India: India and International Commercial Arbitration

Transcription

1 We use cookies to give you the best online experience. By using our website you agree to our use of cookies in accordance with our cookie policy. Learn more here. Close Me Home > India > Litigation, Mediation & Arbitration India: India and International Commercial Arbitration Last Updated: 23 June 2017 Article by Anchit Oswal Khaitan & Co Most Read Contributor in India, May 2017 Your LinkedIn Connections at Firm 0 INDIA AND INTERNATIONAL COMMERCIAL [1] The endeavour in the present article is to analyse and understand the Indian law concerning international arbitrations. The analysis covers the recent amendments introduced in the Indian arbitration law and some recent judgements of the Indian courts with an objective to sense the trend/ attitude of the two actors i.e. the Legislature and Courts towards international arbitrations. The Article also endeavours to study the implications of Part I of the Arbitration and Conciliation Act, 1996 being applicable to an international arbitration and to present a holistic perspective with respect to court's judgement on implied exclusion of the said Part I and consequences thereof. A.Introduction 1. Lately, there have been conscious efforts by the Indian Parliament and Indian courts to align the Indian arbitration jurisprudence with international norms. The recent amendments introduced in the Arbitration and Conciliation Act, 1996 ("1996 Act") by way of Arbitration and Conciliation (Amendment) Act, 2015 ("2015 Amendment") is a step in this direction. The motivation behind amending the 1996 Act seems to be twofold: a. to update the 1996 Act in light of the changes adopted by other jurisdictions; and b. to address specific issues faced by Indian courts while interpreting the original / un amended 1996 Act. Some of the key changes introduced through the 2015 Amendment are as follows: a. Only the High Courts and Supreme Court to jurisdiction in relation to international commercial arbitrations.[i] b. Section 9 (Interim measures), Section 27 (Court assistance in taking evidence) and Sections 37(1) (a) and 37(3) (orders which are appealable) of Part I of the 1996 Act made applicable to international arbitrations, unless expressly excluded by the parties.[ii] c. Non signatories to an arbitration agreement may seek reference to arbitration[iii] d. Judicial scrutiny while referring the parties to arbitration limited to a prima facie finding of the validity of the arbitration agreement.[iv] e. Arbitration proceedings are to be commenced within ninety days after securing an interim order under Section 9.[v] f. Time bound decisions to be made by courts on applications seeking constitution of the arbitral tribunal.[vi] g. The fee of the arbitrators to domestic arbitrations (except where parties have agreed to determination of fees as per rules of an arbitral institution) to be statutorily regulated.[vii] h. Interim measure orders by a tribunal enforceable like an order of court, hence expediting enforcement.[viii] i. The arbitral award to be made within a period of twelve months from the date on which the arbitral tribunal enters upon the reference.[ix] j. Fast track procedure introduced which requires the award to be rendered within six months from the date on which the arbitral; tribunal enters the reference.[x] k. no more automatic stay of award upon filing of objections to the same.[xi] l. Public policy as a ground to review the awards narrowed and defined.[xii] 1/27

