KEY PROVISIONS OF ICC INTERNATIONAL COURT OF ARBITRATION

KEY PROVISIONS OF ICC INTERNATIONAL COURT OF ARBITRATION

This is a ready reference for certain important provisions of ICC International Court of Arbitration opted by parties.

Article 1: International Court of Arbitration

  1. The International Court of Arbitration (the “Court”) of the International Chamber of Commerce (the “ICC”) is the independent arbitration body of the ICC. The statutes of the Court are set forth in Appendix I.
  2. The Court does not itself resolve disputes. It administers the resolution of disputes by arbitral tribunals, in accordance with the Rules of Arbitration of the ICC (the “Rules”). The Court is the only body authorized to administer arbitrations under the Rules, including the scrutiny and approval of awards rendered in accordance with the Rules. It draws up its own internal rules, which are set forth in Appendix II (the “Internal Rules”).
  3. The President of the Court (the “President”) or, in the President’s absence or otherwise at the President’s request, one of its Vice-Presidents shall have the power to take urgent decisions on behalf of the Court, provided that any such decision is reported to the Court at its next session.
  4. As provided for in the Internal Rules, the Court may delegate to one or more committees composed of its members the power to take certain decisions, provided that any such decision is reported to the Court at its next session.
  5. The Court is assisted in its work by the Secretariat of the Court (the “Secretariat”) under the direction of its Secretary General (the “Secretary General”).

Article 4: Request for Arbitration

  1. A party wishing to have recourse to arbitration under the Rules shall submit its Request for Arbitration (the “Request”) to the Secretariat at any of the offices specified in the Internal Rules. The Secretariat shall notify the claimant and respondent of the receipt of the Request and the date of such receipt.
  2. The date on which the Request is received by the Secretariat shall, for all purposes, be deemed to be the date of the commencement of the arbitration.
  3. The Request shall contain the following information:
    • the name in full, description, address and other contact details of each of the parties;
    • the name in full, address and other contact details of any person(s) representing the claimant in the arbitration;
    • a description of the nature and circumstances of the dispute giving rise to the claims and of the basis upon which the claims are made;
    • a statement of the relief sought, together with the amounts of any quantified claims and, to the extent possible, an estimate of the monetary value of any other claims;
    • any relevant agreements and, in particular, the arbitration agreement(s);
    • where claims are made under more than one arbitration agreement, an indication of the arbitration agreement under which each claim is made;   all relevant particulars and any observations or proposals concerning the number of arbitrators and their choice in accordance with the provisions of Articles 12 and 13, and any nomination of an arbitrator required thereby; and
    • all relevant particulars and any observations or proposals as to the place of the arbitration, the applicable rules of law and the language of the arbitration.
    • The claimant may submit such other documents or information with the Request as it considers appropriate or as may contribute to the efficient resolution of the dispute.
  4. Together with the Request, the claimant shall:
    • submit the number of copies thereof required by Article 3(1); and
    • make payment of the filing fee required by Appendix III (“Arbitration Costs and Fees”) in force on the date the Request is submitted.
      In the event that the claimant fails to comply with either of these requirements, the Secretariat may fix a time limit within which the claimant must comply, failing which the file shall be closed without prejudice to the claimant’s right to submit the same claims at a later date in another Request.
  5. The Secretariat shall transmit a copy of the Request and the documents annexed thereto to the respondent for its Answer to the Request once the Secretariat has sufficient copies of the Request and the required filing fee.

Article 5: Answer to the Request; Counterclaims

  1. Within 30 days from the receipt of the Request from the Secretariat, the respondent shall submit an Answer (the “Answer”) which shall contain the following information:
    1. its name in full, description, address and other contact details;
    2.  the name in full, address and other contact details of any person(s) representing the respondent in the arbitration;
    3. its comments as to the nature and circumstances of the dispute giving rise to the claims and the basis upon which the claims are made;
    4. its response to the relief sought;
    5. any observations or proposals concerning the number of arbitrators and their choice in light of the claimant’s proposals and in accordance with the provisions of Articles 12 and 13, and any nomination of an arbitrator required thereby; and
    6. any observations or proposals as to the place of the arbitration, the applicable rules of law and the language of the arbitration.
      The respondent may submit such other documents or information with the Answer as it considers appropriate or as may contribute to the efficient resolution of the dispute.
      2)
  2. The Secretariat may grant the respondent an extension of the time for submitting the Answer, provided the application for such an extension contains the respondent’s observations or proposals concerning the number of arbitrators and their choice and, where required by Articles 12 and 13, the nomination of an arbitrator. If the respondent fails to do so, the Court shall proceed in accordance with the Rules.
  3. The Answer shall be submitted to the Secretariat in the number of copies specified by Article 3(1).
  4. The Secretariat shall communicate the Answer and the documents annexed thereto to all other parties.
  5. Any counterclaims made by the respondent shall be submitted with the Answer and shall provide:
    1. a description of the nature and circumstances of the dispute giving rise to the counterclaims and of the basis upon which the counterclaims are made;
    2. a statement of the relief sought together with the amounts of any quantified counterclaims and, to the extent possible, an estimate of the monetary value of any other counterclaims; c) any relevant agreements and, in particular, the arbitration agreement(s); and
    3. where counterclaims are made under more than one arbitration agreement, an indication of the arbitration agreement under which each counterclaim is made.
      The respondent may submit such other documents or information with the counterclaims as it considers appropriate or as may contribute to the efficient resolution of the dispute.
  6. The claimant shall submit a reply to any counterclaim within 30 days from the date of receipt of the counterclaims communicated by the Secretariat. Prior to the transmission of the file to the arbitral tribunal, the Secretariat may grant the claimant an extension of time for submitting the reply.
    1. Where the parties have agreed to submit to arbitration under the Rules, they shall be deemed to have submitted ipso facto to the Rules in effect on the date of commencement of the arbitration, unless they have agreed to submit to the Rules in effect on the date of their arbitration agreement.
    2. By agreeing to arbitration under the Rules, the parties have accepted that the arbitration shall be administered by the Court.
    3. If any party against which a claim has been made does not submit an Answer, or if any party raises one or more pleas concerning the existence, validity or scope of the arbitration agreement or concerning whether all of the claims made in the arbitration may be determined together in a single arbitration, the arbitration shall proceed and any question of jurisdiction or of whether the claims may be determined together in that arbitration shall be decided directly by the arbitral tribunal, unless the Secretary General refers the matter to the Court for its decision pursuant to Article 6(4).
    4. In all cases referred to the Court under Article 6(3), the Court shall decide whether and to what extent the arbitration shall proceed. The arbitration shall proceed if and to the extent that the Court is prima facie satisfied that an arbitration agreement under the Rules may exist. In particular:
      • where there are more than two parties to the arbitration, the arbitration shall proceed between those of the parties, including any additional parties joined pursuant to Article 7, with respect to which the Court is prima facie satisfied that an arbitration agreement under the Rules that binds them all may exist; and
      • where claims pursuant to Article 9 are made under more than one arbitration agreement, the arbitration shall proceed as to those claims with respect to which the Court is prima facie satisfied (a) that the arbitration agreements under which those claims are made may be compatible, and (b) that all parties to the arbitration may have agreed that those claims can be determined together in a single arbitration.
    5. The Court’s decision pursuant to Article 6(4) is without prejudice to the admissibility or merits of any party’s plea or pleas.
    6. In all matters decided by the Court under Article 6(4), any decision as to the jurisdiction of the arbitral tribunal, except as to parties or claims with respect to which the Court decides that the arbitration cannot proceed, shall then be taken by the arbitral tribunal itself.
    7. Where the parties are notified of the Court’s decision pursuant to Article 6(4) that the arbitration cannot proceed in respect of some or all of them, any party retains the right to ask any court having jurisdiction whether or not, and in respect of which of them, there is a binding arbitration agreement.
    8. Where the Court has decided pursuant to Article 6(4) that the arbitration cannot proceed in respect of any of the claims, such decision shall not prevent a party from reintroducing the same claim at a later date in other proceedings.
    9. If any of the parties refuses or fails to take part in the arbitration or any stage thereof, the arbitration shall proceed notwithstanding such refusal or failure.
    10. Unless otherwise agreed, the arbitral tribunal shall not cease to have jurisdiction by reason of any allegation that the contract is non-existent or null and void, provided that the arbitral tribunal upholds the validity of the arbitration agreement. The arbitral tribunal shall continue to have jurisdiction to determine the parties’ respective rights and to decide their claims and pleas even though the contract itself may be non-existent or null and void.

