Module_6

MODULE 6
EMERGING ISSUES IN ARBITRATION

THE ROLE OF STATE COURTS IN SUPPORT OF THE ARBITRAL PROCESS

▪ When the Seat of International Commercial Arbitration is in India1
The following laws would apply to ICA (International Commercial Arbitration), when the
case falls under part 1 of the act, i.e., when the seat of the arbitration is in India.

Notice of the Arbitration

It is the first step in any arbitration proceeding. One party sends notice to the other party,
asking for the settlement of the dispute through arbitration. Therefore, it implies the
requirement of the following elements:

• There should be an intention of the party submitting the notice to refer the matter to
arbitration.

• The party notifying should ask the other party to settle the dispute through arbitration2

Court’s reference for arbitration

As per section 8 of “The Arbitration and Conciliation Act, 1996”, if the party before the
judicial authority, applies for referring the case to arbitration by submitting an application
along with the original copy of the arbitration agreement on the date of submitting its first
statement itself, then the judicial authority is bound to accept such application and refer the
parties to arbitration. If these requirements are complied with then such judicial authority
would not give any negative judgment, i.e., it cannot deny the parties to refer to arbitration in
spite of any judgment, decree or order of the Supreme Court or any Court, unless the court
feels that prima facie there is no arbitration agreement. However, if the party fails to submit

1 Anubhav Pandey, Jurisdiction of Indian Courts on International Commercial Arbitration (2017), Ipleaders.in.
(Retrieved From- https://blog.ipleaders.in/jurisdiction-indian-courts-international-commercial-arbitration/)
2 Ibid.

the original arbitration agreement or a duly certified copy thereof, then such application can
be dismissed.

If the original arbitration agreement or the certified copy is not available with the party or is
retained by the other party, then in such a situation the party applying will submit the
application along with the copy of the agreement and shall file a petition, praying to the court
to order the other party to submit the original arbitration agreement or its duly certified copy,
to the court. If the application that has been submitted under sub-section (1) is pending before
the judicial authority, the parties may commence or continue the arbitration and an arbitral
award can also be made.3

Interim reliefs in Arbitration

Interim relief is available to the parties under section 9 and section 17 of The Arbitration and
Conciliation Act, 1996. Under section 9, interim relief is granted to the parties by the court
and under section 17, interim relief is granted by the arbitral tribunal. The objective of this
provision is to provide security to the party seeking relief until the final decision is given.

Appointment of arbitrators

Section 11 of the act provides for the appointment of arbitrators. The arbitrator can be of any
nationality unless otherwise agreed by the parties. The parties have to appoint one arbitrator
each and both the arbitrators have to further appoint a third arbitrator, within thirty days,
since the arbitrators are required to be an odd number. However, if there are even number of
arbitrators, for example there are two arbitrators and both the arbitrators give the same
decision, then, in that case, there is no boundation of having a third arbitrator.4

Grounds for challenging the appointment of an arbitrator

3 Aparajita, International Commercial Arbitration- Indian Perspective, (August 31st, 2017, 09:27 PM),
http://ijldai.thelawbrigade.com/wp-content/uploads/2015/09/4.pdf

4 Ibid.

An arbitrator is required to act in an independent and impartial manner. These are the basic
two requirements that have to be there in an arbitrator. If he is found to be partial and
dependent, then his appointment can be challenged. Moreover, if he does not possess the
qualifications that are agreed to by the parties then in that case also his appointment as an
arbitrator can be challenged. The arbitrator is also required to solve the dispute in a time
bound period.

Basics of the proceedings

The parties are needed to be flexible in terms of the procedure, place and language of the
arbitration. The arbitral tribunal has the power to decide that in what sequence the evidence
are to be examined. The parties can also settle the dispute through a mutual consent or it can
be settled by the arbitral tribunal a well. After the decision is given it is recorded as an
arbitral with the consent of both the parties and the arbitral tribunal as per section 30 of “The
Arbitration and Conciliation Act, 1996”.

Cost of the arbitration

The arbitral tribunal decides the cost of the arbitration and that how much amount each party
has to pay. If a party refuses or fails to pay the legal and administration fees, then the tribunal
in such a case refuse to give the award. After refusing to pay, the parties can approach the
court and the court can further give its decision on the cost.

Application for setting aside arbitral award

If a party is not satisfied with the decision of the tribunal then it can make an application to
the court under section 34 of the act to set aside the arbitral award. For example, if the party
making the application was not given proper notice of the appointment of the arbitrator, or if
a party was under some incapacity, or if the arbitration agreement is not valid, or if the
arbitral award is not related to the dispute, or is against the terms of submission to arbitration,
or the matters that are not appropriate to submit to the arbitration.

As per section 34 (2-A), an arbitral award arising out of arbitrations other than international
commercial arbitration may also be set aside, if the award made is illegal in nature.

The application to set aside the award has to be made within three months from the date of
receiving of the award, unless there is a sufficient reason due to which the party could not
apply within the required time. In such a case the court can entertain the application to set
aside the arbitral award within a further period of thirty days.5

Appeals

An appeal can be filed for the following situations:

• Refusal to provide interim relief under section 9 and section 17
• To set aside the arbitral award under section 346

Finality and Enforcement of arbitral award

The arbitral award becomes binding on both the parties under section 35 of the act and is
considered to be the same as an order passed by a court of law based on the provisions of the
Code of Civil Procedure, 1908.

