The study provides an empirical analysis of anti-arbitral proceedings in India, inclined with an international perspective, Decoding legislative intent and judicial statues. An anti-arbitration injunction suit is basically an action bought before the judicial court in order to seek an injunction from initiating or continuing arbitration proceedings. There is a constant tussle between giving autonomy to arbitral tribunals to settle the challenges of their jurisdiction, where there is demonstrable injustice caused to a party by arbitration proceedings. The study will provide an articulated understanding of the legal mechanism in institutionalizing such arbitrary proceedings.
Arbitration is a form of Alternative Dispute Resolution. ADR methods enjoy significant advantages such as lower costs, greater flexibility of the process, higher confidentiality, greater likelihood of settlement, choice of forum, choice of solutions etc. The anti-arbitration injunctions in international arbitrations are injunctive orders issued by courts of one state, restraining a party from initiating or proceeding with the arbitration taking place in another state, or by an arbitral institution. Concomitant with the rise of international arbitrations, anti-arbitration injunctions are becoming increasingly popular as a tactical strategy. But the courts in many jurisdictions are adopting a pro-arbitration stance and are exercising the power to grant anti-arbitration injunctions very sparingly.
Arbitration Law in India has always been trending since its inception, in 1940. The present date arbitration law is a formation of several promulgations and ordinances passed by the government of India to meet the economic reforms taking place in the country from time to time. Arbitration Law in India has primarily contained in the Arbitration and Conciliation Act of 1996 an Act that was passed to consolidate the laws relating to domestic, international arbitration and its enforcement. In an attempt to make arbitration a preferred mode of settlement of commercial disputes and making India a hub of international commercial arbitration some major amendments were introduced in the year to 2015 and 2019. The current law is a composition of several such amendments with the latest amendments being introduced in 2019.
Elements of an Arbitrary Proceedings
- Consent- An arbitration cannot happen without the consent of the parties. The consent is contained within an arbitration agreement. This agreement clearly specifies the desire of the parties to arbitrate their dispute. This agreement takes the form of a binding contract. As per Section 7 of the Act, “arbitration agreement” means an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not.
- Presiding Authority – The Authority adjudicating the dispute is better known as the arbitral tribunal. It is similar to a judge that presides over a court of law. The presiding authority is known as the arbitrator, who is in charge of deciding the disputes between the parties. Just like the judge an arbitrator also has several responsibilities set out in the code. The arbitrator is under oath to perform its duties.
- The seat of Arbitration – The seat of arbitration determines the courts which would exercise jurisdiction over the arbitration proceeding. In absence of such an agreement, the 1996 Act solely operates within the territory of India.
- Autonomy and Procedure – Arbitration gives the parties the choice to select applicable laws, especially if the arbitration is international commercial arbitration. Additionally, there is enormous flexibility to choose the procedure that shall be applicable.
- The finality of the Outcome– No appeal lies against an arbitral award, however, an arbitral award can only be set aside if the said award suffers from the as invalid arbitration agreement, party’s incapacity to enter into an agreement, independence and impartiality of an arbitrator, unfair procedure, etc.
- United kingdom-The courts of the English jurisdictions are in line with Weissfisch v. Julius, where it was stated that the grant of an anti-arbitration injunction would be inconsistent with the doctrine of Kompentenz-Kompetenz and that it is only in “exceptional circumstances” where the existence of valid an arbitration agreement is under challenge, the court would grant such injunction with respect to foreign-seated arbitration.
- France-French court follows a strict policy of non-interference with the arbitration proceedings. In the Republic of Equatorial Guinea v. Fitzpatrick Equatorial Guinea the tribunal of de Grande ruled that French Courts do not recognize anti-arbitration injunction as any such injunction would amount to interference to arbitral proceedings.
- Switzerland- Swiss court in AIR(PTY) ltd v. International Air transport issued that there is no such concept of issuing anti-arbitration injunctions nor enforcing them. The threads of such proceedings have evolved and transformed over time to time thus it becomes crucially important to study the evolution of Indian anti-arbitration Legislations.
The anti-arbitration injunctions are typically requested to prohibit a party from starting or extending arbitration proceedings if that party, moves beyond the negotiated provisions of the settlement, falsely tries to challenge or claim the authority of the arbitrator. In other words, such remedies are granted by the national Courts against the commencement or continuation of the arbitration proceedings if the parties have agreed that they will not refer the matter to arbitration or if they have opted for litigation or alternative dispute resolution methods.
General Grounds for anti-arbitration Injunctions Include:
- There is no agreement to arbitrate
- Arbitral proceedings have been initiated at the wrong seat
- Arbitral proceedings have been initiated before the wrong institution
- The arbitral proceedings are outside the scope of the arbitration agreement
- Arbitration of a certain issue is res judicata; an exclusive Court jurisdiction clause has been breached.
