"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.

Tuesday, May 31, 2011

"Use of 'London Court' by LCIA India is Wrong": Petition Filed before Delhi HC

Law Et Al, a site that provides law related news, has reported that a petition has been filed on behalf of Association of Indian lawyers (AIL) against the Indian chapter of the London Court of International Arbitration (LCIA). The petitioner's allegations seem to be the following:
  1. By employing the word "London", the arbitration institution is misleading as it indicates that institution is an official court of UK.
  2. Using "court" is misleading as it indicates that the institution is a court of law.
  3. The institution creates a parallel system of administration of justice contrary to the laws of India, which is violative of the Indian constitution.
  4. LCIA has "indirectly introduced" foreign lawyer practice in the garb of arbitration, which is actually prohibited in India.
  5. The arbitrators and the directors of LCIA, who attempt to exercise control over the process of arbitration, are practitioners in the UK
Senior Counsel representing the petitioner is reported by Law et al News to have stated that LCIA has consistently passed awards against Indian parties. Notice has been issued by the Delhi High Court to the concerned.

According to the information available in the website of the Delhi High Court, a civil suit has been filed by the Association of Indian Lawyers for perpetual injunction against the LCIA. The matter was placed before the Delhi High Court for admission/ further directions on 30 May. We'll keep our readers posted.

Some Articles on ADR

Volume 4, Part 4 of the Supreme Court Cases Weekly contains a few articles that are deal with ADR and Mediation.

Arvind P. Datar, Senior Counsel, Madras High Court has written an article titled: Legal Consultancy Service- Service Tax on Lawyers. The article deals with the recent introduction of service tax on legal consultancy services. (We already had a post on this issue). As regards service tax on arbitral tribunals, Datar argues that service tax on arbitral tribunals is "unfortunate", the reason being that "most arbitrators are retired judges will find it extremely difficult and cumbersome to file service tax returns, maintain input and output credits and comply with all other procedural formalities". It is submitted that such a reason alone is not convincing.

[So far I have not heard of any article that comprehensively deals the merits of imposition of service tax on arbitral tribunals. If there is any, readers may please give the links/ references]

Sriram Panchu, regarded as one of India's foremost mediators, has written an article titled Recasting Section 89 CPC- Afcons Infrastructure Ltd v. Cherian Varkey Constructions Co. (P) Ltdd. The article deals with the recent case of Afcons Infrastructure v. Cherian Varkey Constructions. The decision is important for Alternative Dispute Resolution in India. The article by Panchu is comprehensive and is worth checking out.

Laila T. Ollapally has written on Mandatory Court Referral for Mediation- Parties Retain the Right to Voluntary Decision. The case also deals with a particular aspect of Afcons Infrastructure.

Happy reading!

Thursday, May 26, 2011

Arbitration and Contract Law: Some Judgements & Links

Contract Law Theory:
Contracts Profs blog calls these set of podcasts the hottest download ever. Check out the post in Contracts Prof that gives links to papers relating to Contract Law Theory. Contract Law Theory lovers would definitely enjoy these.Some of the podcasts are available as papers in SSRN and can be accessed from here.

Randy Barnett (Georgetown), "Contract is Not Promise; Contract is Consent"

Jean Braucher (Arizona), "The Sacred and the Profane Contract Machine: The Complex Morality of Contract Law in Action"

Gregory Klass (Georgetown), “Promises, Etc.”

Avery W. Katz (Columbia), "Virtue Ethics and Efficient Breach"

Tenancy Agreements
Mohamad Ahmed v Atma Ram Chauhan (MANU/SC/0614/2011) is an important decision on Lease Agreements. The decision starts off with a statement made by Deepak Verma, J:, which reads:
"One half of the lis between landlord and tenant would not reach courts, if tenant agrees to pay the present prevalent market rate of rent of the tenanted premises to the landlord."
Empirical legal scholarship aficionados might get upset for the fact that the judge's number is just an estimate and is not backed by data. But the judge is probably right in opining that it is not right on the part of the tenant in paying a rent that was fixed quarter of a century ago. The court stated that "majority" of the cases were filed by landlords because they did not get fair rent from the tenants. So the court, in the guise of laying down some guidelines "for such type of litigation" introduced judiciary made legislation (what are the state legislatures doing?).

The first guideline is in the form of a default rule. According to the Supreme Court, if parties have not agreed for any escalation in their agreement, the default escalation rate would be 10% every three years. The first guideline is in the form of a direction to the authority deciding on fair rent under the Rent legislation to go by a valuation report or on the basis of reliable estimates of building materials in surrounding ares let out on recent in the recent past.

The second guideline is akin to Section 64A of the Sale of Goods Act, 1930 which reads:
"(1) Unless a different intention appears from the terms of the contract, in the event of any tax of the nature described in sub-section (2) being imposed, increased, decreased or remitted in respect of any goods after the making of any contract for the sale or purchase of such goods without stipulations as to the payment of tax where tax was not chargeable at the time of the making of the contract, or for the sale or purchase of such good tax- paid where tax was chargeable at that time.-
(a) if such imposition or increase so takes effect that the tax or increased tax, as the case may be, or any part of such tax is paid or is payable, the seller may add so much to the contract price as will be equivalent to the amount paid or payable in respect of such tax or increase of tax, and he shall be entitled to be paid and to sue for and recover such addition, and
(b) if such decrease or remission so takes effect that the decreased tax only, or no tax, as the case may be, is paid or is payable, the buyer made deduct so much from the contract price as will be equivalent to the decrease of tax or remitted tax, and he shall not be liable to pay, or be sued for, or in respect of, such deduction."

The second guideline states that
  1. property tax, water tax, maintenance charges, electricity charges would be borne by the tenant and
  2. any enhancement in the rates of the above would be borne by the tenant alone.
The purpose of giving this guideline seems to give the landlord a rent free from any deduction. While this guideline is in accord with the standard practices, the issue is whether this rule is a mandatory rule or a default rule (that is, subject to agreement between the parties). According to this blawgger, this should be subject to an agreement to the contrary.

The third and the fourth guidelines allocate the responsibility of maintenance between the tenant and the landlord. Major repairs is the responsibility of the landlord and the usual maintenance is the responsibility of the tenant. In case the tenant wants to do major repairs, he is to seek written permission from the landlord and both of them should agree on the modalities of cost-sharing. 

Another radical guideline is that in case the tenant pays market rate as rent, he cannot be evicted for at least five years. Now, what if the landlord wants to get the tenanted premises for his own purpose? This might cause major hardships to the landlord.Two more guidelines deal with the determination of rent.

This blawgger is of the opinion that some of these guidelines seem to take a wrong approach. The five year immunity guideline is an example.

Class Action Waivers, the Canadian and the American Supreme Courts:
What is with phone services companies and class action waivers? The Canadian and the Supreme Courts had to decide validity of class action waivers in arbitration clauses contained in phone services contracts. The Canadian Supreme Court held in Michelle Siedel v. TELUS Communications Inc. that the Consumer Protection Law (CPL) of the province allowed a "public interest plaintiff" to sue to enforce the CPL's standards. Therefore, class action waivers in such cases are, according to the Canadian Supreme Court, not valid. (Link to the Judgement)

The United States Supreme Court had to consider in AT & T v Concepcion if class action waivers in arbitration clauses were valid. Like the Canadian case, this case was also against a phone services company. The arbitration clause provided that the customer was deemed to have his right to invoke arbitration against AT&T only under his individual capacity and not as a representative of any class action. The Supreme Court had to decide whether such a clause was valid. The Court held, to the consternation of many consumer rights activists, that a class action waiver was valid and enforceable. We had analysed the Court of Appeal judgement in an earlier post. Access it from here. The Supreme Court's decision can be downloaded from here.

Booz Allen:
In Booz Allen Hamilton v SBI Home Finance, the court held that a suit for enforcement of a mortgage by sale is not arbitrable. The court also stated some general rules to decide on questions pertaining to non-arbitrability. We'll deal with this case in a detailed post. Apart from arbitrability, this judgement is also interesting for one another issue. In this case, the Supreme Court held:
"While considering an application under section 11 of the Act, the Chief Justice or his designate would not embark upon an examination of the issue of `arbitrability' or appropriateness of adjudication by a private forum, once he finds that there was an arbitration agreement between or among the parties, and would leave the issue of arbitrability for the decision of the arbitral Tribunal."
Thus, according to the court, arbitrability questions would only be decided by the arbitral tribunal under Section 11. This, on the face of it, appears to be contrary to the justifications given in SBP  Co. v. Patel Engineering. We will have a small series of posts on the decision. For now, check out Lex Arbitri Blog's descriptive comment on the case.

Saturday, May 21, 2011

Choice of Law of Arbitration Agreement: Corrections and Clarifications

One of our readers has commented on a recent post in this blog on Choice of Law in International Commercial Arbitration. The comments are pointed and raise several issues. Owing to the interesting issues raised in the comment, this blawgger has thought it fit to devote an entire post on the issues raised therein. Also, the comment points out a few errors in the said post. We’ll take this opportunity to correct or/and clarify. Each comment is dealt with under a separate heading.
Image from here.

Choice of five regimes: Whether a Choice or Whether a Matter of Applicability
The comment is probably correct in stating that it is not that parties could choose five regimes. It may so happen that five or even more regimes could apply to an international commercial arbitration. This is what even Redfern et al meant.

Choice of Law Governing Enforcement of Award:
As regards the comment that law governing enforcement cannot be chosen, it is not that parties have no choice. There exists an indirect choice- they can approach the jurisdiction of their choice (the choice is somewhat restricted by the relative advantage of choosing one jurisdiction over another, the existence of assets etc). But once a jurisdiction is chosen, there cannot be any law other than the law of that jurisdiction that would apply.

Choice of Law Governing the Capacity of Parties to the Arbitration Agreement:
As regards choice of the law governing capacity of the parties to enter into the arbitration agreement,there is a choice for the parties and the choice is through the choice of law of arbitration agreement itself. Even the Indian case of NTPC v Singer (link to the case in the post) itself states that “The substantive law governing arbitration, which concerns questions like capacity, validity, effect and interpretation of the contract etc."]. Several authorities also agree on this. Therefore, parties could have a choice on issues regarding validity of arbitration agreement. (It might probably be right to argue that parties cannot choose to apply two different laws for capacity and for validity of the arbitration agreement)  If the parties have expressly chosen the law of the arbitration agreement, issues pertaining to capacity of the parties to enter into the arbitration agreement would be governed by that law and not the seat. Readers are requested to cite an Indian or a foreign case that states otherwise. As regards incapacity, Article 34 of the Model Law refers to incapacity of “a party to the arbitration agreement”. The said ground, as confirmed by the report of the UNCITRAL in its 18th session, is not different from the ground in the New York Convention. The relevant New York Convention ground (for refusing enforcement) is quoted in the original post and seems to suggest that incapacity is to be judged from the perspective of the law applicable to the arbitration agreement.

Law of Arbitration Agreement in the Absence of Express Choice by the Parties:
We had discussed the existence of two opinions on this issue in detail. NTPC v Singer states that in the absence of an express choice, the substantive law of arbitration would be the same as that of the contract. If so, then a choice of substantive law of contract would be deemed to be an indication of the law of the arbitration agreement and therefore the issues pertaining to incapacity, validity, etc of the arbitration agreement would be governed by the substantive law of contract.
On the English approach, the comment suggests that in the absence of an express choice of law of arbitration agreement, the recent trend is to take the law of the seat as the law of arbitration agreement. In Dallah Real Estate v Pakistan, the arbitration clause read:
"23. Any dispute or difference of any kind whatsoever between the Trust and Dallah arising out of or in connection with this Agreement shall be settled by arbitration held under the Rules of Conciliation and Arbitration of the International Chamber of Commerce, Paris, by three arbitrators appointed under such Rules."
 There was no express choice of law of arbitration agreement in the arbitration clause. Pakistan resisted enforcement of the arbitral award on the ground that the arbitration agreement was not valid under the law of the country where the award was made, in accordance with Section 103(2)(b) of the English Arbitration Act, 1996. The law where the award was made was French law. According to the English Courts, there was no arbitration agreement with Pakistan as per the French law and therefore, the English Courts refused enforcement for the reason that it was not valid in the law of the place where the award was made.This is in consonance with the New York Convention.Now, it could be argued that both approaches are different. On close analysis, they do not appear to be so. Sonatrach deals with the case where there was an express choice of substantive law of contract. It appears that the English Law is that where there is no express choice of substantive law, either of contract or arbitration agreement, the substantive law for both purposes is the law of the seat. Dallah adopts this approach. In Sonatrach, there was an express choice of the substantive law of contract. In such a case, the approach seems to be that the substantive law of arbitration agreement follows the substantive law of contract. This is a prudent approach. Therefore, the correct position in international arbitration appears to be that in case the substantive law of contract is provided, then the law of arbitration agreement follows the substantive law of contract. In case the substantive law of contract is not provided, then the substantive law of contract is, according to authorities, presumed to be the law of the seat. Even in this case, the substantive law of arbitration agreement follows the substantive law of contract, which is nothing but the law of the seat of arbitration.