▪ When the seat of international commercial arbitration is outside India

Bhatia International v/s. Bulk Trading ((2002) 4 SCC 105)

• In the case of Bhatia International v/s. Bulk Trading, it was held that Indian courts can
exclusively use their jurisdiction in order to test the significance of an arbitral award
made in India, even if the actual law of the contract/agreement is the law of another
country.

5 Supra Note 3.
6 The Arbitration and Conciliation Act, 1996, pg.3 (ed. 2016).

Facts

In this case the parties had referred the case to arbitration as per the rules of the ICC of
arbitration in Paris, with a sole arbitrator.

• The foreign party wanted to ensure that they receive the recovery of their claim from the
Indian party and for that purpose it moved to Indian court for interim relief so as to
secure its property.

• The same was opposed by the Indian party on the ground that as per the New York
Convention (Convention on Recognition and Enforcement of Foreign Arbitral Awards,
concluded on 10th June, 1958), there is no provision to claim interim measure through a
court, other than the one where arbitration is taking place. Therefore, in this case the
arbitration is taking place in Paris, thus the Indian court cannot be approached to claim
the interim relief. 7

Held

• The High Court set aside the plea of the Indian party. The matter went to Supreme
Court. The Supreme Court upheld the decision of the High Court.

Rationale

• In its reasoning, the court said that Part 1 of “The Arbitration and Conciliation Act,
1996” gives effect to UNCITRAL (United Nations Commission on International Trade
Law) Model Law and gives power to the court to grant interim relief even when the seat
of international commercial arbitration is outside India.

Bharat Aluminium v/s. Kaiser Aluminium Technical Services (BALCO) (Civil Appeal
No. 7019 of 2005)

7 The case of Bhatia International and its Overruling, (Retrieved From- http://lawmantra.co.in/the-case-of-
bhatia-international-and-its-overruling/)

The doctrine laid down in the case Bhatia International v/s. Bulk Trading was overruled by
the judgment of Bharat Aluminium v/s. Kaiser Aluminium Technical Services.

Facts

• The parties signed an agreement with respect to the supply of equipment, modernization
and up-gradation of production facilities.

• However, disputes started arising and the dispute was referred to arbitration. The seat of
the arbitration was in England and therefore the proceedings took place in England and
the award was made in favour of the Respondent.8

• Dissatisfied with the decision, the appellant filed application against the award in India,
before the Chhattisgarh High Court under Section 34 of the act, i.e., under Part 1 of the
act.

Held

• The court held that Part 1 of the act would not apply to the cases where the seat of
arbitration is outside India. It shall be applicable to only those arbitrations where the seat
of the arbitration is India.

• No suit can be filed for interim relief in India under Part 1, when the seat of arbitration is
not in India.

• This judgment will be applicable to the cases in which dispute took place after the decision
of this case. The judgment will not have a retrospective effect.9

Rationale

8 Niyati Gandhi and Vyapak Desai, India: What Finally Happened in Bharat Aluminium Co. (BALCO) v/s.
Kaiser Technical Services,
(Retrieved From-
http://www.mondaq.com/india/x/467264/Arbitration+Dispute+Resolution/What+Finally+Happened+In+Bharat
+Aluminium+Co+BALCO+v+Kaiser+Technical+Services)
9 Anubhav Pandey, Jurisdiction of Indian Courts on International Commercial Arbitration (2017), Ipleaders.in.
(Retrieved From- https://blog.ipleaders.in/jurisdiction-indian-courts-international-commercial-arbitration/)

• The rationale behind the judgment is that it is the sat of arbitration that administers the
jurisdiction and if the parties decide to conduct the arbitral proceedings outside India,
then Indian courts don’t have any jurisdiction to grant interim relief to the related parties.

ARBITRABILITY UNDER THE INDIAN LAW

▪ International Commercial Arbitration
The term International Commercial Arbitration (ICA) is defined under the Arbitration and
Conciliation Act, 1996 (the Act) under section 2(I)(f) to mean an arbitration which relates to
disputes which have arisen out of relationships which are commercial in nature, and where
one of the parties is a foreign national, or a body corporate incorporated outside India or an
association or body of persons whose central management and control is exercised abroad.

The provisions of Part II (section 44 to section 60 of the Act) deal with provision, from
referring the parties to ICA, to enforcement and execution of the foreign awards passed under
the New York Convention or Geneva Convention where the seat of arbitration is outside
India.

▪ Parties to a Foreign Seated Arbitration Can Seek Interim Reliefs In India10

The extent and scope of proviso to the amended section 2(2) of the Act was recently
discussed by the Bombay High Court in Aircon Belbars FZE V. Heligo Charters Pvt. Ltd.

The Bombay High Court held that the proviso to the amended section 2(2) of the Act clearly
confers rights upon the parties to an arbitration seated overseas, to approach Indian courts for
interim reliefs. The Bombay High Court also held that in order to exclude the applicability of

10 Maneck Mulla and Siddha Pamecha, India: Extending Frontiers of International Commercial Arbitration in
India (2018), M Mulla Associates

(Retrieved From-

http://www.mondaq.com/india/x/705894/Arbitration+Dispute+Resolution/Extending+Frontiers+Of+Internation

al+Commercial+Arbitration+In+India+)

Part I, the terms of exclusionary agreement should be specific and that a general agreement
providing for a venue and the seat of arbitration will not imply exclusion.

