"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, December 23, 2013

The Kishanganga Arbitration: Summary of the Awards of the Tribunal

Readers interested in reading the entire Kishanganga dispute can go through the posts in this blog under the Label Arbitration: Indus Water Treaty Dispute which contains several small as well as lengthy posts on various facets of the decision. This short post is to summarize the outcome of the developments in the arbitration. 

The title, one may note, uses the term "Awards" instead of "Award" as there are a total of three awards in the matter. The three are the Partial Award (Feb 2013), Interpretation Award (Dec 2013) and the Final Award (Dec 2013). The summary of these three awards are given below:
  • Since the Kishanganga project is a Run-of-River Plant, India is entitled under the Indus Water Treaty to divert the water from the river for the purpose of generation of electricity. (Partial Award)
  • The Treaty does not permit India to reduce the level of the water stored in the Kishanganga dam below the Dead Storage Level of the water level, except in case of Unforeseen Emergency. However, this prohibition is applicable in Run-of-River plants which are either in existence on the date of the Partial Award or are under construction after exchange of designs of such projects to Pakistan and Pakistan has not objected to it. (Partial Award)
  • Desilting using the drawdown flushing method does not constitute Unforeseen Emergency for the purposes of the Treaty. (Partial Award)
  • While India's right to diver the waters under the Treaty is available, such a right is not absolute. India is obligated to take into consideration the existing uses by Pakistan of the river for hydroelectric and agricultural uses. (Partial Award) 
  • Pakistan's uses as provided above are to be considered from two relevant points of time- (1) at the time the Kishanganga project crystallised, and (2) on an ongoing basis throughout the operation of the Kishanganga plant. (Partial Award) 
  • Consequently, India has the obligation to maintain a minimum flow of water downstream the Kishanganga project. (Partial Award) 
  • India's obligation is to maintain a minimum flow of 9 cubic metres per second of water below the plant at all times at which the upstream flow is 9 cubic metres per second or above. (Final Award) 
  • Either party may seek reconsideration of the minimum flow of 9 cubic metres per second as provided above seven years after the diversion of the waters from the Kishanganga river for the purposes of power generation. (Final Award) 
  • Such reconsideration may either be through the Permanent Indus Commission or under the mechanisms built in into the Treaty. (Final Award) 
  • The prohibition on the reduction of level of water in the Run-of-River Plant below the Dead Storage Level is of general applicability under the Treaty and is not restricted merely to the Kishanganga plant. (Interpretation Award).
The prima facie view on the award is that it seems to balance interests of both parties by protecting India's right to harness the river water system and at the same time protect the interests of the riparian Pakistan.

Saturday, December 21, 2013

Final Award in the Kishanganga Arbitration and Related Documents

In the previous post this morning, we had informed of news reports regarding the final decision in the Kishanganga Arbitration. The PCA website has uploaded the Final Award which can be accessed from here. According to the Press Release:

"The Court decided that India shall release a minimum flow of 9 cumecs into the Kishenganga/Neelum River below the KHEP at all times. However, the Court also decided that either India or Pakistan may seek reconsideration of this decision through the Permanent Indus Commission and the mechanisms of the Indus Waters Treaty after a period of seven years from the first diversion of water from the Kishenganga/Neelum River."

Further, it appears that India had sought clarification on the Partial Award as to whether India may deplete the reservoir level of a run-of-river Plant below Dead Storage Level in any circumstances except in the case of an unforeseen emergency was site specific or was applicable in general under the Treaty. The Tribunal held that it was of general application under the Indus Water Treaty.

Kishanganga Award in India's Favour: News Report

A Pakistani news report suggests that the Arbitral Tribunal constituted under the Indus Water Treaty has passed the award in India’s favour, subject to the conditions that half the water from the Kishanganga dam should go to Pakistan and that India cannot maintain water at a very low level in the dam.

The news report can be accessed from here. It may be recollected that the Tribunal had previously passed a partial award in India's favour. The Permanent Court of Arbitration page on the dispute does not contain the details at the time of this post. More once we get the updates.

Added After Posting:

The PCA website has uploaded the Final Award which can be accessed from here. According to the Press Release:

"The Court decided that India shall release a minimum flow of 9 cumecs into the Kishenganga/Neelum River below the KHEP at all times. However, the Court also decided that either India or Pakistan may seek reconsideration of this decision through the Permanent Indus Commission and the mechanisms of the Indus Waters Treaty after a period of seven years from the first diversion of water from the Kishenganga/Neelum River."

Further, it appears that India had sought clarification on the Partial Award as to whether India may deplete the reservoir level of a run-of-river Plant below Dead Storage Level in any circumstances except in the case of an unforeseen emergency was site specific or was applicable in general under the Treaty. The Tribunal held that it was of general application under the Indus Water Treaty.

Wednesday, December 18, 2013

Bangladesh v. India Arbitration on the Territorial Dispute on the Bay of Bengal

Source
We had given links in our facebook page of news paper reports (here and here) pertaining to the final hearing between Bangladesh and India in the Permanent Court of Arbitration regarding their claims over territorial boundaries in the Bay of Bengal. The Permanent Court of Arbitration page on the dispute can be accessed from here. The said page provides info on the arbitrators and the parties. 