As regards the implications of Bhatia, the judgement has made choice of law rules in India more out-of-sync with regard to international arbitration and therefore requires an independent treatment. We'll deal with this in subsequent posts on the topic.

Thursday, May 19, 2011

Natural Gas Allocation in India: Latest Development

We have been following the latest developments on the dispute between some steel producers and the Ministry of Petroleum and Natural Gas on the allocation of natural gas. Certain steel companies had filed cases before the Delhi and the Bombay High Courts challenging the direction of the Ministry of Petroleum and Natural Gas to Reliance Industries Limited to sell gas to priority sectors. We had a post describing the entire dispute and it can be accessed from here. On May 11, the Petroleum Ministry had called for a meeting to hear the grievances of the steel producers. In the said meeting, the Ministry had stated that it would take a decision on the issue by May 18.

Business Standard and the Times of India report that the Ministry has stuck to its initial decision to prioritise gas sale from Reliance D6 Field to the priority sectors first and then only to the Non-priority sectors. The reason that the Ministry had given is reportedly that the production from D6 was below expectations and that the interest of the core sector cannot be sacrificed.
It may be noted that news reports state that the Petroleum Ministry and its exploration regulatory arm, the Directorate General of Hydrocarbons had already asked Reliance Industries Limited to drill two wells by June.

The same issue is pending before the Bombay High Court and is coming up for hearing on 23 May. We'll keep our readers updated on the issue.

Choice of Law in International Commercial Arbitration: An Indian Perspective

According to a Redfern et al, it is possible that parties could choose five different laws applicable to their arbitration. They are:
  1. Governing law of Arbitration (lex arbitri)
  2. Substantive Law of Contract
  3. Law of Validity of Arbitration Agreement
  4. Law Applicable to Capacity of Parties to Enter into Arbitration Agreement
  5. Law governing recognition and enforcement of the arbitral award.
Even the Indian Courts have recognized that parties may choose to apply laws of different jurisdictions in an International Commercial Arbitration (see, NTPC v Singer, for instance). However, the consequences thereof have not been analysed in proper detail (barring certain exceptions). For instance, the Gujarat High Court in Hardy Oil and Gas and the Supreme Court in Videocon Industries seem to have not properly considered the legal consequences of having an agreement governed by law of a country and the arbitration clause contained in the agreement governed by a law of another country. A comprehensive analysis of consequences of choice-of-laws from an Indian perspective is lacking. The purpose of this series of blog posts (labeled "Arbitration: Choice of Law") is to provide a comprehensive introduction to this topic from an Indian perspective.

In Bhatia Internationalv. Bulk Trading SA, a three judge Bench of the Supreme Court held that Part I of the Arbitration and Conciliation Act, 1996 (Act) applied even to international commercial arbitration held outside India. Part I of the Act contains provisions pertaining to arbitration agreement, appointment of arbitrators, interim measures by the court and the arbitral tribunal, rules applicable to the substance of the dispute, annulment of awards etc. Bhatia International has altered the existing framework of international arbitration especially as regards the consequence of choice-of-laws. For instance, it has been held by the Indian courts that arbitral award of an arbitration whose seat is foreign could be annulled even in India. This implies the existence of two supervisory jurisdictions over a single arbitration. The Indian courts have also held that parties could exclude the applicability of Part I of the Act either expressly or impliedly, which is not in congruence with the international arbitration regime. Therefore, choice-of-laws are significant in international arbitration as far as India is concerned. This series additionally addresses the question of implied exclusion of Part I of the Act on the basis of choice-of-laws by the parties. The first few posts on the series address the implications of choice of a law of arbitration agreement distinct from the main contract. In this post, reference to arbitration agreement is a reference to arbitration clause contained in the main contract.

Choice of Law of Arbitration Agreement:
Before analyzing the implications of choice of a law of arbitration agreement distinct from the main contract, it would do good to analyse the consequence of not specially mentioning the law of arbitration agreement. Lets assume that the arbitration clause in a contract between an Indian party and American party provides:
Disputes shall be referred to arbitration. The seat of arbitration shall be New Delhi, India. The substantive law of the contract shall be English Law.
In this clause, there is no mention of the law of arbitration agreement. What is the consequence of the absence of the choice of the law of arbitration agreement? Logically, the choice of law of English Law as the substantive law of contract implies that the arbitration agreement should is also governed by the same substantive law. This is simply because the arbitration clause forms a part of the contract. [Portions added after posting are in dark blue fonts]. According to Redfern et al (p. 148), it is reasonable assumption that the substantive law of arbitration agreement, in the absence of a choice, would be same as that of the main agreement containing the arbitration clause. The authors state that this has been followed in several cases. The English Law seems to favour such an approach. In Sonatrach Petroleum v. Ferrell International, the Commercial Court held:
"[T]he proper law of the arbitration agreement is to be determined according to the general principles for ascertaining the proper law of a contract: there can be an express choice of law or the choice can be implied by reference to that body of law with which the arbitration agreement has its closest and most real connection. Where the substantive contract contains an express choice of law, but the agreement to arbitrate contains no separate express choice of law, the latter agreement will normally be governed by the body of law expressly chosen to govern the substantive contract. Where, however, there is no such express choice of law in either the substantive agreement or the arbitration agreement, but the venue of the arbitration is identified, it will normally, but not invariably, be concluded that the arbitration agreement and the substantive contract are both governed by the law of that place."
However, the authors themselves state subsequently that "the real choice-in the absence of any express or implied choice by the parties- appears to be between the law of the seat of the arbitration and the law which governs the contract as a whole". (p. 149) However, Gary Born argues that “where the parties have not selected a law to govern their arbitration clause, that provision will be governed by the ‘law of the country where the award was made’.” (formatting altered) (also note, Redfern et al quote the previous edition of Gary Born stating the same thing as Redfern et al do at p. 149).

In this case, the law of the arbitration agreement would be Indian Law as the law of the seat is Indian Law. The quote in the quote from Gary Born is actually a provision of the New York Convention on Recognition and Enforcement of International Arbitral Awards, 1958 (NYC) (India is also a signatory to the New York Convention). The relevant provision [Article V(1)(a)] of the NYC reads:
Recognition and enforcement of the award may be refused [where]…a) the parties to the [arbitration] agreement… were, under the law applicable to them, under some incapacity, or the said agreement is not valid under the law to which the parties have subjected it, or failing any indication thereon, under the law of the country where the award was made”.
This single provision of the Convention incorporates several ideas. One, the validity of the arbitration agreement is determined by the law which parties have chosen as the law of the arbitration agreement. Two, in case the parties have not indicated the law of the arbitration agreement, the validity of the said agreement would be judged as per the seat of the arbitration. Here the law of the country where the award is made does not refer to making of an award in a country for the sake of convenience. Commentators are in agreement that it refers to the seat of arbitration. This means that in the absence of a choice of the law of arbitration agreement, by default, the validity of the arbitration agreement would be judged as per the laws of the seat.

The arbitration clause quoted above does not mention the law of the arbitration agreement. Therefore, the law governing validity of the arbitration agreement would be the law of the seat, which is the Indian Law and the validity of the arbitration agreement would be tested in accordance with the Indian laws.

Analysis of the text of the Act also leads to the same results. See, Section 34(2)(a)(ii) provides for setting aside an arbitral award if the arbitration agreement was not valid under the law to which the parties had subjected it or, failing any indication thereon, under Indian Law (the expression under by the provision is “law for the time being in force”).

As per Article V(1)(a) quoted above, the law regarding capacity to enter into arbitration agreement is to be decided as per the law applicable to the parties. The provision does not state whether the applicable law refers to the law of the seat or the law chosen by the parties as arbitration agreement. In India, Section 34(1)(a)(i) is also silent on this aspect. According to Gary Born (p. 424), even questions pertaining to the capacity of the parties to enter into an arbitration agreement would be governed by the law of the arbitration agreement. If so, and if the parties have not specified the same, the law of the seat would govern issues pertaining to capacity of parties to enter into an arbitration agreement. This view is confirmed by the Travaux Preparatoires of the UNCITRAL Model Law as well.
More on the implications of an express choice of law of arbitration agreement in the next post.

Tuesday, May 17, 2011

Further Discussion on Videocon Industries v UoI (Exclusion of Part I of the ACA 96)

In the last post on this issue, we had analysed the decision of the Delhi High Court in the case of Videocon Industries v. Union of India. We summarize our conclusions reached in the previous post below:
  • The seat of arbitration as per the provisions of the Production Sharing Contract (PSC) was Malaysia. However, parties agreed to transfer the seat itself (and not merely to have the hearings outside Malaysia) to London.
  • Interference by the Delhi High Court under Section 9 for the reason that there was a dispute between the parties as to the seat of arbitration was unwarranted.
The next portion of this post deals with the case before the Supreme Court.

Arguments of the Parties before the Supreme Court:
For Videocon:
Summary of Videocon's arguments are:
  • Delhi High Court did not have jurisdiction to pass an order under Section 9 to stay the arbitral proceedings because such relief was beyond the scope of Section 9, especially in view of Section 5.
  • Even if such relief could be granted under Section 9, the Delhi High Court did not have jurisdiction as Part I was impliedly excluded by the parties as the lex arbitri was English Laws.
  • Having agreed for the shifting of seat, UoI is estopped from arguing that the seat of arbitration was Kuala Lumpur.
  • If UoI was aggrieved by the partial award, it could have applied to the English courts to annul the said award.
For UoI:
  • As per the arbitration agreement, Kuala Lumpur was the seat of arbitration. Once Kuala Lumpur was the seat of arbitration, the seat could not have been changed except by amending the PSC as per Article 35.2.
  • Arbitral tribunal was not entitled to determine the seat of arbitration and the record by the tribunal of proceedings to that effect.
  • The PSC was between ONGC Ltd., Videocon Petroleum, Command Petroleum and Ravva Oil and therefore the venue of arbitration cannot be treated to have been amended on the basis of the agreement between the two parties to the arbitration agreement. Any changes in the PSC required concurrence by all the parties. Every written agreement was to be in the name of the President of India and shifting the seat to London did not change the juridical seat of arbitration. Therefore, London was the seat of arbitration.
Decision of the Supreme Court:
According to the Supreme Court, two questions arose for its consideration
  1. Whether Kuala Lumpur was the designated seat of arbitration?
  2. Whether the Delhi High Court could entertain the petition filed by UoI under Section 9?
Decision on Kuala Lumpur as the Seat of Arbitration: The Supreme Court's reasoning and decision on this question is summarized below:
  • The PSC was entered into between five parties with Kuala Lumpur being the seat of arbitration. If the parties were to amend the PSC, they could do so only by amending the PSC as per Article 35.2 through a written instrument. Therefore, there was no transfer of seat but of shifting of venues to different places for convenience.
  • There is no provision in the Arbitration and Conciliation Act by which seat could be changed by the arbitral tribunal. 
  • The distinction between the seat and holding hearings in venues other than the seat has, however, been recognized in international arbitration. Even in Dozco India Ltd. V. Doosan Infracore, the Supreme Court recognized the difference between juridical seat of arbitration and hearings taking place in a jurisdiction outside the seat. [Section 53 English Arbitration Act, 1996]
  • Therefore, there was no agreement to transfer the seat of arbitration to London. The agreement was merely an agreement to hold proceedings outside the seat.
Decision on Implied Excludability of Part I: On the second question, the Court stated that the three judge Bench of the Supreme Court in Bhatia International held that in respect of arbitrations taking place outside India even non-derogable provisions of Part I could be excluded impliedly and that the ratio of Bhatia International was applied in Venture Global. Further, the court held that in Hardy Oil and Gas, the Gujarat High Court had held that Part I was since the Governing Law of arbitration was English Law, Indian courts had no jurisdiction. According to the court, the Gujarat High Court in Hardy Oil and Gas correctly applied the ratio of Bhatia International.

On the basis of the above reasoning the court held that the choice of substantive law of the arbitration agreement as English law implied that Parties had agreed to exclude provisions of Part I. Therefore, the court concluded that the petition under Section 9 was not maintainable.

