By Arunima Singh, Amity Law School
Editor’s Note: Arbitration is an alternative to litigation and any dispute that is civil in nature can be adjudicated through it. However, the independence to refer issues to arbitration is somewhat limited in India because the legislature has pre-existing institutions where issues are to be handled. For instance, Telecom Dispute Settlement Appellate Tribunal (TDSAT) passed an order barring arbitration in matters of telecom and broadcasting as there was no scope for it under the Telecom Regulatory Authority of India act, 1997. Surprisingly the English law has not expressly defined Arbitrability in its act and this lack of definition makes it difficult to understand the concept as to which disputes are arbitrable and which in fact are not. However, the definitions extracted from various case laws state that Arbitrability depends on the civil nature of the suit and capability for legal determination and that prior agreement that dispute be referred for arbitration must exist between the parties to the dispute. Therefore, there is a very thin line of difference between arbitration in India and UK, and a comparative analysis of the two would be beneficial.
Preamble & Objectives
The general assembly of the United Nations adopted the United Nations Commission on International Trade Law (UNCITRAL) Model Law on 21 June, 1985 (with amendments as adopted on 7 July, 2006) at the end of eighteenth session of the commission. Both the Indian Arbitration and Conciliation Act, 1996 and the UK Arbitration Act, 1996 are based on the UNCITRAL Model Law.
The intent of the legislature and the mental stature behind any statutory act is best understood from the Preamble of such act. Therefore following are the Preambles and salient features of both the acts in order to create a background as to the purposes each act seeks to fulfil.
Preamble of the Indian Arbitration Act, 1996
An act to consolidate and amend the law relating to domestic arbitration, international commercial arbitration and enforcement of foreign awards as also to define the law relating to conciliation and for matters connected therewith or incidental thereto
Preamble of the UK Arbitration Act, 1996
An Act to restate and improve the law relating to arbitration pursuant to an arbitration agreement; to make other provision relating to arbitration and arbitration awards; and for connected purposes
The primary purpose of the Indian Arbitration & Conciliation Act, 1996 was to encourage resolving of disputes through arbitration by virtue of it being a speedy, inexpensive and private procedure and to avoid the monotonous and the pending implications of litigation. The preamble of the act envisages the cost effectiveness of arbitration as an alternative dispute resolution. The UK Arbitration Act, 1996 is declared as “probably the most radical piece of legislation” by Tweeddale and Tweeddale[i] given the comprehensive name. It sets out that the object of arbitration is to obtain a fair alternative resolution of disputes by qualified arbitrators without delay and in an inexpensive manner where the parties are free to agree on procedures as to the resolving of the disputes, subjects only to such safeguards as are necessary to public interest. Both the acts are based on the UNCITRAL Model Law. Among the main objectives of the Indian Act, two are, ‘to minimize the supervisory role of courts in the arbitral process’ and ‘to provide that every final arbitral award is enforced in the same manner as if it were a decree of the Court’. It is the theme of the statute to restrict judiciary and the courts from intervening in matters of arbitration and therefore it will be seen further that only under special circumstance or failures to follow procedures does the judiciary intervene. The English Act is logical, clear and has the principles of ‘party autonomy’ as well as ‘judicial non-intervention’ as central themes of the Act. The act’s provisions intend procedural fairness, party autonomy and judicial restraint to be the doctrinal foundations. According to the statute, the judges are expected to exercise restraint in intervening in arbitration matters. This is not, however, absolute and the Act permits courts to exercise their inherent jurisdiction to alleviate injustice where it is necessary.
- Part I of the Indian statute is extremely comprehensive and contains extensive provisions based on the Model Law. Inter alia it provides for arbitrability of disputes, non intervention by courts, composition of the arbitral tribunal, jurisdiction of the arbitral tribunal, conduct of the arbitration proceedings, recourse against arbitral awards and enforcement. Sec16 of the act renders it the competence to rule on its own jurisdiction.
The UK statute contains of four parts. Part I contains general principles, definitions, procedure for commencement of arbitration and intricacies of arbitral tribunal. The power of the tribunal to rule on its own jurisdiction is given in sec30 of the act.
- Part II of the Indian statute concentrates on International Commercial Arbitration, foreign awards and their enforcement governed by the Convention on the Recognition and Enforcement of Foreign Arbitral Awards or the Convention on the Execution of Foreign Arbitral Awards ( New York and Geneva conventions).
Part II of the UK law concerns provisions relating to arbitration such as purely domestic arbitration agreements, consumer arbitration agreements and small claims arbitration in the county courts.
- Part III in the Indian act governs Conciliation and procedures for conducting due conciliation proceedings.
