In its recent decision in Union of India v Hardy Exploration and Production (available here), the Supreme Court of India found that a contractual clause stipulating Kuala Lumpur as the ‘venue’ of arbitration did not amount to a choice of juridical seat. While the Indian courts’ jurisdiction to hear set-aside applications will be excluded if the seat of the arbitration is outside India, the Supreme Court found that in this case there was no chosen seat (and the tribunal had not determined a seat), notwithstanding the choice of Kuala Lumpur as the venue for the arbitral proceedings, and the fact that the award was signed in Kuala Lumpur. Since this was a case where the arbitration agreement pre-dated 6 September 2012 (the date of the key Supreme Court ruling in BALCO), it appears that the Court did not find it necessary to positively determine that the seat was in India; the fact that an overseas seat had not been established appears to have been sufficient for the Indian courts to have jurisdiction to hear the application.
India entered into its first bilateral investment treaty (BIT), with the United Kingdom, in 1994, as part of a strategy to attract inbound foreign direct investment (FDI). Having begun to open its economy in the 1990s, India today is a major investment destination. The Modi government has been keen to attract further investment, including with its “Make in India” campaign.
However, in recent years, a variety of events has led to India being the recipient of a large number of claims by investors under BITs. By 2016, India was one of the most frequently-named respondent states in BIT proceedings. Following its first loss in a BIT arbitration in 2011 (the White Industries case, discussed here. Note: India has recently won its first BIT case, discussed here), the stance of the Indian government towards BIT protections for inbound investors appeared to harden, leading it to send notices in 2016 to terminate BITs with 58 countries, including 22 EU countries (discussed here). This followed its publication of a new 2015 Model BIT (discussed here). For the remaining BITs not cancelled in 2016/2017 (seemingly because they were within their initial terms), India has circulated a proposed joint interpretative statement to the counterparties to these BITs seeking to align the ongoing treaties with its 2015 Model BIT.
There are no known instances of states agreeing to a new treaty based on India’s 2015 Model BIT, although it was reported last year that the Indian government had approved a joint interpretative note to apply to India’s BIT with Bangladesh
In the meantime, the Indian government, through the Centre for Trade and Investment Law (CTIL), a think-tank established in 2016 by the Ministry of Commerce and Industry, in collaboration with Dr. Rishab Gupta, Partner, of Shardul Amarchand Mangaldas & Co., has instituted a survey on experiences and attitudes towards BIT protections, and their importance to FDI flows into and out of India. This outbound element is an important aspect of the analysis as Indian businesses are increasingly involved in FDI outside India, and may wish to take advantage of BIT protections over their investments.
A link to the survey can be found below, which we understand will remain active until the end of October 2018. The survey contains 10-12 questions which vary depending on the initial answers regarding the location and type of entity responding.
The outcome of the questionnaire together with the rest of the study results are scheduled to be publicly released by the end of 2018. All stakeholders with experience of or insight into the BIT regime applicable to India are encouraged to participate.
For further information, please contact Nicholas Peacock, Head of the India Disputes Practice, or your usual Herbert Smith Freehills contact.
Herbert Smith Freehills has issued the latest edition of its Indian international arbitration e-bulletin.
In this issue we consider various court decisions, which cover issues such as the applicability of the Arbitration Amendment Act 2015, binding non-signatories to an award, enforcement of an award before the National Company Law Tribunal, and the continued pro-arbitration approach of the Indian courts. In other news, we consider the continued rise of institutional arbitration in India, a detailed analysis of the proposed amendments to the Arbitration Act, as well as India-related bilateral investment treaty news (and other developments).
An UNCITRAL arbitral tribunal has reportedly dismissed a US$36 million claim by a French investor, Louis Dreyfus Armateurs SAS (“LDA“), against India under the 1997 France-India bilateral investment treaty (“BIT“). The award is not public at this time, but press reports state that LDA has also been ordered to pay approximately US$7 million in respect of India’s substantial legal expenses.