2 2. Further, on 23 October 2015, the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act, 2015 came into force. Under Section 10 of the said Act, where the subject matter of an arbitration is a commercial dispute of a specified value, all applications or appeals arising out of an international commercial arbitration under the 1996 Act, shall be heard and disposed of by the specialised commercial courts under the said Act. This is another step to expedite the hearing of matters arising out of international arbitrations. 3. The focus of national courts across jurisdictions world over, with respect to international arbitrations has been on party autonomy and limiting the role of national courts in the arbitral process. Indian courts are also constantly moving in the same direction. In India, a party has an occasion to approach the national courts in connection to an arbitral proceeding at all the three stages i.e. pre arbitration, during arbitration and post arbitration (enforcement of awards etc.). Indian courts have been upholding the doctrines of minimum interference and party autonomy at all the three stages. In the pre arbitration stage, a party to an international arbitration can move a jurisdictional court seeking either an anti suit arbitration or an anti arbitration injunction. Indian courts have constantly refused to issue an anti arbitration injunctions and have made parties to stick to their bargain to arbitrate their disputes rather than litigating the same in national courts.[xiii] Indian courts have also refused to interfere with the enforcement foreign arbitral awards. 3.1 In a recent case of Cruz City 1 Mauritius Holdings v. Unitech Limited[xiv] where one of the challenge to enforcement of foreign arbitral award was that the same is in violation of the foreign exchange laws of India, the Delhi High Court refused to interfere and observed as under: "122. Even if it is accepted that the Keepwell Agreement was designed to induce Cruz City to make investments by offering assured returns, Unitech cannot escape its liability to Cruz City. Cruz City had invested in Kerrush on the assurances held out by Unitech and notwithstanding that Unitech may be liable to be proceeded against for violation of provisions of FEMA, the enforcement of the Award cannot be declined And thirdly, if Cruz City has been induced to make an investment on a false assurance of the Keepwell Agreement being legal and valid, Unitech must bear the consequences of violating the provisions of Law, but cannot be permitted to escape their liability under the Award" 3.2 In the case of NTT Docomo Inc v. Tata Sons Limited[xv], a similar objection has been raised by the Reserve Bank of India (RBI)[xvi] with respect to breach of foreign exchange laws in India. The Delhi High Court has negated the objections raised by RBI and rejected its intervention application. The Court inter alia held that RBI has no locus to object to the enforcement of the award as the same is not a party to the arbitration. On the merits of the case, the Court held the subject agreement to be valid and capable of being performed under the applicable laws of India. Interestingly, the Court has also upheld the settlement between the parties, pursuant to which the objections filed by Tatas were withdrawn and the Court has enforced the terms of the settlement agreement under its jurisdiction under Section 49 (Enforcement of foreign awards) of the 1996 Act. [xvii] 3.3 In another recent case of Zee Sports Ltd. v. Nimbus Media Pvt. Ltd.[xviii], wherein the Bombay High Court refused to interfere with the arbitral award on merits relying on the judgement in McDermott International Inc. v. Burn Standard Co. Ltd[xix], where in the Supreme Court has observed that as under: "52 The 1996 Act makes provision for the supervisory role of courts, for the review of the arbitral award only to ensure fairness. Intervention of the court is envisaged in few circumstances only, like, in case of fraud or bias by the arbitrators, violation of natural justice, etc. The court cannot correct errors of the arbitrators. It can only quash the award leaving the parties free to begin the arbitration again if it is desired. So, the scheme of the provision aims at keeping the supervisory role of the court at minimum level and this can be justified as parties to the agreement make a conscious decision to exclude the court's jurisdiction by opting for arbitration as they prefer the expediency and finality offered by it." The Bombay High Court refused to continue the stay against enforcement of the award and imposed a cost of Indian Rupees 2 lakhs. 3.4 Similarly, the Kerala High Court in Emmanuel Cashew Industries v. CHI Commodities Handlers Inc[xx], while dealing with challenge to an arbitral award, interpreting Section 48 of the 1996 Act, which prescribes the conditions for enforcement of foreign awards in India, observed that by merely filing of objections to the foreign award under Section 48 is not enough and the objector has to furnish "proof" of circumstances to satisfy any of the conditions mentioned in Section 48 to refuse enforcement of the foreign award. 4. Above cases are indicative of the trend that Indian courts are taking a pro arbitration stand at every stage of arbitration. However, the applicability of Part I of the 1996 Act to international arbitrations is still a grey area. Part I of the 1996 Act, if held to be applicable to international arbitration makes the arbitral process subject to the scrutiny by Indian courts including granting stay orders against the arbitration proceedings in nature of anti arbitration injunctions and setting aside arbitral awards on the grounds other than what may be permissible under internationally accepted convention like the New York Convention. 5. The law before the Balco judgement[xxi] was that the Part I of the 1996 Act would apply to both domestic and international arbitration unless expressly or impliedly excluded by the parties. The Supreme Court, in the landmark Balco Judgement, inter alia upheld the territorial principle and held that arbitrations which are seated outside India will not attract Part I. However, the 2/27

