AI Drafter 
TaxTMI 
TaxTMI 
2018 (5) TMI 1064
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.... Plc ('VG'), i.e., Defendant No.1 and Vodafone Consolidated Holdings Ltd ('VCHL'), i.e., Defendant No.2 (hereinafter referred to as "Defendants") seeking reliefs of declaration and permanent injunction. The prayers sought in the present suit are reproduced hereinbelow:- "(a) Declare that notice of dispute dated 15.06.2015 and the notice of arbitration dated 24.01.2017 issued to the Plaintiff by the Defendant and the proceedings initiated by Defendant Nos. 1 and 2 in furtherance of the said notice of dispute dated 15.06.2015 and the notice of arbitration dated 24.01.2017 under India UK Bilateral Investment Protection Agreement are an abuse of process and null and void; (b) pass a decree of permanent injunction in favour of the plaintiff and against Defendant Nos. 1 and 2 restraining the defendants, their servants, agents, attorneys, assigns from taking any action in furtherance of the notice of dispute dated 15.06.2015 and the notice of arbitration dated 24.01.2017 and from initiating arbitration proceedings under India-UK Bilateral Investment Protection Agreement or continuing with it as regards the dispute mentioned by the Defendants in the Notice of Arbitration dated 24.01.....
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.... the Tin Council Case [J.H. Rayner (Mincing Lane) Ltd. Vs. Department of Trade & Industry & Ors., [1990] 2 AC 418 (House of Lords)]. The relevant portion of the said judgment relied upon by him is as under:- " ......if there existed a rule of international law which implied in a treaty or imposed on sovereign states which enter into a treaty, an obligation....to discharge the debts of an international organisation established by that treaty, the rule of international law could only be enforced under international law. Treaty rights and obligations conferred or imposed by agreement or by international law cannot be enforced by the Courts of the United Kingdom.....The Courts of the United Kingdom have no power to enforce at the behest of any sovereign state or at the behest of any individual citizen of any sovereign state rights granted by treaty or obligations imposed in respect of a treaty by international law.... there is no analogy between private international law which enables the courts of the United Kingdom to resolve differences between different laws of different states, and a rule of public international law which imposes obligations on treaty states......However, one a....
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....the following recommendations: First, the Tribunal recommends that the Government of Pakistan not take any step to initiate a complaint for contempt. It recommends further that, in the event that any other party, including the Supreme Court of Pakistan sua sponte, were to initiate a complaint, the Government of Pakistan take all necessary steps to inform the Court of the current standing of this proceeding and of the fact that this Tribunal must discharge its duty to determine whether it has the jurisdiction to consider the international claim on the merits. The Government of Pakistan should ensure that if contempt proceedings are initiated by any party, such proceedings not be acted upon..." 10. Mr. Salve submitted that the Indian National Courts had neither the jurisdiction over the subject matter of the dispute (which is a dispute arising out of an alleged breach of a Treaty by the Union of India), nor did they have jurisdiction Ratione Personae (i.e. over the Defendants). 11. Learned senior counsel for the Defendants further submitted that domestic law was not a defence to non-performance of the obligations under a treaty. In support of his submission, he relied upon Arti....
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....nt or of a territorial unit of the State. 2. An organ includes any person or entity which has that status in accordance with the internal law of the State." 14. Mr. Salve submitted that Article 9 of the BIPA laid out the procedure to be followed in the case of a dispute between an investor of one Contracting Party (in this case the United Kingdom) and the other Contracting Party (in this case, the Plaintiff-Union of India). According to him, the dispute resolution procedure was an element of the bilateral treaty, and thus any conduct by a State whether by legislation, executive action or resort to a National Court which interfered with this process would in itself be a violation of the Treaty. 15. He pointed out that the BIPA specifically provided for the UNCITRAL Arbitration Rules 1976 to apply and Article 21 incorporated the principle of kompetenz kompetenz. Article 21 reads as under: "1. The arbitral tribunal shall have the power to rule on objections that it has no jurisdiction, including any objections with respect to the existence or validity of the arbitration clause or of the separate arbitration agreement. 2. The arbitral tribunal shall have the power to det....
