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Category: Foreign Awards and their Enforcement

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Foreign Awards and their Enforcement

Centrotrade Minerals and Metals Inc v. Hindustan Copper Limited [Supreme Court, 2 June 2020]

CENTROTRADE MINERALS AND METALS V. HINDUSTAN COPPER

Centrotrade Minerals and Metals Inc v. Hindustan Copper Limited [Supreme Court, 2 June 2020]

ISSUE:

  • Whether the contract’s two-tier arbitration clause, which allows for a second arbitration with the International Chamber of Commerce (ICC) in London after the initial arbitration in India, is legitimate and allowed under Indian law. This issue has already been addressed and resolved in favor of the clause’s legitimacy?
  • Whether the contract’s two-tier arbitration clause, which allows for a second arbitration with the International Chamber of Commerce (ICC) in London after the initial arbitration in India, is legitimate and allowed under Indian law. This issue has already been addressed and resolved in favour of the clause’s legitimacy.

RULE:

  • In this scenario, the relevant rule is the two-tier arbitration clause included in the parties’ contract. This section provides for a two-stage arbitration process, with the first stage involving arbitration in India and the case proceeding to a second arbitration conducted by the International Chamber of Commerce (ICC) in London if either party is dissatisfied with the outcome. This regulation specifies the agreed-upon approach for resolving contract-related issues.

FACTS:

  • Centrotrade Minerals and Metals Inc. (Centrotrade), a US firm, has agreed to sell 15,500 DMT of copper concentrate to Hindustan Copper Ltd. (HCL) for delivery at Kandla Port in Gujarat, India.
  • The contract featured a two-tier arbitration clause: first-tier arbitration in India, followed by a second-tier arbitration held by the International Chamber of Commerce (ICC) in London if either party disagreed with the outcome.
  • A disagreement occurred regarding the quantity of copper concentrate given, prompting arbitration proceedings.
  • In the first-tier arbitration, the arbitrator assigned by the Indian Council of Arbitration issued a Nil Award.
  • Centrotrade requested second-tier arbitration, and the ICC arbiter in London delivered a decision in Centrotrade’s favor, awarding precise monetary amounts.
  • During the London arbitration, HCL filed a suit in a Rajasthan court challenging the arbitration clause, obtaining an interim stay that the Supreme Court ultimately overturned.
  • The implementation of the London award was initially permitted by a single judge of the Calcutta High Court, but a Division Bench overturned this decision.
  • The matter was heard by the Supreme Court, which issued two distinct judgments addressing the constitutionality of the two-tier arbitration clause and the procedural fairness of the arbitration.

HELD:

  • According to S.B. Sinha, J., the two-tier arbitration agreement was unlawful under Indian law, so the foreign judgment was not enforceable in India.
  • Tarun Chatterjee, J., decided that the two-tier arbitration process was lawful and admissible under Indian law, but procedural fairness was difficult throughout the London arbitration. HCL was not allowed to present its case before the ICC arbitrator.
  • The case was submitted to a higher court.
  • The first question, whether the two-tier arbitration agreement was lawful, was answered positively.
  • The matter is currently being evaluated for the second question, which concerns the enforcement of the London award, focusing on whether HCL was given a fair and adequate opportunity to respond.
  • The Court found no evidence to support Hindustan Copper Ltd.’s (HCL) contention that it was unable to present its case during the arbitration hearings. Under Section 48(b) of the Arbitration and Conciliation Act, the refusal ground is an impossibility, not difficulty in presenting one’s case. HCL had many opportunities to state its position but chose not to participate in the arbitration at first.
  • The Court rejected the claim that the London arbitrator should have resolved the issue of jurisdiction as a preliminary matter before examining the contract’s substantive issues. This was the first time this argument was offered, and it needed more substance.
  • The Court criticized one of the judges’ errors in the prior judgment, pointing out that the judge had misread some aspects of the arbitration proceedings and needed to correctly apply essential legal principles.
  • The Court determined that remanding the case to the ICC arbitrator for a new award was outside the enforcing court’s authority under Section 48 of the Arbitration and Conciliation Act.
  • As a result, Centrotrade’s appeal was permitted (Civil Appeal No. 2562 of 2006), and Chatterjee, J.’s judgment was reversed. The appeal filed by HCL (Civil Appeal No. 2564 of 2006) was denied.
Categories
Foreign Awards and their Enforcement

MSM Satellite Pvt. Ltd. v. World Sport Group Ltd. Appeal(Lodging) No. 534 of 2010 in Notice of Motion No. 1809 of 2010 in Suit No. 1828 of 2010

MSM SATELLITE V. WORLD SPORT GROUP

MSM Satellite Pvt. Ltd. v. World Sport Group Ltd. Appeal(Lodging) No. 534 of 2010 in Notice of Motion No. 1809 of 2010 in Suit No. 1828 of 2010

ISSUE:

  • Whether the validity of the Bombay High Court’s injunction judgement, which barred WSG from pursuing ICC arbitration and favoured MSM’s accusations of fraud and deception?
  • Whether the parties’ disagreement should be resolved through Singapore ICC arbitration, as agreed in their agreement, or through Indian courts.?

