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-Samarth Kapoor[1] Introduction Arbitration is considered an alternative to traditional Court litigation. Comparing both the mechanisms of dispute resolution gives an idea that arbitration has an edge over the age-old traditional court litigation as the former offers more privacy, is speedy in nature when it comes to redressal of disputes and is less expensive than the latter. However, the present arbitration regime in India is proving to be wrong in terms of affordability. The high cost of arbitration is making the whole regime unsuccessful and as the cost has various factors involved in it, the need to overlook the same becomes extremely important. Due to the absence of any authoritative regime regarding the arbitration cost, the issue pertaining to the same is persistent. But now the Supreme Court has settled down the debate with regard to the cost of the arbitrators. In the judgment pronounced recently, the Hon’ble Supreme Court settled a few disputes as to the nature of the Fourth Schedule of the Arbitration Act, at what stage the arbitrator’s fees should be fixed and the interpretation of the sum in dispute as mentioned in the Fourth Schedule. The Law Commission had earlier suggested the changes with regard to the fees of the Arbitrators and the same were incorporated in the Amendment Act 2015 and 2019. The amendment came in 2015 and introduced the Fourth Schedule (which was crafted on the basis of the Delhi International Arbitration Centre (Administrative Costs & Arbitrators’ fees) Rules (DIAC Rules) Model Fee) and inserted Section 31A in the Arbitration Act, 1996 (“Arbitration Act”) through which the cost regime was defined and the said provision defines the term “costs” to be considered for a particular set of arbitration. Through the 2019 Amendment, sub-section 3A was inserted in Section 11 which stipulates that the Arbitrator appointed by the parties shall have to abide by the rates specified in the Fourth Schedule. However, the Courts had observed otherwise, as some recognized it to be suggestive in nature in cases where the arbitrator was appointed by the parties and mandatory where the tribunal has been constituted by the Court. Now the differing views of the High Court made a ruckus in the present cost regime. Considering the fact that the Arbitrator works as an adjudicating body and for the work they do, remuneration should be given but what should be the quantum of the same? The fee structure should align with the intention of the Arbitration Act. If Arbitration costs more than litigation or some other method of dispute resolution then what is the point of having it as an alternative, all the efforts of the legislature and the judiciary will be wasted that were taken till now. It’s important to analyze the present legal regime related to the Arbitration cost and for that, it becomes important to look at the provisions of the Arbitration act governing this aspect and the amendment that came into effect in 2015 that changed the cost regime specifically focusing on the goal of increasing the affordability of the Arbitration. Interpretation of Section 31A: What is the intention behind the amendment? In the judgment of the Union of India v. Singh Builders Syndicate (“Singh Builders”), the Supreme Court took note of the exorbitant fees charged by the Arbitrators and held that, “What is found to be objectionable is parties being forced to go to an arbitrator appointed by the court and then being forced to agree for a fee fixed by such Arbitrator. It is unfortunate that delays, high costs, and frequent and sometimes unwarranted judicial interruptions at different stages are seriously hampering the growth of arbitration as an effective dispute resolution process. Delay and high cost are two areas where the Arbitrators by self-regulation can bring about marked improvement.” While discussing the issue of arbitration cost, the Supreme Court also took note of Institutional Arbitration and the benefits of the same as they have a fixed schedule of fees which causes less hindrance in the Arbitration procedure as the Arbitrators are bound by the same. The same suggestive view was taken by the Supreme Court in the case of Sanjeev Kumar Jain v. Raghubir Saran Charitable Trust, wherein it was suggested to have reasonability while deciding the costs, to disclose the fee structure before the appointment of the arbitrator, and every High Court to have a scale of Arbitrator’s fee calibrated with reference to the amount involved in the dispute. Taking note of the judgment, the Law Commission of India in its 246th Report recommended some amendments to the Arbitration Act with regard to having a model schedule of fees. Pursuant to the report, the Amendment Act of 2015 came into existence and Fourth Schedule was introduced in the 1996 Act along with Section 31A. Both these provisions were introduced to tighten the loose end (Arbitrators fees), but the wordings preferred in both provisions were deemed to be of no use as it implies discretion on the Courts and on the tribunal to decide the Cost. Section 31A of the Act covers fees and expenses of the arbitrators, administrative fees of the arbitral institution, and other expenses related to arbitral proceedings and the award. The point to be considered here is the reasonability of costs that can be recovered and not the actual costs, hence, this means that to determine the reasonableness of the costs, the factors will vary and will depend upon case to case basis.[2] Section 31A(2) of the Act states the position as to who will bear the cost of the arbitration wherein the general rule will be governed by the Loser pays principle and departure from the same will warrant a reasoned order. The provision starts with the word “if” which implies discretion on the Court or the tribunal to make an order as to the payment of costs. The wordings of the provision are not in consonance with the intention of the legislature which introduced the new regime on costs.[3] After introducing Section 31A, it was presumed that Courts will take note of the provision and the cost part will be dealt with by the Courts or the tribunals at the early stage of the arbitration proceedings but to the surprise of everyone, neither the courts nor the tribunals took efforts to determine the costs because of the discretion provided in the provision which makes the introduction of Section 31A pointless. Meaning of “Costs”: What we can infer? As per the explanation provided under Section 31A(1) of the Arbitration Act, the costs consist of different components such as fees and expenses of the arbitrators and courts, administrative fees of the arbitral tribunal, legal and other expenses incurred with regard to the arbitration and court proceedings. However, what is defined in the explanation is the reasonable costs and not the actual costs incurred by the parties, hence, the degree of variance may differ on a case-to-case basis. The assessment to determine the reasonability of the costs incurred is not straightforward and the factors that need to be taken into consideration may vary. What is covered within the scope of costs defined is the cost of reference which is broader in nature and which means costs incurred by the parties while adjudicating the matter before the arbitral tribunal and another one is the cost of the award which means the administrative cost of the reference.[4] In the case of ONGC Ltd. v. Dolphin Offshore Enterprises (India) Ltd., the Bombay High Court observed the meaning of the term “Costs” and held that the cost of the proceedings includes the cost of reference, cost of the arbitration proceedings, and cost of the parties. It should be the case that the winning party be compensated not just the arbitral tribunal’s fee but all the expenses borne by the party during the arbitral proceedings. The Hon’ble Supreme Court in the case of National Highway Authority of India v. Gayatri Jhansi Roadways Ltd., held that arbitrator’s fees can be counted under the head of “costs”, but it might not be the case that Sections 31(8) and 31A would directly govern the contracts in which a fee structure has been provided. What is covered within the definition of the Costs is related to the reasonable amount that can be claimed by the party which is incurred during the arbitral proceedings. The only catch is the subjectivity involved with this which makes it difficult for the parties to reach a conclusion as to what can be termed as a reasonable cost and whatnot. NATURE OF FOURTH SCHEDULE: MANDATORY OR DISCRETIONARY? In the case of DSIIDC Ltd. v. Bawana Infra Development Pvt. Ltd., wherein the issue was raised as to the mandatory nature of the Fourth Schedule and whether the arbitrator is bound to follow the same. Answering the question in the negative, the Delhi High Court held that in the case where the arbitrator is appointed by the parties the fee schedule is decided by the arbitrator if no agreement is there in place and if the arbitrator is appointed by the Court u/s 11 of the Arbitration Act, the rules framed by the High Court u/s 11(4) will govern the arbitrator’s fees and in absence of the same, Fourth Schedule will be directory in nature. On a similar footing, in the case of Kumar & Kumar Associates v. Union of India, wherein the arbitrator was appointed u/s 11 of the Act, the Court made a strict direction that the Fourth Schedule will be binding on the Arbitrator. In the case of NHAI v. Gayatri Jhansi Roadways Ltd., the Delhi High Court observed that if the parties have decided the fees while appointing the arbitrator then the Fourth Schedule will not be mandatory to follow in determining the Fees of the Arbitrators but this will be the picture only in cases of Ad-Hoc Arbitration and in other scenarios the parties will not be at any liberty to enter into an agreement with regards to the fees of the Arbitrators. Similarly, in the case of Pashchimanchal Vidyut Vitran Nigam v. IL& FS Engineering and Construction Co. Ltd., the arbitrator was appointed by the parties and the Court observed that no power has been vested in the Courts to determine the fees of the arbitrators, and Fourth Schedule is merely suggestive in nature keeping note of Section 11(1) of the Act. In the case of G.S. Developers & Contractors Pvt. Ltd. v. Alpha Corp. Development Pvt. Ltd., the Delhi HC held that the Fourth Schedule is mere guiding in nature as the same has not been incorporated in the Rules by the High Court, hence, the Arbitrator is free to determine his own fee. With regards to the question of determining the fees of the Arbitrators when there exists an agreement pursuant to the same, the Bombay HC in the case of Transocean Drilling Services (India) Pvt. Ltd. v. ONGC Ltd., observed that the tribunal is bound by the agreement signed between the parties as it is the source of the tribunal’s power. CEILING AMOUNT IN THE FOURTH SCHEDULE: WHAT EXACTLY DOES THE PROVISION TRANSPIRE The Fourth Schedule enlists two conditions - first when the tribunal consists of a sole arbitrator and the other where it consists of two or more arbitrators. In both situations the schedule specifies a ceiling amount as fees that are to be paid to the tribunal which is Rs. 30,00,000/- in cases where the tribunal consists of two or more arbitrators and Rs. 37,50,000/- in cases where the matter has been adjudicated by the sole arbitrator. The wide interpretation of the schedule has given rise to a lack of uniformity but the question remains the same whether the Fourth Schedule is mandatory or directory in nature in cases of Ad-Hoc Arbitrations. The Supreme Court in the recent judgment of Oil and Natural Gas Corporation Ltd. v. Afcons Gunanusa JV (“Afcons Judgment”), the issue was regarding the computation of ceiling amount by interpreting the sixth entry of the fourth schedule. The entry defined the sum in dispute and the model fee which can be charged by the Arbitrator(s). As per the sixth entry, there are 3 sects, first is that the if the amount involved in the arbitration is Rs. 20,00,00,000/- the fee charged by the arbitrator(s) will be Rs. 19,87,500/-. Secondly, if the amount exceeds Rs. 20,00,00,000/-, for every amount exceeding the 20,00,00,000/- cap, 0.5% of that amount (variable amount) will be charged by the arbitrator(s) in addition to their prescribed fees of Rs. 19,87,500/-. Lastly, there exists a restriction on the maximum amount that is to be charged by the arbitrator(s) which is Rs. 30,00,000/. Now, the whole issue is related to the interpretation of the ceiling limit of Rs. 30,00,000/-, i.e., whether the ceiling limit is for the whole fees including the fee given and the variable amount or does it applies to only the variable amount, i.e., extra 0.5% amount that is to be paid if the amount involved in the dispute is exceeding Rs. 20,00,00,000/-. The Supreme Court had an issue with a different grammatical sense of the act culminating in the English and the Hindi version of the Arbitration Act. The issue was that in the English version of the Arbitration Act, at Serial No. 6 of the Fourth Schedule, there exists no comma and because of this reason, the construction of the language conveys the meaning that the ceiling should only be applicable to the variable amount. While deciding on this aspect the Supreme Court took the task to cull out the legislative intent behind this provision. While referring to the DIAC Rules from where the sixth schedule has been taken, the Supreme Court noted that the rule consists of a comma and this ultimately entails that the ceiling would be applicable to the base amount and the variable amount. The Hon’ble Supreme Court while referring to the 246th Law Commission Report and the intent indicated by the same held that the introduction of the Fourth Schedule was to put an end to the exorbitant fees charged by the arbitrators, and if there are 2 options available for the legislature to select, it would be appropriate to choose the lower amount since it goes parallel to the legislative intent. The Patna High Court in the case of State of Bihar v. Bihar State Sugarcane Corporation Ltd. had held that the ceiling of Rs. 30,00,000/- as referred in Entry No. 6 of the fourth schedule is applicable to both the base amount and the variable amount. However, disagreeing with the ratio of Bihar State Sugarcane, the Delhi High Court in the case of Rail Vikas Nigam Ltd. Simplex Infrastructures Ltd., had held that the usage of the word “plus” in Entry No. 6 would entail an inference that the ceiling is applicable to variable amount only. The judgment of the Delhi High Court was challenged before the Supreme Court which was upheld in the Afcons Judgment. The Schedule specifies the ceiling limit in two different scenarios, however, it failed to notice that whether in the case of a tribunal consisting of two or more arbitrators, the fees prescribed are to be divided separately considering the ceiling limit of Rs. 30,00,000/- to be collective in nature or the ceiling limit will be considered individually.[5] In the case of Punjab State Power Corp. Ltd. v. Union of India,[6] the Punjab & Haryana High Court while deciding the quantum of fees of the tribunal consisting of three arbitrators posed the question that whether the fees are to be paid individually on a pro-rata basis or be paid collectively to the arbitrators. Diverging from the general norm, the High Court held that the fees will be calculated by 1/3rd pro-rata distribution of the composite fees determined under the Fourth Schedule. If we go by the same rationale, then it will go against the intention of the legislature that focuses on the good treatment of the arbitrators which will further the case of an arbitration-friendly environment. However, the Supreme Court in the Afcons Judgment resolved the issue of ceiling applicable to an individual arbitrator and the entire arbitral tribunal. The Supreme Court went on to hold that there is nothing in the schedule that entails such interpretation of the provision, secondly if such interpretation is taken into consideration then it will lead to the disparity. The ultimate conclusion that the Supreme Court has reached is that the ceiling is applicable to each arbitrator and not the tribunal as a whole. LOSER PAYS PRINCIPLE: a developing theory The principle revolves around the theory of the unsuccessful party bears the expense of litigation or arbitration. As per the Loser Pays Principle, the winning party or the award creditor will get indemnified by the award debtor at the end of the arbitration. Now, this particular approach recognizes the calculation of the costs at the conclusion of the proceedings. Many Common Law and Civil Law countries follow the same principle and recognize the rights of the winning party not to bear the legal costs because of the wrongdoing of the losing party. Law Commission of India, in its 246th Report, suggested incorporating the principle in the domestic arbitration regime in India and the reasoning for the same was stated to be restrictions that can be imposed on the frivolous litigations/ claims of the parties. The principle revolves around the idea of reducing the fake claims to be raised in an arbitration proceeding, to penalize the losing party and for early disposal of the cases,[7] however, the principle has to be evolved in such a manner to cover the position where proper allocation is to be made. As it is hard to identify the actual winner in an arbitration proceeding, the principle gives either no result or a result detrimental to the interest of justice. The principle is considered to be a best practice across many jurisdictions, but the chances or the reasons to apply this principle are inefficient in itself as there is yet another set of justifications required to identify as to who actually won the arbitration case. This conundrum can be considered while applying the principle but it is the right practice to minimize the foul claims to be raised in the proceedings, a practice prevalent in India. MEANING OF “SUM IN DISPUTE”: INFERENCE DRAWN The term “sum in dispute” appears in the Fourth Schedule of the Arbitration Act. While the meaning of the term was set out by the judicial pronouncements to be the aggregate value or amount involved in a dispute (including the amount of claim and the counter-claim), the other provisions of the Arbitration Act did not allow the same interpretation to be made. Provisions of Section 23, 31, 31A, and 38 talk about the submission of claims and counter-claims, cost structure, and deposits and while perusing these sections, one can easily dissect the meaning of sum in dispute, i.e., whether this particular term includes the aggregate amount of claim and counter-claim or otherwise. In many judgments, it has been held that the Arbitral fee under the fourth schedule is based on the cumulative value of the claim and counter-claim made by the parties. In the case of Delhi State Industrial Infrastructure Development Corporation Ltd. (DSIIDC) v. Bawana Infra Development (P) Ltd., the Delhi High Court referred to the legislative intent behind the introduction of the fourth schedule and while referring to the same the bench referred to the DIAC rules (which is the guiding factor of the fourth schedule). The High Court noted that in the DIAC rules, it has been clearly provided that the term “sum in dispute” shall include the counter-claim made by any party, hence, the intent of the legislature is crystal clear which points to the conclusion that “sum in dispute” would be an aggregate value of claim and counter-claim. In the case of Jivanlal Joitaram Patel v. National Highways Authority of India, the Delhi High Court referred to the case of DSIIDC and held that the expression “sum in dispute” as referred to in the fourth schedule has to be interpreted in the sense that it includes the total amount of claim made by the claimant and the total amount of counter-claim made by the respondent and Sections 31(8), 31A and 38(1) of the Arbitration Act can only be made applicable when the tribunal fixes its own fees. The said judgment was in consonance with the earlier judgment of Supreme Court Singh Builders wherein it was held that the “sum in dispute” as referred to in the Fourth Schedule is the aggregate amount of claim and counter-claim and hence no separate fee is payable on counter-claims. As Section 38 was referred to in the above-mentioned judgment it would become necessary to explain the contours of Section 38. The said section deals with the deposits to be made by both parties and it talks about the discretionary power of the tribunal to direct the parties to deposit an amount in the form of an advance for the costs (as per section 31(8)) which it will incur to adjudicate upon the claim submitted to it. The proviso to this section explains a situation where the tribunal has the power to direct the parties to make separate deposits in a case where the claim and the counter-claim have been submitted separately. Now, if we focus on the term “sum in dispute” and proviso to Section 38(1), we will be having diverse views as there is a proper bifurcation given by the legislature in terms of claims and counter-claims. The interpretation of the Fourth Schedule is directly linked with the interconnection between Section 31(8), 31A and 38(1). For differentiating between the claims and the counter-claims, Section 23(2-A) will be helpful which talks about the submission of counter-claim by the respondent which the tribunal will adjudicate upon if the same falls within the ambit of the arbitration agreement. This will then help the tribunal to determine the costs in accordance with Section 31A if a party files a frivolous counter-claim which leads to a delay in the arbitration proceedings. The intent behind taking up the counter-claim with the claim in the same proceeding was not because of the reason that the counter-claim arose due to the claim but to avoid a multiplicity of proceedings. The Arbitration Act treats both, the claim and the counter-claim distinctively and allows the tribunal to fix a deposit of costs for the claim and counter-claim separately. However, in the case of NTPC Ltd. v. Afcons R.N. Shetty and Co. Pvt. Ltd., the Delhi High Court held that while interpreting the term “sum in dispute” as referred to in the fourth schedule, the amounts contained in the claims and counter-claims can be considered separately and exception can be carved out for the same. The Delhi High Court observed that there can be a huge gap between the amounts claimed by both parties and taking the aggregate of both amounts to calculate the fees of the Arbitrator(s) will burden the party claiming the smaller amount to pay extra fees. The same judgment was challenged in the series of appeals filed before the Supreme Court which was resolved by the judgment of ONGC v. Afcons. In the case of Voltas Ltd. v. Rolta India Ltd., the Supreme Court held that counter-claims were independent claim proceedings by the respondent and the applicability of limitation would be determined with reference to the date the same was instituted before the tribunal. Similarly, in the case of State of Goa v. Praveen Enterprises, the Supreme Court was of the view that the respondent can seek independent recourse to arbitration for deciding the counter-claim but raising a counter-claim in the same proceedings obviates a multiplicity of proceedings. The Supreme Court in the Afcons Judgment held that the term referred to in the fourth schedule of the Act refers to the amount in a claim and counter-claim separately and not cumulatively. And as the sum is separate, the arbitrator(s) can charge the fees separately for both heads and the fee ceiling contained in the fourth schedule will separately apply to both. However, the dissenting opinion authored by Justice Sanjiv Khanna opined that the expression “sum in dispute” consists of the sum total of both, the claims and the counter-claims. The Supreme Court observed the different provisions of the Arbitration Act and held that even though the claim is dismissed or withdrawn, the counter-claim will be adjudicated independently and the same cannot be considered as a set-off even if the counter-claim may arise from similar facts as a claim. The scenarios in such situations may vary where in one case the parties have already agreed to the terms of the payment, second where the parties have not agreed on the payment terms and the court while appointing the arbitrator directs to follow the Fourth Schedule and the last where the parties have not agreed and the Courts have also neglected the payment part.[8] Now in the last situation, the party who wants a speedy and effective redressal will be at loss as the arbitrator will have the liberty to charge exorbitant fees and as nothing is there on paper which governs the pro-rata distribution of payment, the other party will take advantage of the same. In arbitration, the major focus should be on Party Autonomy. If the parties have agreed to the terms related to fees of the arbitrators, and as to what all will be covered as the costs of the arbitration, the tribunal is bound by the terms agreed between the parties. In the case of Bharat Aluminium Co. v. Kaiser Aluminium Technical Services, the Supreme Court emphasized on the concept of Party Autonomy although in a different aspect but the principle was placed on top to guide the spirit of arbitration regime in India. Similarly, in the recent case of Amazon.com NV Investment Holdings LLC v. Future Retail Ltd., the Supreme Court re-emphasized the principle of Party Autonomy as the guiding principle of the Arbitration Act. The parties agreeing to arbitrate a dispute has received a primacy over the provisions of the act. Arbitration and the arbitral tribunal is a subject matter/ outcome of the contract entered between the parties, and every aspect that is covered under the contract is binding on the parties and on the tribunal as well. The Legislature and the Judiciary’s focus on the principle of Party Autonomy is a significant move to channelize the functioning of the arbitral tribunal and also to control the parties and the arbitrators to venture outside the contract. Conclusion The main crux of awarding the cost is to make the loss that the succeeding party has incurred. Before the 2015 amendment, the provision of Section 31(8) of the Arbitration Act governs the whole conundrum. However, the provision was way too much wide and the interpretation of the same was not even sufficient to dictate the terms of awarding the costs. If there is no authority to govern the cost regime, then, consequently, the winning party will lose a substantial part of the award in the arbitration costs. The question here stands as to what will be the recourse if the other party succeeds in frustrating the arbitral proceedings and resultantly the winning party will have to bear the cost of the same.[9] The position does not align with the interest of justice and in the favour of the innocent party who was not at fault but had been compelled to seek a remedy through arbitration. In such scenarios, the Loser Pays principle plays a significant role to restrict the parties to raise frivolous claims and frustrate the arbitration proceedings. The principle is yet to prove its effectiveness in the Indian arbitration regime but will be interesting to see as to how the parties will consider this aspect. Recently, the Hon’ble Supreme Court has decided on the issue pertaining to arbitrators’ fees and with respect to the conundrum of the Fourth Schedule. The judgment is highly appreciated as it has given much-needed clarity on the aspect of the nature of the fourth schedule, however, the close analysis of the judgment will present the loophole it holds. The dissenting opinion of Justice Sanjeev Khanna in terms of the interpretation of the expression “sum in dispute” and on the powers of the arbitral tribunal to fix its own fees in absence of any agreement between the parties. While deciding on the issue of applicability of the ceiling limit, the Supreme Court took note of the legislative intent and also referred to DIAC rules to hold that the ceiling limit is applicable to the cumulative of the base amount and the variable amount and is in accordance with the legislative intent to reduce the exorbitant fees charged by the Arbitrators but at the time of interpreting the expression “sum in dispute,” the majority did not go with the legislative intent. Justice Sanjeev Khanna specifically refers to the DIAC rules and observed the legislature’s conscious exclusion of the separate reference to the amounts mentioned in claims and counter-claims. From the perspective of making India an arbitration hub, the suggestive changes should be taken care of which will work as authority for future litigations to come. The “Loser Pays Principle” should be adopted in the Indian Arbitration regime as it will restrict the parties to delay the proceedings and only the genuine issues will be raised during the arbitral proceedings. However, serious concerns have to be looked upon to identify that the innocent party should not be subjected to the applicability of this principle. Now, this will increase the discretionary power of the tribunal to consider different aspects before applying this principle and to ask the losing party to bear all the expenses of the arbitration. After perusing different authorities the intention of the legislature is still in dubious situation as to what exactly the position the legislature wanted to resolve this issue. Whether it is to make India “Arbitrators’ friendly” or “Arbitration friendly.” While there should be a focus on party autonomy but on a similar footing, the cost regime should be developed and should be looked upon. [1] Final Year Law Student pursuing B.A., LL.B. (Hons.) at Maharashtra National Law University, Aurangabad. [2] Ajay Bhargava, Arvind Ray & Vansha Sethi, Cost Regime under Arbitration and Conciliation Act, Lexology (September 11, 2022, 7:45 PM), https://www.lexology.com/commentary/arbitration-adr/india/khaitan-co/costs-regime-under-arbitration-and-conciliation-act. [3] Badrinath Srinivasan, Need for overhaul of the Costs Regime in Indian Arbitration Law, Kluwer Arbitration (September 12, 2022, 7:15 PM), http://arbitrationblog.kluwerarbitration.com/2019/03/05/need-for-overhaul-of-the-costs-regime-in-indian-arbitration-law/ [4]Dr. P.C. Markanda, Law Relating to Arbitration and Conciliation, 10th Edn., p. 968. [5]Tanya Aggarwal, Fee Schedule of Arbitral Tribunal: Focusing on the Sole Arbitrator’s Fee, SCC Online Blog (September 11, 2022, 6:15 PM), https://www.scconline.com/blog/post/2020/06/11/fee-schedule-of-arbitral-tribunal-focusing-on-the-sole-arbitrators-fee/. [6] Punjab State Power Corp. Ltd. v. Union of India, 2017 SCC OnLine P&H 5375. [7] Aastha Chawla, Cost Allocation Rules in Arbitration: A Solution to frivolous claims?, Mondaq (October 2, 2022, 7:15 PM), https://www.mondaq.com/india/arbitration-dispute-resolution/1169440/cost-allocation-rules-in-arbitration-a-solution-to-frivolous-claims#:~:text=The%20Losing%20Party%20pays%20it,follows%20an%20outcome%2Dbased%20approach.&text=As%20per%20this%20approach%2C%20the,the%20entire%20legal%20cost%20incurred. [8] Kartik Seth & Anchal Kapoor, Arbitrary Arbitrator Fees and the Law post 2019 Amendment, Bar and Bench (September 16, 2022, 6:30 PM), https://www.barandbench.com/columns/arbitrary-arbitrator-fees-and-the-law-post-2019-amendment#:~:text=20%2C00%2C00%2C000%2C%20the,is%20payable%20as%20arbitrator%20fees. [9]Anhad S. Miglani & Shaurya Punj, Saving Arbitration from Arbitration Costs: The Case of Arbitrator’s Fees, SCC Online Blog (September 16, 2022, 11:10 PM), https://www.scconline.com/blog/post/2020/08/10/saving-arbitration-from-arbitration-costs-the-case-of-arbitrators-fees/#_ftn1.

