A ProjectOnSeat of Arbitral Tribunal: Determination and Change, if anyAlternate Dispute Resolution

Supervised by: Submitted by: Mrs. Apoorva Sharma Ms. Komal SinghFaculty Semester VIII Sec- A Roll no. 25

UNIVERSITY FIVE YEAR LAW COLLEGEUNIVERSITY OF RAJASTHAN, JAIPURFEBRUARY-2014

CERTIFICATE

Mrs. Apoorva SharmaDate: 18th Feb, 2014FacultyUniversity Five Year Law CollegeJaipur

This is to certify that Ms. Komal Singh a student of VIII Semester Sec A, has submitted project titled Seat of Arbitral Tribunal: Determination and Change, if any under my supervision. The student has completed research work in stipulated time and according to the norms prescribed for the purpose.

Supervisor

ACKNOWLEDGEMENT

I have written this project titled Seat of Arbitral Tribunal: Determination and Change, if any under the supervision of Mrs. Apoorva Sharma, Faculty, University Five Year Law College, University of Rajasthan, Jaipur. Her valuable suggestions herein have not only helped me immensely in making this work but also in developing an analytical approach in this work. I found no words to express my sense of gratitude for Dr. Mahesh Koolwal, Director, UFYLC I am extremely grateful to librarian staff of the college for the support and co-operation extended by them from time to time.

Komal Singh

Table of Contents

CertificateiiAcknowledgementiiiChapter-1 1.Introduction1.1 Research Methodology Chapter-22-7.Determination of Seat of Arbitral Tribunal 2.1 The place of arbitration 2.1.1 Institutional arbitration 2.1.2 Domestic arbitration 2.1.3 International arbitration 2.1.4 Foreign arbitration2.2 Section 202.3 Section 28Chapter-38.Conclusion

Table of CasesBibliography

INTRODUCTION

Arbitral Tribunal means a sole arbitrator or a panel of arbitrators defined under section 2(1) of Arbitration and conciliation Act, 1996. An arbitrator constitutes a domestic tribunal. It has been left to the parties to determine the number of arbitrators for setting their dispute or difference, the only limitation being that an even number of arbitration shall not be appointed. In case the parties do not determine the number of arbitrators, the arbitral tribunal shall consist of sole arbitrator. Parties are also free to agree on the place of arbitration under section 20(1). Section 20 is in Part I of the Act and concerns arbitrations in India. Obviously, section 20(1) is subject to section 2(2) in the case of arbitrations to which Part I applies, the place can only be in India. But in case of Institutional Arbitration if it is stipulated in arbitration agreement that in case of dispute or differences arising between them, they will be referred to a particular institution. In case of International Arbitration, it can take place at such place either in India or outside India in cases where there are ingredients of foreign origin relating to the parties or the subject-matter of the dispute. The law applicable may be Indian law or foreign law depending on the agreement between parties in this regard.Research MethodologyIn order to complete this project report I have taken the help of Doctrinal method such as books, internet, etcHypothesisParties are free to agree upon the place of arbitration in absence of any agreement it can be determined by the Arbitral Tribunal.Scope of StudyThis project deals with the place of Arbitration and its determination CHAPTER- 2Determination of Seat of Arbitral Tribunal

The seat or place of arbitration has been defined as the geographical location to which the arbitration is ultimately tied and where arbitrator or arbitrators meet and where arbitral proceedings are conducted.2.1 The place of arbitration The place of arbitration in following cases will be; 2.1.1 Institutional ArbitrationIn an institutional arbitration it may stimulate in the arbitration agreement that in case of dispute or differences arising between them, they will be referred to a particular institution such as Indian Council of Arbitration (ICA) or International Chamber of Commerce (ICC), Federation of Indian Chamber of Commerce & Industry (FICCI); World Intellectual Property Organisation (WIPO) etc. All these institutions have framed their own rules of arbitration which would be applicable to arbitral proceedings conducted by these institution and place of arbitration will be at such place where it decides.2.1.2 Domestic Arbitration Domestic arbitration takes place in India when the arbitration proceedings, the subject matter of the contract and the merits of the dispute are all governed by the Indian Law; or when the cause of action for the dispute arises wholly in India or where the parties are otherwise subject to Indian Jurisdiction and seat of arbitration will be in India only.2.1.3 International ArbitrationInternational arbitration can take place either in India or outside India in cases where there are ingredients of foreign origin relating to the parties or the subject-matter of the dispute. The law applicable may be Indian law or foreign law depending on the agreement between parties in this regard. So the place of arbitration can be in India or at such place outside India: 1. Where one of the parties has business located abroad;2. Where the agreement has to be performed abroad;3. Where the subject-matter of the transaction is located abroad;4. Where one of the parties to the transaction is a foreign national.TDM infra-structure (P) Ltd. v. U.E. Development India (P) Ltd.[footnoteRef:2], in this case, the petitioner company was registered and incorporated under the Indian Companies Act,1956 in India though its directors and shareholders were all residents of Malaysia. Pursuant to the arbitration clause, respondent proposed change of arbitration venue to Kuala Lumpur from New Delhi and determination of dispute in terms of Malaysian law. The nominees proposed by parties were not acceptable to them; hence they moved an application for appointment of sole arbitrator. The Court held that since all the Board meetings in the instant case took place in Malaysia hence the court had no jurisdiction to nominate an arbitrator and therefore, the application was dismissed. [2: AIR 2008 SC 2928]

2.1.4 Foreign Arbitration A foreign arbitration is an arbitration which is conducted in a place outside India. It shall be governed according to the two conventions i.e., the New York and the Geneva Conventions.

