OVERVIEW

Arbitration in India has evolved a great deal ever since the inception of the Arbitration and Conciliation Act in 1996. There are multiple developments that are taking place in the world of Arbitration and one such advancement is the acceptance of Third-party funding by numerous legislations, which has managed to take the world by a blizzard. This concept refers to the act where the funder, a party who is not interested in the disputed matter makes an investment in the arbitration, and later reaps the benefit of such investment made. In contrast to Third-party funding being a stepping stone in providing justice to parties in need, there were also multiple questions raised regarding the breach of confidentiality of the proceedings, dilution of the power exercised by the financed party due to the funder, creation of trouble by encouraging vexatious claims, etc. Third-party arbitration funding is like a double-edged sword that has to be utilized with utmost caution as the financer may be tempted to tamper with the process as he is interested in the outcome, but is also often exaggerated thus making it a coin with two sides. Third-party funding is rather a new concept and was adapted by many legislations only recently due to the illegality of the doctrines of maintenance and champerty in common-law jurisdictions in the past. However, despite the worldwide acceptance of Third-party arbitration funding in legislations like Singapore, Hong Kong, etc, India still remains silent in this aspect. Through this research, the current situation prevailing in India will be examined in order to determine whether India is ready for Third-party funding and if there exist some grey areas that need to be given attention. 

INTRODUCTION

Since the 1996 enactment of the Arbitration and Conciliation Act, arbitration in India has progressed significantly. There are several advancements in the area of arbitration, one of which is the recognition of third-party funding by numerous legislations, which has managed to engulf the entire world in a blizzard. This notion relates to the conduct of a funder, who is a party uninterested in the dispute, investing in the arbitration and afterward reaping the benefits of that investment. It can be observed commonly in commercial and investor-state arbitrations. The common models observed in Third-party funding[11] are as follows:

• Where a trust is created and the proceeds of the dispute go to the trust containing the funder as a beneficiary
• Where the claimant assigns the profits of the claim(s) to the third-party funder; or
• Where the claim(s) are assigned to the funder.

International arbitration, which has become the go-to method for resolving cross-border issues, cannot be ignored. Despite the fact that it is the favored method of conflict settlement, the process’ high expenses are unavoidable. The Apex Court itself identified these outrageous costs as one of the major reasons responsible for the hindrance to the growth of arbitration[12]. Third-party funding in Arbitration faced growth due to the possibility of being able to provide everyone an equal right to access justice coupled with the unhidden fact that arbitration is a costly affair and that the costs can reach the sky.

Third-party funding is rather a new concept and was adapted by many legislations only recently due to the illegality of the doctrines of maintenance and champerty in common-law jurisdictions in the past[13]. Maintenance referred to the involvement of a third party that was unrelated to the proceedings and someone who did not have a locus. Champerty referred to an agreement where the proceeds were shared between the party involved with the third party who aided in the claim’s enforceability. The evolving times call for change and this can be observed in the way the doctrines of maintenance and champerty were slacked with[14]. However, despite the worldwide acceptance of Third-party arbitration funding in legislations like Singapore, Hong Kong, etc, India still remains silent on this aspect. There is no express law against Third-party arbitration funding unless it is done by lawyers as can be understood on a conjoint reading of the Bar Council of India rules. The objective of this research is to bring to light the readiness of India to welcome Third-party arbitration funding with wide arms along with examining it through a judicial lens.

CURRENT SCENARIO THROUGH A JUDICIAL LENS

Common law traditions that are being followed in India have been acquired from the UK but still the doctrines of “maintenance” and “champerty” have not been followed strictly here. In 1939, a stance was taken in Ram Surap v. Court of Wards[15] where it was clarified that as long as the funding for the process was for a portion of the proceeds, it was not illegal. The only condition that needs to be satisfied for a champertous agreement to be void is the ability to prove that it is contrary to public policy, “justice, equity and good conscience” which can be made for improper objects. This stance was also confirmed in Raja Rai Bhagwat Dayal Singh v. Debi Dayal Sahu[16].

The extent of acceptability of TPF in India has been clarified in a plethora of cases one of them being Bar Council of India v. A.K Balaji[17]. It was clearly pronounced that “there appears to be no restriction on third parties (non-lawyers) funding the litigation and getting repaid after the outcome of the litigation”[18]. This was again confirmed by the Court on various occasions[19]. There also exists a provision in the “Civil Procedure Code, 1908” wherein it is permitted to seek security from third parties, which again points towards the acceptance of TPF. Further, the “IBA Guideline” also mentions the possibility of a third party being concerned with any dispute and how it is mandatory for an arbitrator to make disclosures in case there exists any related party.

In India, the absence of contingency fees[20] makes it extremely difficult for the advocates to compete with foreign jurisdictions where they are permitted to do so. The BCI Rules do not permit such an arrangement[21] as this may hamper the professional services furthered by a lawyer. Despite the absence of an open provision for TPF, the amendments in the “Arbitration and Conciliation Act, 1999” and the “Specific Relief Act, 1963” which have ensured that the performance of a contract is mandatory, boost the confidence of the funders and make it prone to increased cases of funding. The statistics in India also point toward the hidden success of TPF in the field of arbitration. This can be said due to the FDI for the previous decade has been at around $456.79 billion[22], which is a huge indicator of the already existing opportunities and the willingness of foreign investors. This coupled with the increase in the number of cases makes it inevitable for TPF to succeed in the arbitration sector as almost every commercial contract has an arbitration clause[23]. Therefore, India shows a huge potential for TPF without the cases having to face any restrictions from the judiciary as well.  

DRAWBACKS OF TPF: SUFFICIENT FOR IT TO BACKFIRE?

The concept of TPF, though accepted explicitly by the law of the land, has two sides to it similar to the way of a coin. However, in order to assess the implementation of a concept, the drawbacks need to be examined intricately in order to ensure that the harm done is not outsized by the benefit caused to the public at large. TPF in a general sense deals with certain drawbacks such as party autonomy and the disclosure related to the independence of an arbitral tribunal.

While these are concerns regarding any arbitration, they become very specific when a third party is involved as it includes multiple variables in the equation. Considering the various milestones that need to be achieved with the concept of TPF in India, where there is no concrete legislation with regards to the same, the following are some parameters that need attention to detail.

DEFINITION  

It is proposed that TPF be allowed for all domestic and international arbitral procedures, as well as judicial procedures actions. Simultaneously, a set of qualifications for financiers, along with any minimum financial standards, must be established. At the outset of regulations, it’s ideal to limit TPF in India to specialist financing companies, that is, companies whose core activity is providing such funds and therefore are not tied to the group’s official adviser in any manner. Considering India’s clear restriction on attorneys entering into conditional fee arrangements[24], the researcher urge that India’s rules only enable participants to pursue funds straight without the participation of their legal counsel. 

DEGREE OF CONTROL

Participants should be entitled to determine the amount of engagement in the conflict they relinquish to the financier, as long as the procedure of the judicial authority is not jeopardized. It is recommended that the concepts of the payment assertion have included the source of financing having minimal authority, particularly over the selection of legal advisers, specialists, and arbiters, and or otherwise, the financial backer and/or its lawyers must be consulted as to regardless of whether a specific settling bid must be acknowledged or if a complaint must be delisted[25].

