"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.

Thursday, September 30, 2010

The Ayodhya Verdict

The decision is out. Court has said Ram was born in the place beneath the main dome of the erstwhile Mosque. Channels have qualified judgments as ‘astonishingly once sided’, ‘panhchayati’ and ‘paving way to reconciliation and settlement’. One commentator even said that the judgment has gone all in favour of the Hindu’s at the same time showing magnanimity to the Muslims. Some call it a political decision making than legal. For some, it is a welcome decision whereas for others it is partially disappointing and both sides have registered their intention to go on appeal all the same.

I had occasion to gloss over the summaries of the judgments and thought the reasoning given by S U Khan (in the summary) for the division as joint possession for a long time as appealing. Could not stop musing, had there been more than three claimants! But I am sure the promised gargantuan judgments will have findings relating to title, ownership and possession of the property that the judges decided for apportionment. There is law to back the decision and not mere sense of reconciliation.

While listening to the responses of lawyers and opinion makers I could find at least two camps. One that find fault with the judgment because of the perceived lack of legalese, going on the reconciliatory way and arriving at a formula verdict which was asked neither by the plaintiffs nor by the respondents. Others exalt the judgment for its practicality and problem solving potential. My initial reaction was that of equating the judges with the Karta of the family who lets the warring heirs go on their own ways partitioning the property for peace.

What intrigued me in all these is the role of the judiciary. Is it just to apply the law without any concerns about the repercussions it could create, or find an amicable settlement, may be even tweaking the law? True, we call the courts court of law but it is also a court of justice. Does the demand of justice adorn the courts the problem solving mandate through the methods of law and if no way found there through notions of good conscious and equity? Or will it be good to leave this part to the other branches governance and politics and courts confine only to law and legality, doubting judges’ suitability and capability to deal with issues other than law? Would we want a dynamic court or letter of law court? Pros and cons are on both sides but I, in the background of this judgment, would support a court with problem solving capabilities than a mere black letter court.

Wednesday, September 29, 2010

On the contempt of court proceedings initiated against Advocate Prashant Bushan

A Statement by the Asian Human Rights Commission. AHRC is a Hong Kong based Human Rights Organisation.

INDIA: Test of honesty for the country's judiciary or an ode on its demise

The contempt of court proceedings initiated against Advocate Prashant Bushan in the Supreme Court of India for the allegations he made against some of the former Chief Justices of the country will test the maturity of India's judicial system and that of its democratic framework. Indeed the Court has a statutory right to initiate proceedings against anyone, suo motu or through a petition presented before it. So have Prashant, and every other citizen in the country, a right to express their opinion of what they believe is to be true. Unfortunately, the tainted image of the Indian judiciary is one among them, whether the judges like it or not.

In an interview with Thelka magazine, published on 5 September 2010, Prashant alleged, "… that out of the last 16 to 17 Chief Justices, half have been corrupt". Through an Amicus Curiae petition filed by a lawyer, Mr. Harish Salve, the Supreme Court of India issued notice to Prashant asking him to show cause why his statement and opinion should not be treated as 'contempt of court'.

Prashant's affidavit filed in reply to the contempt proceedings reiterate, explain and further name some of the 'tainted' judges. All of those who have been named, to clear their name if they can, must undergo a thorough investigation and a public trial by an impartial tribunal. Indeed it is to be seen whether the Indian judiciary, or any other democratic institution worthy of its salt and name (as democratic) will be willing to take this 'risk'.

Prashant's original opinion, further reiterated and explained in his affidavit is nothing but a detailed narration of the reasons why the average Indian fear that the country's judiciary, in particular its Apex Court, has become unworthy of the maxim it claims to uphold, 'Yaddo Dharmastho Jayah', the Devnagari equivalent of fiat justitia ruat caelum. Indeed Prashant being a lawyer, is privileged to possess 'written, documentary and oral' evidence to substantiate his apprehensions than the aam admi (ordinary person), who face the worst brunt, should the judiciary of the country, the working for which his tax money is used is indeed corrupt.

Judiciary's negation of every attempt to bring 'fresh air and light into (its) dark and dusty corridors of power' has become its deplorable character during the past decade. By preventing all attempts to bring transparency in the functioning of the court, ranging from the question of appointment of judges to the applicability of the Right to Information Act, 2005, the Indian judiciary has behaved in such fashion as if it has indeed embarrassing things to hide behind its elevated dais where the most paid and immune jurists in the largest democracy of the world are seated. These attempts have reduced the Indian judiciary into despicable situations where on one occasion it had a serving judge, transferred and later elevated to the Apex Court while unambiguous allegations of material corruption were made against him based on which there was an audit objection and an impeachment proceeding. The Supreme Court also had the unique opportunity to direct its own Registrar to file an appeal against the order of a subordinate court, the Delhi High Court, in the Supreme Court, so that it could affirm the absoluteness of its impunity against public accountability at the expense of the taxpayer's money.

The Court has also the record of 'legally and fatally injuring' everyone who dared to suggest that the 'king is naked' using its sword of Contempt of Courts Act, 1971. This law, based on a medieval mental framework, has no place in a democracy, like a judiciary that despises transparency and decries accountability.

The allegation Prashant has made is just not an Indian issue. For instance a former Chief Justice of India, Mr. A. M. Ahmadi, was nominated to serve in international committees. He was appointed to look into human rights violations in East Timor by the United Nations, to assist the judiciary in Liberia by the International Court of Justice, and has been requested to review the state of relations between the judiciary, the legal profession and the executive and violation of human rights in Zimbabwe by the International Bar Association. Any argument that Ahmedi would do justice to the victims of human rights violations in foreign lands, while he has allegedly robbed the same for sheer self-interest and greed from his countrymen (and women) does not hold water. Ahmadi's case is just one among many that must be investigated.

It is often said that making public statements of the above nature against the judiciary of a country is immature. Some may ask, will such statements help in sorting out the mess that has now surfaced? Is it not amateur and nonprofessional to say these things in such emphatic tone? The Asian Human Rights Commission (AHRC) believes that the professionalism of the civil society is demonstrated in its ability to raise timely questions of rule of law, with an expectation that it would generate a worthy public debate in the country where it is engaged.

Unfortunately, most of India's media are observing their characteristic silence on the issue. They have apparently perfected their art of stirring public opinion for the wrong cause using all the wrong methods, as they demonstrated in dealing with the parliament attack case, where they proved the case against the 'suspects', parroting the confession statement of the accused, extracted by some of the dreaded criminals wearing police uniforms, who practiced some of the most inhuman methods upon the accused, including torture. Indeed the Indian judiciary convicted the accused, despite the prosecution failing to prove their case, an act by which the judiciary too reiterated that pride and speculation rules above justice.

The AHRC supports and congratulates Prashant Bushan for the bold initiative that he has taken by calling for openness and transparency in one of the most immune public institutions of the world. It is now the responsibility of India's civil society to wake up from its slumber and augment this process of fastening public accountability to one of India's oldest constitutional institutions. It is the primary responsibility of the lawyers and judges who believes in the rule of law and democracy to publically support the process Prashant has initiated.

The AHRC requests everyone to sign an online petition created for the purpose.

To say the least, if the allegations made by Prashant do not lead into an impartial, prompt and public investigation, it has to be believed that the democracy is dead in India.

* The affidavit filed by Prashant Bushan is available here.
* The affidavit filed by Shanti Bushan is available here.
* The online petition can be accessed here.

