Should the Arbitration Clause be Given a Mythological Status?

Developments in the last few decades, including the very recent ones in the USA (see in American Express Co. v. Italian Colors Restaurant and preliminary comments here and here), have accorded a near-mythological status, so much that arbitration clauses have been enforced when the effect of the same clearly promoted anti-competitive and anti-consumer behaviour. As compared to such developments, the Indian legal system, with all its faults, provides adequate remedies for the party with weak bargaining power. For instance, a consumer can opt either to arbitrate or to approach the consumer fora when a binding arbitration clause exists in the consumer contract. The question, at the end of the day, is whether arbitration  as a process and the arbitration clause really deserves the place it is given.

Recent Developments in English Law on Arbitration

We bring to your attention a recent decision of the UK Supreme Court in Ust-Kamenogorsk- Hydropower Plant JSC v. AES Ust-Kamenogorsk Hydropower Plant LLP [2013] UKSC 35. In the said decision, the question before the Supreme Court pertainined to the power of English court to order anti-suit injunction in courts outside the European regime where there is an arbitration agreement even if there is no intent on the Applicant to invoke arbitration. The question, in other words, was whether an English Court could injunct non-European foreign court proceedings if the contract provided for London seated arbitration even if the Applicant did not prefer to invoke arbitration.

 

In a unanimous decision, the UK Supreme Court held that such a power existed under Section 37 of the Senior Courts Act, 1981. The effect of the decision is to preserve the efficacy of choosing London as the venue of arbitration.

 

[hat tip: Herbert Smith Freehills Arbitration Notes- can be accessed from here.]

In Mauritius Commercial Bank Ltd v Hestia Holdings Ltd and Another [2013] EWHC 1328 (Comm), the English High Court (Commercial Court) has held valid an exlcusive jurisdiction clause which gives the option to one of the parties to initiate proceedings elsewhere than the agreed jurisdiction. In the case, the contract provided that the courts at England would have exclsuive jurisdiction to settle any dispute  in respect of the Agreement. In addition, it also provided, "...the Lender shall not be prevented from taking proceedings related to a Dispute in any other court in any jurisdiction. To the extent allowed by law the Lender may take concurrent proceedings in any number of jurisdictions."

 

[hat tip: Herbert Smith Freehills Arbitration Notes- can be accessed from here.]

National Law University Jodhpur Law Review: Call for Submissions

National Law University Jodhpur Law Review

Call For Submissions

NLUJ Law Review is the flagship publication of National Law University, Jodhpur (NLUJ). The Review is student-edited and publishes one volume every year comprising of two separate issues. Each issue contains submissions by student members of the Review, NLUJ students and other external contributors such as law students and professors, practicing lawyers and other members of the legal fraternity.

The Review was established in order to become a formidable instrument in providing impetus to legal research in India. However, beyond contributing to the legal academia, the Review realises the growing paradox in legal scholarship, in that, most journals have increasingly focussed on being published rather than being read. The Review believes that legal scholarship will only truly realise its raison d’être when it plays a more tangible role in the lives of students, professors, lawyers and judges. Thus, the Review is committed to the cause of increasing the readability of published legal scholarship and relieving it of some of the esotericism it seems to have acquired.

Consequently, the Editorial Board invites original and unpublished Articles, Notes and Book Reviews for the Review’s upcoming Volume 2. Although the Review accepts submissions on a rolling basis throughout the year, the last date for a submission to be considered for publication inVolume 2, Number 1 is August 5, 2013.

Brief Submission Guidelines

¨     Submissions should be made via email at lawreviewnluj@gmail.com in Microsoft Word format.

¨    The Review has a word limit of 20,000 words or fewer (including footnotes) for Articles; 15,000 words or fewer (including footnotes) for Notes; and 10,000 words or fewer (including footnotes) for Book Reviews. However, the Editorial Board may make exceptions to this rule on a case-by-case basis.

