Arbitration Law

[By Sikander Hyaat Khan and Parina Muchhala] Sikander Hyaat Khan (4th year) and Parina Muchhala (2nd year) are students of Maharashtra National Law University Mumbai Transparency has assumed an important position in the contemporary international arbitration dynamic. A major aspect of transparency in international arbitration regime is that of third party or amicus submissions. This holds true even more in the realm of investment arbitration, where there is likeliness of some degree of public interest being at stake. Unlike commercial arbitrations, investment arbitrations deal with matters concerning various public sector services that implicate “government regulation aimed at the protection of public welfare [such as] human rights, health and safety, labor laws, [or] environmental protection.”[1]Another rationale put forth by scholars emphasizing on the need of transparency in investment arbitration proceedings is that any decision against the respondent will lead to rendering of a monetary award that will be paid out of public’s money.[2] Amicus interventions are therefore, said to bring about transparency and legitimacy to the process of investor-state arbitrations. Many institutional rules and treaty frameworks are now becoming increasingly welcoming towards this trend and coming up with provisions for third party submissions. The ICSID Arbitration Rules under Rule 37(2) and Additional Facility Rules under Rule 41 (3) provide for third party submissions. The amended SCC Rules of 2017 in its Appendix III have also made provision for third party submissions. These vest discretion with tribunal to allow third party submissions. Similarly, UNCITRAL Transparency Rules under Article 5 provides for third party intervention in issues of treaty interpretation. At the same time, it is pertinent to highlight that accepting such applications for submissions pose certain problems for the arbitral process. This post identifies certain problems with amicus submissions and provides alternatives that can help calibrate transparency through amicus submissions into the investor-state arbitration fold while minimizing its adverse implications. Pertinent problems with amicus submissions in today’s context Against confidentiality Confidentiality is one of the many pivotal characteristics of arbitration that make it a preferred mode of dispute settlement over the courtroom process.[3] Arbitrations are characterized by confidentiality at various stages: the stage of filing, the proceedings, documents and evidences filed and the award passed. These may however be made public pursuant to party consent but otherwise remain confidential. A major reason behind why confidentiality is essential is because there is confidential information belonging to investors and/or states that cannot be disclosed to non-disputing parties. Third party submissions are at direct odds with confidentiality. There is a general concern that third-party intervention could lead to ‘re-politicization of disputes, making arbitration a “court of public opinion.”’[4] Against the principles of timeliness and cutting down of costs One of the main advantages of arbitration is to resolve disputes quickly and cheaply. An arbitration adheres to strict temporal requirements that leads to faster settlement of disputes.[5] In the context of huge investor corporations or states, there are major policy decisions and huge sum of money involved at the heart of the dispute which require even greater expediency. Third party submissions would require additional time for deliberation by arbitrators. Moreover, most factual submissions would require cross-examination to check veracity of facts which again, is a tedious and time-consuming process. It has been highlighted that allowing greater third-party intervention in State-investor disputes could potentially lead to rising costs and delays.[6] Emergence of a fractured jurisprudence The current position of law on amicus submissions in investment arbitrations is erratic. Some institutions are devoid of any rules on amicus submissions. In cases where amicus submissions have been accepted, most grounds of acceptance of such applications have been similar. These are still susceptible to dispersion though. This leads to a scope of emergence of different standards of admission of amicus submissions which is somewhat similar to the disparity in standards of disqualification of arbitrators under ICSID as compared to other institutional rules. While the ICSID jurisprudence has developed to call for a strict standard of disqualification, other institutional rules call for a mere appearance of bias. The same is possible with amicus submissions wherein conflicting decisions on the standard of admissibility of such submissions will disturb the jurisprudence constante inadvertently. Forum Shopping Currently, many institutions and treaties do not have provision for third party submissions. While it may be a far-fetched argument to make, it is possible that parties may opt for institutions or draw up procedures that include rules which do not have provisions on third party submissions to deliberately avoid the same. Suitable course of action A friction is therefore created by allowing third party interventions. The Methanex v USA tribunal highlighted that there is a need to ensure that third party participation does