The Mechanics of Choice of Seat and Curial Law in International Arbitration: An Indian Perspective

In our last post under the label “Arbitration: Choice of Law”, we did a descriptive comment on the decision of the Supreme Court in Yograj Infrastructure v Ssang Yong Engineering & Construction Co. Ltd. We identified certain flaws with the judgement and concluded that the “court’s reasoning/ analysis on curial law, consequence of choice of the law of seat etc is erroneous.” In this post and the subsequent ones, we provide reasons for our claim. Before that, the relevant terms of the agreement in the case are reproduced for the convenience of the reader:

“27. Arbitration

27.1 All disputes, differences arising out of or in connection with the Agreement shall be referred to arbitration. The arbitration proceedings shall be conducted in English in Singapore in accordance with the Singapore International Arbitration Centre (SIAC) Rules as in force at the time of signing of this Agreement. The arbitration shall be final and binding.

27.2 The arbitration shall take place in Singapore and be conducted in English language.

27.3 None of the Party shall be entitled to suspend the performance of the Agreement merely by reason of a dispute and/or a dispute referred to arbitration.

28. This agreement shall be subject to the laws of India. During the period of arbitration, the performance of this agreement shall be carried on without interruption and in accordance with its terms and provisions.”

In Yograj, the Supreme Court held that as per the choice of the parties in Clause 27.1, the curial law or the procedural law (see, para 33 of the judgement, for the synonymous treatment of curial law and procedural law), that is, the “law which regulates the procedure to be adopted in conducting the arbitration”, was the Arbitration Rules of the Singapore International Arbitration Centre. (Para 35). Subsequently, at Para 39, the Supreme Court held that the SIAC Rules- the curial law- becomes applicable only after the arbitral proceedings were commenced. Following conclusions can be deduced from these findings of Supreme Court:

1.   In an international commercial arbitration, where parties choose the Rules of a particular arbitration institution for the conduct of arbitration, such Rules is the curial law or the procedural law of arbitration.

2.     Curial law or the procedural law begins to operate when the arbitration commences.

At a basic level these two propositions are erroneous. The judgement is against well settled principles of international arbitration recognized by prominent authorities.

Choice of a Foreign Seat:

As per settled principles of international arbitration, what does a choice of foreign seat indicate? As it happened in this case, the Indian party and the South Korean party chose to conduct their arbitration in a country which was connected to neither of them. It is normal for parties to choose a forum which is unconnected to either parties. They chose Singapore as the seat of arbitration. Now, what does the choice of Singapore as the seat of arbitration imply? We’ll look at the relevant provisions of the New York Convention:

Article V provides the grounds on which the recognition and enforcement of foreign awards may be refused. India is the signatory of the New York Convention. Article V.1 provides:

“1. Recognition and enforcement of the award may be refused, at the request of the party against whom it is invoked, only if that party furnishes to the competent authority where the recognition and enforcement is sought, proof that:

(a) The parties to the agreement referred to in article II 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; or

…

(d) The composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties, or, failing such agreement, was not in accordance with the law of the country where the arbitration took place; or

(e) The award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made.”

Thus, three kinds of broad roles have been accorded to the seat of arbitration. [It may be noted that we are considering the law of the country where the award was made and the law of the country where arbitration took place to be the law of the seat of arbitration itself. While both are treated distinctly by the New York Convention, in practice and in most cases, both are the same. See, GARY B. BORN, INTERNATIONAL COMMERCIAL ARBITRATION 1258-1262 (VOLUME II), (2009)]. The three broad roles are as follows:

a)   Where the parties have not indicated the law applicable to their arbitration agreement, an arbitral award under that agreement could be refused enforcement if the parties were under some incapacity under the laws of country where the award was made, which in most cases is the law of the seat of arbitration.

b)    Where the parties had agreed to a procedure or the composition of tribunal and such agreement had failed, and such composition or the arbitral procedure was to be in accordance with the law of the seat of arbitration.

c)    The award is not binding or has been set aside or suspended by the country in which the award has been made or under the law under which the award is made, which, in most cases, but not always, is the law of the seat of arbitration.

By virtue of point (c) and to an extent point (b) above, the law of the seat of arbitration is endowed with the power to virtually ensure that the award by the tribunal is not an award that could be recognized even under the NYC. Born (supra, at p. 1264), reluctantly concedes:

“[T]he New York Convention is often interpreted as affording the law of the arbitral seat essentially plenary power over the procedures used in international arbitration.”

