Debevoise & Plimpton partner Lord Goldsmith QC has called on the Indian government to delay controversial amendments to the country’s arbitration law, warning that they could “set back the cause of Indian arbitration” by a generation.
Lord Goldsmith, who heads the Asian and European litigation practice at Debevoise and formerly served as the UK attorney general under Tony Blair, gave the warning on 16 February while delivering the inaugural address at the 11th Annual International Arbitration Conclave in New Delhi.
He was referring to proposed reforms in The Arbitration and Conciliation (Amendment) Bill, 2018, which was passed by the lower house of the Indian Parliament in August but has yet to be passed by the upper house or to receive the assent of the country’s president. The bill follows a prior set of reforms to the country’s arbitration law that were enacted in 2015.
While some of the changes in the new bill are “welcome”, Lord Goldsmith said there was international concern over provisions for a new body, the Indian Council of Arbitration, which will not merely promote arbitration but also “regulate it.”
”The idea that a government appointed body should regulate arbitration and arbitrators is anathema to the idea of free and autonomous arbitration,” he said.
He also expressed concern about proposals that would require an arbitrator to be qualified as an Indian advocate with ten years of practice experience. Such provisions “would appear at a stroke to prohibit the appointment of foreign lawyers as arbitrators in Indian seated arbitrations,” he warned.
Lord Goldsmith acknowledged there were some exceptions in the bill for other qualifications such as Indian chartered accountants, but said it would nonetheless block the appointment of “many experienced and able arbitrators” from fields such as shipping, architecture and medicine.
While some defenders of the bill have suggested it is open to the government to relax these rules in consultation with the new council, Lord Goldsmith said there was no reason to believe this would happen. “The conservatism of the Indian legal regulatory bodies in not allowing foreign legal professionals in is notorious,” he said.
Lord Goldsmith recalled how, in his then role as chair of the English Bar, he had first come to India 25 years ago to argue for a relaxation of the rules on foreign lawyers practising in India. “Due to the opposition of some Indian professional legal bodies we are still waiting.” He said he would therefore not hold his breath for the “monopoly” on arbitral appointments for Indian lawyers to be given up so easily once it is bestowed by statute.
If these amendments become law, he said non-Indian businesses will be deterred from signing agreements providing for Indian arbitration as they will be precluded from appointing arbitrators from “more familiar” jurisdictions.
He predicted that the bill could “set the cause of Indian arbitration back by many years, perhaps a generation”. Having pushed “the Sisyphean rock of Indian arbitration painfully up the steep slope of international acceptability”, Lord Goldsmith said that by passing the bill India would “release that boulder to plummet in free fall back down again.”
Lord Goldsmith, who is a council member of the Hong Kong International Arbitration Centre, emphasised that he was not speaking “as a competitor” but “a friend of India and of Indian arbitration” and as a practitioner seeking to encourage a faster alternative to India’s “overcrowded court system.”
He said it is “not too late” to halt the bill, observing that there is “a good chance” the bill would not pass before the country’s 2019 election, which is expected in April or May. He said the bill should be delayed so that “better advice can prevail” and that its “pernicious elements” be removed.
Lord Goldsmith went on to address the official subject of his speech, his “essential rules” for counsel when preparing for an international commercial arbitration, including how to guard against guerrilla tactics that may sometimes be employed by the opposing side.
He said counsel and clients must know their appointed arbitrators sufficiently well to safeguard against “unmeritorious attempts to derail the proceedings” via disqualification requests, he said. He pointed to recent high-profile resignations in ICSID proceedings as examples of a growing trend in attempts to challenge arbitrators. He said he knew of other cases where arbitrators have been challenged as a way of “putting pressure on them.”
Lord Goldsmith also addressed the “due process paranoia” of tribunals who allow arbitral proceedings to become protracted out of fear that their award will be set aside for failure to give the parties a fair hearing. He said this paranoia was “fertile soil for abuse” but noted a recent survey of court decisions that showed up to 90% of challenges to the enforcement of awards based on the “due process” ground under the New York Convention were unsuccessful.
He also considered the recently launched Prague Rules, which favour the use of the civil law “inquisitorial model of procedure” and limit the scope for document production. He noted that the response to the rules had so far been “mixed” and that it was not yet possible to evaluate their potential success. However, he said they “may find traction” with clients and lawyers from civil law backgrounds – for example in proceedings between Indian parties and those from China, Korea, Japan and the Netherlands – and also in cases that mainly concern contractual interpretation.
Lord Goldsmith also briefly addressed the potential impact of Brexit on London’s popularity as a seat of arbitration, saying that “if” the UK leaves the European Union, London will remain a “vibrant and popular place to arbitrate”. He said it was adherence to the New York Convention that made international arbitration effective, not membership of the EU. But he acknowledged that “others may have doubts” which could result in businesses signing up to arbitration elsewhere, creating opportunity for other arbitral centres such as in India.
The 11th Annual International Arbitration Conclave was conducted by the Nani Palkhivala Arbitration Centre at the Hotel Shangri-La in New Delhi on 16 February. The one-day event included speakers David Wolfson QC and Niranjan Venkatesan of London’s One Essex Court, and Singapore-based partners Sapna Jhangiani of Clyde & Co and Shourav Lahiri of Reed Smith.
The full text of Lord Goldsmith QC’s address is available here.