Aircon Belbars FZE (Aircon) approached the Bombay High Court by way of an urgent
application under section 9 of the Act, seeking injunction against Heligo Charters Pvt.
Ltd. (Heligo) from selling an asset in India.

Heligo contented that Aircon cannot approach the Bombay High Court as Part I was not
applicable to foreign awards passed in an arbitration seated outside India. In any case, the
applicability of Part I of the Act is excluded by the parties on the basis of an express
agreement to the contrary. Rejecting this contention, the court held that if the amended
section 2(2) and its proviso is read in such a way to suggest that, a general arbitration
agreement which provides venue and law of arbitration in effect impliedly excludes the
application of Part I of the Act, it would definitely render the section and proviso utterly
otiose. Therefore, exclusion must be in specific words, saying that Part I (or some section of
Part I) will not apply to the arbitration between parties.

The second submission made by Heligo was that even if there is no exclusionary agreement,
Aircon still cannot invoke provisions of section 9 of the Act, in view of the specific words
appearing in the proviso to amended section 2(2) of the Act i.e "enforceable and recognized
under Part II of the Act" in that way implying that until the foreign award is enforceable
under section 48 of the Act, no interim reliefs can be granted by a court in favour of Aircon.

Notably, section 48 of the Act enumerates the conditions based on which a foreign award is
required to be tested by a court in India in order to determine whether the foreign award is
enforceable in India.

While rejecting the second submission of Heligo, the Bombay High Court observed that
actually what the proviso to amended section 2(2) seeks to do is to make available a remedy
or recourse under section 9 to the parties holding a foreign award, pending the process
contemplated under section 48 of the Act is completed. The court further observed that the
amendment ensures that a court in India can interfere, in order to protect an asset from being
diverted or dissipated and to ensure that the holder of a foreign award has an asset to proceed
against if the enforceability of the Award succeeds the test of section 48 of the Act. Whereas

if the Award fails the tests of section 48 the protective order under section 9 will come to an
end.

In view of the observations of Bombay High Court in Aircon's case and as per the provisions
of section 9 it can be safely concluded that the parties to an arbitration seated outside India
can apply for interim reliefs to a court in India (where such assets are situated), before the
invocation of the arbitration, during the continuance of the arbitration proceeding and after
the award is passed till the award is executed, subject of course to the facts of the matter and
subject to the provisions of Part I not being expressly excluded by the parties in the
arbitration agreement.

▪ Can Two Indian Parties Choose A Foreign Seat Of Arbitration11

Recently the Delhi High Court in the case of GMR Energy Limited Vs Doosan Power
Systems India Private Limited, concluded that the two Indian parties can choose a foreign
seat of arbitration and such clauses between two Indian parties are not in derogation of Indian
law. Although there are no authoritative decisions of the Supreme Court which in terms
decide this issue, after considering various other rulings of the Supreme Court which touch
upon this issue, the Delhi High Court came to this conclusion.

Another important issue decided by the Delhi High Court in this judgment is that the Arbitral
Tribunal has jurisdiction to pierce the corporate veil. Relying upon the doctrine of single
economic unit, the Delhi High Court went on to hold that issues concerning alter ego can also
fall within the jurisdiction of the arbitral tribunal.

▪ Case Laws explaining the scope of Arbitration under Indian Laws12

11 Maneck Mulla and Siddha Pamecha, India: Extending Frontiers of International Commercial Arbitration in
India (2018), M Mulla Associates

(Retrieved From-

http://www.mondaq.com/india/x/705894/Arbitration+Dispute+Resolution/Extending+Frontiers+Of+Internation

al+Commercial+Arbitration+In+India+)

12 International Commercial Arbitration- Law and Recent Development in India (2019), Nishith Desai
Advocates with inputs from Singapore International Arbitration Centre (SIAC)

In Booz Allen and Hamilton Inc. v. SBI Home Finance Ltd.13, the Supreme Court discussed
the concept of arbitrability in detail and held that the term ‘arbitrability’ had different
meanings in different contexts:
(a) disputes capable of being adjudicated through arbitration,
(b) disputes covered by the arbitration agreement, and
(c) disputes that parties have referred to arbitration.

It stated that in principle, any dispute that can be decided by a civil court can also be resolved
through arbitration. However, certain disputes may, by necessary implication, stand excluded
from resolution by a private forum. Such non arbitrable disputes include:

(i) disputes relating to rights and liabilities which give rise to or arise out of criminal
offences;

(ii) matrimonial disputes relating to divorce, judicial separation, restitution of
conjugal rights, or child custody;

(iii) guardianship matters;
(iv) insolvency and winding up matters;
(v) testamentary matters (grant of probate, letters of administration and succession

certificate); and
(vi) eviction or tenancy matters governed by special statutes where the tenant enjoys

statutory protection against eviction and only the specified courts are conferred
jurisdiction to grant eviction or decide the disputes.

Also, the Supreme Court has held, in N. Radhakrishnan v. M/S Maestro Engineers,14
that where fraud and serious malpractices are alleged, the matter can only be settled by the
court and such a situation cannot be referred to an arbitrator. The Supreme Court also
observed that fraud, financial malpractice and collusion are allegations with criminal
repercussions and as an arbitrator is a creature of the contract, he
has limited jurisdiction. The courts are more equipped to adjudicate serious and complex
allegations and are competent in offering a wider range of reliefs to the parties in dispute.

