Alternative Dispute Resolution : Amendments to the Arbitration and Conciliation Act 1996 to strengthen Ease of Doing business in India
May 2015
Prime Minister Narendra Modi-led government is trying to present India as an investor-friendly nation to the world and hence the laws should also be supporting this.
"There should be ease of doing business in India. Nobody is prepared to have an arbitration in India. The process gets delayed due to arbitration. We want to have a stipulated timeframe for this," Gowda said.Some of the amendments which maybe considered are
- Amending Section 34 of the Act which allows, among other grounds, for an award to be set aside if it is in conflict with the public policy of India. The amendment would make clear that this exception applies only where (i) an award has been obtained by fraud or corruption, (ii) an award is in conflict with a fundamental policy of Indian law or (iii) an award is against the basic notions of morality and justice.
- Section 36 of the Act as it stands today allows for an automatic stay of the enforcement of an arbitral award if it has been challenged. The proposed amendment provides that no automatic stay would apply, and a party seeking such a stay must obtain a specific order to this effect.
- An amendment regarding arbitrators’ fees, so that these would not be on the basis of the number of sittings or hearings, but rather on a composite basis.
- Tribunals would be required to render arbitral awards within a period of nine months of the case being filed, unless the Court grants an extension. An arbitrator who delays the matter for their personal benefit can be barred from sitting in any new arbitration proceedings for a period of up to three years.
- Courts would be required to dispose of any application to challenge an arbitral award within one year of the application being filed.
- Where parties are unable to decide on their arbitrator they can approach the High Court or the Supreme Court (as the case may warrant), under Section 11 of the Act, and ask the Court to appoint an arbitrator. The amendments proposed state that Courts should dispose of such applications as expeditiously as possible, with the aim of doing so within 60 days.
- The Court’s powers under Section 11 of the Act would be limited to examining, prima facie, the existence of an arbitration agreement and not delving into the merits of the dispute.
ICC Arbitration Court Paris to ramp up presence in India
March 2014 : Paris ICC Arbitration Court vows to ramp up India as first Indian lawyer joins from US LLM
The Paris-headquartered International Court of Arbitration (ICA) of the International Chambers of Commerce (ICC) has hired its first Indian lawyer in a bid to expand in India by increasing visibility and uptake, despite the remaining problem of judicial interference.
Former Mulla & Mulla associate Abhinav Bhushan, who is a graduate of Government Law College (GLC) Mumbai in 2008 and the Columbia Law School LLM programme last year, has joined the ICC’s commonwealth team as one of the two deputy counsel.
He is working under common law counsel Allison Pearsall, who told Legally India: “As common law counsel and having spent some time studying in India, I am interested in developing ICC arbitration in India.”
Bhushan told Legally India that he competed with 100 other applicants, clearing several rounds of interviews, including a final interview with the deputy secretary general of the ICA in Paris.
Pearsall said that the total interview process took approximately two weeks after short listing 40 people, each of whom were interviewed by telephone, with six finally being selected for face-to-face interviews. “We work closely together here at the secretariat,” explained Pearsall about the stringent selection process for her team that has a caseload of around 170. “Our team is comprised of lawyers the UK, Canada and the United States. We felt that that deputy counsel from India could be advantageous given our caseload for India and our continuing work with Indian parties and practitioners.”
“Everybody has to pull together and get along. Everybody comes from different countries,” she said. “[It] brings with it other challenges, social skills are also helpful into working within an international organization in a small team.”
Managing Indian disputes from abroad
ICC India works with the ICA to propose qualified Indian arbitrators to sit on arbitral tribunals under ICC rules, and disburse ICC publications including statistics and rules among Indian exporters and importer.
Pearsall told Legally India that ICC India’s case load last year comprised about 35 cases involving more than 50 Indian parties, arbitrated in Delhi, Mumbai, Kolkata and Goa. Pearsall’s Paris-based Commonwealth team handled approximately half of those cases, with the other half managed by a Hong Kong-based team.