- Arbitration has been commenced against a third party who was not a party to the agreement
Indian Arbitrary Division
The Arbitration and Conciliation Act, 1996 (“the Act”) does not contain any specific provision in relation to anti-arbitration injunctions. However, Section 45 of the Act provides certain powers to the court to interfere with proceeding in foreign arbitrations if the arbitration agreement between the parties is null and void or inoperative or incapable of being performed. Given the contentious existence of the anti-arbitration injunctions, it has arisen as one of the possible remedies in various jurisdictions. Nevertheless, their presence under either the New York Convention or the Model Law is far from clear as there is no express clause that authorizes its grant or a law that renders them illegal. Therefore, every authority has its strategy concerning their presence and availability.
The issue concerning the grant of anti-arbitration injunction has seen divergent decisions from the Supreme Court, varying opinions are being promulgated by the apex court. Thus with respect to the history of anti-arbitrational opinions the variable is divided into two lines of thought which is the narrow approach and moderate approach.
Narrow Approach- The narrow approach suggests that a civil court in India has no jurisdiction at all to entertain suits seeking grant of anti-arbitration injunctions. In Kvaerner Cementation and Subsequent Developments. Kvaerner Cementation was an early decision of the Supreme Court (given in 2001, but reported in 2012) on the Arbitration and Conciliation Act, 1996 (“Act”) which did not consider the interplay between the various provisions of the Act, or the scope of judicial intervention in relation to arbitration. It is a short order which did not consider or cite any precedent, nor did it elaborate on the facts of the dispute. Kvaerner had sought the grant of an anti-arbitration injunction on the ground that there was no arbitration agreement between the parties, and as such the arbitration already initiated was without jurisdiction. The Supreme Court, on a bare reading of Section 16 of the Act (which enshrines the principle of( kompetenz-kompetenz) and the object of the Act, held that a civil court did not have jurisdiction to determine any objection with respect to the existence or validity of the arbitration agreement.
In National Aluminium Company Ltd. v. Subhash Infra Engineers Private Ltd. the Supreme Court relied upon Kvanver Cementation and held that any objection with regard to the existence or validity of an arbitration agreement may be raised before the arbitrator but a suit for declaration or injunction cannot be maintained for such an objection.
Moderate Approach – Moderate approach suggests that an anti-arbitration injunction can be granted by a civil court under limited or exceptional circumstances. Subsequent to Kvanver Cementation, the Supreme Court and different High Courts have affirmed the jurisdiction to civil courts to grant anti-arbitration injunctions. In Chatterjee Petrocham Company and Anr. v. Haldia (“Chatterjee“), the Supreme Court affirmed the jurisdiction of civil courts to grant anti-arbitration injunctions. While ultimately, the Supreme Court declined to grant an anti-arbitration injunction, such a decision was based on facts.
The Bina Modi Case – A trust was set up by the Modi family for managing family assets and properties. Disputes arose between the trustees under a trust deed dated April 9, 2014. One of the trustees, Lalit Modi, filed an application seeking emergency measures before the International Chamber of Commerce (ICC), Singapore, against the other trustees. The other trustees commenced anti-arbitration injunction suits before the Delhi High Court, seeking a declaration that the arbitration proceedings are unenforceable and are contrary to the public policy of India.
The main contention of the plaintiffs was that the issue of arbitrability cannot be left to be decided by the arbitral tribunal or by the courts in Singapore or the emergency arbitrator and that such forums would also be forum non-conveniens, oppressive, manifestly unfair, unreasonable and prejudicial to the interest of the plaintiffs. The suits were dismissed by following Kvaerner Cementation in which the Supreme Court had held that the suit for anti-arbitration injunction is not maintainable owing to an alternative remedy being available under Section 16 of the Arbitration Act. The Single Judge refused to rely on the Division bench judgment of the same court in McDonald’s India Private Limited v. Vikram Bakshi.
A reading of the aforementioned decisions would reveal that both the Supreme Court and the High Courts have recognized the jurisdiction of civil courts to grant anti-arbitration injunctions only in the following circumstances:
1. If the arbitration agreement is null and void, inoperative, or incapable of being performed.
2. If continuation of foreign arbitration proceedings is oppressive or vexatious or unconscionable
3. If abuse of legal process is caused by the reason for initiation of arbitral proceedings.
It can be deduced that anti-arbitral injunctions are considered as being violative of customary international law, international public policy and fundamental principles of international arbitration. Since the principles of kompetenz-kompetenz and the autonomy of the arbitral process have developed in many jurisdictions and have now become fundamental to the fabric of international arbitration, the national courts, as well as the court in international fora, are exercising restraint in granting anti-arbitration injunction, so that a frivolous and unsubstantiated plea is not used to thwart arbitral proceedings.
1. What are anti arbitrational proceedings?
An anti-arbitration injunction suit is basically an action bought before the judicial court in order to seek an injunction from initiating or continuing arbitration proceedings.
2. When was the arbitration law incepted in?
3. When was the Indian Arbitration and conciliation Act came into force?
4. What is the narrow approach of arbitrational division?
The narrow approach suggests that a civil court in India has no jurisdiction at all to entertain suits seeking grant of anti-arbitration injunctions
5. What is the Moderate Approach of Arbitrational Division?
The narrow approach suggests that a civil court in India has no jurisdiction at all to entertain suits seeking grant of anti-arbitration injunctions.