"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.
In the recent past, there has
been substantial developments in exploring the potential of Small Modular
Nuclear reactors (SMR) in India. NITI Aayog came up with a detailed publication
in May 2023 about SMRs in India titled "The Role of Small Modular Reactors in the Energy Transition" (download the study from here).
The first and the most important
regulatory stumbling block is the Atomic Energy Act, 1962, which prohibits the
private sector from commissioning nuclear reactors. Section 14(1) of the 1962
Act states:
“(1) The Central Government
may, subject to such rules as may be made in this behalf, by order prohibit
except under a licence granted by it—
(i) the working of any mine or
minerals specified in the order, being a mine or minerals from which in the
opinion of the Central Government any of the prescribed substances can be
obtained;
(ii) the acquisition,
production, possession, use, disposal, export or import—
(a) of any of the prescribed
substances; or
(b) of any minerals or other
substances specified in the rules, from which in the opinion of the Central
Government any of the prescribed substances can be obtained; or
(c) of any plant designed or
adopted or manufactured for the production, development and use of atomic
energy or for research into matters connected therewith; or
(d) of any prescribed
equipment.”
A perusal of Section 14(1)(ii)(c)
seems to suggest that the Central Government could grant licence for the
acquisition, production, possession, use, disposal, export or import of any of
any plant designed or adopted or manufactured for the production, development
and use of atomic energy or for research. But this provision has to be read
together with Section 14(1A), which states:
“[(1A) No licence under
sub-clause (c) of clause (ii) of sub-section (1) shall be granted to a person other
than a Department of the Central Government or any authority or an institution
or a corporation established by the Central Government, or a Government company.”
In other words, the Central
Government is barred from granting a licence to a person other than a Central
Government entity for this purpose.
NITI Aayog has recommended in its
Report:
“With the advent of clean
energy transition, there has been a great thrust towards adopting cleaner
energy options to move towards the net zero emissions scenario by the
respective countries. Many nations have already declared their net zero
emissions targets. Apart from Renewable Energy (RE), nuclear is also being
explored as a clean energy option to help the nations in achieving their
decarbonization goals…" (p. 2)
SMR industry needs to find its
way through early challenges of technology demonstration, special material availability,
special manufacturing techniques, project funding requirements and regulatory
harmonization. Given such challenges and the need to grow SMR industry for
achieving long-term Net-zero goals, it is essential to establish SMR ecosystem.” (p. 5).
About fifteen years back, there were news reports that India would open up nuclear energy for private participation in producing nuclear power. See, for example, here. Somehow, that did not happen. See, here.
But for these to happen now as envisaged in the NITI Aayog report, the first step would be to amend these provisions to allow participation of private players in SMRs.
Founded
in 2009, the philosophy of Trade, Law and Development (TL&D) has been to
generate and sustain a constructive and democratic debate on emergent issues in
international economic law and to serve as a forum for the discussion and
distribution of ideas. Towards these ends, the Journal has published works by
noted scholars such as the WTO DDG Yonov F. Agah, Dr. (Prof.) Ernst Ulrich
Petersmann, Prof. Steve Charnovitz, Prof. Petros Mavroidis, Prof. Mitsuo
Matsuhita, Prof. Raj Bhala, Prof. Joel Trachtman, Dr. (Prof.) Gabrielle
Marceau, Prof. Simon Lester, Prof. Bryan Mercurio, and Prof. M. Sornarajah
among others. TL&D also has the distinction of being ranked the best
journal in India across all fields of law for several years by Washington and
Lee University, School of Law.
Accordingly,
the Board of Editors of TL&D is pleased to invite original, unpublished
manuscripts for publication in the Special Issue of the Journal (Vol. XV, No. 2)
in the form of ‘Articles’, ‘Notes’, ‘Comments’ and ‘Book Reviews’.
Manuscripts received by August 05, 2023, pertaining to
any area within the purview of international economic law will be reviewed for
publication in the Winter’22 issue.