2.2 Section 20Section 20 of Arbitration and Conciliation Act, 1996 is modified on Article 20 of the Model Law. Section 20(1) provides for place of arbitration, where the arbitrator/arbitrators has/have to meet and conduct proceedings. Under sub-section (1) the parties are free to select place of arbitration which may be decided by an agreement. Section 20(2) provides that if the party fails to select and fix any place of arbitration, in such a situation the arbitral tribunal itself may select and fix place of arbitration. However convenience of the parties and circumstances of the case is to be taken into consideration while fixing place of arbitration as to remove scope of arbitrariness.Section 20(3) provides power to the arbitral tribunal that it may conduct its meeting at any place which it considers proper for consultation among its members, for the purpose of hearing witnesses, experts, or the parties, or for inspection of documents, goods or other property The Supreme Court in Sanshin Chemicals Industry v. Oriental Carbons and Chemicals Ltd.[footnoteRef:3], observed that appeal against the decision relating to venue of arbitration, can be maintained. Where the parties agreed for reference of disputes to Arbitral Tribunal, the decisions on the venue of arbitration will have to be determined by Joint Arbitration Committee. It was held that such decision of the Arbitration Committee will be justified and final. [3: AIR 2001 SC 1219]

In Sulaikha Clay Mines v. Alpha Clays & Others[footnoteRef:4], the Arbitral Tribunal granted oral hearings of parties at the premises of parties without notice to the other party and inspections were conducted by it without notice to both the parties. Even evidence collected from one party was kept secret from the other party and it was not disclosed even at the time of hearing. The place of arbitration was also not determined and not intimated to the parties. Thus the entire proceedings suffered from gross procedural irregularities violating the provisions of Sections 18, 19, 20 and 24 of the Arbitration and Conciliation Act, 1996. It was evident that arbitrator was not fair and had not treated both the parties equally. The Kerala High Court, therefore, set aside the award because of the procedural violation and directed the appellant to approach the Civil Courts for redressal of its grievances. [4: AIR 2005 Ker.3]

2.2 Section 28Section 28(1) refers to domestic arbitration where the substantive law of India would be applicable. Sub-section (1) (b) contains provision relating to the substantive law to be applied in the dispute under arbitration in the case of International Commercial arbitration. Such dispute shall be arbitrated in accordance with the law designated by the parties. If the parties to International commercial arbitration fail to agree among themselves about the applicability of the substantive law, the arbitral tribunal has the authority to apply the rules of law it considers to be proper and appropriate in the given circumstances of the case i.e., dispute. Conflict of laws It is generally observed that International commercial arbitration often gives rise to the problem of conflict of law in which the laws of different countries are involved and the countries have the freedom to choose the law which would be applicable to arbitration proceedings to which they are parties. Foe example, if contract is made in London between an Indian and an American to be performed in India, then there is conflict of laws both for Indian Courts and American Courts as also the English Courts. Now if suit is filed in an Indian or an American Court, the pertinent question which shall arise is whether the Court has jurisdiction, and if it has, what law will it apply to decide the case. In the above situation the case is governed by Section 28 of the Arbitration and Conciliation Act, 1996. The section provides that the parties to the contract have the freedom to choose which of the national laws of different States will be applied and if the parties fail to do so, the arbitral tribunal shall decide the applicability of law keeping in mind the surrounding circumstances of the dispute before it for arbitration. It must, however, be stated that international arbitrations are generally entrusted to an arbitral institution and the parties are deemed to have authorized the institution to exercise their freedom of choice of the law to be applicable in their case. Therefore, the rules of the Institution govern the entire arbitral proceedings. In Tzortzis & Sykias v. Monark Line A/B[footnoteRef:5], a contract between parties subject to the jurisdiction of Sweden and Greece respectively provided for arbitration in London. The Court held that even though English law was not the law of either party, they had chosen English law to be applicable as the law of contract for redressal of their disputes. [5: (1968) 1 WLR 406.]

Foreign Jurisdiction Clause Quite often, the parties to an international commercial transaction provide a clause in their contract that all disputes between them arising out of the contract shall be referred for arbitration to the exclusive jurisdiction for a foreign court. Such a clause is indicative of the parties intention that their arbitration shall be governed by the law of that country. In Gas Authority of India Ltd. (GAIL) v. Spie Capag,[footnoteRef:6] the court held that where the choice of applicability of law to arbitration is not expressly stated in the agreement the intention of the parties must be gathered from the agreement itself, having regard to other aspects of the contract which may serve as a link between the contract and the country with which it is most closely and vitally connected. This may include considerations as to (i) the place where the agreement has been entered into (lex loci) (ii) the place where the contract is performed; and (iii) the place i.e., the forum where the dispute has to be resolved (lex fori). [6: (1994) 1 Arb LR 431 (Del.)]

