Comparison of Arbitration Regime in India, Singapore and England and Wales – Part 3

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Image Courtesy: iEduNote

In continuation of Part 1 (Comparison of Arbitration Regime in India, Singapore and England and Wales – Part 1) and Part 2 (Comparison of Arbitration regime in India, Singapore and England and Wales – Part 2) of this series, I would be covering different issues related to an arbitral award in this part. With much gratitude, I would like to thank Mr. Sumeet Kachwaha, Mr. Alvin Yeo, Ms. Lim Wei Lee, and Ms. Angeline Welsh for their contributions in the International Bar Association’s (IBA) guide to the law and practice of arbitration published in 2018 which is the primary source of information used in this series to analyze the arbitration practice in these three jurisdictions.

Formal Requirements of Award

The basic formal requirements in all three jurisdictions are same which includes that the award must be in writing, it must be signed by all the arbitrators or by majority, it must be reasoned, and it must state the date and place/seat of arbitration.

Types of Permissible Remedies

In Singapore, unless otherwise agreed by the parties, the tribunal may award any remedy or relief that could have been ordered by the High Court if the dispute had been the subject of civil proceedings in that court. The tribunal is accordingly empowered to grant a wide range of remedies, including damages, rectification, injunctive relief, declarations, indemnities and specific performance. Similarly in India, there are no limitations on the type of permissible relief save as may apply to any court. In England as well, the tribunal can make a declaration as to any matter to be determined in the proceedings, order a payment of money, order a party to do or refrain from doing something, order specific performance under a contract (except one that relates to land), order rectification and set aside or cancel a deed or other document.

Punitive/Exemplary Damages

In Singapore and England & Wales, there are no rules preventing arbitrators from awarding punitive damages in Singapore. That said, under Singapore law, such damages are exceptional and granted only for claims in tort, and thus rarely awarded in Singapore arbitrations. Under English law, if the parties agree, the arbitrators can award punitive or exemplary damages. Without such agreement they can award exemplary damages in the same circumstances that the English courts could if English law applies or if such damages are provided for in the applicable law. In India, arbitrators cannot award punitive or exemplary damages for breach of contract.

Interest/Compound Interest

The English Arbitration Act gives the tribunal the power to award simple or compound interest. Under the International Arbitration Act (the IAA) and Arbitration Act (the AA) of Singapore, the tribunal is permitted to award interest (whether simple or compound) on the whole or any part of any sum which is awarded to any party (for the whole or any part of the period up to the date of the award), or is in issue in the proceedings but is paid before the date of the award (for the whole or any part of the period up to the date of payment). The basis (simple or compound; annual or monthly) and rate of interest is at the discretion of the tribunal and largely dependent on the circumstances of the case.

In similar way, Arbitrators under Indian law can award interest, on the whole or part of the sum awarded, and for any period between the date of cause of action and the date of the award, and thereafter until payment is received. Where the contract specifies a particular rate of interest (or prohibits grant of interest), the arbitrator is bound to abide by the same while awarding pre-award interest. The arbitrator has the power to award compound interest, even if the contract does not provide for the same.

Enforceability of Interim/Partial Award

All three jurisdictions allow the enforcement of interim or partial award. However, there is a catch in the definition of interim/partial award. In Singapore, the IAA and AA define an award as ‘a decision of the arbitral tribunal on the substance of the dispute and includes any interim, interlocutory or partial award’. This definition specifically excludes any interim orders or directions. Nevertheless, the IAA and AA also provide for the enforceability of orders or directions made or given by an arbitral tribunal.

