FEATURED ~ SOCIETY FOR EXCELLENCE IN ARBITRATION LAW

By: Aarushi Gupta, Ishika Chauhan, Shravani Nag, Shreya Shrivastava and Animekh Pandey

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INTERNATIONAL DEVELOPMENTS

1. The arbitral award cannot be held unenforceable only on the ground of the bankruptcy of the party (case no. 5A_910/2019)

In this case, the arbitral award rendered by the London Court of International Arbitration allowed the claimant to receive financial compensation from the respondent. However, the respondent was undergoing a bankruptcy process, and the arbitration proceedings were pending. The claimant sought enforcement of the arbitral award, and consequently, the matter was appealed at the Swiss Federal Supreme Court. The court upheld the lower court judgment and LCIA decision to enforce the award. It observed that an arbitral award is enforceable even if the party is bankrupt, provided that the arbitral proceedings were initiated before the opening of bankruptcy.

Read more

2. Disputes in the escalation clause is a matter of admissibility, and the arbitral tribunal is empowered to settle such disputes (C v D)

In this case, the petitioner challenged the jurisdiction of the arbitral tribunal by stating that the respondent had not complied with the escalation mechanism. (Escalation mechanism is the procedure followed before commencing the arbitration proceedings.) The matter was rejected by the tribunal. Consequently, the plaintiff filed under section 81 of the Arbitration Ordinance, which allows setting aside the award if “the arbitral procedural was not in accordance with the agreement of the parties.”

The Hong Kong High Court ruled that the compliance with the escalation mechanism is a question of admissibility rather than jurisdiction, and thus, the arbitral tribunal has jurisdiction to decide the issue.  Further, from the circumstances of the present case, the parties had not intended or explicitly provided it to be a matter of jurisdiction.

3.     Advocate general presented its views in case of an implicit agreement to Arbitration without challenging the jurisdiction of the tribunal (Republic of Poland v PL Holdings Sarl)

The case C-109/20 was presented before the Court of Justice of the EU (CJEU). The dispute was raised between investor PL Holdings Sàrl and Poland. The latter challenged the jurisdiction of the tribunal after two years. The Republic of Poland relied on Achmea Judgment, which observed that the arbitration provisions in intra-EU BITs are incompatible with the EU Law. And since the present case relates to intra- EU BIT, the arbitration provisions cannot be enforced. In Stockholm, the court of Appeal ruled that the Achmea Judgment cannot be applied as Poland has challenged jurisdiction after two years, showing implicit consent to Arbitration.

When appealed to the Supreme Court of Sweden, the court referred to CJEU for the preliminary hearing. The Advocate General opined that implicit arbitration agreements would be valid in the following circumstances: “firstly, the award must be subject to a comprehensive review of the award in light of EU law, and the arbitration agreement must not violate the principle of equal treatment.”

4. Singapore High Court defined the scope and Arbitration of forced joinder in Arbitration (CJD v CJE)

Forced joinder can be defined as the concept where the consenting third party joins arbitration proceedings on an application by a party even if other parties do not consent or object. In CJD V CJE, the Singapore High Court resolved man issues revolving around the concept of forced joinder.

The court held that merely being a party to a multi-party contract does not amount to consent to joinder in the arbitral proceedings. Further, whether the arbitral tribunal is empowered to permit forced joinder will be deciphered from the institutional rules and the arbitration agreement. The interpretation and scope of the wording should be “unambiguous and clear.” Thus, the court has emphasized the concept of party autonomy and consent.

5. Public Policy Challenge Does Not Allow Reopening of Decided Issues of Fact or Law (Betamax Ltd v State Trading Corporation)

 In this case, the issue before the Privy Council dealt with the question of how review courts must handle pleas of setting aside an award on the pretext of public police violation when an arbitrator has already found that there was no illegality. The case deals with the interpretation of public procurement legislation and the determination of whether the contract between the parties was exempted from that legislative regime. In the Privy Council’s view, such questions of interpretation did not give rise to any issue of public policy as a reviewing court should not go behind the arbitration tribunal’s decision and permit the reopening of the arbitral tribunal’s decision. They believed that the party challenging the award was simply trying to reopen a decided issue and thus have no basis for a public policy challenge.