It is also critical that the financial backer does not constrain or inhibit the attorney’s moral and trustee responsibilities due and owing to the capital provider, and also that, inside the occasion of a confrontation among both the financial backer and the sponsored partner, the litigator is independent to act in this same finest preferences of a capital provider, even though this is disadvantageous to the financial backer. It is advised that certain safeguards be explicitly mentioned in the financing contract and conflict-of-interest guidelines.

CONFIDENTIALITY

The 2019 Constitutional Amendment adds a quasi-clause (Section 42A) that requires the arbiter, arbitral institution, and participants to keep the processes private. Nevertheless, in fact, for a side to use the assistance of an insurer, it is unavoidable that the parties must reveal some sensitive data about the procedures to the funders in enough for the financial backer to assess the claim prior to entering into a financing arrangement[26]. As a result, the “Arbitration and Conciliation Act 1996’s” confidentially rule will need to be changed to enable the release of sensitive material “for the purpose of having, or soliciting, TPF of arbitration from a third-party.”[27] In particular, the sponsor must be required to maintain the secrecy of all arbitration-related data and paperwork.

DISCLOSURE

India’s present arbitration process solely considers a side’s contradiction with an arbiter. When a TPF is engaged, the sponsor as well as the arbiter, or the funders as well as the non-funded side, may have a dispute[28]. As a result, the disclaimer rule must be revised to necessitate the stakeholders and/or one‘s legislators to offer a formal notification to the judiciary and/or presiding judge, as quickly as feasible after financing is supplied or a configuration to offer to finance for the arbitral proceedings, divulging the presence of a TPF agreement and the individuality of the financial backer[29]. This method is the result was in line with the more recent issue of the “IBA Guidelines on Potential conflicts Of involvement” in International Arbitration which requires disputants to disclose any connection among each other, even those with a “direct economic interest in the award to be rendered in the arbitration, such as an entity providing funding for the arbitration.”

ADVERSE COSTS ORDERS

A tribunal may have authority to impose an expenses judgment over a TPF without an explicit authority in the “Arbitration and Conciliation Act, 1996” or the related organizational norms. As a result, courts must be allowed to impose expenses it against funders if the financing contract specifically states that the funders is responsible for unwelcome expenses and the negative costs decision relates to expenses involved during the time when the dispute was sponsored by the funders in issue[30].

IS IT TIME FOR INDIA TO CHANGE?

In an International setting, when arbitration is viewed, there is no harmony as to the propriety of TPF agreements. In comparison, there exists consensus on the arbitration front with regards to TPF. There arises a need to examine the legality of these TPF agreements in various jurisdictions to understand whether India is geared up for the introduction of TPF in Arbitration.

UNITED KINGDOM

 Despite the origin of the doctrines of “maintenance” and “champerty” in this land, they were allowed ever since 1886. It was held by the Privy Council in Ram Chandoo v. Chunder Mookerjee[31] that “TPF agreements are not inherently contrary to public policy”. This was further supported when the Criminal Law Act, of 1967 did away with these crimes and torts of “maintenance” and “champerty”. Over time, the acceptance of TPF agreements was also drastically increased when the Courts’ questioning regarding the same deteriorated. The restriction on contingent fee agreements, on the other hand, remains in effect and has been extended to arbitration procedures as well. As a result, in terms of arbitration proceedings, TPF’s legality cannot be questioned[32].

SINGAPORE

Singapore is one of the major hubs for arbitration and it is still in the process of marking itself as the “International commercial dispute resolution hub”[33]. This was a journey with multiple stops because in the earlier periods, the doctrines of “maintenance” and “champerty” were still in force. It was observed in Otech Pakistan v. Clough Engineering[34] that TPF is against the public policy and this had to be applicable for both litigation as well as international and domestic arbitration. Nevertheless, taking into account the importance of the place in International arbitration, proposals were made for legitimizing TPF which was finally accepted and started to take shape in 2017 through a new framework for TPF which included the “Civil Law (Third-Party Funding) Regulations 2017. Through this framework, it was intended that any funding received, would be from qualified entities who meet certain thresholds and would still preserve the sanctity of the arbitration process for both domestic and international disputes. 

HONG KONG

The following the doctrines of “maintenance” and “champerty” in Hong Kong sure did make it dawdle in the race of TPF development. It was only in Winnie Lo v. HKSAR[35], that it was stated that the extent of applicability of these doctrines has watered down. It further went on to mention that this was only possible due to the public policy considerations. Further, in Cannonway Consultants v. Kenworth Engineering[36], it was clarified that these doctrines seize to apply when it came down to international arbitration. Finally, it was expressly stated that TPF in foreign seated arbitration was valid in Unruh v. Seeberger[37]. 2017 was the time period when TPF was accepted in the field of arbitration and mediation[38]. For the purposes of better facilitation, the Arbitration Rules in 2018 further ensured the express acceptability of TPFs.  

INDIA

It is time for India also to bring amends to the current legislation and ensure that it ups its game in terms of the arbitration sphere. Moreover, better implementation can be assured in India as it can be ensured that the problems faced by other jurisdictions are not repeated. TPF is commonly considered to be in an “embryonic regulatory state”[39]. Because of the legal and moral difficulties connected with TPF, there is currently no definite system in place, excluding handful of territories. The “ICCA QMUL Task Force Report”, published in April 2018, presents authoritative advice on a multitude of topics relating to TPF in global arbitral proceedings and serves as the foundation for future legal changes in states such as “India”, which lack a legal structure.

IS INDIA READY FOR TPF?

Litigation is a never-ending process and is only increasing in numbers as the hours pass by. The whole journey of dispute resolution was never known to be easy on parties. More so, the Covid-19 pandemic certainly did not reduce the burden on the parties by adversely distressing their businesses. This period would certainly be a much-needed boost for the introduction of TPF since it would ease the financial burden on the individuals/businesses while guiding them towards a light at the end of the tunnel after having faced the massacre of shrinking balance sheets and credit.

Formalization alleviates unfavorable concerns about the validity and use of TPF in arbitral proceedings among all sides, namely clients, panelists, arbitral tribunals, and financial backers, as shown in statutory revisions in Hong Kong And Singapore[40]. The proposed changes to the “Arbitration and Conciliation Act 1996” permit this same utilization of TPF in dispute resolution, which include specifying the context and impact of the regulations, forming a system that will improve with a rigorous process to settle conflicts and desire to engage, and constructing a disclaimer responsibility, will help India’s dispute settlement sector grow. After the famous “BALCO judgment in 2012”[41], India’s judicial system is becoming lesser intrusive, giving more attention to the arbitration proceedings program’s legitimacy, bringing forth a fresh, pro-arbitration legal climate. Nevertheless, prior to starting any of the others, the Indian administration should convene an experienced group to do a viability assessment on the extent of TPF’s growth and development in India, as well as the potential advantages in terms of ensuring fairness as well as the regulation problems.