The arbitration was invoked by Bangladesh in October 2009 under the United Nations Convention on the Law of the Sea (UNCLOS).The final hearings commenced on 9 December 2013 and would have ended today (18 December 2013). 

The PCA Press Release on the dispute can be accessed from here. Links to documents related to the dispute as available in the PCA site can be found below:

Rules of Procedure

Procedural Order No. 1, dated August 28, 2013

Procedural Order No. 2, dated November 6, 2013

Procedural Order No. 3, dated November 20, 2013

Procedural Order No. 4, dated December 6, 2013

The dispute has a lot of economic implications to the respective States. A news report in the Telegraph states:
"At stake is the future livelihood of millions of Bengal and Odisha fishermen, for whom the settlement could open up miles of unchallenged open sea that both India and Bangladesh currently prevent each other from using for anything other than transit. As fish near the coast are depleted, fishermen are increasingly finding themselves forced to go further out to sea.
India in 2006 also discovered 100 trillion cubic feet of natural gas in a creek about 50km to the south of the mouth of the Hariabhanga, and within the contested region. This is almost twice what the entire Krishna-Godavari basin at the centre of the corporate battle between the Ambani siblings has been shown to hold to date."
We will keep readers updated on the developments in the arbitration. Further readings on the dispute can be accessed from here here and here.

Tuesday, December 17, 2013

Chloro Controls is Good Law: Arasmeta Captive Power Co. v. Lafarge India

Recently, a two judge Bench of the Supreme Court of India had the occasion in Arasmeta Captive Power Co. v. Lafarge India (12.12.2013) to deal with the submission by Mr. Ranjit Kumar, senior counsel that since Chloro Controls contradicted with the decision of the larger Bench in Patel Engineering the same must be placed before a larger Bench. This post reviews the said decision.
 
Facts:
Arasmeta Captive Power Co. was engaged in the business of power generation. Lafarge India owned 49% equity in Arasmeta. Appellant No. 2 owned 51% in Arasmeta. Arasmeta had entered into two power purchase agreements (PPA) with Lafarge India for supply of power. The PPA provided for arbitration except in case of excepted matters which were to be referred to an expert. Disputes arose between Arasmeta and Lafarge India. 
Arasmeta wanted the disputes to be resolved by an expert while Lafarge India argued that the same were to be referred to arbitration. Lafarge India therefore filed an application under Section 11 for the constitution of the tribunal. Arasmeta resisted the same and contended that the High Court had to determine whether the dispute was an excepted matter. The High Court concluded that the dispute was not an excepted matter and referred the same to arbitration.
Hence, an appeal by special leave was filed by Arasmeta. 
 
Contentions:
Following were the contentions of Arasmeta in the SLP:
  • The dispute between the parties was an excepted matter and was therefore not arbitrable. The dispute had to be resolved by an expert committee constituted as per the agreement.
  • Since the dispute was non-arbitrable, the court under Section 11 alone had to decide questions pertaining to arbitrability.
  • The analysis by the two judge Bench in Boghara Polyfab and by the three judge Bench in Chloro Controls was not in consonance with that of the five judge Bench in Patel Engineering.
  • Shree Ram Mills Case and Boghara Polyfab contradicted with each other and Chloro Controls was wrong to read both the judgements as not being contrary.
Contentions on behalf of Lafarge India were following:
  • The question as to whether the matter was an excepted matter or not was to be decided by the arbitrator.
  • This is in line with Patel Engineering, Boghara Polyfab and Chloro Controls.
  • Considering that the law has been well settled by decided cases, the matter has to be referred to arbitration.
Decision:
The court agreed with the contention of Lafarge India that the decided cases including Boghara Polyfab and Chloro Controls were in consonance with the seven judge bench decision in Patel Engineering. Further, the court held that Chloro Controls was right in reading Boghara Polyfab and Shree Ram Mills as not being contrary. In fact, the Booz Allen decision of the Supreme Court also held that the question on arbitrability as regards Section 8 proceedings should be left to the tribunal. However, the court held that the High Court had erred in holding the dispute as arbitrable and held that the same had to be decided by the arbitral tribunal.

Monday, December 16, 2013

Dhandapani Finance Ltd. v. Laxmi Cranes and Trailers Pvt. Ltd.: Comment

Dhandapani Finance Ltd. v. Laxmi Cranes and Trailers Pvt. Ltd. 2013 (5) CTC 832 (Madras HC, August 2012) is a very interesting case.

Laxmi Cranes had obtained loan from a finance company (Dhandapani). The suit was filed by Laxmi seeking damages for non-release of the crane-related documents despite full payment of the loan taken by them. In the plaint, it was alleged that Dhandapani obtained signature on blank bond papers from the representative of Laxmi Cranes. Dhandapani filed an application under Section 8 to refer the matter to arbitration. Laxmi Cranes resisted the application on the ground that the relief sought for in the Plaint was permanent injunction restraining Dhandapani from interefereing with the business of Laxmi Cranes and such a relief was not arbitrable. Consequently, it was contended that the matter was not arbitrable in view of Sukanya Holdings v. Jayesh H. Panda and Arul Singh v. Sunil Kumar Singh 2008 (2) CTC 856.

