EASE IN INDIAN ARBITRATION: THE OUTLANDISH CASE OF OVERSEAS ARBITRATOR IN INDIA
– Niharika Verma
“For an arbitrator goes by equity of a case, a judge by the law, and arbitration was invented with the express purpose of securing full power of equity.”
In the year 2013, in A.K Balaji v. Union of India instance a question arises hitherto the Madras Court that even if the overseas arbitrators should be given permission to exercise or practice or layout their office in India. The case was pleaded in 2015 at the Apex Court and Hon’ble Court assign with the concern matter in 2018 vastly. The Court purified the definition which is given under section 2 (1) (f) of the Arbitration and Conciliation Act 1996. It was expounded that arbitration issue between the parties to the arbitration agreement should be known as “International Commercial Arbitration” if the matter is analogous to the conflicts, which may or may not be statutory, yet position at least one party regularly inhabits abroad.
The New York Convention will pertain to an agreement if it contain a foreign element or impression incriminate international trade and commerce, nevertheless such agreement doesn’t lead to overseas award. Multiple corporate and more parties favour the arbitral space in India and because of this numerous licit practitioners and white-collars from overseas come to India on wave in and wave out basis. This bestow escalation to significant issue, weather the white-collars from foreign land can guide Indian law or not. The Madras High Court decided that overseas law firm or a white-collar can guide on Indian Law barely if they obey with Advocates Act 1961 and Bar Council of India Rules.
The Hon’ble Apex Court has endeavor the matter and decided in the favour of Union of India. The paper clutch an irrational glance at the scope of Section 2 (1) (f) of the Arbitration and Conciliation Act, 1996 enable the International Commercial Arbitration to direct and layout their office in India. The paper seeks to scrutiny the issue with the aid of current cases and various views of the High Courts and pen pushers. Fundamentally the paper will aim to mark the issue of whether the overseas arbitrators or foreign firms are direct to execution and layout offices in India and guide on Indian Law.
Keywords: Domestic Arbitration; International Commercial Arbitration; Overseas Arbitration
CONSULTATION UNDERNEATH INDIAN ARBITRATION LAW
Purview of the section: according to the provision of section 11 of the Arbitration and Conciliation Act, 1996, the Chief Justice has unquestionable finite power related to appointment of arbitrator and lead arbitrator yet not in all demonstrations For instance. The bench can fabricate no appointment in the demonstration of correspondence for associating to 3 arbitrators. Yet the bench can provide indirect intervention by lodging a suit pigeonhole in defiance of the compliance.
As section 11 of the act says that Chief Justice can appoint a 3rd arbitrator who will be leading whether the further two arbitrator faded to come to a consent concerning 3rd arbitrator S.11 (4) (b) & (1) the two arbitrators or the concern party have a potential to reappoint a leading arbitrator in case the 1st appointee dismissed or refused to perform in the capabilities of leading arbitrator. The stratagem of the provision has been interpreted by G.P.MATHUR J. in the following words-
“Therefore, a combined reading of the various sub-section of S.11 of the Act show that the request to the Chief Justice for the appointment of an arbitrator can be made under sub-sections (4) and (5) of Section 11 where parties have not agreed on a procedure for appointing an arbitrator as contemplated by sub-section (2) of Section 11. A request to the Chief Justice for appointment of an arbitrator can also be made under sub-section (6) where parties have agreed on a procedure for appointment of an arbitrator as contemplated in sub-section (2) but certain consequential measures which are required to be taken in clause (a) or (b) of sub-section (6) are not taken or performed.”
CONSTITUTIONAL VALIDITY CHALLENGED
A challenge to the constitutional validity of the arbitration clause won’t be diverted in a legal action for appointment of arbitration underneath S.11.
INSTANCE OF DEBATE TO ARBITRATOR
“When the clause in the correspondence was that a conflict would paramount have to be related to standing committee inside in the notable time, and instance to arbitration put up be made only on detain by hitherto the committee. The power underneath S.11 wasn’t empowered to be implored. The power to appoint requires the power to dismiss an appointment. The cast-off of word ‘shall’ is not unquestionable. Appointment force is dismissed if prerequisite obviously not fulfilled. Although, if the dissents to the appointment requires heavy arguments, the appointment strength be made withhold those arguments to be made besides the arbitrator.
