International Commercial Arbitration between India and United States of America

Introduction

The importance of transnational commercial arbitration has been recognized the world over. The aim is to achieve the sole objective of resolving the dispute timely and efficiently with minimum intervention of a Court of Law so that the trade and commerce is not affected on account of litigations before a Court.

One of the most important choices to be made by parties to an international commercial contract when they include an arbitration clause is that of the seat of the arbitration. It is indeed the seat of the arbitration which determines the procedural rules applicable to the arbitration, the extent to which the ordinary courts will be involved or will interfere in the arbitral process, as well as the degree to which an arbitral award is subject to challenge. The choice of the seat will also have impact on the duration and costs of the proceedings. Party autonomy being one of the cornerstones of international arbitration, parties are free to agree on the seat of arbitration. It is even open to parties to have a separate seat of arbitration and have a separate law governing the law applicable to the substance of the disputes.

While Indian arbitration law has undergone a rapid evolution in recent years, and the Indian government has taken steps towards developing India as an arbitration- and foreign investor-friendly country, Indian parties may not always be able impose a seat in India on their foreign counterparts, which usually prefer the arbitration to be seated outside India, often in a jurisdiction considered neutral to both parties. There might also be practical or tactical advantages for Indian parties themselves in choosing a seat outside India, including in terms of the duration and costs of the arbitral process.

This article specifically focuses on a U.S. seated arbitration with the governing law as Indian law.

Why arbitration?

In a dispute concerning an Indian party and a party from the USA, it might be relevant to note why arbitration is specifically preferred as a dispute resolution mechanism over a regular civil proceedings.

The recognition and enforcement of foreign judgments and decrees in India are governed by Section 44A, read with Section 13 of the Code of Civil Procedure 1908. A foreign judgment which is conclusive under Section 13 of the code can be enforced by:

  • Instituting execution proceedings under Section 44-A, read with Section 13 of the code in the case of ‘reciprocating territories’; or
  • Instituting a civil suit on the judgment in the case of a non-reciprocating country.

This implies that executing a judgment from a non-reciprocating territory requires a civil suit on the foreign judgment to be filed before the competent court. Therefore, execution of a judgment from a non-reciprocating territory would be completely inefficient, time consuming as well as costly as it involves the prolonged procedural hassles of a civil suit.

On the other hand, since the USA and India are both parties to the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards and The United States of America is among the countries notified by India under the New York Convention, the arbitration award passed in the USA is recognized in India as a decree of court. The vice versa is also true. This means, that instead of re-instituting a civil suit, a party, after crossing certain limited hurdles provided under the Arbitration and Conciliation Act, 1996 itself, can directly move for execution of the award.  Hence arbitration is the best mechanism that can be adopted for dispute resolution. The hurdle to a foreign award is also discussed in the latter part of this article.

Systems of Law Applicable to Arbitrations:-

  • Law Applicable to Arbitration Agreement

The law applicable to the arbitration agreement is relevant both for the interpretation and assessing the validity of the arbitration agreement. Under the Indian Arbitration Act, the law governing the substantive disputes is the same as the law applicable to the arbitral tribunal itself[1], unless specifically provided in the contract between the parties, for instance ICC Rules.

  • The law governing the recognition and enforcement of the award

In India, the recognition and enforcement of a foreign international arbitral award is governed by Part II of the Indian Arbitration Act which, inter alia, implements the New York Convention.[2]

  • Enforcement of Foreign Awards in India

Part II of the Indian Arbitration Act applies to

Section 48 of the Indian Arbitration Act deals with the conditions requisite for enforcement of foreign awards, which also provides the ground for challenging a foreign award. Section 48 mirrors the grounds to challenge the enforcement of a foreign award set out in Article V of the New York Convention. The conditions for enforcement include party incapacity, invalidity of agreement under the law of the seat, absence of proper notice to the party regarding appointment, or inability of a party to represent his case, non arbitrability of the dispute, matters beyond scope of arbitration, wrong composition of tribunal, or that the award has not become binding as per the law of the seat. The only distinct ground which is available to the Court to refuse enforcement of the award is the award being against the public policy. This new ground has also been added by way of the 2015 Amendment.

The enforcement of a foreign award in India is a process which begins by filing an execution petition. At first, a court would determine whether the award complies with the requirements of the Act. Once an award is found to be enforceable it may be enforced like a decree of the particular court. At this specific stage parties would have to be mindful of the various challenges that may arise such as frivolous objections taken by the opposite party, and requirements such as filing original/ authenticated copy of the award and the underlying agreement before the court.

If the Indian enforcement court is satisfied that a foreign award is enforceable under Part II, Chapter 1 of the Indian Arbitration Act, the award will be deemed to be a decree of that court[3] . Accordingly, the award can be executed under Order XXI of the Code of Civil Procedure, 1908 in the same manner as a judgment from an Indian court.

Interim Relief

The procedure for obtaining interim relief and the type of relief available also varies according to the seat of the arbitration.

In India, Section 9 of the Indian Arbitration Act deals with the power of the courts to grant interim relief. It is based on Article 9 of the UNCITRAL Model Law. Under Section 9 of the Indian Arbitration Act, a party may apply to Indian courts for certain interim measures, before, during or after the award has been rendered by the arbitral tribunal.

For a limited period of time, from 2012 to 2015, interim relief pursuant to Section 9 of the Indian Arbitration Act was not available to parties to an arbitration seated outside India. This was the result of a judgment rendered by the Supreme Court of India in in 2012 in the case of Bharat Aluminum and Co. vs. Kaiser Aluminium and Co. (BALCO), in which it held that Part I of the Indian Arbitration Act (including Section 9 governing interim relief) did not apply to any foreign seated arbitration. However, the situation changed with the entry into force of the 2015 Amendment. The 2015 Amendment abrogates the case law laid down in BALCO to a limited extent as it expressly provides that, even in relation to an international commercial arbitration with a foreign seat, a party can seek appropriate interim relief from the Indian courts under Section 9 of the Indian Arbitration Act. The type of measures available under Section 9 of the Indian Arbitration Act are generally for the protection, preservation or interim custody of goods, assets, properties, securing the amounts in dispute, appointment of interim receivers etc.

An interim relief ordered by the Indian courts under Section 9 is subject to appeal under Part I, Section 37 of the Indian Arbitration Act.

Conclusion

The recent developments in India’s arbitration law, in particular the entry into force of the 2015 Amendment, offer parties to an international arbitration additional tools and protection by allowing them to seek interim relief before Indian courts even if the arbitration is seated outside of India.  This can be particularly useful if one of the parties has assets in India.

The Indian courts might also be seized with an application to enforce award rendered by an arbitral tribunal seated in USA. The enforcement of such an award in India is greatly facilitated by the fact that both USA and India are signatories of the New York Convention. As a result, the grounds on which Indian courts may refuse to enforce an arbitral award rendered in USA are limited.

 

 

 

[1] Yograj Infrastructure Ltd. v. Ssangyong Engineering & Construction Co. Ltd. (2012) 12 SCC 359

[2] Judgments of the Supreme Court of India in the cases of Sumitomo Heavy Industries Ltd. v. ONGC Ltd. (1998) 1 SCC 305, Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc (2012) 9 SCC 552, Enercon (India) Ltd. and Ors.v.EnerconGmbh and Anr. (2014) 5 SCC 1.

[3] Section 49 of the Indian Arbitration Act.

International Commercial Arbitrations between Canada and India

International Commercial Arbitrations between Canada and India

(This article is co-authored by International Commercial Arbitration lawyers of Singhania & Partners LLP, India and Lapointe Rosenstein Marchand Melançon., L.L.P, Canada)


28/2/2018  

Meet the authors

The present article focuses on International Commercial Arbitrations between Indian and overseas parties, where the seat of arbitration is in Canada. It discusses the issues faced by foreign companies trying to obtain reliefs and remedies in India and Canada as well as the enforcement mechanisms for Canada-seated arbitrations involving parties in both countries. This summary of a selection of applicable legal principles should assist companies and other commercial parties in selecting the appropriate forum for dispute resolution in the context of their dealings with foreign parties.

The arbitration process is essentially guided by the terms of the contract between the parties . Relevant arbitration law only applies to procedural issues not agreed upon or specifically addressed in the parties’ arbitration agreement. By submitting their disputes to arbitral tribunals, parties ensure that their differences are settled outside the scope of the national court system in a relatively expeditious, cost-effective and private manner . It is also owing to these factors that several countries including India have undergone a rapid evolution in the law of Arbitration to make it attractive to foreign investors.

Arbitrations can be both institutional as well as ad-hoc arbitrations. Various institutions such as the London Court of International Arbitration (LCIA), the International Chamber of Commerce (ICC), and the Singapore International Arbitration Centre (SIAC), also administer arbitrations, and carry their own rules of procedure for arbitration. However, this article deals with the basic law governing arbitrations in Canada as well as India in respect of Canada-seated arbitrations.

It is also important to note that the parties may select the substantive law that governs their contractual relationship; while the rules applicable to the parties’ choice of law are beyond the scope of this article, parties must consider that where an arbitration is seated in a jurisdiction other than the jurisdiction of the selected governing law, the substantive rules applicable to the contract must be proven before the arbitral tribunal .

LEGAL SYSTEMS GOVERNING AN ARBITRATION

The seat of arbitration carries with it implications regarding the procedural law which is applicable to the arbitration proceedings. When considering whether to conduct arbitration in Canada or India, it is important to understand how both jurisdictions deal with different processes applicable to an arbitration agreement.

India
In the Indian legal system, where an arbitration contains a foreign element, there are three different systems of law which govern the arbitration :-

1. The law governing the substantive law of the contract which is the law governing substantive issues in dispute in the contract. Also referred to as “substantive law”, “applicable law”, or “proper law of the contract”.
2. The law governing the existence and proceedings of the arbitral tribunal , which is the law governing the conduct of the arbitration proceedings. It is also referred to as the “curial law” or the “lexarbitri”. This is the law which is determined by the seat of arbitration.
3. The law governing the recognition and enforcement of the award is the law which governs the enforcement, as well as filing or setting

aside of the award and is also the law which governs the arbitrability of the dispute.

Furthermore, in the absence of any other stipulation in the contract, proper law is the law applicable to the arbitral tribunal itself . The place of the arbitration specified in a contract generally determines the seat of arbitration unless contrary intention is apparent from the contract. Also the lexarbitri and the law governing the recognition and enforcement of the award are one and the same in the absence of an intention/stipulation to the contrary .

The Indian law on arbitration, provided for in theArbitration and Conciliation Act, 1996 (the ‟Indian Act”), is based on the 1985 UNCITRAL Model Law on International Commercial Arbitration and the UNCITRAL Arbitration Rules 1976 (the ‟Model Law”). In the Indian Act, an International Commercial Arbitration is defined as an arbitration arising from a legal relationship which must be considered commercial, where either of the parties is a foreign national or resident, or is a foreign body corporate or is a company, association or body of individuals whose central management or control is exercised in some other country, or a government of a foreign country .

An International Commercial Arbitration may either be seated in India, or be seated in a foreign country, such as Canada. Where an International Commercial Arbitration is seated in Canada, Part I of the Indian Act, which is the curial law in India, is excluded for such arbitrations, barring certain exceptions discussed further below.

Canada
Parties wishing to institute arbitral proceedings in Canada must take into consideration the particularity of the Canadian legal framework . The Canadian constitution provides for the division of legislative powers between the federal and provincial governments . Traditionally, matters relating to commercial arbitration have fallen within the purview of the provincial and territorial legislatures . Canada adopted the Model Law in 1985 and accordingly, all Canadian provinces and territories, including Quebec (Canada’s only civil law jurisdiction), have enacted international commercial arbitration legislation premised on the Model Law . As a result, the rules applicable to Canada-seated arbitration are generally consistent with those applicable in India.
In essence, the parties’ choice of law will be respected, the parties will be required to make proof of their claims and defenses through accepted means of introducing evidence and testimony , and the enforcement of the arbitral award will depend on the criteria applicable in the jurisdiction where enforcement is sought.

INTERIM RELIEF FROM COURT

The mode of obtaining Interim Reliefs would vary depending on the seat of arbitration, as already explained above. The need to obtain interim relief will depend on whether a party may suffer damages or irreparable harm if any issues in dispute remain unaddressed while the arbitration proceedings run their course. For example, a party may insist that its contractual counterpart continue respecting the terms of a contract throughout the arbitration, whether by continuing to supply products, ceasing to engage in competitive activities, refraining from conduct that may constitute intellectual property infringement, etc. As such, it is important to consider whether the seat of the arbitration may affect outcomes in respect of interim relief.

India
In India, Section 9 of the Indian Act governs the power of the courts to grant interim relief. It is based on Article 9 of the Model Law . Under Section 9 of the Indian Act, a party is permitted to apply to Court for certain interim measures, before, during or after making of the award by the Tribunal. Although Section 9 is a part of Part I of the Indian Act, owing to a recent amendment , the position has been substantially changed. Before the amendment of 2015, the law with respect to seeking interim relief from court was governed by a judgment (‟BALCO”) of the Supreme Court of India. The BALCO judgment clearly laid down that Part I of the Arbitration and Conciliation Act (of which Section 9 is a part) would be inapplicable to any foreign seated arbitration. However, the 2015 amendment essentially nullifies the law laid down in BALCO to a limited extent and holds that even in an International Commercial Arbitration having a foreign seat; a party can approach Indian courts under Section 9 and obtain appropriate relief.

Therefore a Section 9 remedy would be available for a Canada-seated arbitration, only if the arbitration has been commenced after the coming into effect of the amending act . The nature of reliefs sought under Section 9 are generally for protection, preservation or interim custody of goods, assets, properties, securing the amounts in dispute and appointment of interim receivers.
This provision gives a huge relief to parties in cases where assets of parties to a Canada-seated arbitration are located in India and there is a fear of disposal or where conduct reproached of a party occurs in India or causes harm in India. Similarly, the Appeal against an Order passed in a Petition filed under Section 9 would also lie to Indian courts only as per the amendment .

Canada
In Canada, provincial legislation derived from the Model Law provides that national courts and arbitral tribunals have concurrent jurisdiction in granting interim relief . Canadian courts have continuously held that the option to seek interim relief from national courts should be available to parties, even though they have agreed to submit the resolution of their disputes to arbitration . Resorting to the Canadian court system for interim relief is not equivalent to a waiver of the right to arbitrate . As such, parties are free to request interim relief from courts without first having to obtain the consent of an arbitral tribunal . It is also possible to apply to the courts for interim relief where arbitration has not yet commenced, although this process may be affected by the parties’ choice of governing law and venue for dispute resolution. In any event, the flexibility provided by this concurrent jurisdiction may prove to be of interest to parties in selecting their arbitration seat.

