Arbitration mandarins have been keenly watching India. As the enthusiasm towards arbitration among Indian parties’ grows (the “PwC survey on Corporate Attitudes and Practices towards Arbitration in India” pegged 95 per cent of the surveyed companies as arbitration users), the judicial and jurisprudential developments in post-BALCO1 India have been particularly encouraging. The Indian courts, led by the Supreme Court of India, have steered clear of undue interference in the arbitration process, not only practicing restraint but preaching it too. Recent decisions rendered by the Indian courts have definitely enlivened the arbitration process in India. These decisions have confronted key issues in arbitration that will have real world implications on how businesses and their counsel utilise arbitration agreements.
The Supreme Court decisions
In a decision that will revolutionise the enforcement of foreign awards in India, the Supreme Court of India, in its latest decision, Shri Lal Mahel Ltd. v Progetto Grano Spa, has significantly limited the scope of the public policy challenge to the enforcement of foreign awards. It has clearly demarcated the scope of ‘public policy’ under section 48 of India’s Arbitration and Conciliation Act 1996 (the Act), which deals with the enforcement of foreign awards, and under section 34 of the Act, which deals with the setting aside of awards rendered in domestic arbitrations.
The English Judge Burrough, in the much celebrated decision of Richardson v Mellish (1824) had observed that ‘the argument of public policy leads you from sound law and is never argued but when all other points fail’. This observation is fairly reflective of the way public policy challenges to awards have played out in the past in India. However, with the Supreme Court decision, the reckless use of public policy by the Indian bar to challenge awards, particularly ones issued by foreign-seated tribunals, is set to take a significant new turn. The Supreme Court, largely taking the sting out of its previous decision of ONGC v Saw Pipes Ltd., decided in favour of a narrow meaning of public policy with regard to foreign seated arbitrations, therefore allowing only a limited recourse to the ground of public policy. Raising the bar for such challenges, now, only a foreign award that is contrary to the fundamental policy of Indian law, the interests of India or justice or morality of the country, will fall foul of the public policy of India and be refused enforcement in India.
In Antrix Corp. Ltd. v Devas Multimedia Pvt. Ltd., the Supreme Court of India refused to allow a party to separately invoke the provisions of the arbitration agreement when the other party had already invoked the arbitration agreement on a particular dispute and an arbitrator had been appointed. The controversy in this case arose due to an ambiguous arbitration agreement that provided for arbitration to be conducted as per the either the ICC Rules or UNCITRAL Rules. The Court rejected the argument raised by Antrix that since the agreement clearly intended that the arbitration proceedings be governed by Indian law, the UNCITRAL Rules should be applicable and not the ICC Rules, as the Act was based on the UNCITRAL model law.
While deciding on the issue of foreign seated arbitrations, the Supreme Court in Chloro Controls (India) Pvt. Ltd. v Severn Trent Water Purification, declined jurisdiction in favour of a London-seated arbitration proceeding. The apex court of India, affirming the arbitration process in the complex multi-party multicontract dispute, held that in exceptional circumstances persons who were not signatories to the arbitration agreement could also seek referral of a dispute to arbitration, provided they were 'claiming through or under' a party who was a signatory.
Recently, the Supreme Court in Schlumberger Asia Services Ltd v ONGC was of the firm opinion that in case of a dispute where arbitration has been provided for, it is the arbitral tribunal and not a court that would normally decide whether the claims are long dead and barred by the law of limitation.
Such robust pro-arbitration stands have not been limited to the Supreme Court of India and even the High Courts of the states of the country have been equally pro-active in their pro-arbitration outlook.
The High Court decisions
The High Court of Madhya Pradesh, in May 2013, in the case of Yograj Infrastructure Ltd. v Ssangyong Engineering and Construction Co. Ltd. rejected a petition to set aside an interim award passed under arbitration proceedings governed by the Singapore International Arbitration Centre (SIAC) Rules, holding that the Indian Courts had no power to provide for interim awards when the parties have submitted to the curial law of Singapore. The Court felt that the SIAC Rules 2007 (SIAC rules then in force) clearly provided for Singapore’s International Arbitration Act to be the applicable law, and thus the provisions applicable for setting aside the award of any proceedings under the SIAC Rules must also be derived from the same Act (i.e. Singapore’s International Arbitration Act).
The Delhi High Court in NNR Global Logistics (Shanghai) Co. Ltd. v Aargus Global Logistics Pvt. Ltd. refused a petition challenging a foreign award on the grounds of public policy. Guided by BALCO, the Court ruled that even when the contractual relationship of the parties was governed by Indian law, the applicable curial law would be the law of the seat. The Court held that the law of limitation is procedural, and not substantive, and is thus part of the curial law. Therefore, in the absence of a chosen curial law, the relevant law shall be the law of the seat of the arbitration. It is pertinent to mention that the arbitration agreement in question pre-dated 6 September 2012, the cut-off date set by the Supreme Court to the application of the BALCO rule.
The Bombay High Court in its latest judgment has also clarified that the Supreme Court in BALCO had intended only for the relief granted in that case to be prospective and not the reasoning behind the decision. In Konkola Copper Mines (PLC) v Stewards & Lloyds of India Ltd, the Court, shedding some light on the issue of the application of BALCO, held that the extensive discussion regarding the meaning and scope of the Act contained in BALCO was not limited to the Act’s prospective application, and that courts may look to BALCO for the interpretation of the Act.
Also in PowerGrid Corporation of India Ltd. v Siemens Ltd., the Delhi High Court disallowed PowerGrid Corporation of India’s attempt to escape arbitration proceedings by contending that the invocation of arbitration was by Siemens, while the agreement in question was between PowerGrid and the joint venture company formed by Siemens and two other parties. In enforcing the arbitration agreement, the Court recognised Siemens’ right to claim on behalf of the joint venture. In doing so, the Court also pointed out that PowerGrid, in the correspondence exchanged between the parties, had not seemingly questioned Siemens being party to the dispute, as opposed to their pleading in Court.
Not long ago, in Indeen BioPower ltd. v Dalkia India Pvt. Ltd., the Delhi High Court, relying on the doctrine of kompetenz-kompetenz, held that a tribunal appointed under Part – I of the Act had the authority to decide not only the width of its jurisdiction, but also the root of its jurisdiction.
Although it may be too early to say that the spectre of excessive and untimely interference by the Indian courts in the arbitration process is a thing of the past, these recent court decisions strongly demonstrate the growing importance placed by Indian courts on enforcing arbitration agreements and adopting a ‘hands-off’ approach to the growing number of arbitration cases in India, especially arbitrations conducted outside India.
The significance of these decisions lie not only in the fact that they may act as binding precedents, but also in their role as key blocks in building a forceful superstructure of arbitration in India, and for Indian parties arbitrating abroad. The growing recognition of arbitration in the country is indicative of the realisation that the growing economic activity and commerce in India must not be held ransom to a slow, over-pressured and occasionally less than effective judicial system. There is no doubt that deep-pocketed commercial actors are able to writ petition their way to temporary relief; however even for them, the resolution of disputes remain a distant goal.
Given the handicap of having a lower judiciary that continues to be not only inefficient on a time-cost scale, but also largely incapable of adjudicating complex commercial disputes, arbitration provides an effective and efficient avenue for dispute resolution to both domestic as well as foreign actors.
However, the fundamental principle remains that the parties must make informed choices when including arbitration clauses in contracts, and ensure that arbitration clauses are clear and precise in order to eliminate unintended consequences.