Mr. Panda, welcome to the Arbitration Workshop! We appreciate the opportunity to share your perspective with our readers at an exciting moment, where new discernible trends pertaining to arbitration are emerging and particularly when online dispute resolution is finally establishing itself as a credible option in this COVID Era.
Q.1. Before we delve in, may we request you to kindly introduce yourself and tell us about the origins of your interest in the field of International Arbitration?
A.1. I have been working in the litigation field since I started working as a lawyer in the year 2008 after graduating from the first batch of Hidayatullah National Law University, Raipur, Chhattisgarh. Prior to that, I completed my Secondary schooling from DAV Public School, Cuttack, Odisha and High Secondary from Stewart Science College, Cuttack, Odisha. I started my career in the Kolkata Office of the Firm (Khaitan & Co) and extensively practiced in the Original Side jurisdiction of the Calcutta High Court amongst other courts/ forums. This provided me good exposure to trial and final arguments on some very interesting legal issues involved in commercial civil suits, some of which were filed even before my birth. I recollect that arbitration then was considered secondary to litigation and was more popular for the high tea menu of the arbitration venue (mostly a colonial club or a five-star hotel) which lawyers and arbitrators enjoyed at client’s expenses after court hours. We have indeed come a long way since then.
Arbitration emerged as an area of alternate dispute resolution over the second half of the last decade and today, you are unlikely to come across a commercial contract without arbitration being designated as the course for dispute resolution under the contract. I found that arbitration provided space for in depth and detailed argumentation with the undivided attention of the panel to the matter at hand and allowed a lot more leeway for technical argumentation. I found this appealing both from the perspective of my clients as well as from my perspective in terms of development of my advocacy skills of how to approach a matter. Specifically, in the case of international arbitration, I have found that parties are a lot more comfortable resolving dispute through arbitration and are apprehensive of taking part in proceedings before the domestic courts. With my developing interest in arbitration over the years, and work involving international clients, I also began working in the field of international arbitration in addition to commercial litigation and employment, which are my other areas of focus.
Q.2. In recent years, the issue of impartiality of party appointed arbitrators has come into sharp scrutiny, how valid is the criticism in the context of due process in International Arbitration. Could you also elaborate a little upon the thought process and deliberations that take place between Counsels and Parties while selecting an arbitrator in domestic, international arbitrations?
A.2. As it is rightly said, “With great power comes great responsibility.” With arbitrators acting as a substitute to courts and with reduced judicial intervention to arbitral awards, the role of arbitrators has assumed significance like never before. There is a lot at stake for the parties who repose faith and trust on the arbitrators, that they will adjudicate their matters efficiently and will dispense justice fairly, reasonably and in accordance with the rule of law.
Needless to mention, the independence and impartiality are the key hallmarks of an arbitral tribunal. It is also important to keep in mind that an arbitrator’s reputation is of utmost importance for him/ her to be selected by parties to resolve high stake disputes between them. Given the significance that the notion of impartiality carries in the career of an arbitrator, it is unlikely that too many persons shall choose to act in a manner that is biased or impartial. The increasing dependency on arbitration as a means to facilitate the adjudication of commercial disputes, has bestowed upon the courts the responsibility to give sanctity to this institution, by promoting independence and impartiality in the appointment of arbitrators.
Having said this, there have been instances where questions of impartiality of the arbitrators have been raised in the recent past. However, given that the parties to an arbitration have the autonomy to appoint the tribunal, they also have the autonomy to remove an arbitrator if it can conclusively be shown that there is reason for such apprehension.
Another issue I have seen is the inclusion of unilateral clauses in contracts. In this regard, the legislature has notably inserted Schedule V and VII into the Arbitration and Conciliation Act, 1996 (“1996 Act”), via its 2015 Amendment, to restrain the parties having a higher bargaining position, from influencing the adjudication process.
These two Schedules, read with Section 12(5) of the 1996 Act, essentially lay down the qualifications of an arbitrator, viewed from the test of independence and impartiality. In simpler terms, if an arbitrator has an interest in the outcome of dispute, then his appointment will not be permitted in law.
