top of page

Search Results

157 items found for ""

  • Modernizing Arbitration in India: Integrating AI Responsibly

    *Aparna Tiwari Introduction Arbitration has emerged as a vital pillar in the modern landscape of dispute resolution, offering a sophisticated and effective alternative to litigation for resolving commercial disputes. With overburdened court systems and increasingly complex commercial disagreements, arbitration provides an efficient and fair means of achieving resolutions, ultimately lessening the burden on courts and fostering a more efficient business environment.  Justice B.N. Agrawal of the Supreme Court of India, aptly captured the essence of arbitration, that it is not only a speedy but also an inexpensive and efficacious mode of resolving disputes. [1] As artificial intelligence (AI) continues to revolutionize industries, its influence is reaching arbitration as well. The Supreme Court of India has been using the Supreme Court Vidhik Anuvaad Software ( SUVAS ), an AI-powered translation tool, to translate English legal documents into nine local languages and vice versa. SUVAS has proven to be an efficient tool in the Court's efforts to introduce AI into the legal domain and increase access to justice by making judgments available in regional languages. AI has the potential to streamline processes such as document review and analysis, contract analysis, and more. In India, while NITI Aayog's ODR report (Designing the Future of Dispute Resolution (the ODR Policy Plan for India) 2021)  acknowledges AI's potential, clear regulations for its use in arbitration are still lacking. This highlights the need for a balanced approach that harnesses AI's benefits while addressing legal and ethical concerns.   The Utilization of AI in the Arbitration Process The integration of Artificial Intelligence (AI) in the arbitral process represents a transformative leap, enhancing efficiency and accuracy through automated document review, predictive analytics, and online dispute resolution platforms. This confluence of technology and law has the potential to ensure more informed and objective decision-making. However, the current arbitral process can be influenced by human biases, while AI systems are not infallible and require transparency, fairness, and accountability measures. Successful integration of AI in arbitration necessitates clear regulations and guidelines, as well as a shared understanding among stakeholders. By harnessing the power of AI while addressing its challenges, the arbitration community can strive for more informed, fair, and effective dispute resolution. In this analysis, we will delve into these applications in detail to gain a better outlook and understanding of how AI is reshaping the arbitration landscape. AI tools like Relativity and Brainspace can streamline document review and production by automating the process, reducing the time and effort required for manual review and analysis. Additionally, AI-powered tools such as Lex Machina and Solomonic analyze can analyze vast amounts of historical arbitration data to predict potential case outcomes, optimize arbitrator selection, and provide accurate time and cost estimations. These advancements can help parties make more informed decisions, reduce uncertainty, and improve the overall efficiency and fairness of the arbitration process. AI can also assist in drafting arbitration awards by generating preliminary drafts based on the evidence and legal arguments presented. Tools like LexPredict use natural language processing (NLP) to summarize case facts, extract relevant legal principles, and suggest wording for the awards. This can save arbitrators significant time and ensure consistency in award drafting. AI can further enhance compliance and due diligence by ensuring adherence to regulations and identifying potential conflicts of interest. In data security, AI detects and prevents breaches, safeguarding sensitive information. Additionally, decision support systems analyze evidence and identify patterns to aid arbitrators. Natural language processing (NLP) improves document summarization and written communication, while virtual arbitrators assist in negotiations and fact-finding. The use of AI in arbitration can also reduce the risk of human error , which is a significant concern in the legal profession. AI can automate tedious tasks like analyzing vast amounts of documents, contracts, and other legal materials, reducing the likelihood of errors and improving the overall accuracy of the arbitration process. Moreover, AI can assist in the selection of arbitrators by analyzing their past decisions, tendencies, and expertise. This can help parties make more informed decisions about who to appoint as arbitrators, ensuring that the arbitration process is fair and impartial. The integration of AI in arbitration also presents opportunities for dispute prevention . AI can be used for contract management and execution, mapping out potential risks, and even flagging contract breaches. This can help parties avoid or mitigate delay and disruption claims, reducing the need for arbitration in the first place. The adoption of AI in arbitration marks a pivotal moment, revolutionizing the field by merging cutting-edge technology with established legal practices to deliver more enlightened and impartial outcomes. As the arbitration community embraces this transformative shift, it stands poised to navigate the challenges and capitalize on the opportunities presented by AI, ultimately ushering in a new era of enhanced efficiency, fairness, and effectiveness in dispute resolution. Legal and Ethical Challenges AI assisted arbitration introduces significant legal and ethical challenges that must be addressed to safeguard the fairness and integrity of the arbitration process. Algorithmic bias, the opaque nature of AI decision-making, and the potential displacement of human arbitrators amongst others are some of the critical concerns that require careful consideration. This section explores the above- mentioned challenges in depth, drawing on the Silicon Valley Arbitration & Mediation Center ( SVAMC ) and providing concrete examples to illustrate the complexities involved. Algorithmic Bias in AI-Driven Arbitration: - Significant concerns regarding algorithmic bias from the training data used to develop these systems. This data can embed existing biases prevalent in historical arbitration decisions, perpetuating discrimination based on factors such as gender, race, or nationality. AI models, when trained on past arbitration data, may inherit and amplify these biases, reflecting historical disparities in arbitrator selections, decision-making patterns, and outcomes. SVAMC Guidelines caution against the risk of AI tools inadvertently perpetuating stereotypes, highlighting concerns of characterizing arbitrators as "male, pale, and stale." For instance, if historical data reveals a trend of favorable rulings towards certain demographics, AI systems may learn and replicate these patterns, thus disadvantaging underrepresented groups. Parties and arbitrators must critically assess AI tools to identify and mitigate such biases, ensuring that AI-driven arbitration remains fair and impartial. This entails regular audits, bias detection mechanisms, and a diverse dataset to train AI models. Transparency and Explainability in AI-Driven Arbitration: - The opaque nature of many AI algorithms, often described as " black boxes ," presents significant challenges in maintaining transparency and explainability in arbitration. This opacity can obscure the reasoning behind AI-generated decisions, complicating efforts to evaluate the fairness and validity of outcomes. A lack of transparency threatens the fundamental principles of due process in arbitration, such as the right to be heard and the ability to contest decisions. For example, in an arbitration model where AI provides award recommendations but the final decision rests with a human arbitrator but the ai award is without a clear rationale, parties may find it challenging to understand the decision's basis or to identify potential errors. The SVAMC AI Guidelines emphasize the necessity for "appropriate disclosure of the use of AI and the ability to understand and assess the AI tool's decision-making process." Ensuring transparency involves not only disclosing the AI's role in decision-making but also providing comprehensible explanations of its processes and outcomes. This can be achieved through techniques like explainable AI (XAI), which aims to make AI's operations more interpretable to humans. Human Arbitrator Displacement in AI-Driven Arbitration: - The increasing reliance on AI in arbitration raises concerns about the potential displacement of human arbitrators. While AI can enhance efficiency and accuracy in tasks such as document review and preliminary analysis, it should not supplant human judgment and decision-making. Preserving human oversight is crucial to maintaining the integrity and fairness of the arbitration process. The SVAMC AI Guidelines advocate that AI should not be used as the sole basis for decision-making without human input or without assessing the AI tool's selection critically and independently. This principle underscores the importance of human arbitrators' ability to override AI-generated decisions when necessary. For example, in complex cases involving nuanced legal interpretation or ethical considerations, human arbitrators are indispensable for ensuring that decisions are just and equitable. Addressing these challenges is crucial to safeguarding the fairness and integrity of the arbitration process, ensuring that AI tools are used responsibly and justly in dispute resolution. The Regulatory Gap The Arbitration and Conciliation Act 1996, (“Arbitration Act”), which serves as the foundational legislation for arbitration in India, does not specifically address the utilization of AI technologies in arbitration processes. This omission creates uncertainty regarding the application and enforcement of AI-assisted arbitral awards under current legal provisions. Despite the efforts by India's apex public policy think tank, NITI Aayog, to release guidelines for the responsible development and deployment of AI, these guidelines lack the force of law and do not constitute binding regulations. Consequently, there exists a legislative void wherein AI-specific regulatory measures, including those governing arbitration, are yet to be formalized. This regulatory gap contributes to potential legal ambiguities and challenges, particularly concerning issues such as algorithmic bias, transparency in decision-making processes, and the appropriate role of human arbitrators in AI-assisted arbitrators as discussed above. The evolving regulatory landscape further exacerbates these challenges. While the NITI Aayog provides guidance, the absence of a comprehensive legal framework tailored to AI in arbitration leaves stakeholders vulnerable to inconsistencies and uncertainties due to inconsistent rules across countries.  The current legal framework's limitations become evident in scenarios involving cross-jurisdictional issues or interactions with other regulatory regimes, such as the Foreign Exchange Management Act (FEMA), which may impact the enforceability of arbitral awards influenced by AI technologies. Even helpful guidance isn't enough. Existing arbitration laws are outdated for AI, creating loopholes. Updating them and balancing strictness (like EU fines) with encouraging innovation are big hurdles. Regulatory competition between countries will make things even more confusing. Until clear and consistent regulations are established, AI's potential in arbitration will be limited. This requires significant effort from governments and institutions to bridge the gap between current laws and the realities of AI. Along with India, jurisdictions worldwide are in a regulatory tug-of-war with AI in arbitration. The EU's AI Act represents a firm stance with strict compliance measures, while the US takes a wait-and-see approach, leaving it to individual states. Meanwhile, UNCITRAL attempts to forge a global path with guidelines. Arbitral institutions, caught in the crossfire, cautiously leverage AI for tasks but shy away from AI adjudication due to enforceability concerns and potential conflicts with existing laws. Bridging the Regulatory Gap To navigate this complex landscape, a comprehensive legal framework is essential. This framework must address the validation and oversight of AI algorithms, ensure robust data protection, and mitigate algorithmic biases. By drawing on global best practices such as the EU GDPR and AI Act, and implementing stringent regulations and human oversight, India can establish a responsible and ethical approach to AI deployment in arbitration. Amendment of Arbitration Laws: - Amend the Arbitration Act, to explicitly incorporate provisions addressing the validation and oversight of AI algorithms used in arbitration. This includes mandates for transparency, explainability, and mechanisms for maintaining human oversight throughout the arbitral process. Regulate Algorithmic Bias and Fairness: - India should adopt regulations that mandate the testing of AI systems for biases, ensuring fairness and impartiality in arbitration outcomes. This can be achieved by integrating provisions similar to AAA Guidelines (AAA Guidelines for the Use of Artificial Intelligence in Arbitration, 2024), Section 3, and the SIAC AI Guidelines (Singapore International Arbitration Centre AI Guidelines), Guideline 3, which focus on addressing algorithmic bias in AI-assisted arbitration. They emphasize the importance of testing AI systems to identify and mitigate biases that could lead to unfair outcomes. Thereby upholding the principles of justice and equality in legal proceedings. Ensure Transparency and Explainability: - India should implement regulations that mandate transparency and explainability in AI-assisted arbitration, akin to the EU AI Act (Regulation (EU) 2021/XXX on Artificial Intelligence), Article 52, and the AAA Guidelines (AAA Guidelines for the Use of Artificial Intelligence in Arbitration, 2024), Section 5. This involves disclosing the use of AI in arbitration and ensuring that the decision-making process of AI systems is understandable to all parties involved. Such transparency is essential for procedural fairness and helps build trust in AI-driven arbitration. Maintain Human Oversight and Accountability: - India should emphasize human oversight in AI-assisted arbitration by adopting regulations similar to those in the Section 7 of AAA Guidelines , Guideline 7 of the   SIAC AI Guidelines (Singapore International Arbitration Centre AI Guidelines), Guideline 7. This involves ensuring that human arbitrators have the ultimate authority to intervene in AI-generated decisions. Additionally, adopting provisions from the EU AI Act (Regulation (EU) 2021/XXX on Artificial Intelligence), Article 9, which emphasize human oversight in high-risk AI systems, can further enhance accountability and safeguard the integrity of arbitration proceedings. Independent Review Mechanism: India is advised to create a special review system for AI-assisted arbitration. This independent body would have AI, legal, and ethics experts to assess fairness, transparency, and compliance with ethical guidelines. It could recommend remedies like re-hearings or award annulment, with its decisions being binding. This differs from existing mechanisms by focusing on AI, having specialized members, being independent, having stronger remedial powers, and prioritizing transparency, aligning with recommendations from the SVAMC guidelines . This mechanism would provide an essential layer of accountability and ensure that decisions made with AI assistance are fair and impartial. India can unlock the benefits of AI-powered arbitration by building a robust legal framework. This framework should prioritize responsible AI use through validation, data protection, and bias mitigation. Learning from global regulations like the EU's GDPR and AI Act, India can establish ethical guidelines for AI in arbitration. This can be achieved by amending existing laws, regulating bias, ensuring transparency, maintaining human oversight, and creating a specialized review body. These steps will ensure AI is used fairly and ethically, fostering trust and innovation in India's arbitration landscape. Conclusion The integration of artificial intelligence (AI) into arbitration processes holds the promise of significantly enhancing efficiency, expediency, and fairness in dispute resolution, thereby fulfilling the core objective of arbitration: to resolve disputes swiftly and effectively. By leveraging AI tools for document review, case prediction, and arbitrator selection, arbitration can streamline procedures and reduce the time and resources traditionally required. However, these advancements must be accompanied by robust regulatory frameworks that ensure transparency, mitigate algorithmic biases, and maintain human oversight. Drawing on global best practices, India has the opportunity to enact tailored legislation that not only facilitates responsible AI deployment in arbitration but also fosters confidence in the integrity of arbitration outcomes. Such proactive measures will not only modernize the arbitration landscape but also uphold justice by providing quicker and more efficient resolutions to disputes. *4th year law student at Dr. Ram Manohar Lohiya National Law University, Lucknow. [1] Bharat Aluminium Company vs Kaiser Aluminum Technical Services Inc, (2012) 9 SCC 552.

  • Kompetenz-Kompetenz as the Saviour? Empowering Tribunals against Hybrid Clauses