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....bitrator if the Plaintiff-Union of India failed to appoint one by 07th September, 2017. On the same date, the Plaintiff-Union of India appointed its arbitrator for the arbitration. These facts, according to him, established not only lack of bona fides, but also that the Plaintiff-Union of India had obstructed a remedy of dispute resolution which in itself was a continuation of violation of the BIPA. Mr. Salve prayed that the suit be dismissed on the ground of suppression. 20. Learned senior counsel for Defendants, without prejudice to the rights and contentions of the Defendants, offered that should the Plaintiff-Union of India bring the challenge of abuse of process before the India-United Kingdom BIPA Arbitration tribunal, they along with the Claimants in the India-Netherlands BIPA arbitration would apply to the United Kingdom Tribunal to consolidate the two arbitrations and with consent of parties both arbitrations could be conducted before the same tribunal. SUBMISSIONS OF MR. SANJAY JAIN, SENIOR COUNSEL FOR PLAINTIFF-UNION OF INDIA 21. Per contra, Mr. Sanjay Jain, learned senior counsel for Plaintiff-Union of India submitted that the initiation of arbitration proceedi....
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....nds BIPA but also opposed the application dated 22nd December, 2017 by Union of India to the tribunal under the India-Netherlands BIPA for an early determination of the jurisdictional objection. 25. Learned senior counsel for Plaintiff-Union of India pointed out that the UK entities and the Netherlands entity were in the same vertical corporate chain (all under the control of the Vodafone Group) and they complained of the same measures and the disputes notified to India as well as relief sought were identical in both the arbitrations. According to him, this was a clear abuse of process. In support of his contention, he relied upon the following:- (A) Article on Abuse of Process in International Arbitration by Prof. Emmanuel Gaillard1 delivered at The Paris Court of Appeal as the opening lecture of the 2015 Session of Arbitration Academy, wherein he states, "a claimant will commit an abuse of process when it initiates more than one proceeding to resolve the same or related dispute in order to maximize its chances of success" and that "This strategy is highly prejudicial to a respondent, who is forced to defend multiple sets of claims before different arbitral tribunals r....
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....reaty, then they must be held to proper consequence of such election and if Defendants were to lose the arbitration proceedings under the India-Netherlands BIPA on a jurisdictional objection or otherwise, then such an outcome should be the end of the matter. He contended that if Defendants were not restrained through an appropriate injunction, Union of India may face further arbitration proceedings under other investment treaties without any end in sight. 28. Learned senior counsel for Plaintiff-Union of India further submitted that commencement of any other arbitration proceedings under the India- United Kingdom BIPA was unnecessary and pre-mature at this stage. According to him, this Court should not second guess' the outcome of the arbitration proceedings under the India-Netherlands BIPA and conjecture as to the need for a failsafe' at present. He pointed out that it is entirely possible for Defendants to be heard on merits in India- Netherlands BIPA arbitration proceedings and if that were to happen, it would obviate the need for arbitration proceedings under the India-United Kingdom BIPA. Consequently, according to learned senior counsel for Plaintiff-Union of India, the ob....
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....e, or such other court that may have jurisdiction over the parties, the Bombay High Court had no jurisdiction to entertain the suit and restrain the arbitration proceedings at Singapore because of the principle of comity of courts...... 23. In the present case no decision of a court of foreign country or no law of a foreign country has been cited on behalf of the appellant to contend that the courts in India out of deference to such decision of the foreign court or foreign law must not assume jurisdiction to restrain arbitration proceedings at Singapore. On the other hand, as has been rightly submitted by Mr Subramanium, under Section 9 CPC, the courts in India have jurisdiction to try all suits of a civil nature excepting suits of which cognizance is either expressly or impliedly barred. Thus, the appropriate civil court in India has jurisdiction to entertain the suit and pass appropriate orders in the suit by virtue of Section 9 CPC and Clause 9 of the Facilitation Deed providing that the courts in Singapore or any other court having jurisdiction over the parties can be approached for equitable relief could not oust the jurisdiction of the appropriate civil court conferred ....
