Chapter 8: Miscellaneous Provisions in Arbitration

Komal Ahuja — Wed, 04 Oct 2023 11:06:00 +0000

Introduction

Arbitration in India is not just confined to the procedural and substantive aspects of the dispute resolution process. There are various other facets that play a crucial role in the effective conduct of arbitration. This chapter aims to discuss these miscellaneous yet significant provisions.

Choice of Law

The choice of law in arbitration is often determined by the parties involved. However, in the absence of such an agreement, the arbitral tribunal usually applies the law of the country where the arbitration takes place. The Arbitration and Conciliation Act, 1996, under Section 28, provides that in an international commercial arbitration, the tribunal shall decide the dispute in accordance with the rules of law designated by the parties as applicable to the substance of the dispute, and in the absence of such designation, in accordance with the rules of law it considers appropriate given all the circumstances surrounding the dispute1. In a domestic arbitration, the tribunal shall decide the dispute in accordance with the substantive law for the time being in force in India¹.

Seat of Arbitration

The seat of arbitration is a critical aspect as it determines the procedural law applicable to the arbitration. The Arbitration and Conciliation Act, 1996, allows parties to choose the seat, failing which the tribunal decides. The seat also determines the jurisdiction of courts to intervene in or supervise the arbitration proceedings. The Supreme Court of India has recently clarified that once a seat is designated, it is akin to an exclusive jurisdiction clause². Therefore, only courts at that place can exercise jurisdiction over any matter arising out of or relating to that arbitration².

Costs and Interest

Section 31A: Costs

The Act under Section 31A provides a comprehensive regime for the award of costs in arbitration proceedings. It states that unless otherwise agreed by the parties, the arbitral tribunal shall have discretion to determine which party shall bear what proportion of costs incurred during or in relation to arbitration proceedings¹. The costs may include fees and expenses of arbitrators, courts and witnesses; legal fees and expenses; any administration fees; and any other expenses incurred in connection with arbitral proceedings¹. The tribunal shall consider various factors while awarding costs, such as conduct of parties; whether a party has succeeded partly or wholly; whether a party has made frivolous counterclaims; and whether any reasonable offer to settle was made by a party¹.

Section 31(7): Interest

Interest on the amount awarded can be granted from the date of the award to the date of payment. The Act under Section 31(7) provides that unless otherwise agreed by the parties, where an arbitral award is for payment of money, interest shall be payable on such money at a rate specified by parties or at a rate fixed by tribunal not exceeding eighteen percent per annum from date of award till date of payment¹. Further, unless otherwise agreed by parties, where an arbitral award is for payment of money, interest shall be payable on such money at a rate specified by parties or at a rate fixed by tribunal not exceeding eighteen percent per annum from date on which cause of action arose till date on which award is made¹.

Confidentiality and Immunity

Section 42: Confidentiality

The Act does not explicitly provide for confidentiality but it is generally accepted as an inherent part of arbitration. The parties may agree to keep their arbitration proceedings confidential or they may be bound by confidentiality obligations imposed by institutional rules or codes of conduct. The Delhi High Court has held that confidentiality is an essential characteristic of arbitration and every arbitrator is under an obligation to maintain confidentiality except where disclosure is necessary for implementation and enforcement of award or required by law³.

Section 42: Immunity to Arbitrators

Arbitrators are generally immune from liability for anything done in good faith during the arbitration proceedings. The Act under Section 42 provides that no suit or other legal proceeding shall lie against an arbitrator for anything which is done or intended to be done in good faith as an arbitrator or in relation to arbitral proceedings¹. This provision aims to protect arbitrators from vexatious litigation and ensure their independence and impartiality.

Group of Companies Doctrine

This doctrine allows an arbitration agreement to bind non-signatory affiliates of a signatory company, provided certain conditions are met. The doctrine was first recognized by Indian courts in Chloro Controls India Pvt Ltd v Severn Trent Water Purification Inc4, where it was held that non-signatories can be bound by an arbitration agreement if they have a direct relationship with the signatory party, a direct commonality of the subject matter, and a composite nature of the transaction. The doctrine was recently applied by the Supreme Court in Mahanagar Telephone Nigam Ltd v Canara Bank⁵, where it was held that a non-signatory subsidiary company was bound by an arbitration agreement entered into by its parent company with another party, as the subsidiary company was involved in the execution of the contract and had derived benefits from it.

Arbitration Council of India (ACI)

The Arbitration Council of India, established under Part 1A of the Arbitration and Conciliation Act, 1996, aims to promote and encourage arbitration. The ACI is a statutory body consisting of a chairperson, who is a retired judge of the Supreme Court or a High Court, and other members representing various stakeholders in arbitration. The functions of the ACI include framing policies for grading arbitral institutions and arbitrators; recognizing professional institutes providing accreditation to arbitrators; reviewing the grading of arbitral institutions and arbitrators; facilitating the establishment, operation and maintenance of uniform professional standards in respect of all matters relating to arbitration; and maintaining an electronic depository of arbitral awards made in India or abroad¹.

India International Arbitration Centre Act, 2019

This Act aims to establish an autonomous and independent institution for better arbitration management. The India International Arbitration Centre (IIAC) is envisaged as a world-class arbitration centre that will provide facilities and administrative assistance for conducting domestic and international arbitration. The IIAC will have a governing council consisting of eminent persons from the field of law, commerce, industry and academics. The IIAC will also have various chambers for different types of arbitration, such as commercial, maritime, construction, intellectual property, etc. The IIAC will also have its own rules for conducting arbitration proceedings⁶.

Conclusion

Understanding these miscellaneous provisions is essential for a holistic understanding of arbitration in India. They not only add layers of complexity but also offer solutions that make arbitration a more effective dispute resolution mechanism.
¹: Arbitration and Conciliation Act, 1996 ²: BGS SGS Soma JV v NHPC Ltd ³: Ameet Lalchand Shah v Rishabh Enterprises ⁴: Chloro Controls India Pvt Ltd v Severn Trent Water Purification Inc ⁵: Mahanagar Telephone Nigam Ltd v Canara Bank ⁶: India International Arbitration Centre Act, 2019

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