Under the Indian Arbitration Act, ‘award’ is defined to include the interim award. A recent judgement of Supreme Court of India In the case of M/s. Indian Farmers Fertilizer Co-Operative Ltd. Vs. M/s. Bhadra Products [Civil Appeal No. 824 of 2018 arising out of SLP (C) No.19771 of 2017 dated January 23, 2018], the Supreme Court of India while addressing the issue of whether an award delivered by an Arbitrator, which decides the issue of limitation, can be said to be an interim award, and whether such interim award can then be set aside under Section 34 of the Indian Arbitration and Conciliation Act, 1996 (the Act), held that the order of the tribunal finally determines the issue of limitation and therefore, such an order is an interim award within the meaning of Section 2(1)(c) of the Act which is amenable to challenge under Section 34 of the Act. (The full case analysis is available at Supreme Court of India: whether an award deciding the issue of limitation is an interim award, and whether such interim award can then be set aside under the permissible grounds to set aside an award)

Status of Awards made by Consent

In all three jurisdictions such awards are permitted though the terminologies used to define it may differ. In India such awards are not required to be reasoned. Such awards have same effect and legal status as any other award on merits or substance of the case in all three jurisdictions.

Power to Correct or Interpret and Award

In Singapore and India, the arbitrators are allowed to correct any clerical or typographical mistakes/corrections/error ‘or other errors of similar nature’ either suo moto or at the request of any party within a time frame of 30 days from the receipt of the award. Under English law, the tribunal may correct an award in order to remove any clerical mistake or error arising from an accidental slip or omission, clarify or remove any ambiguity in the award or make an additional award in respect of any claim (including a claim for interest or costs) which was presented to the tribunal but not dealt with in the award. Similarly in Singapore and India, the parties can seek interpretation of any specific point from the tribunal and can also request the tribunal to make an additional award as to claims presented to the tribunal but omitted from the award.

Cost of Arbitration

Under English and Indian law, the costs should follow the event except in cases where it would not be appropriate to do so meaning thereby that generally it is the unsuccessfully party that bears the cost of arbitration. However, in India, where the case of the parties is evenly balanced or a fair point of law is involved, parties are often left to bear their own costs. In Singapore, typically, reasonable costs are awarded to the prevailing party, based on the time spent and the complexity of the case.

Jurisdiction to decide Tribunal’s Cost

In India, the arbitrator’s fees for ad-hoc and purely domestic arbitrations are given in the Schedule IV of the Indian Arbitration Act itself. For other arbitrations, the tribunal has jurisdiction to decide its own cost. Similarly, under English law, the tribunal has jurisdiction to determine its own costs and expenses subject to the application of the procedural rules agreed between the parties. However, in Singapore, the tribunal may decide on its own costs and expenses; subject to the parties’ right to require that such fees be taxed by the SIAC Registrar. Where the SIAC Rules apply, the tribunal’s fees are determined in accordance with the SIAC’s Schedule of Fees in force at the time of the commencement of the arbitration.

Apportionment of Cost

In Singapore and England & Wales, the Arbitrators can determine the apportionment of the costs of the arbitration, unless the parties have otherwise agreed. However, under the under the AA, any provision that parties shall in any event pay their own costs in an arbitration agreement is deemed void, unless such provision is part of an agreement to arbitrate a pre-existing dispute. Similarly, under English law, any agreement that a specific party must pay all or part of the costs is valid only if made after the dispute has arisen. In all three jurisdictions, the tribunal exercises this jurisdiction based on the merits of the case and conduct of parties.

Challenges to Award

India

There is a difference between domestic awards (including those arising from an international arbitration taking place in India) and foreign awards. A domestic award is straightaway enforceable as a decree of the court, without the need to go through a separate proceeding to convert it into a decree. An application to ‘set aside’ a domestic award may be filed, within three months of receipt of the same (extendable by 30 days thereafter, but no further).

An application to seek the execution of a domestic award may be preferred, when the time prescribed for making of an application to set aside the award has lapsed. Earlier, mere preference of an application for setting aside of an award resulted in an automatic bar to enforcement (until disposal of such an application). The 2015 Amendment has changed this. Now, execution of an award as a decree can nonetheless proceed pending adjudication of the setting aside application, unless the court has specifically ‘stayed’ execution of the award. While staying execution of an award, the court is required to pass a reasoned order, taking into account the provisions applicable for stay of a money decree, which ordinarily requires the judgment debtor to deposit the decretal amount (or a part of the same) in court, which may, pending proceedings, be allowed to be withdrawn by the decree holder, subject to furnishing a suitable security.

