"I realise that some of my criticisms may be mistaken; but to refuse to criticize judgements for fear of being mistaken is to abandon criticism altogether... If any of my criticisms are found to be correct, the cause is served; and if any are found to be incorrect the very process of finding out my mistakes must lead to the discovery of the right reasons, or better reasons than I have been able to give, and the cause is served just as well." -Mr. HM Seervai, Preface to the 1st ed., Constitutional Law of India.

Monday, November 22, 2010

Dallah Real Estate and Tourism Holding Company v. Ministry of Religious Affairs, Government of Pakistan (Part III)

In the previous post on this topic, we had discussed a portion of the landmark case of Dallah Real Estate and Tourism Holding Company v. Ministry of Religious Affairs, Government of Pakistan. We had in an earlier post given an overview of the case and started off the discussion on the case by discussing a very portion of the Commercial Court’s decision. In this post, we intend to analyse the decision of the Commercial Court further. As with most of our posts, we would simultaneously analyse the Indian law on too.

Issue 2: What is the scope of enquiry by a court when a party challenges the recognition and enforcement of a NYC award under S 103(2)(b)?

One of the parties had argued that the court had to conduct a “full hearing of all the relevant evidence” while the recognition and enforcement of a New York Convention award is challenged while the other party had argued that the nature of enquiry was a review of the arbitral tribunal’s decision on jurisdiction simpliciter.  What comes out of this question is this: according to Dallah, the argument was that the court cannot go into a full rehearing of whether Pakistan had proved, in accordance with French law, that it was not a party to the arbitration agreement. Pakistan took a contrary position. It was in Dallah’s interests that the scope of enquiry was limited.  

However, court was in favour of the former, ruling that the grounds under S 103(2)(b) were those of fact requiring the challenging party “to adduce all evidence necessary to satisfy the burden of proof on it to establish the existence of one of the grounds”  The relevant provision states:

103 Refusal of recognition or enforcement
(2) Recognition or enforcement of the award may be refused if the person against whom it is invoked proves
(b) that the arbitration agreement was not valid under the law to which the parties subjected it or, failing any indication thereon, under the law of the country where the award was made;

Thus, it is inherent in the language of S 103(2) that the party against whom the award is invoked (Pakistan) proves that the arbitration agreement was not valid under French Law. Thus:

If a party has to "prove" a matter, that must mean, in the context of English civil proceedings, prove the existence of the relevant matters on a balance of probabilities.

Issue 3: The parties are in agreement that the arbitration agreement would be tested on the touchstone of the French Law. But what are the French law principles applicable in the case?

A question as to foreign law is a question of fact, usually established through the use of experts. In this case, the French Law experts of both sides submitted a Joint Memorandum on the law in France on the principles pertaining to whether Pakistan had validly agreed to arbitration as per the arbitration agreement in issue., though they disagreed on several aspects. Following were some of the principles explicated by them:
  • The test to decide whether Pakistan was a part of the arbitration agreement was to see if it was the common intention of all the parties to the said agreement to be bound by the arbitration agreement.
  • The common intention could be established on the basis of facts. For this, the courts would look into all surrounding facts to see if they pointed to an intent to be bound by the arbitration clause.
  • The ascertainment of subjective intention of the parties to be bound by the arbitration clause would be based on the objective conduct of the parties.
  • The French Jurisprudence Constante* is that the international arbitration agreement “must be extended to parties directly implicated in the performance of the contract and in any disputes arising out of the contract.
  • It must be established that, notwithstanding the absence of any signature to the international arbitration agreement, “respective contractual situations and existing usual commercial relations” of the purported parties such an agreement gave rise to a presumption that the purported parties had bound themselves to the arbitration agreement.
  • To establish common intention, “good faith” must be taken into account.
  • A State or a State entity, when it enters into an arbitration agreement, waives the State immunity from the jurisdiction of the arbitral tribunal and the immunity against execution of the arbitral award against it.
We will continue the discussion on the remainder of third issue in a future post. The discussion on the third issue is extremely interesting and we might devote an independent post on the remaining portion of it.

* Jurisprudence Constante, a term of French origin, translates roughly as “uniform jurisprudence”. It refers to “a long series of previous decisions applying a particular rule of law carries great weight and may be determinative in subsequent cases.” According to Wikipedia, “Jurisprudence constante is a legal doctrine according to which a long series of previous decisions applying a particular rule of law is very important and may be determinative in subsequent cases. This doctrine is recognized in most civil law jurisdictions, in the civil law of Louisiana, for example. The rule of law applied in the Jurisprudence constante directly compares with stare decisis. But the Louisiana Supreme Court notes the principal difference between the two legal doctrines: a single court decision can provide sufficient foundation for stare decisis, however, ‘a series of adjudicated cases, all in accord, form the basis for jurisprudence constante’.” [The Wikipedia reference has been verified and seems to be correct. See foot note 17 to the case cited in the article. The case can be accessed from this link.]

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