Monday, September 27, 2010

Surprising... they seems to be ready to give up liberty for security!

Selvi v. State of Karnataka, Criminal Appeal No. 1267 of 2004, Date of Judgment 05/05/10

The Constitutional Law Society of NUJS conducted a panel discussion on 23rd of this month on three aspects of this decision; constitutional, procedural and evidence law and national security dimensions. I had occasion to present certain constitutional issues of the case and open the floor for discussion. This gave me a chance to read the case closely to appreciate some of its finer points which I presume have not got much attention of Constitutional Scholars.

The debate about this judgment so far has been mainly surrounded on the concerns of the national security as to how the now disallowed Narcoanalysis, Polygraph Test and BEAP could have helped to prevent and detect terrorist activities. For many, this is a chance lost to diffuse the ‘ticking bombs.’

It was surprising to find students’ responses that perceive liberty and security as binary opposites. It was disheartening to hear them arguing for giving up their liberties for apparent threats against security. Was wondering whether paranoia has struck that hard on this generation!

Anyway, I am not at it specifically. The case to me gave some interesting vantage points. Ultimately, the court held that compulsory brain-mapping and polygraph tests and narcoanalysis were in violation of Articles 20(3) and 21 of the Constitution. The highlights of the case, for me, are the following

  1. Radiation of constitutional rights into statutes, including procedural laws
  2. Reiteration of Maneka position that rights are not islands. The impugned tests have to pass not only the test of Art. 20 but of Art. 21
  3. The explicit use of substantive due process in the reasoning
  4. Interpretative tools used; the court has liberally quoted and allowed to be persuaded by foreign judgments. Quoted even a Israeli Supreme Court Decision
  5. Debunking the notion that security is at the cost liberty

To be Contd...

Saturday, September 18, 2010

Fortnightly Roundup of SSRN Articles on Arbitration (September 1 - 15)

The 2010 Amendments to the International Arbitration Act: A New Dawn for Australia?
Richard Garnett and Luke R. Nottage

On 6 July 2010 Royal Assent was given to amendments passed by the Australian Federal Parliament relating to the International Arbitration Act 1974 (Cth) (IAA). These were the first substantial changes to the IAA for over 20 years and consequently warrant close scrutiny. Along with some other innovations, they follow most of the 2006 revisions to the 1985 UNCITRAL Model Law on International Commercial Arbitration (Model Law), which has been particularly popular for Australasian jurisdictions updating their arbitration legislation. The amended IAA also provides the agreed core for Australian states and territories updating their Commercial Arbitration Acts (CAAs), although they adopt some variants given that their focus is on domestic arbitrations. This paper considers the amended IAA’s aims, writing requirements for arbitration agreements, enforcement of foreign awards, exclusion of the Model Law, interim measures, confidentiality, other substantive matters, and the temporal application of the 2010 amendments. It concludes that their scope is somewhat limited and unadventurous, but should significantly enhance the legal regime for international arbitration in Australia.

Drinking Poison to Quench Thirst': The Discriminatory Arbitral Award Enforcement Regime under Chinese Arbitration Law
Manjiao Chi

Arbitration makes sense only when the award can be enforced satisfactorily. With the development of the Chinese economy, arbitration is becoming popular in China. Despite the progress and achievements China has made, the award enforcement regime under Chinese arbitration law is seriously defective due chiefly to the out-dated “dual-track system”, unsatisfactory enforcement of the New York Convention awards and prohibition of ad hoc arbitration. These measures make Chinese arbitration law increasingly discriminatory against domestic arbitration and lower courts, and consequently hurt the competitiveness of Chinese arbitration. To ensure the healthy development of Chinese arbitration, mere amendment of legislation is not enough; rather, a full-range judicial reform is needed.

Is Chinese Arbitration Act Truly Arbitration-Friendly? Determining the Validity of Arbitration Agreement Under Chinese Law
Manjiao Chi

This article mainly discusses three major issues in relation to the validity of arbitration agreements under Chinese Arbitration Act (CAA). In addition to the introduction part, Part II and Part III of this article concentrate on the formal requirement and the mandate substantive requirements of arbitration agreements respectively, and Part IV deals with the challenge to the validity of arbitration agreements. The aim of this article is to provide an explanation of CAA provisions relating to arbitration agreements, analyze their defects, explore the methods to improve these provisions in order to help remove unnecessary concerns and serve as references for future amendment work of CAA.

The Fading of Compulsory Consolidation of Arbitration: A Fight between the Principles of Efficiency and Party Autonomy in International Commercial Arbitration
Manjiao Chi

International commercial disputes are getting more complex with the time being, which necessitates the adoption of compulsory consolidation of arbitration by the courts in some countries and regions. In practice, courts usually justify their decisions on three major grounds. However, compulsory consolidation of arbitration in essence is in violation of major principles and natures of international commercial arbitration system, and thus has insurmountable pitfalls. Consequently, a review of recent legislation and practice shows that compulsory consolidation of arbitration is fading nowadays world-widely.

Time to Make a Change? A Comparative Study of Chinese Arbitration Law and the 2006 UNCITRAL Model Law and the Forecast of Chinese Arbitration Law Reform
Manjiao Chi

In addition to the introduction (Part A) and conclusion (Part F), this Note consists of four parts: Part B discuses the legal framework of Chinese arbitration law; Part C, D and E respectively focus on three major amendments of the 2006 UNCITRAL Model Law vis-à-vis the Chinese arbitration law: the written form requirement of arbitration agreement, the interim measures of protection in arbitration proceedings and the recognition and enforcement of arbitral award, and raise suggestions for the upcoming reform of Chinese arbitration law in these aspects. This Note observes that the transplantation of the “new standard” into Chinese arbitration law is an issue of more political than legislative nature. Even though China may partly adopt the “new standard” under the current sociopolitical background, no fundamental outbreak could be expected unless the complete judicial independence is achieved.

Non-Signatories to the Arbitration Agreement: Recent Developments in Brazil
Pedro Costa Braga

This draft article touches on Brazilian case law relating to jurisdiction over non-signatories of arbitral clauses. It discusses upper court decisions on both the “extension” and the “assignment” of arbitral clauses under Brazilian law.

The Arbitrators Perspective: Cultural Issues in International Arbitration
Shahla F. Ali

The theme of cultural convergence and divergence in international arbitration practice is both broad and deep. It is played out daily in multiple arbitral locations, at the crossroads of different legal systems, party and counsel behavior, arbitrator predisposition, and local customs. Examining both the convergence and divergence of approaches to arbitration in diverse settings provides an avenue to understanding the impact of globalization on the international practice of law.

This chapter introduces us to this vast subject matter, taking a higher view while at the same time touching briefly on cultural differences in arbitration practice between mainland China and Hong Kong where the author is located. The author goes one step beyond strict arbitration to explore the cultural aspects of using mediation in combination with arbitration, analyzing with surveys how this approach has been received worldwide.

The Role of Domestic Courts in International Commercial Arbitration
Angualia Daniel

With the tremendous growth in international trade and investments, international commercial arbitration has become a frequently used mechanism to settle investment/trade/contractual disputes. Most people are of the opinion that resolution of dispute by litigation in court is time consuming and money consuming whereas arbitration may speed the resolution and lower the expenses of disputes. However to ensure the integrity of the arbitral process and protect the public interest, the courts must support and supervise that process. On the other hand, to prevent the confidence of users of the arbitral system from being damaged, the level of judicial control should not be too high. The debate in international commercial arbitration is what scale of judicial intervention should be allowed. While it is argued that arbitration must be free from courts, in order to be effective, it is also accepted that arbitration needs the support of national courts to be effective. Flowing from this contention laws and rules has been formulated to balance the competing interests.

