Developments in India

Over the last few years, the Indian judiciary has made significant strides in establishing India as an arbitration-friendly jurisdiction. Most notably the decision in Bharat Aluminium Co v Kaiser Aluminium Technical Services Inc (BALCO) closed the door on a controversial line of authority, which since 2002 had allowed the Indian courts to intervene in arbitrations seated outside the country. It was a decision that was prospective only and still left some major issues, in particular, ONGC v Saw Pipes where the Supreme Court had held that an award that conflicted with Indian law would be contrary to public policy and therefore unenforceable.  This expanded public policy ground had since been applied in Phulchand Exports Ltd Vs OOO Patriot, as a standard for challenging enforcement of foreign-seated awards in India.  The obvious concern for parties was that the Saw Pipes and Phulchand Exports cases appeared to permit a substantive review of the merits of any award rendered outside of India.  However, in Shri Lal Mahal Ltd Vs Progetto Grano Spa, the Supreme Court addressed this concern holding that the expression “public policy of India” should be given a narrow meaning and that the enforcement of a foreign award would be refused on this ground only if it is contrary to the fundamental policy of Indian law such as the interests of India; and justice or morality.  The Supreme Court reinforced its decision in Renusagar Power Company Ltd Vs General Electric Company and overruled the expansive interpretation of public policy as laid down in Phulchand Exports. This has provided welcome relief to parties involved in foreign seated arbitrations.

Notwithstanding these strides forward there remain some rogue decisions.  For example, the Delhi High Court has granted an anti-arbitration injunction restraining McDonald’s from continuing with an LCIA arbitration in London against its Indian joint venture partners. The court found that the arbitration agreement was incapable of being performed or was inoperative. Further, it ruled that the plaintiffs would be prejudiced on the ground of forum non conveniens if they had to arbitrate in London and that McDonald’s had submitted to the jurisdiction of the Indian courts and the Indian Company Law Board.

Of greatest concern is the judge’s finding on forum non conveniens, which has no application to arbitration agreements. Further, the judge’s findings appear inconsistent with the authorities on which he relied. (Bakshi v McDonald’s India Pvt. Ltd)

Returning the the theme of arbitration-friendly the Supreme Court of India has made two further helpful and orthodox decisions.

Firstly, it upheld a decision of the Bombay High Court, holding that an arbitration agreement does not have to be signed.  The Supreme Court concluded that, while it was mandatory for an arbitration agreement to be in writing, a valid arbitration agreement could be construed from the correspondence between the parties.  Moreover, in this case the applicant had submitted a counterclaim and had therefore submitted to the jurisdiction of the arbitral tribunal.  The Court found that there was a valid arbitration agreement.

This decision should assist the Indian courts in rejecting future challenges to arbitral awards on the basis that there was no express arbitration agreement executed between the parties. If an intention to refer the dispute to arbitration can be inferred through the exchange of communication between the parties, that will sufficient (Govind Rubber v Louis Dreyfus Commodities).

Secondly, the Supreme Court of India has dismissed a party’s challenge to the jurisdiction of an arbitrator appointed by the Singapore International Arbitration Centre (SIAC).

The dispute resolution clause in a joint venture contract between the parties provided for arbitration with the arbitrator to be appointed “in accordance with the rules of arbitration of the Singapore Chamber of Commerce“. The seat of the arbitration was Singapore and the underlying law of the contract was Indian law.

The respondent contended the clause as meaning a reference to SIAC and requested that SIAC appoint an arbitrator. The applicant challenged the jurisdiction of the arbitrator contending that the arbitration agreement should be governed by Indian law, and that parties had not excluded the application of the Indian Arbitration and Conciliation Act 1996.

The Supreme Court held that it would be reasonable to construe the clause as meaning that the arbitral appointment was to be made by SIAC. In doing so, the court upheld the principles of freedom of contract and party autonomy by focusing on the reasonable construction and interpretation of the dispute resolution clause, limiting the scope of judicial intervention in the sphere of India-related international arbitration (Pricol v Johnson Controls Enterprise)

 

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