3 Balco Judgement has been made applicable prospectively i.e. only to those arbitration agreements which are entered into after 6 September The Authors have previously analysed the possible scenarios where parties can be deemed to have excluded Part I of the 1996 Act by implication[xxii]. The following table endeavours to show the judicial trend in India with respect to applicability of Part I of the 1996 Act to international arbitrations: NTPC v. Singer Co.[xxiii] [T]he laws applicable to this Contract shall be the laws in force in India. The courts of Delhi shall have exclusive jurisdiction in all matters arising under this contract." (7.2). Issue: "7. The point for consideration is whether the High 27.7 In the event of foreign contractor, the Court was right in rejecting the appellant's application filed under arbitration shall be the provisions of the Arbitration conducted by three arbitrators, one each to Act, 1940 and in holding that the award which was made in London be nominated by the on an arbitration agreement was owner and the contractor and the third to be not governed by the law of India and that it was a foreign award named by the President within the meaning of the Foreign of the International Chamber of Awards Act and beyond the jurisdiction of the Indian Courts Commerce, Paris. Save except for the purpose of as above all rules of recognition and enforcement conciliation and under the latter Act." arbitration of the International Chamber of Commerce shall apply to such arbitrations. The arbitration shall be conducted at such places as the arbitrators may determine "27. The proper law of the contract in the present case being expressly stipulated to be the laws in force in India and the exclusive jurisdiction of the courts in Delhi in all matters arising under the contract having been specifically accepted, and the parties not having chosen expressly or by implication a law different from the Indian law in regard to the agreement contained in the arbitration clause, the proper law governing the arbitration agreement is indeed the law in force in India, and the competent courts of this country must necessarily have jurisdiction over all matters concerning arbitration. Neither the rules of procedure for the conduct of arbitration contractually chosen by the parties (the ICC Rules) nor the mandatory requirements of the procedure followed in the courts of the country in which the arbitration is held can in any manner supersede the overriding jurisdiction and control of the Indian law and the Indian courts. 51. In sum, it may be stated that the law expressly chosen by the parties in respect of all matters arising under their contract, which must necessarily include the agreement contained in the arbitration clause, being Indian law and the exclusive jurisdiction of the courts in Delhi having been expressly recognised by the parties to the contract in all matters arising under it, and the contract being most intimately associated with India, the proper law of arbitration and the competent courts are both exclusively Indian, while matters of procedure connected with the conduct of arbitration are left to be regulated by the contractually chosen rules of the ICC to the extent that such rules are not in conflict with the public policy and the mandatory requirements of the proper law and of the law of the place of arbitration. The Foreign Awards Act, 1961 has no application to the award in question which has been made on an arbitration agreement governed by the law of India". Sumitomo "17.0 Laws/Arbitration Heavy Industries 17.1 Applicable Laws Ltd. Issue: "7...What is the area of operation of the curial law." "11. The conclusion that we reach is that the curial law operates during the continuance of the proceedings before the arbitrator to 3/27

4 Vs. ONGC Ltd. and Ors[xxiv] All questions, disputes or differences arising under, out of or in connection with this contract shall be subject to the laws of India Arbitration If any dispute, difference or question shall at any time hereafter arise between the parties hereto or their respective representatives or assigns in respect of the construction of these presents or concerning anything herein contained or arising out of these presents or as to the rights, liabilities or duties of the said parties hereunder which cannot be mutually resolved by the parties, the same shall be referred to arbitration, the proceedings of which shall be held at London, U.K. Within 30 days of the receipt of the notice of intention of appointing arbitrators each party shall appoint an arbitrator of its own choice and inform the other party. Before entering upon the arbitration, the two arbitrators shall appoint an umpire. In case the parties fail to appoint its arbitrator within 30 days from the receipt of a notice from the other party in this behalf or if any dispute in selection of umpire, the President of International Chamber of Commerce, Paris, shall appoint the arbitrator and/or the umpire as the case may be. The decision of the arbitrators and failing to an agreed decision by them, the decision of the umpire shall be final and binding on the parties. govern the procedure and conduct thereof. FINDING The courts OF administering THE COURT the curial law have the authority to entertain applications by parties to arbitrations being conducted within their jurisdiction for the purpose of ensuring that the procedure that is adopted in the proceedings before the arbitrator conforms to the requirements of the curial law and for reliefs incidental thereto. Such authority of the courts administering the curial law ceases when the proceedings before the arbitrator are concluded." 17. The law which would apply to the filing of the award, to its enforcement and to its setting aside would be the law governing the agreement to arbitrate and the performance of that agreement. Having regard to the clear terms of Clause 17 of the contract between the appellant and the first respondent, we are in no doubt that the law governing the contract and the law governing the rights and obligations of the parties arising from their agreement to arbitrate, and, in particular, their obligation to submit disputes to arbitration and to honour the award, are governed by the law of India; nor is there any dispute in this behalf.." 4/27

5 The arbitration proceedings shall be held in accordance with the provision of International Chamber of Commerce and the rules made thereunder as amended from time to time. The arbitration proceedings shall be conducted in English language." Arbitration was to be conducted as per ICC Bhatia Rules at Paris. However, International[xxv] the actual clause is not reproduced in the Judgment. Issue: Whether Part I of the 1996 Act applies to international commercial arbitrations. " By omitting to provide that Part I will not apply to international commercial arbitrations which take place outside India the effect would be that Part I would also apply to International commercial arbitrations held out of India. But by not specifically providing that the provisions of Part I apply to international commercial arbitrations held out of India, the intention of the legislature appears to be to ally (sic allow) parties to provide by agreement that Part I or any provision therein will not apply. Thus in respect of arbitrations which take place outside India even the nonderogable provisions of Part I can be excluded. Such an agreement may be express or implied. 32. To conclude, we hold that the provisions of Part I would apply to all arbitrations and to all proceedings relating thereto. Where such arbitration is held in India the provisions of Part I would compulsorily apply and parties are free to deviate only to the extent permitted by the derogable provisions of Part I. In cases of international commercial arbitrations 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." 5/27