“It is always important to keep in mind that users of arbitration, the parties, that bring cases to arbitration, when they draft their contracts, they have a choice of what institutions to bring their case to. You're offering a service; [it] has to be good [and] efficient.”
India future in dispute
Pearsall said that she sees a green flag for ICC India in the fast developing Indian arbitration market, which, in her perception, puts ICC at an advantage despite a number of other arbitral institutions, such as the LCIA and IIAM.
“I think there's a lot of potential for India, culturally and geographically, given the amount of business it does with Europe and Asia,” she said.
Even though India is well-placed commercially, said Pearsall, the perception of the degree of judicial interference in arbitration in India would need to be further addressed to improve India’s reputation as a seat of arbitration.
A modification of the Indian Arbitration Framework could improve India’s image as a desirable seat of arbitration similar to that enjoyed by the United Kingdom.
Popularity contested
When asked about the apparently greater popularity of domestic ad hoc arbitrations vis-à-vis institutional arbitrations in domestically drafted agreements, she said it could partly be attributable to a misconception that institutional arbitration is expensive, or that arbitrating parties have less control over the procedure.
The costs of an ICC arbitration are constantly monitored and even adjusted up or down, she explained.
The ICC offers a lot in terms of service, she claimed. “The cases are monitored by a truly international team coming from a number of different jurisdictions. ICC arbitration cases are monitored by lawyers. Awards are scrutinised by the court, comprised of seasoned international practitioners. No award is rendered without the court approving it as to its form.”
The entry into force of new ICC rules in January was an excellent opportunity to hold educational events on ICC arbitration in Delhi next month, she said. “This will be a good opportunity for the court, its secretariat and ICC India to work closely together to raise awareness of ICC arbitration.”
Arbitration clause - Administered Arbitration Vs Adhoc arbitration -Substantive law and procedural law as per Indian Arbitration and Conciliation Act
Arbitration administered by an institution Vs Adhoc arbitration
· Opting for Institutional Arbitration results in deciding in advance who should act as arbitrator and procedural rules applicable to the conduct of arbitration process. Also administrator charges
· Adhoc arbitration achieves the objective of opting out of jurisdiction of courts and however, dispute has to be settled by a tribunal mutually agreed between parties. This results in two open questions- who will be arbitrator and what are the rules to be followed by arbitrator.
The other variant is to specify the applicable rules and appointment of arbitrators to be made after the dispute arises.
Jurisdiction and location
Substantive law : The law to decide the merits of the dispute arising out of the contract.
Procedural Law : The law to be followed in conducting the proceedings of arbitration and interference of courts. In the absence of specification in contract, the seat/location of arbitration specified in the contract decides the procedural law. The popular arbitration friendly regimes opted for international arbitration are London, Newyork, Paris, Hongkong and Singapore. The tribunal may meet anywhere in the world and need not be at the place specified. The location specified is only relevant for the procedural law.
S. 28 of the
Arbitration and Conciliation Act, 1996 (A&C) provides for the rules
applicable to thesubstance of the dispute. However, s. 28 is
applicable only when the place of arbitration is in India as it starts with the
words ‘[w]here the place of arbitration is situate in India…’. Therefore
s. 28 does not apply where the place of arbitration is outside India.
In international commercial arbitrations, it has become a practice that
parties agree upon a substantive law and on curial law. It is in these
circumstances, question arises as to whether Part I of A&C is excluded
either expressly or impliedly by choosing procedural law other than A&C for
conducing arbitration proceedings.
The SC in Bhatia International’s case held that
“Part I of the A&C would apply to all arbitrations and to all
proceedings relating thereto. Where such arbitration is held in India, the
provisions of Part I of A&C would compulsorily apply and the parties are
free to deviate to the extent permitted by the derogable provisions of Part I.