    Shambhavi & Satyam* I. INTRODUCTION Party autonomy is one of the basic tenets of arbitration as an Alternate Dispute Resolution (“ ADR ”) mechanism. It fundamentally means the freedom of contract .  Along with the choice of the applicable law, it also incorporates the liberty to choose the presiding tribunal, the place, the language, and the procedure of the arbitration. This is to facilitate the smooth functioning of the tribunal and expedite the dispute resolution process.  The principle of party autonomy has its advantages and disadvantages. A lack of legal literacy among the parties and their appointed draftsmen might lead to the drafting of pathological arbitration clauses, which can lead to chaos and prolong arbitration proceedings. Pathological clauses are those with inherent defects that can impede the smooth advancement of arbitration proceedings .   They create an unnecessary burden for courts because they provide an easy avenue for appeals and challenges to arbitral awards and proceedings. However, pathology in the arbitration clause or agreement, will not render it invalid by itself. Courts tend to prefer an interpretation in favor of the arbitration proceedings. There have been many instances where courts have had a reconciliatory approach toward the interpretation of such inconsistent arbitration clauses. Examples would include the case of  Fiona Trust & Holding Corp v Privalov , which established the Fiona Trust doctrine, that has been used to construct conflicting arbitration clauses, based on the presumption that rational parties would want their disputes to be adjudicated under a single forum. This doctrine has been used to harmonize inconsistencies within dispute resolution clauses in cases such as Melford Capital Partners (Holdings) LLP l v Wingfield Digby , directing the parties to approach an arbitral tribunal. One kind of pathology that arises is “hybrid arbitration clauses (institutional)”. Hybrid institutional arbitration clauses are situations in which parties choose one arbitral institution to administer a case but under the rules of another arbitral institution . An example of the same would be– “The arbitration proceedings will be carried under the supervision of the Delhi Arbitration Centre, by the rules of the Singapore International Arbitration Centre (“ SIAC ”).” Hybrid clauses end up creating an adverse situation for the administering institution, wherein they have to abide by the rules of a different institution, for which they lack adequate machinery. As stated earlier, in most cases, courts have upheld the parties’ intent to arbitrate. Notable examples would be -  Insigma Technology Co Ltd. v. Alstom Technology Ltd ., Flashbird v. Compagnie de Sécurité Privée et Industrielle , and Value Advisory Services v. ZTE Corp , which will be discussed in the upcoming section. Although words of such clauses are constructed liberally to give way to arbitration, we cannot turn a blind eye to the problems caused in terms of certainty and litigiousness of the proceedings when they are implemented. While such clauses can be practically implemented, it has been held that there are manifest complications and disadvantages in doing so. Henceforth, the authors propose that the doctrine of kompetenz-kompetenz can mitigate the anomalous nature of such clauses and can benefit both the court and the arbitral institution, as it would allow the tribunal itself to decide which rules are best applicable to the proceedings. The powers of the arbitral tribunal go beyond deciding upon its jurisdiction . The Supreme Court in India has determined that when the existence of an arbitration agreement is not disputed, all jurisdictional issues are to be left under the tribunal’s authority. The article begins with the examination of landmark cases concerning hybrid arbitration clauses, and the ratio which has been upheld by courts of different jurisdictions ( Section II ). Thereafter, the authors will analyze the difficulties caused by such clauses, including the application of the doctrine of kompetenz-kompetenz ( Section III ), and end with concluding remarks ( Section IV ). The aim is to show how the doctrine of kompetenz-kompetenz can prove itself as an effective solution to the problems caused by such clauses and reduce the burden of courts and institutions. II. PRECEDENTIAL ASPECT OF HYBRID ARBITRATION CLAUSES The evolution of arbitral jurisprudence has given rise to jurisdictional disputes premised on hybrid arbitration clauses. Despite the obstacles arising in its arbitrability, courts and Tribunals have focused more on the operable and enforceable parts of the same. [i] The authors in this section aim to elaborate on the same with the help of domestic and international case-laws. The case of Insigma Technology Co. Ltd v. Alstom Technology Ltd (“ Insigma ”), followed a dispute between Insigma and Alstom Technologies that led to an objection to the arbitration clause in their agreement. Insigma challenged that the arbitration should have been filed with the International Chamber of Commerce (“ ICC ”) instead of SIAC. The court found that the parties had agreed to ad hoc arbitration by choosing a mix of regulations, and SIAC was able to supply the necessary actors to make the ICC rules workable. The case highlights the challenges of hybrid arbitration clauses, where parties try to benefit from the cost differences between different arbitration institutions, but end up spending more on jurisdictional disputes [ii] . The court's decision upholds the parties' agreement and the ability of SIAC to administer the arbitration under the ICC rules. In the case of Russian Federation v. I.M Badprim, SRL (“ Svea Appeal ”), Badprim, a Moldovan company, and the Russian Federation (Customs Office) agreed on the construction of a border crossing post. The arbitration clause designated the Arbitration Institute of the Stockholm Chamber of Commerce (“ SCC ”) to administer disputes under ICC rules. The Russian Federation contested jurisdiction due to the SCC's inability to fully comply with ICC rules. The Svea Court of Appeal upheld the clause, emphasizing the intent to resolve disputes at the SCC and the SCC's adaptation of ICC rules. The court prioritized dispute resolution over technicalities, demonstrating a pragmatic approach to enforceability and operability despite partial invalidity.  In the case of Top Gains Minerals Macao Commercial Offshore Limited v. TL Resources Pte Ltd (“ Top Gains ”), t he Hong Kong court upheld the kompetenz-kompetenz principle in a dispute between Top Gains and TL Resources over a hybrid arbitration clause in their iron ore supply agreement. Despite the defendant's argument that the clause's reference to SIAC administration under ICC rules deprived the arbitral panel of jurisdiction, the court ruled that it was the tribunal, and not the court, that must determine the jurisdiction. The court deferred to the ICC's decision to register the case and left the final jurisdictional determination to the arbitral tribunal, in line with the kompetenz-kompetenz principle.  In one of the recent cases (“ HCCI ”), the Budapest Metropolitan Court upheld an arbitral tribunal's decision to enforce a pathological arbitration clause that referred disputes to the HCCI Arbitration Court while specifying the application of the ICC Rules. Despite the respondents' challenge that the two institutions could not coherently administer the proceedings, the court reasoned that the parties' clear intent to arbitrate should be preserved by severing the invalid portions and enforcing the remainder to the extent possible, even when the clause contains technical defects. This case exemplifies the courts' pragmatic approach towards interpreting pathological arbitration clauses, prioritizing the parties' agreement to arbitrate over the clause's technical flaws. In Flashbird v. Compagnie de Sécurité Privée et Industrielle (“ Flashbird ”) , The Supreme Court of Mauritius dismissed an appeal by Flashbird against an arbitral award that was raised on the premise of the appointment of arbitrators under ICC Rules and that arbitral procedure has not been followed according to the agreement. The court and the Privy Council upon dismissing the appeal, discussed different spheres of the drafting of hybrid clauses. Their observations were that the major obstacles are jurisdictional disputes and applicability of laws. The privy council was not supposed to rule on jurisdiction but they suggested the draftsmen to avoid any contradiction that may arise like in this case regarding the appointment of arbitrators under ICC rules. The jurisprudence in India has been arbitration-friendly. One such case was   Value Advisory Services v. ZTE Corporation (“ Value Advisory ”) . There was an agreement that provided for the settlement of disputes under ICC rules at SIAC. This could not happen because SIAC declined the request stating it would not be able to administer an arbitration under ICC rules. ZTE challenged the arbitration administered under the Secretariat of the ICC Court (ICC Secretariat). The court following the doctrine of severability upheld the clause and its arbitrability, and observed that a contract cannot completely be rendered void if one part is impossible to perform rather, the impossible part shall be severed from the main contract, and the rest of it shall be enforced. The arbitration friendly approach of enforcing hybrid clauses was also observed in the case of Centrotrade Minerals and Metals Inc. v. Hindustan Copper  Ltd . The case involved a contractual dispute over copper concentrate supply. The contract included a two-tier arbitration mechanism. Two arbitral awards were passed, both mutually destructive. The Supreme Court of India enforced the second award, bringing an end to the long-standing litigation. The Court held that the respondent did not participate in the arbitral proceedings and the foreign award must be enforced under the Arbitration and Conciliation Act, 1996. It also observed that the court does not prevent a two-tier arbitration clause and upheld the arbitrability of such a clause. The kompetenz-kompetenz principle has been validated by our Supreme Court in Uttarakhand Purv Sainik Kalyan Ltd. V. Northern Coal Field Ltd . The Division Bench emphasized on the role of tribunals in deciding their jurisdiction and upheld that the autonomy granted to them under the principle of  kompetenz-kompetenz should be rightfully followed. It observed that the principle aims at minimizing the judicial intervention in the arbitration process which is the exact reason why the ADR mechanism came into existence. III. TRIBUNAL AUTHORITY AND HYBRID CLAUSES – AN ANALYSIS The term ‘pathological clauses’ was coined by Frédéric Eisemann , Secretary General of the ICC Court of Arbitration and a law theorist. Eisenmann has set out four elements essential for an arbitration clause. [iii] These elements are – “(1) The first, which is common to all agreements, is to produce mandatory consequences for the parties, (2) The second, is to exclude the intervention of state courts in the settlement of the disputes, at least before the issuance of the award, (3) The third, is to give powers to the arbitrators to resolve the disputes likely to arise between the parties, (4) The fourth, is to permit the putting in place of a procedure leading under the best conditions of efficiency and rapidity to the rendering of an award that is susceptible of judicial enforcement.” Hybrid arbitration clauses are antithetical to the second and fourth elements. A perusal of the preceding section of the article shows how they have warranted interference from courts multiple times, even before the passage of the arbitral award. They create disputes related to jurisdiction, and end up being detrimental to the efficacy and rapidity of the entire proceeding. While some might argue that hybrid arbitration clauses can prove accommodative of the parties’ intention to include multiple institutional jurisdictions, it is very apparent that the costs of incorporating hybrid clauses are more than any potential benefits. [iv] The question that arises is whether the tenet of party autonomy can supersede the efficacy of arbitration, as well as the set rules in place by these institutions. Implementing the rules of a different arbitration institution translates to increased costs, ultimately borne by the parties. On top of this, there is a multiplicity of suits due to jurisdiction-related disputes, which again aggravates the costs incurred. The ICC Rules were amended post Insigma case, which states that only ICC Courts are vested with the power to conduct arbitrations by ICC Rules and that the parties’ agreement to arbitrate under ICC Rules amounts to their acceptance of ICC being the administrating body. [v] Nevertheless, there have been multiple instances of a contradictory application in arbitration agreements, as seen in the Svea Appeal, Top Gains, and Flashbird cases. The general trend with judicial decisions is to not disrupt arbitration proceedings. Earlier, SIAC followed the trend of preferring party autonomy over everything and has administered arbitrations under ICC Rules, as was seen in Insigma and another case of HKL v Rizq International. However, in the Indian case of Value Advisory Services , we saw that it was the SIAC’s refusal to tend to arbitration under foreign rules that compelled the parties to approach the ICC. The Delhi HC upheld the tribunal’s mandate by applying the doctrine of severability. This shows that institutions nowadays are refusing to administer hybrid arbitrations. It is the arbitral tribunal that has the ultimate jurisdiction over the case , as per the principle of kompetenz-kompetenz. It states that an arbitral tribunal is competent to decide upon its jurisdiction. This, in turn, empowers the tribunal to decide upon which rules it considers fit to abide by. There are examples of cases where the tribunal’s mandate, whether in favor of a hybrid arbitration or against it, has been upheld by the courts. In the recent HCCI and Flashbird cases, the tribunal’s decision to accommodate foreign rules within its framework to serve the parties’ interests, was upheld. Meanwhile, in the Top Gains case, the High Court of Hong Kong upheld the ICC tribunal’s decision to administer the arbitration without applying SIAC rules, following the principle of kompetenz-kompetenz. This very well shows the court’s deference towards this doctrine. Neither SIAC nor ICC was compelled to face the dilemma of applying the rules of a foreign institution. In the Svea Appeal case, the hybrid arbitration was allowed, because the institution of SCC agreed to do so. The SCC Board of Directors wrongly observed that the institution has the jurisdiction to “resolve the dispute”. They conveniently ignored that the tribunal is vested with such power and not the institution.  This stand of the SCC Board has been subject to criticism for invalidating one of the basic jurisprudential doctrines of arbitration. The widely accepted principle better known as competence-competence, is incorporated under Section 16 of the Arbitration and Conciliation Act 1996. The principle of minimum judicial interference has been affirmed in cases like Bhaven Construction v. Executive Engineer   and Deep Industries v. ONGC .   The Apex Court has also held that court interference should just be limited to ascertaining the existence of an arbitration agreement. This would automatically imply that the rest of the jurisdictional disputes are to be decided by the arbitral tribunal.  Party autonomy allows the parties to exercise their discretion in a wide manner, and decide everything from the seat of arbitration to applicable laws . The intention of parties is prime, and the same manifested through contractual provisions would prevail. Yet, if the same autonomy acts as an obstacle to the smoothness and efficiency of the arbitration proceedings, the tribunal’s powers will have to step in. While we have already observed the courts’ endorsement of the tribunal mandate, it would also be practicable to apply the same strategy when a case is brought up before courts at the referral stage of the proceedings. Instead of leaving this question to the convenience of the institutions, or judicial interpretation, letting the tribunal decide might help provide a definite solution as to resolving the anomaly caused by hybrid arbitration clauses. Once a dispute has been referred to a certain institution, the tribunal constituted by such institution can very well decide. Whenever the courts have upheld the performance of hybrid arbitration agreements, the application of unfamiliar rules became the tribunal’s burden. Application of kompetenz-kompetenz would sustain the proceedings’ independence from conventional dispute resolution fora. A more practical solution to the problems created by hybrid arbitration agreements would simply be better drafting,drafting of arbitration clauses needs to be viewed from the perspective of the parties who want an easy and amicable settlement. The clarity in the words should be given paramount importance to eliminate any chances of misinterpretation of laws applicable and jurisdiction in such clauses. The Clause should precisely mention the institution that will arbitrate the dispute and the applicable laws. If proper guidelines are followed and precautions are incorporated, it will have a two-fold impact - one would be streamlining the arbitration process, and the other would be non-intervention of court which would turn save time and money for the parties in dispute. Parties and their draftsmen should refrain from getting adventurous with their arbitration agreements. They should properly deliberate upon the suitable forum for adjudication of disputes and attempt to stick to such applicable laws that would be more suitable to these forums. A good draftsman or counsel with adequate experience in arbitration can prove very helpful. When it comes to using a format for drafting the clause or agreement, it would be prudent to stick to model or standard arbitration clause formats. Major arbitration institutions like the ICC, SIAC, LCIA, etc have their standard clauses which can be used if the parties intend to submit their dispute under these respective forums.   In any event, one has to be prepared for scenarios where hybrid clauses are agreed upon, thus resulting in questions regarding jurisdiction.  Amendment of ICC Rules did not help mitigate the frequency of this pathology in arbitration agreements. Therefore, it is better to leave the question to tribunals, while simultaneously discouraging such pathology in arbitration clauses. IV.  CONCLUSION Hybrid arbitration clauses have brought up a plethora of jurisdictional disputes in recent times. Although the disputes are administered and are enforceable it has become a drawn-out process because oftentimes litigation is preferred to reach a focal point in such disputes. The long-drawn-out procedure of law is always antithetical to the core idea of alternative dispute resolution. Hence, this sparks a conversation on the doctrine of kompetenz-kompetenz which means the tribunal is competent on its own to decide the jurisdiction. The above principle has been much talked about and the same has been elaborated upon through case laws. This principle should be applied universally and can be included in this aspect. Hybrid arbitration clauses have a lot of implications such as financial loss, delay caused, court interference, etc. Hybrid arbitration clauses should be avoided at all costs as they create a deadlock on the question of jurisdiction. As suggested previously, it all comes down to the drafting of arbitration clauses. It would be helpful to have a universal model guideline on the framing of arbitration clauses. Institution-specific guidelines and model clauses should be used by the framers to their advantage. Framers of commercial agreements must have this inherent intent to facilitate arbitration, and properly frame arbitration clauses with clarity on the applicable rules and administering institution. *Shambhavi & Satyam are law students at Chanakya National Law University, Patna. [i] Insigma Technologies V Alstom Technology Ltd [2009] 1 SLR 23. [ii] Jennifer Kirby, 'Insigma Technology Co. Ltd v. Alstom Technology Ltd: SIAC Can Administer Cases under the ICC Rules?!?', in William W. Park (ed), Arbitration International (OUP 2009). [iii] Frédéric Eisemann, La clause d’arbitrage Pathologique , in Commercial Arbitration Essays in Memoriam Eugenio Minoli (Torino: Unione Tipografico-editrice Torinese 1974). [iv] Jennifer Kirby, Insigma Technology Co. Ltd v. Alstom Technology Ltd: SIAC Can Administer Cases under the ICC Rules?!? ,  25 (3) OUP 319, (2009). [v] ICC Rules of Arbitration – art. 6(2) (2021).

  • Going beyond the test of 'Cause Of Arbitration' for Limitation Period For a Section 11 (6) Application: SC Settles the Dust?

