A Bit More on Reciprocal Arrangements under Section 44 of the 1996 Act

In the last decade (yes you read it right!) we wrote two posts (here and here) on the notifications relating to reciprocal arrangements under the Foreign  Awards (Recognition & Enforcement) Act, 1961 and the Arbitration and Conciliation Act, 1996. Thanks to inputs from readers, we were able to get hold of a few more notifications. In this post, we provide a consolidated overview of the notifications and the law on the subject. It would be great if readers could contribute to the list of notifications either by posting the notification's link on the comment box or by emailing it to lawbadri@gmail.com.

1. Source: Justice Bachawat's Law of Arbitration & Conciliation (5th ed. 2010), P.2264 ff. List of countries notified under the Foreign  Awards (Recognition & Enforcement) Act, 1961 (p. 2296): The countries are Austria, Botswana, Bulgaria, Central African Republic, Chile, Cuba, Czechslovak Socialist Republic, Denmark, Ecuador, Arab Republic of Egypt, Finland, France, German Democratic Republic, Federal Republic of Germany, Ghana, Greece, Hungary, Italy, Japan, Kuwait, Republic of Korea, Malagasy Republic, Mexico, Morocco, Nigeria, The Netherlands, Norway, Philippines, Poland, Romania, San Marino, Spain, Sweden, Switzerland, Syrian Arab Republic, Thailand, Trinidad and Tobago, Tunisia, USSR, UK, United Republic of Tanzania, and USA.
2. Source: Reply to RTI Application (here): Singapore, Malaysia, Canada, Australia, China, Hong Kong SAR and Macao SAR, Mauritius

Some Related Issues:

Whether Notifications issued under the Foreign  Awards (Recognition & Enforcement) Act, 1961 could be used for Awards after 1996 Act was brought into force?

Yes, guess so. Please see Section 85 which states: 

"85. Repeal and savings.—(1) The Arbitration (Protocol and Convention) Act, 1937 (6 of 1937), the Arbitration Act, 1940 (10 of 1940) and the Foreign Awards (Recognition and Enforcement) Act, 1961 (45 of 1961) are hereby repealed.

(2) Notwithstanding such repeal,—

(a) the provisions of the said enactments shall apply in relation to arbitral proceedings which commenced before this Act came into force unless otherwise agreed by the parties but this Act shall apply in relation to arbitral proceedings which commenced on or after this Act comes into force;

(b) all rules made and notifications published, under the said enactments shall, to the extent to which they are not repugnant to this Act, be deemed respectively to have been made or issued under this Act." (emphasis added).

Whether precedents enforcing of foreign awards can be cited in the absence of tracing the relevant notifications?

Will not hurt making such an attempt. In the last post in 2018, we had noted:

"We spoke to some of the practitioners in the field. They say that none of the respondents had raised such an objection. Even if they raise such an objection, it would be possible to cite previous judgements where awards for such territories have been enforced. But the question is whether such an objection has been raised in the first place in those decisions?"

However, it is possible for a counter-argument (where applicable) that the objection regarding reciprocity was not taken before the court which enforcement a foreign award.

In any case, to address the information gap, it would be useful for courts deciding on enforcement of foreign arbitral awards to specify the seat of arbitration so that such precedents could be cited, in the absence of copy of notifications. We find that in several decisions enforcement foreign awards, courts have not been mentioning the seat/ place of arbitration. It would be useful if they did so. 

Some judgments mention the seat and courts in those cases have enforced foreign awards from seats not mentioned in the notifications issued under the 1996 Act (here). Some such judgments rendered in the last three years are as follows:

Switzerland: Pasl Wind Solutions Private Limited vs. GE Power Conversion India Private Limited (20.04.2021 - SC) : MANU/SC/0295/2021(strictly, not a decision enforcing a foreign award)

USA: International Nut Alliance LLC vs. Johns Cashew Company (09.12.2021 - KERHC) : MANU/KE/3139/2021 

Finland: Finnish Fund for Industrial Corporation Ltd. vs. VME Precast Pvt. Ltd. and Ors. (14.10.2020 - MADHC) : MANU/TN/5710/2020

Egypt: Angelique International Limited vs. Public Electricity Corporation and Ors. (23.06.2020 - DELHC) : MANU/DE/1290/2020  

UK: Glencore International AG vs. Hindustan Zinc Limited (08.06.2020 - DELHC) : MANU/DE/1238/2020 (London Court of International Arbitration-LCIA- Award enforced); Peniel Cashew Company and Ors. vs. Ahcom Sarl (30.10.2018 - KERHC) : MANU/KE/2997/2018 (CENTA award); C and C Maritime Pte. Ltd. vs. Advance Surfactants India Ltd. (24.01.2019 - DELHC) : MANU/DE/0280/2019.

