.jpg)
28 February, 2018
Herbert Smith Freehills has issued the latest edition of its Indian international arbitration e-bulletin. In this issue we will consider various Indian court decisions, including the availability of interim relief in support of foreign arbitration, sanctions for non-compliance with arbitral orders and the pro-arbitration position adopted by the courts in upholding a foreign seat. In other news, we consider the rise of institutional arbitration in India and a detailed analysis of the Sri Krishna Committee report, developments in the Indian mediation landscape, proposed reforms for commercial courts, as well as India-related bilateral investment treaty news (and other developments).
CASES
Bombay High Court confirms that parties to foreign seated arbitrations can seek interim relief in India
In Aircon Beibars FZE v Heligo Charters Pvt Ltd, the Bombay High Court confirmed that parties to an international commercial arbitration with a foreign seat have the option of seeking interim relief in India, under section 9 of the Arbitration and Conciliation Act 1996 (the “Act”).
The court confirmed that the parties are free to choose a foreign governing law and a foreign seat for international commercial arbitrations, and that choice should not restrict the parties from being able to approach the Indian courts for interim relief. The court recognised that parties could expressly provide that Part I of the Act is entirely excluded from applying to the arbitration. However, absent any such exception, parties are free to apply to the courts for protection under section 9 of the Act when an arbitration is likely or pending. Read more here.
Supreme Court clarifies contempt powers for non-compliance with arbitral orders
In the recent case of Alka Chandewar v Shamshul Ishrar Khan, the Indian Supreme Court has confirmed that contempt of arbitral tribunal orders will be treated in the same manner as contempt of a court order.
Moreover, such orders can be enforced under the Civil Procedure Code, 1908 or the Contempt of Courts Act, 1971 in the same manner as if they were court orders. Read more here.
Indian courts uphold parties’ offshore seat choices despite terminology issues
As previously reported here, the Indian Supreme Court’s judgment in Roger Shashoua v Mukesh Sharma sheds further light on the court’s approach to interpreting arbitration agreements, particularly regarding the parties’ implied choice of seat. The court found that the designation of London as the “venue” of the arbitration in the absence of any express designation of a seat would suggest that the parties agreed that London would be the seat of the arbitration (in the absence of anything to the contrary).
This is not the only recent occasion on which the Indian courts ruled that the designation of a place of arbitration by the parties should be understood as the juridical seat of their arbitration. In the recent decision of Katra Holdings Limited vs Corsair Investments Llc and Ors (see judgment here) the Bombay High Court found that the juridical seat of the arbitration was rightly determined to be New York in light of the parties’ agreement and conduct. The parties’ agreement provided that the “place of arbitration shall be New York, New York or such other place as may be agreed upon by the Arbitrating Parties” and that the arbitration shall be conducted under the Commercial Arbitration Rules of the American Arbitration Association. The arbitration took place in New York with the parties relying on provisions of the United States’ Federal Arbitration Act. As a result, the award could not be challenged under Section 34 of the Indian Arbitration and Conciliation Act 1996, which only applies to arbitrations seated in India. The Bombay High Court consequently refused to hear the appellant’s challenge to the award.
NEWS
Sri Krishna Committee Report on Institutional Arbitration and Proposed Amendments to the Arbitration Act
In July 2017, a high level committee chaired by retired Supreme Court judge, Justice B.N. Srikrishna, concluded and presented their report suggesting measures for institutionalisation of arbitration in India and improving arbitration mechanisms in India (the “Report”), which we had first reported here. The Srikrishna Committee consisted of retired Supreme Court judges, active judges of the high courts, senior advocates, public policy organisations and various industry bodies. The Report is in keeping with the Modi government’s push for India to be recognised as a global arbitration hub, and provides recommendations on how to promote arbitration in India including assessing skill gaps in ADR and institutions. Additionally it provided its comments on various aspects of the Indian Arbitration and Conciliation Act 1996 which was amended in 2015 (the “Act”) (see here) and proposed several amendments to the same.
The Report is divided into four parts: (1) an analysis of institutional arbitration in India; (2) proposed amendments to the 2015 amendments of the Act; (3) a case study of the Delhi-based International Centre for Alternative Dispute Resolution (“ICADR”); and (4) the role of arbitration in bilateral investment treaty disputes involving India (see here).
The Report can be accessed on the Department of Legal Affairs’ website. Our analysis of the Report is here.
Promotion of the New Delhi International Arbitration Centre
On Friday, 5 January 2018, the Indian Law Ministry published a Bill titled the New Delhi International Arbitration Centre Bill, 2018 (the “Bill”) for the establishment and incorporation of the New Delhi International Arbitration Centre (“NDIAC”). The Bill seeks to create an independent and autonomous regime for institutionalised arbitration and to transfer the authority from the existing International Centre for Alternative Dispute Resolution (the “ICADR”). The recommendation to revamp the ICADR appears to stem from the Sri Krishna Report discussed here.
The objectives of the NDIAC include the following:
- Being a premier institution for domestic and international arbitration;
- Provide facilities and assistance in conciliation and mediation;
- Maintain a panel of accredited arbitrators – both domestic and international;
- To set up facilities for conducting arbitration hearings;
- To set up an Arbitration Chamber (for arbitrator panels) and an Arbitration Academy (to train arbitrators in India).
We will report on the further development of the NDIAC as it progresses.
Task force considers introducing new standalone mediation and conciliation law
Whilst arbitration reform has been on the government agenda for some time, developments of other forms of ADR, particularly mediation and conciliation, have also been gaining prominence. The concepts of “mediation” and “conciliation” were given official recognition in India by the Arbitration and Conciliation Act 1996 (the “Act”) and by the amendment of the Civil Procedure Code (the “CPC”) in 1999. Since then, mediation in India has grown steadily. It is being viewed, at least in part, as a mechanism for reducing case backlogs and delays in the courts.