    Nidhisha Garg* Background The question of limitation for an application under Section 11(6) of the Arbitration and Conciliation Act, 1996 ('Act') for appointment of an arbitrator has been the subject of much deliberation by the High Courts and the Supreme Court alike. The Act does not prescribe any time period for filing an application under Section 11. In view of this legislative vacuum, the Courts have time and again held that by virtue of Section 43 of the Act, Article 137 of the Schedule to the Limitation Act, 1963 shall govern the limitation for a Section 11 application. In accordance with Article 137 of the Limitation Act, 1963 such an application under Section 11(6) of the Act must be filed within a period of 3 years from 'when the right to apply accrues'. However, the question of when this right to apply can be said to have conclusively accrued has notoriously been the subject of much controversy. In this regard, the present article shall proceed to discuss the jurisprudence on how the courts have read the limitation period of three (3) years to commence from the expiry of 30 days from the service of notice under Section 21 of the Act. This shall be followed by a detailed analysis of the ratio of the Supreme Court in the recent judgment of Arif Azim Company Limited v. Aptech Limited,  including an analysis of whether the said judgment has disturbed the otherwise settled law on the point. Towards the conclusion, along with suggestions for the legislature to initiate steps for a pressing need for an amendment to the Act. Section 11(5) of the Act provides that an application for appointment of an arbitrator may be made upon the expiry of 30 days from the receipt of a request made in this regard by one party. Further, Section 21 of the Act, provides that an arbitration proceeding shall be said to have commenced on the date of receipt of such request/notice by the other party. In view of the above provisions, the Supreme Court in Bharat Sanchar Nigam Limited v. Nortel Networks India Private Limited ('BSNL case'), observed that limitation for filing an application under Section 11 would arise upon the failure to make the appointment of the arbitrator within a period of 30 days from issuance of the notice invoking arbitration. The Supreme Court also sounded off with a word of caution that limitation for a Section 11 application must not be confused with the limitation applicable to the substantive claims made in the underlying commercial contract as the latter are governed by various provisions of the Limitation Act, 1963 and are necessarily distinct from limitation for filing an application for appointment of an arbitrator. However, the Supreme Court has now, in a judgment delivered on March 1, 2024, in Arif Azim Company Limited v. Aptech Limited ('Arif Azim case') sought to modify the above settled position by resorting to the 'cause of arbitration' approach, under which the two otherwise distinct 'cause of action for the substantive claim' and 'cause of action for the Section 11 application' are inter-linked and harmoniously construed to arrive at a combined 'cause of arbitration'. The Ratio in the Arif Azim Case The Supreme Court in the Arif Azim case itself referred to the principle enunciated in the BSNL case that the question of a Section 11(6) application being time-barred, being a question of 'jurisdiction of the arbitral tribunal', falls within the purview of the referral court under Section 11(6) whereas the question of the substantive claim being barred by limitation can rightfully be adjudicated upon only by the arbitral tribunal as it pertains to 'admissibility' of the claim itself. Despite the otherwise clear-cut distinction between limitation for a Section 11 application and that for the substantive claims, the Supreme Court in the BSNL case proceeded upon a conjoint construction of the two for the limited purpose of determining if the notice invoking arbitration had been issued within limitation. It observed that there must be a clear notice invoking arbitration setting out the claims which must be received by the other party within a period of 3 years from the rejection of a final claim, failing which, the time bar would prevail. It may therefore be inferred that the determination whether a Section 11 application is time-barred entails a two-fold enquiry: (i) Firstly, evaluating if the notice invoking arbitration was issued in a time-bound manner, i.e. within the applicable statutory limitation period from the date on which the cause of action for the substantive claims arose. For this purpose, the Court shall be guided by the compass of 'breaking point' as enunciated in the case of M/s. B and T AG v. Ministry of Defence, that is, the time at which any reasonable party would have abandoned efforts at arriving at a settlement and contemplated referral of the dispute to arbitration; and (ii) Secondly, if the answer to the first question is 'yes', then evaluating if the Section 11 application has been filed within 3 years from the expiry of 30 days from the date on which the notice invoking arbitration was received by the respondent party. It is therefore settled that dilution of the distinction between jurisdiction and admissibility is permissible for the limited purpose of evaluating whether the notice invoking arbitration was time-barred, which is further relevant for determining whether the Section 11 application is time-barred. This approach was in fact resorted to by the Supreme Court in the Arif Azim case to arrive at the conclusion that the Section 11 application therein was not time-barred. The Supreme Court, however, did not stop there. Instead, it went beyond this permissible threshold and proceeded to enquire as to whether the claims being sought to be arbitrated by the petitioner therein, were ex-facie barred by limitation and whether appointment of arbitrator under Section 11(6) may be refused on this ground alone. The Hon'ble Supreme Court deviated from the settled position of law by observing that although limitation is an admissibility issue, yet it is the duty of the courts to prima-facie examine and reject non-arbitrable or dead claims, so as to protect the other party from being drawn into a time-consuming and costly arbitration process. The Supreme Court finally opined that a referral court under Section 11 (6) should dwell upon the limitation of both, the Section 11 application as also the substantive claims being sought to be arbitrated. It further went on to state that if either of the above questions is answered in the negative, the referral court should reject the application for appointment of an arbitrator. Critical Analysis of the Arif Azim case The Supreme Court in the Arif Azim case relied upon Vidya Drolia and Others v. Durga Trading Corporation ('Vidya Drolia case') wherein it was observed that limitation law being procedural and disputes, being factual, would be for the arbitrator to decide. The court at the referral stage can interfere only when it is manifest that the claims are ex facie time-barred and dead, or there is no subsisting dispute. All other cases should be referred to the arbitral tribunal. Unfortunately, however, the full bench failed to consider its own observations in the seven judge constitution bench decision of In re: Interplay between arbitration agreements under the Arbitration and Conciliation Act, 1996 and the Indian Stamp Act ('N. N. Global case'). It has been observed therein that the legislature confined the scope of the referral courts under Section 11(6A) to only examining the existence of an arbitration agreement. The use of the term “examination” in itself connotes that the power is limited to a prima facie determination on the basis of Section 7, i.e. the requirement that the agreement be in writing. This interpretation also gives true effect to the doctrine of competence-competence by leaving the issue of substantive existence and validity of an arbitration agreement to be decided by arbitral tribunal under Section 16. The Supreme Court also added that the ratio of Vidya Drolia case stood modified to this extent. In fact, the Supreme Court opined that the view taken in the Vidya Drolia case is erroneous inasmuch as it proceeded with the presumption that the omission of Section 11(6A) of the Act had already been notified, which is certainly not the case. The 2019 Amendment to the Act omitted Section 11(6A) from the Act, which provided that while considering an application for appointment of an arbitrator, a Court shall confine its examination to the “existence of an arbitration agreement.” The Supreme Court in the N. N. Global case clarified that pending the notification of this deletion, Section 11(6A) of the Act continues to remain in force. On this basis, it proceeded to opine that for a reference under Section 11(6), the referral court's examination must be extremely restricted to see that an arbitration agreement existed in writing. In view of the above observations in the N. N. Global case, the ratio of the Vidya Drolia case has been partially over-ruled. Resultantly, the ratio of Uttarakhand Purv Sainik Kalyan Nigam Ltd v. Northern Coal Field Limited stands restored, wherein it was unequivocally laid down that the issue of limitation is a jurisdictional issue, which would be required to be decided by the arbitrator under Section 16, and not at the pre-reference stage under Section 11 of the Act. Even the two-fold / eye of the needle test laid down in the NTPC case, entails an inquiry by the referral court only into the existence of an arbitration agreement and a prima facie enquiry of the arbitrability of the dispute. The question of whether the substantive claims are time-barred or not, is not for the referral court to inquire under a Section 11 application. Conclusion and the way forward What is relevant to note is that the three judges that constituted the full bench in the Arif Azim case also formed part of the seven-judge bench in the N. N. Global case. It is trite that the ratio of a seven-judge bench can only be modified by a subsequent bench of seven or more judges. It therefore remains to be seen as to how the Courts shall proceed to apply the ratio of the Arif Azim case, so long as the ratio in the N. N. Global case holds the fort. More particularly, if the omission of Section 11 (6A) actually comes to be notified, the ratio of the Arif Azim case, to the extent it authorises referral courts to divulge into the question of the substantive claims being barred by limitation, shall need a relook. Further, post the omission of Section 11 (6A) from the Act, when the scope of scrutiny by a referral court would be rendered extremely restricted, the suggestion of the SC in the Arif Azim case, for the legislature to firstly introduce a specific period of limitation under Section 11 and secondly, to keep such prescribed period of limitation shorter than three (3) years would become more relevant now than ever. *Nidhisha Garg is an Associate at Trilegal. The article has been written by the author in her personal capacity and does not represent the views of the firm with which she is associated.

  • RISE OF ONLINE ARBITRATION IN INDIA: CHALLENGES, OPPORTUNITIES AND CALL FOR A CODE

    Siddh Sanghavi[1] Introduction The concept of Arbitration is broadly based on two important principles flexibility and party autonomy. Allowing for an online dispute resolution (ODR) mechanism with the consent of both parties will only help in achieving these principles and provide a speedy mechanism for dispute resolution. As the name suggests online arbitration means using electronic communications to conduct arbitration proceedings. The proceedings here also include the process of initiating the arbitration by giving notice, and the process of discovery, wherein all documentary evidence will be uploaded online. Here the benefits are visible as having an online arbitration will significantly reduce costs and time, and provide greater flexibility while providing a more sustainable and environmentally friendly dispute resolution mechanism. The idea of Online Arbitration also seems more and more practical since the need for face-to-face interaction has decreased, especially in construction, oil and gas and infrastructure disputes wherein reliance is usually on documentary evidence rather than witness testimonies. Further, the concept of ODR is gaining traction day by day. The government and its think tanks are pushing for ODR mechanisms. The NITI Aayog also released its report in October 2021, Designing the Future of Dispute Resolution: The ODR Policy Plan for India’ which made recommendations to the government to incorporate ODR-friendly policies. These ODR-friendly policies will also increase the ease of doing business and thereby increase investment in the country. The same has also been recognised by the government. In an unstarred question posed by a Member of Parliament to the Ministry of Law and Justice concerning the development of the ODR mechanism, the Ministry that while the concept of ODR was still at a nascent stage, the government had planned to adopt the NITI Aayog report mentioned above in a phased manner. Therefore it is evident that ODR holds a lot of potential in India. Legal Backing for online arbitration While online mediation has already been given statutory backing in the Mediation Act 2023, a similar provision is lacking for online Arbitration. Currently, there are a number of legislations that deal with ODR and Online Arbitration. While the Arbitration and Conciliation Act 1996 {hereinafter referred to as the A&C Act} governs the procedure of Arbitration, the Information and Technology Act 2000 deals to the technical aspect. Particularly section 4 and 5 of the act which gives validity to electronic records and signatures. Therefore even an arbitration agreement signed online would be lawful and enforceable. The same has been validated by the Supreme Court in Shakti Bhog Foods Ltd V. Kola Shipping Ltd, wherein the court recognised the validity of an arbitration agreement entered into by exchange of emails. Legal backing to arbitration proceedings conducted online has also been given by the Supreme Court. The Supreme Court in a number of cases has now enabled a contact-free dispute resolution. From the service of notice to invoking arbitration to recording statements and witness testimony can now be done online. The Supreme Court in Kross Television India Pvt Ltd & Anr V. Vikhyat Chitra Production & Ors held that the purpose of service is to put the other party to notice and where an alternative mode, (which can include Emails and even WhatsApp) is used and the service is shown to be effected of the notice and is acknowledged, it cannot be suggested that there was no notice. Further, in State of Maharashtra V. Praful Desai, the Supreme Court affirmed video conferencing as an acceptable means of recording witness testimony and evidence. Therefore examination and cross-examination of witnesses can now be done through video conferencing eliminating the need for the physical presence of witnesses. Challenges Associated with Online Arbitration One of the biggest issues in Online Arbitration is determining the seat of the arbitration in case there is absence of a mutual agreement between the parties.  While the venue of the Arbitration is online, the issue arises concerning the seat of the arbitration. The seat of the arbitration becomes important as it would then decide the courts that would have the jurisdiction to enforce the awards and hear challenges against the award. Section 20 of the A&C Act states that the parties are free to decide the seat of the arbitration, and in the absence of such mutual agreement the seat shall be decided by the Arbitral Tribunal taking into account the convenience of both parties. Since there does not exist any separate framework for ODR, the seat of an online arbitration will be decided based on Section 20 itself. For online arbitration the issue arises in case of an absence of any mutual agreement. As there is no geographical location in cyberspace and internet activity does not fall within any specific jurisdiction, determining seat based on convenience becomes difficult. Further, the issue becomes more complex in ODR since there are many places and legal jurisdictions involved. While in a physical form of arbitration, a physical space or a jurisdiction can help in determining the seat, the virtual nature of the online arbitration makes it difficult to decide based on a specific geographical location. Therefore determining seat based on the convenience of parties as specified under Section 20 becomes complicated. An important concern for the parties using this online mechanism will also be data security and privacy. One of the main reasons why parties sometimes adopt arbitration is that the proceedings are kept confidential. However, if documents are given for discovery online and even witness testimonies are taken online it is natural for parties to be worried about confidentiality and data security. Here we see the need for having certain basic standards and requirements that can be set by arbitral institutions. Confidentiality is also enumerated as a principle under Section 42- A of the A&C act which mandates that both the arbitrators as well as the parties are to keep the proceedings confidential and private. This breach of confidentiality and privacy of the parties has already happened before in International commercial arbitrations as seen in the case of a cyber-breach of the Permanent Court of Arbitration in 2015, which resulted in data theft in the China- Philippines border dispute.  In this case, the malware was implanted on PCA’s website which exposed the parties to data theft. Currently, the confidentiality of the party under Indian law is protected only under section 72 of the Information Technology Act 2000, which criminalises the disclosure of personal information by a party having access to such information in breach of a lawful contract. This is also only a punitive measure providing punishment and not a preventive measure ensuring the security of data. If online arbitrations are conducted in unsecured online communications then confidentiality and privacy of the parties will always be at risk. Therefore there exists a dire need for data protection guidelines and regulations in the field of arbitration. Although the parliament recently passed the Digital Personal Data Protection Act 2023, its applicability to online arbitration proceedings is still in question, and regardless of the same, there has to be a separate governance framework regulating data protection in online Arbitration Proceedings. Key Aspects to be clarified in a Code for Online Arbitration The government and even arbitral institutions can come up with a code for ODR that the parties can voluntarily adopt. Currently, the International Council for Online Dispute Resolution has come up with a set of open standards that can be adopted by the parties. The ICCA-NYC Bar – CPR Protocol on cyber security was adopted in 2019. This protocol offers a comprehensive framework on how parties can agree to reasonable cyber security measures during arbitration proceedings. The framework involves control of access to important documents, encryption and management of cyber security. Another privacy concern is related to the recording of the online proceedings. Under the Seoul Protocol on Video Conference in International Arbitration discretion to record the proceedings is given to the Arbitral tribunal. Whereas in HKIAC recording of proceedings requires consent of both the parties as well as the arbitral tribunal. A similar code regulating these aspects is currently lacking in the arbitral institutions in India. Further, the issue of bias and partiality of arbitrators in the context of online arbitration can also be combatted through a dedicated code. These voluntary codes can specifically set out guidelines for ensuring the independence of arbitrators in the virtual space. For instance, the UNCITRAL Technical Notes on Online Dispute Resolution have specific provisions and suggestions to ensure arbitrators are impartial. These UNCITRAL guidelines provide that every ODR mechanism have a method to object to the appointment of the arbitrator. And whenever there is an objection to the appointment of the neutral, the ODR administrator must decide as to whether the arbitrator should be replaced. The UNCITRAL guidelines also specifically provide that the arbitrator declare his impartiality whenever there is any circumstance that raises doubts as to his impartiality. For India to establish its position as an international arbitration hub, establishing a dedicated code for online arbitration will be crucial. Clear guidelines are necessary regarding recording online proceedings, requiring informed consent from all parties. Additionally, establishing a secure and transparent process for handling sensitive data and documentary evidence is paramount. The code should specify protocols for data storage, access, and security measures. Further, the code should emphasize the independence of arbitrators, adhering to protocols like the UNCITRAL Technical Notes for ODR. This will help promote transparency and mitigate concerns about bias. Conclusion By clarifying the critical aspects which have been mentioned above, a code can foster trust in ODR, attracting domestic and international participants. This, in turn, can translate into greater efficiency and cost-effectiveness for dispute resolution compared to traditional methods. A note of caution would be that we should focus on coming up with a voluntary code and not impose mandatory government regulations that could hinder the processes’ growth and adaptability. Rigid requirements might introduce unnecessary constraints, stifling innovation and flexibility within the ODR ecosystem. Indian arbitral institutions can design a comprehensive set of guidelines for online arbitration taking inspiration from successful models of foreign arbitral institutions. These guidelines can be in the form of a voluntary code that can be adopted by parties if they choose to solve their disputes through Online Arbitration. [1] Siddh Sanghavi, a 2nd year student of National Law University Odisha (NLUO).