13 2011 (5) SCC 532.
14 2010 (1) SCC 72.

But the Supreme Court, in Swiss Timing Limited v. Organizing Committee, Commonwealth
Games 2010, Delhi15 and World Sport Group (Mauritius)
Ltd. v. MSM Satellite (Singapore) Pte. Ltd.16,held that allegations of fraud are not a bar to
refer parties to a foreign-seated arbitration and that the only exception to refer parties to
foreign seated arbitration are those which are specified in Section 45 of Act, i.e. in cases
where the arbitration agreement is either (i) null and void; or (ii) inoperative; or (iii)
incapable of being performed. Thus, it seemed that though
allegations of fraud are not arbitrable in ICAs with a seat in India, the same bar would not
apply to ICAs with a foreign seat.
The decision of the Supreme Court in A Ayyasamy v. A Paramasivam & Ors.17 has clarified
that allegations of fraud are arbitrable as long as it is in relation to simple fraud. In A
Ayyasamy, the Supreme Court held that: (a) allegations of fraud are arbitrable unless they are
serious and complex in nature; (b) unless fraud is alleged against the arbitration agreement,
there is no impediment in arbitrability of fraud; (c) the decision in Swiss Timing did not
overrule Radhakrishnan.
The judgment differentiates between ‘fraud simpliciter’ and ‘serious fraud’, and concludes
that while ‘serious fraud’ is best left to be determined by the court, ‘fraud simpliciter’ can be
decided by the arbitral tribunal. In the same vein, the Supreme Court has held that an
appointed arbitrator can thoroughly examine the allegations regarding fraud.18

THIRD PARTY FUNDING

▪ Understanding the Concept of Third Party Funding
Third-party funding (‘TPF’) is a financing method whereby an entity that is not party to a
dispute and the Proceedings arising there from, finances all or part of a party’s costs of
proceedings, in return for a percentage of recovery made under the judgment or award. TPF
is commonly associated with non-recourse outcome based financing—where funder’s fees
are repaid only upon success. Historically, TPF was introduced to facilitate access to justice
for an impecunious party (usually the claimant). Today, the need to manage and allocate risks

15 2014 (6) SCC 677.
16 AIR 2014 SC 968.
17 (2016) 10 SCC 386.
18 Ameet Lalchand Shah & Ors. v. Rishabh Enterprises and Anr.,
2018 SCC OnLine SC 487

of proceedings; maintain healthy cash flow in business; or find alternative avenues for
investment have led to exploring TPF for diverse goals. ‘Funding’ includes classic costs of
proceedings viz. attorney fees, evidentiary hearings, arbitrator fees, administrative fees,
payment under judgment or award or others. It may also include exceptional costs such as
security and adverse costs of the successful party. A funding agreement may stipulate a cap
on funding, deposit of security, percentage of return, success fee, payment of adverse costs
and termination rights among other conditions. An arbitral tribunal holds discretion to award
or allocate costs of proceedings.19

TPF originally emerged firstly in civil litigation where it was conceived as a method of
financing litigation and hence as a tool to reduce or eliminate the risk associated with
potentially unfavorable outcome of the litigation.20 The TPF takes place when a third party,
external to the parties and not involved in the legal relation between them, agrees to pay for
the one party’s (usually the claimant) legal fees, such as costs of lawyers, experts, outside
counsels, any other costs that may be relevant or needed in the civil litigation in accordance
with a stipulated agreement and stipulated budget, in exchange for an agreed return. The
funder may additionally agree to pay the opposing party’s costs if the funded party is so
ordered and provide security for the opponent’s costs.21

▪ Why there is a need of Third Party Funding in International Arbitration
TPF has been widely used in both international commercial and investment arbitration,
however, due to confidentiality principle still in force in commercial arbitration and to some
extent compromised in investment arbitration, this concept raises a number of concerns and
challenges.22 According to Queen Marry and White & Case 2015 International Arbitration
Survey: Improvements and Innovations in International Arbitration, the respondents are

19 Third Party Funding: liability of third party funders to pay cost in Arbitration; Entitlement of successful
claimant to cost of Third Party Funding (2017), IBPA Journal No. 87 News and Legal Update.
20 M. de Morpurgo, A Comparative Legal And Economic Approach To Third-Party Litiga-tion Funding,
“Cardozo Journal Of International & Comparative Law” 2011, Vol. 19, p. 350.
21 S. R. Garimella, Third Party Funding in International Arbitration: Issued and Chal-lenges in Asian
Jurisdiction, “AALCO Journal of International Law” 2014, Vol. 3, Issue 1, p. 48;
22 Comapre J. von Goeler, Show Me Your Case and I’ll Show You the Money – How to Balance Conflicts
Between Third-Party Funding and Confidentiality in Arbitration Proceed-ings, Kluwer Arbitration Blog
21.07.2016, [online] http://kluwerarbitrationblog.com/ 2016/ 07/21/show-case-ill-show-money-balance-
conflicts-third-party-funding-aand-con-fidentiality-iin-arbitration-proceedings/.

