Mr. Duffy also goes on to discuss investor-state arbitration. He states that there is a serious movement afoot to criticize ISDS. The ISDS does have shortcomings, but people are raising questions and looking for solutions. He discusses the issues such as fairness and legitimacy, which improperly impinges on host government policy, whether the system accords foreign investors greater rights than domestic parties, and whether ISDS results in increased FDI. He questions whether increased FDI is even a legitimate expectation. Is globalization is a good thing? Anecdotal evidence is present which shows that ISDS does promote FDI. ISDS strengthens the rule of law. The system is relatively new, since 1960s, but does address its own shortcomings- by the early dismissal of claims, the US Model BIT, transparency increasing in the process and the inclusion of umbrella clauses. He concludes by saying that crossroads mean there is a choice, it doesn’t mean you have to make a poor choice; there can be a positive outcome- from events like this very Conference.
Mr. Pothan discussed the potential difficulties: the first being the appointment of tribunal, each dispute has an independent chair set up, and a lot of work goes on to see what the awards the Chair has previously passed, but there exists a vagueness, still. Another issue is who the competent person is to appoint the chair of the tribunal. The second issue to be addressed is the scenario when individuals acting as arbitrators and counsels parallely. This lays a doubt on the impartiality of the arbitrator. The third issue stressed upon is the seat of arbitration; many a times parties fail to agree on a seat.
To avoid difficulties, the exhaustion of local remedies has been held to be done for a period of five years. This is a shift in the global regime. The ICJ model is something the UNICTRAL is looking at in the new investment court. There will be global representation based on the model of ICJ and greater representation for each region. Furthermore, attention has to be paid while drafting the treaty, to ensure that there is no conflict of interest and that a proper structure and procedure for hearing is in place. The nationality of the tribunal hearing each case, also needs to be addressed. The treaty needs to spell out a mechanism for enforcements of awards. Mr. Pothan also discussed TTIP and CETA. He concludes by stating that while the need of the hour is to fix the gaps in BIT, the purpose of the ISDS is to protect and promote investments –assure investors that in case you are not comfortable with the judicial system in another country, there is exists another neutral form, however there is a need to redress this, which can perhaps be done the new investment code.
Dr. Ranjan discusses the provisions of the Indian Model BIT. Article 13 restricts the scope only to disputes arising under Chapter 2- such as expropriation, national treatment. He also discusses that there is a requirement to exhaust local remedies- exhaustion of local remedies is also a part of customary international law, but countries have been signing BITs, thus deviating from this. The Indian BIT states that investors have to first exhaust local remedies, not fully, but atleast for a period of five years, and this is how the Indian Model BIT is different. He discusses Article 15.5, which provides the period to be elapsed before starting proceedings. Another feature of the BIT, is the prevention of conflict of interests of arbitrators and challengers and one of the factors listed is if the arbitrator has publicly advocated a fixed position. He states that a distinction needs to be drawn between an academic writing and the position of the arbitrator on a panel.
Article 22 is also discussed, which deals with transparency- Dr. Ranjan stresses that states should make the award publicly available; there is the need for the Indian government to start making the award public for researchers and academicians. The Government’s past record on this has not been very good. Also, Dr. Ranjan states that transparency also means in transparency in negotiating bilateral treaties: who is consulted in the BIT, what processes are followed, whether parliament taken into confidence, etc.
Burden of proof and governing law is another interesting point discussed by Dr. Ranjan, the standard of review in BIT, to what extent the tribunal should go in reviewing, but there is a requirement that states that there should be a high level of deference- this could be an abuse of regulatory power. This thus needs to be defined in a more nuanced way. Dr. Ranjan states that Article 29 is a good feature of Indian BIT. An appellate mechanism is necessary– divergent awards result will without it.
He concludes by saying that the Indian Model BIT does try to strike a balance but a careful reading of the ISDS provisions seems to show the aim to immunize India from future BIT claims. To give investors a fair chance, the ISDS needs to be revisited.
4. Dr. Aniruddha Rajput, Advocate Supreme Court of India, will be discussing the TPP-ISDS and ISDS Only Tobacco carve out. Mr. Rajput begins by giving an introduction on ISDS. He discusses the tumultuous history of BIT. In this context, he states that TPP stands as a light in this dark setting.