The relevant portion of the arbitration clause provided: “22(a). All disputes, differences any/or claim arising out of this Agreement whether during its subsistence of thereafter shall be settled by arbitration in accordance with the provisions of the Arbitration and Conciliation Act, 1996, or any statutory amendments thereof and shall be referred to the sole Arbitration of an Arbitrator nominated by the Managing Director of the Lender. The Award given by such an Arbitrator shall be final and binding on the borrower to this Agreement. It is a term of this Agreement that in the event of such an Arbitrator, to whom the matter has been originally referred dying or being unable to act for any reason, the Managing Director of the Lender, at the time of such death of the Arbitrator or of his inability to act as Arbitrator, shall appoint another person to act as Arbitrator. Such a person shall be entitled to proceed with the reference from the stage at which it was left by his predecessor.” (emphasis supplied)

A Single Judge of the Madras High Court (Subbiah, J.) held the following:
a) Where the subject matter before the court involves arbitrable and non-arbitrable matters, the civil court can proceed with the suit and decide the entire subject matter.
b) In the present case, the relief sought for is permanent injunction restraining Dhandapani from interfering with its business, including injunction against sending of henchmen to seize the cranes, etc.
c) Further, the dispute pertains to release of a document for which the Defendant has already made payment and such a dispute would not come within the scope of the arbitration clause. Hence, the matter falls outside the scope of arbitration.

Comment:
There are only two points worth noting here. First, just because the relief sought is permanent injunction, that alone does not make the dispute non-arbitrable. The right not to be disturbed by the finance company is not even a right in rem. Secondly, the arbitration clause as provided is sufficiently worded and courts these days do not dissect the arbitration clause to see if the dispute is covered within the purview of arbitration. The clause in the current context does not indicate any intent to exclude the above dispute from arbitration. Hence, it is doubtable if such a clause is arbitrable. It appears that the judge has perhaps recognized that in such loan transactions, the lender has a superior bargaining position, especially when the lender has the right to appoint the arbitrator. Nevertheless, the question is whether the judge should distort the law to suit the ends of his conception of justice.

Sunday, December 15, 2013

Call for Papers: Indian Journal of International Economic Law

(Formatted)

Call for Submissions

The Indian Journal of International Economic Law is now accepting submissions for its upcoming issue – Volume 6. The Indian Journal of International Economic Law (IJIEL) is an annual law journal published by National Law School of India University, Bangalore (NLSIU) under the patronage of the Indian government sponsored chair on WTO Law. The Journal is an endeavour by the Student Bar Association (SBA), NLSIU to encourage scholarship in the fields of international trade law and international economic law, in recognition of the staggering impact of World Trade Organization (WTO) and cross-border trade and commerce in the world today.

Submissions to the IJIEL are selected for publication on the basis of a peer-review mechanism conducted through an external Article Review Board consisting of scholars and experts in the field of international economic law. The previous issues of the Journal have featured articles by distinguished authors such as Fiona Smith, Faizel Ismail, Enrico Baffi, Lotta Viikari, G.R. Bhatia, Michelle Sanson, Jason R. Bonin and Rafiqul Islam and forewords by Prof. Jagdish Bhagwati and Prof. Stephen Hobe.

The IJIEL accepts academic submissions in the form of articles, notes, comments or book reviews on a host of legal issues in the field of international economic law, which includes multidisciplinary research concerning the WTO, trade laws at various levels of government, financial institutions, regulatory subjects such as taxation and competition policy, various services sectors such as banking and brokerage, linkages to human rights and cultural problems and international commercial arbitration.

The Journal is also oriented towards publishing academic work that considers the aforementioned issues from a comparative perspective and/or the perspective of the developing world.

Papers may be submitted under the following categories:
  1. Articles (5000 to 12000 words)
  2. Essays for the Law in Focus section (3000 to 5000 words)
  3. Case notes and Legislative Commentaries (2000 to 7000 words)


Book reviews are published through solicitations by the editorial board. Articles must deal with a theme of interest or importance comprehensively and are expected to show an extensive coverage of existing literature and a high level of analysis. Submissions in the form of essays for the ‘Law in Focus’ section must concisely analyse contemporary legislations, landmark treaties or other specific issues in international economic law of a contemporary nature.

The Editorial Board invites submissions for Volume No. 6 of 2014. The Journal follows a rolling submissions policy and the deadline for the forthcoming volume is 20th March, 2014. The submissions received after this date shall be considered for the next volume. The submissions must relate to any of the broad themes mentioned above or any other aspect of international economic law, with a focus on developing country perspective.

