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A Legislative Guide Gautam Mohanty[1] & Raghav Bhargava[2] [Originally published in the Journal of International Arbitration. The details of the original publication are as hereunder: Mohanty, Gautam & Bhargava, Raghav. ‘Separability of Arbitration Agreement in Mutual Termination of Contracts in India: A Legislative Guideline’. Journal of International Arbitration 36, no. 6 (2019): 727–738. This article is being republished here under the rights of the Author (Gautam Mohanty) to republish on personal website with permission of Kluwer Law International for a non-commercial purpose and with permission of the Co-author Raghav Bhargava. Gautam Mohanty is an Editor of The Arbitration Workshop. The separability for an arbitration agreement from the underlying contract is a well-established theory in commercial arbitration by courts and arbitral tribunals across the globe. However, the position becomes complex in circumstances where the underlying contract is mutually terminated between the parties. Jurisdictions across the globe have adopted a different approach to this kind of separability either through legislative provisions or judicial decisions. Unfortunately, the position remains rather unclear in India due to conflicting judicial decisions of the Bombay High Court and lack of any authoritative ruling by the Supreme Court of India. This article aims to conduct a comparative analysis of various national systems as well as international rules and arbitral institutions regarding this theory and to suggest the way forward for India. 1. INTRODUCTION An arbitration agreement is treated independent of the contract that contains the agreement. Section 16(1)(b) of the Indian Arbitration and Conciliation Act, 1996 expressly states that the invalidity of a contract shall not affect the validity of an arbitration agreement, even in cases of the contract being void ab initio. This provision is modelled on the UNCITRAL Model Law. This settled position of law has also been reflected through the Honoura’ble Supreme Court of India’s judgment in the case of A. Ayyasamy v. A. Paramasivam,[3] wherein the Apex Court has given due recognition to the principle of severability in contracts stipulating a separate arbitration clause. However, such rulings are restricted to cases whether either the contract is void ab initio or has been terminated, inter alia, due to reasons such as fraud, impossibility to perform, non-performance of the contract etc. Pertinently, the question of whether, as a consequence of mutual bilateral termination of a contract, an arbitration clause is terminated or not, still remains and is res integra. The purpose behind the doctrine of severability in a contract containing an arbitration agreement is to ensure the effective resolution of disputes arising between the parties to a contract via arbitration. It is intended for an effective adjudicatory mechanism to exist even in situations where the contract becomes non-executable due to reasons beyond the control of the contracting parties. While the arbitral process is contingent on mutual consent of the parties to refer the matter to arbitration, a peculiar scenario arises in situations where the contract containing the arbitral agreement is mutually terminated. This results in a dichotomy: the parties’ clear intention to terminate the arbitration agreement for resolution of disputes between the parties, on the one hand, contradicts a pre-decided mechanism of dispute resolution on the other hand. In light of the above, it is pertinent to consider the judicial dicta relating to this issue. The Honourable High Court of Bombay has sought to clarify such bilateral terminations in the cases of Ashok Thapar v. Tarang Exports[4] and Mulheim Pipecoatings GmbH v. Welspun Fintrade Ltd. & anor.[5]But in the absence of any legislative action or a categorical decision by the Honourable Supreme Court of India clarifying the legal position regarding the same and conflicting jurisprudence of the Honourable Bombay High Court, this issue remains unclear. This article aims to analyze views taken by the Honourable Bombay High Court against the current position of law, analyze the position in foreign jurisdictions, and suggest legislative reforms with regard to the issue of existence of an arbitration agreement in cases of bilateral termination of contracts. 2. EXISTING JURISPRUDENCE 2.1 Ashok Thapar v. Tarang Exports 2.1.1 Background Facts The plaintiff and the respondent entered into a Leave and License Agreement, pursuant to which the respondent (Tarang Exports) was permitted to occupy the property. Subsequently, both parties mutually ended the Agreement. Disputes arose with respect to recovery of security deposit and other monies. The plaintiff filed a suit with the City Civil Judge for recovery of the security deposit and other claims based on the Leave and License Agreement. Thereafter, the defendant argued that the Civil Court did not possess requisite jurisdiction to entertain the suit in light of the arbitration clause contained in the Leave and License Agreement. The Civil Court dismissed the defendant’s application and held that it had jurisdiction in the matter. The defendant appealed before the Bombay High Court. 2.1.2 Judgment The Bombay High Court opined that the issue in dispute was “whether an Arbitration Clause survives even after bilateral termination of the Agreement” and that the above issue was res integra in nature. Further, the Bombay High Court, while relying on the judgments of the Supreme Court in the cases of SMS Tea Estate Pvt. Ltd. v. Chandmari Tea Co. Pvt. Ltd.,[6] Branch Manager, Magma Leasing & Finance Ltd. v. Potluri Madhavilata,[7] and Ford Credit Kota Mahindra Ltd. v. M. Swaminathan,[8] held that the doctrine of separability applies even in cases of mutual termination of a contract containing the arbitration agreement and thus, the matter should be referred to arbitration. In its judgment, the Bombay High Court did not address the application of the doctrine of severability in the context of unilateral termination of agreements or in the context of an impossible agreement. 2.2 Mulheim Pipecoatings Gmbh v. Welspun Fintrade Ltd. & Anor. 2.2.1 Facts The appellant and respondent had entered into a Share Purchase Agreement (SPA) which contained an arbitration clause covering all disputes related to it. The agreement included a transfer of shares by the respondent to the appellant. The appellant company was not allowed to transfer the shares to a third party within two years. If after the expiry of two years, they wished to transfer the same, the first preference should be given to the respondent at the same price. A subsequent Memorandum of Understanding (MOU) entered between the two did not contain any mention of arbitration as a method of dispute resolution, but had provisions contradictory to the SPA. Disputes arose regarding the validity of the notice and the transfer of the shares. The matter was brought before the Bombay High Court. 2.2.2 Judgment The Court, while opining that arbitral proceedings must continue in this matter, made interesting observations. Justice Chandrachud distinguished between two situations: first, when the performance of the contract containing the arbitration agreement is brought to an end; second, when the existence of the contract is brought to an end. In the former, the arbitral agreement will survive, while it will not survive in the latter. As a result of Ashok Thapar and Mulheim, a confusion has arisen, as the same court in two different judgments has interpreted severability during mutual termination of an agreement in two opposite ways: in one of which the arbitration agreement will be valid, while in the other it will not be. This contradictory interpretation by the same court requires much needed clarity. 3. INTERPRETING THE JUDGMENT IN ASHOK THAPAR The controversial ruling of the Honourable Bombay High Court in Ashok Thapar has unsettled the position with respect to severability. Frustratingly, while it interprets the law in an unconventional manner, this ruling does not adequately explain its reasons for reaching this conclusion. However, various arguments can be made in support of the Ashok Thapar decision. First, arbitration agreements have autonomy. Legislations in India are often modelled according to legislations in England. The Arbitration and Conciliation Act of 1996 (“Indian Act”) is a proof of the same with respect to the Arbitration Act of 1996 (“English Act”). Pertinently, a similar question as to the status of an arbitration agreement pursuant to mutual bilateral termination of a contract has been dealt with in the landmark English case of England Harbour Assurance Case.[9] In this case, an action was brought by re-insurers on the grounds of illegality of reinsurance policies, as a result of which the plaintiff should not be held liable. The illegality was denied by the defendants who sought a stay and reference to arbitration. The court held that while the purposes of the contract may fail, resulting in termination of a contract, the arbitration clause may not be automatically extinguished for the purpose of the agreement. More recently, in 2007, the English Court of Appeal and House of Lords in Fiona Trusts & Holding Corp. v. Privalov,[10]which involved claims of fraudulent inducement of a party’s agent, observed that such a claim levelled at the sanctity of the underlying contract does not adversely affect the arbitration clause within the contract. The court, while relying upon several authoritative academic works,[11]declared that: It is not enough to say that the bribery impeaches the whole contract unless there is some special reason for saying that the bribery impeaches the arbitration clause in particular … It is only if the arbitration agreement is itself directly impeached for some specific reason that the tribunal will be prevented from deciding the disputes that relate to the main contract. Therefore, the arbitration agreement is treated as a self-contained contract ancillary to the principal contract.[12] This is popularly referred to as the principle of autonomy, wherein the arbitration agreement remains unaffected by the fate of the main contract, that is, the latter’s nullity, resolution, termination, or even its non-existence.[13] Accordingly, the arbitrator/judiciary possesses the ability to determine the existence of an arbitration agreement. This interpretation does find support in section 11(6A)[14] of the Indian Act pursuant to which the courts have the power to determine the existence of an arbitration agreement. The principle of autonomy also finds acceptance in rules of various international arbitration centres and institutions, such as the London Court of International Arbitration (LCIA) Rules,[15] wherein an arbitration agreement is treated as a distinct agreement. Similarly, the International Chamber of Commerce (ICC) Rules,[16] as well as the UNCITRAL[17] Rules, also reflect the independent nature of the arbitration agreement vis-à-vis the principal agreement. Thus, the autonomy of the arbitration agreement has now become a general principle of arbitration on which arbitrators across the globe rely to solve disputes.[18] Secondly, arbitration agreements are not compulsorily governed by the laws governing the contract containing the arbitration agreement. A contract is to be governed by national laws under which it is made, whereas, an arbitration agreement is governed by the laws chosen by the parties. As a result, situations might exist wherein the principal contract is governed by laws separate from that of the arbitration agreement. Thus, laws which govern the principal contract cannot be enforced upon the arbitration agreement. In such situations, an arbitration agreement would stand independent of the principal contract. The arbitration agreement would not be scrutinized based on national law rules regarding the validity of other contracts. The reverse also holds true. National law rules which render an agreement invalid would not be made applicable to the arbitration agreement. Thus, the validity or invalidity of the arbitration agreement would be separate and independent to that of the main contract. Though not explicitly stated, the aforesaid view could also form the basis to come to similar conclusions as that of the court in Ashok Thapar. Redfern and Hunter provide further support to the aforesaid argumentation. In their view, there are two separate contracts.[19] The first contract is the primary contract which contains commercial obligations and transactions with respect to the parties to the contract. This is the contract that governs all transactions between the parties. The second contract is the arbitration clause. This contract deals with all disputes relating to the primary contract which may arise between the parties. The second contract remains dormant and only becomes active when there is a dispute between the parties regarding the first contract. As a result, the autonomy of the arbitration agreement results in two independent contracts, which even though contingent on each other to a certain extent remain independent as well. 4. BOGHARA POLYFAB AND KISHORILAL GUPTA: SEPARABILITY PRINCIPLE ENGULFED IN OBITER For the purposes of this article, the authors believe that the case of Union of India (UOI) v. Kishorilal Gupta & Bros.[20] and National Insurance Co. Ltd. v. Boghara Polyfab Pvt. Ltd.[21] assume pivotal importance, as the Honourable Supreme Court has in the aforesaid cases made observations with regard to the applicability of the separability principle to bilateral termination of contracts. However, as the observations are obiter dicta in nature and not ratio decidendi, they are barred from legal recognition under judicial dictum as laid elaborately laid down by the Apex Court of India.[22] In Union of India v. Kishorilal Gupta & Bros.,[23] the Honourable Supreme Court, while deciding a Special Leave Petition (SLP), was principally adjudicating upon the legal question of survival of an arbitration clause in a contract when the contract was superseded by a new contract. In that case, certain disputes arose under three contracts in relation to the supply of raw materials and for compensation for breach of contract. The Supreme Court of India, after application of its judicial mind uninfluenced by authorities or case-law, observed that: the logical outcome of the earlier discussion would be that the arbitration clause perished with the original contract. Whether the said clause was a substantive term or a collateral one, it was none the less an integral part of the contract, which had no existence de hors the contract … Though the phraseology was of the widest amplitude, it is inconceivable that the parties intended its survival even after the contract was mutually rescinded and substituted by a new agreement.