Pursuant to a three-part test developed by the Supreme Court of Canada, prior to granting interim relief to arbitrating parties, Courts of the Canadian common law provinces (i.e. provinces other than Quebec) must first establish whether:

(i) the applicant raises a serious question to be decided;
(ii) the applicant would suffer irreparable harm without an interlocutory injunction; and
(iii) the balance of convenience favors granting the relief sought .

A similar test also applies for granting interlocutory injunctions in the province of Quebec .
Parties may look to courts instead of arbitral tribunals for obtaining interim relief for several reasons. Firstly, provincial legislation provides that arbitral tribunals may only order interim measures in respect of the subject matter of the dispute. Therefore, parties will have no choice but to turn to the ordinary courts if they require urgent relief prior to the formation of an arbitral tribunal, or relating to an ancillary but related matter that is not squarely within the subject matter of the dispute. In the same vein, a preservation order from a court will also be required in situations involving third parties who do not fall within the jurisdiction of arbitral tribunals (i.e. parties who are not bound by a bilateral arbitration clause) . Finally, interim measures ordered by an arbitral tribunal are of no force or effect without the enforcement of such orders provided by courts, while interim relief granted by courts is enforceable as such in its own right .

However, it remains that national courts continue to show great deference towards arbitral tribunals, thus abiding by the general rule that they may only intervene in exceptional circumstances . Furthermore, provisions relating to the courts’ inherent powers in granting interim measures have been interpreted narrowly so as to not allow parties to evade the application of arbitration clauses .
The province of Ontario has taken additional steps in modifying its international arbitration legislation in order to expressly recognize the types of interim measures that may be ordered by arbitral tribunals .

APPLICATION FOR APPOINTMENT OF ARBITRATORS
The procedure for appointment of arbitrators in both territories is once again dependent upon the seat of arbitration, and may impact commercial parties’ selection of the venue for their arbitration, particularly where the method of selecting an arbitrator and for dealing with disputes arising in that context is not specifically addressed by contract.

India
The appointment of Arbitrators in India is governed by Section 11 of the Indian Act, Article 11 being the concomitant provision of the Model Law. As for appointment of Arbitrators in a Canada-seated Arbitration, Part I of the Indian Act has no application. In these cases, the domestic law of the Canadian province in which the Arbitration is seated would be relevant, as explained above.

Canada
In Canada, provincial legislation provides that courts may only intervene in the appointment of arbitrators when there is discord between the parties in this regard. Parties may decide upon the composition of the arbitral tribunal as they see fit. If they fail to do so, the arbitral tribunal will, by default, consist of three arbitrators . If the parties fail to agree on the procedure for appointing their arbitrators, each party may appoint one arbitrator, who will then appoint a third arbitrator. Following a request by the other party, if a party fails to appoint an arbitrator within 30 days of receipt of that request, or if the two arbitrators are unable to decide upon a third arbitrator, a court appointed arbitrator will be assigned to the parties. In addition, a party may request the court to enforce the arbitrator appointment procedure agreed upon by the parties .

It is important to note that any measures taken by the court regarding the appointment of arbitrators may not be appealed. An arbitrator may only be replaced if there is reasonable doubt as to his or her impartiality or independence in respect of the arbitral proceedings .

APPLICATION FOR CHALLENGING / ENFORCEMENT OF THE AWARD
The law governing the enforcement/challenge to an arbitral award is extremely relevant, and especially so, in the case of an International Commercial Arbitration. This is because an award remains a mere written instrument until it can be enforced in the relevant country and compliance can be ensured. Both India and Canada recognize foreign arbitral awards; the applicable particularities are described in further detail in this section.

India
In an arbitration seated in a foreign territory, Part II of the Indian Act is applicable. Part II of the Act deals with enforcement of certain foreign awards in India. These awards are either awards passed in New York Convention Territories, or Geneva Convention Territories, Canada being a New York Convention Country.

Section 44 of the Indian Act provides that in order for a foreign award to be recognized as such under Part II, Chapter I (New York Convention Awards), certain conditions must be fulfilled, as follows:-

i. The territory should be signatory to the New York Convention
ii. The Indian Central Government should have notified in the Official Gazette that it has reciprocal provisions with such a territory.
Since, in the case of Canada, both the above conditions are met, the awards are recognized as Foreign Awards in India and the enforcement mechanism provided under Part II of the Indian Act applies .

I. Recognition and Enforcement of Foreign Award
Section 47 of the Indian Act provides that a party, when applying for the enforcement of a foreign award, apart from the procedural aspects of certification and authenticity, has also to produce such evidence as is necessary to prove that the award fulfils the conditions described above.

Furthermore, Section 48 of the Indian Act provides the grounds to challenge the enforcement of a foreign award which include (i) party incapacity, (ii) invalidity of agreement under the law of the seat, (iii) absence of proper notice to the party regarding appointment, or (iv) inability of a party to present his or her case, (v) non-arbitrability of the dispute, (vi) matters beyond scope of arbitration, (vii) irregular composition of tribunal, (viii) that the award has not become binding as per the law of the seat of arbitration, or (ix) is against the public policy of India.
II. Setting aside a Foreign Award
Once the award has survived a challenge or has been successfully reviewed for enforcement and the Court is satisfied that the foreign award is enforceable under this Chapter, the award shall be deemed to be a decree of that Court . After this stage it can be executed under Order XXI of the Code of Civil Procedure, 1908 in the same manner as a decree from an Indian court.

Canada
Where an arbitration is seated in Canada, the only recourse available to parties against the arbitral award is an application to courts for setting aside the award. Furthermore, the award must be recognized by courts in order to have binding legal effect.

I. Setting Aside an Arbitral Award
In Canada, parties are generally barred from appealing a duly recognized arbitral award on the merits . The legislative grounds for challenging or setting aside arbitral awards include: (i) party incapacity; (ii) invalidity of the arbitration agreement pursuant to the laws of Canada or Quebec; (iii) absence of proper notice of the appointment of an arbitrator or of the arbitral proceedings; (iv) inability of a party to present his or her case; (v) non-arbitrability of the dispute; (vi) matters beyond the scope of arbitration; (vii) irregular composition of the tribunal or (viii) the award’s infringement of Canadian or Quebec public policy . These grounds are essentially based on rules of due process and principles of fundamental justice. This restrictive approach towards the challenge of arbitral awards is also in line with the general principle that courts should rarely interfere with arbitral proceedings.While arbitral awards are not “immune from challenge”, applicants should bear in mind that there is a strong presumption in favour of upholding the validity and recognition of these decisions .
Additionally, the party seeking to challenge an arbitral award bears the onus of proving one or more of the relevant grounds enumerated above to the competent provincial court . It is also important to note that the courts’ power to set aside an arbitral award is discretionary; even if a party is successful in establishing that the requirements for setting aside an arbitral award are met, courts may still uphold the decision rendered by the arbitral tribunal .

II. Recognition and Enforcement of an Arbitral Award
The same rules apply for the recognition and enforcement of both Canadian and foreign arbitral awards; these are described in this section.

A. Procedure
In the Canadian provinces governed by common law, an arbitral award must be confirmed by the relevant provincial courts in order to be enforceable against the parties . Parties applying for the recognition of an arbitral award must provide the court with an original or certified copy of (i) the arbitral award and (ii) the arbitration agreement . More importantly, the applicants must supply the court with a duly certified translation of the arbitral award if the original document is not in English or in French . Once the award has been recognized, it is solely binding upon the parties to the arbitration agreement .

Aside from a difference in nomenclature, the procedure for having arbitral awards recognized in Quebec is identical to the one applicable in Canadian common law provinces. According to Quebec’s Civil Code of Procedure, once an arbitral award is homologated by the court, it acquires the force and effect of a judgment .

B. Grounds for Refusing the Recognition and Enforcement of an Arbitral Award
In Canada, the grounds for refusing to recognize or to homologate an arbitral award are the same as those required for setting aside an award, which include: (i) party incapacity; (ii) invalidity of the arbitration agreement pursuant to the law governing the arbitration; (iii) absence of proper notice of the appointment of an arbitrator or of the arbitral proceedings; (iv) inability of a party to present his or her case; (v) non-arbitrability of the dispute; (vi) matters beyond the scope of arbitration; (vii) irregular composition of the tribunal or (viii) the award’s infringement of public policy pursuant to the laws of the seat of the arbitration .

The Canadian courts’ power in granting recognition of an arbitral award is also discretionary. As such, it is open to Canadian courts to either enforce or dismiss the application for recognition of foreign arbitral awards that have been set aside in another jurisdiction . As a result, it is possible for Canadian courts to recognize an arbitral award that has been otherwise set aside by courts in India. Finally, arbitrating parties should take note of the fact that courts throughout Canada will refuse to recognize arbitral awards only in cases of serious misconduct .

APPEALS ARISING FROM ORDERS OF INTERIM RELIEFS OR ORDERS OF ENFORCEMENT OF FOREIGN AWARDS
The process for ensuring enforcement of, and/or challenging interim decisions or arbitration awards is also important for parties to consider.

India
It follows from the discussion above that where an interim relief is given under Section 9, automatically an appeal against such Orders would lie to Indian Courts under Part I, Section 37 of the Indian Act. Similarly, in case an order of an Indian court in respect of a challenge to an award passed in Canada under Part II needs to be appealed, Section 50 of Act would become applicable and again the Appeal would lie in India.

However, in a scenario where Indian courts have not been approached for the execution, enforcement or challenge of the award passed in Canada, then Indian Courts would not have any role to play in the appeal process either.

Canada
In Canada, parties to arbitration must follow the regular appeal procedures when challenging interim orders issued by national courts. While the standard of review of interim court measures is outside the scope of this article, parties should note that appealing interim court orders may lead to a review on the merits, particularly for questions of law. With regard to interim relief ordered by arbitral tribunals, neither Provincial legislation nor the Model Law provide for the setting aside or appeal of these interlocutory procedural measures; as such, an interim arbitral award will be without appeal and must be presented before the courts to ensure enforcement .

Conclusion
To conclude, it may be said that the courts in both India and Canada would play different roles in International Commercial Arbitrations seated in Canada. Firstly, the seat of arbitration must be determined, as well as the curial law which is attracted. Thereafter for different remedies, different courts can be approached.

Both India and Canada have sophisticated legal systems with established frameworks for considering commercial arbitration involving a foreign element and for enforcing duly rendered arbitral awards. Canadian courts have also highlighted the importance of limiting their intervention in the arbitration process and recognizing arbitral awards in order to promote greater stability and predictability in international business relations. Courts will seldom intervene in arbitral proceedings in order to respect the freedom of contract of parties who wish to resolve their disputes outside the national court system.

Moreover, in India, the 2015 amendment has given more leeway to Indian courts as far as interim reliefs are concerned, thus providing additional protection to Canada based parties vis-a-vis Indian parties. In view of the above, India is fast becoming an arbitration and foreign investor friendly country.

As discussed throughout this article, the legal framework applicable to international arbitration is nuanced. As such, arbitration clauses should be carefully drafted with a view to ensuring that the parties’ decision to submit their disputes to arbitration is unequivocal. A model arbitration clause has been provided below for reference; it contemplates an agreement for parties to submit to arbitration in Canada, subject to the substantive laws of India:

Any dispute, controversy or claim arising under, out of or relating to this agreement (and any amendment, restatement, replacement or renewal hereof) including, without limitation, as to its formation, validity, binding effect, interpretation, performance, breach or termination, as well as non-contractual claims relating hereto, shall be determined by final and binding arbitration, to the exclusion of courts (with the exception of injunctive relief sought by either party), in accordance with the Rules of Arbitration of the International Chamber of Commerce. The sole arbitrator shall be appointed by the International Chamber of Commerce in accordance with said rules and must have expertise and experience relevant to the subject matter of this agreement. The place of arbitration shall be Montreal, Quebec, Canada. The language to be used in the arbitral proceedings shall be English. The dispute, controversy or claim shall be decided in accordance with the laws of India. The parties hereby expressly agree to confer upon the arbitrator the powers to fill gaps, cure contractual omissions and to perform all other activities which said arbitrator may deem necessary and/or opportune in reaching its decision. The parties undertake to fully and punctually abide by the award rendered by the arbitrator. Payment of the award, including interest from the date of breach and violation, shall be made in accordance with the relevant provisions of this agreement. This section constitutes an arbitration agreement between the parties.

Each of the parties agrees to the enforcement of any award rendered by the arbitrator or any injunctive relief granted by a court of competent jurisdiction in respect of this agreement, before the Courts of India, Montreal, or elsewhere.

This sample clause is meant to serve solely as an example and parties should seek the advice of specialized legal counsel when drafting arbitration clauses with a view to ensuring that their interests are addressed.

Firms Profile

Singhania & Partners LLP
A sharp rise in international business transactions, Global bidding for contracts and Foreign direct investment many Companies have to deal with International Arbitrations. Parties that are signatories to international contracts often want to avoid using the home courts of one of the parties in order to ensure neutrality as well as unbiased decisions thus avoiding the problem faced due to unfamiliar or unpredictable local court procedures. Singhania and Partners LLP has strong experience in handling International arbitrations keeping the seat in India and outside India like Singapore, U.K, China, Switzerland, Canada and many more. The Firm also provides consultation at the time of negotiation of contracts to incorporate effective arbitration clauses. We conduct both institutional and ad hoc arbitrations.

The firm is a member of TerraLex which is a premier network of law firms offices worldwide. The membership of TerraLex provides the firm with trusted advisors in more than 153 jurisdictions in cross-border matters.

Lapointe RosensteinMarchandMelançon, L.L.P.
Lapointe RosensteinMarchandMelançon., L.L.P. is one of the largest independent law firms in the Province of Quebec, Canada and comprises several dozen lawyers practicing in a wide range of practice areas including commercial law, international transactions, franchising, real estate, banking and finance, bankruptcy and insolvency, licensing and technology, intellectual property, tax, labour and employment, as well as civil and commercial litigation.

The firm has also actively sought out and developed an international practice in order to better serve its clients in the face of increasing globalization and market expansion. Lapointe Rosenstein MarchandMelançon’s membership in TerraLex, an international organization of attorneys in over 100 countries, provides it with access to a worldwide network of legal and other business advisors.
Lapointe Rosenstein MarchandMelançon systematically provides its clients with a full range of top-tier legal services tailored to their specific needs, and consistently surpasses its clients’ expectations for expertise, availability and reliability through elevated standards of professional service, promptness and efficiency. The firm’s commitment to its clients is to provide value-added service and loyalty through a team of highly-qualified professionals and international reach. Lapointe Rosenstein MarchandMelançon enjoys a reputation built upon a tradition of professional excellence, ingenuity and foresight – the cornerstone of the firm’s philosophy is to understand its clients’ activities in order to become their trusted and valued legal and business advisors, and its attorneys are creative, flexible and responsive, always in search of solutions and the best tailored results for clients.