Guidelines:
  1. All manuscripts must be accompanied by:
    1. A covering letter with the name(s) of the author(s), institution/affiliation, the title of the manuscript and contact information.
    2. An abstract of not more than 200 words describing the submission
  2. No biographical information or references, including the name(s) of the author (s), affiliation(s) and acknowledgements should be included in the text of the manuscript, file name or document properties. All such information may be incorporated in the covering letter accompanying the manuscripts.
  3. Submissions are preferred in Times New Roman font, double-spaced. Main text should be in font size 12 and footnotes in font size 10.
  4. The IJIEL uses only footnotes (and not end-notes) as a method of citation. Submissions must conform to the Bluebook (19th edn.) system of citation.
  5. All contributions submitted to the Journal should be original. Authors are also required to inform the Editorial Board if they have submitted their manuscript to another law journal and if they have received an offer of publication. Authors may request an expedited review on this basis. It shall be within the discretion of the Editorial Board to grant an expedited review.
  6. The IJIEL only accepts electronic submissions which may be emailed to ijiel.nls@gmail.com under the subject heading ‘IJIEL Vol. 6 Submission’. All submissions should be made in MS Word format (.doc) or (.docx) and clearly indicate which category they are intended for.

For any clarifications, please contact us at ijiel.nls@gmail.com or ijiel@nls.ac.in.
Shreya Jain                                                    Ayushi Sutaria                                                                                         Chief Editor                                                  Convenor

Friday, November 29, 2013

Symposium Alert: VII NLSIR Symposium 2013-14: Bridging the Security-Liberty Divide

The National Law School of India Review (NLSIR) - the flagship journal of the National Law School of India University (NLSIU), Bangalore is pleased to announce the VIIth NLSIR Symposium on “Bridging the Security-Liberty Divide” scheduled to be held on December 21 and December 22, 2013 at the National Assessment and Accreditation Council (NAAC, opposite NLSIU Campus, Nagarhavi) Conference Hall, Bangalore. The decade following September 11 has been dubbed “liberty’s lost decade”, not just for the United States of America but for the world at large, marked by increasing tension between State interests in national security and individual liberty. As we continue to grapple with the implications of this clash, one clear winner seems to be emerging, best observed by examining changes in legal systems throughout this decade. The recent upsurge of criticism against NSA activity globally, however, could be seen as indicative of a changing trend. The VIIth NLSIR Symposium seeks to trace this dialogue between competing notions of security and liberty, and hopes to assess and analyse similar developments in India. 

Confirmed speakers for the symposium include Hon’ble Justice Muralidhar, Menaka Guruswamy, Mrinal Satish, Bharat Karnad, Aparna Chandra, Chinmayi Arun, Shyam Divan, Bhairav Acharya, Roshni, Yug Mohit Chaudhary and Saikat Datta.

This year, the discussions will be divided into four panels:

Session I: Securing Liberty from the State - Redefining Thresholds for Offences
(Forenoon, December 21, 2013, Saturday)

Session II: Intrusive Intelligence - Surveillance Programs and Privacy in India 
(Afternoon, December 21, 2013, Saturday)

Session III: Beyond Borders - Extradition, Asylum and Concerns of State Security 
(Forenoon, December 22, 2013, Sunday)

Session IV: Security and Liberty in India - Redefining the Debate
(Afternoon, December 22, 2013, Sunday)

Registration fee for those who make an advance payment/bank transfer is Rs. 500 for students and Rs. 750 for others. All those interested are requested to register at: https://docs.google.com/forms/d/19s9HkuoTRNBxKahu_pDSYbDb-6CCXvk6ZV4d1kkOW9s/viewform 

The registration fee for those who register at the venue is Rs. 750 for students and Rs. 1000 for others.

For more details visit our facebook page https://www.facebook.com/events/393805164084543/
Or visit our website http://nlsir.in/symposium.html

For further information, please contact Abhinav Sekhri (Chief Editor): +91- 9538003614; Mansi Sood (Deputy Chief Editor): +91- 9632745265 or email us at mail.nlsir@gmail.com.


Monday, November 25, 2013

Call for Papers: Indian Journal of Arbitration Law, Volume 3 Issue 1

Call for Papers from IJAL:

"The Indian Journal of Arbitration Law is a biannual, student reviewed Journal by the Centre for Advanced Research and Training in Arbitration Law (CARTAL) of National Law University, Jodhpur. 

The Journal strives to inculcate the prevalent theories in the field of arbitration with their practical relevance. The editorial board seeks to achieve this feat by including contributions from individuals with varied expertise of practicing arbitration and by focusing on developing trends. In this regard, the board would give due emphasis to the rich thought processes of students of law, who bring to the forefront the innovative academic research currently underway in mostlaw schools all over the world. Inclusion of changing regional trends will play a vital part in understanding the scope and extant of this discipline and would therefore find due importance in the Journal. 

The Indian Journal of Arbitration Law is pleased to announce its upcoming issue (Volume 3: Issue 1), which is to be published in March next year on the following theme. 

“The Rise of Asian Arbitral Institutions and its Impact on International Arbitration” 

We would be happy to review papers on contemporary international arbitration law in the Asia-pacific region, which are not specifically related to the above mentioned theme.

The Board of Editors cordially invites original, unpublished submissions for publication in the following 
categories: 
- Articles 
- Notes/Comments 
- Book Reviews 

Manuscripts may be submitted via email to editor.cartal@gmail.com latest by 31st January 2014. 

For further details regarding Editorial policy and submission guidelines please visit the website here."