We had previously contended that it was not necessary for the Delhi High Court to rely on the uncertainty of the seat of arbitration for interfering in the arbitral proceedings under Section 9. We are unsure why the Supreme Court had to decide the issue of the seat of arbitration. Perhaps, the parties had raised arguments on this. In any case, we consider it unnecessary for the court to have done so as the fundamental issue before the Delhi High Court was whether Part I of the Arbitration and Conciliation Act, 1996 (Act) was excluded in view of the arbitral clause. Therefore, we’ll address the issue as to the seat subsequent to the analysis on implied exclusion of Part I.

Implied Exclusion of Part I: By merely choosing foreign laws, Part I could be impliedly excluded; but unless it is excluded, Part I would apply even to arbitrations held outside India. This principle, whose source is Bhatia International, is fairly well established. But what is not well-established is what are the choices to be made that would lead to exclusion of Part I. The contours of implied excludability is a matter of considerable confusion.

The Supreme Court was of the opinion that Hardy Oil and Gas was a case similar to Videocon. In Hardy Oil and Gas, the substantive law of the contract was Indian Law, the law governing arbitration was English Law, the arbitration was to be conducted as per Rules of the London Court of International Arbitration and the venue was London. The Gujarat High Court held that Part I was impliedly excluded because the parties had expressly chosen English Law to be the law governing arbitration. It may also be noted that the facts in Hardy Oil and Gas are virtually similar to the present case because as per the arbitration clause in the case, the law of the arbitration agreement was English Law. It would do well to quote the relevant clause in Hardy Oil and Gas:
"9.5 Governing Law and Arbitration
1. This Agreement (except for the provisions of Clause 9.5.4 relating to arbitration) shall be governed by and construed in accordance with the substantive laws of India.
2. Any dispute or difference of whatever nature arising under, out of, or in connection with this Agreement, including any question regarding its existence, validity or termination... shall at the instance of any Party be referred to and finally resolved by Arbitration under the rules of the London Court of International Arbitration (SLCIA), which Rules (Rules) are deemed to be incorporated by reference into this clause.

4. The place of arbitration shall be London and the language of arbitration shall be English. The law governing arbitration will be the English law.
5. Any decision or award of an arbitral tribunal shall be final and binding on the Parties
On the face of it, it could be argued that Indian Law was the substantive law of arbitration agreement. But on a close reading.of Article 9.5.1 we would argue that apart from the governing law of arbitration being English Law, the governing law of arbitration agreement was also English Law because of the bracketed portions of 9.5.1.

It must however be noted that in Hardy Oil and Gas, the Gujarat High Court did not go into the question of whether a choice of a foreign law as the substantive law of the arbitration agreement impliedly excluded Part I. At least the decision of the Gujarat High Court discloses no analysis to that effect. Therefore, according to this blawgger, the ratio of Hardy Oil and Gas is that a choice of a foreign arbitral seat acts as a an exclusive jurisdiction clause and Part I is deemed to be impliedly excluded for the same. This is confirmed by the Supreme Court’s decision in Videocon, relevant portion of which is quoted below:
In our opinion, the learned Single Judge of Gujarat High Court had rightly followed the conclusion recorded [in Bhatia International] and held that the District Court, Vadodara did not have jurisdiction to entertain the petition filed under Section 9 of the Act because the parties had agreed that the law governing arbitration will be English Law”. (emphasis supplied)
However, the reasoning of the Supreme Court in Videocon was that the choice of English Law as the law of arbitration agreement meant that Part I was excluded. The court held:
In the present case also, the parties had agreed that notwithstanding Article 33.1, the arbitration agreement contained in Article 34 shall be governed by laws of England. This necessarily implies that the parties had agreed to exclude the provisions of Part I of the Act. As a corollary to the above conclusion, we hold that the Delhi High Court did not have the jurisdiction to entertain the petition filed by the respondents under Section 9 of the Act and the mere fact that the appellant had earlier filed similar petitions was not sufficient to clothe that High Court with the jurisdiction to entertain the petition filed by the respondents.” (emphasis supplied)
As is apparent from the above two quotes, in Hardy Oil and Gas, the Gujarat High Court held that a mere choice of foreign arbitration law as the governing law meant that Part I was excluded.

In Videocon the arbitration agreement was an English Arbitration Agreement. The court held that because there the substantive law of arbitration agreement was English Law, it was implied that Part I was excluded. The court did not explain why. One plausible explanation would be that the validity and the interpretation of the arbitration agreement in Videocon was to be decided in accordance with English Law. As per English Law, an agreement to have a matter arbitrated in a seat operates similar to an exclusive jurisdiction clause and no court in another country would have jurisdiction over the arbitration proceedings [Shashoua v. Sharma], unless the parties have agreed otherwise. Therefore, the choice of English Law as the substantive law of arbitration agreement meant that no other country had jurisdiction over the matter. However, the question would be whether English Law prohibits a party from seeking interim relief in any other jurisdiction. Probably this should have been the methodology of analysis by the Supreme Court.

Even so, shouldn’t the question of whether the English Arbitration Agreement excluded the applicability of the Indian Act have been a question of fact (being a question as to foreign law)?

In any case, the law as it stands today post-Videocon is that if the arbitration agreement is governed by a foreign law, if the seat of arbitration is foreign, Part I would be impliedly excluded even if the substantive law of arbitration the main agreement was Indian Law. This decision does not deal with the law pertaining to implied exclusion of Part I if the substantive law of contract is Indian Law and the seat of arbitration is not India.

We'll look at the issue of transfer of the seat in another post.

Friday, May 13, 2011

More Clarity of Implied Exclusion of Part I? Videocon v. Union of India

[Due to some problems with Blogger, our yesterday's post on Videocon v Union of India got deleted. Apart from critiquing the decision of the Delhi High Court, we also reproduce yesterday's post with some modifications.]
The Indian Corporate Law Blog has a brief post on the latest decision of the Supreme Court (decided on 11.05.2011) in Videocon Industries Limited v. Union of India & Others (Videocon). The decision is significant for obvious reasons: it clarifies the law pertaining to implied exclusion of Part I of the Arbitration and Conciliation Act, 1996 (although there are decisions that have held otherwise). 

Provisions of the Production Sharing Contract:
The dispute arose out of provisions of a Production Sharing Contract (PSC) signed between the Government of India (UoI) on the one hand and a consortium consisting of four companies on the other. The relevant provisions of the PSC dated 28.10.1994 are as follows: 
“33.1 Indian Law to Govern
Subject to the provisions of Article 34.12, this Contract shall be governed and interpreted in accordance with the laws of India.
33.2 Laws of India Not to be Contravened
Subject to Article 17.1 nothing in this Contract shall entitle the Contractor to exercise the rights, privileges and powers conferred upon it by this Contract in a manner which will contravene the laws of India.
34.3 Unresolved Disputes
Subject to the provisions of this Contract, the Parties agree that any matter, unresolved dispute, difference or claim which cannot be agreed or settled amicably within twenty one (21) days may be submitted to a sole expert (where Article 34.2 applies) or otherwise to an arbitral tribunal for final decision as hereinafter provided.
34.12. Venue and Law of Arbitration Agreement
The venue of sole expert, conciliation or arbitration proceedings pursuant to this Article, unless the Parties otherwise agree, shall be Kuala Lumpur, Malaysia, and shall be conducted in the English language. Insofar as practicable, the Parties shall continue to implement the terms of this Contract notwithstanding the initiation of arbitral proceedings and any pending claim or dispute. Notwithstanding the provisions of Article 33.1, the arbitration agreement contained in this Article 34 shall be governed by the laws of England.
35.2 Amendment
This Contract shall not be amended, modified, varied or supplemented in any respect except by an instrument in writing signed by all the Parties, which shall state the date upon which the amendment or modification shall become effective.”
This PSC, it may be noted, is a Pre-NELP PSC. For those uninitiated in Indian Petroleum Law, NELP refers to National Exploration Licence Policy. In the late 1990s the Government of India felt that there was a need to accelerate the pace of hydrocarbon exploration and production and sought to liberalize the petroleum sector. After holding consultations with the State Governments on the terms of the Exploration Licence, the Ministry of Petroleum and Natural Gas held the first NELP bidding round in 1999. So far contracts under eight rounds of NELP have been awarded.

As regards dispute resolutions provisions, NELP PSCs are not as liberal as some of the Pre-NELP PSCs are. Non-Indian seats have not been permitted under the NELP PSCs. For instance, the latest Model PSC for the NELP IX round does not contemplate a foreign seat. Relevant clauses read as under:
32.1 This Contract shall be governed and interpreted in accordance with the laws of India.
32.2 Nothing in this Contract shall entitle the Contractor to exercise the rights, privileges and powers conferred upon it by this Contract in a manner which will contravene the laws of India.

33.9 The arbitration agreement contained in this Article 33 shall be governed by the Arbitration and Conciliation Act, 1996 (Arbitration Act). Arbitration proceedings shall be conducted in accordance with the rules for arbitration provided in Arbitration Act.

33.12 The venue of the sole expert, conciliation or arbitration proceedings pursuant to this Article, unless the Parties agree otherwise, shall be New Delhi, India and shall be conducted in the English language. Insofar as practicable, the Parties shall continue to implement the terms of this Contract notwithstanding the initiation of proceedings before a sole expert, conciliator or arbitral tribunal and any pending claim or dispute
Most of the PSCs in other countries do not allow foreign arbitration seats.

The Dispute:
Provisions pertaining to cost recovery is one of the most controversial provisions in Production Sharing Contracts and disputes have arisen even in India pertaining to the same (see, for example, Niko Resources Ltd. v Union of India). Even in this case, disputes arose between the Government and the Contractor (consisting of a consortium of four companies) on cost recovery. [We’ll do a detailed post on the concepts in the Indian Production Sharing Contract in the near future]. In furtherance of the dispute resolution provisions, the arbitral tribunal was constituted and the first hearing was to take place in Kuala Lumpur (the Malaysian capital) in March 2003.

However, the March hearing did no take place because of the SARS epidemic that became the news in early 2003. The tribunal shifted the venue of the proceedings to Amsterdam (the Netherlands) and London (UK). In October 2003, the Tribunal passed a consent order which read: "By consent of parties, seat of the arbitration is shifted to London.”

Subsequently, all the proceedings pertaining to the dispute were held in London. A partial award was passed by the tribunal in March 2005. Union of India challenged the petition in the High Court of Malaysia. At the same time, Union of India also sought directions under Section 9 of the Arbitration and Conciliation Act, 1996 from the Delhi High Court to stay the arbitral proceedings. Videocon objected to the maintainability of the petition. 

Arguments on Non-maintainability of the Petition:
Before the Delhi High Court, Videocon argued that by choosing English Law as the Law of the Arbitration Agreement, the parties have excluded the applicability of Part I of the Indian Act. Therefore, the argument was that the Delhi High Court did not have jurisdiction over the matter. Apart from the argument that Part I was applicable, UoI’s argument was that English Law governed the substantive aspects of the arbitration agreement while the procedural aspects of the arbitration agreement were governed by the curial law, which is the law of the seat of arbitration. In the dispute, UoI contended that since the seat of arbitration was Kuala Lumpur, the Malaysian Laws on arbitration governed the conduct of the arbitral proceedings. Against this, Videocon contended that English Law was the curial law and not Malaysian Law in view of the agreement of the parties to shift the seat of arbitration to London.

Decision of the Delhi High Court:
The Delhi High Court held that the petition was special case and that since “the governing procedural law is yet to be determined”, the question as to the seat of arbitration is to be determined by a court which has the closest connection to the parties or the dispute. Accordingly, the court held that since Indian courts were most closely connected to the dispute, which arose out of an Indian PSC, the Delhi High Court would have jurisdiction. The court stated:
In the absence of any indication to the contrary, the governing law of the contract or the “proper law” (in the words of Dicey) of the contract being Indian Law, it is that system of law which must necessarily govern matters concerning arbitration, although in-certain respects the law of the place of arbitration may have its relevance in regard to procedural matters.”
The High Court also reasoned that the dispute between the parties pertaining to the seat of arbitration had resulted in a stalemate as the annulment proceedings in Kuala Lumpur were in a standstill due to issues of jurisdiction. Further, UoI stated that for the English courts to assume jurisdiction, the place of arbitration was a relevant factor. The High Court apprehended that in such a situation, the arbitration would become a stalemate and such a situation would be an affront to the spirit of Section 9.

