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Arbitration News Newsletter of the International Bar Association Legal Practice Division
Vol 17 No 2 September 2012
arbitration nEWSLEttEr September 2012 3
In this issuefrom the co-chairs 5
from the editor 7
committee officers 9
ibA Annual conference, dublin 30 september – 5 october 2012: our committee’s sessions 10
conference reports: Arbitration day in stockholm, 8–10 march 2012
IBA Mediation Committee breakfast 14
Is procedure really neutral? 15
Roundtable: arbitrators subject to suspicion? 17
How neutral is the system of investment arbitration? 18
The IBA Guidelines on Conflicts: do they set the standard or is there now a need for revision? 20
Interview with an arbitrator: Jan Paulsson (as interviewed by I Minorini Lima) 22
country developments
Africa
Analysing the right to confidentiality under the Nigerian Arbitration and Conciliation Act 24 Adedapo Tunde-Olowu and Chinyerugo Ugoji
Asia: east & pacific
The new CIETAC Arbitration Rules: a move towards internationalisation? 27 Jessica Fei, Tracy Wu, and Weina Ye
Report on the 2011 Taipei International Conference on Arbitration and Mediation 30 Tiffany Ting Sun
Asia: south & central
Arbitration agreements in government contracts in India 34 Sahil Kanuga
Re-visiting Bhatia International 36 Niyati Nath and Khursheed Vajifdar
middle east
Recent developments in the enforcement of foreign arbitral awards in the United Arab Emirates 38 Hassan Arab
Israel: referral of state disputes to arbitration 41 Joseph Benkel, Ofer Larisch and Shiri Shapiro
europe
West Tankers – disharmonious variations in the European dispute resolution process? 43 Michael Mendelowitz and Yasmin Lilley
Protecting arbitration in Europe, at any cost? 47 Giulio Giannini
The law of the arbitration agreement according to English law – which law applies and why does it matter? 50 Paula Hodges and Joanne Greenaway
Mission impossible? Challenging arbitration in England 53 Margaret Tofalides and Clare Arthurs
Speed and certainty: the approach of the Irish courts to the Arbitration Act 2010 56 Nicola Dunleavy and Gearóid Carey
The costs of arbitration: the treatment of costs in Ireland pursuant to the Arbitration Act 2010 59 Niav O’Higgins and Karen Killoran
Set-aside actions in France under the new 2011 Arbitration Law 62 Samaa A Haridi and Yannick Gontier
Swiss Supreme Court sets aside its first international arbitral award for breach of substantive public policy 65 Angelina M Petti
The 2012 Swiss Rules of International Arbitration: an overview 68 Xavier Favre-Bulle and Sebastiano Nessi
Higher court in Germany finds procedural order is an instrument of parties’ agreement 71 Stephan Wilske and Andreas Heuser
Conflicts of interest: recent changes in the Italian rules of conduct for arbitrators 74 Nicola Romano
Arbitrability of real estate and shareholder disputes in Russia 76 Andrey A Panov
latin America
Landmark decision in Brazil: on ‘full’ versus ‘empty’ arbitration agreements and the possibility of tacit acceptance of arbitration by conduct 79 Arnoldo Wald and Ana Gerdau de Borja
New law on international commercial arbitration in Costa Rica 81 Pedro Oller and José Prado
Recent evidence of Uruguay courts’ respect for foreign arbitral awards 83 Carlos Brandes, Macarena Fariña and Juan Manuel Rey
Slowly moving forward: Colombia and the New York Convention 85 Laura Sinisterra, María Cristina Martínez, and Sebastián Mantilla
Public policy in Mexican arbitration law: still an undefined and misunderstood concept 87 Leonel Pereznieto Castro and James A Graham
north America
The injunctive powers of arbitrators pursuant to Quebec law 88 Marc Gold
Continued overleaf
InternatIonal Bar assocIatIon legal PractIce DIvIsIon4
in this issue
Canadian developments in international arbitration: a new arbitration hearing centre and more supportive court decisions 91 Barry Leon and John Siwiec
Republic of Argentina v BG Group, PLC: United States appellate court vacates international investment award for failure to comply with condition precedent 94 Bruce G Paulsen and Jeffrey M Dine
Conflicts of interest and disclosure under United States law 97 Robert B Davidson
investment arbitration
Asset valuation and discount rates in the Exxon v PDVSA Award 102 Ramón Andrade
Arbitration institutions
ACICA influential in arbitration paradigm shift in Australia 104 Michelle Sindler
Rules revision well under way at the Hong Kong International Arbitration Centre 108 Chiann Bao
The Vienna International Arbitral Centre – general information and recent developments 109 Dr Manfred Heider and Alice Fremuth-Wolf
InternatIonal Bar assocIatIon legal PractIce DIvIsIon36
country developments: AsiA: south & centrAl
Afive-member constitutional bench of the Indian Supreme Court (the ‘Court’) is currently reconsidering the ratio articulated by the Court
in Bhatia International v Bulk Trading SA [2002] 4 SCC 105.