Monday, November 18, 2013

One Reason Why Indian Law Journals Need to Put More Effort

Last year, we did a blog post critically analysing the Sulamerica case decided by the English Court of Appeal and comparing the decision with Indian law on the issue. While perusing through the recent issue of the Indian Journal of Arbitration law, this blawgger found that the said post has been reproduced in substance in a paper titled "Sulamerica & NTPC: A Comparative Interface" (p. 14-17). Shocked at seeing the same, I wrote to the Journal and to the faculty advisor. I also wrote a letter to the authors The annexure to the letter contained a comparative statement on the similarities between the paper and the above post. The said comparison speaks for itself. The following is the substance of the email (in italics):

"Dear Editor,

Kindly refer to the recent article titled "Sulamerica & NTPC: A Comparative Interface" by [authors name removed] published in Volume II Issue 2 of your reputed journal. I have been a follower of your journal and have contributed to two papers (one in the first issue and the second in the recent issue). The editorial team has been doing an excellent job in getting good papers published. 

However, I came across the above mentioned article and was dismayed to see that p. 14-17 are a virtual repetition of a blog post of mine that appeared in the practical academic blog. The link to the said post is below:


As you might see, even the table in the said blog has been repeated. While my complaint is less about the authors not acknowledging the source, it is a unhappy state of affairs that the article brings about nothing new but merely repeats what has already been published in the said blog post. 

Publishing of such papers bring great disrepute to your journal. I hope there is more quality control in the papers your publish. Otherwise, IJAL will meet the same fate as most other journals."

The faculty advisor replied on the same date (in italics):

"Deat Badri,

Thanks for pointing this out. It's a serious issue.

I'll take it up with my student editorial team and rectify it soon."

The response of the Editorial team of the law review is reproduced in italics:

"Dear Badrinath,

Thank you for bringing it to our notice. We would be extremely careful about the same next time."

I wrote the following letter to the authors of the said paper:

"Hearty congratulations on getting a wonderful paper ("Sulamerica & NTPC: A Comparative Interface") published in Volume II issue 2 of the Indian Journal of Arbitration Law. The paper is well analysed and what is most admirable is that you have disagreed with the English Court of Appeal “after having studied exhaustively the English jurisprudence on the choice of proper law of governing the arbitration agreement” and have concluded that the Sulamerica ratio should not be followed in India, where NTPC v. Singer rules the field. I once again congratulate you on the excellent work.

The purpose of this letter goes beyond the above congratulatory message. I thank you for citing a blog post of mine that appeared in the Practical Academic blog.[1] The said post was cited in your paper when you discussed the “exceptional circumstances” proposition in NTPC v. Singer. I feel proud to state that my views in the said blog post have been reiterated in a paper of students of an august national law school. I am also thrilled by the fact that you read the Practical Academic Blog. I have been writing blog posts in the said blog since 2008 and I thought that there are only handful readers for the blog. I never knew that two national law school students took their time away from their busy schedule to read the blog. I am also ecstatic because p. 14 -17 of your paper are a virtual repetition of my blog post (See Annexure) and the Editors of the Indian Journal of Arbitration Law have found it fit to be published in their journal (Volume II Issue 2)!

Although, you have not acknowledged this fact in your paper (except in two places), I am happy that the ideas in my blog post have been published almost verbatim (with changes here and there, of course) in such a wonderful law journal.

I hope you keep up the excellent work and make your parents and your law school proud by copying from other writings without due acknowledgement and without any application of mind.

Yours sincerely,



Badrinath Srinivasan


CC:[removed]


Annexure
Similar/ Identical Sentences Used without Acknowledgement

Choice of Proper Law of Arbitration Agreement: Sulamerica (Blog post)[2]
Sulamerica & NTPC: A Comparative Interface (paper) [3][4]
One of the earliest cases to decide on the determination of the law of the arbitration agreement in the absence of express choice is the well-known case of NTPC v. Singer AIR 1993 SC 998, where the Supreme Court held that the proper law of the arbitration agreement was “normally” the proper law of the contract expressly chosen by the parties.


The court clarified that where the parties had expressly agreed on the proper law of the contract but had not designated the proper law of the arbitration agreement, “[i]t is Indian law which governs the contract, including the arbitration clause, although in certain respects regarding the conduct of the arbitration proceedings the foreign procedural law and the competent courts of that country may have a certain measure of control."

It must be noted that the court stated that in “exceptional cases”, the expressly designated proper law of the contract may not be the proper law of the arbitration agreement, although the court did not elaborate on what the exceptional circumstances were.
The earliest case in India to consider and decide upon the moot question at hand i.e. the determination of the proper law of the arbitration agreement in the absence of express choice was in the case of NTPC v. Singer, wherein the Apex Court held that “the proper law of the arbitration agreement was ‘normally’ the proper law of the contract expressly chosen by the parties”

and also went on to clarify that where the parties had expressly agreed on the proper law of the contract but had not designated the proper law of the arbitration agreement, “[i]t is Indian law which governs the contract, including the arbitration clause, although in certain respects regarding the conduct of the arbitration proceedings the foreign procedural law and the competent courts of that country may have a certain measure of control.”