Richa Jain[1] INTRODUCTION In a recent ruling of the Hong Kong Court of Appeal, the reputed Herbert Smith Freehills law firm has once again derailed a landmark ruling in C v D having global implications for contract disputes. The Hong Kong Court of Appeal on June 7, 2022, determined that any disagreement over escalation clauses should be settled by arbitrators appointed by the parties rather than by the courts. In other words, the decisions of the arbitration panel on such matters will be final and binding and cannot be used to contest the final award. PRE-CONDITIONS & ESCALATION CLAUSES Many commercial contracts have "escalation clauses", which compel a party to engage in negotiations or mediation before initiating legal actions. These clauses are designed to facilitate speedy dispute settlement, though in practice, they frequently result in costly litigation. In the dispute resolution provision of an agreement, parties frequently consider negotiation or other means of amicable dispute resolution as a “precondition” for sending the matter to arbitration. Parties often agree to a list of preconditions or escalation procedures that must be met before formal arbitration may begin. Pre-conditions in a dispute resolution process take the shape of 'multi-tiered' and 'escalation' clauses, which often envision cost-effective conciliatory means of peacefully settling conflicts before resorting to the zero-sum game of arbitration. A recurring problem in commercial contracts is whether a claimant's inability to comply with the terms of a dispute resolution clause raises an issue of admissibility or jurisdiction. A number of recent rulings by courts throughout the world have addressed this issue, all holding that problems of compliance with pre-arbitral processes relate to the admissibility of an issue in dispute rather than the arbitral tribunal's jurisdiction. JURISDICTION v ADMISSIBILITY The delineation between jurisdiction and admissibility is immensely crucial. If an arbitral tribunal lacks jurisdiction over an issue, then it does not have the authority to issue an award on the merits of that matter. In contrast, admissibility pertains to whether the arbitral tribunal has the authority to rule on the merits of the claims brought to it. At its core, the distinction between a matter of jurisdiction and matter of admissibility has a delicate balance with a thin line. Matter of Jurisdiction – It is the theory that the arbitration agreement is not triggered until the pre-condition procedures are met. It also purports that the formation of a Tribunal is invalid and that the issue concerning the same cannot be heard by the Tribunal because it goes to the core of its jurisdiction. Matter of Admissibility – It is the argument that the arbitration agreement exists and gives the arbitrators a jurisdiction to hear the question of non-compliance with the pre-conditions, but does not allow adjudication of significant claims until the problem of non-compliance with the pre-conditions is resolved. While a challenge to jurisdiction is a ground for appeal in a number of jurisdictions such as the United States, Switzerland, and England, and as also stated in the UNCITRAL Model Law, on the question of admissibility, the decision of the arbitral tribunal is decisive and is not a ground for appeal. In this article, the author compares the current position in India with other jurisdictions to outline pre-arbitral procedural requirements and determine whether they are an issue of jurisdiction or admissibility. INTERNATIONAL JURISPRUDENCE HK Case of C vs. D The case of C vs. D [2021] HKCFI 1474 stems from a contract that obliged parties to try to settle problems through settlement sessions for 60 days before proceeding to arbitration. A disagreement ensued between the parties, and the defendant requested arbitration. The plaintiff disputed the arbitral tribunal's jurisdiction on the grounds that the contract's dispute escalation clauses had not been followed. The arbitral tribunal rejected this objection, and the plaintiff then sought to dismiss the arbitral tribunal's ruling on the grounds that it dealt with an issue that did not fit within the scope of the arbitration filing. The court correctly observed that the essential question here is whether the parties intended for the issue of fulfilment of pre-conditions' to be decided by the arbitral tribunal. To answer this question, the Hong Kong court referred to Lord Hoffmann's landmark English decision Fiona Trust [2010] EWHC 3199, in which he held that there is a presumption that parties, as rational businessmen, would have intended any dispute arising out of their relationship to be decided by the same tribunal. After reviewing significant International Judgements, the Hong Kong court concluded that the "commonly held position of international tribunals and national courts" is that failing to comply with a pre-condition to arbitration is an issue of admissibility rather than jurisdiction. The Hong Kong court acknowledged that the commonly held position may be overturned if the parties expressly stipulate that failure to comply with pre-arbitration conditions precludes the arbitral tribunal's jurisdiction, but the court then concluded that no such express provision existed in the circumstances in question. One of the takeaways from above judgement is that when a party fails to comply with a pre-condition to arbitration, that should not stop the case from moving ahead, since it will be up to the arbitrators to evaluate if the provision was followed and, if not, what the repercussions should be. Since the tribunal retains jurisdiction to consider the case, an award cannot be challenged in court on this ground. This gives the procedure far more clarity (and finality), and should avoid costly and prolonged litigation. The aforementioned C v. D case was affirmed in Kinli Civil Engineering vs. Geotech Engineering [2021] HKCFI 2503 in the context of a dispute filed under a contract including an arbitration agreement allowing that a party may submit a disagreement to arbitration. The Court issued a stay of litigation in favour of arbitration, stating that the Court has no involvement in evaluating whether the preconditions for the right to arbitrate have been met. US Case of BG Group vs. Republic of Argentina The US Supreme Court's 2014 decision of BG Group vs. Republic of Argentina 134 S.Ct, 1198 is perhaps the oldest known case which seeks to delineate the problems of admissibility and jurisdiction. It denied a challenge to an arbitral award on the grounds that a statutory pre-condition to arbitration was not met. In this case, BG Group had invoked arbitration under the Argentina-UK BIT in response to Argentina's actions in the aftermath of its economic collapse in late 2001. The Argentina-UK BIT obliged claimants to fight their claims in Argentina for 18 months before filing a claim in arbitration. After arbitrators rendered an award against Argentina, it moved to vacate the award in US courts, claiming that the arbitrators lacked jurisdiction since BG Group did not follow the local litigation requirement. The US Supreme Cour ruled that, courts presume that the parties intend arbitrators, not courts, to resolve disputes about the meaning and application of specific procedural preconditions for using arbitration, such as the satisfaction of "prerequisites such as time limits, notice, laches, estoppel, and other conditions precedent to an obligation to arbitrate." The arbitral tribunal ruled that BG Group's claim was valid despite the fact that it had not sought remedy in Argentine courts first. BG Group won the arbitration, which was held in Washington, DC. Singapore Case of BBA vs. BAZ and BTN vs. BTP The case of BBA vs. BAZ [2020] SGCA 53 concerned a dispute originating from a sale and purchase agreement that included an arbitration clause requiring arbitration in Singapore. The contract specifically prohibited the arbitral tribunal from awarding punitive, exemplary, or consequential damages. BAZ won the arbitration and attempted to have the verdict enforced in Singapore. BBA opposed enforcement on the grounds that (i) the arbitral tribunal had exceeded its jurisdiction by awarding damages and pre-award interest, which they claimed amounted to compensation for loss of opportunity in violation of the prohibition on awarding consequential damages, and that (ii) the claim for fraud was time-barred. The Singapore Court of Appeal refused to rescind the decision, reasoning that the first concern was about the award's merits rather than jurisdiction, and that the time-bar problem was about admissibility rather than jurisdiction because it was directed at the claim rather than the tribunal. This is a significant judgement that explains an essential point of law while also limiting the basis for potential court intervention in the initial stages of an arbitration. UK Case of Republic of Sierra Leone vs. SL Mining Ltd. The English High Court declined to set aside an arbitral judgement in Republic of Sierra Leone v SL Mining Ltd [2021] EWHC 286 (Comm.) on the grounds that the defendant had failed to comply with certain pre-conditions to arbitration. The underlying issue was the revocation of a mining permit. The licence included a multi-tiered dispute resolution clause in which the parties promised to try to resolve disagreements amicably for three months. A notice of dispute was served on 14th July, 2019 and six weeks later on 30th August, 2019, the defendant issued a notice of disagreement, followed by a request for arbitration. The claimant sought to invalidate the decision under Section 67 of the English Arbitration Act 1996 wherein “if the issue relates to whether a claim could not be brought to arbitration, the issue is ordinarily one of jurisdiction and subject to further recourse”, claiming that the arbitral panel lacked substantive jurisdiction to hear the case. The English court determined that the primary comments and authorities all pointed "one direction" in that pre-conditions to arbitration are concerns of admissibility to be determined by arbitrators rather than jurisdiction falling under Section 67. It is important to note here that the Chartered Institute of Arbitrators, one of the world's major arbitration organisations, has warned arbitrators to distinguish between a challenge to jurisdiction and admissibility in the Preamble and S.6 of its International Arbitration Practice Guidelines on Jurisdictional Challenges. The Guidelines establish optimal practises in international commercial arbitration. STANCE OF INDIAN LAW The jurisprudence on the legality of jurisdiction vs. admissibility in the Indian context is still at a very nascent stage. We have till now seen the status quo of other jurisdictions by analysing some important international judgements governing this law in order to deeply understand the position of Indian Law. Now, let us try to discern the position of Indian Jurisdiction for multi-tiered contracts containing escalation clauses and pre-conditions. In the case of BSNL v. Nortel (2021) 5 SCC 738, the Hon’ble Supreme Court employed the 'tribunal v. claim' test to assess whether the question of a statutory time bar is one of jurisdiction or admissibility. To put it simply, the 'tribunal v claim’ asks whether the objection / issue is directed at the tribunal, in the sense that the claim should not be arbitrated due to a flaw in or failure to consent to arbitration, or at the claim, in the sense that the claim itself is defective and should not be raised at all. In the current instance, the Court relied on BBA vs. BZA, and ruled in favour of treating the question of limitation as one of admissibility since it challenges the character of the claims submitted rather than the tribunal's jurisdiction. Another significant case is United India Insurance Co. Limited v Hyundai Engineering and Construction Co Ltd & Ors (Civil Appeal no 8146 of 2018), in which the Supreme Court held that in a case where the amount under the CAR Policy has to be admitted as a pre-condition to bring forth the claim in Arbitration, the said pre-condition must be satisfied before Arbitration can be invoked, because only the admitted amount can be made part of the dispute to be adjudicated. To restate, the Arbitration Clause would be activated only if the purportedly defaulting party admits obligation under the CAR Policy as a precondition. However, because the decision was not explicitly concerned with the distinction between a jurisdictional and an admissibility issue, it is indicative of the dearth of Indian law on the subject. Given this deficiency and the situation of law in other jurisdictions, it is hoped that the Supreme Court would take a stride forward rather than two steps back. Certain important takeaways from analysing foreign Jurisprudence to incorporate in Indian Jurisprudence could be: · With multi-tiered conflict resolution clauses, clear drafting and compliance are critical to avoid costly and time-consuming judicial proceedings; · Failure to comply with pre-arbitration procedures does not change the venue of dispute resolution from arbitration to court; · in many cases, parties should provide the arbitrator with their grievances, both substantive and procedural; · if the parties really want the court to intervene on pre-arbitration compliance concerns, their wish should be conveyed in the clause. CONCLUDING REMARKS The relevancy of admissibility and jurisdiction is becoming extremely pertinent in cases where parties have escalation clauses or preconditions in their contractual agreements and arbitration in dispute. Not many cases have dealt with this novice issue, thus it is still a gray area, especially for the Indian jurisdiction. With the newer arbitration clauses and contracts, we can see the incorporation of preconditions in dispute clauses. The 'tribunal v. claim' test might be helpful in situations involving pre-conditions to arbitration. The test requires the judge to assess the object of the objection in order to decide whether the problem is one of admissibility or jurisdiction, and then to evaluate whether a motion to set aside the award on the cited grounds can be granted. By using 'tribunal v. claim,' courts across diverse jurisdictions are clearly inclined to treat the question of conformity with preconditions laid forth in dispute resolution clauses as one of admissibility rather than jurisdiction. The tribunal's ruling on the issue of admissibility is regarded final. Therefore, by delimiting the grounds for challenge, this practice furthers the idea of minimal judicial interference which advises courts of law to meddle with the arbitral judgement to the smallest degree feasible. There is an existing gap on this subject in Indian arbitration law. However, given the judgements in the aforementioned countries as well as that of BSNL v Nortel Networks India Pvt Ltd., it is anticipated that when the matter is taken before the Supreme Court of India, it would resolve the issue of non-compliance as one of admissibility rather than jurisdiction. Such a decision would be consistent with the pro-arbitration attitude and "overarching" concept of least involvement enunciated in the Arbitration and Conciliation Act of 1996. [1] Richa Jain is a student of RMLNLU 3rd Year.