RULE:

  • According to the New York Convention, which is similar to the Indian Arbitration and Conciliation Act, an arbitration agreement does not become void or incapable of performance just because the dispute involves charges of misrepresentation. Courts cannot refuse to refer a case to arbitration only because one side has claimed fraud. An arbitration panel has the ability to resolve disputes involving fraud or misrepresentation. Courts must send a dispute to arbitration if the parties’ agreement contains an arbitration clause, unless the agreement is “void, inoperative, or impossible to perform.”

FACTS:

  • The Board of Control for Cricket in India (BCCI) and MSM Satellite (Singapore) Pte. Ltd. (MSM) were at odds over media rights for the Indian Premier League (IPL).
  • The BCCI granted World Sports Group (WSG) global media rights for ten years in 2008.
  • MSM alleged that there was a pre-bid arrangement in place under which MSM pledged to gain global media rights to broadcast IPL for the first two years.
  • After one season, BCCI cancelled the agreement and started negotiations with WSG, prompting MSM to bring a complaint against BCCI.
  • In 2009, WSG and MSM reached an arrangement in which WSG agreed to give up all global media rights to IPL in exchange for INR 4.7 billion, and MSM may purchase these rights straight from BCCI.
  • A stipulation in the agreement stated that any dispute resulting from the agreement would be referred to the Singapore ICC arbitration.

HELD:

  • The court emphasised that the New York Convention, to which India is a member, promotes and facilitates cross-border acceptance and enforcement of arbitral judgements, thereby contributing to the growth of international arbitration.
  • The court emphasised that arbitration is an alternative dispute resolution tool chosen by parties to resolve their issues efficiently and expeditiously, and that courts must respect this choice.
  • It emphasised that courts should not intervene in arbitration procedures unless there are exceptional circumstances, such as where the arbitration agreement is clearly invalid or incapable of being implemented.
  • The decision emphasised the importance of parties’ sovereignty in choosing arbitration as their prefered mode of dispute resolution and the sanctity of arbitration agreements.
  • The court’s judgement attempted to foster an environment favourable to international arbitration in India by preventing needless intrusion by Indian courts in such processes.
  • In this instance, the court determined that the parties had agreed to refer their dispute to the Singapore ICC arbitration, and that this agreement should be upheld and enforced in accordance with international law and arbitration norms. The judgement of the court confirmed India’s adherence to international arbitration rules and principles, aligning it with worldwide best practises for resolving international commercial disputes.
Categories
Foreign Awards and their Enforcement

National Agricultural Cooperative Marketing Federation of India v. Alimenta SA 2020 SCC OnLine SC 381

NATIONAL AGRICULTURAL COOPERATIVE MARKETING FEDERATION OF INDIA V. ALIMENTA

National Agricultural Cooperative Marketing Federation of India v Alimenta SA 2020 SCC OnLine SC 381

ISSUE:

  • “Whether the Indian Supreme Court’s extensive review of the merits of the foreign arbitral award in the NAFED case aligns with the pro-enforcement bias stipulated in Section 48 of the 1996 Act and the New York Convention’s principles of minimal judicial intervention?”
  • Whether a violation of India’s export policy can legitimately be regarded as a violation of public policy under Section 48 of the 1996 Act, and whether this broader interpretation may lead to increased difficulties in enforcing foreign arbitrary judgments in India?”

RULE:

  • Section 7(1)(b)(ii) of the Foreign Awards (Recognition and Enforcement) Act, 1961 (now Section 48(2)(b) of the Arbitration and Conciliation Act, 1996), which allows for the refusal of enforcement of foreign arbitral awards on grounds of public policy, is one of the important legal provisions.

FACTS:

  • NAFED and Alimenta S.A. signed an agreement to supply Indian HPS groundnut.
  • The deal incorporated terms and conditions from the FOSFA 20 contract, which included a clause indicating that the agreement would be canceled if an executive order or law imposed an export embargo.
  • Due to export limitations imposed by the Indian government’s Export Control Order, NAFED could not perform the contract, prompting an arbitration procedure before FOSFA.
  • FOSFA awarded Alimenta damages, which the FOSFA Board of Appeal confirmed.
  • Alimenta attempted to have this international arbitral award enforced in India.