OTHER NOTABLE DEVELOPMENTS

1. From 1^st June 2021, there are three significant changes in the theatre of Swiss arbitration. Firstly, the Swiss Chambers’ Arbitration Institution (SCAI) has transformed into the Swiss Arbitration Centre; secondly the revision of the Swiss Rules of International Arbitration (Swiss Rules 2021) and; finally the launch of a new Swiss arbitration platform. The Swiss Rules 2021 were developed to improve and cope up with the new developments and so focus on many themes from multi-contract and multi-party arbitrations to new provisions dealing with current technological developments in international arbitration. They also encourage paperless arbitrations and increased protection to inform data protection and cybersecurity reflected in Article 19 (2). The new rules among other things also give more autonomy to the parties for choosing and replacing their legal counsel. Read here for more

2. Brazilian Law 14.133 was published on April 1st, 2021, introducing a new regime for private parties to bid and enter into contracts with Brazilian state-controlled entities. Among other issues, the new Brazilian “Public Contracts Act” allows the adoption of Arbitration, Mediation and dispute boards.

3. The Kemet Centre for International Arbitration has been launched in Cairo as the first center of its kind on 22^nd June 2021 to promote arbitration in Egypt.

4. The Arbitration Foundation of Southern Africa (AFSA) International Arbitration Rules came into effect on 1 June 2021 to improve the management of international cases and make their resolution easier.

5. With effect from 1 July 2021, the Vienna International Arbitral Centre (the VIAC) has new specialized VIAC Rules of Investment Arbitration (Vienna Investment Arbitration Rules) and the VIAC Rules of Investment Mediation which seek to provide efficient alternatives for resolving investor-State disputes at a lower value.

JUDICIAL DEVELOPMENTS IN INDIA

Supreme Court

1. SC rules that two Indian parties can arbitrate outside India and the resulting award will be valid and enforceable in India. (PASL Wind Solutions Private Limited v GE Power Conversion India Private Limited)

No bar exists under the Arbitration & Conciliation Act 1996 which restricts the parties from choosing a seat outside India as well as choosing a foreign law as the law of the contract. These awards will be termed as foreign awards which would find their enforcement under Part-II of the Arbitration Act. Furthermore, Indian courts will have the power to pass interim relief in these awards

2. Whether an agreement that contains an arbitration clause has or has not been novated, cannot be decided by the Courts at the Section 11 stage (Sanjiv Prakash v Seema Kukreja and Ors)

The three-judge bench of the SC held that the civil courts cannot at section 11 stage, enter into a mini-trial or elaborate review of the facts and law that would usurp the jurisdiction of the arbitral tribunal.

3. The seat of arbitration can be changed by mutual consent of the parties and Courts at the Seat of Arbitration to have Exclusive Jurisdiction over Arbitral Proceedings (M/S Inox Renewables Ltd v Jayesh Electricals Ltd)

SC held the parties to an arbitration agreement are free to change the seat of arbitration if there is a mutual agreement between the parties. This mutual agreement will be considered valid even if it’s not in writing, as long as it remains unchallenged by both parties and is recorded in the award. Reference was made to BSG SGS SOMA JV v NHPC Limited and the court re-emphasized how the decision of parties in the selection of a seat is similar to an exclusive jurisdiction clause which empowers the court at such seat to exercise jurisdiction in all matters related to the arbitration

4. The SC upholds that the existence of an arbitration clause does not debar the court from entertaining a writ petition (Uttar Pradesh Power Transmission Corporation Ltd v CG Power and Industrial Solutions Ltd)

The SC observed that despite the existence of an arbitration clause or an alternative remedy, the HCs can still entertain a writ petition. The court highlighted the particular conditions in which the writ petition can be entertained which include cases wherein the writ petition seeks enforcement of a fundamental right, or there is a failure of observance of principles of natural justice, or the impugned orders or proceedings are whole without jurisdiction or wherein the vires of an Act is under challenge. Furthermore, the court remarked that the HCs can give reliefs sought under article 226 even in cases arising out of a contract containing an arbitration clause.

5. SC reiterates the principle of minimum interference in arbitral awards (NTPC v M/s Deconar Services Pvt Ltd)

 A three-judge bench of the Supreme Court emphasized the principle of minimum interference and stated that for challenging an arbitral award, the party who is challenging it needs to prove that the arbitrator’s award suffered from perversity; or an error of law; or that there was misconduct on behalf of the arbitrator. The bench also observed that merely showing that there could be another reasonable interpretation or possibly another view that can be taken based on the material on record is insufficient to allow the court’s interference.

