SEAL Quarterly Round-Ups: Q2 2020

By: Archi Jain, Parimal Kashyap, Ramachandaran Balachandran & Utkarsh Khandelwal


INTERNATIONAL DEVELOPMENTS

Headliners

1. African Arbitration Academy Develops a Protocol for Virtual Arbitration Hearings 

The African Arbitration Academy has developed a ground-breaking Protocol on Virtual Hearings in Africa for conducting virtual hearings. It deals with the arbitration related concerns around COVID-19, as well as aims at reducing the costs and enhancing the efficiency of the arbitral proceedings.  

2. EU Member States Sign a New Agreement for Termination of Intra-EU BITs

Twenty-three member states of the European Union have concluded the Agreement for the Termination of Bilateral Investment Treaties. What seems to be an effect of the Achmea judgment, the agreement stipulates that the arbitration clauses included in the intra-EU BITs are incompatible with the EU law. It also extinguishes sunset clauses of all intra-EU BITs.

3. UNCITRAL and ICSID Publish a Draft of the Code of Conduct for Adjudicators in Investor-State Dispute Settlement

ICSID and UNCITRAL have released a long-awaited draft code of conduct for adjudicators in investment disputes – including proposals on double hatting, limitations on the number of cases that can be heard simultaneously and sanctions for unethical behavior.

4. The US Supreme Court Allows Adding Non-Signatories to the Arbitration through ‘Equitable Estoppel’ (GE Energy Power Conversion France SAS, Corp. v. Outokumpu Stainless USA, LLC)

In a recent decision, the SCOTUS has ruled that the application of the domestic principle of equitable estoppel to allow enforcement of arbitration agreement by a non-signatory does not violate Article II of the New York Convention. The SCOTUS held that the New York Convention was drafted against the backdrop of domestic law and it would be unnatural to displace domestic doctrines while interpreting its provisions. It further added that Article II of the New York Convention contemplates using domestic doctrines to fill gaps in the Convention and hence such application is valid. This is a sigh of relief for the foreign investors looking at avoiding hefty litigation costs in the United States. To read more on the decision, click here. 

5. Due Process Paranoia: Singapore Court of Appeal Attempts at Striking Balance (China Machine New Energy Corporation v. Jaguar Energy Guatemala LLC)

Due process and adherence to the principles of natural justice in arbitration has led to long-drawn legal battles and discourses around its abuse to challenge the award. In that regard, the Singapore Court of Appeal has held that a balance needs to be struck between genuine due process concerns and a prompt and efficient resolution of the dispute at hand. The Court further added that the parties must not be allowed to hedge against an adverse result if a fair intimation regarding the alleged “fatal failure” of the process of arbitration was not given by the party to the tribunal. To read more on the decision, visit here.

6. English Court of Appeal Rules on Governing Law of an Arbitration Agreement (Enka v. Chubb)

The English Court of Appeal, deviating from the “three stage analysis” to determine the governing law, as prescribed by the Sulamerica case, held that irrespective of the main contract being governed by Russian law, nowhere in the contract was suggested that the parties’ general choice of law will be the governing law of the arbitration agreement.  The court gave preference to the choice of seat of arbitration as opposed to law governing the contract in determining the law governing the arbitration agreement. To read an in-depth analysis of the decision, visit here

7. Nissan Settles Dispute with Government of Tamil Nadu over Unpaid Dues (Nissan Motor Co., Ltd. v. Republic of India)

Nissan has settled an investment treaty claim against India after a settlement offer of US$238 million was made to end the dispute which arose after Nissan alleged non-payment of certain incentives under a 2008 agreement to set up a car plant in the state. The initial claims of Nissan after initiation of the arbitration in 2016 amounted to US$280 million in unpaid dues and US$387 million in damages and other costs. 

8. Singapore Court of Appeal Rules that Inconsistent Arguments in Related Proceedings is to be Considered as Abuse of Process (BWG v. BWF) 

In a recent decision, the Singapore Court of Appeal has held that in absence of  a valid justification for the inconsistency in same or related arbitration proceedings, the same shall be considered an abuse of process leading to the respective party losing its right to claim relief. Hence, the parties involved in multiple related arbitrations are expected to harmoniously construct their legal position(s) in both formal legal proceedings and pre-action correspondence for the dispute. The judgment holds much importance in wake of the current pandemic and the disputes arising due to it. For a detailed analysis on the issue, visit here.