The Arbitration Agreement: Article 33.1 of the PSC provided that the Contract was to be governed by the laws of India. Now, when there is such a clause in the contract, it implies that the choice of the Substantive Law of Contract was Indian Law. Therefore, the issues pertaining to formation, validity, performance, interpretation etc were to be governed by the Indian Contract Law. Article 33.1 also uses the expression “subject to Article 34.12”. Relevant portion of Article 34.12 provides: “Notwithstanding the provisions of Article 33.1, the arbitration agreement contained in this Article 34 shall be governed by the laws of England.” Thus, according to the PSC, the arbitration agreement would be governed by English Law.

But what is the precise difference between these two? A single agreement (the arbitration clause is a part of the PSC) is governed by laws of two different jurisdictions. This situation arises due to an important theoretical construct in international arbitration known as the severability of the arbitration agreement. The severability doctrine states that an arbitration clause in the agreement is severable from the main contract. This independence leads (among many others) to two crucial consequences relevant to us: (1) the validity of the arbitration clause does not depend merely on the validity of the main agreement; (2) parties could choose a law for the arbitration clause that is different from that of the main contract.
In general, however, authorities agree that there is a presumption that the substantive law of the arbitration clause would be the same as that of the main agreement which contains the arbitration clause, unless there is an agreement to the contrary. This blawgger is apprehensive in calling this as a presumption. It would be more precise to call this a default rule.
Under the PSC in Videocon, issues pertaining to formation, validity, interpretation, performance etc of the arbitration agreement were to be governed by English Law. Hypothetically, if English Law provides for a mandatory rule that the arbitral tribunal should consist of odd number of arbitrators and an arbitration agreement whose governing law is English law provides for two arbitrators, such an agreement would be void as per the (hypothetical) English rule even if the main contract containing the said arbitration clause is governed by a jurisdiction which does not invalidate such a clause.
This option for the parties to choose a law for the arbitration agreement distinct from the main contract exists possibly because parties could enter into submission agreements, i.e., an independent agreement to arbitrate, and choose a separate governing law for it. For instance, parties could enter into a contract with Indian laws as the substantive law but could agree upon an independent agreement to arbitrate disputes arising out of the Indian contract with English Law as the governing law. hence, it would be superfluous to deny a choice to the parties to have their arbitration clause contained governed by a law different from the substantive law of the main contract.
Article 34.12 provides that the venue of the arbitral proceedings shall be Kuala Lumpur. In short, the implication of this choice, as far as international arbitration is concerned, is that the parties have agreed that the legal validity of the arbitration proceedings and the outcome of the arbitration proceedings would be recognized by the Malaysian Laws. One of the consequences of this is that if a party to such proceedings wants to challenge the legal validity of the arbitration or its outcome, the challenge is to be in Malaysia.
Therefore, the arbitral tribunal is to apply three different laws to the proceedings (1) the substantive law of contract- Indian Laws, (2) substantive law of arbitration agreement- English Laws, and (3) Lex arbitri or the governing law of arbitration-Malaysian laws. Redfern & Hunter differentiate between the law governing the parties’ capacity to enter into an arbitration agreement and the law governing the arbitration agreement and the performance of that agreement. We do not go into that distinction for the simple reason that the distinction is more theoretical than practical.
Consequences of the Agreement of the Parties to Shift the Seat of Arbitration
We had previously noted that the chain of events as described in the Delhi High Court judgement is significant. Here we describe why. The original seat of arbitration was Kuala Lumpur. However, the arbitral tribunal decided to hold the arbitral proceedings in Amsterdam and London. What is the consequence of holding the proceedings in Amsterdam or in London as far as the seat of arbitration is concerned? The answer is it depends on the law of the seat. For instance, if the parties to an agreement have agreed on an Indian seat but hold the arbitration proceedings in, say, London, there is no implied agreement to have the seat in London. Section 20(3) of the Indian Act provides: “Notwithstanding [the choice of the place of arbitration or the determination by the tribunal of the place of arbitration], the arbitral tribunal may, unless otherwise agreed by the parties, meet at any place it considers appropriate for consultation among its members, for hearing witnesses, experts or the parties, or for inspection of documents, goods, or other property”. If the Malaysian laws do not prohibit conducting hearings outside Malaysia, the seat of arbitration would be Malaysia even if the hearings are held elsewhere for convenience. In fact, Section 22(3) of the Malaysian Arbitration Act, 2005 (which came into force after the arbitration in this case commenced) contains a provision similar to Section 20(3) of the Indian Act. [Since the Malaysian Arbitration Act, 1952 was based on the English Arbitration Act,1950, and since the latter allowed hearings to be conducted outside the seat of arbitration, we assume here that the Malaysian Laws permitted it]
In Videocon, due to SARS, the tribunal conducted its proceedings in Amsterdam and London. Even then, the seat of arbitration was Kuala Lumpur and the Malaysian Law was the lex arbitri. Subsequently, the parties expressly agreed to shift the arbitration to London. This agreement cannot be construed as an agreement merely to hold arbitration proceedings outside the seat of arbitration (Malaysia) for convenience for two reasons: (1) there was no necessity for such an agreement because the tribunal had been doing the same by holding proceedings in Amsterdam and London even before the agreement was reached, (2) the agreement uses the term “seat of arbitration”. The seat of arbitration specifically connotes the jurisdiction which would grant the “legal touch” to the arbitration proceedings. These were parties that had sophisticated legal counsel (for obvious reasons- the agreement was reached during the arbitration proceedings and was recorded by the tribunal). Therefore, the usage of the term “seat of arbitration” could not have been in reference to any thing other than the jurisdiction which grants the legal touch to the arbitration. The consequence of this agreement (in the absence of more information on the agreement between the parties) was a transfer of the seat of arbitration from Kuala Lumpur to London and not merely an agreement to hold proceedings outside the seat for convenience reasons.
Rarely does a transfer of seat take place. But if it happens, the question is what happens to the proceedings that were held prior to the shifting of the seat. Another issue is what if a party against whom an award is passed after the transfer goes to the original seat and challenges the award (as it happened in Videocon. [see, Gary Born, International Commercial Arbitration 1695-1696 (Volume II)(2009); Pierre Lalive, On the Transfer of Seat in International Arbitration].

The Dispute as to the Seat: It is surprising why the Delhi High Court had to deal with the issue as to the seat of arbitration in the proceedings under Section 9 in the first place and hold that the “governing procedural law is yet to be determined”. Videocon’s argument was that in view of London choice of seat of the parties, Part I was impliedly excluded. UoI contended that Malaysia was the seat of arbitration. The question as to whether London or Malaysia was the seat of arbitration was immaterial in deciding whether Part I was excluded impliedly because the argument was that the choice of a foreign seat had impliedly excluded applicability of Part I. So the court had to simply decide whether the choice of a foreign seat, of English Law as the law of arbitration agreement and of Indian law as the substantive law of contract excluded the applicability of Part I.
Existence of a Stalemate: The Delhi High Court’s reasoning for holding the Section 9 petition to be valid was the peculiar circumstances in the case that arose out of the dispute between the parties pertaining to the seat of arbitration. In the absence of access to entire records, and based on the facts as stated in the Supreme Court’s decision, this reasoning sounds unconvincing. If there was a dispute as to the seat of arbitration, the parties could have approached the arbitral tribunal first. In international arbitration, in the absence of any agreement by the parties, seat of arbitration is often determined by the arbitral tribunal itself.
Even if the parties could not have gone to the tribunal, they could have approached to the English courts to decide the question. The Delhi High Court’s reasoning on why the petitioner was right in not approaching the English courts is not convincing: 
The petitioner has already expressed its dissidence about the English Court deciding the question of seat of arbitration for the reason that for the English Court to assume jurisdiction, it is the place of arbitration which is the relevant factor. In such a situation, of the Indian Court does not adjudicate upon the present petition, the arbitral proceedings between the parties will invariably end in a stalemate.”
 In simple, the court held that the petitioner did not go to the English Courts because the petitioner did not consider London to be the seat of arbitration. The court did simply stated the argument of UoI in different words but did not decided on the correctness of the argument. The existence of a “stalemate” was dependent on whether UoI was right in arguing that London was not the seat of arbitration. This decision was never made by the High Court. Therefore, the reason for granting the prayer asked by UoI was not in accordance with the well-established principles of international arbitration. 

We'll analyse the reasoning and the decision of the Supreme Court in the next post.

Wednesday, May 11, 2011

Gas Allocation & Utilization in India: Further Developments

In our last post, we had dealt with the case pertaining to allocation of natural gas. In the case filed by Welspun Maxsteel and Ispat, the Bombay High Court had directed the Government to hear the concerns of the petitioners. The counsel for the Government stated in the court that the Government would hear the petitioners as well as others who were affected by the directions given to Reliance to supply gas only to priority sectors. Pursuant thereto, the Government has called for a meeting to be conducted today (May 11, 2011) chaired by the Joint Secretary (Marketing), Ministry of Petroleum & Natural Gas for hearing the affected parties.

Tuesday, May 10, 2011

Natural Gas Allocation and Utilisation in India: Matter Goes to Court

Reliance D 6*
Several newspapers in the last few days have reported petitions against the Ministry of Petroleum & Natural Gas, Government of India (MOPNG), for prioritizing the allocation of natural gas from the Reliance KG-D6 to specific industries. Essar Steel has, reportedly, filed a petition before the Delhi High Court against the order of the MOPNG dated April 21, 2011 (Direction) allocating gas from Reliance’s KG D6 Field to “priority” sectors such as fertilizers, power etc, and only after the demand in the sectors are met, to sectors such as steel, petrochemicals and refineries.The per day demand of priority sector seems to be around 47.6  million metric standard cubic meters per day (mmscmd). The Direction seems to empower Reliance to cut off supplies to non-priority sectors if the natural gas demand of the priority sectors has not been met. Consequently, Reliance Industries Limited (RIL) has reportedly cut off the natural gas supply to such non-priority sectors from this Monday (10.05.2011).

About 3.2 mmscmd gas was supplied from D6 to Essar Steel. However, of late, D6 field has not been producing enough natural gas, leading to strict directions from the Exploration & Production regulator-Directorate General of Hydrocarbons to RIL. This Direction is a possible consequence of the low production. Essar Steel challenged the Direction to RIL. Essar Steel had also asked for an interim stay on the direction of the MOPNG. However, the Delhi High Court refused to grant stay without hearing the Government. When the court asked for the contentions of the Government with the Additional Solicitor General, Mr A.S. Chandiok (ASG), the ASG asked for more time to review the decision of the Bombay High Court on a similar matter that arose out of petitions filed by Welspun Maxsteel and a few others.