Number of Arbitrators

  1. The disputes shall be decided by a sole arbitrator or by three arbitrators.
  2. Where the parties have not agreed upon the number of arbitrators, the Court shall appoint a sole arbitrator, save where it appears to the Court that the dispute is such as to warrant the appointment of three arbitrators. In such case, the claimant shall nominate an arbitrator within a period of 15 days from the receipt of the notification of the decision of the Court, and the respondent shall nominate an arbitrator within a period of 15 days from the receipt of the notification of the nomination made by the claimant. If a party fails to nominate an arbitrator, the appointment shall be made by the Court.

Sole Arbitrator

  1. Where the parties have agreed that the dispute shall be resolved by a sole arbitrator, they may, by agreement, nominate the sole arbitrator for confirmation. If the parties fail to nominate a sole arbitrator within 30 days from the date when the claimant’s Request for Arbitration has been received by the other party, or within such additional time as may be allowed by the Secretariat, the sole arbitrator shall be appointed by the Court.

Three Arbitrators

  • Where the parties have agreed that the dispute shall be resolved by three arbitrators, each party shall nominate in the Request and the Answer, respectively, one arbitrator for confirmation. If a party fails to nominate an arbitrator, the appointment shall be made by the Court.
  • Where the dispute is to be referred to three arbitrators, the third arbitrator, who will act as president of the arbitral tribunal, shall be appointed by the Court, unless the parties have agreed upon another procedure for such appointment, in which case the nomination will be subject to confirmation pursuant to Article 13. Should such procedure not result in a nomination within 30 days from the confirmation or appointment of the co-arbitrators or any other time limit agreed by the parties or fixed by the Court, the third arbitrator shall be appointed by the Court.
  • Where there are multiple claimants or multiple respondents, and where the dispute is to be referred to three arbitrators, the multiple claimants, jointly, and the multiple respondents, jointly, shall nominate an arbitrator for confirmation pursuant to Article 13.
  • Where an additional party has been joined, and where the dispute is to be referred to three arbitrators, the additional party may, jointly with the claimant(s) or with the respondent(s), nominate an arbitrator for confirmation pursuant to Article 13.
  • In the absence of a joint nomination pursuant to Articles 12(6) or 12(7) and where all parties are unable to agree to a method for the constitution of the arbitral tribunal, the Court may appoint each member of the arbitral tribunal and shall designate one of them to act as president. In such case, the Court shall be at liberty to choose any person it regards as suitable to act as arbitrator, applying Article 13 when it considers this appropriate.

Article 13: Appointment and Confirmation of the Arbitrators

  1. In confirming or appointing arbitrators, the Court shall consider the prospective arbitrator’s nationality, residence and other relationships with the countries of which the parties or the other arbitrators are nationals and the prospective arbitrator’s availability and ability to conduct the arbitration in accordance with the Rules. The same shall apply where the Secretary General confirms arbitrators pursuant to Article 13(2).
  2. The Secretary General may confirm as co-arbitrators, sole arbitrators and presidents of arbitral tribunals persons nominated by the parties or pursuant to their particular agreements, provided that the statement they have submitted contains no qualification regarding impartiality or independence or that a qualified statement regarding impartiality or independence has not given rise to objections. Such confirmation shall be reported to the Court at its next session. If the Secretary General considers that a co-arbitrator, sole arbitrator or president of an arbitral tribunal should not be confirmed, the matter shall be submitted to the Court.
  3. Where the Court is to appoint an arbitrator, it shall make the appointment upon proposal of a National Committee or Group of the ICC that it considers to be appropriate. If the Court does not accept the proposal made, or if the National Committee or Group fails to make the proposal requested within the time limit fixed by the Court, the Court may repeat its request, request a proposal from another National Committee or Group that it considers to be appropriate, or appoint directly any person whom it regards as suitable.
  4. The Court may also appoint directly to act as arbitrator any person whom it regards as suitable where:
    •  one or more of the parties is a state or may be considered to be a state entity;
    • the Court considers that it would be appropriate to appoint an arbitrator from a country or territory where there is no National Committee or Group; or
    • the President certifies to the Court that circumstances exist which, in the President’s opinion, make a direct appointment necessary and appropriate.
  5. The sole arbitrator or the president of the arbitral tribunal shall be of a nationality other than those of the parties. However, in suitable circumstances and provided that none of the parties objects within the time limit fixed by the Court, the sole arbitrator or the president of the arbitral tribunal may be chosen from a country of which any of the parties is a national.

Article 19: Rules Governing the Proceedings

The proceedings before the arbitral tribunal shall be governed by the Rules and, where the Rules are silent, by any rules which the parties or, failing them, the arbitral tribunal may settle on, whether or not reference is thereby made to the rules of procedure of a national law to be applied to the arbitration.

Article 21: Applicable Rules of Law

  1. The parties shall be free to agree upon the rules of law to be applied by the arbitral tribunal to the merits of the dispute. In the absence of any such agreement, the arbitral tribunal shall apply the rules of law which it determines to be appropriate.
  2. The arbitral tribunal shall take account of the provisions of the contract, if any, between the parties and of any relevant trade usages.
  3. The arbitral tribunal shall assume the powers of an amiable compositeur or decide ex aequoet bono only if the parties have agreed to give it such powers.

Article 22: Conduct of the Arbitration

  1. The arbitral tribunal and the parties shall make every effort to conduct the arbitration in an expeditious and cost-effective manner, having regard to the complexity and value of the dispute.
  2. In order to ensure effective case management, the arbitral tribunal, after consulting the parties, may adopt such procedural measures as it considers appropriate, provided that they are not contrary to any agreement of the parties.
  3. Upon the request of any party, the arbitral tribunal may make orders concerning the confidentiality of the arbitration proceedings or of any other matters in connection with the arbitration and may take measures for protecting trade secrets and confidential information.
  4. In all cases, the arbitral tribunal shall act fairly and impartially and ensure that each party has a reasonable opportunity to present its case.
  5.  The parties undertake to comply with any order made by the arbitral tribunal.

Explanation: The arbitral tribunal and the parties shall make every effort to conduct the arbitration in an speedy  and cost-effective manner, having regard to the complexity and value of the dispute.

