Recently, on 10 May, 2013, the Supreme Court of India decided a case ( ANTRIX CORP. LTD. Vs. DEVAS MULTIMEDIA P. LTD.) that appears to have bolstered the viability of international commercial arbitration in India (there have been other similar recent decisions in the last few years.)
The facts were:
Antrix, an Indian government owned entity and Devas Multimedia entered into a contract which contained an arbitration clause that said that in the event of a dispute, the parties will arbitrate their dispute using either the UNCITRAL or the ICC Rules (bad drafting.)
When Devas referred a contractual dispute to the ICC, Antrix, the government entity, possibly attempting to delay proceedings, attempted to constute a separate tribunal under the UNCITRAL rules after not replying to the ICC efforts at constituting a tribunal, thereby creating a dispute as to the identity fo the arbitrators. Then they asserted that the governing law of the agreement and the arbitration was Indian law (quoting Dicey, no less) and that under section 11 of the Arbitration and Conciliation Act, 1996 (the "Act") if the parties do not agree on the choice of arbitrators or do not follow the agreed upon procedure then one party could petition the Chief Justice of the Supreme Court of India to supervise the process.
The reasoning was very suspect. Antrix maintained that the choice of rules should have been made after the constitution of the tribunal and that the unilateral reference to an ICC tribunal (as opposed to the UNCITRAL tribunal) violated the arbitration agreement. This line of reasoning is strange, since it is unclear exactly how one is to constitute a tribunal if one does not choose the institutional rules under which it is to be constituted. A chicken and egg situation.
Actually, it appears from the facts that Antrix was attempting to negotiate the dispute, within a commercial context where they had more more power, and avoid neutral third party arbitration. When Devas insisted on referring the matter to arbitration udner the ICC rules, they hurriedly made a separate reference to the UNCITRAL rules, and then attempted to muddy the water further by trying to involve the Indian judiciary claiming a bona fide dispute as to constitution of the tribunal and its jurisdiction. Antrix's counsel alleged to the court that the reference to the ICC tribunal was an attempt to usurp the juridiction of the Supreme Court under the Act (eye roll!)
It appears that the Supreme Court decided not to get involved and on a technicality stepped away from the issue by saying once a tribunal is constituted, section 11 of the Act does not give the Chief Justice the power to constitute another tribunal that will supercede the first.
The Indian (and Pakistani) judiciary has a fairly spotty and specious record in the way judges, to jealously guard their juridiction, have "re-interpreted" the language in arbitration legislation (that in terms of drafting, is actually very similar to that of other countries.)
This is a welcome shift for parties hoping to use arbitration to avoid the delays of the Indian judicial system. The author hopes the trend continues.
The arbitration clause in the agreement between the parties is:
Article 20 Arbitration
a In the event of there bring any dispute or difference between the Parties hereto as to any clause or provision of this Agreement or as to the interpretation thereof or as to any account or valuation or as to the rights, liabilities, acts, omissions of any Party hereto arising under or by virtue of these presents or otherwise in any way relating to this Agreement such dispute or difference shall be referred to the senior management of both Parties to resolve within three (3) weeks failing which it will be referred to an Arbiter Tribunal comprising of three arbitrators, one to be appointed by each party (i.e. DEVAS and ANTRIX) and the arbitrators so appointed will appoint the third arbitrator.
b. The seat of Arbitration shall be at NEW DELI in India.
c. The Arbitration proceedings shall be held in accordance with the rules and procedures of the ICC (International Chamber of Commerce) or UNCITRAL.
d. The Arbitration Tribunal shall reach and render a decision or award in writing (concurred in by a majority of the members of the Arbital Tribunal with respect to the appropriate award to be rendered or remedy to be granted pursuant to the dispute, (including the amount that any indemnifying Party is required to pay to the indemnified Party in respect of a claim filed by the indemnified Party).