The judiciary has additionally complimented the legislative changes by taking a pro-active approach to promote the legislative intent. I was privileged to have advised and strategized the first case on the subject after the 2015 amendment was the Voestalpine Schienen GmbH v. Delhi Metro Rail Corporation Limited (Voestalpine case) reported in (2017) 4 SCC 665, wherein the Supreme Court ordered deletion of the arbitration clause that vested, in one party, the right to constitute a panel of persons out of which the arbitrator was to be appointed. It further directed the constitution of a broad-based panel, so that no party is given the charge to chart the process. Subsequently, in the case of Perkins Eastman Architects DPC & Anr v. HSCC (India) Ltd. (Perkins) reported in 2019 SCC OnLine SC 1517, the Supreme Court laid down a much welcomed principle, originating from the Voestalpine judgment, by holding that any person, having a substantial interest in the outcome of the dispute, shall have no authority to appoint the sole arbitrator, as it will hamper the rights of the other party to the dispute.
However, a three judge bench of the same court, in the case of Central Organisation for Railway Electrification v. M/S ECI-SPIC-SMO-MCML (JV) reported in 2019 SCC OnLine SC 1635, has yet again opened the debate as regards validity and enforceability of unilateral clauses and appointment of arbitrators, which was answered previously in the Perkins judgment.
In my view, it is high time that such obsolete clauses be done away with if we intend to demonstrate India as an arbitration friendly country.
Q.3. What new technology or method could be introduced to assist arbitration lawyers in their practice especially given that in light of COVID-19 arbitration hearings have moved online?
A.3. In my opinion we already have several available platforms to enable the smooth conduction of arbitrations virtually. For instance, various documents sharing platforms are already available for electronic bundles, like, video-conferencing platforms, ranging from customized hearing solutions offered by some providers (such as Opus, Transperect and Xbundle) to licensed publically available platforms to free-to-use platforms.
Some organisations like the ICC, SCC, JAMS, AAA-ICDR and the LMAA, are using or proposing the use of commercially available services like FaceTime, Skype, Vidyocloud, Microsoft Team, Zoom, while others are offering more bespoke services – examples being SIAC, in collaboration with Maxwell Chamber’s Virtual platform, JAM’s EndisputeTM mediation platform, IDRC’s collaboration with Opus 2.
One of the few impediments I foresee, however, is at certain stages of proceedings such as the recording of evidence. For instance, a party might, during the examination, feign a technical glitch, terminate the call and seek clarification from his/ her lawyer to guide him as to how best to answer the question. Alternatively, a third party may be prompting the witness being questioned, through another device, or by simply being physically outside the line of sight of the camera. In such a situation, despite having the best of technology, like AI proctored system, the entire process will fail. The Supreme Court of India, taking suo motu cognizance of the above issue but not in relation to arbitration particularly, vide its order dated 06 April 2020, directed the suspension of conduction of evidence through online mode.
A possible solution to the same can be envisioned through the appointment of a Local Commission, who could be present to monitor the situation.
All of the above can be explored and are useful for online hearings during COVID-19. Having said this, practically speaking, there is still a lot of reluctance to adopt, adapt and embrace technology amongst arbitrators (particularly adhoc ones) even for conducting procedural and other stages of an arbitration which are comparatively easier to conduct through virtual medium and with the prevalent situation, I am hopeful that slowly but steadily use of technology will help achieve the larger objective of efficient, inexpensive and expeditious adjudication through arbitration.
Q.4. In recent years, Indian arbitral jurisprudence has been progressing towards pro-enforcement. Do you agree with this statement? If yes, could you please share some of your experiences which made you realise the same.
A.4. Yes, I agree with the statement. This has been the recent trend barring a few exceptions here and there. There has been a move to make India a preferred destination for arbitration as is evidenced by the various amendments of the 1996 Act and laudable efforts of the judiciary to minimize interference and, particularly, the adoption of the principles enshrined in the Convention on Recognition and Enforcement of Foreign Arbitral Awards, 1958.
The principle of reduced judicial interference imbibed in the New York Convention has been adopted both in letter and spirit by the Indian Courts now. These limited grounds of objections have also been incorporated in the Act under Section 48.