Unnati Sinha[1] Introduction The Arbitration & Conciliation Act (“Act”)(hereafter referred to as "the 1996 Act") was initially made official by the issuance of an ordinance as a promising approach to the urgent economic changes demanded by new economic policy. The Arbitration & Conciliation (Amendment) ordinance, which, 20 years later, revised the 1996 Act to bring it into compliance with international standards. Arbitration has recently evolved into the best option for resolving business conflicts. However, during the last 20 years, the arbitration procedure, particularly in ad hoc domestic disputes, has started to resemble the adversarial processes in India to a greater extent. High costs brought on by an inadequate supply of qualified and educated arbitrators contributed to the rising frustration felt by its customers. Public authorities addressed the adjustments that are required to close any voids in the 1996 Act and reduce the likelihood of it being misinterpreted and other issues with its implementation. Numerous organizations submitted reports and recommendations with the goal of modifying the 1996 Act. These recommendations, however, fall short of the urgent demands of contemporary practice. The 1996 Act has not been modified despite two failed efforts to do so in the years 2001 and 2010. Additionally, the Arbitration and Conciliation (Amendment) Act, 2015 includes novel features that have not yet been included in important arbitration legislation. Some of these regulations deal with unusual situations in ad hoc domestic arbitration, such as the deadline for finishing the arbitration and the fees of the arbitrators. The Amendment Act also makes other important revisions that significantly diverge from the legislation that was previously in place, resolve disputes, or affirm the regulations that have developed as a result of court interpretations. Amendments to the Indian Arbitration Act, 1996 The Arbitration and Conciliation Act, 1996 (the "Arbitration Act") has finally been amended, after great outcry. The President of India gave his nod to the Arbitration and Conciliation (Amendment) Act, 2015 (the "Amendment Act") on December 31, 2015, and it entered into effect on October 23, 2015. The Amendment Act suggested significant modifications to the Arbitration Act. The road to the Amendment Act was somewhat difficult. The Arbitration Act was passed in 1996 in order to facilitate quick and efficient conflict settlement via arbitration or conciliation and lessen the load on courts, . The Act now employs a new word, "arbitral institution," which refers to an arbitration institution selected by the Supreme Court or High Court in accordance with the law. The judge of the relevant High Court may appoint an arbitral tribunal to carry out the duties and responsibilities of the arbitration institution and supervise the arbitral tribunal regularly. The Supreme Court and the High Court have powers to appoint arbitration bodies from time to time, classified by the Council. Once the arbitral ruling has been rendered, no application may be brought for interim orders under Section 17. The aim is to resolve the dispute within a year from the day the pleadings under Section are accomplished. The ruling in international commercial arbitration may be made as quickly as practicable (4). After the revision, only the arbitral tribunal's record may be utilized under Section 34 to seek the annulment of an arbitral award. The Act's Sections 37(1) and 50 provide the legislature with further authority to appeal. A new Section, known as Sections 42A and 42B, has been added regarding the confidentiality of all arbitral proceedings, with the exception of awards where a disclaimer is required for the execution and enforcement of the award. This section also states that the arbitrator is not subject to legal action for anything done or aimed to be done in good faith in accordance with this Act or the rules or regulations created thereunder. The Act for the Establishment of the Arbitration Council of India contains a new component, Part 1A. After the amendment, judicial authorities may refuse to submit a party to arbitration based on the proposal of the party asserting rights thereby or based on it, even if the contract is first determined to be invalid, void, or unenforceable. Matters relating to the parties' entering into the contract are referred to in Article 44. Arbitrator qualifications and experience have changed, and Article 26 of the law has been rejected by recent amendments. The court has started enforcing the arbitration award. This means that time limits under the Arbitration Act are no longer pending and no courts need to be involved. The Supreme Court addressed the retroactive issue of the 2015 Amendments and the changes that reversed the BCCI decisions made by the 2019 Amendments in decisions published in the cases BCCI Vs. Kochi Cricket and Hindustan Construction Vs. UOI. The Supreme Court in the aforementioned case totally avoided the anomalies that would develop if the meaning it gave to Section 26 is applied to other circumstances by ignoring the aforementioned revised parts as well. For instance, Section 9 amendment, being a judicial procedure, would apply even before the changes went into effect, but a Section 17 modification will only apply to arbitral proceedings begun after the 2015 Amendment. It is possible to argue that although Section 36 does not alter vested rights, Sections 9 and 17 modifications will have an impact on those rights, therefore a Section 9 amendment would not be applicable retroactively. Since the revisions in amendment act were implemented via an ordinance, there was still uncertainty and ambiguity, and it was unclear whether the amendments would be applied prospectively or retroactively. The Amendment Act is unquestionably a positive step and has been praised for giving the Indian arbitration process the much-needed boost. Maximizing Possibilities for Joinder in International Arbitration Although non-signatories have been included in the arbitral procedure as a result of Chloro Controls India (P) Ltd. v. Severn Trent Water Purification Inc., there is still some uncertainty over their acknowledgment. Relying on their participation and interest, the question of whether the arbitral judgment is enforceable against such non-signatories varies from case to case. The Supreme Court thoroughly construed Part II of the Act in Gemini Bay Transcription (P) Ltd. v. Integrated Sales Service Ltd. and concluded that foreign awards should also be enforceable on non-signatories to the arbitration. However, it is unclear if their authority corresponds with a party's obligations under Section 2(h) of the Act. The arbitration's subject matter and location are entirely at the discretion of the parties. Since these non-signatories share equal responsibility with the signatories for the award's compliance, they should have an equal say in changing the arbitration's structure. According to Section 2(1)(f)(iii) of the Act, one such condition for international commercial arbitration (“ICA”) is the central focus of central management and control in the case of an association or a group of people. The ICA principles would be in effect if such central management or power were to be applied in any nation other than India. By putting ICA into the equation, this clause thereby denotes a proactive strategy involving various stakeholders, including signatories and non-signatories. The possibility exists to change the character of arbitration from domestic to international commercial arbitration if a non-signatory foreign party is established outside of India, as well as any organization or group of persons with administration or control outside of India. The High Courts have appropriately departed and progressively adopted a favorable stance, even though some earlier judgments had ascribed a restrictive interpretation to the scope of ICAs. According to Section 44 of the Act, participants in a "legal connection," whether or not one is contractual, may decide on overseas awards. When compared to Section 2(1)(f) of the Act, this section does not include the "foreign party" component. Therefore, in accordance with the Act, a foreign award may be made regardless of the ICA's terms. The court has weakened the arbitration clause so that Indian parties may get a foreign seat, bringing ICA to local courts. With this decision, the courts have given parties reason to believe in the arbitration's party autonomy premise. It is important to contrast the two current circumstances. Even if there might be a foreign component in an arbitration ruling, a foreign party is nonetheless subject to domestic arbitration. With the proper judicial interpretation and application of the laws, the discordant tone may be corrected. The foundation of arbitration is autonomy and consent, hence the Indian courts may take a more cutting-edge approach to granting ICA in response to parties' requests. The equivalents of the parties to the arbitration will soon experience some relief after following the path of the arbitration guidelines. The Indian Supreme Court upholds the arbitrability of cases involving allegations of fraud In its ruling on whether disputes involving fraud allegations are subject to arbitration in India, the Supreme Court concluded that only "substantial fraud allegations" need to be decided by civil courts, i.e. allegations that violate the agreement to arbitrate or raise questions of public law. The Share Subscription Agreement ("SSA"), via which HSBC invested US$60 million in Avitel India in 2011, gave rise to the underlying issue. The HSBC investment was based on the assertions made by Avitel's promoters that, amongst many other significant contracts, they were close to finalizing a high-value deal with the British Broadcasting Corporation and that the money would be used to buy equipment to support this contract. Later, HSBC learned that such a contract did not exist and that the promoters had diverted a bulk of their funding into other businesses. It started the arbitration process in 2012, and the conclusion of the arbitration was reached in 2014. In the meantime, in 2013, HSBC also filed a criminal complaint. The arbitral tribunal ruled in favor of HSBC, concluding that Avitel's promoters intentionally made false or misleading claims to induce investment into HSBC. In addition to interest and costs, the court awarded damages totaling $60 million. The Supreme Court issued this ruling as under the section 9 of the Act proceedings. HSBC requested that the entire sum be insured in Avitel’s bank account pending enforcement of the arbitration award. Among other things, the Supreme Court considered whether HSBC had strong prima facie evidence in the enforcement proceedings. The parties argued before the Supreme Court over whether the disagreement may be the focus of an arbitration hearing since there were fraud claims implicated, involving criminal accusations. The court took into account earlier instances and cited Section 8 of the Act, which requires courts to submit disputes that are covered by an arbitration agreement to arbitration. The court established two criteria to evaluate if "serious accusations of fraud" exist to the point where the civil courts should get involved: (i) When the fraud corrupts the arbitration agreement and renders it void, (ii) When the state or one of its agencies is accused of acting arbitrarily, dishonestly, or maliciously, and the hearing entails discussing issues that are of general interest and not related to the parties' contractual arrangement. Regarding the case's circumstances, the court determined that there was no fraud present that would have rendered the SSA's arbitration clause invalid. False representation, money theft, and other difficulties were all between the parties and did not meet the criteria outlined in the previous sentence for a judicial trial. This situation regarding the arbitration of disputes, including fraud charges, has been beneficially clarified by this judgment. It may also inspire civil courts to be more discriminating in deciding if fraud is being charged just to thwart arbitration procedures. Concluding Remarks As a result of legislative reforms that eliminated several flaws in the main 1996 Act and rendered invalid court judgments that inhibited the correct implementation of arbitration rules in India, these improvements are significant advances toward enhancing the arbitration process and arbitration jurisprudence. A word of caution is linked to these advancements, however,that the revisions call for the application of many rules in the arbitration process to be made in too little time, which is difficult to do in reality and runs the danger of forcing unnecessary judicial conflict settlement. The aforementioned revisions reiterate the specifics that are now used by the parties or institutions, but there are still no clear-cut requirements supporting institutional arbitration in India. Although the adjustments may have been made with noble intentions, their implementation was not perfect. The change is a positive move, and with some other changes, India would be able to establish itself as a center for arbitration. [1] Unnati Sinha is a 3rd-year student pursuing B.B.A.L.L.B (Hons.). She can be reached at unnatisinha1412@gmail.com.

Mr. Sheth, welcome to the Arbitration Workshop! Firstly, we are extremely honoured that you agreed to give us an interview and to share your perspective with our readers. Q. Before we delve in, may we request you to kindly introduce yourself and tell us about your professional background? A. I am the Founder and Director at Konverj-Zeus Consulting Pvt. Ltd. I am a Risk, Forensics and Dispute Advisory professional with 14+ years of post-qualification experience. I am a Chartered Accountant, a Certified Fraud Examiner and a Valuer of Securities & Financial Assets. I am a member of – Steering Committee of Young MCIA (Mumbai Centre for International Arbitration) for 2021-23 Chartered Institute of Arbitrators Institute of Chartered Accountants of India Association of Certified Fraud Examiners Q. How did you come to be associated with the field of Arbitration? A. I started my professional career in Risk and Corporate Governance with some of the larger accounting firms in India. Later, I started conducting Forensic Investigations for banks and non-banking corporates. While conducting forensic investigations, I then supported few arbitration matters, both in India and internationally. Post these experiences, I started serving dispute matters for some of the larger law firms. This is how I got into the entire Arbitration field. Q. How is your expertise utilised by prospective clients in arbitrations? How would you explain your role in the entire arbitration mechanism of today.? A. Currently, for domestic and international arbitration, my role is primarily that of a Commercial Damage Quantification Expert. I also testify as an Expert Witness. My role also sometimes extends to rebutting the other Expert’s report or value and submitting a Rebuttal report. I have supported Arbitrations in India and internationally under the Rules of SIAC, LCIA, AAA and ICC. The disputes that I currently support are interestingly of varied nature. They include Contractual disputes, Shareholder disputes, Construction disputes, Valuation disputes, IP disputes and Anti-Trust disputes. Some disputes also include supporting the counsels to cross examine the other Expert. Another area of support is Economic Consulting in matters of Investment arbitrations or matters involving Competition Acts. Today, in few cases, I also get approached to be a Consultant, obviously not independent role, to help the client to ascertain the extent of damage or value of the claim. Arbitration for me also includes supporting on Managed Document Review, where there are tonnes of documents to be reviewed, which is where I support law firms. These more often conducted using technological platforms, which save a lot of time and cost. Then there are calculation of damages in Business Interruption disputes that I have supported the clients in quantifying the Lost Profits due to, say for example, catastrophic events like earthquakes or hurricanes. A few dispute matters have also involved fact finding exercise for me, where our Forensic Accounting skill set comes into play. In these cases, I review a lot of financial records and un-earth the facts of the case, which then become very important for the law firms to strategize their case. And lately, I also play a new role in supporting Litigation Funding and Litigation Management. So, my role in disputes, especially in arbitrations is spread across. Q. At what stage of the arbitration proceedings do you find your expertise the most valuable? How does your expertise assist the Claimant or Respondent in representing their case before the arbitral tribunal ? A. As mentioned, most of the cases I am involved in require my expertise as an Expert for the independent report and testify as an expert witness. This is the stage where in most cases the SOC and SOD are filed and then my role as an expert comes up. My support here is more of an independent evaluator of the claim or counter-claim values. Another role is where I am a consultant to the client, helping them ascertain the value of damage or claim. This is the stage of pre submission and filing of claim or counter claim statements. When we talk about litigation funding and litigation management, the role is spread right throughout the case and may start from when the dispute arises and ending post the dispute is over or settled. Q. In our experience, we have seen arbitral tribunal’s being skeptical about damages expert engaged by the parties, what has been your experience while providing expert evidence on behalf of a party. Alternatively, do arbitral tribunals engage you or other damages expert as an independent witness? What if any is the difference in your role when engaged by the arbitral tribunal as compared to when engaged by a party in an arbitration? A. Yes, the Tribunal may appoint an independent expert on their own, irrespective of whether the parties have or have not appointed an expert, more so in cases where they have not. The expert’s role in terms of duties and independence is same whether appointed by the client or the Tribunal. However, matters such as a list of issues on which the expert is requested to express an opinion, information, data, timeframe, communication protocols, method of exchange of expert reports and instructions concerning examinations, tests, experiments and site visits, if any that the expert receives is given by the Tribunal. So, in that sense the role and results differ if I get appointed by the Tribunal. In certain cases, the Tribunal may appoint an expert to report to it on specific issues to be determined by the arbitral tribunal. The parties usually participate in selection of an expert and also agree upon the selection by the Tribunal. Q. Could your broadly throw light on the different mechanism or methods of valuations which are utilised by experts like you in determining the damages or valuation of a transaction or the value of a shareholding which may be relevant in an arbitration proceeding. A. I believe it depends upon what one is valuing. If it is a company or share valuation, then one has three basic approaches – Income approach, Market approach and Asset approach. If one is valuing Intellectual Property, then one can select the most appropriate one of the methods – Cost method or Income method or Market method. If one is calculating the lost profits, then usually either of Before and After approach, Yardstick (comparable) approach and Sales Projections (But For) approach is used. Q. Could you guide our readers towards certain literature that arbitration practitioners and Chartered Accountants could read to know more about valuation and damages expert in arbitration practice. A. I think for my fellow Chartered Accountant friends, as many would know, Aswath Damodaran has authored numerous books and are the best reference material. But equally important are publications like International Valuation Standards by International Valuation Standards Council and for valuations in India, it is always useful to refer to ICAI Valuation Standards by Valuation Standards Board. For lost profits, I think Lost Profits Damages: Principles, Methods, and Applications by Everett P Harry III and Jeffrey H. Kinrich is very useful. But there are various books depending on the topic one wants to refer. Q. What advice could you provide to budding Chartered Accountants who might want to develop an expertise and a practice as damages and valuation experts in Arbitrations? A. I think I would recommend my fellow budding Chartered Accountants to take up this area as early as possible to gain a lot of experience. I would suggest one should start working with some of the top Economic Consulting firms globally, which will give them immense exposure to the more complex projects. Attending events or webinars and just interacting or listening to speakers in this zone also adds up to a lot of knowledge. Academically and professionally, I think a degree or a specialised course in Valuation or Economics would definitely be very useful. I would welcome interested professionals to this service line of consulting, which is only here to grow in future. The Editorial Team at the Arbitration Workshop would like to thank Mr. Keval Sheth for taking out time from his busy schedule and for sharing his perspectives with us!

*Arnav Doshi Introduction The growing tendency of corruption employed as a ground for non-enforcement of arbitral awards has awoken tribunals and judiciaries alike from adopting a head-in-the-sand approach to addressing the issue on a war footing. The creeping roots of corruption in arbitration are a potential minefield that “leads to violations of human rights, distorts markets, erodes the quality of life and allows organized crime, terrorism and other threats to human security to flourish”. Thus, with the increasing disputes pivoting around corruption and “the convergence of obligations around its prevention, detection, and remediation in both the public and private sectors, corruption has increasingly figured as an issue in international arbitration”. In the Indian context, the enforcement of the International Chamber of Commerce’s [‘ICC’] award in Devas Multimedia Private Limited v. Antrix Corporation Limited was tainted by the allegations of corruption put forth by Antrix Corporation Limited [‘Antrix’], an Indian government-owned company, is the prime and recent most example of the growing tendency of corruption as a basis on preventing the enforcement of awards. This post demonstrates the approach of tribunals and courts towards dealing with corruption allegations in international arbitration and further analyses and critiques the approach by the Indian courts in the Antrix-Devas case. The essay illustrates the general principles and international precedents concerning corruption allegations. Further, the burden and standards of proof adopted by international tribunals are examined (I) to scrutinize the decision of the National Company Appellate Tribunal [‘NCLT’] and Supreme Court of India in affirming the corruption allegations against Devas Multimedia Private Limited [‘Devas’] (II). In conclusion, the approach adopted by the Indian courts in adjudicating corruption allegations will be juxtaposed with the approach by foreign tribunals in relation to the burden and standard of proof being met in the aforesaid dispute. I. Corruption Allegation in International Arbitration More than 50 years ago, Judge Lagergren refused jurisdiction in International Chamber of Commerce [‘ICC’] Case No. 1110 on the grounds of corrupt payments, based on his observation that “corruption is an international evil… contrary to good morals and to an international public policy common to the community of nation”. In furtherance of Judge Lagergren’s observation, the forerunners in the battle against corruption in the international arena are the UN Convention against Corruption, 2003 and the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, 1997 which have adopted “a comprehensive and multidisciplinary approach is required to prevent and combat corruption effectively”. The conventions to combat this issue have recognized the “problem of corruption as part of international (and transnational) public policy”. Moreover, the International Centre of Settlement of Investment Disputes [‘ICSID’] in Metal Tech, World Duty-Free v Republic of Kenya observed that bribery is contrary to the international public policy of most, if not all, States or, to use another formula, to transnational public policy. The ICSID witnessed a catena of cases namely- African Holding v Congo, TSA Spectrum v Argentina, EDF v Romania, Niko Resources v Bangladesh, and MetalTech v Uzbekistan-wherein the parties have alleged corruption as the basis for claims or jurisdictional defences. However, the vague and ambiguous scope of corruption, burden and standards of proof and the duties of a tribunal coupled with the “rules of attribution, and the effect of host country investigation and/or prosecution” have been under immense scrutiny owing to various approaches adopted by tribunals. The traditional approach to the standard of proof for corruption allegations is the well-accepted principle that the burden of proof rests on the party “who advances a proposition affirmatively (‘actori incumbit probatio’)”.[1] However, a paradigm shift from the traditional approach can be observed. In addressing corruption allegations in international arbitration, however, five significant challenges can be observed: (a) definitional challenge; (b) standard and burden of proof; (c) role of an arbitral tribunal; (d) consequences of corruption allegations; and (e) emerging issues from greater compliance. However, for the purposes of this post, the standard and burden of proof will be critically examined to highlight the inadequate approach taken by the Indian Courts vis-à-vis international standards and practices. A major challenge in proving an allegation of corruption in international arbitration is owing to the standard, methods and burden of proof. Barring the UNCITRAL Arbitration Rules, none of the established arbitration rules contain provisions on the burden and standard of proof.[2] Through a jurisprudence of tribunals in consonance with international law principles and applicable law, two traditional standards of proof can be evidenced: (i) High Standard of Proof: The high standard of proof refers to proving corruption allegations beyond a reasonable doubt and is applicable when a rigorous standard of proof is needed to tackle the party allegations. For instance, bribery is deemed as conduct contra bonos mores that requiring application of the heightened standard of proof. In Westinghouse v Philippines, the ICC in relation to allegations of corruption held that fraud in civil cases must be proven to exist “by clear and convincing evidence amounting to more than a mere preponderance, and cannot be justified by a mere speculation”. Further, in EDF (Services) Limited v Romania, arguing that the breach of BIT between the United Kingdom and Romania was caused by the investor's refusal to comply with demands for immense bribes by Romanian government officials, the arbitral tribunal found that the “seriousness of the accusation of corruption demands clear and convincing evidence”. (ii) Balance of Probabilities or Preponderance of Evidence: Gary Born notes that although there is little discussion of the issue, in most international arbitrations, the standard of proof appears to be (or is assumed to be) a ‘balance of probabilities’ or ‘more likely than not’ standard.[3] The classic or typical approach to the standard of proof was observed in the ICC Case No. 8891 wherein not only did the tribunal acknowledge the difficulties of proving corruption, but it also adopted the appropriate standard of proof owing to the difficulties. Additionally, the Tribunal in Kardassopoulos and Fuchs v Georgia recognized that “the principle articulated by the vast majority of arbitral tribunals in respect of the standard of proof in international arbitration proceedings does not impose on the parties any standard of proof beyond a balance of probabilities”. There exists an evident dichotomy regarding international tribunals adopting standards of proof. In relation to the High Standard of Proof, commonly, arbitral tribunals have expressed that a case for corruption would not exist if the party with the burden of proof could neither prove it “beyond a reasonable doubt” nor yield “clear and convincing evidence” displaying an act of corruption or corrupt intent. However, a limitation subject to the application of the balance of probabilities would be that a party seeking relief from contractual obligations can exploit the ease in which corruption may be invoked due to a lower standard of proving corruption allegations. In light of these standards, Part II examines the decision taken by the NCLT and Supreme Court in the Antrix-Devas case and determines the standard of proof the Indian courts adopt. II. Proving Corruption Allegations in India A. Arbitrability of Fraud and Corruption in India Prior to the enactment of the Arbitration and Conciliation (Amendment) Act, 2021 [‘2021 Amendment’], the judiciary in Avitel Post Studio Limited v HSBC PI Holdings (Mauritius) Limited [‘Avitel’] laid a two-fold test to determine the arbitrability of fraud. On allegations of fraudulent activities, the subject-matter of a dispute would become non-arbitrable upon (1) the plea on fraud relating to the entire contract, including the arbitration agreement, and thereby rendering it void; and (2) whether the allegations pertained the internal affairs of the parties inter se having no implication in the public domain. Moreover, Vidya Drolia and Others v Durga Trading Corporation and Others reaffirmed the decision in Avitel on non-arbitrability on the arbitration clause being tainted with fraud, and further stated that when allegations of fraud relate to a civil dispute, they can be made a subject matter of arbitration. The position on the arbitrability of fraud allegations that progressed to widen the scope of tribunals and enforcement of arbitral awards was hindered by the 2021 Amendment. The amendment to Section 36 of the Arbitration and Conciliation Act, 1996 diluted the enforcement of arbitral awards. The amended Section 36 read to effectuate an unconditional stay on the enforcement of an arbitral award pending disposal under a Section 34 application on account of fraud or corruption. Furthermore, the efficient enforcement system set in place by the jurisprudence was overhauled by the amendment’s ability to provide non-enforcing party to the arbitral proceedings the option to seek indefinite stay on the award. The 2021 Amendment provided for the retrospective application of the amended Section 36, and paved way for the influx of fraud or corruption allegations to set aside the enforcement of arbitral awards on a prima facie basis. In light of otiose jurisprudence and new statutory guidance, the post examines the inadequate method and standard proving of corruption allegations in arbitral proceedings. B. Brief Background: Antrix-Devas dispute Antrix is the commercial arm of the Indian Space Research Organization [‘ISRO’] which is wholly owned by the Government of India under the Department of Space. On 28.07.2003, Antrix entered into a Memorandum of Understanding with Forge Advisors LLC [‘Forge Advisors’], a Virginia Corporation. Thereafter, Forge Advisors proposed an Indian joint venture known as DEVAS (Digitally Enhanced Video and Audio Services) in which ISRO would potentially invest. On 17.12.2004, Devas Multimedia Private Limited was incorporated as a private company. Immediately thereafter, Antrix entered into an agreement with Devas to provide multimedia services to mobile platforms in India using S-band spectrum transponders on two ISRO satellites for an investment of Rs. 576 crores. However, the Agreement was terminated by Antrix on the grounds of force majeure and policy. Devas initiated arbitration against Antrix before the ICC and two separate arbitral proceedings were initiated under the India-Mauritius BIT and India-Germany BIT by Devas’ investors- Mauritius investors and Deutsche Telekom respectively. India lost all three disputes and the ICC tribunal ordered India to pay $1.2 billion to Devas. Antrix filed a petition before the NCLAT that granted authorization to initiate the winding up of Devas which was upheld by the Supreme Court of India. C. Corruption Allegations In view of the corruption allegations, the Central Bureau of Investigation [‘CBI’] filed a First Information Report on 16.03.2015 against Devas for the criminal conduct of fraudulently misappropriating property and cheating under provisions of the Prevention of Corruption Act, 1988 and Indian Penal Code, 1860. The bone of contention presented by Antrix was that Devas was formed for fraudulent and unlawful purposes, and the transactions were tainted with corruption. Thus, contending the winding up in liquidation of Devas under Section 231 of the Companies Act, 2013 was on account of fraud. Devas argued before the Supreme Court that the NCLT and NCLAT [collectively ‘Tribunals’] applied an incorrect standard of proof- the findings were recorded to be only prima facie, which is not sufficient to order the winding up of the company. In terms of evidence, the forerunning contention on corruption was that the agreement entered into between both parties was a result of fraudulent and criminal conspiracy between the management of affairs of Devas and the officials of Antrix/Government of India to award the lease of scarce and valuable S-band spectrum without necessary approvals. The Tribunals recorded concurrent findings on facts and the Member (Technical) of the NCLAT classified the evidence on fraud into eight categories which succinctly concluded that the formation of Devas and the conduct of affairs by personnel and conduct of the management of its affairs are guilty of fraudulent activities. In view of the evidence recorded by NCLAT, Devas challenged the recording of evidence and consequently application of the standard of proof to arrive at the decision to be based on prima facie findings. Devas mooted for a higher standard of proof to be applicable considering the matter was for the winding up of a company. However, the Supreme Court refused to re-appreciate the evidence and through a head-in-the-sand approach stated that the detailed findings recorded by the Tribunal show that they are final and not prima facie. Therefore, it can be observed that the Court did not appreciate the High Standard of Proof in the present case. Although, in analysing the decision of the Court in relation to the standard of proof adopted to prove corruption allegations, it can be postulated that the Court, per contra, did not adopt the traditional balance of probabilities standard as well. It expressly stated that merely because the NCLAT used erroneous expression of the findings being prima facie, those findings are not in actuality prima facie and are detailed enough to be of a standard higher than the normal rule. Conclusion and Recommendation The vague and ambiguous language of the judgment invites the conundrum of the standard of proof adopted for corruption allegations. A recommendation for resolving the conundrum would be for Indian courts to seek guidance from the European Continental tradition of “conviction intimate” or “inner conviction” for establishing a standard of proof for corruption disputes in India. According to this tradition, the threshold standard is whether submitted evidence is sufficient to convince the judge or arbitrator of the existence of a fact. In other words, the inner conviction standard rests upon the answer to the question: was the evidence enough to persuade? The standard can be evidenced in the Westacre v. Jugoimport case wherein the ICC Tribunal held if the claimant’s claim is based on the contract is to be voided by the defence of bribery, the arbitral tribunal, as any state court, must be convinced that there is indeed a case of bribery. The Supreme Court in the Antrix-Devas matter, had the opportunity of planting the roots of the inner conviction standard in the Indian context to resolve the conundrum. However, the ‘parchment’ standard of proof dictated in the aforesaid case has muddied the waters regarding the burden and standard of proof parties need to adhere with to prove corruption charges. The inner conviction standard sets a middle ground between the extremes of the high and low standard of proof which Indian courts may concretize and apply for corruption allegation disputes and thereby remedy the conundrum. *Arnav Doshi is a Junior Staff Editor for the Arbitration Workshop. He is a third-year student pursuing B.B.A. LL.B. (Hons.) at O.P. Jindal Global Law School. He can be reached at 19jgls-arnav.jd@jgu.edu.in. [1] Andreas Reiner, ‘Burden and General Standards of Proof’ in Alan Redfern et al., The Standards and Burden of Proof in International Arbitration (10 Arbitration International 1994) 320. [2] Alan Redfern, ‘The Practical Distinction Between the Burden of Proof and the Taking of Evidence – An English Perspective’ in Alan Redfern and others (eds.), The Standards and Burden of Proof in International Arbitration, (Arbitration International 1994) 320. [3] Gary Born, International Commercial Arbitration (2nd edn., Kluwer Law International 2014) §15.09B.

