ADR Class Notes
ADR Class Notes
2/08/22
Arbitration is a procedure like CPC. (adversarial)
Arbitration more exhaustive (not prescriptive coupled with substantive principles)as a
legislation than CPC (CPC 2 parts – prescriptive and descriptive).
Arbitrability
Legislation – find out its aim (karna kya chahta hai), prof is looking for sense of relatability
include that in assignments, understand the whys to understand the hows
LINE OF ARGUMENT SHOULD BE SOLID
Legislation (sections) supreme to the judgement, judgement explaining not the provision but
how the provision is to be read is essential.
LEARN TO READ IT, NOT JUST CONVENIENTLY
Read SR Bomai (whenever the case of a hung Assembly, and the subsequent exercise of
government formation, came up, the Bommai case would be cited, making it one of the most
quoted verdicts in the country's political history.)
https://www.thehindu.com/news/national/what-is-the-sr-bommai-case-and-why-is-it-quoted-
often/article61834854.ece
Bhajanlal , The case re established that our Constitution is based on the concept of Rule of
Law which serves as an aorta of governance in our democratic system and no one or authority
is higher than law and that Law Is Supreme.(corruption case) https://lawtimesjournal.in/state-
of-haryana-vs-bhajan-lal-and-ors/
Kesavanda – basic structure doctrine , main issue - : Was the power of Parliament to amend
the Constitution unlimited? In other words, could Parliament alter, amend, abrogate any part
of the Constitution even to the extent of taking away all fundamental rights? any provision of
the Indian Constitution can be amended by the Parliament in order to fulfil its socio-
economic obligations that were guaranteed to the citizens as given in the Preamble, provided
that such amendment did not change the Constitution’s basic structure https://byjus.com/free-
ias-prep/kesavananda-bharati-case-1973-sc-judgements/
3/08/22
“Hmm” can be prevented at the Cause of action stage otherwise difficult to figure out what
exactly it is that they want, where is the main cause of action, grievance . Identifying the
forum i.e. the third person is also a problem here.
Matters can be resolved at the cause of action stage by coming to a consensus and accepting
an answer.
Mediator, conciliator, arbitrator make you talk. Give a chance to be heard.because we stop
talking we have an issue.
Parties talking to someone through someone depending upon who and the mode of
communication we understand whether a matter is resolved or settled.
When the parties give some, take some, loose some and arrive at a consensus settled.
The end is not near, the end is resolution.
A,D figured. R is resolution.
Adjudication is the process of fact finding from day 1 .
Evidence is studied for verification of facts coming from parties, standard to coagulate facts
and law is provided by evidence act.
Whenever you are contesting everything is alleged or averse until it is declared as right.
This whole process is adjudication.
Trial begins on the day when the issues are framed by the court. End result of adjudication is
resolution.
Settlement, two parties settle it amongst themselves, is where the parties are doing all sorts of
communications facilitated by the mediator.
Caucus being one of the tricks used by the mediator to make the party talk.
Settlement lacks the mandate by the state. Mediation builds, repairs relationships.
No PREDICTIBILITY – BIGGEST ASPECT OF DISPUTE RESOLUTION, THE CRUX,
FULCRUM.
Resolution as well as settlement can be the outcomes of ADR. R is a bias in favour of
arbitration.
Tiffany v. Swatch- keep on flipping between resolution and settlement but where is the
predictability.
Arbitral award is well reasoned and can be opened up by the court the same cannot be done
for mediation.
Arbitration act Conciliation Act recognizes the alternative mechanisms like mediation, lok
Adalat as well. This is the uniqueness of the above mentioned legislation in India, the same is
not recognized by other countries.
MEDARB- if mediation fails, go for arbitration. ( mediation compulsory before arbitration)
9/08/22
Break down concept, relate it to the questions – crisp answers.