Resolving Disputes in the Asia Pacific: International Mediation and Arbitration in East Asia and the West
Shahla F. Ali

How diverse cultures approach conflict in the context of the integration of global markets is a new arena for research and practice. To date, most of the research on international arbitration has focused exclusively on Western models of arbitration as practiced in Europe and North America. While such studies have accurately reflected the geographic foci of international arbitration practice in the late twentieth century, the number of international arbitrations conducted in East Asia has recently been growing steadily and on par with growth in Western regions.

Resolving Disputes in the Asia-Pacific Region presents empirical research about the attitudes and perceptions of over 115 arbitrators, judges, lawyers and members of the rapidly expanding arbitration community in China, Hong Kong, Korea, Japan, Singapore, and Malaysia as well as North America and Europe. The both covers both international commercial arbitration and "alternative" techniques such as mediation, providing an empirical analysis of how both types of dispute resolution are conducted in the East Asian context. The book examines the history and cultural context surrounding preferred methods of dispute resolution in the East Asian region and sheds light on the various approaches to international arbitration across these diverse regions.

This book will be of great interest to students and scholars of international arbitration and dispute resolution, comparative and Asian law, as well as anyone dealing with potential conflict in international business relationships in East Asia.

When is a Forum 'More Favourable'? The Use of MFN Clauses to Found an Investment Arbitration Tribunal’s Jurisdiction
Tony Cole and Madhur Agrawal

The goal of this article is to provide a baseline analysis of the operation of MFN clauses in the international investment law context, from which more refined analyses can be made of the operation of a particular clause in a particular context. The restriction of the present analysis to this baseline approach is necessary because although MFN clauses are a common feature of international investment agreements, the language in which they are expressed can differ significantly, and any such differences will, of course, impact upon their manner of operation. However, while attention must ultimately be paid to the specific language adopted in each individual MFN clause, this does not entail that nothing can be said regarding the operation of such clauses generally. Rather, it simply means that the general analysis offered here can always be varied by States through the language they choose for the MFN clause they adopt. That is, the analysis offered here provides a first step in the analysis of any individual MFN clause, it does not provide the final word.

From Jumping Frogs to Graffiti-Painted Walls Legal Issues Caused by Mistranslation in International Commercial Arbitration
Marianne Dellinger

In a world of global business and connectivity, the translation industry has become vital to today’s commercial players. Nonetheless, translation services are often considered fungible and thus not given much thought. This often leads to mistranslation and legal problems requiring solution by international arbitral institution and courts of law.

This article examines existing translation standards in select arbitral conventions, institutional rules, and select national legislation. On that background, it analyzes typical resolutions of legal issues caused by substandard translation in both arbitral and post-arbitral proceedings. In spite of some existing rules governing translation, the outcome of quasi-legal and legal proceedings in this area is highly uncertain and divergent. Thus, the article proposes possible preventive solutions to the demonstrated problem.

Getting to the Law Applicable to the Merits in International Arbitration and the Consequences of Getting it Wrong
Linda Silberman and Franco Ferrari

This paper critically examines the importance of conflicts of laws rules in determining the law applicable to the merits. In doing so, it analyzes the various view taken on the issues both by commentators and arbitral tribunals. The paper also focuses on the consequences of an erroneous choice of law decision by the arbitrators in the context both of annulment and recognition and enforcement of arbitral award.

The Litigation-Arbitration Dichotomy Meets the Class Action
Richard A. Nagareda

Courts and commentators often conceive of litigation and arbitration as dichotomous regimes for civil dispute resolution. Two new decisions from the Supreme Court provide the occasion to rethink this conventional view. In Shady Grove v. Allstate Insurance, the Court acknowledges that a class action often alters dramatically the incidence of claiming but, for purposes of the Rules Enabling Act, the Court deems this effect to be merely “incidental.” In Stolt-Nielsen v. AnimalFeeds, however, the Court deems the use of class-wide arbitration to be such a “fundamental” change as to lie outside the authority of arbitrators in the face of contractual silence as to class treatment.

This Article – for the annual Federal Courts, Practice & Procedure issue of the Notre Dame Law Review – urges a more synthetic understanding of litigation and arbitration. For all their differences, the Court’s accounts of class treatment under the Rules Enabling Act and the Federal Arbitration Act (FAA) evidence a deep, but undertheorized, convergence. Shady Grove is the latest of the Court’s efforts to map the proper relationship between federal and state law under the Erie and Hanna doctrines. This Article explains how the Court’s arbitration jurisprudence has come to replicate key structural features of the Erie and Hanna doctrines in litigation. The Article then underscores the transnational dimensions of arbitration in our modern world of globalized commerce – one that frames in a new light the holding in Stolt-Nielsen within the context of the Court’s thinking about extraterritoriality and transnational recognition of judgments in litigation.

The Article then turns to a case now before the Court – AT&T Mobility v. Concepcion – concerning an arbitration clause that would waive the opportunity for consumers to participate in either a class action or a class arbitration. The Article explains how the approach of the lower courts in Concepcion presents the Supreme Court with the counterpart, in the arbitration setting, to the mistaken application of state law rightly overturned in Shady Grove under the Hanna doctrine. Such a view nonetheless would afford ample latitude for contextual, Erie-like analysis of other arbitration clauses with class waivers tantamount to exculpatory clauses. The Article concludes by situating its synthetic conception of litigation and arbitration within ongoing debate over the proposed Arbitration Fairness Act.

The End of Mandatory Securities Arbitration?
Jill Gross

In this essay, I examine recent Congressional efforts to ban pre-dispute arbitration clauses in securities brokerage account agreements and thus eliminate mandatory arbitration of customer-broker disputes. In the proposed Arbitration Fairness Act, Congress would ban such clauses in all consumer contracts, including in the securities industry. However, securities arbitration - whose fairness is regulated with substantial oversight by the Securities and Exchange Commission - does not suffer from the same features and flaws that critics of arbitration in other forums have excoriated as oppressively unfair. In the recently-enacted Dodd-Frank Act, Congress delegated to the SEC the authority to prohibit arbitration clauses in customer agreements through admininstrative rule-making. After examining these regulatory efforts, I argue that neither Congress nor the SEC should prohibit mandatory securities arbitration because it would have significant adverse consequences for investors and for the vitality of the dispute resolution mechanism. The essay concludes by asserting that regulators should not enact arbitration reform that needlessly and without foundation brands securities arbitration as the evil twin of adhesive consumer

Reinstatement in Arbitration: The Grievors' Perspective
Kelly Williams and Daphne G. Taras

Virtually absent in the arbitration literature is the voice of the grievor. We examine post-reinstatement experiences primarily from the perspectives of a group of seven Alberta grievors. We first review the declining frequency of Alberta arbitrations, the extent to which dismissal cases form a proportion of the arbitral caseload, and the relatively low rate of reinstatement. Findings are: (1) grievors are unaware of the public availability of arbitration awards; (2) reinstated grievors are critical of the union that successfully defended them; (3) they have a more benign view of management;(4) very little reinstatement assistance is offered; and (5) grievors' positive attitudes to their worksites are more determinative of successful reinstatement than remorse and acceptance of culpability.