This is especially true in India, where it is unclear to forecast exactly the legal environment would regard TPF, notably in terms of overseas capital management (within the context of its “Foreign Exchange Management Act, 1999”). It is crucial to determine if the financing of a claimant is considered overseas straightforward capital or borrowing. Because, in actuality, financing a complaint can be done in any way and funders can have any organization, determining whether it should be controlled is a challenging task at this time and requires further research.

Meanwhile, India’s politicians will have to choose between a harsh stance and this gentle method used by “Singapore and Hong Kong”. In the writer’s opinion, a gentle method would have been the best way for Indians, certainly at first. It is self-evident that legislation has to be rational and appropriate to the real hazards in the issue in an attempt to function properly. A rising sector with little legislation might result in marketplace malfeasance, while a moderate-risk industry with much legislation might stifle development.

As a result, the researcher suggests that non-rules or standards of practice for interested parties, such as claimants, their agents, panelists, financiers, and administrative bodies, are a good place to start for TPF regulation in the Indian scenario.

CONCLUSION AND SUGGESTIONS

On the basis of the best experiences and norms worldwide, India has every reason to favor Third-party funding in arbitration. One of the very first steps toward this direction would be the implementation of such a provision in International commercial arbitration as there lies a lot of potential in this area. The assistance that these kinds of disputes receive in the form of funds would act as a catalyzing agent to achieve the problem of serving justice and also ensure that the revenues are channelized for purposes such as expansion rather than towards expensive litigations. Further, after this becomes a success, India can then venture into other parts of arbitration. This would aid in putting India back on the map for International arbitration alongside helping it gain the status of the South Asian Hub.

Given that the economy is still in the nascent stages of recovery after the pandemic, it increases the chances of instant success for TPF. Moreover, the adaptability of TPF in India would be smooth given that the “Arbitration and Conciliation Act, 1999” is in consensus with the “UNCITRAL Model Law on International Commercial Arbitration”. 

International arbitration has experienced phenomenal growth and Hong Kong and Singapore are the legislations that made this possible. The favorable rules and encouragement for arbitration in these legislations, along with the explicit acceptance of TPF have made these legislations “the explosion of international arbitration in Asia”. These favorable circumstances helped prove that Asian actors are not just “rule takers”. As of now, India has not taken any notable steps in this direction. However, irrespective of whether or not this concept is implemented in India, it is a “commercial reality” and is not going to vanish soon on the other hand, is a trend that is to stay. The absence of a provision in this regard in the 2019 Amendment definitely is an opportunity that was not utilized to its potential and this is the real task in the arbitration community that India needs to overcome. Considering the positive attitude of the judiciary over the years towards TPF, it can be concluded that it is definitely not within a lot of time that India will also be a hot seat for International Commercial arbitration that would essentially involve TPF along with certain thresholds to be fulfilled.

[1] Gladwin Issac & Trishna Menon, Walking the Tightrope of Third-Party Funding in Arbitration in India: Challenges, Opportunities and Prospects, IALR 1–15 (2020).

[2] Bar Council of India Rules: Part VI, Chapter II. Rule 20, Section II.

[3] Stravos Brekoulakis, William W. (Rusty) Park & Catherine A. Rogers, Report of the ICCA-Queen Mary Task Force on Third-party Funding in International Arbitration 185–199 (2018).

[4] Justice B.N. Srikrishna, Report of the High Level Committee to Review the Institutionalisation of Arbitration Mechanism in India 49–53 (2017).

[5] Selvyn Seidel & Sandra Sherman, “Corporate Governance” Rules Are Coming to Third Party Financing of International Arbitration, 10 in Third-Party Funding in International Arbitration 32–49, https://www-kluwerarbitration-com.eu (last visited Apr 8, 2022).

[6] Varun Mansinghka, Third-Party Funding in International Commercial Arbitration and its Impact on Independence of Arbitrators: An Indian Perspective, 13 Asian International Arbitration Journal (2017).

[7] Gourab Banerji, Third Party Funding In International Arbitration: An Indian Perspective, International Arbitration and the Rule of Law 407–423 (2021).

[8] Simon Bachmann, The Impact of Third-Party Funding on Security for Costs Requests in International Arbitration Proceedings, 38 Kluwer Law International 842–853 (2020).

[9] Caroline Kenny, A Comparison of Singapore and Hong Kong’s Third-Party Funding Regimes to England and Australia, 87 The International Journal of Arbitration, Mediation and Dispute Management 170–190 (2021).

[10] Manoj Mukerjee, Financing arbitration in the mainland: Hong Kong’s legislation as a model, 34 Arbitration International 485–498 (2018).

[11] Third party funding in arbitration in India: setting the law straight, https://www.ibanet.org/thirdpartyfunding-arb-India (last visited Apr 8, 2022).

[12] Union of India v. Singh Builders Syndicate, (2009) 4 SCC 523.

[13] Sai Ramani Garimella, Interrogating Third Party Funding in Investment Arbitration: The Need for Regulation in the UK and India Part 1: Special Symposium: UK-India Post-Brexit: Trade and Power Democracy, 16 Manchester J. Int’l Econ. L. 213–233 (2019).

[14]  Issac and Menon, supra note 1.

[15] [1939] ILR 1 (PC).

[16] (1908) 10 BOM LR 230.

[17] (2018) 2 SCC 39.

[18] Bom HC | Not unlawful for an Advocate to enter into a “contingent contract” while appearing in capacity of a “counsel” in arbitration proceedings, SCC Blog (2019), https://www.scconline.com/blog/post/2019/04/08/bom-hc-not-unlawful-for-an-advocate-to-enter-into-a-contingent-contract-while-appearing-in-capacity-of-a-counsel-in-arbitration-proceedings/ (last visited Apr 8, 2022).

[19] Jayaswal Ashoka Infrastructure (P) Ltd. v. Pansare Lawad Sallagar, 2019 SCC Online Bom 578.

[20] B. Sunitha v. State of Telangana, Appeal (Crl.), 2068 of 2017.

[21] Mr. ‘G’, A Senior Advocate v. Unknown, 1955 1 SCR 490.

[22] FDI in India: Foreign Direct Investment Opportunities, Policy | IBEF, https://www.ibef.org/economy/foreign-direct-investment.aspx (last visited Apr 8, 2022).

[23] Light-the-beacons-–-it-is-time-to-test-third-party-funding-in-India-.pdf, https://www.cyrilshroff.com/it-is-time-to-test-third-party-funding-in-India-.pdf (last visited Apr 8, 2022).

[24] Bar Council of India Rules: Part VI, Chapter II. Rule 20, Section II

[25] Manoj K Singh, The future of arbitration in India: Strengthening the process of alternative dispute resolution, The Economic Times, April 17, 2021, https://economictimes.indiatimes.com/small-biz/legal/the-future-of-arbitration-in-india-strengthening-the-process-of-alternative-dispute-resolution/articleshow/82114707.cms?from=mdr (last visited Apr 8, 2022).

[26] Anish Wadia & Shivani Rawat, Third-Party Funding in Arbitration – India’s Readiness in a Global Context, 15 TDM (2017), https://transitionaldisputemanagement.com (last visited Apr 8, 2022).

[27] Issac and Menon, supra note 1.