  • A Case of Staggered Timelines Under The Arbitration and Conciliation Act, 1996

    Vrinda Gaur* Introduction The Arbitration and Conciliation Act, 1996 (Act) was implemented with a foundational aim to transgress the normative court-facilitated resolution of disputes owing to the overburdened dockets of the benches and the overarching issue of adjournments sought either by the parties or granted by the courts. Through an adjudication by a mutually agreed group of experts, parties were bestowed with the privilege to settle their claims through a collaborative approach with a restricted role of the courts. However, the emergence of ambiguities and inefficiencies within the mechanism over time has led to no other alternative for the parties but to seek clarifications from the courts themselves. One major ambiguity which has led parties to knock on the doors of the court pertains to missed timelines by parties to the proceedings. Alternatively, parties are aggrieved by the delays attributable to the lackadaisical disposal of applications by the judicial forum itself. In light of this, the article delves into the plethora of factors which has caused arbitration as a mode of dispute resolution to be a time-staggering practice and further aims to prescribe a way forward to rectify the predicaments. Factors Attributable to Delays First, if we look at Part I of the Act, the most prominent provision facing the test of time is Section 8 of the Act, which gives a judicial authority the power to refer parties to arbitration. However, looking at most arbitration agreements/clauses, it binds parties to arbitration as soon as disputes arise and parties can proceed to such an arrangement without any interference by the courts. To much of our[1][2]  disappointment, this practice of first initiating legal proceedings against the party for breach of contractual obligations and later awaiting the green signal of the court to refer parties to arbitration has unnecessarily caused delays. Considering the pendency rate at judicial forums[3][4]  and a lack of time constraints on courts to dispose of a Section 8 application, it further burdens the dockets of the judicial benches. Second, concerning the issue of appointment of arbitrators under Section 11, if under circumstances, the parties fail to appoint an arbitrator mutually within a timeframe of 60 days, this onus is often shifted on a judicial authority to appoint the same. Apart from delays attributable to frequent adjournments sought by the parties, a complementary factor is the discretion granted to the courts concerning disposal timelines for authorising such appointments. Further, there is no mechanism in place to ensure that Section 11 applications get heard on a priority basis as the listing of matters is still done through a date determined by computer-based software which has no options for preferential listing. Third, a major factor leading to staggered timelines is a challenge to the appointment of arbitrators under Section 12 of the Act. If such a challenge is rejected by the tribunal at the initial stage, as per procedure the only opportunity a party has to challenge such an appointment is under Section 37 of the Act after the pronouncement of an award. Hypothetically speaking, if such a challenge is admitted under a Section 37 application, two recourses would follow: (i) initial proceeding would be set aside and fresh proceedings would follow at the discretion of the parties, or (ii) a new arbitrator may be appointed to evaluate the award and traverse through the pleadings of the parties to affirm the award. Both of these alternatives may take a considerable amount of time if not 6 months as prescribed under the Act. Considering the paramount role played by time in arbitration proceedings which necessitates the delivery of an award within one year after the completion of pleadings, a lack of discretion for parties to challenge the appointment after the arbitrator affirms his appointment under section 13 of the Act and before the appeal stage under Section 37 leads to unwarranted postponement of award enforcement and realisation of claims. This goes against the very design of the Act, which was to expedite outside court settlement by the mutual consent of the parties. Fourth, Section 23 of the Act furnishes a 6 month period for the completion of pleadings before the arbitral tribunal. However, ambiguity prevails on whether this timeline is the maximum limit or just recommendatory considering most proceedings neglect this timeframe and often exceed this timeframe. Moreover, this procedural inefficiency is due to a lack of defined procedural guidelines for conducting ad hoc arbitral proceedings as opposed to institution-facilitated settlements. Fifth, Section 37 of the Act provides for a provision of appeal to the award passed by the tribunal. Again, there is no prescribed timeline for allowing such an appeal before the courts. In practice, parties have been moving an appeal before the court, even after the expiry of the 90-day buffer under Section 36 of the Act, which prohibits an award recipient from moving for enforcement and allows the other party to challenge it on reasonable grounds before a court of law. Further, under the Commercial Courts Act 2015, a prescribed timeline for appeal is sanctioned at 60 days. Under this circumstance, there is no plausible explanation for a 90-day buffer under Section 36 of the Act. Conclusively, after the landmark Amazon Investment Holding LLC vs Future Retail judgment, the Apex Court has given sanction to the idea of emergency arbitration even though there are no explicit provisions within the Act recognising the same. Though in practice, the entire process ideally takes a minimum of 30 days including the ideal 14 days timeline for pronouncement of award, however, owing to a lack of legislative sanctions concerning timelines for appointments of emergency arbitrators and grant of interim relief by such persons leaves a wide scope of discretion to either the appointing authority or the emergency arbitrator to set timelines as per their individualistic interest and preference. Way Forward The delays caused either by the parties to the proceedings or the judicial authorities have been actively recognised by practitioners and experts.[5] [6]  However, little process has been made to bridge this gap of missed timelines despite the courts having on numerous occasions called out parties to proceed with punctuality. The need for efficient timelines has further been discussed in the recent Expert Committee report released by the Ministry of Law and Justice. In light of this, it is pertinent to take certain recourses to adequately address this issue. Firstly, in light of the increasing burden on the courts, it is necessary to have a distinct bench/division overseeing appeals and fresh petitions. If not all, it would be prudent to refer high-stake and high-valuation prospective disputes to this special bench. Further, the fast-track procedure under Section 29B has become popular amongst stakeholders with parties having the discretion to refer to fast-track proceedings at two stages, namely, (a) before the appointment of an arbitral tribunal and (b) at the time of appointment of the arbitral tribunal. Though this procedure ensures delivery of an award within 6 months as against the allotment of a 1-year time frame for delivery of an award under the routine procedure, a need is felt to extend its scope post-pleading stage. There is no rationale to date to restrict its application only up to the stage of the constitution of the arbitral tribunal and not after. Further, the government needs to sanction a certain procedural code, mainly for ad hoc arbitrations, as it is not as systematic as the case of Institutional Arbitration, where every institution has its prescribed code of conduct of arbitrators and relevant procedural formalities. A lack of time shrewdness under sections 8, 11,12, 23 and 37 as discussed above can most certainly be addressed through a sanction of prescribed timelines by the legislature To some extent, this would also be in consonance with the recommendations of the expert committee report[7][8]. Conclusively it is pertinent to give legislative sanction to numerous judicial precedents pronounced over time that would further aid the mechanism in upholding punctuality indirectly. For instance, a legislative sanction of the recent landmark ruling of the Apex Court In Re: Interplay Judgement where the court upheld the validity of an unstamped arbitration agreement, would prevent frivolous appeals and similar issues from arising before the court for further consideration. Hence, endorsing certain time constraints within the Act would make India an attractive destination for arbitration, both domestically and internationally. *Vrinda Gaur, a 3rd Year Law Student from National Law University Lucknow.

  • Reinforcement of Doctrine of Separability and Competence-Competence

    Abhinaya Ranganathan[1] & Akshita Grover[2] An arbitration agreement is a creation of a contract and is thus governed by the Arbitration & Conciliation Act, 1996(‘ACA’), The Indian Contract Act, 1872 and The Indian Stamp Act, 1899 (‘Stamp Act’). The Stamp Act provides that an unstamped instrument cannot be acted upon unless duly stamped. As a deviation from this, ACA provides for the validity of an arbitration agreement and does not mandate complying with the provisions of the Stamp Act. Due to this jigsaw of the legislations, there have been a series of cases which have attempted to answer the validity of an unstamped arbitration agreement. The case of Great Offshore held that the objective of ACA is to ensure minimal judicial intervention and held that “adding stamps, seals and other formalities to an arbitration agreement was antithetical to this objective”. The case of Geo-Group validated an unstamped arbitration agreement. As opposed to this,  SMS Tea Estates invalidated an arbitration clause contained in an unstamped contract. Building upon this, Garwareheld that arbitration clauses in unstamped contracts would be unenforceable. Vidya Drolia upheld both the decisions of Garware and SMS Tea Estates. In contrast, NN Global held that the absence of stamp duty will not be a valid ground for the unenforceability of an arbitration agreement. By a majority of 3:2, NN Global 2 overruled NN Global 1 and held that an unstamped arbitration agreement will be void and unenforceable. In a recent case, In Re: The Interplay, the SC has finally settled the law and has incorporated the doctrine of separability and competence – competence. The paper attempts at looking at the validity of an unstamped arbitration agreement through the lens of these doctrines and its implications. THE DOCTRINE OF SEPARABILTY An arbitration agreement can be in the form of a clause in a contract or a separate agreement in itself. But, regardless of the form, the parties sign the same with a presumption that in case of any dispute arising out of the contract, the parties will have an arbitration proceeding (in effect, excluding the court’s jurisdiction). This expectation of the parties, is essentially the ‘Presumption of Separability’. This presumption holds that the validity or existence of the contract will not affect the arbitration agreement and the identities of the contract. The arbitration agreement and the contract are to be treated separately, wherein the former deals with the substantive rights and obligations and the later lays down the procedural framework. This presumption becomes relevant in the context of an unstamped arbitration agreement. For an arbitration agreement to be valid, Section 35 of the Stamp Act mandates stamping whereas Section 7 of ACA only mandates that it be in writing and duly signed. This raises the question of “whether an arbitration agreement is required to be stamped to be valid and enforceable?” Globally, the courts have enforced the presumption of separability and have held it to be at the core of arbitration laws. If the parties to an arbitration agreement need to approach courts every time a contract is deemed to be invalid, then in effect, the tribunals will be excused of jurisdiction and the entire purpose of arbitration will be undermined. The case of NN Global 2 negated this doctrine and gave precedence to the procedure established by the Stamp Act. As an implication, the Stamp Act had an overriding effect over the ACA. Parties opt for arbitration to essentially do away with the traditional court formalities and ironically the pressure of procedural compliance was reinstated by NN Global 2. Reading in stamping, registration and other procedural formalities were undermining Section 7, ACA. To solve this conundrum, the SC in, In Re: The Interplay, has overruled NN Global 2. In effect, the termination of the underlying contract will not render an arbitration agreement inoperative in line with the separability presumption. The Court has ruled in favour of applying separability and held that “The above position of law is contrary to the separability presumption which treats an arbitration agreement as separate from the underlying contract”. THE DOCTRINE OF COMPETENCE – COMPETENCE The presumption of separability compliments the doctrine of competence-competence. While the former ensures that the validity of the underlying contract does not affect the jurisdiction of the Tribunal , the latter limits the jurisdiction of courts in this regard. The Doctrine of Competence – Competence has both positive and negative connotations to it. The positive aspect upholds the parties’ autonomy in choosing the arbitrator to resolve their disputes and deters them from instituting suits at courts delaying the arbitral process. The negative aspect carries the same ratio but from the perspective of courts. It suggests that the courts should refrain from entertaining challenges to jurisdiction of the arbitral tribunal before the arbitrators themselves have had the opportunity to do so. As much as it is recognized that the judicial machinery renders its essential support to the process of arbitration, the paradox of arbitration seeking to release itself from the clutches of the judiciary persists. To this, the courts have consistently sustained the statement of object and reasons of the ACA being to minimize judicial intervention in arbitration proceedings and respect party autonomy to settle through arbitration and not litigation. In this judgment, the Apex court dealt with the question of whether a tribunal can effectively exercise its jurisdiction to settle the claims between the parties if the stamp duty is unpaid on the underlying instrument. Arguments to the contrary were made stating that the credibility of the court rested on the foundation that negated expediency, viewing the Apex court as a means and ends institution. Further, it was contended that the court did not possess appropriate jurisdiction to rule on the matter. CJI Chandrachud and Justice Kaul remarked on the large ramifications of the issue awaiting an appropriate case to decide and held, upon applying the doctrine of competence-competence, that the arbitral tribunal must have the first opportunity to decide on the issue of stamping. The Apex court whilst agreeing to stamping being a revenue related issue, categorically held that it is a curable problem. While, drawing a clear distinction between the words ‘examination’ and ‘ruling’ as used in Section 11and Section 16 of the ACA respectively, the court held that the first examination will be undertaken by the arbitrator. This results in thwarting forward the process of arbitration. Thus, In Re: The Interplay has restrained the exercise of powers by the judicial authorities under Section 8 and Section 11 of ACA emphasizing the legislative intent behind Section 5 of the ACA. CONCLUSION It is a well settled law that the ACA is no longer viewed as an ouster statute but one which favours the remedy of arbitration so as to de-clog the extremely burdened civil courts. This underlying jurisprudence has been used to support the arguments involving the doctrine of separability and the doctrine of competence-competence. In a judgment whilst commenting on the arbitration proceedings under the 1940 Act, it was noted that the challenge to arbitral proceedings in Courts have made “lawyers laugh and legal philosophers weep”. In a more recent judgment, it was observed that several applications under Section 11 of the Act were decided and disposed of after a period of four years, which defeated the purpose of the amended Act. Amidst continuing state of affairs, a refreshing change was seen in a dissenting opinion, by way of holding that non-stamping or insufficient stamping of the substantive contract or instrument would not render the arbitration agreement non-existent in law and unenforceable, for the purpose of referring a matter to arbitration. This judgment in In Re: The Interplay takes a step forward in making India a pro-arbitration hub. The authors are penultimate-year law students at Jindal Global Law School. [1] ranganathanabhinaya@gmail.com [2] akshitagrover@gmail.com

  • The Role of Emergency Arbitration in India: Navigating Urgent Relief in Arbitral Proceedings