Lecture Series on International Investment Law: Lectures 16 to 30

Just before the Second Wave of Covid19 in India, we started off a lecture series introducing international investment law. As was stated in a previous post in this blog, the objective of the lecture series was to cover the fundamentals of International Investment Law and making the subject more accessible through short lectures (approximately 8 to 10 minutes). The lecture series is not restricted to any particular jurisdiction, although many of the examples provided relate to India. Overview of the first fifteen lectures is contained in this post. This post covers lectures 16 to 30.

Chapter 3: Substantive Standards of Protection I

Lecture 15: Fair & Equitable Treatment: An Introduction

In this lecture, we discuss one of the most widely used substantial protections under international investment law, that is, Fair and Equitable Treatment, or FET. We also deal with the FET clause in the India-UAE BIT, 2013 and the Brazil India BIT, 2020

Lecture 16: Fair & Equitable Treatment: Preliminary Aspects

This lecture deals with certain preliminary aspects of the FET standard, including its brief history and its nature and function.

Lecture 17: More on Fair and Equitable Standards

This lecture addresses issues such as whether FET standard is a part of customary international law relating to minimum standard of treatment and the evolution of FET standard

Lecture 18: India and the FET Standard

This lecture looks at India’s skirmishes with the FET standard in the White Industries Award and the Cairn BIT Award. Note that the purpose of this lecture series is to introduce readers to the subject and therefore, this lecture does not critically examines the Award insofar as the FET standard is concerned but would only provide a descriptive comment.

Lecture 19: Introduction to Full Protection and Security Standard

This lecture introduces the full protection and security standard. It talks about how the standard finds its place in certain Indian BITs and about the first case in BIT history, which pertained to this standard.

Lecture 20: More on Full Protection and Security Standard

Lecture 20 discusses the scope of the FPSS and provides an overview of its features.

Lecture 21: Full Protection & Security in LDA v India Arbitration

This lecture concerns the application of the Full Protection and Security standard in the Louis Dreyfus Armateurs SAS (France) v. India arbitration, which India successfully defended.

Lecture 22: Non-Impairment Standard: An Introduction

Lecture 22 discusses Non-impairment standard, which is another substantive protection in investment treaties. The lecture discusses the non-impairment.

Lecture 23: More on the Non-Impairment Standard

Lecture 23 discusses the measures that can constitute a violation of the non-impairment standard. The cases of EDF (Services) Limited v. Romania, ELSI Elettronica Sicula SpA, Siemens v. Argentina, LG&E Energy Corp v. Argentina have also been discussed.

Lecture 24: The Umbrella Clause

This lecture discusses the meaning, evolution, and variants of the Umbrella clause.

Lecture 25: More on the Umbrella Clause

This lecture discusses the case of SGS v Pakistan insofar as it relates to the Umbrella clause.

Lecture 26: Approaches to the Umbrella Clause

Umbrella clause has not received a uniform interpretation. Different tribunals, including the one in SGS v. Pakistan, have construed the clause differently.

Lecture 27: Nissan v India and the Umbrella Clause

This lecture discusses the recent case of Nissan v. India which relates to the Umbrella clause.

Chapter IV: Substantive Standards of Protection II

Lecture 28: Most Favoured Nation Standard

In this lecture, we discuss the Most Favoured Nation or the MFN standard.

Lecture 29: More on the MFN Standard

In this lecture, we cover the issues of exceptions to MFN standard and the temporal scope of the standard.

Lecture 30: MFN & Procedural Rules

In this lecture, we deal with an interesting topic under MFN-extension of MFN to procedural rules. The MFN standard has been construed to extend even to procedural provisions such as dispute resolution although MFN in itself is a substantive standard.