not result in imposition of additional burdens on parties and the arbitral process. Most institutional rules and investment treaties provide for a somewhat similar metric for tribunals to administer its discretion in allowing amicus submissions. In cases where both the parties consent to such intervention in the form of submissions and/or access to proceedings, the tribunal by the means of a procedural order can allow the same. In some cases, as discussed above, institutional rules provide for third party interventions. These require the respective tribunals to solicit their discretion based on the metrics provided by the rules. Presumption against admission of third-party submissions Owing to the principles of timeliness and confidentiality being the core values of arbitration, the presumption should lie against admission of third-party submissions. The burden of proof should lie on the applicant to show why their submissions should be allowed. Developing a standard metric and introducing metric where absent It is imperative that a standard metric be developed for tribunals to practice their discretion. The criteria given under Rule 37 (2) of the ICSID Arbitration Rules suffice for appropriate grounds that should warrant amicus submissions. Institutional rules should therefore be amended in line with the ICSID rules to incorporate provision for amicus submissions. Such process of amendment varies over different institutions and instruments in the investor-state arbitration regime, but they

[Srijan Srivastava]   The author is a 3rd year student of NLU, Jodhpur. Introduction “Counterclaims: An indispensible component of Investment Arbitration”. Counterclaims are the claims that are made by the respondent which retaliate the primary claims as put forth by the claimant. It basically lays down the defence of respondent by asserting a separate cause of action taken out by the claimants. It not only defends the respondent, it also attacks the claimant for their actions. The reason for allowing a counter-claim to be included as part of an existing case is not because it assists in disposition of the principal claim but, rather, to assist in the disposition of two autonomous claims.[i]The counterclaim is allowed to become a part of an existing case ‘in order to ensure better administration of justice, given the specific nature of the claims in question’ and ‘to achieve a procedural economy whilst enabling the Court to have an overview of the respective claims of the parties and to decide them more consistently’. Counterclaims in various tribunals ICSID Convention The ICSID convention categorically talks about rules of filling counterclaims in arbitration procedures. It says that, the tribunal shall if requested determine any counterclaims arising directly out of the subject matter of the dispute provided that they are within the scope of the consent of the parties and are otherwise within the jurisdiction of the Centre.[ii] If we dissect this provision we will see that this provision sets out certain conditions to be complied with in order to file a counterclaim. First, the counterclaim must fall within the consent of the parties to a dispute. Second, there must be a close factual and legal connection between a counterclaim and the primary claim. This is also known as the close connection test. Finally, the counterclaim must fulfil the requirements as given under Article 25 of the Convention. This is to see that the counterclaim fits within the jurisdiction of the Centre, i.e. the counterclaim must directly arise out of an investment. The ICSID Additional Facility Rules under Article 47 permits the filing of the counterclaims. They just mandate that the counterclaim should fall within the arbitration agreement of the parties. Apart from the condition of consent, they do not pose further restrictions for the filing of counterclaims, leaving it to the consideration of arbitral tribunals whether they fall within their jurisdiction. UNCITRAL Convention UNCITRAL Convention talks about the twin requirements of any counterclaims to be admissible before the tribunal. The Arbitration rules require that the counterclaims should arise “out of the same contract.”[iii]This section when narrowed down is considered as “inappropriate to arbitration arising under international treaties.”[iv]In cases where an investment contract is absent between an investor and a host state, the Arbitration Rules has certain loophole with regard to treaty violations ad as the language of the arbitration rules were discarded by the tribunals. However the UNCITRAL working group on Arbitration and Conciliation proposed to modify the provision that will fill this loophole. The group allowed counterclaim that were substantially connected or arose out of the initial claim as put forth by the investor or claimant. After the abovementioned modification, the provision was replaced by Article 21(3) of the UNCITRAL Arbitration Rules, 2010. This provision includes a description of counterclaims in the state’s response to the notice of arbitration provided that the arbitral tribunal has a jurisdiction over it. Therefore UNCITRAL in a way give express permission of admissibility of counterclaims. International Court of Justice The ICJ Statute does not directly address the issue of the respondent filing a counterclaim against the applicant. Article 80 