[24] However, after incisively analysing the relevant judicial opinion and principles regarding the doctrine of separability, the Honourable Supreme Court enunciated the necessary principles for judicial determination of separability as below:[25] (1) An arbitration clause is a collateral term of a contract as distinguished from its substantive terms; but none the less it is an integral part of it; (2) however comprehensive the terms of an arbitration clause may be, the existence of the contract is a necessary condition for its operation; it perishes with the contract; [emphasis added] (3) the contract may be non est in the sense that it never came legally into existence or it was void ab initio; (4) though the contract was validly executed, the parties may put an end to it as if it had never existed and substitute a new contract for it solely governing their rights and liabilities thereunder; (5) in the former case, if the original contract has no legal existence, the arbitration clause also cannot operate, for along with the original contract, it is also void; in the latter case, as the original contract is extinguished by the substituted one, the arbitration clause of the original contract perishes with it; and (6) between the two falls many categories of disputes in connection with a contract, such as the question of repudiation, frustration, breach, etc. In those cases, it is the performance of the contract that has come to an end, but the contract is still in existence for certain purposes in respect of disputes arising under it or in connection with it. As the contract subsists for certain purposes, the arbitration clause operates in respect of these purposes. The Supreme Court ultimately held that the new contract entered into between the parties had superseded the earlier contracts entered into between the parties and as a result the arbitration clause postulated in the earlier contracts perished automatically. Even though, the ratio decidendi of the Court in the aforesaid case was limited to the validity of an arbitration agreement in a contract which was superseded by a new contract, the Court has clearly opined as obiter dicta that the existence of an arbitration clause is entirely dependent upon the existence of the contract, which can be argued as necessarily implying that an arbitration clause does not survive pursuant to bilateral termination of the contract. In National Insurance Co. Ltd. v. Boghara Polyfab Pvt. Ltd.,[26]the Supreme Court, while deciding an insurance matter, framed the moot legal question as whether a dispute raised by an insured, after giving a full and final discharge voucher to the insurer, could be referred to arbitration. The disputes in the case arose around the discharge voucher issued by the National Insurance Co. Ltd. (appellant in this case) in favour of Boghara Polyfab whereby the appellant argued that Boghara Polyfab had accepted the payment offered in full and final settlement and therefore arbitration for any disputes arising thereafter was not arbitrable on account of discharge of the contract. In response, Boghara Polyfab argued that the discharge voucher was obtained by fraud and coercion. A perusal of the judgment delivered by the Apex Court categorically highlights that the ratio decidendi of the case is in relation to the ambit of powers vested with the Chief Justice/his designate under section 11 of the Indian Arbitration and Conciliation Act, 1996. Nonetheless, the Supreme Court of India has in its obiter dicta opined about the consequences emanating from bilateral termination of contract as stated below: We may next examine some related and incidental issues. Firstly, we may refer to the consequences of discharge of a contract. When a contract has been fully performed, there is a discharge of the contract by performance, and the contract comes to an end. In regard to such a discharged contract, nothing remains – neither any right to seek performance nor any obligation to perform. In short, there cannot be any dispute. Consequently, there cannot obviously be reference to arbitration of any dispute arising from a discharged contract. … It is thus clear that the arbitration agreement contained in a contract cannot be invoked to seek reference of any dispute to arbitration, in the following circumstances, when the contract is discharged on account of performance, or accord and satisfaction, or mutual agreement, and the same is reduced to writing (and signed by both parties or by the party seeking arbitration): (a) Where the obligations under a contract are fully performed and discharge of the contract by performance is acknowledged by a full and final discharge voucher/receipt. Nothing survives in regard to such discharged contract. (b) Where the parties to the contract, by mutual agreement, accept performance of altered, modified and substituted obligations and confirm in writing the discharge of contract by performance of the altered, modified or substituted obligations. (c) Where the parties to a contract, by mutual agreement, absolve each other from performance of their respective obligations (either on account of frustration or otherwise) and consequently cancel the agreement and confirm that there is no outstanding claims or disputes. 5. THE NOTION OF SEVERABILITY ACROSS INTERNATIONAL JURISDICTIONS 5.1 Austria The Austrian Arbitration Law Reform Act, 2006 is based on the UNCITRAL Model Law and follows the principles enshrined therein. However, during the course of adoption, Article 16 of the UNCITRAL Model Law, which lays down the theory of separability, was excluded from inclusion in the national legislation.[27]A perusal of the legislative history behind the enactment of the Austrian Arbitration Law indicates that the drafters of the statute took an extreme yet interesting view regarding the doctrine of separability and believed this doctrine to be “misleading, overly simplifying and alien to the general principles of Austrian law,”[28]thus, making Austria one of the only countries which does not have a provision in their national legislation with respect to separability of an arbitration agreement from the main contract. In the absence of an express provision and lack of reasoning provided by the Commission that drafted the Austrian Arbitration Act, the Austrian judiciary has played an important role in clarifying the law regarding separability.The Supreme Court of Austria, in its decision of 2015, gave a landmark judgment wherein it rejected the doctrine of separability by holding that the arbitration agreement is only ancillary to the main agreement.[29] As a consequence, an arbitration agreement is considered akin to any other clause in the underlying contract and therefore does not hold any special place in the contract. It is not the case that the existence of the arbitration agreement is contingent on the existence or fate of the main contract. The rationale behind the judgment of the Austrian Supreme Court as understood is centered around the intention of the parties with respect to the arbitration agreement. The Supreme Court of Austria, in its decision of 5 February 2008,[30] held that while an arbitration agreement may be treated as any other clause in the contract, its survival is contingent on the intention of the parties with respect to the arbitration agreement. Thus, the arbitration agreement will survive if the intention of the parties was to ensure it survives, and alternatively, the arbitration agreement will not survive if the parties did not intend for it to survive.The position of law in Austria, thus, reflects a unique position in international arbitration, wherein the fate of the underlying contract does not drive the fate of the arbitration agreement, but rather it is driven by the intention of the parties. Accordingly, where the parties intended for the arbitration agreement to survive the termination of the contract, it will survive the termination. 5.2 Switzerland The law in Switzerland with regard to treatment of arbitration agreements after termination of the contract containing the agreement therein follows in the footsteps of Austria. Austria and Switzerland both believe that the termination of the contract containing the arbitration agreement shall not affect the arbitration agreement except in cases where an express intention to the effect can be shown. The Swiss Code on Private International Law, 1987[31] lays the foundation for independence of the arbitration agreement from the underlying contract. Article 178[32] states that “the validity of an arbitration agreement may not be contested on the ground that the principal contract is invalid or that the arbitration agreement concerns a dispute not yet existing.” The provision indicates that the courts shall not entertain any challenge to the arbitration agreement stemming from the validity or invalidity. While the provision does not make any express mention of the status of an arbitration agreement during mutual termination of contract, however, it sets the basis for further expansion of the theory of separability to mutual termination of contracts. This is evinced by Judgment 4A_438/2013 of February 27, 2014, First Civil Law Court, wherein the court held that “the severability of the arbitration clause is a cornerstone of arbitration and if a contract provides that the rights and obligations of the parties cease at termination, this will not extend to the arbitration clause unless very specifically stated in the contract.” Similar observations were made by the Association Suisse de l’Arbitrage, who stated that the arbitration clause is independent of the underlying contract and in particular will survive the termination of the contract. [33] Thus, it is clear that Switzerland also believes in the independence of the arbitration clause from the contract containing the clause. 5.3 China The law governing arbitral proceedings in China is the Arbitration Law of China, 1994. The legislation is by far the most explicit amongst domestic legislations across the globe with respect to separability of arbitration agreements. Article 19 of the Act[34] states that “an arbitration agreement shall exist independently. The amendment, rescission, termination or invalidity of a contract shall not affect the validity of the arbitration agreement. The arbitration tribunal shall have the power to affirm the validity of a contract.” Even in China, an arbitration agreement can exist independently of the underlying contract and shall continue to be valid even in cases wherein the underlying contract containing the arbitration agreement is mutually terminated. 5.4 Institutional and International Rules The 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“New York Convention”), the key document with respect to arbitral awards, does not provide any direct reference to the principle of autonomy of the arbitration agreement or its separability from the main contract. However, Article V of the New York Convention lays down grounds on which enforcement of awards may be refused. These grounds include invalidity of the arbitration agreement as per laws under which it was made, incapacity of the parties to arbitrate the matter, amongst others. This reflects the belief that it is indeed within the powers of the national legal system to determine whether the arbitration agreement is valid for enforcement or not. Support with regard to autonomy of arbitration agreements can also be found in the UNCITRAL Arbitration Rules,[35] London Court of International Arbitration Rules,[36] as well as the International Chamber of Commerce Rules of Arbitration.[37] 6. CONCLUSION In the authors’ view, it would be preferable in light of the detailed discussions above, that the Indian Legislature amends the law and expressly incorporates a provision similar to article 19 of the Arbitration Law of China, 1994, explicitly giving legal recognition to the obiter dicta of the Supreme Court as enunciated in the preceding paragraphs. However, one must remain sceptical as to whether the Indian Legislature will take the abovementioned suggested steps, as it rarely amends the Indian Arbitration and Conciliation Act, 1996 in view of purely legal conceptual concerns. Thus, for the time being, it would be apt for parties and practitioners to explicitly incorporate the theory of separability into their arbitration agreement. Any express intention of the parties with regard to the survivability of the arbitration agreement as a separate agreement irrespective of the existence of the main contract will in all likelihood be given due recognition by the courts of India. [1] Gautam Mohanty is a registered Advocate in India and is currently working as an Arbitration Associate with Justice Deepak Verma, Former Judge of Supreme Court of India. [2] Raghav Bhargava has a keen interest in commercial arbitration and international humanitarian law. He has previously worked under Justice Deepak Verma, Former Judge of Supreme Court of India and has written for the Cambridge International Law Journal. [3] A. Ayyasamy v. A. Paramasivam, AIR 2016 SC 4675 (India). [4] Ashok Thapar v. Tarang Exports Pvt. Ltd., 2018 SCC OnLine Bom 1489 (India). [5]Mulheim Pipercoatings GmbH v. Welspun Fintrade Ltd. & Anr., (2014) 2 AIR Bom R 196 (India). [6] SMS Tea Estate (P) Ltd. v. Chandmari Tea Co. (P) Ltd. (2011) 14 SCC 66 (India). [7] Branch Manager, Magma Leasing & Finance Ltd. v. Potluri Madhavillata, (2009) 10 SCC 103 (India). [8] Ford Credit Kota Mahindra Ltd. v. M. Swaminathan, AIR 2005 Mad. 18 (India). [9] Harbour Assurance Co. (UK) Ltd. v. Kansa General Int’l Insurance Co. Ltd. [1993] 1 Lloyds Rep. 81 (QB). [10] Fiona Trust & Holding Corp. v. Privalov, [2007] 1 All E.R. (Comm.) 891 (English Ct. App.), aff’d [2007] UKHL 40 (HL). [11] The Court of Appeal relied in particular on L. Collins (ed.), Dicey, Morris and Collins on The Conflict of Laws ¶12-099 (14th ed. 2006), which approved the analysis in Prima Paint and subsequent U.S. decisions. [12] Hayman v. Darwins Ltd. [1942] A.C. 356 (HL). [13] Aiste Skylent, International Arbitration: The Doctrine of Separability and the Competence-competence Principle (Aarhus School of Business, May 2003) accessed 12 February 2019. [14] Arbitration and Conciliation Act 1996, s. 11(6A) (India). [15] LCIA Arbitration Rules, art. 23(1). [16] ICC Arbitration Rules, art. 6(4). [17] LCIA Arbitration Rules, art. 21(2). [18] Supra n. 11. [19] Alan Redfern and Martin Hunter, Redfern and Hunter on International Arbitration, 5th edn, OUP 2009) 117. [20] Union of India v. Kishorilal Gupta & Bros., AIR 1959 SC 1362 (India). [21] National Insurance Co. Ltd. v. Boghara Polyfab Pvt. Ltd., (2009) 1 SCC 267 (India). [22] State of Haryana v. Ranbir, AIR 2006 SC 1796 (India), para. 10. [23] Supra n. 18. [24] Ibid. para. 8. [25] Ibid. para. 10. [26] Supra n. 19. [27] M Nueber and G Zeiler, ‘Austria’ in S Balthasar (ed), International Commercial Arbitration 194 (C.H. Beck 2016). [28] Dietmar Czernich, Theory of Separability in Austrian Arbitration law: Is it on safe pillars?, 32 Arbitration International 463 (2018). [29] Supreme Court, 23 June 2015, 18 Cg1/15v, RdW 2016 (Austria). [30] Supreme Court, 5 February 2008, 10 Ob 120/07f (Austria). [31] Swiss Federal Code on Private International Law, 1987. [32] Ibid. art. 178. [33] Association Suisse de l’Arbitrage, Arbitration Clauses in Switzlerand (2016) accessed 14 March 2019. [34] Arbitration Law of China, 1994, art. 19. [35] 2010 UNCITRAL Arbitration Rules, arts. 16(1) and 21(2). [36] LCIA Arbitration Rules, art. 23(2). [37] Ibid. art. 6(9).