Manuscripts
may be submitted via e-mail or via the Journal’s website here.
For further information about the Journal, please click here.
For submission guidelines, please click here.
In case of any queries, please feel free to contact us at:
editors[at]tradelawdevelopment[dot]com.
Last Date for
Submissions: August 05, 2023
PATRON: P.P. Saxena | ADVISORS:
Raj Bhala | Jagdish Bhagwati | B.S. Chimni | Glenn Wiser | Daniel B. Magraw,
Jr. | Vaughan Lowe | Ricardo Ramirez Hernandez | W. Michael Reisman | M.
Sornarajah | FACULTY-IN-CHARGE: Dr. Rosmy Joan | BOARD OF EDITORS:
Ananya Awasthi | Ria Chaudhary | Priyanshu Shrivastava| Simran Bherwani| Sunchit
Sethi| Shiva Patil| Anoushka| Chathurya Srinivasan| Himanshu Sharma| Nivedita
Sharma| Alka Mahapatra | Anandita Srivastava | Ishaan Pant | Krishna Ravishankar
| Nalin Agnihotri|Neel Rao | Samiksha Lohia | Shambhavi Uniyal | Sonali P. Raju
| Aastha Gupta | Akanksha Samantray | Ansh Sethi | Bianca Bhardwaj | Manvi
Goyal | Nandini Tripathi | Thejas Velaga| Y. Leela Krishna Reddy | Yug Gandhi
Finally, the decision of the Five Judge Bench in NN Global Mercantile Pvt. Ltd. v. Indo Unique Flame Ltd. (25.04.2023: SCI) is out and can be accessed from here. This post provides a quick read of the summary of the decision as encapsulated in the conclusion of Justice KM Joseph's judgment (p. 1 to 140 of the pdf), quoted below. Justice KM Joseph on his behalf and on behalf of Justice Aniruddha Bose, penned the majority opinion. The dissenting views were expressed by Ajay Rastogi, J. (p. 141- 201 of the pdf file) and Hrishikesh
Roy, J. (p. 202-279 of the pdf file). Justice CT Ravikumar gave an opinion concurring with Justice KM Joseph (p. 280- 298 of the pdf file).
Justice Joseph's conclusions are reproduced below:
"109. The view taken in SMS Tea Estates (supra) as
followed in Garware (supra) and by the Bench in
Dharmaratnakara Rai Bahadur Arcot Narainswamy Mudaliar
Chattram and other Charities v. Bhaskar Raju and
Brothers and others36 as to the effect of an unstamped
contract containing an Arbitration Agreement and the
steps to be taken by the Court, represent the correct
position in law as explained by us hereinbefore. N.N.
Global (supra) was wrongly decided, when it held to the
contrary and overruled SMS Tea Estates (supra) and
Garware (supra).
110. An instrument, which is exigible to stamp
duty, may contain an Arbitration Clause and which is
not stamped, cannot be said to be a contract, which is
enforceable in law within the meaning of Section 2(h) of the Contract Act and is not enforceable under
Section 2(g) of the Contract Act. An unstamped
instrument, when it is required to be stamped, being
not a contract and not enforceable in law, cannot,
therefore, exist in law. Therefore, we approve of
paragraphs-22 and 29 of Garware (supra). To this
extent, we also approve of Vidya Drolia (supra),
insofar as the reasoning in paragraphs-22 and 29 of
Garware (supra) is approved.
111. The true intention behind the insertion of
Section 11(6A) in the Act was to confine the Court,
acting under Section 11, to examine and ascertain about
the existence of an Arbitration Agreement.
112. The Scheme permits the Court, under Section 11
of the Act, acting on the basis of the original
agreement or on a certified copy. The certified copy
must, however, clearly indicate the stamp duty paid as
held in SMS Tea Estates (supra). If it does not do so,
the Court should not act on such a certified copy.