Article 28: Conservatory and Interim Measures 

  1. Unless the parties have otherwise agreed, as soon as the file has been transmitted to it, the arbitral tribunal may, at the request of a party, order any interim or conservatory measure it deems appropriate. The arbitral tribunal may make the granting of any such measure subject to appropriate security being furnished by the requesting party. Any such measure shall take the form of an order, giving reasons, or of an award, as the arbitral tribunal considers appropriate.
  2. Before the file is transmitted to the arbitral tribunal, and in appropriate circumstances even thereafter, the parties may apply to any competent judicial authority for interim or conservatory measures. The application of a party to a judicial authority for such measures or for the implementation of any such measures ordered by an arbitral tribunal shall not be deemed to be an infringement or a waiver of the arbitration agreement and shall not affect the relevant powers reserved to the arbitral tribunal. Any such application and any measures taken by the judicial authority must be notified without delay to the Secretariat. The Secretariat shall inform the arbitral tribunal thereof.

Article 29: Emergency Arbitrator

  1. A party that needs urgent interim or conservatory measures that cannot await the constitution of an arbitral tribunal (“Emergency Measures”) may make an application for such measures pursuant to the Emergency Arbitrator Rules in Appendix V. Any such application shall be accepted only if it is received by the Secretariat prior to the transmission of the file to the arbitral tribunal pursuant to Article 16 and irrespective of whether the party making the application has already submitted its Request for Arbitration.
  2. The emergency arbitrator’s decision shall take the form of an order. The parties undertake to comply with any order made by the emergency arbitrator.
  3. The emergency arbitrator’s order shall not bind the arbitral tribunal with respect to any question, issue or dispute determined in the order. The arbitral tribunal may modify, terminate or annul the order or any modification thereto made by the emergency arbitrator.
  4. The arbitral tribunal shall decide upon any party’s requests or claims related to the emergency arbitrator proceedings, including the reallocation of the costs of such proceedings and any claims arising out of or in connection with the compliance or non-compliance with the order.
  5. Articles 29(1)-29(4) and the Emergency Arbitrator Rules set forth in Appendix V (collectively the “Emergency Arbitrator Provisions”) shall apply only to parties that are either signatories of the arbitration agreement under the Rules that is relied upon for the application or successors to such signatories.
  6. The Emergency Arbitrator Provisions shall not apply if:
    1.  the arbitration agreement under the Rules was concluded before 1 January 2012;
    2. the parties have agreed to opt out of the Emergency Arbitrator Provisions; or
    3. the parties have agreed to another pre-arbitral procedure that provides for the granting of conservatory, interim or similar measures.
  7. The Emergency Arbitrator Provisions are not intended to prevent any party from seeking urgent interim or conservatory measures from a competent judicial authority at any time prior to making an application for such measures, and in appropriate circumstances even thereafter, pursuant to the Rules. Any application for such measures from a competent judicial authority shall not be deemed to be an infringement or a waiver of the arbitration agreement. Any such application and any measures taken by the judicial authority must be notified without delay to the Secretariat.

GENERAL PROVISIONS COMMON TO MOST INSTITUTIONAL ARBITRATIONS

GENERAL PROVISIONS COMMON TO MOST INSTITUTIONAL ARBITRATIONS

This is a ready reference for certain important provisions common to most Institutional Arbitrations.

     A. Request for Arbitration

Generally in different international institutions administering arbitrations, the rules requesting for arbitration deal with a written request for arbitration by the Claimant to the Registrar containing all the required and relevant information within a specified period of time from the date of the commencement of arbitration. Some institutions also contain a provision for a written response to the said request by the opposite party.

     B. Appointment of an Arbitrator and formation of the tribunal

Pursuant to request for arbitration received, the respective institutions constitute the tribunal for the Arbitration. The Arbitrator can either be a sole arbitrator or three arbitrators depending on the agreement between the parties. The various Institutions of arbitrations around the world consider the prospective arbitrator’s nationality, residence and other relationships with the countries of which the parties or the other arbitrators are nationals and the prospective arbitrator’s availability and ability to conduct the arbitration in accordance with the Rules, while appointing arbitrators.

     C. Seat of Arbitration and Place(s) of Hearing

The law applicable to the Arbitration Agreement and the arbitration shall be the law applicable at the seat of the arbitration, unless and to the extent that the parties have agreed in writing on the application of other laws or rules of law and such agreement is not prohibited by the law applicable at the arbitral seat.

     D. Interim Relief

As per the rules of most institutions, parties are at liberty to approach the tribunal for interim measures of protection, custody, preservation etc., which are necessary to protect their respective rights. Furthermore, almost all arbitration institutions allow parties to approach courts before during or after the formation of the tribunal. In the case of emergency at any time prior to the formation or expedited formation of the Arbitral Tribunal, any party may apply to the Court for the immediate appointment of a temporary sole arbitrator to conduct emergency proceedings pending the formation or expedited formation of the Arbitral Tribunal

     E. Awards

The Arbitral Tribunal may make separate awards on different issues at different times, including interim payments on account of any claim or cross-claim (including Legal and Arbitration Costs). Such awards shall have the same status as any other award made by the Arbitral Tribunal.

KEY PROVISIONS OF LONDON COURT OF INTERNATIONAL ARBITRATION (LCIA)

KEY PROVISIONS OF LONDON COURT OF INTERNATIONAL ARBITRATION (LCIA)

This is a ready reference for certain important provisions of London Court of International Arbitration (LCIA) opted by parties.

Article 1  Request for Arbitration  

1.1  Any party wishing to commence an arbitration under the LCIA Rules (the “Claimant”) shall deliver to the Registrar of the LCIA Court (the “Registrar”) a written request for arbitration (the “Request”), containing or accompanied by:

(i)  the full name and all contact details (including postal address, e-mail address, telephone and facsimile numbers) of the Claimant for the purpose of receiving delivery of all documentation in the arbitration; and the same particulars of the Claimant’s legal representatives (if any) and of all other parties to the arbitration;

(ii)  the full terms of the Arbitration Agreement (excepting the LCIA Rules) invoked by the Claimant to support its claim, together with a copy of any contractual or other documentation in which those terms are contained and to which the Claimant’s claim relates;

(iii) a statement briefly summarising the nature and circumstances of the dispute, its estimated monetary amount or value, the transaction(s) at issue and the claim advanced by the Claimant against any other party to the arbitration (each such other party being here separately described as a “Respondent”);

(iv)   a statement of any procedural matters for the arbitration (such as the arbitral seat, the language(s) of the arbitration, the number of arbitrators, their qualifications and identities) upon which the parties have already agreed in writing or in respect of which the Claimant makes any proposal under the Arbitration Agreement;

(v)  if the Arbitration Agreement (or any other written agreement) howsoever calls for any form of party nomination of arbitrators, the full name, postal address, e-mail address, telephone and facsimile numbers of the Claimant’s nominee;

(vi)  confirmation that the registration fee prescribed in the Schedule of Costs has been or is being paid to the LCIA, without which actual receipt of such payment the Request shall be treated by the Registrar as not having been delivered and the arbitration as not having been commenced under the Arbitration Agreement; and

(vii)  confirmation that copies of the Request (including all accompanying documents) have been or are being delivered to all other parties to the arbitration by one or more means to be identified specifically in such confirmation, to be supported then or as soon as possible thereafter by documentary proof satisfactory to the LCIA Court of actual delivery (including the date of delivery) or, if actual delivery is demonstrated to be impossible to the LCIA Court’s satisfaction, sufficient information as to any other

1.2  The Request (including all accompanying documents) may be submitted to the Registrar in electronic form (as e-mail attachments) or in paper form or in both forms. If submitted in paper form, the Request shall be submitted in two copies where a sole arbitrator is to be appointed, or, if the parties have agreed or the Claimant proposes that three arbitrators are to be appointed, in four copies.
1.3 The Claimant may use, but is not required to do so, the standard electronic form available on-line from the LCIA’s website for LCIA Requests.