In cases of International Commercial arbitration held out of India provisions
of Part I would apply unless the parties by agreement express or implied
exclude all or any of its provisions. In that case the laws or rules chosen by
the parties would prevail. Any provision in Part I which is contrary to or
excluded by that law or rules will not apply.” (para 32)
The conclusion in unequivocal terms is that, that in international
commercial arbitration where place of arbitration is outside India, the parties
are free to agree upon the law governing the contract and the procedural law
applicable to arbitral proceedings. Such law as agreed between the parties
shall prevail over Part I of A&C. Therefore parties are free to choose the
substantive law applicable to contract, curial law applicable to the arbitration
proceedings and the judicial seat of arbitration. Where curial chosen is
different from A&C, that law would prevail over A&C.
It has been succinctly expressed in the decision of Hardy Oil and Gas
Limited’s case decided by the Gujarat High Court. To appreciate the views
expressed by the Gujarat HC, the relevant clauses of the contract are extracted
below-:
“Governing Law and Arbitration
1. This Agreement (except for the
provisions of Clause 9.5.4 relating to arbitration) shall be governed by and
construed in accordance with the substantive laws of India.
2. Any dispute or difference of whatever
nature arising under, out of, or in connection with this Agreement, including
any question regarding its existence, validity or termination, which the
parties are unable to resolve between themselves within sixty (60) days of
notification by one or more Parties to the other(s) that a dispute exists for
the purpose of this Clause 9 shall at the instance of any Party be referred to
and finally resolved by Arbitration under the rules of the London Court of
International Arbitration (SLCIA), which Rules (Rules) are deemed to be
incorporated by reference into this clause.
3. The Tribunal shall consist of two
arbitrators who shall be Queen's Counsel, practicing at the English Bar in the
Commercial Division of the High Court, ……………………….
4. The place of arbitration shall be
London and the language of arbitration shall be English. The law governing
arbitration will be the English law……..
The Gujarat HC relied
on Bhatia International and has stated certain principles drawing on National Thermal Power Corporation vs
Singer with reference to choice and applicability of substantive and
curial law with specific reference to conflict of laws. The principles are
given below in brief –
Ø Parties have freedom to choose the law
governing an international commercial arbitration agreement. They may choose
the substantive law governing the arbitration agreement as well as the
procedural law governing the conduct of arbitration. Such choice is exercised
either expressly or by implication.
Ø Where there is no express choice of law
governing contract as a whole, or the arbitration agreement in particular,
there is, in the absence of any contrary indication, a presumption that the
parties have intended that the proper law of the contract as well as the law
governing the arbitration agreement are the same as the law of the country in
which the arbitration is agreed to be held.
Ø On the other hand, where the proper law
of the contract is expressly chosen by the parties (as in the present case),
such law must, in the absence of an unmistakable intention to the contrary,
govern the arbitration agreement which, though collateral or ancillary to the
main contract, is nevertheless a part of such contract.
Ø In the absence of any indication to the
contrary, the governing law of the contract being Indian law, it is that system
of law which must necessarily govern matters concerning arbitration, although
in certain respects the law of the place of arbitration may have its relevance
in regard to procedural matters. The law governing such rights and liabilities
is the proper law of the contract, and unless otherwise provided, such law
governs the whole contract including the arbitration agreement, and
particularly so when the latter is contained not in a separate agreement. This
would be the situation where there is absence of a specific agreement to the
contrary, as is the situation in the matter on hand.
In this case parties
had expressly chosen laws of England as the law governing the arbitration
proceedings and hence it was held that provisions of Part I of A&C were
expressly excluded and it would be the English law that would govern
arbitration proceedings. Therefore parties could not invoke the Indian Courts
under Part I of A&C.