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- Gautam Mohanty and Gaurav Rai IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. 5383 OF 2019 (Arising out of SLP (C)No. 3211 of 2018) NATIONAL HIGHWAYS AUTHORITY OF INDIA Appellant(s) VERSUS GAYATRI JHANSI ROADWAYS LIMITED Respondent(s) WITH CIVIL APPEAL NO. 5384 OF 2019 (Arising out of SLP (C) No. 22099 of 2018) GAMMON ENGINEERS AND CONTRACTORS PVT. LTD. Appellant(s) VERSUS NATIONAL HIGHWAYS AUTHORITY OF INDIA Respondent(s) On 10th July 2019, the Supreme Court of India gave its judgment in two connected matters on a similar issue regarding the status of an agreement between the parties on the arbitral fee in future arbitration cases. (Link to the Judgment of NHAI v. Gayatri Jhansi Roadway and Gammon Engineers v. NHAI https://sci.gov.in/supremecourt/2017/40194/40194_2017_5_5_15008_Order_10-Jul-2019.pdf) The issue which arose for the adjudication of the Supreme Court of India was due to two conflicting judgments of the single bench of the Delhi High Court. In the case of NHAI v. Gayatri Jhansi Roadways Limited in an appeal against the order of the arbitral Tribunal fixing its fees in variance to the NHAI policy circular, the Delhi High Court had held that due to removal of the phrase ‘unless otherwise agreed’ in Section 31(8) and the newly introduced 31A of the Arbitration and Conciliation Act, 1996 vide the 2015 amendment, the parties could no longer fix fees of the Tribunal in their agreement. Since the arbitral Tribunal had fixed the fees in accordance with the 4th Schedule, the Delhi High Court dismissed the appeal. Applying this judgment in another arbitration, the arbitral Tribunal had fixed fees in variance with the NHAI Policy Circular on fees which was incorporated by agreement between the parties in the case of Gammon Engineers v. NHAI. NHAI moved the Delhi High Court to terminate the mandate of the arbitral Tribunal as their action of fixing fees without regard to the policy circular was beyond the agreement between the parties. The Delhi High Court in this case disagreed with the co-ordinate bench in NHAI v. Gayatri Jhansi and terminated the mandate of the arbitral Tribunal for fixing fees beyond what was agreed between the parties as per their executed agreement. The Supreme Court dealt with Gammon Engineers v. NHAI matter on facts. A Contract dated 07.02.2006 was entered into between the Appellants and Respondents. Owing to certain disputes which arose thereafter, the disputes were referred to arbitration under the Arbitration Clause stipulated in the Contract on 23.05.2017. Notably, the aforesaid contract contained Paragraph 5 which reads as follows: “5. The parties are desirous that the remuneration and other expenses payable to the Arbitrators as per arbitration clause for referring the dispute between the parties arising out of the said Contract to the Arbitral Tribunal for resolution in accordance with the procedure laid down therein, shall be as follows: I. That the maximum limit for fee payable to each Arbitrator per day shall be Rs.5000/- subject to a maximum of Rs.1.5 lakh per case. II That each Arbitrator shall be paid a reading fees of Rs.6000/- per case. III That each Arbitrator shall be paid Rs.5000/- by way of secretarial assistant per case. IV. That each Arbitrator shall be paid Rs.6000/- per case towards incidental charges like telephone, FAX, postage etc. V. That other expenses based on actual against presentation of bills, shall also be reimbursed to each Arbitrator subject to the following ceiling (applicable for the days of hearing only) (a) Travelling expenses – Economy class (By Air), First class AC (By train) and AC car (By road). (b) Lodging and boarding – Rs.8000/- per day in Metro cities (Delhi, Mumbai, Chennai & Kolkata), Rs.5000/- per day in other cities OR Rs.2000/- per day if any Arbitrator makes his own arrangement. (c) Local travel – Rs.700/- per day VI Charges for publishing the Award Maximum of Rs.10,000/-; VII That in exceptional cases, such as cases involving major legal implication/wider ramification/higher financial stakes etc. a special fees structure could be fixed in consultation with the Contractor/Supervision consultant and with the specific approval of the Chairman, NHAI before appointment of the Arbitrator.” The fee schedule as postulated in the Arbitration Clause was fixed under a policy decision dated 31.05.2004 of National Highways Authority of India. The policy circular dated 31.05.2004 was subsequently replaced by policy circular of NHAI dated 01.06.2017 whereby “the arbitrators would now get for any claim under Rs.100 crores, Rs.25,000 per day together with enhanced other charges or a lumpsum fee of Rs.5 lakhs per case which includes counter claims, in place of the original fee structure”. Decision of the Supreme Court The Supreme Court of India after having heard both Parties, remarked that the fee schedule contained in the policy circular dated 01.06.2017 substituting the earlier circular of 2004 was to be adhered to and not the Fourth Schedule of the Act, 1996. With regard to the application filed before the High Court to remove the arbitrators, the Apex Court while dismissing the application observed that an arbitrator does not become de jure unable to perform his functions if, by an order passed by such arbitrator(s), they have stated that the agreement does not govern the arbitral fees to be charged following the principle laid down by the Delhi High Court in Gayatri Jhansi Roadways Limited case(Supra) which clearly mandated that the Fourth Schedule and not the agreement would govern. Following the decision of the Supreme Court of India, the position has been made clear i.e. when there is a fee schedule agreed upon by the Parties and the same is stipulated in a contract the same is to be necessarily adhered to. Practical effects of the Judgment The authors have seen various other cases as well in which NHAI seeks to impose the circular as the guide for the fees of the arbitral Tribunal. However, in many of the cases the NHAI circular on fees of the arbitral Tribunal do not form part of the agreement between the parties. The Supreme Court has made it clear that the there needs to be an agreement between the parties for the fee structure to be applicable. Hence due caution should be exercised while drafting arbitration clauses in contracts as to whether there exists a fee schedule for the arbitrators. In case the said schedule prescribes a very low fee, there could be a possibility that many good arbitrators might not accept a nomination. Further in the opinion of the authors, there are several arbitration clauses which provide for institutional arbitrations and rules of such institutions to be followed. The Delhi International Arbitration Centre (DIAC) also prescribes the fee structure along with its rules and hence such an arbitration clause which decides to be governed by the DIAC rules even if not governed by the arbitration centre itself falls under thee bracket of an agreement between the parties to use a particular fee structure for arbitrations. DIAC Fee rules are very similar to the Fourth Schedule but most importantly they also clarify a major issue on which the Fourth Schedule is silent. The DIAC Fee Rules, updated in the year 2018, clarify that the fees mentioned in the rules is to be given to each arbitrator of a three-member arbitral Tribunal and not to be split between the three. The silence of the Fourth Schedule of the Arbitration and Conciliation Act, 1996 on this aspect has caused several parties to not accept the interpretation of the arbitral Tribunals that the fees is to be payable to each arbitrator. In such a situation incorporating the DIAC rules and arbitration clause in agreements would give more clarity to the parties regarding the fees to be payable to the members of the arbitral Tribunal. (Link to THE DELHI INTERNATIONAL ARBITRATION CENTRE (DIAC) (ADMINISTRATIVE COST AND ARBITRATORS FEES) RULES- 2018 http://www.dacdelhi.org/topics.aspx?mid=75) In case the parties want their arbitration to be governed by the institution itself it becomes even easier to implement the rules as Section 11(14) makes it clear that the when the arbitration is being conducted by an arbitral institution, the fee rules of such arbitral institutions shall apply instead of any rules made in consonance of the Fourth Schedule by the High Court. This make the case of parties adopting to resolve their arbitration through DIAC even stronger especially when the Act itself specifies that arbitration institutions can have their own fee structure and that the fee structure of DIAC although similar to the Fourth Schedule does not suffer from the lacunae plaguing the Fourth Schedule as explained above. (Link to The Arbitration and Conciliation, Act 1996 amended by the Arbitration and Conciliation (Amendment) Act, 2015 https://indiacode.nic.in/bitstream/123456789/1978/1/199626.pdf)

GAUTAM MOHANTY[1] In arbitration proceedings, a question which regularly presents itself is about the influence of Civil Procedure Code, 1908 on arbitration proceedings. Despite the presence of Section 19 in the Arbitration and Conciliation Act, 1996, which categorically postulates that the CPC, 1908 will not influence arbitration proceedings, arbitral tribunals do infact tend to rely on CPC, 1908 to a larger extent when intricate and complex interpretation and procedural issues arise. One such issue which recently arose was whether the term ‘cause of action’ as envisaged in Order II Rule 2 could be understood as ‘cause of arbitration’. In this post, I will primarily address three issues: (1) What is the bar under Order II Rule 2 and how does it impact arbitration proceedings (2) What are the necessary constituents of ‘cause of action’ and (3) Whether ‘cause of action’ denotes ‘cause of arbitration’ also. BAR UNDER ORDER II RULE 2 OF THE CIVIL PROCEDURE CODE, 1908 Before proceeding, it would be worthwhile to note the provision contained in Order II Rule 2 of CPC which provides that; 2. Suit to include the whole claim— (1) Every suit shall include the whole of the claim which the plaintiff is entitled to make in respect of the cause of action; but a plaintiff may relinquish any portion of his claim in order to bring the suit within the jurisdiction of any Court. (2) Relinquishment of part of claim — Where a plaintiff omits to sue in respect of, or intentionally relinquishes, any portion of his claim he shall not afterwards sue in respect of the portion so omitted or relinquished. (3) Omission to sue for one of several reliefs—A person entitled to more than one relief in respect of the same cause of action may sue for all or any of such reliefs; but if he omits, except with the leave of the Court, to sue for all such reliefs, he shall not afterwards sue for any relief so omitted.” The provisions of Order II Rule 2 indicate that if a plaintiff is entitled to several reliefs against the defendant in respect of the same cause of action, he cannot split up the claim so as to omit one part of the claim and sue for the other. If the cause of action is the same, the plaintiff has to place all his claims before the Court in one suit as Order II Rule 2 is based on the cardinal principle that the defendant should not be vexed twice for the same cause.[2] One of the objects of Order II Rule 2 is to avoid multiplicity of petitions.[3] The Rule postulated under Order II Rule 2 does not mandate that when several causes of action arise from one transaction, the plaintiff should sue for all of them in one suit. In fact, what the rule lays down is that where there is one entire cause of action, the plaintiff cannot split the cause of action into parts so as to bring separate suits in respect of those parts. A plea of bar under Order II Rule 2 is a highly technical plea. It tends to defeat justice and to deprive the party of a legitimate right. Therefore, care must be taken to see that complete identity of cause of action is established.[4] Where the essential requirement for the applicability of Order II Rule 2, namely, the identity of cause of action in the previous suit and the subsequent suit was not established, the subsequent suit could not be said to be barred under Order II Rule 2.[5] The law relating to bar created under Order II Rule 2 of the CPC is to be noted. The Apex Court in the case of Deva Ram vs. Ishwar Chand[6] has set out the underlying principle for application of Order II Rule 2. Relevant extract is reproduced: “12 ....a bare perusal of the above provisions would indicate that if a Plaintiff is entitled to several reliefs against the Defendant in respect of the same cause of action, he cannot split up the claim so as to omit one part of the claim and sue for the other. If the cause of action is the same, the Plaintiff has to place all his claims before the Court in one suit as Order II, Rule 2 is based on the cardinal principle that the Defendant should not be vexed twice for the same cause”. 