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....d cannot be reopened before the Arbitral Tribunal......" 34. Mr. Sanjay Jain, learned senior counsel for Plaintiff-Union of India submitted that this Court had the subject-matter jurisdiction to grant an antiarbitration injunction under Section 9 read with Order 39 Rules 1 and 2 of the Code of Civil Procedure, 1908 and Section 38 of the Specific Relief Act, 1963, subject to the limitations contained in Section 41 of the Specific Relief Act, 1963. In support of his submission, he relied upon V.O. Tractoroexport, Moscow Vs. Tarapore & Company & Another, (1969) 3 SCC 562; Oil and National Gas Commission Vs. Western Company of North America, (1987) 1 SCC 496 and Modi Entertainment Network & Another Vs. W.S.G. Cricket Pte Ltd., (2003) 4 SCC 341. 35. Mr. Sanjay Jain stated that Defendants are subject to the personal jurisdiction of this Court pursuant to Section 20(c) of the CPC. In support of his submission, he relied upon the judgment of the Supreme Court in Lalji Raja and Sons Vs. Firm Hansraj Nathuram, (1971) 1 SCC 721 wherein the Court has held as under:- "8. The above remarks of the Board indicate that even a decree which is pronounced in absentem by a foreign court is val....
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..... Mr Sanjay Jain stated that the plaint was prepared by 01st August, 2017 and the letters dated 07th August and 11th August, 2017 were not made available to the local lawyers before the filing on 11th August, 2017 and refiling on 16th August, 2017. 41. Learned senior counsel for Plaintiff-Union of India lastly stated that the Union of India had never communicated its voluntary willingness to join the proceedings for the appointment of an arbitrator under the India-United Kingdom BIPA but had participated in such proceedings only under compulsion. SUBMISSIONS OF AMICUS CURIAE 42. Mr. Sumeet Kachwaha, the learned Amicus Curiae submitted that the agreement to arbitrate as mentioned in the investment treaty was like making a contract from an advertisement and such an advertisement constituted a binding unilateral invitation to invite offers that could be accepted by anyone who performed its terms. Consequently, according to the learned Amicus Curiae the provisions in the bilateral investment treaty had given rise to the formation of a contract along the lines of reasoning adopted in Carlill v. Carbolic Smoke Ball Co. [1891-94] All ER. Re 127 and that it was this contractual ri....
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.... Arbitration that the said Tribunal lacked jurisdiction to decide tax issues. He drew this Court's attention to the following paragraph in the Notice of Arbitration issued by the Defendants under the India-United Kingdom BIPA:- "5. The Claimants and Claimants' subsidiary are not seeking double recovery by way of the two claims which are being brought. Indeed, at present, they only seek damages as an alternative remedy - the Claimants' primary requests for relief are merely for declaratory and injunctive relief and an award of their costs. The Respondent has asserted that the Tribunal constituted to determine VIHBV's claim under the Netherlands- India Treaty lacks jurisdiction; these proceedings under the UKIndia Treaty are a direct consequence of the Respondent's position in that arbitration." 46. Learned Amicus Curiae contended that Defendants merely sought one route to arbitration and did not seek double recovery and therefore there was no abuse of process. He emphasised that the absence of double recovery by Vodafone excluded the possibility of abuse of process. 47. He referred to three letters of Defendants dated 17th May, 2017, 17^th June, 2017 and....
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....me. 19. But more than just a procedural mechanism for resolving investment disputes, investment treaty arbitration has come to set standards against which the exercise of public authority by the contracting States are going to be reviewed. In that sense, it mirrors the role of administrative law in reviewing governmental action in the domestic context - hence the suggestion made elsewhere that what we are witnessing is the emergence of an international administrative law that regulates the conduct of States through a private adjudicative mechanism. 20. This is exciting at several levels. But it also gives cause for concern. While those practising in this field have a general understanding that "indirect expropriation" refers to any Government measure that has the effect of eroding the value of an investment, it is probably not settled whether legislative or policy changes, which have a legitimate public interest purpose, will also be caught by the principle. xxx xxx xxx 22. The arbitrators, me....
