Welcome to our latest India International Arbitration ebulletin. In this edition, we look at two encouraging pro-arbitration decisions from the Indian courts, as well as two more curious decisions from the courts of London and Singapore. We also report on the India-Pakistan Indus river arbitration, as well as the latest statistical report on Indian arbitrations from the Singapore International Arbitration Centre.  

Recent case law  

Following on from the Indian Supreme Court's decision in Bharat Aluminium Co. v Kaiser Aluminium Co. ("BALCO") handed down last September (discussed here) two recent decisions of the Indian Courts reflect a continuing pro-arbitration trend.

Indian Supreme Court upholds referral of multi-party dispute to arbitration, including as against non-parties to the arbitration agreement

In Chloro Controls India v Severn Trent Water Purification, the Indian Supreme Court declined jurisdiction over a dispute that involved parties to an arbitration agreement as well as other entities that were not parties to that agreement. The appellant, Chloro Controls, brought claims against various Severn Trent entities in connection with a joint venture arrangement. Some of the Severn Trent entities were named parties to an arbitration agreement with Chloro Controls (as part of the main shareholder agreement), whilst others were not. Chloro Controls maintained that it was entitled to claim against all the Severn Trent entities in the Indian Courts as they were necessary parties to the dispute with the other entities. Severn Trent argued that this was little more than an attempt to avoid the arbitration agreement. The Supreme Court decided it would refer all the parties to arbitration, even those who were not named parties to the arbitration agreement. Read more here.

Delhi High Court applies BALCO jurisprudence to pre-6 September 2012 arbitration agreement and holds that the law of the seat is the appropriate curial law

In NNR Global Logistics v Aargus Global Logistics, the Delhi High Court rejected an application under s.34 of Part I of the Indian Arbitration and Conciliation Act 1996 (the "Act") for a foreign award to be set aside on public policy grounds. Because the arbitration agreement in question pre-dated 6 September 2012, the rule in BALCO did not apply and a challenge to a foreign award under Part I of the Act could proceed. Nonetheless, the Court was guided by the pro-arbitration and internationalist approach taken in BALCO, and cited that decision in holding that even where the parties' contractual relationship was substantively governed by Indian law, the applicable curial law (including as to limitation) was the law of the seat (in this case, Malaysian law). The Court therefore upheld the award, even though this meant giving effect to a claim that would have been time-barred under Indian limitation rules. Read more here.

English High Court holds that dis-applying Part I of the Indian Arbitration Act amounts to choosing Indian law to govern the arbitration agreement

In contrast, the English High Court has, surprisingly, decided that the law applicable to an arbitration agreement was Indian law, even though the arbitration agreement had its closest and most real connection with English law. The Court reached this conclusion on the basis that because the parties had expressly excluded the application of Part I of the Indian Arbitration and Conciliation Act, they had implicitly chosen that the rest of Indian arbitration law would apply. The Court proceeded to set aside the arbitral award on the basis that the tribunal lacked jurisdiction under Indian law. Read more here.

Singapore Court of Appeal sets aside injunction against Maldivian state-owned company in airport dispute

The Singapore Court of Appeal has set aside an interim injunction granted by the High Court against a Maldivian state-owned corporation ("MACL"), by which MACL had been restrained from interfering with the operation of the Maldives airport by the relevant concession holder ("GMIAL"), a joint venture entity partly owned by the India-based infrastructure group, GMR. The Court of Appeal rejected MACL's claim to state immunity and found that it did have jurisdiction to grant an injunction, but in the exercise of its discretion, it found that GMIAL had not demonstrated that the balance of convenience lay in favour of an injunction. The substantive dispute was referred to arbitration. Read more here.

India - Pakistan Kishenganga dispute

Pakistan has partly failed in its treaty claim seeking to prevent India from diverting water from the Indus river system. The dispute was heard by a seven member Tribunal at the Permanent Court of Arbitration. By way of a partial award, the Tribunal held that inter-tributary transfers were permissible under the relevant treaty and, therefore, India could proceed with diverting the waters.

However, Pakistan was afforded some relief as the Tribunal specified that a minimum flow of water was to be maintained at all times in the river – the quantum to be determined by way of final award to be made later this year.

SIAC update

The Singapore International Arbitration Centre ("SIAC") has published its Annual Report for 2012 (a copy is available here). In total, 42 cases involving Indian incorporated parties were filed at SIAC in 2012, making India the second highest overseas source of SIAC arbitrations. China was the leading source with 44 cases. SIAC has also announced plans to open several international offices, including one in Mumbai by April 2013.