15. In Sidramappa v. Rajashetty and Ors. MANU/SC/0396/1969 : [1970] 3 SCR 319, it was laid down that if the cause of action on the basis of which the previous suit was brought, does not form the foundation of the subsequent suit and in the earlier suit the plaintiff could not have claimed the relief which he sought in the subsequent suit, the latter namely, the subsequent suit, will not be barred by the rule contained in Order II Rule 2, CPC. In Gurbux Singh v. Bhura Lal MANU/SC/0241/1964 : [1964]7SCR831, it was observed : In order that a plea of a bar under Order 2 Rule 2(3), Civil Procedure Code should succeed the defendant who raises the plea must make out (1) that the second suit was in respect of the same cause of action as that on which the previous suit was based; (2) that in respect of that cause of action the plaintiff was entitled to more than one relief; (3) that being thus entitled to more than one relief the plaintiff, without leave obtained from the Court, omitted to sue for the relief for which the second suit had been filed. From this analysis, it would be seen that the defendant would have to establish primarily and to start with, the precise cause of action upon which the previous suit was filed, for unless there is identity between the cause of action on which the earlier suit was filed and that on which the claim in the later suit is based there would be no scope for the application of the bar. 16. In view of the above, what is to be seen in the instant case is whether the cause of action on the basis of which the previous suit was filed, is identical to the cause of action on which the subsequent suit giving rise to the present appeal, was filed. If the identity of causes of action is established, the rule would immediately become applicable and it will have to be held that since the relief claimed in the subsequent suit was omitted to be claimed in the earlier suit, without the leave of the court in which the previous suit was originally filed, the subsequent suit for possession is liable to be dismissed as the appellants, being the defendants in both the suits, cannot be vexed twice by two separate suits in respect of the same cause of action.” (Emphasis Supplied) Generally stated, “cause of action” means every fact which is necessary to establish to support a right or obtain judgement. Another shade of meaning is that a cause of action means every fact which will be necessary for the plaintiff to prove.[7] To constitute a bar to fresh suit under Order II Rule 2(3) of CPC three, elements are required to be proved. Firstly, it must be established that the second suit was in respect of the same cause of action as that on which the previous suit was based; secondly, in respect of that cause of action the plaintiff is entitled to more than one relief; and lastly, that being so, the plaintiff, without Leave obtained from the Court, omitted to sue for the relief for which the second suit has been filed. The cause of action for the purpose of this rule means all the essential facts constituting the right and its infringement.[8] In other words, a cause of action consists of all facts which are essential for the plaintiff to allege and to establish, if denied or controverted. It is pertinent to note that in the case of Mahommad Khalil Khan vs. Mahboob Ali Mian[9], the Privy Council, thus summed up the principles underlying this rule: 1) The correct test in cases falling under Order II Rule 2, is “whether the claim in the new suit is in fact founded upon a cause of action distinct from that which was the foundation for the former suit”.[10] 2) The cause of action means every fact, which will be necessary for the plaintiff to prove if traversed in order to support his right to the judgement.[11] 3) If the evidence to support the two claims is different, then the causes of action are also different.[12] 4) The causes of action in the two suits may be considered to be the same, if in substance they are identical.[13] 5) The cause of action has no relation whatsoever to the defence that may be set up by the defendant nor does it depend upon the character of the relief prayed for by the Plaintiff. It refers to the media upon which the plaintiff asks the court to arrive at a conclusion in his favour.[14] Thus, in order to test whether the arbitration proceedings are barred for want of Leave for omitting to sue under Order II Rule 2, the commonality of causes of action between the claim which is first in point of time and the subsequent claims, has to be established. If it is shown that the cause of action, in two proceedings are same and a party has sought to claim reliefs arising out of the same cause of action in parts, without first obtaining Leave for omitting to sue the entire claim in the first proceeding, the subsequent proceedings based on the same cause of action is barred. A. LAW PERTAINING TO CAUSE OF ACTION: The term “cause of action”, as has been defined in Aiyar’s[15] is as below: “Cause of action” in legal parlance is existence of those facts which give a party a right to judicial interference on his behalf… The elements of a cause of action are: first, the breach of duty owing by one person to another; second the damage resulting to the other from the breach. The commission or omission of an act by the defendant, and damage to the plaintiff in consequence thereof, must unite to give a good cause of action. No one of these facts by itself is a cause of action.” Further, the phrase “cause of action” in Halsbury’s Law of England (4th Edn.) as cited in Kunyan Nair Sivaraman Nair vs. Naryanan Nair,[16] has been explained as below: “Cause of action” has been defined as meaning simply a factual situation the existence of which entitles one person to obtain from the Court a remedy against another person. The phrase has been held from earliest time to include every fact which is material to be proved to entitle the plaintiff to succeed, and every fact which a defendant would have a right to traverse. Cause of action has also been taken to mean that particular act on the part of the defendant which gives the plaintiff his cause of complaint, or the subject matter of the grievance founding the action, not merely the technical cause of action.” Notably, in the case of Navin Chandra N. Majithia vs. State of Maharashtra[17] the Hon’ble Supreme Court after placing reliance on Stroud’s Judicial Dictionary as defined the term “cause of action” as below: “…In legal parlance the expression “cause of action" is generally understood to mean a situation or state of facts that entitles a party to maintain an action in a Court or a Tribunal, a group of operative facts giving rise to one or more bases for suing; a factual situation that entitles ...one person to obtain a remedy in Court from another person (Black's Law Dictionary). … a “cause of action” is stated to be the entire set of facts that gives rise to an enforceable claim; the phrase comprises every fact, which if, traversed, the plaintiff must prove in order to obtain judgement…” In reference to arbitration proceedings, the expression, “cause of action” must be read as “cause of arbitration”.[18] Pertinently, the cause of action has no relation whatsoever to the defence which may be set up by the defendant nor does it entirely depend upon the character of the relief prayed for by the plaintiff. It refers to the ground set forth in the plaint as the cause of action, or in other words, to the media upon which the plaintiff asks the Court to arrive at a conclusion in his favour.[19] Additionally, the causes of action in the two suits are the same if in substance they are identical[20] and it is not limited to the actual infringement of the right sued on, but includes all the material facts on which it is founded.[21] In the case of Kunjan Nair Sivaraman Nair vs. Narayanan Nair and Ors.[22], the Hon’ble Apex Court has opined that: “Order 2 Rule 2, Sub-rule (3) requires that the cause of action in the earlier suit must be the same on which the subsequent suit is based. Therefore, there must be identical cause of action in both the suits, to attract the bar of Order II Sub-rule (3)…The salutary principle behind Order II Rule 2 is that a Defendant or Defendants should not be vexed time and against for the same cause by splitting the claim and the reliefs for being indicated in successive litigations. It is, therefore, provided that the Plaintiff must not abandon any part of the claim without the leave of the Court and must claim the whole relief or entire bundle of reliefs available to him in respect of that very same cause of action. He will thereafter be precluded from so doing in any subsequent litigation that he may commence if he has not obtained the prior permission of the Court.” Interestingly, in the case of Balbir Singh vs. Atma Ram Srivastava[23], cause of action has been understood as a set of facts, which establish or give rise to a right of action. The Hon’ble Allahabad High Court, in the aforesaid case, has differentiated between the terms “cause of action” and the “right of action”. It is in the aforementioned context; the following Paras of the above judgement need to be taken into due consideration: “48…There is, however, a 'distinction between “cause of action” and the “right of action”. These terms are not synonymous and interchangeable. A right of action is a right to presently enforce a cause of action a remedial right affording redress, for the infringement of a legal right belonging' to some definite person; a cause of action is the operative facts which give rise to such right of action. The right of action does not arise until the performance of all conditions precedent to the action, and may be taken away by the running of the statute of limitations, through an estopped, or by other circumstances which do not affect the cause of action. There may be several rights of action and one cause of action and rights may accrue at different times from the same cause. … 49. A cause of action arises when that which ought to have been done is not done or that which ought not to have been done is done. The essential elements of a cause of action are thus the existence of a legal right in the plaintiff with a corresponding legal duty in the defendant, and a violation or breach of that "right or duty" with consequential injury or damage to the plaintiff for which he may maintain an action for appropriate relief or reliefs. The right to maintain an action depends upon the existence of a cause of action which involves a combination of a right on the part of the plaintiff and the violation of such right by the defendant... 51. Rule 2 of Order II, Civil Procedure Code however, prohibits splitting up of a cause of action. No precise rule can, however, be formulated for determinating what makes the entire cause of action; it depends upon the facts of a particular case. However, one of the principal tests of identity of causes is said to be the identity of essential facts; if the same evidence will support both actions there is deemed to be but one cause of action. There would be no identity of causes if some of the evidence is the same in both action but the subject-matter is essentially different. Whether the case falls within or out of the rule against splitting depends upon whether the wrong for which redress is sought is the same in both actions and not upon whether different grounds of relief for the same wrong are set forth. Thus, even where the plaintiff is entitled to several forms and kinds of relief there may be only one cause of action. The rule, however, does not require that distinct causes of actions, each of which would authorise independent relief be presented in a single suit.” Therefore, it emanates from the above discussion that the scheme of Order II of the Code of Civil Procedure is of such nature that the provision of Rule 2 is applicable to a given state of facts, wherefrom the plaintiff seeks different kind of reliefs but all of which kinds of relief spring from the same state of facts and, therefore, are connected with the same subject of action. [1] Gautam Mohanty has completed his BBA.LLB(Hons.) from National Law University Odisha in 2015 and has a Master of Laws (LLM) from Central European University, Hungary in 2017. He is currently working as an Arbitration Associate in the office of Justice Deepak Verma, Former Judge Supreme Court of India. [2] Deva Ram vs. Ishwar Chand, (1995) 6 SCC 733. [3] Swatantra Kumar Agarwal vs. Managing Director, UPFC Kanpur, AIR 1994 All 187 (DB). [4] Narashatti Kenpanna vs. Narasappa, AIR 1989 Kant 50. [5] Deva Ram vs. Ishwar Chand, (1995) 6 SCC 733. [6] Deva Ram vs. Ishwar Chand, (1995) 6 SCC 733 (737). [7] Mulla, The Code of Civil Procedure, 1908, 18th Edn. 2016 at Pg. 1569. [8] Sher Ali vs. Torap Ali, AIR 1942 Cal 407. [9] Mahommad Khalil Khan vs. Mahboob Ali Mian, AIR 1949 PC 78. [10] Moonshee Bazloor Ruheem vs. Shumsoonnissa Begum, (1867) 11 MIA 551. [11] Read vs. Brown, (1888) LR 22 QBD 128. [12] Brunsden vs. Humphrey, (1884) 14 QBD 141. See also, Haryana Co-op. Sugar Mills vs. G.D. Supply Co., AIR 1976 P&H 117. [13] Brunsden vs. Humphrey, (1884) 14 QBD 141. [14] Chand Kaur vs. Partap Singh 1889 ILR 16 Cal 98, (PC): 15 IA 156. [15] P Ramanatha Aiyar’s Advanced Law Lexicon, Lexis Nexis; 2017 Fifth edition (23 December 2016). [16] Kunyan Nair Sivaraman Nair vs. Naryanan Nair, (2004) 3 SCC 277, 286, Para 17. See also, Liverpool & London S.P. & I. Assn. Ltd. vs. M.V. Sea Success 1, (2004) 9 SCC 512, 562, Para 140. [17] Navin Chandra N. Majithia vs. State of Maharashtra, (2000) 7 SCC 640, 647, Para 19. See also, State of Rajasthan vs. Swaika Properties, AIR 1985 SC 1289, Hari Shankar Jain vs. Sonia Gandhi, (2001) 8 SCC 233, Para 23, Chand Kaur vs. Partab Singh, ILR 16 Cal 98 (PC) and National Textile Corpn. Ltd. vs. Haribox Swalram, (2004) 9 SCC 786, 796, Para 10. [18] Andrew McGee: Limitation Periods, 4th Edn., 2002, c.16, Para 16.004, Pg.281. [19] Lord Watson in Chand Kaur vs. Partab Singh, (1889) 16 Calcutta 98. See also, Sterling Agro Industries vs. Union of India, AIR 2011 Del 174, Para 6. [20] Praphullachandra vs. Rajbhai, AIR 1964 MP 129. [21] The Indian Plywood Manufacturing Company Limited vs. Orissa Timber Products Limited, (1977) (1) CWR 318. [22] Kunyan Nair Sivaraman Nair vs. Naryanan Nair, (2004) 3 SCC 277 [23] Balbir Singh vs. Atma Ram Srivastava, AIR 1977 All 211.