The Arbitration Fairness Act: Unintended Consequences Threaten U.S.
Edna Sussman

Various proposed bills to amend the Federal Arbitration Act (FAA) have been gaining support in the U.S. Congress. The most prominent of the bills introduced is the Arbitration Fairness Act of 2007 introduced in the 110th Congress in the House and the Senate and reintroduced in largely the same form in the 111th Congress in the House of Representatives. The Senate version of the bill was reintroduced in the 111th Congress with significant improvements. The bills’ proponents do not intend the bills to interfere with international arbitration, but the amendments do not distinguish between domestic and international disputes. The proposed Act is intended to render arbitration agreements invalid or unenforceable with respect to consumer, employment or franchise disputes, but the House version as drafted has much broader and unfortunate consequences. This paper reviews the proposed amendments to the FAA in the House version of the bill, their impact on international arbitration in the United States and the effect on U.S. companies, the U.S. legislation and Supreme Court decisions which form the basic legal predicate for international arbitration in the United States, why arbitration is the preferred method for dispute resolution in international matters, the U.S. role in international arbitration, the proposed amendments to the FAA as they relate to consumers, employees and franchises, the proposed amendments to the FAA as they relate to competence-competence and separability, the consequences of the Act’s substantive and procedural changes, questions as to whether the proposed amendments to the FAA implicate any treaty violations by the United States and finally whether the time has come for the enactment of a separate full-fledged federal international arbitration statute and suggest other legislative solutions to minimize unintended consequences.

Receptivity of ADR in Brazil for Commercial Disputes
Pedro Costa Braga

This article discusses the reasons for non-utilization of ADR in Brazil.It also suggests that mediation and other ADR may follow the footsteps of arbitration, which received broad acceptance by Brazilian lawyers and businesspeople. The article concludes with some steps to make ADR more popular in Brazil.

Designing Effective Med-Arb and Arb-Med Processes in Brazil
Pedro Costa Braga

This article discusses the use of med-arb and arb-med in Brazil, with presentation with legal and practical requirements to the effective use of those two ADR techniques.

Privatizing the Adjudication of Disputes
Bryan Caplan and Edward Peter Stringham

Must the state handle the adjudication of disputes? Researchers of different perspectives, from heterodox scholars of law who advocate legal pluralism to libertarian economists who advocate privatizing law, have increasingly questioned the idea that the state is, or should be, the only source of law. Both groups point out that government law has problems and that non-state alternatives exist. This article discusses some problems with the public judicial system and several for-profit alternatives. Public courts lack both incentives to be customer oriented and pricing mechanisms, plus they face problems associated with the bureaucratic provision of services.

When parties can choose their tribunals, in contrast, those tribunals must serve customers and be mindful about conserving resources. Competition between arbitrators also can allow for experimentation and the provision of customized services rather than a centrally planned, one size fits all system. Contracts with an arbitration clause can easily stipulate the choice of tribunal, and we argue that if government courts simply refused to overrule binding arbitration agreements, de facto privatization could easily take place. This article discusses how private adjudication of disputes could enable the market to internalize externalities and provide services that customers desire.

Alternative Dispute Resolution of Employment Discrimination Claims: Does Race Matter When Reading Ricci and Pyett?
Michael Z. Green

In the landmark article by Richard Delgado and his co-authors, Fairness and Formality: Minimizing the Risk of Prejudice in Alternative Dispute Resolution, 1985 Wisc. L. Rev. 1359, the authors attacked the increasing use of alternative dispute resolution (ADR) to resolve disputes because of the risks of prejudice. Using social science research, the authors argued that the informality of these methods of dispute resolution had a negative impact on persons of color. This paper looks at the impact of ADR in the workplace as a method to resolve employment discrimination claims and re-examines the concerns espoused by the Delgado article which has reached its twenty-five year anniversary. In particular, the paper compares the opportunities for formalized resolution of employment discrimination disputes through the courts with the informalized resolution of employment discrimination disputes under ADR. Using the Supreme Court's analysis in two recent cases, Ricci v. DeStefano and 14 Penn Plaza v. Pyett, as a framework for understanding purported post-racial analysis of employment discrimination dispute resolution, the author's thesis asserts that a balance of both informal and formal dispute resolution processes would represent the best possibilities for employees of color seeking racial justice in today's workplace. To achieve this balance, the author focuses on developing workplace arbitration and mediation processes that offer workers of color a fair opportunity for voice and resolution. With this focus, the author searches for racial justice opportunities that will allow employers, employees, and unions to converge their interests to support a comprehensive dispute resolution system.

Monday, September 13, 2010

Resolution of the Assam Nagaland Border Dispute by Mediation

On 20th August 2010, the Supreme Court of India directed the decades old Assam Nagaland border issue to be resolved through mediation. A Two-judge bench consisting of Markandey Katju and T.S. Thakur, JJ ordered constitution of a panel consisting of two mediators who would, according to the Court, work under its auspices.

History of the Assam- Nagaland Dispute:

Prior to 1957, Naga Hills was a District in the State of Assam. In 1957, an area in the State of Assam, known as the Naga Hills Tsuensang Area was made a Union Territory. On 4 September 1962, due to popular demand for a separate state, the State of Nagaland Act (Act) was passed by the Parliament establishing the State of Nagaland on the Appointed Date. S. 3 of the Act read:

Section 3 - Formation of State of Nagaland

(1) As from the appointed day, there shall be formed a new State to be known as the State of Nagaland comprising the territories which immediately before that day were comprised in the Naga Hills-Tuensang Area and thereupon the said territories shall cease to form part of the State of Assam.

(2) Without prejudice to the power of the State Government to alter the appointed day, the name, extent or boundaries of any district, the State of Nagaland shall consist of three districts to be called the Kohima district, Mokochung district and Tuensang district, each comprising the areas respectively set out in the Schedule.”

1963:    The Act had defined the “Appointed Day” in Section 2 as:

(a) ‘appointed day” means the day which the Central Government may, by notifiation in the Official Gazette, appoint;’

On 1st December 1963, the Appointed Day, the State of Nagaland was formally inaugurated, thereby making it the 16th State in the Union of India.


The dispute is about Nagaland claiming about 1200 square kilometres of area in Assam. Nagaland has,claimed that the said area belonged to it prior to the British occupation but the British had excluded these areas for economic and administrative convenience. Assam disagreed. It argued that the areas demarcated were natural boundaries between the two states and the same had been accorded constitutional status.

The border disagreement led to several clashes between the people of both states. BK Nehru, the then Governor of Nagaland and Assam had arranged a meeting in February 1970 between certain ministers of both States. Unfortunately, the meeting failed to bring any resolution of the dispute. In 16th August, 1971, KVK Sundaram Commission was appointed by the Government of India to study the problem and recommend measures to the Government.

On 2nd May 1972, both the States signed a peace accord to maintain peace between the States. Despite that, there are several armed conflicts between people of the two states.

An original suit was filed under Article 131 (Original Jurisdiction of the Supreme Court) by the State of Assam against the Union of India in 1988 for identification of the boundaries between the States of Nagaland, Assam and Arunachal Pradesh. On 13th September 2004, the Supreme Court ordered for the appointment of a commissioner under Order XLVI of the Supreme Court Rules, 1966 read with Order XXVI Rule 9 of the Code of Civil Procedure, 1908, after consultation with all the parties. The States were asked by the Court to:

cooperate with the Commission and render all possible assistance so that the Commission can function and smoothly discharge the duties, assigned to it by this Court.