¨   Authors are strongly recommended to use footnotes instead of endnotes. Furthermore, text and citations should conform to the 16^th edition of The Chicago Manual of Style.

¨      Please include an abstract of your submission with the text.

¨      Since we review submissions anonymously, we request you not to include your name, affiliation, or any other identifying information in any part of the submission including the cover page, footnotes and headers. Instead, we request you to indicate your name and contact number along with any other information you deem necessary, in the body of the email. Resumes and biographical information are not required to be provided.

¨      You are required to provide datasets with all empirical works so that third parties may replicate the published findings. Exceptions may be made to this rule to the extent necessary to protect privacy or confidentiality.

A Limited Power of the Arbitral Tribunal to Review: ATV Projects v IOC

We have, in this blog, written a bit about the doctrine of functus officio in arbitration (here and here). In a drastic departure from the said rule, a Division Bench of the Delhi High Court has stated that an arbitral tribunal could review its own decision made under Section 25 of the Arbitration and Conciliation Act, 1996 (1996 Act). The Division Bench reiterated its decision in another case. This post provides a descriptive comment on the case. 

Case: ATV Projects Ltd. v. Indian Oil Corporation Ltd. 

Case Details: LPA No.862/2004 dt. 29.04.2013

Coram: Murugesan, C.J. and Rajiv Sahai Endlaw, J.

Facts:

Disputes arose between ATV Projects (ATV) and Indian Oil Corporation (IOC) under contract. ATV referred the disputes to arbitration. Due to inaction from IOC in participating in the appointing process, ATV approached the District Court under Section 11 of the 1996 Act (this happened in the pre-Patel Engineering period- 2002). An arbitrator was appointed by the Court.

After the arbitrator entered into reference, ATV, the Claimant did not file the Statement of Claim. Hence, the arbitrator pass an order that the Claimant lost its right to file the Statement of Claim (Order). IOC submitted before the arbitrator that it had counter-claims against ATV. Hence, the same were filed by IOC. Within three months from the Order, ATV applied to the Tribunal for recalling the order and the same was allowed (Recall Order). 

IOC filed a writ petition against the Recall Order. The Single Judge decided that the writ petition was maintainable and set aside the Recall Order on passing that order the mandate of the arbitrator had terminated, making him functus officio (Indian Oil Corporation Ltd. v. ATV Projects India Ltd. 112 (2004) DLT 701). IOC filed an intra-court appeal in 2004. During the pendency of the appeal, the court allowed the tribunal to continue with the arbitral proceedings but stayed the delivery of the final award.

Arguments:

By the time the hearing in the Appeal commenced, the same Division Bench of the High Court had already delivered a decision in Awasthi Construction Co. v. NCT of Delhi (2012) which held the judgement of the Single Judge in IOC v. ATV Projects as wrong. Hence, the Division Bench asked the counsel for the parties to restrict their submissions to the question as to whether Awasthi Construction required re-consideration. The primary submission of ATV (Appellant)  was that a writ petition was not maintainable against an order of the arbitrator as was held in N. Jayalaxmi v. R. Veeraswamy 2004(1) Arb LR 31 (AP).  IOC (Respondent) argued that Awasthi Construction fails to note the judgements in Punjab Agro Industries v KS Dhillon (2008) 10 SCC 128 and Punj Lloyd v. Petronet MHB (2006) 2 SCC 638 holding that writ remedy was available in respect of arbitral proceedings.