Shri Ravi Shankar Prasad, Member of Parliament and Minister of Law and Justice has Introduced the New Delhi International Arbitration Centre Bill, 2019 in the Lok Sabha on 3rd July 2019. A Link to the bill is as pasted here. http://164.100.47.4/BillsTexts/LSBillTexts/Asintroduced/127_%202019_LS_Eng.pdf A detailed discussion on this bill will follow on the Blog.

28th June 2019 Gaurav Rai: Today we have with us, Justice A.K. Patnaik, Former Judge of the Supreme Court of India and a very active and sought after arbitrator. I am extremely glad that he accepted my invitation for an interview on his experience with arbitrations in India and abroad. Before I begin, I would like to give our readers some background about him. Justice Patnaik did his schooling in Rajkumar College at Raipur and then studied B.A. Honours in Political Science from KM College, University of Delhi. He then returned to Cuttack and completed his Bachelor of Laws in Madhusudan Law College, Cuttack, Odisha. He joined the Bar in Orissa High Court in 1974. He practised as an advocate in all branches of law and his specialisation was in commercial law and constitutional law. He was the Standing Counsel of the State Road Transport Corporation and the Senior Standing Counsel of the Odisha Commercial Taxes Organisation. He was elevated as a Judge of High Court of Orissa in January 1994 and was immediately transferred to Gauhati High Court in February 1994. After a tenure of eight years as a Judge of the Gauhati High Court, he was transferred back to the High Court of Orissa in April 2002. After a stint of about three years as a Judge of High Court of Orissa, he was appointed as the Chief Justice of High Court at Chhatisgarh and thereafter was transferred as Chief Justice of Madhya Pradesh High Court in October 2005. In November 2009, he was appointed as Judge of the Supreme Court of India and he retired from the Supreme Court of India in June 2014 It is not known to many, but it was the Judgment given by him in the Division Bench as the Chief Justice of Chattisgarh High Court in BALCO v. Kaiser which was upheld by the Supreme Court. Today the BALCO Judgment of the Supreme Court is known as one of the leading cases of arbitration law in India. It was his judgment that laid the foundation for the Supreme Court to overrule its previous decision in Venture Global v. Satyam Computers and to make the arbitration regime of India in line with international practices and limited the scope of interference of Indian Courts in foreign seated arbitrations and arbitral awards. (Judgment of the Chattisgarh High Court in BALCO v. Kaiser - https://indiankanoon.org/doc/1623274) (Judgment of the Supreme Court in BALCO v. Kaiser https://indiankanoon.org/doc/173015163/ Gaurav Rai: Thank you so much sir for sparing your valuable time and giving us this interview. Gaurav Rai: You started working as an arbitrator after your retirement from the Supreme Court of India in 2014. What factors motivated you to start working as an arbitrator and how has your experience as a lawyer and a judge for more than 40 years helped you as an arbitrator? Justice Patnaik: I retired at the age of 65 on 3rd June 2014. After retirement from the Supreme Court, I did not want to take up any assignment as a member of a tribunal or as a Chairman of State Human Rights Commission because I thought after my retirement from the Supreme Court it will not be proper for me to take these assignments from the Government. But I had to do something so I thought I should take up arbitration cases. Gaurav Rai Sir, when you started doing arbitrations, did you have to approach anyone to get the nominations? Justice Patnaik Fortunately, that occasion never arose, nor do I think that would be the proper course for an arbitrator to approach any party or any court to get arbitration matters. Arbitrations came to me by appointment as an arbitrator by the Supreme Court of India, the Delhi High Court, by the parties and by the two arbitrators who were nominated by their respective parties to act as the Presiding Arbitrator. Gaurav Rai: Sir, you have seen arbitrations and you have seen court cases, What do you think are the major differences you see in proceedings of court cases and arbitrations? Justice Patnaik: The major difference is this that in arbitration when a date and time of hearing is fixed, only one matter is fixed before the arbitral Tribunal and that one matter may go on for 2 hours, 4 hours or 5 hours etc. In a court case there are several matters fixed in a day. So parties appearing before a court do not know whether their case will be taken up on that day. Whereas before an arbitrator once the matter is fixed, the parties know that the case will be taken up by the arbitrators. Gaurav Rai: I am guessing that is something very positive about arbitrations the fact that when a matter is taken up a lot of detailed hearing takes place? Justice Patnaik Yes yes, because the arbitral Tribunal exclusively devotes it time to the case. Therefore, the parties have to spend the entire time which has been allotted to them before the arbitral Tribunal. Gaurav Rai: What skills would lawyers practicing in courts bring into arbitrations and what additional skills do you believe have to be developed by such lawyers to be successful in arbitrations? Justice Patnaik: The most important skills of lawyers in arbitration are the skills of drafting the pleadings, compiling the documents in support of their case, deciding whether at all oral evidence is required and arguing on the point of dispute that has been formulated by the arbitral Tribunal in a particular case. So the focus of the lawyer should be that particular case, the point of law involved, the factual materials required and the ability to convince the arbitral Tribunal in as short a time as possible that he has a good case. Gaurav Rai: Sir, my follow up question to this would have been what kind of cross examination skills that lawyers would need, but you said that they might also have to decide whether to lead oral evidence or not? What is the reason behind this sir? Justice Patnaik: See, arbitration cases are civil cases, not criminal cases and they arise out of contracts and a number of communications are made between the parties, before the dispute starts. So, interpretation of contract is involved and documents have to be interpreted and appreciated by the arbitral Tribunal. The scope of oral evidence is very less. So in those matters only where a factual dispute arises and that can be established only through oral evidence, oral evidence is required, otherwise not. Gaurav Rai: Sir, in the last 5 years working as an arbitrator, how has your experience been in different arbitration setups, Ad hoc v. Institutional, Domestic v. International Commercial & Foreign Seated arbitrations? Do you feel more comfortable in an Ad hoc setup where you have more control of the proceedings or in an institutional setup which has pre-defined rules. Justice Patnaik: No, I feel comfortable in both kinds of cases. In institutional setups such as Singapore International Arbitration Centre (SIAC) or the Court of Arbitration of the International Chamber of Commerce (ICC), as an arbitrator I got to learn a lot. Because after I made the awards or after the arbitral Tribunal made the awards, they have to be approved by their respective administrative bodies called Court or Secretariat of SIAC and ICC and they insist that every aspect of the case is examined, every contention of the parties is considered. As a result the arbitrator in the arbitral award covers every aspect of the case and the ground for challenge of the award gets reduced and the award is therefore sustained by the Courts, if it is challenged in Court. Gaurav Rai: As you know the Arbitration and Conciliation Act, 1996 is based on the UNCITRAL Model law of 1996 but the Arbitration and Conciliation (Amendment) Act, 2015, which only operated prospectively, brought in significant changes to the arbitration regime. You have had the opportunity to deal with cases on both sides of the amendment as an arbitrator. Do you feel the changes which have been brought in have had a positive impact on the arbitration scene in India and how has it affected your work as an arbitrator? Especially Section 29A and the strict timeline. Justice Patnaik: Initially, most of the arbitrators felt that these timelines were not proper. But experience has shown that these timelines have worked very well. The new arbitrations which were initiated after the commencement of the amendment, are being completed by the arbitrators fast because of the timelines and the timelines are not absolute as the Courts can extend the time. The Courts also have had a very reasonable approach in extending time in appropriate cases. Therefore the arbitrator and the parties now work in the background of the time limits which are laid down in Section 29A of the Act and they don’t want to go to the Court a number of times for extension and if they want to go to the court for an extension there must be a good ground for the extension. All this has helped in expediting the arbitration proceedings. Gaurav Rai: Do you feel that due to the changes made by the Amendment Act and the general change of regime where the Supreme Court through the judgments has made the law more arbitration friendly. Further, do you feel that because of these regime changes people are preferring to arbitrate in New Delhi, Mumbai and other metropolitan cities in India whereas initially they would have preferred going for arbitration to a neutral country like Singapore.? Justice Patnaik: See we have had some cases coming up before us where the parties had initially agreed to have the arbitration in a country like Singapore and other places abroad. They subsequently agreed to have the arbitration in India. This shows that the parties who are from abroad are now appreciating that arbitration in India is getting faster and they have no reason to go out of the Country for arbitration. Gaurav Rai: We have heard from you about what skills would be required in lawyers practicing in arbitration. What do you feel are the skills required in an arbitrator.? Justice Patnaik: They must know the law of contracts, must be very fair in their approach, not partisan, must be very quick in applying their mind and solving the various problems coming before them and at the same time meticulous in observing a fair procedure and the provisions of law. Gaurav Rai: Sir, you had said that the arbitrations in India are becoming faster and efficient. That may be true about the major metropolitan cities like Mumbai, New Delhi, Bangalore and Hyderabad. Do you see arbitrations moving out to other tier 2 cities also. Justice Patnaik: Very difficult. Because in the smaller cities, the lawyers are not that trained in arbitration. Secondly the arbitrators those are available in the cities might not have the skill yet to effectively work on arbitrations. So, until the skills of arbitration both in the arbitrators and the lawyers improve I don’t think the arbitration will pick up in those cities. Gaurav Rai: But do you feel, that the arbitrations will continue to pickup speed and momentum in the major cities so much so that the parties prefer to come back to India and arbitrate rather than …. Justice Patnaik: Yes, I feel, Delhi, Mumbai, Bangalore, Hyderabad, Chennai to some extent and Kolkata are picking up a lot of arbitration work and gradually if the efficiency of the whole arbitration system improves, people will prefer to arbitrate in India particularly where the contracts refer to projects in India. Gaurav Rai: Finally, sir what would be your advice for young lawyers wanting to pursue arbitration as a career? Justice Patnaik They should focus themselves to the work in arbitration, in preparing pleadings, in the art of adducing evidence, relevant evidence, the art of cross examination where oral evidence is led, arguing in a pin point manner, studying and updating themselves of changes in arbitration law and I am sure they will get to acquire a lot of briefs and they will go up in arbitration work. Gaurav Rai Thank you so much for sharing your valuable time with us today. I am sure our subscribers and readers will learn a lot from what we have heard from you today, thank you so much.

