian Law, the proper law of arbitration to be the Singapore International Arbitration Act, 2002 and the curial law to be Singapore law, since the seat of arbitration was in Singapore. Respondent relied on Sumitomo Heavy Industries Ltd. v. ONGC, where it was held that the curial law, besides determining the procedural powers and duties of the Arbitrators, would also determine what judicial remedies are available to the parties, who wished to apply for security for costs or for discovery or who wished to challenge the Award once it had been rendered and before it was enforced.

Next, it was submitted that choice of the seat of arbitration empowered the courts within the seat of arbitration to have supervisory jurisdiction over such arbitration.  

The decision in NTPC v. Singer related to the applicability of the Indian Arbitration Act, 1940, and the Foreign Awards (Recognition and Enforcement) Act, 1961, to a foreign award sought to be set aside in India under the provisions of the 1940 Act. The said decisions have no relevance to the question raised in the present case which raises the question as to whether the Indian Courts would have jurisdiction to entertain an appeal under Section 37 of the 1996 Act against an interim order of the Arbitral Tribunal, despite the parties having expressly agreed that the seat of arbitration would be in Singapore and the Curial law of the arbitration proceedings would be the laws of Singapore. In the NTPC judgment, the Court had observed that Courts would give effect to the choice of a procedural law other than the proper law of contract only where the parties had agreed that the matters of procedure should be governed by a different system of law. In the above-mentioned case, the Court was dealing with a challenge to a domestic award and not a foreign award. Section 9(b) of the Foreign Awards (Recognition and Enforcement) Act, 1961, provides that the said Act would not apply to an award, although, made outside India, but which is governed by the laws of India. Accordingly, all such awards were treated as domestic awards by the 1961 Act and any challenge to the said award, could, therefore, be brought only under the provisions of the 1940 Act. The law of arbitration in the NTPC case was Indian law as opposed to the present case, where the parties had agreed that the law of arbitration would be the International Arbitration Act, 2002, of Singapore.

By virtue of Clause 27 of the Agreement, and by accepting the SIAC Rules, the parties had agreed that Part I of the 1996 Act would not apply to the arbitration proceedings taking place in Singapore. This was reiterated in the Terms of Reference that the arbitration proceedings would be governed by the laws of Singapore. Even in Bhatia International, relied upon by Appellant, the Court had held that parties by agreement, express or implied, could exclude all or any of the provisions of Part I of the 1996 Act. Consequently, in Bhatia International the Court had held that exclusion of Part I of the 1996 Act could be by virtue of the Rules chosen by the parties to govern the arbitration proceedings.

With respect to Section 42 of the 1996 Act, the High Court had held that by express agreement parties had ousted the jurisdiction of the Indian Courts, while the arbitration proceedings were subsisting. Accordingly, it was only the laws of arbitration as governed by the SIAC Rules which would govern the arbitration proceedings along with the procedural law, which is the law of Singapore.

Decision

The decision turned on Clause 27.1 of the Agreement between the parties. As evident from Clause 27.1, the procedural law with regard to the arbitration proceedings, was unambiguously the SIAC Rules. Clause 27.2 made it clear that the seat of arbitration would be Singapore.

To decide on the law on the basis of which the arbitral proceedings were to be decided, the Court looked to Clause 28 of the Agreement. Clause 28 indicated that the governing law of the agreement would be the law of India, i.e., the 1996 Act. While the proper law governed the agreement itself, in the absence of any other stipulation in the arbitration clause as to which law would apply in respect of the arbitral proceedings, it is the law governing the contract which would also be the law applicable to the Arbitral Tribunal itself. Clause 27.1 made it clear, according to the Court that the curial law, regulating the procedure to be adopted in conducting the arbitration, would be the SIAC Rules. 

The question to be decided was whether in such a case the provisions of Section 2(2) of the 1996 Act, indicating that Part I of the Act would apply where the place of arbitration is in India, would be a bar to the invocation of the provisions of Sections 34 and 37 of the Act, as far as the instant arbitral proceedings, being conducted in Singapore, were concerned.

