Costs in Litigation and Arbitration (Part II)

In the last post, we had stated that the law on costs in litigation and arbitration requires reforms. The purpose, which would be achieved through a series of posts, was to provide pointers for a proper costs policy. We had, in the previous post, pointed a few problems with the costs policy. Before we look at further critique on the existing law, we jump one step ahead (for the time being) and analyse the potential of a proper costs policy and its influence on frivolous litigation. Once we are through with that, we would move on to offer further critique on the costs policy and offer pointers for reform.

One of the ways of filtering unmeritorious litigation is by imposing costs on a litigant filing such a case. An example would be the number of applications filed for appointment of arbitrator under S 11 of the Arbitration and Conciliation Act, 1996 when parties had previously agreed on a specific procedure which one of them failed to follow (S 11 provides a mechanism when the parties-chosen appointed procedure fails). Though some High Courts in the past have imposed costs on unmeritorious petitions [Larsen and Toubro Ltd. v. Sunfield Resources Pvt. Ltd MANU/MH/0880/2005; A & A Restaurant v. Dwarikajeet Restaurant 2005(1) Arb. LR 526 (All.); T.K. Aggarwal v. Tara Chand Jain 2005(Suppl.) Arb. LR 13 (Del.). In v/o Tvazhpromexport v. Mukand Ltd. 2005(3) Arb. LR 406 (Bom.)] the Court ordered the Petitioner to pay the Respondent’s costs even when the award was partially set aside), it would seem that the courts have imposed costs only in exceptional cases; non-imposition of costs on the basis of results has been the norm and imposition of costs, an exception [See, for example, the following cases where petition for setting side was dismissed but no costs levied: Delhi Jal Board v. Reliance Diesel Engineering 2005(3) Arb. LR 602(Del.); Avinash Bawa v.State of Himachal Pradesh 2005(Suppl.) Arb. LR 184 (HP); Ennore Port Trust v. Hindustan Construction Co. 2005 (Suppl.) Arb. LR 129 (Mad.)(DB); Union of India v. Pradeep Vinod Construction Co. 2005(Suppl.) Arb. LR 33 (Del.); Hindustan Copper Ltd. V. Bhagwati Gases Ltd. 2005(3) Arb. LR 622 (Rajasthan); Kanha Credit & Holding Pvt. Ltd. v. Janacim Electronics 2005(1) Arb. LR 338 (Del.); Krishna Bhagya Jal Nigam Ltd. V. G. Harishchand 2005(Suppl.) Arb. LR 470 (Kar.)(DB); Union of India v. Deccan Enterprises 2006(4) Arb. LR 444 (Del.); Haryana State Agricultural Marketing Board v. Dharam Puri 2006(3) Arb. LR 285 (P & H); Delhi Development Authority v. Manohar Lal 2006(1) Arb. LR 132 (Del.)]

For a long time, academicians have argued that the costs to borne by the parties influence the incentive to file suits [See, for example, STEVEN SHAVELL, FOUNDATIONS OF ECONOMIC ANALYSIS OF LAW, note 146, at 429 (2004); Avery Weiner Katz, Indemnity of legal Fees, in, BOUDEWIJN BOUCKAERT & GERRIT DE GEEST (EDS.), ENCYCLOPEDIA OF LAW AND ECONOMICS (VOLUME V: THE ECONOMICS OF CRIME AND LITIGATION) 63- 94 (2000)], the rationale being that the decision whether to file an appeal or a suit is an economic question [Steven Shavell, Suit, Settlement and Trial: A Theoretical Analysis under Alternative Methods for the Allocation of Legal Costs, 11 J. Legal. Stud. 55, 58 (1982)]. The general opinion seems to be that the plaintiff will sue if the expected cost is less and the expected benefit is more. If so, an increase or a decrease in the cost or benefit would alter the plaintiff’s incentive to sue. In the past, fee shifting has been used in USA to increase or decrease the number of suits on certain laws. Hence fee shifting has the potential of becoming a potent device in reducing the number of reckless suits like petitions under S 11 to appoint arbitrators when there was nothing wrong about the agreed scheme or reckless challenge to arbitral awards.

There are primarily two models of fee shifting: (1) American Rule, (2) English Rule. In American Rule, the parties bear their own costs of the litigation and the costs are not imposed on the basis of success in the suit. Under the English Rule, the losing party bears the cost of the winning party. The assumption is that the probability of winning is 50 %. If so, under the American Rule, the plaintiff would sue where cost (Direct costs such as attorney fee, court fee and indirect fee such as the time spent on pursuing a suit and so on) incurred is lesser than the benefit received.

If, EC (Expected Costs) > EB (Expected Benefit), the plaintiff would not sue;
Conversely, if the EC < EB the plaintiff would sue.

Under the English Rule, a plaintiff would sue if the probability of winning is equal to or more than 50 % and the benefit, which is the sum of benefit received from the Defendant and the fee incurred by the plaintiff, outweighs the cost, the plaintiff would sue. Under the American Rule, even if the Plaintiff loses, litigation expenses incurred by the Defendant would not be imposed on him. Therefore, the plaintiff would sue if there is a remote possibility of winning. In the English Rule regime, the plaintiff might not sue if the probability of winning the case is less than 50 % because the expected cost might overweigh the expected benefit if he loses. Therefore adopting the English Rule would minimise the incentive to sue provided the probability of winning is less than 50 %. In the subsequent post on this topic, we will look at other models of fee shifting.

Scope of Jurisdiction to Award Interim Measures Vis-à-vis Third Parties (Part IV)

 In the previous posts (see here, here and here), we had dealt with the issue of the power of arbitrator to order Interim Measures against third parties under S 17 of the Arbitration and Conciliation Act, 1996 (Act). This post and the following ones would deal with the power of the court to order interim measures under S 9 of the Act.

The question as to whether a court has under S. 9 of the Arbitration and Conciliation Act, 1996 the power to pass an order against non-signatories to the arbitration agreement if such orders are in relation to arbitral proceedings before it has been answered both ways by the High Courts of India. In the absence of any binding decision of the Supreme Court of India (SCI) on this point, seeking orders under S 9 against third parties for whatever reasons is like walking on a tight-rope blindfolded. The court may decide on way or the other. 

The purpose of this endeavour is to point out reasons in support of the contention that courts have the power to pass orders under S 9 against third parties. We would start off by completing the chain of events that took place in the case of Cadre Estate Pvt. Ltd. v. Salochna Goyal W.P.(C) 2782/2010 and C.M. No. 5556/2010 (Stay). We had, in the previous posts on this topic, explained the scope of the power of an arbitrator under S 17 through the said decision of the Delhi High Court. We had also stated that we would be using the same case for explaining the scope of power of a court under S 9.