However it is pertinent to note that the Court stated in “exceptional cases”, the expressly designated proper law of the contract shall not prevail as to be the proper law of the arbitration agreement, although the court refrained from elaborating on the exceptional circumstances.
In NTPC v. Singer, it was held:
“Where, there is no express choice of the law governing the contract as a whole, or the arbitration agreement as such, 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. But that is only a rebuttable presumption..”

Thus, where neither the proper law of contract nor the proper law of arbitration agreement is chosen, it would be presumed that the latter would be the seat of arbitration.


This does not mean that where the proper law of contract is expressly chosen, the law of the seat of arbitration would nevertheless be the proper law of arbitration agreement.

The Apex Court held that, “Where, there is no express choice of the law governing the contract as a whole, or the arbitration agreement as such, 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. But that is only a rebuttable presumption.”

Thus, where neither the proper law of contract nor the proper law of arbitration agreement is chosen, the Court should take up the stand to presume that the latter would be the seat of arbitration.

This shall not affect a situation wherein the proper law of contract is expressly chosen, the law of the seat of arbitration would continue be in accordance with the proper law of arbitration agreement.
The Indian position can be summed up in three propositions:
1.      In the absence of express choice of the law of arbitration agreement, the choice of the proper law of the contract will also govern the arbitration clause.
2.      However, in exceptional circumstances, even if the proper law of the contract is chosen, such may not be the law of the arbitration agreement where the agreement is silent.
3.      Where neither the proper law of contract nor the proper law of arbitration agreement is chosen, it would be presumed that the latter would be the seat of arbitration.
The Indian Position can be summed up in three propositions:
1. When there is absence of express choice of the law to govern the arbitration agreement, the choice of the proper law of the contract will also govern the arbitration clause.
2. However, in exceptional circumstances, even if the proper law of the contract is chosen, such may not be the law of the arbitration agreement where the agreement is silent or doesn’t provide to the contrary.
3. Nonetheless in a commercial arrangement when neither the proper law of contract nor the proper law to govern the arbitration agreement is chosen, it would be presumed that the latter would be seat of arbitration.
The phrase “exceptional cases” employed in NTPC v. Singer has not been explained in any of the decided cases.

However, from the decided cases, one can decipher what does not amount to an exceptional case. In NTPC v. Singer, for instance, the proper law of contract was Indian law, the courts at Delhi had exclusive jurisdiction, the seat was London and the arbitral rules were the ICC Rules. Even so, the Supreme Court held:
"It is Indian law which governs the contract, including the arbitration clause, although in certain respects regarding the conduct of the arbitration proceedings the foreign procedural law and the competent courts of that country may have a certain measure of control."
The phrase “exceptional cases” employed in NTPC v. Singer has not been explained in any of the decided cases.

However, from the list of decided cases, one can decipher as to ‘what shall not constitute an exceptional case’. For instance, the proper law of contract was Indian law, the courts at Delhi had exclusive jurisdiction, the seat of arbitration was London and the lexarbitriwere the ICC Rules. Still, the Supreme Court held: “It is Indian law which governs the contract, including the arbitration clause, although in certain respects regarding the conduct of the arbitration proceedings the foreign procedural law and the competent courts of that country may have a certain measure of control”.
This judgement has been cited with approval in several cases under the 1940 and the 1996 Acts. 
This very ratio has been cited with approval in several cases under the 1940 and the 1996 Arbitration Act
Even so, the conclusions arrived at by the Court of Appeal and the Supreme Court are different. In the future, Sulamerica would probably be cited in an Indian court to canvass the proposition that even if the proper law of the contract is expressly designated by the parties, the proper law of arbitration agreement would be the law of seat (which is different from that of the proper law of the contract).
Even if the conclusions arrived at by the Court of Appeal and the Supreme Court of India are dissimilar, there still exists a high probability that SulAmérica would be perused as an authority in Indian courts to canvass the proposition that even if the proper law of the contract is expressly designated by the parties, the proper law of arbitration agreement would be the law of seat (which is different from that of the proper law of the contract).

Following are the reasons why the proper law of arbitration agreement should be the expressly designated proper law of contract and not the seat of arbitration:
1. At a basic level, it is only logical that the arbitration clause, which forms a part of the contract, would be governed by the same law that the rest of the contract is.
2. In India, unlike in several other countries, often business managers solely negotiate contracts without any legal advice. In such cases, the law on choice of law should not be intricate or complicated and should proceed on the basis of logic and common sense. Considering that, the conclusion reached in NTPC v. Singer is commonsensical and in accord with business understanding and common sense.
3. The consequence of Sulamerica is to make the parties agree on the proper law of arbitration agreement in addition to that of the contract so as to prevent ambiguities. From a transaction cost point of view, this would lead to additional cost to negotiate a proper law of arbitration agreement, in addition to the proper law of contract.
4. Indian precedents, as discussed above, are not in favour of Sulamerica approach.