[28] Ridhima Sharma, Third Party Funding in International Commercial Arbitration, 12 NUALS L.J. 61–83 (2018).

[29] Diganth Raj Sehgal, Third-party funded Arbitration in India, iPleaders (2021), https://blog.ipleaders.in/third-party-funded-arbitration-india/ (last visited Apr 8, 2022).

[30] Third party Funding – India’s time is now : Clyde & Co, https://www.clydeco.com/insights/2020/12/third-party-funding-india-s-time-is-now (last visited Apr 8, 2022).

[31] [1876] 2 App Cas 186

[32] Varun Mansinghka, supra note 6.

[33] Third-Party Funding to be Permitted for More Categories of Legal Proceedings in Singapore, https://www.mlaw.gov.sg/news/press-releases/2021-06-21-Third-party-funding-framework-permitted-for-more-categories-of-legal-preceedings-in-Singapore (last visited Apr 8, 2022).

[34] [2007] 1 SLR (R) 989

[35] (2012) 15 HKCFAR 15

[36] [1995] 1 HKC 179

[37] (2007) 10 HKCFAR 31

[38] Rahul M. Shankar, Third-Party Funding in Arbitration: Time for India to Regulate?, http://www.lawstreetindia.com/experts/column?sid=439 (last visited Apr 8, 2022).

[39] Selvyn Seidel & Sandra Sherman, “Corporate Governance” Rules Are Coming to Third Party Financing of International Arbitration, 10 in Third-Party Funding in International Arbitration 32–49, https://www-kluwerarbitration-com.eu (last visited Apr 8, 2022).

[40] Sai Ramani Garimella, Arbitration Reforms in India – The Case for Third Party Funding of Arbitral Claims (2018), https://papers.ssrn.com (last visited Apr 8, 2022).

[41]  Bharat Aluminium Co v. Kaiser Aluminium Technical Service Co, 2012 (9) SCC 552.

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Background

Blockchain technology basically refers to to system where there is no centralized control over the transaction. It stores information in decentralized blocks which can only be accessed by the person having the encryption key to the block. Each such block thereon goes to form a chain of such secured decentralized blocks.

Blockchain technology is a decentralized public ledger, which records information in a way which makes it difficult to track, modify or hack.

Since blocks in the blockchain are difficult to hack, modify or track, it can be used in places where confidentiality is of utmost importance. Let us now understand whether confidentiality of arbitration proceedings can be protected through the use of blockchain technology.

Arbitration ~ Confidentiality

This article elucidates upon the possibility of use of Blockchain in Arbitration proceeding.

Will it be advantageous or disadvantageous?

Does the legal framework in India support the implementation of blockchain technology in arbitration proceedings?

Lets know about it here.

Introduction

Blockchain is often correlated with Crypto assets. While this is true that, Crypto transaction take place with the help of Blockchain technology; however, it is just a fraction of the usability of Blockchain Technology.

There are various uses of Blockchain technology which are given as below:

Blockchain ~ Privacy

One of the major qualities of Arbitration is quick resolution and maintaining confidentiality!

Hence, it is apparent that there is a huge possibility of harmonious interplay of Blockchain and Arbitration.

Apart form this, Blockchain could be a boon for the legal industry; in the form of Smart Contracts.

Well. Let’s clear the air. Let’s understand, what Smart Contracts are and why are we talking about this?

What is Smart Contract?

Smart Contract is just like any normal Contract. The only difference is that, the Smart Contracts are completely digital.

In fact Smart Contracts is actually a tiny computer program; which is stored inside of a Blockchain. Let’s take an example to understand how smart contracts work.

Have you heard of Kickstarter?

Kickstarter is one of the largest ‘crowdfunding platform’. Product team can go to Kickstarter. Create a project. Select a Funding Goal and start collecting money from others who believes in their idea.

Kickstarter basically is a third party entity, which sits in between Product team and the supporters. This means both of them need to trust Kickstarter to handle their money correctly. Make sense. Right?

If a project gets successfully funded, product team expects Kickstarter to give them their money; and supporters want their money to go to project if it was funded or a refund, if it didn’t work.

Both the product team and supporters have to trust the Kickstarter!

But with Smart Contracts; You do not require any 3rd party entity like Kickstarter and forcibly subjected to have trust on such entity!

Let’s understand smart contract

We can program a smart contract, so that it can hold all received funds; until its certain goal is reached. The supporter of the project can now transfer their money to the smart contract.

The contract automatically passes the money to the creator of the project; upon the completion of funds. And if the project fails to meet the goal, the money automatically goes back to the supporter. Considering, that smart contract remains on the blockchain; everything is completely distributed. As in this technique no one is having control over this money.

Pretty awesome. Right?

But wait a second…

Why shall we trust Smart Contracts?

Well, because smart contracts are stored on a blockchain; they inherit some interesting properties.

They are immutable and distributed.

Being immutable means that once a smart contract is created it can never be changed again. So no one can go behind your back and tamper with the code of your contract.

Being distributed means that the output of your contact is validated by everyone in the network. So a single person cannot force the contract to release the funds, because other people on the network will spot the attempt and mark it as invalid.

Tampering with smart contracts become almost impossible. Smart contracts can be applied to many different things and not just crowdfunding.

Where can we use smart contract?

Heard of Ethereum?

It was specifically created and designed to support smart contracts. Every time you buy an Ethereum, you involve yourself in the smart contract.

Why are we talking about Smart Contracts?

Well. This article seeks to explore the possibility of using Blockchain technology in the field of arbitration.

Smart Contracts uses the Blockchain technology. Therefore, its imperative to investigate the scope of Smart Contracts in the arbitration proceedings.

Biggest Concern in an Arbitration and Smart Contracts

Have you ever used Indiankanoon, SCCOnline, Manupatra or Legitquest?

Yeah right? You have heard of them, they have a vast resources of Judgments and Court orders.

Court judgments are freely available. What happened with the party? Who were the party?

You can get these info. with a click of a mouse; unless, parties specially apply for removal of their name from the record. Even if they do, sometimes, it gets too late.

Now how many online resources do you know, where you could find Arbitration Awards this freely?

Maybe you could refer Jus Mundi or Wolterskluwer. However, there are a very limited arbitration award which goes public, most of them are kept confidential.

Parties share sensitive information with the tribunal, exchange confidential documents, etc.

What if such information/document is hacked? This is not a ‘never have been done before’ circumstance.

In July 2015, the website of the Permanent Court of Arbitration in the Hague was hacked during a hearing of a sensitive maritime border dispute between China and the Philippines.

Considering, we are opting for virtual arbitration; such incident could create a trust issue in the mind of the parties.

By introducing smart contracts, which will ensure that the documents once put on the system; will be subjected to a defined pathway. Maybe a permanent deletion after sometime. It will also protect such data from unwarranted breach in the cyber security.

Will smartcontracts be enforceable in India?

Section 7(4)(b) of the Arbitration and Conciliation Act, 1996 validates an Arbitration Agreement which was entered into through the communication made via an electronic means. Other laws validates it as well. Hence, if in future Smart contracts makes it to the Arbitration Proceedings; it will be legally binding and viable.