of the Rules, however, it provides that the Court may entertain such a counterclaim in certain circumstances, as a part of the incidental proceedings of an existing case. The Court has focused on the other language of Article 80(1) of the Rules, which provides that the Court may entertain a counterclaim ‘only if’ two requirements are met: First, when the counterclaim ‘comes within the jurisdiction of the Court’. Second, when the counterclaim is ‘directly connected with the subject matter of the claim of the other party’. The Court has characterized these two requirements both as requirements on the ‘admissibility of a counter-claim as such’, explaining that admissibility ‘in this context must be understood broadly to encompass both the jurisdictional requirement and the direct-connection requirement’.[v] Absence of provisions regarding counterclaims in SCC Arbitration Rules Despite the growing popularity of investment arbitration for the settlement of disputes between investors and host states that are governed by Stockholm Chamber of Commerce, provisions governing counterclaims are not well defined in the SCC arbitration rules. The rules only lay down general framework regarding filling of counterclaims. A provision of SCC Arbitration Rules says that counterclaims shall be outlined in Respondent’s answer to Claimant’s request for arbitration.[vi]The rules are silent when it comes to any other conditions such as the parties consent or the close connection test between the claim and the counterclaim. However the tribunal in the case of Amto v. Ukraine explained that the jurisdiction of the counterclaims depends on the terms of the dispute resolution provisions of the treaty, the nature of the counterclaim, and the relationship of the counterclaims with the claims in the arbitration.[vii]  The tribunal, therefore, confirmed uniform application of these requirements, irrespective of the nature of the rules governing the dispute settlement procedure. Impact and Consequences The recent UNCTAD statistics shows that there are over 800 known treaty-based investor-state arbitrations, yet counterclaims were filed and effectively addressed in less than 30 of them.[viii]This is clear enough to indicate why the host states are at certain disadvantage. They do not get adequate opportunity to adopt a more offensive tactics against investors is the language of IIAs that determines whether counterclaims can be heard or not. Arbitral tribunal has a vital role in smooth functioning of the disputes that arise. They have to lay down the procedures through which any dispute can be amicably resolved. They have to lay down certain guidelines

[ Gibran Naushad & Susanah Naushad ]   Gibran Naushad is an Associate at S&R Associates, New Delhi and Susanah Naushad is an Associate at Khaitan & Co., New Delhi. Introduction It is often said that cross-examinations can make or break a trial, a testimony to the importance of the process in the overall scheme of adjudication. There are, however, different ways in which one could approach cross-examination, depending on the nature of the case and the eventual result desired. Given the importance of cross-examinations in trial, situations are bound to arise where a party might want to conduct such examination again owing to its dissatisfaction with the previous cross-examination, amongst other factors. Such multiple cross-examinations are, however, a tricky terrain, and it is not in all cases that such repetition would be allowed. This is particularly true in the context of arbitrations, where the parties would have to primarily depend on the provisions of the Code of Civil Procedure, 1908 to carry out such a process. The authors, through this post, try and explain the practical dimensions of cross examination and the options available to parties in case they are dissatisfied with a cross-examination already conducted. Case laws dealing with the subject would be looked at and an attempt would be made to understand the restrictions imposed on the parties to correct their mistakes or lapses by repeating a process that is germane to any trial. Understanding The Practice Of Cross-Examination Cross examination is one of the most vital constituents of trial. It becomes highly important to question the adversary on crucial facts relating to the matter to establish their falsehood or truthfulness, thereby establishing the credibility of such facts and claims to be taken up during the final arguments in the matter. There is no straightjacket formula for conducting cross-examination. The strategy and method could differ with different counsels. Additionally, the facts and circumstances of different cases along with the eventual result sought to be achieved would require different approaches to be adopted. Certain counsels prefer to attack the witnesses on each and every fact, thereby posing straight questions to such witnesses and subsequently changing the orientation of such questions with each answer so as to direct the witness to their preferred answer. This ensures that the inability of the witnesses to answer correctly and comfortably the questions posed to them on certain facts and claims could be used against them at the time of making the final arguments in the matter. The other approach, however, is a more subtle approach wherein instead of questions, the counsel puts across certain