generally of the opinion that it should be mandatory in international arbitration for claimants
to disclose the fact of using TPF and the identity of the funder, but without revealing the
content of the funding agreement.23
The Task Force on Third-Party Funding prepared a working draft report presented, for
discussion purposes, at the 14th Annual ITA-ASIL Conference on Third-Party funding, held
in Washington, D.C. on 12 April 2017. In light of the Report, the following issues should be
addressed:
1) transparency, without which the legitimacy of the arbitral process could be undermined;
2) privilege (while in the U.K. and the U.S. common interest privilege would likely cover a
claimant and funder working together on a case, this may well not be the case in civil law
jurisdictions);
3) costs (to what extent should the existence of TPF be taken into account in allocating costs
in an increasingly “loser pays” legal environment? Should it be a factor when considering
whether to grant an order on se-curity for costs?) and
4) definitions (who or what exactly is a third party funder?)24
the Task Force report underline the importance of regulating TPF for harmonized
development of arbitration and integrity of the arbitration proceedings. In fact, some of the
leading jurisdictions have already introduced relevant legislation. For example, Hong Kong
and Singapore have recently amended their legislation in order to create the legal framework
for using TPF in arbitration and related proceedings.25

▪ Advantages of Third Party Funding26
Over the last few years there has been a marked increase in third-party funding activity.
Initially focused on investor-state arbitration, it is now spreading to the commercial side.

23 Queen Marry and White & Case 2015 International Arbitration Survey: Improve-ments and Innovations in
International Arbitration, [online] http://www.arbitration.qmul. ac.uk/docs/164761.pdf.
24 J. E. Vernon, op. cit.
25 In Singapore TPF is regulated by Civil Law (Third-Party Funding) Regulations 2017 (Regulation to Civil
Law Act of 1999), that come into operation on 1 March 2017; whereas in Hong Kong the Arbitration and
Mediation Legislation (Third Party Funding) (Amend-ment) Bill 2016 was introduced on 11 January 2017.
26 Third-party funding in international commercial arbitration (2017), Financier Worldwide Magazine-
Litigation and Dispute Resolution.

(Retrieved From- https://www.financierworldwide.com/third-party-funding-in-international-commercial-
arbitration/#.XG5Qa-gzbIW)

In return for funding a case, third-party funders seek a percentage of the proceeds of a
successful case, or a multiple of the financed costs, or an amount calculated using a
combination of those factors. Smaller organisations, and parties that cannot or prefer not to
pay for legal fees and expenses, are most likely to utilise third-party funding. For the last
decade or so, they have been able to work with specialist providers of litigation finance.
“Third-party funding is a valuable tool which has allowed parties to gain access to justice
which may previously have been out of their reach.”
The cost of bringing a claim to arbitration can be prohibitively high. By utilising third-party
funding solutions, parties who might otherwise have been priced out of bringing their claim
still have options.
Presently parties to a dispute are under no obligation to disclose their funding arrangements.
Some parties, such as Oxus Gold PLC, voluntarily disclose their third-party arrangement. The
company, which was involved in a dispute with the Republic of Uzbekistan, released a
statement which noted that it had “entered into a litigation funding agreement” and that under
the terms of this agreement, “the Funder has agreed to pay [its] legal costs in relation to the
international arbitration proceedings on a non-recourse basis”.
Conflicts of interest may arise under a third-party solution. For many arbitrators, the
likelihood of discovering that they are involved in a case where there is a conflict of interest
increases sharply in a third-party funded claim, given the small number of funders currently
operating in the market. Presently, in the UK, there is no general obligation on a funded party
to disclose the facts of its funding arrangement, yet, in light of the concerns regarding
conflicts, demand for greater transparency is growing.

On 22 September 2016, the ICC International Court of Arbitration published a Guidance
Note requiring arbitrators to disclose connections with parties and their affiliates and
expressly extended this to parties with an economic interest in the outcome, again including
funders.
Third-party funding is a valuable tool which has allowed parties to gain access to justice
which may previously have been out of their reach. It is a global growth industry set to be a
feature of international commercial arbitration for many years to come.

However, there are a number of issues which parties gaining access to third-party funding
must take into consideration at the onset of their claim. Questions abound around issues such
as confidentiality, the identity of the claimant, conflicts of interest, disclosure of the funder’s

involvement in the proceedings, security for costs, as well as money laundering. These are
issues which parties cannot simply ignore.

While it is important that parties are not deprived of financial support for their cases and are
granted access to additional financing options, there is currently very little mandatory
regulation of third-party litigation funding in most jurisdictions. Increased regulatory
oversight could benefit the management of third-party funded claims in the future.

EMERGENCY ARBITRATOR

It is the procedure by which parties seeking for an urgent interim relief may appoint an
arbitrator even before the constitution of the tribunal. In any arbitration there are instances
where parties may want to protect their rights such as by freezing opposite parties assets in
order to secure the amount claimed or any other relief similar in nature. The person seeking
such appointment has to satisfy two elements27:

1. The loss by the way of damages are irreparable by nature if the relief is not granted
i.e. Periculum in mora

2. That the person seeking such relief is likely to succeed on merits i.e. Fumus boni Iuris

The emergency arbitration was first introduced in year 2006 by International Centre for
Dispute Resolution (ICDR). Many other major arbitral such as LCIA (London Court for
International Arbitration), SIAC (Singapore International Arbitration Centre), HKIAC (Honk
kong International Arbitration Centre) and ICC (International Chamber of Commerce)
thereafter have followed by inserting the provisions for appointing the emergency arbitrators.
Very recently, SIAC has amended their rules, accordingly by which the President shall seek
to appoint the arbitration within one day of the receipt by the Registrar of such application
requested.28 Likewise, even Mumbai Centre for International Arbitration29 (MCIA) has