Despite the above order, the State of Nagaland did not file an affidavit or do anything to comply with the SC Order. A final opportunity was given on 11th September 2006 by the Court to the Chief Secreatary of Nagaland to comply with the above direction. On 25th September 2006, the Supreme Court appointed Hon'ble Mr. Justice S.N. Variava, a former Judge of the Supreme Court as the Chairperson of the Local Commission ordered to be constituted in its September 2004 order. Justice Variava was to be assisted   by   Mr.   Kamal Naidu, Retired Principal Chief Conservator of Forest, Andhra Pradesh, and Mr. S.P. Goel,   Additional   Surveyor   General of India, as Members. The mandate of the Local Commission was to “identify the boundaries between the States of Nagaland, Assam and Arunachal Pradesh”. The court also held:

We may, however, clarify that this Local Commission is not the boundary commission postulated by the Constitution of India and that all factual and legal objections are kept open for the parties to be urged and   agitated   after   the   receipt   of   the   Report from the Commission. None should be taken to have given up any right on agreeing to the appointment of this Local Commission.  We hope that the Local Commission will be able to furnish the Report within a period of one year or such extended time, as may   be considered   necessary   by   this   Court. It would be open to the Commission to seek such directions from this Court, as deemed necessary.”

Justice Variava had expressed his inability to continue as the Commissioner. Hence, Retired Justice Tarun Chatterjee of the Supreme Court of India was appointed in his stead vide order dated 20th January 2010.

Order dated 20th August 2010:

On 20th August 2010, a Division Bench of the Supreme Court consisting of Markandey Katju and T.S. Thakur, JJ. stated:

[W]e are of the opinion that apart from the proceedings before the Local Commission appointed earlier by this Court, an attempt should also be made to resolve the dispute between the State of Assam and State of Nagaland by mediation.”

The court appointed “two of the foremost experts in mediation in India”, Mr. Sriram Panchoo, Senior Advocate, High Court of Madras and Mr. Niranjan Bhat, Senior Advocate, High Court of Gujarat, as the co-mediators. The major terms of the reference are summarized below:

1.      The Mediators shall have one assistant and the help of experts for the mediation.
2.      The Union Home Ministry shall be associated with the mediation.
3.      After three sittings, a preliminary report shall be filed by the mediators as to whether the dispute is capable of being resolved between the parties by mediation.
4.      On receipt of a positive reply from the mediators, the period of mediation may be extended with the consent of the parties.            

The Court also clarified that the mediation proceedings were to be independent of the proceedings before the  Commission appointed by the Court vide its previous orders (noted above).

The Order dated 20th August 2010 can be accessed from here.

For further information on the dispute and related aspects, check out the below links

Thursday, September 9, 2010

Guest Post: Default Rules in the Indian Contract Act

In one of our previous posts this month, we posed this "poser": What are the Default Rules in the Indian Contract Act, 1872 (at least in the provisions pertaining to contracts generally)? In this guest post, Ms. Lovely Dasgupta, Assistant Professor (Law) at the National University of Juridical Sciences (NUJS), Kolkata, explicates the methodology for identifying default rules in the relevant portion of the Indian Contract Act, 1872 that deals with the general principles of contract. She teaches Contracts I and II, (part from several other courses) at NUJS. 
In this post, Ms. Dasgupta gives us two simple guidelines on how to identify default rules. We thank her immensely for writing us this guest post. Here goes the post.

"Default rules, as the name suggests are those rules that lay down the basic guidelines as to the formation, performance and discharge of a contract. However these rules operate in the absence of any contract to the contrary. On the other hand mandatory rules are those which cannot be contracted around. In other words they can be said to be binding on the parties even before the parties decide to contract. One can also argue that the mandatory rule both limit and protect the ‘freedom to contract’ principle. It restricts the freedom to contract by imposing obligations, and it protects freedom to contract by protecting the bargaining powers of the parties to the contract.

Default rules therefore will have to be ancillary to the mandatory rules, as without complying with the latter it will not be possible to contract out of the former. Theoretically it is easier to detail out the nature of a default rule vis-à-vis a mandatory rule but practically it may be difficult to distinguish the default rules from the mandatory rules. One needs to therefore minutely navigate through the various sections of the Indian Contract Act 1872 (hereinafter called the Act) to identify the default rules. This write up will survey the sections of the Act dealing with the general principles of contract, and attempt to identify the default rules. In the process the attempt would be to identify the method by which one can term a rule as a default rule in the context of the Act.

The Act, from sections 1-75 lays down the general principles of contract viz. from formation, to performance to discharge, breach and damages. Of the seventy five sections, sections 1-36 deals with the formation of contract, sections 37-72 deals with performance, discharge and quasi contractual obligations, and sections 73-75 deals with breach and damages. If one looks into the sections pertaining to formation especially Section 10 of the Indian Contract Act, one finds that the same embodies the mandatory rules of contract formation. This means that any contract to be valid has to comply with this checklist. The other sections in this part, that precedes or follows section 10 are mere elaboration of the mandatory rules prescribed in section 10.

However when it comes to performance, then the rules appear to be flexible. Thus for example Section 40 of the Act makes it clear that the parties are free to decide as to who should perform the contract i.e. either the promisor or any third party can perform the contract. Similarly Sections 42, 43and 45 are clear examples of default rules which can be contracted around, as is evident from the language of these sections. On the other hand Section 53, 64 and Section 75 of the Act makes it clear that restitution does not prevent the claim of damages. In other words one cannot have a contract to the contrary wherein one claim is barred vis-à-vis the other. Similarly the sections 46-50 and section 55 are examples of default rules as they leave on the parties to decide the time of performance and the place of performance and the mode of performance.

Similarly the section 56 dealing with frustration/impossibility of performance is an example of default rule, as it merely states when the contract is said to be impossible to perform. This thereby gives ample leeway to the parties to draft the conditions that they regard as will render the contract as impossible to perform. One look at section 62 and section 63 makes it clear that the rules regarding novation, recission and alteration, as well as performance of the original promise are all at the discretion of the parties to the contract. However so far as the right of restitution under section 64 and 65 is concerned, the same cannot be contracted out, hence is a mandatory provision.

One need not say anything about the sections from 68-72, as they are quasi contractual obligations imposed by law and hence binding. One last example of mandatory rule is Section 74 of the Act, which restricts the right of the parties to impose penalty on the defaulting party. Thus the brief overview of the few provisions of the Act for identifying the default rule proceeded on two simple guidelines. (One) Is to read the bare language of the sections and ask the question: whether it is possible to have a contract without complying with this requirement? If the answer is no then the rule embodied in the section is a mandatory rule and not a default rule which can be contracted around. (Second) To think about the purpose of having the particular section and ask: what is the need to have this section? If the answer is that the rule embodied in the section is a guideline as to the possible manner in which the contract can be drafted/ formed, a guideline which if not adhered to will not affect the efficacy of the contract, then the rule is a default rule.

At the end the process of identifying the default rules in the Indian Contract Act is nothing but a process of reading and re-reading the bare act. As a student or a practitioner of law, one has to be thorough with the fundamentals to be able to identify the spirit of the sections that form the foundation of the Indian Contract Act i.e. the sections embodying the general principles of contract. I believe that most of the problem arises because of the lack of this clarity both amongst the student as well as the practitioners. Since identification of default rules successfully is also about one's conceptual clarity."