OTHER NOTABLE DEVELOPMENTS

  1. The Kingdom of Tonga became the 164th state party to the New York Convention. The Convention will prospectively come into force for Tonga on 10 September 2020.
  2. The LCIA Released its Annual Casework Report of major developments in the field of Arbitration.
  3. UK releases Draft Working Text of the Proposed Free Trade Agreement with the European Union.
  4. The Supreme Court of Canada in Uber Technologies v. Heller provided for a two-pronged test to ascertain the validity of a standard contract signed between UberEats and its drivers forcing them into expensive arbitration proceedings for a dispute. For a detailed analysis visit here.

JUDICIAL DEVELOPMENTS IN INDIA

Supreme Court

1. The Court Refuses to Enforce an Award the Ground that it Violated Export Policy of India (NAFED v. Alimenta SA)

The Supreme Court, reiterating the public policy ground laid in Renusagar v General Electric, held that the award was unenforceable as it sought to fulfil a contractual obligation which was impossible to be performed on account of the then prevailing government restriction. Consequently, The Court opined that the award contravened India’s export policy.

This judgment stirred criticism, particularly, in light of the pro-award dictum delivered by the court through the Vijay Karia Judgement.  In fact, many view this as a step backwards and consider it widening the scope of “public policy” under S. 48. We published a critical analysis of the judgement here.

2. Domestic Award Set Aside for Perverse Interpretation of Force Majeure Clause by the Tribunal (South East Asia Marine Engineering Construtions Ltd. v. Oil India Ltd.)

The Court while taking cognizance of its narrow scope of judicial review under S. 34, held that the award was perverse as the interpretation supplied by the arbitrator was construed to be an impossible one. The judgment also made considerable effort to reiterate the dictum of Dyna Jets v Crompton greaves, by holding that the arbitrator’s opinion shall prevail when two possible interpretations to the contract are available.

The judgment, though clearly defines the scope of S.34, is yet criticised for delving into the merits of the award. To read more about the decision visit here.

3. Objections on Jurisdiction not Raised Before the Tribunal to be Considered Waiver of Right to Object As Per Section 4 of The Act (Quippo Construction v. Janardanan Nirman)

It was held by the court that under sec. 4, a party abstaining itself from presenting its case and not raising objections at the first instance before the arbitral tribunal will be construed as an automatic-waiver to raise objections to the arbitration.  The court also made a pertinent observation that the concept of seat is not of much relevance to domestic arbitrations as the curial law remains constant. The judgment is seen to be a step forward for its liberal interpretation of the concept of the seat in the domestic arbitration regime. Brief analysis of the decision can be found here.

4. The Court Reaffirms the Rulings in Western Geco and Saw Pipes on Patent Illegality as a Ground to Set Aside an Award (NEEPCO v. Patel Engineering)

The court re-affirming the scope of “patent illegality” to domestic arbitration, reiterated its decision in Associate builders and Ssangyong. Considering the holistic approach of the High Court and the perversity of the award, the SC dismissed the SLPs, confirming the high court’s decision to set aside the award.

This judgment has re-confirmed the application of 2015 Amendments as held in BCCI v. Kochi. Also, it has fortified the jurisprudence surrounding the concept of “patent illegality”. Visit here to read more about the decision.

5. The Court Gave Section 48(1)(b) a Narrow Construction While Enforcing an Award. (Centrotrade v. HCL – II)

The court, in line with the pro-arbitration bias as propagated in Vijay Karia, held that a party which is provided an opportunity to present its case, but failing to utilise it will not be entitled to claim defence under S. 48. Also, the court gave a narrow import for the term “otherwise” and further opined that s. 48(1)(b) shall be applicable only in circumstances where the party was unable to present its case due to circumstances beyond its control. The case is lauded for its effort to further the pro-arbitration bias and it has currently settled the dust with regards to the interpretation of the latter part of Section 48(1)(b). A brief analysis of the decision can be found here.