HELD:

  • In the NAFED case, the Indian Supreme Court thoroughly analyzed the merits of a foreign arbitral judgment, including determining whether factors such as export limitations justified the failure to complete a contract.
  • The Court held that enforcing the foreign award could be contrary to Indian national policy, notably in export policy. It was decided that a violation of export policy might be regarded a breach of public policy, which could be used to refuse enforcement.
  • The NAFED decision raised concerns about the pro-enforcement bias specified in Section 48 of the 1996 Act, since it appeared to allow for extended scrutiny and potential denial of enforcement based on public policy grounds.
  • The Court’s reading of public policy, particularly in the context of export policy, diverged from previous decisions, such as Renusagar, which had a narrower view of what constituted a violation of public policy.
  • The judgment created uncertainty and called into question the precedential value of prior decisions, leading to confusion in Indian law regarding the implementation of international arbitral awards. This could have ramifications for India’s reputation as an international arbitration center.
Categories
Foreign Awards and their Enforcement

P.E.C. Ltd v. Austbulk Shipping SDN BHD, 2018 (15)

P.E.C. LTD. V. AUSTBULK SHIPPING

P.E.C. Ltd v. Austbulk Shipping SDN BHD, 2018 (15)

ISSUE:

  • Whether an application for the execution of a foreign award under Section 47 of the Arbitration and Conciliation Act, 1996, could be dismissed if it was not accompanied by the appropriate arbitration agreement?
  • How the phrase “shall” should be construed in Section 47 of the Act in the context of producing documents, such as the original arbitration agreement, during the initial stage of submitting an application for the enforcement of a foreign award?

RULE:

  • The execution of international arbitral awards in India is governed by Section 47 of the Arbitration and Conciliation Act, 1996. Section 47 requires the party seeking international award enforcement to present certain papers, including the original arbitration agreement, at the time of application.

FACTS:

  • A foreign award was being enforced and executed in this instance.
  • The main question was whether an application for enforcement under Section 47 of the Arbitration and Conciliation Act of 1996 was filed without an associated arbitration agreement.
  • Section 47 of the Act requires certain papers, including the original arbitration agreement, to be presented during the application for enforcement of a foreign award.
  • The side seeking enforcement failed to present the arbitration agreement at the time of the application, resulting in a disagreement.
  • The Supreme Court was asked to define the word “shall” in Section 47 and to rule on the consequences of failing to produce the arbitration agreement during the initial application.
  • The decision emphasised the importance of balancing the New York Convention criteria.

HELD:

  • Non-compliance with the production of papers, including the original arbitration agreement, as required by Section 47, should not automatically result in the dismissal of the application at the initial stage of filing an application for the execution of a foreign award.
  • The party seeking enforcement may be asked to correct the fault of non-filing of the arbitration agreement, and the arbitration agreement’s validity will be established at a later stage of the enforcement procedures.
  • To respect the New York Convention’s objectives and avoid impediments to enforcement procedures, the word “shall” in Section 47 should be construed as “may.” This interpretation allows for greater flexibility during the first filing step.
  • However, this view that “shall” means “may” only applies to the application’s initial stage. As a result, the party is still required to present the required documents, including the arbitration agreement, as stated in Section 47.
Categories
Foreign Awards and their Enforcement

Reliance Industries Limited and Anr v. Union of India, (2014) 7 SCC 603

RELIANCE INDUSTRIES LTD. V. UOI

Reliance Industries Limited and Anr v. Union of India, (2014) 7 SCC 603

ISSUE:

  • Whether the disputes concerning royalties, cess, service tax, and the Comptroller and Auditor General’s (CAG) audit are arbitrable under the relevant laws and contractual agreements, or do they challenge the validity of the Oilfields (Regulation and Development) Act, 1948, rendering any agreement to arbitrate void under Section 23 of the Indian Contract Act, 1872?
  • Whether the Arbitral Tribunal has the authority to make decisions on disputes involving royalties, cess, service tax, and the CAG audit, despite the cited rules and precedents, and whether its conclusions are enforceable in India, given the potential defense under Article V(2)(b) of the New York Convention based on public policy considerations?

RULE:

  • Disputes are arbitrated based on applicable laws, commercial agreements, and public policy considerations, and the enforceability of arbitral verdicts in India is subject to the requirements of the New York Convention, which provides for potential public policy defenses.

FACTS:

  • The lawsuit featured disagreements about Production Sharing Contracts (PSCs) for the exploration and production of petroleum from specified areas between the Union of India (Government of India), Reliance Industries Limited (RIL), and BG Exploration and Production India Limited (BG).
  • The parties signed two PSCs, one with RIL and one with BG.
  • Arbitration clauses in the PSCs selected London as the venue of arbitration.
  • Disputes ensued between the parties, and an arbitral tribunal was formed, with London serving as the venue.
  • The court was asked whether various allegations, including royalties, cess, service tax, and the Comptroller and Auditor General’s (CAG) audit were arbitrable under Indian law.