Wednesday, September 8, 2010

News: Vodafone International Holdings v. UoI

The Bombay High Court has ruled in favour of the Income Tax Department in the Vodafone Case regarding taxability of the transfer of its (share capital from Hutch)*. See here and here for newsreports. The judgement can be downloaded from here.

* Added after posting

Tuesday, September 7, 2010

Sree Kamatchi Amman Constructions v. The Divisional Railway Manager (Works), Palghat and Ors.

Decided by R.V. Raveendran and H.L. Gokhale, JJ on 20 August 2010, these Civil Appeal Nos. 6815-6816 of 2010 were pertaining to the question of award of interest.

In this dispute, the High Court had previously remitted the matter to the arbitral tribunal for making a reasoned award (the award was an unreasoned one) after fresh consideration. Instances where Courts have remitted the matter to the tribunals are rare. See, for example, Gayathri Projects Ltd. V. Airport Authority of India 2007(3) Arb. LR 416 (Del.); Union of India v. Prem Kumar Lihala 2005(Suppl.) Arb. LR 506 (Del.).

On remission, the tribunal considered the matter and had rejected all the claims raised by the Respondent (Railways) and a few claims raised by the Appellant (KAC). Hence the “cross petitions” under S 34. Dissatisfied with the decisions of the lower courts both KAC and Railways had approached the Supreme Court.

The Court had to consider two issues:

(i) whether the contract between the parties contains an express bar regarding award of interest?

(ii) If so whether the arbitral tribunal was justified in refusing interest for the period between the date of cause of action to date of award?

The court had to interpret Clause 16(2) of the General Conditions of the Contract. The said Clause read:

"No interest will be payable upon the earnest money or the security deposit or amounts payable to the Contractor under the Contract, but Government Securities deposit in terms of Sub-clause (1) of this Clause will be repayable (with) interest accrued thereon."

The court interpreted the expression “amount payable… under the Contract” to mean any amount that the Railways had to pay as a part of the Contract. Thus, the Contractor could claim no right under the Contract for interest.

While deciding on the second question, that is, the correctness of the tribunal in refusing to award interest, this blawgger noticed an interesting aspect. While discussing the law on the power of the tribunal to award interest, the court listed the leading judgements on the point and only then did it look at the statute. Does this imply that the court accorded a higher stature to its own judgements even compared to the statute? Or is this blawgger reading more into the judgement than what it actually says?

The relevant provision [S 31(7)] in the Arbitration and Conciliation Act, 1996 on interest is quoted below:

"(a) Unless otherwise agreed by the parties, where and in so far as an arbitral award is for the payment of money, the arbitral tribunal may include in the sum for which the award is made interest, at such rate as it deems reasonable, on the whole or any part of the money, for the whole or any part of the period between the date on which the cause of action arose and the date on which the award is made.

(b) A sum directed to be paid by an arbitral award shall, unless the award otherwise directs, carry interest at the rate of eighteen percentum per annum from the date of the award to the date of payment

The judicial lingo used as regards interest rate is as follows:

Pre-reference interest: Interest prior to the period of reference to arbitration.
Pendente lite interest: Interest for the period when the litigation is pending.
Post-award interest: Interest between the date of award and the date of payment

Unlike the court, we shall first analyse the statutory provision. Note that S 31(7)(a) deals with pre-reference interest and pendente lite interest, and S 31(7)(b) deals with post-award interest. Note also that S 31(7)(a) is a Default Rule, and hence is subject to the contract to the contrary. However, prima facie, S 31(7)(b) does not seem to contain a Default Rule. Rather, it leaves it to the discretion of the arbitral tribunal. However, numerous judgements of the courts would tell us that the arbitral tribunal has to act within the “four corners” of the contract that forms the basis of their jurisdiction. Hence, if the contract provides for a particular post-award interest, the tribunal has no alternative but to enforce the same.

On the second question (whether the tribunal was justified in refusing to grant pendente lite interest?), the court held:

Where the arbitral tribunal has exercised its discretion and refused award of interest for the period pendente lite… the award of the arbitrator could not be interfered with.”

The court was probably right in refusing to set aside the award of the tribunal on this point. But, where is the question of the arbitral tribunal having “discretion”? The contract is very clear: No interest is payable on any amount payable under the contract. That being so, from where does this “discretion” arise?

In the passing, it may also be noted that there were two decisions under the 1940 Act which were decisions supporting a contrary point. The SC held that these decisions were under the 1940 Act and were not binding, considering that the wordings in both the respective provisions on interest rate being dissimilar. 
P.S.: On further reading materials pertaining to default rules, see the link given above on default rules. A poser to the readers. What are the Default Rules in the Indian Contract Act, 1872 (at least in the provisions pertaining to contracts generally)?

Sunday, September 5, 2010

A Primer on the Proposed Constitution of Kenya

Recently the Constitution of Kenya has been in news on its successfull outcome in the referendum. The Constitution making process has been long drawn and had witnessed rejection of earlier drafts. The proposed constitution have certain elements which could catch the imagination of a Constitutional Scholar.

The Constitution is divided into 17 chapters with a Preamble and as any other constitution ihave social, political, economic, and legal aspects. It covers the rights and structural part of governance and government.

One of the most striking features of the Constitution is Chapter 6 on 'leadership and integrity'. It spells out the expectations of the nation of its leaders and officials. It also lays down institutions and procedure to realise this constitutional mandate and attempts to address the issue of corruption. It explains the role of state officers, sets standards, and prescribes measures to ensure its upkeep. The mechanism to implement the same is through an Independent Ethics and anti-corruption commission.

Chapter 7 is the next highlight. It sets out the democratic norms. This chapter contains provision for demarcation of constituencies, universal franchise, equitable representation and setting up of a Commission to supervise the business of election. Members of the Commission are determined by an Act of Parliament and the National Assembly must approve the appointments to preserve its independence. The Commission has wide and roving mandate even to enquire into the structure and functioning of political parties. This chapter also sets out the should be characteristic feature of the political parties. They are; to have a national character and not be based on religion, ethnicity or gender and democratically elected governing body. Parties are expected to respect human rights, promote the Constitution and observe the electoral code of conduct.

The constitution recognises the importance of independent judiciary and the provisions relating to judiciary is in chapter 10. To enable the judges to function without fear and favour, certain measures are entrenched. They are; a declaration that judges may not be controlled by anyone when they decide cases, securing the tenure post and pay of the judges, and removal only on specific grounds after following elaborate process, and establishing a Judiciary Fund which will be managed by the Chief Registrar of the judiciary that finance shall not be a pressure point. The judges will be chosen by a Judicial Service Commission, which includes people from the judiciary, the profession, government, and the public. This chapter provides for the setting up of a new court at the apex level, the Supreme Court and retains the structure of the lower level courts as it stood including the Khadis' Courts.

Elaborate Bill of Rights chapters secures the people against the potential of encroachment of rights and seems to be eager to provide for rights in all magnitudes. One of the highlights is the way limitation on rights is prescribed. This seems to reflect the quintessence of judicial review experiences of civil and common law systems. Laying down the criteria of limitation prescribing the standards of review, to me, is the most important underline.

Wednesday, September 1, 2010

Fortnightly Roundup of SSRN Articles on Arbitration (August 15- 31)

Anatomy of the First Public International Sports Arbitration and the Future of Public Arbitration after USADA v. Floyd Landis

Maureen Weston

Mere weeks after American professional cyclist Floyd Landis seemingly won the 2006 Tour de France, the United States Anti-Doping Association (USADA), under the authority granted to it by the U.S. Congress, and through its enforcement of the World Anti-Doping Code (WADC), accused him of having committed doping violations during the race. Landis vehemently denied these allegations, and accused the French laboratory that had performed the testing of his post-race samples, the Laboratoire National du Depistage du Dopage (LNDD), of bias and misconduct in his case.

