Arbitration Clause in International Agreements in India Presentation at Annual Conference Organized by The Institute of Company Secretaries of India On 15th September 2019 At Motel Shiraz, Bhopal By Advocate & IP Anil Chawla Senior Partner, Anil Chawla Law Associates LLP www.indialegalhelp.com This Presentation gives the presenter’s views on the subject. It gives no legal advice. It is not intended to be either complete or exhaustive narration of the subject.

Outline of Presentation A. Understanding Arbitration A1. Domestic vs. International Arb. A2. Domestic vs. Foreign Award A3. Place – Seat and Venue A4. Ad-hoc vs. Institutional A5. Format of Agreement A6. Key Issues B. Ad-hoc Arbitration Key Points B1. Domestic in India B2. Domestic outside India B3. International In India B4. International Outside India This Presentation as well as our Guide on the subject available at www.indialegalhelp.com September 2019 Copyright - Anil Chawla Law Associates LLP

A. Understanding Arbitration

A1. Domestic vs. International Arbitration Commercial Arbitration Domestic Arbitration Site in India Domestic Award Site outside India Foreign Award International Arbitration September 2019 Copyright - Anil Chawla Law Associates LLP

A1. Domestic vs. International Arb. (Continued) Section 2(f) of The Arbitration and Conciliation Act, 1996 September 2019 Copyright - Anil Chawla Law Associates LLP

A1. Domestic vs. International Arb. (Continued) For arbitration to be “international”, at least one of the parties ought to be: Indian citizen (passport-holder) living outside India Citizen of any country other than India Company incorporated outside India (even when the company is owned wholly by Indian resident citizens) A NGO whose central management and control is exercised from outside India (even when the controlling office located outside India is operated wholly by Indian citizens) A foreign government Relationship ought to be (a) legal (b) commercial. Need not be contractual. Absence of a contract does not create a bar. September 2019 Copyright - Anil Chawla Law Associates LLP

A2. Domestic vs. Foreign Award Section 44 of The Arbitration and Conciliation Act, 1996 September 2019 Copyright - Anil Chawla Law Associates LLP

A2. Domestic vs. Foreign Award (Continued) First Schedule of The Arbitration and Conciliation Act, 1996 September 2019 Copyright - Anil Chawla Law Associates LLP

Copyright - Anil Chawla Law Associates LLP A3. Seat / Place & Venue Parties to an Agreement are free to decide the seat or place of arbitration. Seat of arbitration is not just a geographical decision. Seat determines the courts under whose judicial supervision and control. Seat has to be differentiated from venue of arbitration. Proceedings may be held at different places and even by video conferencing. Notwithstanding meetings at different places, courts at the seat will have jurisdiction over the arbitration. Seat is decided by the Parties. Venue(s) is / are decided by the arbitrators. There may be more than one venue, but there will be only one seat of arbitration. Seat / place determines whether award is domestic or foreign. September 2019 Copyright - Anil Chawla Law Associates LLP

A4. Ad-hoc vs. Institutional The following define whether arbitration is ad-hoc or institutional: Venue - Arbitration Institution provides basic infrastructure. Panel of Arbitrators - Appointment of arbitrators from Arbitration Institution’s panel. Appointing Authority - Arbitration Institution has authority to appoint the arbitrators. Administration of Arbitration - Arbitration Institution provides administrative services like sending notices etc. Rules of Arbitration - Parties may accept the Arbitration Institution’s rules or may choose some other rules. For example, arbitration conducted at London Court of International Arbitration using UNCITRAL Rules. September 2019 Copyright - Anil Chawla Law Associates LLP

A4. Ad-hoc vs. Institutional (Continued) September 2019 Copyright - Anil Chawla Law Associates LLP

Copyright - Anil Chawla Law Associates LLP A5. Format of Agreement Need not be a formal agreement. E-mail correspondence can amount to an agreement. Must be in writing (other than oral). May be part of an agreement or may be a separate arbitration agreement. Defined legal relationship is must. Non-contractual but commercial relationships are covered. Under law, no format for either arbitration clause or arbitration agreement. Institutions often have their standard clauses. September 2019 Copyright - Anil Chawla Law Associates LLP

