Written by: Shivangi Pandey
Edited by: Anisha Ratnam
Pranav Shrivastava - Unsplash
Introduction
The changing climate in the sphere of dispute resolution (domestic and international) has resulted in winds flowing in two new directions – towards arbitration, as in the case of the disputing parties, and towards promoting their jurisdictions as a hub/seat of arbitration, as in the case of countries. Singapore International Arbitration Centre (SIAC), as one of the most sought-after seats in the world, has set the bar extremely high for other jurisdictions in Asia [1]. While it is not an equal competitor of SIAC yet, India has nevertheless been coordinating its efforts to promote itself as an advantageous location for the efficient resolution of international commercial disputes.
India's Ascent in International Arbitration
India’s journey in the arbitration circle began with the ratification of the New York Convention (“the Convention”) in July 1960 [2]. An implication of this alignment is upholding the convention’s principle aim, which is to ensure the non-discrimination of international arbitral agreements and awards while enforcing them [3]. Two reservations are significant to India’s application of the Convention: first, it will only enforce agreements and awards in line with the provisions of the Convention when the agreements and awards have been established in a contracting State [4]. Secondly, and more importantly India’s goal to become a global hub of arbitration is that it will apply the convention only to disputes arising in the domain of commercial law, as defined by Indian law [5].
Developments in India's Arbitration Framework
Increasing the caseload of the India International Centre for Arbitration (IICA) is a recent attempt by the Indian government to popularise IICA and arbitration for commercial disputes [6]. More substantively, a high-level expert committee was established in June 2023 to recommend amendments to the Arbitration and Conciliation Act (1996) in India with the general task of reviewing the institutionalisation of arbitration in India under the chairpersonship of retired Justice B.N. Srikrishna, of the Supreme Court of India [7].
The recommendations in Part III of the report, specifically for the ‘Independence and Impartiality of Arbitral Institutions’ (3.12), ‘emergency arbitration’ (3.13), and for setting a time limit on the enforcement of arbitral awards (3.21), and their inclusion in the Arbitration Act carry the potential to put India on track to become an inviting option as a seat [8]. These are now found in the draft Arbitration and Conciliation (Amendment) Bill, 2024. Their inclusion is not contentious because these provisions generally attract consensus rather than disagreements among various stakeholders involved (courts, governments, parties to arbitration, academics, etc.).
One of the more contentious aspects is recommendation 3.5 which includes ‘Validation of Insufficiently stamped or not duly stamped arbitration agreement’ [9]. A recent judgement by India’s Supreme Court (NN Global case) on the issue of ‘stamping’ is a ‘step back’ according to Clifford Chance, an international law firm in the UK [10].
Challenges in India's Arbitration Landscape: The Stamping Dilemma
The case in question – Global Mercantile (P) Ltd. v. Indo Unique Flame Ltd., (2021) involved a decision on the legal standing of an inadequately stamped arbitration agreement in the territory of India [11]. The main clash in this case was regarding whether an arbitration agreement is part of or separate from the agreement between two parties, which had implications for the enforceability of an arbitral award [12]. The India Stamp Act (1899) governs the stamping of ‘instruments’ (documents) involved in transactions between parties [13]. Documents that are insufficiently stamped (the correct amount of stamp duty has not been paid) or unstamped are not admissible as evidence in court [14]. At the final juncture of this case, a 7-judge bench in the Supreme Court of India rendered the arbitration agreement that had not been duly stamped as per the provision of the Indian Stamp Act, to be inadmissible in India [15]. Although the arbitral award was the outcome of a domestic and not international arbitration, this move (or interference) from the apex court has implications for international parties that in the future might consider India as their seat of arbitration.
The requirement that arbitral agreements must be duly stamped according to the provisions of an arguably outdated stamping act of India is a bureaucratic obstacle for parties who turned to arbitration for an efficient and cost-effective dispute resolution process. Not only is this an interference by an authority that adjudicates litigation and not arbitration, but it can also be seen in contravention of an underlying aim of the New York Convention which requires ‘courts of Parties to give full effect to arbitration agreements by requiring courts to deny the parties access to court in contravention of their agreement to refer the matter to an arbitral tribunal’ [16].