6 Shreejee Traco (I) (P) Ltd. v. "Any disputes or claims Paperline will be submitted to International Inc. arbitration in New York." [xxvi] whether the Chief Justice of India or his designate within the meaning of Section 11 of the Act would be competent to appoint an arbitrator.[xxvii] "7... in the absence of express choice of the law governing the contract as a whole or the arbitration agreement as such having been exercised by the parties, a presumption may arise that the law of the country where the arbitration is agreed to be held is the proper law of the arbitration agreement. The presumption is rebuttable. The parties have the freedom to choose the law governing an international commercial arbitration agreement. Where there is no express choice of the law governing the 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 law of the country in which the arbitration is agreed to be held. There is nothing in the contract or correspondence between the parties to rebut the ordinary presumption and spell out an intention of the parties that they intended proper law of India to govern arbitration in spite of the place of arbitration having been agreed to be at New York." National Agricultural Coop. Marketing Federation India Ltd. v. Gains Trading Ltd[xxviii] "17. Arbitration. Any dispute arising out of or in this connection with this contract or the execution thereof shall, Issue: "(i) Whether an arbitration to the extent possible, be clause comes to an end, if the settled amicably by contract containing such negotiation and mutual arbitration agreement, was agreement between the abrogated? seller and the buyer. If no settlement can be reached in this way, the matter in dispute shall then be referred to and finally resolved by arbitration in Hong Kong in accordance with the provisions of the Arbitration and Conciliation Act, 1996 or any other statutory modification, enactment or amendment thereof for the time being in force." (ii) Whether Section 11 of the Act is inapplicable in regard to the arbitrations which are to take place outside India? (iii) Whether the appointment of the arbitrator, and the reference arbitration are governed by the laws in force in Hong Kong and not by the Arbitration and Conciliation Act, 1996?" "9.... When read normally, the arbitration clause makes it clear that the matter in dispute shall be referred to and finally resolved by arbitration in accordance with the provisions of the Arbitration and Conciliation Act, 1996 (or any statutory modification, enactment or amendment thereof) and the venue of arbitration shall be Hong Kong. This interpretation does not render any part of the arbitration clause meaningless or redundant. Merely because the parties have agreed that the venue of arbitration shall be Hong Kong, it does not follow that laws in force in Hong Kong will apply. The arbitration clause states that the Arbitration and Conciliation Act, 1996 (an Indian statute) will apply. Therefore, the said Act will govern the appointment of arbitrator, the reference of disputes and the entire process and procedure of arbitration from the stage of appointment of arbitrator till the award is made and executed/given effect to". 6/27

7 (b) This agreement shall be construed in Venture Global[xxix] accordance with and governed by the laws of the State of Michigan, United States, without regard to the conflicts of law rules of such jurisdiction. Disputes between the parties that cannot be resolved via negotiations shall be submitted for final, binding arbitration to the London Court of Arbitration. (c) Notwithstanding anything to the contrary in this agreement, the shareholders shall at all times act in accordance with the Companies Act and other applicable Acts/rules being in force, in India at any time." whether the aggrieved party is entitled to challenge the foreign award which was passed outside India in terms of Sections 9/34 of the Act[xxx] "44. The non obstante clause would override the entirety of the agreement including Clause (b) which deals with settlement of the dispute by arbitration. Clause (c), therefore, would apply to the enforcement of the award which declares that, notwithstanding that the proper law or the governing law of the contract is the law of the State of Michigan, their shareholders shall at all times act in accordance with the Companies Act and other applicable Acts/rules being in force in India at any time...." 47. In terms of the decision in Bhatia International., we hold that Part I of the Act is applicable to the award in question even though it is a foreign award. We have not expressed anything on the merits of claim of both the parties. It is further made clear that if it is found that the court in which the appellant has filed a petition challenging the award is not competent and having jurisdiction, the same shall be transferred to the appropriate court." 7/27