Conclusion

Blockchain is a new concept. Its decentralized nature, makes it less susceptible to an error, fraud, unwarranted modifications, etc. Smart Contracts works within the Blockchain environment. It ensures, client’s confidentiality; and prevents any possibility of unwarranted external influences. In short, smart contracts are safe and preserve confidentiality. An ideal goal of arbitration is to ensure absolute confidentiality. Smart contracts, ensures the same. Therefore, there is a great scope of Blockchain technology in the Arbitration Proceeding. It will ensure, that the confidential information are preserve and party autonomy is upheld.

First published here: [Access here]

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What is Arbitration?

Arbitration is the most preferred form of alternative dispute resolution. In a court proceeding, the judges play a significant role in delivering justice, the same is in an arbitration proceeding. The arbitrators play important role in accomplishing the aim of arbitration (Resolving dispute). An eminent arbitrator should act fair in deciding the case and granting justice to the parties. He must comply with the Principles of Natural Justice. Section 11 of the Arbitration and Conciliation Act, 1996 defines the appointment of arbitrators. It also mentions who can be an arbitrator?

Who is an Arbitrator?

In arbitration, an arbitrator is the presiding officer. The Cambridge dictionary defines an arbitrator as

A person who has been officially chosen to make a decision between two people or groups who do not agree.

Cambridge Dictionary

In an arbitration proceeding, he plays an important role in deciding the case. An arbitrator is an independent third-party entity. They hear the pieces of evidence, apply the law and decide the result of the arbitration proceedings.

Who can be an Arbitrator?

A person who is of sound mind can be appointed as an arbitrator. The nationality of an arbitrator is not specifically restricted. Hence, the arbitrator may be of any nationality. This is as per Section 11 of the Arbitration and Conciliation Act, 1996 (“The Act”). Furthermore, the parties are free to choose the arbitrator and determine the arbitrator’s qualifications.

A person to become an arbitrator must qualify the following conditions:

• He can be a judge.
• He can be an advocate; or
• He can be a chartered accountant; or
• He can be a maritime expert.
• He can be an executive; or
• He can be an engineer; or
• He can be a businessman;

Some arbitral institutions which conducts international arbitration, have included foreigners for being arbitrators. This was to enable the foreign parties to appoint arbitrators of other nationalities whom they consider more appropriate.

What norms should an Arbitrator abide by?

There are various norms that an arbitrator must abide by.

• A person who is of the general reputation of accountability, integrity. He shall be capable of applying objectivity in arriving at a settlement of disputes.
• An arbitrator should be impartial and neutral. He must avoid entering into any associations which has a tendency to affect the impartiality. The arbitrator must avoid circumstances which might create a reasonable appearance of partiality or bias among the parties.
• The arbitrator must not incorporate himself in any legal proceedings. He should refrain from any potential conflict related to the disputes which he shall arbitrate.
• He must not engage in any private discussions or conversations with the parties related to the dispute.
• The arbitrator must not accept any illegal gratifications.
• For any disputes which come before him, he must be capable of suggesting, recommending or writing a reasonable and enforceable arbitral award.

How is an Arbitrator appointed?

The number of arbitrators to be appointed is stated in Section 10 of the Act. It states that the parties are free to decide the number of arbitrators, however, the number should not be even. For the appointment of an arbitrator, the parties are free to decide the procedure. In case the parties fail to decide or agree on the appointment of arbitrators, they must refer to the agreement.

If the agreement states that three arbitrators are to be appointed for arbitration, each party must choose one. Among the two appointed arbitrators must jointly appoint an arbitrator for the proceeding, who shall act as a presiding arbitrator.

It might so happen that only one arbitrator is present. There might not be an arbitration agreement. In that case, this is the procedure of the appointment of the arbitrator. The parties must decide the arbitrator within 30 days from the day of receipt by one party’s request from the other party for his decision. Else the Chief Justice or his designate appoints the same, as mentioned under section 17 (2) and 17 (5).

While considering the application for the appointment of an arbitrator, the Court should confine to the examination of the arbitration agreement.

What are the powers of an Arbitrator?

According to the Arbitration and Conciliation (Amendment) Act, 2021 (“2021 Act”, the arbitrator has the power to take interim measures under section 17. Section 31 (6) empowers the arbitrator to make an interim arbitral award at any time. He may do so during the arbitration proceedings in any dispute. With regards to it the arbitrator can make a final award.

The arbitrator also has the power to appoint an expert, unless otherwise agreed by the parties for his advice under section 26 under the 2021 Act. An expert, appointed by the concerned party, is to examine them and their documents, goods or property. With the help of the same, he can prepare his report.

CONCLUSION

The above-mentioned qualifications describe who can become an arbitrator. It includes a piece of brief information about the appointment and power. The Arbitration and Conciliation (Amendment) Act, 2021 has eradicated the Schedule VIII of the Arbitration and Conciliation Act, 2019. It was replaced with Section 43J. It states that “The qualifications, experience and norms for accreditation of arbitrators shall be such as may be specified by the regulations“.

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INTRODUCTION

Conflicts are inevitable in any societal set-up. Earlier, the only way available to people was to hustle through litigation but with the advent of alternative dispute resolution methods, Arbitration gained prominence in India. It is a form of dispute resolution in which the parties choose their own adjudicator and mode and place of resolving their disputes whereby the arbitrator through the application of the laws of the land and after hearing both the parties speedily settle the dispute by passing an award in favour of the deserving party. The arbitrator hears both the parties and then relying upon the oral submissions and documents provided, issue a resolution.

KEYWORDS: Arbitration, Cost-effective, appeal, time, law

ADVANTAGES OF ARBITRATION

There are numerous advantages of going for arbitration over litigation. The major ones among them are as follows:

Cost effective

In arbitration, not much legal preparation is required. Most of the charges or costs incurred during the arbitration process are divided between both the parties. This makes this process much cheaper than the traditional litigation. 

Simple and informal procedure

In arbitration, the parties do not have to hire advocates to represent them. The parties can themselves present their issues and demands before the arbitrator. No formal mannerisms are used in this process which results in a comfortable environment.

Fairness

In traditional legal trial, neither part can choose the judge who will decide their case. However, in arbitration, both the parties have the liberty to choose arbitrator. This results in a fair outcome.    

Efficient and flexible

The traditional litigation takes too much time to resolve. It may also take years to solve a particular case. A legal resolution through arbitration is much quicker than litigation. Arbitration is more flexible in terms of scheduling. Arbitration hearings can conveniently be scheduled based on the availability of parties and the arbitrator

Convenience

In litigation, the date of hearing is to be determined by the Court. For this, the convenience of the parties is not kept in mind. Sometimes, the parties have to wait for long time to get court dates. However, in arbitration, parties have the right to agree upon a particular date as suitable for them and their witnesses.

Confidentiality

In Court, all the proceedings are open to public. However, in arbitration, any disclosure made by the parties in the proceedings is to be kept confidential. Therefore, the arbitration legal process is more private than litigation.

Finality 

The decision made by the arbitrator is final one. There is not any system of appeal in the arbitration process.

Agreeableness

In arbitration, neither party wins nor losses. Both the parties came to an agreeable outcome which is in compliance with their needs.