    * Sarthak Srivastava INTRODUCTION Emergency arbitration is a concept in India that allows parties involved in a dispute to seek urgent interim relief from an arbitral tribunal before the commencement of formal arbitration proceedings. It provides a mechanism for parties to preserve their rights and interests, particularly in situations where time is of the essence. In India, emergency arbitration is governed by the Arbitration and Conciliation Act, of 1996. Though, the Act does not expressly provide for Emergency Arbitration, it was contemplated that it would be introduced in the 2015 Amendment after the suggestions of the 246th Law Commission Report to introduce the coverage of Emergency Arbitration under Section 2(d) of the Act. However, the legislature did not deem it fit to introduce such a definition under Section 2(d) and the Act holds lacunae in the definition of Emergency Arbitration, at present. Despite such express recognition, the Hon’ble Supreme Court of India in Amazon .com NV Investment Holdings LLC v. FutureRetail Ltd. & Ors.i upheld the award passed by the Emergency Arbitrator and held that such arbitration proceedings seated in India are enforceable under Section 17(2) as an interim order of the tribunal under the Act. However, there still exists an ambiguity regarding the nature, orders and awards in Emergency Arbitration leaving room for further developments. The Act empowers parties to approach the arbitral tribunal for interim measures that are necessary to prevent imminent harm or to preserve the status quo pending the resolution of the dispute. These interim measures can include injunctions, asset freezes, or the preservation of evidence. The process of emergency arbitration typically involves the appointment of an emergency arbitrator who is appointed by an institution or agreed upon by the parties and must act independently and impartially. The process further follows the filing by the requesting in a written application for such proceedings to the arbitral tribunal. The Emergency Arbitratorenjoys broad powers and is expected to deliver its decision in a matter of days. The key advantage of emergency arbitration is its speed and efficiency. It allows parties to obtain urgent relief within a short timeframe, often within a matter of days, as compared to traditional court proceedings which can be time consuming and costly. Emergency arbitration also provides parties with a level of confidentiality, as the proceedings are not public. Despite having several advantages, Emergency Arbitration comes with several challenges as well. The lack of recognition under Indian Law makes enforceability more complex in the context of different governments. Moreover, it is still in its infancy in India and a lot of developments are required in the domain of Emergency Arbitration for its proper enforcement. Furthermore, the appointment of the Emergency Arbitrator is not well-defined and such lack of a well-drafted appointment procedure despite it being an expedited procedure raises concerns regarding the independence and expertise of the arbitrator. It is important to know that the interim relief granted through emergency arbitration is temporary and is subject to review by the main arbitral tribunal once it is constituted. The decision of the emergency arbitrator is binding on the parties and enforceable under the Arbitration and Conciliation Act, of 1996. Urgent relief in arbitration proceedings is an essential aspect of the arbitration process, as it allows parties to seek interim measures to protect their rights and interests pending the final resolution of the dispute. The urgency of such relief arises in situations where delay can cause irreparable harm to either of the parties involved. For instance, if a party breaches a contract and threatens to sell the assets that are the subject of the dispute, an urgent interlocutory measure can prevent the asset from being sold and preserve the status quo until the matter is resolved. Thus, Emergency Arbitration holds an important position in the Arbitration domain under Indian disputes but the lack of recognition and enforceability provisions becomes a challenge for a proper Emergency Arbitration setup in India. Recent judicial developments have tilted towards upholding the enforceability of orders passed by the Emergency Arbitrator, but still, there are several complexities that need to be taken care of. UNDERSTANDING EMERGENCY ARBITRATION The purpose of emergency arbitration is to provide parties with an effective and expedited mechanism to protect their rights and interests in urgent situations to avoid imminent danger. In Raffles Design International India Pvt. Ltd.& Anr. v Educomp Professional Education Ltd.& Ors.,ii the dispute revolved around the termination of a JV Agreement, resulting in the immediate closure of several educational institutions and causing huge financial loss. This case portrays a clear example of the urgency element involved and a factor of irreparable harm which seeks an immediate remedy that was provided by Emergency Arbitration. Emergency arbitration allows parties to obtain swift interim relief, typically within a matter of days, minimizing the potential consequences of delay. It offers a valuable tool that can help ensure the effectiveness and efficiency of the arbitral process, allowing parties to maintain the status quo and safeguard their positions until the dispute is resolved. THE EMERGENCE OF EMERGENCY ARBITRATION IN INDIA The evolution of emergency arbitration in India can be attributed to various factors, including the need to address time-sensitive and urgent matters that arise during the arbitration process. Recognizing the significance of emergency relief, Indian courts and institutions have gradually embraced and adopted emergency arbitration provisions. One of the key developments in this regard was the decision of the Indian Supreme Court in the case of Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc.iii In this case, the Supreme Court specifically acknowledged the concept of interim measures and stated that it is compatible with Indian arbitration law. This landmark decision provided the necessary framework for the recognition of emergency arbitration in India. Further, there have been several developments acknowledging the concept of Emergency Arbitration in India. In Raffles Design International India Pvt. Ltd.& Anr. v Educomp Professional Education Ltd.& Ors.,iv Delhi HC stated that parties had to take recourse to section 9 of the A&C Act as the order passed by the emergency arbitrator could not be enforced under section 17 of the A&C Act, as section 17 was not available in a foreign-seated arbitration. This was not because of the non-applicability of Emergency Arbitration in India rather on foreign seated arbitration regime. Further, in Ashwani Minda v U-Shin,v Delhi HC observed that a court shall not intervene if an emergency arbitrator has already been appointed. Moreover, the Court observed that the characteristics of an order passed by the Emergency Arbitrator are the same as an interim order passed by an arbitral tribunal. Institutions such as Delhi International Arbitration Centre (DIAC), the Mumbai Centre for International Arbitration (MCIA), and the International Centre for Alternative Dispute Resolution (ICADR) have all incorporated emergency arbitration provisions allow parties to seek urgent interim relief before the constitution of the arbitral tribunal, providing a more efficient and effective mechanism for addressing urgent interim relief before the constitution of the arbitral tribunal, providing a more efficient and effective mechanism for addressing urgent matters in Indian Arbitration.vi Moreover, Indian Arbitration has taken a pro-arbitration approach when it comes to the enforcement of emergency arbitration awards. They have recognized and enforced emergency arbitration awards, treating them as interim measures that are capable of enforcement under the Indian Arbitration and Conciliation Act.vii The recognition and adoption of emergency arbitration provisions by Indian arbitration institutions and the favourable approach of Indian courts signal a growing acceptance and understanding of the importance of emergency relief in arbitration proceedings. This development has not only provided parties with an efficient and effective means of obtaining urgent relief, but it has also enhanced India’s reputation as an arbitration-friendly jurisdiction. Emergency Arbitration has now been recognized globally, by several institutions such as the Singapore International Arbitration Centre (SIAC), the Stockholm Chamber of Commerce (SCC), the Swiss Chambers Arbitration Institution (SCAI), the Mexico City National Chamber of Commerce (CANACO), and the Netherlands Arbitration Institute (NAI) all provide for both expedited formation of the tribunal as well as for the EA. But India still lacks legal recognition as the Act governing Arbitrations in India does not expressly provide for EA. Though rules under DIAC and MIAC have incorporated provisions for Emergency Arbitration, there is still a long way to go. RECENT INVOLVEMENT OF EMERGENCY ARBITRATION IN INDIA In recent years, there have been several notable cases in India where emergency arbitration has been utilized. In the case of Amazon.com NV Investment Holdings LLC v. Future Retail Limited,viii one of India’s largest conglomerates. Amazon sought emergency arbitration to prevent Future Group from proceeding with a multi-billion dollar deal with Reliance Retail. Amazon claimed that the deal violated its pre-existing agreement with Future Group, and sought urgent relief to protect its rights. This case demonstrates the significance of emergency arbitration in contractual disputes, particularly in the retail sector. Issue 1: Whether an "award" delivered by an Emergency Arbitrator under the SIAC Rules can be said to be an order under section 17(1) of the Arbitration Act? The Supreme Court observed that party autonomy is paramount and hence when the parties had agreed to abide by SIACRules, then contesting such rules is irrelevant. Further, the SIAC Rules provide similar law as provided under Sections 9 and 17 of the Act, in the context of Emergency Arbitration. Thus, the award passed by an Emergency Arbitrator can be considered as an interim order under section 17(1)of the Act. Issue 2: Whether an Order passed by the High Court under Section 17(2) of the Arbitration Act for enforcement of an award passed by an Emergency Arbitrator is appealable? The Supreme Court observed that orders passed under Section 17(1) are appealable under Section 37 of the Act, rendering orders passed under Section 17(2) as non-appealable. Apart from the case, emergency arbitration has been prominently utilized in industries such as construction, infrastructure, and energy. Disputes in these sectors often involve complex contractual arrangements and time-sensitive projects. Emergency arbitration provides parties with a means to seek immediate relief to prevent irreparable harm or secure project completion. In the construction industry, disputes frequently arise over issues such as payment delays, performance issues, or termination of contracts. Emergency arbitration allows parties to address these disputes promptly and ensure the continuity of construction projects. In the infrastructure sector, emergency arbitration has been utilized in disputes related to project delays, cost overruns, and breach of contract issues. Given the long-term nature of infrastructure projects and the significant investments involved, parties seek emergency relief to mitigate potential financial losses and protect their interests. The energy sector, including oil and gas, power and renewables, has also witnessed the utilization of emergency arbitration. Disputes in this sector often revolve around issues. Emergency arbitration enables parties to secure interim relief to safeguard their commercial interests and ensure the uninterrupted provision of essential services. EFFECTIVENESS OF EMERGENCY ARBITRATION IN INDIA Emergency arbitration is an effective mechanism where immediate action is needed to prevent irreparable harm and preserve the status quo. It offers several benefits, including speedy resolution of disputes and the ability to protect parties from suffering irreversible damage. One of the main advantages of emergency arbitration is its ability to quickly resolve urgent disputes. Unlike regular arbitration can be initiated promptly, allowing parties to obtain interim relief within a short timeframe. This is particularly valuable in cases where time is of the essence, such as disputes involving an imminent breach of contract or the potential destruction of evidence. In urgent situations, maintaining the existing state affairs is critical to prevent irreparable harm. Emergency arbitrators can grant interim measures, such as injunctions or asset freezes that preserve the status quo until a final resolution can be reached through regular arbitration proceedings or litigation. This helps to avoid irreversible damage, such as dissipation of assets or the destruction of evidence that may impact the final outcome of the dispute.ix CHALLENGES AND LIMITATIONS OF EMERGENCY ARBITRATION IN INDIA While emergency arbitration offers numerous advantages, parties may face certain challenges when opting for this mechanism. These challenges include difficulties in enforcing emergency arbitral awards in certain jurisdictions, potential limitations on the availability of emergency relief, and concerns regarding the balance between speed and due process. One significant challenge that parties may encounter is the enforcement of emergency arbitral awards in domestic courts. For example, in India, the enforceability of emergency awards in domestic courts is not explicitly provided in the Arbitration and Conciliation Act, 1996 this lack of clarity regarding the enforcement of emergency awards could pose challenges for parties seeking immediate relief through emergency arbitration.x Furthermore, the availability of emergency relief may be limited in certain jurisdictions. Parties may face obstacles in obtaining interim measures to preserve the status quo or prevent irreparable harm. Another concern in emergency arbitration is striking a balance between speed and due process. While the primary objective of emergency arbitration is to offer swift resolution to urgent disputes, parties must also be afforded a reasonable opportunity to present their case and adequately respond to the claim made against them. Speed should not come at the expense of the due process rights. Therefore, it is important for emergency arbitrators to ensure that the parties have a fair and meaningful opportunity to be heard and the arbitral proceedings maintain the necessary procedural safeguards. REGULATORY       FRAMEWORK          AND   INSTITUTIONAL    SUPPORT  FOR EMERGENCY ARBITRATION IN INDIA In India, the regulatory framework governing emergency arbitration is primarily provided by the Arbitration and Conciliation Act, 1996, as amended in 2015. Under the Act, emergency Arbitration is recognized as a valid mechanism for parties seeking interim relief. Section 9 of the Act defines an “interim measure” as any temporary relief sought by a party before the arbitral tribunal has been constituted. In addition to the legislative framework, major arbitral institutions in India, such as the Mumbai Centre for International Arbitration (MCIA), the Delhi International Arbitration Centre (DIAC), and the International Centre for Alternative Dispute Resolution (ICADR), have formulated rules and guidelines to regulate emergency arbitration proceedings. The MCIA Rules provide for emergency arbitration, allowing parties to seek interim relief before the tribunal is constituted. The DIAC, through its guidelines on emergency arbitration, provides detailed instructions on initiating the emergency arbitration process and appointing an emergency arbitration mechanism. It is important to note that while the legislative framework and institutional rules provide guidance for emergency arbitration, there have been no specific changes or updates in India directly impacting emergency arbitration proceedings. For instance in Raffles Design International India Pvt. Ltd. v. Educomp Professional Education Ltd.,xi TheDelhi HC observed that the Act does not provide any provision which explicitly provides for enforcing interim orders passed by a foreign seated arbitral tribunal. Thus, the order passed by the Emergency Arbitrator in the instant case was due to no provision providing enforceability of foreign seated interim orders. However, the court opined that an Indian Court can adjudicate such proceedings and pass interim orders under section 9 that might be similar in context to Emergency Arbitration. Moreover, in Avitel Post Studioz Ltd. v. HSBS PI Holdings (Mauritius) Ltd.xii The Bombay HC granted the same interim reliefs as passed by an Emergency Arbitrator. The Court held, “merely because, in the present case such emergency or interim awards have been made by the Arbitral Tribunal at Singapore, that would make no difference, particularly when it comes to the determination of the jurisdiction of the Indian Courts to grant interim measures by resort to section 9 of theAct.” However, it is worth mentioning that the Arbitration and Conciliation Act, 2019, introduces various amendments aimed at promoting institutional arbitration, providing more transparency and expediting the arbitration process, which indirectly impacts emergency arbitration proceedings as well. The Arbitration and Conciliation Act, as amended in 2015, allows parties to seek interim relief before the constitution of the full arbitration panel. Major arbitral institutions in India have also established rules and guidelines specifically addressing emergency arbitration, and recent amendments in the arbitration law indirectly promote and support the emergency arbitration mechanism.xiii FUTURE PROSPECTS AND RECOMMENDATIONS Emergency arbitration is a nascent concept in India, with its first introduction in the 2015 amendment to the Arbitration and Conciliation Act, 1996. Despite its novelty, it has gained popularity as a faster and more efficient dispute resolution mechanism compared to traditional methods. The future of emergency arbitration in India looks bright as more parties opt for this form of dispute resolution. However, certain areas need attention to improve the emergency arbitration process, it is paramount to ensure greater clarity in the Indian arbitration laws concerning emergency arbitration. This will help the parties to be aware of the nuances of the emergency arbitration process and choose it as a viable option for resolving disputes. One possible solution to address the potential challenges and obstacles in the emergency arbitration process is to establish an institutionalized emergency arbitration process. This would require the enactment of the laws and regulations that specifically address the logistics and procedural issues involved in carrying out emergency arbitrations. This would also improve the credibility of the emergency arbitration process as a valid dispute resolution mechanism in India. Another recommendation could be to use technology to streamline the emergency arbitration process. This includes the implementation of an online emergency arbitration platform that offers remote hearings, document sharing, and communication between the parties and arbitrators. The platform could provide real-time document sharing and a virtual hearing system that eliminates the need for the physical presence of the parties thus reducing costs and avoiding procedural delays. Emergency arbitration in India has immense potential as a fast and efficient form of dispute resolution. By enacting new laws, and regulations, and investing in technology to streamline the process, it will be possible to address existing challenges, reinforce its advantages and maximize its potential. CONCLUSION In conclusion, emergency arbitration has emerged as a critical mechanism globally where there is imminent harm and huge financial loss, and to rectify such obnoxious scenarios, Emergency Arbitration is the tool. Though the legislative wisdom in India has not legally recognized the concept but the judicature wing has acknowledged this thriving tool. The mechanism, characterized by its speed, efficiency, and confidentiality, has become a game-changer in the Indian dispute resolution landscape. The evolution of emergency arbitration in India can be seen strengthening its roots from various judicial pronouncements. The founding stone was laid down in the famous case of Bharat Aluminium Co. v. Kaiser Aluminium Technical ServicesInc.,xiv wherein interim order was acknowledged. In the case of Raffles Design,xv the Court did not deny the enforceability of Emergency Arbitration as a whole but observed that foreign seated award of an EA is not enforceable. Furthermore, in Amazon vs. Future Group case,xvi the Supreme Court specifically acknowledged the concept of Emergency Arbitration and observed that its award can be enforceable under Section 17(1) of the Act, as similar to an interim order Furthermore, institutional recognition to EA has also been awarded, like MCIA, DIAC, and ICADR, haveadopted rules and guidelines to regulate emergency arbitration proceedings, enhancing its accessibility and credibility. Emergency arbitration has proven to be a vital tool in preserving the status quo, preventing irreparable harm, andprotecting parties’ interests in these cases. However, challenges persist, including the enforcement of emergency arbitral awards and the need to strike a balance between speed and due process. To further enhance the effectiveness of emergency arbitration in India, it is essential to address these challenges and streamline the process. Additionally, there is no provision regarding appointment of Emergency Arbitrator, and there is a settled principle of law, i.e. justice hurried is justice buried. Therefore, it is important to exercise such appointment with caution as it imparts trust among the parties. Looking ahead, the future of emergency arbitration in India is promising. Clarity in arbitration laws concerningemergency arbitration, coupled with institutionalized processes and technological advancements can foster its growth and ensure that parties continue to benefit from efficiency and expediency. Maintaining a panel of Emergency Arbitrators along-with a focused wing for Emergency Arbitration within existing Arbitral Tribunals can provide for a swift and focused solution to time-sensitive disputes. Moreover, utilizing technological resources such as video-conferencing to ensure attendance and further use of AI can help in contract analysis and case management. These steps can further improve a lot in Emergency Arbitration domain as it will help surely impact increasing speed and efficiency while reducing cost involved in procedures. As India’s dispute resolution landscape evolves, emergency arbitration will likely play an increasingly pivotal role in safeguarding parties rights and interests in situations requiring imminent help. * Sarthak Srivastava is a Fifth-year (B.A.LL.B) student at Lloyd Law College, Greater Noida. Email – srivastavasarthak2207@gmail.com i (2022) 1 SCC 209 ii (2016) SCC Online Del 5521 iii 2012(9)SCC648 iv (2016) SCC Online Del 5521 v (2020) SCC Online Del 721. vi J. H. Jung, Clayton Arlen Looney, Joseph S. Valacich. "Fine-Tuning the Human-Computer Interface: Verbal versusKeyboard Input in an Idea Generation Context" , 2007 40th Annual Hawaii International Conference on SystemSciences (HICSS'07), 2007 vii https://www.mondaq.com/india/arbitration--dispute-resolution/1224786/emergency-arbitrations--an-indianperspective#:~:text=The%20%5BIndian%5D%20Arbitration%20and%20Conciliation,an%20emergency%20award %20in%20India. viii 2021 SCC OnLine SC 623 ix Zia Mody, Aditya Vikram Bhat, Priyanka Shetty. "7. India" , Walter de Gruyter GmbH, 2023 x Deyan Draguiev. "Interim Measures in CrossBorder Civil and Commercial Disputes", Springer Science and BusinessMedia LLC, 2023 xi (2016) SCC Online Del 5521 xii (2020) SCC Online 656. xiii https://arbitratorananya.wordpress.com/2020/04/21/enforcement-of-foreign-emergency-awards-during-covid- 19-in-india/ xiv (2012) 9 SCC 552 xv (2016) SCC Online Del 5521. xvi (2022) 1 SCC 209