Different interpretation – contribution to the existing literature to get an O
Sec 89 CPC – covenant which allows us to go out of the court and help settle the dispute. (aji
humse bachke kahan jaenga)
1
[89. Settlement of disputes outisde the Court.--(1) Where it appears to the Court , (comma
is missing here) that there exist elements of a settlement which may be acceptable to the
parties, the Court shall formulate the terms of settlement and give them to the parties for their
observations and after receiving the observations of the parties, the Court may reformulate
the terms of a possible settlement and refer the same for:--
(a) arbitration;
(b) conciliation;
(c) judicial settlement including settlement through Lok Adalat: or
(d) mediation.
(2) Were a dispute has been referred—
(a) for arbitration or conciliation, the provisions of the Arbitration and Conciliation Act, 1996
(26 of 1996) shall apply as if the proceedings for arbitration or conciliation were referred for
settlement under the provisions of that Act;
(b) to Lok Adalat, the Court shall refer the same to the Lok Adalat in accordance with the
provisions of sub-section (1) of section 20 of the Legal Services Authority Act, 1987 (39 of
1987) and all other provisions of that Act shall .apply in respect of the dispute so referred to
the Lok Adalat;
(c) for judicial settlement, the Court shall refer the same to a suitable institution or person and
such institution or person shall be deemed to be a Lok Adalat and all the provisions of the
Legal Services Authority Act, 1987 (39 of 1987) shall apply as if the dispute were referred to
a Lok Adalat under the provisions of that Act;
(d) for mediation, the Court shall effect a compromise between the parties and shall follow
such procedure as may be prescribed.]
MSMEs- Arbitration
Out of court SETTLEMENT NOT RESOLUTION, either court directed, or court annexed or
through legislation i.e. backed by the legislation rather than court practice.
Prelitigation Mediation, only if it reaches an irreconciliable stage then court. “beta tumse nah
ho paega”
New York Convention [UN Convention on the Recognition and Enforcement of Foreign
Arbitral Awards]
- One of the only documents on arbitral awards. Has impacts on many other conventions
- Article 1:
- Article 2:
- Mandatory for all participating states to recognise an arbitration agreement in writing.
- Undertake (Consent)
- Has to be a defined legal relationship
- All or any differences (Scope)
- 2(2): Agreement in writing shall include an arbitral clause
- Note: Does not include the term "may" in the whole contract/
- If there is consent, it is binding (implication of the word shall)
- Firm requirement
- 2(3): Court of a contracting state when deciding in a matter of arbitration (court
interference/confluence starts here) shall at the request of one of the parties to arbitration
unless it finds the agreement to be null and void (Substantive invalidity), inoperative or
incapable of being performed.
- Shall: An obligation placed on the court to refer the parties to arbitration
- inoperative or incapable of being performed.
- Hotly debated since ambiguous
- The way it stands makes the performance of it inoperable. However, with slight tweaking of
the clause, the arbitration clause can be held to be valid.
- When it is null and void, nothing is going to happen. However, in the case of inoperable or
incapable there is consent, it is written, and is legal. Thus, the court would have to tread
extremely close lines as what the parties had initially intended
- Lucky Gorsal v. Nanuki constructions
- Vidya Droilia Case
- It is obligatory for you to send the parties to arbitrations.