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....ct of future claims and is thereby business-generating. This hints of a modern-day uber-sophisticated ambulance-chasing plaintiffs' lawyer. The pro-investor attitude has even been cited as the reason arbitrators from the developing world often rule in favour of investors from traditionally capital-exporting countries, this being the "price" that has to be paid to gain credibility and access to the privileged club of elite international arbitrators. 40. Unbridled criticisms of how arbitrators are invariably profit-driven and biased, or that they always act strategically so as to be repeat players, are undoubtedly overstated. However, it is undeniable that the typical conditions that assure impartiality in the judicial sphere are lacking in arbitration. Whereas judges are segregated from the rest of the legal professional community, arbitrators are largely drawn from precisely the same pool of professionals. The "usual suspects" in the industry may be arbitrator in one case and lawyer in the very next, often trading places in the process with another in the same select group. And while forum shopping is frowned upon in the judicial context, parties actively seek out arbitra....
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....s far back as May, 2012. 51. He submitted that the assumption that Defendants were somehow entitled to a decision on merits of their case-notwithstanding the election of remedies under the specific BIPA by Vodafone was untenable in law. He submitted that if Defendants had elected to pursue the remedies under a specific treaty, then they must be held to the proper consequence of such election. According to him, to permit otherwise would be contrary to principles of good faith and doctrine of election which were recognized by domestic and international law. 52. Mr. Sanjay Jain stated that the learned Amicus Curiae's reliance on the decision in British Caribbean Bank Limited (supra) to contend that commencement of parallel proceedings was not per se vexatious, failed to consider that in the said case there were parallel proceedings before the National Courts under Municipal Laws and before an arbitral tribunal under an investment treaty. He pointed out that in the (supra) the relevant investment treaty did not contain an exhaustion of local remedies requirement and thereby contemplated parallel proceedings to such an extent. 53. Mr. Sanjay Jain stated that the Defendants&....
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....rein it has been held "....it would be relevant to recall the five cases enunciated by Buckley, L.J. in Emanuel v. Symon [1908] 1 KB 302 in which the Courts of England would enforce a foreign judgment. "In actions in personam", observed Buckley, L.J., "there are five cases in which the Courts of this country will enforce a foreign judgment : (1) where the defendant is a subject of the foreign country in which the judgment has been obtained; (2) where he was resident in the foreign country when the action began; (3) where the defendant in the character of plaintiff has selected the forum in which he is afterwards sued; (4) where he has voluntarily appeared; and (5) where he has contracted to submit himself to the forum in which the judgment was obtained". 57. He reiterated that the Courts were bound to follow domestic law and not respect international obligations, was based on the fundamental proposition that "Courts apply domestic law and not international treaties." In support of his submission, he relied upon Re Barcelona Traction, Light and Power Co. Ltd., (Belgium v Spain) (second phase) [1970] ICJ Rep 4 at 44, LaGrand (Germany v United States) (1999) ICJ Rep 9, Buttes Gas a....
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....m "through", stating, "For the removal of doubts, it is hereby clarified that the expression "through" shall mean and include and shall be deemed to have always meant and included 'by means of', 'in accordance of' or 'by reason of'. The second explanation clarified that "an asset or a capital asset being any share or interest in a company or entity registered or incorporated outside India shall be deemed to be and shall always be deemed to have been situated in India, if the share or interest derives, directly or indirectly, its value substantially from the assets located in India". The 2012 Amendment also clarified that the term "transfer" includes and shall be deemed to have always included disposing of or parting with an asset or any interest therein, or creating any interest in any asset in any manner whatsoever, directly or indirectly, absolutely or conditionally, voluntarily or involuntarily, by way of an agreement (whether entered into in India or outside India) or otherwise, notwithstanding that such transfer of rights had been characterized as being effected or dependent upon or flowing from the transfer of a share or shares of a company registered or incorporated outside ....