6. The SC holds the Limitation Act, 1963 to apply to the arbitration proceedings initiated under provisions of Micro, Small and Medium Enterprises Development Act, 2006 (M/s Silpi Industries v Kerala State Road Transport Corporation)

The court by referring to the case of Andhra Pradesh Power Coordination Committee & Ors v Lanco Kondapalli Power Ltd & Ors held that the applicability of Limitation Act to the arbitrations is covered by Section 43 of the 1996 Act and thus limitation act would apply to the arbitrations covered by Section 18(3) of the MSMED Act. Furthermore, the court also answered the question that if two parallel proceedings are allowed, then which provision was to prevail. It stated that out of the two legislations, the provisions of the MSMED Act will prevail, particularly because it has an overriding provision under Section 24 thereof. Thus, it concluded that the MSMED Act, being a special Statute, will have an overriding effect vis-à-vis Arbitration and Conciliation Act, 1996, which is a general Act.

High Courts

1. If a dispute relating to novation of contract is required to be examined by the Arbitral Tribunal or by a Court under Section 11 (SPML Infra Ltd v NTPC Limited)

The principal controversy that was addressed by the Delhi High Court relates to the scope of examination under Section 11 of the Arbitration and Conciliation Act at a pre-referral stage. The court’s interpretation appropriately balances the allocation of the decision-making authority between the court at the referral stage and the arbitrators’ jurisdiction to decide disputes on merits. Thus, the court is only required to see if the underlying contract contains an arbitration clause for arbitration of the disputes which have arisen between the parties after which the arbitral tribunal must take over.

2. A Party can be compelled to arbitrate even though it is not a signatory to the contract (Shapoorji Pallonji and Co Pvt Ltd v Rattan India Power Ltd and Anr) 

The Delhi High Court considered the question of whether a company can be compelled to arbitrate in disputes that arose in connection with agreements to which they were not signatories. In the present case, the Court held that due to the alter ego principle which is evident through strong organizational and financial links between the signatory and non-signatories resulting in both being bound together under the arbitration agreement. Thus, a non-signatory can be compelled to arbitrate if sufficient evidence of any kind of involvement is found between the signatory and its principal. 

3. A new arbitrator can be appointed after the award has been set aside (Jagdish Kishanchand Valecha v Srei Equipment Finance Ltd and Anr)

The Calcutta High Court stated that after an arbitral award is set aside, the court can appoint a new arbitrator if both parties are in agreement. The basic premise is that the parties who have come to the court cannot be without a remedy when they have agreed that the matter should go before a different arbitrator. Thus, it would ensure party autonomy at all levels right through the dispute resolution process and also to the procedure for challenging the award.

4. The Constitution of the tribunal does not have the same meaning as the appointment of an arbitrator (Quippo Infrastructure Ltd v A2Z Infraservices Ltd and Ors)

The Calcutta High Court contended that if the constitution of the tribunal would have the same meaning as the appointment of an arbitrator, then, in that case, after the amendment of Section 9 by insertion of sub-section 3 of the Act, the scope and application of Section 9 would be very limited. However, the language of sub-section 1 of Section 9 of the Act is so wide in its amplitude and scope and it was retained as such even after the amendment. This suggests that the intention of the legislature was not to substantially restrict the application of Section 9 of the Act. Thus, the constitution of the tribunal has to be interpreted in a purposive way to mean the assumption of jurisdiction by the arbitral tribunal after the commencement of arbitral proceedings under Section 21 of the Act.

5. Third parties who are strangers to the arbitration agreement under consideration before the Court, cannot be injuncted under Section 9 of the Arbitration Act, 1996 Act (Thar Camps Pvt Ltd v Indus River Cruises Pvt Ltd and Ors)

The Delhi High Court held that independent rights, lawfully ensuring in favour of third parties who are strangers to the arbitration agreement under consideration before the Court, cannot be injuncted under Section 9 of the Act. However, in no circumstances can a person who is not a party to the arbitration agreement be restrained from exercising an independent right vis-a-vis one of the parties to the arbitration agreement. Thus, the mere possibility of frustration of arbitral proceedings, or any award which may be passed therein, cannot justify the grant of interim protection under Section 9 of the Act.

6. In case the parties have no consensus on the appointment of the arbitrator then the court has the power to appoint an arbitrator to resolve inter se disputes (Weiss Technik India Pvt Ltd v Bollupalli Madhavilatha)

The Telangana High Court held that since parties are not able to arrive at an understanding to identify a person to act as arbitrator, given the provision in sub-section (2) of section 10 of the Arbitration Act, 1996 Act, a sole arbitrator can be appointed by the Court to resolve the inter se disputes arising out of the employment agreement. It also stated that even an allegation amounting to fraud is a civil aspect of fraud and can be arbitrable.