In a case, an appeal for reference of a conflict was filed by the defendant in a trial for redemption. This appeal was dismissed on the terra firma (ground) that the Hon’ble court didn’t have hegemony to appoint an arbitrator underneath S.11. Refusal has been challenged in revision petition; it was detected that the agreement subsists between the parties and they by their own wish gone for the arbitration. In such situation, it was impound that the bench ought not to have contradicted the appeal for referral.
NO POWER TO AFFIX SOME CONDITIONS TO “APPOINTMENT”
The potential to appoint the arbitrator doesn’t stretch to eye-catching any situation that affix to the arbitration following to such appointment. This has been underlined by J. WATKINS. L, in the following motion-
“There is no power in this court or any other court to do more upon an application such as this than to appoint an arbitrator or arbitrators, as the case may be; we have no power to affix conditions to that appointment, and certainly no power to inform or direct an arbitrator as to how should thereafter conduct the arbitration or arbitrators.”
Court in India has mainly unveiled moderation in imposing any condition or regulation span utilizing the power of appointment. It isn’t unexpected but to spot arbitration where court have urge commitment upon the parties to represent them formerly the arbitrator at a peculiar span arbitrator fees has been fixed and the responsibilities are fixed according to the fees govern the amount of advance regarding the fees, and urged deadline for notification, the act of the arbitration and refusal of the conflict . Hon’ble court has also been perceived to make direction relating the exercise of the power of pro tem relief (interim relief) by the arbitrator.
COMBINED PETITION: A combined petition under section 11(6) & Section 14 bid not lie considering the petition under S.11 (6) is to be apprehend and determine by the chief justice or some people or institution created by him during a petition under S.14 recline in the court of law. later to the conclusion in Patel Engineering , where the potential power of appointment withhold to be utilization of judicial power, the Apex court in Shrishti Infrastructure has certified the aloft position might bygone be good law, and which all are left “unlatch” the similar matter with regards to combine petition Under S. 11 (6) and S.9 . The Jharkhand High Court embrace the view that a combine appeal U/S 11 (6) & 9 will not be maintainable. The Andhra Pradesh High court, in the scene of a combine appeal U/S.11 & 14 has described-
“Since the power to terminate the mandate of the arbitrator has been conferred under S. 14 (2) read with S.2 (e) of the Act, on the Principal Civil Court in a District, the jurisdiction of the Chief Justice, or his designate, cannot be cited foe such termination, even if be couched as a request for appointment U/S.11 (6) of the Act.
On the contrary, the Delhi high court has gone to the limit of withholding even if an appeal has been filed U/S.11, the non-counting of S.14 doesn’t divest a party of slot to solicit cessation of the approval of an arbitrator. Likewise, in further case, it was decided that a combine petition U/S.8 & 11 can be preserve formerly to the lower court, the matter with regards to combine petition proceeding with the potential of appeal hasn’t been absolutely reviewed by the Apex Court hitherto. If combine petition are sanction, this will qualify the Chief Justice to discern combine appeals, which are retainable only in a “court of law”.
However, it might allow a “court’ to discern appeal with regards to appointment of an arbitrator, which is retainable barely hitherto Chief Justice or his delegate. On the other hand, the Apex Court has held that the Chief Justice will not be able to operate as a court stretchutilizing the potential power of appointment. Stretchthe chance of gaining a decision on the collaterals appeals in a merged ruling U/S.11 may be desirable, there are various obstacles affixed with the Chief Justice to be a Court mainly in relation to the provision of S.42 and the privation of right to file an appeal U/s.37 (1) (b)
If there is no debate as to even if the directive of the arbitral tribunal is concluded, for instance when the arbitrator has passed away, quitted or there is an unusual agreement between the two in relation to the exclusion of authority, no appeal will be made U/s.14 and the party may straight pursue his power under the procedure applicable for appointment of a deputy tribunal.