A different view has
been taken in Citation Infowares where the SC distinguished
the case from the principles enumerated in NTPC’s case, and holds that
provisions of Part I of A&C act are applicable to the subject dispute. The
relevant arbitration clause between the parties is given below-
“This agreement shall
be governed by and interpreted in accordance with the laws of California, USA
and matters of dispute, if any, relating to this agreement or its subject
matter shall be referred for arbitration to a mutually agreed Arbitrator"
The SC held that the
parties had agreed upon the substantive law and had not agreed either on the
judicial seat of arbitration or the curial law. It also stated that there was
nothing in the arbitration clause to exclude impliedly provisions of Part I of
A&C and hence it was held that Part I of A&C is applicable and powers
were exercised under Section 11 of the Act to appoint the arbitrator.
This view is contrary
to principle enumerated in NTPC’s case wherein it was held that where there is
no separate arbitration agreement but, arbitration agreement forms part of the
principal agreement as a clause thereof and if there is no specific agreement
between the parties to the contrary, law governing principal agreement would
govern the arbitral proceedings. In Citation Infowares, though the
parties had agreed upon the substantive law applicable to the contract, and the
contract was silent on the curial law, it would have been the law of the
contract that would be applicable to the arbitration proceedings. Since place
of arbitration was not specified, SC held that the principle enunciated in the
NTPC case would not be applicable. In my view, the omission by the parties to
agree on place of arbitration makes Part I of A&C applicable is contrary to
principles stated earlier. It introduces one more criterion to be considered in
determining the intention of the parties which did not exist previously. When
the parties had contemplated laws relating to California as the substantive law
and there was nothing in the agreement to suggest that the parties negated the
applicability of Californian laws as curial law. The natural inference would be
that parties had positively agreed to subject themselves to laws of California
as substantive and curial law.
In Dozco vs Doosan,
SC held that by specifying the substantive law, and the seat of arbitration as
Republic of Korea it becomes fairly clear that the parties had agreed to
exclude Part I of A&C and hence petition under Part I is not maintainable.
The arbitration
clause that was agreed by the parties is given below for ready reference -
Article 23.1
“This agreement shall
be governed by and construed in accordance with the laws of The Republic of
Korea.
All disputes arising
in connection with this Agreement shall be finally settled by arbitration in
Seoul, Korea (or such other place as the parties may agree in writing),
pursuant to the rules of agreement then in force of the International Chamber
of Commerce (emphasis supplied)”
The SC held that language
of Article 23.1 clearly suggests that all the three laws i.e the substantive
law, curial law and the law relating to conduct of arbitration are the laws of
The Republic of Korea. Hence parties impliedly excluded the application of Part
I of A&C.
SC in Dozco’s case though has not stated in as many words but has
followed the principles laid down in NTPC case. As in Bhatia International, the
parties in Dozco had agreed upon ICC Rules of Arbitration. Since the
substantive law applicable to the contract was the law relating to the Republic
of Korea and the place of arbitration was Seoul which added up to enable SC
reach conclusion that Part I of A&C was excluded by the parties and hence
petition under Section 11 before SC was not maintainable. However as stated
earlier, parties had agreed on ICC Rules and not on procedural law of Republic
of Korea.
Lastly, traversing the decision in Videocon Industries Ltd vs Union of
India, SC upheld the decision of Gujarat HC and the principles enunciated in
Bhatia International and NTPC’s case. The clause of arbitration read as
follows-
33.1 Indian Law to
Govern
Subject to the
provisions of Article 34.12, this Contract shall be governed and interpreted in
accordance with the laws of India.
33.2 Laws of India
Not to be Contravened
Subject to Article
17.1 nothing in this Contract shall entitle the Contractor to exercise the
rights, privileges and powers conferred upon it by this Contract in a manner
which will contravene the laws of India.
34.12. Venue and Law
of Arbitration Agreement
The venue of sole
expert, conciliation or arbitration proceedings pursuant to this Article,
unless the Parties otherwise agree, shall be Kuala Lumpur, Malaysia, and shall
be conducted in the English language. Insofar as practicable, the Parties shall
continue to implement the terms of this Contract notwithstanding the initiation
of arbitral proceedings and any pending claim or dispute. Notwithstanding the
provisions of Article 33.1, the arbitration agreement contained in this Article
34 shall be governed by the laws of England.