Full control of the process 

Both the parties have all the rights to determine by agreement the conduct of the proceedings. On the basis of it, the procedure is streamlined to suit the specific requirements of the case at hand.

How to draft an Arbitration Agreement? [Video]

Watch this video on YouTube.

DISADVANTAGES OF ARBITRATION

Every coin has two sides. Along with numerous advantages, there are a number of disadvantages of arbitration that the parties should keep in mind if they want to go for arbitration. The major ones among them are as follows:

No Appeals 

The decision given by the arbitrator is considered as final. There is no system of appeal in arbitration process. Even if one party feels that the outcome of arbitration process was unfair, unjust, or biased, they do not have the option to appeal it.

Cost

Arbitration is generally considered as a cost-effective process as compared to litigation. However, this feature does not hold any significance in those cases in which minimal money is involved.

Rules of Evidence

In a Court of law, a judge has to follow specific rules and regulations while accepting evidence. However, it is not so in arbitration. Arbitrators can utilise any information that is brought to them.

Limited powers of arbitrator

The Court possesses the power to punish the litigants who are obstructive or dilatory in their conduct of the proceedings. However, an arbitrator’s powers are not as strong as to find someone in contempt of court.

Questionable Fairness in Mandatory arbitration

If the contract itself states that arbitration is mandatory in case any dispute arises then the parties do not have the flexibility to choose arbitration upon mutual consent.

Lack of transparency

The arbitration hearings are generally not made open to public and are held in private. This can be a positive as well as a negative feature of arbitration. This lack of transparency may turn the process biased and ultimately result into injustice.

Inconsistently following the law

Although it is right that the arbitrator has to follow the law but the standards are not clear. It is highly possible that the arbitrator may consider the “apparent fairness” of the respective parties’ positions instead of strictly following the law. This becomes more significant when our party would be favored by a strict application of the law.

Sample Arbitration Agreement [PDF]

CONCLUSION             

Arbitration is an attractive method of alternative dispute resolution that can provide an attractive alternative to the traditional legal system. Arbitration has its own advantages and disadvantages. All these pros and cons along with the particular transaction and the needs of the parties should be taken into consideration before agreeing to arbitrate a dispute.

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Watch this video on YouTube.

Arbitration Agreement Sample [PDF]

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Such measures are particularly varied and innovative as international trade practices continue to generate new kinds of remedies according to the needs of the parties to the dispute and to the increasing complexity of cases. In the cases of ICA with seat in India, parties can take interim relief from Courts or Arbitral Tribunals under Section 9 and Section 17 of Arbitration and Conciliation act, 1996.

According to Section 9 of the Act, any party to an arbitration agreement can seek relief by the way of an interim application from the court. This Section permits granting of interim measures by the court before the commencement of the arbitral proceedings or after the pronouncement of award but before its enforcement. After the interim protection has been granted under Section 9, the arbitral proceedings must commence within 90 days from the date of the interim protection order or within such time as determined by the Court.

However, if the Arbitral Tribunal has already been set up, the application for interim relief under Section 9 will not be entertained unless Court finds the circumstances which may render interim relief provided under Section 17 inefficacious. Apart from this, it has to be noted that Section 9 interim measures can also be granted against third parties too in certain cases.

Now coming to Section 17 of the Arbitration and Conciliation act, 1996. It provides the Arbitral Tribunal with same powers as a Civil Court in relation to the grant of interim measures. Later, it had been amended by 2015 Amendment Act wherein the Arbitral Tribunal can give interim measures post award but before its execution. It has to be noted that the order passed by the Tribunal for the interim measures would be equivalent to the order passed by the court and will be enforceable under the Code of Civil Procedure 1908. This power was given with the intention to give significant power to Tribunal and reduce the burden and backlog before the courts.

However, there are various cases and situations where the party is still required to obtain order of interim relief from the Court only. For example, interim relief against encashment of a bank guarantee. So according to 2015 Amendment Act, the Tribunal has power to grant interim relief during arbitral proceedings or at any time after making of the arbitral award. However there was a huge confusion lying in these words. An arbitral Tribunal becomes functus officio once the final award has been rendered that is it loses its official authority and its legal effect. Therefore the words “at any time after making of arbitral award” creates ambiguity on the status of the arbitral Tribunal. Therefore, the 2019 amendment Act omitted this statement to extinguish that ambiguity.

What are the qualifications to provide an interim relief?

So if a party can show that it has a good case on merits, it would likely succeed in obtaining interim relief. There are no specific standards prescribed under the act for grant of interim relief. However, arbitral tribunals have normally required reasons like Irreparable form, urgency and no free judgement of the merits of the case to give the interim relief.

Other than this various courts or tribunals usually apply the standard given in CPC.

In the recent case of Avantha holdings Limited v. Vistra ITCL India Limited, there were some extra pre-requisites given by the court for providing interim relief under Section 9. These were, existence of prima facie case, balance of convenience, possibility of irreparable loss or prejudice if interim relief not granted, consideration of public interest, emergent necessity of ordering interim measures, and lastly when the applicant manifestly intense to initiate arbitral proceedings.

Question of the Week:

Can an Arbitral Tribunal review its award?

It is a very clever question since we have read that the Tribunal becomes functus officio once it gives its award i.e. it loses its authority. So, the answer to this question is that an arbitral tribunal cannot review an award on merits. The tribunal, thus cannot reopen the case even if fresh and extremely important evidence comes to light after pronouncement of award since their authority to re-examine the case ceases to exist.

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To start an arbitration process, or we can say, to invoke the arbitration clause of the commercial contract, a request for arbitration or notice of arbitration must be filed. The name of this initial document depends on the rules of the institution administering the arbitration. This initial document is named as request for arbitration by the arbitral institutions like ICC, LCIA, ICSID, DIAC whereas it is named as notice of arbitration under SIAC, HKIAC and the UNCITRAL rules. The main difference between these two is the name since the required content for both the request and notice for arbitration is similar.

So in both the request for arbitration and notice for arbitration, there are various information which have to be mentioned in the document which depend on the rules of the institution administering the dispute. Generally, it must contain names of each of the parties, names of the representatives of the parties, a description of the dispute giving rise to claims, a statement of the relief sought, a description of the agreement containing the arbitration clause, the choice of one or more arbitrators, a description of the place of arbitration and lastly there should be an indication of the applicable rule of law governing the arbitration and an indicator of the language of the arbitration.

Now parties generally submit the supporting documents with their request for arbitration or notice fof arbitration. However, the supporting documents are not required under all the rules of arbitration and generally a very limited evidence has to be produced during the course of arbitration.

If any International Commercial Arbitration is being conducted in India, that is, the seat of arbitration is in India, generally the parties opt for the rules of International Commercial Arbitration, 2016 which are adopted by the Indian Council of arbitration. These rules provide for the information which has to be mentioned in the request for arbitration and the notice of arbitration to the respondent.