1.4 The date of receipt by the Registrar of the Request shall be treated as the date upon which the arbitration has commenced for all purposes (the “Commencement Date”), subject to the LCIA’s actual receipt of the registration fee.

1.5  There may be one or more Claimants (whether or not jointly represented); and in such event, where appropriate, the term “Claimant” shall be so interpreted under the Arbitration Agreement.

Article 2  Response

2.1  Within 28 days of the Commencement Date, or such lesser or greater period to be determined by the LCIA Court upon application by any party or upon its own initiative (pursuant to Article 22.5), the Respondent shall deliver to the Registrar a written response to the Request (the “Response”), containing or accompanied by:

(i)  the Respondent’s full name and all contact details (including postal address, e-mail address, telephone and facsimile numbers) for the purpose of receiving delivery of all documentation in the arbitration and the same particulars of its legal representatives (if any);

(ii)   confirmation or denial of all or part of the claim advanced by the Claimant in the Request, including the Claimant’s invocation of the Arbitration Agreement in support of its claim;

(iii) if not full confirmation, a statement briefly summarising the nature and circumstances of the dispute, its estimated monetary amount or value, the transaction(s) at issue and the defence advanced by the Respondent, and also indicating whether any cross-claim will be advanced by the Respondent against any other party to the arbitration (such cross-claim to include any counterclaim against any Claimant and any other cross-claim against any Respondent);

(iv)     a response to any procedural statement for the arbitration contained in the Request under Article 1.1(iv), including the Respondent’s own statement relating to the arbitral seat, the language(s) of the arbitration, the number of arbitrators, their qualifications and identities and any other procedural matter upon which the parties have already agreed in writing or in respect of which the Respondent makes any proposal under the Arbitration Agreement;

(v)   if the Arbitration Agreement (or any other written agreement) howsoever calls for party nomination of arbitrators, the full name, postal address, e-mail address, telephone and facsimile numbers of the Respondent’s nominee; and

(vi)  confirmation that copies of the Response (including all accompanying documents) have been or are being delivered to all other parties to the arbitration by one or more means of delivery to be identified specifically in such confirmation, to be supported then or as soon as possible thereafter by documentary proof satisfactory to the LCIA Court of actual delivery (including the date of delivery) or, if actual delivery is demonstrated to be impossible to the LCIA Court’s satisfaction, sufficient information as to any other effective form of notification.

2.2 The Response (including all accompanying documents) may be submitted to the Registrar in electronic form (as e-mail attachments) or in paper form or in both forms. If submitted in paper form, the Response shall be submitted in two copies where a sole arbitrator is to be appointed, or, if the parties have agreed or the Respondent proposes that three arbitrators are to be appointed, in four copies.

2.3 The Respondent may use, but is not required to do so, the standard electronic form available on-line from the LCIA’s website for LCIA Responses.

2.4 Failure to deliver a Response within time shall constitute an irrevocable waiver of that party’s opportunity to nominate or propose any arbitral candidate. Failure to deliver any or any part of a Response within time or at all shall not (by itself) preclude the Respondent from denying any claim or from advancing any defence or cross-claim in the arbitration .

2.5 There may be one or more Respondents (whether or not jointly represented); and in such event, where appropriate, the term “Respondent” shall be so interpreted under the Arbitration Agreement.

Article 5 Formation of Arbitral Tribunal

5.1  The formation of the Arbitral Tribunal by the LCIA Court shall not be impeded by any controversy between the parties relating to the sufficiency of the Request or the Response. The LCIA Court may also proceed with the arbitration notwithstanding that the Request is incomplete or the Response is missing, late or incomplete.

5.2 The expression the “Arbitral Tribunal” includes a sole arbitrator or all the arbitrators where more than one.

5.3   All arbitrators shall be and remain at all times impartial and independent of the parties; and none shall act in the arbitration as advocate for or representative of any party. No arbitrator shall advise any party on the parties’ dispute or the outcome of the arbitration.

5.4   Before appointment by the LCIA Court, each arbitral candidate shall furnish to the Registrar (upon the latter’s request) a brief written summary of his or her qualifications and professional positions (past and present); the candidate shall also agree in writing fee-rates conforming to the Schedule of Costs; the candidate shall sign a written declaration stating: (i) whether there are any circumstances currently known to the candidate which are likely to give rise in the mind of any party to any justifiable doubts as to his or her impartiality or independence and, if so, specifying in full such circumstances in the declaration; and (ii) whether the candidate is ready, willing and able to devote sufficient time, diligence and industry to ensure the expeditious and efficient conduct of the arbitration. The candidate shall furnish promptly such agreement and declaration to the Registrar.

5.5   If appointed, each arbitral candidate shall there by assume a continuing duty as an arbitrator, until the arbitration is finally concluded, forthwith to disclose in writing any circumstances becoming known to that arbitrator after the date of his or her written declaration (under Article 5.4) which are likely to give rise in the mind of any party to any justifiable doubts as to his or her impartiality or independence, to be delivered to the LCIA Court, any other members of the Arbitral Tribunal and all parties in the arbitration.

5.6 The LCIA Court shall appoint the Arbitral Tribunal promptly after receipt by the Registrar of the Response or, if no Response is received, after 35 days from the Commencement Date (or such other lesser or greater period to be determined by the LCIA Court pursuant to Article 22.5).

5.7 No party or third person may appoint any arbitrator under the Arbitration Agreement: the LCIA Court alone is empowered to appoint arbitrators (albeit taking into account any written agreement or joint nomination by the parties).

5.8  A sole arbitrator shall be appointed unless the parties have agreed in writing otherwise or if the LCIA Court determines that in the circumstances a three-member tribunal is appropriate (or, exceptionally, more than three).

5.9 The LCIA Court shall appoint arbitrators with due regard for any particular method or criteria of selection agreed in writing by the parties. The LCIA Court shall also take into account the transaction(s) at issue, the nature and circumstances of the dispute, its monetary amount or value, the location and languages of the parties, the number of parties and all other factors which it may consider relevant in the circumstances.

5.10   The President of the LCIA Court shall only be eligible to be appointed as an arbitrator if the parties agree in writing to nominate him or her as the sole or presiding arbitrator; and the Vice Presidents of the LCIA Court and the Chairman of the LCIA Board of Directors (the latter being ex officio a member of the LCIA Court) shall only be eligible to be appointed as arbitrators if nominated in writing by a party or parties – provided that no such nominee shall have taken or shall take thereafter any part in any function of the LCIA Court or LCIA relating to such arbitration.

Article 6  Nationality of Arbitrators

6.1  Where the parties are of different nationalities, a sole arbitrator or the presiding arbitrator shall not have the same nationality as any party unless the parties who are not of the same nationality as the arbitral candidate all agree in writing otherwise.