He discusses what the TPP tries to do in terms of ISDS, and he also discusses the different views of an international commercial lawyer as compared to a public international lawyer in interpreting a treaty. He also deliberates on how the fair and equitable treatment standards and MFN are used to expand the scope of a treaty. MFN can be used as a mechanism for importing obligations from other treaties that states had entered into. For example, in White industries case, a clause was imported from a treaty not in question and concern was expressed. He goes on to state that the TPP prevents this expansion of its scope by limiting it only to measures or to those actions taken by government authorities. This means that states cannot use MFN or try to find a state responsible for violations of treaties not included.
He speaks about the differentiating standards of FET and also says that states often indulge in an interpretative extravaganza. He states that TPP stops treaty shopping and also tones down expropriation.
In conclusion, he says that TPP gives us a positive notion of the ISDS, and that states still want to be in the system. But he also says that states have created the system and can destroy it also, therefore reform is needed. Lastly he says that maybe TPP has gone too far and become too restrictive but maybe it is the need of the hour.
Panel Session I ends with the Moderators’ Closing Comments and the Questions and Answers Session.
5:45 PM PANEL DISCUSSION II
We will now begin with Panel Discussion II, the theme of which is “Transparency v. Confidentiality: Finding Middle Ground in Perceived Contradictions”.
1. Ratan Singh, Director, CIArb, India and Chairman, Society of Construction Law, UK (India Branch), will be moderating the discussion and delivering the introduction to the theme and opening remarks on the panel. He begins by tracing the origin of privacy and confidentiality in arbitration. He states that the fundamental reason why BITs are being reworked is due to the lack of transparency. He points out that states seem to be convinced that treaty arbitrations are not good for developing or developed country arbitrations. With regard to jurisdiction and the power of arbitrators, the fundamental rule is that the arbitrator cannot pass a decision in rem, because they derive their jurisdiction from the decision of the parties. Therefore, they have a legitimate reason for raising concerns.
According to Mr. Singh, there two fundamental aspects, firstly, that there are three broad categories of arbitration- domestic , international commercial arbitration and treaty arbitration, and all three have their own concerns about confidentiality and transparency. Secondly, the terms and conditions he is talking about is for interested parties alone, or vis a vis third parties. He outlines this is as the scope of the debate and discussion for the panel today.
Mr. Singh states that privacy and confidentiality have two different connotations. Privacy relates to while confidentiality refers to information, documents, data and awards. Mr. Singh says that there is a debate between two camps— the Express Camp, according to this camp, the provisions for confidentially should be expressly stated, and the Implied Camp, this camp asserts that arbitration has an inherent nature of confidentiality. Mr. Singh says there should be a Selective Confidentiality Camp, which states that only whenever it is necessary and legitimate to seek confidentiality, it should be done, or else go more towards transparency. The general concerns of confidentiality are, according to Mr. Singh are the appointment of arbitrators, predictability and jurisprudential development. On the point of appointment of arbitrators – and in default appointments as well, he suggests to have a panel of arbitrators which are given by court and then have parties to choose from that. With regards to jurisprudential development, Mr. Singh goes on to state that arbitration is becoming an impediment in the development of common law jurisprudence.
Mr. Singh also mentions the latest developments in the concerns of transparency and confidentiality, which are the IBA guidelines which includes a confidentially clause, the CIArb guidelines 2016, and third party funding, which also needs transparency.He concludes by stating that if one is concerned with confidentiality, then one needs to look at arbitration agreement, lex abrbitri and the rules of institution. Transparency should be the rule and confidentiality the exception, when it is so legitimate.
2. Ms. Olga Boltenko, Counsel, CMS HascheSigle, Hong Kong, will be discussing transparency regimes under the latest generation of multilateral treaties. Ms. Boltenko begins by commending CARTAL for fostering a thriving academic culture. She states that transparency is a two-limbed creature; firstly, there exists an obligation by host state to a foreign investor. It is important for the host state to make available laws pertaining to foreign investment, and there should also be a system of notification of changes in investment related regulations to the investors. Secondly, there should be transparency obligations on the investors to facilitate the sustainable development of the host state. They should be able to regulate matters of public concern in their own territory, without being hit by claims of an investor state.