A5. Format of Agreement (Continued) September 2019 Copyright - Anil Chawla Law Associates LLP

Copyright - Anil Chawla Law Associates LLP A6. Key Issues Law - (a) the law that will govern the Agreement (Law of one country or the other or UNIDROIT Principles of International Commercial Contracts) (b) law for the arbitration and (c) the law controlling conduct of arbitration (Rules of one country or the other or of the institution or UNCITRAL Rules). Place / Seat and Venue (as discussed in previous slides). Appointment of Arbitrators - Provide procedure for appointment of arbitrators. Either be ad-hoc or institutional. Appointing Authority - Ad-hoc or institutional. Qualification of Arbitrators - Neutral, impartial and independent of both the parties. Language - Must be stated in explicit terms without any ambiguity. September 2019 Copyright - Anil Chawla Law Associates LLP

A6. Key Issues (Continued) Number of Arbitrators - Always odd in numbers. Single arbitrator also possible. Presumed to be single under Indian law. Presumed to be three under UNCITRAL. September 2019 Copyright - Anil Chawla Law Associates LLP

A6. Key Issues (Continued) Powers of Courts – In case of international arbitration, the Parties may decide to stop application of sections 9, 27 and 37(3) and 37(1)(b). Sub-section 2(2) of the Arbitration and Conciliation Act, 1996 September 2019 Copyright - Anil Chawla Law Associates LLP

A6. Key Issues (Continued) September 2019 Copyright - Anil Chawla Law Associates LLP

A6. Key Issues (Continued) September 2019 Copyright - Anil Chawla Law Associates LLP

A6. Key Issues (Continued) Appeal / Two Stage Process – First stage may have a solo arbitrator with second stage having three arbitrators. Costs – Often each side bears his own costs, Pay your own way (PYOWA) / Unsuccessful bears the full costs, Costs follow the event (CFTEA). (Sub-section 31A(2) of the Arbitration and Conciliation Act, 1996). September 2019 Copyright - Anil Chawla Law Associates LLP

B. Ad-hoc Arbitration Key Points

Copyright - Anil Chawla Law Associates LLP B1. Domestic in India Takes place between two Indian Parties. Jurisdiction is of Indian law as well as Indian courts. Part I of The Arbitration and Conciliation Act, 1996 is applicable. Key points: Law governing Agreement Has to be necessarily Indian law. Law for arbitration The Act Curial Law Need not be specified as the arbitration is under provisions of the Act. Place of arbitration Seat to be at a place within India. For the sake of convenience, meetings / proceedings may be held alternately at the respective cities of the parties. September 2019 Copyright - Anil Chawla Law Associates LLP

B1. Domestic in India (Continued) Number of Arbitrators Three is almost the norm. Appointment of Arbitrator Each party to appoint one arbitrator. The two arbitrators to select the Presiding Arbitrator. Appointing Authority Need not be specified since section 11 of the Act provides the powers to High Court. Qualification of Arbitrators If some technical knowledge is required, advisable to specify. Language English unless both parties are comfortable with some other language. Appeal Not recommended Costs During the proceedings each party bears its own. Cost Allocation – By the Arbitration Panel in award. September 2019 Copyright - Anil Chawla Law Associates LLP

B2. Domestic Outside India Unusual situation. To be resorted to only when there are compelling reasons. Law governing Agreement Has to be necessarily Indian law. Law for arbitration Parties are free to choose. If Indian law is not chosen, please take care to mention that Part I of the Act will NOT apply. Curial Law UNCITRAL Rules / ICSID Rules are two common options. Place of arbitration A neutral location may be chosen. The country where the foreign parent is located will put the other party at a disadvantage and should hence be avoided by the other party. September 2019 Copyright - Anil Chawla Law Associates LLP