6.2  The nationality of a party shall be understood to include those of its controlling shareholders or interests.

6.3   A person who is a citizen of two or more States shall be treated as a national of each State; citizens of the European Union shall be treated as nationals of its different Member States and shall not be treated as having the same nationality; a citizen of a State’s overseas territory shall be treated as a national of that territory and not of that State; and a legal person incorporated in a State’s overseas territory shall be treated as such and not (by such fact alone) as a national of or a legal person incorporated in that State.

Article 9A Expedited Formation of Arbitral Tribunal

9.1 In the case of exceptional urgency, any party may apply to the LCIA Court for the expedited formation of the Arbitral Tribunal under Article 5.

9.2 Such an application shall be made to the Registrar in writing (preferably by electronic means), together with a copy of the Request (if made by a Claimant) or a copy of the Response (if made by a Respondent), delivered or notified to all other parties to the arbitration. The application shall set out the specific grounds for exceptional urgency requiring the expedited formation of the Arbitral Tribunal.

9.3 The LCIA Court shall determine the application as expeditiously as possible in the circumstances. If the application is granted, for the purpose of forming the Arbitral Tribunal the LCIA Court may abridge any period of time under the Arbitration Agreement or other agreement of the parties (pursuant to Article 22.5).

Article 9B Emergency Arbitrator

9.4  Subject always to Article 9.14 below, in the case of emergency at any time prior to the formation or expedited formation of the Arbitral Tribunal (under Articles 5 or 9A), any party may apply to the LCIA Court for the immediate appointment of a temporary sole arbitrator to conduct emergency proceedings pending the formation or expedited formation of the Arbitral Tribunal (the “Emergency Arbitrator”).

9.5 Such an application shall be made to the Registrar in writing (preferably by electronic means), together with a copy of the Request (if made by a Claimant) or a copy of the Response (if made by a Respondent), delivered or notified to all other parties to the arbitration. The application shall set out, together with all relevant documentation: (i) the specific grounds for requiring, as an emergency, the appointment of an Emergency Arbitrator; and (ii) the specific claim, with reasons, for emergency relief. The application shall be accompanied by the applicant’s written confirmation that the applicant has paid or is paying to the LCIA the Special Fee under Article 9B, without which actual receipt of such payment the application shall be dismissed by the LCIA Court. The Special Fee shall be subject to the terms of the Schedule of Costs. Its amount is prescribed in the Schedule, covering the fees and expenses of the Emergency Arbitrator and the administrative fees and expenses of the LCIA, with additional charges (if any) of the LCIA Court. After the appointment of the Emergency Arbitrator, the amount of the Special Fee payable by the applicant may be increased by the LCIA Court in accordance with the Schedule. Article 24 shall not apply to any Special Fee paid to the LCIA.

9.6 The LCIA Court shall determine the application as soon as possible in the circumstances. If the application is granted, an Emergency Arbitrator shall be appointed by the LCIA Court within three days of the Registrar’s receipt of the application (or as soon as possible thereafter). Articles 5.1, 5.7, 5.9, 5.10, 6, 9C, 10 and 16.2 (last sentence) shall apply to such appointment. The Emergency Arbitrator shall comply with the requirements of Articles 5.3, 5.4 and (until the emergency proceedings are finally concluded) Article 5.5.

9.7     The Emergency Arbitrator may conduct the emergency proceedings in any manner determined by the Emergency Arbitrator to be appropriate in the circumstances, taking account of the nature of such emergency proceedings, the need to afford to each party, if possible, an opportunity to be consulted on the claim for emergency relief (whether or not it avails itself of such opportunity), the claim and reasons for emergency relief and the parties’ further submissions (if any). The Emergency Arbitrator is not required to hold any hearing with the parties (whether in person, by telephone or otherwise) and may decide the claim for emergency relief on available documentation. In the event of a hearing, Articles 16.3, 19.2, 19.3 and 19.4 shall apply.

9.8     The Emergency Arbitrator shall decide the claim for emergency relief as soon as possible, but no later than 14 days following the Emergency Arbitrator’s appointment. This deadline may only be extended by the LCIA Court in exceptional circumstances (pursuant to Article 22.5) or by the written agreement of all parties to the emergency proceedings. The Emergency Arbitrator may make any order or award which the Arbitral Tribunal could make under the Arbitration Agreement (excepting Arbitration and Legal Costs under Articles 28.2 and 28.3); and, in addition, make any order adjourning the consideration of all or any part of the claim for emergency relief to the proceedings conducted by the Arbitral Tribunal (when formed).

9.9     An order of the Emergency Arbitrator shall be made in writing, with reasons. An award of the Emergency Arbitrator shall comply with Article 26.2 and, when made, take effect as an award under Article 26.8 (subject to Article 9.11). The Emergency Arbitrator shall be responsible for delivering any order or award to the Registrar, who shall transmit the same promptly to the parties by electronic means, in addition to paper form (if so requested by any party). In the event of any disparity between electronic and paper forms, the electronic form shall prevail.

9.10     The Special Fee paid shall form a part of the Arbitration Costs under Article 28.2 determined by the LCIA Court (as to the amount of Arbitration Costs) and decided by the Arbitral Tribunal (as to the proportions in which the parties shall bear Arbitration Costs). Any legal or other expenses incurred by any party during the emergency proceedings shall form a part of the Legal Costs under Article 28.3 decided by the Arbitral Tribunal (as to amount and as to payment between the parties of Legal Costs).

9.11     Any order or award of the Emergency Arbitrator (apart from any order adjourning to the Arbitral Tribunal, when formed, any part of the claim for emergency relief) may be confirmed, varied, discharged or revoked, in whole or in part, by order or award made by the Arbitral Tribunal upon application by any party or upon its own initiative.

9.12     Article 9B shall not prejudice any party’s right to apply to a state court or other legal authority for any interim or conservatory measures before the formation of the Arbitration Tribunal; and it shall not be treated as an alternative to or substitute for the exercise of such right. During the emergency proceedings, any application to and any order by such court or authority shall be communicated promptly in writing to the Emergency Arbitrator, the Registrar and all other parties.

9.13     Articles 3.3, 13.1-13.4, 14.4, 14.5, 16, 17, 18, 22.3, 22.4, 23, 28, 29, 30, 31 and 32 and the Annex shall apply to emergency proceedings. In addition to the provisions expressly set out there and in Article 9B above, the Emergency Arbitrator and the parties to the emergency proceedings shall also be guided by other provisions of the Arbitration Agreement, whilst recognising that several such provisions may not be fully applicable or appropriate to emergency proceedings. Wherever relevant, the LCIA Court may abridge under any such provisions any period of time (pursuant to Article 22.5).

9.14     Article 9B shall not apply if either: (i) the parties have concluded their arbitration agreement before 1 October 2014 and the parties have not agreed in writing to ‘opt in’ to Article 9B; or (ii) the parties have agreed in writing at any time to ‘opt out’ of Article 9B.

Article 14  Conduct of Proceedings

14.1     The parties and the Arbitral Tribunal are encouraged to make contact (whether by a hearing in person, telephone conference-call, video conference or exchange of correspondence) as soon as practicable but no later than 21 days from receipt of the Registrar’s written notification of the formation of the Arbitral Tribunal.

14.2   The parties may agree on joint proposals for the conduct of their arbitration for consideration by the Arbitral Tribunal. They are encouraged to do so in consultation with the Arbitral Tribunal and consistent with the Arbitral Tribunal’s general duties under the Arbitration Agreement.

