In the short span of a decade that the Arbitration and Conciliation Act has been in force, the Supreme Court has gradually carved for itself a wider and wider role in various stages of arbitration proceedings. Its role in the appointment of arbitrators, granting interim injunctions and reviewing arbitral awards on grounds of public policy are a few examples.
Its 2002 decision in Bhatia International effectively extended the applicability of several provisions of Part I of the Arbitration Act to international commercial arbitrations outside India. An earlier post noted that in 2008, the Court further extended the Bhatia reasoning, and chose to even review foreign arbitral awards. This trend has been strengthened with a recent decision in INDTEL Technical Services v. WS Atkins PLC (Arbitration Application No. 16 of 2006, decided on 25 August, 2008).
This decision is noteworthy not just for its adherence to Bhatia, but for its decision to allow an Indian company to invoke the Indian Arbitration Act against a foreign company under a contract that was governed by foreign law. INDTEL had entered into a Memorandum of Understanding with WS Atkins PLC, and submitted a joint tender for an Indian Railways Crashworthiness Project. Before a decision could be made on the tender, Atkins withdrew the joint bid and terminated the MoU. The MoU expressly designated English law, providing that “this Agreement, its construction, validity, and performance shall be governed by and constructed in accordance with the laws of England and Wales”.However, when requests for compensation failed, INDTEL filed an application under Section 11 of the Arbitration Act, seeking the appointment of an arbitrator to settle the dispute. The question before the Court was whether this was maintainable in view of the designation of English law, and whether its decision in Bhatia could be extended to cover a situation of this sort.
The Court held that it could. In Bhatia, it had held that Part I of the Act applied to international arbitrations outside India unless there was a specific provision to the contrary. In Venture Global, it had extended this reasoning and held that a foreign arbitral award could be tested by a domestic court on public policy grounds. In this case, Atkins sought to distinguish these decisions by suggesting that the “specific provision to the contrary” did exist, in the form of the designation of a specific system of law as the applicable law.The Court rejected this suggestion, holding that what is required is not just the designation of a specific system of “substantive” law, but of “arbitration law”. In other words, unless the contract either excludes the applicability of the Indian Arbitration Act, or specifies a foreign Arbitration Act as applicable, the Indian Act will be held to apply. Interestingly, in a 1992 decision (NTPC v. Singer, (1992) 3 SCC 551), the substantive law had been specified as Indian law, but the contract was silent on the applicable arbitration law. The Court had held there that Indian arbitration law applied as a matter of presumption. The law on this aspect is therefore unclear today, although it is possible to reconcile these decisions on the basis of the content of the agreements in question.
While the decision may be open to criticism for its interpretation of the Act, it does have the merit of certainty, since it is now clear that a contract will deprive Indian courts of jurisdiction in respect of arbitration matters only if it satisfies one of the two criteria outlined above. This decision is therefore likely to be welcomed and criticised in equal measure.