*Manan Shishodia This is the second part of the blog post dealing with the phenomena of awards being enforced after being set aside COMMON THREAD IN ALL THE ABOVE CASES AND COUNTERING VIEWS In all the above cases, a common thread that exists is the principle of ‘public policy’. The awards have been challenged at the seat court largely on two grounds: a) validity of an arbitration agreement; and b) award was passed against ‘public policy’ or in violation of a particular law. At this juncture, it is important to analyse the latter aspect to gain a holistic understanding of why awards are challenged. Moreover, there are multifarious interpretations of “public policy” in different jurisdictions. For instance, some jurisdictions construe it broadly and some construe it narrowly as we will discuss further. Let us take the example of India (my home country). India is one of the few jurisdictions to statutorily define ‘public policy’ in the Arbitration and Conciliation (Amendment) Act, 2015. While some countries consider public policy to mean international public policy, Indian courts have held that there is no workable definition of international public policy. Thus, it should be construed to be the doctrine of public policy as applied by courts in India. In the definition of ‘public policy’, India has statutorily included the grounds of fraud, corruption, fundamental policy of Indian law and basic notions of justice and morality. While public policy has no definition and its elements have been identified statutorily in Section 48(2)(b)(ii), additional elements have been sufficiently postulated by judicial interpretation. In light of the above analysis, the following practical deductions can be made about public policy. These will be helpful while assessing an application resisting enforcement of a foreign award. The expression ‘fundamental policy of Indian law’ calls for a violation that is beyond mere statutory violation. In one case, the Indian Supreme Court held that Article V(2)(b) of the New York Convention had omitted the reference to “principles of law of the country in which it is sought to be relied upon” while replacing the Geneva Convention of 1927. Since the expression "public policy" covers the field not covered by the words "and the law of India" which follow the said expression, it was held that contravention of law alone will not attract the bar of public policy and something more than contravention of law is required. It is important to assess the nature, object and scheme of a statute to determine if the violation of such statute would constitute a violation of the fundamental policy of Indian law. In Vijay Karia. v. Prysmian Cavi E. Sistemi SRL[1], the Supreme Court held that any rectifiable breach under the FEMA cannot be said to be a violation of the fundamental policy of Indian law. It held that the Reserve Bank of India could step in and direct the parties to comply with the provisions of the FEMA or even condone the breach. However, the arbitral award would not be non-enforceable as the award would not become void on this count. Citing its judgment in Renusagar Power Company Limited v. General Electric Company[2], the Supreme Court held that the fundamental policy of Indian law must pertain to “a breach of some legal principles or legislation which is so basic to Indian law that it is not susceptible of being compromised. “Fundamental Policy” refers to the core values of India’s public policy as a nation, which may find expression not only in statutes but also time-honoured, hallowed principles which are followed by the Courts.” The ground of public policy is available in India both for challenging to an India-seated award and to resist enforcement of a foreign award. However, in an international commercial arbitration conducted in India, the ground of challenge relating to the public policy of India would be the same as the ground of resisting enforcement of a foreign award in India. This is because Section 34, Arbitration & Conciliation Act, which deals with challenges to awards made by India-seated arbitral tribunals differentiates between international commercial arbitrations held in India and other arbitrations held in India. Thus, after the Arbitration and Conciliation (Amendment) Act, 2015, grounds relating to patent illegality appearing on the face of the award do not apply to (i) international commercial arbitration awards made in India; and (ii) foreign awards being resisted in India. In light of the above discussion, we note that the resistance to the enforcement of foreign awards must be approached with circumspection. The question of whether enforcement of a foreign award violates the public policy of India must be considered in the context that India is a signatory to the New York Convention. It is the sovereign commitment of India to honour foreign awards except on the exhaustive grounds provided under Article V, New York Convention. While it may be tough to construe public policy without a workable definition, judicial interpretation offers sufficient guidance, whilst maintaining that judicial interference remains minimal. It is essential to recognize the need for restraint in examining the correctness of a foreign award or a domestic award tendered in an international commercial arbitration as opposed to a domestic award. The concerns of international comity, respect for the capacities of foreign and transnational tribunals and sensitivity to the need of the international commercial system for predictability in the resolution of disputes require that we enforce the parties' agreement even assuming that a contrary result would be forthcoming in a domestic context. As the Court in Cruz City has aptly stated, a policy to enforce foreign awards itself forms a part of the public policy of India, the courts should strive to find the right balance between the policy of enforcing foreign awards and considering the grounds for resisting the enforcement of foreign awards. The Supreme Court upheld the Delhi High Court judgment in Cruz City Mauritius Holdings v. Unitech Limited. It was held that the contravention of any provision of an enactment is not synonymous to the contravention of the fundamental policy of Indian Law. The expression fundamental policy of Indian Law refers to the principles and the legislative policy on which Indian statutes and laws are founded. The expression “fundamental policy” connotes the basic rationale, values and principles which form the bedrock of laws in our country. The objections to enforcement on the ground of public policy must be such that offend the core values of a member State’s national policy and which it cannot be expected to compromise. The expression “fundamental policy of law” must be interpreted in that perspective and must mean only the fundamental legislative policy and not a provision of any enactment. The Supreme Court held that first and foremost, FEMA – unlike FERA – refers to the nation’s policy of managing foreign exchange instead of policing foreign exchange, the policeman being the Reserve Bank of India under FERA. As grounds were pertaining to violation of Section 47, the Supreme Court held that it no longer exists in FEMA - so the transactions that violate FEMA cannot be held to be void. In addition, if a particular act violates any provision of FEMA or the Rules framed thereunder, the permission of the Reserve Bank of India may be obtained post-facto if such violation can be condoned. Therefore, a rectifiable breach under FEMA can never be held to be a violation of the fundamental policy of Indian Law and the award could not be set aside on that ground alone. In furtherance, if the Reserve Bank of India were to take action under FEMA, the non-enforcement of a foreign award on the ground of violation of FEMA Regulations or Rules would not arise as the award does not become void on that count. Likewise, there have been similar approaches by courts in different jurisdictions. Courts in different jurisdictions have opined that mere violation of a particular provision of law would not tantamount to violation of ‘public policy’ and the standard for the same is much higher. In light of the above discussion of cases and analysis of ‘public policy’ in India, we note that there are differing approaches by different courts across the world. The above cases can make us lead to the inference that ‘public policy’ is construed very broadly as Courts have not prevented enforcement of awards easily. However, these are rare cases and usually when an Award is set aside by a seat court, it is not enforced. The second common thread that connects these cases is that the awards were also challenged on the ground that there did not exist a valid arbitration agreement. The validity of an arbitration agreement is often challenged on numerous grounds. It could be for lack of sufficient stamping, absence of clear intention of parties to arbitrate etc. As is obvious, it always depends on the conspectus of the dispute and the wording of the agreement. The Indian courts have shown a liberal approach and opined that even if there is a faint intention to arbitrate, the validity of the arbitration agreement cannot be denied. Often, vague and unclear arbitration agreements are held to be valid as long as there is a clear intention to arbitrate. The Supreme Court of India has clearly enunciated the requirement of a valid arbitration agreement. The two cases enunciating the same are: Jagdish Chander v. Ramesh Chander and K. K. Modi v. K. N. Modi. I will not delve into the facts of the case and only mention the legal principles enunciated in the case. The same were as follows: The arbitration agreement must be in writing. The parties shall agree to refer any dispute (present or future) arising out of a contract to a private tribunal. The private tribunal should be empowered to adjudicate upon the disputes in an impartial manner, giving due opportunity to the parties to put forth their case before it. The parties must agree to be bound by the decision of the arbitral tribunal. The intention of the parties to refer the dispute to a private tribunal must be unequivocally reflected. There must be ‘consensus ad idem’ between the parties i.e., they should agree to the same thing in the same sense. The words shall contemplate an obligation and determination on the part of the parties to invoke arbitration and not merely a possibility. For example, use of the words such as “parties can if they so desire, refer their dispute to arbitration” or “in the event of any dispute, the parties may also agree to refer the same to arbitration” shall not be construed as submission to arbitration. The agreement clauses shall not in any way specifically exclude any of the aforementioned essentials. For example, a clause permitting the tribunal to decide a claim without hearing the other side. In light of the above-enunciated principles, the Courts have taken a liberal approach and often construed a valid arbitration agreement in most cases. The benefit of the doubt is usually in favour of the existence of agreement as Courts encourage for the disputes to be adjudicated by a private forum and enable parties to get relief(s) expeditiously. A. POTENTIAL INFLUENCES IN DIFFERENT COURTS AND EXERCISING DISCRETION UNDER ARTICLE V(1)(E), NEW YORK CONVENTION Article V (1)(e) allows national courts to refuse recognition or enforcement if it is established that, in the courts of the country in which, or under the law of which, the award was made, the award has been set aside or suspended. In Article V, the term “may” indicates that national courts have the possibility to refuse enforcement of an award on the grounds listed but they are not obliged to do so. Under Article VII, a court will not breach the Convention by enforcing an arbitral award pursuant to more favourable provisions found in its domestic laws in accordance with Article VII (1). Accordingly, a number of courts have accepted to enforce awards suspended or set aside at the seat of the arbitration either on the basis of the use of the term “may” in Article V (1) or on the basis of a more favourable provision in the domestic law than Article V(1)(e) in accordance with Article VII (1). a. Award set aside This ground for refusal “seldom occurs and is almost never successful”, in a number of instances, national courts have rejected this ground for denying enforcement by applying national laws more favourable to enforcement than Article V (1)(e) of the Convention. On the other hand, the Convention does not obligate courts to enforce awards that have been set aside at the place of arbitration, and in some cases, courts have denied enforcement pursuant to Article V(1)(e) on this ground. b. Award suspended Article V (1)(e) of the Convention also allows parties to challenge the enforcement of an award if the award has been “suspended”. The Convention does not provide guidance as to the definition of the term “suspended”; nevertheless, with very few exceptions, the majority of courts agree that this refers to a formal suspension resulting from a court decision. The Swiss Federal Tribunal, for instance, held that this rule covers a situation in which a court, “noticing that a fault is likely to impact the award, prevents its enforcement until such time as the issue is settled substantively by the court examining the action to set aside the award”. In that case, a court decision dismissing the Claimant’s request to wind up the Respondent was found not to call into question the validity of the award or to formally suspend its enforcement. It is understood that the automatic suspension resulting from the initiation of an action to set aside the award in the court of the originating jurisdiction does not meet the requirement of Article V (1)(e). As noted by some commentators, if the term “suspension” were to refer to the automatic suspension of an award in the originating jurisdiction pending an action to set aside, this would defeat the whole system of the Convention, as it would suffice that the party opposing enforcement could initiate an application to set aside the award at the place of arbitration so that the award be refused enforcement everywhere. In Switzerland, for instance, a party challenged the enforcement pursuant to Article V(1)(e) on grounds that the initiation of setting aside proceedings at the courts of the place of arbitration in France automatically suspended the effects of the award. The Swiss Federal Tribunal held that the correct interpretation of the Convention should be that the suspension of the award in the originating jurisdiction would only constitute a ground for a challenge if it were granted by a judicial decision. It will not be when it simply arises from an action brought against the award. A Swedish Supreme Court once held that the reference to a “suspended” award under Article V (1)(e) refers to “a situation where, after specific consideration of the matter, the foreign authority orders the setting aside of a binding and enforceable award or the suspension of its enforcement”. As a result, the court rejected the Respondent’s contention that enforcement should be denied on the ground that a recourse to set aside had been initiated in France, the country where the award was issued. The same principle led a United States Court to deny the enforcement of an award. After confirming that “Article V(1)(e) of the Convention requires a ‘competent authority’ to suspend the award, not just a statutory stay”, the court held that the stay ordered by the Argentinian courts was not merely an “automatic” stay resulting from the initiation of setting aside proceedings or a “pre-ordered” formality and on that basis enforced the award despite it being set aside by seat court. B. COUNTERING VIEWS At this juncture, we need to analyse the countering views and the rationale why a ‘seat’ court is given precedence. Firstly, we will delve into two views of determination of a seat and gradually progress to our discussion on seat court. According to one view, which has long been dominant and still remains strong in England, the seat of arbitration is the equivalent of a municipal jurisdiction’s forum. Under this view, the law of the seat necessarily governs the arbitration agreement, either directly or by designating the applicable law. Similarly, the law of the seat governs the formation and composition of the arbitral tribunal as well as the procedure and the form of the award. The courts at the seat of the arbitration oversee the proper functioning of the procedural aspects of the arbitration and, at the end of the process, confirm or set aside the award. In other words, under this approach, the seat anchors the arbitration to the legal order of the state in which it takes place. In a second conception of arbitration, dominant in France and other countries with civil law traditions, the seat of arbitration is chosen for little more than the sake of convenience. Arbitral tribunals need not operate like the national courts of a particular state simply because they have their seat there. Arbitrators do not derive their powers from the state in which they have their seat but rather from the sum of all the legal orders that recognize, under certain conditions, the validity of the arbitration agreement and the award. This is why it is often said that arbitrators have no forum. The seat court is decided mutually by parties and the common practice has been for the awards to not be enforced after the same are set aside by the seat court. This is primarily because the decisions of the Courts, even today, are given more precedence over any other private forum. Courts, being institutions of prestige and having reputed judges, are treated at a higher pedestal because of the enormous experience that they have in dealing with such issues and cases. However, the cases that we analysed in the paper are exceptions to the general rule. These are few cases in the world where awards were enforced because the decision of the tribunal was given precedence as the awards were not held to be violative of public policy in any manner whatsoever and the validity of arbitration agreement was upheld. C. CONCLUSION It is worth emphasizing in conclusion that arbitral awards should be considered to be “delocalized’ or “floating,” in the sense that they would draw their legal authority solely from the will of the parties or from their de facto existence. Contrary to what an excessive interpretation of the internationalist view of arbitration might lead one to believe, it is indeed in legal orders of states that the arbitration agreement and subsequently the award, acquire their binding nature. The source is not exclusively the legal order of the seat of arbitration but rather the sum of all of the legal orders which, on certain conditions which they set, are willing to recognize the arbitral award, a private act. It remains true that “lex facit arbitrum”, but this law is the law of a community of states rather than the law of just one state, be it the state of the seat or the state of enforcement. It is certainly the law of different states, if not transnational rules, that lend the arbitral award its legal authority. D. RECOMMENDATIONS The Convention does not establish grounds for the annulment of arbitral awards. Although the Convention does not explicitly distinguish between denial of enforcement and annulment of an award, Article V(1)(e) implicitly recognizes this distinction, providing that a party may oppose enforcement of an award when “the award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made.” Article V(1)(e) presupposes the existence of a different procedure for annulment by the courts of the seat of the arbitration in accordance with the laws of the seat. Significantly, Article V(1)(e) of the New York Convention fails to specify the grounds upon which the rendering State may set aside or suspend the award. While it would have provided greater reliability to the enforcement of awards under the Convention had the available grounds been defined in some way, such action would have constituted meddling with national procedure for handling domestic awards, a subject beyond the competence of the Conference. Therefore, including grounds for annulment in the Convention would impose an “authority and scope which the document’s framers and signatory states not only did not intend, but likely that they did not foresee.” *Manan Shishodia (He/Him/His) LL.M. Candidate University of Pennsylvania Carey Law School Class of 2022. [1]2020 SCC OnLine SC 177 [2] 1994 Supp (1) SCC 644

*Manan Shishodia This is the first part of the blog post dealing with the phenomena of awards being enforced after being set aside. The origins of Article V(1)(e) of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958 (“New York Convention”) can be traced back to the shortcomings in the 1927 Geneva Convention. Under the 1927 Geneva Convention, a party seeking enforcement or recognition of an award had to prove that the award had become “final” in the country in which it was made. If an award was open to opposition or appeal, it was not deemed to be final. As a result, the finality of the award could only be achieved by obtaining a leave of enforcement in the courts of the country of the seat of the arbitration. This naturally meant higher costs and delayed proceedings as a party was required to effectively obtain two decisions - one at the country where the award was issued and one at the place of enforcement. In furtherance, the requirement that the award could be final only in the country where it was rendered made it easy for the party to obstruct or delay proceedings simply by instituting proceedings for contesting the validity of an award. Therefore, Article V(1)(e) of the New York Convention was borne out of the necessity to remedy the aforementioned shortcomings. The New York Convention was drafted by abandoning the requirement of an award having “finality” and a non-binding award could be a valid ground for refusing recognition and enforcement. Therefore, the need to obtain two decisions (as mentioned above) was eliminated which reduced delay and costs in the proceedings. A plain reading of the Article stipulates that national courts may refuse the recognition or enforcement of an award if the party opposing enforcement establishes that the award: a) has “not yet become binding” on the parties or; b) has been set aside or suspended. The setting aside or suspension of the award needs to be ordered by a “competent authority” of the country “in which” or “under the laws of which” the award was made. At this juncture, let us dissect each of the crucial terms in the Article to gain a holistic understanding. Firstly, “binding nature of award” is an interesting point of discussion as the drafters of the New York Convention have not defined the term “binding” anywhere. This led to multifarious interpretations of the term depending on where the proceedings pertaining to the award took place. For instance, a Swiss tribunal has defined the binding nature of the award when it can “no longer be appealed by ordinary means”. In other jurisdictions, the binding nature has been defined to be when an award is “no longer open to appeal on merits”. Therefore, we see a differing approach in the interpretation of the term “binding nature of an award”. We are aware that an award may be partial or final. Therefore, the interpretation of the United States District Court in Island Creek Coal Sales Company v. City of Gainesville, Florida that notwithstanding the absence of an award that finally disposes of all the claims that were submitted to arbitration, an award that “finally and definitely disposes of a separate independent claim” could be considered as binding. Thus, any interim order(s) passed would not fall within the scope of “binding nature” as the same has not attained finality. Importantly, the New York Convention firstly shifted the burden of proof of proving the binding nature of the award from the party seeking enforcement to the party opposing it. The party against whom an award is passed has to make a request. Secondly, “competent authority” would mean any Court that has the requisite jurisdiction to suspend and/or set aside the award in each country. This power can be conferred on to a specialised tribunal or a special executive arm of the government. Thirdly, the term “in which” would imply the place of the arbitration. For instance, if the arbitration takes place in Singapore