14.3  Such agreed proposals shall be made by the parties in writing or recorded in writing by the Arbitral Tribunal at the parties’ request and with their authority.

14.4   Under the Arbitration Agreement, the Arbitral Tribunal’s general duties at all times during the arbitration shall include:

(i)     a duty to act fairly and impartially as between all parties, giving each a reasonable opportunity of putting its case and dealing with that of its opponent(s); and

(ii)     a duty to adopt procedures suitable to the circumstances of the arbitration, avoiding unnecessary delay and expense, so as to provide a fair, efficient and expeditious means for the final resolution of the parties’ dispute.

14.5   The Arbitral Tribunal shall have the widest discretion to discharge these general duties, subject to such mandatory law(s) or rules of law as the Arbitral Tribunal may decide to be applicable; and at all times the parties shall do everything necessary in good faith for the fair, efficient and expeditious conduct of the arbitration, including the Arbitral Tribunal’s discharge of its general duties.

14.6   In the case of an Arbitral Tribunal other than a sole arbitrator, the presiding arbitrator, with the prior agreement of its other members and all parties, may make procedural orders alone.

Article 16  Seat(s) of Arbitration and Place(s) of Hearing

16.1   The parties may agree in writing the seat (or legal place) of their arbitration at any time before the formation of the Arbitral Tribunal and, after such formation, with the prior written consent of the Arbitral Tribunal.

16.2   In default of any such agreement, the seat of the arbitration shall be London (England), unless and until the Arbitral Tribunal orders, in view of the circumstances and after having given the parties a reasonable opportunity to make written comments to the Arbitral Tribunal, that another arbitral seat is more appropriate. Such default seat shall not be considered as a relevant circumstance by the LCIA Court in appointing any arbitrators under Articles 5, 9A, 9B, 9C and 11.

16.3  The Arbitral Tribunal may hold any hearing at any convenient geographical place in consultation with the parties and hold its deliberations at any geographical place of its own choice; and if such place(s) should be elsewhere than the seat of the arbitration, the arbitration shall nonetheless be treated for all purposes as an arbitration conducted at the arbitral seat and any order or award as having been made at that seat.

16.4  The law applicable to the Arbitration Agreement and the arbitration shall be the law applicable at the seat of the arbitration, unless and to the extent that the parties have agreed in writing on the application of other laws or rules of law and such agreement is not prohibited by the law applicable at the arbitral seat.

Article 25 -Interim and Conservatory Measures

25.1  The Arbitral Tribunal shall have the power upon the application of any party, after giving all other parties a reasonable opportunity to respond to such application and upon such terms as the Arbitral Tribunal considers appropriate in the circumstances:

(i)     to order any respondent party to a claim or cross-claim to provide security for all or part of the amount in dispute, by way of deposit or bank guarantee or in any other manner;

(ii)     to order the preservation, storage, sale or other disposal of any documents, goods, samples, property, site or thing under the control of any party and relating to the subject-matter of the arbitration; and

(iii)     to order on a provisional basis, subject to a final decision in an award, any relief which the Arbitral Tribunal would have power to grant in an award, including the payment of money or the disposition of property as between any parties.

Such terms may include the provision by the applicant party of a cross-indemnity, secured in such manner as the Arbitral Tribunal considers appropriate, for any costs or losses incurred by the respondent party in complying with the Arbitral Tribunal’s order. Any amount payable under such cross-indemnity and any consequential relief may be decided by the Arbitral Tribunal by one or more awards in the arbitration.

25.2  The Arbitral Tribunal shall have the power upon the application of a party, after giving all other parties a reasonable opportunity to respond to such application, to order any claiming or cross-claiming party to provide or procure security for Legal Costs and Arbitration Costs by way of deposit or bank guarantee or in any other manner and upon such terms as the Arbitral Tribunal considers appropriate in the circumstances. Such terms may include the provision by that other party of a cross-indemnity, itself secured in such manner as the Arbitral Tribunal considers appropriate, for any costs and losses incurred by such claimant or cross-claimant in complying with the Arbitral Tribunal’s order. Any amount payable under such cross-indemnity and any consequential relief may be decided by the Arbitral Tribunal by one or more awards in the arbitration. In the event that a claiming or cross-claiming party does not comply with any order to provide security, the Arbitral Tribunal may stay that party’s claims or cross-claims or dismiss them by an award.

25.3  The power of the Arbitral Tribunal under Article 25.1 shall not prejudice any party’s right to apply to a state court or other legal authority for interim or conservatory measures to similar effect: (i) before the formation of the Arbitral Tribunal; and (ii) after the formation of the Arbitral Tribunal, in exceptional cases and with the Arbitral Tribunal’s authorisation, until the final award. After the Commencement Date, any application and any order for such measures before the formation of the Arbitral Tribunal shall be communicated promptly in writing by the applicant party to the Registrar; after its formation, also to the Arbitral Tribunal; and in both cases also to all other parties.

25.4 By agreeing to arbitration under the Arbitration Agreement, the parties shall be taken to have agreed not to apply to any state court or other legal authority for any order for security for Legal Costs or Arbitration Costs.

Article 26 Award(s)

26.1  The Arbitral Tribunal may make separate awards on different issues at different times, including interim payments on account of any claim or cross-claim (including Legal and Arbitration Costs). Such awards shall have the same status as any other award made by the Arbitral Tribunal.

26.2 The Arbitral Tribunal shall make any award in writing and, unless all parties agree in writing otherwise, shall state the reasons upon which such award is based. The award shall also state the date when the award is made and the seat of the arbitration; and it shall be signed by the Arbitral Tribunal or those of its members assenting to it.

26.3 An award may be expressed in any currency, unless the parties have agreed otherwise.

26.4 Unless the parties have agreed otherwise, the Arbitral Tribunal may order that simple or compound interest shall be paid by any party on any sum awarded at such rates as the Arbitral Tribunal decides to be appropriate (without being bound by rates of interest practised by any state court or other legal authority) in respect of any period which the Arbitral Tribunal decides to be appropriate ending not later than the date upon which the award is complied with.

26.5 Where there is more than one arbitrator and the Arbitral Tribunal fails to agree on any issue, the arbitrators shall decide that issue by a majority. Failing a majority decision on any issue, the presiding arbitrator shall decide that issue.

26.6 If any arbitrator refuses or fails to sign the award, the signatures of the majority or (failing a majority) of the presiding arbitrator shall be sufficient, provided that the reason for the omitted signature is stated in the award by the majority or by the presiding arbitrator.

26.7 The sole or presiding arbitrator shall be responsible for delivering the award to the LCIA Court, which shall transmit to the parties the award authenticated by the Registrar as an LCIA award, provided that all Arbitration Costs have been paid in full to the LCIA in accordance with Articles 24 and 28. Such transmission may be made by any electronic means, in addition to paper form (if so requested by any party). In the event of any disparity between electronic and paper forms, the paper form shall prevail.

26.8 Every award (including reasons for such award) shall be final and binding on the parties. The parties undertake to carry out any award immediately and without any delay (subject only to Article 27); and the parties also waive irrevocably their right to any form of appeal, review or recourse to any state court or other legal authority, insofar as such waiver shall not be prohibited under any applicable law.

