India: India As A Global Destination For International Arbitration: What Will It Take To Reach There?

Last Updated: 15 August 2017
Article by Sumeet Kachwaha

India's past life story:

India's prime role as a frontline jurisdiction helping lay the foundation of modern day arbitration is long forgotten and therefore, this brief prelude:  A little known fact is that India was amongst the only six Asian nations to have signed the Geneva Convention of 1927 1.  Later, it was amongst the ten original signatories to the New York Convention and the fourth country to ratify the same. That was in July 1960. The USA ratified it a full ten years later in 1970 and the UK in 1975. China, Singapore, and Malaysia (illustratively) have ratified it only in the mid 1990's. Therefore, it is no exaggeration to say that India was amongst the handful of countries which helped lay the foundation of modern day international commercial arbitration.

Why India lost the plot:

Equally it cannot be denied that India is not considered to be at the forefront and is (perhaps unfairly) considered to be a laggard.

There are a variety of reasons for this.  Chiefly, we had an unsupportive Arbitration Act 2 which made interim or final challenges to an arbitrator or an award fair game.  Coupled with judicial delays, it often made arbitration a retrograde dispute resolution mechanism. Moreover, (till recent years) there was hardly a body of high value arbitrations to catch the eye of leading practitioners or lead to the growth of an arbitration bar.

Things began to change post the economic reforms from the early 1990's and the opening up of the economy.  India soon positioned itself amongst the fastest growing economies and sought after FDI destination.  High value commercial disputes could not be far away.

Rude Awakening:

The reality has now begun to overtake Indian parties.  All of a sudden, Indian corporations and indeed the Indian State find themselves neck deep in high level arbitrations (generally seated outside India). Most struggle with a new environment and an unfamiliar dispute resolution mechanism. In November 2011, the Indian government suffered acute embarrassment in a unanimous BIT award, rendering India liable for damages – not for any act or omission qua an investor – but for judicial delays of over 9 years in not enforcing an ICC Award (White Industries Australia Limited vs. India)3. The Tribunal, inter alia, held that the delays deprived the Australian investor of "effective means of asserting claims and enforcing rights".  More recent matters include: NTT vs. Tata Sons (LCIA, London); Daiichi vs. Ranbaxy (SIAC, Singapore) and Devas vs. Antrix Corp (ICC, Paris); cumulatively resulting in awards of over US $ 2.5 billion against the Indian defendants.

The BIT arbitrations on the anvil also present alarming figures. The Indian State is involved or threatened with arbitration claims in the telecom, energy and infrastructure sectors which (at rough estimates) amount to over US $ 25 billion. These challenge India's measures varying from tax demands to rescission of contracts. Amongst the companies involved are Vodafone, Russia's Sistema JSFC, Norway's Telenor ASA, Loop Telecom UK, Axiata Group Malaysia and Capital Global & Kaif Investment (Mauritius).  Telenor's claim alone is reported to be in the range of US $ 14 billion4.  It is not a matter of figures alone.  BIT arbitrations often raise issues of sovereignty and public policy. Take for instance the challenge by a UK based hedge fund suing India for directing Coal India to sell subsidized coal to power plants (thereby bringing down its bottom line) or threats by foreign telecom companies to sue India over cancellation of their telecom licenses pursuant to the Supreme Court of India striking down the first-come-first-serve policy as unconstitutional5

In this scenario and with such significant rights and issues at stake, India is virtually an outsider in the system.

A non-player on the world stage?

As per the LCIA's report for the year 2015, it made a total of 449 appointments of arbitrators this past year – not one of them happened to be an Indian.  The nationalities of arbitrators (appointed by the LCIA) in 2015 other than from the UK included Australian; Austrian; Brazilian; Belgian; Canadian; Chinese; Cypriot; Danish; Dutch; French; German; Greek; Hungarian; Iranian; Irish; Italian; Latvian; Lebanese; New Zealand; Nigerian; Russian; Singaporean; South African; Spanish; Swedish; Swiss; Tunisian; Ukrainian; and the US6

Most Indian international arbitrations are now seated in Singapore. SIAC's report for 2015 shows India as the largest non-Singaporean contributor to its case load (and this has indeed been the case for the past several years).  In 2015, Indian disputes contributed 91 cases to SIAC's workload, (with China, at 46 cases, coming a distant second). The SIAC made a total of 126 appointments of arbitrators in 2015.  Indians comprised a mere 3% of this total7.  In comparison, UK did not contribute to SIAC's workload at all but its nationals comprised 27% of the total appointments.  Malaysia contributed with 15 cases and had 9% of the total appointments share.

Thus it has so come to pass that Indians seem to be excluded from the system – hardly ever figuring as sole or presiding arbitrators or indeed for that matter as lead counsel.