and an award was passed there, then the Courts of Singapore would have the competent authority. The term “under the laws of which” would mean the governing law that has been agreed upon by the parties. In usual parlance, this would be the seat of the arbitration as that is the law that parties have agreed upon under their arbitration agreement. Usually, the situs (place) of the arbitration is determinative of the seat or the applicable law. However, there can be cases where the situs and the applicable laws are of different countries. For instance, an arbitration may take place in Singapore and parties may agree that applicable laws of Philippines should govern the arbitration. In that case, the parties have to explicitly agree on which courts of the country will have the competent authority to pass orders on an award. A simplistic understanding of the Article by breaking down the terms makes us learn that the recognition or enforcement of an award may be set aside by a competent authority when it is not binding or has been set aside by a competent authority. An interesting question that arises is whether an award can ever be enforced if the same has been set aside by the seat court/ competent authority? The answer to that is in the affirmative as will be evident from the following analysis of cases. After a succinct analysis of the cases, I will do a comparative analysis of the decisions which will help us understand how different jurisdictions have opined. Corporación Mexicana De Mantenimiento Integral, S. De R.L. De C.V., Vs. Pemex Exploración Y Producción In this case, the Petitioner, Corporación Mexicana De Mantenimiento Integral, S. De R.L. De C.V. (“COMMISA”) had contracted with Pemex-Exploración Y Producción (“PEP”), a state-owned enterprise, to build oil platforms in the Gulf of Mexico. The contracts provided that arbitration would be the exclusive mechanism for dispute resolution and was governed by Mexican law. COMMISA initiated arbitration proceedings and in 2009, obtained an award of approximately $300 million. COMMISA filed a petition in United States District Court for the Southern District of New York for confirmation of the award which was done. PEP subsequently appealed that award and simultaneously challenged the arbitral award in Mexican Courts (seat court). The Mexican Court set aside the award on the ground that PEP could not be forced to arbitrate. After the decision, PEP moved the United States Court of Appeal, 2nd Circuit for the purposes of vacating the decision of the Southern District. The Court upheld the decision of the Southern District of New York and stated that the award was enforceable as the objections of PEP were held to be devoid of merit. The crux of my analysis will deal with the objections raised by PEP for setting aside the award and how the Court reasoned the same. The objections were: a) the personal jurisdiction of the Southern District over PEP and; b) the location of the venue in the district. Regarding personal jurisdiction, PEP contented that it is functionally the Mexican government and can, therefore, not be forced to arbitrate. The Court opined that by application of equitable principles, PEP is an integral part of the Mexican government and would be bound for all portions of the appeal including personal jurisdiction. The Court unanimously decided that the venue is the Southern District of New York because it sought relief from the Southern District of New York and it cannot conveniently reject the forum. The Court analysed provisions of the Panama Convention and stated that as the aim of the Convention is pro-enforcement, the discretion exercised by the Courts would be appropriate as long as it complies with the fundamental notions of what is decent and just. Therefore, it was held that the Southern District of New York did not abuse its discretion and the award was enforced despite being set aside by the Mexican Courts. Cruz City 1 Mauritius Holdings v. Unitech Limited, Delhi High Court (India) In this case, the Petitioner had filed a petition for enforcement of a foreign award arising out of an Agreement between three parties i.e., Cruz City, Burley Holdings Ltd. and Unitech Ltd. The enforcement of the Award was refused on the grounds: a) a decision beyond the scope of the Agreement; b) Unitech did not have proper notice of arbitration for responding to the claim for payment and; c) enforcement of the Award would violate provisions of Foreign Exchange Management Act, 1999 (FEMA). Here, the award was assailed in the High Court of Justice (England) and it was argued that the present challenge is barred by res-judicata. The Court rejected this argument stating that the decision of another Court would only have persuasive value and it would not have any bearing on the validity of an award in other jurisdictions. Regarding objection (b), the Court opined that Unitech had sufficient notice as they had admittedly undertaken to make sufficient funds available to meet their payment obligations after there was a demand made for payment in the notice. Therefore, the key analysis is of objections (a) and (c). It was held that the conspectus of the dispute was within the scope of Arbitration as the relevant parties had expressly undertaken to make payments equivalent to the ‘put-option’ price as per the terms of the Agreement. On analysing the Award in light of FEMA, the Court opined that Article V(2)(b) of the New York Convention and Section 7(1)(b)(ii) of the Foreign Awards (Recognition and Enforcement) Act, 1961 do not postulate refusal of recognition and enforcement of a foreign award on the ground that it is contrary to law of the country of enforcement. The Court stated that the word “public policy” must entail more than a violation of a law of India. Besides that, it was held that FEMA was enacted at the time when India's economy was a closed economy, and the idea was to conserve foreign exchange by effectively prohibiting transactions in foreign exchange unless permitted. Therefore, the objections raised regarding the enforcement of the Award were rejected and the award was eventually enforced. Dallah Real Estate and Tourism Holding Company Vs. Government of Pakistan In this case, Dallah Real Estate and Tourism Holding Company (“Dallah”) sought to enforce an award made in its favour of around $20 million against the Government of Pakistan. The Respondent had challenged the Award on the ground that there was no valid Arbitration Agreement, and it was set aside by the Seat Court. However, the Award was enforced later. Simplistically put, the reasoning given by the Court was as follows: “The court before which recognition or enforcement is sought has a discretion to recognise or enforce even if the party resisting recognition or enforcement has proved that there was no valid arbitration agreement. This is apparent from the difference in wording between the Geneva Convention on the Execution of Foreign Arbitral Awards, 1927 and the New York Convention. The Article 1 of the Geneva Convention provided (Article 1) that, to obtain recognition or enforcement, it was necessary that the award had been made in pursuance of a submission to arbitration which was valid under the law applicable thereto, and contained (Article 2) mandatory grounds (“shall be refused”) for refusal of recognition and enforcement, including the ground that it contained decisions on matters beyond the scope of the submission to arbitration.” Since Section 103(2)(b) gives effect to an international convention, the discretion should be applied in a way that gives effect to the principles behind the Convention. One example is where the party resisting enforcement is estopped from challenging the award. As emphasised by a Learned Judge, there is no arbitrary discretion- the use of the word “may” was designed to enable the court to consider other circumstances, which might on some recognisable legal principle affect the prima facie right to have an award set aside arising in the cases listed in Section 103(2). Direction Générale de l'Aviation Civile de l'Emirat de Dubaï v. Société International Bechtel Co. In this case, an Award was passed on 20th February 2002 in favour of a company registered in Panama (“International Bechtel Co.”) in a dispute against the Directorate General of Civil Aviation of the Emirate of Dubai (“DAC”). The award was subsequently set aside by the Dubai Supreme Court. In the meantime, International Bechtel sought to enforce the award in France, which was granted by an order passed by the First Instance Court of Paris. At the time, the United Arab Emirates was not a party to the New York Convention and the 1991 Convention on judicial cooperation between France and the United Arab Emirates applied to the recognition of arbitral awards. Appealing this decision, DAC requested full recognition on the basis of the 1991 Convention on judicial cooperation of the Dubai Supreme Court decision upholding the setting aside of the Award. It was further argued that the award may not be enforced in France since it did not meet the requirements of the 1991 Convention and was set aside in the application of the law chosen by the parties governing the arbitral procedure.It was also argued that the enforcement disregard of the 1991 Convention constituted an excess of power that the Sole Arbitrator did not comply with his mandate (Article 1502, Code of Civil Procedure) and that the recognition and enforcement of the award was contrary to international public policy (Article 1502). The Paris Court of Appeal confirmed the enforcement order and dismissed DAC's action. It reasoned that the condition relied upon by DAC whereby all recourse must be exhausted in the country of origin before the enforcement of the award may be granted in France is contrary to French fundamental principles of arbitration aiming at facilitating the international circulation of awards. It noted that these principles are applicable in the context of the 1991 Convention which was also concluded to facilitate recognition of awards between the two States, especially since the United Arab Emirates was not a party to the NYC. This reserves the right to apply more favourable French law allowing for the enforcement of an award having been set aside at the seat of the arbitration. The Cour d'appel de Paris then held that decisions rendered following annulment proceedings (similarly to enforcement orders) do not have any international effect outside the country where they have been rendered. It thus examined the grounds for the enforcement of the award irrespective of the annulment of the award by the Dubai Supreme Court and held that the enforcement of the award was not contrary to the 1991 Convention. Yukos Capital S.à r.L. v. OJSC Rosneft Oil Company In this case, the claimant, Yukos Capital S.A.R.L. (“Yukos Capital”), was a Luxembourgian company that had once been a member of the Yukos Group (“Yukos”) in Russia. The defendant, OJSC Rosneft Oil Co. (“Rosneft”), was a Russian State-owned company that had acquired the majority of Yukos’ assets. The acquired assets included a former production subsidiary of Yukos, Yuganskneftegaz (“YNG”). Disputes had arisen in respect of certain loan agreements between Yukos Capital and YNG. The disputes were submitted to arbitration pursuant to the Rules of the International Commercial Arbitration Court at the Chamber of Commerce of Trade and Industry in Russia. The arbitral tribunal issued four awards in favour of Yukos Capital. By the time the awards were issued, YNG had been acquired by Rosneft. Rosneft then applied to the Russian courts to have the awards set aside. The Russian courts granted the application. Meanwhile, Yukos applied to the Dutch courts for enforcement of the awards. The Dutch courts ultimately granted enforcement, refusing to recognise the Russian courts’ setting aside of the awards on the basis that it was the product of a judicial process that was partial and dependent. Yukos also applied to the English High Court to enforce the awards pursuant to Section 101(2) of the UK Arbitration Act, 1996. Rosneft objected to enforcement on three broad grounds. First, it maintained that the awards had been set aside by the Russian courts, relying on Section 103(2)(f) of the Act incorporating Article V(1)(e), New York Convention regarding refusal to recognise or enforce an award where, inter alia, the award has been set aside by a competent authority of the country in which, or under the law of which, it was made. Second, it argued that the allegations by Yukos Capital regarding the conduct of the Russian court proceedings raised a challenge to the validity of executive and administrative acts of a foreign sovereign upon which the English courts could not adjudicate under the act of state doctrine and the doctrine of non-justiciability. Third, it asserted that the awards should not be enforced because they gave effect to an “unlawful” tax evasion scheme. Yukos Capital replied first that the Russian courts’ setting aside of the awards was partial and dependent, as the Dutch courts correctly found in their decision granting enforcement and that this decision bound and estopped Rosneft under the doctrine of issue estoppel. Secondly, the doctrine of act of state did not apply because there was no challenge to the validity of any act of state and the doctrine of non-justiciability did not apply because the allegations were concerned with judicial standards, which were justiciable; and thirdly, the allegation of unlawful tax evasion was part of a campaign to strip the Yukos Group of its assets. The High Court was asked to rule on two preliminary issues namely: (i) whether Rosneft was issue estopped by the decision of the Dutch courts from denying that the Russian courts’ setting aside of the awards was the result of a partial and dependent judicial process and (ii) whether Rosneft was entitled to rely on the act of state and non-justiciability doctrines. The High Court ruled in favour of Yukos Capital on both of the preliminary issues. Subsequently, Rosneft appealed that decision. The Court of Appeal upheld the appeal on the question of estoppel, but dismissed the appeal with respect to the question of the act of state and non-justiciability doctrines. In respect of the first question, the Court noted that the Dutch courts had treated the issue of recognition of the Russian courts’ setting aside of the awards as one of public order. In the Court’s view, the notion of “public order” was inevitably different in each country. In particular, it noted that the standards by which the courts of any particular country resolved the question of whether the courts of another country were “partial and dependent” might vary considerably. It concluded that in an English court, this question fell to be determined as a matter of English law. In respect of the second question, the Court reasoned that the act of state doctrine did not prevent an English court subject to the requirements of an international convention such as the NYC from examining whether a foreign court decision should be recognised or enforced. Therefore, the award was enforced despite being set aside by the Seat Court. Malicorp Limited v. The Arab Republic of Egypt In this case, Malicorp was awarded a contract in 2000 by Egypt for the building of the Ras Sudr Airport on the basis of a “Build, Operate and Transfer” concession contract. In order to be selected, Malicorp took several measures which, after being selected, it decided to cancel. The Contract was signed in November 2000. Starting in December 2000, Respondent notified Malicorp of its non-performance under the Contract including Claimant’s obligation to set up an Egyptian company within 90 days. In August 2001, Respondent terminated Malicorp’s contract for failure to perform its obligations. As a result, Malicorp filed for arbitration before the ICSID for compensation due to allegedly unfair treatment and expropriation amounting to a violation of the BIT. The Respondent, on the other hand, argued that the ICSID Tribunal lacked jurisdiction and that the Contract was validly terminated. At the same time, the Claimant commenced arbitration before the Cairo Regional Centre for International Commercial Arbitration. This Tribunal ruled in favour of the Claimant and ordered the Respondent to pay the Claimant. Following this award, the Respondent applied to set this award aside in Egypt and the Claimant filed for enforcement of the award in France. In the seat court, the judge refused to enforce a Cairo Regional Centre for International Commercial Arbitration award even after it was set aside by a decision of the Cairo Court of Appeal in 2012 because it was opined that the award granted remedies on a basis that was neither pleaded nor argued. The Judge opted not to exercise his discretion under Section 103, Arbitration Act, 1996 to enforce the award in any event. Therefore, the court opined with the ICSID tribunal disabling Malicorp to recover from the Egyptian state. However, at the proceedings in French Courts, the question that the Court was confronted with was whether there was a violation of “public policy” in the enforcement of the award. As we know, the definition of public policy has really differed in each jurisdiction (discussed in detail later) and the French Court opined that the Award must be enforced because there was nothing in the adjudication of the dispute that defied tenets of public policy.

Analysis of Section 28(3) of the Arbitration and Conciliation Act, 1996 Sneha Rath[1] and Gaurav Rai[2] PDF version of the Article Introduction 1. The central force behind the creation of a valid contract, including an arbitration agreement, is the doctrine of ‘party autonomy’ which embodies the willingness of parties to determine their rights and interests, and to commit to fulfilling certain obligations therein. 2. In disputes involving contracts, inter alia work contracts, before the arbitral tribunals (tribunal), it has been established by the Supreme Court of India (“Supreme Court”) in Ssangyong Engineering & Construction Co. Ltd. v. National Highways Authority of India, 2019 15 SCC 131 (“Ssangyong”) at para 76 and PSA SICAL Terminals Pvt. Ltd. (SICAL) v. The Board of Trustees (Board), 2021 SCC Online SC 508 (“PSA SICAL”) at para 82 - that tribunals do not have the power to alter or modify the terms of an agreement that could result in the creation of a new contract between the parties. Further, in February 2022, the Supreme Court in Indian Oil Corporation Ltd. (IOCL) v. M/s Shree Ganesh Petroleum Rajgurunagar (Ganesh Petroleum), 2022 SCC OnLine SC 131 (“IOCL v. Shree Ganesh”) discussed the existing jurisprudence around the scope of arbitrators’ powers in committing ‘acceptable errors’ and ‘unacceptable errors’ when delivering arbitral awards as far as interpreting terms of a contract are concerned. 3. By way of this article, the authors will discuss the historical jurisprudence under the Arbitration and Conciliation Act, 1996 on the issue of scope of the arbitrator’s power to wander beyond the Contract. The same will begin with a discussion of the Judgment of the Supreme Court in Oil and Natural Gas Corporation v. SAW Pipes (2003) 5 SCC 705 (“ONGC v. SAW Pipes”), followed by the suggestions by the Law Commission in their 246th Report on the basis of which amendments were made to the Arbitration and Conciliation Act, 1996 in the year 2015. We shall thereafter see the changing stance taken by courts to give effect to these amendments. Thereafter, we shall analyse the two judgments of the Supreme Court in Ssangyong and PSA SICAL which discussed the restrictions on the power of the arbitral tribunal to make alterations to the Contract. Finally, the authors shall conclude the article by discussing the case of IOCL v. Shree Ganesh and analyse the scope of the powers of the arbitral tribunal as discussed in the case and compare with the dictum of the judgment of ONGC v. SAW Pipes. The comparison will help us state firmly the changes in law that have occurred regarding the scope of the arbitral tribunal to ‘interpret’ or disregard terms of the contract and how far the amendments of the Arbitration Act may have been neutralised by judicial pronouncements. Jurisprudence Around Arbitrators’ Powers to Alter or Modify a Contract 4. The law as it stood prior to the 2015 Amendment to Section 28(3) of the Arbitration Act, was established in the case of ONGC v. SAW Pipes, wherein the arbitrator was restricted from making any changes to the terms of the contract on the reasoning that a tribunal was a creation of a contract and thus, even a reference to the common trade practices in the market did not allow the arbitrator to take a liberal approach in altering or modifying the terms of a contract. 5. Concurrent to the findings in ONGC v. SAW Pipes, the Supreme Court in Bharat Coking Coal Ltd. v. Annapurna Construction, 2003 8 SCC 154 (“Annapurna Case”) distinguished between ‘error within jurisdiction’ and ‘error outside jurisdiction’ by underlining that an award can be set aside if the arbitrator has interpreted the terms of an agreement by travelling beyond the contract; however, if the interpretation has been made without travelling beyond the scope of the contract, then the award is not liable to be set aside. The former was construed as an arbitrator committing ‘error without jurisdiction’ and the latter as ‘error within jurisdiction’. 6. The Supreme Court went ahead to clarify the legislative intent behind such a restrictive approach that was taken under Section 28(3) of the Arbitration Act, in the subsequent case of MD, Army Welfare Housing Organization v. Sumangal Services (P) Ltd, (2004) 9 SCC 619 where it was observed that a tribunal, not being a court of law, its orders not being judicial orders, and its functions not being judicial functions, could not exercise its power ex debito justitiae i.e. ‘as a matter of right’. Thus, the arbitrator’s jurisdiction “being confined to the four corners of the agreement, he can only pass such an order which may be the subject matter of reference”. 246th Report of the Law Commission and the Amendments to the Act in 2015 7. The Law Commission of India in its 246th Report had suggested for an amendment to Section 28(3) of the Arbitration and Conciliation Act, 1996 (Arbitration Act) in the following format: “(ii) In sub-section (3), after the words “tribunal shall decide” delete the words “in accordance with” and add the words “having regard to””, with the expression of its intention to “overrule the effect of ONGC Ltd. v. Saw Pipes Ltd., (2003) 5 SCC 705, where the Hon’ble Supreme Court held that any contravention of the terms of the contract would result in the award falling foul of Section 28 and consequently being against public policy.” 8. The pre-amended Section 28(3) of the Arbitration Act stood as - “In all cases, the arbitral tribunal shall decide in accordance with the terms of the contract and shall take into account the usages of the trade applicable to the transaction.” Amendment to Section 28(3) of the Arbitration Act was pursuant to the legislative recommendations that were expressed in the 246th Law Commission Report. The amended Section 28(3) of the Arbitration Act reads as: -“While deciding and making an award, the arbitral tribunal shall, in all cases, take into account the terms of the contract and trade usages applicable to the transaction.” 9. Post the 2015 Amendment, several courts in India seem to have upheld the legislative intent as was expressed in the 246th Law Commission Report substantiated with reasoning for the same. In the recent case of Eastern Coalfields Ltd. v. Rungta Projects Ltd., 2018 SCC OnLine Cal 6555 the Calcutta High Court praised the Ld. Arbitrator for taking a practical, commercial approach to the competing claims instead of giving a restrictive meaning to the terms of the contract. Following is the relevant para from the judgement “24. Instead of giving a restrictive meaning to the terms of the contract, the Ld Arbitrator took a practical, commercial approach to the competing claims. He could have shut his eyes to the ground realities in most cases of premature terminations, where the contractor is left high-and-dry and destined to clear the dirt; including settling claims of vendors, dismantling sheds, rid the site of equipment. In ploughing through the pleadings and evidence, the Ld Arbitrator meticulously weighed each of the claim against the actual expenses incurred in the context of the initial expectation of both parties that the contract would last for three years. In doing so, the Ld Arbitrator gave a correct construction to section 28 (3) of the Act; he took into account the trade usages and commercial practices prevalent in situations of this nature where a contractor is saddled with the burden of taking on expenses for paying off disgruntled third parties over and above the imminent monetary loss of the project altogether. In this Court's view, the extent of expenditure incurred under different heads and the quantum awarded under each head of claim by the learned arbitrator is a question of fact arrived at after proper evaluation of materials and a re-assessment of those facts can only be done if the assessment is found to be misdirected or perverse. The Award is in consonance with efficacious business practices applicable to commercial transactions where a contractor can apply for liquidated damages for the loss and damage suffered by it on account of premature termination of the contract.” 