26.9 In the event of any final settlement of the parties’ dispute, the Arbitral Tribunal may decide to make an award recording the settlement if the parties jointly so request in writing (a “Consent Award”), provided always that such Consent Award shall contain an express statement on its face that it is an award made at the parties’ joint request and with their consent. A Consent Award need not contain reasons. If the parties do not jointly request a Consent Award, on written confirmation by the parties to the LCIA Court that a final settlement has been reached, the Arbitral Tribunal shall be discharged and the arbitration proceedings concluded by the LCIA Court, subject to payment by the parties of any outstanding Arbitration Costs in accordance with Articles 24 and 28.

LAWS FOR OWNING DRONES AND GYROPLANES IN PIPELINE IN INDIA

LAWS FOR OWNING DRONES AND GYROPLANES IN PIPELINE IN INDIA

Drones are unmanned aircraft that can fly autonomously without a human in control. The flight (speed, navigation, aerobatics, etc.) are controlled by onboard computers which are in turn directed by remote human operators.

Gyroplanes are aircrafts, such as a Helicopters, Microlight aircraft, Light sport aircraft or Autogyros, equipped with wings that rotate about an approximately vertical axis.

Recently the Director General of Civil Aviation has laid down the following draft rules for commercial usage of drones and gyroplanes:

Licence permit for Drones

  • Drones weighing more than 250 grams will not be allowed to fly unless such aircraft has been allotted a Unique Identification Number by the Director-General. The fee to issue a unique identification number for a remotely piloted aircraft would amount to Rupees 1000 only.
  • The fees payable for grant of permit is Rupees 50,000 and for renewal of permit is Rupees 15,000 which is to be paid in the manner specified by the Director-General.
  • As per the conditions of the permit issued by the Director-General, a remotely piloted aircraft with all up weight exceeding the limit as specified by the Director- General from time to time is not to be permitted to fly by the operator.

Licence and pilot permit for Gyroplanes

  • The applicant should not be less than 17 years of age on the date of application.
  • Should have passed Class 10 or equivalent examination from a recognised Board.
  • Provide a certificate of physical fitness from an approved medical practitioner as per the requirements notified by the Director General.
  • Pass a written examination in Air Regulations, Air Navigation, Aviation Meteorology and Aircraft and Engine. An applicant who holds a valid Private Pilot’s Licence (Aeroplanes)/ (Helicopters) or a higher category of Pilot’s Licence shall pass an examination in Aircraft and Engines only.
  • Completed flying training in accordance with the syllabus prescribed by the Director-General.
  • The Licence shall indicate the type of gyroplane the holder is entitled to fly.
  • A Pilot of a gyroplane should have completed at least 40 hours of flight time that includes at least 15 hours of solo flight time of which 10 hours at the minimum should be completed within 12 months.
  • The holder of a current Private Pilot’s Licence (Helicopter) or a higher category of Licence (Helicopter) are only required to carry out familiarization flights under the supervision of an approved Examiner or a Flight Instructor authorized by the Director-General satisfactorily that need to be followed by not less than 3 solo take-offs and landings.
  • When a pilot completes a minimum of 100 hours of flight time as Pilot-in-Command, they are given an open rating for all types of gyroplanes.
  • Successfully perform the procedures and maneuvers prescribed in the syllabus, within 6 months of the date of application.
  • A Gyroplane Pilot is not allowed to:
    • Carry a passenger or property for compensation or hire.
    • Fly at night.
    • Fly in Class D and E airspace (controlled airspace) unless he holds a valid Flight Radio Telephony Operator’s Licence (Restricted) and has been trained by an approved instructor.
    • Fly at an altitude of more than 10,000 feet mean sea level or 2000 feet above ground level, whichever is higher and surface visibility is less than 5000 meter.
    • Fly without visual reference to surface.
    • Fly contrary to any operating limitation placed on the special certificate of airworthiness of the aircraft being flown.
THE COMPANIES (AMENDMENT) BILL, 2016 – KEY FEATURES

THE COMPANIES (AMENDMENT) BILL, 2016 – KEY FEATURES

With a focus to ease doing business in India, the Government of India through this Bill addresses inconsistencies and procedural restrictions in the present Companies Act, 2013. Considering the changes the Bill propose to bring about, it can be clearly said that there will be a sea change in the present Act which will boost economic growth and upheave foreign investment in India.

INTRODUCTION

In order to facilitate ease of doing business in India, the Lok Sabha on 27th July, 2017 passed The Companies (Amendment) Bill, 2016 (“Bill”) thereby bringing change to the present Companies Act, 2013 (“Act”) with respect to structuring, disclosure and compliance requirements for the companies.

Some of the focal points of the Bill are discussed hereinbelow:

  1. Associate Company: In order to align the definition with the Accounting Standards, the Bill propose to change the definition of “significant influence” in section 2(6) of the Act and accordingly, it shall mean control of twenty percent of the total voting power, or control of or participation in business decisions under an agreement.

The Bill propose to include the definition of “joint venture” which shall mean a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement.

  1. Key Managerial Personnel (KMP): The definition of KMP as given in section 2(51) has been extended to include any other officer of the company (i) who is not more than one level below the directors; (ii) who is in whole time employment; and (iii) has been designated by the Board as a KMP.
  2. Related Party: The term “company” under section 2(76) (viii) is proposed to be substituted with “body corporate” so as to include the companies incorporated outside India related to the Indian company under the related party definition.

Additionally, a body corporate which is an investing company or the venturer of a company would also be a related party.

  1. Small Company: Paid-up Capital is proposed to be increased from INR 5 Million to INR 100 Million in section 2(85). Turnover from minimum of INR 20 Million and maximum of INR 200 million is proposed to be revised to a maximum of INR 1000 Million in the said section.
  2. Liability of Members: Insertion of new clause 3A providing for liability of members when the minimum number of members falls below the statutory limit i.e. seven in case of a public company or two in case of a private company and such a situation continues for a period exceeding six months or more. The persons continuing to be involved with the company as members shall be severally liable for the payment of the debts contracted during the above period and they shall also be liable to be sued severally for such debts.
  3. Business Objects: The company would not be required to have main objects in its Memorandum of Association as required under section 4(1) (c) and 4 (5) (i) and is permitted to engage in any lawful act or activity or business, or any act or activity or business to pursue any specific object or objects, as per the law for the time being in force.

However, where the company propose to carry out any specific object or activity, it has to mention the same in the Memorandum and the company shall not pursue any other activity than mentioned in the Memorandum.

The time limit for reservation of name of the company by the Registrar of Companies has been proposed to be reduced to twenty days from the existing period of sixty days.

  1. Registered Office: It is proposed that the company shall within 30 of its incorporation have registered office instead of present requirement of 15 days as provided under section 12 (1). Also, in case of change of registered office of the company, it shall intimate such change to the Registrar of Companies within 30 days from the date of change instead of 15 days.
  2. Beneficial Interest: The Bill propose to define “beneficial interest” under section 89 in a share shall now include holding directly or indirectly, through any contract, arrangement or otherwise, the right or entitlement of a person alone or together with another person to either exercise the rights attached to the shares or to receive or participate in respect of the dividend on the said shares.
  3. Annual Return: The Bill propose to exclude the extract of Annual Return forming part of the Board’s Report as provided under section 92.
  4. Place of Annual General Meeting: The Bill Propose to amend section 96 whereafter Annual General Meeting (AGM) of unlisted company may be held at any place in India if consent is given in writing or by electronic mode by all the members in advance.
  5. Global Extra-Ordinary General Meeting: Extra-Ordinary General Meeting (EGM), as provided under section 100, of wholly owned subsidiary of a company incorporated outside India can be held outside India.