Lecture 2: History of International Investment Law from 1870 to 1914 (Script & Video)

Those watching this lecture series would recollect that in the last lecture, we discussed about the origins of the IIL wherein we saw that it evolved out of colonialism. We also discussed that many concepts that evolved out of colonialism and imperialism are used even in the latest of Investment treaties.

In this lecture we delve into the evolution of IIL in the first phase that is, between 1870 and 1914. But before we go further, those watching may refer to two interesting papers on the origins before 1870, one by Kate Miles, the author of the book which we referred to in last lecture, and the other by Anne-Charlotte Martineau.

The two papers are:

• Kate Miles, International Investment Law: Origins, Imperialism and Conceptualizing the Environment, 21 Colo. J. Int'l Envtl. L. & Pol'y 1 (2010); and
• Anne-Charlotte Martineau, A Forgotten Chapter in the History of International Commercial Arbitration: The Slave Trade's Dispute Settlement System, Leiden Journal of International Law (2018), page 1 of 23.

The first lecture was mainly based on Chapter I of Kate Miles book, whose content is similar to the first paper.

The second paper above is equally interesting: it traces the origins of the present system of IIL and Dispute resolution system in IIL to slave trade in the 16^th to 18^th centuries. It states that the institution of judges-conservators established to resolve disputes out of slave trade was the precursor to arbitral tribunals established for resolving disputes through international arbitration.

Interesting conclusions are drawn in the paper: one, contrary to the widely held belief that international law came to rescue slaves by advocating its abolition, international law created, supported and perpetrated the slave trade regime for at least three centuries.

The author speaks of ‘private’ dimensions of formal and informal imperialism. This important and interesting. Colonialism has its roots in corporations effecting economic and political control over the third world. East India Company in India an apt example. 

The author is therefore correct in saying that : “There is nothing neutral, normal or apolitical in investment law and adjudication.”

So, the evolution of IIL is not about good faith, treaties and precedents, but about blood, sweat and tears.

Now, coming to the evolution of IIL from 1870, this phase saw two prominent developments.

One was the entrenchment of the expropriation doctrine. Standards for compensation due to expropriation were developed. For example, the Convention of Friendship, Commerce and Extradition Between the United States and Switzerland, 1850 stated in Article 2(3):

“In case of [] expropriation for purposes of public utility, the citizens of one of the two countries residing or established in the other shall be placed upon an equal footing with the citizens of the country in which they reside, with respect to indemnities for damages they may have sustained.”

Thus, the standard for compensation on account of expropriation was national treatment.

In this phase, expropriation was considered lawful if certain conditions were met. These conditions were:

a) it was carried out for a public purpose;

b) it was not arbitrary or discriminatory; and

c) prompt, adequate, and effective compensation was paid.

It would be interesting to note that the phrase “prompt, adequate, and effective” was coined in 1940 by United States Secretary of State Cordell Hull in diplomatic correspondence with Mexico. This became the ‘Hull Formula’. Interestingly, Hull was awarded the Nobel Peace Prize in 1945 for playing a pivotal role in establishing the United Nations.

Another development in this period was the entrenchment of the international minimum standards and the national treatment doctrines and the tension between these concepts.

While US and other European powers subscribed to the international minimum standard rule, the countries in the third world, especially the Latin American nations advocated the national treatment rule. Their argument was that the international minimum standards rule impinged on their sovereignty and foreign persons could not be afforded a treatment that was beyond what a state offered to its citizens.

National treatment was also the second limb of the famous Calvo Doctrine. This doctrine arose from the ideas of Carlos Calvo, a jurist from Argentina, first published in 1868.

The first limb of the Calvo doctrine was that state sovereignty precluded states from interfering into the affairs of another state, either through diplomatic channels or by force.

Although the Calvo doctrine came to be looked upon with disfavour by the Western nations, it has had a considerable influence in the evolution of IIL.

This is possibly a precursor to the local exhaustion rule in international investment law.

More on the first phase in the next lecture.

