Two-tier arbitration clauses or appellate arbitration mechanisms were upheld by a three-judge bench of the Supreme Court in Centrotrade Minerals and Metal Inc v Hindustan Copper Limited. This article discusses the evolution of the jurisprudence surrounding two-tier arbitration in India and analyses both the utility of such a mechanism for the parties and its usefulness in certain situations.
The Supreme Court recently held that the only prerequisite for an arbitration agreement is that it be in writing. Through this decision, the court has adopted a pro-arbitration approach and, as such, may contribute positively to the existing jurisprudence on the Indian arbitration regime. By relying on the unsigned bill of lading, the court focused on the parties' conduct and intent, both of which indicated that there was an arbitration agreement between them.
The Bombay High Court recently issued a landmark ruling regarding third parties' right to challenge interim measures granted by an arbitral tribunal under the Arbitration and Conciliation Act. The ruling is a welcome reprieve for non-signatories to arbitration proceedings in situations where disputes between arbitrating parties have a bearing on their rights and interests, as well as a step towards balancing innocent parties' interests.
Before its amendment in 2015, the Arbitration and Conciliation Act 1996 neither promoted institutional arbitration nor discouraged parties from considering it. The 2015 amendment was an attempt to reduce judiciary intervention in arbitration proceedings and promote a culture of institutional arbitration. One of the proposed changes was the amendment to Section 11 of the 1996 act, which provides for the appointment of arbitrators by the competent court.
Following the enforcement of the Arbitration and Conciliation (Amendment) Act 2015, the Arbitration and Conciliation (Amendment) Bill 2018 proposes to further amend the Arbitration and Conciliation Act 1996. The bill is another step by policymakers towards making India "a robust centre for international and domestic arbitration" and attempts to make it an investor-friendly jurisdiction and a preferred seat of arbitration for dispute resolution.
The Bombay High Court recently held that in accordance with the 2015 amendment of Section 11 of the Arbitration and Conciliation Act 1996, the courts' responsibility to refer a dispute to arbitration is narrow and limited to examining the existence of an arbitration agreement. Further, the high court held that an unstamped document does not bar a dispute from arbitration.
The Bombay High Court recently ruled that an application under Section 9 of the Arbitration and Conciliation Act 1996 which had been filed following an award passed by a foreign-seated arbitral tribunal had to be brought before a 'court' as defined in the explanation to Section 47 rather than Section 2(1)(e)(ii) of the act. The judgment has clarified, and to a large extent simplified, the procedure for a foreign award holder.
Section 34 of the Arbitration and Conciliation Act 1996 sets out the conditions for setting aside an arbitral award. In this context, the term 'arbitral award' has always been understood as an award rendered by the majority members of an arbitral tribunal. However, recent decisions of the Bombay High Court and the Delhi High Court, while setting aside the award of the arbitral tribunal, have upheld the so-called 'minority award', in variance with the act and established precedent.
Multi-tiered dispute resolution clauses prescribing pre-arbitral steps are common in commercial contracts in order to allow parties to resolve their disputes in a non-adversarial set up, preserve commercial relationships and save costs. Almost all contracts require performance of such pre-arbitral steps as a condition precedent to arbitration, but are they specifically enforceable? In other words, are pre-arbitral steps mandatory or directory in nature?
The Supreme Court recently set out the legal position regarding challenges to a person's possible appointment as an arbitrator. It held that since ineligibility goes to the root of the appointment, the Arbitration and Conciliation Act 1996 clarifies that if the arbitrator falls under any of the categories specified in the Seventh Schedule, he or she becomes ineligible to act as an arbitrator. However, if the circumstances fall under the Fifth Schedule, the person would not be de jure ineligible.
By way of the Arbitration and Conciliation (Amendment) Act 2015, the government sought to reform the law in relation to international commercial arbitrations conducted in India and foreign-seated international commercial arbitrations. Following recent judgments from the Delhi High Court and the Bombay High Court, it is timely to analyse the amendment act with reference to the United Nations Commission on International Trade Law Model Law on international commercial arbitration.
The Supreme Court recently reaffirmed that Indian arbitration law does not specifically prohibit two-tier arbitration clauses which provide for appellate review of an arbitral award by a subsequent arbitration. This judgment is an important win for party autonomy in India and sends a pro-arbitration message.
The Delhi High Court recently clarified the scope and interpretation of Section 26 of the Arbitration and Conciliation (Amendment) Act 2015. The Delhi High Court held that if arbitration was commenced before October 23 2015, the amendment act does not apply to the court proceedings for setting aside an arbitral award rendered in relation to such proceedings.
The independence and impartiality of arbitral tribunals is significant in order to encourage faith and trust in litigants and ensure that disputes are independently, impartially and fairly adjudicated. Against this backdrop, the enforceability of contracts between private parties and government entities must be considered, as such entities often appoint arbitrators who act with such inflexibility as essentially to render arbitration agreements redundant and the required consent of the parties meaningless.
India's arbitration law was transformed in several key respects when the Arbitration and Conciliation (Amendment) Act 2015 came into force. However, despite the visionary changes introduced by the act, it is vague in both applicability and scope, which has led various courts to reach different conclusions about its applicability. Until these issues are resolved, the act cannot be hailed as a game changer for the Indian arbitral regime.
The Delhi High Court recently addressed a unique jurisdictional issue regarding the applicability of an incorrect provision of the Commercial Courts Ordinance which was retrospectively corrected by the Commercial Courts Act. However, the retrospective application of the Commercial Courts Act has raised concerns which must be clarified to ensure a smooth transition from the Commercial Courts Ordinance to the Commercial Courts Act.
In order to rectify the issues associated with arbitration in India, Parliament recently passed the Arbitration and Conciliation (Amendment) Act. The amendment seeks to make arbitration in India a quicker and more streamlined process, reduce interference by the courts, make India a more attractive destination for foreign investors and improve the ease of doing business.
India recently released its new Model Bilateral Investment Treaty (BIT). Compared to the previous Model BIT, the new BIT incorporates substantial and critical changes and considers international precedents and trends in investment treaty law. The new Model BIT attempts to safeguard the host state's interests and is intended to form the basis of India's negotiations with other countries in relation to the redrafting of existing BITs.
The Arbitration and Conciliation (Amendment) Ordinance, 2015 – which provides for less cumbersome, more cost-effective, efficient and expeditious dispute resolution – has been welcomed by litigants. However, more clarity is needed with regard to the ambiguities in the new Section 11 – in particular, in relation to the scope and applicability of the Fourth Schedule and the model fee structure payable to arbitrators.
The courts have issued a series of judgments which have strengthened the pro-arbitration stance of the Indian judiciary with regard to international commercial arbitration. However, the jurisprudence is more nuanced with respect to arbitrating disputes between two Indian parties and uncertainty still persists with regard to whether two Indian parties can choose a foreign seat and a foreign law to govern their arbitration agreements.