Lapointe Rosenstein MarchandMelançon has a team of experienced litigators and negotiators who help clients understand the issues at hand with a view to determining and implementing a strategy that is suited to their needs. The firm’s attorneys also have significant experience in commercial arbitration and mediation, as well as in enforcing foreign judgments and arbitral awards.

Advantages of a Swiss Seat of Arbitration for International Commercial Disputes Involving Indian Parties

Advantages of a Swiss Seat of Arbitration for International Commercial Disputes Involving Indian Parties

(This article is co-authored by International Commercial Arbitration lawyers of Singhania & Partners LLP, India and LALIVE, Switzerland)


28/2/2018  

Meet the authors

INTRODUCTION

The purpose of this article is to provide an introduction to international arbitration in Switzerland for parties who may be contemplating arbitration to resolve international commercial disputes involving Indian parties. It also highlights the differences between the Swiss and Indian arbitration laws, and the residual role played by Indian courts when the seat of the arbitration is outside India.

An increasing number of international commercial contracts worldwide provide for arbitration as the agreed dispute resolution mechanism. This is also true of commercial contracts between Indian and foreign parties. In the Indian legal system, international commercial arbitration is available to parties provided the legal relationship between them qualifies as “commercial” and one of the parties is a foreign national, resident, body corporate, a company, an association or a body of individuals whose central management and control is exercised in any country other than India. Although the term “commercial” has not been defined anywhere, courts in India have taken the term to be broad-based dealing with any matters of trade and commercial contracts.

One of the most important choices to be made by parties to an international commercial contract when they include an arbitration clause is that of the seat of the arbitration. It is indeed the seat of the arbitration which will determine the procedural rules applicable to the arbitration, the extent to which the ordinary courts will be involved or will interfere in the arbitral process, as well as the degree to which an arbitral award is subject to challenge. The choice of the seat will also have impact on the duration and costs of the proceedings. Party autonomy being one of the cornerstones of international arbitration, parties are free to agree on the seat of arbitration.

While Indian arbitration law has undergone a rapid evolution in recent years, and the Indian government has taken steps towards developing India as an arbitration- and foreign investor-friendly country, Indian parties may not always be able impose a seat in India on their foreign counterparts, which usually prefer the arbitration to be seated outside India, often in a jurisdiction considered neutral to both parties. There might also be practical or tactical advantages for Indian parties themselves in choosing a seat outside India, including in terms of the duration and costs of the arbitral process.

One of the foreign seats often chosen in practice by parties to international commercial contracts, including the Indian parties, is Switzerland. Indeed, Switzerland not only has the advantage of being both neutral and international, but more importantly, it also has a long-standing and well-established reputation for being a pro-arbitration jurisdiction. Two of its main cities, Geneva and Zurich, are regularly ranked among the preferred seats of arbitration worldwide.

This article explains why the distinctive features of international arbitration in Switzerland make it a seat of choice for disputes involving Indian parties. After briefly examining the laws governing the arbitration, this article focuses on the appointment and challenge of arbitrator, interim relief, the setting aside of the award, and the recognition and enforcement of the award. For each of these topics, the article provides a comparison of the relevant provisions of the Swiss and Indian arbitration laws, and the remedies available before Indian courts when the arbitration is seated in Switzerland. With respect to the Indian arbitration laws, the authors will focus only on arbitrations governed by the substantive law of India and/or Arbitration and Conciliation Act, 1996, as last amended by the Arbitration and Conciliation (Amendment) Act 2015 (the “Indian Arbitration Act”).
For ready reference we are reproducing a model clause below, as per which, the seat of arbitration would be

Switzerland and the substantive law would be Indian:-
“Any dispute, controversy or claim arising out of, or in relation to, this contract, including the validity, invalidity, breach, or termination thereof, shall be resolved by arbitration in accordance with the Swiss Rules of International Arbitration of the Swiss Chambers’ Arbitration Institution in force on the date on which the Notice of Arbitration is submitted in accordance with these Rules.
The number of arbitrators shall be three;
The seat of the arbitration shall be Switzerland
The arbitral proceedings shall be conducted in English
The governing law of the contract would be substantive law of India”

LAWS GOVERNING THE ARBITRATION

One of the reasons for the growth of arbitration is the flexibility which it affords the parties to choose not only the law governing the merits of the dispute, but also the law and rules applicable to the arbitral proceedings. However, as mentioned above, the choice of the seat of the arbitration has implications on the law applicable to the arbitration. It is therefore important to identify the various sources of law which come into play in the context of an international arbitration and how they are dealt with both in Switzerland and in India.

The main laws and rules which may apply in relation to an international arbitration seated in Switzerland or in India are (1) the arbitration law, (2) the arbitration rules, (3) the substantive law, (4) the law applicable to the arbitration agreement, and (5) the legal regime applicable to the recognition and enforcement of the award.

[LALIVE Comment: As the relevant laws/rules appear to be quite similar in Switzerland and in India, we suggest organising this section slightly differently than what you had initially suggested, i.e. by source of law rather than by jurisdiction. We have tried to adjust the sections on Indian law as required, but apologise in advance for any mistakes we may have made in doing so. We would be grateful if you could review this section carefully and also check the references indicated in the footnotes to make sure they still make sense after the various changes.]

Arbitration law

The arbitration law (also referred to as the “lexarbitri”) is the law of the seat of the arbitration and defines the general legal framework of the arbitration, including the constitution of the arbitral tribunal and the conduct of the arbitral proceedings.

Switzerland
In Switzerland, international arbitrations are governed by Chapter 12 (Articles 176-194) of the Swiss Private International Law Act (“PILA”). Chapter 12 PILA sets out amongst other things the basic procedural principles, the mechanisms for appointing and challenging arbitrators in the absence of an agreement between the parties, and the grounds for setting aside the award. Chapter 12 PILA also governs the arbitrability of the dispute, irrespective of any more restrictive rules of law governing the substance of the dispute, the parties’ national laws or the laws of the likely place of enforcement. Under Swiss arbitration law, only disputes relating to matters with an economical value may be submitted to arbitration. The scope of arbitrable disputes in Switzerland is quite broad as it covers any claims which have a financial value for one of the parties.

[LALIVE Comment: Would there be any issues in enforcing an arbitral award rendered by a tribunal seated in Switzerland in India if the dispute is not considered arbitrable under Indian arbitration law although it is under Swiss arbitration law? If so, on what basis, public policy? ]

One of the main characteristics of the Swiss arbitration law is the fact that it affords parties the maximum autonomy and flexibility in structuring their proceedings. It also keeps the possibility of a judicial intervention other than in the support of the arbitral process to the strict minimum.

India
In India, international arbitrations are governed by the Arbitration and Conciliation Act 1996 (the “Indian Arbitration Act”), as amended by the Arbitration and Conciliation (Amendment) Act 2015, which took effect as of 23 October 2015 (the “2015 Amendment”). The Indian Arbitration Act is based on the 1985 United Nations Commission of International Trade Law (UNCITRAL) Model Law on International Commercial Arbitration (the “UNCITRALModel Law”) and the 1980 UNCITRAL Conciliation Rules. Part I of the Indian Arbitration Act applies to arbitrations seated in India and governs the procedure, the setting aside of the award, and the arbitrability of the dispute. The procedural framework of the arbitration proceedings themselves (i.e. applicable procedural rules (as to which see Section 2.2 below) and any mandatory provisions of the relevant arbitration law) are referred to by Indian courts as “curial law”.

It is now well established that the designation of a Swiss seat excludes the application of Part I of the Indian Arbitration Act, with the exception of the provisions dealing with interim measures (as to which see Section 4 below), the assistance of the Indian courts in relation to the taking of evidence, and the remedies available in the event an Indian court refuses to refer the matter to arbitration.

Rules of arbitration

One of the distinguishing features of international commercial arbitration is party autonomy, which means that the parties are in principle free to decide on the procedural rules applicable to the arbitration within the limits of the mandatory provisions of the applicable arbitration law. Parties often chose to refer to the arbitration rules of organisations (institutional arbitration) which administer and supervise the arbitrations and offer a range of arbitration services. There are a number of reputable arbitration institutions, including for example the Swiss Chambers’ Arbitration Institution (SCAI), the International Chamber of Commerce (ICC), the London Court of International Arbitration (LCIA), the Singapore International Arbitration Centre (SIAC). Arbitrations which are not administered by an arbitration institution are referred to as “ad hoc arbitrations” and allow the parties to determine the arbitral procedure themselves.

The substantive law

The substantive law is the law governing the merits of the dispute. It is also referred to as the “applicable law” or the “proper law of the contract”.

Switzerland
In arbitrations seated in Switzerland, the arbitral tribunal will apply the law chosen by the parties to govern the substance of the dispute. In the absence of a choice of law by the parties, the arbitral tribunal shall apply the law with which the case has the closest connection.

India
A similar approach is followed in international commercial arbitrations seated in India: the arbitral tribunal will apply the rules of law chosen by the parties to govern the substance of the dispute (also referred to as the “proper law of the contract”). However, the arbitral tribunal is not obliged to apply the conflict of law rules of the legal system designated by the parties. In the absence of any such designation, the arbitral tribunal shall apply the rules of law that it considers to be appropriate in light of all the circumstances of the dispute. Thus in India, the seat of arbitration decides the substantive law of India.

The law applicable to the arbitration agreement

The law applicable to the arbitration agreement is relevant both for the interpretation and assessing the validity of the arbitration agreement.

Switzerland
Under Swiss arbitration law, an arbitration agreement is materially valid if it conforms to any one of the following (1) the law chosen by the parties to govern the arbitration agreement; (2) the law governing the subject matter of the dispute, respectively, the principal contract; or (3) Swiss law. This alternative test reflects Switzerland’s pro-arbitration approach as it seeks to avoid, to the extent possible, the invalidity of the arbitration agreement. As for the minimal form requirements, they are set out by Swiss arbitration law, which requires an arbitration agreement to be in writing or in a form of communication allowing it to be evidenced by text, but does not require the signature of the parties.

India
Under the Indian Arbitration Act, the law governing the substantive disputes is the same as the law applicable to the arbitral tribunal itself, unless specifically provided in the contract between the parties, for instance ICC Rules.

The law governing the recognition and enforcement of the award

Switzerland
In Switzerland, the recognition and enforcement of a foreign international arbitral award is governed by the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958 (the “New York Convention”).

India
In India, the recognition and enforcement of a foreign international arbitral award is governed by Part II of the Indian Arbitration Act which, inter alia, implements the New York Convention.
See Section 6 below for further details on the recognition and enforcement of foreign international arbitral awards in Switzerland and India.

APPOINTMENT AND CHALLENGE OF ARBITRATORS

[LALIVE Comment: for the sake of completeness, we suggest adding a short passage on the challenge of arbitrators.] Although sections 13 and 14 of Part I of the Indian Arbitration Act deal with the challenge to the appointment of arbitrators, these provisions are not expressly available to Swiss seated arbitrations. However, at the time of enforcement or challenge to the award before an Indian Court.
The procedure for the appointment and the challenge of arbitrators is governed by the arbitration law of the seat of the arbitration.

Switzerland
In accordance with the principle of party autonomy, the parties are free to agree on the procedure for appointing the arbitrators of an arbitral tribunal seated in Switzerland. In principle, any individual can act as arbitrator; there are no specific qualifications required. The arbitrator must however be both independent of the parties and impartial. The parties are also free to decide on the number of arbitrators, usually one or three.

Where the parties have not agreed on the procedure for the appointment of arbitrators (neither directly nor by reference to institutional rules), they can apply to the Swiss court at the seat of the arbitration to act as appointing authority. The Swiss court will then appoint the arbitral tribunal unless a summary examination of the case reveals that there is no valid arbitration agreement between the parties.

A party may challenge an arbitrator in the following circumstances:
i. the arbitrator does not meet the qualifications agreed upon by the parties;
ii. a ground for challenge exists under the rules of arbitration agreed upon by the parties or the arbitrator was not appointed in accordance with the applicable procedure; or
iii. circumstances exist that give rise to justifiable doubts as to the arbitrator’s independence.
However, a party may only challenge an arbitrator it has appointed for reasons of which it becomes aware after the appointment has been made.

The ground for challenge must be notified to the arbitral tribunal and to the other party without delay. The parties are otherwise free to agree on the procedure for challenging an arbitrator, including on possible time limits within which to do so. If the parties have not agreed on the procedure for challenging an arbitrator, including by reference to any arbitration rules, either party may apply to the competent Swiss courts at the seat of the arbitration for a decision on the challenge. The decision of the Swiss courts on the challenge of an arbitrator is final.

India
The appointment and challenge of arbitrators in India is governed by Part I, Sections 11-14 of the Indian Arbitration Act. Section 11, which deals with the appointment of arbitrators, corresponds to Article 11 of the UNCITRAL Model Law. A person of any nationality may be an arbitrator, unless otherwise agreed by the parties.
The Indian Arbitration Act does not apply to the appointment or the challenge of the members of an arbitral tribunal seated in Switzerland, which, as set out above, is governed by Swiss Arbitration law. Where a party nonetheless seeks the assistance from the Indian courts regarding the appointment of an arbitrator in a foreign-seated arbitration, then such an application will, as a rule, be dismissed for lack of jurisdiction.

INTERIM RELIEF

The procedure for obtaining interim relief and the type of relief available also varies according to the seat of the arbitration.

Switzerland
Arbitral tribunals seated in Switzerland may, at the request of a party, grant interim relief (provisional and conservatory measures) unless the parties have agreed otherwise. Arbitral tribunals seated in Switzerland have broad discretion as regards the type of interim relief they can order. As a general rule, interim relief will only be ordered if the arbitral tribunal considers it necessary and appropriate to protect a party from harm which cannot be repaired (for example by an order for the payment of damages) in the final award.

The power of the arbitral tribunal to order interim measures does not prevent a party from seeking interim relief from a competent Swiss or foreign court, even after the arbitral proceedings have begun. In other words, there is concurrent jurisdiction between the arbitral tribunal and the courts to order interim relief. This means that a party could, for example, apply for interim relief before any other foreign courts, including Indian courts (as to which, see below), even if the arbitration is seated in Switzerland (for the Indian law perspective, see below). By applying to courts for interim relief a party will not be deemed to have waived its right to rely on the arbitration agreement. The Swiss court or foreign court seized with an application for interim relief will apply its own procedural law to determine the conditions for granting interim relief and the type of relief available. If interim relief is sought from the Swiss courts, the procedure will be governed by the Swiss Code of Civil Procedure (“SCCP”).

In practice, parties typically decide to request interim relief from the court instead of the arbitral tribunal in cases where the arbitral tribunal is not yet constituted and emergency arbitration, as provided under several institutional rules is not available, the interim relief is directed at a third party against which the arbitral tribunal does not have jurisdiction or there is a risk that the other party will not comply voluntarily with an order for interim relief granted by the arbitral tribunal.