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.... avoidance of doubt, "double recovery is in no way being sought". (xii) On 12th May, 2017, the Plaintiff-Union of India wrote to the Appointing Authority (Judge Ronny Abraham, President, ICJ) that the India-United Kingdom BIPA Arbitration concerned exactly the same subject matter as the India-Netherlands BIPA Arbitration and that in both cases, members of the Vodafone Group under common control had the same complaint about the imposition of tax. The Plaintiff-Union of India further stated: "The Vodafone Group has also taken steps to ensure that the two arbitrations cannot be consolidated. VIHBV resisted the Republic's attempt to avoid having a UK national appointed in the Dutch Arbitration despite knowing that the India-UK BIPA precludes a UK national from being the Presiding Arbitrator. In addition, VG and VCHL appointed a different arbitrator (David Caron) in the UK Arbitration than in the Dutch Arbitration (Yves Fortier)". (xiii) On 17th May, 2017, Defendants responded to Union of India's letter dated 12th May, 2017 and denied any abuse of process. The Defendants reiterated that their rights under the India- United Kingdom BIPA could be determined only in an arbitr....
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.... different rights under different bilateral treaties and that the Defendants were not seeking double recovery. As to consolidation, the letter stated "India has refused to accept the Claimants' invitation to accept jurisdiction under one BIT or the other as a means to avoid parallel proceedings. India has also remained silent in response to the Claimants' stated willingness to discuss potential consolidation." (xix) On 26th July, 2017, the President, ICJ wrote, "...I take note of the fact that you asked the Tribunal to "grant [the Application] on an expedited basis" but, in order to take an informed decision on your request, I would need to know at which date to expect a decision from the Tribunal. I understand that you may need to consult with the members of the Tribunal to obtain such information, and request that you do so without delay and come back to me in this respect in any event before August 4, 2017." (xx) On 07th August, 2017, the Presiding Arbitrator in the India- Netherlands BIPA arbitration wrote to President, ICJ, to the effect that the written submissions between the parties would be completed by 12th August, 2017 and the Tribunal would thereafter proc....
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....ither granted or refused, it seems obvious to the Tribunal that, as the conduct alleged is not conduct in the present Arbitration at all but rather in the UK arbitration, the natural remedy is for the Republic of India to raise its argument before the tribunal in that arbitration once that tribunal is established. Not only would all the necessary parties be before the tribunal, but they would also all be subject to the authority of the tribunal, which would then be competent to decide, with binding effect on the parties to those proceedings, whether the proceedings before it constituted an abuse of process in the light of the fact that the present Arbitration was already under way. Nothing in the present Decision should be interpreted as reflecting in any way on the merits of any such future application." (xxvi) On 01st September, 2017, the President, ICJ informed the parties, "The Claimants indicated, in a letter sent to me on 25 August, 2017, that they had "made all their submissions on the matter of the appointment, and [that] it is their understanding the matter is pending now for orders by the Appointing Authority"; consequently, I note that the Claimants have not withdrawn....
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....d order would have no effect. Copy of order dated 17.11.2017 passed by the learned Single Judge is placed before us, as per which the matter is listed now for hearing on 8th, 9th and 10th of January, 2018, when the High Court is going to hear and decide the matter. Going by the totality of the circumstances, let the parties go ahead as per the orders dated 26.10.2017 and the Chairman be appointed and the Arbitral Tribunal be constituted. However, since the matter is coming up before the learned Single Judge of the High Court for Tribunal so constituted, if any, shall not commence hearing before 10.01.2018. Needless to mention, we have not made any observations on the merits of the contentions raised by the parties in the Suit including the contention of theplaintiff that such proceedings are abuse of the process of law and the claims of the respondent that the Courts in India have no jurisdiction to deal with the issue. We also expect the hearing to take place before the learned Single Judge on the dates fixed and it would be for the learned Single Judge to pass any further orders. The special leave petition stands disposed of." (xxxii) On 09th January, 2....