10. The reasoning by the High Court appears to be based on the premise that no party to a contract can claim unjust benefits by putting another party in a disadvantageous position. Therefore, it is well within the rights of an arbitrator to interpret the terms of a commercial contract in light of the prevalent trade and business practices. 11. At this juncture, a very pertinent question could arise as to what the extent of the powers of an arbitrator is when adjudicating a contractual dispute in light of prevailing trade usages. Reference to the Delhi High Court’s observations in the recent matter of Astonfield Renewables Pvt. Ltd. & Anr. v. Ravinder Raina, 2018 SCC OnLine Del 6665 (Astonfield Case) would be relevant here - “50. A reading of the above would show that the present is not a case where the Arbitrator has acted in ignorance of the terms of the Agreement, but is a case where the Arbitrator has interpreted the terms of the Agreement to reach a particular conclusion. This distinction is very relevant as construction of the terms of the contract is primarily for an Arbitrator to decide unless the Arbitrator construed the contract in such a way that it could be said to be something that no fair minded or reasonable person could do.” 12. Therefore, it can be concluded that the developments around the amendment to Section 28(3) of the Arbitration Act always aimed at upholding the doctrine of party autonomy by giving due regard to the terms of a contract; but the only change has been in the transition from a restrictive-to-liberal approach while interpreting the commercial viability of the terms the said contract. Discussions regarding the amendments by the Supreme Court 13. Just prior to the 246th Law Commissions report and the amendments, the Supreme Court in Associate Builders v. Delhi Development Authority, 2015 3 SCC 49 (Associate Builders Case), held that an arbitrator is said to commit an ‘error within jurisdiction’ if he interprets the terms of the contract wrongly, but the same error would amount to ‘error without jurisdiction’ if he exercises powers which are not conferred on him. Essentially, the arbitrator is free to take into account the prevailing business practices as long as it is within the jurisdictional powers conferred on him, and such a reference must result in preserving the rights and interests of the parties to the contract. 14. Post the amendment, the Supreme Court in Ssangyong in para 76, while referring to Associate Builders, held that a Court can interfere with the award of an arbitrator only in exceptional circumstances including where it is evident that the course of conduct by an arbitrator is contrary to the fundamental principles of justice. 15. In PSA SICAL, the Court clarified that an arbitrator cannot unilaterally amend the terms of a contract unless it is apparent from the evidence on record (such as documents, contractual terms, letters/exhibits exchanged, etc.) that the parties consent to the same. Further, it was iterated that it must be noted that in the facts of this case, the documents on record proved that when the change in Ministry’s notification was received and a subsequent change was suggested by SICAL, the Board never consented to the same. Further, the Court has remarked that the change suggested by SICAL was not necessary as nothing on record suggested that the old revenue model would not have continued to function efficiently under the Ministry’s Notification. In essence, it can be construed from the above observations: that if there is a change in the trade practices, it must have relevance to the terms of the contracts for the arbitrator to go ahead and incorporate the same during the construction of the contracts; and, that parties’ consent plays a key role in determining their agreement to be subjected to a change in the contractual terms. 16. Although the Court has made the scope of the arbitrator’s powers to interpret the terms of the contract crystal clear, there is ambiguity regarding the following: whether an arbitrator’s powers will override the parties disagreement to an amendment in an event where the arbitrator has found the trade practices relevant to the construction of the contracts? If the parties were aware of the prevailing trade practices before the dispute came before the arbitrator and one of them expressed disagreement to incorporating the changes, does the arbitrator still have the power to modify and alter the terms? And, whether the award by the arbitrator in the PSA Sical case was an error within the jurisdiction or an error outside the jurisdiction? IOCL v. Ganesh Petroleum - Arbitrator going beyond the terms of the Contract 17. The intention however behind the 2015 Amendment to Section 28(3) of the Arbitration Act has been established which entails- a. That a tribunal is empowered to take a more liberal approach when interpreting agreements by considering the prevalent significant trade practices and developments in the market; and b. That such an interpretation by a tribunal would not necessarily qualify as a valid ground to challenge its award. 18. However, there are still multiple interpretations as to what extent, and under what circumstances, can an arbitrator/tribunal exercise its powers under Section 28(3) of the Arbitration Act. The subsequent paragraphs will attempt to discern whether the recent ruling by the Court in the matter of IOCL v. Shree Ganesh Petroleum has continued to uphold and extend the legislative intent behind the 246th Law Commission Report or has taken a detour to the defunct laws by silently reinstating the legislatively overruled judgement of ONGC v SAW Pipes. 19. Ganesh Petroleum leased a plot of land to IOCL, for a term of 29 years with further renewal by mutual consent and a lease rent of Rs. 1750/- per month, to set up a retail outlet for the sale of its petroleum products (lease agreement). Ganesh Petroleum and IOCL are together referred to as “the parties”. IOCL was permitted to assign, transfer, sublet, underlet, or part with the possession of the premises or any part thereof to any person without the consent of Ganesh Petroleum. 20. Additionally, a dealership agreement was entered between the parties whereby Ganesh Petroleum was appointed as the dealer of the retail outlet which was set up by IOCL in the leased premises. The dealership agreement was for a term of 15 years and was to continue thereafter for successive years of one year each until either party determined to terminate the agreement by giving three months’ notice in writing to the other of its intention to terminate the said agreement. 21. The arbitrator, while delivering the award on the disputes concerning the dealership agreement, increased the monthly lease rent under the lease agreement for IOCL from Rs.1750/- per month to Rs.10,000/- per month with 20% increase after every three years. Hence, the present appeal by IOCL. 22. By allowing the appeal against the judgment of the Bombay High Court (BHC) and simultaneously setting aside the award of the Arbitrator for increasing the lease rent from Rs.1750/- per month to Rs.10,000/- per month, the Court ruled that the arbitral award (award) was liable to be set aside under Section 34(2)(a)(iv) of the Arbitration Act as it concerned with the dispute of lease rent that did not fall within the arbitration clause in the dealership agreement and was thus patently beyond the scope of the submission to the arbitration, that a tribunal being a creature of contract, is bound to act in terms of the contract under which it is constituted, that a High Court or Supreme Court does not sit in appeal to an award and such courts can interfere with the award only if any of the following conditions are fulfilled: (i) When an award is, on its face, in patent violation of a statutory provision. (ii)When the Arbitrator/Arbitral Tribunal has failed to adopt a judicial approach in deciding the dispute. (iii)When an award is in violation of the principles of natural justice. (iv)When an award is unreasonable or perverse. (v) When an award is patently illegal, which would include an award in patent contravention of any substantive law of India or in patent breach of the Arbitration Act. (vi)When an award is contrary to the interest of India, or against justice or morality, in the sense that it shocks the conscience of the Court. 23. The Supreme Court while deciding to set aside the award in the case of IOCL v. Ganesh Petroleum, made a reference to the Associate Builders Case, wherein it observed that a tribunal cannot wander outside the scope of an agreement and alter its terms and conditions on the ground that such an act is to prevent injustice to a party when the parties had clearly entered into the agreement earlier with their eyes open. With subsequent reference to para 40 of Ssangyong the Court tried to draw a distinction between an error within the jurisdiction and an error outside the jurisdiction in light of when a tribunal can make reference to the prevailing trade usages in the market under Section 28(3) of the Arbitration Act. Further, the Hon’ble Supreme Court of India in the Ssangyong has held in para 76, that an Arbitral Tribunal, or for that matter, the Court cannot alter the terms and conditions of a valid contract executed between the parties. This view seems eerily similar to the ONGC v. SAW Pipes ruling which was legislatively overruled by the 2015 amendment. 24. In the present case of IOCL v Ganesh Petroleum, the Court observed that the dealership agreement and the lease agreement were two separate agreements, which had clearly outlined the manner in which disputes central to each of the agreements would be settled. It is already established from the facts in the case that the dispute had arisen pursuant to the termination of the dealership agreement. However, the arbitrator went ahead to pass an award in light of a matter (i.e. increase of the lease rent) that was central to the lease agreement and was not under the scope of the arbitration in the present case. Such an act of the arbitrator is clearly an error outside its jurisdiction because the issue was not under the scope of the agreement which was in dispute before it. Analysis 25. Based on the aforesaid discussion and background the authors are of the opinion that if the matter has fallen within the scope of the agreement in dispute, the power of the arbitrator to still disregard the terms of the contract would have to be heavily backed by statutory provisions which disallow certain types of terms in the contract to be overlooked in case they are onerous or one-sided or if it had been apparent that such terms were unilaterally imposed and thus the consent was not freely given by the other party. If the arbitral tribunal provides specific reasons for the disregard of the terms of the contract the same may still be upheld as opposed to the earlier regime wherein the slightest wandering outside the terms of the contract would have meant automatic setting aside under the ONGC v. SAW Pipes jurisprudence. For example, if the terms of the contract state that no damages would be payable for a breach of the contract and if such terms are to be strictly followed then no damages should be payable for the breach. But such a clause of the contract would clearly be in violation of the principles of contract law enshrined in the Indian Contract Act, 1872. Most often when terms of the contract are disregarded it is because the arbitral tribunal tries to impose the supremacy of the Contract Act. 26. The authors believe that the amendment to Section 28(3) of the Arbitration and Conciliation Act, 1996 is not necessarily regarding the trade usages being used by the arbitral tribunal to disregard the terms of the Contract but rather to allow the freedom to the arbitral tribunal to decide whether certain terms of the contract which are being relied upon by the parties are onerous and not in the spirit of the Contract Act, 1872. Further, the arbitral tribunal may also have the liberty, although very limited, to decide on the basis of adequate pleadings, that the terms being relied on disallowing the relief claimed by the plaintiff were not freely consented to and may be disregarded in light of the provisions of the Contract Act, 1872 which support the case of the plaintiff / claimant. This decision of the arbitral tribunal cannot be automatic, i.e. not all terms of the contract which are not in consonance with the Contract Act, 1872 may be disregarded as the principles of statutory interpretation and autonomy of parties to waive entitlements under a statute may play a role. The Supreme Court in National Insurance v. Boghara Polyfab (2009) 1 SCC 267 has held that the presumption always has to be that the parties have entered into the contract with equal bargaining power and free consent, and only if the plaintiff is able to discharge its burden that the terms which restrict their entitlement are onerous or did not consent or the entitlements and protections under the Contract Act were not willingly waived, should the arbitral tribunal have the rights to disregard such terms of the contract and award the protection of the Contract Act to the plaintiff and the consequent reliefs. 27. In arguendo, if a tribunal were to decide a matter which was not within the scope of the arbitration submissions before it, then it would implicitly empower every arbitrator to espouse the power to interfere with any arbitration agreement, whether or not the parties to such agreement consented to submit to his jurisdiction. However, such a scenario is unrealistic given the nature of the creation of the arbitral tribunal and the role of party autonomy in the creation of an arbitration agreement. Hence, we can be rest assured that the Courts have NOT attempted to re-instate the ONGC v. SAW Pipes jurisprudence of awards being set aside as being beyond the terms of the Contract. The arbitration matter in IOCL v. Shree Ganesh was rather a case of the jurisdiction not being available with the arbitrator and the award being set aside under Section 34(2)(a)(iv) and not being set aside under Section 34(2A) for being patently illegal. [1] Sneha is a 3rd year student at National Law of University Odisha and is a Junior Staff Editor at the Arbitration Workshop Blog. She can be contacted at sneharath2111@gmail.com. [2] Gaurav is a Senior Associate at Legafin Law Associates and Co - Editor in Chief of The Arbitration Workshop Blog. He can be contacted at gaurav@thearbitrationconsultant.in.

*Umang Bhat Nair Introduction As things stand today, climate change poses a grave threat that we cannot turn a blind eye to any more. The acidification of oceans, melting of sea ice, and increase in average temperatures heralds bleak future if steps are not taken to actively combat climate change. Climate change is an issue that pervades across business sectors and impacts everyone. To go about one’s business without considering its impact on the environment is like littering the same park you run in till one day it’s impossible to run there anymore. Fortunately, businesses seem to be getting cognizant of the risks of climate change and we now see a rise in the number of companies putting environmental, social and governance [“ESG”] principles at the forefront of their businesses. The increase in usage of sustainable financing to further commercial ambitions while achieving ESG goals through the issue of bonds such as Green Bonds, Sustainability-Linked bonds and Impact bonds is another indicator of businesses moving in the right direction. While businesses may be moving in the right direction, it is perceived that the international arbitration community has not yet moved similarly.[1] It is also perceived that it is only a few members of the community are fully informed and engaged with issues of climate change.[2] Arbitrations between States and foreign investors, in particular, are likely to be forced into submitting their attention to climate change as it continues to increasingly pose a grave threat to investments.[3] Changes in the Investment Treaty landscape such as States bringing counterclaims against investors violating domestic environmental laws and regulatory changes due to the Paris Agreement affecting investments are likely to be central causes for concern. With this background, this Article shall endeavour to highlight the rise in prominence of environmental issues in investment arbitrations and then analyse how investment arbitral tribunals and States, today, may hold investors accountable for environment-related obligations within the framework of existing Bilateral Investment Treaties [“BIT”] that may contain only minimal or unclear language for such obligations. The Article is divided into 4 parts. First, it shall trace the upward trajectory of the attention given to environmental issues in treaty arbitration. Second, it shall briefly introduce the central concerns that hamper the development of a more vibrant approach to environment-related claims in treaty arbitration. Consequently, the author shall rely on the general rule of interpretation in international law found in Article 31 of the Vienna Convention on the Law of Treaties [“VCLT”] to argue that investors may be held liable for breaching environment-related obligations even where the relevant BITs do not explicitly impose the same. Finally, conclusions are drawn. Environmental Issues in Treaty Arbitration – the rise in prominence While policy considerations are not to be confused with the black letter of the law, they still form an integral part of international law.[4] Just as a reference to current norms and past decisions that influence the decisions of treaty arbitration tribunals, policy considerations also form a part of the extra-legal considerations involved in the legal process of decision-making.[5] In today’s changing BIT landscape, standards for environment-related obligations which were earlier merely voluntary and guidelines to be followed are now appearing as BIT provisions. These obligations mostly come under the ambit of corporate social responsibility [“CSR”] and can be seen in international instruments such as the OECD Guidelines for MNCs.[6] Today, certain BITs such as the Chile-Hong Kong BIT include provisions such as: “The Parties reaffirm the importance of each Party encouraging enterprises operation within its area to voluntarily incorporate into their internal policies those internationally recognised standards, guidelines and principles of corporate social responsibility that have been endorsed or are supported by that Party.”[7] An increase in BITs containing such provisions shows a marked shift in the investment treaty landscape towards including environment-related obligations. If we were to look back at a tribunal’s decision in Metalclad,[8] it can be seen that the tribunal did not consider the environmental aspects of the challenged measures and assessed the claims strictly from the relevant treaty’s protection standards. Now, with an enhanced focus of State governments on protecting the environment and an increase in environmental investments (for e.g., renewable energy, waste management), we are seeing several treaties including provisions like the one highlighted above in the Chile-Hong Kong BIT. Today, there are BITs that require an investment to be contributing to the environment for validly claiming any substantive protections. For instance, the Moroccan Model BIT,[9] requires investments to contribute to sustainable development for qualifying as a protected investment. In addition, Model BITs of countries like South Africa and the Netherlands impose environmental obligations for investors. Finally, we also see tribunals actively including policy considerations in their decisions. For example, in the Final Award passed in the case of Philip Morris v. Uruguay,[10] while it was public health and not the environment that was considered by the tribunal, their approach shows an inclination to passing decisions that are mindful of policy considerations outside the four corners of the relevant BIT. Even when we look at foreign investors, we see a rise in the invocation of the FET standard or claims of indirect expropriation due to a Host State’s failure to adopt or enforce environmental regulations.[11] Environmental concerns are also often seen in energy-related investment disputes where tribunals are tasked with balancing a State’s regulatory powers and protections afforded to foreign investors. In SD Myers v. Canada,[12] Canada relied on the foreign investor’s alleged non-compliance with state environmental norms to dismiss the claim. In Aven v. Costa Rica,[13] a defence of ‘unclean hands’ was made with reliance placed on a violation of environmental norms. In Copper Mesa Mining v. Ecuador,[14] a mitigation argument involving environment-related obligations was made. Environmental issues are being raised in the form of both a sword and a shield by either Party in treaty arbitrations. Hence, it can be reasonably concluded that environmental issues have carved out a certain space for themselves in the investment treaty law regime. Contemporary Concerns Having seen the rise in prominence of environmental issues in investment arbitration, it is time to turn to the plaguing issues in this line of jurisprudence. A potentially major roadblock in the way of development of this area of law, which this paper shall attempt to address, is that while newer Model BITs have begun to introduce explicit obligations for foreign investors with respect to the environment, multiple existing treaties, both old and new, do not have any mention of such obligations. This will undeniably lead to violations against the environment committed by foreign investors going unchecked without any form of sanction. Through the following parts of this paper, the author shall attempt at positing a solution for this conundrum. The second source of concern is the inherent imbalance and asymmetry between host states and foreign investors when it comes to the rights and obligations imposed on both. Investors have been vested with numerous rights and protections and the opportunity for opting for stable dispute settlement procedures in these traditional investment treaties. States, however, have merely given their assent to non-reciprocal obligations, an assent which severely hampers their policy space. It is true that contemporary BITs like the Model India BIT introduce greater equilibrium between foreign investors and host states when it comes to corresponding rights and obligations. Such Model BITs that place the doctrine of sustainable development as a central policy objective are few and far in between and the majority of existing BITs are silent on such aspects.[15] Another concern relates to the fact that international investment treaties do not provide any sort of guidance on issues related to the environment.[16] This leads to tribunals adjudicating investor obligations on the basis of unclear and minimalist language in BITs.[17] Proposing a framework for applying Article 31 of the Vienna Convention on the Law of Treaties to resolve existing issues for environmental obligations in existing BITs There has been a steady shift toward States taking greater care of their residents, and a corresponding rise in investors being pulled up for violating environmental obligations. The Indian Model BIT is a representative example of this shift in treaty practice.