e. To the extent practicable all decisions of the board of Arbitration shall be rendered no more than 30 (thirty) days following commencement of proceedings with respect thereto. The Arbital Tribunal shall realize its decision on award into writing and cause the same to be delivered to the Parties.
f. Any decision or award made by the board of Arbitration shall be final, binding and conclusive on the Parties and entitleo to be enforced to the fullest extent permitted by Laws and entered in any court of competent jurisdiction.
g. Each Party' to any Arbitration shall bear its owr costs or expenses in relation thereto, including but not limited to such Party's attorneys' fees, if any, and the expenses and fees of the member of the Arbital Tribunal appointed by such party, provided, however that the expenses and fees of the third member of the Arbital Tribunal and any other expenses of the
Arbital Tribunal not capable of being attributed to any one member shall be borne in equal parts by the Parties.
Section 11 of the Act is as below:
11. Appointment of arbitrators
(1) A person of any nationality may be an arbitrator, unless otherwise agreed the parties.
(2) Subject to sub-section (6) the parties are free to agree on a procedure for appointing the arbitrator or arbitrators.
(3) Failing any agreement referred to in sub-section (2), in a arbitration with three arbitrator, each party shall appoint one arbitrator, and the two appointed arbitrators shall appoint the third arbitrator who shall act as the presiding arbitrator.
(4) If the appointment procedure in sub-section (3) applies and-
(a) a party fails to appoint an arbitrator within thirty days from the receipt or a request to do so from the other party; or
(b) the two appointed arbitrators fail to agree on the third arbitrator within thirty days from the date of their appointment,
the appointment shall be made, upon request to a party, by the Chief Justice or any person or institution designated by him.
(5) Failing any agreement referred to in sub-section (2), in an arbitration with a sole arbitrator, if the parties fail to agree on the arbitrator within thirty days from receipt of a request by one party from the other party to so agree the appointment shall be made, upon request of a party, by the Chief Justice or any person or institution designated by him.
(6) Where, under an appointment procedure agreed upon by the parties-
(a) a party fails to act as required under that procedure; or
(b) the parties, or the two appointed arbitrators, fail to reach an agreement expected of them under that procedure; or
(c) a person, including an institution, fails to perform any function entrusted to him or it under that procedure,
a party may request the Chief Justice or any person or institution designated by him to take a necessary measure, unless the agreement on the appointment procedure provides other means for securing the appointment.
(7) A decision on a matter entrusted by sub-section (4) or sub-section (5) or sub-section (6) to the Chief Justice or the person or institution designated by him is final.
(8) The Chief Justice or the person or institution designated by him, in appointing an arbitrator, shall have due regard to-
(a) any qualifications required of the arbitrator by the agreement of the parties; and
(b) other considerations as are likely to secure the appointment of an independent and impartial arbitrator.
(9) In the case of appointment of sole or third arbitrator in an international commercial arbitration, the Chief Justice of India or the person or institution designated by him may appoint an arbitrator of a nationality other than the nationalities of the parties where the parties belong to different nationalities.
(10) The Chief Justice may make such scheme as he may deem appropriate for dealing with matters entrusted by sub-section (4) or sub-section (5) or sub-section (6) to him.
(11) Where more than one request has been made under sub-section (4) or sub-section (5) or sub-section (6) to the Chief Justices of different High Courts or their designates, the Chief Justice or his designate to whom the request has been first made under the relevant sub-section shall alone be competent to decide on the request.
(12)(a) Where the matters referred to in sub-section (4), (5), (6), (7), (8) and (10) arise in an international commercial arbitration, the reference to "Chief Justice" in those sub-sections shall be construed as a reference to the "Chief Justice of India".
(b) Where the matters referred to in sub-section (4), (5), (6), (7), (8) and (10) arise in any other arbitration, the reference to "Chief Justice" in those sub-sections shall be construed as a reference to the Chief Justice of the High Court within whose local limits the principal civil court referred to in clause (e) of sub-section (1) of section 2 is situate and, where the High Court itself is the court referred to in that clause, to the Chief Justice of that High Court.