Before we start off with the facts in the said case, this blawgger would like to acknowledge that this series of posts was inspired by a guest post in the Lex Arbitri blog by Mr. Naravane on the issue that is the leitmotif of this post. There was a discussion in that blog on the subject (see the comments section in the post).

Since we had already addressed certain facts in the above mentioned case, we will repeat only some relevant ones for this post:

“30.09.2008:     An agreement to sell was executed between Saroj Kumar Bagaria (Bagaria) and Salochna Goyal (Goyal) by which Bagaria agreed to sell a property (Disputed Property) for consideration. Goyal alleged that she had paid Earnest Money Deposit in respect of the Disputed Property.

31.12.2008:     A Tripartite Agreement was entered into between CEPL, Saroj Kumar Bagaria (Bagaria) and the Punjab National Bank (PNB) by which CEPL purchased the Disputed Property.

Goyal alleged that Bagaria, CEPL and PNB had colluded and had wrongfully denied Goyal of the right to the said property. Dispute arose under the Agreement to Sell."

At this stage, Goyal filed a petition under S 9 of the Arbitration and Conciliation Act, 1996 (Act) for interim measures. Bagaria, PNB, CEPL, Standard Chartered Bank (SCB), and Punjab National Bank (PNB) were made respondents to the petition for interim relief to protect her rights under the Agreement to Sell.

31.03.2009:     The Delhi High Court, where the petition was filed, ordered: “The petitioner in this petition under Section 9 of the Arbitration and Conciliation Act, 1996 made respondents No.2, 3 and 4 as party to this petition who are not parties to the agreement to sell. It is submitted by counsel for the petitioner that the petitioner does not press these respondents No.2 [CEPL], 3 [SCB] and 4 [PNB] as parties to this petition and their names may be deleted from the array of parties. Accordingly, names of respondents No.2, 3 and 4 are hereby deleted from the array of parties.”

Comment:

It appears that the Delhi High Court might have stated that persons who are not parties to the Agreement to Sell cannot be made parties to a petition under S 9. Hence, Goyal was probably forced to agree to delete Respondents 2-4 as parties to the petition under S 9.

Essentially what has happened here is a case where the High Court has not afforded Goyal the right to pursue the remedy of interim relief against Respondents 2-4 (assuming Goyal was entitled to it. See the previous post on this topic where the law pertaining to the right to interim injunction despite the doctrine of lis pendens becoming applicable is briefly discussed). Subsequently, she had obtained the said relief from the arbitrator even against Respondents 2-4, who were not parties to the Agreement to Sell even though the arbitrator had, as we have argued in our previous post on this topic, absolutely no jurisdiction to do so!

This is a typical case where the court should have exercised its jurisdiction correctly and passed interim measures against even Respondents 2-4, if Goyal could establish that she was entitled to it. What might happen in this case is this: CEPL, the petitioner in the writ petition, would approach the appropriate court under Section 37 of the Act and invalidate (rightly so) the interim order passed by the arbitrator against CEPL (and Respondents 3 and 4 too probably). Goyal would be left remediless! More on this in the next post.

What Amounts to Exclusion of Part I? A Survey of Post- Bhatia Judgements

Recently, there were two notable analyses in two blogs on the issue of what amounts to exclusion of Part I of the Arbitration and Conciliation Act, 1996. The two posts are:

•  “Dosco India v Doosan: The Sequel to Citation Infowares” by Mr. V. Niranjan in the Indian Corporate Law Blog.
•  “A Few Positives, a Few Negatives, a Few Judicial Transplantations: The Supreme Court’s Decision in Dozco India P. Ltd. V.  Doosan Infracore Co. Ltd” by Mr. Anirudh Krishnan in the Lex Arbitri Blog.

 Both the posts are extremely informative on the point as to what amounts to the exclusion of Part I of the Arbitration and Conciliation Act, 1996. We suggest readers to have a look at these posts to understand the issues pertaining to the applicability of Part I of the Act. The purpose of this post is not to replicate the efforts expended in these posts. The purpose is altogether different.

One of the fundamental objectives of the Indian Arbitration and Conciliation Act, 1996, while adopting the structure of the UNCTIRAL Model Law on International Commercial Arbitration, 1985 (UML) and the UNCITRAL Conciliation Rules 1980 was to update the law on arbitration and make at as nearly as possible in tune with the general principles prevailing throughout the world. An important reason why the Act was based on UML is that UML provided a simple but efficient model to adopt so that international commerce is not hindered by hyper technicalities that law (at times) brings forth.

We hypothesize that one of the depressing side effects of Bhatia International and the judgements that followed Bhatia International is that law has become uncertain and has defeated the fundamental objective of the 1996 Act, that is, to enact a simplistic and efficient law on arbitration, primarily for two reasons:

·         The law regarding what amounts to exclusion of Indian law has been extremely murky, with judges finding it extremely difficult to grasp firmly established principles of international commercial arbitration, creating precedents that conflict with co-ordinate benches, that impliedly overrule previous decisions or even not following decisions of higher courts, and

·         Due to the above, the principles pertaining to choice of governing law of arbitration, governing law of contract and the choice of forum in internationally recognized arbitration clause have been rendered nugatory Post-Bhatia International, thus eroding one of the chief purposes of the 1996 Act.

The malefic effect of Bhatia International is not restricted to the law pertaining to interim measures in foreign arbitrations- it has extended its tentacles to even the law pertaining to appointment of arbitrators, setting aside foreign arbitral awards etc. It applies to any issue that is addressed by Part I of the Act.

This blog shall, in the next few months, aim to establish this hypothesis [We do hope that before this series of posts on the topic gets over there would be an amendment to the Act.]. There is nothing novel about this hypothesis. But what we would try to do here is to see the entire thing from a transactional lawyer’s perspective.

We’ll do two things:

• We’ll survey the law laid down in Bhatia International as applied by the High Courts and the Supreme Court Post-Bhatia International.
• We will attempt to explain what the law should be Post-Bhatia International on the issue of what ought to amount to the exclusion of Part I of the Act.

 [Note: We have obtained the judgements that apply the law in Bhatia International from Manupatra (with the search parameter “Bhatia International” in their arbitration database). We’ll not look at Indian Kanoon (but will try to provide Indian Kanoon links to most judgements) because the Manupatra search is sufficient to establish our point and it also seems to cover the popular (or notorious, depending on one's point of view) cases.  