The grounds for challenge of domestic awards are the same as per the Model Law (Article 34 thereof). The minor differences are that under the Model Law an award can also be challenged on the ground of lack of impartiality or independence of the arbitrator or any ruling by the arbitrator as to the existence or validity of the arbitration agreement. Under Indian laws there is no recourse to courts on these grounds during the arbitral process and thereafter a challenge is permitted once the award is rendered.

A controversial 2003 decision of the Supreme Court, Oil & Natural Gas Corporation v. SAW Pipes (Saw Pipes) had introduced the concept of a merit based challenge if the court found the award to be ‘patently illegal’ or against the terms of the parties’ contract, by expanding the ‘public policy’ ground as contained in Section 34 of the Act.

The 2015 Amendment curtails the applicability of Saw Pipes, by providing that:-

  • The ground to set aside an award on ‘patent illegality’ is not available against an award rendered in an international arbitration (i.e. where at least one party is a foreign national / entity),
  • An award can be set aside on the ground of patent illegality, only if the same is apparent on the face of the award,
  • An award cannot be set aside merely on the ground of an erroneous application of the law, or by re-appreciation of evidence,
  • The public policy ground has been narrowly defined, making it clear that it is confined to cases where there is fraud or corruption in the making of the award or where the award is in “contravention with the fundamental policy of Indian law”, or “is in conflict with the most basic notions of morality or justice.” The definition clarifies that the public policy contravention ground cannot bring in a merit based challenge.

Lastly, the 2015 Amendment provides a time limit of 1 year from date of service of notice on the non-applicant, for deciding an application to set aside an award. It remains to be seen if Indian courts are able to follow this time limit.

Now to deal with foreign awards: The first point of distinction is that a foreign award is not a decree capable of being enforced automatically. An application is required to be moved for enforcement and execution of a foreign award. Earlier such an application needs to be filed before the appropriate High Court having jurisdiction over the subject matter, or the respondent (at the applicant’s discretion). But in the recent judgement of Supreme Court of India in Sundaram Finance Limited v. Abdul Samad & Anr. 2018, the Court concluded that execution and enforcement proceedings regarding an arbitral award (foreign) can be filed in any Court of India where such decree can be executed and there is no pre-requisite to obtain a transfer decree from the Court which would have jurisdiction over the arbitral proceedings. (The full case report is available at The riddle of Indian Court’s Territorial Jurisdiction and Execution of International Arbitration Awards in India: Sundaram Finance Limited vs. Abdul Samad & Anr)

A foreign award cannot be set aside; it can only be enforced or declined to be enforced. The grounds on which enforcement of a foreign award can be declined are similar to those provided under the New York Convention.

The 2015 Amendment, as a matter of abundant caution, clarifies that a merits based review is not available while considering an application for enforcement of a foreign award. There was some confusion in the past, with another controversial decision in Venture Global Engineering Vs. Satyam Computer Services Ltd. and Anr. (2008) 4 SCC 190, (Venture Global) holding that the provisions for setting aside of a domestic award (including on the patent illegality ground laid down in Saw Pipes) can apply to foreign awards as well, unless it could be shown that the parties intended to exclude the applicability of Part-I of the Arbitration Act (which contains the provisions applicable to domestic arbitrations). The decision in Venture Global was over-ruled by the Supreme Court in 2012 but only prospectively. The 2015 Amendment takes care of the situation by completely burying the ghost of Venture Global.

Singapore

A dissatisfied party may apply to the Singapore Courts for a setting aside of a Singapore arbitration award.

The grounds for setting aside a Singapore award mirror Article 34 of the Model Law, with two additional grounds:

(a) The making of the award was induced or affected by fraud or corruption; or

(b) A breach of the rules of natural justice occurred in connection with the making of the award by which the rights of any party have been prejudiced.