Under the pre-amendment era, the Courts were sceptical about enforcement of foreign awards and usually preferred delving into merits of the case, consequently, interfering with its findings. This gathered a lot of criticism globally, specifically in terms of the judgment rendered in the case of Phulchand Exports v. OOO Patriot reported in (2011) 10 SCC 300.
Later, steps were taken to slowly venture into a pro-enforcement regime with the Supreme Court’s decision (Bharat Aluminium Co. v. Kaiser Aluminium Technical Service reported in (2016) 4 SCC 126) settling the applicability of Part I to only Indian seated arbitrations. This is a celebrated decision as it cleared the air regarding the limited jurisdiction of Indian Courts with respect to foreign awards under Part II.
Recently, the Supreme Court (Vijay Karia v. Prysmian Cavi E Sistemi Srl, reported in 2020 SCC OnLine SC 177) re-affirmed the pro-enforcement regime by delineating the scope of “due-process” objections that are available to a party under Section 48. It also held that courts have a discretion to enforce a foreign arbitral award even if certain grounds objecting to the same are made out.
However, it is important that the judiciary proceed with its pro-enforcement outlook keeping in mind the sanctity of public policy and certain basic principles of law. International arbitral awards which are contrary to these basic tenets shall cause chaos and pave the way for judicial adventurism.
Even in case of an application for setting aside an arbitral under Section 34 of the 1996 Act, the amendments to Section 34 and Section 36 of the 1996 Act in particular come as a welcome change with the intent of reduced judicial interference on very limited grounds and also doing away with the automatic stay the moment a challenge was filed, as was the case prior to the 2015 Amendment. The requirement of a mandatory application for stay of execution of the arbitral award and consideration and grant thereof subject to imposition of conditions like – pre-deposit of a percentage of the awarded sum is a good deterrent for the judgment debtors filing a challenge against arbitral awards as a matter of course. The courts have also taken a pro-active role where I have personally witnessed the reluctance of courts to interfere with arbitral awards and in some cases, do not even hesitate to dismiss frivolous and vexatious applications even in the admission hearing stage. Therefore, it can safely be stated that we have come a long way since what the position used to be particularly in the pre-2015 Amendment era.
Q.5. In your experience, how prevalent are dissenting awards? Does it help to have a dissenting award in case of a challenge to the majority award?
A.5. Speaking of international commercial arbitration, dissenting opinions are essentially unheard of. The sample size is so negligible that it does not warrant discussion.
They are not very prevalent on the whole. They usually arise when there is a staunchly pro-State or pro-Investor arbitrator on the tribunal and either one of the State or investor has made a decent argument in an otherwise losing case.
Usually, it is only in instances where it is almost impossible to find a middle ground that a decision will be unanimous. However, in fact, in most cases the decision is unanimous because a strong argument cannot be made for the losing side.
Having said this, an award does not become more or less enforceable/ easy to challenge in view of it being a majority award as opposed to a unanimous award. It is a recognized principle that if there are two possible and legally tenable views on an issue, an award cannot be set aside on the basis that the majority award adopted one view, but the Court before which such an award is being challenged may have adopted the other. However in cases of apparent illegalities/ abnormalities in the majority award, it cannot be denied that a majority award does give the Court before which such an award is being challenged, an insight into the rationale of the arbitrator that forms the minority opinion, providing a more complete picture to the deciding Court.
2. As far as domestic arbitration is concerned, an “arbitral award” has always been construed as an award passed by the majority members of an arbitral tribunal (Section 31 of the Act provides for the same). Implying, a dissenting opinion, does not qualify as an award.
In fact, it has been held time and again that a minority award is in the nature of an opinion and is not binding in nature and hence cannot be relied upon in proceedings under Section 34 of the 1996 Act. It is a settled position of law that it is not permissible to look into at the minority award while considering a petition to set aside a majority award. [Chowgule Brothers v. Rashtriya Chemicals & Fertilizers Limited reported in 2006 (3) Arb. LR 457 and Fertilizer Corporation of India Ltd., New Delhi v. I.D.I. Management (U.S.A.) reported in AIR 1984 Delhi 333 (DB) and National Highways Authority of India v. Som Datt Builders- NCC- NEC (JV) reported in 2014 SCC Online Del 2733]
In fact, there are plethora of judgements which affirm the position that the courts while hearing a Section 34 application, can only quash the award and not correct it. Therefore, the position is clear, courts cannot replace the majority award with minority opinion, but they can very well refer to it, while deciding a Section 34 application.