Following are the reasons why the proper law of arbitration agreement should be the expressly designated proper law of contract and not the seat of arbitration:
1. At a basic level, it is only logical that the arbitration clause, which forms a part of the contract, would be governed by the same law that governs the rest of the contract is.
2. In India, unlike in several other countries, often business managers solely negotiate contracts without any legal advice. In such cases, the law on choice of law should not be intricate or complicated and should proceed on the basis of logic and common sense. Considering that, the conclusion reached in NTPC v. Singer out of commonsense and in
accordance with the business understanding.
3. The consequence of SulAméricais to make the parties agree on the proper law of arbitration agreement in addition to that of the contract so as to prevent ambiguities. From a transaction cost point of view, this would lead to additional cost to negotiate a proper law of arbitration agreement, in addition to the proper law of contract.
4. However the judgements rendered by the Indian courts reflect an approach which is not
in consonance with the approach adopted by English courts in SulAmérica Case.
5… Assume for a moment that a contract identical to the one in Sulamerica is agreed to between two parties. If Sulamerica approach is adopted, English Law would be the law of arbitration agreement. Assume that prior to reference of a dispute under the contract to arbitration, the Brazilian legal requirement of further consent is removed by an amendment to the law. In such a case, would English Law still remain the law of arbitration agreement? This hypothetical example points out the defect of the Sulamerica approach. The choice of the law of arbitration agreement would change during the currency of the contract not by an amendment to the contract but by operation of Brazilian law, which the parties might not even be aware of. Law on choice of law is already complicated. Why make it murkier? [Note that Sulamerica can be read as holding that even if the contract provides for the proper law of contract but not the proper law of arbitration agreement, the latter would be the law of the foreign seat…
Nevertheless the drawback persists of this approach. We can better understand this with the help of the following hypothetical example i.e. let’s assume that before the Court in SulAméricaa contract identical to the one at hand is entered into by the parties. If SulAmérica approach is adhered to, English Law shall be the law of arbitration agreement. Now assuming that prior to reference of a dispute under the contract to arbitration, there was an amendment to the proper law of contract. In such a situation, would English Law still remain the law governing the arbitration agreement? The answer would take us at the same spot from where we had started; hence this example highlights the shortcomings that any judicial system shall face on applying the SulAmérica approach blindly. The choice of the law of arbitration agreement would change during the continuance of the contract not by an amendment to the contract but by operation of proper law, which the parties at times might not even be aware of. The choice of the law of arbitration agreement would change during the continuance of the contract not by an amendment to the contract but by operation of Brazilian law, which the parties at times might not be aware of. Law on choice of law is very complex butSulAmérica can be interpreted as even if the contract provides for the proper law of contract but not the proper law of arbitration agreement, the latter would be the law of the foreign seat.
It may be noted that the Sulamerica approach is not altogether disadvantageous. If the law of the seat is to be the law of arbitration agreement in the absence of express designation, a foreign party entering into a contractual relationship with Indian law as the substantive law of contract providing for arbitration in London need not worry about the Indian arbitration law (in a scenario where Bhatia International does not exist). The party needs to only look at the English arbitration law which it would in any case do considering that the lex arbitri would be English Law.  However, considering the above reasons, it makes sense for India to continue to apply NTPC v. Singer.
At this juncture it is also indispensable to note that the SulAmérica approach is not prejucial because if the law of the seat is to be the law of arbitration agreement in the non-existence of express designation, a foreign party entering into a commercial arrangement with Indian law involved as the substantive law of contract providing for seat of arbitration can do without the Arbitration and Conciliation Act, 1996. While taking into account the current Indian conditions and its increasing popularity of being seat of arbitration in most of the international commercial arbitrations, it is necessary for Indian judiciary to carry forward the foundation laid down in the NTPC v. Singer Case with respect to choice of proper law governing the arbitration agreement.





[1] Badrinath Srinivasan, Choice of Proper Law of Arbitration Agreement: Sulameric, (25 July 2012), available at http://practicalacademic.blogspot.in/2012/07/choice-of-proper-law-of-arbitration.html (accessed on 16 November 2013)
[4] Footnotes omitted

On the entire issue, this blawgger has the following questions:

1) The authors belong to a reputed national law school. They should have definitely got in after a competitive process. Despite this, the authors showed a complete lack of quality by merely copying the paper and added/ removed/ replaced a few words.

2) The authors displayed a complete lack of morality by publishing the paper. It may be noted that the authors  akcnolweged the post in respect of two propositions. However, the most of p. 14-17 of the paper was a virtual reproduction of the blog post. The abject lack of morality is shocking!

3) The Indian Journal of Arbitration Law is a student run journal. It is expected that students would put in some effort in verifying whether a paper submitted for publication is plagirised or not. From my own experience, the said journal seemed to have a robust check at plagiarism. However, omission of this magnitude from the journal is shocking, to say the least.

4) While the faculty advisor's response to the email that the said paper was plagiarised was positive, the editorial team's response lacked any sense of propriety. Perhaps, the journal lacked a policy on how to respond to plagiarism. However, one would expect a little more responsible reply from the journal. A journal which publishes plagiarised content is surely on its way to oblivion. 

I wish Indian Law Journals and students were more responsible. 