8 Indtel Technical Services (P) Ltd. v. W.S. Atkins Rail Ltd[xxxi] "13. Settlement of disputes This agreement, its construction, validity and performance shall be governed by and construed in accordance with the laws of England and Wales; 36. "... it is fairly well settled that when an arbitration agreement is silent as to the law Subject to Clause 13.3 all disputes or "... primarily two questions were required to be answered in this and procedure to be followed in implementing the arbitration agreement, the law governing differences arising out of, matter, namely: the said agreement would ordinarily be the or in connection with, same as the law governing the contract itself. (i) Whether Clauses 13.2 and 13.3 this agreement which The decisions cited by Mr Tripathi and the of the memorandum of cannot be settled views of the jurists referred to in NTPC understanding can be construed amicably by the parties support such a proposition. What, however, to be an arbitration agreement; shall be referred to distinguishes the various decisions and and adjudication; views of the authorities in this case is the (ii) Whether having regard to If any dispute or Clause 13.1 of the memorandum difference under this of understanding indicating that agreement touches or the construction, validity and concerns any dispute or performance of the agreement difference under either of would be governed by and the sub contract constructed in accordance with agreements, then the laws of England and Wales, this parties agree that such Court would have jurisdiction to dispute or difference appoint an arbitrator under hereunder will be Section 11 of the Arbitration and referred to the Conciliation Act, 1996." adjudicator or the courts as the case may be appointed to decide the dispute or difference under the relevant subcontract agreement and the parties hereto agree to abide by such decision as if it were a decision under this agreement." fact that in Bhatia International this Court laid down the proposition that notwithstanding the provisions of Section 2(2) of the Arbitration and Conciliation Act, 1996, indicating that Part I of the said Act would apply where the place of arbitration is in India, even in respect of international commercial agreements, which are to be governed by the laws of another country, the parties would be entitled to invoke the provisions of Part I of the aforesaid Act and consequently the application made under Section 11 thereof would be maintainable." 8/27

9 Citation Infowares Ltd. v. Equinox Corp. [xxxii] "10. Any dispute between the parties hereto arising from this Agreement, or from an individual agreement concluded on the basis thereof, shall be finally referred to a mutually agreed Arbitrator. "10.1 Governing law 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. "26. In my opinion the scope of the expressions in para 23 of NTPC case must be held to be limited. There may be presumption where the parties have agreed to hold arbitration in a particular country. In that circumstance, the presumption would arise that the law of the country where the arbitration is agreed to be held would apply as a law of contract. Where there has been no specific expression about the law of contract, the situation is otherwise. In this case the law of contract is agreed upon as the Californian law. 27. However, there is no agreement in respect of the law governing the procedure of arbitration. " the question that has arisen is whether this Court would 32...if the parties intended specifically in this have the jurisdiction in the present case that the law governing the contract was factual scenario and on the Californian law, as expressed in Bhatia backdrop of the fact that the International as well as in Indtel Technical parties vide the aforementioned Services case, an implied exclusion of Part I Clause 10.1 had agreed that the should be presumed. I am afraid it is not governing law would be that of possible to read such an implied exclusion. California, USA." Seeing the striking similarity between Clause 10.1 in the instant case and Clauses 13.1 and 13.2 in Indtel case which have been quoted above and further the view expressed by the learned Judge in Indtel Technical Services case regarding the exclusion, it is not possible to even distantly read such an implied exclusion of Part I. It cannot be forgotten that one of the contracting parties is the Indian party. The obligations under the contract were to be completed in India. Further, considering the nature of the contract, it is difficult to read any such implied exclusion of Part I in the language of Clause That argument of learned Senior Counsel for the respondent therefore must be rejected." 9/27

10 "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 Venue and law of "Whether the Delhi High Court arbitration agreement. could entertain the petition filed by The venue of sole the respondents under Section 9 expert, conciliation or of the Arbitration and Conciliation arbitration proceedings Act, 1996 (for short "the Act") for pursuant to this article, 33. In the present case also, the parties had grant of a declaration that Kuala unless the parties agreed that notwithstanding Article 33.1, Videocon Lumpur (Malaysia) is the otherwise agree, shall be the arbitration agreement contained in Industries Ltd. v. contractual and juridical seat of Kuala Lumpur, Article 34 shall be governed by laws of Union of arbitration and for issuance of a Malaysia, and shall be England. This necessarily implies that the India[xxxiii] direction to the Arbitral Tribunal to conducted in the English parties had agreed to exclude the continue the hearing at Kuala language. Insofar as provisions of Part I of the Act. Lumpur in terms of Clause 34 of practicable, the parties the Production Sharing Contract shall continue to (PSC), is the question which implement the terms of arises for consideration in this this contract appeal." 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." 10/27

11 Dozco India Private Ltd. v. Doosan Infracore Company Ltd[xxxiv] Article 22. Governing Laws 22.1: This agreement shall be governed by and construed in accordance with the laws of The Republic of Korea. Article 23. Arbitration 23.1: 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." "20. In that view, my inferences are that: (i) The clear language of Articles 22 and 23 of "5. The respondent, therefore, the distributorship agreement between the parties in this case spells out a clear contended that the petitioner agreement between the parties excluding would not be entitled to maintain Part I of the Act. the present proceedings in India by invoking the provisions of the (ii) The law laid down in Bhatia International Act. The respondent specifically v. Bulk Trading S.A. and Indtel Technical disputes the stand of the petitioner Services (P) Ltd. v. W.S. Atkins Rail Ltd., as that there is nothing in the also in Citation Infowares Ltd. v. Equinox agreement to deny the Corpn. is not applicable to the present case. applicability of Indian procedural law seeking appointment of (iii) Since the interpretation of Article 23.1 arbitrator. The respondent also suggests that the law governing the specifically contended that there is arbitration will be Korean Law and the seat express exclusion of Indian courts of arbitration will be Seoul in Korea, there and/or the applicability of the Act. will be no question of applicability of Section 11(6) of the Act and the appointment of arbitrator in terms of that provision. 11/27