  • Tribunal Oversight: Assessing Evidence Adequacy vis-a-vis Damages

    Yash Tiwari & Ayush Bajpai[1] Introduction The efficacy of any business contract is contingent on the assumption, that any of the parties breaching the contract shall be held liable in law for the breach, and it shall be within the powers of the aggrieved party to claim the damages for the same, otherwise, the whole objective of the business contract will become redundant. With the arising uncertainties in the contemporary business world and to eliminate the probability of protracted legislation, the contracts contain the clause for liquidated damages. Although in both the scenarios of liquidated and unliquidated damages, there isn't much difference, while the court or arbitrator is adjudicating the claim of damages. However, with the recent judicial precedents, it can be inferred that in the cases where it is not possible with the available evidence to quantify or prove the damages therein, the court shall consider granting the specified stipulated damages. Since in most of the contracts, arbitration acts as the preliminary adjudicating authority of the disputes between the parties, therefore the article also analyzes the authority of the tribunal to evaluate the adequate evidence and its power to grant damages. Law of damages in an arbitration proceeding: The law of damages in any agreement is governed by Sections 73 and 74 of the Indian Contract Act, 1872 i.e. the general rule of damages. The Arbitration and Conciliation Act 1996 does not have any specific clause governing the damages claimed under the arbitral proceedings. The Apex court in General Manager Northern Railways and Ors. vs. Sarvesh Chopra, held that the jurisdiction of the arbitrator to award the compensation is limited to the terms of the contract. Therefore, the arbitrator is bound by the contractual clauses, and in the absence of the same the general law is followed, however, none of the clauses shall be against the general law/public policy, as the same will be void under sec 23 of the act. Sections 73 and 74 of the Indian Contract Act, acts as a guiding factor for the arbitrator to adjudicate upon the issue of damages under the arbitral proceeding. Section 73 provides the general rule of damages, that the party is entitled to claim damages on the breach of agreement by the other parties, however section 74 of the act specifies a certain amount or a method concerning the quantification of damages on the breach of contract. Section 74 i.e. Liquidated damages stipulates a pre-estimate of loss in a contract, however where the idea behind the stipulated amount in an agreement is just to secure the performance of the parties then that is termed as a penalty. The Apex Court in Maharashtra State Electricity Board vs. Sterlite Industries (India), held that under section 74 it is open to the contracting parties to specify a certain procedure for computation of damages and specify the pre-estimate of loss that will be suffered by the parties on the breach of contract or, specify a fixed penalty on the breach. The principle idea behind the liquidated damages is to avoid undesirable and protracted litigation between the parties and give effect to the principle of business efficacy. Need of evidence for Quantification of damages The legal maxim Onus Probandi dictates that the party making an affirmative claim must prove it. Section 102 of Evidence Act lays down that “the burden of proof in a suit or proceeding lies on that person who would fail if no evidence at all were given on either side.” Therefore, the onus lies on the claimant to present the reasonable evidence, although the presence of an exclusionary clause or any stipulated damage in a contract minimizes this onus, however, it does not exclude it altogether. It has been settled law, corroborated by a catena of judgments that liquidated damages are not much different from unliquidated damages as in both scenarios, the onus is on the claimant to prove the breach and damages claimed. The difference lies in the nature and necessity of the need for cogent evidence, to quantify and prove the amount of damages. The apex court in Oil & Natural Gas Commission v. Saw Pipes Ltd after a conjoint reading of sections 73 and 74 of the Indian Contract Act, 1872, held that in the circumstances where it is impossible to quantify the damages due to lack of evidence of actual loss, in those circumstances the arbitral tribunal shall award the stipulated Liquidated damages. Further, recently the division bench of the Delhi High Court in Sudershan Kumar Vs. Vinod Seth and the Supreme Court in M/S UNIBROS v. All INDIA RADIO reiterated that liquidated damages cannot be awarded in the absence of proof of the actual damage/loss, it is the onus of the claimant to prove that firstly, there was a breach of the contract and, secondly that the parties suffered injury due to such breach. Therefore, it can be rightly concluded that the contractual clause stipulating liquidated damages cannot act as an embargo upon the claimant's duty to prove damages with cogent evidence. It is pertinent to note that the basic difference between the abovementioned case laws is that, in the circumstances where the clause for liquidated damages is present and it is not possible to prove or quantify the real damages or loss by the present evidence, therein the court is well within its jurisdiction to award the stipulated liquidated damages based on the proof of actual loss/damage furnished. In cases where the general rule of damage, i.e. section 73 is the guiding factor, in such cases the inability to prove the actual loss by actual evidence goes against the interest of the party claiming damages. Tribunal's Authority: Assessing Evidence for Damages The arbitral tribunal is the Master of quality, quantity and adequacy of the evidence. It is a settled law that even though the law of evidence might not apply to proceedings before an arbitral tribunal, principles of evidence do apply. There are certain basic principles of law of evidence that have to be adhered to even while citing evidence before an arbitral tribunal. The Arbitrator needs to consider the basic laws while assessing and granting any kind of damages/compensation. To appreciate the reasonableness of the evidence the tribunal relies on the basic rule of evidence. The High Court of Delhi in Satluj Vidyut Nigam Ltd v. Jaiprakash Hyundai Consortium, held that the arbitrator, cannot decide the claims of a party based on mathematical calculation/derivations without any actual evidence supporting such claims, by showing the actual amount incurred by the party claiming damages before the tribunal. Further, the nature of the evidence is contingent upon the facts and circumstances of the case and the arbitral tribunal is the master of quality, quantity and adequacy of evidence and the same cannot be reappraised by the Court. Further, the Apex Court has observed that while the quantum of evidence required to accept a claim may be a matter within the exclusive jurisdiction of the arbitrator to decide, if there was no evidence at all and if the arbitrator makes an award of the amount claimed in the claim statement, merely on the basis of the claim statement without anything more, it has to be held that the award on that account would be invalid. Suffice it to say that the entire award under this head is wholly illegal and beyond the jurisdiction of the arbitrator, and wholly unsustainable. Therefore, although the arbitrator is the master of the evidence presented before the tribunal, the tribunal must interpret the adequacy of the evidence reasonably, concerning the general law. Conclusion The legal landscape surrounding damages in business contracts, particularly in the realm of arbitration, is governed by a delicate balance between contractual provisions and general legal principles. The certainty that parties who violate commercial contracts will face consequences for their actions is crucial to their effectiveness. Sections 73 and 74 of the Indian Contract Act set forth the foundation for determining damages; liquidated damages are a tool for pre-estimating losses and averting drawn-out legal disputes. However, recent case law highlights the necessity of evidence to support claims—whether they relate to liquidated or unliquidated damages. The arbitral tribunal has a crucial role in both regulating the flow of evidence and judging what constitutes reasonableness. While the tribunal enjoys discretion in evaluating evidence, it must adhere to basic principles of evidence and ensure claims are supported by cogent proof. Contractual provisions must be taken into account, the burden of proof must be upheld, and the supplied evidence must be reasonably evaluated. Although the tribunal holds authority over evidence, its decisions are not immune to scrutiny. Reasoned decision-making and respect to legal principles are essential, and courts retain the right to intervene if awards are ruled erroneous or beyond the tribunal’s jurisdiction. Essentially, even though the arbitrator has a great deal of power while assessing the evidence, the arbitrator must act within the bounds of accepted legal norms to maintain the legitimacy and fairness of the arbitration process. [1] Yash Tiwari is a 4th year student of RMLNLU, Lucknow. Ayush Bajpai is a 3rd Year Student of RMLNLU, Lucknow.

  • No Stamps No Problem? Navigating Arbitration Agreements Post ‘In Re: Interplay’

    Anubhav Patidar[1] and Sarthika Singhal [2] Introduction A seven-judge Constitutional Bench of Hon’ble Supreme Court in its recent judgment in Re: Interplay Between Arbitration Agreements Under the Arbitration and Conciliation Act 1996 and the Indian Stamp Act 1899 (‘Re: Interplay’), settled the debate surrounding unstamped arbitration agreements to hold that, notwithstanding that the underlying contract is unstamped, arbitration agreements would not be rendered void or void ab initio or unenforceable. However, unstamped or inadequately stamped agreements would not be admissible in evidence under Section 35 of the Stamp Act. Backdrop of the Ambiguity The conundrum concerning the admissibility and enforceability of unstamped arbitration agreement arose in a three-judge bench of Supreme Court N. N. Global Mercantile (P) Ltd. v. Indo Unique Flame Ltd (‘NN Global-1’). The Bench overruled its previous ruling in SMS Tea Estates (P) Ltd. v. Chandmari Tea Co. (P) Ltd. and Garware Wall Ropes Ltd. v. Coastal Marine Constructions & Engg. Ltd.  (‘Garware Walls’) and clarified that non-payment of stamp duty on the substantive commercial contract will not render the arbitration agreement unenforceable, invalid or non-existent. It emphasized that the absence of proper stamping on an arbitration agreement could be rectified. However, the conclusions in the Vidya Drolia v. Durga Trading Corpn., (‘Vidya Drolia’) by a coordinate bench upheld the decision in the Garware Walls, and the matter, among other things, arose the issue regarding whether the failure to pay stamp duty on the commercial contract would render the arbitration agreement invalid. By a majority of 3:2, a 5-judge constitution bench of the Supreme Court of India addressed this issue in NN Global-2. The ruling stated that an unstamped instrument, subject to stamp duty and containing an arbitration clause, doesn’t qualify as a legally enforceable contract under Section 2(h) of the Indian Contract Act 1872 (‘Contract Act’). Therefore, it cannot be enforced as per Section 2(g) of the Contract Act. Furthermore, the court held that Sections 33 and the restriction outlined in Section 35 of the Stamp Act 1899 (‘Stamp Act’), applicable to instruments liable for stamp duty under Section 3 of the Stamp Act’s Schedule, would invalidate the arbitration agreement in such a document, unless the instrument is validated in accordance with the Stamp Act. This approach hindered the initiation of arbitration proceedings and the formation of arbitral tribunals. In a recent development, a 5-judge Constitution Bench, in Bhaskar Raju & Brothers v. Dharmaratnakara Rai Bahadur Arcot Narainswamy Mudaliar Chattram Other Charities, expressed doubts about the correctness of NN Global 2. Recognizing the broader repercussions and consequences arising from the majority stance in the NN Global-2 in the appointment of arbitrators under Section 11(6A), the proceedings came before a seven-Judge Bench via curative petition. Deconstructing Re: Interplay Before delivering the operative part of the judgment, the Hon’ble Bench provided clarification on the maintainability of reference of the constitutional question to a seven-judge bench. Connoting the issue to have seminal importance in the field of business and commerce in the country, the Bench validated the reference and decided the issue to be left open on facts. The Bench mandated a change in the cause title to: “In Re: Interplay between the arbitration agreements under the Arbitration and Conciliation Act 1996 and the Indian Stamp Act 1899,” to highlight the core focus on the relationship and interaction between arbitration agreements as per the Arbitration and Conciliation Act of 1996 and the stipulations outlined in the Indian Stamp Act of 1899. Doctrine of separability and competence-competence The Bench encapsulated the concept of separability presumption harmonizing with the Kompetenz-Kompetnz doctrine underlying Section 16 of the Arbitration Act. Accordingly, an arbitration agreement would stand independently, unaffected by the legality, invalidity, or termination of the overarching contract. Not only does the doctrine upholds the validity of an arbitration agreement but also empowers the tribunal to assert jurisdiction, decide on its own authority, and validate the arbitration agreement’s existence amidst challenges to the underlying contract’s validity. In a prior ruling, the Supreme Court in NN Global-2 declined to invoke this doctrine within the framework of Sections 33 and 35 of the Stamp Act. Resolving Dilemma between inadmissibility and voidness The Court drew a distinction between inadmissibility and voidness in law. In accordance with Section 2(g) of the Contracts Act, agreements unenforceable by law is said to be void. However, the admissibility of a document revolves around whether it can be introduced in a legal proceeding and whether the court can rely upon it. In essence, while an agreement may be devoid of legal standing and unenforceable, it could still hold relevance as admissible evidence in a court of law. Here, it is important to note that, Section 35 of the Stamp Act renders a document inadmissible and not void. Instruments chargeable with duty, i.e., if they are not properly stamped or unstamped, are only inadmissible not void. Furthermore, Section 42(2) emphasizes that duly stamped instruments are admissible in evidence. This means that the document retains its legal validity but cannot be admitted as evidence in court proceedings unless the stamp duty deficiency is rectified. Unlike void agreements, for which no procedure exists to cure their invalidity, the Stamp Act offers a framework for rectifying the deficiency in stamp duty payments, thereby allowing the document to regain admissibility. Therefore, Bench in Re: Interplay held that non-payment of stamp duty is a curable defect and thereby overruled the judgment in NN-Global 2 which blurred the vital distinction between enforceability and admissibility. Moreover, the Bench clarified the position established in Vidya Drolia, which inaccurately asserted that, following the 2019 Amendment Act, Section 11(6A) would no longer apply. Consequently, a differentiation arises between the term 'validity' found in Section 8 and the term 'existence' in Section 11 of the Arbitration Act. Section 11(6A) obligates the referring court to assess solely the existence of the arbitration agreement and is prohibited from delving into the agreement's validity based on stamping. Reconciling Arbitration v. Revenue Next, the Hon’ble Court was faced with a challenge to reconcile the Arbitration Act, aimed at ensuring an effective arbitration process with minimal court intervention, and the Stamp Act, focused on state revenue. Attempting to uphold the functionality and efficiency of both laws, the Court held that: I. The Arbitration Act will take precedence in matters concerning arbitration agreements, as it is well-established legal principle that a general law must yield to a special law. Additionally, Section 5 of the Arbitration Act contains a non-obstante clause, asserting legislative intent to limit judicial interference during arbitration by prioritizing its provisions over other concurrent laws. II. The appointment of an arbitral tribunal will not by itself validate an agreement in which arbitration clause is contained. The legitimate concerns regarding stamp duty revenue are not defeated because the arbitral tribunal retains jurisdiction to function within the framework provided by the Stamp Act. After the arbitral tribunal is appointed, it can impound the agreement under the Stamp Act’s Section 33 and collect evidence with parties’ consent as per Section 35. This upholds the competence-competence principle, ensuring arbitration remains a swift alternative to lengthy court proceedings. III. The essence of the Stamp Act is preserved as the applicable duty must be settled prior to making the concerned agreement admissible and before the dispute between the involved parties is adjudicated. In this process, Courts uphold a policy of minimal interference (as per Section 5 of the Arbitration Act), a prima facie standard (as stipulated in Sections 8 and 11 of the Arbitration Act), and align with the Stamp Act's objective. This approach aims to prevent delays arising from technicalities that could impede dispute resolution while safeguarding the interests of revenue. The Bench, further highlighted Arbitral Autonomy and notion of Judicial Non-Interference as fundamental pillars within the dynamic realm of arbitration law. The principles encapsulate the freedom granted to parties involved in an arbitration agreement, empowering them to confer upon the arbitral tribunal the authority to resolve potential disputes between them. At its core, they seek to honor the genuine intentions of parties by steering clear of the constraints posed by local judicial biases. Concluding Remarks In conclusion, the recent Supreme Court judgment marks a pivotal departure from the prior NN Global 2 scenario. The NN Global 2 ruling had cast an additional burden on courts, causing setbacks in arbitrator appointments and tarnishing India’s reputation as an arbitration-friendly jurisdiction. The reversal in Re: The Interplay is a welcome stride forward, reinstating the original intent of the Arbitration Act to furnish a swift remedy and endorsing arbitration as the preferred dispute resolution mechanism. This pro-arbitration stance not only dispels uncertainties surrounding unstamped or insufficiently stamped arbitration agreements but also aligns India with global arbitration norms. The judgment ensures that stamping issues won’t impede courts’ exercise of powers under Sections 8 and 11 of the Arbitration Act, fostering a more streamlined approach. The competence-competence principle receives renewed emphasis, underscoring that stamp duty objections should be addressed by the arbitral tribunal once constituted, rather than prematurely by the courts. The ramifications of the 7-Judge Judgment extend to institutional arbitration, rectifying the oversight of NN Global 2 regarding the authority of arbitral institutions to appoint arbitrators. This rectification fortifies the framework of institutional arbitration, addressing longstanding challenges and promoting procedural efficiency. In practical terms, the judgment empowers arbitral tribunals to ascertain the fate of unstamped or inadequately stamped arbitration agreements, even authorizing them to impound such agreements if necessary. This shift triggers a plethora of questions concerning the adequacy of stamp duty paid, potentially impacting the efficiency of arbitral proceedings. The arbitral ecosystem must swiftly adapt to this reality by arming itself to adeptly handle these matters. As stakeholders navigate this new legal landscape, it becomes crucial to recognize the delicate equilibrium achieved by the court. The intersection of arbitration and stamping laws, once a source of ambiguity, is now a terrain of legal clarity. It is a testament to the judiciary’s commitment to fostering a robust and efficient dispute resolution framework while safeguarding the interests of all parties involved. [1]Anubhav Patidar is a 4th Year Student pursuing B.B.A. LL.B. (Hons.) at Narsee Monjee Institute of Management Studies. (anubhav.patidar585@nmims.edu.in) [2]Sarthika Singhal is a 3rd Year Student pursuing B.A. LL. B at Damodaram Sanjivayya National Law University. (sarthikasinghal@dsnlu.ac.in)