27 Kunal Kumar and Anshuman Ray, India: Appointment of Emergency Arbitration in India (2017), Singh &

Associates.(Retrieved From-

http://www.mondaq.com/india/x/593666/Arbitration+Dispute+Resolution/Appointment+Of+Emergency+Arbitr

ator+In+India)

28 Schedule 1, Rule 3 of the SIAC Rules 2016
29 Established in 2016

adopted provision for the appointment of emergency arbitrator30 and the Delhi International
Arbitrator Centre has also included the provision for the 'Emergency Arbitrator' and the
appointment, procedure and time period for the same.

However, the concept of 'Emergency Arbitration' has not been so popular in India. Most of
the Indian parties have chosen SIAC as the arbitral institutions and reportedly 9 out of 34
applications for the appointment of emergency arbitrator were in fact made by the Indian
parties.31 Previously, the Indian arbitration rules and the laws were not so arbitration friendly
but after the amendment of Arbitration & Conciliation Act, 1996 and the MCIA Rules 2016
India is gradually moving forward and adapting the international standards in commercial
arbitration.

The first issue relating to the emergency arbitration was discussed in the case of HSBC PI
Holding (Mauritius) Limited v. Avitel Post Studiouz Limited32 dated 22.01.2014 by the
Bombay High Court. In the present case, the locus loci arbitri i.e. the seat of arbitration was
Singapore i.e. outside India. The Petitioner had moved an application for the appointment of
emergency arbitrator to seek interim measures. The emergency arbitrator had granted the
interim measures and passed the award in favor of the Petitioner by freezing the accounts of
the Respondents and required them to disclose their assets to HSBC Mauritius information.
The Petitioner later moved an application under Section 9 before Bombay high Court to seek
the same reliefs which was also granted by the Arbitral Tribunal. The Honorable High Court
of Bombay held that since the party had moved an application under Section 9 of the Act and
was not seeking to enforce the emergency award passed, the same could be granted by the
Court. It is pertinent note that the judgment was delivered prior to the BALCO decision
where it was held that the Indian Courts cannot entertain interim relief where the seat of
arbitration is outside India.33

30 Under Rule 14, MCIA Rules 2016
31 From July 2010 – 1 April, 2014: http://hsfnotes.com/arbitration/2014/04/01/siac-emergency-arbitrator-

awardsa- speedier-route-to-interim-relief-before-the-indiancourts/

32 MANU/MH/0050/2014

33 Kunal Kumar and Anshuman Ray, India: Appointment of Emergency Arbitration in India (2017), Singh &

Associates.(Retrieved From-

http://www.mondaq.com/india/x/593666/Arbitration+Dispute+Resolution/Appointment+Of+Emergency+Arbitr

ator+In+India)

On 07.10.2016, in the case of Raffles Design International India Private Limited & Ors.
v. Educomp Professional Education Limited & Ors.,34 held by the Delhi High Court the
issue of emergency arbitrator was again discussed. The seat of arbitration was Singapore. The
interim relief was granted by the emergency arbitrator restraining the Respondent from taking
any action that would deprive the rights of the Claimants in the agreement in respect of (a)
Hiring and dismissal of employees in the society and (2) functioning and management of the
society. Additionally, the Respondent was restrained from instigating the terminated
employees of the Society.

The concept of 'Appointment of Emergency Arbitrator' in India is not new. Arbitral Centres
such as Madras High Court Arbitration Centre and Delhi International Arbitration Centre had
introduced appointment of emergency arbitration in their rules long back. However, not many
parties are aware that their interests can be protected even before the tribunal is constituted
and such applications are not just limited to the courts.35

SINGAPORE CONVENTION

On June 26, 2018, the United Nations Commission on International Trade Law
(UNCITRAL) approved the final draft of the Convention on the Enforcement of International
Settlement Agreements and its associated Model Law. This resolution is now known as “The
Singapore Mediation Convention.” Its approval follows three years of intense deliberation
among the 85 member states and 35 international governmental and nongovernmental entities
comprising the commission. The convention takes effect once three member states ratify it.36

Until now, there was no procedure for the direct enforcement of mediated settlements. This is
a problem given the increasingly global economy. The Singapore Convention aims to change
that. If successful, the Singapore Convention will have a significant positive affect on the
recognition and enforceability of international controversies which have been settled through

34 MANU/DE/2754/2016
35 Supra Note 33.
36 Patrick R. Kingsley, Singapore Convention on Mediation: Good News for Business (2019), The Legal
Intelligence powered by TheLaw.com
(Retrieved From- https://www.law.com/thelegalintelligencer/2019/01/09/the-singapore-convention-on-
mediation-good-news-for-businesses/?slreturn=20190203093533)

mediations. It is modeled roughly on the New York Arbitration Convention, which has been
quite successful.37

The Earlier New York Convention on Arbitration38

The Convention on the Recognition and Enforcement of Foreign Arbitration Awards was
adopted by the United Nations at the United conference on June 10, 1958, and entered into
force on June 7, 1959. It is commonly referred to as the “New York Convention.” The
convention requires courts of contracting states to give effect of private agreements to
arbitrate and to recognize and enforce arbitration awards made in other contracting states.
The New York Convention has been regarded as an extremely successful in managing
international controversies. As of this writing, there are 159 state parties to the convention
which makes its effect extremely wide-spread. International arbitration has become an
increasingly popular means of alternative dispute resolutions for commercial controversies
that extend across borders. This is no small part due to the New York Convention. Thanks to
the New York Convention, arbitration awards are now often easier to enforce that a decision
from the courts of another country.

