Arbitration Updates

In the past month or two there have been a few significant arbitration related developments, which are noted in this short post.

The Law of Arbitration Agreement in the absence of express choice of law

The English Court of Appeal has clarified the law on the determination of the law of the arbitration agreement in the absence of express choice by the parties. Comments on the judgement in Sulamérica Cia Nacional De Seguros S.A. v Enesa Engenharia S.A. [2012] EWCA Civ 638 can be accessed from Indian Corporate Law Blog (Part I & II), and Herbert Smith Arbitration News. We will do a detailed post on the case as a part of our Choice of Law series.

Supreme Court finds a Way to Circumvent IOC v. Raja Transport

Indian Oil Corporation v. Raja Transport is one of those decisions where the Supreme Court upheld the practice of Government agencies and Public Sector Enterprises of appointing its own senior personnel as arbitrators in dispute with their Contractors. The Supreme Court held that senior officers, usually heads of department or equivalent, of a government/statutory corporation/ public sector undertaking, not associated with the contract, are considered to be independent and impartial and are not barred from functioning as arbitrators merely because their employer is a party to the contract. The court also recommended discontinuance of the said practice considering the need for independence and impartiality of the arbitral process. In the recent case of Bipromasz Bipron Trading SA v. Bharat Electronics Limited MANU/SC/0478/2012, the Supreme Court held that “where there is material to create a reasonable apprehension that the person mentioned in the arbitration agreement as the arbitrator is not likely to act independently or impartially... then the Chief Justice or his designate may, after recording reasons for not following the agreed procedure of referring the dispute to the named arbitrator, appoint an independent arbitrator in accordance with Section 11(8) of the Act.” The arbitration clause provided for reference of disputes to the Chairman & Managing Director (CMD) of BEL or his nominee. The CMD appointed a General Manager as the arbitrator. Even so the court appointed a retired judge of the Madras High Court as arbitrator considering that (1) the CMD had directly dealt with the entire contract (2) the appointed arbitrator was a direct subordinate to the CMD (3) there was a reasonable apprehension of partiality as the CMD had dealt with the entire contract. Check out MJ Antony's article in the Business Standard on the case. The article also discusses a few past decisions on the topic.

The New Swiss Rules:

The Swiss Chambers of Commerce Association of Arbitration and Mediation and the Chambers of Basel, Bern, Geneva, Neuchâtel, Ticino, Vaud and Zurich have revised their Swiss Rules of International Arbitration in June 2012. The revised Rules can be downloaded from here (pdf). Comments on the revisions in the 2012 Rules can be found in Kluwer Arbitration Blog (here and here), Kluwer Mediation Blog and Transactional Notes blog.