Presentation at Annual Conference Organized by The Institute of Company Secretaries of Indi a On 15 th September 2019 At Motel Shiraz Bhopal By Advocate amp IP Anil Chawla Senior Partner ID: 775235
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Arbitration Clause in International Agreements in India
Presentation atAnnual ConferenceOrganized byThe Institute of Company Secretaries of IndiaOn 15th September 2019At Motel Shiraz, BhopalBy Advocate & IP Anil Chawla Senior Partner,Anil Chawla Law Associates LLPwww.indialegalhelp.com
This Presentation gives the presenter’s views on the subject. It gives no legal advice. It is not intended to be either complete or exhaustive narration of the subject.
Slide2Outline of Presentation
A. Understanding ArbitrationA1. Domestic vs. International Arb.A2. Domestic vs. Foreign AwardA3. Place – Seat and VenueA4. Ad-hoc vs. InstitutionalA5. Format of AgreementA6. Key Issues
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B.
Ad-hoc Arbitration Key PointsB1. Domestic in IndiaB2. Domestic outside IndiaB3. International In IndiaB4. International Outside India
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Slide3A. Understanding Arbitration
Slide4A1. Domestic vs. International Arbitration
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Slide5A1. Domestic vs. International Arb. (Continued)
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Section 2(f) of The Arbitration and Conciliation Act, 1996
Slide6A1. Domestic vs. International Arb. (Continued)
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For arbitration to be “international”, at least one of the parties ought to be:
Indian citizen (passport-holder) living outside India
Citizen of any country other than India
Company incorporated outside India (even when the company is owned wholly by Indian resident citizens)
A NGO whose central management and control is exercised from outside India (even when the controlling office located outside India is operated wholly by Indian citizens)
A foreign government
Relationship ought to be (a) legal (b) commercial. Need not be contractual. Absence of a contract does not create a bar.
Slide7A2. Domestic vs. Foreign Award
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Section 44 of The Arbitration and Conciliation Act, 1996
Slide8A2. Domestic vs. Foreign Award (Continued)
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First Schedule of The Arbitration and Conciliation Act, 1996
Slide9A3. Seat / Place & Venue
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Parties to an Agreement are free to decide the seat or place of arbitration.
Seat of arbitration is not just a geographical decision.
Seat determines the courts under whose judicial supervision and control.
Seat has to be differentiated from venue of arbitration.
Proceedings may be held at different places and even by video conferencing. Notwithstanding meetings at different places, courts at the seat will have jurisdiction over the arbitration.
Seat is decided by the Parties. Venue(s) is / are decided by the arbitrators.
There may be more than one venue, but there will be only one seat of arbitration.
Seat / place determines whether award is domestic or foreign.
Slide10A4. Ad-hoc vs. Institutional
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The following define whether arbitration is ad-hoc or institutional:
Venue -
Arbitration Institution provides basic infrastructure.
Panel of Arbitrators -
Appointment of arbitrators from Arbitration Institution’s panel.
Appointing Authority -
Arbitration Institution has authority to appoint the arbitrators.
Administration of Arbitration -
Arbitration Institution provides administrative services like sending notices etc.
Rules of Arbitration -
Parties may accept the Arbitration Institution’s rules or may choose some other rules. For example, arbitration conducted at London Court of International Arbitration using UNCITRAL Rules.
Slide11A4. Ad-hoc vs. Institutional (Continued)
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Slide12A5. Format of Agreement
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Need not be a formal agreement.
E-mail correspondence can amount to an agreement.
Must be in writing (other than oral).
May be part of an agreement or may be a separate arbitration agreement.
Defined legal relationship is must. Non-contractual but commercial relationships are covered.
Under law, no format for either arbitration clause or arbitration agreement.
Institutions often have their standard clauses.
Slide13A5. Format of Agreement (Continued)
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Slide14A6. Key Issues
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Law
- (a) the law that will govern the Agreement
(Law of one country or the other or UNIDROIT Principles of International Commercial Contracts)
(b) law for the arbitration and (c) the law controlling conduct of arbitration
(Rules of one country or the other or of the institution or UNCITRAL Rules)
.
Place
/
Seat and Venue
(as discussed in previous slides)
.
Appointment of Arbitrators
-
Provide procedure for appointment of arbitrators
. E
ither
be ad-hoc or institutional.
Appointing Authority
-
Ad-hoc or institutional
.
Qualification of Arbitrators
-
Neutral, impartial and independent of both the parties
.
Language
-
Must be stated in explicit terms without any ambiguity
.
Slide15A6. Key Issues (Continued)
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Number of Arbitrators - Always odd in numbers. Single arbitrator also possible. Presumed to be single under Indian law. Presumed to be three under UNCITRAL.
Slide16A6. Key Issues (Continued)
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Powers of Courts – In case of international arbitration, the Parties may decide to stop application of sections 9, 27 and 37(3) and 37(1)(b).
Sub-section 2(2) of the Arbitration and Conciliation Act, 1996
Slide17A6. Key Issues (Continued)
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Slide18A6. Key Issues (Continued)
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Slide19A6. Key Issues (Continued)
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Appeal / Two Stage Process – First stage may have a solo arbitrator with second stage having three arbitrators. Costs – Often each side bears his own costs, Pay your own way (PYOWA) / Unsuccessful bears the full costs, Costs follow the event (CFTEA). (Sub-section 31A(2) of the Arbitration and Conciliation Act, 1996).