113. If the original of the instrument is produced
and it is unstamped, the Court, acting under Section 11, is duty-bound to act under Section 33 of the Stamp
Act as explained hereinbefore. When it does so,
needless to say, the other provisions, which, in the
case of the payment of the duty and penalty would
culminate in the certificate under Section 42(2) of the
Stamp Act, would also apply. When such a stage arises,
the Court will be free to process the Application as
per law.
114. An Arbitration Agreement, within the meaning
of Section 7 of the Act, which attracts stamp duty and
which is not stamped or insufficiently stamped, cannot
be acted upon, in view of Section 35 of the Stamp Act,
unless following impounding and payment of the
requisite duty, necessary certificate is provided under
Section 42 of the Stamp Act.
115. We further hold that the provisions of
Sections 33 and the bar under Section 35 of the Stamp
Act, applicable to instruments chargeable to stamp duty
under Section 3 read with the Schedule to the Stamp
Act, would render the Arbitration Agreement contained
in such instrument as being non-existent in law unless
the instrument is validated under the Stamp Act.
116. In a given case, the Court has power under
paragraph-5 of the Scheme, to seek information from a
party, even in regard to stamp duty.
117. We make it clear that we have not pronounced
on the matter with reference to Section 9 of the Act.
The reference to the Constitution Bench shall stand
answered accordingly..."
This is the edited script of Lecture 2 of the Lecture Series on International Arbitration Practice. The lecture series can be accessed from here:
This 2nd lecture of
the lecture series on Introduction to International Arbitration Practice is
titled Mistakes to Avoid While Drafting Arbitration Agreements a.k.a.
Pathological Arbitration Clauses”. Pardon the lengthy title. Those who watched
the first lecture might be wondering where “arbitration practice” was in it.
Let me assure you: this course would not teach arbitration theory. But some
theoretical discussion explaining key concepts and doctrines act as a
springboard to understand practical aspects. For example, we discussed in the
first lecture about the ingredients of an arbitration agreement as per the
UNCITRAL Model Law on International Commercial Arbitration, 1985 and the
Arbitration and Conciliation Act, 1996. One of the ingredients was that there
should be a reference to arbitration. In other words, an agreement to
constitute an arbitration agreement should provide that disputes that may arise
would be referred to arbitration. In other words, the agreement should provide
for reference of disputes to arbitration in order to call it an arbitration
agreement.
In this lecture, we will see that
if an agreement provides arbitration as an option for both parties to agree to
refer disputes, such an agreement is not an arbitration agreement although
parties might have, at the time of entering into the agreement, had that in
their minds. Such clauses which although purport to be arbitration clauses have
some defects that are grounds for not calling them as arbitration clauses are
known in arbitration parlance as “pathological” arbitration clauses. In other words, a pathological arbitration
clause is a Defective or badly drafted arbitration clause. So, in order to
discuss the common mistakes while drafting arbitration agreements, that is,
pathological arbitration clauses, the theoretical prelude was necessary.
In this lecture and the next few,
we will discuss some common mistakes parties make while drafting arbitration
clauses. Arbitration practice is not only about representing parties in
arbitrations but also about advising parties to draft proper arbitration
agreements. In India, like in many other countries, this aspect of law practice
is largely ignored. Through this lecture, we bring to the attention of lawyers
about the importance of drafting good arbitration clauses. Before embarking on
the exercise as to how to draft arbitration clauses, it would be better to
understand how not to draft arbitration clauses, now that we are well-aware of
what is meant by arbitration agreements from the first lecture in the lecture
series. For your convenience, we have provided the link to the first lecture in
the description to this video.
Coming back to the topic of
pathological arbitration clauses, the term “pathological” was used in this
context by Frederic Eisemann in 1974 and thereafter, the phrase has become quite
popular in international arbitration parlance.
Courts have addressed
pathological arbitration clauses with a set of tools, mainly with the intent of
enforcing arbitration clauses, known popularly in arbitration parlance as
pro-arbitration approach. Courts have generally been liberal in addressing such
clauses, that is, resolving it in favour of referring them to arbitration,
rather than rejecting reference, unless the clause in question cannot satisfy
the ingredients of what constitutes an arbitration agreement.