Lecture Series on International Investment Law: Lectures 1 to 15

Recently, we had commenced a lecture series introducing the subject of International Investment Law. We have completed the first fifteen lectures of the lecture series. The lecture series is aimed at covering the fundamentals of International Investment Law and making the subject more accessible through short lectures (approximately 8 to 10 minutes). The lecture series is divided into various chapters addressing specific topics and each chapter contains several lectures.

In this post, we will provide links to the first fifteen lectures with a brief overview of each video.

[Note: The first few videos have feeble audio. Readers may use headphones. For subsequent videos, laptop's inbuilt speaker will do.]

Chapter 1: Chapter 1 : History & Nature of International Investment Law

Lecture 1: Origins of International Investment Law before 1870 (click on the lecture name)

Historically, International Investment Law has evolved in three distinct phases in the modern history: Phase I is the period from 1870 to 1914; Phase II is the inter-war period, between 1918 to1945, and phase III is the post-war period, beginning from 1945. But, even before the first phase (1870), certain developments in international politics have had influence in the evolution of IIL. This lecture deals with those developments.

Lecture 2: More About Origins & A Bit about Phase I

In this lecture we delve into the evolution of IIL in the first phase that is, between 1870 and 1914. But before we go further, those watching may refer to two interesting papers on the origins before 1870, one by Kate Miles, the author of the book which we referred to in last lecture, and the other by Anne-Charlotte Martineau.

Lecture 3: Inter-War Period & Evolution Thereafter

In this lecture, we will see how International Investment Law evolved during the inter-war period, between 1914 and 1945,. We will also discuss its evolution during the post-II world war phase till 1964.

Lecture 4: The Era of Dichotomy

In the last lecture, we saw that there are four phases through which IIL evolved after the World War II. We saw that the first phase, known as the era of infancy spanned up to 1964. In this lecture, we look at the Era of Dichotomy from 1965 to 1987.

Lecture 5: The Eras of Proliferation and Reorientation

In this lecture, we discuss how International Investment Law evolved through the eras of proliferation (1990-2007) and reorientation (2008- till date).

Chapter 2: Investment Treaty/ Contract

Lecture 6: Nature of Foreign Investment

In the first five lectures we introduced the subject and provided a historical overview of how IIL evolved. In this lecture, we will have a look at the nature of foreign investment.

Lecture 7: What is Investment?

In this lecture, we will answer the fundamental question: what is investment?

Lecture 8: What is Investment? Part II

In the last video, we discussed the concept of “Investment” and analysed two different types of definition of investment, taking the India-UAE BIT and the Brazil- India BIT as examples. We also saw the general practices regarding the definition of investment. In this video, we’ll discuss the ICSID practice and the Salini test on the definition of investment.

Lecture 9: Who is an Investor?

In this video we will be dealing with another important threshold question: Who is an investor?

Lecture 10: Natural Persons as Investors

In the last lecture, we discussed certain general aspects relating to the question: “who is an investor?”. In this lecture, we will look at how the question is answered from the perspective of natural persons.

Lecture 11: Legal Persons as Investors

In this, video, we will discuss various tests to determine the nationality of juridical persons.

Lecture 12: Who is an Investor? Treaty Shopping

In this lecture we will deal with an important aspect relating to the question "who is an investor?": Treaty shopping.

Lecture 13: Shareholders as Investors

The general principles regarding investor and investment apply equally to shareholders. This lecture deals with the law relating to whether shareholders could initiate investment treaty claims.

Lecture 14: Elements of an Investment Treaty

In this lecture, we will see the core elements of an investment treaty. We will also use the India-UAE BIT, 2013 and the Brazil India BIT, 2020 to provide an idea of how these provisions look in practice.

Chapter 3: Fair and Equitable Treatment

Lecture 15: Fair & Equitable Treatment: An Introduction

In this lecture, we will discuss one of the most widely used substantial protections under international investment law, that is, Fair and Equitable Treatment, or FET.

History of International Investment Law: Lecture Series on Introduction to International Law

In the past three months, we have been uploading a lecture every fortnight on the broad purpose of providing an introductory overview to international investment law. The purpose of these lectures is to make the subject more accessible. The lectures uploaded so far can be accessed from here. The first five lectures provide a brief historical overview of the subject. The transcript of the first lecture on the origins of international investment law before 1870 are dealt with in this post.