Tia Majumdar[1] ABSTRACT At the outset, the paper discusses the merits of arbitration as a mode of dispute resolution after which it focuses on provisional measures in international commercial arbitration. The author also discusses the need for the procedure of emergency arbitration and the substantive requirements of the same. Additionally, the paper expounds on the state of interim arbitral relief in the Indian context. The author has relied on purely doctrinal sources for the purpose of this paper. These sources include, but are not limited to research papers, articles, essays, books and other textual evidence. Introduction Arbitration as a mode of dispute resolution has gained immense currency over the last few decades. Admittedly, such dramatic growth was facilitated by developments in international trade and commerce. However, as far as the identification of reasons for such advancement is concerned, it would perhaps be prejudicial to withhold credit from the merits of international commercial arbitration as a mechanism for dispute resolution. The most perceptible hallmark of arbitration is perhaps the degree of confidentiality[2] that is maintained, in addition to the entire process being less protracted than court proceedings.[3] International arbitration has often been referred to as “the oil, which lubricates the machinery of world trade”.[4] An efficient means of dispute resolution – international commercial arbitration facilitates the development of trans-national trade and commerce appreciably.[5] Parties often resort to this mode of dispute resolution for the neutrality it offers as regards disputes between multi-national parties – thereby enabling the parties to evade unfavourable provisions of the national laws of their co-contractors.[6] However, procedural safeguards and due process result in inevitable delay in the process of arriving at the resolution of the concerned dispute.[7] Due to the considerable time lapse between the commencement of the arbitral proceedings and the constitution of Arbitral Tribunal, the subject matter of the arbitration may be prejudicially affected causing irreparable and non-compensable harm thereby rendering a final award frustrated.[8] There is thus a dire need for provisional measures in order to indemnify the concerned party against such irreparable harm. In the context of arbitration, provisional or interim measures are granted by arbitral tribunals or national courts. It is into this area of research that the author seeks to delve in the course of this paper. The present paper is divided into two chief sections - the first section of which expounds on the field of emergency arbitration with a special focus on interim measures granted therein. The author, in the second section seeks to comment on provisional measures granted by tribunals in the context of India. Provisional Measures in International Commercial Arbitration The 2012 amendment to the new International Chamber of Commerce Rules of Arbitration (hereinafter “ICC Rules”) brought with it the possibility of parties obtaining interim conservatory relief in urgent matters that “cannot await the constitution of the tribunal”.[9] The procedure of obtaining an emergency arbitrator is a spin-off on the ICC Pre-Arbitral Referee[10], which was a standard clause found in the ICC Rules of 1990.[11] The need for provisions relating to urgent relief is fast coming to the fore. The ICC is not alone in introducing such a procedure as the Stockholm Chamber of Commerce (SCC), the International Center for Dispute Resolution (ICDR) and the American Arbitration Association (AAA) have followed suit.[12] In order to avoid the potentially time-consuming and unpredictable court proceedings, the parties may choose to seek recourse to the Emergency Arbitrator to secure interim reliefs before the constitution of an Arbitral Tribunal. However, the Emergency Arbitrator provisions are not intended to be the only means of seeking urgent relief and they are only an alternative to seeking relief from state courts.[13] Art. 29(7) of the Rules recognises the parties’ right to seek urgent interim or conservatory measures from a competent judicial authority at any time during the course of arbitral proceedings without infringing the arbitration agreement, thereby recognising the concurrent jurisdiction of both the Emergency Arbitrator and a competent judicial authority.[14] An interesting aspect of this procedure is that the parties can opt out of the applicability of Emergency Arbitrator Provisions[15] and unless the parties so opt out, the provisions are applicable automatically.[16] Substantive Requirements for Granting Interim Measures The determination of the substantive conditions that need to be satisfied for the grant of emergency measures is usually left to the discretion of the Emergency Arbitrator.[17] These grounds are usually similar to those of provisional measures before an Arbitral Tribunal.[18] The ICC Rules do not lay down any substantive pre-requisites for granting emergency measures except urgency and recourse to Emergency Arbitrator is available only for truly urgent matters.[19] Urgency is to be broadly interpreted and is deemed to be established when it is proven that a party’s potential losses increase with the mere passage of time.[20] The pre-requisites laid down by the ICC Rules are often read in conjunction with those laid down in the UNCITRAL Model Law (hereinafter “Model Law”). The substantive requirements provided under Article 17A of the Model Law require that without the grant of the measures requested, the party requesting relief is likely to face irreparable harm substantially outweighing the likely harm to the opposing party if the measure is granted.[21] That is to say that the Emergency Arbitrator is obligated to ensure that the potential advantage to the requesting party with the granting of the requested measures does not outweigh the potential harm to the opposing party.[22] Irreperable harm in this context ought to be construed in an economic sense as opposed to a literal interpretation.[23] An additional requirement lays down that there ought to be a reasonable possibility that the requesting party succeeds on the merits of the dispute under arbitration.[24]. However, it is only a prima facie examination on the merits that is in order, as it has been widely held that the arbitrator ought not to prejudge on the merits of the case.[25] Emergency Arbitration under Indian Arbitration Law The Arbitration and Conciliation Act, 1996 (hereinafter “The Act”) is primarily modeled after the UNCITRAL Model Law. Section 17 of the Act pertains to the grant of interim relief.[26] By virtue of this provision, unless there is an agreement indicating otherwise, the arbitral tribunal is empowered with the implied authority to direct any party to the dispute to undertake such conservatory measures as it deems fit in order to protect the subject matter of the dispute – the fundamental aim being to prevent frustration of the award so made.[27] Emergency Arbitration as a procedure is still in its nascent stages as regards the Indian context as is evidenced in the fact that until extremely recently, there had been only one Indian decision pertaining to the usage and application of emergency arbitrators which was passed by the Bombay High Court in HSBC Pl. Holdings (Mauritius) Ltd. v. Avitel Post Studioz Ltd wherein the Court acknowledged that an emergency arbitrator did indeed fall under the purview of Section 17.[28] This decision was further buttressed by the 246th Law Commission Report, which suggested amendments to the Act in order to bring emergency arbitrators under the ambit of Clause 2(1)(d).[29] The recommendation by the Law Commission is a significant step forward for India in the scheme of international arbitration, as in the event that the suggestion is accepted and incorporated within the Act, India would be the sole country to have extended the scope of the definition of “Arbitral Tribunals” to include emergency arbitrators.[30] Conclusion The Indian scenario in relation to interim measures ordered by emergency arbitrators has thus far not been objectively favourable. This has been sought to be reformed by the amendments recommended by the 246th Law Commission Report, which while being a leap in the correct direction, has several flaws, which have to be corrected in order to become completely effective. Emergency arbitration is an ingeniously useful pre-arbitral mechanism, which could be imported into the Indian arbitral regime with the inclusion of an emergency arbitrator within the definition of an arbitrator under Section 2(d) of the Act. In the opinion of the author, emergency arbitrators ensure that the purpose of the final arbitral award is not frustrated and to this end, should be adopted as the preferred form of pre-arbitral interim measures, over Section 9 of the Act. The Law Commission’s recommendations, in the opinion of the author, should be adopted, after considering the changes proposed by various jurists, given that the Commission’s proposals make for a strong argument in favour of imbuing the arbitration climate in India with a welcoming flavour. [1] Tia Majumdar is a graduate from National Law University, Delhi with a specific interest in commercial dispute resolution. She has assisted various Arbitral Tribunals in several high stake disputes under the guidance of Justice Deepak Verma (Retd.), Former Judge, Supreme Court of India. [2] Hanotiau, International Arbitration in A Global Economy: The Challenges of the Future, 28 J. Int’l Arb. 89, 90 (2011); Knahr & Reinisch, Transparency Versus Confidentiality in International Investment Arbitration – The Biwater Gauff Compromise, 6 L. & Prac. Int’l Cts. & Tribs. 97, 109 (2007); La Spada, in T. Zuberbühler, C. Müller & P. Habegger (eds.), Swiss Rules of International Arbitration: Commentary Art. 43, ¶2 (2005); Neill, Confidentiality in Arbitration, 12 Arb. Int’l 287, 315-16 (1995); Trakman, Confidentiality in International Commercial Arbitration, 18 Arb. Int’l 1 (2002). [3] Emmanuel Gaillard and John Savage (eds), Fouchard Gaillard Goldman on International Commercial Arbitration, Kluwer Law International (1999) at p. 1; David L. Threlkeld & Co. v. Metallgesellschaft Ltd, 923 F.2d 245, 248 (2d Cir. 1991). [4] Veeder, The Lawyer’s Duty to Arbitrate in Good Faith, in L. Lévy & V. Veeder (eds.), Arbitration and Oral Evidence 115, 118 (2004); Paulsson, International Arbitration Is Not Arbitration, 2008:2 Stockholm Int’l Arb. Rev. 1. [5] D. Caron & L. Caplan, The UNCITRAL Arbitration Rules: A Commentary 2 (2d ed. 2013) [6] Emmanuel Gaillard and John Savage (eds), Fouchard Gaillard Goldman on International Commercial Arbitration, Kluwer Law International (1999) at p. 1. [7] Gary B. Born , International Commercial Arbitration (Second Edition), 2nd edition, Kluwer Law International 2014 at p. 2425. [8] Ibid at p. 2426; Baruch Baigel, The Emergency Arbitrator Procedure under the 2012 ICC Rules: A Juridical Analysis, Journal of International Arbitration, Kluwer Law International 2014, Volume 31 Issue 1) at p. 2. [9] Article 29, ICC Rules of Arbitration 2012. [10] Article 2, ICC Rules of Arbitration 1990. [11] Baruch Baigel, The Emergency Arbitrator Procedure under the 2012 ICC Rules: A Juridical Analysis, Journal of International Arbitration, Kluwer Law International 2014, Volume 31 Issue 1) at p. 1. [12] Ibid. [13] Fry, Jason; Greenberg, Simon; Mazza, Francesca, Commentary on the 2012 Rules, The Secretariat's Guide to ICC Arbitration, 2012 at ¶3-1105. [14] Gary B. Born , International Commercial Arbitration (Second Edition), 2nd edition, Kluwer Law International 2014 at p. 2457. [15] Article 29(6), ICC Rules of Arbitration 2012; Webster, Thomas H; Bühler, Michael W,Handbook of ICC Arbitration, Sweet and Maxwell, 2008 ed. (2014) at ¶29-141. [16] Fry, Jason; Greenberg, Simon; Mazza, Francesca, Commentary on the 2012 Rules, The Secretariat's Guide to ICC Arbitration, 2012 at ¶3-1055. [17] Yesilirmak, Ali, Provisional Measures in International Commercial Arbitration, Kluwer Law International 2005 at ¶4-58. [18] Ibid at ¶4-59. [19] Bühler, Michael, ICC Pre-Arbitral Referee and Emergency Arbitrator Proceedings Compared, Special Supplement 2011: Interim, Conservatory and Emergency Measures in ICC Arbitration, at p. 95. [20] ICC Interlocutory Award 10596 of 2000 (Unpublished), discussed in page 177 & 179 of Provisional Measures in International Commercial Arbitration by Ali Yesilirmak (refer to Note 17). [21] Article 17A(1), UNCITRAL Model Law. [22] Berger, Klaus Peter, International Economic Arbitration, Kluwer Law and Taxation Publishers (1993) at p. 336. [23] Lew, Julian D. M.; Mistelis, Loukas A.; Kröll, Stefan Michael, Comparative International Commercial Arbitration, Kluwer Law International (2003) at ¶23-65. [24] Ibid; Yesilirmak, Ali, Provisional Measures in International Commercial Arbitration, Kluwer Law International 2005 at ¶5-28. [25] ICC Second Partial Award 8113 of 1995, Extracts published in 11(1) ICC International Court Arbitration Bull 65‐69 (2000). [26] Arbitration and Conciliation Act, 1996. [27] Justice R.S. Bachawat, Justice R.S. Bachawat’s Law of Arbitration and Conciliation, LexiNexis Butterworths Wadhwa Nagpur, 5th edn. (2010), at p. 1127. [28] 2014 Indlaw MUM 29. [29] 246th Report, Law Commission of India, at p. 37. [30] Nikhil J. Variyar, Tribunal Ordered Interim Measures and Emergency Arbitrators: Recent Developments Across The World and in India, Indian Journal of Arbitration Law, Volume IV, Issue I (2015) at p. 39