Thursday, October 31, 2013

Lengthy Law Reviews and their Usefulness; Chevron and Rise in Arbitral Power

Followers of the law blogsphere would be aware of the ongoing debates on the usefulness of law reviews. The recent debate really started off with a New York Times piece titled "The Lackluster Reviews that Lawyers Love to Hate". A lot of responses were written to this piece and some of these responses (chosen in random) can be found here, here, here and here.  Our short take on this debate is the subject of this post. An allied purpose is to bring to the attention of our readers a seemingly interesting article published in the Stanford Law Review on the rise of arbitral power.
 
This blawgger read a recent post in the Opinio Juris Blog on the Chevron arbitration and the rise of the power of arbitrators vis-a-vis domestic courts/ tribunals. The post contained a link to a recent Stanford Law Review article titled "The Rise of Arbitral Power over Domestic Courts" by Michael D. Goldhaber. The article's title seems extremely interesting considering the abstract of the same provided by the Opinio Juris post. However, as a practitioner, it is extremely difficult to read a forty four paged article on the topic.
 
This gives rise to the question- why are law review articles, especially by senior law professors, very very very long? Perhaps this is one of the factors which makes practicioners averse to reading law reviews. On the face of it, this phenomenon of publishing lengthy law review articles is more prevalent in USA than in UK. Is writing a lengthy article really necessary? In India, several law reviews do not encourage lengthy articles. I think this is good practice. If at all law reviews want to publish lengthy law reviews, there should be executive summaries summarising the paper in slight detail as a 250 word abstract might not be sufficient to encompass all the ideas stated in the paper.

Thursday, October 3, 2013

Scope of Power under S. 27 Arbitration & Conciliation Act: Delta Distilleries

In a recent judgement in Delta Distilleries v. United Sprits Limited, the Supreme Court has ruled on the scope of S. 27 of the Arbitration and Conciliation Act, 1996 (Act or 1996 Act). In this short post, we comment on the relevant aspects of the judgement.

Facts:

Briefly, the facts that led to the decision are that in the arbitration proceedings between Delta Distilleries (Delta) and United Sprits Limited (USL), USL sought inspection of sales tax returns and sales tax assessment and appellate orders (Sales Tax Documents) relating to Delta. The request was denied by Delta. Consequently, an application was made before the arbitrator for production of these documents. The arbitrator allowed the application partially by ordering production of sales tax assessment and appellate orders. 

Subsequently, allegations of bias were made against the arbitrator who resigned and subsequently, a three member arbitral tribunal was formed. The tribunal refused to review the previous order passed by the arbitrator for production of the said documents. Delta refused to comply with the order. Consequently, the tribunal allowed USL to approach the court under Section 27 praying for a direction to Delta to produce the said orders.

Consequently, USL approached a Single Judge of the Bombay High Court which allowed the application and directed Delta to produce the sales tax assessment and appellate orders. Delta filed a special leave petition to the Supreme Court against the Single Judge’s Order on two grounds:

(1) the Single Judge did not have the competence to pass the order under S. 27 of the Act,
(2) the documents sought to be produced were confidential documents.

Decision:

In this post, we will deal with the court’s ruling on the first ground while briefly touching upon the ruling on the second.

As regards the first ground, the court rejected the contention of Delta that S. 27 (and S. 43 of the 1940 Act) did not contemplate passing of an order in the nature of the order by the Single Judge but was only for the purpose of calling witnesses. The Court held that the scope of the power under S. 27 includes the power to call a party to the arbitration or any third party. The Supreme Court held that S. 27 would be available to the tribunal “to seek assistance from the court where any person who is not cooperating with the Arbitral Tribunal or where any evidence is required from any person, be it a party to the proceedings or others.” The Court held that S. 27 can even be exercised against a party which is not appearing before the arbitral tribunal.

 Therefore, the Court dismissed the appeal.

Comments:
Two points, which are interrelated, are noteworthy.

One, the second ground raised by Delta against the Single Judge’s order was that the sales tax orders sought to be produced were confidential under the relevant tax laws. The Supreme Court rejected this contention. The court agreed that the Maharashtra VAT Act, 2002 provided that no court shall pass an order directing the tax officials to produce documents, returns or statements submitted to the tax officials. The court, however, held that while there was a bar against orders requiring government officials to produce such documents, there was no bar against an order directing the party to produce the same. 

Two, in the application filed before the Single Judge, USL impleaded the Assistant Commissioner of Sales Tax, Pune as Respondent as well. The Single Judge allowed the petition under S. 27 by directing the appellant to produce the documents. In the penultimate para of the judgement, the Single Judge observed:

“In that view of the matter, in ordinary course this Court would have passed the order directing the Respondent No.2 to produce the Assessment Orders on the failure of the Respondent No.1 to produce the same. However, since the learned AGP categorically stated that the record is not available with the Respondent No.2, as such a direction cannot be issued as against the Respondent No.2.”

The Supreme Court recognized that no court could order a government official to disclose documents, returns or statements made by the assessee in the course of proceedings before the tax officials bud did not rule on the correctness of the interpretation of the VAT Act by the Single Judge that records, statements or returns would not include assessment orders or appellate orders.