Lecture 1: Origins of International Investment Law before 1870

Lecture Link: https://youtu.be/_x57zCsHOxU

Hello and welcome to the video lectures on the Introduction to International Investment Law.

In this lecture series, we would be covering about 10-12 broad topics on the subject, and these would include important and controversial topics such as expropriation, Fair and Equal Treatment and Most Favoured Nation principles, as well as the latest developments, both in international investment law and international investor-state arbitration.

This lecture series can be taken up by students and others who are interested in getting an introductory overview of the subject.

Moving on to the first chapter of this series, “Nature & Evolution of International Investment Law”, we can see that historically International Investment Law has evolved in three distinct phases in the modern history:

Phase I is the period from 1870 to 1914; Phase II is the inter-war period, between 1918 to1945, and phase III is the post-war period, beginning from 1945.

But, even before the first phase, certain developments in international politics have had influence in the evolution of IIL.

For example, in 1778, USA and France concluded the first commercial treaty, known as the Treaty of Alliance; in fact there were many treaties and they are collectively called Treaties of Alliance. The treaty importantly provided for commercial relationship between both countries.

Then followed the various Friendship, Commerce and Navigation Treaties entered into between countries, especially between US and others. Take the example of the United States–Paraguay Treaty of Friendship, Commerce and Navigation of 1859.

These treaties protected individual and other rights such as:

• Protection of individuals and their property,
• freedom of movement and worship,
• assuring rights to trade and to engage in commercial enterprise,
• granting national treatment and most-favoured-nation status,
• allowing for access to ports, and
• granting navigation rights through territorial waters

One would note that even the recent most treaties guarantee these rights.

There were also Unequal or capitulation treaties. These conferred one-sided rights on the dominant conquering colonizer. These were the products of actual or threatened use of force by the dominant powers, especially those from the West. Although these treaties were couched in neutral language, they were actually meant to protect the rights, property and investment of the colonizer.

Examples of such treaties include treaties between Western powers and China between 1840s to 1860s.

In fact, it has been argued that the imposition of such unequal treaties was a key legal strategy in the European colonization. Key features of these treaties included:

• Travel prerogatives of foreign traders,
• the securing of extensive trading and investment rights,
• non-discriminatory commercial access to the host state,
• grant of concessions to foreign companies,
• the protection of Christian missionaries,
• leasing or ceding of territory to foreign states, and
• governance powers, including establishment of parallel systems of governance.

Thus, the origins of the IIL themselves have been tainted by colonialism and the superstructure of IIL was built with colonialism and power dynamics between nations as the base.

Another important aspect is the evolution of the law on diplomatic protection to alien property in the 19th and the early 20th centuries.

A new branch of international law began to emerge in the 19th century known as diplomatic protection of aliens. This concerned establishment of an internationally acceptable minimum standard for the treatment of foreign persons and foreign companies, protection of person and property, etc. Violation of these standards meant that the host state was responsible and this meant military or other intervention by the state to which that alien belonged.

For more information on this, readers can refer to the first chapter of the book by Kate Miles titled “The Origins of International Investment Law: Empire, Environment and the Safeguarding of Capital” and published by the CUP in the year 2013.

Symposium Alert: XIV Annual NLSIR-Samvād Partners Symposium on Strategising a Healthcare Framework for India: Headways, Dilemmas, and the Way Forward

 [Announcement of NLSIR Symposium as received from NLSIR is posted below]

About NLSIR

The National Law School of India Review (NLSIR) is the flagship journal of the National Law School of India University, Bangalore (NLSIU). For over 30 years now, NLSIR has constantly sought to encourage legal scholarship on issues of relevance to legal practitioners. In 2009, we became the first Indian student-run journal to be cited by the Supreme Court of India in its decision in Action Committee, Unaided Private Schools v. Director of Education. Notably, we have also been cited recently in the Supreme Court’s landmark judgment, Justice K.S. Puttaswamy v. Union of India, which established the Right to Privacy in India.