Edita Marić (Edita Marić is a Legal Research Associate at Alchemy Capital and is based in Sarajevo, Bosnia and Herzegovina. She holds an LL.M degree from University College London, University of London and an LLB degree in International and Comparative Law from American University in Bosnia and Herzegovina. She can be contacted at edita.maric@gmail.com) At times of heightened criticism and in the light of recent reform proposals, it is reasonable to question to what extent has the investment arbitration regime cured its legitimacy crisis. Namely, extensive rule revisions have been proposed at the International Centre for Settlement of Investment Disputes ("ICSID"), or leading institution for the resolution of international investment disputes. It is significant to observe that on August 3, 2018, ICSID has announced a very challenging task – amending its Regulations and Rules. For the purpose of this article, the focus will be on the rules aimed towards enhancing the impartiality and independence of arbitrators, as the main actors in the system. In specific, it was announced that the process for arbitrators’ challenges will be revised, with an additional option of expedited challenge filling. Independence and impartiality of arbitrators as well as other decision-makers are of paramount significance for the rule of law. Specifically, ICSID Convention contains rules and procedures on the independence and impartiality of arbitrators, such as arbitrators’ obligation of disclosure and the right of the disputing parties to remove arbitrators.[1] Article 57 of the ICSID Convention in conjunction with Article 14 provide grounds for challenging an arbitrator, on the basis of “of any fact indicating a manifest lack of the qualities required by paragraph (1) of Article 14”.[2] Regarding the disclosure, as per the Rule 6(2) of the ICSID Arbitration Rules, arbitrators shall disclose any previous circumstances or relationships that ‘‘might cause the arbitrator's reliability for independent judgment to be questioned by a party’’.[3] By the analysis of these provisions, it can be concluded that the bar for disqualification of arbitrators is too high, in comparison to other rules governing arbitration procedure such as UNCITRAL Arbitration rules. For instance, the ground for disqualification or disclosure under UNCITRAL Arbitration Rules are any circumstances or relationship that would raise ‘’justifiable doubts as to arbitrator’s impartiality and independence‘’.[4] Significantly, the same standards are applicable and replicated in other national arbitration legislations as well as in other institutional arbitration rules and regulations. Also, the timing for these reforms is interesting due to concerns raised by the arbitration community on the matter as well as increasing interest in the concept of multilateral investment court. Since the multilateral investment court is aimed at strengthening public confidence and predictability by abolishing some of the existing arbitration features, ICSID has to safeguard its legitimacy and its decision-makers’ accountability. Namely, as rightly pointed out by Walter in terms of ensuring greater independence and impartiality, numerous issues arise from the method of appointment of arbitrators.[5] It is still striking that double hatting (arbitrator-counsel) as well as repeat appointments are tolerated in the international investment arbitration, while the future adjudicators at multilateral investment court are seen as non-renewable and fully independent with no options of changing their ‘hats’ easily.[6] In order to grasp on current system’s inefficiencies, it is important to make a reference to the party – appointments of arbitrators. As Paulsson[7] argues, the party - appointments should be abolished as they inherently contradict the very notions of impartiality and independence. Moreover, as correctly pointed out by Horvatz and Berzero[8], double hatting in terms of serving as an arbitrator and counsel is also problematic as it is incompatible with duty of impartiality and independence. Ultimately, Cleis suggests alternatives such as: arbitrators’ appointment by a neutral body as well as party-appointment by roster.[9] However, there might be potential flaws in these recommendations. For instance, ICSID Secretariat/Secretary General, can be perceived as political and autocratic appointing body due to potential lack of arbitrators’ independence or neutrality. Also, with regards to the party-appointment from a roster, size of the roster can be problematic as it may limit the parties’ freedom of choice or even arbitrators’ selection in case the roster is too large.[10] Quite contrary than promoting transparency, the core issues such as repeat appointments, double hatting as well as ruling on similar subject matter would be common. Apparently, the overlap and the tension exist between the party - appointment and the party autonomy in selecting arbitrator for a given dispute as one of the greatest advantages of the international arbitration.[11] Still, party autonomy is the essential element in the international arbitration and as such shall not be prejudiced, but rather alternatives other than suggested shall be delivered. In terms of innovating ICSID, by means of amending Rules and Procedures, clear rules on arbitrators’ impartiality and independence and their effective enforcement can cure deficiencies and the overall perceptions on legitimacy and transparency. As emphasized by Sands, bias apprehension is particularly raised in ‘’a situation where the appearance of an individual as an arbitrator in one ICSID case who acts as counsel as expert in another ICSID case may give rise to a perception of bias, in the sense that his or her role might be perceived to inform actions in the other”.[12] Although ‘role confusion’ or double hatting is highly controversial, yet it is debatable whether its total or partial ban as suggested by proponents of future multilateral investment court would be beneficial. In terms of already small pool of investment arbitrators, it may be counterproductive and resulting in inevitable repeat appointments, loss of diversity and to an extent reducing the number of arbitrators as they might opt for counsel’s positions. Hence, provisions on double – hatting on determining the correlation between the two roles ie. arbitrator – counsel shall have to be well-drafted, detailed and clear. Finally, due to high and ambiguous threshold of the arbitrator challenges and thus excessive burden of proof on the side of challenging party (Amco Asia[13], OPIC[14]), one of the recommendations has been to include explicit provision in the ICSID Arbitration Rules that would allow parties to jointly modify current ICSID’s test for disqualification.[15] In particular, there is an apparent gap in interpretation of Article 57 and the disqualification test, so the parties but the community too are deprived of predictability and consistency of the arbitral decisions. Accordingly, inconsistent challenge threshold implies no standard whatsoever, so the clarification and interpretation of the standard, i.e. whether it refers to the standard to be established or to the seriousness of the lack of qualities prescribed, is urgent.[16] One of the additional recommendations would be to apply justifiable doubts standard as a threshold in order to avoid issue conflict and even enlarge the pool of investment arbitrators and encourage new appointments of qualified practitioners. This seems as a rather solid reform proposal, particularly due to the application of a more lenient threshold in some of the previously rendered decisions. (Vivendi[17]) If the above-mentioned issues are not adequately addressed, the multilateral investment court may become an alternative to investor-state arbitral tribunals. No case demonstrates it better than recent Slovak Republic v. Achmea BV (Case C‑284/16)[18], where it was ruled that arbitrations under bilateral investment treaties between European Union Member States are incompatible with European Union (EU) law. Finally, attractiveness of the international investment arbitration as means of settling disputes shall not be taken for granted. Without exaggeration, ICSID Rule Amendment project and proposed amendments can have a historical impact on the future of Investor-State arbitration. [1] Stefanie Schacherer, Independence and Impartiality of Arbitrators A Rule of Law Analysis, 2018, 7. [2] ICSID Convention, art. 14. [3] ICSID Rules of Procedure for Arbitration Proceedings (‘ICSID Arbitration Rules’) (April 2006). [4] UN Doc. A/RES/31/98; 15 ILM 701 (1976) (‘UNCITRAL Rules’) art.12. [5] Munia El Harti Alonso, Kluwer Arbitration Blog, Topical Issues in ISDS: Review of Recent Developments in the European Union, 2019. [6] ibid. [7] Jan Paulsson, Moral Hazard in International Dispute Resolution, ICSID Review - Foreign Investment Law Journal, Volume 25, Issue 2, Fall 2010, Pages 339–355, [8] Horvath G.J and Berzero R, ‘Arbitrator and Counsel: the Double-Hat Dilemma’ (TDM 2013),< https://www.transnational-dispute-management.com/article.asp?key=1985> [9] Maria Nicole Cleis, The Independence and Impartiality of ICSID Arbitrators: Current Case Law, Alternative Approaches, and Improvement Suggestions, (Brill 2017), 198. [10] ibid. [11] UNCTAD, ‘Investor-State Dispute Settlement’, UNCTAD Series on Issues in International Investment Agreements II, (United Nations, Geneva, 2014) 93. [12] Stefanie Schacherer, Independence and Impartiality of Arbitrators A Rule of Law Analysis, 2018, 7,12 [13] Amco Asia Corporation and others v. Republic of Indonesia, ICSID Case No. ARB/81/1, < https://www.italaw.com/cases/3475> [14] OPIC Karimum Corporation v. The Bolivarian Republic of Venezuela, ICSID Case No. ARB/10/14, [15] Yarik Kryvoi, ICSID Arbitration Reform: Mapping Concerns of Users and How to Address Them, Kluwer Arbitration Blog 2018. [16] James Crawford, Confronting Global Challenges: From Gunboat Diplomacy to Investor- State Arbitration, PCA Peace Palace Centenary Seminar, 11 October 2013. [17] Compañiá de Aguas del Aconquija S.A. and Vivendi Universal S.A. v. Argentine Republic, ICSID Case No. ARB/97/3 (formerly Compañía de Aguas del Aconquija, S.A. and Compagnie Générale des Eaux v. Argentine Republic) , [18]Achmea B.V. v. The Slovak Republic, UNCITRAL, PCA Case No. 2008-13 (formerly Eureko B.V. v. The Slovak Republic),

Gautam Mohanty[1] The applicability of the principle of without prejudice in litigation arena is fairly well-settled. However, from my perspective as a Tribunal Secretary, its practical manifestation in the context of arbitration is not well-elaborated. Through this post, I aim to elaborate upon two things primarily; (i) A real proposition regarding the applicability of the without prejudice principle raised as a contention by one of the Parties in a high stake construction arbitration and (ii) The law regarding the same. In the Arbitration Proceedings, one of the Parties sought to argue that in absence of the words “without prejudice” marked in the correspondences exchanged between the Parties the correspondences constituted a binding agreement between the Parties. 1. The law pertaining to the “without prejudice” has been elaborately enunciated in the judgements of Hon’ble Supreme Court in the case of MD, NTPC Ltd v. Reshmi Constructions, Builders & Contractors[2], Peacock Plywood (P) Ltd. v. Oriental Insurance Co. Ltd.[3]. Phipson on Evidence[4] as has been relied upon by the Hon’ble Supreme Court in the case, while relying on Peacock Plywood (P) Ltd. v. Oriental Insurance Co. Ltd., in the context of “without prejudice” Court has observed that: “… (C)… If it is clear from the surrounding circumstances that the parties were seeking to compromise the action, evidence of the content of these negotiations will, as a general rule, not be admissible… It has been said that if one is seeking to change the basis of the correspondence from without prejudice to open it is incumbent on that person to make the change clear, although that may be more a pointer than a rule. There is no reason why every letter for which without prejudice is claimed should contain an offer or consideration of an offer, so long as the without prejudice correspondence is part of a body of negotiation correspondence.” 2. Similarly, Wharton’s Law Lexicon[5], as relied upon by the Apex Court in the case of MD, NTPC Ltd v. Reshmi Constructions, Builders & Contractors[6], states as below: “The words import an understanding that if the negotiation fails, nothing that has passed shall be taken advantage of thereafter; so, if a defendant offers, ‘without prejudice’, to pay half the claim, the plaintiff must not only rely on the offer as an admission of his having a right to some payment. The rule is that nothing written or said 'without prejudice' can be considered at the trial without the consent of both parties - not even by a Judge in determining whether or not there is good cause for depriving a successful litigant of costs … The word is also frequently used without the foregoing implications in statutes and inter parties to exclude or save transactions, acts and rights from the consequences of a stated proposition and so as to mean 'not affecting', 'saving' or 'excepting'.” 3. P Ramanatha Aiyar’s, Advanced Law Lexicon,[7] replying upon the judgement of Tata Oil Mills Co. Ltd. v. Lokanatha Chemical Works[8] has elaborated upon the term “without prejudice” and has stated: ““ Without prejudice” means that the proposed terms are not to be used against the writer, if there is not settlement. If the proposed terms are acceptable, the parties will be bound by the terms and if the terms become infructuous, they cannot be used against the writer.” 4. The term "without prejudice" has been defined in Black's Law Dictionary[9] as follows: “Where an offer or admission is made 'without prejudice', or a motion is defined or a bill in equity dismissed 'without prejudice', it is meant as a declaration that no rights or privileges of the party concerned are to be considered as thereby waived or lost, except in so far as may be expressly conceded or decided. See, also Dismissal Without Prejudice.” 5. After having perused the aforesaid judgement of the Hon’ble Supreme Court, I am of the opinion that in a nutshell, the Apex Court has held that the implication of the term 'without prejudice' means (1) that the cause or the matter has not been decided on merits, (2) that “fresh proceedings according to law were not barred." 