Proceedings before the Bombay High Court:
The Direction was also the subject matter of a petition filed in the Bombay High Court by Welspun Maxsteel. Relevant portions of the impugned Direction dated April 21, 2011 reads as follows: 
2. Under the Government's Gas Utilization Policy, allocations for KG D6 fields had initially been made for core sectors and subsequently, taking into account expectation of higher production, allocations had been made for non-core sectors. As the gas production from KG D6 fields has decreased to around 50 mmscmd, it is only natural that the said production be supplied firstly to core sectors and Ministry's direction vide letter of even number dated 30.03.2011 has been issued in this context. The said direction has been issued in pursuance of Government's Gas Utilization Policy under the provisions of the PSC. Hence, the said direction needs to be complied with.
3. The Hon'ble Supreme Court in its order dated 7.5.2010 in the RIL & RNRL case has held that the Government owns the gas till it reaches its ultimate consumer. Further, it has been held that the PSC shall override any other contractual obligation between the Contractor and any other party.”
It may be noted that he MOPNG has been deciding on the allocation of natural gas to different sectors for a long time. As regards natural gas from the D6 Field, Government had, though an EGoM (Empowered Group of Ministers), framed a policy, known as Gas Utilisation Policy (June 2008), for the allocation of gas to various sectors. The said policy also contained certain general directions for the allocation of natural gas in respect of all NELP (New Exploration Licence Policy) Production Sharing Contracts. Following are the features of the general guidelines:
  • The marketing priorities for the sale of gas from NELP Blocks would be determined by the Government and the sale would be on the basis of pricing formula approved by it.
  • Gas allocation to a particular sector would not mean reservation or quota to that particular sector. In case consumers of a particular priority sector are not in a position to take gas when available, the gas not taken would be first offered to other entities in that priority sector and if they are not in a position to take the gas, the gas not taken would go to the sector which is next in priority.
  • The priority for gas supply would be applicable only to customers who are connected to the existing pipelines network. In the absence of a network, a small or marginal field could sell the gas to customers connected to or can be connected to (within a short period of three- six months) it.
  • This prioritization would not affect the process of price discovery as all customers would participate in the price discovery process (as per the extant policy of the EGoM) and would be eligible for utilizing natural gas subject to priority.
  • This guidelines would be reviewed after five years 
Apart from these general guidelines, the policy prioritized sectors for the utilization of the D6 gas. The priority sectors as per the policy are:
  • Gas based urea plants
  • Gas based LPG plants
  • Liquid Fuel plants and power plants lying idle or underutilized
  • City Gas distribution
  • Gas based power plants
There are two sources of such power of the Government. One, the Production  Sharing Contract itself gives the Government the right to frame policies pertaining to marketing of natural gas. The relevant provisions in the latest (NELP IX) PSC are as follows: 
"21.1 Until such time as the total availability of Natural Gas from all Petroleum production activities in India meets the total national demand as determined by the Government, each Company comprising the Contractor, shall sell in the domestic market in India all of the Company’s entitlement to Natural Gas from the Contract Area.
21.3 For the purpose of domestic sale obligation, the Contractor shall have freedom to market the Natural Gas and sell its entitlement as per Government Policy for utilization of gas among different sectors. 
21.3.1 For purposes of Article 21, the Government may from time to time frame policy for utilization of gas among different sectors, both for Associated Natural Gas (ANG) as well as Non-Associated Natural Gas (NANG) which would cover issues relating to gas supplies to different consumer sectors."
The second source comes from the Constitution itself. Article 73 read with Entry 53, List I of Schedule VII. Entry 53 reads:
"Regulation and development of oilfields and mineral oil resources; petroleum and petroleum products; other liquids and substances declared by Parliament by law to be dangerously inflammable."
Now, in the Welspun Maxsteel case, it was argued that if no gas was supplied to the petitioners, their manufacturing process would come to a standstill and this would have a cascading effect on the economy. A two judge Bench consisting of Ranjana Desai & Ranjit More, JJ. were of the opinion that the Union of India has to hold a meeting with the petitioners to sort out their grievance. The Bench ordered the matter to be heard on May, 9, 2011. The order can be accessed from here. On May 9, the Vacation Bench consisting of Mridula Bhatkar & RG Ketkar, JJ heard the matter.In the said hearing, the counsel for Union of India stated that a meeting would be conducted on May 11 between the petitioners, representatives of other non-priority sectors affected by the decision of the Government, and the MOPNG and a decision on the matter would be communicated to the petitioners by May 19, 2011. The court adjourned the matter to May 23, 2011. The order can be downloaded from here.

It would be interesting to see what the MoPNG would do. We will keep our readers updated.

* Image from here.

    Thinking Aloud: Indian Contract Act and the English Contract Law

    The Indian Contract Act, 1872, primarily drafted by the Third Law Commission of India, is primarily a codification of English Law subject to certain changes. The Act also heavily drew from the draft Civil Code of New York (drafting attributed to David Dudley Field), although Pollock, the renowned commentator on the Indian Contract Act, was of the opinion that the said Civil Code was “about the worst piece of codification ever produced". [Sir Fredrick Pollock & Sir Dinshaw Fardunji Mulla, The Indian Contract Act, p. vii (1909)].

    The Third Law Commission of India is said to have produced the first draft of the Contract Act. The said draft was circulated to all the local governments, judges and practitioners for their comments. The draft was discussed at least before three committees of the Legislative Council of the Governor-General of India. The Legislative Council conducted a minute study of the Act and differed with the Law Commission primarily on two issues: (1) Treatment of all penalties as Liquidated Damages, and (2) Acquisition of ownership in goods by a buyer in good faith.

    Due to the differences between the Law Commission and the Legislative Council, two members of the Law Commission resigned and the work on the Indian Contract Bill was given to Sir James Stephen. [BK Acharyya, Tagore Law Lectures 1912: Codification in British India]. The Bill was finally passed in 1872. Considering the British origins of our contract law system, questions have arisen before the courts as to whether it is correct to rely on the English Law for answers to questions. For obvious reasons, English precedents are not binding in India. That much is clear and uncontroversial.

    The second point is that there are certain departures in the Indian Contract Act, 1872 from the then existing English Law. In Satyabrata Ghose v Mugneeram Bangur AIR 1954 SC 44, the Supreme Court held:
    "It must be held also that to the extent that the Indian Contract Act deals with a particular subject, it is exhaustive upon the same and it is not permissible to import the principles of English law dehors these statutory provisions. The decisions of the English courts possess only a persuasive value and may be helpful in showing how the courts in England have decided cases under circumstances similar to those which have come before our courts."
    In Krishnan Murgai AIR 1980 SC 1717, the Supreme Court went further and stated that even if a provision in the Act is based on English Law on a particular aspect, the extent and scope of the provision must be governed by the statute itself and not by the English doctrine.

    However, in Forosal v ONGC AIR 1984 SC 241, the Supreme Court held that since our contract law is based on English Law, it would do good to rely on English decisions for aiding the courts decide such issues where there was no Indian decision on the point. Thus, according to the court, when a statute (such as the Negotiable Instruments Act, Indian Evidence Act etc) is based on English law, it would do good to refer to the English Law for assistance provided such a question has not been previously decided by an Indian Court and is binding.

    Reliance on English law may not be problematic in such cases, but wholly disregarding the Indian law does not bode well for the legal system. The Supreme Court held in Cotton Corporation of India v United Industrial Bank AIR 1983 SC 1272:
    "[I]gnoring all the relevant considerations, one cannot bodily import English decisions in our system to develop a hybrid legal system and one cannot be so hypnotised by English decisions to overlook legislative changes introduced in Indian Law."
    The court provided indications of when reliance of an English decision would be apt. Following are the aspects that must be taken into consideration while taking aid of an English decision:
    • Similar provisions in the English and the Indian statutes
    • Absence of material difference in conditions prevailing in India and in UK
    • Consistency with Indian jurisprudence
    • Consistency with Indian social conditions.
    An unwarranted practice of Indian Courts is to cite English decisions even without citing past Indian decisions on the same point. See, for example, Trimex v Vedanta, where the Supreme Court did not cite even a single Indian decision related to the case when there were at least three to four Indian decisions relating to the issue. Such practices make us wonder if there is any “Indian jurisprudence” of contract law, barring the deviations from English law that were made in the 19th Century.

    Saturday, May 7, 2011

    Kishanganga Dispute between India & Pakistan: An Update

    A Pakistani new report suggests that Pakistan has been given time till July 15, 2011 by the seven member international arbitral tribunal to submit its claim statement (the news paper refers it to reply but we understand that India has not yet filed any application for Pakistan to reply to. Therefore, we presume that the reference in the news paper is actually to the claim statement/ memorandum). India, according to the said news report, has been given six months' time from the submission of the claim for the submission of the reply statement.

    Friday, May 6, 2011

    National Highways Authority of India and Arbitration: A few Startling Numbers

    There is something inherently wrong in the working of the National Highways Authority of India (NHAI). Business Standard reports a startling figure. If the said news report is true, more than Rs. 11,000 crore of claims have been made in various arbitrations against the NHAI. This is a serious issue and there is something inherently wrong in the working of the said body. Following are the total number of claims against NHAI and their value*.
    Arbitration & Post-Arbitration Proceedings against NHAI
    It would be interesting to see the nature of issues that have been taken up against the NHAI. The news report also suggests that change of design is a major culprit in disputes arising between the parties. Disputes also arise because of restrictive conditions in the Invitation to Bid and a take-it-or-get-out approach as regards acceptance of the government imposed tender conditions. See, for example, NHAI v. Unitech-NCC Joint Venture, where the Delhi High Court admonished NHAI for not having escalation clauses in their contracts despite the work under the contracts are for a few/ several years. The court held:
    It is for this reason that I put it to the learned senior counsel for the petitioner to point out to me even a single contract or a single case in which National Highways Authority of India has entered into a contract without any price escalation and variation clause although the contract covers a huge period of many years and cost of which runs into crores and crores of rupees. Obviously there was no answer to the query put by the Court to the Learned ASG.”
    In 2009, a Committee was constituted under the Chairmanship of BK Chaturvedi to look into the National Highways Development Plan and to find out means to suggest reforms to the industry. The first report of the committee did not deal with dispute resolution. However, the second report dealt with the same. Following are the highlights of the second report. A summary of the recommendations of the said Committee can be accessed from here. More on this in a future post.

    * The table has been modified after posting to make it more clear.

    Wednesday, May 4, 2011

    Expert Arbitrators in India?

    An article in the recent issue of Arbitration Law Reporter titled "Qualification of Arbitratiors with regard to their Appointment in Engineering Contracts" 2011(2) Arb LR 1 (J), (penned by KK Singal & VK Tyagi -both are engineers but the latter is an engineer as well as a lawyer), argues that people well-versed in engineering are better equipped to be arbitrators in disputes pertaining to engineering, construction and other contracts which are technical in nature. They draw an analogy to the appoint of lecturers in colleges. According to the authors, appointing non-technical people as arbitrators in technically intensive contractual disputes is akin to asking a layman to lecture on an engineering subject. The authors, after a textual analysis of the provisions of the Indian Contract Act, 1872 and the Arbitration and Conciliation Act, 1996 argue that "only technically qualified persons with adequate relevant experience would qualify for appointment as arbitrators in construction contracts."

    A few points on the article:
    1. The authors are correct in arguing that there are issues in construction contracts (for that matter in any technically intensive contract) that are better decided by engineers than laymen (i.e., Ex-Judges and advocates). The authors aptly provide five illustrations of such issues. As an In-house lawyer. this blawgger has been in several unenviable situations acting as a link between the technical man and the legal man, translating technical language into legal language and vice-versa. A tougher situation is when at stage of arguments, one of the arbitrators, an ex-judge of the apex court, asks the counsel as to the meaning to a term which is a basic concept in the agreement from which disputes arose. It is extremely difficult to make such arbitrators understand the technical intricacies. Hence, the authors are right in stating that Engineer arbitrators would be better placed to decide such issues
    2. The authors are also correct in conceding that in arbitrations complex legal issues might arise. They argue that such legal issues are, nevertheless, matters of common sense and technocrats with experience as arbitrators would have no problems dealing with such issues.
    3. However, the authors err in trying to place an obligation on the courts to appoint technical arbitrators from the text of the statute. The nearest provision that comes to casting such an obligation on the appointing judge is under Section 11(8), which reads:
      "The Chief Justice or the person or institution designated by him, in appointing an arbitrator, shall have due regard to-
      (a) any qualifications required of the arbitrator by the agreement of the parties and
      (b) other considerations as are likely to secure the appointment of an independent and impartial arbitrator."
    4. Here, the provision casts an obligation on the Chief Justice or his designate to "have due regard to" the qualifications of the arbitrator required by the arbitration agreement. There is no independent duty on the arbitrator in the absence of an arbitration agreement. 
    5. Nevertheless, it is good practice for the High Courts and the Supreme Court to have due regard to the nature of issues while appointing arbitrators. 
    The manner of selecting an arbitrator by a High Court, or for that matter the Supreme Court, under Section 11 does not seem very transparent. The manner of selecting a person to be an arbitrator is also not open. Further, the roster of arbitrators with the relevant High Court needs to be publicised. The courts must have even technical men in their roster and refer technically-intensive disputes to such expert arbitrators than to ex-judges. It would seem that the courts are only keen in giving business to their retired brother/ sister judges!

    [Also see, Rajiv Sinha, Specialist Arbitrator- A Call for Future, 2006(4) Arb LR 6 (J)]

    Monday, May 2, 2011

    SSRN Articles for April 2011

    Lots of SSRN articles on arbitration last month. Many promising abstracts. Cunningham, for example, argues that by having a judicial policy of favouring arbitration, the American courts might be putting their interest ahead of the contracting parties. Check out ADR Prof Blog's take on this article from here.Another article deals with the validity of religious arbitrations in USA and UK. Abstract of the article by Schultz about the concept of law in transnational legal order seems promising (on a related note, check out the article by Jan Paulsson titled 'Arbitration in Three Dimensions'). We also have two articles on transnational norms-lex mercatoria and lex sportiva. Happy reading!

    Brussels I and Arbitration Revisited - The European Commission’s Proposal COM(2010) 748 final -
    Martin Illmer

    In December 2010, the European Commission presented its long-awaited proposal for a reformed Brussels I Regulation. One of the cornerstones of the proposal is the interface between the Regulation and arbitration. In the first part, the article sets out the development of the exclusion of arbitration from the Regulation's scope up to the West Tankers and National Navigation cases. In the second, main part, the author, who is a member of the Commission's Expert Group on the arbitration interface, provides a detailed account and evaluation of the new lis pendens-mechanism established by the Commission proposal in order to effectively prevent parallel proceedings in the arbitration context. In the third, final part, the author scrutinizes the Commission proposal against the background of the Commission's Impact Assessment before concluding with a short resumé.