23rd August
arising out of- stipulated obligations that the parties consented to--
in connection with- during the performance of these obligations, an ancillary issue arose (like
for cost of cement
Separability ensures that arbitration agreement exists even when the contract itself is in
dispute (void/illegal etc.)--- because the party consented to it expressly---hands over
jurisdiction for arbitration—essence is survival of arbitration agreement
And the second competence---the tribunal will investigate the subject matter and not with
respect to the nature of dispute instead it would be looking at the capacity for resolution of
the dispute (whether it is a contractual dispute)
{Essentially the tribunal agreement must be given the capacity to ascertain the jurisdiction
of the disputes}
6th September
Arbitrability
7th September
When we are looking at arbitrability as an issue—how will the tribunal resolve the issue
proximity with the main contract(scope)—irrespective of the subject-matter of
dispute
the relevance of the law of the seat
the arbitrator’s dilemma---too many factors to consider when the seat and the parties
to the arb. agreement is from different countries—problems such as the award could
be against the public policy for one of the parties involved (few have jurisdiction on
ipr while others may not)—it’s been restricted to public policy and not from
arbitrators’ point of view
Aftaab Singh judgement- go through
The capacity of the parties to arbitrate- subjective arbitrability—here the parties to the
contract do not have the capacity to go for arbitration
The subject matter for arbitration- objective arbitrability—here the arbitration tribunal does
not have the capacity to adjudicate
13th September
Section 16(1) (a)- separability
Section 16(1)(b)- decision of arbitral tribunal that contract is void does not make the
arbitration clause invalid
Anti-suit injunctions are often the result of disputes regarding the proper jurisdiction i.e.,
court of a country to decide the dispute. They have become increasingly common, largely
due to the application of foreign law to contracts, arbitration clauses and their resulting
disputes. In fact, the law of anti-suit injunction has developed to such an extent that it gave
birth to the concept of anti-anti-suit injunctions, also known as anti-enforcement injunctions
Security for costs--- cost for the arbitration proceeding---venue, payment to arbitrator etc
antecedence as respondent— the past conduct such as prior default by the parties
financial conditions- insolvency/impecunious situations
Security for claims----
11th October
Any dispute arising out of or in connection with the performance of this agreement shall be
finally resolved through arbitration. There shall be 3 arbitrators, one each nominated by the
parties, the chairman shall be appointed by the 2 arbitrators. The seat shall be New Delhi.
The arbitration shall be governed by the MCIA rules, the arbitration agreement is
governed by the A&C.--- this procedural part makes the arbitration agreement works
This agreement derives the validity from A&C act--- which provides substantive validity to
the arbitration agreement
External lex arbitri----A&C act-- helps you to bridge the gap between the tribunal in its
internal functioning with the seat court---will bridge the gap that goes outside the realm
of the tribunal (nahi toh internal mechanism i.e., arbitral tribunal would do) For instance—
approaching court for assisting in evidence
{also, if mcia rules contradicts the law governing the arbitration, then the internal
mechanism process becomes problematic and then, the courts through (the external lex
arbitri) the governing law would try to solve the issue)
18th October
There is no norm or no legislation that provides how to balance the legitimate expectation of
the parties in arbitration—this is the problem of legislator
The parties also have legitimate expectation like not disclosing documents that are against the
interest and the arbitration does not have police powers for enforcement
Procedural substance- the arbitrators may act as amiable compositeur or ex aequo et bono
Most favored nation- we look at similar situations of the party with a different nation( a
different treaty with a 3rd country) while resolving the dispute of the parties.
closest connection test & lex mercatoria are often used by arbitrators for figuring out
procedural substance- this is based on the principle of ‘amiable compositeur’ i.e., equity and
good conscience
Landmark Cases
Banco Central de Venezuela v Bank of England
Zaiwalla & Co acted for the Central Bank of Venezuela (BCV) in a dispute arising out
of the political crisis following Venezuela’s disputed 2018 presidential election. The
Bank of England (BoE) holds approximately US$2.1 billion of gold reserves on behalf
of the state of Venezuela appointed by President Maduro but has questioned the
authority of the current Board of BCV. We are acting for the BCV in a claim against
the BoE to gain access to those reserves to finance the purchase of humanitarian,
food and medical supplies necessary to meet the Coronavirus pandemic. This is
disputed by a board appointed by Juan Guaidó, who claims the title of Interim
President of Venezuela.
This issue has been considered by all levels of the UK courts, including the Supreme
Court where Zaiwalla & Co acted.
Overgas
Our team acted for a Bulgarian gas distributor in arbitration disputes with Russian
energy giant Gazprom, in relation to Gazprom’s decision to stop supplying natural gas
to Overgas in January 2016. Gazprom claimed that Overgas owed them
approximately $105m under this arrangement, while Overgas claimed that Gazprom
had acted in breach of EU and Bulgarian competition law and in breach of contract.
We achieved a significant confidential settlement for our client.