While Born argues for “structural limits” (p. 1265) on the power of the law of the seat, Redfern et al seems to content with the state of affairs. According to the latter scholarly work, affording primacy to the law of the seat of arbitration “gives an established legal framework to an international commercial arbitration.” [REDFERN ET AL, LAW AND PRACTICE OF INTERNATIONAL COMMERCIAL ARBITRATION 109 (2004)] The debate over which of the two approaches is better is a topic for another day; for now, the point is that it is been recognized in almost prominent jurisdictions and by popular commentators that the choice of a particular jurisdiction as the place of arbitration results in the automatic applicability of the law pertaining to provisional measures pending, prior to, or after arbitration, procedures pertaining to arbitration, setting aside arbitral awards and so on. This law of arbitration, known in international arbitration lingo as the lex arbitri, is the arbitration law of the seat of arbitration.

There is considerable confusion on what lex arbitri is. The short answer is- it depends. We’ll do another post on lex arbitri and its contents but, for now, the thing is when two parties resolve their disputes through arbitration in a particular jurisdiction, the rules of that jurisdiction will govern the arbitration because, ultimately, it is that jurisdiction which will give the “legal touch” (not always, though) to the arbitration. The fundamental error in Yograj (and judgements prior to Yograj right from Bhatia International) was the complete disregard to this consequence: when parties chose Singapore as the seat, the Singaporean arbitration law applied including in respect of provisions pertaining to interim relief prior to the commencement of arbitration [see, Section 12A(4) of the Singaporean International Arbitration Act]. Thus, the Singaporean International Arbitration Act applied even before the commencement of arbitration. Therefore, the applicability of the said Act is not consequent to Rule 32 of the SIAC Rules but because the said Act is a part of the Singaporean Arbitration Law and the Act provided that it applied to international arbitration.

As long as death sentence is in the statute book...

Ajitsingh Harnamsingh Gujral v. State of Maharashtra, CRIMINAL APPEAL NO. 1969 OF 2009, Date of Judgment 13/09/2011.

Justice Markandeya Katju while delivering the judgment affirming the death sentence said that as long as death sentence remain in the statute book the judiciary would award it in appropriate cases. To do otherwise, would be repeal of death sentence by the judiciary, which is not its domain.

The last part of the judgment is amusing and reminds one of the master stroke of Truepenny (C.J) in the Speluncean Explorers case. Paragraph 103 of the judgment says the following

"Before parting with this case, we would like to mention that we are not dealing with mercy petitions under Article 72 and 161of the Constitution, but are confining ourselves to the question of imposing death penalty on the judicial side."

ICC Arbitration Rules 2012

After UNCITRAL came up with the new Arbitration Rules in 2010, its the turn of International Chamber of Commerce to come up with revision of its 1998 Arbitration Rules. The Rules of Arbitration of the International Chamber of Commerce will be in force with effect from 1 January 2012. The 2012 Rules can be downloaded from here.

SSRN: Weekly Round up of Articles on Constitutional Law

1. Curtailment of Revisional Jurisdiction of High Courts in India: A Critique

Brajesh Ranjan , Bombay High court

Abstract

The jurisdiction exercised by the High Courts in India under Section 115 of the Code of Civil Procedure, 1908 is called the revisional jurisdiction of the High Courts. It has been conferred on the High Courts for effective exercise of the High Court’s superintending and visitorial powers over the subordinate courts. The revisional jurisdiction of the High Courts has undergone a radical metamorphosis since its inception. Today the powers and functions of the High Courts in India stands altered to suit the roles they are expected to don amidst the changing socio-judicial scenario. This article makes an attempt to review the amendments which have come to circumscribe the scope of revisional jurisdiction of the High Courts in India and to examine as to whether the objectives underlying these amendments have been achieved. The article further attempts to identify the loop-hole required to be plugged so as at to render effective, the objectives behind the amendments.

2. The Declining Influence of the United States Constitution

David S. Law , Washington University in Saint Louis - School of Law; Washington University in Saint Louis - Department of Political Science

Mila Versteeg, University of Virginia - School of Law

Abstract

It has been suggested, with growing frequency, that the United States may be losing its influence over constitutionalism in other countries because it is increasingly out of sync with an evolving global consensus on issues of human rights. Little is known in an empirical and systematic way, however, about the extent to which the U.S. Constitution influences the revision and adoption of formal constitutions in other countries.

In this Article, we show empirically that other countries have, in recent decades, become increasingly unlikely to model either the rights-related provisions or the basic structural provisions of their own constitutions upon those found in the U.S. Constitution. Analysis of sixty years of comprehensive data on the content of the world’s constitutions reveals that there is a significant and growing generic component to global constitutionalism, in the form of a set of rights provisions that appear in nearly all formal constitutions. Our analysis also confirms, however, that the U.S. Constitution is becoming increasingly out of sync with these global practices.

