Lifeline of an Arbitration Webinar Series - PowerPoint Presentation

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Lifeline of an Arbitration Webinar SeriesManaging and strategizing pre-disputes phase

Session presenters:

Christopher Lau, Senior Counsel, Barrister, 3 Verulam Buildings, London, MCIA Council Member

Promod

Nair, Founder, Arista Law Chambers, MCIA Council Member

Kritika Venugopal, Senior Associate, Herbert Smith Freehills, Member, Young MCIA Steering Committee

Alipak

Banerjee, Leader, Nishith Desai Associates, Member, Young MCIA Steering Committee

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Victorious warriors win first and then go to war, while defeated warriors go to war first and then seek to win.- Sun Tzu, the art of war

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Assessment of the case

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Sue or be sued?Understanding client needs

Contractual basis

Exhausting other options

Chance of success

Financial ability of the adverse party

Reputational concerns

Risk appetite

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Evidence for preliminary assessmentIdentification, collection and verification of pertinent facts

Documentary evidence

Identifying key persons

Expert evidence and technical issues

Balancing act between efficiency and being thorough

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Contract and arbitration clauseContractual remedies

Escalation process and key steps to be taken

Institutional or

adhoc

arbitration

Process of appointment of arbitrators

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Jurisdictional IssuesForum choice

Parallel court proceedings

Limitation issues

Arbitrability of issues

Consolidation of arbitrations and joinder of parties

Preliminary determination of an issue or bifurcation of proceedings

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Asset tracingPlace of enforcement

Assets of the adverse party

Company searches and other searches

Insolvency regime

Common problems of obfuscation, using offshore jurisdictions etc.

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Nature of reliefsMonetary relief

Punitive damages or penalties

Declaratory relief

Specific performance

Restitution

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CostsCost-benefit analysis

Costs of the arbitration

Other party costs

Adverse orders

Allocation of costs and relevant factors

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Third Party Funding

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ConceptsThird Party Funding (TPF):Means funding, from a person or entity who is not a party to the dispute, to cover in whole or in part, the payment of the Claimant’s costs;

TPF is not available for Defendant’s costs except in relation to a counterclaim.

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Why Funding?Necessity

Liquidity Constraints

Budgetary Constraints

Validation of Claim

Chances of Settlement

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Indian legal position

Ram

Coomar

Coondoo

v

Chunder

Canto Mookerjee 1876 SCC OnLine

PC 19

"

a fair agreement to supply funds to carry on a suit in consideration of having a share of the property, if recovered, ought not to be regarded as being, per se, opposed to public policy. Indeed, cases may be easily supposed in which it would be in furtherance of right and justice, and necessary to resist oppression, that a suitor who had a just title to property, and no means except the property itself, should be assisted in this manner.“

A transaction which is 

“inequitable, extortionate and unconscionable and not made with the bona fide objects of assisting a claim

” would be opposed to public policy.

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Ram Lal v. Nil Kanth (1893 SCC OnLine

PC 7)

The Privy Council went so far as to hold that: “

agreements to share the subject of litigation, if recovered in consideration of supplying funds to carry it on, are not in themselves opposed to public policy”.

Bar Council of India v. A. K. Balaji,  AIR 2018 SC 1382

…32. In India, with regard to Contingency fees, Rule 20 in Part VI, Chapter II of the BCI Rules bars an advocate from stipulating a fee contingent on the results of the litigation or from agreeing to share the proceeds thereof. Rule 21 prohibits practices akin to champerty or maintenance, and prohibits an advocate from buying or trafficking in or stipulating or agreeing to receive any share or interest in an actionable claim. ..

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35. In India, funding of litigation by advocates is not explicitly prohibited, but a conjoint reading of Rule 18 (fomenting litigation), Rule 20 (contingency fees), Rule 21 (share or interest in an actionable claim) and Rule 22 (participating in bids in execution, etc.) would strongly suggest that advocates in India cannot fund litigation on behalf of their clients. There appears to be no restriction on third parties (non-lawyers) funding the litigation and getting repaid after the outcome of the litigation. In U.S.A., lawyers are permitted to fund the entire litigation and take their fee as a percentage of the proceeds if they win the case. Third Party Litigation Funding/Legal Financing agreements are not prohibited. In U.K., Section 58B of the Courts and Legal Services Act, 1990 permits litigation funding agreements between legal service providers and litigants or clients, and also permits third party Litigation Funding or Legal Financing agreements, whereby the third party can get a share of the damages or "winnings“…

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What is covered?Legal fees which are reasonable (Cost of engaging a Solicitor, Barrister, fee of the Arbitral Tribunal)

Disbursements: Fee paid towards the Arbitral Institution, out of pocket expenses

Security for costs: if asked to be deposited

Adverse Cost orders

Ancillary proceedings: Court proceedings

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Basis of FundingDefendant’s assets in friendly jurisdiction

Likely timeline in enforcement of the Award

Value of the dispute

Prospects of success

Budget

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Process of FundingNon Disclosure Agreement

Compilation of the documents

Detailed scrutiny by the Funder

Merits of the case

Legal opinion by the Solicitor/ External Counsel

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Funding AgreementFunders Involvement

Funders Entitlement

Warranties

Obligation of the party seeking funding

Termination clause

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Forming the right team

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Strategizing the Arbitration

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Appointment of the ArbitratorOne v. Three – can agree to one by a submission agreement even if three is prescribed

Application under Section 11 of the Indian Arbitration Act – if India seated

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arbitration

Application before the institution – if institutional arbitration

2019 amendments to Section 11 of the Indian Arbitration Act – not yet notified

Arbitration clause may prescribe specific qualification – such as expertise in oil and gas drilling operations

Conflict of Interest – IBA Guidelines on Conflict of Interest, and Disclosures

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Interim Reliefs – Court v. TribunalSection 9 – before, during or after Award has been passed

Section 9 – arbitration has to be commenced within 90 days from the date of the order

If Tribunal is constituted, application to be made before Tribunal

Section 9 is a stand alone provision, available in foreign seated arbitrations as well

Interim order passed by foreign seated Tribunal

Challenges in enforcement of such an order

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Interim Reliefs – Which Court?Exclusive Jurisdiction v. Courts at the seat of arbitration

Supreme Court’s decision in BGS Soma

Where seat is not mentioned, when can venue be construed as seat

If seat/ venue not mentioned, which Court will have jurisdiction?

Exclusive jurisdiction clause in case of a foreign seated arbitration -

Mankastu

Impex Pvt. Ltd. v.

Airvisual Ltd

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Expedited Arbitration/ Fast Track ArbitrationExpedited Arbitration – Institutional Rules

Monetary threshold, at the discretion of the Institution

Strict timeline, option of document only arbitration

Section 29 B of the Indian Arbitration Act – Fast Track procedure

Practical difficulties with Section 29 B

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Emergency ArbitrationProcedure prescribed under the institutional rulesCan be opted in case of extreme urgency

The orders of the Emergency Arbitrator can be confirmed, varied, discharged or revoked by the regular Tribunal

Challenges in enforceability of such an order in India

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Identification of Preliminary IssuesJurisdictionScope of arbitration reference

Arbitrability

Joinder/ non-joinder of parties

Consolidation of cases

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ADR options

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Takeaways