The Indian Arbitration and Conciliation Act 1996 (the ‘Act’) has four distinct parts, of which Parts I and II are relevant for this article. Part I applies where the place of arbitration is in India; among other things it confers powers on the Indian courts to grant interim measures (section 9), to appoint and replace arbitrators (section 11) and to set aside arbitral awards (section 34). Part II is concerned with the recognition and enforcement in India of foreign awards that fall within the scope of the 1958 New York Convention and the 1927 Geneva Convention.
In the case of Bhatia, a three-judge bench of the Court considered the matter of a request to an Indian court for interim measures of protection by a party to an arbitration seated in Paris. One of the respondents had sought interim relief from the court under Part I of the Act. The appellant objected that the application could not be allowed on the basis that Part I did not apply to arbitrations seated outside India. The district judge held that the application was maintainable. The matter eventually reached the Court on a second appeal.
The Court held that the provisions of Part I of the Act apply to all arbitrations, including international commercial arbitrations seated outside India, unless the parties have expressly or impliedly excluded its application. The Court’s reasons for the finding were as follows:• IftheActdoesnotassurepartiestoan
arbitration governed by Part II the right to apply for interim relief pursuant to section 9 (Part I), the parties will find themselves without a remedy, as far as obtaining interim relief in India is concerned.
•Section2(2)oftheActprovidesthatPartI will apply where the place of arbitration is in India and section 2(4) of the Act uses the words ‘every arbitration’. Section 2(5) refers to ‘all arbitrations and to all proceedings relating thereto’. Section 2 is in Part I of the Act. The Court was of the view that the finding that Part I applies to all arbitrations
resolves any apparent inconsistency between these provisions.
•TheActisbasedontheUNCITRALModelLaw (the ‘Model Law’). The provision of the Model Law that is analogous to section 2(2) of the Act states that the law, with the exception of certain provisions, will apply only if the arbitration takes place in the territory of the state. The Court reads the omission of the word ‘only’ in section 2(2) as further evidence of legislative intent to permit Part I of the Act to apply to arbitrations that take place outside India.
•Section44statesthataforeignawardisanaward issued in a territory that is a signatory to the New York Convention and that has been notified by the Government of India as a reciprocating territory. Awards issued in arbitration proceedings that take place in countries that are not signatories to the New York Convention and/or are not notified as reciprocating territories (‘non-Convention awards’) are not foreign awards and are not governed by Part II of the Act. Section 2(7) states that an arbitral award made under Part I shall be considered a domestic award. The Court observed that there would be no need to define an award as a domestic award unless the intention was to address awards that would otherwise not be covered by this definition, such as non-Convention awards. The Court was of the view that the legislature intended Part I to apply to all arbitrations. This interpretation facilitates the enforcement of non-Convention awards in India.