    Rhetoric versus Reality in Arbitration Jurisprudence: How the Supreme Court Flaunts and Flunks Contracts (and Why Contracts Teachers Need Not Teach the Cases)
    Lawrence A. Cunningham

    Supreme Court rhetoric about the role of contracts and contract law in arbitration jurisprudence differs sharply from the reality of its applications. In the name of contracts, the Court administers a self-declared national policy favoring arbitration, a policy directly benefiting the judicial branch of government. This often puts the Court’s preferences ahead of those of contracting parties while declaring its mission as solely to enforce contracts in accordance with contract law. The Court thus cloaks in the rhetoric of volition a policy in tension with constitutionally-pedigreed access to justice and venerable principles of federalism.

    This Article documents the rhetoric-reality gap and explores why it exists and why it matters. The rhetoric-reality gap is attributable in part to a dilemma the Court created for itself: its national policy favoring arbitration is constitutionally-suspect unless people assent, yet letting people make what contracts they wish would prevent implementing the national policy. The jurisprudence diminishes the Court’s legitimacy, tempts defiance, creates doctrinal incoherence, and poses other costs. This Article calls for reconciling these conflicting positions rather than sustaining the status quo: the Court should either give up its national policy favoring arbitration and truly respect freedom of contract or come clean about its national policy’s real implications and acknowledge its narrow conception of contract and contract law.

    The Status of Religious Arbitration in the United States and Canada
    Nicholas Walter

    This paper discusses, and challenges, the status of religious arbitration in the United States and Canada. Religious arbitration - defined as the settling of disputes through the intermediation of religious authorities, rather than having recourse to the courts - has been written about considerably in recent years. All writers to date have considered ways in which rights guaranteed by secular courts can be maintained before religious tribunals. This paper is the first to consider the problem caused by religious tribunals for the rights of free exercise of religion for those using religious tribunals. It argues that the enforcement of awards made by religious tribunals, and agreements to arbitrate before religious tribunals, by secular courts is an unconstitutional infringement of parties’ rights of free exercise of religion in both the United States and Canada. This is true even though the United States Supreme Court and the Canadian Supreme Court have different jurisprudence on freedom of religion. Although the United States and Canada may still encourage parties to mediate their disputes through religious means, statutes should be enacted in both countries providing that no party may enter a contract to enter a binding arbitration process based on religious principles. Furthermore, the discussion in the paper has implications for debates about the status of religious tribunals in other countries, such as the United Kingdom.

    The Interplay of International Dispute Resolution Mechanisms: The Softwood Lumber Controversy
    Leonila Guglya

    The Article discusses the interrelation of ‘competing’ international mechanisms for the settlement of disputes originating from the same factual background. The problem is assessed with reference to the of the fourth and fifth phases of the Softwood Lumber controversy between the United States and Canada - an immense dispute featuring the interplay between domestic litigation, investment arbitration and dispute settlement conducted under the rules of different chapters of the regional trade agreement (North American Free Trade Agreement), WTO dispute settlement, as well as interstate arbitration proceedings conducted within the London Court of International Arbitration under specially ‘customized’ rules of the latter.

    Why Arbitrate? Substantive versus Procedural Theories of Private Judging
    Christopher R. Drahozal

    This paper examines why parties agree to arbitrate. Or, more specifically, it examines whether parties agree to arbitrate for procedural reasons or for substantive reasons. Procedural reasons focus on how the arbitral process differs from the litigation process: it may be faster, cheaper, or avoid "hometown justice," for example. Substantive reasons focus on the rules of decision in arbitration versus litigation: parties may want a decision maker who applies more formalistic rules than courts would apply or rules (such as transnational law) that are separate from national laws, for example.

    Of course, parties can agree to arbitrate for both procedural and substantive reasons, and some reasons are difficult to classify as either procedural or substantive. But subject to those important limitations, the available empirical evidence suggests that procedural reasons tend to be more important (for many, although not all, types of contracts) than substantive reasons in explaining why parties agree to arbitrate. One exception is that in some U.S. consumer contracts, businesses use arbitration clauses to reduce the risk of class relief, a reason that might be classified as either substantive or procedural.

    Foreign Investment and Dispute Resolution Law and Practice in Asia: An Overview
    Vivienne Bath and Luke R. Nottage

    International investment, especially Foreign Direct Investment (FDI), continues to grow apace across the Asian region, despite the Asian Financial Crisis and now the aftermath of the Global Financial Crisis (GFC). This paper is based on the introductory chapter for our 13-volume book (Foreign Investment and Dispute Resolution Law and Practice in Asia, forthcoming in October 2011 from Routledge). The book surveys both substantive law affecting FDI and investment dispute resolution law and practice, focusing on major capital exporting and importing countries in the region (especially Japan, China, India, Korea, Indonesia, Malaysia and Vietnam). Another distinguishing feature of the book is the way it integrates comparative law studies of domestic legal systems with analyses of important emerging trends in international investment treaty law. With a Preface from the President of the International Bar Association, the book also brings together further chapters from a diverse group of senior and up-and-coming academics and practitioners expert in these fields:

    - Preface (by Akira Kawamura)
    - Investment Arbitration in Asia: Five Perspectives on Law and Practice (Luke Nottage and J. Romesh Weeramantry)
    - A Passive Player in International Investment Law: Typically Japanese? (Shotaro Hamamoto)
    - The Quandary for Chinese Regulators: Controlling the Flow of Investment into and out of China (Vivienne Bath)
    - China’s Investment Treaties: A Procedural Perspective (Nils Eliasson)
    - Foreign Investment in Indonesia: The Problem of Legal Uncertainty (Simon Butt)
    - The Japan-Indonesia Economic Partnership Agreement: An Energy Security Perspective (Sita Sitaresmi)
    - Malaysia’s New Foreign Investment Law Regime (Salim Farrar)
    - Treaty Definitions of ‘Investment’ and the Role of Economic Development: A Critical Analysis of the Malaysian Historical Salvors Cases (Govert Coppens)
    - The ‘Object and Purpose’ of Indian Investment Agreements: Failing to Balance Investment Protection and Regulatory Power (Prabhash Ranjan)
    - The Evolution of Korea’s Investment Treaties and Investor-State Dispute Settlement Provisions (Joongi Kim)
    - Legal Issues in Vietnam’s FDI Law: Protections under Domestic Law, Bilateral Investment Treaties and Sovereign Guarantees (Hop Dang)
    - Review of Asian Views on Foreign Investment Law (Muthucumaraswamy Sornarajah)
    The present paper sets the scene for these other chapters in the book by outlining key features and some current controversies about FDI flows and the regulatory regimes under domestic and international law. Part II presents an historical overview of economic development and foreign investment in Asia, including the ASEAN sub-region, as well as the most recent trends. Part III provides a brief introduction to dispute resolution more generally throughout Asia. Part IV offers short summaries of the other chapters in the book.

    The Concept of Law in Transnational Arbitral Legal Orders and Some of its Consequences
    Thomas Schultz

    If an arbitration system, hypothetically disconnected from states, were to seek to replicate the rule of law beyond the state, in its own transnational order, what would it look like? This question, which seems current given the proliferation of international dispute resolution mechanism and the continuing rise of international arbitration, formed an implicit theme of the scholarship known as the School of Dijon. Some thirty years ago, the School of Dijon asserted the existence of non-national legal systems revolving around arbitration mechanisms, such as the lex mercatoria. Over the years, their claim developed into the argument that these systems’ own legality forms a basis for claims of autonomy from the state, the presence of law dispensing from the need for control by another legal order. This article argues first that this line of arguments is an enthymeme, as the concept of law has been the object of a near wholesale eschewal of definitional attention by the School of Dijon and its kindred theories. The article then maintains that any concept of law used for the aforementioned rhetorical and political purposes ought to include the fundamental principles of the rule of law. It then examines the guise that the rule of law takes when applied to transnational adjudicative normative orders instead of national legal systems.

    Friends of the Panel: The Evolution of Amicus Participation in International Investment Arbitration
    Andrew Friedman

    This paper traces the history of amicus briefs in international investment arbitration from their first introduction through their recent use. It further discusses the potential future importance of amicus participation in international investment arbitration due to the newest generation of bilateral investment treaties.

    The Competence of Investment Arbitration Tribunals to Seek Preliminary Rulings from European Courts
    Miloš Olík and David Fyrbach

    In the wake of the accession of new EU Member States in 2004 and in 2007, the portfolio of bilateral investment treaties (BIT) between Member States has become significantly larger. The fact that these BITs overlap with EU law creates friction when BITs are applied by investment tribunals which are constituted thereunder. In the spirit of the requirement that EU law be applied uniformly, these tribunals should have the authority to refer matters to the ECJ for preliminary rulings. Given the peculiarities of commercial and investment arbitration tribunals, it will not do to point to the previous case law of the ECJ on the admissibility of requests for a preliminary ruling by international commercial tribunals (i.e., in particular, Nordsee, Danfoss). In assessing the options of investment arbitration tribunals for referring matters for a preliminary ruling, one must put the focus on the basis of their jurisdiction, which derives from the provisions of the given legal system, i.e., the international treaty.

    Private Selection and Arbitrator Impartiality
    Alon Klement and Zvika Neeman

    This paper examines the effect of private selection of arbitrators over arbitrators’ incentives in deciding the cases before them in an impartial and unbiased manner. We argue that the private selection of arbitrators might adversely affect the accuracy of arbitrators’ decisions. Arbitrators might want to make an incorrect decision when a correct decision may raise the suspicion that they are biased. We compare the accuracy of arbitrators’ decisions under different arbitrator selection procedures and discuss the implications for the design of arbitration rules by arbitration and dispute resolution providers.

    The Three Pursuits of Dispute Settlement
    Thomas Schultz

    What is dispute settlement? What should we expect or ask from a dispute resolution mechanism? To what extent and with what consequences can we buy dispute resolution, privatise it and remove it from society’s purview? Should arbitration be seen as a mechanism that merely does away with disputes, or rather as an instrument of governance? These are some of the principal questions on which this essay seeks to provide some basic structuring reflections. To this effect, the essay envisions three functions that dispute settlement may pursue: the individualised and isolated maximisation of the parties’ satisfaction; the sustainment of the rule of law and of predictability; and the enforcement of substantive societal values

    Arbitration Provisions: Little Darlings and Little Monsters
    Stephen E. Friedman

    This Article takes a new approach to resolving the growing tension between the Federal Arbitration Act (FAA) and the unconscionability doctrine. While arbitration provisions are favored under the FAA, they are viewed far more skeptically by courts applying unconscionability to refuse enforcement of one-sided arbitration provisions. This tension, which has increased dramatically in recent years, represents a major fault line in contract law. Jurisprudence and commentary on this issue have assumed that courts have the authority to apply the unconscionability doctrine to arbitration provisions. This Article refutes that assumption, taking the position that Congress, in passing the FAA, removed from the courts the power to use unconscionability to deny enforcement of arbitration provisions. This argument is based on the language and structure of the FAA, the FAA’s legislative history, commentary contemporaneous with the passage of the FAA, and the nature of unconscionability. To the extent it is necessary to protect vulnerable parties from one-sided arbitration provisions, judicial application of the unconscionability doctrine cannot be the solution. This Article suggests that the arbitration system itself may be capable of addressing any such overreaching.

    Lex Sportiva: Transnational Law in Action
    Ken Foster

    This paper deals with the concept of lex sportiva as an example of transnational law. It attempts a defintion of the concept after reviewing the literature, and argues that it is mainly the application of general legal princples to sports-related disputes settled by the awards of the Court of Arbitration for Sport. It further argues for a recognition of the special features of sports jurisprudence as a 'lex ludica' as a distinct category. It ends by highlighting the extent to which lex sportiva is private justice created by global sporting organisations and outside the range of judicial review by national courts.

    Yes, Final and Binding but We Have To Talk: Humanizing or Vacating the Award?
    Simon M. Weldehaimanot

    After a devastating war that lasted for two years, Eritrea and Ethiopia went to an international arbitration the award of which they agreed to take as a “final and binding” settlement of their border dispute. Unfortunately, settled in law the dispute remains alive as a matter of fact. Ethiopia is demanding that both countries talk on the demarcation process of their boundaries to eliminate those situations in which villages are divided by the boundary and that, as a precondition, Eritrea ceases being a security threat to the region lest Ethiopia would consider regime change in Eritrea. Knowing the delimitation award does not prohibit such sensible departure in the course of demarcation and believing that Ethiopia’s demand for dialogue is not honest, Eritrea has adamantly declined talks on the “final and binding” award. This article explores the legal validity of the several positions of both countries. Questions pertaining to the wisdom of opening a “final and binding” international award for dialogue and the very rare possibilities of vacating such an award are some of the relevant issue of international law involved.

