Section 34 of the Arbitration and Conciliation Act 1996 sets out the conditions for setting aside an arbitral award. In this context, the term 'arbitral award' has always been understood as an award rendered by the majority members of an arbitral tribunal. However, recent decisions of the Bombay High Court and the Delhi High Court, while setting aside the award of the arbitral tribunal, have upheld the so-called 'minority award', in variance with the act and established precedent.
Multi-tiered dispute resolution clauses prescribing pre-arbitral steps are common in commercial contracts in order to allow parties to resolve their disputes in a non-adversarial set up, preserve commercial relationships and save costs. Almost all contracts require performance of such pre-arbitral steps as a condition precedent to arbitration, but are they specifically enforceable? In other words, are pre-arbitral steps mandatory or directory in nature?
The Supreme Court recently set out the legal position regarding challenges to a person's possible appointment as an arbitrator. It held that since ineligibility goes to the root of the appointment, the Arbitration and Conciliation Act 1996 clarifies that if the arbitrator falls under any of the categories specified in the Seventh Schedule, he or she becomes ineligible to act as an arbitrator. However, if the circumstances fall under the Fifth Schedule, the person would not be de jure ineligible.
By way of the Arbitration and Conciliation (Amendment) Act 2015, the government sought to reform the law in relation to international commercial arbitrations conducted in India and foreign-seated international commercial arbitrations. Following recent judgments from the Delhi High Court and the Bombay High Court, it is timely to analyse the amendment act with reference to the United Nations Commission on International Trade Law Model Law on international commercial arbitration.
The Supreme Court recently reaffirmed that Indian arbitration law does not specifically prohibit two-tier arbitration clauses which provide for appellate review of an arbitral award by a subsequent arbitration. This judgment is an important win for party autonomy in India and sends a pro-arbitration message.
The Delhi High Court recently clarified the scope and interpretation of Section 26 of the Arbitration and Conciliation (Amendment) Act 2015. The Delhi High Court held that if arbitration was commenced before October 23 2015, the amendment act does not apply to the court proceedings for setting aside an arbitral award rendered in relation to such proceedings.
The independence and impartiality of arbitral tribunals is significant in order to encourage faith and trust in litigants and ensure that disputes are independently, impartially and fairly adjudicated. Against this backdrop, the enforceability of contracts between private parties and government entities must be considered, as such entities often appoint arbitrators who act with such inflexibility as essentially to render arbitration agreements redundant and the required consent of the parties meaningless.
India's arbitration law was transformed in several key respects when the Arbitration and Conciliation (Amendment) Act 2015 came into force. However, despite the visionary changes introduced by the act, it is vague in both applicability and scope, which has led various courts to reach different conclusions about its applicability. Until these issues are resolved, the act cannot be hailed as a game changer for the Indian arbitral regime.
The Delhi High Court recently addressed a unique jurisdictional issue regarding the applicability of an incorrect provision of the Commercial Courts Ordinance which was retrospectively corrected by the Commercial Courts Act. However, the retrospective application of the Commercial Courts Act has raised concerns which must be clarified to ensure a smooth transition from the Commercial Courts Ordinance to the Commercial Courts Act.
In order to rectify the issues associated with arbitration in India, Parliament recently passed the Arbitration and Conciliation (Amendment) Act. The amendment seeks to make arbitration in India a quicker and more streamlined process, reduce interference by the courts, make India a more attractive destination for foreign investors and improve the ease of doing business.
India recently released its new Model Bilateral Investment Treaty (BIT). Compared to the previous Model BIT, the new BIT incorporates substantial and critical changes and considers international precedents and trends in investment treaty law. The new Model BIT attempts to safeguard the host state's interests and is intended to form the basis of India's negotiations with other countries in relation to the redrafting of existing BITs.
The Arbitration and Conciliation (Amendment) Ordinance, 2015 – which provides for less cumbersome, more cost-effective, efficient and expeditious dispute resolution – has been welcomed by litigants. However, more clarity is needed with regard to the ambiguities in the new Section 11 – in particular, in relation to the scope and applicability of the Fourth Schedule and the model fee structure payable to arbitrators.
The courts have issued a series of judgments which have strengthened the pro-arbitration stance of the Indian judiciary with regard to international commercial arbitration. However, the jurisprudence is more nuanced with respect to arbitrating disputes between two Indian parties and uncertainty still persists with regard to whether two Indian parties can choose a foreign seat and a foreign law to govern their arbitration agreements.
The courts continue to retain jurisdiction over pre-BALCO arbitration agreements under the Bhatia International regime. However, theories of expressed and implied exclusions have been carved out to bar the application of Part I of the Arbitration and Conciliation Act 1996. That said, unless the courts provide further clarity, implied exclusion of Part I does not apply to two Indian parties which have agreed to foreign-seated arbitration.
While the jurisdiction of the Indian courts in relation to international commercial arbitration remains a complex issue, the Supreme Court has attempted to strike a balance between the courts, arbitrators and parties through a series of judicial pronouncements. A recent Supreme Court decision significantly altered the settled position on the application of the Arbitration and Conciliation Act in relation to international commercial arbitration.
A transaction culminating in arbitral proceedings often creates questions regarding the scope and power of an arbitral tribunal to grant relief to a successful party. A question that often arises when arbitral awards are made is whether further interest can be imposed on an awarded sum. In other words, can interest be awarded on interest? The Supreme Court recently ruled that such claims for compound interest are sustainable.
A recent Supreme Court judgment confirms that Part I of the (Indian) Arbitration and Conciliation Act 1996, which governs domestic arbitration, does not apply where the arbitration clause has expressly specified foreign law as the law applicable to the arbitration agreement. The court further held that the issue of arbitrability of the disputes themselves would be determined in accordance with the law governing the arbitration agreement.
A recent Supreme Court decision has significantly altered the country's position on the arbitrability of fraud. However, while the decision could speed up domestic arbitration proceedings, it has raised many questions, as the single judge held that he was not bound by a two-judge bench decision because it had been made without reference to relevant decisions and statutory provisions.
Allegations of fraud by a party have proved to be a vexatious issue for arbitration in India. Judicial pronouncements have led to a situation where even a hint of any fraudulent activity could take disputes out of an arbitrator's jurisdiction. Although recent decisions on international arbitrations linked to India appear to have steered the legal position towards international practice, allegations of fraud in domestic arbitrations remain a minefield.
The Supreme Court recently held that the doctrine of 'double exequatur' is inapplicable in India, in light of the change in law introduced by the Arbitration and Conciliation Act. The court rejected the argument that a foreign arbitral award could not be enforced in India unless confirmation thereof was first sought from the relevant foreign court.