Arbitration is becoming increasingly prominent in India’s legal sector, with courts and the government continuing to provide support. Lawyers say that while certain challenges still remain, the sector will continue to grow in strength.
ALB: The recent QMUL Survey ranked Singapore as the most preferred seat for international arbitrations. Do you think this is in part a result of the ever-increasing arbitrations involving Indian parties?
“The government has come through as responsive and has shown intent for India to be recognized as an arbitration-friendly jurisdiction. Courts too have since adopted a hands-off approach towards foreign arbitral awards.”-RAJAT MALHOTRA, partner, Laware Associates
RAJAT MALHOTRA: There is no disputing that the centre of the business world is shifting east. The White & Case-QMUL survey’s finding that the “balance of power: in the arbitration world is similarly shifting from Europe to Asia should thus not come as a surprise. In fact, it is not only Singapore – which shares top honours with London - Hong Kong, too, has taken substantial strides as a seat of choice. Numbers will show that India has dominated the Singapore Arbitration Centre’s (SIAC) caseload, and as of 2017, Indian parties were responsible for close to one-fifth of SIAC’s cases. There is no doubting the fact that increase in disputes concerning Indian parties has led to Singapore’s rise to the top. However, credit must be given where due: Singapore, with its robust legal system and arbitration and commerce-friendly perception, deserves to be at the top and SIAC deserves the caseload it receives. We need an Indian seat and arbitral institution rising to join in sharing this ever-increasing caseload.
MANISHA CHAUDHARY: Reasons such as neutrality and geographical advantage as well as factors like well-organised political and legal infrastructure with adequate skills and efficiency make Singapore a great venue and seat. Singapore’s regular reviews in the rules governing arbitration proceedings, enhancing the range, expeditious disposal of cases, as well as adequate opportunities to the young arbitrators make it a sought-out seat of arbitration. Further, most parties in India incorporate SIAC clauses in their arbitration clauses/agreements due to insistence to Singapore as a seat of arbitration by foreign companies who enter into business relations with Indian companies keeping in view the foregoing factors and in fact, recent trends involve sophisticated Indian parties on both sides also choosing Singapore as a seat.
VAIBHAV GAGGAR: While several Indian parties are involved in arbitrations in Singapore, and as a matter of fact a number of arbitration agreements/clauses in agreements provide Singapore as the venue of arbitration, however, it may be a bit of a stretch to believe that Singapore is the most preferred seat for international arbitrations because of increasing arbitrations involving Indian parties only. Singapore has a number of factors going in its favour, which have led to it becoming a very popular seat for arbitration. Apart from the obvious pro-business environment of the country, SIAC arbitrations are efficiently managed, with a well-reasoned and thought out procedure, robust infrastructure support, some very fine senior as well as junior-level arbitrators and the lack of interference by courts generally in Singapore. The rules, quality and speed of services and offerings, make Singapore arbitration-friendly. Even from an affordability perspective, the proceedings in Singapore are probably not as expensive as LCIA or ICC. In short therefore, while the Indian market provides an important source of disputes for helping Singapore becoming one of the more preferred seats for arbitration, however, it has limited impact according to me as Singapore is very much on the global map now.
ALB: In your opinion, have the continued amendments to the Arbitration & Conciliation Act positively impacted the world’s view of India as an arbitration-friendly jurisdiction?
MALHOTRA: Repeated changes to laws are usually not desirable. However, in this case, the amendments since 2015 have been seen as a continuing attempt at improvement. The legislature has sought to improve the system, codify the settled principles, right the wrongs, shorten the period for adjudication and ensure clarity. The Amendment Act of 2016 was lauded as a giant step in the correct direction across the spectrum. The amendments of 2019 and 2020 have tweaked the law-basis learnings from the 2015 amendments and feedback from users. The government of India has come through as responsive and has shown intent for India to be recognised as an arbitration-friendly jurisdiction. Courts too have since adopted a hands-off approach towards foreign arbitral awards. All these are welcome steps. However, have these steps altered India’s perception in the world of international arbitration — not yet. There’s still a long way to go and the intent must now translate.
“With the recent amendments, there has been a significant shift towards pro-enforcement and strict adherence to the principle of judicial restricted interference with arbitral awards.”