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....onstitution of the arbitral tribunal or any other attending circumstances, the present suit has become infructuous? BACKGROUND 62. According to United Nations Conference on Trade and Development [UNCTAD], the number of BIPAs increased from 385 at the end of the 1980s to a total of 2,926 by the end of 2014. Further, by the end of 2014, the number of known treaty based investor - State cases had reached 608-- approximately ten times the figure as it stood at 2000. 63. As the number of investment treaty arbitrations have grown, concerns over the investment treaty system have arisen. These concerns include a perceived deficit of legitimacy given that States are being judged on their conduct by private non-elected individuals. Concerns have also arisen in respect of inconsistent arbitral awards, the independence and impartiality of arbitrators, and the delays and costs of arbitral procedures. These concerns have resonated in some scholarly publications. 64. Commenting on Growth in Investment Treaty Arbitration, Mr. Justice Sundaresh Menon, Chief Justice of Singapore in his speech on International Arbitration: The Coming of New Age for Asia (and Elsewhere) (supra) state....
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....Netherlands. The amount of damages ordered was roughly equivalent to the country's entire health care budget. These cases illustrate that an entirely new source of state accountability and liability has emerged. The potential size and impact of such awards mean that government agencies just cannot afford to ignore the seemingly expansive treaty obligations they have undertaken. xxx xxx xxx 33. The broad and open-textured way in which treaty commitments are defined, coupled with the length of time over which they are expected to operate without any supervision or control by electoral mechanisms, mean that the discretion vested in private arbitrators to interpret these rules is likely to have a considerable impact on States. This shift of power from the States to the arbitral tribunals, has resulted in jurisprudence that has been colourfully described as "a house of cards built largely by reference to other tribunal awards and academic opinions", "unconstrained by the discipline of the treaty parties' practice of expectations". ....
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....can be adopted without difficulty by our courts in determining whether the forum court has jurisdiction where the alleged breach is related to an activity on the internet.... xxxx xxxx xxxx xxxx 40. .....It appears to this court that for the purposes of a passing off action or an action for infringement where the Plaintiff is not carrying on business within the jurisdiction of the forum court, and where there is no long arm statute, the Plaintiff would have to show that the Defendant purposefully availed itself of the jurisdiction of the forum court...... xxxx xxxx xxxx xxxx 42. ....For the 'effects' test to apply, the Plaintiff must necessarily plead and show prima facie that the specific targeting of the forum state by the Defendant resulted in an injury or harm to the Plaintiff within the forum state......" (emphasis supplied) 68. Similarly, the Supreme Court of United States in Iain Calder and John So....
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.... parties as recognised by rules of international law. What is meant by competency in this context was stated by Balckburn, J., speaking for the Judges in answer to the question referred by the House of Lords in Castrique v. Imrie [(1870) LR 4 HL 414]. Relying upon Story's Conflict of Laws, the learned Judge observed: "We may observe that the words as to an action being in rem or in personam, and the common statement that the one is binding on third persona and the other not, are apt to be used by English lawyers without attaching any very definite meaning to those phrases. We apprehend the true principle to be that indicated in the last few words quoted from Story. We think the enquiry is, first, whether the subject-matter was so situated as to be within the lawful control of the State under the authority of which the Court sits; and secondly, whether the sovereign authority of that State has conferred on the Court jurisdiction to decide as to the disposition of the thing, and the Court has acted within its jurisdiction. If these conditions are fulfilled, the adjudication is conclusive against all the world." Story's exact words are to be found in para 586 of his book....
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....ent suit partly arose within the jurisdiction of this Court and Defendants had purposefully availed of Indian jurisdiction, inter alia, by making an investment in India, holding economic interests in India and carrying on business in India and from a reasonable and holistic perspective, Defendants have to be considered as working for gain within the jurisdiction of this Court. 73. Moreover, even if it is taken that a corporation that is incorporated under the laws of another state would, under the established principles of international law, have its rights and obligations governed by the domestic law of the state of its incorporation, then also the test of residence would be satisfied by applying the principles of "single economic entity"- which principle is applicable even under the English law. This Court in Pankaj Aluminium Industries Pvt. Ltd. Vs. M/s. Bharat Aluminium Company Ltd., 2011 IV AD (Delhi) 212 after relying upon DHN Food Distributors Ltd. and Others v. London Borough of Tower Hamlets [1976] 3 All ER 462 at Page 467 has recognised the doctrine of single economic entity. In DHN Food Distributors Ltd. (supra), it has been held as under:- ".....We all know that i....
