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Interventionist, No More?

This article was first published in the Kluwer Arbitration Blog
(www.kluwerarbitrationblog.com) on 30 November 2011 

Vivek-resized Ankit_Goyal

Vivekananda N. & Ankit Goyal

Mr. Vivekananda N. is Head (South Asia) & Counsel, Singapore International Arbitration Centre (SIAC) and Mr. Ankit Goyal is Managing Associate, Orrick, Hong Kong Office. 

International consciousness that India is an arbitration unfriendly jurisdiction has existed for some time now. This feeling owes in part to seemingly interventionist judicial views, in part to the delays that are oft complained of about the Indian judicial system and in part to the lack of infrastructure necessary for any arbitration friendly destination. This piece seeks to briefly examine the first of these issues.

Interference by Indian courts in arbitral proceedings has especially been striking in the grant of interim measures of protection and interim relief. This is normally in exercise of the power under Section 9 of the [Indian] Arbitration and Conciliation Act, 1996 (the “1996 Act”). Section 9 forms part of Part I of the 1996 Act that largely incorporates the provisions of the Model Law on the conduct of arbitrations. Part II of the 1996 Act codifies the New York and Geneva Conventions and provides for the recognition and enforcement of foreign awards in India.

Given that a court could pass interim orders before the commencement of arbitral proceedings, the Bhatia decision led to scores of ‘Section 9 applications’ for interim relief being filed in courts across the country in relation to arbitrations, whether seated in India or outside. The decision remains a topic of debate.

However, the only carve out that the Court provided for was the parties’ express or implied exclusion of Part I. There was no guidance on what constituted an implied exclusion of Part I. This only served to complicate matters further since Part I also included important provisions for appointment of arbitrators and setting aside of awards, amongst others. Unclear with whether Part I had been impliedly excluded or not in specific instances, Indian courts began to appoint arbitrators in arbitrations seated outside India, for instance in National Agricultural (2007) and Indtel (2008) and permit setting aside of foreign awards, for instance in Venture Global(2008).

In the beginning was Bhatia

In the specific area of grant of interim measures of protection, of foremost importance, is the Bhatia (2002) decision of the Supreme Court taking the view that Part I of the 1996 Act applies equally to international commercial arbitrations that are seated outside India. The decision came about in the context of a request for interim relief made by a party to an ICC arbitration seated in Paris. The request was made to, and rejected by a District Judge. The appeal to the High Court was also rejected. The Supreme Court, however, took the view that unless expressly or impliedly excluded, the provisions of Part I would also apply to arbitrations seated outside India.

The post Bhatia conundrum

Given that a court could pass interim orders before the commencement of arbitral proceedings, the Bhatia decision led to scores of ‘Section 9 applications’ for interim relief being filed in courts across the country in relation to arbitrations, whether seated in India or outside. The decision remains a topic of debate.

However, the only carve out that the Court provided for was the parties’ express or implied exclusion of Part I. There was no guidance on what constituted an implied exclusion of Part I. This only served to complicate matters further since Part I also included important provisions for appointment of arbitrators and setting aside of awards, amongst others. Unclear with whether Part I had been impliedly excluded or not in specific instances, Indian courts began to appoint arbitrators in arbitrations seated outside India, for instance in National Agricultural (2007) and Indtel (2008) and permit setting aside of foreign awards, for instance in Venture Global(2008).

It is interesting to see that courts are increasingly willing to exercise restraint where parties have chosen to apply laws of other jurisdictions to govern the arbitration agreement. Similarly, foreign seats of arbitration appear to be an important factor. The choice of specific institutional rules for the conduct of arbitration is also of considerable influence in making the determination that parties had impliedly excluded the application of Part I.

Of some interest to Indian parties is the Videocon decision where the Supreme Court, albeit seized with other issues concerning the distinction between the seat and venue of arbitration, was willing to respect the choice of English law as the governing law of arbitration while the substantive contract continued to be governed by Indian law. This is a clear positive option for Indian entities negotiating dispute resolution clauses with foreign entities.

Equally of interest is the mention of Rule 26 of the SIAC Rules, being the SIAC Emergency Arbitrator provisions in Unknown by the Madras High Court as an alternate remedy for interim relief. Since their introduction in the 2010 Rules, the SIAC Emergency Arbitrator provisions have most often been used by Indian parties to seek and obtain emergency interim relief, in one case within three days and in another within ten days of the application. In these cases, as luck would have it, the disputes were consensually and amicably resolved by parties subsequent to the grant of such emergency interim relief.

Also of some interest is news that the Supreme Court of India has now constituted a five judge Bench to hear a batch of cases which will consider whether Indian courts can entertain a challenge to a foreign award under Section 34 and in effect reconsider Bhatia (2002) and Venture Global (2008).