suggestions which follow questions. The suggestions are meant to point towards the insufficiency in the answers to the questions. An example of such a suggestion could be – ‘I put it to you that you are lying about the illegal termination of the contract with Party X’. The aim behind putting such suggestions is to create an adverse inference against the party at the time of final arguments. Therefore, while the former approach is a head-on approach where the answers themselves bring out the adverse inference, the latter approach is a more nuanced approach where the counsel realizes that it would not be possible to extract such answers and it would be better to suggest adverse inferences. In view of the fact that there is no fixed approach for conducting cross-examinations, there is a possibility that post the completion of the cross-examination; a party might feel that it wants to cross-examine its adversary again. The reasons for this could vary, from strategic lapses by the counsel to new facts coming on record which merit putting up the person on stand yet again. However, conducting such cross-examination for the second time is an uncertain proposition, particularly in the context of arbitration, and such strategy might not fly past the arbitrator in most cases. The Arbitration and Conciliation Act, 1996 (the “Act”) does not contain specific provisions for examination of the witnesses. However, Section 19 of the Act does stipulate that the parties are free to choose a procedure for the conduct of the arbitral proceedings.[1] Additionally, in case such procedure has not been agreed upon by the parties, the arbitral tribunal could conduct the proceedings in the manner it deems appropriate.[2] The Act stipulates that the arbitral tribunal would not be bound by the Code of Civil Procedure, 1908 (the “Code”).[3]However, the Bombay High Court decision of Maharashtra State Electricity Board v. Datar Switchgear Limited[4] becomes important in this context. The Bombay High Court, while dealing with Section 19(1) of the Act clearly stated that Section 19(1) of the Act contained words of amplitude and not of restriction.[5] Therefore, though the arbitral tribunal is not bound by the Code, it could draw sustenance from the fundamental principles underlying the Code.[6] Order XVIII Rule 17 is one such provision from where sustenance can be drawn. The provision stipulates that the Court could at any stage of the suit recall a witness who has been examined and put such questions to the witness as the Court thinks fit. Therefore, if the Court is satisfied that there are grounds that exist for the recalling of the witness, cross-examination can be conducted on such witness again. Order XVIII, Rule 17: Discretionary But Limited Scope of Recall Order XVIII, Rule 17 is clearly a provision of the Code which could be used for recalling witnesses in arbitration proceedings. Though the provision stipulates that the Court can recall the witness on its own if it feels the need to do so, the parties could also make applications to invoke this provision and request the Court for such recalling. It has been held by the Punjab and Haryana High Court in the case of Om Prakash v. Sarupa[7] that the court could not only use Order XVIII, Rule 17 of the Code to recall a witness on its own but could also use this provision on an application made by the defendants. Similar views have been held by the

[Nitya Jain]   The author is a 3rd year student of Nirma University. Introduction With growing transactions and declining approachability in trade and commerce, disputes inevitably arise. Today, irrespective of whether a dispute is domestic or international, parties prefer an unbiased forum for resolving their disputes. Effectively, Arbitration is the most suited method when it comes to sidestepping the lengthy procedures of court. The capability of parties to achieve a speedy relief is fundamental to any arbitration proceeding. In order to safeguard and further uphold party autonomy, major arbitration institutions develop mechanisms and procedures that eliminate judicial involvement in arbitration proceedings. When a party seeks an interim relief, they either resort to domestic courts or wait for the constitution of the tribunal. Resorting to courts undermined the very purpose of choosing arbitration over litigation and pendency of tribunal formation gravely hampers the expedite procedure.[i]In order to address the aforementioned fallacy international institutions and various countries have developed the concept of Emergency arbitrator. A party appoints an Emergency Arbitrator when it urgently requires a relief that if not granted, will lead to grave loss of asset or evidence. Proceedings of such an arbitration is governed by agreement and consensus of the parties. Emergency arbitrator is not a part of the tribunal in fact, his job ends with the granting of relief and he is not to decide the case on merits. The types of emergency reliefs sought  are broadly categorized in four broad headers- (i) anti-suit injunctions ; (ii) reliefs aimed at restoring status quo of the disputant ; (iii) measured intended at safeguarding enforcement of a future award and (iv) orders for interim payments. A good amount of time has passed since the concept of Emergency Arbitrator has been around. The institutions are continuously introducing provisions and rules as an attempt to improve the workability of the concept of emergency arbitrator. Various countries in their domestic laws have also adopted the concept.  