Zaiwalla & Co obtained a confidential LCIA arbitration award in favour of its client for
US$200 million, in a dispute over family assets held through a Cypriot company
following their client’s divorce.
Zaiwalla & Co obtains a confidential LCIA arbitration award in favour of its client for
US$200 million in a dispute over family assets held through a Cypriot company
following their client’s divorce.
Kamlesh Pattni
The firm acted for this very well-known Indian businessman in Kenya in his successful
application for a judicial review of the UK Home Office’s refusal to register him as a
British Citizen and to issue him with a British passport. Mr Pattni received his British
passport after 22 years of waiting.
Punjab National Bank v Srinivasan
The team defeated a claim for US$45 million made against several defendants
brought in the English High Court by an Indian bank, based on an alleged fraud. We
successfully argued that the claim was too weak and should not have been started in
England because the defendants were more closely connected with India. We also
successfully resisted the Bank’s appeal against this decision.
Bank Mellat
A multi-level fraud claim for over £150m, in which Zaiwalla & Co represented the
London Stock Exchange listed Kazakh paper manufacturer to secure a freezing order
against its former owners, which was upheld by the Court of Appeal. The case is now
authority for many propositions of law, including the way the Court should deal with
cost claim where lawyer incur disproportionate and unreasonable amounts of costs
(as the opponents did in this case).
The firm advised the Russian Federation on a successful strategy, based on a novel
point of law not considered by the existing legal team, to apply in The Hague to set
aside two US$50 billion international arbitration awards in favour of former Yukos
shareholders.
We acted for one of Moscow’s leading lawyers in defence to a $300 million claim by
Russian oligarch Sergei Polonskiy following the sale of a stake in his company to
another shareholder, which he claimed was going to be sold to oligarch Roman
Abramovich. We successfully had the claim dismissed and a judgment was granted on
our client’s counterclaim.
IPartner Pte Shipping Ltd & Ors v Panacore Resources
Zaiwalla & Co won its argument that an arbitration clause was valid. The Court
decided that an agreement which stated that “the parties could decide to submit any
dispute between them to an arbiter of their choice in London” was a valid arbitration
agreement. This is now a significant authority for the regular disputes between
parties about whether they have even agreed to arbitrate.
Considered to be one of the top 10 cases of 2013 by leading publication The Lawyer,
Zaiwalla & Co. successfully challenged before the UK Supreme Court the listing of
Bank Mellat by the UK Treasury under the UK’s Iran sanctions regime. Due to its
major national security elements, the case involved the first ever ‘closed hearing’ in
the Supreme Court’s history. It is now a landmark case on the approach to be
adopted by the English Courts when part of the proceedings takes place behind
closed doors.
Zaiwalla & Co also led Bank Mellat’s successful challenge against sanctions imposed
by the European Union, causing the European Court of Justice to declare the
sanctions unlawful.
Jivraj v Hashwani
Known as ‘the arbitration case of the decade’, Zaiwalla & Co won its client’s case in
the Court of Appeal arguing that an arbitration agreement that purported to restrict
the appointment of arbitrators to members of a single religious denomination was
void by reason of anti-discrimination legislation applicable to employment rights.
Shah v HSBC
One of the most significant worldwide banking cases of the 2010s, where our client
claimed damages of US$300 million arising out of his private bank’s refusal to carry
out his instructions, on the basis of an alleged suspicion of money laundering. In
granting our client’s appeal, the English Court of Appeal rejected HSBC’s argument
that it did not need to prove that its employees did genuinely suspect money
laundering – bank’s do not have ‘carte blanche’ to refuse their client’s instructions.
Summary judgment for the bank was therefore refused and the matter went to a full
trial.
The High Court held, for the first time, that an arbitrator should have stood down
from his role because of his apparent bias in favour of the English party. This
judgment was recently applied to by the UK Supreme Court in November 2020.
The High Court decided that even though the parties had agreed to arbitrate any
disputes in London, Indian law should apply to the arbitration procedure. This result
was very beneficial to overseas parties fighting cases in London arbitrations.