In addition, the Swiss courts at the seat of the arbitration have jurisdiction for any assistance required by the arbitral tribunal or the parties in support of the arbitration. The assistance of Swiss courts can for example be sought to enforce an order for interim relief issued by the arbitral tribunal, which lacks the power to enforce its own orders or impose sanctions in case of non-compliance with an order for interim relief.

An arbitral tribunal’s order to grant interim relief is not open to challenge. A party may, however, request that the arbitral tribunal reconsider its decision. By contrast, orders rendered by Swiss courts on applications for interim relief is subject to appeal before the higher instance court within ten days from service. The decision of the higher instance court can itself be appealed before the Swiss Supreme Court, Switzerland’s highest court, provided the conditions for such an appeal are met.

India
In India, Section 9 of the Indian Arbitration Act deals with the power of the courts to grant interim relief. It is based on Article 9 of the UNCITRAL Model Law. Under Section 9 of the Indian Arbitration Act, a party may apply to Indian courts for certain interim measures, before, during or after the award has been rendered by the arbitral tribunal.

For a limited period of time, from 2012 to 2015, interim relief pursuant to Section 9 of the Indian Arbitration Act was not available to parties to an arbitration seated outside India. This was the result of a judgment rendered by the Supreme Court of India in in 2012 in the case of Bharat Aluminumand Co. vs. Kaiser Aluminium and Co. (BALCO), in which it held that Part I of the Indian Arbitration Act (including Section 9 governing interim relief) did not apply to any foreign seated arbitration. However, the situation changed with the entry into force of the 2015 Amendment. The 2015 Amendment abrogates the case law laid down in BALCO to a limited extent as it expressly provides that, even in relation to an international commercial arbitration with a foreign seat, a party can seek appropriate interim relief from the Indian courts under Section 9 of the Indian Arbitration Act. Accordingly, a Section 9 remedy would be available to parties to an international arbitration seated in Switzerland seated arbitration, provided the arbitration is governed by the 2015 Amendment.

The type of measures available under Section 9 of the Indian Arbitration Act are generally for the protection, preservation or interim custody of goods, assets, properties, securing the amounts in dispute, appointment of interim receivers etc.
This provision may be particularly useful to a party to an arbitration in Switzerland in cases where the adverse party has assets in India and there is a risk that it will dispose of those assets.

An interim relief ordered by the Indian courts under Section 9 is subject to appeal under Part I, Section 37 of the Indian Arbitration Act. .

SETTING ASIDE OF THE AWARD

An important question when choosing the seat of the arbitration, is the grounds on which the award might be set aside at the seat of the arbitration once it has been rendered. This goes to the finality of the award, which is one of the key features and attractions of arbitration as dispute resolution mechanism.

Switzerland
The award rendered by an arbitral tribunal seated in Switzerland is final and binding upon its communication to the parties.
There is no ordinary appeal mechanism for an international arbitral award rendered in Switzerland. The main remedy is the setting aside of the award by Switzerland’s highest court, the Swiss Supreme Court. The application to set aside the award must be filed within 30 days from service of the award.
There are only a limited number of grounds for setting aside an international arbitral award rendered in Switzerland, namely the following:
i. the arbitral tribunal was constituted irregularly (Article 190(2)(a) PILA);
ii. the arbitral tribunal erroneously held that it had or that it lacked jurisdiction (Article 190(2)(b) PILA);
iii. the arbitral tribunal ruled on matters beyond the claims submitted to it or if it failed to rule on one of the claims (Article 190(2)(c) PILA);
iv. the principle of equal treatment of the parties and their right to be heard in adversarial proceedings was violated (Article 190(2)(d) PILA);
v. the award is incompatible with public policy (Article 190(2)(e) PILA).
The Supreme Court interprets each of the grounds set out above extremely narrowly. Importantly, in setting aside proceedings, the Supreme Court does not review the merits of the award, or the arbitral tribunal’s assessment of the evidence produced in the arbitration. As a result, the threshold for the setting aside of an award rendered in Switzerland is extremely high, as confirmed by the low number of cases which resulted in the complete or partial setting aside of the award.
The setting aside proceedings before the Swiss Supreme Court are short by comparison with other jurisdictions as they typically take only four to seven months from the time of filing of the setting aside application. Setting aside proceedings usually do not prevent the award from being enforced in the meantime.
The parties may waive their right to apply for the setting aside of the award, provided neither party to the arbitration has its place of domicile or seat in Switzerland. This feature of Swiss arbitration law may be of interest in disputes involving one or several Indian parties, as it increases the finality of the award and allows the successful party to enforce an arbitral award rendered in Switzerland in less time and at less cost.

India
As in Switzerland, the grounds available to the parties in India for challenge of an award passed in Switzerland are limited. These grounds are available to parties when a foreign award is filed for enforcement against them in Courts in India . These grounds are discussed in some detail in Section 6 below.

RECOGNITION AND ENFORCEMENT OF THE AWARD

The law governing the recognition and enforcement of an arbitral award is also extremely important, and especially so, in the case of an international commercial arbitration. This is because an award remains a dead letter until it can be enforced and compliance by the unsuccessful party can be ensured.

Switzerland
The New York Convention applies to the recognition and enforcement of all foreign arbitral awards in Switzerland, regardless of whether the state in which the award was rendered is a party to the New York Convention. Accordingly, the New York Convention will apply to the recognition and enforcement in Switzerland of awards rendered in India.

Switzerland has a long-standing tradition of being a pro-enforcement jurisdiction. As a result, Parties who have obtained an award from an arbitral tribunal seated in India (or in another foreign state) should not, as a rule, face any particular difficulties in obtaining its recognition and enforcement in Switzerland.

A party applying for recognition or enforcement of a foreign award must include with its application the original or a copy of the arbitral award and arbitration agreement, together with any translations into the official language of the place at which enforcement is sought (French, German or Italian), in accordance with Article IV of the New York Convention. Swiss courts take a liberal, pragmatic and pro-enforcement approach to the New York Convention in practice. Thus, Swiss courts will only insist on strict compliance with the form requirements set out in Article IV of the New York Convention (authentication and certification) if the authenticity of the documents submitted with the application is disputed. Swiss courts will usually not insist on compliance with the translation requirement if the documents are in English.

Once Swiss courts are satisfied that the requirements of Article IV of the New York Convention are met, recognition and enforcement will only be denied on one of the limited grounds listed in Article V of the New York Convention. These grounds can be summarised as follows:
i. party incapacity or invalidity of the arbitration agreement (Article V(1)(a));
ii. no proper notice of the appointment of the arbitrator or the proceedings or party otherwise unable to present its case (Article V(1)(b));
iii. award of arbitral tribunal on matters beyond or outside of scope of arbitration (Article V(1)(c));
iv. irregular composition of the arbitral tribunal or procedure contrary to parties’ agreement or, in the absence of such agreement, of the laws applicable at the seat of the arbitration (Article V(1)(d));
v. award not binding pursuant to the laws applicable at the seat of the arbitration or set aside at the seat (Article V(1)(e));
vi. non-arbitrability of the dispute (Article V(2)(a));
vii. award contrary to the public policy of the country in which its recognition or enforcement is sought (Article V(2)(b)).
In Switzerland, the threshold for successfully resisting recognition and enforcement of a foreign arbitral award on the basis of Article V of the New York Convention is extremely high and will only be met in exceptional circumstances.

India

Part II of the Indian Arbitration Act applies to the recognition and enforcement of foreign arbitral awards. For these awards to be recognised under Part II, they must have been rendered in a state which either ratified the New York Convention or the 1927 Geneva Convention on the Execution of Foreign Arbitral Awards (the “Geneva Convention”) and the Indian Central Government, being satisfied that it reciprocal provisions have been made, declared such state to be a territory to which the relevant convention applies by notification in the Official Gazette.

In the case of Switzerland, which is a New York Convention state, the above conditions are met. As a result, awards rendered by an arbitral tribunal seated in Switzerland can be recognised and enforced in India directly, in accordance with Part II, Chapter 1, Sections 44-52 of the Indian Arbitration Act.

Section 47 of the Indian Arbitration Act is largely based on Article IV of the New York Convention and sets out the evidence a party has to produce in support of an application for the enforcement of a foreign award before Indian courts. Pursuant to this Section 47, a party must produce with its application: the original or a duly authenticated copy of the arbitral award, the original arbitration agreement or a certified copy thereof, as we all any such evidence as may be necessary to prove the award is a foreign, together with certified English translations where necessary.

Section 48 of the Indian Arbitration Act deals with the conditions requisite for enforcement of foreign awards. Section 48 mirrors the grounds to challenge the enforcement of a foreign award set out in Article V of the New York Convention. The conditions for enforcement include party incapacity, invalidity of agreement under the law of the seat, absence of proper notice to the party regarding appointment, or inability of a party to represent his case, non arbitrability of the dispute, matters beyond scope of arbitration, wrong composition of tribunal, or that the award has not become binding as per the law of the seat, or is against the public policy of India.

[LALIVE Comment: Consider adding a short paragraph on how the requirements of Sections 47 and 48 are implemented in practice by the Indian courts. In particular, are there any possible issues (e.g. public policy related, analysis of arbitrability) which parties to an arbitration seated in Switzerland should be aware of? ]

If the Indian enforcement court is satisfied that a foreign award is enforceable under Part II, Chapter 1 of the Indian Arbitration Act, the award will be deemed to be a decree of that court . Accordingly, the award can be executed under Order XXI of the Code of Civil Procedure, 1908 in the same manner as a judgment from an Indian court.

The decision of the Indian court regarding the enforcement of a foreign arbitral award is subject to appeal before the designated Indian appellate court.

CONCLUSION

As we have seen, a Swiss seat of arbitration presents a number of advantages for international commercial disputes involving Indian parties. It offers parties an extremely flexible legal framework and keeps the intervention of Swiss courts in the arbitral process to a minimum. When Swiss courts do become involved this is in most cases in support of the arbitral process, and only at the request of a party or the arbitral tribunal, typically in cases relating to the appointment and challenge of arbitrators and interim measures.
Switzerland also lives up to its reputation for efficiency in the field of arbitration: once the arbitral tribunal renders its award, the award is final and binding. There are only limited grounds for setting aside the award; those are intended to guarantee the parties’ minimal procedural rights and are only admitted restrictively. The setting aside proceedings themselves are relatively short (only four to seven months) and take place directly before Switzerland’s highest court. Parties can also choose to waive in advance their right to apply for the setting aside of the award in Switzerland, which increases the finality of the award.

Even when the arbitration is seated in Switzerland, the Indian courts might still have a role to play. The recent developments in India’s arbitration law, in particular the entry into force of the 2015 Amendment, offer parties to an international arbitration additional tools and protection by allowing them to seek interim relief before Indian courts even if the arbitration is seated outside of India. This can be particularly useful if one of the parties has assets in India.

The Indian courts might also be seized with an application to enforce award rendered by an arbitral tribunal seated in Switzerland. The enforcement of such an award in India is greatly facilitated by the fact that both Switzerland and India are signatories of the New York Convention. As a result, the grounds on which Indian courts may refuse to enforce an arbitral award rendered in Switzerland are limited.

Firms Profile

Singhania & Partners LLP
A sharp rise in international business transactions, Global bidding for contracts and Foreign direct investment many Companies have to deal with International Arbitrations. Parties that are signatories to international contracts often want to avoid using the home courts of one of the parties in order to ensure neutrality as well as unbiased decisions thus avoiding the problem faced due to unfamiliar or unpredictable local court procedures. Singhania and Partners LLP has strong experience in handling International arbitrations keeping the seat in India and outside India like Singapore, U.K, China, Switzerland, Canada and many more. The Firm also provides consultation at the time of negotiation of contracts to incorporate effective arbitration clauses. We conduct both institutional and ad hoc arbitrations. The firm is a member of TerraLex which is a premier network of law firms offices worldwide. The membership of TerraLex provides the firm with trusted advisors in more than 153 jurisdictions in cross-border matters.

Lalive
LALIVE has been renowned for its expertise in international commercial arbitration for more than 50 years, and is recognized as a global leader in the field by the main legal directories and industry publications.

The firm’s international commercial arbitration specialists regularly act as counsel or arbitrators in proceedings under all of the major arbitration rules, in all the major arbitration venues throughout the world and in a wide range of industries, including energy, telecommunications, construction and infrastructure, transportation, commodities, life sciences and biotechnology.

The firm has substantial expertise in assessing complex claims, managing voluminous cases, leading large teams of lawyers and experts in various jurisdictions, and cooperating closely with clients’ in-house and local counsel. In addition, the legal expertise of LALIVE’s lawyers, who together speak more than a dozen languages, covers several key jurisdictions other than Switzerland.

The firm also routinely advises and represents clients on the annulment, recognition and enforcement of arbitral awards in Switzerland and abroad, including in relation to preliminary steps such asset tracing and attachment orders.

International Commercial Arbitrations between Singapore and India

INTERNATIONAL COMMERCIAL ARBITRATIONS BETWEEN SINGAPORE AND INDIA

(This article is co-authored by International Commercial Arbitration lawyers of Singhania & Partners LLP, India and Kelvin Chia Partnership, Singapore)


28/2/2018  

Meet the authors

The present article focuses on International Commercial Arbitrations between Indian and overseas parties, where the seat of arbitration is in Singapore. It further discusses the issues faced by foreign companies trying to seek alternative methods of dispute resolution, obtain reliefs and remedies in India and Singapore as well as with the enforcement mechanism for Singapore seated arbitrations in both countries.

With the growth of international trade and commerce, more and more disputes arise from cross-border transactions involving ‘foreign’ parties, and parties have turned towards alternative methods of dispute resolution beyond the traditional forum of court. Given that the bedrock of arbitration is consent by parties, parties are free to agree to the procedures concerning arbitrations including the seat of arbitration. Parties normally agree to arbitration by means of an arbitration clause in a contract made by them before a dispute has arisen, although it can also be agreed to after a dispute has arisen. Arbitrations can be both institutional as well as ad-hoc arbitrations. Various institutions such as London Court of International Arbitration (LCIA), the International Chamber of Commerce (ICC), Singapore International Arbitration Centre (SIAC), etc. also administer arbitrations, and carry their own rules of procedure for arbitration.

The SIAC was established in July 1991. The SIAC administers most of its cases under its own rules of arbitration although it is able to administer arbitrations under any other rules agreed to by the parties. The SIAC has initiated provisions for the purpose of:
1. International and domestic commercial arbitration and conciliation;
2. Promotion of arbitration and conciliation as alternatives to litigation for the settlement commercial disputes; and
3. Development of a pool of arbitrators and experts in the law and practice of international arbitration and conciliation
The SIAC has assisted in rendering administrative services which include settling fees of arbitrators, providing venue for hearings, organizing dates for meetings between the tribunal and parties’ representatives and acting as a registry of pleadings, documents and correspondence.