Apart from this, if the the dispute is not referred to arbitration by the parties themselves, then the court can do so if the subject matter of the dispute is governed by arbitration clause. This has been mentioned in the Section 8 of Arbitration and Conciliation Act. However, there is one exception here. In the conditions where the dispute settlement clause in the contract grants an option of getting the dispute adjudicated by arbitration or by Court, the party has to make a formal application to the Court for referring the dispute to arbitration which would be accompanied by a duly certified or original copy of the arbitration agreement. However, the agreement need not be signed to be considered as a valid agreement.

Also, there is no requirement for filing a formal application seeking a specific prayer for reference as long as the party raised an objection on the maintainability of suit in the light of the arbitration clause.

Validity of arbitration agreement:

Now you must be curious about who exactly would check the validity of any arbitration agreement? So, the 2015 Amendment Act narrowed the scope of the power of the judicial authority to examine or check the validity of any arbitration agreement between parties to agreement. It was decided that a mere incorporation of a document or clause relating to arbitration will be considered as a valid arbitration agreement. However, intention of the parties as well as consensus-ad-idem of the parties will be very important even if the same is implied from their conduct.

Non-signatories as a party to arbitration:

Since International Commercial Arbitration and its rules are developing day by day with every award, now the process has become very flexible. In one of the very important case of Supreme Court namely Chloro Controls Private Limited v. Severn Trent Water purification Inc & Ors, it was held that in any foreign seated arbitration the definition of the word ‘party’ to an arbitration agreement will also include persons claiming through or under such party, specially when there is a clear intention of the parties to bind both the signatory as well as the non-signatory parties. Therefore, even non-signatories to the arbitration agreement, whether in a domestic arbitration or India-seated International Commercial Arbitration, are concerned may also participate in arbitration proceedings as long as there are proper and necessary parties to the agreement. However this will depend on the nature of relief claimed by or against a party.

So this was all about notice of arbitration or request for arbitration and reference of the dispute to arbitration.

Question of the Week:

In what cases the court denies to refer a dispute for arbitration despite the presence of arbitration clause in the agreement?

As we discussed in the previous blog post, if the subject matter of the dispute is not arbitrable, the court can deny to refer the dispute to arbitration.

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The very important case in which the arbitrability of disputes was specifically discussed in India was the Booze Allen and Hamilton Inc. v. SBI Home Finance Ltd. In this case, the Supreme Court opined that the meaning of Arbitrability of any dispute changes in different contexts. It stated that the disputes which are capable of being adjudicated through arbitration; disputes which are covered by the arbitration agreement and the disputes that the parties have referred to arbitration will be arbitrable.

It was also stated by the court that any dispute which can be decided by a civil court can also be resolved through Arbitration.

However, there were few disputes which were excluded from the resolution by a private forum. These consisted of the disputes which are related to rights and liabilities arising out of any criminal offence, matrimony, guardianship matters, insolvency and winding up matters, testimony matters, trust deeds & Indian Trust Act, 1882 and evictions & tenancy related matters.

Now apart from this, there has always been a huge confusion that whether the disputes of fraud and Malpractices were considered to arbitrable or not. There are various judgements which provided different opinion in this context. In the case of N. Radhakrishnan v. M/s Maestro Engineers, it was alleged by one of the parties that the matters related to the serious malpractices and fraud are to be settled by court and not by the Arbitral Tribunal which was completely supported by the Court.

However, in Swiss Timing Limited v. Organizing Committee Commonwealth Games, 2010 as well as World Sport Group (Mauritius) Limited v. MSM Satellite (Singapore) Pvt. Ltd., the court held that Allegations to fraud are not a bar to refer the parties to a foreign seated arbitration. The only exception to refer parties to foreign seated arbitration are those which are specified in Section 45 of the Arbitration and Conciliation Act i.e., in cases where the arbitration agreement is either null or void, inoperative or incapable of being performed.

So, it can be concluded here that though the allegations of fraud are not arbitrable in ICA’s with a seat in India, the same bar would not be applied to ICA’s with a foreign seat.

Another important judgement which gave a very important opinion for the disputes related to fraud is the A Ayyasamy v. A Paramasivam & Ors., wherein the Supreme Court held that the allegations of fraud are arbitrable unless they are serious and complex in nature. It is important to note here that this opinion does not the overrule the case of N. Radhakrishnan discussed above but in fact is supplementary to that case. This judgment just differentiated between a “Fraud simpliciter” and “Serious Fraud” and insists that the serious fraud is best left to be determined by the court but the simple fraud can be determined by the Tribunal.

To simplify this opinion, the Supreme Court in Rashid Raga v. Sadaf Akhtar provide two prog tests to identify whether a particular dispute related to fraud is arbitrable or not. These two tests are:

1. Whether the plea permeates the arbitration agreement and render it void?
2. Whether the allegations of fraud touch upon the internal affairs of the parties inter se having no implication in the public domain?

So, this was about arbitrability of disputes pertaining through fraud.

There are various other subject matters for which the Courts had various discussions and came on to a conclusion in regards to their arbitrability.

In 2019, a very important judgement came which simplified the meaning of arbitrability of any dispute and gave a four-fold test. In the case of Vidhya Drolia & Ors v. Durga Trading Corporation, it was held that a dispute would be non-arbitrable when:

1. It relates to action in rem or actions arising from right in rem.
2. It affects the third-party rights.
3. It relates to the inalienable sovereign and public interest.
4. It is specifically implied as non-arbitrable by a mandatory statute.

Later in various judgements it was also decided that the disputes related to oppression and management and Consumer Issues cannot be referred to arbitration as per tests given in the Vidhya Drolia case.

Question of the Week:

Whether the disputes pertaining to IPR are arbitrable?

Well, since there are not sufficient judgements as well legislations in this subject, the arbitrability of IPR disputes remain unsettled. However, through the various discussions of the Judges in Supreme Court and High Court on this matter, it can be understood that there cannot be bar on the arbitrability of the disputes relating to IPR arising out of the agreement entered by the parties and it will depend on the facts of each case.

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One of the most vital concerns that a legal practitioner is essentially seen to deal with, that is with respect to any particular dispute or one that has arisen out of a legal relationship between the respective parties subsequently brings into consideration the forum which has/will/have the territorial jurisdiction to entertain such a dispute. 

It would be imperative to take into cognizance the concept of jurisdiction which is a conglomeration of two terms, such as juris (meaning “law”) and diction (meaning “to speak”), which can be translated as presuming the appropriate forum that has the potential to “speak the law.” Likewise, the Black Law’s Dictionary has defined the aforementioned term as “a court’s power to decide a case or issue a decree.” In totality, the sole rationale behind introducing such a concept is that each court shall have the liberty to adjudicate and try those matters which tend to fall within the pecuniary or territorial limits of the concerned jurisdiction. The sheer origin of Jurisdiction can be claimed to draw its essence from Public International Law, Constitutional law, the conflict of laws and the powers stipulated in the legislative and executive branches of the government to allocate resources in order to adequately serve the needs of the society. 

AN OVERVIEW OF THE TERRITORIAL JURISDICTION OF CIVIL COURTS IN INDIA

It would be pertinent to take into consideration Section 20 of the Civil Procedure Code, 1908 which postulates that a plaintiff has the full freedom and liberty to file a suit in a particular court of law that is within the local limits of the opponent against whom such a claim voluntarily arises, wherein the latter is employed or is witnessed to carry on his/her business. 

