Law Times

PAGE 12 FOCUS February 6, 2012 • Law Times Tips to avoid traps of India's judicial system Treatment of arbitration matters long a bane for international lawyers BY JULIUS MELNITZER For Law Times Indian courts have been quite will- ing to interfere on public policy grounds which they interpret in a very broad manner," says Barry Leon of Ottawa's Perley-Robertson Hill & McDougall LLP. Indeed, the Indian courts' ten- I dency to treat errors of law on the face of the record as reviewable errors contrary to public policy has sparked widespread criticism. Many commentators are of the view that Indian jurisprudence on review of international arbitral awards runs contrary to the principles of the New York Arbitration Convention to which India is a signatory. "The purpose of the convention was to facilitate trading relations by setting up a uniform system to ndia's judicial system has long been a leading bane of the inter- national arbitration community. "The biggest problem is that resolve international trade disputes," says Dylan McKimmie of Norton Rose's office in Perth, Australia. "Countries who take an interven- tionist approach create trading risk that are then priced into their trad- ing relations." But in early January, a five-judge constitutional bench of the Indian Supreme Court began hearings in Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc. with the expressed intention of reconsidering its 2002 judgment in Bhatia International v. Bulk Trading S.A. About 10 other appeals involv- ing the same issues have been joined, and leading arbitral institu- tions have applied for intervener status at the court's invitation. In Bhatia, the Supreme Court held that Indian courts could inter- vene to order interim relief even in arbitrations whose venue was outside India as long as the dispute had a connection to India and the parties hadn't expressly or impliedly In recent years, various high courts have sought to narrow Bhatia's scope, mostly by readily inferring exclusions of the arbitra- tion legislation. On the other hand, legislative initiatives to change the law have fallen flat. At first blush, the Supreme 'The biggest problem is that Indian courts have been quite willing to interfere on public policy grounds which they interpret in a very broad manner,' says Barry Leon. excluded the applicability of India's arbitration legislation in their com- mercial agreement. Court — sometimes criticized for being unfriendly to arbitration — seemed receptive to reconsidering the law. At the hearing's opening, the court remarked that its initial view was that there should be a re-evaluation of Bhatia and that it was keen to address concerns about deterring foreign investors through the prospect of long-winded litiga- tion in connection to India-related commercial contracts. Canadian companies entering the Indian marketplace or dealing with Indian counterparts have long tried to avoid the delays inherent in the labyrinth of Indian justice by inserting arbitration clauses in their commercial agreements. What many didn't realize in the wake of Bhatia, however, was that if they didn't take great care in drafting arbitration clauses or agreements, they could find themselves before the Indian courts in any event. "The difficulty is that clauses excluding domestic legislation are not normally found in arbitration agreements as the law of the arbitra- tion's venue is usually accepted as the law governing the arbitration," McKimmie notes. "What is also unclear is whether the adoption of institutional rules from an institu- tion outside India in cases where the arbitration is held outside India is sufficient to imply an agreement to exclude the Indian legislation's operation." Until the Supreme Court issues its judgment in Bharat, then, parties should take special care to avoid review by the Indian courts in cases where a party from India is a party to a contract; where the subject matter is connected to India; or where the contract specifies the law of India to be the governing law. "Ideally, the contract should NOW IN ITS 25TH YEAR UNITED STATES, SECOND EDITION RAYMOND E. BROWN (FORMERLY ENTITLED THE LAW OF DEFAMATION IN CANADA, 2ND EDITION) BROWN ON DEFAMATION: CANADA, UNITED KINGDOM, AUSTRALIA, NEW ZEALAND, contain an express exclusion of the operation of Part I of the Arbitration and Conciliation Act," McKimmie says. 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Ignoring this advice entails con- siderable commercial risk until the law changes. "From the perspective of final- ity, even doing business in China is less of a risk than doing business in India," says McKimmie. "India is very high on the interventionist scale, especially when one consid- ers the complete lockout of foreign lawyers from the country to the point where they would not even be able to properly oversee the arbitral review proceedings as conducted by domestic lawyers." LT AVAILABLE RISK-FREE FOR 30 DAYS Order online at www.carswell.com Call Toll-Free: 1-800-387-5164 In Toronto: 416-609-3800 www.lawtimesnews.com

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