Ms. Boltenko states that the ISDS backlash stems from the perception that private tribunals decide matters of extreme importance behind closed doors. The critics appear to want the ability to participate as an amicus in arbitration and demonstrate their opinion. Ms. Boltenko also questions whether the mafia of investor state arbitrators, who get to decide cases, exists, but says this instead stands for the Mutual Assistance for Investment Arbitration.
Ms. Boltenko also discusses the new trends in multilateral treaties. Bilateral treaties were previously pro-investor and have pro-investor case law. The ISDS backlash is based on this history, but now it is targeting the new sophisticated generation of multilateral treaties. A treaty, according to Ms. Boltenko, is a piece of legal technology that evolves over a time. The approach to transparency is much more balanced in these multilateral treaties than what was seen in the older bilateral treaties. She goes on to state that there is a new hope, the ICSID convention has been amended, NAFTA has become transparent, and the Singapore- US FTA and other BITS all have transparency provisions. Further, the UNCITRAL rules on transparency, though not designed for investor-state, are still used. These rules are universal, and can be used in commercial arbitration also. The TPP is a sophisticated balance of multilateral treaties; it contains robust provisions of transparency. The Indian Model BIT also has sophisticated provisions for transparency.
In conclusion, Ms. Boltenko states that TPP and other multilateral treaties do address transparency, thus, the journey has been successful, but the only thing left is to do is to convince the public that the multilateral treaties “are a good thing”.
3. Mr. Rishab Gupta, Counsel, Shardul Amarchand Mangaldas & Co. Mumbai, will be discussing transparency in arbitral appointments in treaty arbitration. Mr. Gupta begins by stating that the ability to choose an arbitrator is in fact a quantitative exercise, and it needs to be a sort of “scientific” appointment. This can be done by creating a database, to try and collate as much information as necessary to select an arbitrator and to be able to capture everything there is and put out that information in the investor treaty domain, thus making it more scientific. The two things which are of most importance in the database are the total number of decisions and also the total number of citations. Mr. Gupta states that despite there being no stare decisis, arbitrators do cite cases, and thus, citations are important. His unique database has analyzed the most cited arbirators, the most cited cases and the factors behind the same. He has also analyzes the shelf life of a case and has examined the case of Metaclad v. Mexico as an example. He also uses the “H index” – a method to calculate the most influential arbitrator.
4. Mr. Kabir Duggal, Senior Associate, Baker & McKenzie, New York, will be discussing Third Party Funding- transparency v. confidentiality concerns. He discusses the funding of law suits by a third party exchange for a portion of the award in event of a successful outcome. The problem herein, he says, lies with the conflicting values at stake:
- It promotes due process and permits justice for investors with no other option.
- It promotes gambling and hedging of cases at the cost of public good, with the risk of non-payment of costs.
Mr. Duggal says this will be viewed in the context of transparency and confidentiality. The problem here is however, potential conflicts; who would the real party in interest and who gives the instruction for the case? If there might be a conflict of interest existing with the arbitrator, it must be dealt with by disclosure. There are three views in this regard, according to Mr. Duggal:
- No disclosure (where it does not matter who funds the money)
- Must disclose (but only the fact that there is a funder)
- Must disclose funding arrangement as well
Mr. Duggal also discussed whether a security for costs is needed in case of a funder. Most cases have said that the security for these costs do not warrant the disclosure of the funder.
Panel Session II ends with the Moderators’ Closing Comments and the Questions and Answers Session.
We are pleased to welcome you back to the 1st Cartal Conference on International Arbitration, Arbitration at Crossroads.We report to you live on Day 2.
8:45 AM PANEL DISCUSSION III
We will now begin with Panel Discussion III, the theme of which is “Institutional Arbitration in India: Past, Present and Future”.