3. The Democratic Coup d’État

Ozan O. Varol , Chicago-Kent College of Law

Abstract

This Article identifies and examines the typical characteristics and constitutional consequences of a largely neglected phenomenon that I call the “democratic coup d’état.” To date, the academic legal literature has analyzed all military coups d’état under a single framework. That conventional framework considers all military coups to be entirely anti-democratic and assumes that all coups are perpetrated by power-hungry military officers seeking to depose an existing regime to rule the nation indefinitely. Under the prevailing view, all military coups therefore constitute an affront to stability, legitimacy, and democracy. Federal law in the United States reflects the same disdain for military coups by prohibiting any financial assistance “to the government of any country whose duly elected head of government is deposed by military coup or decree.”

This Article challenges that conventional view and its underlying assumptions. I argue that although all military coups have anti-democratic features, not all coups are equally anti-democratic. Rather, some military coups are distinctly more democratic than others because they respond to a popular opposition against an authoritarian or totalitarian regime and overthrow that regime for the limited purpose of transitioning the state to a democracy and facilitating the fair and free elections of civilian leaders. Drawing on fieldwork that I conducted in Egypt and Turkey in 2011, this Article sets forth a theory for a democratic coup d’état and examines its constitutional consequences using three comparative case studies: (1) the 1960 military coup in Turkey; (2) the 1974 military coup in Portugal; and (3) the 2011 military coup in Egypt.

4. Why No Parliaments in the United States?

Jonathan Zasloff , University of California, Los Angeles (UCLA) - School of Law

Abstract

Throughout American history, individual states have engaged in what scholars have aptly referred to as an “orgy of constitution-making.” States’ basic charters, however, have diverged profoundly from the federal Constitution in virtually every possible way but one: no state has ever created a parliamentary system. This Article asks why this is so, and finds that the answer reveals a basic American political pathology: a hatred of parties and legislative process, grounded in the electorate’s mythic belief that the only thing preventing political consensus are special interests or venal politicians. The current political paralysis in Washington and state capitals also derives from this myth, demonstrating that inquiring into the absence of American parliaments reveals basic flaws in our current political culture.

5. Making Constitutions Matter: The Dangers of Constitutional Politics in Current Post-Authoritarian Constitution Making

William Partlett , Stanford Law School

Abstract

This paper will explore a critical normative question at the intersection of constitutional and democratic theory: Is the process of constitutional drafting and ratification important in determining whether a constitution will serve as a constraint on future government activity? Many constitutional theorists maintain that constitution-making process is critical in making a constitution “matter.” They argue that the best constitution-making process is one where the people divorce constitutional drafting and ratification as much as possible from pre-existing, ordinary rules and institutions by encouraging the “people” to directly act through irregular mechanisms such as referendums and constitutional conventions. This irregular expression of popular sovereignty – called “constitutional politics” – ensures that the constitution will transcend ordinary politics and therefore limit future legislative and executive action.

The massive wave of constitution making in post-communist Europe and Asia in the late 1980s and early 1990s – a valuable laboratory for testing constitutional theory – suggests serious problems with this approach. First, the most successful and legitimate post-communist constitutional orders were established without engaging in constitutional politics. Instead, these countries made wide use of ordinary political mechanisms - including parliaments - in the construction of robust constitutional orders. Second, post-communist nations that have sidelined ordinary political institutions and rules in favor of the mechanisms of higher lawmaking in creating constitutional orders have actually been far less successful in building constitutions that constrain government activity.

6. Revolution as a Constitutional Concept

Guyora Binder , University of Buffalo School of Law

Abstract

Although the concept of revolution was associated with a predictable cycling among static constitutional orders in seventeenth and eighteenth century republican thought, this article explores the idea of a dynamic or revolutionary constitution. It traces this idea back to a customary constitutionalism articulated in the French and American revolutions, and examines its fuller expression in the synthesis of Whig and antislavery constitutionalism developed by Abraham Lincoln.