The Court distinguished Bhatia International, wherein while considering the applicability of Part I of the 1996 Act to arbitral proceedings where the seat of arbitration was in India, the Court was of the view that Part I of the Act did not automatically exclude all foreign arbitral proceedings or awards, unless the parties specifically agreed to exclude the same. In the present case, parties had categorically agreed that the arbitration proceedings, if any, would be governed by the SIAC Rules as the Curial law, which included Rule 32, requiring applicability of the Singapore International Arbitration Act, 2002.

Regarding Rule 1.1 of the SIAC Rules, the Court ruled that Section 2(2) of the 1996 Act indicates that Part I would apply only in cases where the seat of arbitration is in India. Although the Court in Bhatia International, while considering the said provision, held that in certain situations the provision of Part I of the aforesaid Act would apply even when the seat of arbitration was not in India, in the instant case, once the parties had specifically agreed that the arbitration proceedings would be conducted in accordance with the SIAC Rules, which includes Rule 32, the decision in Bhatia International and subsequent decisions relying on it, would no longer apply.

With regard to Section 42 of the 1996 Act, the Court held that the same was applicable at the pre-arbitral stage, when the Arbitrator had not also been appointed. Once the Arbitrator was appointed and the arbitral proceedings were commenced, the SIAC Rules became applicable excluding the applicability of Section 42 as well as Part I of the 1996 Act, including the right of appeal under Section 37 thereof.

Thus the appeal under Section 37 was not maintainable and the instant appeal was dismissed.

Errors in translation of institutional rules: an interesting post

The curse of Babel seems to be having its impact on arbitration too. This post by Isabelle Liger lists 100 errors in translation of institutional arbitration rules. Rules in Chinese, Korean, Japanese, English and French have been subjected to analysis. The work is commendable simply because it is not every day that one comes across an individual or a group of individuals capable of analysing texts in so many different languages. A summary of this post by Mr. Badrinath Srinivasan can be found here.

Hurdle for International Arbitration Centre, Goa.

The New Year is definitely not a good start for the proposed International Arbitration Centre at Goa, India. Aires Rodrigues, a social activist has asked Law Minister Veerappa Moily not to inaugurate the centre as it is being set up by a private trust and also because there are already international arbitrations happening at Indian Council of Arbitration and Indian Council of Dispute Resolution (ICADR), both being registered under the Societies Registration Act 1860. According to Aires Rodrigues the new private center at Goa will be run by a private trust which will not be accountable to the public. More on this can be found here.

I doubt whether an international arbitration centre for commercial matters necessarily requires a registration under Societies Registration Act. On the other hand, there remains a skepticism (as was discussed in few conferences organized this year): Will so many arbitration institutions mushrooming without any international expertise and without any support of the government or any other international arbitration institute help the business community or only add to confusion and chaos?

International Arbitration Centre to open in Goa

An International Arbitration Centre is soon to become operational in Goa. It is to be inaugurated on January 4, 2011. It will initially function from the premises of the Goa Chamber of Commerce and Industries.

This new Centre was announced a few months ago by Union Law Minister Veerappa Moily after the regional meeting on implementation of the 13th Finance Commission recommendations.

It is hoped that Goa's status as a popular tourist destination would help to make it an attractive destination for arbitration.

More on this here.

HKIAC and PCA sign cooperation agreement

The Hong Kong International Arbitration Center (HKIAC) and the Permanent Court of Arbitration (PCA) at the Hague entered into a cooperation agreement on the occasion of the 25th anniversary of HKIAC. The terms of this agreement are not yet known. 

Previously, PCA had entered into a cooperation agreement with China International Economic and Trade Arbitration Commission (CIETAC)  to facilitate cooperation in organizing conferences, lectures, and seminars on arbitration and other means of dispute resolution.

SEBI Circular to streamline arbitration mechanisms in stock exchanges

Securities and Exchange Board of India issued a Circular on August 11, 2010 to all stock exchanges to mandate the availability of arbitration mechanisms in stock exchanges for settlement of disputes between clients and members. It also seeks to streamline the existing mechanisms in this regard.