The ratio in Bhatia was subsequently extended in other decisions to permit Indian courts to set aside foreign awards1 and to appoint arbitrators in arbitrations seated outside India.2 Bhatia and the string of cases that follow it have been widely criticised for judicial over-reach and for creating significant uncertainty and delay in arbitrations that are seated outside India but involve Indian counter-parties or laws. It has thus become standard practice in India-related commercial transactions and arbitration agreements to expressly exclude the application of Part I to arbitrations seated outside India, with a view to escape the consequences of Bhatia.
re-visiting Bhatia Internationalniyati nathJ Sagar Associates,
Mumbai
khursheed vajifdarJ Sagar Associates,
Mumbai
khursheed.vajifdar@
jsalaw.com
arbitration nEWSLEttEr September 2012 37
country developments: AsiA: south & centrAl
The Indian judiciary has also evinced discomfort with the findings in Bhatia and its like-minded successors. It has, in recent decisions sought to restrict the applicability of Part I of the Act to arbitrations seated outside India. Indian courts have also demonstrated a willingness to infer implied exclusions of Part I where parties have chosen a foreign seat and a foreign law to govern the arbitration.3
In December 2011, while considering the case of Bharat Aluminium v Kaiser Aluminium,4 the Court decided that a five-member constitutional bench of the Court would reconsider the Court’s own ruling in Bhatia. The Court invited interested parties to intervene in order to assist the Court as amicus curiae. In response, the London Court of International Arbitration India (LCIA India), the Singapore International Arbitration Centre (SIAC) and the Nani Palkhivala Arbitration Centre intervened in the proceedings. Hearings commenced on 10 January 2012 and continued until 29 February 2012. An array of counsel presented their views to the constitutional bench. They made the following submissions, amongst others:•Thelawoftheseatorplacewherethe
arbitration is held is the appropriate law to govern the arbitration. The theory and practice of international commercial arbitration supports the territorial link between the seat of arbitration and the law governing the arbitration. The Model Law on which the Act is based adopts the territorial principle, as does the Act. The territoriality principle mandates the regulation of the conduct of the arbitration and challenge to the award by the courts of the country in which the arbitration is conducted.
•AnIndiancourtmaygrantinterimreliefonly if so authorised by the law. Section 9 of the Act enables the court to grant interim measures of protection before or during arbitral proceedings or at any time after the making of an arbitral award but before the award is enforced pursuant to section 36 of the Act. These powers are wider than the powers available to a civil court under the general Indian law. Part I of the Act (including section 9) does not apply to arbitration seated outside India; consequently, Indian courts cannot grant interim relief in an arbitration seated outside India pursuant to the general law.
•NonConventionawardscannotbeenforcedpursuant to the Act as neither Part I nor
Part II apply. They may be enforced in India by filing a suit that seeks enforcement of the award under the Code of Civil Procedure (CPC). The award will have to be proven in the suit.
•Theonlyremedyagainstaforeignawardistooppose its enforcement pursuant to Part II of the Act. One cannot seek to have the award set aside pursuant to section 34 (Part I).
•CounselsupportingBhatia submitted that section 9 is applicable to all arbitrations irrespective of the seat of arbitration. If section 9 is held not to apply to an arbitration seated outside India where a party’s assets are located within India, then such arbitration will be rendered infructuous. The nature of the relief granted pursuant to section 9 is interim and conservatory. Such relief does not militate against the principle that courts ought not to interfere in arbitration proceedings. The rules for arbitration promulgated by the LCIA, the SIAC and UNCITRAL are hospitable to the idea of parties seeking interim measures of protection from national courts.
While the constitutional bench appeared to be of the prima facie view that Part I ought not to apply to arbitrations seated outside India, it was troubled at the prospect of leaving a party to an arbitration seated outside India without recourse to the provisions of section 9. The Court asked counsel for their views on: •whetherpartiesmayinsteadapplytothe
Indian courts for an interlocutory order pursuant to order 39 of the CPC; and
•whetheranIndiancourtmaygrantinterimrelief to parties pursuant to sections 8 and 45 of the Act. These provisions permit a judicial authority to refer the parties to arbitration at the request of one of the parties, where there is an arbitration agreement. Section 8 applies to arbitrations governed by Part I while section 45 applies to arbitrations governed by Part II.