[18] It achieves this by including expressly obligations related to the environment. Historically, arbitral tribunals have been largely indifferent to environmental issues. This is evident from the Metalclad[19] case, where the tribunal ignored the environmental aspects of the disputed measures. A possible reason for this indifference may stem from the fact that public international law is ‘fragmented.’ Unlike national legislations, public international law is not formulated by central legislators. As a result, the various domains of international law have evolved mostly independently of each other. Thus, an investment arbitration tribunal is free to adjudicate upon a dispute by only following the text of the applicable investment treaty. Principally, the tribunal is barred from relying on other norms, such as environmental legal norms. While traditional contracts are limited by mandatory rules of public policy, there is no equal limitation on investment treaties outside international law’s standard peremptory norms. These peremptory norms do not substantially address environmental concerns and therefore, historically, there has been a lack of engagement with environmental concerns in investment arbitration. This historical tendency to ignore environmental issues while adjudicating investment treaty disputes is argued to be outdated. Public international law cannot be seen as restricted to States as the only actors involved. Multinational corporations with going concerns in multiple jurisdictions have become actors as well.[20] Tribunals constituted in recent times have started to progressively shift their stance to including extra-legal considerations as factors to be taken into account during the adjudication of a dispute. In Philip Morris v. Uruguay,[21] the tribunal found a legitimate interest in an anti-smoking policy. The tribunal was swayed by considerations of public health and inserted a deliberate obiter dictum in its Award in this regard. If a tribunal could be swayed by considerations of public health that was not a part of the original intention of the treaty’s drafters, it may be argued that a tribunal could also be swayed by considerations related to environmental protection laws. Another example of tribunals including extra-legal norms in their assessment can be seen in the UPS v. Canada case.[22] In this case, the tribunal rejected a submission made by the Claimant by placing reliance on principles followed by the ‘international postal regime.’[23]Such reasoning may be applied to environment-related cases, with tribunals considering a State’s international obligations under the ‘international environmental laws regime.’ The tribunal in Mamidoil v. Albania,[24] included violations of environmental law for justifying the initial illegality of the foreign investor’s investment. This final case of Mamidoil is an important one to consider when understanding the way forward for environmental obligations in investment arbitration. The illegality of investment directly affects the jurisdiction of an investment arbitration tribunal. If there is a change in the approach taken by tribunals on the lines of Mamidoil, i.e., testing the legality of an investor’s investment against environmental laws, it would impose a certain amount of responsibility onto investors assuming they may violate environmental laws while retaining all their rights under the concerned investment treaty. Investors are not parties to investment treaties and thus are not explicitly fettered with obligations or duties. With the presence of provisions for investments to be publicly responsible, investor obligations could be inferred to arise from these provisions. An expanded definition for investments that makes it mandatory for investments to follow domestic legislation on areas such as environmental regulation would deter investors from violating said regulations. It would be feared that non-compliance could lead to nullifying the jurisdiction of any arbitral tribunal over a dispute regarding the investment. With this context in mind, it is pointed out again that some of the newer BITs have begun to include progressive provisions that impose environmental obligations on investments. However, such developments do not give way for progressive solutions when it comes to issues arising from existing BITs that do not mention environmental obligations on investments. It is here that the author submits that Article 31 of the Vienna Convention on the Law of Treaties may be of some use. Take into consideration the tribunal decisions in Von Pezold v. Zimbabwe,[25] Roussalis v. Romania,[26] and Urbaser v. The Argentine Republic.[27] There has been a marked shift in the approach on how to apply international law in general to investment disputes. In Von Pezold, certain third parties had made an application to appear as amicus curiae. They argued that international human rights law on the rights of the indigenous would be applicable because of the relevant BIT’s mention of “international law.” However, the tribunal rejected this submission and held that general international law and its rules would not attract into it the entire gamut of international laws such as those on indigenous people rights. Rather, such a reference would be limited to attracting rules of international law associated with the content of the BIT, such as those on FET standards. Comparing these decisions to that of the tribunal in Urbaser, reflects a clear change in the way tribunals approach references to the application of general international law. In Urbaser, Argentina filed a counterclaim amounting to close to USD 200 million. It was alleged that the foreign investors were in violation of their human rights obligations when it came to accessing water. While the counterclaim was dismissed on substantive grounds, the tribunal interpreted Article 10(1) of the Spain-Argentina BIT[28] “in good faith” to finally hold that disputes concerning foreign investor obligations would also be covered under the BIT. The Tribunal went further to hold that these obligations could be found in international law, inclusive of human rights norms.[29] The shift from Von Pezold and Roussalis to Urbaser shows a change toward including international law norms in the assessment of obligation violations by foreign investors. It would, of course, be inaccurate to argue that this is a perception change across arbitrators worldwide. However, inspiration may be drawn from the Urbaser tribunal’s approach. In paragraph 1204, the tribunal relied on Article 31(3)(c) of the VCLT to hold that it would be apt to consider if other parts of international law might be relevant. Shifting from a mere textual analysis of investment treaties to imposing investor obligations by making applicable the relevant rules of general international law would push forward a more environmentally responsible dispute settlement procedure. Conclusion While treaty negotiators have tried their best to open up the doors for environmental counterclaims by states, the current state of affairs remains a patchwork of provisions that are confusing. New treaty provisions in the newer BITs do not necessarily imply that arbitrators would now change their outlook when it comes to interpreting the standards for allowing to hear a counterclaim. In the hope of change, the author shall now make some recommendations for the stakeholders to consider for smoother dispute resolution that is environmentally conscious. States and foreign investors may consider negotiating their investment agreements with each other and cover in this discussion, environmental issues that may prop up during the lifetime of the investment.[30] One such state that solely accepts claims under investment agreements is Brazil.[31] Ecuador, a state with an emerging mining industry, recently pulled out of its investment treaties and removed legislation calling for negotiating investment contracts directly with foreign investors.[32] The terms of investment agreements would undeniably be a good way forward for all stakeholders given the predictability it would imbibe. Another method to achieve progress would be for states to introduce sustainability goals in investment treaty preambles and require foreign investments to be set up and run in accordance with the host state’s laws. In any event, it is hoped that the international arbitration community recognises the pressing need for imposing environmental obligations, either using the new BITs or Article 31 of the VCLT on older treaties to attract the application of international environmental law. *Umang Bhat Nair is a 4th-year student of NALSAR University of Law, Hyderabad. [1] Lucy Greenwood, “The Canary is Dead: Arbitration and Climate Change”, in Maxi Scherer (ed), Journal of International Arbitration, Kluwer Law International, Vol. 38 Issue 3, 309-311 (2021). [2]“BVI: A Frontline Focus for Resolving Future Climate Change Related Disputes” (2019). [3] Valerie Volcovici, “UN Climate Chief urges investors to bolster global warming fight”, Reuters (16 January 2014) < https://www.reuters.com/article/us-un-climate-change/un-climate-chief-urges-investors-to-bolster-global-warming-fight-idUSBREA0E1KM20140115?edition-redirect=uk> accessed last 20 April 2022. [4] Higgins, “Integrations of Authority and Control,” 85. [5] Id. [6] OECD (2011), OECD Guidelines for Multinational Enterprises, OECD Publishing, available at last accessed 20 April 2022. [7] Chile-Hong Kong BIT, Article 16. [8] Metalclad Corporation v. The United Mexican States, ICSID Case No. ARB(AF)/97/1. [9] Moroccan Model BIT of 2019, Article 14. [10] Philip Morris Brands v. Oriental Republic of Uruguay, ICSID ase No. ARB/10/7. [11] Yasmine Lahlou, Rainbow Willard and Meredith, “The Rise of Environmental Counterclaims in Mining Arbitration,” Global Arbitration Review (2019). [12] S.D. Myers Inc. v. Government of Canada, UNCITRAL (1976). [13] David R. Aven and others v. Republic of Costa Rica, ICSID Case No. UNCT/15/3. [14] Copper Mesa Mining v. Republic of Ecuador, PCA No. 2012-2. [15] Sonal Kumar Singh, Anish Jaipuriar, and Sayantika Ganguly, “Environmental obligations in Investor-State Arbitration: The investor Perspective,” Mondaq (12 March 2021) < https://www.mondaq.com/india/environmental-law/1046270/environmental-obligations-in-investor-state-arbitrations-the-investor-perspective> accessed 20 April 2022. [16] Crina Baltag, “Human Rights and Environmental Disputes in International Arbitration,” Kluwer Arbitation Blog (24 July 2018) < http://arbitrationblog.kluwerarbitration.com/2018/07/24/human-rights-and-environmental-disputes-in-international-arbitration/> accessed 20 April 2022. [17] Maria Fanou, “Environmental Considerations in Investment Arbitration: A Report of a ‘Topical issues in ISDS’ Seminar’” Kluwer Arbitation Blog (22 May 2019) < http://arbitrationblog.kluwerarbitration.com/2019/05/22/environmental-considerations-in-investment-arbitration-a-report-of-a-topical-issues-in-isds-seminar/> accessed 20 April 2022. [18] Id. [19] Supra, at note 8. [20]Urbaser S.A. and Consorcio de Aguas Bilbao Bizkaia, Bilbao Biskaia Ur Partzuergoa v. The Argentine Republic, ICSID Case No. ARB/07/26, Award of 8 December 2016, para 1195. [21] Supra, at note 10. [22] United Parcel Service of America Inc. v. Government of Canada, ICSID Case No. UNCT/02/1. [23] Id., at paras 139-141 [24] Mamidoil Jetoil Greek Petroleum Products Societe S.A. v. Republic of Albania, ICSID Case No. ARB/11/24. [25] Bernhard von Pezold and others v. Republic of Zimbabwe, ICSID Case No. ARB/10/15, Procedural Order No. 2 of 26 June 2012, paras 39, 57. [26] Spyridon Roussalis v. Romania, ICSID Case No. ARB/06/01. [27] Supra, at note 20. [28] Article X (1) of the Argentine-Spain BIT of 1991: “Disputes arising between a Party and an investor of the other Party in connection with investments within the meaning of this Agreement shall, as far as possible, be settled amicably between the parties to the dispute.” [29] Supra, at note 20. [30] Burlington Resources Inc. v. Republic of Ecuador, ICSID Case No. ARB/08/05. As the only contemporary example of a state prevailing against a foreign investor in a counterclaim, the decision may push states to opt for investment agreements directly with foreign investors for counterclaim opportunities. [31] R Zabaglia and A Di Franco, “The International Arbitration Review, Brazil,” The Law Reviews (9th ed. 2018). [32] C Torres and A Hurtado-Larrea, “The International Comparative Legal Guide to: Investor-State Arbitration 2019, Ecaudor,” Global Legal Group Limited; London (1st ed., 2018) < https://iclg.com/practice-areas/investor-state-arbitration-laws-and-regulations/ecuador> last accessed 20 April 2022.

Harsh Mahaseth* | Aadya Narain­ I. Introduction The Singapore International Arbitration Centre (SIAC) opened a representative office for the Americans in New York in December 2020, the first one outside of Asia. With a record-breaking announcement that its caseload had crossed the 1,000 mark this year, it leaped 125 percent from the 479 cases filed in 2019, despite its relatively short history compared to established arbitration institutions. Singapore also administers an exceptional number of arbitrations that do not involve local entities and stands out as a neutral venue for the resolution of international commercial disputes. Situated at the intersection of South and East Asia, with highly advanced administrative, financial and legal systems, Singapore has historically gained popularity as a regional base in Asia for Western firms. Maintaining steady foreign relations with the opposing superpower China, particularly in the trade and advancement of technology has allowed it to remain a neutral party in the bipolar global order. This neutrality is reaffirmed by the country’s recent judgments and commitments upholding the right to arbitration of disputing parties and enforcing arbitral awards in all but the most extreme cases. This article traces the emergence of Singapore as a global centre for arbitration. It begins with an analysis of domestic policies that have enabled the country to set up a high-quality arbitral infrastructure. Secondly, it tackles shifts and relations in the international sphere that have created favorable conditions for demand for the country’s arbitration centres. It finally analyses the way forward for the country, the suggestions and predictions of scholars in the field, and the method the country must employ to capitalise on them. II. Developing Arbitration in Singapore a. Developing Expertise To develop competence in the field of commercial arbitration, the Singapore Government initially mobilized the expertise of foreign law firms using the country as a base in the Asia Pacific. It encouraged joint ventures between local and foreign firms to train local lawyers in the civil law of various jurisdictions. For their expertise, these firms were offered significant incentives, including practising Singaporean law through the local firm, receiving tax credits, and in the case of the massive arbitration venue Maxwell Chambers, substantial government investment. Diverging from the popular practice of hiring judges exclusively from its own country, Singapore invited ‘international judges’ from many jurisdictions, thus generating the scope for multi-lingual common and civil law proceedings to be successfully arbitrated. Thus Singapore created a domestic pool of highly skilled arbitrators. b. Developing Confidence In order to supplement efforts at the international level, subordinate courts have taken impressive strides to integrate alternate dispute resolution into the domestic court system. For example, the Singaporean judiciary instituted a Primary Dispute Resolution Centre (PDRC) nearly twenty years ago for providing the option of mediation to parties in motor accidents and personal injury cases that reached lower courts. This allowed citizens to circumvent lengthy and costly trials to resolve simple civil claims. Simultaneously, it introduced a culture of mediation alternative to the traditional court system, with citizens having a level of familiarity with alternate dispute resolution far greater than most jurisdictions across the world. Singapore’s Practice Directions (issued by the courts to regulate practice and procedure) were eventually amended to provide that all civil disputes must be considered for mediation. Parties may face costs sanctions if they refuse to comply with a direction by the judge managing the pre-trial. These measures are especially important because most Singaporeans and residents encounter the law at this primary level. These mandatory procedures develop confidence in alternative dispute resolution as a viable mechanism to guarantee fair and affordable justice, and thus also serve to garner support for the country’s broader agenda of establishing itself as a global hub for arbitration. c. Developing Laws Prudent and constant revisions to the original law governing arbitration demonstrate the Singapore Government’s dynamic responses to complex considerations. For example, of two historically interchangeably used terms, ‘privacy’ refers to the closed-door policy of international arbitration that disallows third parties from attending arbitral hearings and conferences, while confidentiality, refers to non-disclosure of specific or all information in the public domain. Privacy does not necessarily imply confidentiality. However, both are insisted upon in all SIAC proceedings. It ensures that legal complications or the divulgence of certain information in one sector do not hamper prospects or profits in another. Despite the desirability of this stipulation, key jurisdictions’ arbitration acts vary dramatically with regard to mandatory confidentiality of international arbitration. The United States and the United Kingdom recognise it only implicitly, while most other countries grant no such provision without an existing clause in the arbitration agreement. However, following a public consultation in 2019, the Singapore’s Law Ministry recognised the High Court’s power to strictly enforce confidentiality obligations during arbitration, including non-disclosure of parties’ identities and potential sealing of documents. The all-inclusive and indiscriminate nature of this policy, eliminating the need for additional steps to secure the same, is a significant benefit of international commercial arbitration in the country. Similarly, in early 2021, Singapore’s Ministry of Law approved the Civil Law (Third Party Funding) Regulations, allowing a third party to fund the arbitration proceedings of a dispute it is not connected to. Third-party funding increases a party’s versatility, leads to better management of disputes, and also enables economically disadvantaged entities with strong claims to be better positioned to pursue their proceedings. It helps companies manage financial risk by allowing capital that would otherwise be spent on legal fees to be allocated to other areas of their business during the proceedings. In conjunction with confidentiality laws, Singapore has created an ideal environment for the majority of international parties unwilling to publicise the nature and matter of their international disputes. d. Developing International Accreditation Further, the SIAC ensured that internationally ratified standards constituted the foundation of the domestic legal and administrative frameworks for alternative dispute resolution. The United Nations Commission on International Trade Law (UNCITRAL) developed a ‘Model Law’ to aid States in reforming their arbitral laws and creating uniformity across jurisdictions. It was effectuated in Singapore under the International Arbitration Act (IAA). The two separate legal regimes instituted under the IAA are distinguished primarily by the degree of court intervention in the arbitral process. Parties exercise sole discretion in selecting a particular regime through mutual agreement, allowing them valuable flexibility in each unique circumstance. Further, the SIAC has promoted the adoption of summary procedures, which enable arbitral tribunals to dispose of unmeritorious cases. Traditionally avoided due to a lack of a procedure for appeal for cases dismissed via this procedure, the SIAC expressly encourages this to prevent the misuse of resources and personnel on fruitless proceedings. This determination also serves as a testament to the faith of Singaporean courts in the quality of appellate arbitral courts. e. Developing a Balance Although the judiciary strongly supports arbitration in Singapore, this does not lead to unquestioning or undiscerning deference to the decisions of arbitrators. While preserving the spirit of the Model Law in preventing any unnecessary interference in international arbitral proceedings, the courts recognize that an award that conflicts with the public policy of the State or is induced by fraud or corruption must be set aside. Therefore, despite the massive influx of high-profile, economic disputes adjudicated in the country, this active protection of local interests ensures that Singaporeans do not bear the brunt of any negative repercussions, and are committed to the continuing excellence of their arbitration services. III. Global Geopolitics The increase in the number and complexity of disputes in Asia is fuelled by rapidly growing economies and subsequently increased trade, augmented inter-governmental economic cooperation through forums such as the Association of Southeast Asian Nations (ASEAN), and expanding operations of Western multinationals in these massive markets. For example, against the timely backdrop of China’s ambitious Belt and Road Initiative in Asia and Africa, Singapore launched the Beihai Asia International Arbitration Centre (BAIAC), in 2019 with a commitment to focus on disputes arising from the project. Spanning sixty-eight countries and approximately 40% of the global gross domestic product, the exclusive resolution of the multilateral disputes arising from this massive infrastructural endeavour serves to further establish Singapore as a cornerstone of international arbitration. Simultaneously, a Memorandum of Understanding was signed with the China Council for the Promotion of International Trade (‘CCPIT’) to similar effect for various other Chinese businesses. This, therefore, ensures a steady flow of mediation business from the economic superpower, alongside experience and involvement in a wide range of disputes across the globe. The Singaporean government thus strategically capitalised on the country’s location at the nucleus of this growing market for commercial arbitration by tailoring an efficient forum for the resolution of the naturally resulting contestations. IV. Conclusion Professor Gary Bell from the National University of Singapore emphasizes his Government's priority in advancing Singapore as a hub for legal services, across and beyond Southeast Asia. It is the preferred site of impartial arbitration due to its consistent political and legal stability, wide selection of experienced arbitrators, and strict adherence to international standards of conduct. The Singapore International Commercial Court was established in 2016 to augment the SIAC’s global arbitration presence, a testament to the massive demand for these services. Even as they grappled with stringent lockdown measures during the Covid-19 pandemic, the country's swift transition to remote hearings has entrenched their position as leaders in this field. Within days of national lockdowns being declared, the SIAC had published a series of notices concurring with the latest regulations. It was among the first transition to completely virtual platforms with guidelines for using a dedicated case management email for e-filing and e-payment purposes. Singapore has harnessed the advantages of location, non-partisan foreign policy, legal, political, technical, and economic infrastructure, and a skilled and growing workforce, to emerge in 2021 as Asia’s most popular, and the world’s second most popular seat of arbitration. * Harsh Mahaseth is an Assistant Professor and Assistant Dean (Academic Affairs) at Jindal Global Law School, and a Senior Research Analyst at the Engino Kipgen Centre for Southeast Asian Studies, Jindal School of International Affairs, O.P. Jindal Global University, India. ­Aadya Narain is a law student at Jindal Global Law School and a Research Assistant at the Nehginpao Kipgen Centre for Southeast Asian Studies, Jindal School of International Affairs, O.P. Jindal Global University, India.