    Whose Dictionary Controls?: Recent Challenges to the Term ‘Investment’ in ICSID Arbitration
    Joseph Boddicker

    In April 2009, two ICSID tribunals once again split over the definition of the term “investment.” The tribunal in Phoenix Action, Ltd. v. Czech Republic elected to employ an objective standard for investment. Building upon the ubiquitous Salini hallmarks, the tribunal added the requirements that the assets be invested in accordance with the laws of the host state and bona fide. Yet in an annulment granted merely a day later, the ad hoc committee in Malaysian Historical Salvors SDN BHD v. Malaysia (MHS) minimized the importance of the Salini criteria, stating that they were not “fixed or mandatory as a matter of law.” Using a subjective standard, it defined “investment” based almost entirely on the term’s definition in the applicable BIT. Since neither the Convention nor international law incorporates the concept of stare decisis, this vacillation will likely persist.

    This Comment analyzes the bases of ICSID tribunals’ authority to define “investment” given the Phoenix tribunal’s supplementation to the Salini factors, and the MHS tribunal’s rejection thereof. After concluding that Article 25 of the ICSID Convention requires that tribunals assign an expansive definition to the term “investment,” the analysis shifts to the Phoenix tribunal’s failure to apply basic principles of equity and international law in reaching its decision and to the MHS tribunal’s correct derivation of “investment” from both the ICSID Convention and the U.K.-Malaysia BIT. This Comment contends that, in order to sufficiently eliminate legal risk and induce private international investment, ICSID tribunals’ jurisdiction over investment disputes must lie in the intersection of its Convention and applicable member states’ BITs and FTAs.

    Consumer (In)Justice: Reflections on Canadian Consumer Class Actions
    Jasminka Kalajdzic

    This paper was written on the occasion of the 40th anniversary of the Annual Workshop on Commercial and Consumer Law and as a contribution to a collection of retrospective essays in the 50th volume of the Canadian Business Law Journal. In the paper, I reflect briefly on the impact of collective action on consumer access to courts, and the promised guarantee of effective justice. In the first part of the paper, I summarize the results of an empirical study which asked class action lawyers to identify the categories of cases being litigated, including those that come within the rubric of "consumer protection actions." I then examine two of the more significant advances in consumer rights litigation, namely, the development of the waiver of tort doctrine and the widespread rejection of mandatory arbitration clauses in consumer contracts. In the final part of the paper, I discuss two challenges to achieving substantive justice for consumers that have recently become more pronounced: increasing reliance on cy près distribution of settlements, and the effect of adverse costs awards on representative plaintiffs.

    Is There Light at the End of the Gas Pipe? On the (Provisional?) Applicability of the Energy Charter Treaty to the 2009 Russia-Ukraine Gas Transit Dispute and the Relevance of the Yukos Interim Awards
    Anna Marhold

    This article focuses on the Energy Charter Treaty (ECT) and what role Article 7(7) on energy transit could have played in resolving the gas transit dispute between Russia and the Ukraine in 2009. Subsequently, the article discusses Russia’s provisional application of the ECT and its withdrawal from the Treaty in October of 2009, and the implications thereof for a potential future gas transit dispute between the two countries. Finally, the article looks at the conclusions to be drawn from the Interim Awards of the Yukos arbitration in order to answer the question: Is there light at the end of the gas pipe?

    Internet Disputes, Fairness in Arbitration and Transnationalism: A Reply to Dr Hörnle
    Thomas Schultz

    This article is a reply to Julia Hörnle's book Cross-border Internet Dispute Resolution. Starting from Dr Hörnle's insistence on fairness, the author discusses three dimensions of online arbitration that shape the contours of justice in a transnational dispute resolution setting: accuracy, due process and applicable law. The author contends that online arbitration must remain limited to seeking approximate truth, applying an 80/20 principle to due process, where 20 per cent of the efforts yield 80 of the results in terms of due process. More importantly, the author maintains that the pursuit of the sort of justice with associate with the rule law requires online arbitration to apply transnational rules, and national consumer laws.

    The State, a Perpetual Respondent in Investment Arbitration? Some Unorthodox Considerations
    Mehmet Toral and Thomas Schultz

    International arbitration, generally speaking, has dramatically increased in use over the last decades and, as an institution, has begun to play a more central role in shaping the global economy. In particular, the important role played by investment arbitration as a de facto regulatory institution of international investment is increasingly recognized. But this regulatory role is rather divorced from the original raison d’être of the system of international investment arbitration, which was to provide heightened protection of investors and thereby encourage international investment. Accordingly, the system was initially designed as a shield placed in the hands of the investor, some form of defense directed toward protecting it from the state. While the number of cases submitted to the International Centre for Settlement of Investment Disputes (ICSID) and other investment arbitral tribunals has risen spectacularly, the number of arbitration proceedings initiated by states has remained extremely low, leaving the state in the role of perpetual respondent. In other words, while the shield is well used, it is increasingly coming to resemble the sword. The ensuing, and repeated, blows against states presumably contribute to the current backlash against international investment arbitration. The institution that is arbitration, establishing in this case such a disproportionate balance of arms, understandably encounters problems when it acquires a rather unintended regulatory role as an effect of its widespread use. Put more prosaically, the investor is almost systematically cast in the role of the claimant in disputes in opposition to the state that hosts the investment. The structure of investment arbitration is thus seen as primarily benefiting the investor to the detriment of the state.

    Consequently, the system of investment arbitration, because of the way its de facto role has evolved, requires us to seriously consider the possibility of proceedings that go both ways rather than one. We must ask ourselves how, in which situations and to what extent the state is legally capable, and politically and economically likely, to act as a claimant. Some aspects of this question have already been discussed rather extensively, such as issues of consent in treaty-based arbitration, and the possibility for the state to bring counterclaims. These now orthodox considerations do not form the main subject of our study and are only raised en passant. Rather, we seek to extend our understanding of the problem by approaching it from more substantive aspects and political/realistic perspectives than strictly procedural considerations.

    This essay moves in two parts. Part I relates to treaty-based arbitration; it examines the dichotomy between the obligations of states and the obligations of investors. It challenges the assumption that the current regime of bilateral investment treaties imposes obligations only on states and not on investors. Part II relates to contract-based arbitration; it contemplates the situations in which the state has the right incentives to act as claimant. Brutally simplified, the state acts as a private party and not as a sovereign power when expropriation would presumably not achieve the state’s objectives: lack of sufficient investor assets within the territory of the state; mistrust by the state in its own institutions, such as a corrupt judiciary; or the need to take internal dissensions to an independent international tribunal.

    Law and International Commerce: Between the Parochial and the Cosmopolitan
    J. J. Spigelman

    In the context of international commerce, legal decision-makers in the legislative, executive and judicial branches of government are influenced by their philosophical predisposition about respect for foreign elements of the matter involved. This predisposition ranges over a broad spectrum: from parochialism at one end to cosmopolitanism at the other. This paper discusses those areas of the law where the contrasting values of cosmopolitanism and parochialism are evident, including commercial arbitration, the possible emergence of an international lex mercatoria, venue and forum disputation, the availability and use of anti-suit injunctions, the enforcement of foreign judgments, judicial cooperation and comity, and the determination of questions of foreign law. In all these contexts, this paper argues that international judicial cooperation is required to provide a functional response to cross-border problems, and that the trend towards judicial globalisation ought to continue.

    The Interplay Between U.S. Statutory Rights and Public Policy Under the FAA/New York Convention in International Disputes
    Daniel Schwarz
    The "prospective waiver" doctrine allows U.S. courts to invalidate or sever arbitration clauses in otherwise valid agreements to arbitrate where arbitrating under foreign law would prevent a U.S. party from seeking relief under a U.S. statute. The loss of this opportunity is said to affront U.S. public policy. This paper acknowledges that courts’ application of this idea has resulted in the need for a more fundamental revisiting of the question of whose law should be "mandatory" in international arbitration. But more specifically, this paper proposes appropriate sets of factors for pre-arbitration courts, arbitrators, and post-arbitration enforcement courts to consider in balancing the competing forces of desiring to protect vulnerable parties, to hold parties to their bargain, to give regard to the general preference for international arbitration as a beneficial means for resolving international commercial disputes, and otherwise to ensure that the interest in effective implementation of public policy is not stifled.

    American Justice at a Crossroads
    Thomas Stipanowich

    This Article provides a transcript of Professor Stipanowich’s remarks during the Pepperdine Dispute Resolution Law Journal’s symposium, American Justice at a Crossroads. In these remarks, Professor Stipanowich discusses issues raised in the Final Report of the American College of Trial Lawyers and the Institute for the Advancement of the American Legal System, including those related to discovery and court rules. He also comments on the new Protocols for Expeditious, Cost-Effective Commercial Arbitration: Key Action Steps for Business Users, Counsel, Arbitrators, and Arbitration Provider Institutions. Finally, he expresses his hope that the symposium serves as a landmark occasion for those interested in developing more effective and appropriate approaches to resolving conflict.

    The Roles of Dispute Settlement and ODR
    Thomas Schultz

    To anyone asking whether online dispute resolution (ODR) works, whether it is important, whether it deserves to get a chapter of its own in a book such as this, a simple answer may be offered: eBay today resolves through ODR about sixty million disputes per year. At this stage, the normal reader will probably feel either dismayed or puzzled. Or both.

    Dismayed that a few lines into the article, an important typo has escaped correction. But no, this staggering number is not a reckless lapse in accuracy. To make it more credible, it may simply be compared with this statement by two high-ranking eBay officials, one of whom is perhaps the world’s most respected ODR expert: ‘Unofficial estimates put the number of online disputes into the hundreds of millions of cases per year, maybe even into the billions.’ Sixty million disputes resolved remains a relatively small fraction of all the disputes that could be submitted to these forms of resolution – there is in fact much room for growth of ODR.

    How is it possible that this set of dispute resolution mechanisms has grown so much without attracting notice? Why are important international regulatory bodies not evincing more compunctions about their lack of work in this area? Why have the numerous books on ODR (including some of my own) not found their way onto the shelves of every arbitration and mediation practitioner, when they deal with the world’s most successful dispute resolution systems, caseload-wise? Possibly yet more puzzling is why is it so extremely rare to meet an e-commerce consumer who has ever heard of the concept of ODR?

    A partial answer to this last question likely is that many online shoppers have used an ODR system, but without actually identifying it as such. And there is the rub – ODR is, to a certain extent, not really dispute resolution at all.

    So what is there to know about ODR? However much one may enjoy the logical thrills of investigating legal rules and their interconnections, at this stage of the research in the field one must surrender to the conclusion that questions of black letter law relating to ODR have become barely deserving of esteem by anyone not looking for an exercise. A recent excellent book by Julia Hornle adroitly settled the remaining questions in this regard and only invites comments regarding some of its sociological, practical and philosophical underpinnings. Today one is left with a gnawing sense that the real questions are elsewhere. They may well be situated at two extremes: on the one hand at the level of punctilious but nonetheless crucial questions of practical implementation, such as the most appropriate ways to design a webpage and an IT system so as to create an electronic environment particularly conducive to settlement. On the other hand, important underlying questions appear with respect to the role of dispute resolution in society. This book’s editor asked me to focus on the latter, quite rightly so.

    Accordingly, this chapter will start with a particularly terse summary of ODR mechanisms, before quickly moving on to a nutshell illustration of how a dispute resolution-based regulatory system can be made transnational and over-come the hurdles of the world’s segmentation into different states with different laws. These two sections set the background for the real theme of this chapter, which will form the balance of the essay: the variegated roles of dispute resolution systems.

    The Use of Information Technology in Arbitration
    Gabrielle Kaufmann-Kohler and Thomas Schultz

    Information technology (IT) has invaded the legal profession. Very few are those who, today, do not work on a daily basis with electronic communication technologies. And dispute resolution is one of the most rapidly developing fields of IT usage. This article thus seeks to chart progress of the use of IT in offline arbitration.