Some counsel expressed the view that a party to an arbitration seated outside India may, in fact, file a suit seeking a Mareva injunction to freeze the assets of the other party. Most were of the view, however, that the remedy of an interlocutory order pursuant to the CPC is not available or ought not to be available for the following reasons:•wherethearbitrationisyettobeinitiated,
the suit seeking interlocutory orders pursuant to order 39 may amount to a waiver of the party’s right to arbitrate in respect of the same cause of action;
InternatIonal Bar assocIatIon legal PractIce DIvIsIon38
country developments: middle eAst
•wherethearbitrationispendingatthetimeof filing such suit, the suit will not have a separate cause of action from the pending arbitration and will not be maintainable;
• thefinalreliefinthesuitwillinfactbean interim relief. This is not permitted by Indian law;
• thecourt’spowerstograntinterimreliefpursuant to section 9 of the Act are far wider than the powers granted pursuant to the CPC and thus, in relation to arbitrations where section 9 does not apply, Indian courts are not authorised by general law to grant the interim relief envisaged by section 9;
• inthecaseofSiskina v DistosCompaniaNaviera SA [1979] AC 210, an English court considered whether it had the jurisdiction to order interim measures in respect of substantive proceedings outside its jurisdiction, merely on the basis that certain assets were located within its jurisdiction. The court held that interlocutory relief does not exist in isolation. If a court does not have jurisdiction to decide a dispute in relation to the underlying cause of action, it may not grant interlocutory relief; and
• thecourtsoftheseatofarbitrationhavejurisdiction to issue interim measures in an arbitration proceeding. If Indian courts are given concurrent jurisdiction, there
is a danger that parallel proceedings will be commenced before both sets of courts that may result in multiple and mutually inconsistent decisions. This will create further uncertainty and delays.
In response to the question of whether interim relief may be granted by Indian courts in arbitrations seated outside India pursuant to section 45 of the Act, most counsel replied in the negative.
At the time of writing, the judgment is awaited. All eyes are on this litigation, with investors, Indian and foreign corporations and the international legal community waiting eagerly for the Court’s ruling. The Court has the opportunity to overturn Bhatia, to reduce the scope of judicial interference in arbitrations seated outside India and to improve the climate for enforcement of foreign awards in India.
Notes1 Venture Global Engineering v Satyam Computer Services Ltd
[2008] 4 SCC 190.2 Indtel Technical Services Pvt Ltd v WS Atkins Plc [2008]
10 SCC 308.3 Videocon Industries Ltd v Union of India [2011] 6 SCC
161; Yograj Infrastructure Ltd v Sang Yong Engineering and Construction Co Ltd [2011] 9 SCC 735.
4 Civil Appeal No 7019 of 2005.
those following the UAE local1 courts’ decisions concerning the enforcement of international arbitral awards will recognise the fundamental shift that
occurred following the UAE’s accession to the New York Convention. Prior to ratifying the Convention in November 2006, the position of the UAE courts had not been favourable towards foreign arbitral awards. UAE courts would only uphold awards upon the satisfaction of conditions that can be described at the very least as unattainable.
the legislative scheme governing the enforcement of foreign awards prior to accession to the new york convention
The enforcement of foreign arbitral awards is governed by a number of articles contained in the Federal Civil Procedure Law (Law No 11 of 1992, as amended). The preconditions to the enforcement of foreign arbitral awards are the same as for foreign judgments.
Article 235 of the Civil Procedure Law places a number of potential obstacles to the enforcement of foreign arbitral awards and foreign judgments alike, including that:
recent developments in the enforcement of foreign arbitral awards in the United Arab emirates
hassan ArabAl Tamimi & Company,
Dubai