Be that as it may, dissenting opinions can always be relied upon by parties while making their submissions and Courts may refer to the minority opinion while considering the Section 34 application, though the same is not binding as stated above.
Q.6. In our experience as Tribunal Secretaries, we have often witnessed the adversarial nature of arbitration proceedings, which often entail exchanging harsh words between counsel on different sides. How should a relatively less experienced counsel approach such a difficult situation especially when its peer opposing practitioner is a senior in the bar?
A.6. An arbitral proceeding is expected to be a less formal set-up as compared to a typical litigation in a court room. Like the judges regulate the conduct of proceedings in a court, the arbitral tribunal regulate the conduct of arbitration proceedings. Usually, the arbitrators are seasoned professionals in their respective field and do interject to ensure that the proceedings are conducted in a manner by which the counsel do not go personal and are not disrespectful to one another.
I have always believed that if you are well prepared for the matter, you can take on any counsel on merits irrespective of his/ her seniority. In my experience, the arbitral tribunal can see through and gauge your preparation levels and noise levels and drama do not help the cause. However, in case one is faced with such scenarios, one could resort to preliminary discussion on the code of ethics that a lawyer is expected to follow, be it courtroom or an arbitral proceeding.
Moreover, one should, through their demeanour, indicate to the other counsel that cases are won on merits and not by employing profane language.
As a key rule, one should always maintain their calm before the arbitral tribunal as one’s composed attitude is critical in such situations.
Additionally, taking assistance of the arbitral tribunal may be advisable to regulate the conduct of the proceedings. In most cases, harsh words are only aimed at derailing or misleading a counsel and if one can ignore without losing focus, that would be the ideal course to follow.
Q.7. In your experience and opinion does an academic background in arbitration hold any pivotal importance when it comes to arbitration practice?
A.7. Yes, an academic background that is arbitration centric certainly gives one an edge. In my opinion, there are two essential aspects of an arbitration proceeding (similar to court proceedings)- understanding of law and the presentation. The former gets strengthened by having a strong academic background, which ensures that one is thorough with the basics of Arbitration. This background will definitely provide one a head-start in their research work, which would be of great help in urgent matters.
However, I strongly believe that personal interest and temperament of learning and exploring the subject with interest is of greater significance than academic background. Practical experience in handling matters in the original side of courts, particularly the trial/ evidence stage gives much needed exposure for effectively handling arbitration proceedings. This coupled with strong first principles and domain knowledge of substantive laws like – Contract, Specific Relief, etc helps in breaking down complex legal issues involved in voluminous arbitration claims into smaller propositions which are easier to address in pleadings, evidence and arguments.
Q.8. Moving ahead, the issue of costs involved in Arbitration has also come under sharp criticism, with practitioners often complaining that the costs involved in arbitration are extravagant. Do you agree and to what extent? What possible legislative and practical innovations, in your opinion, counter the issue of rising costs?
A.8. The problem of costs is undeniably prevalent but has significantly reduced in the recent times. Costs are fundamentally viewed in terms of the (i) advocate’s and tribunal’s fees (ii) legal costs.
The Legislature has been proactive in addressing the issue at hand and for the same, inserted Schedule IV to the 1996 Act, which provides for the calculation of the arbitrator’s fees. Uncertainty regarding the calculation of cost in the case of a sole arbitration, still prevails despite the amendment. Though in reality, most of the arbitrators in adhoc arbitration give it a go-by and propose their own schedule of fees which is often imposed upon parties in the procedural hearing itself.
However, the imposition of statutory timelines, promotion of institutional arbitration over adhoc arbitration and arbitration as a preferred mode of dispute resolution has brought in a lot of discipline and has ensured reduction of costs to a lot extent. The imposition of costs in favour of the successful party by arbitral tribunals has also been an effective deterrent against parties trying to delay the arbitral process. The large number of sittings, hearings spread over long time span, shorter duration of hearings (rather than having full day hearings for evidence and final argument stage), non-availability of dates of all the members of the tribunal, etc have been addressed to a lot extent and there is a lot more discipline in the arbitrators, counsel and the parties which has resulted in expeditious disposal of matters and in turn, reduced costs.