While part II of the Indian act talks about New York convention, it is Part III of the English act which talks about New York Convention on the Recognition and Enforcement of Arbitral Awards.
- Part IVs of both the countries’ acts provide for general provisions.
The Arbitration & Conciliation Act, 1996 of India and the Arbitration Act, 1996 of the United Kingdom are studied, analysed and compared in the following sections of the assignment. Grounds of comparison will be, one, issues which can be resorted to arbitration, that is, arbitrabilty and the various judgements which courts of both the countries have given to clear the ambiguity. Two, the much controversial judicial intervention, its nature, scope, extent and the leading judgements from the courts of law of India and UK.
The Arbitration & Conciliation Act of India, 1996
Arbitration is an alternative to litigation and any dispute that is civil in nature can be adjudicated through it. However, the independence to refer issues to arbitration is somewhat limited in india because the legislature has pre-existing institutions where issues are to be handled. For instance, Telecom Dispute Settlement Appellate Tribunal (TDSAT) passed an order barring arbitration in matters of telecom and broadcasting as there was no scope for it under the Telecom Regulatory Authority of India act,1997. An injunction was not granted under sec 9 as the dispute was related to telecoms.[ii] However there are acts like the Indian Telegraph Act,1885 whereby it is specifically provided in the statute itself that matters in dispute are to be sorted through arbitration barring the courts from interference. Now, there are three approaches to Arbitrability:
- Disputes which can be adjudicated by arbitration;
- Disputes which fall under the arbitration agreement; and
- Disputes which are referred for arbitration by the parties.
But normally, matrimonial matters, testamentary issues (relating to will), guardianship issues, disputes relating to insolvency, matters falling under the ambit of antitrust laws or criminal proceedings resort to their statutory tribunals for adjudication. The courts in their judgments have often given that there are certain classes of cases that can be adjudicated only by private fora. General principle being actions relating to rights in rem are to be pursued in the court of law whereas actions relating to rights in personam can be delt with in the private fora.[iii]
Sec2(3) of the act gives that part I (applying to arbitration in India) will not affect any other law in force by virtue of which certain disputes may not be submitted to arbitration. Therefore, it can be concluded that there are only certain types of disputes which can be taken up for arbitration rather than any civil suit. Also, sec 16 provides for the arbitral tribunal to rule on its own jurisdiction in matters of existence and validity of arbitration agreement. If any matter falls out of the jurisdiction or scope of authority of the arbitral tribunal, the arbitrator is sanctioned to reject reference to such a matter on the grounds of non-Arbitrability. The act, in defining arbitration agreement in sec7, lifts the obligation of parties to the arbitration agreement to be in a contractual relationship which implies that tortious cases can also be settled through arbitration unless it can be demonstrated that the cause of action is de hors the contract which contains the arbitration clause.[iv] When a controversy arose if arbitrators could order for specific performance of a contract, the apex court put a rest to the controversy by relying on the UK principle ‘a justifiable issue triable civilly. A fair test of this is whether the difference can be compromised lawfully by way of accord and satisfaction’[v] and held that arbitrators do have the power to order specific performance of contracts.[vi]
The Arbitration Act of UK, 1996
Surprisingly the English law has not expressly defined Arbitrability in its act and this lack of definition makes it difficult to understand the concept as to which disputes are arbitrable and which in fact are not. In UK jurisdiction, Lord Justice Hurst has explained his idea of ‘arbitrability’ as, “To my mind the hallmark of the arbitration process is that it is a procedure to determine the legal rights and obligations of the parties judicially, with binding effect, which is enforceable in law, thus reflecting in private proceedings the role of a civil court of law.”[vii] The definition does help in understanding the procedure of arbitration but does not completely refine the concept of Arbitrability. However, the following judgements have helped in understanding the notion of the UK legal system towards the arbitrabilty of issues.
- In O’Callaghan v Coral Racing Ltd[viii], it was held that since the dispute did not involve the issue of determination of legal rights anymore, therefore, the arbitral tribunal had no jurisdiction to determine the matter.
- For reasons of public policy, the UK Court of Appeal refused to enforce an UK arbitration award issued on the basis of the Jewish law (applicable law by the terms of the contract), on the grounds that the dispute was regarding such a company practise which was illegal in the UK law.[ix]
- In case of Diniz v. Walkinshaw[x], it was held that the character of arbitration was that the parties either chose the arbitrator or agree over a procedure of his appointment.