Though the novel concept of emergency arbitrator is highly appreciated in the arbitration community globally, enforcement of the order passed by the arbitrator is still debatable. It eventually boils down to the subjectivity of various national courts and laws of the respective countries as to whether an order passed by an emergency arbitrator is enforceable or not.  Except Hong Kong and Singapore all other national laws are silent on the question of enforceability of emergency arbitrator’s decision. Provisions under Indian Law The Indian law does not expressly recognize the concept emergency arbitrator. In an attempt to abide by the global trend and also to provide statutory recognition to the awards passed under institutional rules like SIAC and ICC, the 246thLaw commission report did recommend the adoption of the concept of emergency arbitrator under sec 2(d) of the Act which stated “Arbitral tribunal” means a sole arbitrator or a panel of arbitrators and, in the case of an arbitration conducted under the rules of an institution providing for appointment of an emergency arbitrator, includes such emergency arbitrator.” However the same was rejected by the legislature while amending the Arbitration and Conciliation Act, 1996 and thereby the concept is not a part of the Arbitration and Conciliation Act, 2015. There is also no express judicial recognition of the awards passed by emergency arbitrator or its enforcement. Till date the Indian courts, for that matter, had no opportunity to test the validity of the same.[ii]Due to the non- recognition of the concept of emergency arbitrator in India the trend has been such that parties after obtaining an emergency arbitrator award outside India, enforce the same in India via seeking interim order under Sec 9 of the Arbitration and Conciliation Act.[iii] The Indian legislature consciously omitted the inclusion of the provision of Emergency arbitration in the amended Indian Arbitration and conciliation Act. The non-acceptability of Emergency Arbitration in India has numerous probable reasons behind it. Firstly, Emergency arbitration fails to address the issues of third party i.e. an emergency arbitrator cannot grant measures against a third party. An emergency arbitrator’s jurisdiction is limited to the signatories and cannot be extended beyond. On the contrary, Indian courts, like courts of other jurisdictions, can grant interim relief against third parties under certain circumstances (for example, where such orders are necessary to protect the subject matter of the arbitration).  Secondly, unlike domestic courts, emergency arbitrators cannot pass ex-parteorders as this would go against the purpose of their constitution – both parties won’t be provided with an equal opportunity. Indian courts, like other jurisdictions, can grant ex parte orders in exceptional circumstances. Ex parte orders become necessary in some special circumstances where if the respondent comes to know about the order he might displace the assets or other similar grounds. Thirdly, an award passed by an emergency arbitrator is to be further scrutinized by the actual tribunal and can also be overturned, this however is not the case with the interim orders passed by the domestic courts. Lastly, enforceability of emergency arbitrator’s award is again a controversial question. The scant judgments passed by the Indian Judiciary only have dealt with the enforceability of the awards passed in Singapore or Hong Kong.[iv]India is yet to clarify its position regarding the enforceability of awards in other jurisdictions. Conclusion However, it is undeniable that Emergency arbitration ensures minimum court intervention which is the need of the hour in order to develop India as a pro-arbitration country. It would a progressive step towards making India a global hub for arbitration, like Hong Kong and Singapore. Often emergency arbitration proceedings are hassle free and ensure efficiency, which eventually develop a set standard of behavior for the parties. Experience also shows that parties are more likely to comply and abide by the orders passed by emergency arbitrators. An emergency award if recognized in India will definitely be beneficial for parties if the parties against whom the claim is made have their assets in a different jurisdiction which recognizes emergency awards. For India to become a pro-arbitration country, it is high time

[Mreganka Kukreja]   The author is a 4th year student of SLS, Pune.   