Under USADA rules, an American athlete accused of doping may request an arbitration hearing before the American Arbitration Association (AAA), using the AAA Supplementary Procedures for the Arbitration of Olympic Doping Disputes. Although arbitration hearings are generally held in private, under these Supplementary Procedures, the athlete may choose to have this hearing open to the public. Landis requested a public hearing for his case, the first athlete to ever have done so.

This Article chronicles the public arbitration hearing in the Landis case, which was held at the Pepperdine University School of Law in 2007. Following its initial explanation of the regulatory and procedural framework involved when a U.S. athlete challenges a doping allegation, the Article describes the strategy and events leading up to Landis’ hearing, including the preparation, financing, and publicizing of Landis’ defense, the selection of the arbitration panel, and key pre-hearing rulings related to procedure and discovery. The Article examines the hearing itself, considering each side’s execution of its arbitration strategy, the scientific and personal testimony offered during the hearing, and the arbitral panel’s 2-1 ruling in favor of the USADA. The Article describes the subsequent legal action pursued by Landis, including an unsuccessful non-public appeal to the Court for Arbitration of Sport (CAS), and an attempt to persuade a U.S. Federal Court to vacate the CAS ruling. The Article concludes by discussing the value to the public and the legal community that came from having the initial Landis arbitration hearing open to the public, including increased awareness of the need for more transparency and greater organizational accountability in the doping arbitral process.

While the Article was published prior to the recent admission of doping by Floyd Landis, certainly the anti-doping standards and adjudicatory process continues to play a vital role in the lives and careers of international sport athletes.

Arbitration as Delegation
David Horton

Hundreds of millions of consumer and employment contracts include mandatory arbitration clauses, class arbitration waivers, and other terms that modify the rules of litigation. These provisions ride the wake of the Supreme Court’s expansive interpretation of the Federal Arbitration Act (“FAA”). For decades, scholars have criticized the Court’s arbitration jurisprudence for distorting Congress’s wishes and ignoring the fact that companies use fine print dispute resolution provisions as a clandestine way to eliminate substantive rights. This Article claims that the Court’s reading of the statute suffers from a deeper, more fundamental flaw: it transforms the FAA into an unconstitutional delegation of legislative power. Article I, section 1 of the Constitution forbids Congress from conferring the right to make law upon private parties. As construed by the Court, that is exactly what the FAA does. Invoking the statute, firms have created a parallel system of civil procedure for consumer and employment cases.This widespread procedural rulemaking is especially troubling because it establishes a private regulatory regime in an area that Congress has already attempted to regulate. In light of these concerns, the Article proposes several ways that the Court can narrow the statute and thus assuage concerns about its constitutionality.

Investment Treaty Arbitration, Procedural Fairness, and the Rule of Law
Gus Van Harten

Investment treaty arbitration is often promoted as a fair, rules-based system that advances the rule of law. The system falls short of this expectation, however, due to its unique combination of arbitration and public law, its asymmetrical claims structure, its reliance on executive officials to make case-by-case appointments, and its attenuation of judicial oversight. The focus of concern is not actual bias on the part of individual arbitrators but, more appropriately, institutional and procedural aspects of the adjudicative process that raise suspicions of bias.

Chinese Labour Contract Arbitration: 'No Union, No Problem'
Jinyue Sun , Ruth Obar and E. Patrick McDermott

There has been an explosion of labour contract disputes in China. The authors surveyed participant demographics, experience and opinions concerning the arbitration of these disputes under the local government Labour Dispute Arbitration Bureau (LAB) in the city of Dalian, Liaoning Province. Contrary to the Chinese labour union’s statutory duties, the findings show that the union is not involved in advocating for the rights of the employee from the inception of the dispute through to the LAB hearing. While some scholars have questioned the quality of the LAB process, particularly its fairness for workers, Chinese workers and employers reported high levels of satisfaction with the arbitration process on a range of procedural due process and substantive due process measures. Results indicate overall party satisfaction with the arbitration, a belief that the arbitration was fair, and a willingness to recommend it to others who are similarly situated. Demographic data indicate that the process was somewhat inclusive, with lesser educated workers, migrant workers, and women all participating.

Necessity in Investor-State Arbitration: The Sempra Annulment Decision
Sahib Singh

Available at EJIL: Talk! (Blog of the European Journal of International Law)

This is a short comment piece looking at the Annulment Committee's approach to interpretation. In particular it looks at how the interpretive tools of public international law are applied between the customary based norm of necessity and the necessity defence available under the Argentina-US bilateral investment treaty. It concludes that there is a severe lack of methodological vigour in the Committee's approach.

The Legal Standing of Shareholders Before Arbitral Tribunals: Has Any Rule of Customary International Law Crystallised?
Patrick Dumberry

States have concluded thousands of bilateral investment treaties (“BITs”) in the 1990s that regulate the treatment of foreign investors and their investments in the host State where an investment is made. These investment treaties provide foreign investors with an unprecedented level of substantive legal protection over and above the usual protections otherwise available to them. BITs also offer groundbreaking procedural benefits to foreign investors by allowing them to submit their disputes with the host State directly to an international arbitral tribunal.

One area of the law on foreign investments where significant new developments have occurred in recent decades is the legal standing of shareholders of corporations investing abroad to submit claims to arbitral tribunals constituted under investment treaties. The focus of this Article is not to systematically analyse the legal standing of shareholders under these treaties. This Article focuses instead on whether or not any rule of customary international law has emerged concerning the protection of shareholders and their legal standing before arbitral tribunals.

This paper argues that no such customary rule has crystallized. This is mainly because the scope and extent of legal protection offered to corporations and shareholders under BITs are not consistent enough to constitute the basis for any custom rule. Thus, there are some important inconsistencies between BITs with respect to how they specifically define “investor” and the nationality of corporations. There is also no evidence of any opinio juris in the context of investment treaties. Moreover, any such customary rule would be contrary to the general principle that corporations lack any automatic jus standi before international tribunals in the absence of specific State consent. It would also be contrary to the principle that an arbitral tribunal cannot exceed its powers.

Are BITs Representing the 'New' Customary International Law in International Investment Law?
Patrick Dumberry


The question of the existence of legal protection for foreign investors under customary international law (or “custom”) has always been controversial. As a result of this perceived lack of established customary principles, States concluded thousands of bilateral investment treaties in the 1990s for the promotion and the protection of investments (“BITs”). The number of BITs is now so overwhelming and their scope so comprehensive that a new debate has recently arisen in doctrine about the impact of these treaties on the existence of custom in the field of international investment law. It has been recently argued in doctrine that these BITs represent the “new” custom in this field. For some writers, the content of both custom and BITs is now simply just the same.

This paper rejects this proposition. The main reason is based on the fact that taken together BITs are missing the two necessary elements of customary international law. First, these BITs are very diverse in their content and scope and certainly not consistent enough, taken together, to constitute the basis for any customary rule. Second, BITs also lack any opinio juris. States sign BITs clearly not out of a sense of legal obligation, but for economic motive, i.e. to attract foreign investments and to offer protection to their investors doing business abroad.