We’ll start off with Nirma Ltd. v. Lentjes Energy (India) Pvt. Ltd., decided by the High Court of Gujarat. The Agreement in question was governed by the laws of India. The venue of arbitration was London and the rules applicable were the Rules of conciliation and arbitration of the International Chamber of Commerce. The court held: (We quote the relevant provisions of the judgement and also state what it implies so that readers can point out if we make an error in the reading of the judgement. So pardon the lengthy quotes)

“In the present case, under Articles 16.2 and 16.4 of the agreement between the appellant and the respondent No. 2, the agreement was to be governed according to the laws of India which will include the said Act. The provisions of section 9 of the said Act are not excluded under that agreement. This Court will, therefore, have powers under section 9 of the said Act to issue interim injunction against the respondent No. 2 even if arbitration proceedings on the basis of that agreement are pending before the ICC, London…”

So, according to the court:

• mere choice of governing law of the contract (a.k.a substantive law of contract and also the substantive law of the arbitration agreement because the arbitration clause is a part of the main agreement) as Indian law (with the seat being a foreign seat and rules being a foreign institutional arbitration rules)* would not exclude the applicability of Part I.
• This is because “laws of India”, as per the court, would include all laws of India and not merely the substantive contract law or the substantive arbitration law# (those portions of the arbitration law which lay down the law relating to the validity of arbitration agreements, if it is a part of the arbitration law). 

·         What follows from the above is the mere choice of a foreign seat or a foreign institutional arbitration rule is insufficient to exclude Part I unless one excludes the applicability of Indian law altogether.

The parties in the previous case once again approached the High Court of Gujarat. This time the issue was whether the court could set aside the partial award made by the ICC tribunal. A bench of the High Court of Gujarat of the same strength as the previous one, on the same arbitration clause, held:

“In the instant case, there is no doubt about the fact that the arbitration in question is an international commercial arbitration and the proper law governing the arbitration is the law of India. Applying the above principles evolved in NTPC (supra) and Bhatia International (supra), not only that the provisions of the Arbitration Act apply to the arbitration, but the Court of competent jurisdiction in India has jurisdiction to entertain applications in accordance with law. In the context of Section 34 of the Act, the above view is further fortified by the fact that it provides for recourse to a Court against an "arbitral" award without deploying the words "domestic award" or "foreign award"… The Indian Act having been enacted after taking into account the Model Law and the Rules, the omission of either of the above alternative clauses in Article 34 indicates a conscious choice and decision to allow recourse to a Court against any award, whether made in the territory of India or made under the Act.”

·         Thus the court held that even S 34 would apply to challenge foreign awards.

The next case is the case of Liverpool and London Steamship Protection and Indeminity Association Ltd. v.  Arabian Tankers Co., LLC and Ors., where London as the chosen venue and the Rules of the London Maritime Arbitration Association was to be applied. The Law of the Contract was English law. The court held:

“Once that be the case what emerges is that the substantive law of the contract is English law, the law of the Arbitration agreement is the English Arbitration Act 1996 and the arbitral procedure or the curial law would be the Rules of the London Maritime Arbitration Association. Once this is considered the substantive law of the contract, the law of the arbitral agreement and the curial law would be as existing in England, but for Rules 47-C and 48 framed by the petitioner. Under Rules 47-C and 48 framed by the petitioner arrears of insurance premium result in creating a lien on the ship which will entitle seizure, attachment or arrest of assets for any amounts owed to the association. Under Rule 48 the rights of lien can be enforced in any jurisdiction in accordance with local law in such jurisdiction and it has to be construed in accordance with English law.”

·         Thus, where the substantive law of contract was English Law, the venue was London and the procedural rules to be applicable was the Rules of the London Maritime Association, there would have been a clear exclusion of Part I. However, since the Rules themselves provided for the applicability of Indian law (local law) for certain purposes, parties are deemed to have chosen not to exclude Indian law as regards certain matters.

Note that each High Court has tried to make sense of Bhatia International and apply it to the existing facts. What emerges from the above decision is that parties are left to their whim and fancy to apply Part I in relation to specific aspects of their agreements and not others. In effect, Part I, including the public policy ground to set aside awards is entirely optional. More on this later.  

We’ll survey the rest of the decisions in subsequent posts.
* added after posting
# Law of the Arbitration Agreement is a better, commonly used term.

Scope of Jurisdiction to Award Interim Measures Vis-à-vis Third Parties (Part III)

In two previous posts in this blog (which can be accessed from here and here), we had discussed the law relating to the power of an arbitrator to pass an order against a third party under Section 17 of the Arbitration and Conciliation Act, 1996. Taking the case of Cadre Estate Pvt. Ltd. v. Salochna Goyal W.P.(C) 2782/2010 and C.M. No. 5556/2010 (Stay) by way of an example, we proffered justifications for the absence of such a power with an arbitrator. In that case, it was argued by the Petitioner in the application for interim measures under S 17 that although the Second Respondent was not a party to the arbitration agreement, since the second respondent was a subsequent purchaser of the disputed property, it would be deemed to be a party to the arbitration. The arbitrator ordered the first respondent (who was a party to the Agreement to Sell), and the second respondent (which was not a party to the Agreement to Sell) not to deal with the disputed property till further orders. In this short post, we give one further justification in support of the contention that the arbitrator had no such power to issue injunction against the second respondent and state further that the arbitrator’s award might be erroneous on other counts as well.

Consensus is the foundation of an arbitrator’s jurisdiction. Such consensus is to be formed in the manner specified in S 7 of the Act (arbitration agreement). A third party to the arbitration does not give consent. This argument was dealt with in sufficient detail in the previous posts.

Another reason for the absence of such a power is because of the manner in which arbitration proceedings are conducted. Arbitration is generally a private affair. The participants are the parties to the dispute and the arbitral tribunal formed pursuant to an arbitration agreement between parties. If that is so, a third party cannot participate in the said proceedings. The privacy of arbitral proceedings has been recognized world over. So is the concept that joinder of third parties is not permitted in arbitration proceedings unless such third party consents to the arbitration proceedings.