*Neil Chatterjee Recently, the Indian Supreme Court (“Court”) in Vodafone Idea Cellular Ltd. v Ajay Kumar Agarwal (“Vodafone-Idea”) once again revisited the amaranthine battle between a referral to arbitration in the face of an existing alternative statutory remedy, with, however, a slight twist – would a remedy of a statutory arbitration under Section 7B of the Indian Telegraph Act, 1885 (“Telegraph Act”) oust the jurisdiction of a consumer forum under the Consumer Protection Act, 1986 (“Act of 1986”). The Court was of the view that jurisdiction would not stand ousted, which was based on the fact that the nature of the arbitration was irrelevant to the additional remedy provided by the Act of 1986 which a consumer was entitled to opt for. In this blog, an attempt is made to explore this finding and whether statutory arbitrations require greater deference. The Absence of a Non-Obstante “Overriding Clause” In Vodafone-Idea, one of the bases for the Court to unsubscribe to a prior judgment of a two-judge bench of the Court in General Manager, Telecom v M. Krishnan & Anr. (“M. Krishnan”) holding that the jurisdiction under the Act of 1986 was impliedly ousted was that the Act of 1986 was a special law protecting vital consumer interests. Section 3 of the Act of 1986 was pressed into service to overrule M. Krishnan. It was further held that even if the Act of 1986 were assumed to be a general law, given the inconsistency between the Act of 1986 and the Telegraph Act (which was a special law), the later general law would prevail. While the Act of 1986 may be a special law qua consumer disputes, in the absence of a non-obstante “overriding effect” clause in the said Act, it would operate solely “in addition to and not in derogation of” the Telegraph Act. In other words, it could not annul or detract from the provisions of the Telegraph Act. In S. Vanitha v Deputy Commissioner, Bengaluru Urban District & Ors. (“S. Vanitha”), the Court was faced with a relatively similar set of competing remedies between the Protection of Women from Domestic Violence Act, 2005, (“PWDV”) and the Maintenance and Welfare of Parents and Senior Citizens Act, 2007 (“Senior Citizens Act”). While Section 36 of the PWDV Act was similar to Section 3 of the Act of 1986 (being in addition to and not in derogation of), Section 3 of the Senior Citizens Act (a later law) was in the nature of a non-obstante “overriding effect” clause. Speaking through D.Y. Chandrachud J. (who, incidentally, also authored Vodafone-Idea), the Court was of the view that though the Senior Citizens Act was promulgated to provide a speedy and inexpensive remedy, Section 3 therein could not be interpreted such as to preclude all the competing remedies under the PWDV Act. This was solely because of the nature of the two special legislations, which requires a harmonious interpretation by analysing the dominant purpose of the said legislations. Viewed thus, in the present case, both the Act of 1986 and the Telegraph Act would be considered special legislations and the Act of 1986 could not be read as precluding the competing remedies that are conferred by the Telegraph Act. On a broader issue of harmonization of legislations, the Court, with the utmost respect, could not simply press Section 3 of the Act of 1986 into service without examining the dominant purpose of the two legislations in question and attempting a harmonization so as to preserve the sanctity of the remedy of statutory arbitration. In fact, compared to S. Vanitha and Vodafone-Idea stands on a better footing as neither the Act of 1986 nor the Telegraph Act contain a non-obstante “overriding effect” clause that existed in S. Vanitha and therefore, the Act of 1986 could not simply annul or detract from the statutory remedy under the Telegraph Act simply on account of being a special law for consumer disputes. Harmonization of the Two Legislations Given the foregoing, it would be appropriate for a forum under the Act of 1986 to grant such remedies that do not result in obviating competing remedies under the Telegraph Act. For this, it would be crucial for a court to juxtapose the reliefs capable of being granted by a forum under the Act of 1986, i.e., under Section 14 therein, with the reliefs that a statutory arbitral tribunal may grant under the Telegraph Act. To the extent a relief is capable of being granted exclusively by the forum under the Act of 1986 and not the statutory tribunal, for instance, discontinuation of unfair trade practice or restrictive trade practice, desist from offering hazardous services, pay sums where injury or loss has been suffered by a larger number of consumers not conveniently identifiable and issue corrective advertisement to neutralize the effect of misleading advertisement, the Act of 1986 would prevail. However, where the dispute exclusively relates to the telegraph line, appliance, or apparatus of the person for whose benefit it is / has been provided, and the relief claimed is limited to the conditions and restrictions basis which such service is provided and the consequences thereof, it is the statutory arbitral tribunal that would exercise jurisdiction. In a case of statutory arbitration, Parliament has consciously provided a statutory remedy that exists notwithstanding the existence of an arbitration agreement between the parties. The remedy itself acts as a mandatory arbitration agreement, which is saved by Section 2(4) of the Indian Arbitration & Conciliation Act, 1996 (“Arbitration Act”). (See, M.P. Rural Road Development Authority & Anr. v. L.G. Chaudhary Engineers & Construction (“M.P. Rural”), M.P. Rural Larger Bench Decision and PSEB, Mahipalpur v. Guru Nanak Cold Storage & Ice Factory, Mahipalpur) As a result, where the dispute falls within the scope of the Telegraph Act and the relief claimed can be granted by the statutory arbitral tribunal, the strict mandate of Section 8 of the Arbitration Act ought to be followed which requires that a reference be made to arbitration unless “prima facie no valid arbitration agreement exists” – the existence of a valid arbitration agreement in this case no longer being in contest. Reconciling with Vidya Drolia In fact, in Vidya Drolia v Durga Trading Corporation (“Vidya Drolia”), a coordinate bench of the Court went so far as to turn the issue from one of doctrine of election to implicit non-arbitrability. Unfortunately, Vidya Drolia was not brought to the attention of the Court in Vodafone-Idea even though it was rendered prior in time. In Vidya Drolia, the Court was of the view that a review by the courts in a Section 8 reference would be limited and restricted to protecting parties from being forced to arbitrate when a matter is demonstrably non-arbitrable and to cut off the deadwood. Consumer disputes were, as such, held inarbitrable owing to the nature of reliefs that may be granted by a consumer forum. The Court held that a consumer under the Act of 1986 could not waive its right to approach the statutory judicial forum constituted therein by opting for arbitration. However, when juxtaposed with Vodafone-Idea where the Court states that “it would be open to a consumer to opt for the remedy of arbitration, but there is no compulsion in law to do so and it would be open to a consumer to seek recourse to the remedies which are provided under the Act of 1986, now replaced by the Act of 2019”, the aspect of implicit non-arbitrability stands surpassed. It appears that the Court acknowledges that the arbitrability of consumer disputes is not an issue – merely the prioritization of the conflicting remedies at the hands of the consumer. In such a case, following the mandate of Vidya Drolia, a judicial authority would have no alternative but to refer the parties to statutory arbitration since the sole caveat under Section 8 of the Arbitration Act - “unless it finds that prima facie no valid arbitration agreement exists” - would not be triggered. The existence of a statutory remedy to arbitration would fulfill the caveat. Given the final finding of Vidya Drolia that “the Arbitral Tribunal is the preferred first authority to determine and decide all questions of non-arbitrability” and that “the court has been conferred power of “second look” on aspects of non-arbitrability post the award in terms of sub-clauses (i), (ii) or (iv) of Section 34(2)(a) or sub-clause (i) of Section 34(2)(b) of the Arbitration Act”, as well as that “rarely as a demurrer the court may interfere at Section 8 or 11 stage when it is manifestly and ex facie certain that the arbitration agreement is non-existent, invalid or the disputes are non-arbitrable, though the nature and facet of non-arbitrability would, to some extent, determine the level and nature of judicial scrutiny”, Section 8 of the Arbitration Act would have to be followed in letter and in spirit. Thus, it appears that an inconsistency exists between the findings rendered in Vidya Drolia and Vodafone-Idea, which must be viewed in light of the fact that Vidya Drolia holds consumer disputes to be fundamentally inarbitrable owing to reliefs that a consumer forum can award without expounding on whether the particular reliefs can be granted by an arbitral tribunal. Reconnecting the Dots on Special versus General law Further, the analysis in Vodafone-Idea that the Act of 1986 is a subsequent special law, and even if assumed to be a general law, yet prevails over the prior special Telegraph Act, may not be in line with the position established by a coordinate bench of the Court in LIC v. D.J. Bahadur (“D.J. Bahadur”), which was affirmed by the Constitution Bench of the Court in Pankajakshi (Dead) through L.R. & Ors. v. Chandrika & Ors. (“Chandrika”) In D.J. Bahadur, the Court was called upon to decide whether the Life Insurance Corporation Act, 1956 (“LIC”), is a special statute qua the Industrial Disputes Act, 1947 (“IDA”) as regards a dispute pertaining to the conditions of service of the employees of the Life Insurance Corporation. The Court was of the view that while the IDA specifically relates to the industrial disputes between workmen and employers, the LIC Act is general statute silent on disputes between management and workmen. Thus, while holding that the special nature of the LIC Act qua regulating takeover of private insurance business would not be relevant to the subject-matter at hand to regard it as prevailing over the IDA, the Court framed a working test in the following words: “52. In determining whether a statute is a special or a general one, the focus must be on the principal subject matter plus the particular perspective. For certain purposes, an Act may be general and for certain other purposes it may be special, and we cannot blur distinctions when dealing with finer points of law. In law, we have a cosmos of relativity, not absolutes – so too in life.” Given the stamp of approval accorded by the Constitution Bench in Chandiraka to the above test, the reliance placed by the Court in Vodafone-Idea on Ajoy Kumar Banerjee v Union of India to consider the Act of 1986 as prevailing over the Telegraph Act simply owing to an “inconsistency” between the two legislations may not, with the utmost of respect, be consistent with precedent. As such, for the investigation and settlement of telecom disputes relating to the telegraph line, appliance, or apparatus of the person for whose benefit it is / has been provided, the Telegraph Act is a special law. The Act of 1986 is a special law for the resolution of consumer disputes pertaining to all other services and telecom disputes of other natures given the expansive definition of “service” under the Act of 1986. In fact, even taking that telecom services stand covered under the expansive definition of “service” in the Act of 1986, as held by the Court in Vodafone-Idea to extend the reach of the Act of 1986 over telecom disputes, yet the position remains unchanged owing to the working test formulated in D.J. Bahadur. Therefore, there exists a greater need for deference to the remedy of statutory arbitration under the Telegraph Act. Conclusion With India’s growing support towards arbitration, especially the limited judicial review that may be exercised in Section 8 or Section 11 reference under the Arbitration Act, Vodafone-Idea poses certain issues that may require ironing out if a clear position on the limits to the country’s pro-arbitration approach is to be established, especially in light of the ruling in Vidya Drolia. On a broader issue, the de-recognition of a remedy of statutory arbitration despite the special nature of the disputes covered within the scope of such arbitration poses certain difficulties, no matter the laudable effort of recognizing the special nature of consumer rights and the remedies provided therein. Hopefully, in an appropriate case, the Court would have the opportunity to revisit some of these issues and clarify the position in law. *Neil Chatterjee is an Advocate, Supreme Court of India | LL.M, MIDS-Geneva.

*Prateek 1. Introduction: With the rapid growth of cross-jurisdictional trade catalysed by globalisation, arbitration has been gaining traction as the preferred platform for resolving international commercial disputes and has been touted as an effective mode of cross-jurisdiction dispute resolution, especially since the propensity of state intervention is minimal. Yet, certain areas of ambiguity in the jurisprudential and policy approach towards arbitration on a global scale provides space for varying national policies. Arbitrator’s immunity is one such subject, where the UNCITRAL Model Law itself is silent. Therefore, it is necessary to understand every position on the spectrum of immunity when attempting to find an optimum balance. 2. Relevant Schools of Thought on Nature of Arbitration: While determining the extent of liability imposed upon an arbitrator, the discourse invariably steers towards the nature of these proceedings. Therefore, to effectively deconstruct all notions and manifestations of immunity, one must undertake the task of analysing the nature of arbitration, as perceived and implemented by various jurisdictions. a. Contractual Theory: As per the Contractual Theory, arbitration is the outcome of a contractual relationship between adversarial parties for the resolution of disputes. Different structures of this contractual relationship have been proposed by the proponents of this theory. The lowest common denominator amongst all these perspectives are the underlying propositions that arbitration is undertaken as a private venture for dispute resolution. Therefore, the principle of pacta sunct servanda (‘agreements should be observed’) is propagated under the theory, stipulating that all parties must follow through their end of the arbitration agreement to allow its enforcement, without much interference by state. Merlin, a major proponent of this theory, proposed that the contractual relationship under an arbitration agreement is one where parties appoint arbitrators as their agent to resolve disputes on their behalf.[i]Thus, all decisions made by the agent, who is the arbitrator in this case, are binding on the principal, i.e., the parties to an arbitration proceeding. But, various Contractualists disagree with this structural interpretation.[ii]While agreeing with the underlying contractual nature of the relationship, the opponents disagree as they believe that an arbitration agreement does not fit any pre-existing structures of a contractual relationship. Additionally, while arbitrators are required to be impartial, agents are partial towards their principal’s interest. This glaring dissimilarity further discredits Merlin’s approach. Another proposition under the contractual theory proposes the structure of equal parties, whereby all parties to the arbitration agreement, including the arbitrator, have an equal contractual position. This contractual relationship includes two contracts. The first one is the arbitration agreement between two parties. The second agreement is the agreement for appointment of arbitrators between the parties and the arbitrator. This structure gained vague judicial recognition in the English case of K/S Norjarl A/S v. Hyundai Heavy Industries Co. Ltd.,[iii] where the court determined that arbitration is based upon a tripartite agreement. The court further established that an arbitrator consequently has the duty to act with due and reasonable care while making the award. b. Jurisdictional Theory: The Jurisdictional Theory proposes that arbitration is a private extension of state’s judicial power through a quasi-judicial forum. According to this theory, lex arbitri provides for the boundaries which bind the functional capabilities of an arbitral tribunal. The theory further postulates that state exercises substantial supervision over all arbitral proceedings. From the initial stage of establishing an arbitration agreement, to the final stage of enforcement/challenge of an arbitral award, the state maintains complete control over all these steps. Such control is premediated in the form of the lex fori which governs all such steps. This also leads to the invariable conclusion that while arbitral awards are made by a private forum, by virtue of legislative legitimacy and state supervision, the award is backed by state machinery. c. Hybrid Theory: The Hybrid Theory proposes a combination of the Contractual and Jurisdictional view.[iv] This theory proposes that state makes a concession, whereby parties are allowed to undertake binding adjudication for dispute resolution through private forums, while submitting to the judiciary’s supervisory jurisdiction.[v] This approach allows for concessions in nomination of arbitrators and selection of lex fori, among other issues, to be made by the parties, in exchange of the state retaining supervision, and the ability to determine the curial law. Therefore, on utilitarian grounds, it is imperative for state to allow independent adjudication by a quasi-judicial body that state has made a concession to, under mutual consent of parties to a dispute. While state reservations over arbitrability and public policy are maintained, parties are granted generally high levels of liberty with other aspects of the arbitration process. 3. Diametric Approach to Arbitrator’s Immunity: The approach on this issue is largely diametric, with one school of thought granting the arbitrator a complete immunity against any personal claims, whereas the other promotes some level of personal liability. a. Championing the Cause of Arbitrator’s Immunity: While the UNCITRAL Model Law on Arbitration is silent on this issue, Article 16 of the UNCITRAL Arbitration Rules, 2010 provide that an arbitrator must be granted immunity against all claims by parties for any acts or omissions except wilful wrongdoings. The basis of this approach can be found in the quasi-judicial nature of an arbitrator’s role. While the arbitrator is essentially a private party, the adjudication process gains state recognition by virtue of the submission to legislative policy through the curial law and judicial supervision. Therefore, through virtual designation of powers, the arbitrator is granted quasi-judicial legitimacy and recognition by state through the above-mentioned mechanisms. This delegation of power leads to the creation of a special status for the arbitrator to act within the jurisdiction drawn by state’s curial law. While the level of immunity exists on a spectrum, it can largely be addressed under the following two categories: i. Absolute Immunity: Absolute immunity provides for unlimited personal immunity for arbitrators against any civil claims by parties to a dispute. The Unites States of America (“USA”) provides the perfect case study for absolute immunity being granted to arbitrators. The two-pronged justification for absolute immunity is on the grounds of public policy combined with the Jurisdictional Theory of arbitration. The Federal Arbitration Act, 1925 is silent on the issue of immunity. The concept has instead been developed through judicial precedent. The nation has taken a quasi-judicial approach towards arbitration, with the court in Hoosac Tunnel Dock & Elevator Co. v O’Brien[vi] holding that an arbitrator must be protected just like a judge or juror, from any undue influences, to allow better determination of disputes. This blanket protection of the arbitrator is consistent with the Jurisdictional School on nature of arbitration since the quasi-judicial aspect has been highlighted. The angle of public policy is apparent as well, since the primary driving force behind this approach is to provide better optics with respect to trust-worthiness of the arbitration process. Through S.14 of the Revised Uniform Arbitration Act, 2004, the legislature has granted recognition to this principle by equating an arbitrator’s standards of immunity to those granted to judicial officers of the state. This approach has been frequently reiterated, and recently in the case of Sacks v Dietrich[vii] it was held that an arbitrator is immune to all civil liability arising out of their discharge of duty. This immunity has been further extended to arbitration institutes through the judgment in Cort v American Arbitration Institute,[viii] and therefore all such institutes are immune from claims of breach and negligence. This deliberate corresponding placement of arbitration with judicial adjudication grants overriding optical legitimacy to the process of arbitration, equating its legal position to that of courts to some extent. Overwhelming promotion of arbitration has been a prominent policy in the USA, and this position on arbitrator’s immunity can be partially attributed to the same.[ix] ii. Qualified Immunity: Arguably the most prominent approach across jurisdictions, this concept is manifested under the English position of ‘absolute immunity with the exception of bad faith’. Bad faith is a justified exception under this approach since the state concession to private adjudication is limited to the confines of jurisdiction drawn by the lex arbitri, and any wilful act in excess would consequently cause cessation of such immunities. This approach falls under the Hybrid School on nature of arbitration. While the arbitrators are protected to a large extent as quasi-judicial bodies, such protection is only granted for acts committed under good faith since there is an additional contractual duty over arbitrators to resolve the disputes with utmost care and professionalism. The protection is also limited to within the confines of their duty as an arbitrator. Tying of immunity exclusively to the decision-making function allows parties to hold arbitrators accountable when the latter acts in excess of their jurisdiction. The hybrid approach is therefore evident optically, with the quasi-judicial nature of arbitration being confined by extents defined through the underlying contractual relationship. This is one of the most widely followed approaches to arbitrator immunity across the world. Under English Law, arbitrators are immune to claims arising out of the discharge of their duties and functions, but they are liable for any act or omission which is evidenced to have been tainted by bad faith. Similarly, under German Law, an arbitrator is liable for claims arising out of wilful misconduct and negligent acts.[x]Under purely theoretical grounds, the German example may be deemed an outlier since the form of immunity extended to arbitrators is directly proportional to that granted to judges in the country, whereby erroneous application of law amounting to a deliberate criminal offence would not be protected by immunity. This would principally fall under the jurisdictional theory since the arbitrator’s position has been squarely equated to that of a judge, without the caveat being derived out of any underlying contractual element. b. Against the Arbitrator’s Immunity: Conversely, on this spectrum’s other end is the approach where no form of immunity against claims of personal civil liability is granted to arbitrators. Evidently following the Contractual perspective, under this approach arbitrators can be held accountable by parties for any breach of duty, even if the same was committed while exercising their decision-making power, as long as some element of negligence or mala fides is evident. Since arbitrators are deemed professionals acting under a private contract, the state must allow parties to hold them accountable for civil damages similar to any other professional providing a service. This approach creates significant scope for the establishment of higher professional standards for arbitrators since the added accountability provides a layer of deterrence against negligence or wilful misconduct, as well as any other form of unprofessional conduct. But on the flipside, this also deters professionals from donning the arbitrator’s role due to a fear of being unnecessarily dragged to court by losing parties pursuing litigation out of spite. While there are no perfect examples of this approach, its manifestations can be observed in a few different forms to various extents. Nations following Islamic Law seem to enforce contractual liabilities on arbitrators to some extent. This includes the possibility of parties pursuing civil action against arbitrators for negligence and breach of duty causing damages, including unjustified withdrawal, or general failures as a professional who is otherwise required to act with due and reasonable care. France provides another interesting manifestation whereby an arbitrator is fully and personally liable to the extent of the contract, but these claims are only enforceable if no alternative remedy can be pursued. Further, Finland takes an expressly Contractualist approach, whereby any form of negligence or mistake in discharge of duty, or other form of obstruction to the proceedings, would create personal civil liability. China undertakes a unique position on the issue, whereby arbitrators are criminally liable under certain circumstances. While criminal liability for fraud and corruption can be observed in various jurisdictions, Chinese law takes criminal liability a step forward and provides that arbitrators are criminally liable for making awards that are deemed to be in excess of the law. Under the Chinese rule against perversion of law, encapsulated under S.311(I) of the Criminal Law of People’s Republic of China, arbitrators are criminally liable for any award that is deemed to be in perversion of state laws. While this possesses characteristics of absolute liability, this example is an outlier as it seemingly follows the Jurisdictional Approach. This is because criminal liability under perversion of law, through S.399 of the Criminal Law of People’s Republic of China, is also imposed upon judges under Chinese Law. Hence while this shows a lack of immunity, it is similar to the levels of impunity granted to judicial bodies in China. Laws providing for an arbitrator’s personal liability arising out of the award provide breeding grounds for parties wishing to delay the award’s enforcement. A recent shift in India’s position, as discussed below, poses a manifestation of this threat, and therefore the consequences of the Chinese position become particularly relevant. 4. Conclusion – Striking the Perfect Balance: Evidently, the coin of arbitrator immunity has two clear sides. The position of absolute immunity, like the American position discussed above, ensures that professionals have more incentive to work as arbitrators, and the arbitrators are optically independent in the discharge of their duties by virtue of not having the axe of vindictive litigation hanging above their necks. But on the flipside, this also creates a lack of trust for parties considering the avenue of arbitration, since there is little to no recourse against unprofessional and negligent discharge of duties by the arbitrator. On the other extreme end, the complete lack of immunity would deter professionals from taking up the role of an arbitrator. This would further create space for litigation claiming personal liability against the arbitrator arising out of the award, solely pursued with the intent of delaying the award’s enforcement. With these elements in mind, before analysing the need for change in the Indian position, the status quo must be understood. While the Arbitration and Conciliation Act, 1996 was originally silent on the issue of arbitrator immunity, this changed with the introduction of S.42B through the 2019 Amendment. The provision provides arbitrators with an immunity against personal claims for all acts done in good faith within the confines of the State’s rules and regulations on arbitration. But the amendment has been criticized for being ambiguous, as the golden standard of “good faith” is seemingly vague and lacks clear definition as a metric under the provision. Further, with the 2021 Amendment to the Act, S.36 now provides for an automatic injunction on execution of an award if the award is prima facie shown to have been affected or induced by fraud and corruption. While S.42B is intended to take away any incentive for parties to make allegations of personal claims against the arbitrator, the singular route to achieving an automatic injunction on execution of an award under S.36 now being the claim of fraud and corruption incentivises parties to undertake such litigation. Therefore, for a nation like India, which has a budding sphere of arbitration, the best position would be somewhere in the middle of this spectrum. Qualified immunity would allow for arbitrators to be held liable in cases of express negligence and misconduct, creating better trust for parties in the system. But a general cover of immunity for acts undertaken within the confines of the arbitrator’s jurisdiction creates a conducive environment for professionals to take up an arbitrator’s role without fearing retaliatory and vindictive litigation by parties that they might rule against. As stated above, promoting professional standards for arbitrators is crucial for maintaining a pool of high-quality professional arbitrations, as this would consequently increase public trust in the process. Legislative intent towards this is already evident in India. Through the 2021 Amendment, the Legislature aims to reshape S.43J and allow the prescription of qualification standards for arbitrators by the government in India. This negates the central problem of complacency and low standards of decision-making that may follow immunity in some cases. But qualification standards still require practical enforcement. While these would provide a high bar for entrance, the quality needs to maintained in practice so that public trust in arbitration is increased. Therefore, the standard of qualified immunity must be enforced at the highest levels. For this, a better definition of ‘good faith’ under S.42B of the Arbitration and Conciliation Act, 1996 is essential. This definition must be exhaustive so that the scope of recourse is limited. Limiting the scope of this term to “wilful or gross negligence” would allow for parties to seek recourse in cases of unprofessional conduct, while also limiting the scope of civil liability to a reasonable extent, allowing free and independent decision making by arbitrators. This is also the scope of liability endorsed by the Japan Commercial Arbitrator Association through Rule 13 of their Commercial Arbitration Rules. This is consistent with the Hybrid approach towards the nature of arbitration that Indian jurisprudence seems to follow. *The Author, Prateek, is a Fifth Year Student of Law (BA. LLB) at the Army Institute of Law, Mohali. [i] Merlin, 9 'Recueil Alphabitique de Questions de Droit' (4th edn 1829), at 144; translation see A Samuel, Jurisdictional Problems in International Commercial Arbitration: A Study of Belgian, Dutch, English, French, Swedish, Swiss, US and West German Law (Ziirich and Schulthess: Polygraphischer Verlag Zurich, 1989), at 34. [ii]Adam Samuel: Jurisdictional Problems in International Commercial Arbitration: A Study of Belgian, Dutch, English, French, Swedish, Swiss, US and West German Law 63 (1989). [iii]K/S Norjarl A/S v. Hyundai Heavy Industries Co. Ltd., [1991] 3 All ER 211 (CA) (U.K.) [iv]Savadkouhi, S. H. and Savadkouhid, S. H. and Bashiri, A. (2014) The four legal theories of international commercial arbitration. Asian Journal of Research in Social Sciences and Humanities, 4 (5). ISSN 2249-7315 [v] Alan Redfern et al., Law and Practice of International Commercial Arbitration, 8 (2d Ed., 1991) [vi]Hoosac Tunnel Dock & Elevator Co. v O’Brien, 137 Mass 424, 426 (1884) [vii]Sacks v Dietrich, 633 F.3d 1065, 1069-70 (9th Circuit, 2011) [viii]Cort v American Arbitration Institute, 795 F.Supp. 970 (N.D. Cal. 1992) [ix]Martin Hunter, Arbitration International, vol. 9, no.3, 1993 [x]Section 839(2) of the BGB; P Reinert in Bamberger/Roth, BeckOK BGB (43rd Edition, 2017) s 839, recital 101.