-MANISHA CHAUDHARY, managing partner, UKCA and Partners
CHAUDHARY: In my opinion, the amendments brought in the year 2019 and 2021 really helped to upgrade the world’s view of India as an arbitration-friendly jurisdiction. Efforts of limiting court intervention, industry-specific approach, qualification of experts and certified arbitrators, regulations to appoint international arbitrators, time-bound comple-tion, cost-effectiveness, etc. along with the creation of the Arbitration Council of India (ACI), apart from the tremendous amount of research and liaising for policy change being done by various stakeholders, is boosting the confidence of both global and local parties in the arbitration proceedings, especially when compared to litigation. However, the ACI (and other stakeholders) have their task cut out for them, including formulating policies and most importantly being the maintenance of a depository of arbitral awards made in India and abroad.
GAGGAR: While some of the recent amendments to the act have brought about a positive view of India, we are still a work in progress to gain our rightful place in the global arbitration world order. Impartiality, fairness, professionalism, expertise and understanding of the subject matter of disputes, strict timelines, non-interference of orders of the tribunal by the courts and value for money for conducting the proceedings efficiently are the cornerstone on which any serious arbitration venues are built. Many of the amendments are definitely in the right direction. Provisions such as confidentiality and no automatic stay have helped tremendously. Clearly, more teeth has been given to the tribunals now and the amendments to the fifth and the seventh schedules will certainly go a long way in bringing about confidence in the fairness of the proceedings.
ALB: Enforcement of foreign arbitral awards has always been a problematic area under Indian law. With the concept “public policy of India” being given an explanation through the Amendment Act of 2015, has your experience regarding enforcement of foreign awards changed for the better?
MALHOTRA: The adding of Explanations in Section 48(2)(b) to detail the meaning and limits of “public policy of India” has been one of the most important amendments ushered in by the Amendment Act of 2015. While the position had been clarified by the Supreme Court in Renusagar Power Company vs General Electric Company in 1993, the transgressions continued and newer tangential grounds continued to be added as in ONGC vs Saw Pipes Limited (patent illegality on the face of the award). This led the Law Commission to discuss the issue in detail, resulting in incorporation of the term “fundamental policy of India law” (as christened by the SC in Renusagar) in the statute. Further, now it has been clarified that review on “fundamental policy of Indian law” i.e. on “public policy of India” shall not entail review on the merits of the dispute. Another important amendment was the deletion of “contrary to the interest of India” as a ground to resist enforcement. These amendments have together resulted in clarity of legal position and effect of all tangential jurisprudence from prior to 2015 has been washed away.
CHAUDHARY: With the recent amendments, there has been a significant shift towards pro-enforcement and strict adherence to the principle of judicial restricted interference with arbitral awards. While dealing with the term “public policy of India”, it is laudable that the meaning given to the term through an Explanation in the 2015 Amendment Act has been narrowed down. The definition of public policy being precisely defined under the amended legislation along with judicial activism and policy liaising has significantly reduced the interference by the Indian courts in the execution of foreign awards. Marking a significant shift from the decision of the Supreme Court in Renusagar, which is considered as an authority on the subject, the courts have now gone much further and limited the scope of their intervention with foreign awards. While dealing with the challenge to a foreign award, in Vijay Karia vs Prysmian Cavi E Sistemi Srl, the Supreme Court held that it was not permitted to review the merits of the decision and that an enforcing cannot interfere by second-guessing an arbitrator's interpretation of the agreement under the guise of public policy. Thus, it can be concluded that awarding a precise definition to the term “public policy” has proved to be beneficial for India in enforcing foreign awards as well as at the same time for establishing itself as a pro-arbitration regime across the globe.
“Clearly, more teeth has been given to the tribunals now and the amendments to the fifth and the seventh schedules will certainly go a long way in bringing about confidence in the fairness of the proceedings.”
-VAIBHAV GAGGAR, partner, Gaggar & Partners
GAGGAR: The arbitration regime in India has undergone a sea change with the Amendment Act of 2015. The 2015 amendment clarified that an award can only be set aside on the ground that it is against the public policy of India, which means, – (i) the award is vitiated by fraud or corruption; (ii) it is in contravention to the fundamental policy of Indian law; (iii) it conflicts with basic notions of morality and justice. Most importantly, the defence against a domestic arbitral award on the ground of an award being “patently illegal” cannot anymore be taken for challenging the enforcement of an award rendered in international commercial arbitration. The challenge is restricted only to the three categories mentioned above. The judgments of the Supreme Court in Ssangyong Engineering & Construction Co. vs National Highway Authority of India, Venture Global Engineering LLC vs Tech Mahindra, and the most recent one in PASL Wind Solutions vs GE Power Conversion India have also set to clear the scope and narrow the ambit of “public policy” as it was quite open-ended as a ground of challenge earlier. The judgment in the PASL case specially has comprehensively set to rest some of the left-over ambiguities, demonstrating once again India’s pro-arbitration approach and recognising a seminal principle of private law that in absence of public harm, party autonomy ought to be upheld.