The tribunal’s order in the said case is erroneous for another reason It has been recognized that a third party transferee is bound by a decree passed in a suit between the transferor and another party on an immovable property that has been transferred pendente lite. Section 52 of the Transfer of Property Act, 1882. It has also been recognized that in such a case, the third party transferee need not even be impleaded as a party to the said suit nor does such transferee have the right to be impleaded [S.N. Arora v. Brokers and Brokers Pvt. Ltd. MANU/DE/2314/2010 cites several Supreme Court judgements on this point]

Further, the plaintiff in such a suit might not even be entitled to an injunction, whether temporary or final, as S 52 of the Transfer of Property Act, 1882 sufficiently protects the interests of the plaintiff. [Kachhi Properties v. Ganpatrao, decided by a Single Judge bench of the Bombay High Court. Also see Sharad Jamnadharji Mor v. Arjun Yeshwant Dhanwatey & Anr., 2009 (4) Bom.C.R. 523, a decision by the same judge] Even so, there might be situations where S 52 might not afford adequate protection to the plaintiff [this is even recognized in Kachhi Properties v. Ganpatrao]. Only in such cases would the plaintiff be entitled to the relief of injunction. In this case, the arbitrator passed an order of interim injunction under S 17 restraining a third party from dealing with the property. In this regard, it is pertinent to note the following observations in Kachhi Properties v. Ganpatrao:

“There can be no doubt that there could always be cases where rule of lis pendens may be inadequate to prevent the mischief and a temporary injunction to prevent such mischief would be warranted. This would imply that a person claiming injunction in such a situation would have to show that protection under Section 52 of the TP Act is not adequate. Merely because there is a power, its exercise could not be sought as a matter of course; or simply because its exercise is unlikely to hurt the defendant; for, while granting injunction the Court must see that plaintiff makes out a case of irreparable loss and it is not for the defendant to prove that he would suffer if an injunction is issued. After plaintiff proves irreparable loss comes the question of balance of convenience or rather balance of inconvenience, when the Court would enquire as to who would suffer greater inconvenience and decide whether injunction ought to be granted.”

[In the next post on this topic, we would be dealing with the power of a court under S 9 of the Arbitration and Conciliation Act, 1996 to issue interim orders against third parties.]

Indus Valley Civilisation as one of the Sources of the Western Legal Tradition?

The title to this post might sound ridiculous. But see this paper titled "On the Origins of Western Law and Western Civilization (in the Indus Valley)" by Robin Bradley Kar . The paper can be accessed from this link. Abstract of the paper is as below:

"Western Law and Western Civilization are often said to be parts of a distinctive tradition, which differentiates them from their counterparts in the “East,” and explains many of their special capacities and characteristics. On one common version of this story, as propounded by legal scholars such as Harold Berman, Western Civilization begins with a return to the texts of three more primordial traditions: those of ancient Greece, Rome, and Israel. The basic story that Western Civilization finds its origins in ancient Greek, Roman and Hebrew culture is, however, so familiar and so pervasive that it has rarely - until recently - been questioned in the West. The story has illuminated a broad range of topics, arising from a diverse set of fields, and over a wide expanse of time.

There is nevertheless a deep sense in which this story is incomplete, and even potentially misleading. This article - along with its sequels - argues that if we are genuinely interested in understanding our origins, in a way that will shed light on why the West has exhibited such distinctive capacities for large-scale human civilization and the rule of law, then the story we commonly tell ourselves starts abruptly in the middle, and leaves out some of the most formative (and potentially transformative) dimensions of the truth. Western Law and Western Civilization are not just the outgrowths of three particularly creative cultures, which straddled the transition from human prehistory into human history, and developed in either Southeastern Europe or the Near East. Rather, the West is descended from a much deeper cultural tradition, which extends all the way back to some of our first human forays out of hunter-gatherer modes of subsistence and into settled agricultural living. The tradition in question began not in Greece, Rome, or Israel, however, but rather in the Indus Valley - which is a region that spans the Northwestern portions of the Indian subcontinent. Our failure to know this about ourselves has limited our self-understanding in critical respects, and has prevented us from realizing useful aspects of our traditions - including, in some cases, aspects that make them work so well for large-scale human civilization.

We live in an era in which it is, moreover, especially important to decipher the deepest origins of Western Law and Civilization. Scholars within the emerging “legal origins” tradition have produced an impressive body of empirical work, which suggests that we can explain a broad range of features of modern societies - incuding aspects of their corporate governance structure, labor regulations, the robustness of capital markets, and even literacy and infant mortality rates - in terms of the origins of their laws. Other legal scholars, such as James Whitman at Yale Law School, have argued that that the expansionary tendencies of Western law should be understood as arising in part from its origin in the Greek city-states and the socio-cultural dynamics inherent in that early situation. A proper understanding of the prehistoric structure of our legal family tree can, moreover, help combat various Western exceptionalist explanations of the relationship between Western law and other important variables, such modern economic development, political stability, and the rule of law. These exceptionalist explanations have, unfortunately, led to a series of failed policy decisions around the world, as we have exported various Western legal institutions to developing countries.

If legal origin variables can have important consequences like these, and if we hope to study these causal relations in more detail, then we plainly need to know the correct structure of our legal family tree. At the same time, however, both the present legal origins literature and much comparative law scholarship distinguishes primarily between the civil versus common law origins of a nation’s legal system, or between both of these types of Western law and various non-Western legal systems, and the findings of this literature have not yet been harmonized with the spate of known difficulties that many developing nations have faced in transitioning to large-scale societies with the rule of law regardless of its civil or common law origins. The family trees that are employed in these literatures are, moreover, typically identified from the historical record, and therefore fail to detect any relevant relations that might have arisen in human prehistory. The story told here will, by contrast, allow us to see the great majority of large-scale empires that have arisen throughout world history (and in both the “West” and much of the “East”, other than China) as arising from a shared cultural origin that goes much further back in time. Examples of such empires from ancient times will include the Roman, Athenian, Macedonian, Byzantine, Hittite, Mauryan, Carthaginian, Achaemenid, Sassanid, and Parthian empires; examples from the medieval period will include the Umayyad, Abassid, Sassanid, Carolingian, Danish, Mughal, Hapsburg, and German empires; and examples from more modern times will include the Portuguese, Spanish, Russian, Swedish, Dutch, British, French, Austro-Hungarian, German, Italian, and - most recently - American empires. These empires did not face the same difficulties in sustaining large-scale societies with the rule of law that many developing nations have, and features of their common origin may help to explain why."

[Found out about this paper thanks to the Legal Theory Blog]

Costs in Litigation and Arbitration

Sections 35, 35A and 35B of the Code of Civil Procedure, 1908 deal with the law pertaining to costs. The said sections read:

“35. Costs
(1) Subject to such conditions and limitations as may be prescribed, and to the provisions of law for the time being in force, the costs of and incident to all suits shall be in the discretion of the Court, and the Court shall have full power to determine by whom or out of what property and to what extent such costs are to be paid, and to give all necessary directions for the purposes aforesaid. The fact that the Court has no jurisdiction to try the suit shall be no bar to the exercise of such powers.
(2) Where the Court directs that any costs shall not follow the event, the Court shall state its reasons in writing.