Slide20B. Ad-hoc Arbitration Key Points
Slide21B1. Domestic in India
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Takes place between two Indian Parties. Jurisdiction is of Indian law as well as Indian courts.Part I of The Arbitration and Conciliation Act, 1996 is applicable.Key points:
Law governing Agreement
Has to be necessarily Indian law.
Law for arbitration
The Act
Curial Law
Need not be specified as the arbitration is under provisions of the Act.
Place of arbitration
Seat to be at a place within India. For the sake of convenience, meetings / proceedings may be held alternately at the respective cities of the parties.
Slide22B1. Domestic in India (Continued)
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Number of Arbitrators
Three is almost the norm.
Appointment of Arbitrator
Each party to appoint one arbitrator. The two arbitrators to select the Presiding Arbitrator.
Appointing Authority
Need not be specified since section 11 of the Act provides the powers to High Court.
Qualification of Arbitrators
If some technical knowledge is required, advisable to specify.
Language
English unless both parties are comfortable with some other language.
Appeal
Not recommended
Costs
During the proceedings each party bears its own.
Cost Allocation – By the Arbitration Panel in award.
Slide23B2. Domestic Outside India
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Unusual situation. To be resorted to only when there are compelling reasons.
Law governing Agreement
Has to be necessarily Indian law.
Law for arbitration
Parties are free to choose. If Indian law is not chosen, please take care to mention that Part I of the Act will NOT apply.
Curial Law
UNCITRAL Rules / ICSID Rules are two common options.
Place of arbitration
A neutral location may be chosen. The country where the foreign parent is located will put the other party at a disadvantage and should hence be avoided by the other party.
Slide24B2. Domestic Outside India (Continued)
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Number of Arbitrators
Three is almost the norm.
Appointment of Arbitrator
Each party to appoint one arbitrator. The two arbitrators to select the Presiding Arbitrator.
Appointing Authority
Need not be specified since the chosen Curial Law will often have a provision.
Qualification of Arbitrators
If some technical knowledge is required, it is advisable to specify.
Language
English unless both parties are comfortable with some other language.
Appeal
Not recommended
Costs
During the proceedings each party bears its own.
Cost Allocation – By the Arbitration Panel in award.
Slide25B3. International in India
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Law governing the agreement is a critical issue. Six options for an India-UK agreement:
This Agreement shall be governed by Indian law.
OR
This Agreement shall be governed by the law of UK.
OR
This Agreement shall be governed by the UNIDROIT Principles of International Commercial Contracts (2016).
OR
This Agreement shall be governed by the UNIDROIT Principles of international Commercial Contracts (2016) and, with respect to issues not covered by such Principles, by generally accepted principles of international commercial law.
OR
This Agreement shall be governed by the UNIDROIT Principles of International Commercial Contracts (2016) and, with respect to issues not covered by such Principles, by the law of India.
OR
This Agreement shall be governed by the UNIDROIT Principles of International Commercial Contracts (2016) and, with respect to issues not covered by such Principles, by the law of UK.
Slide26B3. International in India (Continued)
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Law governing Agreement
One of the six options given above.
Law for arbitration
Part I of Arbitration and Conciliation Act, 1996 will apply.
Curial Law
UNCITRAL Rules / ICSID Rules are two common options.
Place of arbitration
Specify the place in India.
Number of Arbitrators
Three is almost the norm.
Appointment of Arbitrator
Each party to appoint one arbitrator. The two arbitrators to select the Presiding Arbitrator.
Slide27B3. International in India (Continued)
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Appointing Authority
Need not be specified since the Act has a provision for Supreme Court of India to act as Appointing Authority.
Qualification of Arbitrators
If some technical knowledge is required, it is advisable to specify.
Language
English unless both parties are comfortable with some other language.
Appeal
Not recommended
Costs
During the proceedings each party bears its own.
Cost Allocation – By the Arbitration Panel in award.
Slide28B4. International Outside India
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Arbitration law should be of the country where arbitration is proposed to be held.
Law governing Agreement
One of the six options given in the previous chapter about international arbitration in India.
Law for arbitration
Arbitration law of the seat of arbitration to apply. Part I of Arbitration and Conciliation Act, 1996 will NOT apply.
Curial Law
UNCITRAL Rules / ICSID Rules are two common options.
Place of arbitration
Specify the place outside India.
Number of Arbitrators
Three is almost the norm.
Slide29B4. International outside India (Continued)
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Appointment of Arbitrator
Each party to appoint one arbitrator. The two arbitrators to select the Presiding Arbitrator.
Appointing Authority
May be left to the Curial Law.
Qualification of Arbitrators
If some technical knowledge is required, it is advisable to specify.
Language
English unless both parties are comfortable with some other language.
Appeal
Not recommended
Costs
During the proceedings each party bears its own.
Cost Allocation – By the Arbitration Panel in award.
Slide30Thanks!
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Anil Chawla Law Associates LLP is registered with limited liability and bears LLPIN AAA‑8450.This Presentation is an academic exercise. It does not offer any advice or suggestion to any individual or firm or company. While all efforts have been made to ensure accuracy and correctness of information provided, no warranties / assurances are provided or implied. Readers are advised to consult a Legal Professional / Company Secretary / Chartered Accountant before taking any business decisions. Anil Chawla Law Associates LLP does not accept any liability, either direct or indirect, with regard to any damages / consequences / results arising due to use of the information contained in this Presentation.