However, it could be argued that Indian courts are not entering a situation where their actions are ultra vires as the Convention does not explicitly have a prohibition on stamping requirements and Article 3 prohibits fees that are ‘onerous’ or more than the amount required for domestic awards for enforcement of international arbitral awards [17]. But when it comes to choosing a seat, parties involved in a commercial dispute will opt for a jurisdiction with more progressive arbitral laws that minimise judicial intervention, allowing for swift enforcement of awards.
Nonetheless, even this ‘step back’ reflects the changing climate of the international legal community. As pointed out by an article published by an Indian legal database, while the bench deemed the arbitral agreement inadmissible, the ruling did not make the agreement void (or unenforceable) [18]. As per section 35 of the Stamping Act, an instrument not duly stamped is inadmissible as evidence but this does not automatically amount to the award becoming unenforceable [19]. The bench further upheld that domestic statutes will not interfere with the arbitration act unless stated otherwise. Since there was no such statement in the agreement prohibiting other statutes, the bench concluded that it must then take the relevant domestic statutes into account. More significantly, in my opinion, the iteration by the bench regarding the aim of the Arbitration Act in reducing the ‘supervisory role’ of the judiciary can play in the process of arbitration.
Conclusion
Issues arising in the process of arbitration (akin to this one) involve an advanced approach towards balancing between upholding the autonomy and independence of the arbitration process and giving weight to the relevant domestic laws to not go against the intention of the representative lawmakers. While businesses want the laws to create efficient resolution mechanisms that save them time and money, the business of law has an inherent inclination towards loyalty to procedure and just application of laws. The swiftly expanding domain of private international law has brought opportunities for enthusiastic and business-accommodating jurisdictions like India. But at the same time, it requires lawmakers and keepers to keep a close eye on the tug of war between internationally valued efficiency compared to the due process and rule of law of the domestic sphere. At present, with further amendments recommended to the arbitration act in India, the effect of the international commercial-legal domain is proving to be heftier.
REFERENCES
[1] Yeap A, Poon K and Pradhan A, ‘The rise of arbitration in the Asia Pacific region (2023) GAR<https://globalarbitrationreview.com/review/the-asia-pacific-arbitration-review/2024/article/the-rise-of-arbitration-in-the-asia-pacific-region > accessed 23 November 2024
[2] ‘Jurisdictions (Signatories)’ (The New York Convention Guide, 2024) <https://newyorkconvention1958.org/index.php?lvl=cmspage&pageid=4&menu=671&opac_view=-1 > accessed 24 November 2024
[3],[16] ‘Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, 1958) (the "New York Convention")’ (Adopted 10 June 1958, entered into force 7 June 1959) UNCITRAL
[4],[5] Tagotra S and Mishra I, ‘Recent Developments in the Enforcement of New York Convention Awards in India’ (Kluwer Arbitration Blog, July 6 2020) <https://arbitrationblog.kluwerarbitration.com/2020/07/06/recent-developments-in-the-enforcement-of-new-york-convention-awards-in-india/ > Accessed 23 November 2024
[6] Neha Joshi, ‘India wants to be an arbitration hub. It won’t be an easy task’ (Mint, 27 October 2024) < https://www.livemint.com/industry/arbitration-appeal-tribunals-need-right-talent-to-yield-results-11730011075540.html > Accessed 23 November 2024
[7],[8],[9] Department of Law and Justice, Report of the High Level Committee to Review the Institutionalisation of Arbitration Mechanism in India (Report, 2023) Part III
[10] Indian Arbitration – one step forward, one step back (Clifford Chance, 2023) < https://www.cliffordchance.com/content/dam/cliffordchance/briefings/2023/06/Indian-case-on-third-party-funding.pdf > Accessed 23 November 2024
[11] N.N. Global Mercantile (P) Ltd. v. Indo Unique Flame Ltd., (2021) 4 SCC 379
[12],[15],[18] Apoorva, ‘7-Judge Bench Verdict | Supreme Court Judgment on validity of Unstamped Arbitration Agreement’ (SCC Online, 13 December 2023) < https://www.scconline.com/blog/post/2023/12/13/7-judge-bench-verdict-supreme-court-judgment-on-validity-of-unstamped-arbitration-agreement/ > Accessed 24 November 2024
[13],[14],[19] The Indian Stamp Act 1899
[17] ‘Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, 1958) (the "New York Convention")’ (Adopted 10 June 1958, entered into force 7 June 1959) UNCITRAL
Comments