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.

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.

Reciprocal Arrangement Countries under Section 44 of the 1996 Act

In one of the conferences on International Arbitration held in May this year, a partner of a Delhi-based law firm remarked that nobody knew the complete list of territories with which India had a reciprocal arrangement as per Section 44(b) of the Arbitration and Conciliation Act, 1996. The remark prompted this blawgger to attempt to find out such a list. This short post deals with this the list of such territories.

"Section 44: Definition.- In this Chapter, unless the context otherwise requires, "foreign award" means an arbitral award on differences between persons arising out of legal relationships, whether contractual or not, considered as commercial under the law in force in India, made on or after the 11th day of October, 1960-

(a) in pursuance of an agreement in writing for arbitration to which the Convention set forth in the First Schedule applies, and

(b) in one of such territories as the Central Government, being satisfied that reciprocal provisions have been made may, by notification in the Official Gazette, declare to be territories to which the said Convention applies."

Section 44 defines the term "foreign award" for the purposes of Chapter I, Part II of 1996 Act. According to it, a foreign award must satisfy the following conditions:

• It must be an arbitral award on the differences between persons.
• Such differences must have arisen out of legal relationships, whether contractual or otherwise.
• The award was in pursuance of an arbitration agreement to which the New York Convention applied.
• The award was made in one of the territories to which the Convention applied and the Central Government had notified that such a country had made reciprocal provisions for enforcement of such awards made in India.

Justice Bachawat's Law of Arbitration & Conciliation (5th ed. 2010), P.2264 ff. has an excellent discussion on the subject and one may refer to the same for detailed analysis. The said commentary (at p. 2296) provides a list of countries that were notified under Section 2 of the Foreign Awards (Recognition and Enforcement) Act, 1961 as having reciprocal provisions for enforcement of Indian awards.  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.

It may be noted that the Notifications declaring these countries to have provided reciprocal arrangements is valid even under the 1996 Act, in view of Section 82(2)(b) of the 1996 Act which provides: "(2) Notwithstanding such repeal-...(b) all rules made and notifications published, under the said enactments [Arbitration (Protocol and Convention) Act, 1937, Arbitration Act, 1940, and Foreign Awards (Recognition and Enforcement) Act, 1961] 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." [fn. 45, p. 2296, Justice Bachawat's Law of Arbitration & Conciliation (5th ed. 2010)]

Considering the availability of the notified territories in the public domain, ambiguities, if at all, should have arisen in respect of territories notified subsequent to the enactment of the 1996 Act. Consequently, an application under the Right to Information Act, 2005 dt. 22.05.2013 was given to the Ministry of External Affairs seeking reply on the list of territories notified under Section 44(b) of the 1996 Act. The Ministry forwarded the said application to the Department of Legal Affairs, Ministry of Law and Justice on 08.07.2013. It took more than two months for the Department to find out the territories under Section 44(b) of the 1996 Act. As per the Reply dt. 16.09.2013, the Notified countries are Singapore, Malaysia, Canada and Australia.

The CPIO could not find the notification number for the Notification of Australia. The Reply can be accessed from here.

It may be noted that on 19.03.2012, the Department of Legal Affairs had notified China, Hong Kong SAR and Macao SAR as territories under Section 44(b) (See, MANU/LAFF/2012) . However, the CPIO has not disclosed the same. 

Recent Developments in Indian Arbitration

In this short post, we give an overview of two recent developments in Indian Arbitration.

 

The first one pertains to the doctrine of separability and its application in the context of Section 45 (Power of Judicial Authority to Refer Parties to Arbitration) of the Arbitration and Conciliation Act, 1996 (1996 Act). Mr. Mihir Naniwadekar of the Indian Corporate Law Blog has written a post on the seeming conflict in approaches between the Supreme Court and the Bombay High Court on applying the separability doctrine in relation to the question as to whether the arbitration clause in the agreement that was novated stood extinguished. The issue is not only that of separability but also, and perhaps more importantly, of competenz-competenz- What types of jurisdictional questions pertaining to novation would the Judicial Authority/Designate decide? See the post in Indian Corporate Law blog for further details.

 

The next development is the case of Embassy Property Developments Limited v. Jumbo World Holdings Limited decided by the Madras High Court on 20 June 2013. The case is interesting because it deals in detail with the availability of interim measures under Section 9 against third parties. The availability of interim measures against third parties is a topic of great interest with there emerging a bit of clarity on the law. Read the posts that appeared in the Lex Arbitri Blog and this blog (series of posts) and also read this paper on the topic.

 

Now, coming back to the Embassy Property case, the Division Bench of the Madras High Court  held that interim measures could be ordered even against third parties to the arbitration agreement under Section 9 of the 1996 Act. On the contours of such power, the court held: 

"We are of the view that the power of this court, under Section 9 of the Arbitration and Conciliation Act, 1996, is wide in scope and it would extend even to third parties in whom the properties or goods are vested, even though such parties may not be a party to the arbitration clause in an agreement. Even though section 9 of the Arbitration and Conciliation Act, 1996, could be invoked only by a party to the arbitration agreement, the interim relief could be granted by this court even against the third parties. Unless such a power is available, under section 9 of the Arbitration and Conciliation act, 1996, the parties to the arbitral agreement could be frustrated even if they succeed in the arbitral proceedings before the Arbitration Tribunal concerned."

 

As the emphasised words clearly suggest, the High Court held that where the goods/ properties that pertain to the arbitration, interim measures would be available against third parties who claim/ enjoy rights relating to such goods/ properties. 

 

The court also observed that since Section 9 aims at preserving and protecting the subject matter of the arbitration, relief would be available even if the subject matter is in the hands of third parties. As long as a nexus is available between the subject matter and the parties to the arbitration agreement, the court could order interim measures even against third parties.