7. Foreign State cannot claim sovereign immunity against enforcement of an arbitral award arising out of a commercial transaction (KLA Const Technologies Pvt Ltd and Ors v The Embassy of Islamic Republic of Afghanistan and Ors)

The Delhi High Court held that in a contract arising out of a commercial transaction, a Foreign State cannot seek Sovereign Immunity for stalling execution of an arbitral award rendered against it. It also stated that prior consent of central government is not necessary under Section 86(3) of the Code of Civil Procedure to enforce an arbitral award against a Foreign State. Further, Section 36 of the Arbitration and Conciliation Act is for the limited purpose of enforcement of an arbitral award as a Decree of the Court by providing it with an associated legitimacy as well as validity and not prescribing it as a decree under the Code of Civil Procedure. Thus, an arbitration agreement in a commercial contract between a party and a Foreign State is an implied waiver by the Foreign State to preclude it from raising a defence against an enforcement action premised upon the principle of Sovereign Immunity.

8. The cancellation of the assignment of the trademark in favour of the plaintiffs is legal and valid (Golden Tobie Pvt Ltd v Golden Tobacco Ltd)

The Delhi High Court held that the assignment of a trademark is by a contract and not by a statutory act. It does not involve any exercise of sovereign functions of the State. Therefore, the right asserted by the plaintiff is not a right that emanates from the Trademark Act but a right that emanates from the Agreement signed by the parties and thus, it cannot be said that the trademark disputes are not arbitrable.

EDITORS PICK: FRESH LITERATURE

Books

1. Banerji, Nair, Pothan, International Arbitration and the Rule of Law: Essays in Honour of Fali Nariman, (Wolters Kluwer 2021)
2. Nudrat Piracha, Toward Uniformly Accepted Principles for Interpreting MFN Clauses: Striking a Balance Between Sovereignty  and the Protection of Investors (Wolters Kluwer 2021)

Full length Articles

1. Nils R. Eliasson; Edward Taylor, Levelling the International Arbitration Playing Field: Outcome-Related Fee Structure Reform in Hong Kong and Singapore, (Vol. 23 (2), Asian Dispute Review 2021)
2. Charles Kimmins; Nigel Rawding; Luke Pearce; Olivia Valner, The Test for Apparent Bias and Arbitrators’ Duties of Disclosure Following Halliburton v. Chubb: Welcome Clarification, but Questions Remain, (Vol. 38 (3), Journal of International Arbitration 2021)
3. John David Branson, The Abuse of Process Doctrine Extended: A Tool for Right Thinking People in International Arbitration, (Vol. 38 (2), Journal of International Arbitration 2021)
4. Henk J. Snijders, Arbitration and AI, from arbitration to ‘robotisation and from human arbitrator to robot, (Vol. 87(2), The Int’l Journal of Arbitration, Mediation and Dispute Management 2021)
5. Caroline Kenny, A Comparison of Singapore and Hong Kong’s Third-Party Funding Regimes to England and Australia, (Vol. 87(2), The Int’l Journal of Arbitration, Mediation and Dispute Management 2021)
6. Jacob Grierson; Thomas Granier; Sacha Karsenti, Is Arbitration Helping or Hindering the Protection of the Environment and Public Health?(Vol. 38 (3), Journal of International Arbitration 2021)
7. Thomas Willams; Ahmed Durrani; Umang Singh, The Advance on Costs in Arbitration: Reimbursement of Substituted Payment, (Vol. 38 (3), Journal of International Arbitration 2021)
8. Ihab Amro, The Use of Online Mediation in the Resolution of Civil and Commercial Disputes in Theory and in Practice, (Vol. 87(2), The Int’l Journal of Arbitration, Mediation and Dispute Management 2021)

Blogs

1. Kabir A.N. Duggal, Nicholas J. Diamond & Sarah Ayreen Mir, Procedural versus Substantive Reforms: Is the Work of UNCITRAL WGIII Worth the Wait? , (Kluwer Arbitration Blog)
2. Sang Jin Lee, Michael van Muelken, Virtual Hearing Guidelines: A Comparative Analysis and Direction for the Future, (Kluwer Arbitration Blog)
3. Ashish Dholakia, Ketan Gaur & Kaustub Narendran, India’s Arbitration And Conciliation (Amendment) Act, 2021: A Wolf In Sheep’s Clothing? (Kluwer Arbitration Blog)
4. Aviral Shrivastava and Ritvik Chouhan, Accessibility of Interim Relief While Selecting a Foreign Seat of Arbitration: A Misnomer or Reality, (RMLNLU Arbitration Law Blog)
5. Gourav Asati & Sarthak Chouhan, Institutional Arbitration: Can India Efficiently Deal with it?  (RMLNLU Arbitration Law Blog)
6. Dr. Markus Altenkirch and Brigitta John, Climate Finance and Arbitration, (Global Arbitration News)