The New Singapore Convention’s Purpose39

The Singapore Convention facilitates the enforcement of international commercial settlement
agreements that result from mediation. Prior to the convention, if an international disputant
settled a case through mediation, it would usually be required to enforce that settlement
agreement as it would any other contract: by bringing a brand new action in the contractual
counter-party’s own country. Thus, the aggrieved party would have to institute an action (by
complaint or otherwise), obtain a judgment or award on the contract (i.e., the mediated
settlement agreement) and then seek to enforce the award. That is a lot of litigation to enforce
a settlement that was probably designed, at least in part, to avoid litigation in the first place.

The Singapore Convention endeavors to allow the party seeking to enforce a mediated
settlement agreement to skip the step of litigation and go right to the enforcement. The
convention provides a method for settling parties to directly enforce their mediated settlement
agreements.

37 Ibid.
38 Supra Note 36.
39 Ibid.

Main Features of the Singapore Convention and Model Law40

Terminology
UNCITRAL developed the Model Law on International Commercial Conciliation (2002
Model Law) in 2002. The new Model Law seeks to revise this, primarily by replacing the
term “conciliation” with “mediation”. WGII recognized that the terms ‘mediation’ and
‘mediator’ were more widely used and changing the terminology would make it easier to
promote and enhance the visibility of the Convention and Model Law.

Scope
The Convention is significant as it facilitates, for the first time, the enforcement of
international commercial settlement agreements resulting from mediation. The Convention
applies to “international agreements resulting from mediation” and concluded “in writing” by
parties to resolve a “commercial dispute”. The Convention excludes settlement agreements
which (a) have been approved by a court or have been concluded in the course of court
proceedings; (b) are enforceable as a judgment in the state of that court or (c) that have been
recorded and are enforceable as an arbitral award. The rationale of the carve out is that there
are other widely accepted international instruments such as the New York Convention and
the Hague Convention on the Choice of Court Agreements that specifically govern those
types of settlement agreements. The Singapore Convention will focus on circumstances
where these other instruments are not applicable.

Mode of Enforcement

The Draft Convention provides flexibility and autonomy to the State Parties in not
prescribing a specific mode of enforcement. Instead it lists conditions to be fulfilled in order
for a State to enforce a settlement agreement under the Convention, i.e.:
– “in accordance with its rules of procedure, and
– under the conditions laid down in this Convention, in order to prove that the matter has
been already resolved” (for applicable conditions, see Articles 2(1) and 4).

Enforcement application

40 Nadja Alexendra, Singapore Convention on Mediation (2018), Kluwer Mediation blog.
(Retrieved From- http://mediationblog.kluwerarbitration.com/2018/07/24/singapore-convention-mediation/)

According to Article 4, a party relying on a settlement agreement shall supply to the
competent authority of the State where relief is sought, the following:
(a) the signed settlement agreement; and

(b) evidence that the settlement resulted from mediation

Examples of evidence that the settlement resulted from mediation might include the
mediator’s signature on the settlement agreement, document signed by the mediator
confirming the mediation was carried out, an attestation by the institution administering the
mediation or any other evidence acceptable to the competent authority. However, the ‘catch-
all’ provision leaves the competent authority of the State Party the autonomy to decide what
evidence is acceptable.

Exceptions to enforcement/Refusing relief

States may refuse relief only if one of five grounds in Article 5 is proved. The five grounds
Article 5(1) include:
• Incapacity of a party to the settlement
• The settlement agreement is null and void, inoperative or incapable of being performed
under the applicable law
• The settlement agreement

o Is not binding, or is not final, according to its terms

o Has been subsequently modified

o The obligations in the settlement agreement

o Have been performed or

o Are not clear or comprehensible

o Granting relief would be contrary to the terms of the settlement agreement
• There was a serious breach by the mediator of mediator standards
• There was a failure by the mediator to disclose to the parties’ circumstances that raise
justifiable doubts as to the mediator’s impartiality or independence

The penultimate and last grounds, relating to mediator conduct, align with Articles 5(4), 5(5)
and 6(3) of the 2002 Model Law on International Commercial Conciliation.
In addition, pursuant to Article 5(2), relief may be refused where it is “contrary to the public
policy” of the State in which enforcement is sought or the “subject matter of the dispute is not
capable of settlement by mediation under the law of that State”.