7. The Scope of U.S. Senate Control Over the Conclusion and Operation of Treaties

Stefan A. Riesenfeld , University of California, Berkeley - School of Law

Frederick M. Abbott , Florida State University College of Law

Abstract

This article will briefly describe the basic allocation of the treaty power in the United States and the status of treaty law in the municipal legal system. These matters are the subject of a number of excellent studies by American and foreign scholars. Our main concern, however, is with a particular feature of the constitutional landscape-the role which the Senate plays in the treaty-making process through the attachment of qualifications to resolutions of ratification; namely amendments, reservations, understandings, declarations, and provisos. We are concerned with the effect these conditions are accorded by the President, United States courts, and the international community. We are concerned with whether a minority of the Senate will be enabled to effect an influence on the international and domestic legal process greatly in excess of the constituency it represents. We believe that the phenomenon of Senate conditions must be carefully examined in the light of developments in the international legal system, and particularly the growing acceptance of individuals and individual rights as proper subjects of international law.

8. Law is Everywhere

Owen M. Fiss , Yale University - Law School

Abstract

War places great stress on society. It calls for major readjustments in government and in ordinary life. Often people are called on to make enormous sacrifices. In order to respond to these needs, codified law is often changed. The Executive promulgates new regulations and Congress enacts statutes to meet the exigencies of the war. The governing assumption of American society is that these war measures will be undertaken within the terms of the Constitution - that the allocation of powers among the branches set forth in the Constitution will be respected and basic liberties will be honored. Ours is a Constitution for times of war as well as times of peace.

The last five years have confounded this assumption and rendered the example of Justice Aharon Barak especially compelling. He has honored the special security needs of Israel while being adamant in protecting Israel’s democratic character. The contrast with the American experience is stark, even when a principle as sacrosanct as the prohibition against torture is at stake. The war against terrorism seems to have absolved the current Administration from any sense of limits.

9. The Constitutionality of State Prohibitions on Sharia Law

Ellery Richardson , Vermont Law Review

Abstract

A representative in the Tennessee legislature has recently proposed a bill banning the practice of sharia law, which is the Islamic law and code of conduct. Oklahoma amended its constitution to forbid judges from citing sharia law, or any foreign law, in their opinions and decisions of first impression. Other states are also considering passing similar legislation. This note will review these bills and laws, delve into their motives, and ask why the use of sharia law has become such a controversy on the state level. This note will attempt to concisely explain what sharia law is and why some consider banning it from our courts, or even making its practice a crime, a necessity. Then it will look at the bills in light of the first amendment and analyze their constitutionality.

10. The Example of America

Owen M. Fiss , Yale University - Law School

Abstract

In this essay, I focus on one of the most egregious of all abuses - the policies and practices of the Bush years that put into doubt the American commitment to prohibiting torture. This prohibition is embodied in a number of international instruments, most notably the 1984 Convention Against Torture and the criminal statute that we enacted to implement that treaty. Yet it is important to understand, so that we can be clear about the magnitude of the wrong, that the rule against torture did not await the arrival of the 1984 Convention and its implementing statute; it is rooted in the Constitution itself.

11. The Perils of Minimalism

Owen M. Fiss , Yale University - Law School

Abstract

The basic constitutional question posed by Guantánamo is whether the prisoners held there have any constitutional rights that might be protected by the courts. This may not seem much of a question in many democracies throughout the world, including Israel, because they view their constitutions in universalistic terms. The guarantee of human dignity, for example, controls the actions of Israeli officers wherever they act and against whomever they act. The American Supreme Court moved toward such a cosmopolitan conception of the United States Constitution during the Warren Court era, but starting in 1990 it headed in a different direction.

12. Right to Adequate Housing in India: Human Rights Perspective

Dr. Pradeep Kumar Pandey , The ICFAI University Tripura, INDIA

Abstract

In the era of so-called developed and progressive societies, where we declare to achieve a lot of things for our sustenance and survival, the basic requirements to live a life like a human being is far from reality. Among others, the basic needs like roti, kapda, makan are not available to all human beings. This situation is not in any one or two countries rather it has been spreaded all over the world. Right to adequate housing is a recognized human rights at the international level in various instruments like UDHR, ICESCR, CEDAW, CRC, CERD etc. which are very crucial for India. In India a lot of rights are guaranteed under Constitution of India as well as in other laws but no where right to adequate housing is mentioned specifically, though India has signed and ratified many international instruments which talk about this right. In this respect, what the achievement is, that is only due to Judiciary but the role of Judiciary in this respect is always changing. Even for some time Indian Judiciary ruled that right to adequate housing is essential part of Fundamental Rights guaranteed under Part-III Article 21 and 19(1)(e) but in some case the Judiciary has also disappointed to people who need housing right. In the light of abovementioned facts, the paper proposes to discuss the existing norms and parameters available at the national, regional and international level in respect of right to adequate housing. Further, it gives some sensible suggestions to strengthen this right.