POSITION FOLLOWING TO “PATEL ENGINEERING”
In this case the essence of the CJ’s power was qualified by 7 Judge Constitutional Bench judgment of Apex Court. The court held that utilizing power of the CJI is a ‘Judicial Act’. The extending scope of S.11 (6) to cover the appointment in the Judicial potential not in administrative capacity has further stemmed the vacillation of court of law. The drawback of this idea is that as soon as the court will appoint the arbitrator the question will arise about the validity of the agreements and the other matter as well. The decree appointing the arbitrator must show the reason and Chief Justice should be satisfy with such reasoning and his delegates as well on the same matter?
The arbitrator will be fixture only once all the situations precedent to the beginning of arbitration succeeding exist and are manifest to the satisfaction of the CJ. To vindicate this with the potential of the arbitral tribunal to determine suo motu in S.16, the Apex Court has to admit to the regulation of Kompetenz-Kompetenz underneath a various condition and will use only in those cases where the arbitrator has not been appointed by the CJ. The court in this case coined the following conclusions.
“(i) The power exercised by the Chief Justice of the High Court or the Chief Justice of India under S. 11(6) of the Act is not an administrative power. It is a judicial power.
(ii) The power under Section 11(6) of the Act, in its entirety, could be delegated, by the Chief Justice of the High Court only to another judge of that court and by the Chief Justice of India to another judge of the Supreme Court.
(iii) In case of designation of a judge of the High Court or of the Supreme Court, the power that is exercised by the designated, judge would be that of the Chief Justice as conferred by the statute.
(iv) The Chief Justice or the designated judge will have the right to decide the preliminary aspects as indicated in the earlier part of the judgment. These will be his own jurisdiction, to entertain the request, the existence of a valid arbitration agreement, the existence or otherwise of a live affirm the existence of the condition for the exercise of his power and on the qualifications of the arbitrator or arbitrators. The Chief Justice or the Judge designated would be entitled to seek the opinion of an institution in terms of S.11(8) of the Act if the need arises but the order appointing the arbitrator could only be that of the Chief Justice or the Judge designated.
(v) Designation of a district judge as the authority under S. 11(6) of the Act by the Chief Justice of the High Court is not warranted on the scheme of the Act.
(vi)Once the matter reaches the arbitral tribunal or the sole arbitrator, the High Court would not interfere with orders passed by the arbitrator or the arbitral tribunal during the course of the arbitration pursuing and the parties could approach the court only in terms of Section 37 of the Act or in terms of section 34 of the Act.
(vii) Since an order passed by the Chief Justice of the High Court or by the designated judge of that court is a judicial order, an appeal will lie against that order only under Art. 136 of the Constitution of India to the Supreme Court.
(viii) There can be no appeal against an order of the Chief Justice of India or a judge of the Apex court designated by him stretchentertaining an application under S. 11(6) of the Act.
(ix) In a case where an arbitral tribunal has been constituted by the parties without having recourse to S. 11(6) of the Act, the arbitral tribunal will have the jurisdiction to decide all matters as contemplated by S. 16 of the Act.
(x) Since all were guided by the decision of this court in Konkan Railway Corpn. Ltd. v. Rani Construction Pvt. Ltd.31, and orders under S. 11(6) of the Act have been made based on the position adopted in that decision, we clarify that appointment of arbitrators or arbitral tribunals thus far made, are to be treated as valid, all objections being left to be decided under S. 16 of the Act. As and from this date, the position as adopted in this judgment will govern even pending applications under S. 11(6) of the Act.
(xi) Where District Judges had been designated by the Chief Justice of the High Court under S.11(6) of the Act, the appointment orders thus far made by them will be treated as valid.
(xii) The decision in Konkan Railway Corporation Ltd. v Rani Construction Pvt. Ltd. is overruled.”
Conflict that has to be aim by the Chief Justice doesn’t embrace the conflict about arbitrability of the matter. He need not also determine whether the altercation rose falls in the awaited matter.
The function of conciliation can’t be in 2 tiers, delegated judge considering the essence requirement of utilizing potential U/s.11 (6) do exist or not than the Chief Justice making the appointment. The CJ or his delegates utilize judicial function stretchdoing the appointment. Consideration of the whole of appeal has to be by the Chief Justice or his delegate. The question whether assert raised is dead assert can be determine under this sub-subject only when assert is rightly time-out. Conflict as to be whether cognizance for appointment of arbitrator which ever undergo by the respondent whether to hold on the matter of evidence to be sent left to the arbitral tribunal to decide. The petition for appointment was allowed in the context.