ALB: Do you believe that Delhi High Court in Future Retail vs Amazon Inc has correctly opined on enforcement of emergency arbitration awards?
MALHOTRA: In Future Retail vs Amazon, the Delhi High Court in two separate judgements ruled that - (a) an emergency arbitration, albeit foreign to the Arbitration and Conciliation Act, was not contrary to provisions of the act and thus the authority of the emergency arbitrator could not be invalidated merely because it did not strictly fall within the definition of “arbitral tribunal” under the act; and (b) the award of the emergency arbitrator was akin to a Section 17 interim measure passed by an arbitral tribunal, and hence enforceable as a decree of the court in India. While the matter is now before the Supreme Court, in my opinion both the judgments of the Delhi High Court are based on sound logic and settled legal position. Parties in the matter chose SIAC Rules to govern the conduct of their arbitration. For interim measures prior to constitution of the arbitral tribunal, the SIAC Rules give two options: To approach the concern court for relief or to apply to SIAC for appointment of an emergency arbitrator. Parties having chosen the SIAC Rules and then having appeared before the emergency arbitrator acceded to the jurisdiction of such arbitrator. The award passed is without doubt akin to interim measures by an arbitral tribunal, and it was both reasonable and progressive of the Delhi High Court to find such emergency award enforceable in the absence of anything specific to the contrary in the Act.
CHAUDHARY: I do believe that the Single Judge of the Delhi High Court’s decision to uphold the emergency arbitrator’s award in favour of Amazon was correct. The single judge ruled that the concept of the emergency arbitrator is not alien to Indian law. He adopted an expansive definition of Section 2(1)(d) of the Act and held that the authority of the emergency arbitrator could not be held to be invalid because it is not expressly defined under Section 2(1)(d) of the act. Further, it held that Section 17 of the Indian Arbitration Act 1996, which empowers an arbitral tribunal to grant interim reliefs, does not preclude or intimate that parties cannot agree to institutional rules which allow recourse to an emergency arbitrator. In the absence of a mandatory prohibition contained in the Arbitraion & Conciliation Act, or public policy constraints, the parties may agree to an arbitral procedure. However, I may not entirely agree with the rejection of the argument wherein the parliamentary committees’ recommendations and subsequent rejection of the same by the legislature was not paid heed to. Having stated the foregoing, in my personal opinion, the decision given by single judge is probably a good judgment. To dovetail the present response into the earlier question, if Singapore is a preferred seat of arbitration, then the Indian courts have to be alive to the process and mechanism employed in such jurisdictions including but not limited to the concept of an emergency arbitrator, the concept of which is an integral part of the SIAC, ICC rules and most major arbitration rules. Therefore, for an Indian court to take a draconian view and hold that award of the emergency arbitrator is not enforceable in India, it would essentially set at nought the attempts made in the last few years. The final judgment of the Supreme Court is awaited and let’s hope that the same is in sync with the global standards of arbitration and promotes India as a preferred seat.
GAGGAR: While the act does not contain any provision which provides any legal basis to “emergency arbitration” in India and the definition of “arbitral tribunal” under Section 2(1)(d) of the Arbitration Act, does not envisage or contain any enabling provisions regarding “emergency arbitrations;” however, the Delhi High Court (Single Judge) while adjudicating the dispute has adopted, and perhaps rightly so, the concept of “party autonomy” to be the governing factor to be considered in such a situation. By that measure, since the parties had mutually agreed to be governed by the SIAC rules, all the SIAC rules include emergency arbitration which forms the part of proceedings between the parties, unless the same is contrary to public policy or prohibited by any law in force would apply to the parties. It may be noted that in order to bring emergency arbitration within its regime, the 246th Law Commission had recommended adding the phrase “emergency arbitration” to Section 2(1)(d) of the act. The Single Judge took cognizance of the same and came to the conclusion that merely because the Law Commission recommendation has not been adopted yet, does not mean that it is illegal or not envisaged under the law. Once it is held that the arbitration has been validly instituted and the award is in the nature of an international commercial award, then I believe – at a prima facie level, of course – that the Single Judge was correct in enforcing the award, keeping in mind the dicta that enforcement of award could only be on the very limited grounds of “public policy.”
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