Efficacy or Exclusivity: Can Parties Seek Interim Relief Outside a Seat under the Indian Arbitration Act?

[Guest post by Nishanth Vasanth, NALSAR University of Law, Hyderabad]

Introduction & Context

In international arbitration, the exclusive jurisdiction of the seat seeks to prevent courts of two nations from simultaneously exercising territorial jurisdiction over a matter, so as to uphold the sanctity of the final award. Courts, under UNCITRAL Model Law on International Commercial Arbitration (Article 8) and the Arbitration and Conciliation Act, 1996 (the “Arbitration Act”), preclude their jurisdiction on merits when faced with disputes with arbitration clauses. However, in relation to interim relief, the need for an efficacious remedy to protect the arbitral process overshadows the need for certainty that the choice of a seat provides.

On April 19, 2017, the Indian Supreme Court in Indus Mobiles Pvt. Ltd v. Datawind Technologies (“Indus”) held that the courts of a city of the seat of domestic arbitration would have exclusive jurisdiction over proceedings under the agreement, even if they lacked a cause of action under the Code of Civil Procedure, 1908 (“CPC”). The decision was rendered while the court was disposing of appeals from the Delhi High Court’s orders to preserve certain properties and for the appointment of an arbitrator. The parties had inserted a clause providing the courts of Mumbai with exclusive jurisdiction. However, the Supreme Court held that a specific choice of seat was by itself akin to an exclusive jurisdiction clause, and cursorily addressed the exclusive jurisdiction clause. Notwithstanding the holding on facts, this post seeks to examine the implications of courts being denied the ability to provide efficacious interim relief due to the treatment accorded to courts outside the seat in the judgment.

Indian Judicial position

The decisions of the Supreme Court cited in Indus need to be evaluated to arrive at the Indian position, before analysing the amended scheme of the Arbitration Act.

In Bharat Aluminium Co. (BALCO) v. Kaiser Aluminium Technical Services Inc., (2012) 9 SCC 552, the Court held that there was deliberate legislative intent to provide both the court where the cause of action is located and the court of the seat of arbitration with jurisdiction over the dispute (¶96-106). It added that the scheme of the Arbitration Act would be rendered nugatory if these courts did not have concurrent jurisdiction. The parties however were free to specify exclusive jurisdiction.

In Enercon (India) Ltd. v. Enercon Gmbh, (2014) 5 SCC 1, the Court held that the parties’ explicit choice of Indian seat and laws meant that the Indian courts have exclusive supervisory jurisdiction. This reversed a Delhi High Court judgement granting London, the venue of the arbitration, concurrent jurisdiction with the seat. Interim measures were separately litigated in India, where the assets were present. In fact, A v. B, (2007) 1 AllER (Comm) 591, relied on here, clearly points out that the choice of seat is analogous to an exclusive jurisdiction clause for the validity of interim or final awards. The court held that the ultimate objective of arbitration was to resolve disputes finally, economically and speedily. Thus, this decision cannot be extrapolated to include any processual inefficiency.

The Supreme Court has dealt with the question of seat, situs and venue in a host of decisions culminating in Union of India v. Reliance Industries Limited and Others, (2015) 10 SCC 213. In cases deemed to be foreign seated arbitrations, the application of Part I of the Arbitration Act was wholly excluded, and thus only the court of the seat had jurisdiction over all implications of the curial law. See Videocon Industries v. Union of India & Anr., (2011) 6 SCC 161.

Amendment of the Arbitration Act

Following the amendments in 2015, section 2(2) of the Arbitration Act reads:

…Provided that subject to an agreement to the contrary, the provisions of sections 9…shall also apply to international commercial arbitration, even if the place of arbitration is outside India, and an arbitral award made or to be made in such place is enforceable and recognised under the provisions of Part II of this Act.

It is accepted position that the word “place” as used in the Arbitration Act (except in section 20(3)) refers to the seat of the arbitration [See BALCO ¶96]. Thus, the Arbitration Act now contemplates interim relief outside the seat to ensure efficacy of the arbitral process. The legislative intent is clearly visible, as the section enumerates three provisions, i.e., sections 9, 27 and 37 which are now applicable to foreign seated arbitrations. It is interesting that the Court in Indus extrapolated pre-amendment decisions of the Supreme Court, without dealing with the inefficiencies the amendment sought to do away with. 