35A. Compensatory costs in respect of false or vexatious claims or defenses
(1) If any suit or other proceedings including an execution proceedings but excluding an appeal or a revision any party objects to the claim of defence on the ground that the claim or defence or any part of it is, as against the objector, false or vexatious to the knowledge of the party by whom it has been put forward, and if thereafter, as against the objector, such claim or defence is disallowed, abandoned or withdrawn in whole or in part, the Court if it so thinks fit, may, after recording its reasons for holding such claim or defence to be false or vexatious, make an order for the payment to the object or by the party by whom such claim or defence has been put forward, of cost by way of compensation.
(2) No Court shall make any such order for the payment of an amount exceeding three thousand rupees or exceeding the limits of it pecuniary jurisdiction, whichever amount is less:
Provided that where the pecuniary limits of the jurisdiction of any Court exercising the jurisdiction of a Court of Small Causes under the Provincial Small Cause Courts Act, 1887 (9 of 1887) or under a corresponding law in force in any part of India to which the said Act does not extend and not being a Court constituted under such Act or law, are less than two hundred and fifty rupees, the High Court may empower such Court to award as costs under this section any amount not exceeding two hundred and fifty rupees and not exceeding those limits by more than one hundred rupees :
Provided, further, that the High Court may limit the amount or class of Courts is empowered to award as costs under this Section.
(3) No person against whom an order has been made under this section shall, by reason thereof, be exempted from any criminal liability in respect of any claim or defence made by him.
(4) The amount of any compensation awarded under this section in respect of a false or vexatious claim or defence shall be taken into account in any subsequent suit for damages or compensation in respect of such claim or defence.”
“35B. Costs for causing delay
(1) If, one any date fixed for the hearing of a suit or for taking any step therein, a party to the suit--
(a) fails to take the step which he was required by or under this Code to take on that date, or
(b) obtains an adjournment for taking such step or for producing evidence or on any other ground,
the Court may, for reasons to be recorded, make an order requiring such party to pay to the other party such costs as would, in the opinion of the Court, be reasonably sufficient to reimburse the other party in respect of the expenses incurred by him in attending the Court on that date, and payment of such costs, on the date next following the date of such order, shall be a condition precedent to the further prosecution of—
(a) the suit by the plaintiff, where the plaintiff was ordered to pay such costs,
(b) the defence by the defendant, where the defendant was ordered to pay such costs.
Explanation.--Where separate defences have been raised by the defendants or groups of defendants, payment of such costs shall be a condition precedent to the further prosecution of the defence by such defendants or groups of defendants as have been ordered by the Court to pay such costs.
(2) The costs, ordered to be paid under sub-section (1), shall not, if paid, be included in the costs awarded in the decree passed in the suit; but, if such costs are not paid, a separate order shall be drawn up indicating the amount of such costs and the names and addresses of the persons by whom such costs are payable and the order so drawn up shall be executable against such persons.”

As interpreted by the Supreme Court in Ashok Kumar Mittal v. Ram Kumar Gupta (January 2009)], following are some of the salient features pertaining to the above provisions:

• Awarding costs is the discretion of the court.
• The court discretion is subject to (a) limitations imposed by laws, and (b) provisions of law in force.
• Purpose of these provisions is to “recompense a litigant for the expense incurred by him in litigation to vindicate or defend his right.
• When the plaintiff has already paid the prescribed court fee, it is doubtful if costs should be imposed in favour of the state in litigation between two private parties.
• The law on costs so far as civil procedure is concerned is contained in Ss 35 and 35A. Hence, the inherent power of the court cannot be exercised to grant costs contrary to the said provisions.

Finally, the court lamented that the law on costs was “wholly unsatisfactory” as it does not deter vexatious litigation. The court held:
 

“Whether we should adopt suitably, the western models of awarding actual and more realistic costs is a matter that requires to be debated and should engage the urgent attention of the Law Commission of India.”

The court is correct in pointing out that the costs issue ought to be the subject of any immediate effort at litigation reform. Curiously, the National Litigation Policy (June 2010) of the Ministry of Law and Justice did not address this aspect. Perhaps the Ministry thought the issue was fit for the Law Commission to deal with. The Law Commission has, so far, not addressed this issue (atleast there is no report on this issue in the recent past).

This post is intended to identify a few of the many aspects that might have to be addressed to formulate a proper costs policy.

Awarding Costs is Discretionary: The courts have been consistent in maintaining that awarding of costs as per S 35 is at the discretion of the courts. [Ashok Kumar Mittal v. Ram Kumar Gupta]

S 35(2) is crucial in the interpretation of S 35. Though S 35(1) states that costs are subject to court discretion, S 35(2) seems to state that awarding costs ought to be the norm, and when the court digresses from the said norm, reasons should be given. [Disclaimer: I not sure if the drafting history of this provision supports this interpretation but there is no reason for the drafters to provide for this requirement unless they feel that awarding costs should be the rule.] There is nothing novel in this interpretation. In United Commercial Bank v. Satish Chandra Ghosh (AIR 1991 Gau 59), for instance, Justice BP Saraf, stated:

“Section 35 of the Civil Procedure Code deals with the power of the Court to award costs. Under the said section, the award of the cost is within the discretion of the Court. But the discretion must be exercised judicially on the basis of the well established legal principles. The Court cannot just refuse to award costs on its whim. The normal rule is that costs shall follow the event. Where a departure is to be made from the said rule, there must be good reasons. Sub-section (2) of Section 35 of the Civil Procedure Code specifically provides that where the Court directs that any costs shall not follow the event, it should state its reason in writing. From a conjoint reading of Sub-sections (1) and (2) of Section 35, it is clear that discretion of the Court in the matter of awarding of costs is very limited. In the normal course… the liability to pay the costs normally follow the event. There must be reasons to deviate from this normal rule.”

A random survey of Supreme Court cases in 2010 revealed that in many cases, the court  has not complied with the requirement of Section 35(2). Some of them are listed below:

Case	Bench	Court
State of Himachal Pradesh v. Siri Dutt (Dead) by L.Rs. and Ors.	G.S. Singhvi and Asok Kumar Ganguly, JJ.	Supreme Court of India
Md. Nooman and Ors. v. Md. Jabed Alam and Ors	Aftab Alam and R.M. Lodha, JJ.	Supreme Court of India
Subhan Rao and Ors. v. Parvathi Bai and Ors.	G.S. Singhvi and Asok Kumar Ganguly, JJ.	Supreme Court of India

Courts should ensure compliance with S 35(2) and provide cogent reasons for not awarding costs. Courts, at times, provide vague and inadequate reasons (such as “in view of the facts and circumstances there shall be no order as to costs”) for not awarding costs. Such practice should be stopped. The discretion to disallow costs must be, as Justice Saraf would say, based on “good reasons”.