Furthermore, the aforementioned provision also stipulates that the suit may also be filed before the court within the local limits of the opponent, wherein a part or the whole of the cause of action is witnessed to arise. That being brought under one’s attention, the cause of action is in general, considered to be facts in context to the relief, claim(s) brought forth by the plaintiff and also gives the said party an opportunity to bring forth a legal action against the said person. In addition to the same, the Civil Procedure Code, 1908 has also ensured to provide that in circumstances where there is more than one defendant, the concerned suit can be instituted in a particular court within whose jurisdiction, the defendant(s) carries on their business or resides. 

Having mentioned the same, it would also be pertinent to note that in circumstances, where the property is witnessed to be situated within the jurisdiction of more than one court, in such a situation, the plaintiff has the liberty to file the concerned suit in either of the courts falling within the jurisdiction of the parties. 

In the case of A.B.C. Laminart Private Limited v. A.P. Agencies Salem, the Hon’ble Supreme Court postulated that the cause of action can be considered to refer to every fact, which if transversed would make it compulsory for the plaintiff to make a proof of his right with reference to the judgement that is passed by the court. 

AN OVERVIEW OF THE TERRITORIAL JURISDICTION OF CRIMINAL COURTS IN INDIA

Section 177 of the Code of Criminal Procedure, 1973 plays an exemplary role in ensuring that every offence that is committed within the Indian jurisdiction would be tried and ordinarily inquired before the Court after taking into account the local limits of the offence that has been committed. What makes this provision all the more unique is that this law also stipulates that in cases where the offence is witnessed to consist of several acts, that have been committed in various local areas, in such conditions, the case will be tried and inquired before a particular Court that is witnessed to have jurisdiction over such local areas. 

One would also find it necessary to note Section 188 of the Code of Criminal Procedure, 1973 which bestows the power and jurisdiction to Indian Criminal Courts, wherein if the offence is portrayed to be committed outside India by a non-citizen or an Indian Citizen, committed on aircrafts or on ships that have been registered in India, the accused will then be dealt with regard to the said offence, as if the said offence was in actuality, committed within a jurisdiction falling within India, provided that there has been a sanction acquired from the Central Government. In simpler words, while the police does take cognizance of the concerned offence within India, the trial will under no conditions, proceed without the previous sanction acquired from the Central Government as has been postulated in the aforementioned provision.

It would be essential to note the case of Reg c. Benito Lopez, wherein the issue pertaining to jurisdiction was brought into regard with respect to offences that are committed on the high seas by the foreigners or those travelling to England borne ships. This decision led to the highlighting of several principles of International Law, in which it was contended that an individual irrespective of the place where the crime was committed, is liable to be punished of their offences. 

AN OVERVIEW OF THE TERRITORIAL JURISDICTION OF COURTS IN CONTEXT TO MATTERS RELATED TO ARBITRATION

The law under the Indian Arbitration & Conciliation Act, 1996 holds an essential role in defining the concept of a “court” under Section 2(1)(e) wherein the mentioned provision states the very purpose of the Principal Civil Court that functions in a particular district that exercises original civil jurisdiction and is regarded to be competent under the applicable law to exercise jurisdiction in relation to the subject matter of arbitration. In addition to the same, this provision also provides that the Court is inclusive or a High Court of the respective States, but however does not include a particular court that is inferior to a court of Small Causes or a Principal Civil Court. 

This law that has been specified in the Arbitration Act provides that any individual who is aggrieved from a particular arbitration award, or in circumstances where the person wants to challenge the award or in conditions, where it wishes to enforce the award can bring forth an arbitration petition to either the Learned Civil Court or the Hon’ble High Court, in accordance to the stipulated provisions of the Civil Procedure Code, 1908, that has enlisted such rules of original civil jurisdiction. 

Therefore, any particular party with reference to an arbitration agreement can file such an arbitration petition seeking or challenging the enforcement of the arbitration award under the following conditions:

• Either where the defendant carries on business or is seen to reside.
• Where part or whole of the cause of action arises.

If one were to contemplate the essential principles of Arbitration Law, one would ensure to mention the essence of arbitration proceedings which are governed by the Municipal Law of the Seat of Arbitration, in which Section 2(1)(e) is worthy of mention which, as has been elucidated before, has defined the court having jurisdiction pertaining to the “subject matter of arbitration.” The law therefore is witnessed to confer supervisory jurisdiction on the High Court or the Principal Civil Courts within the local limits of arbitration. It would be pertinent to take into cognizance, the case of BALCO v. Kaiser Services, wherein the Apex Court shed light on the aforementioned principle and used the phrase, “subject matter of arbitration.”

AN OVERVIEW OF THE TERRITORIAL JURISDICTION OF COURTS PERTAINING TO WRIT PETITIONS IN INDIA

The sheer nature of a Writ Petition brings into account the enforcement of Fundamental Rights that can be brought forth either before the Supreme Court under Article 32 of the Indian Constitution or the High Court under Article 226 of the Indian Constitution.

Article 226(1) of the Indian Constitution for instance, introspects and postulates that the High Court within whose jurisdiction the government, authority, or the individual is located would have the power of jurisdiction to entertain the said writ petition, directed against the defendant, irrespective of the place pertaining to the cause of action, provided that there was in fact, a cause of action to file the mentioned petition.

Furthermore, Article 226(2) of the Indian Constitution, provides that the High Court within whose local limits or jurisdiction a part or the whole of the cause of action is seen to arise shall have the jurisdiction to pass the required order(s) or direction(s), in order to ensure the enforcement of fundamental rights or any other right with respect to the same.

CONCLUDING REMARKS

In totality, it is highly essential to deliberate and get a critical understanding of the concept of jurisdiction, given a misinterpretation of the relevant provisions can culminate to costs and a time-consuming procedure in matters of litigation. Furthermore, it would be imperative to note that in circumstances, where there is an absence of jurisdiction, such a jurisdiction within the respective court/forum/tribunal cannot under any means, be created through a contract between the concerned parties.

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The defendant-appellant moved to compel the arbitration and stay the litigation since there was an arbitration clause contained withing the partnership deed. The Ninth Circuit panel reviewed SS Mumbai’s motion to compel arbitration twice. The defendant argued that the plaintiff should be equitably estopped from avoiding the arbitration clause in the partnership dee. However, the district court denied the motion stating that general Ninth Circuit estoppel doctrine.

The appellate court also held that the non-signatory defendant was barred from compelling arbitration under the convention on the Recognition and enforcement of foreign Arbitral Awards i.e., the New York Convention. It was interpreted such that the convention to require that the parties actually sign an agreement to arbitrate their disputed in order to compel arbitration. This happened in the first review. In the second review, the court explained that the Indian choice of law provision was in the Partnership Deed as a non-signatory was a threshold issue for which the court would not look to the agreement itself. In the present case, since the case involves the federal claims and turns to the court’s federal question jurisdiction. The court therefore, declined again to apply the Indian Law and instead applied federal substantive law and ordinary contract and agency principles.

Hence, the Ninth Circuit again upheld the district court decision to deny defendant’s motion to compel arbitration.

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