About the Symposium

In furtherance of our mandate to encourage legal scholarship and push the boundaries of law and policy, we are organising the XIV Annual NLSIR-Samvād Partners Symposium on Strategising a Healthcare Framework for India: Headways, Dilemmas, and the Way Forward. The Symposium will be held virtually on May 9, 2021 and is completely free to attend. The Symposium is divided into three sessions, the outlines of which are available in the attached Concept Note. Each panel will be followed by a Q&A session, where attendees will have the opportunity to interact with the panellists.

 This year, Justice Ravindra Bhat, Supreme Court of India, will be delivering the Inaugural Address and Dr. Soumya Swaminathan, Chief Scientist, WHO, will be delivering the Introductory Address to the Symposium.

Sessions

 

Session I is titled 'Assessing India's Clinical Trial Rules: Developments and Some Festering Concerns for the Healthcare System'. In this session, we seek to engage in a discussion on India's clinical trial regime and its particular complications with regard to scientific and traditional medicines. 

 

Keynote Speaker: Mr. Murali Neelakantan - Principal Lawyer, Amicus and former Global General Counsel, Cipla Limited

The panellists for Session I are:

1.     Mr. Milind Antani - Lead, Pharma, Life Science, and Healthcare Practice, Nishith Desai Associates

2.     Prof. Padmavati Manchikanti - Professor, Rajiv Gandhi School of Intellectual Property, IIT Kharagpur

3.     Mr. Dinesh Thakur - Public Health Activist and Expert in Pharmaceutical, Biomedical Product Development, and Drug Regulation

4.     Ms. Nivedita Saksena - Digital Health Policy Fellow, India Digital Health Network

Session II, titled 'The Ecosystem of Healthcare: Patent and Trade', will consider two competing interests - incentives for research and development on the one hand, and accessibility of vital drugs on the other hand - and their implications amidst the Covid-19 crisis. 

 Keynote Speaker: Justice Prabha Sridevan - Retired Judge, Madras High Court and Chairperson of the Intellectual Property Appellate Tribunal from 2011 to 2013

The panellists for Session II are:

1.     Prof. Jayashree Watal - Adjunct Professor of Law, Georgetown University and Counsellor, Intellectual Property Division of the WTO from 2001 to 2019

2.     Mr. Rohan K George - Partner, Samvād: Partners

3.     Prof. Padmashree Gehl-Sampath - Fellow and Senior Advisor of the Global Access in Action Program at the Berkman Klein Center, Harvard University

4.     Mr. Prashant Reddy - Lawyer and Expert on Intellectual Property Law and Drug Regulations

5.     Ms. Neha Srivastava - Partner Designate, Remfry & Sagar

Session III is titled 'The Law and Model Framework to Provide Universal Right to Health and Healthcare Infrastructure'. In this session, we will explore the existing public healthcare system in India, its varied actors and stakeholders, and endeavour to conceptualise a universal right to healthcare in India. 

 Keynote Speaker: Mr. Anand Grover - Senior Advocate, Supreme Court of India

The panellists for this session are:

1.     Prof. S.V. Joga Rao - Visiting Professor, NLSIU and Healthcare Consultant at Legalexcel

2.     Ms. Arkaja Singh - Fellow, Centre for Policy Research

3.     Mr. Akshat Agarwal - Senior Resident Fellow, Vidhi Centre for Legal Policy

4.     Mr. Varun Jhaveri - Officer on Special Duty at the National Health Authority, Government of India

Registration

Please use the following link to register for the Symposium: https://docs.google.com/forms/d/e/1FAIpQLSdsouhY1bifv355PKzNzNGkqmKyoTiVAmAs-379bcJC7yrEEg/viewform. Since slots are limited, we urge you to register as soon as possible. We hope to see you at the Symposium and would love to have you engage with the discussions on this pertinent theme.

Please feel free to contact the undersigned in case you have any queries. You can also mail us at nlsir@nls.ac.in.