This article deals with the basic law governing arbitrations in Singapore as well as India in respect of Singapore seated arbitrations, with a special focus on SIAC Rules.

For ready reference we are reproducing a model clause below, as per which the seat of arbitration would be Singapore and the substantive law is Indian:-

“Any dispute arising out of or in connection with this contract, including any question regarding its existence, validity or termination, shall be referred to and finally resolved by arbitration administered by the Singapore International Arbitration Centre (“SIAC”) in accordance with the Arbitration Rules of the Singapore International Arbitration Centre (“SIAC Rules”) for the time being in force, which rules are deemed to be incorporated by reference in this clause.

The seat of arbitration shall be Singapore
The language to be used in the arbitral proceedings shall be English
The governing law of the contract would be the substantive law of India”

LEGAL SYSTEMS GOVERNING AN ARBITRATION

The seat of arbitration carries with it, implications regarding the law which is attracted to the proceedings of the arbitration. This is why it is important to understand how both jurisdictions deal with different systems of law applicable to an agreement.
The SIAC rules provide primacy to party autonomy as regards the seat. However, in absence of any particular provision by the parties, the tribunal is free to determine the seat.

Singapore
In Singapore, different aspects of an arbitration proceeding can and are often governed by different systems of law including and rules, including:
1. The governing law of the conduct of the arbitration (the lexarbitri or curial law);
2. If the arbitration is an institutional arbitration, the arbitral rules of that institution;
3. The governing law of the arbitration agreement;
4. The governing law of the contract i.e. the substantive dispute; and
5. The law governing the recognition and enforcement of the arbitral award.

Each of these is discussed briefly below.

(1) Lex Arbitri / Curial Law

The selection of the seat of arbitration is crucial as the lexarbitri has profound implications on the conduct of the arbitration proceedings, from the initial stages when a party attempts to commence arbitration to the enforcement of the arbitral award. The lexarbitri can regulate, inter alia:
(a) The validity of the arbitration agreement;
(b) The commencement of arbitral proceedings;
(c) The constitution of the tribunal, grounds for challenging their jurisdiction and their ability
to rule on their own jurisdiction;
(d) Interim measures available to the parties;
(e) The court’s involvement or assistance in relation to support or supervision of the
arbitration; and
(f) The court’s power in relation to the award in terms of review and appeal .
Where the seat of an arbitration is Singapore (this is not to be conflated with the physical venue of the arbitration), the arbitration proceedings will be governed by either the Arbitration Act (Cap 10) (“Singapore AA”) if the arbitration is a domestic arbitration or the International Arbitration Act (Cap 143A) (“Singapore IAA”) if the arbitration is an international one. An arbitration is considered “international” if one of the following applies:
(a) At least one party has its place of business outside Singapore when the arbitration agreement is made;
(b) Either the place of arbitration, the place where a substantial part of the obligations is to be performed or the place with which the subject matter of the dispute is most closely connected is outside the state in which the parties have their places of business; or
(c) The parties have expressly agreed that the subject-matter of the arbitration agreement relates to more than one country.
Section 3 of the Singapore IAA provides that the UNCITRAL Model Law on International Commercial Arbitration (“Model Law”)adopted by the United Nations Commission on International Trade Law on 21st June 1985 has the force of law in Singapore.

(2) Institutional Arbitration versus Ad Hoc Arbitration

International arbitration proceedings in Singapore may be administered and supervised by an institution or conducted on an ad hoc basis. Although ad hoc arbitrations are often cheaper and faster, there are many advantages to having an arbitral institution administer and supervise the arbitration process. For instance, the institution may prescribe an established set of arbitration rules for the parties to abide by, offer administrative assistance to the parties and give them easier access to a panel of reputable, accredited arbitrators . The selection of arbitrators is discussed in a later part of this article.

Institutional arbitration rules that are often used in Singapore include the Rules of Arbitration of the International Chamber of Commerce (“ICC Rules”), the London Court of International Arbitration Rules (“LCIA Rules”) as well as the Singapore International Arbitration Centre Rules (“SIAC Rules”). The parties to an arbitration may also choose independent, stand-alone arbitration rules formulated by institutions which do not administer or supervise arbitrations. These rules include the UNCITRAL Arbitration Rules and the Singapore Institute of

Architects Arbitration Rules (frequently adopted in domestic construction disputes).
In contrast with the lexarbitri, arbitration rules provide the procedural framework for the arbitration proceedings. Put differently, arbitration rules serve as a guide on the manner in which the administration and adjudication of the dispute is to be carried out. They are therefore analogous to the Rules of Court applicable in court proceedings.

(3) Governing Law of the Arbitration Agreement

The governing law of an arbitration agreement is determined in accordance with a three-step test: (a) the parties’ express choice; (b) in the absence of an express choice, the implied choice of the parties as gleaned from their intentions at the time of contracting; or (c) in the absence of any express or implied choice, the system of law with which the arbitration agreement has the closest and most real connection.

In the absence of an express choice, how should the implied choice of the parties as to the governing law of the arbitration agreement be determined? The position in Singapore is that if there is an absence of any indication to the contrary and where the arbitration is part of the main contract, the parties are assumed to have intended the whole of their relationship to be governed by the same system of law. The natural inference is that the proper law of the main contract forming the subject matter of the dispute should also govern the arbitration agreement . However, where the arbitration agreement is free-standing, in the sense that it was not intended to be a term of any other contract, then in the absence of any express choice of law, the law of the seat would most likely be the governing law of the arbitration agreement .

Although disputes over the governing law of the arbitration agreement are rare, it is advisable that parties entering into a transaction make it very clear in their contract what the governing law of the arbitration agreement is; this is especially so when the lexarbitri is not the same as the governing law of the transaction.

(4) Governing Law of the Contract

The approach of the Singapore courts in determining the governing or “proper” law of the contract is set out in Overseas Union Insurance Ltd v Turegum Insurance Co [2001] 2 SLR(R) 285 (“Teregum Insurance”) and comprises three stages not unlike those applied in the process of determining the governing law of the arbitration agreement:
(a) Examine the contract itself to determine whether it states expressly what the governing law
should be.
(b) In the absence of an express provision, see whether the intention of the parties as to the
governing law can be inferred from the circumstances.
(c) If neither of the above can be done, then determine with which system of law the contract has
it most close and real connection .

With reference to the second stage, the following are among the relevant factors for consideration: if the contracting parties agree that the courts of a given county shall have jurisdiction in any matter arising out of a contract, if they agree that the arbitration shall take place in a certain country, the language or terminology used in the contract, the form of the documents used in the transaction, a connection with a preceding transaction, the currency of the contract or the currency of payment, the places of residence or business of the parties, and the commercial purpose of the transaction .

InTeregum Insurance the Judith Prakash J clarified there is no strict necessity for there to be proof that the second stage could not apply before the court can move on to the third stage, because the tests of inferred intention and close connection often merge into each other and because before the objection close connection test became fully established, the test of inferred intention was an objective test designed not to elicit actual intention but to impute an intention which had not been formed.

(5) Law Governing the Recognition and Enforcement of Arbitral Awards

A distinction has to be made between arbitral awards made pursuant to an arbitral award made pursuant to an arbitration seated in Singapore and an arbitral award made pursuant to a foreign arbitration. The former is recognised and enforced in accordance with the Singapore AA or Part II of the Singapore IAA, both of which have similar provisions for recognition and enforcement of such an award. The latter is recognised and enforced in accordance with Part III of the Singapore IAA, which gives effect to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“New York Convention”), of which India is also a contracting state. The topic of recognition and enforcement of arbitral awards is discussed in greater detail below.

India

In the Indian legal system in an arbitration containing a foreign element, there are three different systems of law which govern the arbitration :-
1. The law governing the substantive law of the contract which is the law governing substantive issues in dispute in the contract. Also referred to as “substantive law”, “applicable law”, or “proper law of the contract”.
2. The law governing the existence and proceedings of the arbitral tribunal , which is the law governing the conduct of the arbitration proceedings. It is also referred to as the “curial law” or the “lexarbitri”. This is the law which is derived from the seat of arbitration.
3. The law governing the recognition and enforcement of the award is the law which governs the enforcement, as well as filing or setting aside of the award and is also the law which governs the arbitrability of the dispute.
Furthermore, in absence of any other stipulation in the contract, proper law is the law applicable to the arbitral tribunal itself . Also the lexarbitri and the law governing the recognition and enforcement of the award are one and the same in absence of an intention/stipulation to the contrary . The place of the arbitration generally specified in a contract determines the seat of arbitration unless contrary intention is apparent from the contract.
In the Indian legal system, an International Commercial Arbitration is defined as an arbitration arising from a legal relationship which must be considered commercial, where either of the parties is a foreign national or resident or is a foreign body corporate or is a company, association or body of individuals whose central management or control is exercise in some other country, or a government of a foreign country .
The Arbitration and Conciliation Amendment Act, 2015 recognizes companies controlled byforeign hands as a foreign body corporate, the Supreme Court has excluded its application to companies registered in India and having Indian nationality. In case a corporation has dual nationality, one based on foreign control and other based on registration in India, such corporation would not be regarded as a foreign corporation.
An International Commercial Arbitration may either be seated in India, or be seated in a foreign country, and this article focuses on International Commercial Arbitrations seated only in Singapore The implication of Singapore seat is that Part I of the Arbitration and Conciliation Act, 1996 (the Indian Act), which is the curial law in India, is excluded for such arbitrations, barring certain exceptions discussed later.

INTERIM RELIEF FROM COURT

The mode of obtaining Interim Reliefs would vary depending on the seat of arbitration, as already explained above. While drafting of contracts, the parties must be extremely careful while choosing the seat of arbitration and choosing the law to be made applicable to said arbitration between them. The SIAC rules also provide that it shall be open to parties to seek interim relief from judicial authorities prior to constitution of the tribunal itself. In exceptional circumstances, parties can approach court, even after the constitution of the tribunal.

Singapore

Under Section 12 of the Singapore IAA, an arbitral tribunal have powers to make orders or give directions to any party in respect of interim measures. The arbitral tribunal can, inter alia, direct one party to give the other security for costs, give directions for the discovery of documents and interrogatories and grant injunctions including those that would ensure that any award which may be made in the arbitral proceedings is not rendered ineffectual by the dissipation of assets by a party.
However, sometimes it is necessary for the court to intervene and assist when the parties require interim relief that goes beyond the scope of the arbitral tribunal’s powers. Such situations arise where the interim relief is needed before the tribunal has been constituted, or where the interim relief sought must be applied for ex parte and on an urgent basis. Section 12A of the Singapore IAA empowers the court to make orders for:
(a) Giving of evidence by affidavit;
(b) The preservation, interim custody or sale of any property which is or forms part of the subject-matter of the dispute;
(c) Samples to be taken from, or any observation to be made of or experiment conducted upon, any property which is or forms part of the subject-matter of the dispute;
(d) The preservation and interim custody of any evidence for the purposes of the proceedings;
(e) Securing the amount in dispute;
(f) Ensuring that any award which may be made in the arbitral proceedings is not rendered ineffectual by the dissipation of assets by a party; and
(g) An interim injunction or any other interim measure.
These above remedies are available regardless of where the arbitration is seated. However, the court powers are not unlimited. These restrictions are set out in sub-sections (3) to (7) of Section 12A of the Singapore IAA, and are summarized briefly below:
(a) If the fact that the place of arbitration is outside Singapore or likely to be outside Singapore
when it is designated or determined makes it inappropriate to make such order.
(b) If the case is one of urgency, the court may make orders under Section 12A(2) of the Singapore IAA as it thinks necessary for the purpose of preserving evidence or assets.
(c) If the case is not one of urgency, the court may make orders under Section 12A(2) of the Singapore IAA only with the permission of the arbitral tribunal or the agreement in writing of the other parties to the arbitration proceedings.
(d) The court may make orders under Section 12A(2) of the Singapore IAA only if or to the extent that the arbitral tribunal has no power or is unable for the time being to act effectively.
(e) Such orders made by the court will cease to have effect if the arbitral tribunal makes an order which expressly relates to the whole or part of the order under Section 12A(2) of the Singapore IAA.
If the parties to an arbitration have opted for the application of the SIAC Rules, these rules empower the SIAC to appoint an emergency arbitrator for the purposes of adjudicating an application for emergency relief before the arbitral tribunal is constituted. The remedy thereby allows parties to dispense with the need to go to court for interim relief . The availability of this remedy, however, does not appear to preclude the parties from seeking relief in court, it is expressly provided in the SIAC Rules that a request for interim relief made by a party to a judicial authority prior to the constitution of the Tribunal, or in exceptional circumstances thereafter, is not incompatible with the SIAC Rules.

India

In India, Section 9 of the Indian Act governs the power of the courts to grant interim relief. It is based on Article 9 of the UNCITRAL Model Law . Under Section 9 of the Indian Act, a party is permitted to apply to Court for certain interim measures, before, during or after making of the award by thae Tribunal. Although Section 9 is a part of Part I of the Indian Act, owing to a recent amendment , the position has been substantially changed. Before the amendment of 2015, the law with respect to seeking interim relief from court was governed by a judgment of the Supreme Court of India. The judgment clearly laid down that Part I of the Arbitration and Conciliation Act (of which Section 9 is a part) would be inapplicable to any foreign seated arbitration. However, the 2015 amendment, in effect, nullifies the law laid down in BALCO to a limited extent and holds that even in an International Commercial Arbitration having a foreign seat, a party can approach Indian courts under Section 9 and get appropriate relief.
Therefore a Section 9 remedy would be available for a Singapore seated arbitration, only if the arbitration has been commenced after the coming into effect of the amending act .

The nature of reliefs sought under Section 9 are generally for protection, preservation or interim custody of goods, assets, properties, securing the amounts in dispute, appointment of interim receivers etc.
This provision gives a huge relief to parties in cases where assets of parties to the Singapore seated arbitration are located in India and there is a fear of disposal. Similarly, the Appeal against an Order passed in a Petition filed under Section 9 would also lie to Indian courts only as per the amendment.

APPLICATION FOR APPOINTMENT OF ARBITRATORS

The procedure for appointment of arbitrators in both territories is once again dependent upon the seat of arbitration. A person of any nationality may be an arbitrator, unless otherwise agreed by the parties.As far as the SIAC rules are concerned, the appointment of the arbitrators as well as the tribunal is done by the parties depending on the procedure agreed between them. Further on failure of the parties SIAC itself can also constitute the tribunal having due regard to any qualifications provided by the parties’ agreement itself.

Singapore

(1) Default Appointments

Sections 9 and 9A of the Singapore IAA set out the basic guidelines for the appointment of arbitrators in international arbitrators in the absence of an agreement between parties on this matter. While parties are a liberty to determine the number of arbitrators hearing their dispute (usually one or three arbitrators), where there is no such determination or agreement, Section 9 provides that there shall be a single arbitrator. The parties will then have to jointly nominate an arbitrator, but if they are unable to agree, one of the parties will have to make an application for the appointment of the arbitrator by the President of the SIAC.
Where there are three arbitrators, Section 9A of the Singapore IAA provides that each party shall appoint one arbitrator, and the parties shall by agreement appoint the third arbitrator. Where the parties fail to agree on the appointment of the third arbitrator within 30 days of the receipt of the first request by either party to do so, the parties may apply to the President of the SIAC to appoint the third arbitrator.