Part II to follow

Fortnightly Roundup of SSRN Articles on Arbitration (October 1 - 15)

Arbitration Clause as Unfair Contract Term: Some Observations on the ECJ's Claro Case

Zdenek Novy

Abstract:

This paper addresses the problem of the annulment of an arbitration award by national courts on the grounds that the arbitration proceedings were based on arbitration clause as an unfair contract term under the Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts.

The ECJ decided in the case Claro v Móvil that arbitration award may be annulled by national court if it is based on arbitration clause which turns out to be unfair contract term. Moreover, according to the ECJ, consumer has no duty to object unfairness of the arbitration clause in the course of arbitration proceedings. Therefore, the national court may find the term unfair thus void on its own motion. The reasoning behind this was that the arbitration award was at odds with mandatory provisions of the Directive on unfair terms in consumer contracts, which form part, in the view of the ECJ, of the so called European public policy.

Notwithstanding the different opinions on this case, the message from the ECJ is clear. The arbitration is a mean of settlement of disputes which is intended for the B2B disputes. On the contrary, the B2C disputes should be resolved in Alternative Disputes Resolution or before ordinary national courts.

Consequently, I would like to offer some ideas on the potential impact of the Claro decision upon Czech legal order. Thus, particularly the existing legal frame for consumer disputes created by the Czech Arbitration Act and Civil Code is analysed.

Arbitration in the Western Balkans: The Emerging Commercial Landscape
Matthew Parish

Abstract:
The rise of international arbitration was driven by the globalisation of commerce in the nineteenth and twentieth centuries, and the development of international law to regulate relations between the Great Powers. The history of the Western Balkans region in the same period insulated it from these influences, and thus arbitration remained unfamiliar. In the communist period, arbitration represented the antithesis of the political purposes assigned by the communist authorities to the domestic legal system. In the wars following disintegration of the former Yugoslavia, institutional capacity was further weakened by elite capture of judicial institutions. That legacy persists to the present day; but its effect is to exclude a significant proportion of the potential levels of foreign investment in the region. International arbitration remains a valuable tool for escaping partial domestic court systems and its use is likely to increase as the Western Balkans becomes increasingly open to foreign direct investment.

Brief of Arbitration Professors as Amicus Curiae in Support of Respondents
Hiro N. Aragaki

Abstract:
This brief is a natural extension of my research and writing over the past two years, which seeks to develop an antidiscrimination model of FAA section 2 preemption. The arguments in the brief originate, and are explored in greater depth in, my forthcoming piece, Equal Opportunity for Arbitration, 58 U.C.L.A. Law Review, Vol. 58 2011.

Petitioner (and Respondents) in this case have famed the FAA preemption issue in terms of antidiscrimination: That is, a state law is preempted if it "discriminates" against arbitration. Thus, the California Supreme Court's Discover Bank rule is preempted if it can be characterized as reviving the ancient judicial hostility toward arbitration.

This brief argues that the Petitioners' interpretation of this "antidiscrimination principle" is incorrect, and that the Discover Bank rule should not be preempted, for two reasons: 1) Although it has often been said that the FAA's purpose is to place arbitration agreements on the same footing as other agreements, the true purpose of doing so is to place arbtration on the same footing as litigation, so that it could emerge as a bona fide dispute resolution alternative. 2) Although lower courts frequently find statutes and judicial decisions preempted if they fail to apply literally to "all contracts," the all contracts standard is fundamentally incoherent and should be rejected.

A Brief History of Arbitration in the United States
Steven A. Certilman

Abstract:
A brief history of arbitration and ADR in the Unitede States from colonial times to the present.

How the Payday Predator Hides Among Us: The Predatory Nature of the Payday Loan Industry and its Use of Consumer Arbitration to Further Discriminatory Lending Practices
Michael Satz

Abstract:
This Article argues that Payday lending is a predatory lending practice that disproportionately targets minority customers, and that the Payday lending industry utilizes consumer arbitration agreements to further the industry’s discriminatory lending practices. The Article further argues that the protections afforded military members in the FY 2007 Defense Authorization Act should be applied globally in the form of federal legislation.

While there is no bright line definition of what constitutes predatory lending, there are certain badges that tend to be present in a predatory lending transaction, which include high interest rates, limited or confusing disclosures, deceptive acts and practices utilized in drawing in would-be customers, and often the targeting of particularly vulnerable classes of persons. The Payday lending industry makes effective use of these predatory practices to target vulnerable classes of customers, particularly targeting African-American and Latino populations, and engages in lending practices that can lead to loans with interest rates in excess of 500%. Concurrent with the rise of the Payday lending industry in the United States, consumer arbitration agreements became popular. These arbitration agreements require consumers with a legal claim against a business to submit that claim to binding, final arbitration. Although arbitrators in such cases are ostensibly supposed to be neutral, recent evidence indicates that such arbitrators favor lenders in consumer disputes and, in addition, the arbitration of consumer disputes is replete with other problems including issues with fairness, financial costs, other transaction costs, and lack of knowledge on the consumer’s part. Payday lenders take advantage of the benefits that consumer arbitration offers to repeat business players to shield their predatory actions from the public eye, thereby lessening the chance that a state or federal regulatory authority will learn of these actions and consequently take regulatory action or steps in civil court to curb the questionable conduct. Likewise, when dealing with individual consumers, the arbitration agreements tend to dissuade consumers from pressing a claim, prevent consumers with similar claims from learning about previous cases, and prevent consumers from joining forces as members of a class in a class action law suit.

Because one of the predicates of the Payday lending industry is predatory lending that targets minority customers, the use of arbitration agreements to shield the industry from liability and accountability make these arbitration agreements effective tools that allow the Payday lending industry to further propagate its discriminatory lending practices.

This Article concludes with a call for a ban of the use of arbitration agreements in the Payday lending field, and further seeks more equitable and representative drafting and application of legislation to protect all constituencies from predatory lending practices.

