INDIAN SUPREME COURT RULES THAT PRE-DEPOSIT REQUIREMENT IN AN ARBITRATION AGREEMENT IS UNCONSTITUTIONAL

In a decision of 11 March 2019, the Supreme Court of India (the “Court“) struck down part of an arbitration clause which required a claimant to deposit 10 per cent of the amount claimed with the arbitrator before the arbitration went ahead. The contract was between a government entity and a private party and the Court relied on principles of Indian constitutional and administrative law to hold that the clause was arbitrary and therefore liable to be struck down. The Court also emphasised the need for arbitration to be speedy, effective and inexpensive so that it can “de-clog” the overburdened court system in India. This is an important decision for parties with arbitration agreements with Indian state or state-owned entities, and another encouraging indicator of the pro-arbitration mindset shown by the highest echelons of the Indian judiciary.

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Indian Courts settle key issues relating to enforcement of awards

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.

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Delhi High Court reaffirms pro-arbitration approach in two recent judgments

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.

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India announces further amendments to the Arbitration Act to strengthen institutions and clarify previous reforms

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.

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Indian Supreme Court upholds English High Court’s decision on parties’ choice of London seat

The Indian Supreme Court’s judgment in Roger Shashoua v Mukesh Sharma sheds further light on the court’s approach to interpreting arbitration agreements, particularly regarding the parties’ implied choice of seat. The court found that the designation of London as the “venue” of the arbitration in the absence of any express designation of a seat would suggest that the parties agreed that London would be the seat of the arbitration (in the absence of anything to the contrary). It is also notable that the court expressly followed the English courts’ approach to the same question. Shashoua is particularly relevant to contracts with Indian parties providing for arbitration that were concluded prior to 6 September 2012, the date of the court’s judgment in Bharat Aluminium Co. v Kaiser Aluminium Technical Services Inc. (“BALCO“) (discussed here). As we consider in further detail below, this can have significant implications on the degree of Indian courts’ powers to interfere in arbitration proceedings, grant interim relief, appoint arbitrators or set aside an award, in connection with pre-BALCO agreements. Continue reading

Delhi High Court allows enforcement of arbitral awards despite foreign exchange regulations

Two recent judgments from the Delhi High Court affirm the court's pro-enforcement stance on foreign arbitral awards and offer welcome guidance on the exit rights of foreign investors in Indian companies, an important subject for many companies looking to invest in India.  In the dispute between Tata Sons and Tata Teleservices ("Tata") and NTT Docomo Inc ("Docomo"), the court ruled that the Reserve Bank of India did not have standing to prevent enforcement of a foreign award between two private parties on grounds of Indian public policy.  In a similar case (Cruz City 1 Mauritius Holdings v Unitech Limited), the court dismissed a challenge to enforcement by an award debtor arguing that a foreign award was contrary to Indian foreign exchange regulations.

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Mixed messages to investors as India quietly terminates bilateral investment treaties with 58 countries

The Government of India says it has sent notices to terminate bilateral investment treaties (BITs) with 58 countries, including 22 EU countries.  It has been reported that many of these BITs will cease to apply to new investments from as early as April 2017. The BIT between India and The Netherlands (which had been a common route for investment into India) has already been terminated from December 2016.  Termination of the BITs would also remove protection for new investments by Indian investors into the counterparty countries. For the remaining 25 of its BITs that have not completed their initial term, and so are not ripe for termination, 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.  While investments made before the termination of the 58 treaties may be protected for some years under the ‘sunset’ clauses in those BITs, India’s actions send mixed messages at a time when the Indian government is making renewed efforts to attract inbound investment with its ‘Make in India’ campaign, and when outbound investment by Indian companies continues to increase into both developed and developing economies.

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