Unlike the New York Convention (which does not specifically address reservations), the
Singapore Convention expressly permits a number of reservations including in relation to
whether or not the Convention would apply to the government of signatory state (Article 8).41

PRAGUE RULES

The new Rules on the Efficient Conduct of Proceedings in International Arbitration (Prague
Rules) launched last month in the Czech Republic and aim to provide a more efficient
framework for arbitral procedure which can be used to streamline a dispute, reducing delay
and costs. Their approach is closer to civil law than common law traditions, with the tribunal
pro-actively managing the dispute from the start. The Prague Rules provide for early
narrowing of the legal and factual issues in dispute at an initial case management conference
and preliminary tribunal decisions on key matters. Tribunals can order site inspections and
request key documents. The new rules seek to heavily restrict disclosure, with parties told
they should “avoid any form of document production, including e-discovery“. No requests for
documents will ordinarily be permissible after the first case management conference. There is
an inquisitorial approach to witness evidence and tribunal-appointed experts are suggested.
Provided that the parties give their consent, the rules allow members of the tribunal to
facilitate a commercial settlement, or to mediate the dispute – an approach which remains
controversial to some parties and practitioners. Where disputes do not settle, parties and
tribunals are encouraged to proceed on documents only, avoiding oral hearings where
possible.42

41 Ibid.
42 Craig Tevendale, Prague Rules on efficiency in arbitration now launched (2019), Herbert Smith Freehills
LLP – Lexology.
(Retrieved From - https://www.lexology.com/library/detail.aspx?g=bfd4a3ed-178b-4114-b8aa-a56e941b7426)

Much of what the Rules cover is not entirely novel, and could already be put in place where
the IBA Rules are used. For example, tribunals can already appoint their own experts, adopt a
civil-style inquisitorial approach to witnesses and order limited disclosure. However, whilst
these powers are in principle largely available to tribunals and can be requested by parties, in
practice this happens infrequently. It follows that if the procedural framework proposed in the
Prague Rules were adopted in its entirety, it would produce a very different arbitration
process to the experience with which most parties will be familiar. It remains to be seen
whether the Rules are in fact the solution to procedural inefficacy. The issues which
commonly frustrate parties generally arise from the reluctance of the tribunal to actually use
more active case-management approaches, rather than from an absence of available powers
under the applicable procedure. It has been suggested that using the Prague Rules may front-
load costs in some cases and that some due-process challenges may follow.43

The mediation/arbitration-arbitration/mediation provision in the Rules has also generated
some skepticism, as this is a source of concern in relation to arbitrator impartiality in many
jurisdictions. However, the Rules do aim to provide some protection in allowing one or both
parties to ask an arbitrator to step down after an unsuccessful settlement attempt.
The Prague Rules may well be a useful tool where both parties want to exercise their party
autonomy to resolve their dispute using an approach closer to civil law traditions. The Rules
are likely to be used in cases where restricting evidence makes sense, such as disputes which
mainly relate to issues of law, but are less likely to be used in cases which are high-value,
fact-heavy and/or complex, where more extensive witness evidence and documentary
disclosure will be needed. For the right type of dispute, and where the parties share similar
expectations on how their process should run, the Rules offer an opportunity to realise
efficiencies and tangible cost savings. More generally, the Prague Rules have prompted a
renewed discussion of procedural problems in international arbitration and how best to
achieve efficiency, which is a welcome development for the arbitration community as a
whole.44

43 Ibid.
44 Supra Note 42.

Fact Finding45
An arbitral tribunal conducting proceedings under the Prague Rules is ‘entitled and
encouraged to take a proactive role in establishing the facts of the case which it considers
relevant for the resolution of the dispute’ (Article 3.1), but this does not ‘release the parties
from their burden of proof’. The tribunal is authorised to take steps at its own motion and at
any time after having heard the parties to:

a. ask a party to produce relevant documents or make available the testimony of a fact
witness;
b. appoint one or more experts (including on legal issues);
c. order inspections; and/or
d. 'for the purposes of fact finding, take any other actions which it deems
appropriate.'(Article 3.2).

Under Article 3.3 of the Prague Rules, an arbitral tribunal may impose a ‘cut-off date for
submission of evidence’ so that evidence after that date is not accepted ‘except in exceptional
circumstances’.

Disclosure Of Documents46
The IBA Rules deliberately and clearly adopt a disclosure regime which contains elements of
discovery or disclosure under each of civil and common law frameworks. Article 3 sets out in
detail the process for document requests, including requests from non-parties or
organisations.

The Prague Rules seek to restrict disclosure on a number of fronts. First, parties are required
to produce ‘documentary evidence upon which [they intend] to rely in support of [their] case
as early as possible in the proceedings’ and the arbitral tribunal and the parties are
encouraged to ‘avoid any form of document production, including e-discovery’ (Articles 4.1

45 Corrs Chambers Westgarth ,Challenging the regime in international arbitration: an introduction to the
Prague Rules (2019).
(Retrieved From- https://www.corrs.com.au/publications/corrs-in-brief/challenging-the-regime-in-international-
arbitration-an-introduction-to-the-prague-rules/)
46 Ibid.

and 4.2). There is, however, opportunity under the Prague Rules for a party to request a
document or documents and for the arbitral tribunal to order disclosure (Articles 4.3 to 4.5).
Confidentiality47
There is no general obligation of confidentiality in the Prague Rules. However, Article 4.7
provides that documents produced by a party in the arbitration proceedings and not otherwise
in ‘any public domain’ must be kept confidential and ‘may only be used in connection with
that arbitration save where and to the extent that disclosure may be required of a party by the
applicable law’.
The IBA Rules have a consistent theme of confidentiality, including in relation to documents,
settlement discussions, evidence and experts (see in particular Articles 3 and 9).

47 Supra Note 45.