B2. Domestic Outside India (Continued) Number of Arbitrators Three is almost the norm. Appointment of Arbitrator Each party to appoint one arbitrator. The two arbitrators to select the Presiding Arbitrator. Appointing Authority Need not be specified since the chosen Curial Law will often have a provision. Qualification of Arbitrators If some technical knowledge is required, it is advisable to specify. Language English unless both parties are comfortable with some other language. Appeal Not recommended Costs During the proceedings each party bears its own. Cost Allocation – By the Arbitration Panel in award. September 2019 Copyright - Anil Chawla Law Associates LLP

B3. International in India Law governing the agreement is a critical issue. Six options for an India-UK agreement: This Agreement shall be governed by Indian law. OR This Agreement shall be governed by the law of UK. OR This Agreement shall be governed by the UNIDROIT Principles of International Commercial Contracts (2016). OR This Agreement shall be governed by the UNIDROIT Principles of international Commercial Contracts (2016) and, with respect to issues not covered by such Principles, by generally accepted principles of international commercial law. OR This Agreement shall be governed by the UNIDROIT Principles of International Commercial Contracts (2016) and, with respect to issues not covered by such Principles, by the law of India. OR This Agreement shall be governed by the UNIDROIT Principles of International Commercial Contracts (2016) and, with respect to issues not covered by such Principles, by the law of UK. September 2019 Copyright - Anil Chawla Law Associates LLP

B3. International in India (Continued) Law governing Agreement One of the six options given above. Law for arbitration Part I of Arbitration and Conciliation Act, 1996 will apply. Curial Law UNCITRAL Rules / ICSID Rules are two common options. Place of arbitration Specify the place in India. Number of Arbitrators Three is almost the norm. Appointment of Arbitrator Each party to appoint one arbitrator. The two arbitrators to select the Presiding Arbitrator. September 2019 Copyright - Anil Chawla Law Associates LLP

B3. International in India (Continued) Appointing Authority Need not be specified since the Act has a provision for Supreme Court of India to act as Appointing Authority. Qualification of Arbitrators If some technical knowledge is required, it is advisable to specify. Language English unless both parties are comfortable with some other language. Appeal Not recommended Costs During the proceedings each party bears its own. Cost Allocation – By the Arbitration Panel in award. September 2019 Copyright - Anil Chawla Law Associates LLP

B4. International Outside India Arbitration law should be of the country where arbitration is proposed to be held. Law governing Agreement One of the six options given in the previous chapter about international arbitration in India. Law for arbitration Arbitration law of the seat of arbitration to apply. Part I of Arbitration and Conciliation Act, 1996 will NOT apply. Curial Law UNCITRAL Rules / ICSID Rules are two common options. Place of arbitration Specify the place outside India. Number of Arbitrators Three is almost the norm. September 2019 Copyright - Anil Chawla Law Associates LLP

B4. International outside India (Continued) Appointment of Arbitrator Each party to appoint one arbitrator. The two arbitrators to select the Presiding Arbitrator. Appointing Authority May be left to the Curial Law. Qualification of Arbitrators If some technical knowledge is required, it is advisable to specify. Language English unless both parties are comfortable with some other language. Appeal Not recommended Costs During the proceedings each party bears its own. Cost Allocation – By the Arbitration Panel in award. September 2019 Copyright - Anil Chawla Law Associates LLP

Copyright - Anil Chawla Law Associates LLP Thanks! www.indialegalhelp.com info@indialegalhelp.com Anil Chawla Law Associates LLP is registered with limited liability and bears LLPIN AAA‑8450. This Presentation is an academic exercise. It does not offer any advice or suggestion to any individual or firm or company. While all efforts have been made to ensure accuracy and correctness of information provided, no warranties / assurances are provided or implied. Readers are advised to consult a Legal Professional / Company Secretary / Chartered Accountant before taking any business decisions. Anil Chawla Law Associates LLP does not accept any liability, either direct or indirect, with regard to any damages / consequences / results arising due to use of the information contained in this Presentation. September 2019 Copyright - Anil Chawla Law Associates LLP