The Panellists for this discussion are:
- Mr. Shashi K. Dholandas, Associate General Counsel, The Judge Ltd.; and Former Director, ICDR, New York,
- Mr. Pranav Mago, South Asia Head, Singapore International Arbitration Centre
- Ms. Neeti Sachdeva, Registrar, Mumbai Centre for International Arbitration
- Mr. Kartikey Mahajan, Associate, Clifford Chance, Singapore
The Panel Discussion shall be conducted as a series of questions asked by the Moderator, Mr. Dholandas and answers given by the other panelists. The audience is also given the opportunity to ask the panelists questions during the discussion.
Mr. Shashi K. Dholandas, gives the introduction to the theme and opening remarks on the panel. He begins by thanking CARTAL and IJAL for organizing the programme. He then commences the panel discussion by posing questions to the panellists.
Question 1: What are the challenges faced in institutional arb in India?
Mr. Kartikey Mahajan: The biggest challenge is that the perception of arbitration, which hasn’t change enough, but will gradually change. Arb is seen as a part time profession.
Ms. Neeti Sachdeva: The LCIA and MCIA believe people need to move on from ad-hoc arbitration to institutional arbitration. Ad-hoc arbitration comes with plenty of challenges, and the advantages of institutional arbitration need to be emphasized, and the MCIA does this. There is a lack of a credible Indian international arbitration institution.
Mr. Pranav Mago: The concept of arbitration still confused with mediation. The two concepts are very different, and arbitration has several advantages, such as the choice to nominate an expert to the dispute. With the rise in the popularity of institutional arbitration in the last decade, institutions like SIAC and the MCIA need to help in the development of awareness.
Moderator’s comment: The moderator gives an insight ICDR perspective. The real key for success is to look for what the client companies and other investors in the system need, and what can be catered to. Arbitration institutions have trouble when they do not understand the need to exist, arbitration is, after all, creature of party autonomy, and has often been rejected for trying to impose what might be necessary.
Question 2: What guidance can be given for arbitrator selection?
Mr. Kartikey Mahajan: The know-how in appointing an arbitrator comes through peoples’ reputation, one’s friends, based their viewpoints, but a panel is also good for guidance.
Question 3: Cost effectiveness of ad hoc v. institutional arbitration for a local small commercial dispute; is it fair to say that only large scale disputes are handled by institution arbitration?
Moderator’s comment: The benefits of ad-hoc arbitration only exist in a system where the ad-hoc arbitration is not broken. The moment an arbitration is set, the understanding is that the parties have a disagreement. The question is how then would one agree to things in ad-hoc arbitration; the costs go up, as the court rounds increase. Institutional arbitration lets one move forward, regardless of whether the other party is stalling or not. One need not run to court, since arbitration rules make it easier. An in-built system is necessary.
Mr. Kartikey Mahajan: There is empirical evidence to the fact that the cost of institutional arbitration is only 2%. Institutional arbitration is lesser in cost than ad hoc.
Moderator’s comment: Institutional rules all state that their rules can be augmented by agreement between parties, and since these are always subject to party decisions, the institution cannot impose.
Mr. Pranav Mago: The costs are calculated on an ad-valorem basis, so institutional benefits here. In ad-hoc arbitration, you run the risk of exceeding the cost, where the cost of the arbitration has exceeded the summon value.
Ms. Neeti Sachdeva: Institutional arbitration centres in their rules have a provisions for expedited procedure for smaller value claims, to ensure the arbitration gets over in a smaller period of time. Most institutions have this.
Question 4: Is there any region where ad-hoc arbitration is recommended?
Moderator’s comment: There is no such jurisdiction.
Question 5: Comment on the claims insurance companies in arbitration.
Moderator’s comment: Institutional arbitration takes care of claims which are to be handled by arbitration, for example, in calamities.
Question 6: How is MCIA reaching out?
Ms. Neeti Sachdeva: The Government of Maharashtra announced that any government contract above 5 crores has to have an institutional arbitration clause. The MCIA is glad that the government recognizes this important step. The MCIA conducts seminars and general courses as ways to reach out. India has started in the right direction.
Mr. Kartikey Mahajan: Believes that that institutional arbitration cannot develop in India till there is a single, large institution.