Government of India
Since the early 1980s Zaiwalla & Co has handled over 1000 arbitrations arising out of
vessel charters to transport foodstuffs to India during the food shortage between
1982-94. The firm’s tenacious defence of these claims saved the Indian Government
over US$80 million at a time when foreign capital reserves were scarce.
The original recognition of seat becomes problematic when the parties push to apply Indian
laws through part 1 and for every dispute the parties are directed to Indian jurisdiction
For foreign seats, Indian courts cannot intervene for any dispute aside from non-execution of
the arbitral award – the foreign seat has the jurisdiction primarily
Bharat Aluminium Co v. Kaiser Aluminium Technical
Services (‘BALCO’)
The general thrust of the BALCO judgment is to shield the future against previous incorrect and
anachronistic rulings and to encourage Indian courts to become more arbitration-friendly and
thereby less likely to participate in the arbitral phase, in line with the fundamental theory and
ethos of the New York Convention and UNCITRAL Model Rule. To that end, BALCO lives up to the
excitement created in the international arbitration community when it was announced earlier
this year that the Indian Supreme Court was hearing a case seeking reconsideration of its earlier
judgments in Bhatia International v. Bulk Trading SA and Venture Global Engineering v. Satyam
Computer Services Ltd.
FACTS
The parties had agreed on the supply of equipment and the modernisation and upgrading of
manufacturing facilities. Inevitable disagreements occurred and were sent to arbitration in
England, with awards in favour of the Respondent. The Appellant had applied to the
Chhattisgarh High Court under Section 34 of the Act to have the award set aside.
ISSUE
1. Whether the two awards which were passed in England could be challenged in India u/s. 34
of the Act?
2. Whether Section 9 of the act was applicable or not?
HELD
The court held that the aim of section 2(7) of the Act is to distinguish the domestic award (Part I
of the Act) from the ‘foreign award’ (Part II of the Act), i.e. there is a clear distinction between
Parts I and II, with clauses that apply to entirely separate fields with no overlap.
Further, the Court made a difference between a ‘seat’ and a ‘location’ which would be essential if
the arbitration arrangement names a foreign nation as the ‘seat’ of the arbitration and chooses
the Act as the curial law regulating the proceedings. The Court went on to say that selecting
another nation as the seat of arbitration invariably implies that the proceedings would be
governed by the laws of that country governing the behaviour and oversight of arbitrations.
As a result, even though the arrangement states that the Act governs the arbitration
proceedings, Part I of the Act will not be valid or will not allow Indian courts to exercise
supervisory authority over the arbitration or the award if the arbitration agreement is identified
or kept to provide for a seat/position of arbitration outside India. It simply means that the parties
have contractually imported from the Act specific clauses relating to the internal operation of
their arbitration that is not in conflict with mandatory English procedural or curial legislation. As
a result, it's safe to assume that Part I only extends to arbitrations that take place in India.
The Court disagreed with the findings in the Bhatia International case. It went on to say that,
based on a fair reading of the Act, Indian courts do not have the authority to grant temporary
steps where the arbitration is held outside of India. A cursory reading of Section 9 of the Act
reveals that it pertains to transitional action taken before or after arbitral hearings, or at some
period after the arbitral award is made but before it is applied in compliance with Section 36.
(enforcement of domestic awards). As a result, the arbitral hearings before the judgment
contemplated by Section 36 will only apply to arbitrations held in India.
The Court went on to say that in international commercial litigation involving foreign parties, no
appeal for temporary relief may be filed in India, whether by arbitration or a lawsuit.
CONCLUSION
The BALCO judgment is not a solution for all the ills connected with the arbitration in India, but it
is an excellent first step in the right direction by the Indian Supreme Court. Although there is no
doubt a long and challenging road ahead, replete with complex legal and policy obstacles, before
India can be called an arbitration-friendly jurisdiction, the BALCO decision gives reason to believe
that a new and exciting age for arbitration in India has begun.