In case of institutional arbitration, though at the first instance, various heads of expenses look alarming but the professionalism and efficiency with which the proceedings are administered and conducted saves substantial costs in the longer run.
The entire process, despite being expensive, pales in comparison to the costs involved in seemingly eternal litigations. However, to uphold the efficacy of the process, certain measures must be resorted to in order to reduce the costs and the way forward in this regard could be mandating a percentage of arbitration fees in institutional arbitrations. Even though the legislature and judiciary refrain from interfering in private arbitration agreements, measures should be taken to rein in the unfettered discretion of arbitrators in charging fees, and adherence of the same to the model structure proposed in the Act.
This system will ensure that parties are given an opportunity to choose arbitrator that suits their pocket and will go a long way in making the process friendlier and efficient. In fact, parties may also consider going for arbitral tribunals comprising of sole arbitrator rather than three member tribunals which increases the costs significantly. This would also save on time and costs as in case of a three-member arbitral tribunal getting mutually convenient dates for the members of the tribunal becomes an issue which defeats the purpose of arbitration as an alternative remedy.
On a cost benefit analysis between an arbitration (through virtual medium) and a litigation (particularly in the prevalent times with suspended functioning of most courts), in my view the pros outweigh the cons of arbitration and therefore, should be a preferred mode of dispute resolution. In terms of practical innovations, the adoption and use of technology at most stages of the arbitration and promoting hearings through virtual medium would save on substantial costs and expenses usually incurred towards travel, venue and related incidental expenses in case of physical hearings at different cities/ countries.
Q.9. Based on your experiences, do you have any recommendations for parties to consider when drafting an arbitration clause to include in their contract?
A.9. Essential Check-list for drafting an arbitration clause:
Must convey the intention to arbitrate;
Must specify “Seat” and “Place” of arbitration. It should be, explicitly made clear that, the same is non-negotiable;
Must contain the manner in which proceedings are to be carried out – institutional or adhoc – in the event that the parties opt for institutional arbitration, it is important to identify the arbitral institution;
Must not contain unilateral clauses for appointment of arbitrators
Must specifically set out the number of arbitrators and the procedure for appointment of the tribunal (in cases of adhoc arbitration);
Must provide for language to be adopted for proceedings;
In case of international arbitration, it must provide the law which would govern the proceedings.
Q.10. What are the three steps in your opinion that one should undertake to start a career in international arbitration? Further, what are the three steps that one should undertake to develop an arbitration practitioner’s profile?
A.10. To be able to start a career in international arbitration, following steps must be kept in mind:
a) Be a scholar of international law, as much of international arbitration involves expertise in Private International Law. Specifically, for commercial arbitration, a person should be well attuned to Private International Law and Conflict of Laws Rules;
b) International arbitration requires having the ability to network, especially with people outside of your country and having a culture very different from yours. Being able to deal with that becomes important;
c) If one plans to work in investment arbitration in India specifically, it is important to understand that the government is not adept at knowledge about Bilateral Investment Treaties and the law surrounding it. Hence, one will need to know how to manage expectations and spoon feed them every step of the way.
I believe that the latter part of the question has already been covered earlier. Just to sum it, careful observation of the under noted will definitely help one build a rich arbitration practitioner’s profile:
a) One should first try and practice in the original side of the courts and then delve into arbitration as this will provide them great insights to the process of trial and final arguments;
b) The above coupled with good domain knowledge on the first principles is a pre-requisite to become an intellectual practitioner. Importantly, having great command over Procedural laws and the nitty-gritties of contractual relations, will definitely help one, step-up their profile.
c) The most crucial aspect which often gets overlooked – the adoption of a meticulous approach, must always be observed. In order to be a great practitioner, one should always pay attention to each and every detail; which can be achieved by reading voraciously. I have seen that matters which involve bulky correspondences are often lost owing to adoption of a non-meticulous approach, therefore adopting an attention-based meticulous approach becomes important, as, it is a game-changer.
The Editorial Team at the Arbitration Workshop would like to thank Mr. Panda for taking out time from his busy schedule and for sharing his perspectives with us!