Should a country, with a glorious legal heritage, not wish otherwise? And what will it take to move on from here?

One needs to realize that there is competition to be met and there are no easy trophies to be won. I give below three suggestions for consideration by the stakeholders.

Moving forward:

  • First: An effective and credible arbitral institution:

The importance of a strong and credible arbitration institute cannot be overstated.  It is no coincidence that the leading arbitration centres in the world are also home to leading arbitration institutes.

Arbitral institutes are not mere buildings letting out hearing rooms or setting fees. They serve as centres of learning – schools and colleges where young enthusiasts intermingle with senior colleagues and under the aegis of which they gather to brain storm and exchange ideas through seminars, journals etc. This spurs the growth of an arbitration bar which in turn provides the pool for world-class arbitrators.  Arbitral institutions also (through trial, error and usage) help in evolution of best practices and sanctify them through their rules, practice notes etc. and all this contributes to the growth of soft law of arbitration jurisprudence.

Strengthening arbitration institutes: SIAC and its vital role in promoting Singapore as a centre of international arbitration can be seen as a case study.  Initially, the SIAC was funded by the Singapore Government (though now it is entirely self-funded).  The legislature put it on a special pedestal. Under the (Singapore) International Arbitration Act, the Chairman SIAC is the "appointing authority" (if the default mechanism for appointment is triggered)8.  Further, the government has carved out a tax break for local law firms.  Singapore law firms can avail of a 50% tax rebate on fees earned through international arbitrations seated in Singapore. This gives Singaporean lawyers a vested interest in having arbitrations seated locally and being competitive vis-ŕ-vis foreign lawyers.

However, what matters most is the leadership and the people at the helm of affairs. Institution building can only happen by attracting brilliant minds and empowering them to lead. The institute head is indeed the brand ambassador for his or her institute and lends it credibility. Credibility is paramount for any institute whose purpose is to administer dispute resolution.  Once again, witness the Singapore example where it has not hesitated in reaching out to the best available talent beyond its shores.

  • Second: Engaging with the Judiciary: The local judiciary being in tune with the ethos of arbitration and support from the domestic courts is essential for the popularity and growth of any centre for arbitration.

At the outset, I may state my view that India, as a jurisdiction, should not be viewed as one lacking in legislative or court support for arbitrations. India's image has no doubt suffered due to a few retrograde court decisions (which now stand overruled and addressed under the October 2015 Amendment Act9). The Indian Arbitration Act10 (though based on the Model Law) goes an extra mile in trying to keep court intervention out and lend its fullest support to the arbitration process. Three illustrations should suffice to make this point: 

Article 5 of the Model Law simply states that in matters provided for therein, no court shall intervene (except where so provided for under the said law).  The Indian Act makes its intent far more emphatic rendering it a non-obstante clause: ("Notwithstanding anything contained in any other law for the time being in force...... no judicial authority shall intervene.....")11.

Next, Section 8 (court's power to refer parties to arbitration where there is an arbitration agreement) requires the judicial authority, seized of any matter which is subject to an arbitration agreement, to refer the parties to arbitration.  The only ground on which this can be resisted under Indian law is if the court finds that prima facie no valid arbitration agreement exists. The language of the Model Law leaves far more room for judicial intervention. It permits a non-reference to arbitration if the court finds that the said agreement "is null and void, inoperative or incapable of being performed". These potential loopholes stand removed under Indian law from court scrutiny (and entrusted to the arbitral tribunal). 

Lastly, (to illustrate the Indian Arbitration Act's pro-arbitration stance), Sections 13, 14 and 16 can be seen. The Model Law provides an interim appeal to a court, if a challenge to an arbitrator inter alia on the grounds of bias, jurisdiction, validity of the agreement etc. fails. Not so under the Indian Act, which requires the arbitration to continue and an award rendered – which award can then be challenged by the aggrieved party.

Coming to court support, this can be seen best from the actual statistics of enforcement of awards.  As per a 2008 study, out of a total of 17 challenges to foreign awards, only one was upheld by the Indian Courts, while one was modified12. Subsequent statistics are about consistent with this ratio. This is far more favorable than the global average rate.13 The domestic awards challenge figures may be misleading as under the old Arbitration Act (of 1940) a challenge to an award was permissible on wider grounds than currently permissible (under the 1996 Act).