- The parties in case of Al Midani v. Al Midani[xi], agreed to refer to a ‘Islamic Judicial body’ for dispute resolution without participating in its appointment. Here also it was held that an arbitration agreement could not be implied and also that the mere use of ‘judicial’ explains that the parties intended to resort to judiciary as opposed to arbitration.
Therefore it can be extracted from the case laws that Arbitrability depends on the civil nature of the suit and capability for legal determination and that prior agreement that dispute be referred for arbitration must exist between the parties to the dispute.
Judicial Intervention: Scope, Nature & Extent
Nature and extent of judicial intervention in India : Relative Provisions
The principle that judiciary shall not interfere in the arbitral mechanisms is the fundamental theme of the Alternative Dispute Resolution. The 1996 act expressly provides in sec5 that no judicial authority can intervene except where so provided in part I.[xii] There are three stages mainly here arbitration can be intervened by the judiciary and the stages are as follows :
- Intervention before/during arbitration – either of the parties may move the court seeking interim measures at any time before, during or after the award has been awarded but before it is enforced. The court shall entertain such application and pass suitable orders if the application is duly made, that is, it is made on one of the five grounds mentioned in sec9. After the dispute is referred to the arbitrator, interim order passed by the court need not be continued.[xiii]
- Intervention in appointing the arbitrators – Sec11 prescribes for the procedure of appointment of arbitrator by the parties. When the parties/arbitrators/any person including an institution fails to agree/act/perform any function entrusted to them or any procedure they are expected to agree upon under sub clauses (4), (5) or (6), then a party may request Chief Justice or any person or any institution designated by him to take the necessary measure. This is the first instance where the act envisages recourse to a court in relation to arbitration proceedings. The difference between model law and Indian law is that the model law envisages the court to appoint the arbitrator whereas the Indian law requires the Chief Justice of the High court in national and Chief Justice of India in case International Commercial Arbitration to appoint the arbitrator. As explained by the supreme court in the case of Konkan Rly. Corp v. Rani Construction Pvt. Ltd.[xiv], the idea behind this is to ensure that nomination for the arbitrator is made by a high judicial designate who would appoint a competent, independent and qualified arbitrator in good faith. But judicial authority appointing the arbitrator can lead to conflicting decisions. On this, the court has held that the function of appointment of arbitrator is not judicial but administrative in nature.[xv] Even if any ‘doubt’ arises in the mind of the Chief Justice or any person so designated by him as to the existence or validity of the arbitration agreement, same has to be referred to the arbitral tribunal to resolve[xvi] but the judiciary is not to intervene with the arbitration.
- Challenging the appointment of the arbitrator – Under sec12, an arbitrator can be challenged under only two conditions : 1. Circumstances exist to indicate that justifiable doubt exists as to the impartiality or independence of the arbitrator; or 2. The arbitrator so appointed is not aptly qualified.
Further, subject to the parties’ agreement that, it is the arbitral tribunal which shall decide over the challenge. In case, the challenge fails, the arbitration proceedings shall continue and the arbitral tribunal will render award. This is a significant departure from model law as in the event the arbitral tribunal rejects the challenge, model law envisages recourse to a court of law.
- Intervention in setting aside an arbitral award – sec34 gives for the process of making an application to set aside the arbitral award and sec37 gives for the appeals that may lie in the higher court against any order made by virtue of sec9 and sec34. Also, an order of the arbitral tribunal may be appealed against in the court of law if an order is made by the arbitral tribunal under sub clause (2) or (3) of sec16 or sec17.
Analysis of Judicial Intervention
Extending The Scope Of Judicial Intervention: Applying Part I Provisions To Part II.
The question that can Indian courts issue interim measures in International Commercial Arbitration held outside India arose in the case of Bhatia International v. Bulk Trading S.A.[xvii] Supreme court moved on the belief that courts in India would have jurisdiction even in respect of an international commercial arbitration because if an ouster of jurisdiction cannot be implied, it has to be express. And consequently, decided that despite its contrary wording Part I of the act was applicable to International Commercial Arbitration held outside India. Making such a decision, the court went in contrast with the conceptual and architectural demarcations of the model law. The court upheld its decision in subsequent cases maintaining that a party could challenge an arbitral award under sec34 even if the awarded outside India.[xviii] Finally in the recent case of Balco v. Kaiser[xix] the apex court set aside the decisions in the Bhatia and the Satyam case[xx] and held that Part I and Part II do not overlap. The judgment draws a line of distinction between seat of arbitration and place of arbitration. The court also said that foreign awards cannot be challenged by an Indian entity under sec 34 until the party s resisting to enforcement of such award has to prove one or more grounds as per sec48. Also, no interim order relief under sec9 or order XXXIX of Code of Civil Procedure would be available where the seat of arbitration is outside India.