The existence of a concluded contract was in dispute, though the physical existence of arbitration agreement was in no doubt. The court said that any question relating to validity of the contract or arbitrability of the dispute must be left to be decided by the tribunal. The Chief Justice has to take only a prima facie view. More involved adjudication must be left to the contractual tribunal. The question regarding existence of the arbitration agreement, and not its merits or defense, has to be decided at the first instance by the Chief Justice or his designate himself. It cannot be left to be decided by the arbitrator.
Beyond this, the appointing authority cannot go into the question of the validity of the contract or its scope. These things are for the arbitrator to consider. They can be raised before him. The arbitration clause was contained in a substantive agreement. The question was whether the substantive agreement was a concluded contract. The court said that it was for the arbitral tribunal to decide. Courts have to adopt a policy of least intervention because it is one of the duties of the courts to make the arbitration clause to be effective.
The plea of the non-applicant was that it was not a party to the agreement with the developer. A copy of the agreement showed that it was entered into between the developer and the society represented by its president. The society was thus regarded as a party to the agreement. The court said that its denial had no bearing on the arbitration agreement. It has been reiterated in an Apex court decision that the Chief Justice exercises judicial power under this section. The present case is an illustration of the very first point listed among types of cases which require decision making, namely whether the affirm is already “dead” or still alive.
Under the agreement, a affirm for recovery defective working by the contractor had to be raised within two years. Payment was made in respect of undisputed bills. Payment for disputed amount was withheld. No affirm was made during the two years period. The Chief Justice was of the view that it required adjudication as to from which late two years period was to commence. Hence, the affirm could not be regarded as a dead affirm.
REMEDY AGAINST DECISION OF CHIEF JUSTICE
Since the decision on an application under S.11(4), (5) and (6) is of administrative nature, it can be challenged in a writ petition. The court found that under the Andhra Scheme, a notice has to be issued to the other party and decision has to be arrived at after hearing both parties. The power of the High Court to review the decision remains intact. Thus, revision is maintainable.
The power of appointment has now been characterized as being judicial in nature and the remedies available against the decision of the Chief Justice has been clarified subsequent to the Supreme Court’s decision in Patel Engineering, and this has been discussed later.
CONSULTATION UNDERNEATH UNCITRAL
Under UNCITRAL there are different methods for appointment of arbitrators, which are as follows:
• by agreement of the parties;
• by an arbitral institution;
• by means of a list system;
• by means of the co-arbitrators appointing a presiding arbitrator;
• by a professional institution or a trade association;
• By a national court.
QUALITIES REQUIRED IN INTERNATIONAL ARBITRATORS
Any legal person can be appointed as arbitrator provided he should have the required legal capacity. However the choice of an arbitrator is critical and information as to the potential candidates’ experience in the subject matter of the arbitration, as well as his or her specific procedural and substantive tendencies, should be sought. The required information can be collected from the arbitration community or through the concerned law firms.
RESTRICTIONS IMPOSED BY THE CONTRACTS: In the international standard forms of contracts, there is a provision for appointment of arbitrator when there is a dispute. So it is suggested to not maintain any arbitrator’s qualification, because there may be competent persons who may undertake the job of an arbitrator in case no one is available. Certain basic restrictions can be imposed like fluency in language of contract or sometimes restrictions are imposed in terms of nationality etc. In case of dispute the only requirement is to satisfy the parties as per the contract they have entered into.
RESTRICTIONS IMPOSED BY THE APPLICABLE LAW: There has been a reduction in the restrictions imposed by the nations on the choice of arbitrator. Like Spain recently removed the previous restriction that the arbitrator should must be a qualified lawyer. Similarly Saudi Arabia also removed the requirement that the arbitrator should have the knowledge of Shariat Law.
PROFESSIONAL QUALIFICATIONS: International disputes are too complex that any restrictions Imposed will lead to further complications. Parties should agree about what qualification they want from the arbitrator
• Sole arbitrator
• Three arbitrators
• Experience & outlook
FOREIGN LAW FIRM CASE: WHETHER FOREIGN ARBITRATOR CAN REPRESENT A PARTY IN INDIA IF THE SEAT OF ARBITRATION IS IN INDIA
The intention and scope of international commercial arbitration was discussed in detail in the recent case of A.K Balaji v. Union of India in Madras High Court. The court in this case dealt with the definition of international commercial arbitration in S. (1)(f) of the 1996 Act.