According to the Rules of International Chamber of Commerce (ICC), the arbitration should normally be under the law of procedure chosen by the parties, failing which; it should be conducted under the law of the country in which the arbitral tribunal holds the proceedings[footnoteRef:7]. [7: Article 16 of ICC]

It would be pertinent to refer to facts and decision of Supreme Court in National Thermal Power Corporation (NTPC) v. Singer Company,[footnoteRef:8] wherein the question of applicability of law as also the jurisdiction and place of arbitration was involved. The facts of the case were briefly as follows: [8: (1992) 3 SCC 551 (SC)]

The contract in this clause provided that all disputes and differences arising out of the subject matter of the contract shall be settled by the process of arbitration. The contractor in this case being a foreigner, one of the terms of the contract provided that the arbitration was to be conducted by three arbitrators, one each to be nominated by the owner and the contractor and the third to be named by the President of International Chamber of Commerce (ICC), Paris. Except this arbitrators appointment clause, the entire arbitration was to be governed by the Rules of Conciliation and Arbitration of the ICC and the arbitration was to be conducted at place determined by the arbitrators. Consequent to a dispute arising between the parties, the arbitration was held at London and the arbitrators made an interim award on preliminary issues. An application was moved under the Arbitration Act, 1940 for setting aside the award in the Delhi High Court. The question before the Court for decision was whether a suit for setting aside the interim award was maintainable in an Indian Court under the arbitration law of India or it had to be filed in a London Court. The High Court of Delhi held that the interim award under challenge, being a foreign award and the arbitration having taken place at London, it could be challenged in London Court as lex fori and the Indian Court had no jurisdiction to set aside the award. The Court further observed that so far as the contract was concerned, it could be governed by the Indian law of contract because the contract was entered into in India but as regards the validity, interpretation and effect of the arbitration clause and the arbitration proceedings, the law of the country in which the arbitration proceedings were held (i.e., English Law in this case) would be applicable. On appeal, the Supreme Court reversed the decision of the Delhi High Court and held that in this case the contract was between an Indian company and foreign company. It contained an arbitration clause stipulating that Indian law shall be applicable to all matters arising out of the contract and the arbitration was to be governed by the Rules of ICC Paris. The Supreme Court noted that the parties having selected Indian law as proper law of contract, it could also be applicable to arbitration agreement which was also a contract. Therefore, the award of the arbitral tribunal would also be governed by the Indian Law of Arbitration and it was erroneous to think that it was a foreign award. The Apex Court emphasized that merely because the arbitrators chose London as the place of arbitration, it could not be inferred that English law of arbitration would apply to determine the validity of interim award which was challenged in this case.

Chapter-3ConclusionTo sum up the provisions laid down in Section 20 of the Arbitration and Conciliation Act, 1996 the parties are free to determine the place of arbitration as the venue of arbitration, however it is to be fixed by the mutual consent of the parties. Where there is no mutual consent as to place of arbitration, then the arbitrator has to fix the venue of arbitration. It is to be noted that arbitrator while fixing the venue of arbitration has to see the convenience of the parties and in absence of consent of the parties the arbitrator has to perform this duty by consulting its members. In case of Institutional Arbitration if it is stipulated in arbitration agreement that in case of dispute or differences arising between them, they will be referred to a particular institution and then that institution will appoint arbitrator or arbitrators and they will decide the place of arbitration. In case of International Arbitration, it can take place at such place either in India or outside India in cases where there are ingredients of foreign origin relating to the parties or the subject-matter of the dispute. The law applicable may be Indian law or foreign law depending on the agreement between parties in this regard.

Table of Cases

Gas Authority of India Ltd. (GAIL) v. Spie Capag , (1994) 1 Arb LR 431 (Del.) Thermal Power Corporation (NTPC) v. Singer Company , (1992) 3 SCC 551 (SC) Sanshin Chemicals Industry v. Oriental Carbons and Chemicals Ltd, AIR 2001 SC 1219. Sulaikha Clay Mines v. Alpha Clays & Others , AIR 2005 Ker.3 TDM infra-structure (P) Ltd. v. U.E. Development India (P) Ltd , AIR 2008 SC 2928 Tzortzis & Sykias v. Monark Line A/B, (1968) 1 WLR 406.

Bibliography

Books Dr. N.V. Paranjape, Law Relating to Arbitration and Conciliation in India, fourth edition, 2011, Central Law Agency, Allahabad. 7th edition, 2009, Central Law Agency, Allahabad.Websites http://www.hg.org/article.asp?id=27514 http://indiankanoon.org/seach/?formInput=place%20of%20arbitration%20