The above clauses make it amply clear that substantive law is Indian Law
and the curial law applicable is English law. Therefore the forum to be
approached is English Courts and all the arbitration proceedings including
interim measures, setting aside of award shall be in accordance with the
provisions of English law.
To conclude, the decision of Bhatia International and NTPC is followed
in all the cases. There is a distinction made in the case of Citation Infowares
where even though the parties had agreed on the substantive law, and had
omitted to agree on the place of arbitration and curial law, the SC differed
from NTPC’s principle and held that omission by the parties to agree upon
judicial seat of arbitration and language of arbitration resulted in applicability
of Part I of A&C. When the parties had agreed upon the substantive law, the
SC ought not to have looked at other considerations to determine applicability
of Part I of A&C and the law governing the contract would be curial law as
there is no contrary intention demonstrated by the parties to negate the
applicability of substantive law as curial law. The decision is also not
practically in accordance with the intention of the parties as SC appointed an
Indian National to adjudicate the dispute in accordance with the laws of State
of California.
It is necessary to state here that SC in Dozco’s case relies on the
principle stated by Mustill and Boyd “In the absence of express agreement, there is a strong prima facie
presumption that the parties intend the curial law to be the law of the 'seat'
of the arbitration, i.e. the place at which the arbitration is to be conducted,
on the ground that that is the country most closely connected with the
proceedings. So in order to determine the curial law in the absence of an
express choice by the parties it is first necessary to determine the seat of
the arbitration, by construing the agreement to arbitrate.”
Singapore Convention on Mediation (Convention) for cross border dispute resolution.
Businesses in India and around the world will now have greater certainty in resolving cross-border disputes through mediation, as the Convention provides a more effective means for mediated outcomes to be enforced.
The Convention, also known as the United Nations (UN) Convention on International Settlement Agreements Resulting from Mediation, is the first UN treaty to be named after Singapore.
As of September 1, 2020, the Convention has 53 signatories, including India, China, and the United States. Ecuador is the most recent country to ratify the Convention, joining Singapore, Fiji, Qatar, Saudi Arabia and Belarus, and bringing the number of countries who have ratified the Convention to six.
With the Convention, businesses can rely on mediation as a dispute resolution option for their cross-border transactions, with greater certainty and assurance that their mediated outcomes are enforceable. The conciliatory nature of mediation also helps to preserve commercial relationships despite the disputes.
With the Convention in force, businesses seeking enforcement of a mediated settlement agreement across borders can do so by applying directly to the courts of countries that have signed and ratified the treaty, instead of having to enforce the settlement agreement as a contract in accordance with each country’s domestic process.
The harmonised and simplified enforcement framework under the Convention translates to savings in time and legal costs.
Minister for Home Affairs and Law, Singapore K Shanmugam said, “The Convention’s entry into force is a significant milestone, as it further strengthens the international dispute resolution enforcement framework. This benefits businesses by providing greater certainty in resolving cross-border commercial disputes, ultimately facilitating international trade and commerce.”
Anna Joubin-Bret, Secretary of the United Nations Commission on International Trade Law, says, “With the Convention successfully entered into force, we look forward to it bringing certainty and stability to the international framework on mediation, and contributing to the Sustainable Development Goals, including the goal of promoting peaceful and inclusive societies for sustainable development.”
As adoption of the Convention becomes more prevalent globally, it will also strengthen Singapore’s position as an international dispute resolution centre and better serve the needs of international businesses that use Singapore as a base for their international commercial transactions.
Over the years, Singapore has set up various institutions, including the Singapore International Arbitration Centre, Singapore International Mediation Centre, and Singapore International Commercial Court to provide a full suite of dispute resolution services for international commercial parties to resolve their disputes in Singapore.
The Convention opened for signature at a signing ceremony on August 7, 2019, and 46 countries signed the Convention. The number of first-day signatories was among the highest for any UN trade convention, reflecting international recognition and support of the Convention’s benefits.