  • Navigating Uncharted Territories: ICSID Tribunals’ Power to Remove Counsel

    This article was originally published on the HNLU CCLS Blog on November 23, 2023 (find here). Aarya Parihar* The role of a lawyer is extremely crucial in an arbitration proceeding. The right to effective legal representation of one’s own choice is specifically recognized in various international instruments, like Article 14 of International Covenant on Civil and Political Rights and Article 6 European Convention on Human Rights. Such a right is equally important in investor-State arbitration proceedings, where it may form part of the due process expectations of the parties to the proceedings with serious transgressions from the principle even may potentially constituting a ground to challenge the award itself. The ICSID Convention, Rules, and Regulations do not expressly address the authority of ICSID Tribunals to permit the withdrawal of legal counsel or to compel their continued participation in the proceedings (against their wishes). This post discusses the authority of ICSID Tribunals to exclude or require the presence of particular counsel in a dispute. The post then discusses the existing arbitral decisions on this issue to examine the contours of ICSID Tribunals’ powers in relation to these matters. Do ICSID Tribunals Have the Power to Remove/Exclude Counsel? ICSID Tribunals are formed to resolve treaty disputes between contracting parties. Every dispute has its own separate Tribunal with separate procedural rules agreed by the disputing parties. Arbitration’s inherent nature of being party-centric, where the autonomy of parties is given primacy leads to divergent procedural practices. Additionally, the non-binding nature or lack of precedential character of ICSID awards over other ICSID Tribunals leads to differing awards. Thus, it is essential that before moving to ICSID Tribunals, assistance shall be taken from the federal courts of the United States who have often used their power to decide upon the issue of counsel resignation. Generally, the US Courts look for a good cause, which depends upon the facts and circumstances of every case. Simply put, there is no straitjacket formula to when a counsel can legally stop their representation. It, hugely and majorly, depends upon the peculiar factual matrix of every case and the application of mind by the judge presiding over it. In the realm of ICSID, only a few Tribunals were called upon to decide upon the issue of counsel resignation or removal of counsel. Five of the publicly available awards are from Hrvatska Tribunal, Rompetrol Tribunal, Edmond Khudyan Tribunal, Fraport Tribunal, and Theodore David Einarsson Tribunal. These five orders from five different Tribunals delve into the issue of removal of counsel. In all these five decisions, the Tribunal found its power to remove counsel under Article 44 of the ICSID Convention, which provides for residuary power to the Tribunals. It empowers the Tribunals to decide upon any question of procedure which is not explicitly covered under the ICSID Convention, Rules, and Regulations. Due to the heavy amount of cross-referencing/quoting done in these decisions, it is important to discuss all of them separately and conjointly. The post attempts to cull out only the important dictum from these decisions, which is required to facilitate analysis in the present article. Hrvatska Tribunal In the Hrvatska award, the removal of counsel was warranted because of his apparent connection with one of the arbitrators, which might have caused bias. The Tribunal found that the right to effective representation is pitted against the right to effective and unbiased proceedings. After due deliberation, the Tribunal found itself empowered to rule on this issue by virtue of Article 44 of the ICSID Convention. Rompetrol Tribunal The Respondent in the Rompetrol decision cited the Hrvatska decision as the sole authority to buttress their argument regarding ICSID Tribunals’ authority to exclude counsel from the proceedings. The Tribunal found that it has inherent power to exclude counsels under Article 44 of the ICSID Convention but refused to exercise the same in the present dispute. According to this Tribunal, this power should only be used in exceptionally uncommon circumstances, where the integrity of the whole proceeding is in question/dispute. Edmond and Fraport Tribunals In the decision rendered in Edmond dispute also the Tribunal reiterated that it has the power to exclude participation of counsel under Article 44 of the ICSID Convention. In this case, both parties agreed to this power of the Tribunal without any disagreements. The Tribunal emphasised once again on the requirement of using this power sparingly and only in certain circumstances. It should be used only to protect the integrity and fairness of the proceedings, and to ensure equality of the parties. The Tribunal heavily quoted from the Fraport decision, which also reached similar conclusion. The Fraport Tribunal also imposed the necessary contours of “ensuring fair conduct of the proceedings” while exercising its power under Article 44 of the ICSID Convention. Theodre Einarsson Tribunal Another important decision in this aspect is of the Theodore Einarsson Tribunal, where the Tribunal while deliberating on removal of a counsel outlined that the ICSID Tribunals do not have the power to police the compliance of counsels with their deontological or ethical mandates imposed by any local code/rule. It reasoned that since the issue of removal attacks the core of the fairness of proceedings and thereby a mandate of ICSID Tribunal. The Contours of the Power of ICSID Tribunals to Control Representation of Counsels The Tribunals in all the above-quoted disputes have reasoned that the power to remove counsel is exercised to ensure the fairness and integrity of the proceedings. In both of the decisions in Fraport and Theodore, the Tribunals refused to look into the counsel’s deontological or ethical mandate. They found it outside the purview of their authority, and a question that is to be decided by local or regional courts. It can be understood that the ICSID Tribunals have been reluctant to rule on anything else apart from simply the participation of a counsel. The Author believes that the power to exclude also includes the power to include counsel by overriding the choice of the parties. One important aspect to highlight is the conditions or situations where a counsel can be removed from the ongoing proceedings. Ruling on Counsel’s request for removal The five above-referenced awards did not concern any situation where the Tribunal was required to address a counsel’s request to resign. In almost all of them, there was some kind of bias or conflict between the challenged counsel and an arbitrator. There may arise a situation where the counsel wishes to resign, whether on a voluntary basis or per the desire of an either party that wants their counsel to discontinue representation. In these scenarios, as already stated, the courts generally use their wisdom to decide based on the peculiar facts and circumstances of every case. Generally, counsels decide to withdraw their representation when there is a breakdown of any attorney-client relationship. In simpler words, it is when the attorney has lost faith in his client and their case or vice versa. It is breakdown to such an extent where the representation would only harm the case of the client. Also, it is important to note that the withdrawal should not cause undue or unreasonable delay to the proceeding. This also means that there should be no prejudice caused to any of the parties involved from the withdrawal of a Counsel. In the Jean-Bosco trial, the International Criminal Tribunal (hereinafter “ICT”) for Rwanda denied withdrawal/replacement of counsel because of the possibility of undue delay in the proceedings that would cause prejudice to the parties. It was highlighted in the Jean-Bosco decision, that it is extremely essential for a new counsel to acquaint themselves with the facts, documents and figures of the existing case. Sometimes, this process of getting acquainted with everything also causes an undue delay in the proceedings, and the Courts have rejected the withdrawal for this reason. This similar reasoning was also employed by the ICT for Rwanda in the Jean-Bosco Trial to arrive at the decision of rejecting the withdrawal/replacement of counsel. Suggestions and Conclusion There is an apparent dearth of awards and decisions by ICSID Tribunals on the issue of counsel withdrawal/exclusion. The available awards reiterate the similar reasoning applied by the Tribunals in every dispute. There seems to be a well-founded reluctance by ICSID Tribunals to adjudicate over counsel’s withdrawal or exclusion with full vigour. ICSID Tribunals are constituted mainly to resolve the dispute between investors and States. The contours of a Tribunal’s powers are well-defined in ICSID Convention, Rules, and Regulation. Thus, the Tribunal finds itself in a quagmire or conundrum where the chances of overreach exist. In the light of various awards highlighted in this article, it is abundantly clear that the ICSID Tribunals have discovered their inherent power to decide on any question of “procedure” of the dispute flowing from Article 44 of the ICSID Convention. Issues of counsel’s conduct and obligations are not the mandate of ICSID Tribunals. If the Tribunals are given unfettered power to decide upon the issue of counsel’s ethical obligations, it would open a floodgate of proceedings and would further cause delay in proceedings. This would defeat the purpose of arbitration proceedings, where the primary aim is to promote expediency and efficiency. If a further step could be taken, the ICSID Convention should insert an explicit provision defining the power of its Tribunals to decide upon the issue of counsel resignation/removal, in cases of apparent bias/conflict with the arbitrator or irrevocable breakdown of attorney-client relationship. To develop their contours or limits, the Tribunals may take assistance from decision of local courts and also of international tribunals where the issue of counsel resignation has been discussed in length. *Aarya Parihar B.A. LL.B. (Hons.) | Candidate of 2026 Dr. Ram Manohar Lohiya National Law University.

  • Incorporation of ‘Group of Companies’ Doctrine: Decoding the consent aspect of the SC Ruling

    Digvijay Khatai[1] and Jibisa Janvi Behera[2] I. Introduction On 6th December 2023, the Supreme Court bench comprising Chief Justice of India D.Y. Chandrachud, Justice Hrishikesh Roy, Justice J.B. Pardiwala, Justice Manoj Misra and the concurring judgment of Justice PS Narasimha, retained the ‘group of companies’ doctrine in the Indian Jurisprudence. The ruling was pronounced in the appellate decision of Cox and Kings Ltd v. SAP India Pvt Ltd and Anr. (“Cox and Kings II”). Recognized internationally, the theory holds that a non-signatory may be bound by the terms of an arbitration agreement, if it is a member of the same corporate group as the signatory; and all parties to the agreement intend for the non-signatory to be bound by the agreement. Here, a non-signatory party is someone that has not submitted its ‘written signature’ to the agreement, signifying the absence of an ‘express consent’ to be bound by such agreement. Hence, the primary element, by the virtue of which a non-signatory party is bound by an arbitration agreement is the ‘implied consent’ of such party. There have been several Apex Court rulings that have validly recognized and tried incorporating the said doctrine by upholding its various aspects like mutual intention, economic conveniences etc. However, the jurisprudence did not particularly lay down emphasis on the consensual nature of the doctrine. This gap was recently filled by the Cox and Kings (II) judgement. As such, in this article, the authors specifically analyze how a pragmatic approach towards consent played as the ‘x factor’ in the ruling that successfully retained the doctrine in the Arbitration and Conciliation Act, 1996 (“The Arbitration Act”). II. Brief Facts In 2010, Cox and Kings Ltd. entered into a Software License Agreement with SAP India Private Ltd. for the development of an e-commerce platform.  In 2015, SAP India recommended ‘the Hybris Solution’ to Cox and Kings as it included several benefits. The Agreement comprised three agreements (in particular, contracts), a Software License Agreement, a Support Agreement, and a Services General Terms of Contract Agreement. Further the Services General Terms of Contract Agreement consisted of an arbitration clause. However, due to failure in implementing the Solution, the Hybris Solution’s contractual framework was terminated in 2016, leading to a demand for a refund of Rs. 45 crores by Cox and Kings Ltd. Failed attempts to resolve the matter led SAP India to invoke arbitration, and it further claimed a payment of Rs. 17 Crores, for wrongful termination of the Contract by the Petitioner. The disagreements remained unresolved. The establishment of an Arbitral Tribunal is noteworthy, particularly in light of the exclusion of the second respondent, “SAP SE GMBH” from the Arbitration Proceedings. In addition, Cox & Kings filed an application pursuant to Section 16 of the 1996 Arbitration & Conciliation Act (the "Act"), arguing that the four agreements together constituted a single, composite transaction. Further, in response to an application filed against the Petitioner under Section 7 of the Insolvency and Bankruptcy Code, 2016, the National Company Law Tribunal appointed an Interim Resolution Professional on October 22, 2019. The Corporate Insolvency Resolution Process commenced on November 5, 2019, and NCLT ordered the parties to postpone the arbitration proceedings. Cox & Kings Ltd., this time arraying SAP SE GMBH, sent a second notice of intent to invoke arbitration on November 7, 2019, but SAP India Private Ltd did not reply. Aggrieved, Cox & Kings Ltd. filed an application under Sections 11(6) and l1 (12) (a) of the Arbitration Act with the Hon’ble Supreme Court of India, requesting the setting up of an Arbitral Tribunal. In Cox and Kings Limited v. SAP India Private Limited and Another, pronounced by Chief Justice N.V. Ramana on May 06, 2022 (“Cox and Kings (I)"), the former Chief Justice criticized the group of companies’ doctrine applicability in India, raising questions about its basis and emphasizing caution. In contrast, Justice Surya Kant supported the doctrine but referred critical legal questions to a larger bench that read as follows - 1.    Whether the group of companies doctrine should be read into Section 8 of the Act or whether it can exist in Indian jurisprudence independent of any statutory provision; 2.    Whether the group of companies doctrine should continue to be invoked on the basis of the principle of ‘single economic reality’; 3.    Whether the group of companies doctrine should be construed as a means of interpreting implied consent intent to arbitrate between the parties; 4.    Whether the principle of alter ego/and or piercing the corporate veil can alone justify pressing the group of companies doctrine into operation even in the absence of implied consent. The blog limits its scope to the current Cox and Kings 2023 (II) judgment, and hence the issues recognised in the Cox & Kings (I) have only been provided as an advent to the same. III. Issues The principle of ‘privy/ privity of contract’, arising from the Indian Contract Act, 1872, mandates that parties to an agreement are the only entities against whom terms of the agreement can be enforced. This principle primarily stems from the assumption that – it is only the parties – that have consented to the agreement. Nonetheless, consent can be expressed in two forms i.e. implied and expressed. While it is easier to identify express consent that emanates from direct written or oral form, implied consent is inferred from the implicit behavior or conduct of the concerned party. In the case of written agreements, consent is expressed in the form of a signature and the party doing so is also known as the ‘signatory to the agreement’. Here it is also important to maintain the difference between ‘signatory’ and ‘party’ to the arbitration agreement. Similarly, arbitration agreements are agreements between parties of a pre-existing agreement, to submit to arbitration in the event of a future dispute between them. Section 7 of the Arbitration Act governs arbitration agreements in India. Further, sub-section 7(3) of the Arbitration Act recognizes the same in the form of ‘written agreements’ only. The group of companies’ doctrine seeks to bind a non-signatory party by the virtue of its membership in the same group of companies who constitute as a party to the agreement. With the absence of an ‘express consent’ in the form of a signature on behalf of the non-signatory party, the core element that binds such party to the agreement is its ‘implied consent’ to be bound by the arbitration agreement. The deduction of such implied consent is completely based on the facts and circumstance of the case. However, at the same time, “[s]ince consent forms the cornerstone of arbitration, a non-signatory cannot be forcibly made a “party” to an arbitration agreement, as doing so would violate the sacrosanct principles of privity of contract and party autonomy.” (Paragraph 65) Where Section 7 of the Arbitration Act recognizes arbitration agreements in written forms only, a valid question arises as to whether written agreements accommodate recording implied consent under it. Therefore, the Constitution Bench recognized two critical questions under the consent part of the judgement. 1.    Is it necessary for a party to be a ‘signatory’ of the arbitration agreement to be bound by the same. 2.    Does implied consent come under the ambit of Section 7 of the Act that rigidly recognizes arbitration agreements in written forms only? In the following sections, the authors have highlighted how adjudacting these questions led to the successful incorporation of the doctrine and where the judicial precedents have failed to do the same. IV. Judicial Precedents There are several precedents in the field of arbitration law that have laid down circumstantial grounds to bind non-signatories to arbitration agreements. In Chloro Control (P) Ltd v. Severn Trent Water Purification Inc. (“Chloro Control”), the Supreme Court laid down several grounds on which a non-signatory could be bound by the arbitration agreement. As per the ruling, the non-signatory not only needed to share a direct legal relationship with the signatories to the agreement and but must also have a direct commonality to the subject-matter of such a transaction. Relying on the Chloro Control (supra) judgment, the Supreme Court in Ameet Lalchand Shah v. Rishabh Enterprises held that in arbitral disputes where several interconnected agreements exist among parties (involving both signatories and non-signatories), all the parties can be referred to arbitration by the virtue of their participation in interconnected agreements. Similarly, a two-judge bench of the Apex court in Reckitt Benckiser (India) Private Limited v. Reynders Label Printing India Private Limited held that for a non-signatory to be bound by an arbitration agreement, it needs to have a ‘causal relationship’ with negotiations preceding the agreement. The causal relationshop contextually refers to the ‘active involvement’ of the concerned non-signatory party in the negotiations of the concerned transaction before its execution. The doctrine’s purport was also under question in Cheran Properties v. Kasturi Sons Pvt Ltd & Ors (2021),where the Apex Court observed that, the doctrine intends to facilitate the fulfilment of a mutually held intent between parties, where the circumstances indicated the intention to bind non-signatories as well. It binds a party who assumes obligations in layered business transactions without formally being a signatory to it. Lastly, the Supreme Court in the ONGC v. Discovery Enterprises noted that a non-signatory may be bound by an arbitration agreement, where (a) there exists a group of companies; and (b) the parties have made statements or engaged in conduct indicating an intention to bind a non-signatory. It thus, established a dual requirement for the application of the doctrine. Further, it reiterated that the present law on the subject considers the following factors: (a) mutual intent of parties; (b) relationship of a non-signatory to a signatory; (c) commonality of the subject-matter; (d) composite nature of the transaction; and (e) performance of the contract. The group of companies doctrine traces its origins from the French case Dow Chemical Vs. Isover Saint Gobain adjudicated by the International Chamber of Commerce Tribunal (“ICC”). Seeking to determine its jurisdiction over non-signatories, the ICC tribunal tried to discover the ‘common intention’ of the parties to be part of the negotiation and performance of the agreement. The tribunal concluded that if an ‘intention’ of the parties could be discovered from their actions, to be bound by the process of negotiation and performance of the agreement, then the parties can be said to be ‘parties to the agreement’. This additionally made the non-signatory parties to the arbitration. The case has also emphasized upon the inclusion of implied consent under the ambit of written agreements. Now, it can be inferred from the domestic rulings that none of them precisely answer the questions and issues discussed in the previous section. The SC in its previous rulings, has not been cognizant of the issue of including implied consent under written arbitration agreements. Although the Discovery Enterprises tried laying down guidelines for including almost every aspect of the doctrine, it overlooked the ‘consent aspect’ of the doctrine. In the following section, the authors attempt to demonstrate how the Court has finally laid down to rest the issues raised in the previous section. V. Parties Being Non-Signatories Before scrutinizing the ambit of Section 7 of the Arbitration Act, the Court had to first look at the meaning of ‘parties’ in the context of arbitration agreements. The Court noted, that as per Section 2(h) of the Arbitration Act a ‘party’ refers to ‘any party to an arbitration agreement’. The Court also took note of how Section 7 of the Arbitration Act recognizes arbitration agreements in writing and in three different forms as per sub-section 7(4). The Court observed that Section 7 has both aspects i.e. formal and substantive. The substantive aspect has been captured in sub-section 7(1) that forms a legal relationship between parties to submit to dispute to arbitration in the event of any dispute arising out of the contractual relationship. Legal relationships that are contractual in nature have to abide by the Indian Contract Act, 1872. The Court further emphasized that contracts can be both express and implied. In words of the bench, as per paragraph 74 of judgment, “[t]hus, it is not necessary for the persons or entities to be signatories to a contract to enter into a legal relationship – the only important aspect to be determined is whether they intended or consented to enter into the legal relationship by the dint of their action or conduct’. Similarly in paragraph 75, examining sub-section 7(3) of the Arbitration Act, the Bench held that “[t]he mandatory requirement of a written arbitration agreement is merely to ensure that there is a clearly established record of the consent of the parties to refer their disputes to arbitration to the exclusion of the domestic courts”. To substantiate its stand, the Bench referred to Article 7 of the UNCITRAL Model Law. The Article states that an arbitration agreement may be entered into in any form, for example orally or tacitly, as long as the content of the agreement is recorded. It eliminates the requirement of the signature of parties or an exchange of messages between the parties. When recorded in writing under Section 7 of the Arbitration Act, a ‘signature’ is an expressed or formalistic version of signifying consent to an agreement, which directs towards the idea of ‘express consent’. In regard to ‘implied consent’ under the ambit of written arbitration agreements, there is no explicit provision in the existing legal framework. However, it is important to note that Section 7 of the Arbitration Act does not explicitly speak on whether it requires consent to be similarly recorded in an expressed form, or it subsumes implied consent under it. This ambiguity proves to be a major impediment in the incorporation of the group of companies’ doctrine that binds non-signatories to an arbitration agreement by the virtue of their implied consent. Before scrutinizing the ambit of Section 7 of the Arbitration Act, the Court had to first look at the meaning of ‘parties’ in the context of arbitration agreements. The Court noted in Paragraph 73 of the judgment, that as per Section 2(h) of the Arbitration Act a ‘party’ refers to any party to an arbitration agreement. The Court also took note of Section 7’s rigid requirement of arbitration agreement in written form only and the three different forms as per sub-section 7(4) namely – a)    a document signed by the parties. b)    an exchange of letters, telex, telegrams, or other means of telecommunication 1[including communication through electronic means] which provide a record of the agreement; or c)    an exchange of statements of claim and defence in which the existence of the agreement is alleged by one party and not denied by the other. The Court observed that Section 7 has both aspects i.e., formal and substantive in sub-sections 7(3) and 7(1) respectively. The substantive aspect has been captured in sub-section 7(1) that forms a legal relationship between parties to submit to dispute at the event of any dispute. The Court also noted that, as similar to contracts, consent to a legal relationship can be both implied or expressed and the same has to be inferred from the conduct of the parties. As per paragraph 74 of judgment, “The legal relationships between and among parties could either be contractual or non-contractual. For legal relations to be contractual in nature, they ought to meet the requirements of the Indian contract law as contained in the Contract Act. It has been shown in the preceding paragraphs that a contract can either be express or implied, which is inferred on the basis of action or conduct of the parties. Thus, it is not necessary for the persons or entities to be signatories to a contract to enter into a legal relationship – the only important aspect to be determined is whether they intended or consented to enter into the legal relationship by the dint of their action or conduct”. Hence, the Bench prioritized the presence of consent of a party, over the manner in which the same is discovered i.e., expressed or implied, in order to bind such party to an agreement. Hence, the Court ruled in paragraph 76 that “Section 2(h) read with Section 7 does not expressly require the “party” to be a signatory to an arbitration agreement or the underlying contract containing the arbitration agreement”. Hence after reading Section 7, the Court held that it is not necessary for the persons or entities to be signatories to the arbitration agreement to be bound by it. In case of non-signatory parties, the important determination for the courts is whether the persons or entities intended or ‘consented’ to be bound by the arbitration agreement or the underlying contract containing the arbitration agreement through their acts or conduct. VI. Consent- A Pragmatic Approach The Constitutional Bench observed that there often arise situations where a company which has signed the contract containing the arbitration clause is not always the one to negotiate or perform the underlying contractual obligations. In such situations, emphasis on formal consent will lead to the exclusion of such non-signatories from the ambit of the arbitration agreement, leading to multiplicity of proceedings and fragmentation of disputes. Hence, the Court felt the need for a more pragmatic approach towards consent. Paragraph 93 of the ruling took note of Professor Hanotiau who suggested that “it is more accurate to refer to a modern approach to consent; an approach that is more pragmatic, more focussed on an analysis of facts, which places an emphasis on commercial practice, economic reality, trade usages, and the complex and multifaceted dimensions of large projects involving group of companies and connected agreements in multiparty multi-contract scenarios; an approach that is no longer restricted to express consent but that takes into consideration all its various expressions and tends to give much more importance than before to the conduct of the individuals or companies concerned”. Evidently, the need for the recognition of implied consent is being talked about, in world of business and commercial agreements that restrict their understanding of consent in an express form i.e., signature only. Looking at the modern-day businesses involving complex multiparty contractual agreements, the Court understood the context how the group of companies’ doctrine was created to bind non-signatory parties who were implicated in subject matter of the dispute of arbitration. Hence, the Court expressed its concluding opinion in paragraph 128 of the ruling which states “[w]e hold that all the cumulative factors laid down in Discovery Enterprises (supra) must be considered while determining the applicability of the group of companies doctrine. However, the application of the above factors has to be fact-specific, and this Court cannot tie the hands of the courts or tribunals by laying down how much weightage they ought to give to the above factors. This approach ensures that a dogmatic emphasis on express consent is eschewed in favour of a modern approach to consent which focuses on the factual analysis, complexity of commercial projects, and thereby increases the relevance of arbitration in multi-party disputes. Moreover, it is also keeping in line with the objectives of the Arbitration Act which aims to make the Indian arbitration law more responsive to the contemporary requirements’. The bench took note of the fact Indian arbitration law is both domestic and international in nature and needs to abide by principles of contracts and corporate law recognised internationally. Finally, the court concluded the consent aspect of judgment in the following three points:- a)    The definition of “parties” under Section 2(1)(h) read with Section 7 of the Arbitration Act includes both the signatory as well as non-signatory parties. b)    Conduct of the non-signatory parties could be an indicator of their consent to be bound by the arbitration agreement. c)    The requirement of a written arbitration agreement under Section 7 does not exclude the possibility of binding non-signatory parties. With such an inclusive approach towards, the court held that requirement of written agreements Section 7 of the Arbitration act does not exclude a non-signatory party from being bound by an arbitration agreement solely due to the absence of a formal signature of such party. This pragmatic construal of consent coupled with the holistic application of guidelines laid down in Discovery Enterprises (Supra) leads to the successful integration of the group of companies doctrine into the existing legal framework. VI. Conclusion In this article, the authors have fairly pointed out the ‘x factor’ that segregates this landmark judgment of the Supreme Court from its previous ones i.e. a pragmatic approach towards consent. The authors also bring to the notice that the group of companies’ doctrine is consent based doctrine, and any effort to integrate the doctrine into the legal system also requires recognition of implied consent by the parties to be bound by an arbitration agreement. Further the Court has also set a pathbreaking precedent that emphasizes the importance of taking an inclusive approach towards implied consent while dealing with disputes pertaining to legal relationships. Hence, the ruling can be considered a welcome one in the field of not only arbitration law but corporate legal system in general. [1] Digvijay Khatai is a second-year B.A. LL.B. Student at National Law University, Odisha. EMAIL: 22ba037@nluo.ac.in [2] Jibisa Janvi Behera is a second-year B.A. LL.B. Student at National Law University, Odisha. EMAIL: 22ba044@nluo.ac.in