HELD:

  • The Court ruled that applicable laws, contractual agreements, and public policy considerations should establish the arbitrability of disputes.
  • The Court emphasized that agreements that violate Indian law, particularly those that call into question the constitutionality of Indian legislation, may be unlawful and unenforceable.
  • The Court recognized that awards may need to be enforced in India and that public policy factors may influence arbitral award enforcement.
  • The Court evaluated the potential defense to execution of any award under Article V(2)(b) of the New York Convention on Arbitration in considering the arbitrability of claims about royalties.
  • The Court referred to pertinent Indian law statutes, arbitration norms, and prior judgments (Nataraj Studios vs. Navarang Studios, Amrit Banaspati Co. Ltd. vs. State of Punjab, Mafatlal Industries Ltd. vs. Union of India).
  • Finally, the Court did not decide on the arbitrability of the claims in this judgment but instead posed two questions to be resolved in subsequent procedures.
  • The Court articulated issues to determine whether royalties and other claims were arbitrable and whether they could be resolved using public policy and Indian legal rules.
  • The Delhi High Court’s decision to apply Part I of the Arbitration Act because the substantive contract was governed by Indian law was overturned.
  • If required, the award’s enforceability in India can be challenged on public policy grounds.
  • Because the parties willingly agreed to English law regulating the arbitration agreement, the Indian party is not without recourse if the award is attempted to be enforced outside of India.
  • The appeal was granted, and the High Court’s decision was reversed.
Categories
Foreign Awards and their Enforcement

Shin etsu chemical co ltd v. M/s Aksh Optifibre Ltd & Anr Civil Appeal No 5048 of 2005

SHIN ETSU CHEMICAL V. M/S AKSH OPTIFIBRE LTD.

Shin etsu chemical co ltd v. M/s Aksh Optifibre Ltd & Anr Civil Appeal No 5048 of 2005

ISSUE:

  • When a party objects to the enforceability of an arbitration agreement, does Section 45 of the Arbitration and Conciliation Act of 1996 require a prima facie finding or a final judgment on its validity?
  • Whether the Arbitration and Conciliation Act of 1996 aims to reduce judicial intervention in the arbitral procedure and accelerate dispute settlement by the UNCITRAL Model Law on International Commercial Arbitration?

RULE:

  • The key problem is the interpretation of Section 45 of the Arbitration and Conciliation Act, 1996, which focuses on the type of adjudication required when a party claims that the arbitration agreement is “null and void, inoperative, or incapable of being performed.” The rule requires the judicial authority to evaluate whether a prima facie decision or a final ruling on the objection should be issued.

FACTS:

  • The issue concerns a disagreement between the Appellant and Respondent No. 1, who signed into an agreement on November 16th and 18th, 2000, that includes an arbitration clause.
  • The agreement stipulated that any issues would be resolved through arbitration in Tokyo, Japan, by the International Chamber of Commerce regulations.
  • On December 31, 2002, the Appellant canceled the agreement.
  • Respondent No. 1 filed a suit against the Appellant seeking a declaration and injunction to cancel the agreement, claiming that the terms were unconscionable, unfair, against public policy, and entered into under duress, rendering it void and incapable of performance.
  • The trial court granted the Appellant’s Section 8 application and referred the parties to arbitration.
  • Respondent No. 1 filed a petition under Article 227 of the Indian Constitution, stating that Section 45 of the Act should have been applied instead of Section 8.
  • The High Court ruled that the trial court should have used Section 45 and ordered a new trial under Section 45.

HELD:

  • The court based its conclusion on the parties’ affidavits and business realities, as it was impossible to study the records in-depth due to a lack of evidence confirming the broker’s authorization to act on behalf of the shipping company.
  • Because the arbitral tribunal would revisit the issue, the court used the criteria of a “plainly arguable case” or a “strongly arguable case.” However, it was not established that this criterion must be followed in all circumstances because it may not be prescribed by legislation in other countries.
  • It was recognized that the Arbitration and Conciliation Act of 1996 is not an exact adaptation of the UNCITRAL Model Law and that the articles of the Hong Kong Arbitration Ordinance deviate from the requirements of the UNCITRAL Model Law.
  • The case ordered that applications filed under Section 45 to dispute the validity of an arbitration agreement be considered as soon as possible, ideally within three months of filing. In rare circumstances requiring oral evidence, the judicial authority may extend the term by three months with a report to the superior/appellate authority.