Now, you might wonder, why should
I know about this topic? Why can’t this guy straightaway talk about invoking
arbitration, pleadings, evidence, etc.? Well, a pathological arbitration clause
may have huge consequences on enforceability of arbitral awards, and may entail
substantial costs and efforts to be expended by your client. A badly drafted
arbitration clause may ruin your reputation as a lawyer.
So, be very very careful-
drafting arbitration clauses might sound simple but when you see the
pathological arbitration clauses, you might wonder: how did this happen?! Without
spending much time “about” pathological clauses, we will straightaway deal
“with” such clauses.
Let us consider the below clause.
“30.2 In case of such failure,
the dispute shall be referred to sole arbitrator to be mutually agreed upon by
the Parties. In case the Parties are not able to arrive at such an arbitrator,
the arbitrator appointed shall be appointed in accordance with the rules of
arbitration of the Singapore Chamber of Commerce.”
Please pause the video and find out
what’s wrong with this clause. On the first reading, you will ask: what is
wrong with this clause? The clause seems to be fine. But on a closer reading
and with a search engine, you will notice that there is no such institution
called Singapore Chamber of Commerce. The parties here possibly got confused
between the International Chamber of Commerce and the Singapore International
Arbitration Centre.
So, this is a type of defect
where parties agree to refer the dispute to a non-existent arbitral
institution. If there is no such institution, how can the arbitration be
conducted as per the rules of the non-existent institution? I will underline
the defective portion for your convenience.
“30.2 In case of such failure,
the dispute shall be referred to sole arbitrator to be mutually agreed upon by
the Parties. In case the Parties are not able to arrive at such an arbitrator,
the arbitrator appointed shall be appointed in accordance with the rules
of arbitration of the Singapore Chamber of Commerce.”
You might be wondering if this
fact situation we discussed was real. This arose in the case of Pricol Ltd. v.
Johnson Controls Enterprises Ltd., a decision of the Supreme Court of India in
2014, which arose out of a joint venture agreement between the said parties. We
have provided the link to this decision in the lecture’s description. So the
lesson that we learn is if you are opting for institutional arbitration, make
sure that you refer to the institution’s name correctly.
This defect typically takes place
when non-lawyers negotiate the arbitration clause. Nevertheless, such defects
are common. For those supremely confident lawyers, let me tell you about this
transaction, from a Press Release dated about ten years ago, that is, 27 March
2012.
“Johnson Controls, a global
leader in automotive seating, overhead systems, door and instrument panels, and
interior electronics, has formed a joint venture with Pricol Limited, a leading
supplier of automotive instrument clusters in India…
About Johnson Controls:
Johnson Controls is a global
diversified technology and industrial leader serving customers in more than 150
countries. Our 162,000 employees create quality products, services and
solutions to optimize energy and operational efficiencies of buildings;
lead-acid automotive batteries and advanced batteries for hybrid and electric
vehicles; and interior systems for automobiles. Our commitment to
sustainability dates back to our roots in 1885, with the invention of the first
electric room thermostat…
…
About Pricol:
Pricol, which started its
operations 35 years ago, is a well-known name in the Indian automotive
component sector. Over the last 25 years, Pricol has been a leading supplier of
automotive instrument clusters for two wheelers, cars, trucks and tractors in
India. The company supports automakers and after-market customers across
Europe, America, Middle East and Australasia and supplies instruments and other
products including sensors, oil pumps, chain tensioners, fleet management
solution products…”
Apologies for the lengthy quote.
I am not trying to consume your time with an unnecessary quote but to drive
home the point that such drafting defects take place even when global and
well-experienced companies or sophisticated parties are involved in a
transaction, which was probably drafted with legal advice. Link to the complete
press release is provided in the link to the description below.
More on pathological arbitration
clauses in the next lecture. Till
then, adios y hasta luego.