This paper also argues that BITs will nevertheless influence customary international law. Thus, BITs will contribute to the consolidation of already existing custom rules (codification). BITs will also contribute to the crystallisation of new rules of customary international law in the future. In this age of BITs proliferation, the determination of the content of customary rules of international investment law remains of fundamental importance. Thus, custom is the applicable legal regime between a foreign investor and the host State in the absence of any BIT. The content of custom remains also essential in cases where BITs make explicit reference to custom. Finally, custom has a gap-filling role whenever a BIT is silent on a particular legal issue.

One Bridge Too Far: Why the Employee Free Choice Act Has, and Should, Fail
Richard A. Epstein


The Employer Free Choice Act has had enjoyed strong academic support. but thus far has been stymied by fierce political resistance to its central positions that first institute a card-check for the selection of a union and then requires mandatory arbitration if the parties cannot agree to a new contract within 130 days of union recognition. This article critiques the arguments made in support of this fundamental revision of labor law offered by Craig Becker, Benjamin Sachs, and Catherine Fisk & Adam Pulver, all of which purport to show that flaws in the current system of collective bargaining need major prounion adjustments. The key theoretical insight of the paper is that no ad hoc justifications for particular changes in the statute can be considered in isolation of the fundamental decision under the National Labor Relations Act to impose a system of mandatory collective bargaining. Once an employer may not refuse to bargain to a union, it must receive in exchange a broad number of offsetting rights, such as the ability to speak during organizing campaigns, and to reject in good faith those offers that it finds unacceptable, as current law provides. EFCA has failed because of the widespread political perception that it would usher in a new wave of union dominance that would destroy job opportunities and create major administrative burdens and political dislocations.

Green Eggs and Ham: The CISG, Path Dependence, and the Behavioural Economics of Lawyers’ Choices of Law in International Sales Contracts
Lisa Spagnolo


Why do lawyers in some jurisdictions continue to ‘automatically’ exclude the 1980 UN Convention on Contracts for the International Sale of Goods (CISG) in their choices of law for international sales contracts? Why do lawyers in other jurisdictions approach the decision very differently? Why do standardized commodity contracts universally opt out of the CISG?

This article identifies the key reasons for opting in or out of the CISG across jurisdictions and markets, and then turns to economics and psychology in order to expose the underlying causes for choices of law for international sales contracts.

A number of perspectives are utilized within this analysis: neoclassical economics, including agency costs, information costs, moral hazard and market distortion; rational decision making within game theory frameworks under different jurisdictional background conditions; behavioural economics, including notions of path dependence and satisficing; psychological and behavioural perspectives including heuristics and group polarization; and finally, the forces behind institutionalization of choices of law and network effects.

The breadth of this approach provides new insight into the reasons for choices of law, and enables a thorough analysis of current and future trends in exclusion of the CISG. The author concludes that choices of law in jurisdictions that presently overwhelmingly favour ‘automatic’ exclusion of the CISG will inevitably change.

This paper is an extended version of an earlier paper published in the Vindobona Journal of International Commercial Law & Arbitration. It contains extended analysis of the psychological & economic aspects, and new sections dealing with the commodities trade sector.

Forum Shopping and Anti Suit Injunctions: A Brief Overview (and Update)
Noel Rhys Clift


The subject of this paper is “Forum Shopping, Anti-Suit Injunctions and EU Law: A Brief Overview (and update)". This is substantially but not wholly an English perspective.

This paper is based upon a talk I gave in January 2006. It has now been slightly amended and updated for two reasons. First, the “FRONT COMOR” was heard by the House of Lords in early December 2006. Judgment was issued on 21 February 2007. The case will now progress to the European Court of Justice.

Secondly, from 1 January 2007 there are two new members of the European Union, Romania and Bulgaria. How will these developments affect planning of the defence (or prosecution) of claims, in particular choice of forum? The legal landscape in this field (at least with regard to arbitration clauses) may be about to undergo another shift.

For these reasons, perhaps it is time to review strategy in cases where the dispute is subject to either an English Jurisdiction Clause or an English Arbitration Clause.

The main body of this paper has (as usual) been broadly designed so that you can dip into any section or point of interest, or alternatively read the whole narrative. This paper is an overview and deliberately states a rather simplified picture, in short form.

Frailty in Contractual Limits When a Grievance is Arbitrated: The Parry Sound Ruling
Fernand Morin


In a recent ruling (Parry Sound (District) Social Services Administration Board v. O.P.S.E.U., Local 324, 2003 SCC 42), the Supreme Court of Canada states that an arbitrator has jurisdiction to hear a dispute that involves rights guaranteed by codes, charters and employment legislation even if the arbitrator has been barred from such recourse under a collective agreement. In the case at issue, an employee with probationary status benefited from maternity leave and was discharged upon her return.

Despite the clarity of the wording under the collective agreement stating that a probationary employee may not resort to arbitration, a grievance was filed and was worded as follows: [Translation] “. . . was discharged without reason and this decision is arbitrary, discriminatory, unjust and vitiated by bad faith.”

Owing to the rights vesting in the employee under the Employment Standards Act (Ontario), the Board of Arbitration ruled on its own jurisdiction to hear such a grievance. This decision was quashed in judicial review (Superior Court) and but was then upheld in Court of Appeal and once again by the Supreme Court of Canada (majority 7/9).

The Supreme Court of Canada began by making several observations concerning the criteria of judgment applicable to judicial review, namely that which is considered patently unreasonable. An attempt was made to distinguish between an unreasonable decision and one that would be patently unreasonable. It seems to us that such a distinction remains ambiguous and further confuses the exercising of a fair judicial review; unreasonableness should not be graded by degrees.

In a second approach, the ruling establishes the relationship between State standards (Codes, Charters and employment legislation) and contractual standards. Working from the basis that State standards would be incorporated into the collective agreement, the Court establishes that the limit imposed upon the collective agreement regarding access to arbitration had the practical effect of denying the right to maternity leave, elsewhere guaranteed by law. For this reason, the arbitrator had to intervene and exercise control in order to ensure respect for established standards of public order. To achieve these ends, the Supreme Court of Canada seemed to experience considerable difficulty in qualifying the collective agreement and classified it in the category of private contracts.

Such a categorization, confined to the traditional “public/private” dichotomy, dismisses the true legal and desired effect seeking to make the collective agreement a regulatory labour provision complementary to statutes governing public order and intimately related to the latter.

In support of his line of reasoning, Judge Iacobucci, on behalf of the majority (7/9), repeatedly referred to the ruling: McLeod v. Egan, [1975] 1 S.C.R. 517. The referrals denied under this ruling are hardly convincing and uselessly weigh down the reasoning. Moreover, Judge Major (dissenting) also referred to it and considered that Judge Iacobucci was reading into the McLeod v. Egan ruling a purport that it just does not have.

In all, we believe that the codes, charters and employment legislation serve as the basis upon which the collective agreement is built and, consequently, the parties’ contractual freedom both derives from this basis and is limited thereto. This interrelation would be analogous to that of the Constitution and employment statutes, without it being possible to affirm that the Constitution would be found to be a part of each of these statutes.

This ruling is especially interesting because it recognizes the employee’s right to resort to arbitration in order to ensure respect for guarantees stipulated in employment legislation, despite wording to the contrary in the collective agreement. Parties to collective agreements and arbitrators must therefore respectively correct their approach and grant access to arbitration for all employees from the very moment that their fundamental rights are jeopardized in any way.