Commenting on the Indian judiciary and Indian courts, noted Indian Jurist Mr. F.S. Nariman stated:

"I must stress that there is no foreigner bias in India's legal system, nor amongst its judges.  The foreign party loses or wins as often as the local.  In fact, statistics show that in the last fifty-five years, amongst the important arbitration cases that ultimately reached the Supreme Court of India, foreign parties have succeeded over Indian parties in a preponderating majority of cases".'14

It must also be emphasized that many of the retrograde judgments (which sometimes led to stalling of arbitrations and encouraging reluctant parties to adopt guerilla tactics) now stand largely neutralized by the 2015 Amendment to Arbitration Act15 and it would be fair to expect that arbitrations in India would normally be in as friendly and supportive an environment as anywhere else in the world.

While all of the above is true, equally it has to be recognized that India is a very large jurisdiction. With 24 High courts (not counting the circuit benches) and over 600 High Court Judges and over 28 Supreme Court Judges (and indeed the spectrum of judicial delays), it is unrealistic to expect a uniform or consistent judicial approach or outcome.  Not all judges have the necessary commercial or international arbitration exposure. Coupled with judicial delays, there can be missteps and expectation gaps. To some extent the issue is being addressed by designating special commercial and arbitration courts in the High Courts. But that is a work in progress and will not (by itself) suffice.  Accordingly, (in my respectful suggestion) the judiciary must be open to the idea of engaging and interacting with the international arbitration community and indeed contribute to the development of the international jurisprudence on the subject.

  • Third: Evolving An Arbitration Bar

India cannot hope to become a centre for arbitration without a body of well reputed specialist arbitration lawyers.  Being a good (or outstanding) lawyer in the court system is not good enough.  One has to be "within" the arbitration system.  The legal bar in India has trained and grown in its own manner with emphasis on oral advocacy and court procedures (which is far removed from a typical well run international arbitration). Moreover, the eminent sections of the bar operate within a comfort zone where their name and reputation speaks for itself. Recognition as part of an international arbitration bar however is another ball game. All over the world, serious arbitration practitioners regularly intermingle with their peers, write and speak on the subject in international/national forums, get noticed and stand out. The serious Indian contenders will have to do likewise. Recognition, credibility and acceptability will not come without a special effort.  Well entrenched lawyers may perhaps not have the appetite to get into this long haul.  It is up to the younger sections of the bar to take this initiative.

Conclusion:

India as a centre for arbitration, should not be viewed in any narrow prism as serving the economic agenda of a few.  It should be viewed as a matter of national interest and the mindset of the State agencies (and the judiciary) should contribute towards this effort. Surely the desirability for a country to come into its own on the international dispute resolution stage has advantages beyond the obvious and I trust that the Indian participants will take it forward in right earnest.

Footnotes

1 The other five being: Japan, New Zealand, Pakistan, Thailand and Hong Kong.  None from the America subscribed to it. (Mr. F.S. Nariman: 'East Meets West: Tradition, Globalisation and the Future of Arbitration', LCIA Arbitration International (Vol.20, issue 2, Page 123).

2  The Indian Arbitration Act 1940 (10 of 1940).

3  Final Award dated 30th November 2011 in the matter of UNCITRAL arbitration under the Agreement between Government of Australia and the Government of Republic of India.

4  'The New Challenges and Opportunities for India in Bilateral Investment Treaties': Sumeet Kachwaha; Lexis Nexis. Emerging Issues Analysis: 12th January, 2013.

5  Centre for Public litigation v/s UOI & Others. (2012) 3 SCC 1.

6 LCIA Registrar's Report 2015. [www.lcia.org/LCIA/reports.aspx].

7 LCIA Registrar's Report 2015 [www.siac.org.sg/images/stories/articles/annual_report/SIAC_Annual_Report_  LCIA Registrar's Report 2015 [www.siac.org.sg/images/stories/articles/annual_report/SIAC_Annual_Report_ 2015.pdf].

8  Section 9 A read with Section 2 (1), 8 (2) and 8(3) of the International Arbitration Act.

9  The Arbitration and Conciliation (Amendment Act 2015 – Act 3 of 2016 – with retrospective effect from 23rd October, 2015).

10  The Arbitration and Conciliation Act, 1996 (26 of 1996) as amended by Act 3 of 2016 (hereafter Arbitration Act).

11  Section 5, The Arbitration and Conciliation Act, 1996.

12 'Enforcement of Arbitral Awards in India' by Sumeet Kachwaha, Asian International Arbitration Journal (Kluwer) Vol.4 No.1 Pg. 64 at 81.

13  See Prof. Albert Jan Van Den Berg's study which concluded that globally only about 10% of the New York Convention Awards were not enforced: 'Why are some awards not enforceable?' ICCA Congress Series no.12 (Beijing 2004) at 19 291.

14  Fali S. Nariman, 'India and International Arbitration', 41 Geo.  Wash. Intl. L. Rev 367-379 (2009).

15 Act 3 of 2015 – w.e.f. 23rd October, 2015.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.