12 "27. Arbitration. Yograj Infrastructure Ltd. v. Ssang Yong Engg. and Construction Co. Ltd[xxxv] 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 "(i) whether the Indian courts "38. Having agreed to the above, it was no longer available to the Appellant to contend that the "proper law" of the agreement would apply to the arbitration proceedings. The decision in Bhatia International v. Bulk Trading S.A., which was applied subsequently in the case of Venture Global Engg. v. Satyam Computer Services Ltd. and and binding. would have jurisdiction to entertain Citation Infowares Ltd. v. Equinox an appeal under Section 37 of the 27.2 The arbitration shall Arbitration and Conciliation Act, Corporation, would have no application once the parties agreed by virtue of Clause 27.1 take place in Singapore and be conducted in English language None of the Party shall be entitled to suspend the performance of the Agreement merely by reason of a dispute 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 of the Agreement that the arbitration proceedings would be conducted in Singapore, i.e., the seat of arbitration would be in Singapore, in accordance with the Singapore International Arbitration Centre Rules as in force at the time of signing of the Agreement....In the instant case, once the parties had specifically agreed that the arbitration and/or a dispute referred be the laws of Singapore?" to arbitration. proceedings would be conducted in accordance with the SIAC Rules, which includes Rule 32, the decision in Bhatia "32. Clause 28 of the Agreement describes the governing law and provides as follows: This agreement shall International and the subsequent decisions on the same lines, would no longer apply in the instant case where the parties had willingly agreed to be governed by the SIAC Rules." 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". 12/27

13 "17.1. Any dispute or claim arising out of or relating to this agreement shall be in the first instance, endeavoured to be settled amicably by Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc. [xxxvi] negotiation between the parties hereto and failing which the same will be settled by arbitration pursuant to the English arbitration law and subsequent amendments thereto The arbitration proceedings shall be carried out by two arbitrators, one appointed by Balco and one by Kaiser chosen freely and without any bias. The Court of Arbitration shall be held wholly in London, England and shall use English language in the proceeding. The findings and award of the Court of Arbitration shall be final and binding upon the parties. *** Does Section 2(2) bar the application of Part I to arbitrations which take place outside India? Does Section 2(7) indicate that Part I applies to arbitrations held outside India? 194. In view of the above discussion, we are of the considered opinion that the Arbitration Act, 1996 has accepted the territoriality principle which has been adopted in the Uncitral Model Law. Section 2(2) makes a declaration that Part I of the Arbitration Act, 1996 shall apply to all arbitrations which take place within India. We are of the considered opinion that Part I of the Arbitration Act, 1996 would have no application to international commercial arbitration held outside India. Therefore, such awards would only be subject to the jurisdiction of the Indian courts when the same are sought to be enforced in India in accordance with the provisions contained in Part II of the Arbitration Act, In our opinion, the provisions contained in the Arbitration Act, 1996 make it crystal clear that there can be no overlapping or intermingling of the provisions contained in Part I with the provisions contained in Part II of the Arbitration Act, We conclude that Part I of the Arbitration Act, 1996 is applicable only to all the arbitrations which take place within the territory of India. 22.Governing law. This agreement will be governed by the prevailing law of India and in case of arbitration, the English law shall apply." 13/27

14 "32. Applicable law and language of the contract: Subject to the provisions of Article 33.12, this contract shall be governed and interpreted in accordance with the laws of India Nothing in this contract shall entitle the Government or 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 "37....whether Part I of the Reliance 33. Sole expert, Arbitration Act, 1996 would be Industries conciliation and applicable to the arbitration Limited and arbitration: agreement irrespective of the fact Another v. Union that the seat of arbitration is of India[xxxvii] The venue of outside India." conciliation or arbitration proceedings pursuant to this article, unless the parties otherwise agree, shall be London, England and shall be conducted in the English language. The arbitration agreement contained in this Article 33 shall be governed by the laws of England. 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." 60. In this case, the parties have by agreement provided that the juridical seat of arbitration will be in London. On the basis of the aforesaid agreement, necessary amendment has been made in the PSCs. On the basis of the agreement and the consent of the parties, the Arbitral Tribunal has made the "final partial consent award" on fixing the juridical seat (or legal place) of arbitration for the purposes of arbitration initiated under the claimants' notice of arbitration dated in London, England. To make it even further clear that the award also records that any hearing in the arbitration may take place in Paris, France, Singapore or any other location the Tribunal considers convenient. Article stipulates that arbitration proceedings shall be conducted in English language. The arbitration agreement contained in Article 33 shall be governed by the laws of England. A combined effect of all these factors would clearly show that the parties have by express agreement excluded the applicability of Part I of the Arbitration Act, 1996 (Indian) to the arbitration proceedings. 14/27