Enforcement Difficulties

The Law Commission of India in its 246th report, on the Arbitration Act highlighted difficulties with the BALCO exclusion of foreign seated arbitrations. It highlighted that the parties would have no effective remedy if there were assets located in India, and the courts of India were ousted of jurisdiction.

The situation post Indus furthers domestically the problems that the Law Commission had pointed out in the international context. The party seeking the remedy now has to litigate twice: once to obtain interim relief, and again possibly before a different court to ensure execution. Three areas where the time and complexity of the interim process are increased may be identified:

  1. The Indian position on whether the CPC’s threshold used for temporary injunction under Order 38 Rule 5 and Order 39 Rules 1 & 2 has not reached finality, and may throw up substantive challenges depending on the court (See Nishith Desai Associates’ analysis).
  2. A court’s interim order is not a deemed decree, unlike an arbitration award. Thus, an application would have to be made for the enforcement of the order as a decree, pursuant to section 36 of the CPC.
  3. This order would then have to be transferred from the court of the seat to the court(s) where the remedy lay. Pursuant to section 40 of the CPC, this application would have to be made in line with differential rules of each state.

Comparative positions

Various jurisdictions have differing perspectives on the interaction between the seat and interim relief. However, a predominant number allow for the commercially prudent option of allowing interim relief outside the seat, at least for preservation measures.

England: The courts do not differentiate between international and domestic arbitration, and in U&M Mining Zambia Ltd v. Konkola Copper Mines Plc (2013) held that the parties may apply to courts outside the seat, if that was the only way the interim measure could be rationally sought

Belgium: Both in domestic and international arbitrations, the Private International Law Code stipulates the jurisdiction of the courts. The Belgian Judicial Code (BJC) in §1683 stipulates that the court of first instance, typically having territorial jurisdiction over the interim measure sought, is the court that has jurisdiction over interim measures. Pursuant to §1680 of the BJC, the appointment of an arbitrator is to occur at the court of the seat of arbitration. However, there are no stipulations about other interim measures.

China: In line with the Regulations of the Supreme People’s Court on Several Issues Concerning Enforcement Conducted by the People’s Courts, any preservation measures are to be enforced in the Intermediate People’s Court (if foreign-seated) or the Basic Courts (if domestic-seated) of the place where the party is domiciled or where the property is located.

Germany: Pursuant to sections 919 and 942 of the Code of Civil Procedure, i.e., ZPO, in domestic arbitrations, the court which has jurisdiction over the merits and the court of the district where the assets are located. In international arbitrations, despite conflicting decisions, in OLG Köln and LG Berlin, the Court held under section 1033 ZPO, a standard arbitration clause does not constitute a choice of forum, and a German local court could provide interim relief.

Algeria: Under section 1046 of the Civil Code, the arbitral tribunal may request the competent court for assistance in enforcement of interim relief. The rules are silent on the inherent power of the court, but Article 458 bis 6 of the Civil Procedure allows parties to bestow such a power onto the tribunal.

Bahrain: Unless parties agrees otherwise, the summary courts have default jurisdiction over interim measures, for urgent and non-substantive matters.

Egypt: Article 9 of the Civil Procedure provides that in a domestic arbitration, the local court and the Cairo Court of Appeals in an international arbitration would have original jurisdiction.

Kuwait: In Kuwait, urgent matters are not arbitrated, unless the parties agree. Thus, parties may decide interim relief procedure under Article 173 of the Civil Procedure.

Model Law (Canada): In TLC Multimedia Inc. v. Core Curriculum Tech. Inc., [1998] B.C.J. No. 1656 (B.C. Sup. Ct.), the Court held that the UNCITRAL Model Law under Art. 9 allowed for interim relief to aid foreign seated arbitration.  

Conclusion

The Court must balance the efficacy of interim measures with the exclusivity of the seat. The Court may find the Belgian jurisprudence useful, as it draws a distinction between the mandated appointment of the arbitrator at the seat, and other interim relief which may be sought outside of it. However, until the Court distinguishes this decision on facts, parties could be sure of their positions by adding specific clauses stipulating or restricting the jurisdiction of courts outside the seat.

– Nishanth Vasanth

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