In general, the courts in Singapore do not readily grant applications to set aside arbitration awards, but only where the Court is satisfied that the grounds for challenge have been substantiated. The legal literature on breach of natural justice and public policy as a ground for setting aside an award in Singapore thus far is available at Singapore Court of Appeal and High Court: Grounds to set aside an award, criteria to determine the breach of Natural Justice and Public Policy

Challenge proceedings do not automatically stay any enforcement proceedings. However, the court may give directions for enforcement proceedings to be heard together with the challenge proceedings.

England & Wales

While it is generally difficult to challenge an award in this jurisdiction, there are three grounds on which a challenge can be made, namely: (a) jurisdiction; (b) serious irregularity; and (c) a point of law. Before applying to a court, the applicant must first exhaust all available recourses from the tribunal to correct the award or make an additional award and any available arbitral process of appeal or review.

(a) Challenge to the tribunal’s substantive jurisdiction

The challenge may be to the substantive award on the merits, or may be a challenge to a preliminary award on the tribunal’s jurisdiction. Jurisdictional challenges can be made to the existence or validity of the arbitration agreement, the constitution of the tribunal or the scope of the arbitration agreement. Recent English case law has confirmed that where a party is seeking to resist enforcement on the basis that the tribunal lacked jurisdiction the court is bound to revisit the tribunal’s decision on jurisdictions. In the recent case of Uttam Galva Steels Led v Gunvor Singapore Pte Ltd [2018] EWHC 1098 (Comm) (10 May 2018), the English Commercial High Court addressed the issue of whether or not an arbitration clause covers a claim on the Bills of exchange, as against one on the underlying contract of sale and whether ‘Ruling on Jurisdiction’ of an arbitrator is an ‘award’ for the purposes of challenging an award on substantive jurisdiction. The Court answered both issues in affirmative. The full case report is available at English Commercial High Court: Does an arbitration clause in the underlying contract provide jurisdiction to an arbitral tribunal to address claims under the bill of exchange? Whether ‘Ruling on Jurisdiction’ of an arbitrator is an ‘award’ for the purposes of challenging an award on substantive jurisdiction

(b) Challenge on the ground of serious irregularity

An award can be challenged if there has been a serious irregularity that has caused or will cause substantial injustice to the applicant. The irregularity may relate to the tribunal, the proceedings or to the award itself. The bases for mounting such a challenge are where the tribunal failed to act fairly and impartially, caused unnecessary delay or expense, exceeded its powers, failed to deal with all the issues that were put to it or where the award was obtained by fraud or in a way contrary to public policy. In a recent case, the UK Commercial High Court refused to set aside a US$820 million LCIA award challenged on the ground of serious irregularity in conducting the arbitration unfairly and causing substantial injustice to a party. The full case report is available at UK Commercial High Court: refuses to set aside a US$820 million LCIA award challenged on the ground of serious irregularity in conducting the arbitration unfairly and causing substantial injustice to a party

(c) Appeal on a point of law

An appeal on a point of law can be brought with the agreement of all other parties to the arbitration or with the leave of the court. For such judicial leave to be granted, the applicant must be able to show: that a determination of the question will substantially affect its rights; that the question of law is one which the tribunal was asked to determine; that the decision of the tribunal is obviously wrong; or that the question is of general public importance and the tribunal’s decision is open to serious doubt. The court must also be satisfied that it is just and proper to determine the question.

Waiver of right to challenge an award

In Singapore and England & Wales, parties can waive of this right by clear expression but such waiver is not available under Indian law.

Appeal against the Award

Under English legal theory there are three levels of appeal: an appeal can be made to a court of first instance, then to the Court of Appeal and finally to the Supreme Court. There is no provision to “appeal” against an arbitral award under Indian law. In Singapore, a party may appeal to the court on a question of law in domestic arbitrations arising out of an award under section 49 AA. Such appeals are not permitted in international arbitrations under the IAA.

 

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