EGM can be called at a shorter notice where consent is given by members holding not less than 95% of paid-up share capital in case the company is having share capital.

  1. Consolidated Financial Statements: The company shall prepare a consolidated financial statement of the company and of all the subsidiaries and associate companies in the same form and manner as that of its own and in accordance with applicable accounting standards, which shall then be laid before the AGM of the company. Presently, as per section 129 (3) the company is required to file consolidated financial statement of only its subsidiaries.
  2. Board’s Report: Few of the proposed changes in section 134 are as follows:
  • The Board Report shall be signed by the Chief Executive Officer, whether he is a director in the company or not.
  • Disclosures which have been provided in the financial statement shall not be required to be reproduced in the report again.
  • The extract of the Annual Return is not required to be annexed with the board’s Report. Only the of the web address where the Return can be accessed needs to be furnished;
  • The company need not mention the exact text of the policies, key feature of policies along with its web link shall be disclosed in Board’s Report.
  1. Corporate Social Responsibility (CSR): Eligibility criteria for constituting the corporate social responsibility committee and incurring expenditure towards CSR as provided under section 135 is proposed to be calculated based on immediately preceding financial year instead of preceding three financial years.

The CSR committee can be constituted with two or more directors in case the company is not required to appoint independent director.

  1. Ratification of Auditors: The requirement of ratification of appointment of auditors under section 139 at every AGM shall not be necessary.
  2. Qualifications of Directors: Few of the proposed changes in chapter XI are as follows:
  • The computation of 182 days for determining whether a director is resident in India shall be done in reference to previous financial year instead of calendar year;
  • The Central Government should be empowered to recognize any other identification number in place of Director Identification Number;
  • Directorships in dormant company shall be counted for the purpose of calculating the ceiling limit of number of directorships;
  • Any director who has been disqualified under section 167(2) shall cease to his directorship in other companies except the company in which he has defaulted;
  • It is optional to file form DIR-11 by the director upon resignation; and
  • The directors shall be allowed to participate on restricted items at board meetings through video conferencing or other audio-visual means if there is quorum through physical presence of directors.
  1. Loans to Director: The entire section 185 has been substituted. Some important changes are:
  • The Bill propose to impose complete restriction on providing loan, guarantee or security in connection with loan to any director, director of the holding company or any partner or relative of any such director or any firm in which any such director or relative in a partner;
  • Loan to any private company of which any such director is a director or member; any body corporate at a general meeting of which not less than twenty- five per cent. of the total voting power may be exercised or controlled by any such director, or by
  • two or more such directors, together; or any body corporate, the Board of directors, managing director or manager, whereof is accustomed to act in accordance with the directions or instructions of the Board, or of any director or directors, of the lending company; is allowed subject to special resolution passed by the shareholders of the company.
  1. Loan and investment by a company: The Bill propose to remove the restriction under section 186 of making investment through not more than two layers of investment companies.

CONCLUSION

With a focus to ease doing business in India, the Government of India through this Bill addresses inconsistencies and procedural restrictions in the present Companies Act, 2013. Considering the changes the Bill propose to bring about, it can be clearly said that there will be a sea change in the present Act which will boost economic growth and upheave foreign investment in India.

 

(The author would like to thank Ankita Singh, Associate of the firm for the valuable assistance in researching for this article.)

INDIAN GOVERNMENT’S MOVE TO ENCOURAGE PRIVATE PARTICIPATION IN INFRASTRUCTURE

INDIAN GOVERNMENT’S MOVE TO ENCOURAGE PRIVATE PARTICIPATION IN INFRASTRUCTURE

According to various studies undertaken on the infrastructure sector in India, in many cases where the award is made against government bodies, the government sector would inevitably challenge the award, and the private player would inevitably have to await not only the arbitration process, but also the entire challenge process. According to the available data, over 85% of the claims raised against the Government bodies are still pending of which 11% is pending with the Government agencies, 64% with the arbitrators and 8.5% with the Courts. An amount of nearly Rs. 3,400 crore is the awarded dues and another Rs. 4,500 is still under arbitration. No wonder the report commissioned by the CII indicates pointed out that the pending claims from government bodies are the key factor behind burgeoning debt of construction companies, accounting for about 150 % of the debt.

However, the Government of India has decided to change all this to encourage private participation in infrastructure and improve the overall condition of Infrastructure in the country.

On 31st August, 2016, the Cabinet Committee on Economic Affairs, chaired by Mr. Narendra Modi, Hon’ble Prime Minister of India, approved various measures to revive the construction sector[1]. The decision was taken in the backdrop of the constant stress that the sector has been undergoing. According to the decision, in cases where the award is made against any Government agency or a Public sector undertaking, and the agency is challenging the award, it will have to pay 75 per cent of the amount of the award in an escrow account against margin free bank guarantee. This escrow account will thereby be used to repay bank loans or to meet commitments in ongoing projects. The measures will strengthen the ailing construction sector.

The benefits of this step are manifold. There is expected to be a drastic increase in the employment opportunities, for the construction sector, which is the largest sector of direct and indirect employment. Moreover, the projects which had to be halted, for the want of funds, will be able to resume the construction. The regime will, thereby, ensure that the contractor does not suffer once the dispute is resolved by arbitration. The average time settlement of claims is estimated to be more than seven years, and a majority of arbitration awards are given against the Government agencies. Therefore, the step will ensure the loss of time and blockage of capital and material is avoided.

It is also likely to benefit the banking sector. Once the projects get restarted, the companies would begin to repay the interests and the principal dues, thereby, the books of the banks are expected to improve, however the improvement will be gradual. Currently, the exposure of financial service sector on the construction is more than of Rs. 3 lakh crore, out of which 45 % are under stress. Therefore, there is expectation of increase in liquidity of financial service sector.

Several other measures have also been introduced. One of them is that in all new contracts, there would be a provision for conciliation board, which will comprise of independent subject experts. This has been included to ensure that there will be a contractual mechanism for renegotiations without bringing projects to a standstill, when public servants are reluctant to participate in the renegotiations on changes in commercial circumstances. Moreover, it will promote a cheaper and less time-taking mechanism of dispute resolution. Further, the contractors have also been provided with an option of shifting their pending disputes with government bodies, to the new arbitration procedures, from the old Arbitration Act. This will provide them with the opportunity of utilizing the cheaper and fast track arbitral process, as introduced by the recent amendment.

The construction companies are expecting an immediate benefit out of the regime. So far the implementation seems to be a success. Government bodies seem to be already acting on these initiatives. On 23rd March, 2017, ONGC issued a Protocol for the implementation of the Niti Aayog’s initiative for the revival of construction sector, as approved by its Board on 31st January’17 in the 289th meeting[2]. It laid down comprehensive guidelines for complying with the regime. With a total of around 597 cases pending, under arbitration proceedings or pending before the court, in respect of PSUs, this step was most welcomed. With the co-operation of PSUs like ONGC, the implementation seems to be proceeding at a decent rate. The regime has received a positive response in the market and is expected to divulge outcomes within 2-3 years.

With all these measures in place, India would definitely become a much more attractive investment option for the private players as far as the infrastructure sector is concerned.

(The author would like to thank Gunjan Chhabra, Senior Associate of the firm for the valuable assistance in researching for this article.)

[1] Press note released by Press information Bureau, 31st August, 2016, available at:[2] Available at: