Comparison of Arbitration Regime in India, Singapore and England and Wales – Part 1

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Following comparative analysis is primarily based on the contributions made by Mr. Sumeet Kachwaha, Mr. Alvin Yeo, Ms. Lim Wei Lee, and Ms. Angeline Welsh in the International Bar Association’s (IBA) guide to the law and practice of arbitration published in 2018 along with my own case updates from my past entries on this blog.

Institutional or ad hoc

Most arbitration in Singapore are conducted under institutional rules, with the SIAC Rules, which are now in their sixth edition, being the most popular choice, and the ICC Rules being the most-favoured alternative. Where ad hoc arbitration is concerned, parties typically choose the UNCITRAL Arbitration Rules. The trend in England and Wales is also same.In the stark contrast, in India most arbitrations are ad hoc. UNCITRAL Rules are sometimes used in ad hoc international arbitration.

Duration

The time stretch in all three jurisdictions is almost similar and bit uncertain. It largely depends on the arrangement amongst parties, the pace of conduction arbitration and complexity of case. That being said, in India, the 2015 Amendment to the Arbitration and Conciliation Act 1996 (the Indian Act) aims to reduce the time consumed in arbitral proceedings, inter-alia by specifying an upper limit of 1 year from the date of constitution of the arbitral tribunal, for completion of proceedings and making of an award. Parties can consent to extend this period by a further 6 months only, after which an application is required to be made to the court for extension. In this regard Singapore provides options such as documents-only hearing and expedited procedure of arbitration under the SIAC Rules. Further amendments to the SIAC Rules in 2016 have also introduced a procedure for the early dismissal of a claim or a defence. In England and Wales, a reasonably substantial international arbitration will likely take between one and two years.

Restrictions on Foreign Counsels/Arbitrators

The Indian Act expressly states that a person of any nationality may be an arbitrator, unless otherwise agreed by the parties. According to a latest ruling of Indian Supreme Court, foreign lawyers can advise on international commercial arbitrations in India but the Bar Council of India may write rules governing this (Bar Council of India v A.K. Balaji And Ors., decided on March 13, 2018 available here). In Singapore foreign nationals may act as counsel in Singapore arbitrations. The Singapore Legal Profession Act was amended in 2004 to expressly permit foreign lawyers to represent a party in Singapore arbitrations and give advice in relation thereto, even if the substantive law of the dispute is Singapore law. However, should a party to an arbitration wish to make an arbitration-related court application, it must retain Singapore counsel for that purpose. Neither the Arbitration Act (AA) nor the International Arbitration Act (IAA) provides any nationality restrictions on the appointment of arbitrators. Likewise there are no professional restrictions on foreign nationals acting as arbitration counsel or arbitrators in England and Wales as well.

Distinction between domestic and international arbitration

Both domestic and international arbitrations (i.e, where at least one party is a foreign individual or entity), seated in India, are governed by the same set of provisions (contained in Part I of the Indian Act). Singapore has a dual-track regime, with the AA governing ‘domestic’ arbitrations and the IAA governing international arbitrations. The IAA applies to international arbitrations as well as non-international arbitrations where parties have agreed so in writing. The IAA gives the 1985 UNCITRAL Model Law the force of law in Singapore with some modifications. In England and Wales the English Arbitration Act applies to both domestic and international arbitration.

Legal requirements relating to form and content of arbitration agreement

In India, there is no legal requirement as to the form and content of an arbitration agreement. It may be even contained in an exchange of letters or any other means of telecommunication, which provides a record of the agreement, including communication through electronic means. The agreement need not be signed but it must be in writing.

In Singapore, the definition of an arbitration agreement under the AA and IAA has been broadened via legislative amendments in 2012, to include arbitration agreements concluded by any means (orally, by conduct or otherwise), so long as such agreement is subsequently recorded. This is in line with option I of Article 7 of the 2006 Amendments to the Model Law. In addition, an arbitration agreement is deemed by law ‘where in any arbitral or legal proceedings, a party asserts the existence of an arbitration agreement in a pleading, statement of case or any other document in circumstances in which the assertion calls for a reply and the assertion is not denied’ under both the IAA and the AA.

The English Arbitration Act requires that an arbitration agreement must be in writing or evidenced in writing. What constitutes ‘in writing or evidenced in writing’ is broadly defined and includes an oral agreement to arbitrate by reference to terms which are in writing. A purely oral arbitration agreement would only be recognised by the common law and the provisions of the Arbitration Act would not apply. ‘Writing’ means recorded by any means, and therefore encompasses electronic records or communications.

Approach of courts towards enforcement of agreements to arbitrate

In India the courts are now moving towards minimalistic inference approach. The 2015 Amendment to the Indian Arbitration Act provides that reference to arbitration must now be made “notwithstanding any judgment, decree or order of the Supreme Court or any Court,” thereby nullifying past judgments which enabled escape from arbitration. In a recent 2018 judgment of the Supreme Court of India (Punjab State Civil Supplies Corporation Ltd. & Anr. v M/s Atwal Rice & General Mills Rep. by its Partners), the Court inter alia held that that an inquiry into facts cannot be held in execution proceedings in relation to award/decree.

The English Courts are supportive of arbitration and will endeavour to uphold parties’ agreements to arbitrate even if they are poorly drafted. They will not enforce an agreement if it is deemed to be ‘pathological’, that is, if it is impossible to understand what the parties agreed.

The Singapore courts will generally give full effect to the parties’ arbitration agreement unless such choice offends the law (e.g. contrary to public policy, agreement procured by fraud). The Singapore courts recognize ‘pathological’ arbitral clauses/agreement. In Insigma Technology Co. Ltd v. Alstom Technology Ltd [2009] 1 SLR 23, the Singapore High Court inter alia held that such clauses though recognized such clause yet noted that it is not wise to have such clauses. The costs of using hybrid clauses can easily outweigh any advantages parties imagine they might gain.

Multi-tier clauses

In India, if the clause contemplates different levels of dispute resolution or constitutes a pre-condition to initiating the arbitration, it may be binding depending upon the language used. As stated above such multi-tier clauses are enforceable in Singapore. Likewise in England and Wales, Multi-tier clauses are commonly used, particularly in the construction and engineering sectors.

Multi-party arbitration agreement

The Indian Supreme Court in P.R. Shah, Shares & Stock Brokers (P) Ltd. v. B.H.H. Securities (P) Ltd.; (2012) 1 SCC 594 held that a common arbitration may be brought against multiple parties, even if all the parties do not have a common arbitration agreement with each other. In Singapore as well as England and Wales, there are no additional requirements in this regards.

Arbitration agreements and non-signatories

In England and Wales, an arbitration agreement binds a person claiming under or through a party to the arbitration agreement, for example an assignee or a person subrogated to that party’s contractual rights. A third party beneficiary of rights under a contract may also be bound by an arbitration clause under English law. Otherwise, arbitration agreements cannot bind a party that has not consented to arbitration. This has been recently adopted by India in the case of Cheran Properties Limited v. Kasturi and Sons Limited and Ors (Civil Appeal no.s 10025-10026 of 2017), where the Supreme Court of India while dealing with an issue of whether or not an arbitration award can be enforced against a non-signatory third party inter alia held that in terms of Section 35 of the Indian Arbitration Act, a person who claims under a party is bound by the arbitral award. Besides the parties, an arbitral award binds every person whose capacity or position is derived from and is the same as a party to the proceedings. To determine whether the award binds the third party, the Court adopted the English doctrine of ‘group of companies’ which uses the intentions of parties as a parameter in this regard. The group of companies doctrine has been applied to pierce the corporate veil to locate the “true” party in interest, and more significantly, to target the creditworthy member of a group of companies. For detailed analysis, please read my case analysis on Indian Supreme Court: Can arbitral award be enforced against a non-signatory third party? interpreted ‘persons claiming under’ the parties; adopted the English Doctrine of ‘group of companies’

In Singapore, the non-signatories may also be considered parties to an arbitration agreement through the application of legal principles such as an assumption of rights and/or liabilities by assignment or novation, where the signatory is deemed to be an agent of the third party, where the corporate veil is pierced on the basis of the alter ego principle, or by operation of the doctrine of estoppel. Singapore law does not recognize the “group of companies” doctrine. In addition, a third party may be treated as a party to the arbitration agreement where section 9 of the Contracts (Rights of Third Parties) Act applies.

Arbitrability

The Indian Act recognizes the principle of non-arbitrability. It is an express ground for setting aside an arbitral award (‘the subject matter of the dispute is not capable of settlement by arbitration’). The Act, however, nowhere defines what is considered to be non-arbitrable. In India, prior to the 2015 Amendment, a court could at the reference stage go into the issue of arbitrability and decline reference if it found the dispute to be not arbitrable. The position now stands changed. Section 8 (1) of the Act is amended (see Section III(ii) above) and also the insertion of Section 11 (6A) which provides that a court while appointing an arbitrator under Section 11 of the Act “shall, notwithstanding any judgment, decree or order of any Court, confine to the examination of the existence of an arbitration agreement.” Hence the issue of arbitrability is to be examined by the tribunal and it is its call to treat it as a preliminary issue or not.

In Singapore, both the IAA and AA recognize that any dispute is generally arbitrable in Singapore, unless an arbitration of such dispute is contrary to the public policy of Singapore or ‘not capable of settlement by arbitration’. In Tomolugen Holdings Ltd v Silica Investors Ltd [2015] SGCA 57, that minority oppression claims were generally arbitrable. In L Capital Jones Ltd and another v Maniach Pte Ltd [2017] SGCA 03, the Singapore Court of Appeal confirmed that minority oppression claims were generally arbitrable but held that, on the facts of the case, a majority shareholder of a joint venture company had taken a ‘step’ in the court proceedings notwithstanding that it was the joint venture company that took out the actual striking out application.

In England and Wales, some types of disputes cannot be referred to arbitration. These include criminal cases and planning laws, which restrict the rights of landowners to develop their property. This used to be the case in relation to family law disputes, although recently schemes have been established to allow certain aspects of family law disputes to be resolved in arbitration. Usually, the tribunal will determine whether the dispute can be referred to arbitration, but under certain conditions the courts may decide. The question of whether the subject matter of the dispute can be arbitrated can arise at different stages of the proceedings.

Objection over Jurisdiction

In India, insofar as domestic (India seated) arbitrations are concerned, the Act states that if an action brought before a judicial authority is the subject matter of an arbitration agreement, the judicial authority shall refer the parties to arbitration, unless it finds that prima facie no valid arbitration agreement exists. In of M/s. MSP Infrastructure Ltd. v. Madhya Pradesh Road Development Corporation Ltd. (2015) 13 SCC 713, the Supreme Court of India was faced with a peculiar issue of “whether a party to an arbitration proceeding may be permitted to raise objections under Section 34 of the Indian Arbitration Act, with regard to the jurisdiction of the Arbitral Tribunal after the stage of submission of the written statement.” In this case the Court had analyzed the intention behind Section 16(2) of the Arbitration Act, 1996 and concluded that “there is a prohibition on the party from raising a plea that the Tribunal does not have jurisdiction after the party has submitted its statement of defence.” In a recent case of M/s Lion Engineering Consultants v. State Of M.P., Civil Appeal Nos. 8984-8985 of 2017 there is no bar to plea of jurisdiction being raised by way of an objection under Section 34 of the Indian Act even if no such objection was raised under Section 16. For detailed analysis, please read my case analysis on “Public Policy” includes State Law, no bar on objecting the Tribunal’s Competence even after submission of the statement of defence

In England and Wales, where a party commences litigation in the courts in this jurisdiction in breach of a valid arbitration agreement, the other party may apply to stay the proceedings. A defendant must challenge the court’s jurisdiction within the time for acknowledging service of the claim (usually 14 days). The defendant need not serve a defence on the merits until the jurisdictional dispute is resolved (and if it did so, would normally be deemed to have waived any objection to the court’s jurisdiction). If the party breaching the arbitration clause commences litigation in another jurisdiction (other than a Member State of the European Union or a Contracting State to the Lugano Conventions), the responding party can apply to the court in this jurisdiction for an anti-suit injunction. Although having an English seat is not mandatory, English courts are less likely to grant an anti-suit injunction without one.

 

Read the second part of this series at Comparison of Arbitration regime in India, Singapore and England and Wales – Part 2