The views in these cases should serve as an important guideline for drafting dispute resolution clauses effectively with a view to ensuring that the correct jurisdiction can be approached to seek reliefs to aid arbitral proceedings. Needless to say, it is also perhaps reason for some measured optimism on the hitherto held view that Indian courts are interventionist and mindless of jurisdictional limitations.

Recent trends

Given that a court could pass interim orders before the commencement of arbitral proceedings, the Bhatia decision led to scores of ‘Section 9 applications’ for interim relief being filed in courts across the country in relation to arbitrations, whether seated in India or outside. The decision remains a topic of debate.

However, the only carve out that the Court provided for was the parties’ express or implied exclusion of Part I. There was no guidance on what constituted an implied exclusion of Part I. This only served to complicate matters further since Part I also included important provisions for appointment of arbitrators and setting aside of awards, amongst others. Unclear with whether Part I had been impliedly excluded or not in specific instances, Indian courts began to appoint arbitrators in arbitrations seated outside India, for instance in National Agricultural (2007) and Indtel (2008) and permit setting aside of foreign awards, for instance in Venture Global (2008).

Case Applicable law
of contract
Applicable
law of
arbitration
agreement
Applicable
institutional
rules for
conduct of
arbitration
Seat of
arbitration
Area of intervention
sought
Whether an
implied
exclusion of
Part I accepted?
Hardy Oil
(Gujarat HC, 2005)
Indian English LCIA Rules London Interim relief
(under Section 9)
Yes
Indtel Technical
(Supreme Court, 2008)
English N.A. N.A. N.A. Appointment of arbitrator
(under Section 11)
No
Citation Infoware
(Supreme Court, 2009)
USA N.A. N.A. N.A. Appointment of arbitrator
(under Section 11)
No
DGS Realtors
(Delhi HC, 2009)
State of New Jersey, USA N.A. AAA Rules New York Interim relief
(under Section 9)
No
Max India
(Delhi HC, 2009)
Singapore N.A. SIAC Rules Singapore Interim relief
(under Section 9)
Yes
Dozco India
(Supreme Court, 2010)
Korea N.A. ICC Rules Seoul, Korea Appointment of arbitrator
(under Section 11)
Yes
Unknown
(Madras HC, 2011)
Singapore N.A. SIAC Rules Singapore Interim relief
(under Section 9)
Yes
Videocon Industries
(Supreme Court, 2011)
Indian   N.A. Kuala Lumpur Interim relief
(under Section 9)
Yes
Yograj Infra
(Supreme Court, 2011)
Indian N.A. SIAC Rules Singapore Appeal against interim order of tribunal
(under Section 37)
Yes
Prima Buildwell
(Delhi High Court, 2011)
England & Wales N.A. ICC Rules London Interim relief
(under Section 9)
Yes

It is interesting to see that courts are increasingly willing to exercise restraint where parties have chosen to apply laws of other jurisdictions to govern the arbitration agreement. Similarly, foreign seats of arbitration appear to be an important factor. The choice of specific institutional rules for the conduct of arbitration is also of considerable influence in making the determination that parties had impliedly excluded the application of Part I.

Of some interest to Indian parties is the Videocon decision where the Supreme Court, albeit seized with other issues concerning the distinction between the seat and venue of arbitration, was willing to respect the choice of English law as the governing law of arbitration while the substantive contract continued to be governed by Indian law. This is a clear positive option for Indian entities negotiating dispute resolution clauses with foreign entities.

Equally of interest is the mention of Rule 26 of the SIAC Rules, being the SIAC Emergency Arbitrator provisions in Unknown by the Madras High Court as an alternate remedy for interim relief. Since their introduction in the 2010 Rules, the SIAC Emergency Arbitrator provisions have most often been used by Indian parties to seek and obtain emergency interim relief, in one case within three days and in another within ten days of the application. In these cases, as luck would have it, the disputes were consensually and amicably resolved by parties subsequent to the grant of such emergency interim relief.

Also of some interest is news that the Supreme Court of India has now constituted a five judge Bench to hear a batch of cases which will consider whether Indian courts can entertain a challenge to a foreign award under Section 34 and in effect reconsider Bhatia (2002) and Venture Global (2008).

The views in these cases should serve as an important guideline for drafting dispute resolution clauses effectively with a view to ensuring that the correct jurisdiction can be approached to seek reliefs to aid arbitral proceedings. Needless to say, it is also perhaps reason for some measured optimism on the hitherto held view that Indian courts are interventionist and mindless of jurisdictional limitations.


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