As previously reported here, a draft Bill to amend the Arbitration and Conciliation Act 1996 (the “Act“) was approved by the Indian Cabinet on 7 March 2018 (the “Bill“). The Bill was listed as a part of the agenda for the monsoon session of the Indian Parliament and was passed by the Lower House on 10 August 2018, without any amendments. The text of the Bill can be found here.
The Law Minister has described the Bill as “a momentous and important legislation” aimed at making India “a hub of domestic and international arbitration”. The key features of the Bill are:
In its decision of 4 July 2018, the Delhi High Court (“Court“) has agreed to enforce a China International Economic and Trade Arbitration Commission (CIETAC) award against an Indian company, despite the award debtor’s arguments that the dispute should have been referred to and administrated by the now independent Shanghai International Arbitration Centre (SHIAC), which until mid-2012 was the Shanghai Sub-Commission of CIETAC (“Shanghai Sub-Commission“). The Court’s decision is interesting not only in discussing the 2012 split of CIETAC, but also because it may provide some guidance on how Indian courts may, in future, deal with structural changes to other arbitral institutions, such as the very recent termination of the joint venture between LCIA and Mauritius (the LCIA-MIAC Arbitration Centre), or the Shenzhen Court of International Arbitration (SCIETAC/SCIA) and the Shenzhen Arbitration Commission (SAC) merger at the beginning of 2018. Last but not least, this decision reinforces a pro-enforcement approach of Indian courts in relation to foreign arbitral awards.
In a decision dated 7 May 2018, the Delhi High Court dismissed the Government of India’s application to declare Vodafone’s second BIT arbitration proceedings in relation to the retrospective tax liability imposed on Vodafone’s 2007 acquisition of Hutchison Whampoa’s Indian operations an abuse of process, and in so doing declined to grant a permanent injunction restraining Vodafone from continuing those arbitration proceedings. The Court granted liberty to India to bring the issue before the Tribunal in those second proceedings (under the India-UK Bilateral Investment Protection Agreement) for that Tribunal to decide on the alleged abuse of process on its own merits.
In five recent judgments, the Indian courts have offered important guidance on the enforcement of both domestic and international awards in India.
This post first discusses three judgments of the Supreme Court of India (“Supreme Court“), clarifying the interpretation of the Arbitration and Conciliation Act, 1996 (“Arbitration Act“), in light of recent amendments intended to simplify the enforcement process.
Next, the post covers two judgments of the Delhi High Court and Rajasthan High Court on challenges to enforcement of awards, which offer useful guidance on the courts’ approach to issues of public policy.
In two recent judgments, the Delhi High Court (the “Court“) dismissed challenges to arbitral awards and emphasised its reluctance to interfere with decisions of arbitral tribunals, except in limited circumstances. In NHAI v M/S. Bsc-Rbm-Pati Joint Venture, the Court strongly criticised unnecessary challenges to awards, especially by public sector undertakings, noting that it wasted valuable judicial time. Carrying on with the sentiment to not interfere, in Delhi Metro Rail Corporation Limited v Delhi Airport Metro Express Private Limited, the Court stated that it would not interfere with an arbitral decision if the view taken by a tribunal was plausible, even where an alternative view was possible.
A brief summary of both cases can be found below.
According to this press release, on 7 March 2018, the Indian Cabinet approved a draft Bill to amend the Arbitration and Conciliation Act, 1996 (“Arbitration Act“). The press release indicates that the Bill will focus on building institutional support for arbitration by establishing a new body, the “Arbitration Council of India” (“Council“), to grade arbitral institutions, develop guidelines for the accreditation of arbitrators and promote the use of arbitration and ADR. It also suggests that the Bill will impose a duty of confidentiality on all aspects of an arbitration, except that the Council will maintain an electronic repository of all awards (with perhaps the implication that awards will also be published in some form). Finally, the press release notes that aspects of the 2015 Amendments will be clarified, including the controversial twelve month time-limit for tribunals to render awards and the somewhat ambiguous application of the 2015 Amendments to existing proceedings.
The proposed amendments derive from recommendations made by the Srikrishna Committee that was set up to review the Arbitration Act. We reviewed the report here.