(2) Appointments under the SIAC Rules

If the parties to an arbitration have elected for the arbitration to be governed by the SIAC Rules, then the mechanisms set out at Rules 9 to 11 of the SIAC Rules (2016) for the appointment of one or three arbitrators will be applied instead.

One advantage to adopting the SIAC Rules is that they provide for multi-party appointment of arbitrators (i.e. where there are multiple claimants and/or respondents). In contrast, the Singapore IAA is silent on this matter.

Rule 12 of the SIAC Rules (2016) provide that where there are more than two parties to the arbitration, and a sole arbitrator is to be appointed, the parties may agree to jointly nominate the sole arbitrator. In the absence of such joint nomination, the President of the SIAC shall appoint the sole arbitrator. Where there are more than two parties to the arbitration and three arbitrators are to be appointed, the claimants shall jointly nominate on arbitrator and the respondents shall jointly nominate one arbitrator. If the parties cannot jointly nominate the third, then the President of the SIAC will appoint the remaining arbitrator, who will also be the presiding arbitrator. If the claimants and the respondents are not able to agree among themselves on their joint nominations, the President of the SIAC will appoint all three arbitrators and designate on of them to be the presiding arbitrator.

India

The appointment of Arbitrators in India is governed by Section 11 of the Indian Act, Article 11 being the concomitant provision of the UNCITRAL Model Law. As far appointment of Arbitrators in a Singapore seated Arbitration, Part I of the Indian Act has no application and there is no exception carved out in the act itself. In these cases, it is the domestic law of Singapore which would be relevant, as explained above.

The only relief on this front which a party can obtain in the case of a Singaporeseated arbitration is, that in case an Indian court is seized of a matter in respect of which an arbitration agreement exists, it can refer the parties to arbitration .

APPLICATION FOR CHALLENGING/ENFORCEMENT OF THE AWARD

The law governing the enforcement/challenge to the award is extremely relevant, and especially so, in the case of an International Commercial Arbitration. This is because an award remains a mere dead letter until it can be enforced in the relevant country and compliance can be ensured.

Singapore

(1) Domestic International Awards

As discussed above, the recognition and enforcement of Singapore seated domestic and international arbitrations are governed by the Singapore AA and Part II of the Singapore IAA respectively.

An application under Section 19 of the Singapore IAA to enforce a domestic international award (the nomenclature for an award given in an international arbitration seated in Singapore) can be made pursuant to Order 69A rule 6 of the Singapore Rules of Court. To start the enforcement process, the applicant has to make an ex parte application for leave to enforce the award. Once the order for leave to enforce the award is granted, the applicant must serve the order on the respondent by delivering it to the respondent personally, leaving it at the respondent’s usual or last known place of residence or business or in such manner as the court may direct.

The respondent may apply to have the order set aside within a limit period after it has been served; during that time, the applicant will not be able to enforce the award until the expiry of the time given, or the disposal of the application to set aside the order (if any) . A party may therefore challenge an arbitral award in this manner, or take a more proactive approach by making an application to set aside the arbitral award without waiting for the other party to attempt to enforce it.

What are the bases on which a party may challenge an arbitral award? Although the Singapore courts are generally reluctant to interfere with arbitral awards, this policy of minimal curial intervention remains subject to the parties’ statutory rights to recourse against arbitral awards . The grounds on which a party may set aside a domestic international arbitral award are enumerated in Section 24 of the Singapore IAA and Article 34 of the Model Law. Briefly, the statutory grounds for the setting aside or challenging a domestic international award are as follows:
(a) If the making of the award was induced or affected by fraud or corruption;

(b) If a breach of the rule of natural justice occurred in connection with the making of the award by which the rights of any party have been prejudiced;

(c) If a party to the arbitration agreement was under some incapacity, or the arbitration agreement is not valid under the law to which the parties subjected it;

(d) If the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case;

(e) If the award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration or contains decisions on matters beyond the scope of the submission to arbitration, provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the award which contains decisions on matters not submitted to arbitration may be set aside;

(f) If the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, or, failing such agreement, was not in accordance with the law of the seat of the arbitration;

(g) If the award has not yet become binding on the parties or has been set aside or suspended by a court of the seat of the arbitration.

(h) If the subject-matter of the dispute is not capable of settlement by arbitration under the laws of Singapore; or

(i) The award is in conflict with the public policy of Singapore.

(2) Foreign Awards

The New York Convention has been implemented in Singapore by virtue of Part III of the Singapore IAA. Section 29 of the Singapore IAA provides that a foreign award may be enforced in a court either by action or in the same manner as an award of an arbitrator made in Singapore enforceable under Section 19. Note that Part III of the Singapore IAA applies only to foreign awards made in Convention countries. However, this restriction is unlikely to present as a barrier to the enforcement of international awards as the number of countries that are parties to the New York Convention is growing every year. As at November 2017, there are 157 Convention states.

India

In an arbitration seated in a foreign territory, Part II of the Indian Act is applicable. Part II of the Act deals with enforcement of certain foreign awards in India. These awards are either awards passed in New York Convention Territories, or Geneva Convention Territories, Singapore being a New York Convention Country.

Section 44 of the Indian Act provides that in order for a foreign award to be recognized as such under Part II, Chapter I (New York Convention Awards) certain conditions need to be fulfilled, which are as under:-
i. The territory should be signatory to the New York Convention
ii. The Indian Central Government should have notified in the Official Gazette that it has reciprocal provisions with such a territory.
Since, in the case of Singapore, both the above conditions are met, the awards are recognized as Foreign Awards in India and the enforcement mechanism provided under Part II of the Indian Act needs to be followed.
Section 47 of the Indian Act provides that a party while applying for the enforcement of a foreign award, apart from the procedural aspects of certification and authenticity, also has to produce such evidence as is necessary to prove that the award fulfils the conditions as above stated.
Furthermore, Section 48 of the Indian Act provide the grounds to challenge the enforcement of a foreign award which include party incapacity, invalidity of agreement under the law of the seat, absence of proper notice to the party regarding appointment, or inability of a party to represent his case, non arbitrability of the dispute, matters beyond scope of arbitration, wrong composition of tribunal, or that the award has not become binding as per the law of the seat, or is against the public policy of India.
Once the award has survived the challenge and the Court is satisfied that the foreign award is enforceable under this Chapter, the award shall be deemed to be a decree of that Court . After this stage it can be executed under Order XXI of the Code of Civil Procedure, 1908 in the same manner as a decree from an Indian court.

APPEALS ARISING FROM ORDERS OF INTERIM RELIEFS OR ORDERS OF ENFORCEMENT OF FOREIGN AWARDS

Singapore

(1) Appeals arising from Interim Orders made in Arbitral Proceedings

Section 24 of the Singapore IAA permits the court to set aside awards made by arbitral tribunals. However, it has been held that the definition of “awards” excludes orders or directions made under Section 12 of the Singapore IAA, that is, order or directions made by an arbitral tribunal and that deal with procedural matters protective measures.
The rationale for the differential treatment of final arbitration awards and interim orders made by arbitral tribunals was summarized in the local decision of PT Pukuafu Indah and others v Newmont Indonesia Ltd and another [2012] 4 SLR 1157; [2012] SGHC 187, where Lee Seiu Kin J observed that procedural issues fell directly within the province of arbitral tribunals.Arbitration, particularly international arbitration, was conceptualised as a form of dispute settlement that is not bound by the parochial application of the procedural rules of the arbitral seat, albeit subject to a minimal level of procedural integrity. This limited control by the court should therefore only be exercised at the stage where a party seeks to set aside a final award, and not with respect to each and every order made by the tribunal .
In contrast with final awards, interim orders may require a more nuanced balance to be struck between the efficiency of arbitration and safeguards to ensure due process. This is because orders granting interim relief (such as injunctions) may have the effect of prejudging the substantive rights of one party and are dependent on the court for coercive effect. The Singapore Parliament has chosen to strike this balance by adopting the line of minimal curial intervention to limit challenges only to awards that decided the substantive merits of the case .
(2) Appeals arising from Interim Orders made by the Court and Appeals against Decisions concerning the Enforcement of Foreign Awards
Appeals arising from interim and enforcement orders made by the court under Section 12A and Section 29 respectively of the Singapore IAA may be made in accordance with Order 56 of the Singapore Rules of Court.

India

It follows from the discussion above that an interim relief is given under Section 9, then automatically an appeal against such Orders would lie to Indian Courts under Part I, Section 37 of the Indian Act. Similarly, incase an order of an Indian court in respect of a challenge to an award passed in Singapore under Part II needs to be appealed, Section 50 of Act would become applicable and again the Appeal would lie in India.

However, in a scenario, where Indian courts have not been approached forexecution/enforcement/challenge from the award passed in Singapore, then Indian Courts would not have any role to play in the appeal process either.

Conclusion

To conclude it may be said, that the courts in both countries would play different roles in International Commercial Arbitrations seated in the Singapore. Firstly it needs to be determined which is the seat of arbitration and which is the curial law which is attracted. Thereafter for different remedies, different courts can be approached.
Singapore has taken steps to ensure practical support for international arbitrations conducted in the country, with the result that it is regarded, both legally and commercially, as a preferred forum for resolving trade disputes. Singapore is widely recognised by parties trading in the region as a place for conducting arbitrations that is both neutral and geographically convenient in relation to the parties to the dispute.Moreover, the 2015 amendment has given more leeway to Indian courts as far as Interim reliefs are concerned, thus providing additional protection to Singapore based parties vis-s-a-vis Indian players. In view of the above, India is fast becoming an arbitration and foreign investor friendly country.

Firms Profile

Singhania & Partners LLP

A sharp rise in international business transactions, Global bidding for contracts and Foreign direct investment many Companies have to deal with International Arbitrations. Parties that are signatories to international contracts often want to avoid using the home courts of one of the parties in order to ensure neutrality as well as unbiased decisions thus avoiding the problem faced due to unfamiliar or unpredictable local court procedures. Singhania and Partners LLP has strong experience in handling International arbitrations keeping the seat in India and outside India like Singapore, U.K, China, Switzerland, Canada and many more. The Firm also provides consultation at the time of negotiation of contracts to incorporate effective arbitration clauses. We conduct both institutional and ad hoc arbitrations. The firm is a member of TerraLex which is a premier network of law firms offices worldwide. The membership of TerraLex provides the firm with trusted advisors in more than 153 jurisdictions in cross-border matters.

Kelvin Chia Partnership

We have a team of experienced and seasoned arbitrators who have engaged in domestic and international arbitrations. Notably, we were involved in arbitration proceedings in London over a manufacturing and trade mark licensing arrangement, and have acted for a leading Chinese tunnelling, infrastructure and engineering state enterprise in an arbitration against a Swedish multi-national transportation and infrastructure company. We also represented a large European multinational telecommunications company in enforcing a multi-million dollar foreign arbitration award in Singapore.
Our lawyers are attuned to the needs of our clients, and are committed to the amicable and hassle-free settlement of disputes, management of conflict or negotiation of contracts in the mediation process.

International Commercial Arbitrations between China and India

International Commercial Arbitrations between China and India

(This article is co-authored by International Commercial Arbitration lawyers of Singhania & Partners LLP, India and ZhongLun Law Firm, China)


28/2/2018  

Meet the authors

The present article focuses on International Commercial Arbitrations between Indian and overseas parties, where the seat of arbitration is in China. It further discusses the issues faced by foreign companies trying to obtain reliefs and remedies in India and China as well as with the enforcement mechanism for China Seated arbitrations in both countries.

Arbitration owes its popularity amongst investors primarily because it holds four distinct advantages over other dispute redressal mechanisms.Arbitration offers parties a great deal of confidentiality and privacy.Since arbitrations are more or less about party autonomy, parties are free to agree to the procedures concerning arbitrations, including the seat of arbitration. Arbitrations can be both institutional as well as ad-hoc arbitrations. Various institutions such as London Court of International Arbitration (LCIA), the International Chamber of Commerce (ICC), Singapore International Arbitration Centre (SIAC), China International Economic and Trade Arbitration Commission (CIETAC) etc. also administer arbitrations, and carry their own rules of procedure for arbitration. However, this article deals with the basic law governing arbitrations in China as well as India in respect of China seated arbitrations.
For ready reference we are reproducing a model clause below, as per which the seat of arbitration would be

China and the substantive law is Indian:-
“Any dispute arising from or in connection with this Contract shall be submitted to China International Economic and Trade Arbitration Commission for arbitration which shall be conducted in accordance with the Commission’s arbitration rules in effect at the time of applying for arbitration. The arbitral award is final and binding upon both parties.
The seat of arbitration shall be Beijing, China
The language to be used in the arbitral proceedings shall be English
The governing law of the contract would be the substantive law of India”

LEGAL SYSTEMS GOVERNING AN ARBITRATION

The seat of arbitration carries with it, implications regarding the law which is attracted to the proceedings of the arbitration.This is why it is important to understand how both jurisdictions deal with different systems of law applicable to an agreement.

China
Under the Chinese legal system for a foreign-related arbitration seated in China, rules of the applicable law can be perceived from the four main aspects set out as below:

1. For validity of the arbitration agreement, it is explicitly addressed by the Judicial Interpretations on Chinese Arbitration Law of the Supreme Court of China that the applicable law should be the law selected by the parties by agreement, otherwise the law of seat of arbitration shall apply.
2. For substantive issues, the Law on Application of Law in Foreign-related Civil Relations allows the parties to select by agreement the applicable law, either domestic law or foreign law, to govern the contract, provided that such selection does not violate any Chinese mandatory provisions or the social and public interests of China. The law most closely associated with the contract shall apply by default of an agreed selection.
3. For procedural issues, it is generally recognized that the Chinese Civil Procedural Law , the Chinese Arbitration Law and related judicial interpretations, as well as the arbitration rules of the selected arbitration institutions will be applied in China seated arbitrations. However, instead of a direct application of rules of the selected arbitration institutions, the currently effective arbitration rules of CIETAC (CIETAC Rules) gives an implication that arbitration rules selected by the parties by agreement shall prevail unless the agreement violates mandatory procedural provisions.
4. For recognition and enforcement of the awards made in China, the governing laws are the Chinese Civil Procedural Law, the Chinese Arbitration Law and related judicial interpretations. The Number 5 Circular of the Supreme Court of China in 1987 (the Circular) is to be applied specifically for the recognition and enforcement of foreign arbitral awards. Application of the Circular will be further discussed in this article.