  • Clarity Amidst Controversy: Has Green Light been given on Unstamped Arbitration Agreements?

    Kushagra Tolambia I. Introduction The interpretation of unstamped arbitration agreements has been a contentious issue before various Courts worldwide. The Indian Supreme Court, for instance, has faced numerous cases dealing with the enforceability of arbitration clauses within unstamped contracts. Historically, the Court's stance leaned towards upholding the validity of arbitration agreements, even in unstamped contracts, if the agreement itself could be treated independently from the underlying contract. The Indian Arbitration and Conciliation Act, 1996, was enacted to align with international practices and streamline the arbitration process. Section 11 of the Act empowers the court to appoint arbitrators unless the agreement is null and void, inoperative, or incapable of being performed. The Supreme Court, in a series of landmark judgements, emphasized the separability doctrine, asserting that an arbitration agreement could exist independently from the underlying contract. Recently, a seven judge bench of the Supreme Court in the case of In Re: Interplay between Arbitration Agreements under the Arbitration and Conciliation Act, 1996 And the Indian Stamp Act, 1899 (“In Re: The Interplay”), has upheld the validity of unstamped or inadequately stamped agreements in an arbitration proceeding. II. What is the issue about? The issue arose in the context of the interplay between the Arbitration and Conciliation Act, 1996 (“the Act, 1996”), the Indian Stamp Act, 1899 (“the Stamp Act, 1899”)and the Indian Contract Act, 1872 (“the Contract Act, 1872”). Under the Stamp Act, 1899, an instrument which is unstamped or inadequately stamped is inadmissible in evidence and cannot be acted upon. Often, contracts containing arbitration clauses are unstamped. When a party seeks appointment of an arbitrator under Section 11 of the Act, 1996, objections are raised that the arbitration agreement is inadmissible since the underlying contract is unstamped. The key question was whether such an unstamped contract (and consequently the arbitration agreement) would be non-existent, unenforceable or invalid. In N.N. Global Mercantile (P) Ltd. v. Indo Unique Flame Ltd.,2021 (“N.N. Global"), a three-judge bench held that an arbitration agreement is separate and distinct from the underlying commercial contract, and would remain valid and enforceable despite the contract being unstamped. This view differed from the earlier judgments in SMS Tea Estates v. Chandmari Tea Co. P. Ltd. (“SMS Tea Estates”) and Garware Wall Ropes Ltd. v. Coastal Marine Constructions & Engg. Ltd (“Garware Wall Ropes”). A five-judge Constitution Bench in N.N. Global Mercantile (P) Ltd. v. Indo Unique Flame Ltd., 2023 (“the N.N. Global (II)”)” subsequently affirmed SMS Tea Estates and Garware Wall Ropes and held that an unstamped contract containing an arbitration clause is void under Section 2(g) of the Indian Contract Act, 1872, and the arbitration agreement cannot be acted upon until the underlying contract is duly stamped. Thereafter, a three-judge bench decision in Vidya Drolia v. Durga Trading Corporation, 2020 cited SMS Tea Estates and Garware Wall Ropes with approval. This led to a reference before a larger seven-judge bench in the case of In Re: The Interplay to reconsider the correctness of N.N. Global and related issues concerning stamping of arbitration agreements. III. The Court’s Conclusion? 1.  Unstamped instruments are inadmissible in evidence but not void The Court held that merely being unstamped does not render an instrument void under the Stamp Act 1899. The consequence of non-payment of stamp duty is that the instrument is inadmissible in evidence. However, this does not amount to invalidity. Being a fiscal statute, the Stamp Act, 1899 renders an instrument inadmissible in evidence to ensure payment of stamp duty. It does not prescribe the substantive consequences of voidness, unenforceability or non-existence. 2. Non-stamping is a curable defect The Court held that non-stamping or insufficient stamping is merely a curable defect. The Stamp Act itself provides a procedure for having the instrument stamped on payment of requisite stamp duty and penalty. This indicates that unstamped instruments are not void ab initio. There is no procedure for ‘curing’ a void instrument. 3. Arbitration agreements are valid despite unstamped underlying contract The Court relied on the doctrine of separability enshrined in Section 16 of the Act, 1996 to hold that an arbitration agreement contained in an unstamped underlying contract remains valid and enforceable. The non-stamping of the substantive contract does not ipso facto invalidate the arbitration agreement therein, since the latter is a separate agreement. 4. Limited prima facie examination under Section 11 of the Act, 1966 Under Section 11, a court is confined to examining the existence of an arbitration agreement prima facie. It cannot undertake a detailed adjudication on stamping or impound the instrument at the pre-arbitral stage. This would undermine the competence-competence principle and the arbitral tribunal’s jurisdiction. Issues of stamp duty and impounding fall within the domain of the arbitrators. 5. The Act, 1996 has primacy over the Stamp Act, 1899 with respect to arbitration agreements The Court held that the Act, 1996 being a special law governing arbitrations, will prevail over the more general Stamp Act, 1899 and Contract Act, 1872 qua arbitration agreements. The minimal judicial intervention mandate of Section 5 of the Act, 1996 implies that provisions of the Stamp Act, 1899 cannot interfere with the operation of the Arbitration Act, which has primacy. IV. Settling Down the Controversy of Unstamped Arbitration Agreements (Analysis) The Supreme Court's judgment settles the controversy on the validity of arbitration agreements in unstamped contracts. It steers a middle path so that neither the Act, 1996 nor the Stamp Act, 1899 is rendered otiose. The ruling upholds party autonomy and the competence-competence principle which are cornerstones of arbitration law. At the same time, it preserves the object of the Stamp Act, 1899 in securing revenue by requiring payment of stamp duty before the underlying contract is acted upon. By holding that unstamped instruments are not void ab initio, the Court followed a long line of precedents including Thiruvengadam Pillai v. Navaneethammal, 2008 and Gulzari Lal Marwari v. Ramgopal 1936 which had distinguished between voidness and inadmissibility. The Court correctly held that the Stamp Act, 1899 renders a document inadmissible in evidence and not void or invalid. The ruling settles this confusion in jurisprudence. The Court has also authoritatively applied the doctrine of separability to hold that defects in the underlying contract do not ipso facto invalidate the arbitration clause, which remains a distinct agreement. This finding accords with international arbitration jurisprudence and gives full effect to party autonomy. The judgment helpfully clarifies the contours of Sections 8 and 11 of the Act, 1996. The prima-facie existence test under Section 11 excludes issues of stamping which must be left to the arbitrators. This upholds competence-competence and speedy constitution of tribunals. At the same time, issues of stamp duty can be agitated later during arbitration or challenge to the award. V. Implications of the Judgment The Supreme Court's judgment will have far-reaching implications. First, it settles the law by holding that unstamped contracts and arbitration agreements are not void or invalid. Second, it secures the validity of India's position as an arbitration friendly jurisdiction and a global hub for international arbitrations. Third, it upholds party autonomy and minimises judicial intervention at the pre-arbitral stage. Fourth, it reduces litigation over the appointment of arbitrators and ensures speedy constitution of tribunals. Commercially, the judgment is a boon for business transactions and contracts containing arbitration clauses. Parties need not rush to pay stamp duty at the time of execution for fear of subsequent invalidation. The ruling incentivises business entities to choose arbitration over litigation. At the same time, it preserves the revenue interests of states since stamp duty remains payable before substantive rights and obligations under a contract can be enforced. For arbitral institutions and foreign parties, the verdict assures that unstamped contracts will not derail India-seated arbitrations at the outset. It promotes arbitration as a time and cost effective dispute resolution mechanism. Court delays over impounding contracts at the pre-arbitral stage will also reduce. However, courts can still test the validity and enforceability of unstamped underlying contracts if an award is challenged on such grounds later under Section 34 of the Act, 1996. VI. The Way Forward The Supreme Court has given a pro-arbitration interpretation to reconcile party autonomy under the Act, 1996 with the state's fiscal interests under the Stamp Act, 1899. Lower courts must adhere to this authoritative pronouncement and refrain from delaying arbitration proceedings due to unstamped contracts. However, access to justice concerns may arise if arbitration becomes an exclusive domain for affluent parties, while weaker parties are unable to invoke arbitration due to procedural costs and delays in stamping contracts. Courts should adopt a balanced approach. For domestic and small-value disputes, substantial stamping compliance must be ensured at the initial stage itself. For high-value commercial and international arbitrations, exorbitant stamp duty requirements should not hamper arbitration. The onus is also on states to rationalize and simplify stamp duty administration, adopt technology solutions and minimize penal consequences for unstamped instruments. This will complement the Supreme Court's judgment in fulfilling the objectives of both the Stamp Act, 1899 and the Act, 1996. The ruling lays the ground for India's economic growth, global role and emergence as an arbitration hub. *Kushagra Tolambia is a third-year B.A. LL.B (Hons.) student at National Law University, Lucknow

bottom of page