Ms. Neeti Sachdeva: Disagrees with this. She gives the example of Singapore, but says we cannot compare their model to ours, Singapore being much smaller than India. All institutions put together in India cannot handle the number of arbitrations. Every institution has different elements, and people should have the flexibility to choose.
Question 7: Whether MCIA is being marketed as a forum for Indian firms?
Ms. Neeti Sachdeva: If there are two Indian parties, institutions will ensure that the arbitrators have in-depth knowledge of the governing law. The MCIA will want to be the go-to institutions for Indian firms, but will not restrict itself only to that.
Question 8: Will the timelines for ad-hoc arbitration be binding for institutional arbitration as well?
Mr. Pranav Mago: Section 29A is unclear on this aspect. The modalities of the same are not well-defined.
10:15 AM PANEL DISCUSSION IV
We will now begin with Panel Discussion IV, the theme of which is “Overhaul of India’s Arbitration Law: Critiquing the Amendment Act of 2015.” Ms. Aakanksha Kumar, Executive Director, CARTAL will be the Moderator for this discussion. The panelists for this discussion are Mr. Sahil Kanuga, Senior Member, Nishith Desai Associates, Mumbai; Mr. Promod Nair, Founding Partner, Arista Chambers, Bangalore and Ms. Sonali Mathur, Senior Associate, AZB & Partners. Ms. Aakanksha Kumar begins the discussion by giving an overview of the Arbitration Amendment ,2015.
Question 1: The language of Section 8 poses 3 interesting aspects:
- The definition of parties has changed.
- Legislative overruling of judicial decisions
- Prima facie existence of a valid arbitration agreement.
Comment on the same.
Mr. Sahil Kanuga: The language in Section 8 may have its roots in the Chloro Controls case, including non-signatories who want to be a part of the arbitration. Section 8 acts as an enabling clause for the same.
The test for determining the prima facie existence of a valid arbitration agreement is something that has been discussed repeatedly. The point to be looked into is whether it is a judicial decision or an administrative decision. Under Section 11, it is an administrative decision. According to Section 8, the prima facie existence is only an administrative decision, one need not go too deep into it. The language in Section 8 and 11 are very different, thus there are two different thresholds. However, overtime this will lead to two different streams of law. The amendments are not without loopholes. All these changes are very new in the system, the issues will be ironed out over a certain period of time.
Mr. Promod Nair: There is a clear distinction between Section 8 and Section 11, the scope of Section 8 is to see if there is a valid arb agreement. The validity would also entail an enquiry into the arbitrability of the dispute. Section 11 on the other hand, states that a court shall confine itself to only the existence of an arbitration agreement, and what is missing from this is the word valid, and hence the question of the enquiry does not come up.
Question 2: On the subject of trust disputes: are they non arbitrable?
Mr. Sahil Kanuga: On the face of it, certain disputes are non-arbitrable. Judges will take time to appreciate the changes in arbitration and thus the issues will be ironed out in some time.
Mr. Promod Nair: The parties to a trust are signatories to the documents, but a trust also contains beneficiaries, thus if there is a dispute between the trustees and beneficiaries, would the beneficiaries be dragged into the arbitration? There can be two views to this after the Chloro Controls case. Firstly, the definition of party has broadened; thus, beneficiaries can be joined. Secondly, there could be a situation where by consent, beneficiaries are those that have derived benefit, thus, since they are assignees to the document, they can be brought as a party, by the principle of estoppel. In terms of the subject matter of the same – it is not a criminal dispute, and the award will not have an in rem character, thus, he does not see why qualitatively, a trust dispute cannot be arbitrated.
Question 3: Section 12 has been considerably overhauled, and the IBA guidelines have seen to be codified into our section. What is the rationale for including Schedule 5 and 7?
Mr. Sahil Kanuga: The problem in India is that everyone points at tribunal saying there is something wrong with arbitrators. The amendment has strengthened the language of Section 12 and widened the scope of potential interest that an arbitrator may have. This is the first time codification of this kind has taken place anywhere in the world, even the IBA rules are only guidelines. A school of thought that has been brewing is that by codifying this, people are being given ammunition to challenge the tribunal. Also, by bringing in the lists in Schedule 5 and 7, has the amendment done too much? This is a waivable provision, which could have done differently, and to codify it would be taking things too far.