    This article is not about specific niches of dispute resolution, but about standard procedures. In other words, it is not about online dispute resolution (ODR), but about how various IT solutions may be put to good use in traditional arbitral proceedings. Moreover, it is not meant for particularly computer-literate counsel or arbitrators, but for practitioners with a standard understanding of IT. Hence, its subject-matter is centered on a discussion of the more commonplace IT solutions (e.g. e-mails, online filing, case-management websites, videoconferencing), and not of exotically sophisticated and rarely used technologies.

    This article is practice oriented, and thus includes practice guidelines and suggests standard forms for the use of IT. It also presents the services currently offered by arbitral institutions, such as NetCase, the ICC's IT facility that has recently just become operational.

    This article has been substantially revised for publication as a book: Thomas Schultz, Information technology and arbitration - A practitioner's guide, Kluwer Law International, 2006.

    Arbitration – A Good Deal for Consumers
    Peter B. Rutledge

    This white paper provides lawmakers and their staffs with a counterpoint to the Public Citizen Report and sets forth the case, grounded in empirical research, for why arbitration is a good deal for consumers.

    Flexible Arbitration for the Developing World: Piero Foresti and the Future of Bilateral Investment Treaties in the Global South
    Andrew Friedman

    The recent arbitration of Piero Foresti et al v. Republic of South Africa opened several questions that will no doubt have tremendous implications going forward in the world of international investment. It concerned the rights of investors weighed against the right of a host state to pass legislation in an effort to remedy past discrimination. The paper suggests a flexible method for review of such cases in an effort to allow host states to fulfill internationally recognized goals such as remedying past discrimination and marginalization.

    Some Critical Comments on the Juridicity of Lex Mercatoria
    Thomas Schultz

    This article discussed the legality of the lex mercatoria, that it whether lex mercatoria can be considered law. It is divided into three Parts, which reflect the three main views of the nature of the lex mercatoria, in an order that starts with the most watered-down acceptance of the lex mercatoria and ends with the most ambitious one. It may be pointed out that these different views of the lex mercatoria are assessed not according to their appeal, workable character, or popularity in practice, but only with respect to their accuracy as theoretical constructs.

    Part I examines the idea that the lex mercatoria is merely a method of decision making used by arbitrators. This view relies on the idea that the lex mercatoria is a method of rule-selection, ac- cording to which rules are extracted from other legal systems (typically national ones), reinterpreted and adapted to international commerce, and applied in this new guise. The analysis will show that this view implicitly and necessarily relies on the idea that the lex mercatoria is, in fact, a legal system of its own.

    Part II delves into the view that the lex mercatoria is not a legal system, but merely a set of legal rules. The discussion will show that this view is fundamentally flawed, inasmuch as that which makes rules legal is their belonging to a legal system, which legal system is necessarily the lex mercatoria itself.

    Part III then critically analyzes the lex mercatoria as a legal system of its own, and concludes that it fails to meet certain requirements of structure and that its normative contents lack certain formal qualities, which all are essential features of a legal system. The article concludes that the lex mercatoria is not law, that it is in and of itself devoid of jural character, that it is not an instance of legal pluralism.

    International Commercial Litigation: An Asian Perspective
    J. J. Spigelman

    This paper focuses on the legal transaction costs which operate as a significant non-tariff barrier to mutually beneficial exchange in trade and investment between nations. It sets out the role, functions and advantages of the international regime for commercial arbitration, based on the UNCITRAL Model Law and the New York Convention for Enforcement of Arbitral Awards. The paper discusses a range of mechanisms to harmonise civil procedure and to enhance co-operation between courts on cross-border issues, including: the Model Principles of Transnational Civil Procedure of the American Law Institute and UNIDROIT; the incidence of venue disputation; the Hague Choice of Court Convention; the UNCITRAL Model Law on Cross-Border Insolvency; the Hague Evidence Convention and Hague Service Convention and the mechanisms for enforcement of foreign judgments. The emergence of a new conception of judicial comity and of an international sense of collegiality in the context of globalisation is discussed.

    Whither Arbitration?
    Peter B. Rutledge

    Over the past several decades, scholars and policymakers have debated the future of arbitration in the United States. Those debates have taken on new significance in the present Congress, which is considering a variety of reform proposals. Among the most widely watched are ones that would prohibit the enforcement of predispute arbitration clauses in employment, consumer and franchise contracts. Reviewing the available empirical literature, the paper explains how many of the assumptions driving the arbitration reform debate are unproven at best and flatly wrong at worst. It then tries to sketch out the economic impact of any move by Congress to limit arbitration in certain fields. The effect, I submit, would be to harm the very consumers and employees whom Congress is trying to protect. While arbitration certainly can be refined on the edges and more empirical research needs to be done, advocates for reform simply have not made their case.

    International Commercial Arbitration Address
    J. J. Spigelman

    The coherent international system for resolving cross-border commercial disputes that has been devised in the interlocked provisions of the UNCITRAL Model Law on International Commercial Arbitration, the New York Convention for Enforcement of Arbitral Awards and the Washington Convention for Investment Disputes plays an essential role in reducing the non-tariff barriers to international trade. This paper discusses the relationship between the courts and commercial arbitration, particularly, the circumstances in which the court’s supervisory power over arbitrations ought to be exercised. In this respect, the paper documents a change in judicial attitude, from a time when the judiciary and arbitrators treated one another as trade rivals, to the current situation where Australian commercial judges are, generally, active proponents of alternative dispute resolution mechanisms, including commercial arbitration. It argues against any trend towards making arbitration processes similar to those in a court, and urges judges, arbitrators and practitioners to ensure that arbitration remains a just, quick and cheap form of dispute resolution.

    Mediation in Employment and Creeping Legalism: Implications for Dispute Systems Design
    Lisa Blomgren Bingham , Susan Summer Raines , Timothy Hedeen and Lisa-Marie Napoli

    This article will explore the question of creeping legalism in mediation of statutory disputes arising out of employment. First, it will briefly review the issue of creeping legalism in arbitration. Second, it will introduce dispute systems design (DSD). Third, it will review the analogous debate on legalism in mediation in three design contexts: evaluative mediation of employment disputes in the court-connected setting, grievance mediation embedded in the collective bargaining agreement, and transformative mediation of employment disputes in the United States Postal Service’s (USPS’s) REDRESS program. Most employees do not face a choice among mediation models; instead, they choose among adjudicative processes or mediation. Thus, the article will conclude by reporting the results of an interview study comparing USPS employees’ experiences in the EEO complaint process, grievance arbitration, and employment mediation. These results show that an individual employee complainant may benefit from a non-adversarial, non-legalistic, and voluntary mediation model that seeks to foster communication and mutual understanding.

    A Reflection on American Justice at a Crossroads: A Public and Private Crisis
    Maureen Weston

    In this essay, Professor Weston outlines the ideas discussed, in relation to the theme of “Justice for All,” at the Pepperdine Dispute Resolution Law Journal’s symposium, American Justice at a Crossroads. These ideas included the challenges faced by the federal judiciary, innovations that are impacting the American court system, approaches to conflict management, the duty of lawyers to facilitate wide-reaching access to justice, judicial reforms, alternative dispute resolution, and modern arbitration practice.

    On Repeat Players, Adhesive Contracts, and the Use of Statistics in Judicial Review of Employment Arbitration Awards
    Lisa Blomgren Bingham

    This Article empirically examines the repeat player employer and the use of personnel manuals, one form of contract of adhesion, in employment arbitration. First, it briefly reviews some of the salient cases that allow for the imposition of arbitration through an adhesive employment contract. Second, it summarizes prior empirical research on employment arbitration. Third, it reports the results of an empirical study on the repeat player effect as it relates to the presence of a personnel manual or handbook as the basis for arbitration. That study finds that repeat player employers do better in arbitration than one-shotters, and that employers arbitrating pursuant to a personnel manual do better than those arbitrating under an individual contract. Thus, adhesive contracts do put employees at a disadvantage. Fourth, the article examines some of the accounts for the repeat player effect in light of Marc Galanter's catalogue of advantages. Lastly, it discusses ways empirical analysis of arbitration awards should, and should not, be used in the judicial review of employment arbitration awards in light of the repeat player effect. It argues that statistics on an arbitrator's past record should not be used in judicial review for actual active bias of the arbitrator. However, undisclosed prior cases with the same employer are relevant evidence on the question of the reasonable appearance of arbitrator bias. Finally, statistical analysis on the set of cases decided under certain arbitration rules or protocols may be helpful in examining structural bias.

    Collective Arbitration Under the DIS Supplementary Rules for Corporate Law Disputes: A European Form of Class Arbitration?
    S.I. Strong

    A great deal of attention has been paid recently to class arbitration, a US form of large-scale arbitral relief that brings many of the procedures used in judicial class actions into the arbitral context. However, the United States is not the only country to use arbitration to provide collective redress. Germany has recently developed its own form of collective arbitration through the promulgation of the DIS Supplementary Rules for Corporate Law Disputes. This article compares the DIS Supplementary Rules with the American Arbitration Association's Supplementary Rules for Class Arbitration to identify differences and similarities between the two procedural approaches and to consider the extent to which the two rule systems reflect the jurisprudential preferences of Germany and the United States.

    First Contract Arbitration and the Employee Free Choice Act: Multi-Jurisdictional Evidence from Canada
    Sara Slinn and Richard W. Hurd

    First contract arbitration (FCA) provisions are posed as a solution to the difficulties of negotiating a first contract for newly certified bargaining units. FCA is a longstanding, and no longer controversial, element of Canadian labor legislation. FCA provisions now exist in six Canadian jurisdictions and four distinct FCA models have developed (the exceptional remedy or fault model, the automatic access model, the no-fault model, and the mediation intensive model). In the United States the Employee Free Choice Act (EFCA) included a highly contested proposal to amend the National Labor Relations Act (NLRA) to include an FCA provision similar to the Canadian automatic access model. This chapter offers a balanced assessment of FCA evidence from Canada addressing the main objections to FCA in the EFCA debates. Individual case level data from jurisdictions representing each of the four FCA models is examined. The evidence demonstrates that although FCA is widely available in Canada, it is an option that is rarely sought and, when sought, rarely granted; that parties involved in FCA are able to establish stable bargaining relationships; and, that this process does not, as critics charge, simply prolong the life of nonviable bargaining units. This chapter concludes by suggesting that the practice under Quebec’s "no-fault" model and British Columbia's "mediation intensive" model merit consideration for adoption elsewhere. These models position the FCA process as a mechanism fostering collective bargaining and voluntary agreements, rather than treating it as a remedy for dysfunctional negotiations and as part of the unfair labor practice framework.

    Is This a Great Leap Forward? – A Comparative Review of the Investor-State Arbitration Clause in the ASEAN-China Investment Treaty: From BIT Jurisprudential and Practical Perspectives
    Wei Shen

    A major feature of modern bilateral investment treaties (BITs) is to allow investors to access international tribunals such as ICSID for the resolution of disputes between the investor and the host state. Both ASEAN member states and China are active BIT players and entered into more than 240 and 120 BITs respectively. With tremendous political, economic and legal significance, ASEAN and China concluded an investment treaty in 2009. The focus of this article is to scrutinize key aspects of the investor-state arbitration clause in this new regional treaty from BIT jurisprudential and practical perspectives, in particular, the Chinese BIT perspectives. Compared to old-generation Chinese BITs, this treaty is leaning towards a liberal stance further facilitating investors to resort to international arbitration for investment disputes, which in turn promotes liberalism and unity in BIT activities in the region.

    Law Applicable to the Merits of the Dispute Submitted to Arbitration in the Absence of the Choice of Law by the Parties (Remarks on Polish Law)
    Mateusz J. Pilich

    The main purpose of this paper is to analyze dominant trends in conflict of laws under Article 1194(1) of Polish Code of Civil Procedure, which concerns the law applicable to the merits of international commercial arbitration. Polish arbitration law is generally opened to various approaches in this respect, so that Polish law should be interpreted as recognizing both “indirect” and “direct” method of designating the law applicable by arbitrators.

    Oral Advocacy Training: a Beginner’s Look at the Willem C. Vis International Commercial Arbitration Moot from a Coaching Perspective
    Leonila Guglya

    The Article is based on the author’s personal experience of the participation as an oralist in W.C. Vis International Commercial Arbitration Moot – in 2004 and 2006, as an arbitrator and a team coach in 2007. It discusses practical dilemmas arising in course of the oral advocacy training of the Moot team participants, focusing on the issues of selection and motivation of oralists, organizing and carrying through internal and external pre-moot rehearsals, emphasizing at the meantime an importance of keeping a healthy spirit of team cooperation high in course of the practice phase. The Article is aimed at fostering the academic debates over the issues related to coaching of the Vis Moot teams among those involved in this sphere and so to enhance the cooperation therein.