All stock exchanges are to maintain a panel of arbitrators consisting of as many persons as necessary to ensure timely settlement of disputes. The members of the panel are to be selected on the basis of (i) age, (ii) qualification in areas of law, finance, accounts, economics, management or administration and (iii) experience in financial services including securities market. Persons chosen to be members of the panel are to disclose any associations that they or their dependents have with the securities market. The stock exchange is to provide at least seven days of continuing education per year to the arbitrators and should appraise the performance of the arbitrators at least annually. A detailed nine-point code of conduct for the arbitrators has been provided. Any claim involving a sum upto `25 lakh will be heard by a sole arbitrator whereas any dispute involving a larger sum will be placed before a panel of three arbitrators.

Australian International Disputes Centre

We had earlier written about rapid changes in the arbitration landscape in Australia. Improving on the same, the Australian International Disputes Centre was launched in Sydney on August 3rd, as part of a joint initiative by the Australian Centre for International Commercial Arbitration and the Australian Commercial Disputes Centre and is backed by State and Federal governments.

The Centre offers a wide range of dispute resolution services ranging from arbitration and mediation to hybrid dispute resolution, facilitated negotiation and conciliation, among many others.

The launch of this Centre will give a further boost to Australia and especially Sydney as a commercial hub, competing with other Asia-Pacific dispute resolution Centres in Singapore and Hong Kong.

LCIA India Rules: Tailored for Indian Scenario - Guest Post by Mr. Sonal Singh

We are happy to publish a guest post by Mr. Sonal Singh on LCIA India Rules. Mr. Singh is an Advocate and Solicitor (England & Wales) and is an alumnus of Kings College, London. He is currently associated with the Indian International & Domestic Arbitration Center, a recent initiative which has on its list of consultants stalwarts like Prof. Martin Hunter. Following is the text of Mr. Singh's post:

LCIA India has recently introduced its new arbitration rules (LCIA Rules (India)) specifically tailored for Indian scenario. The opening of LCIA India and unveiling of the LCIA Rules (India) has provided a boost to the development of institutional arbitration in India. The LCIA Rules (India) of course have the advantage of well established and recognized LCIA Rules (London), while at the same time; they have been modified to compliment the current Indian Legal regime.

The LCIA Rules (India) have tried to ensure fairness and expediency in the arbitration proceedings by creating obligations on the parties and Tribunal and granting greater powers to the LCIA Court. Also the new rules have provided an extremely attractive frame work of arbitration cost for parties. All these deviations specifically made to counter the obstacles in India being Arbitration-attractive destination are discussed herein below.

Arbitrations to be handled with speed and efficiency

The LCIA Rules (India) have specifically made a provision under Article 14.2 which states that:

“At all times the parties shall do everything necessary for the fair, efficient and expeditious conduct of the arbitration including complying without delay with any determination of the Arbitral Tribunal and the LCIA Court as to procedural or evidential matters or with any order of directions of the Arbitral Tribunal and the LCIA Court”.

This clause obligates the parties to do everything for efficient and expeditious conduct of arbitration proceedings. This clause does not find place in the original LCIA Rules.

Another effort to expedite the arbitration proceedings can be seen in clause 5.3(b) of the LCIA Rules (India), which require the prospective Arbitrators to confirm their ability to devote sufficient time to ensure the expeditious conduct of the arbitration before they are appointed.This article is some what similar to the new ICC statement of acceptance availability and independence and clarifies that only those arbitrators who can devote sufficient time and conduct the proceedings expeditiously will be selected.

Article 28.4 which appears to be most interesting and innovative states that Tribunal may order costs taking in account the “conduct and cooperation by the parties during the arbitration proceedings”. Thus any undue delay, unnecessary expenses caused by parties or their representatives can be detrimental to their interest and pocket. There might be a possibility, where a party wins the case and gets an order in its favour, but may also be imposed with costs for causing undue delay, obstructing the arbitration proceedings etc.

This clause imposes an obligation on both, the Tribunal, to observe the conduct of the parties, and the parties, to bear good conduct during the arbitration proceedings.

LCIA Court to appoint Members and Chairman of the Tribunal

The LCIA Rules (India) (Article 5.5, 5.6 & 5.7) empowers the LCIA court to appoint the members and the chairman of the Tribunal. Greater authority is provided to the LCIA court to control and ensure that the Arbitration proceedings are conducted in fair, neutral and expeditious manner.