Anti-Suit Injunctions in Support of Arbitration Agreements in Europe – The Final Curtain Has Fallen
Martin Illmer

Abstract:
Yet another blow for the English: the final curtain for anti-suit injunctions to enforce arbitration agreements within the European Union has fallen. As the augurs had predicted, the ECJ, following the AG’s opinion, held that anti-suit injunctions enforcing arbitration agreements are incompatible with Regulation 44/2001. Considering the previous judgments in Marc Rich, van Uden and Turner as well as the civil law approach of the Regulation, the West Tankers judgment does not come as a surprise. It accords with the system and structure of the Regulation. De lege lata the decision is correct. Moaning about the admittedly thin reasoning and an alleged lack of convincing arguments does not render the decision less correct. Instead, the focus must shift to the already initiated legislative reform of Regulation 44/2001. Meanwhile, one may look for alternatives within the existing system to hold the parties to the arbitration (or jurisdiction) agreement, foreclosing abusive tactics by parties filing actions in certain Member States notorious for protracted court proceedings.

International Arbitration: Selected Preliminary Topics
Giovanni Distefano

Abstract:
A. International arbitration as opposed to other means of dispute settlement
B. The Concept of International Arbitration: definition, composition and international public / private arbitration
C. The requirement of consent
D. Applicable Law
E. The pathology of arbitral awards

First Contract Arbitration: Effects on Bargaining and Work Stoppages
Susan J.T. Johnson

Abstract:
Newly certified unions often experience difficulty negotiating a first agreement. To remedy this, the Employee Free Choice Act (EFCA) proposes that the National Labor Relations Act (NLRA) provide for first contract arbitration. Using a panel of Canadian jurisdictions that have introduced FCA legislation at different times over several decades, the author addresses three questions: (1) How does First Contract Arbitration (FCA) legislation affect the incidence of first agreement work stoppages? (2) Does FCA encourage or discourage collective bargaining in the negotiation of first agreements? (3) Does FCA influence the duration of first agreement work stoppages? First, the author finds that the presence of FCA legislation reduces first agreement work stoppage incidence by at least 50 percent. Descriptive measures reveal that FCA is accessed infrequently; it is even rarer for a first contract (in whole or in part) to be imposed. Second, the fact that FCA is associated with a substantial reduction in work stoppage incidence, when combined with evidence that it is rarely used, suggests that FCA encourages collective bargaining. Finally, first contract arbitration has no statistically significant impact on the duration of first agreement work stoppages.

The Energy Charter Treaty: A Step towards Consistency in International Investment Arbitration?
Oliver Jones and Justin D’Agostino

Abstract:
The potential for multiplicity of proceedings under international investment treaties has been the subject of concern and much recent debate. One of the most significant drawbacks identified is the possibility of inconsistent outcomes. Cases with materially identical facts and causes of action have resulted in divergent arbitral awards. This article (i) explores the background to and reasons for the contrary decisions in the Czech Republic and Ecuador disputes, (ii) critically appraises the solutions proposed by commentators in the field and (iii) examines whether the Energy Charter Treaty could help solve this problem for energy disputes.

At the Brink of Free Agency: Creating the Foundation for the Messersmith-McNally Decision - 1968-1975
Edmund P. Edmonds

Abstract:
One of the most dramatic periods in baseball’s long history of labor relations occurred from 1968 through 1975. The Major League Baseball Players Association negotiated baseball’s first Basic Agreement in 1968 without the benefit of any leverage that could alter most of Organized Baseball’s long practices that controlled the players’ mobility and wages. In 1975, however, the union won an arbitration panel hearing that determined that pitchers Dave McNally and Andy Messersmith were free agents after playing one full season under the renewed option year of their contracts and filing a grievance under the newly adopted arbitration process. This stunning result fundamentally altered Organized Baseball’s reserve system and launched free agency and the era of tremendous salary growth for major league baseball players.

This article highlights the stories of more than twenty players who refused to sign contracts before reporting to spring training between 1968 and 1975. Part I of the article provide a brief discussion of the creation of the reserve system during the nineteenth century. Part II offers a brief description of the three-year period from 1965 to 1968 that was a prelude to Al Downing’s decision in 1968 to report to spring training without signing his contract offer from the New York Yankees. Part III discusses Downing’s negotiations with the Yankees. Part IV covers events from 1969 to 1972 including the significance of Ted Simmons’ contractual dispute with the St. Louis Cardinals. Part V recounts the stories of the twenty players who began the 1973 through 1975 seasons without signing new contracts. Although all of these players, except Dave McNally and Andy Messersmith, ultimately reached an agreement or disappeared from the major league baseball scene, their collective efforts were an important contribution to the Players Association’s winning strategy over the owners.

The Hague Choice of Court Convention: Magnum Opus or Much Ado About Nothing?
Richard Garnett

Abstract:
It is a truism to note that in the past 50 years there has been an enormous expansion in international commerce and communications and that with such expansion there has been a proportionate increase in the volume and intensity of transnational disputes. The growth in such disputes has led to greater contact and conflict between legal systems. Rules of private international law which arose only rarely in the business of most national courts are now examined and applied regularly.

The problem of multi-jurisdictional adjudication where a single transaction spawns applications for relief in a number of countries pursuant to a number of different laws is becoming commonplace. Such a development has cast particular light on the rules for establishing jurisdiction in national courts and also the principles governing recognition and enforcement of judgments of foreign courts. Once greater attention and scrutiny was placed on the national rules of jurisdiction and enforcement of judgments it is not surprising that disparities and inconsistencies of approach were uncovered.

Typically, European defendants would complain of excessive exercise of jurisdiction by United States courts while US plaintiffs would bemoan the fact that European (and other national) courts were inconsistent and unreliable in recognising US judgments. While such a situation had been present for a long time it was the sheer volume of recent transnational disputes that made a solution more pressing.

The other development which had masked the problem of disparate national jurisdictional and judgment rules was the increased use and popularity of international commercial arbitration beginning in the 1980s. Once advisers realised that they could refer transnational business disputes to a private, neutral panel of their choice whose awards would be recognised by national courts in the vast majority of cases, the problems of transnational litigation could be often ignored.

Yet, international commercial arbitration has not been without its critics or its disadvantages, in particular cost in the large institutional arbitrations. This fact, combined with the problem that a number of transnational disputes could not be submitted to arbitration (eg. personal injury, consumer and employment cases) meant that the need for a globally uniform system of jurisdiction and judgment rules remained acute.

Paul Beaumont in his article in this colloquium traces the at times tortuous history of the Hague Conference negotiations and how the Hague Convention on Choice of Court Agreements (“the Convention”) emerged from what had originally been envisaged as a much larger project. Other contributors to this colloquium have made detailed considerations of particular provisions or subject matter in the Hague Convention. My task, by contrast, is to examine the Convention from a more holistic and forward-looking perspective. Specifically, the question I will address is whether the Convention will be regarded as a great achievement in the history of multilateral reform of private international law or instead will it be seen as a narrow document which allows too much scope for the intrusion of national interests at the expense of harmonisation?