India
In the Indian legal system in an arbitration containing a foreign element, there are three different systems of law which govern the arbitration :
1. The law governing the substantive law of the contract which is the law governing substantive issues in dispute in the contract. Also referred to as “substantive law”, “applicable law”, or “proper law of the contract”.
2. The law governing the existence and proceedings of the arbitral tribunal , which is the law governing the conduct of the arbitration proceedings. It is also referred to as the “curial law” or the “lexarbitri”. This is the law which is derived from the seat of arbitration.
3. The law governing the recognition and enforcement of the award is the law which governs the enforcement, as well as filing or setting aside of the award and is also the law which governs the arbitrability of the dispute.
Furthermore, in absence of any other stipulation in the contract, proper law is the law applicable to the arbitral tribunal itself . Also the lexarbitri and the law governing the recognition and enforcement of the award are one and the same in absence of an intention/stipulation to the contrary . The place of the arbitration generally specified in a contract determines the seat of arbitration unless contrary intention is apparent from the contract.
In the Indian legal system, an International Commercial Arbitration is defined as an arbitration arising from a legal relationship which must be considered commercial, where either of the parties is a foreign national or resident or is a foreign body corporate or is a company, association or body of individuals whose central management or control is exercise in some other country, or a government of a foreign country .
An International Commercial Arbitration may either be seated in India, or be seated in a foreign country, and this article focuses on International Commercial Arbitrations seated only in China. The implication of the Chinese seat is that Part I of the Arbitration and Conciliation Act, 1996 (the Indian Act), which is the curial law in India, is excluded for such arbitrations, barring certain exceptions discussed later.

INTERIM RELIEF FROM THE COURT

The mode of obtaining Interim Reliefs would vary depending on the seat of arbitration, as already explained above.The nature of interim relief sought by the parties may vary based on the facts and circumstances of the dispute. In certain situations the effective provision of interim reliefs may involve directions to third parties also.

China
It is generally recognized by the Chinese law that the parties to the arbitration may apply for preservation of property or evidence as interim remedies before or during the arbitration. The CIETAC Rules provide a new mechanism for the interim reliefs under which the parties, in addition to the right to apply for the aforementioned preservations, may also apply for emergency relief pursuant to the CIETAC Emergency Arbitrator Procedures.

Article 81 and Article 101 of the Chinese Civil Procedural Law lay down the provisions on the pre-arbitration preservation of property/evidence. Such preservation is to be applied by the interested party directly with the court only if the legitimate right of the interested party might be irreparably damaged, or the evidence might be destroyed or difficult to obtain later on due to an urgent situation. Specific rules on the pre-arbitration preservation of property include a compulsory security for the preservation to be provided by the applicant, and a strict timeline of 30 days to formally file the arbitration application after enforcing the preservation.

Article 68 of the Chinese Arbitration Law and Article 272 of the Chinese Civil Procedure Law respectively prescribes on the preservation during a foreign-relate arbitration. Unlike the pre-arbitration preservation proceedings, both provisions require the application to be filed with the foreign-related arbitration institution first and forwarded to the court by the arbitration institution afterwards.

India
In India, Section 9 of the Indian Act governs the power of the courts to grant interim relief. It is based on Article 9 of the UNCITRAL Model Law . Under Section 9 of the Indian Act, a party is permitted to apply to Court for certain interim measures, before, during or after making of the award by the Tribunal. Although Section 9 is a part of Part I of the Indian Act, owing to a recent amendment , the position has been substantially changed. Before the amendment of 2015, the law with respect to seeking interim relief from court was governed by a judgment of the Supreme Court of India. The judgment clearly laid down that Part I of the Arbitration and Conciliation Act (of which Section 9 is a part) would be inapplicable to any foreign seated arbitration. However, the 2015 amendment, in effect, nullifies the law laid down in BALCO to a limited extent and holds that even in an International Commercial Arbitration having a foreign seat, a party can approach Indian courts under Section 9 and get appropriate relief. The modification made by the amendment in case of Foreign Seated Arbitrations is a welcome change. However, from the scheme of the Act it is clear that Sections 9, 27 and 37(1) (a) and 37 (3) of the Act would apply only to arbitrations having seat in such countries with which India has reciprocal arrangements in terms of the Act.
Therefore a Section 9 remedy would be available for a Chinese seated arbitration, only if the arbitration has been commenced after the coming into effect of the amending act .

The nature of reliefs sought under Section 9 are generally for protection, preservation or interim custody of goods, assets, properties, securing the amounts in dispute, appointment of interim receivers etc.
This provision gives a huge relief to parties in cases where assets of parties to the Chinese seated arbitration are located in India and there is a fear of disposal. Similarly, the Appeal against an Order passed in a Petition filed under Section 9 would also lie to Indian courts only as per the amendment .

APPLICATION FOR APPOINTMENT OF ARBITRATORS

The procedure for appointment of arbitrators in both territories is once again dependent upon the seat of arbitration. A person of any nationality may be an arbitrator, unless otherwise agreed by the parties.

China
Section 2 “Composition of the Arbitral Tribunal” of the Chinese Arbitration Law sets forth the general provisions on appointment of arbitrators. Each party can select or authorize the chairman of the arbitration commission to appoint an arbitrator, whereas the third arbitrator, as the presiding arbitrator of an arbitral tribunal composed of three members, or the arbitrator of a sole-arbitrator tribunal, is to be jointly selected by the parties or appointed by the chairman of the arbitration commission jointly authorized by the parties.
a. A more specific appointment process is regulated by the rules of the selected arbitration institution. The CIETAC Rules require the arbitrators to be appointed from the Panel of Arbitrators provided by CIETAC, and certain factors, e.g. the applicable law, the seat of arbitration, the language of arbitration, the nationalities of the parties shall also be taken into consideration for the appointment.

India
The appointment of Arbitrators in India is governed by Section 11 of the Indian Act, Article 11 being the concomitant provision of the UNCITRAL Model Law. As far appointment of Arbitrators in a Chinese seated Arbitration is concerned, Part I of the Indian Act has no application and there is no exception carved out in the act itself. In these cases, it is the domestic law of China which would be relevant, as explained above.

The only relief on this front which a party can obtain in the case of a Chinese seated arbitration is, that incase an Indian court is seized of a matter in respect of which an arbitration agreement exists, it can refer the parties to arbitration .

APPLICATION FOR CHALLENGING/ENFORCEMENT OF THE AWARD

The law governing the enforcement/challenge to the award is extremely relevant, and especially so, in the case of an International Commercial Arbitration. This is because an award remains a mere dead letter until it can be enforced in the relevant country and compliance can be ensured.

China
The enforcement/challenge to the award of foreign-related arbitration made by a Chinese arbitration institution is governed by the Chinese Arbitration Law, the Chinese Civil Procedural Law and the respective judicial interpretations. The Circular is applied, upon China’s reservation statement of the New York Convention , in recognition and enforcement of awards made in territory of another state, or awards not considered as domestic awards in China.

According to Article 70, Article 71 of the Chinese Arbitration Law and related provisions of the Chinese Civil Procedure Law, the award of a foreign-related arbitration made by a Chinese arbitration institution can be applied with the Chinese court for enforcement once the award comes into effect. Challenges to the award can be filed by either party within a statutory period. More specifically, the court can rule to cancel the award or not enforce the award upon the request of the entitled party, provided that the award is proved to meet one of the following circumstances.

1. No written arbitration clause is included in the disputed contract or no written arbitration agreement has been reached subsequently.
2. The respondent was not served with the notice of appointing the arbitrator or attending the oral hearings, or was unable to give statement due to reasons other than the respondent’s own fault.
3. Formation of the arbitral tribunal or the arbitration proceedings violated the arbitration rules;
4. The subject matter of the arbitration exceeded the scope of the arbitration agreement or the arbitral authority of the arbitration institution; or
5. The court determines that execution of the award will violate the social and public interest.
Another type of arbitral award is the award of a China seated arbitration made by a foreign arbitration institution. The Chinese law has no explicit provisions on the recognition and enforcement of this type of award, but in certain cases where ICC awards made in China were reviewed by the Chinese courts for recognition and enforcement, such awards were identified as “awards not considered as domestic awards” and reviewed through application of the New York Convention .

India
In an arbitration seated in a foreign territory, Part II of the Indian Act is applicable. Part II of the Act deals with enforcement of certain foreign awards in India. These awards are either awards passed in New York Convention Territories, or Geneva Convention Territories, China being a New York Convention Country.In 2012, the government of India declared that the People’s Republic of China, including the Hong Kong Special Administrative Region and the Macau Special Administrative Region, is a territory to which the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“New York Convention”) applied for the purpose of enforcement of foreign arbitral awards in India. The formal notification was published in the official Gazette of India.
Section 44 of the Indian Act provides that in order for a foreign award to be recognized as such under Part II, Chapter I (New York Convention Awards) certain conditions need to be fulfilled, which are as under:-
i. The territory should be signatory to the New York Convention
ii. The Indian Central Government should have notified in the Official Gazette that it has reciprocal provisions with such a territory.
Since, in the case of China, both the above conditions are met, the awards are directly recognizable in India and no separate mechanism needs to be followed.

Section 47 of the Indian Act provides that a party while applying for the enforcement of a foreign award, apart from the procedural aspects of certification and authenticity, has also to produce such evidence as is necessary to prove that the award fulfils the conditions as stated above.

Furthermore, Section 48 of the Indian Act provide the grounds to challenge the enforcement of a foreign award which include party incapacity, invalidity of agreement under the law of the seat, absence of proper notice to the party regarding appointment, or inability of a party to represent his case, non arbitrability of the dispute, matters beyond scope of arbitration, wrong composition of tribunal, or that the award has not become binding as per the law of the seat, or is against the public policy of India.

Once the award has survived the challenge and the Court is satisfied that the foreign award is enforceable under this Chapter, the award shall be deemed to be a decree of that Court . After this stage it can be executed under Order XXI of the Code of Civil Procedure, 1908 in the same manner as a decree from an Indian court.

APPEALS ARISING FROM ORDERS OF INTERIM RELIEFS OR ORDERS OF ENFORCEMENT OF FOREIGN AWARDS

China
In China, appeal to the order of interim reliefs given by a court is only allowed in the form of application with the court for a review in accordance with Article 108 of the Chinese Civil Procedure Law. Enforcement of the order will not be suspended during the court review period.

Appeal to the order on not enforcing an arbitral award is prohibited by Article 478 of the Judicial Interpretation of Chinese Civil Procedure Law . Instead, the parties may choose to re-enter into a written arbitration agreement and submit the dispute to arbitration or bring a lawsuit to the competent court. In scenario of a foreign award, the order on denial of recognition and enforcement of the foreign award by the court should be subject to a mandatory double review by the Higher Court and the Supreme Court and the final order cannot be appealed neither.

India
It follows from the discussion above that an interim relief is given under Section 9, then automatically an appeal against such Orders would lie to Indian Courts under Part I, Section 37 of the Indian Act. Similarly, in case an order of an Indian court in respect of a challenge to an award passed in China under Part II needs to be appealed, Section 50 of Act would become applicable and again the Appeal would lie in India.
However, in a scenario, where Indian courts have not been approached for execution/enforcement/challenge from the award passed in China, then Indian Courts would not have any role to play in the appeal process either.

Conclusion

To conclude it may be said, that the courts in both countries would play different roles in International Commercial Arbitrations seated in China. Firstly it needs to be determined which is the seat of arbitration and which is the curial law which is attracted. Thereafter for different remedies, different courts can be approached.

Contracts relating to foreign investments in Mainland China usually provide that any dispute arising between the parties should be settled by friendly negotiation, failing which the dispute should be referred to arbitration. Foreign related arbitrations in China are mainly administered by China International Economic and Trade Arbitration Commission (CIETAC), although many other arbitration commissions may accept foreign related arbitration cases.Moreover, the 2015 amendment has given more leeway to Indian courts as far as Interim reliefs are concerned, thus providing additional protection to China based parties vis-s-a-vis Indian players. In view of the above, India is fast becoming an arbitration and foreign investor friendly country.

Firms Profile

Singhania & Partners LLP
A sharp rise in international business transactions, Global bidding for contracts and Foreign direct investment many Companies have to deal with International Arbitrations. Parties that are signatories to international contracts often want to avoid using the home courts of one of the parties in order to ensure neutrality as well as unbiased decisions thus avoiding the problem faced due to unfamiliar or unpredictable local court procedures. Singhania and Partners LLP has strong experience in handling International arbitrations keeping the seat in India and outside India like Singapore, U.K, China, Switzerland, Canada and many more. The Firm also provides consultation at the time of negotiation of contracts to incorporate effective arbitration clauses. We conduct both institutional and ad hoc arbitrations. The firm is a member of TerraLex which is a premier network of law firms offices worldwide. The membership of TerraLex provides the firm with trusted advisors in more than 153 jurisdictions in cross-border matters.

ZhongLun Law Firm
ZhongLun’s litigation and arbitration team boasts a wealth of experience in handling litigation, arbitration, enforcement and all kinds of emergencies in relation thereto, and is without a doubt a cut above other contenders in the industry.

ZhongLun is recognized as one of the firms appearing in the largest number of cases before the Supreme People’s Court of China. We also have extensive experience when it comes to arbitration cases before China International Economic and Trade Arbitration Commission (CIETAC), Hong Kong International Arbitration Centre (HKIAC), Singapore International Arbitration Centre (SIAC), Beijing Arbitration Commission, Shanghai Arbitration Commission and Shenzhen Arbitration Commission. In addition, more than ten of our partners serve as arbitrators for HKIAC, CIETAC, Beijing Arbitration Commission and other local arbitration commissions.

Our broad client base encompasses both domestic clientele and a great number of industrial heavyweights from abroad, whom are deeply impressed with and praise us for our excellent language abilities, communication skills, expertise, commitment and seamless cooperation.

International Commercial Arbitration for parties in India and UK

International Commercial Arbitration for parties in India and UK

(This article is co-authored by International Commercial Arbitration lawyers of Singhania & Partners LLP, India and Reynolds Porter Chamberlain, UK)


28/2/2018  

Meet the authors

This article examines the core components of International Commercial Arbitrations between Indian and overseas parties, where the seat of arbitration is in London. It further discusses the issues faced by foreign companies trying to obtain relief and remedies in India and England, as well as addressing enforcement mechanisms.

For context, a clause providing for a London seat and an Indian-law governed arbitration might look as follows:

Any disputes arising out of or in connection with this contract, including any question regarding the existence, validity or termination, shall be referred to and finally resolved by arbitration to be conducted by a Sole Arbitrator under the LCIA Rules, which rules are deemed to be incorporated by reference into this clause.