High Courts

1. Bom HC rules that the seat can be determined on the basis of conduct of the parties (Omprakash & Ors. v. Vijay Dwarkada Varma

In a recent decision regarding the determination of “seat” of arbitration, the Bombay High Court ruled that since there was no objection by either of the parties regarding Nagpur as the place of arbitration, courts of Nagpur had supervisory jurisdiction over the arbitration. The Court further held that the conduct of the parties was sufficient to determine the seat of arbitration. A brief analysis of the decision can be found here.

2. Bombay High Court rules on objections to enforcement of foreign awards (Banyan Tree Growth Capital LLC v. Axiom Cordages Ltd)

On 30 April 2020, the Bombay High Court interpreted the scope of Public Policy as a ground to set aside a foreign arbitral award. In a petition filed under section 47-49 of Arbitration and Conciliation Act, the Court, in accordance with Vijay Karia case, held that the enforcement of a foreign award cannot be said to be against public policy because the contract is contrary to the provisions of SCRA and FEMA regulations. The Court distinguished the decision of the Supreme court in the case of SMS Tea Estates Pvt. Ltd v. Chandmari Tea Co. Pvt. Ltd and Garware Wall Ropes Ltd. v. Coastal Marine Constructions and Engineering Ltd as it ruled that, whether the agreement was sufficiently stamped or not would be equivalent to reopening the trial and is therefore, outside the jurisdiction of the Court. To read more about the decision, visit here and here.

3. High Courts make different interpretation of “Court” under section 29A (Lots Shipping Company Ltd. v. Cochin Port Trust and DDA v. Tarachand Sumit Construction Co.)

A similar issue concerning the meaning of “court” under section 29A to grant extension in time arose before High Courts at Delhi and Kerala. The Delhi High Court ruled that an application under section 29A would lie with the court having the power to appoint an arbitrator under Section 11 of the Act. On the other hand, Kerala High Court interpreted the meaning of the term “Court” as under Section 29A of ACA as the ‘Supreme Court’ in the case of International Commercial Arbitration and as the ‘High Court’ in the case of domestic arbitration. To read more about the decision, visit here and here.

4. Delhi High Court Rules on the Relationship Between Foreign Law Firm and an Indian Client under Section 44 (Spentex Industries Ltd. v. Quinn Emanuel Urquhart & Sullivan LLP)

The Delhi High Court elucidated the relationship between a foreign law firm and an Indian client and interpreted the nature of commercial relationship under the Act. The court ruled the transactions related to services provided for valuable consideration would qualify as ‘commercial relationship’ under Section 44 of the Act. Consequently, the court also legitimized the contracts between Indian clients and a foreign firm. To read more about this decision, visit here and here.

5. Bombay High Court Sets Aside an Award on the Ground that it Shocks the Conscience of the Court (Jackie Kukubhai Shroff v. Ratnam Sudesh Iyer

The Bombay High Court widened the scope of Section 34 and set aside an award passed in International Commercial Arbitration on the ground that it ‘shocked the conscience of the Court’. The Court ruled that the award was ‘impossible’ and based on ‘conclusions which no fair or judiciously minded person could have arrived at’. It also noted that there was misapplication of law and hence led to huge miscarriage of justice.

6. Bombay High Court Rules that Arbitration Clause Providing that “Disputes may be Referred to Arbitration” is Non-Binding (Quick Heal v. NCS Computers and Ors

In the recent decision, the Bombay High Court interpreted the term “may” and “shall” in the arbitration clause. The court came to the conclusion that the use of the term “may” in the arbitration clause makes it non-binding on the parties. It further clarified that such a clause cannot operate independently and can only be invoked when both the parties agree to it. 

7. Delhi High Court Holds that a Plea under Section 39 is Maintainable Only Until the Award is Made (M/S Janapriya Engineers Syndicate Pvt. Ltd. v. Union of India)

On 5th June 2020, The Delhi High Court ruled that the plea under Section 39 is maintainable until the award is made but not delivered on the account of payment of fees. The Court further explained that the provisions of section 39(2) can be invoked for the purpose of delivery of award as it would entitle the parties to either challenge it or seek execution of the same. To read more about this decision, visit here.

EDITORS’ PICKS: FRESH LITERATURE

Books

  1. Surya P Subedi QC, International Investment Law: Reconciling Policy and Principle (Hart Publishing 2020)
  2. Oliver Armas, Samma Haridi & Gabriella Morello, Comparison of International Arbitration Rules (5th edn 2020)
  3. Xu Qian, Water Services Disputes in International Arbitration (Wolters Kluwer 2020)

Full-Length Articles

  1. Patrick Dumberry, The Emergence of the Concept of ‘General Principle of International Law’ in Investment Arbitration Case Law (Vol. 11(2), Journal of Intl Dispute Settlement 2020), doi: 10.1093/jnlids/idz027
  2. Vivienne Bath & Luke R. Nottage, International Investment Agreements and Investor-State Arbitration in Asia (University of Sydney Law School Legal Studies Research Paper Series No. 20/08, 2020)
  3. Giorgio Risso & Anna Chiara Amato,  Pleas of Illegality and the Application of Domestic Law in Investment Treaty Arbitration (Vol. 9, Cambridge Intl Law Journal 2020), doi: 10.4337/cilj.2020.01.05
  4. Daniel Behn & Malcolm Langford, Empirical Perspectives on Investment Arbitration: What Do We Know? Does It Matter? (Vol. 21(2-3), Journal of World Investment & Trade 2020)
  5. William W Park, Tax and Arbitration (Vol. 36(2), Arbitration International 2020)
  6. Saarthak Jain & Kashish Makkar, The Dilution of Interim Anti-Arbitration Injunctions in Devi Resources: Pro-Enforcement Approach Gone Too Far? (Vol. 36(2), Arbitration International 2020)
  7. Manasi Kumar, The ‘Composite Transaction’ and Extension of Arbitration Agreements in India (Vol. 33(3), Journal of International Arbitration 2020)
  8. Juan Miguel Alvarez Contreras, The USMCA Revisited: The Beginning of the End for Investor-State Dispute Settlement (ISDS) Between Developed Countries … and Developing as Well? (Special Issue: Transnational Dispute Management 2020)

Blog Posts

  1. Aparajita Kaul, A Regulatory Dilemma: Possibility of a Chinese FET Claim Against India on Account of FDI Amendment (RMLNLU Arbitration Law Blog)
  2. Ridhi Arora, Arbitration Agreements in Invoices – Barking Up the Wrong Tree? (RMLNLU Arbitration Law Blog)
  3. Sameer Sharma & Rajat Sharma, What Qualifies as an Interim Award? (Practical Academic)
  4. Stéphanie Papazoglou, The Scope, the Validity and the Effect of Advanced Liability Waivers: Investment and Commercial Arbitration Perspective (Young ICCA Blog)
  5. Julio-César Betancourt, Is An Arbitral Tribunal’s Draft Award Susceptible to Judicial Review? (Kluwer Arbitration Blog)
  6. Ioannis Glinavo, Huawei and ISDS: 5G Infrastructure and Investment Claims (Kluwer Arbitration Blog)
  7. Marike R. P. Paulsson, The 2019 Dutch Model BIT: Its Remarkable Traits and the Impact on FDI (Kluwer Arbitration Blog)

EDITORS’ PICKS: VINTAGE LITERATURE

Jane Byeff Korn, Changing Our Perspective on Arbitration: A Traditional and a Feminist View (University of Illinois Law Rev 1991)

Excerpt:

In our legal system, litigation is the norm; arbitration is outside the norm. While the Court may say that arbitration is as good as litigation, the Court may still view arbitration as less than equal. The courts’ rhetoric asserting that arbitration now has favored status is like saying that we have legislation against sex discrimination, therefore women have equal rights.

Until the legal system takes off its litigation-colored glasses, arbitration will be different and inferior to litigation. Courts and lawyers need to assess arbitration by itself-and not in comparison to litigation. Feminist theory teaches that women do not need to change or adapt to become like men-rather, we should reconstruct the existing systems. Likewise, alternative dispute resolution should not have to become more like litigation.

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