The scope of degree judicial intervention in enforcement stage of the award has had a history of debate, particularly sec34. Courts have time and again been conflicted with what constitutes public policy to set an award under this act. In the case of Renusager Power Co. v. General Electric Co.[xxi], the supreme court held that the exception of public policy should be construed narrowly, moreover it is only satisfied when the award violates:
- Fundamental policy of the Indian law;
- The interest of India; or
- The justice of morality.[xxii]
In the important and controversial case of Oil & Natural Gas Corporation Ltd v. Saw Pipes Ltd[xxiii], the Supreme Court expanded the concept of public policy to add that the award would be contrary to public policy if it is “patently illegal”. In addition to this, the court defined “patently illegal” as contrary to substantive provisions of applied law, to the provisions of the arbitration act, or the terms of the contract. This was a very broad interpretation of public policy, the judgment implicated the delicate balance between finality of the arbitration award and the permissible judicial review.
Nature & Extent of Judicial Intervention in Arbitration in England
Provisional Aspect :
Intervention before commencement of arbitral proceedings – Under the Arbitration Act,1996 the court intervenes in two ways:
- Power to extend time limits – where a party can show that either they sought to begin the arbitral proceedings or they began alternative dispute resolution methods which had to be exhausted before arbitral proceedings could begin, except in such cases, the time limit agreed to by the parties in the arbitration agreement for referral of a dispute to arbitration shall be upheld as per sec12(1) and sec12(3). It is for the arbitral tribunal to decide whether to extend time to commence arbitral proceedings and the court is not to intervene at such stage.[xxiv]
- Power to appoint an arbitrator – sec18 of the act provides that in the absence of any agreement, any party to the arbitration agreement can apply to the court for appointment of an arbitrator. The UK courts have shown supportive attitude as may be seen in the case of Atlanska Plovidba v Consignaciones Asturianas SA where Moore-Bick said “..whereas the ability to reach a fair resolution of the dispute goes to the heart of the arbitral process, delay and expense do not, unless they are so serious as to undermine that fundamental requirement”. The arbitration act also specifically provides for revocation of appointments already made. A marked difference from model law.
Intervention during Arbitral Proceedings – the judicial intervention is made in the following ways :
- Assistance to the Arbitral Tribunal – sec44 of the 1996 act empowers the court for a number of actions which include of the evidence of witnesses, the preservation of evidence, making orders relating to property which is the subject of the proceedings, the sale of any goods the subject of the proceedings or the granting of an interim injunction or the appointment of a receiver. Normally the arbitrator’s power is confined to property which is owned by or in due possession of parties to a proceeding[xxv]. The language of this sec44 is permissive rather than prohibitive[xxvi]. Sec44(5) requires for the party moving the court to first prove that the arbitral tribunal has no power to make the required order. Therefore, sec44 is a supportive section that allows the court to intervene but such intervention is positive and assisting in nature but not contravening the powers or independency of the arbitral tribunal.
- Staying legal proceedings – sec8 of the Indian Arbitration Act provides for referring the parties to arbitration where arbitration exists but the case differs somewhat in the UK. The act differentiates between domestic and foreign arbitration agreements. In non-domestic cases, the UK law grants immediate stay where a valid arbitration agreement exists. But when it is domestic cases, the court must grant a stay unless it is satisfied that there were sufficient grounds for not requiring the parties to the arbitration agreement. However, the wide scope of this section gives opportunity to the parties that intend to delay arbitration by inducing litigation in the attempt to prove that sufficient grounds for not abiding by the arbitration agreement exist.
- Inherent jurisdiction of the Court – the court has an inherent jurisdiction to restrain arbitration proceedings where it will be right and just. For instance, this may occur, where the claimant has been guilty of inexcusable and inordinate delay that a fair hearing is impossible. Bremer Vulkan Schiffbau und Maschinenfabrik Respondents v South India Shipping Corporation Ltd.[xxvii] was a leading case where the court had to answer whether it had jurisdiction to restrain a party from continuing with the arbitration. The court held that claimants are under a duty not to delay, and if they do, the respondents are entitled to amount this to breach of arbitration agreement. The court held it in clear terms that it be recognised that arbitrators are impotent and that only the court could bring the party to book. This power of the judiciary to restrain arbitral proceedings, in theory at least, represents a significant power over arbitral proceedings with no significant restraints. Something which is in contrast to the principles of Model law.