Article 5.6 of the LCIA Rules (India) states that in case of a three-member Arbitral Tribunal, the chairman shall in all cases be selected by the LCIA court. Even power to nominate the chairman has been taken away from the parties and the party nominees.

However, Article 5.7, allows the parties to “nominate” its nominee arbitrator (party arbitrators) but article 5.6 empowers the court to “appoint” them. However, it has been clarified that LCIA court would give due regard for any particular method or criteria of selection agreed in writing by the parties, nature of transaction, circumstances of disputes etc while appointing such arbitrators.

Further, Article 7.1 states in case the parties have agreed that any arbitrator is to be appointed by one or more of them or any third party, such agreement shall be treated as an agreement to nominate the arbitrator. This means that the power to appoint the arbitrators has been exclusively given to LCIA Court.

Seat of arbitration to be determined by LCIA Court

Unlike the LCIA Rules (London), which makes London the default seat if parties fail to arrive at any agreement as to the seat, neither New Delhi nor any other city has been made the default seat under the LCIA Rules (India).

Moreover, Article 16.1, states that when parties fail to agree to the seat of arbitration, LCIA Court shall decide the seat in view of all circumstances and taking into account the written statements made by the parties.

Bhatia International Sidelined

Another unique India-specific provision is Article 32.6 of the LCIA Rules (India) which provides for exclusion of Part-I of the Indian Arbitration and Conciliation Act 1996, where the place (or seat) of arbitration is outside India.

This clause sidelines the much controversial decision of the Hon’ble Supreme Court in the case of Bhatia International. Notably, by virtue of this article, in case of arbitrations held outside India, part I is excluded even if parties fail to stipulate to such exclusion in arbitration agreement

Attractive frame work of arbitration costs

The Rules provide for an hourly rate of compensation for arbitration capped at `20,000/- per hour. This is a departure from the current general practice in India. Currently, in ad-hoc arbitrations in India, the arbitrators are the ones who decide their fees. There are no fixed parameters to decide the fees and which may vary from `20,000/- to `1,00,000/-, for High Court Judges and `50,000/- to `2,00,000/- for Supreme Court Judges on per sitting basis (Usually a sitting is scheduled for 3-4 hour and anything over it is considered to be second sitting). The fees also depends on the amount of claim and complexity of disputes. Sometimes arbitrations may charge an extra fee for reading the cases and for drafting the awards. Considering the current practice the new Rules might prove to be attractive and cost effective to the parties.

But the cap on the arbitrators fee leave the floor open for many questions: would international arbitrators who get paid at £400 per hour or so under original LCIA rules and other arbitration rules, agree to conduct arbitrations in almost half the fee? Would it be possible for a party to nominate an arbitrator of its choice? Would not the other party refuse to higher cap as it would affect its own pay out?

These questions will be answered in months to follow when the Rules would be put to judicial scrutiny.

Conclusion

LCIA Rules (India) have been made to strike the correct balance between the well established LCIA Rules and new innovations, improvements and clarifications made as per Indian Legal regime. The New Rules are well equipped to avoid unnecessary delays that may be caused by the employment of dilatory tactics by the parties. In this respect the rules surpass Indian courts and ad-hoc arbitrations.

We can just hope that the opening of LCIA and introduction of the New Rules is the much awaited light at the end of the tunnel for a new culture International Commercial Arbitration in India.

SIAC publishes new arbitration rules

The Singapore International Arbitration Center (SIAC) has published the fourth edition SIAC Arbitration Rules, a new set of procedural rules for arbitrations to be administered by it. The Rules were drafted by the Rules Committee of the SIAC Board of Directors consisting of Mr. David Rivkin (Chairman) Mr. Sundaresh Menon (Deputy Chairman), Ms. Judith Gill, QC, Mr. Pierre-Yves Gunter and Mr. John Savage. The Rules came into effect on July 1, 2010 replacing the 2007 Rules. 

The special features of the new Rules include: (i) an expedited procedure to be followed in cases involving sums not exceeding S$5million or cases of extreme urgency or cases where parties agree; (ii) provision for appointment of Emergency Arbitrator to issue interim measures pending the constitution of the tribunal.