15 Sakuma Exports v Louis Dreyfus Commodities Suisse S.A[xxxviii] "This contract is subject to the Rules of The Refined Sugar Association, London as fully as if the same had been expressly inserted herein, whether or not either or both parties to it are Members of the Association. If any provision of this contract is inconsistent "The issue which falls for with the Rules, said provisions shall prevail." "Arbitration: All disputes arising out of or in conjunction with this Contract shall be referred to the Refined Sugar Association, London for settlement in accordance with the Rules relating to Arbitration. This Contract shall be governed by and construed in accordance with English Law." determination in the appeal is whether parties in this case by their agreement, express or implied, have excluded all or any of the provisions of Part I of the Act of 1996."[xxxix] "5. Since one of the terms and conditions of the agreement makes the contract subject to the Rules of the Refined Sugar Association, London by treating the same to have been expressly inserted in the agreement, Rule 8 of the Refined Sugar Association, London leaves no manner of doubt that the parties have not only accepted English law as the law governing the contract but the disputes and the arbitration shall also be governed by the law of England. The seat of Arbitration is admittedly England. 15/27

16 "17. Governing law 17.1 This agreement and any dispute or claims arising out of or in connection with its subject matter are governed by and construed in accordance with the law of India. Enercon (India) Ltd. v. Enercon GmbH[xl] 18. Disputes and arbitration " curial law of England would become applicable only if there was clear designation of the seat in London. Since the parties 18.3 The proceedings in such arbitration shall be conducted in English. The venue of the "71.5. (v) In case the arbitration have deliberately chosen London as a venue, as a neutral place to hold the meetings of arbitration only, it cannot be accepted that London is the seat of arbitration proceedings clause is held to be workable, is arbitration.... If seat is in London, then shall be in London. The the seat of arbitration in London or challenge to the award would also be in arbitrators may (but shall in India? London. But the parties having chosen the not be obliged to) award costs and reasonable (vi) In the event it is held that Indian Arbitration Act, 1996 Chapters III, IV, the seat is in India, would the V and VI; Section 11 would be applicable for expenses (including appointment of arbitrator in case the reasonable fees of English courts have the concurrent jurisdiction for taking machinery for appointment of arbitrators counsel) to the party(ies) agreed between the parties breaks down. that substantially prevail such measures as required in support of the arbitration as the This would be so since the ratio laid down in on merit. The Bhatia will apply i.e. Part I of the Indian provisions of the venue for the arbitration Arbitration Act, 1996 would apply even Indian Arbitration and proceedings is London? though the seat of arbitration is not in India. Conciliation Act, 1996 shall apply. The reference of any matter, dispute or claim or arbitration pursuant to This position has been reversed in Balco, but only prospectively. Balco would apply to the agreements on or after Therefore, to interpret that London has been designated as the seat would lead to absurd results this Section 18 or the continuance of any arbitration proceedings consequent thereto or both will in no way operate as a waiver of the obligations of the parties to perform their respective obligations under this agreement." 16/27