In addressing this dichotomy, the Hague Convention will be examined from two main perspectives: firstly the likely impact of its principal provisions in Australian law and secondly the response to the Hague Convention among governments, practitioners and scholars in other potential Contracting States.


Reconciling Differences: The Theory and Law of Mediating Labor Grievances
Deborah A. Schmedemann

Abstract:
While grievance arbitration is the most common method of resolution of disputes arising under collective bargaining agreements, the author proposes that there is also a place for grievance mediation. The author compares mediation to arbitration and negotiation, and describes the strengths and weaknesses of mediation. She explains how mediation clauses in labor agreements could be enforced under section 301 of the LMRA, to protect rights created by those agreements, and proposes that mediation clauses be a basis for injunctions against strikes during the term of an agreement in certain situations. However, the author suggests that courts and the National Labor Relations Board should still have primary responsibility for enforcing non-waivable statutory rights. The author discusses the legal standards for review of arbitration and mediation in Title VII cases, in which the courts generally do not defer to prior findings. She then analyzes the Board's deferral doctrines in depth, and suggests that agreements to mediate should be given deference by the Board when the rights at issue are waivable. The author concludes that, under that standard, mediation could help maintain the relationships necessary for effective collective bargaining without sacrificing protections guaranteed by the law.

Drafting International Mediation Clauses
Rahim Moloo and Justin Jacinto

Abstract:
This chapter seeks to identify various topics that are important to consider in drafting a mediation clause, whether based on a model clause or not, in the context of an international transaction.

The Compliance with the Law Requirement in International Investment Law
Rahim Moloo and Alex Khachaturian

Investment treaties often require that an investment be made in accordance with the law of the host-State in order to receive protection under the treaty. As such, a tribunal hearing claims under such an investment treaty does not have jurisdiction over claims relating to illegally made investments. Even where no such requirement is present, there is an emerging trend, though inconsistently applied, that requires investments to comply with both host-State and international law in order for claims based on those investments to be admissible. Drawing on international case law and general principles of law this article discusses when an investment’s non-compliance with the law should act as a barrier to the investor’s ability to pursue its claims under an investment treaty.

Review of International Energy Investment Law: The Pursuit of Stability
Rafael Leal-Arcas

Abstract:
This book by Professor Peter Cameron examines the current multifaceted and multilayered system of legal stability for energy investments and how this system has been tested by unilateral state demands for contract renegotiation. Cameron’s contextual point of departure is the extraordinary increase in investor-state disputes in recent years and the growth of protection for investments in international law. In this sense, Cameron wonders how much of a difference it has really made to the energy investment scene.

Reestablishing Doctrinal Clarity and Correctness: Treaty Exceptions, Necessity, and the CMS, Sempra, and Enron Annulment Decisions
Andreas von Staden

Abstract:
Several arbitration awards rendered against Argentina have revealed fundamental problems in the interpretation and application of treaty-based non-precluded measures provisions and the customary law defense of necessity. The ICSID annulment decisions in the cases of CMS, Sempra, and Enron have provided much needed doctrinal clarification in this respect, and two of these have justifiably annulled the awards for failure to apply the proper law.

The International Centre for Settlement of Investment Disputes: Its Emerging Principles with Reference to Some Latest Cases
Sugandh Saksena

Abstract:
It’s an age of globalisation where trade and investment are no where concerned with international boundaries. Where there is trade, there is investment. Likewise, investments bring with them a room for disputes. International disputes are best resolved by Arbitration and Conciliation, i.e., Alternative Dispute Resolution system. In order to facilitate such a system of dispute resolution, the International Law provides for a Convention, known as the Convention for Settlement of Investment Disputes, much popularly as, the ‘Washington Convention’. The body established under this Convention, for the settlement of Investment Disputes, is the International Centre for Settlement of Investment Disputes (ICSID). The ICSID Convention is a multilateral treaty formulated by the Executive Directors of the International Bank for Reconstruction and Development (the World Bank). It was opened for signature on March 18, 1965 and entered into force on October 14, 1966.

To date 143 countries have signed and ratified the Convention to become Contracting State. As evidenced by its large membership, considerable caseload, and by the numerous references to its arbitration facilities in investment treaties and laws, ICSID plays an important role in the field of international investment and economic development.

This Paper aims at throwing light on the functioning of the Centre with the most recent principles laid down by the Centre in its awards, regarding Foreign Investments, and relations between the States and the Parties investing, along with a motive, as to why India should also be one of the signatories and ratifiers of the Convention.

News Links and Updates- Arbitration and Contract

A twenty four year dispute finally got resolved when the Supreme Court in Oil and Natural Gas Corporation v. Wig Brothers Builders & Engineers Pvt. Ltd. partially set the award aside (actually set aside partially the judgements on the trial court and the high court making the award the rule of the court). Disputes arose between ONGC and Wig Brothers Builders and Engineers Pvt. Ltd. which were referred to a sole arbitrator in December 1986. Do check out this judgement from here.

In Dozco India P. Ltd. v. Doosan Infracore Co. Ltd., the arbitration clause read:

“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.”

The application was for appointment of arbitrator under S 11(6) of the Arbitration and Conciliation Act, 1996. Counsel for Dozco vehemently argued that the Supreme Court would have jurisdiction to appoint the arbitrator and that the choice of venue was not the choice of seat of arbitration. The court rejected the contention of Dozco and held that the relevant law was the law of the Republic of Korea and the Supreme Court, in view of the arbitration clause, had no jurisdiction to appoint the arbitrator. The judgement can be accessed from here.

Kluwer Arbitration Blog contains an excellent post by an in-house lawyer on arbitration from the perspective of the consumers of arbitration. Do check out the post. Also check out his follow up post on transparency arbitrator performance and arbitrator selection.

Lex Arbitri Blog contains a write up on the Bombay High Court decision in Thyssen Krupp Industries India Pvt. Ltd. v. S.D. Industries. The case deals with the question as to whether delay in two party-appointed arbitrators agreeing on the third arbitrators after more than thirty days would make the appointment of the third arbitrator invalid. The court distinguished between “failure to agree” and “failure to appoint”. The link to this judgement is available in the said write up.

Kluwer Construction Blog has a post on “Track Changes” and contract negotiations. While negotiating contracts, parties generally work on a draft agreement and exchange it several times between them. They work on each other’s drafts in the “Track Changes” mode available in the word processors. There is a risk in completely relying on the version which the other party sends. Interesting post.