It stated that: “arbitration matter between the parties to the arbitration agreement shall be called an “international commercial arbitration” if the matter relates to the disputes, which may or may not be contractual, but where at least one of the parties habitually resides abroad whether a national of that country or not.”
The New York Convention will be applicable only if the arbitration has a foreign element or the dispute involves the issue of international trade and commerce, even if the agreement does not lead to any foreign award . Many of the body corporate and other parties prefer the arbitral seat in India and due to this the many legal practitioners and professionals from abroad come to India on fly in and fly out basis. This gives rise to an important issue, weather the practitioners from abroad can advise on Indian law or not.
The court held the foreign law firm or a practitioner can advise on Indian law only if they comply with the Advocates Act 1961 and Bar Council of India rules. The court’s reasoning behind this is that the professionals from abroad would not have expertise in the concerned subject and hence is barred from rendering litigation or non-litigation legal services. In short the court made the following observations-
“(i) Foreign law firms or foreign lawyers cannot practice the profession of law in India either on the litigation or non-litigation side, unless they fulfil the requirement of the Advocates Act, 1961 and the Bar Council of India Rules.
(ii) However, there is no bar either in the Act or the Proclamation for the foreign law firms or foreign lawyers to visit India for a temporary period on a “fly in and fly out” basis, for the purpose of giving legal advice to their clients in India regarding foreign law or their own system of law and on diverse international legal issues.
(iii) Moreover, having regard to the aim and object of the International Commercial Arbitration introduced in the Arbitration and Conciliation Act, 1996, foreign lawyers cannot be debarred to come to India and conduct arbitration pursuing in respect of disputes arising out of a contract relating to international commercial arbitration.
(iv) The B.P.O. Companies providing wide range of customized and integrated services and functions to its customers like word-processing, secretarial support, transcription services, proofreading services, travel desk support services, etc. do not come within the purview of the Advocates Act, 1961 or the Bar Council of India Rules. However, in the event of any complaint made against these B.P.O. Companies violating the provisions of the Act, the Bar Council of India may take appropriate action against such erring companies
Finally the case was addressed by Hon’ble Apex court which clear stated that the foreign
arbitrators cannot be allowed to engage in arbitration if the seat of arbitration is in India. In case they want to render any advice on Indian Laws on the basis of fly in and fly out basis, they can do so but that would also amount to ‘practice’ under Advocates Act if the visit is frequent, the visit should must be casual.
The court said that the foreign arbitrators are not subject to any proclamation and the Bar Council of India in order to regulate their activities can make a set of rules. Also the court said that it is impossible to completely bar the foreign arbitrators from coordinating the arbitrations in India but that is subject to some conditions like that must be regulated by the proclamation of any notable institutions and the pursuing must be adhered to stretch coordinating the arbitration.
In B.N. Sri Krishna detail past year on “Institutionalization of Arbitration Mechanism in India” the detail cited too little hindrance to arbitration in India and any one of them as the ‘Interventionist nature of the Indian Courts’ and ‘Unavailability of an Institution to regulate the disputes pertaining to arbitration. The A.K.Balaji case the conciliation essence of our court which wholly refuses the essence and motive of arbitration. The entire idea beyond arbitration is aid justice and eschews the plan provided in normal circumstances; the similar has been also reviewed in S.9 of the Act, When the court divert such issue like challenging of arbitral award it is just stretching the span taken in arbitration and defeating the entire aim of arbitration.
In the future the court has to develop practice to stop indulging in arbitration conflict and let them to be decided in the court itself. The decision of the court not to allow the overseas arbitrators to practice in India shows the arbitration-unfriendly nature of the court. If India wants to establish India as a center of Institutional Arbitration then it has to take steps as that have been suggested in the B. N Srikrishna Report by reducing the interventionist nature of the courts. With such a amount of backlog cases, arbitration can help to reduce that and share the load on judiciary also.