6. Subsequently, I am also of the opinion that two judgements of the Hon’ble Bombay High Court also require to be taken into consideration with relation to the discussion about “without prejudice” i.e. Sanjay Kumar Agarwal v. Central Bank of India[10] and Oberai Construction v. Worli Shivshahi Co-op Housing Society[11]. In the case of Sanjay Kumar Agarwal v. Central Bank of India (Supra) the Hon’ble Bombay High Court has opined as below: “15. Moreover, the correspondence written by the plaintiff to the defendant are all on without prejudice basis. Therefore, in my view, we cannot even place reliance on such documents to conclude that there was a concluded understanding. The meaning of without prejudice has been stated in Oberoi Constructions Pvt. Ltd. v. Worli Shivshahi Co-op. Hsg. Society Ltd. Paragraph-9 reads as under:- “The next legal contention advanced is as to what will be the effect of the words “without prejudice”. On behalf of the appellants, the learned Counsel has drawn our attention to the judgment of the Supreme Court in the case of Chairman and MD, NTPC Ltd. v. Reshmi Constructions, Builders and Contractors reported in AIR 2004 SC 1330. The Apex Court noted that even correspondence marked as “without prejudice” may have to be interpreted differently in different situations. The interpretation would be based amongst others according to usage in the profession and that no issue of public policy is involved. The Supreme Court quoted with approval the judgment in Rush & Tompkins Ltd. v. Greater London Council (1988) 1 All ER 549 at pp. 551g-552b. It was held that the rule which gives the protection of privilege to “without prejudice” correspondence depends partly on public policy, namely the need to facilitate compromise and partly an implied agreement. In the same judgment the exposition of definition of “without prejudice” contained in the judgment of Lindley, LJ in Walker v. Wilsher (1889) 23 QBD 335 was set out, which reads as under: ‘What is the meaning of the words “without prejudice”? I think they mean without prejudice to the position of the writer of the letter if the terms he proposes are not accepted. If the terms proposed in the letter are accepted a complete contract is established and the letter, although written without prejudice, operates to alter the old stage of things and to establish a new one. The court then noted that the term had come up for consideration in Superintendent (Tech.I), Central Excise v. Pratap Rai reported in 1978 CriLJ 1266, wherein it was observed “without prejudice” would indicate that the order was not final and irrevocable. The definition in Black's law Dictionary was then quoted which reads as under: Where an offer or admission is made “without prejudice” or a motion is denied or a bill in equity dismissed “without prejudice”, it is meant as a declaration that no rights or privileges of the party concerned are to be considered as thereby waived or lost, except insofar as may be expressly conceded or decided. See also ‘Dismissal without prejudice’. It would thus, be clear that the expression “without prejudice” is to be understood on the fact situation. When parties agree to a set of things then merely marking on the document “without prejudice” would be of no consequence. However, if the material indicates that the negotiations are still in progress and there is no finality on what was contained in the document marked “without prejudice”, then the document marked “without prejudice” cannot be considered without the consent of both the parties.” 7. Likewise, in the case of Oberai Construction v. Worli Shivshahi Co-op Housing Society (Supra) the Hon’ble Bombay High Court has observed that: “15. The next legal contention was advanced is as to what will be the effect of the words “without prejudice”. On behalf of the appellants the learned Counsel has drawn our attention to the judgment of the Supreme Court in the case of (Chairman and MD, NTPC Ltd. v. Reshmi Constructions, Builders and Contractors)3, reported in 2004 DGLS 339 (soft) : (2004) 2 S.C.C. 663 : A.I.R. 2004 S.C. 1330. The Apex Court noted that even correspondence marked as “without prejudice” may have to be interpreted differently in different situations. The interpretation would be based amongst others according to usage in the profession and that no issue of public policy is involved. The Supreme Court quoted with approval the judgment in (Rush & Tompkins Ltd. v. Greater London Council)4, All. E.R. PP. 551g-552b. It was held that “the rule which gives the protection of privilege to “without prejudice” correspondence depends partly on public policy, namely the need to facilitate compromise and partly an implied agreement. In the same judgment the exposition of definition of “without prejudice” contained in the judgment of Lindley, L.J., in (Walker v. Wilsher), 12 Q.B.D. 337 was set out, which reads as under: “What is the meaning of the words “without prejudice”? I think they mean without prejudice to the position of the writer of the letter if the terms he proposes are not accepted. If the terms proposed in letter are accepted a complete contract is established and the letter although written without prejudice, operates to alter the old stage of things and to establish a new one.” 16. The Court then noted that the term had come up for consideration in (Superintendent (Tech. 1), Central Excise v. Pratap Rai), reported in 1978 DGLS 136 (soft) : (1978) 3 S.C.C. 113 : A.I.R. 1978 S.C. 1244, wherein it was observed “without prejudice” would indicate that the order was not final and irrevocable. The definition in Black's Law Dictionary was then quoted which reads as under: “Where an offer or admissions made “without prejudice” or a motion is denied or a bill is equity dismissed “without prejudice”. It is meant as a declaration that no rights or privileges of the party concerned are to be considered as thereby waived or lost, except in so far as may be expressly conceded or decided. See, also, Dismissal without prejudice.” 8. Pursuant to the above mentioned judicial dicta and opinion postulated in various treatises, it appears that the expression “without prejudice” is to be understood as per the factual situation in hand. When Parties agree to a set of things then merely marking on the document, emails or any correspondence “without prejudice” would be of no consequence. However, if the material indicates that the negotiations are still in progress and there is no finality on what was contained in the document marked ‘without prejudice’ then the document marked ‘without prejudice’ cannot be considered without consent of both the Parties. [1] The author is currently working as an Arbitration Associate with Justice Deepak Verma, Former Judge of Supreme Court of India and can be reached at gautam.mohanty1414@gmail.com. [2] MD, NTPC Ltd v. Reshmi Constructions, Builders & Contractors, (2004) 2 SCC 663. [3] Peacock Plywood (P) Ltd. v. Oriental Insurance Co. Ltd., (2006) 12 SCC 673. [4] Phipson on Evidence 19th ed Mainwork by Hodge M. Malek, Jonathan Auburn, Roderick Bagshaw. [5] Wharton's Law Lexicon, J J S (John Jane Smith) 181 Wharton, 2010. [6] MD, NTPC Ltd v. Reshmi Constructions, Builders & Contractors, (2004) 2 SCC 663. [7] Shakil Ahmad Khan, P Ramanatha Aiyar’s, Advanced Law Lexicon, 5th Edition. Pg.5520. [8] Tata Oil Mills Co. Ltd. v. Lokanatha Chemical Works, AIR 1987 Cal 13. [9] Bryan A Garner, Black’s Law Dictionary, 10th Edition. [10] Sanjay Kumar Agarwal v. Central Bank of India, 2016 SCC OnLine Bom 10368. [11] Oberai Construction v. Worli Shivshahi Co-op Housing Society, 2008 SCC OnLine Bom 102.

Gaurav Rai[1] In India, retired judges of the Supreme Court are barred by the Constitution to plead or act in any court or authority within the territory in India.[2] Retired High Court judges are however allowed to practice in the Supreme Court and High Courts other than in those where they presided as judges but they need to get their licence renewed. In my limited experience working as an Assistant to a retired Supreme Court Judge, who regularly acts as an arbitrator, I have witnessed that retired High Court Judges acting as arbitrators do not take up the role of advocacy in the Supreme Court of India or other High Courts. However, one practice which has become quite prominent in Indian scenario is the seeking of an opinion from such retired Supreme Court and High Court judges on legal issues. These retired judges are approached as consultants for legal dilemmas which the parties or the lawyers themselves may not be able to figure out. The parties and lawyers seeking such legal opinion rely on the vast experience of such judges to provide a way of solving such issues. A situation may therefore arise where a party who has sought such an opinion from a retired Supreme Court or High Court judge may also nominate such Retired Supreme Court or High Court Judge as an arbitrator in another unrelated matter. This may attract item 1, 8 and 14 of the Seventh Schedule of the Arbitration and Conciliation Act, 1996 as amended in 2015. The same is extracted hereunder: “1. The arbitrator is an employee, consultant, advisor or has any other past or present business relationship with a party. 8. The arbitrator regularly advises the appointing party or an affiliate of the appointing party even though neither the arbitrator nor his or her firm derives a significant financial income therefrom. 14. The arbitrator regularly advises the appointing party or an affiliate of the appointing party, and the arbitrator or his or her firm derives a significant financial income therefrom.” In such cases the opposite party may be able to raise the issue of ineligibility as the arbitrator so appointed by the party has provided an opinion to such party in the past and the person so appointed is ineligible to continue as an arbitrator as they may not be independent and impartial. Indian Courts have dealt with only a few issues regarding a party appointing its own employee as an arbitrator in a skewed arbitration agreement and notably, the observations of the Indian Courts are limited to the interpretation of upholding such clauses rather than appointment of a balanced and impartial arbitrator.[3] There were hence no clear guidelines for applicability of the justifiable doubts standard which existed in the Indian Arbitration and Conciliation Act,1996 which is premised on the Model Law. Hence the 246th Report had proposed incorporation of schedules which borrowed from the Red and Orange list of the IBA guidelines to the Arbitration Act to act as guide for the applicability of the justifiable doubts’ standard.[4] The only literature on the IBA lists are the guidelines postulated in the 2004 and 2014 notes of the IBA and the Law Commissions 246th Report on Arbitration. The Supreme Court of India, however got the opportunity to delve into the applicability of these Schedule 5 and 7 to the Arbitration and Conciliation Act, 1996 in two cases namely Voelstapine v. DMRC[5] and the case of HMD Corporation v. GAIL India.[6] This working paper series might deal with Voelstapine Case in another context when dealing with pool of arbitrators and appointing authority. I will limit my focus to one paragraph from the HRD Corporation case which will deal with the issue I have outlined above regarding legal opinions being provided by retired Supreme Court Judges and they being nominated by such opinion seekers in an arbitration in an unrelated matter. Other aspects of HRD Corporation might be relevant in further parts of this working series. Para 22 is relevant for our discussion and is extracted hereunder. I have inserted the items of the 7th Schedule wherever discussed in this extract accordingly. "22. Shri Divan has pressed before us that since on a legal issue between GAIL and another public sector undertaking an opinion had been given by Justice Lahoti to GAIL in the year 2014, which had no concern with respect to the present matter, he would stand disqualified under Item 1[7] of the Seventh Schedule. Items 8[8] and 15[9] were also faintly argued as interdicting Justice Lahoti’s appointment. Item 8 would have no application as it is nobody’s case that Justice Lahoti “regularly” advises the respondent and Item 15 cannot apply as no legal opinion qua the dispute at hand was ever given. On reading Item 1 of the Seventh Schedule, it is clear that the item deals with “business relationships”. The words “any other” show that the first part of Item 1 also confines “advisor” to a “business relationship”. The arbitrator must, therefore, be an “advisor” insofar as it concerns the business of a party. Howsoever widely construed, it is very difficult to state that a professional relationship is equal to a business relationship, as, in its widest sense, it would include commercial relationships of all kinds, but would not include legal advice given. This becomes clear if it is read along with Items 2[10], 8, 14 and 15, the last item specifically dealing with “legal advice”. Under Items 2, 8 and 14, advice given need not be advice relating to business but can be advice of any kind. The importance of contrasting Item 1 with Items 2, 8 and 14 is that the arbitrator should be a regular advisor under items 2, 8 and 14 to one of the parties or the appointing party or an affiliate thereof, as the case may be. Though the word “regularly” is missing from Items 1 and 2, it is clear that the arbitrator, if he is an “advisor”, in the sense of being a person who has a business relationship in Item 1, or is a person who “currently” advises a party or his affiliates in Item 2, connotes some degree of regularity in both items. The advice given under any of these items cannot possibly be one opinion given by a retired Judge on a professional basis at arm’s length. Something more is required, which is the element of being connected in an advisory capacity with a party. Since Justice Lahoti has only given a professional opinion to GAIL, which has no concern with the present dispute, he is clearly not disqualified under Item 1." Hence this passage from the judgment makes it abundantly clear that Retired Supreme Court Judges or even Retired High Court Judges who provide legal opinions to parties as discussed in the paper, occasionally and on an arm’s length basis, are not ineligible under Item 1 or other items as discussed in the HRD Corporation case, to be appointed as an arbitrator, in an unrelated matter, by the same party, which sought such a legal opinion from them. [1] Gaurav Rai - The author is Advocate registered in State Bar Council of Delhi and is currently working as a legal assistant to Justice A.K. Patnaik, Former Judge Supreme Court of India and assists Justice Patnaik in his work as an arbitrator. He can be reached at raigaurav.legal@gmail.com [2] Article 124(7), Constitution of India 1950. [3] ‘Law Commission of India Report No. 246’ para 56 . [4] ‘Law Commission of India Report No. 246’ (n 2) para 59. [5] Voestalpine Schienen GmbH v Delhi Metro Rail Corporation Ltd (2017) 4 SCC 665. [6] HRD Corporation v GAIL (India) Ltd (2017) 12 SCC 471 (Supreme Court of India). [7] 1. The arbitrator is an employee, consultant, advisor or has any other past or present business relationship with a party. [8] 8. The arbitrator regularly advises the appointing party or an affiliate of the appointing party even though neither the arbitrator nor his or her firm derives a significant financial income therefrom. [9] 15. The arbitrator has given legal advice or provided an expert opinion on the dispute to a party or an affiliate of one of the parties. [10] The arbitrator currently represents or advises one of the parties or an affiliate of one of the parties.