The seat of arbitration shall be London

The language to be used in the arbitral proceedings shall be English

A growing number of international contracts provide for disputes to be referred to arbitration. In light of this trend, several countries (including India) have undertaken a rapid expansion and development of their arbitral law to make it more accessible and flexible for foreign investors. Since one of the purposes of arbitration is more or less to provide for greater party autonomy, parties are generally more free to agree the procedures governing their arbitrations, including the seat of that arbitration.The governing law of the contract would be the substantive law of India

Principally, arbitrations are either institutional (i.e. adhering to institutional rules), or ad-hoc (i.e. governed by the statutory regime of the arbitral seat).  Certain mandatory (statutory) rules still apply to an arbitration governed by institutional rules. Popular institutions that provide a procedure for international arbitration are the London Court of International Arbitration (LCIA), the International Chamber of Commerce (ICC), and the Singapore International Arbitration Centre (SIAC).


[1]
References to London-seated arbitrations throughout this article are a shorthand for England and Wales.  In the United Kingdom, there are two principal (and distinct) legal systems: England and Wales (which also applies in large part to Northern Ireland), and Scotland.  This article does not address questions of Scottish law.This article addresses the basic procedural framework in India and England.

PROCEDURAL LAW GOVERNING AN ARBITRATION

The seat of arbitration carries with it certain implications regarding the procedural law which governs the arbitration proceedings. It is therefore important to understand the procedural framework in both India and England.

London

Statute

Where the seat of arbitration is London, the Arbitration Act 1996 (The English Act) will apply certain rules to that arbitration. These are split into three main elements:

  1. The governing law of the dispute:
    • International parties to sophisticated commercial contracts typically choose the law that governs their dispute (which can be a different law to that of the seat). The English Act requires that the arbitral tribunal determine these disputes under the law chosen by the parties. If the parties have not chosen a governing law, a London-seated tribunal will apply conflicts of law rules to determine the governing law. It is therefore strongly advisable to provide for the governing law in the agreement.
    • The parties can also agree that the tribunal decides the dispute under ‘Lex Mercatoria‘ (a body of transnational trade and commercial principles) or ex aequo et bono(where the tribunal considers solely what would be a “fair and equitable” resolution). However, these two governing law choices are rare due to their inherent uncertainty, and are generally not recommended.
  1. The procedural law of the arbitration:
    • The English Act enables parties to determine the applicable procedural rules to govern the arbitration. This is often done by reference to the rules of an arbitral institution.
    • In the absence of agreement between the parties on the procedural rules, certain “default” rules will apply. In short, the tribunal: (i) shall act fairly and impartially, giving each party a reasonable opportunity of putting their case and dealing with that of his opponent; and (ii) shall adopt procedures suitable to the particular case, avoiding unnecessary delay and expense so as to provide a fair means to resolve the dispute.
  1. “Mandatory” rules: despite having the freedom to choose both the governing and procedural law applicable to the dispute, certain mandatory rules under the English Act will still apply to London-seated arbitrations (which is limited, England being an arbitration-friendly jurisdiction). These relate primarily to the powers of the English Courts to intervene in an arbitral dispute, the immunity of the arbitrator, and enforcement.

India

In the Indian legal system in an arbitration containing a foreign element, there are three different systems of law which govern the arbitration[1]:-

  1. The law governing the substantive law of the contract. This is also referred to as “substantive law”, “applicable law”, or “proper law of the contract”.
  2. The law governing the existence and proceedings of the arbitral tribunal, which is the law governing the conduct of the arbitration proceedings. It is also referred to as the “curial law” or the “lex arbitri”. This is the law which is derived from the seat of arbitration.
  3. The law governing the recognition and enforcement of the award is the law which governs the enforcement, as well as filing or setting aside of the award.

In the absence of any other stipulation in the contract, the proper law is the law that the arbitral tribunal itself will apply.  The same applies to the lex arbitri and the law governing recognition and enforcement, in absence of an intention/stipulation to the contrary. The seat of the arbitration specified in a contract generally determines the seat of arbitration, unless clear contrary intention is apparent from the contract.

In the Indian legal system, under the Arbitration and Conciliation Act 1996 (the Indian Act) an International Commercial Arbitration is defined as an arbitration arising from a legal relationship which must be considered commercial, where either of the parties is a foreign national or resident or is a foreign body corporate or is a company, association or body of individuals whose central management or control is exercise in some other country, or a government of a foreign country.

An International Commercial Arbitration may either be seated in India, or be seated in a foreign country. For London-seated arbitrations, the provisions of Part I of the Indian Act are excluded for such arbitrations, barring certain exceptions.

INTERIM RELIEF FROM THE COURT

In certain circumstances, in London-seated arbitrations interim relief is available from the English courts or the presiding institution.

London

In England, a court can only intervene in arbitration proceedings to the extent expressly permitted by the English Act.

The English Act sets out the English court’s powers that may be available in support of arbitration. Unless otherwise agreed by the parties (for example by choosing institutional framework), the court has the power to make the following orders:

  1. Taking evidence from witnesses
  2. Preserving evidence
  3. Relating to property which is the subject of the proceedings –
    • For the inspection, photographing, preservation, custody or detention of the property, or
    • Ordering that samples be taken from, or experiment conducted upon, the property;
  4. In relation to the sale of any goods the subject of the proceedings
  5. Granting an interim injunction or the appointment of a receiver

One of the most important powers of the Court is the granting of a freezing order in respect of assets, to avoid dissipation prior to the award being granted and as an aid to enforcement.

India

In India, the Indian Act governs the power of the courts to grant interim relief. It is based on Article 9 of the UNCITRAL Model Law[1]. Under Section 9 of the Indian Act, a party is permitted to apply to an Indian court for certain interim measures in support of an Indian (or, to a more limited extent, London-seated arbitration), before, during or after making of the award by a tribunal.  The law in this area has recently changed[2] to expand the scope of interim relief to foreign-seated arbitrations.  Under the terms of the amended Indian law, interim relief is only available if the arbitration has commenced after 23 October 2015.

The types of interim relief sought under Section 9 are similar to those in the English Arbitration Act, namely the protection, preservation or interim custody of goods, assets, properties, securing the amounts in dispute, and the appointment of interim receivers.

This is a huge step forward, and should give commercial parties more comfort, especially in cases where assets of parties to a London-seated arbitration are located in India and there is a fear of disposal.

APPLICATION FOR APPOINTMENT OF ARBITRATORS

The procedure for appointment of arbitrators in both territories is once again dependent upon the seat of arbitration.

London

The parties to an arbitration are free to agree on the procedure for appointing arbitrators. In the absence of such a choice, the English Act provides default appointment provisions as follows:

  1. The parties will jointly a sole arbitrator (if the parties wish to have a sole arbitrator)
  2. If the parties wish to have two arbitrators, each party will appoint one arbitrator
  3. If the parties wish to have three arbitrators:
    • Each party will appoint one arbitrator
    • The two appointed arbitrators will appoint a third arbitrator as the chairman of the tribunal

Unless the parties agree otherwise, if one party fails to appoint an arbitrator, the other party may give notice in writing to the other party to propose to appoint their arbitrator to act as sole arbitrator.

If the processes to appoint an arbitrator fail for any reason, the parties are free to agree what is to happen. In the absence of such agreement, any party to the arbitration agreement may apply to the English court for the following:

  1. Directions as to making any necessary appointments to the tribunal
  2. Directions that the tribunal must be constituted by the appointments that have already been made
  3. To revoke any appointments already made
  4. For the court to make any necessary appointments itself

By way of comment, the better course is to provide for the number of arbitrators, time frame and process for appointment. Delay may otherwise occur to the disadvantage of one or other of the parties.

India

The appointment of Arbitrators in India is governed by Section 11 of the Indian Act. As far appointment of arbitrators in a London-seated arbitration is concerned, English procedural law applies (as explained above).  There are only very limited exceptions to this rule under Indian law.

APPLICATION FOR ENFORCEMENT / CHALLENGE OF THE AWARD

The law governing the enforcement/challenge to the award is extremely relevant, and especially so in international commercial arbitration. This is because an award remains a mere “dead letter” until it can be enforced in the relevant country and compliance with its terms can be ensured.

London

England, along with another 156 countries, is a signatory to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958) (the New York Convention).  Enforcement of arbitral awards internationally under the New York Convention is said to be one of the significant advantages of international arbitration as a means of dispute resolution.

Section 66 of the Arbitration Act governs enforcement of arbitral awards. With the court’s permission, any award made by a tribunal pursuant to an arbitration agreement may be enforced in the same manner as a judgment or order of the English court. Where the court gives permission, judgment can be made in the terms of the arbitral award. Therefore, the party wishing to enforce an award must apply for permission. The court may refuse permission if the person against whom the award is sought to be enforced can show that the arbitral tribunal lacked “substantive jurisdiction” to make the award.

Under S.101 of the Arbitration Act, an award made by an arbitral tribunal within a New York Convention state (which includes India) shall be recognised as binding on the parties to the arbitration. A New York Convention award may, with the permission of the court, be enforced in the same manner as a judgment or order of the court to the same effect.

An arbitration award can be challenged in three ways:

  1. Under S.67 of the Arbitration Act, the “substantive jurisdiction” of the tribunal can be challenged. Under a S.67 application, a court may confirm the award, vary the award of set aside the award in whole or in part
  2. Under S.68 of the Arbitration Act, an award may be challenged on the ground of “serious irregularity affecting the tribunal”, the proceedings or the award. The court may send the award to the tribunal for reconsideration, set the award aside in whole or in part, or declare the award to be of no effect in whole or in part.
  3. Under S.69, a party to the arbitration may appeal on a question of law arising out of an award made in the proceedings. The agreement of all parties and permission of the court is needed to appeal under S.69. The court may confirm the award, vary the award, remit the award for reconsideration by the tribunal or set aside the award in whole or in part.

A party may lose its right to object before the tribunal or the court on objections if a party takes part, or continues to take part, in the arbitration without making such an objection. The party will not lose this right if they can show at the time of taking part, or continuing to take part, in the arbitration, they did not know and could not “with reasonable diligence” have discovered the grounds for the objection.

Institutional rules, such as the LCIA and ICC rules, preclude appeals except to a limited extent, and research suggests that challenges to awards are infrequently upheld.

India

In an arbitration seated in a foreign territory, Part II of the Indian Act is applicable. Part II of the Act deals with enforcement of certain foreign awards in India. These awards are either awards passed in New York Convention Territories, or Geneva Convention Territories, England being a New York Convention Country.

Section 44 of the Indian Act

provides that in order for a foreign award to be recognized as such under Part II, Chapter I (New York Convention Awards) certain conditions need to be fulfilled, which are as under:-

  1. The territory should be signatory to the New York Convention
  2. The Indian Central Government should have notified in the Official Gazette that it has reciprocal provisions with such a territory.

Since, in the case of England, both of these conditions are met, the awards are recognized as Foreign Awards in India and the enforcement mechanism provided under Part II of the Indian Act needs to be followed.

Section 47 of the Indian Act provides that a party must produce such evidence as is necessary to prove that the award satisfy the above conditions.

Furthermore, Section 48  of the Indian Act provide the grounds to challenge the enforcement of a foreign award which include party incapacity, invalidity of agreement under the law of the seat, absence of proper notice to the party regarding appointment, or inability of a party to represent his case, non-arbitrability of the dispute, matters beyond the scope of the arbitration, the wrong composition of tribunal, or that the award has not become binding as per the law of the seat, or is against Indian public policy.

Once the award has survived any challenge and the Indian court is satisfied that the foreign award is enforceable under this Chapter, the award shall be deemed to be a decree of that court and executed in the customary manner.

APPEALS ARISING FROM ORDERS OF INTERIM RELIEF OR ORDERS OF ENFORCEMENT OF FOREIGN AWARDS

London

As discussed above, Section 44 of the Arbitration Act provides that the courts have the same powers in relation to arbitration proceedings, for certain matters, as it has in legal proceedings.  An order for interim relief may only be appealed at first instance with the court’s permission.

There are several grounds to resist enforcement of a New York Convention award, namely that:

  1. a party to the arbitration agreement was (under the law applicable to him) under some incapacity;
  2. the agreement to arbitrate itself was not valid under the governing law;
  3. the party was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings or was otherwise unable to present his case;
  4. the award deals with matters beyond the scope of the submission to arbitration;
  5. the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties or the procedural law of the; or
  6. the award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the law of which, it was made.

The party seeking to resist enforcement of the award under these grounds bears the burden of proof before the court. However, successful challenges to New York Convention awards are rare, as the courts are generally supportive of the arbitration process.

India

If interim relief is granted by an Indian court under Section 9, there is an automatic right of appeal to the higher Indian court. This also applies to enforcement challenges.

However, where the Indian courts have not been approached for an execution, enforcement or other challenge arising from an English award, then the Indian courts will not play a role in the appeal process.

Conclusion

India is moving towards becoming an arbitration and foreign investor-friendly country. Indian and English courts play different roles in support of London-seated arbitrations, depending on the make-up of the arbitration procedure. The starting point is for the parties to choose the seat of arbitration, following which the established frameworks described above can be built. The critical point to remember is that a comprehensively drafted clause, taking into account the relevant advantages and disadvantages of respective legal systems, is paramount.

Firms Profile

Singhania & Partners LLP

A sharp rise in international business transactions, Global bidding for contracts and Foreign direct investment many Companies have to deal with International Arbitrations. Parties that are signatories to international contracts often want to avoid using the home courts of one of the parties in order to ensure neutrality as well as unbiased decisions thus avoiding the problem faced due to unfamiliar or unpredictable local court procedures. Singhania and Partners LLP  has strong experience in handling International arbitrations keeping the seat in India and outside India like Singapore, U.K, China, Switzerland, Canada and many more. The Firm also provides consultation at the time of negotiation of contracts to incorporate effective arbitration clauses. We conduct both institutional and ad hoc arbitrations. The firm is a member of TerraLex which is a premier network of law firms offices worldwide. The membership of TerraLex provides the firm with trusted advisors in more than 153 jurisdictions in cross-border matters.

RPC LAW

It can be a fast, cost-effective, flexible and confidential alternative to court proceedings.

It can also be complex. That’s why, with our International Arbitration service, lawyers with the experience and international outlook you need are on hand to guide you through the process. We know how the arbitral institutions across the globe operate. Equally, we understand multicultural nuances and have the sensitivity needed to bring a dispute with an overseas counterparty to a satisfactory conclusion.

Hailed by the directories as “top-notch performers”, our International Arbitration team works from our offices in London, Hong Kong and Singapore, handling arbitration cases across the world.

With this global perspective, we’re ideally placed to help you resolve disputes through bodies such as the LCIA, ICC, ICSID, SIAC, CIETAC, HKIAC, DIFC, trade associations such as FOSFA, GAFTA, LMAA , SICOM and WIPO, as well as ad hoc arbitrations including ARIAS, CIArb and UNCITRAL rules.

Where we need to work alongside lawyers in other jurisdictions, we are part of the TerraLex network and have access to over 150 law firms in 100 jurisdictions across the globe.