17 " As we perceive, it forms as a part of the arbitration clause. There is ample indication through various phrases like "arbitration in London to apply", arbitrators "The issue that has emanated for are to be the members of the "London consideration in this appeal is Arbitration Association" and the contract "to whether in the obtaining factual be governed and construed according to matrix, especially regard being "5. If any dispute or English Law". It is worth noting that there is had to the nature of the arbitration difference should arise no other stipulation relating to the applicability clause, the High Court is justified under this charter, of any law to the agreement. There is no in setting aside the order passed general other clause anywhere in the contract. That by the learned Additional District average/arbitration in apart, it is also postulated that if the dispute is Judge, Ernakulam on in London to apply, one to for an amount less than US $ then, the I.A. No of 2014 in O.P. be appointed by each of arbitration should be conducted in (ARB) No. 802/2014 directing the the parties hereto, the accordance with small claims procedure of first respondent therein to furnish third by the two so the London Maritime Arbitration security for US$ 11,15,400 or its chosen, and their Association. When the aforesaid stipulations equivalent (approximate) Indian decision or that of any are read and appreciated in the contextual Rupees 6,60,00,000/ or to show two of them, shall be perspective, "the presumed intention" of cause on or before , final and binding, and the parties is clear as crystal that the and as an interim measure this agreement may, for juridical seat of arbitration would be conditionally attaching the cargo enforcing the same, be London. belonging to the first respondent Harmony made a rule of Court. herein, while dealing with an 46. Thus, interpreting the clause in question Innovation Said three parties to be application moved under Section 9 on the bedrock of the aforesaid principles it is Shipping Ltd. v. commercial men who are of the Arbitration and Conciliation vivid that the intended effect is to have the the members of the Gupta Coal India Act, 1996 (for brevity, "the Act"), seat of arbitration at London. The London Arbitrators on the foundation that Section 9 of commercial background, the context of Ltd. & Anr.[xli] Association. This the Act is limited to the the contract and the circumstances of the contract is to be applications to arbitration that parties and in the background in which governed and takes place in India and has no the contract was entered into, irresistibly construed according to applicability to arbitration which lead in that direction. We are not impressed English Law. For takes place outside India in view by the submission that by such interpretation disputes where total of the pronouncement in Bharat it will put the respondent in an advantageous amount claim by either Aluminium Co. v. Kaiser position. Therefore, we think it would be party does not exceed Aluminium Technical Services Inc. appropriate to interpret the clause that it is a USD 50,000 the inasmuch as clause 5 of the proper clause or substantial clause and not a arbitration should be contract which is the arbitration curial or a procedural one by which the conducted in accordance clause clearly spells out that the arbitration proceedings are to be conducted with small claims contract is to be governed and and hence, we are disposed to think that procedure of the construed according to English the seat of arbitration will be at London. London Maritime law and if the dispute of the claim Arbitration does not exceed USD 50,000, the 47. Having said that the implied exclusion Association." principle stated in Bhatia International (supra) arbitration should be conducted in accordance with small claims would be applicable, regard being had to the clause in the agreement, there is no need to procedure of the London Maritime Arbitration Association." dwell upon the contention raised pertaining to the addendum, for any interpretation placed on the said document would not make any difference to the ultimate conclusion that we have already arrived at." 17/27

18 Eitzen Bulk A/S v. Ashapura Minechem Ltd. [xlii] 28. Any dispute arising under this C.O.A. is to be settled and referred to Arbitration in London. One Arbitrator to be employed by the Charterers and one by the Owners and in case they shall not agree then 24. Thus, the main question on shall appoint an Umpire which contentions were advanced whose decision shall be by the learned counsel for the final and binding, the parties is whether Part I of the Arbitrators and Umpire to Arbitration Act is excluded from its be Commercial Shipping operation in case of a foreign Men. English Law to award where the arbitration is not apply. Notwithstanding held in India and is governed by anything to the contrary foreign law agreed in the C.O.A., all disputes where the amount involved is less that USD 50,000/ (fifty thousand) the Arbitration shall be conducted in accordance with the Small Claims Procedure of L.M.A.A. The question is whether the above stipulations show the intention of the parties to expressly or impliedly exclude the provisions of Part I to the arbitration, which was to be held outside India i.e. in London. We think that the clause evinces such an intention by providing that the English law will apply to the arbitration. The clause expressly provides that Indian law or any other law will not apply by positing that English law will apply. The intention is that English law will apply to the resolution of any dispute arising under the law. This means that English law will apply to the conduct of the arbitration. It must also follow that any objection to the conduct of the arbitration or the award will also be governed by English law. Clearly, this implies that the challenge to the award must be in accordance with English law. There is thus an express exclusion of the applicability of Part I to the instant arbitration by Clause 28. In fact, Clause 28 deals with not only the seat of arbitration but also provides that there shall be two arbitrators, one appointed by the charterers and one by the owners and they shall appoint an umpire, in case there is no agreement. In this context, it may be noted that the Indian Arbitration and Conciliation Act, 1996 makes no provision for umpires and the intention is clearly to refer to an umpire contemplated by Section 21 of the English Arbitration Act, It is thus clear that the intention is that the arbitration should be conducted under the English law i.e. the English Arbitration Act, It may also be noted that Sections 67, 68 and 69 of the English Arbitration Act provide for challenge to an award on grounds stated therein. The intention is thus clearly to exclude the applicability of Part I to the instant arbitration proceedings. 7. Below is a matrix segregating components of arbitration agreements (or as interpreted by the court) and the applicability of Part I in respect to the above cases: PROPER LAW CURIAL/ PROPER LAW OF THE MAIN PROCEDURAL OF THE CONTRACT/ LAW OF THE SEAT SUBSTANTIVE AGREEMENT LAW AGREEMENT PLACE/ VENUE EXCLUSIVE APPLICABLITY JURISDICTION OF PART I 18/27