- Judicial intervention after arbitral proceedings – The courts’ interference at this stage necessarily undermines the meaning and whole idea of arbitral awards. Three broad frameworks of arbitral awards can be distinguished as: a right to appeal matters related to both points of law and procedural fairness; a right to challenge an award only for defects of procedural integrity in the arbitration; and, no judicial review at all.[xxviii] Now, for any award to have sanctity or practical value, the award is to be enforced by means of the procedure of summary proceedings laid down in sec66. However, in the alternative, the award can be enforced by bringing an action in the court:
- The nature of the award – “The term ‘award’ is one that permeates municipal arbitration legislation, arbitration rules, treaties and conventions. However, it is a term that is often not defined”.[xxix] It is fundamental to differentiate award from other orders of the arbitral tribunal. Sec48 of the Arbitration act,1996 deals with remedies available to the arbitral tribunal. A basic distinction made in the section is between declarations and orders.
- The execution of the award – the execution of awards can be done only through national courts because it is not a guarantee that party against whom the award is granted will follow it. In UK arbitration, an award can be enforced by either bringing an action in the court or by a summary procedure in sec66. However, international arbitration awards have number of ways of enforcement. First, by securing an UK judgement. Second, the position of the claimant is the same as in domestic arbitrations if the award falls within the New York Convention, as enacted into UK domestic law by the Arbitration Act 1996, the Washington Convention of 1965, or the Geneva Convention on the Execution of Foreign Arbitral Awards 1927. Third, if the award has been made enforceable by a foreign judgment, an action on such judgement may be sought in the court. Fourth, an arbitral award is treated as if it were a judgement made in that country where the Administration of Justice Act 1920, Part II, or the Foreign Judgments (Reciprocal Enforcement) Act 1933 extends. Lastly, if the arbitral award is made in the UK but other than in England or Wales and is enforceable there as a judgment then such an award is enforced by registration in England.
- Challenging/Appealing the Arbitration award – The Arbitration Act provides that an award may be challenged or appealed on the grounds of: (i) lack of jurisdiction under sect67; (ii) serious irregularity of the proceedings or substantial injustice suffered by a party in accordance with sect68; and substantive breach of law, under sec69. Also, arbitral awards can be challenges on the grounds of incapacity of the parties to enter into arbitration agreement or the infringement of the public policy of the state where the award is made.
Edited by Kanchi Kaushik
[i] A Practical Approach to Arbitration Law, note 13.
[ii] Relaince Infocomm v. BSNL 108 (2003) DLT 669
[iii] Booz Allen & Hamilton Inc. v. SBI Home Finance Ltd., (2011) 5 SCC 532
[iv]Renu Sagar Power Co. v General Electric Co. 1994 AIR 860, 1994 SCC
[v] Halsbury’s Laws of England
[vi] Olympus Superstructures Pvt. Ltd. v. Meena Vĳay Khetan & Ors. (1999) 5 SCC 651
[vii] O’Callaghan v Coral Racing Ltd (1998) The Times, Court of Appeal
[ix] Soleimany v. Soleimany (1998) 3 WLR 811.
[x] 8  2 All ER (Comm) 237.
[xi] 9 (1999) 1 Lloyd’s Rep 923.
[xii] Extent of Judicial Intervention – notwithstanding anything contained in any other law for the time beingin force, in matters governed by this Part, no judicial authority shall intervene except where so provided in this Part.
[xiii] Health Hygiene v. New Goodwill Corp. Housing Society 71 (1998) DLT 572, 1998 (44) DRJ 494.
[xiv] Appeal (civil) 5880-5889 of 1997.
[xvi]Nimet Resources v. Essar Steels
[xvii] (2002) 4 S.C.C. 105.
[xviii] Venture Global Engineering v. Satyam Computer Services Limited (2008) 4 S.C.C. 190
[xix] Bharat Aluminium Co. Ltd. v. Kaiser Aluminium Technical Service, Inc. Civil Appeal No. 7019 of 2005
[xx] Ibid 16 & 17
[xxi] (1994) 1 S.C.C. 644
[xxiii] (2003) 5 S.C.C. 705
[xxiv] Marc Rich Agricultural Trading SA v Agrimex Ltd  EWHC 193 (Comm).
[xxv] Sec38(4) of the Arbitration Act, 1996.
[xxvi] Hiscox Underwriting Ltd v Dickson Manchester & Company Ltd.  EWHC 479 (Comm).
[xxvii] 9  2 WLR 141
[xxviii] William Park, “The Interaction of Courts and Arbitrators in England: the 1996 Act as a Model for the United States?” (1998) International Arbitration Law Review 54 at 56.
[xxix] Tweeddale and Tweeddale, Arbitration of Commercial Disputes: International and UK Law and Practice, note 40, at 327.