Regards,

Viraj Ananth (+91 81979 98480) and Kashish Makkar (+91 96369 41027),

Editors-in-Chief, National Law School of India Review '20-'21

Time as Essence in Construction Contracts: Need for a Comprehensive Relook

The issue of time as essence in construction contracts is controversial and is frequently litigated. The law on the subject is largely unsatisfactory. In a paper titled "The Law on Time as Essence in Construction Contracts: A Critique" published in Volume 8 Issue 1 of the RGNUL Financial and mercantile Law Review (here), the law on the subject is critically evaluated. The paper argues that the precedent on the issue, Hind Construction Contractors v. State of Maharashtra, AIR 1979 SC 720 ("Hind Construction"), was wrongly decided and requires reconsideration. It also argues that:

• Hind Construction is no more relevant to the current times and provides incentives to inefficient contractors leading to delay in project completion; 
• Contracting parties do not appear to have circumvented the adverse effect produced by Hind Construction through the use of appropriate language in their contracts despite various decisions following the said decision; and 
• One of such reasons for the phenomena appears to be a lack of direction by courts as to what contracting language could constitute future courts to construe a contractual condition providing that time is of the essence as such.

The paper concludes by arguing that concludes by highlighting possible contractual clauses and contract management strategies that could further party intent that time is of the essence in construction contracts notwithstanding Hind Construction and later decisions following it.

Abstract of the Paper is provided below:

"The concept of time as essence in construction contracts is a controversial topic. Even though parties routinely provide in their agreements that time is of the essence, these clauses inevitably figure in construction disputes. Arbitral tribunals and courts have mostly decided such disputes holding those clauses to be of no legal effect, mainly by relying on the decision of a three-judge bench of the Hon’ble Supreme Court in Hind Construction Contractors v. State of Maharashtra. This paper argues that Hind Construction was wrongly decided, that it is not good law and that it requires reconsideration given the changing times. The paper further notes that parties do not appear to have circumvented the adverse effect of Hind Construction. Usually, in such situations, there is a change in contracting behaviour by the use of appropriate contracting language. Perhaps, this is due to the lack of direction by courts as to what appropriate language could be used in contracts to make time as the essence of the contract. This paper concludes by suggesting possible methods by which courts and arbitral tribunals could validly enforce time-as-essence clauses."

Critique of the paper is welcome as comments to this post. Readers can also write to lawbadri@gmail.com

* Image from here.

Supreme Court's Suggestion on Providing for Appeals against Orders U/s 11: Whether Correct?

This short post discusses the supposed anomaly identified by the SC in Section 11 of the 1996 Act (as amended) in that it provides that while an order in Section 8 is appealable under Section 37 and an order under Section 11 is not. The relevant quotes from the judgment of the SC in the recent case of Pravin Electricals Pvt Ltd v Galaxy Infra and Engineering Pvt Ltd. are posted at the end of this post.

In short, the suggestion of the SC may not be workable and could lead to further delays in the constitution of the Tribunal. The law as it stands today is that an appeal from an order under Section 11 is not appealable except through the SLP route.  Note that S. 11 is not a trial  by itself but is only intended to aid the parties to constitute the arbitral tribunal. If the suggestion of the SC is accepted, it would simply add one more layer to the current process which is already time-consuming, costly and cumbersome. See, this article, which empirically provides an overview of how long it takes for the arbitral tribunal to be constituted where appeals are filed to the SC from HC orders. 

The following table, noted in the above article, represents the time taken from the date of application to the High Court (HC) for appointment of arbitrator till the date of final disposal by the Supreme Court of appeal from the order of the HC: 

Time taken (Months)	Petitions from date of appointment to final disposal by Supreme Court	Petitions from date of arbitration notice to final disposal by Supreme Court
Up to 12	3	2
13-36	40	38
37-60	17	18
61-84	15	15
Over 84	8	10
Total	83	83

The data collected up to 2011 is available here. 

As the data shows above, in most cases, it has taken more than a year for the courts from the date of notice of arbitration till the data of final disposal (of appeal) appointing or rejecting appointment petition for arbitrator. The data since 2011 could be collected and analysed but this blawgger is not really sure if there would be a remarkable improvement in the disposal rate necessitating a contrary view from what is noted above. [this para has been slightly modified after posting]

The purpose of Section 8 is totally different from that of Section 11. The limited purpose of Section 11 is to enable constitution of tribunal. Whether any point would be served if an additional layer of courts would be added needs to be examined. There might be an "anomaly" in treatment of S. 8 petitions and S. 11 petitions insofar as appeal is concerned but that does not mean that an amendment has to be carried out. Doctrinal consonance cannot triumph necessity.