Decision:

The decision was based chiefly on Patel Engineering, Awasthi Constructions and judgements of High Courts on the issue. Below is a summary of the same:

•  Punjab Agro Industries v KS Dhillon (2008) 10 SCC 128 and Punj Lloyd v. Petronet MHB (2006) 2 SCC 638 were held as the law applicable was the Pre-Patel Engineering Law. After SBP & Co. v. Patel Engineering, writ remedy did not lie against the order of Chief Justice/ Designate under Section 11. 
• There are decisions of the High Courts to the effect that Writ Petition was maintainable against an order of the High Court.
• In Senbo Engineering v. State of Bihar, the Patna High Court held that the arbitral tribunal has sufficient powers to recall its orders made under Section 25(a) of the 1996 Act. [Section 25(a) reads: "25.Default of a party.- Unless otherwise agreed by the parties, where, without showing sufficient cause,- (a) the claimant fails to communicate his statement of claim in accordance with sub-section (1) of section 23, the arbitral tribunal shall terminate the proceedings;]
• A Single Judge in the Bombay High Court in Anuptech Equipments Ltd. v. Ganapati Co-op Society (1999) had held that a writ was maintainable  from an order under Section 25(a). The same Judge sat as the Chief Justice of the High Court of Allahabad held in SK & Associates v. Indian Farmer & Fertilizers Co-op Ltd. MANU/UP/2357/2010 and held a writ petition to be maintainable against an order of the arbitrator. The Bombay High Court has held in Rashtriya Chemicals Fertilizers Ltd .v .JS Ocean Liner that writ remedy was available but must be exercised sparingly.
• Although the Supreme Court in State of Arunachal Pradesh v. Damani Construction Co. (2007) 10 SCC 742 held that the arbitrator does not have the power of review of its award, in the context of the power of an industrial adjudicator, the Supreme Court has affirmed in Grindlays Bank v. CGIT (1980) Suppl. SCC 420 and in Kapra Mazdoor Ekta Union v. Birla Cotton Spg & wvg. Mills Ltd. (2005) 13 SCC 777 that the power of procedural review (and not a review on merits) is available. There, it was held that justice demanded that the adjudicator be empowered to correct a procedural defect or an inadvertent error in order to prevent abuse of process. Damani Construction concerned with the power of review of the arbitrator of its award, which was a review on merits.
• Section 25(a) does not provide that termination of the proceedings shall take place automatically in case the Claimant fails to communicate his Statement of Claim. Discretion is available to the tribunal to look into the sufficiency of the cause for failure to do so. 
• Here, drawing a distinction between showing sufficient cause before or after the termination of the proceedings  would be too superficial.
• This reading of the law is in line with the principle that the 1996 Act should be interpreted so as to make the alternative dispute resolution mechanism effective and not in a way to make the same cumbersome.
• Interpreting otherwise would make arbitral proceedings amenable to challenge under writ jurisdiction and the same would also be inefficient for parties located far away from the High Court.
• Sections 19(2) empower the parties to agree on the procedure of arbitration. The parties could even expressly provide for the power of review or revival of arbitration proceedings and such an agreement would be binding on the tribunal.
• In case the Tribunal exercised such a power, following would be the consequences:
• Challenge to the order by the tribunal of restoration of proceedings would be available as per Section 34 of the Act.
• In case the tribunal terminates the proceedings if it is not satisfied with the sufficiency of the cause, the said decision would be an award under the Act and can be challenged under Section 34.
• Section 32 (termination of proceedings) provides for termination of arbitral proceedings either by way of an award [Section 32(1)] or by way of an order [Section 32(2)]. Since a decision dismissing the application for review/ recall of the termination order does not come within the scope of Section 32(2), the said decision would be an award under Section 32(1). 
• Since such an order would be an "award" the same shall be accompanied by reasons in line with Section 31(3) of the Act.
• If writ remedy is available, then it would empower High Courts to exercise jurisdiction against private parties and arbitrators which is not desirable when an there is a remedy available within the Act itself.
• In the case, since the tribunal was satisfied with the sufficiency of the cause shown, its order to recall the termination order and proceed with the arbitration is valid.

Consequently, the court allowed the appeal, set aside the order of the Single Judge and directed the arbitrator to continue the arbitral proceedings.

Political parties under scanner

A ruling of Central Information Commission is creating ripples. Some hails the ruling of bringing political parties under the public's scanner. Some has raised brows and questions its prudence. It would be interesting to see the Government's official position on the issue.