Introduction The seat versus venue debate, owing to the simultaneous convergence and polarity of the two theories, has been a matter of long-standing deliberation before the courts. The Indian Judiciary in the case of Union of India v. Hardy Exploration and Production (India) Inc., [1] was once again required to substantiate the relationship between the two concepts. The author discusses the background of the case; the decision of the court and the implications of the pronouncement on the arbitration regime in India. Background The dispute between Hardy Exploration and Production (India) Inc. (hereinafter “Hardy”) and Union of India (hereinafter “India”) arose under the Production Sharing Contract concerning oil and gas exploration rights in India’s territorial waters. In 2006, Hardy claimed that it had discovered natural gas in India’s Southeastern coasts, which, under the contract, entitled it to a five-year appraisal period to ascertain the commercial viability of the extraction. India disagreed on the proposition, claiming that the discovery was of crude oil, which entitled Hardy to an appraisal period of two years. On expiry of the two-year time period, India relinquished Hardy’s rights to the block on the ground that Hardy has failed to submit the commercial viability in a timely manner. This prompted Hardy to initiate arbitration proceedings against India. On February 2, 2013, the arbitrators, sitting in Kuala Lumpur, issued an arbitral award in favour of Hardy. India knocked the doors of Delhi High Court to set aside the said award under S.34 of the Indian Arbitration and Conciliation Act 1996 (hereinafter “the Act”). The Delhi High Court upheld Hardy’s preliminary objection that the court had no jurisdiction over the matter and Part I of the Act is inapplicable, thereby rejecting India’s argument that Kuala Lumpur was merely a physical venue where the arbitration between the parties was concluded. [2] India appealed this decision to the Supreme Court. A two-judge bench of the Supreme Court referred the matter to a larger bench to determine the seat of arbitration and consequently, Indian Court’s jurisdiction in the present case. [3] Therefore, the present case came before a three-judge bench of the Supreme Court. Earlier in the month of June, the United States District Court for Columbia had not considered India’s request to stay the order for enforcement of arbitral award owing to pending proceedings in the Indian Court, however, the court ultimately refused to enforce the arbitral award. [4] Hence, the US District Court did not make any observations on the seat of arbitration or the competency of the Indian courts to hear the matter. Issue When the arbitration agreement specifies the ‘venue’ of arbitration, but does not specify the ‘seat’ of arbitration, then on what basis and principle is the ‘seat’ of arbitration proceedings determined? Judgment [A.] A reflection on the existing jurisprudence and non-application of Sumitomo case  The appellant had relied on the case of Sumitomo Heavy Industries Limited v. ONGC Limited & Ors [5] to argue that in the absence of an expressed seat of arbitration, the proper law of the contract (lex contractus), which in the present case was that of India, must govern the arbitration proceedings. The court observed that discussion in the Sumitomo case pertained to the Arbitration Act, 1940 and Foreign Awards (Recognition and Enforcement) Act, 1961. Further, the developments subsequent to the Bharat Aluminum Company v Kaiser Aluminum Technical Services Inc.[6] has rendered the Sumitomo case irrelevant and therefore, non-applicable in the present case. The court discussed a plethora of judicial pronouncements that had already discussed the relationship between the seat of and venue of arbitration [7] and explained the difference between the terms, pointing that while the former is concerned with the law of arbitration, the latter is merely restricted to a geographical location of the award. Thereafter, the Court reiterated that the arbitration clause of a contract has to be read in a holistic manner, and if there is a mention of venue and additional information pertaining to the venue, then depending upon the information appended, the court could conclude that there is an implied exclusion of Part I of the Act. The applications of these principles in the light of facts of the case were discussed as elaborated below. [B.] Approaches when the parties have not agreed to the juridical seat  The court discussed the course of action when the arbitration agreement does not provide for a seat of arbitration. First, the court said that the seat of arbitration could be inferred on the basis of the venue of the arbitration in conjunction with concomitant factors pointing towards the venue. [8] Second, on reading Art. 20 and Art. 31 of the UNCITRAL Model Law, the court said that in the absence of an expressed seat of arbitration, the arbitral tribunal is competent to ‘determine’ the seat of arbitration. The court discussed the case of Imax Corporation v. E-City Entertainment (India) Pvt. Limited, wherein the arbitration agreement provided that as per the ICC Rules, the arbitral tribunal would decide the place of arbitration, and therefore, Arbitral tribunal’s decision to hold the seat as London was upheld, as opposed to party’s plea for Paris to be the seat. [9] [C.] The constructs of arbitral tribunal’s ‘determination’   The court held that determination by the arbitral tribunal requires a ‘positive act to be done’ and the same must be considered contextually. Reliance was placed on Ashok Leyland Limited and State of T.N. and anr. as per which, the test of determination was laid down as an expressive opinion. [10.] In the present case, there was no adjudication and expression of opinion of the arbitral tribunal and the only act that was done was that the award was given in Kuala Lumpur. The Court held that Indian Courts have jurisdiction and the order passed by the Delhi High Court must therefore be side aside. The court’s position could be summarized in the following words: “The word ‘place’ cannot