Extracts from Pravin Electricals Pvt Ltd v Galaxy Infra and Engineering Pvt Ltd. 

"21. However, by a process of judicial interpretation, Vidya Drolia (supra) has now read the “prima facie test” into Section 11(6A) so as to bring the provisions of Sections 8(1) and 11(6) r/w 11(6A) on par. Considering that Section 11(7) and Section 37 have not been amended, an anomaly thus arises. Whereas in cases decided under Section 8, a refusal to refer parties to arbitration is appealable under Section 37(1)(a), a similar refusal to refer parties to arbitration under Section 11(6) read with Sections 6(A) and 7 is not appealable. In the light of what has been decided in Vidya Drolia (supra), Parliament may need to have a re-look at Section 11(7) and Section 37 so that orders made under Sections 8 and 11 are brought on par qua appealability as well."

Take or Pay Obligations in Fuel Supply Agreements: An Overview

Contractual clauses that obligate the buyer to take delivery of a pre-determined quantity of natural gas or other fuel or pay the monetary equivalent of the pre-determined quantity of fuel in case of failure to take delivery are known as take or pay (TOP) clauses. TOPC (TOPC) have been justified from the seller’s point of view on the ground that these clauses help the seller recoup substantial capital investment.

TOPC have been in vogue in the natural gas industry for more than half a century. At the same time, they have been criticised as anti-competitive and anti-consumer. Consequently, the validity of TOPC has been challenged in judicial forums on numerous legal grounds.

The challenges have been more frequent when end-consumers, such as power-producers (using gas as the raw material), are unable to use the committed quantity of gas for consumption owing to circumstances beyond their control. TOPC have also been questioned especially when the prices of natural gas supplied are higher than those of alternative fuels or spot market prices, thereby encouraging buyers to go for such sources, and in economic rescission where demand for gas would be considerably lower than anticipated by the buyer.

Consonant with international practice, TOPC are prevalent in fuel supply agreements in India. In the forthcoming paper to be published in the Dr. Ram Manohar Lohiya National Law University Journal (2020), the manner in which these clauses have continued to be used in fuel sales agreements despite legal challenges under the rubrics of various laws in India has been analysed.

The paper first provides a brief overview of the history and the economic rationale for the continued use of TOPC. It describes the legal developments pertaining to the clause from competition law, contract law and electricity law perspectives. Considering the use of such clauses world over, an international perspective is also provided. The paper concludes by arguing that although TOPC are here to stay, various abuses surrounding TOPC have been, and are being, duly addressed in Indian law.

Padia Timbers & Contracting Through Tendering Process

A recent decision of the Supreme Court in Padia Timber v Vishakapatnam Port Trust is interesting on many counts. One, it is a rare decision by the Supreme Court construing general contract law (Sections 4 and 7 of the Indian Contract Act, 1872. Two, the Supreme Court overturned the decision of the trial court and the High Court notwithstanding that the case does not involve any new question of law that courts previously had not dealt with but that the lower courts (trial court and the High Court) did not deal with in this case. Three, the decision throws considerable light on government contracting practices and can act as a context in discussing such practices.  Four, this case relates to a notice inviting tender that was floated more than thirty years back (1990)! The matter was heard in the SC several times between 2007 and 2011 but it appears that the matter was not heard between 2011 and 2018.

The judgment reiterates the position that acceptance should be unconditional as per Section 7 and various decided cases. 

On facts, when  the appellant, Padia Timbers, submitted its bid, it made a revised quotation stating that inspection would have to be conducted at Padia Timber's depot an not otherwise. This is where government tendering practices are to be noted. Given the requirement of a rigorous and complaint free tendering process, government contracts usually state that the bidder must "accept" all the conditions stated in its offer.  If that is not the case, the Government entity generally rejects the bid if the non-acceptance pertains to a material provision. In this case, the error committed was that the Government entity went ahead with the tendering process and awarded the contract to the bidder despite deviation from the condition regarding inspection. What really happened making the port trust to proceed with the tendering process and awarding the contract is not clear and will be known if the tender file is perused.

The Court ultimately ordered the Port Trust to refund the earnest money to Padia Timber at an interest rate of 6% per annum from the date of institution of the suit (1994) till the date of refund.