A task force set up to improve India’s ranking in the World Bank’s parameter of “Doing Business: Enforcing Contracts”, headed by Justice Secretary Snehlata Srivastava, recognises the function and benefits of mediation. The task force is currently considering introducing a new legal framework for mediation, either through a standalone “mediation and conciliation law” or by amendment to the Act. The task force is also looking at increasing incentives for parties to disputes to resort to mediation by way of tax rebates.
The formation of the task force is part of India’s efforts to improve its position in international rankings. To date there has been some success: as has been widely reported, India rose 30 places in the World Bank’s Doing Business 2018: Reforming to Create Jobs report, released on 31 October 2017, to rank 100th out of 190 nations. However, it remains 164th for ease of enforcing contracts (see World Bank report here).
Efforts to promote mediation and conciliation have also been demonstrated at a local level. Maharashtra recently announced the creation of a conciliation committee under the Real Estate (Regulation and Development) Act, which will comprise a voluntary conciliation scheme. Mediation centres annexed to courts are contributing to the growth of mediation. The government has also requested High Courts in Delhi and Mumbai to implement pre-litigation voluntary mediation under various statutory frameworks.
Law Ministry to propose amendments to ease the resolution of commercial disputes
India has seen significant improvements in the World Bank’s Ease of Doing Business index (the “Index”) in 2017. The Index monitors and ranks countries according to different criteria including investors’ ability to (a) start a business; (b) get credit; (c) register a property; and (d) enforce contracts. India’s overall ranking has risen thirty places from 130 to 100 from 2016 to 2017 – second only to Bhutan in the South Asia region. Having stated an aim to break into the global top 50, the next bundle of reforms proposed by the Indian government are to amend the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act 2015 (the “Commercial Courts Act”).
We cover a brief overview of two recent legislative proposals from the Indian government to improve the resolution of commercial disputes and enforceability of contracts here.
Payment under LCIA award puts an end to Tata/Docomo dispute
We previously reported the latest judicial development in the Tata/Docomo dispute, with the Delhi High Court (“Court”) clearing the way for enforcement of an LCIA award issued in favour of NTT DoCoMo Inc (“Docomo”), thereby dismissing objections on grounds of Indian public policy of the Reserve Bank of India, reported here. The Court also confirmed that payment of the award amount was not for the purchase by Tata Sons (“Tata”) of Docomo’s shares but only payment of damages for breach of contract by Tata.
The long-running dispute is now at an end: on 31 October 2017, Docomo announced that it had received a payment of USD 1.27 billion from Tata, and that it had transferred its stake in Tata’s telecom unit Tata Teleservices (“TTSL”) back to Tata, marking the end of a dispute which arose after Docomo’s decision to exit its venture in TTSL in 2014.
The Second Annual MCIA Conference
The Mumbai Centre for International Arbitration held its second annual conference on 4 November 2017, in Mumbai (the “Conference”). The Conference was attended by more than 230 participants from different jurisdictions across India and internationally. The Conference marked the end of a year since the establishment of the MCIA (previously reported here). Key highlights of the Conference included keynote speeches by the Chief Justice of India, Dipak Misra, Supreme Court judge, A.K. Sikri, Minister of Commerce & Industry, Shri Suresh Prabhu and General Counsel for the Tata Group, Mr. Shuva Mandal.
The Conference was divided into five broad sessions covering: (i) Negotiating Contracts; Importance of Arbitration Clauses; (ii) Industry Specific Experience in Arbitration; (iii) Development Post Amendments to Arbitration Act; (iv) Hot Topics of Arbitration; and (v) Role of Experts in Arbitration. Nicholas Peacock (Herbert Smith Freehills Partner, Head of Indian Arbitration practice and Council Member at the MCIA) participated as a panel member.
As announced at the Conference, in the past year the MCIA has facilitated over 150 hearings in 60 arbitrations, a positive trend towards the usage of its state-of-the-art hearing facilities since its inception. The MCIA also reported that it has been informed by industry players that MCIA arbitration clauses are increasingly being used in India-related contracts. Further, the MCIA has been supported by the Maharashtra government which has prescribed that contracts of a certain value with the Maharashtra government must contain MCIA arbitration clauses. In an unprecedented order, the Supreme Court of India directed the parties to approach the MCIA as the appointing authority in an international arbitration dispute (previously reported here). Additionally, the MCIA has also signed a MoU with the Permanent Court of Arbitration to use their facilities for arbitrations.
McDonald’s battle with Vikram Bakshi continues
The long-running joint venture dispute between McDonald’s and its local business partner Vikram Bakshi (on which we reported here and here) has entered a new phase, with a challenge against the enforcement of a foreign arbitral award, whilst parallel proceedings before the National Company Law Tribunal (“NCLT”) have produced apparently conflicting results. See here for more details.
Investment Treaty Updates
BIT claims involving India continue to arise, with Vodafone filing a second arbitration against India in the retrospective taxation claims – this time under the India-UK BIT. India also faces a claim by Nissan relating to its establishment of a manufacturing plant in Tamil Nadu. Indian investors are also taking advantage of investment treaty protections, such as the claims reported to have been commenced by Indian and US investors against Bosnia & Herzegovina. At a state-to-state level, India and Bangladesh are working together to produce a joint interpretative statement to clarify the BIT in place between the two countries.
Further updates are here
For further information, please contact:
Nicholas Peacock, Partner, Herbert Smith Freehills
nicholas.peacock@hsf.com