Question 4: Discussing the proviso to Section 12: does it mean a waiver?
Mr. Sahil Kanuga: A fresh waiver, and consent to go ahead with that person.
Mr. Promod Nair: There is difference between consent and informed consent. The provisio requires informed consent.
Question 5: What is to be done in arbitration clauses which provide for named arbitrator?
Mr. Promod Nair: The arbitration clause must be split into two parts: First, to discern the parties’ intention to arbitrate, and second, the part to name an arbitrator will be invalid as of now, but this should not invalidate the agreement itself. The intention would have to be looked into: whether the parties intended to arbitrate at all, or only with that named arbitrator? This will need to be seen from a contractual interpretation basis.
Question 6: Comment on Section 9 and 17 and the inter-relation between them. Does the arbitration tribunal have some inherent powers with the amendment, how will it work? There seems to be a blind incorporation of Section 9 in Section 17, which gives the tribunal inherent powers. How will Section 17 work with these inherent powers and what would be an efficacious remedy?
Mr. Promod Nair: A Section 17 order could not be enforced earlier and depended on voluntary compliance. Thus, the changes to Section 17 are welcome and well-intended. It however, does create difficulties in practice. After the making of the award, Section 17 could also be enforced, which is absurd, since the mandate terminates after making the awards. Thus going to the arb tribunal now would not be an efficacious remedy– one will have to go to court instead. A court has compulsory jurisdiction, but the jurisdiction of an arbitration tribunal will be traceable exclusively to the arbitration agreement between parties.
Question 7: With regard to section 17 (1)(e): how does this provision work, and when can the arbitration tribunal give any such interim measure as is “just and convenient”?
Mr. Promod Nair: Section 17 gives fairly wide powers to the tribunal, but can be used only on application by party. Section 17(1) & (2) gives very specific powers to the tribunal. For example, if an anti-suit injunction needs to be given, that is not covered in Section 17, therefore a just and convenient measure must be taken.
Ms. Sonali Mathur then discussed the retrospective Application of the Amendment Act and the BCCI v. Kochi Cricket judgment. Section 26 operates in two parts, as a negative part (shall not apply to certain proceedings) and positive. The issue is the amendment shall not be applicable to pending arbitration proceedings. The word ‘to’ and ‘in relation to’ in the first and second part of the Section respectively must be noted.
With regard to the amendment of Section 36 – a change in automatic stay provisions. This has brought up confusion with respect to the retrospective applicability of the amendment. The problems that may arise as those in the BCCI v. Kochi Cricket case, in which the arbitration had been completed by June. The BCCI challenged this in September, which was pending when the Amendment Act, 2015 came into effect. The judgement creditors said there was no automatic stay. The court analyzed what an arbitration proceeding is– proceedings end when the award is given. Therefore, arbitral proceedings do not include an action before or after the award is passed. The court proceedings are thus not included within the ambit of arbitral proceedings. The suspension of the award was not a vested right of the parties, it was more of a disqualification that the judgment debtor had to face. Court proceedings which were filed before October 23 and pending, will be governed by Amendment Act. In another case, there was an award given by an emergency arbitrator in Singapore. An objection was raised- Section 9 was not available to the claimant because the proceedings began in September 2015. The amendment to Section 9 has been extended to for seated arbitration. The claim of opposing party was that the amendment did not apply to this case. Court proceedings arising from an existing arbitration will apply, however. However until the Supreme Court gives a ruling on Section 26, each court will interpret it differently.
11:45 AM CLOSING CEREMONY
The Report of the Conference was delivered by Ms. Sanjana Srikumar and Mr. Varun Mansinghka (Co-Convenors, CARTAL) and a Vote of Thanks was delivered by Mr. Viraj Dhuri (Organizing Secretary).
The winners of the Gary B. Born National Essay Writing Competition of International Arbitration, 2016 were also announced:
First Place: Bhagirath Ashiya (Christ University)
Second Place: Anushka Shah (GLC, Mumbai)
Third Place: Anchit Tripathi (RMLNLU)