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..... It is settled law that the jurisdiction of the Civil Courts in India is all embracing except to the extent it is excluded by an explicit provision of law or by clear intendment arising from such law. The ouster of the jurisdiction of a Civil Court is not to be lightly inferred and can only be established if there is an express provision of law or is clearly implied. [See: Dhulabhai Vs. State of M.P., 1968 (3) SCR 662]. 77. Though Article 253 of the Constitution empowers the Indian Parliament to make a law to give effect to International Treaties, yet the Parliament has not passed any specific legislation to give effect to BIPA Agreements. However, there is no statutory bar or case law relating to treaty obligation which creates an ouster of jurisdiction or threshold bar for Indian courts in relation to a bilateral investment treaty arbitration. Accordingly, there is no explicit or implicit ouster of jurisdiction of National Courts. 78. Further, India has not acceded to the position that in matters of bilateral investment treaty arbitrations, there is an ouster of jurisdiction of National Courts as is apparent from Union of India's refusal to accede to the five decades o....
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....r and a Host State (1) Any dispute between an investor of one Contracting Party and the other Contracting Party in relation to an investment of the former under this Agreement shall, as far as possible, be settled amicably through negotiations between the parties to the dispute. (2) Any dispute which has not been amicably settled within a period of six months from written notification of a claim may besubmitted to international conciliation under the Conciliation Rules of the United Nations Commission on International Trade Law, if the parties to the dispute so agree. (3) Where the dispute is not referred to international conciliation, or where it is so referred but conciliation proceedings are terminated other than by the signing of a settlement agreement, the dispute may be referred to arbitration as follows:.... xxxx xxxx xxxx xxxx (c) to an ad hoc arbitral tribunal by either party to the dispute in accordance with the Arbitration Rules of the United Nations Commission on International Trade Law, 1976. In respect of suc....
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....d Kingdom. In Republic of Ecuador v Occidental Exploration and Production Co [2005] EWCA Civ 1116, the Republic of Ecuador brought a claim under Sections 67 and 68 of the Arbitration Act 1996 of England and Wales seeking to set aside the award of an arbitral tribunal dated 01st July, 2004 given largely in favour of the Defendants, Occidental Exploration and Production Company, a Californian corporation. The dispute arose in relation to an investment agreement between the parties entered into pursuant to a bilateral investment treaty between the Republic of Ecuador and the United States of America. The arbitration was provided for by the terms of the treaty and Occidental raised a preliminary objection that any challenge to the award would involve an interpretation of an unincorporated treaty which made the claim nonjusticiable by an English court. Justice Aikens on 29 April, 2005 ([2005] EWHC 774 (Comm), [2005] 2 Lloyd's Re 242) found in favour of the Republic of Ecuador on the objection and Occidental appealed. The Court of Appeal in the said case after considering the judgments cited by Mr. Salve including the Tin Council Case (supra), Re Barcelona Traction, Light and Power C....
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....ate investor on the one side and the host State on the other, yet it is neither an International Commercial Arbitration governed by the Arbitration and Conciliation Act, 1996 (hereinafter referred to as "Act, 1996") nor a domestic arbitration. 90. The Act, 1996 including Sections 5 and 45 thereof, do not apply proprio vigore to a BIPA. Section 5 does not apply as this is not a Part I arbitration and Section 45 does not apply as Section 44 makes it clear that Part II of the Act, 1996 will apply to an arbitration considered to be commercial under the Indian law. Indeed, India, while acceding to the New York Convention, made a reservation that it will apply the Convention "only to differences arising out of legal relationship..... that are considered commercial under the national law". 91. Investment Arbitration disputes are fundamentally different from commercial disputes as the cause of action (whether contractual or not) is grounded on State guarantees and assurances (and are not commercial in nature). The roots of Investment Arbitrations are in public international law, obligations of State and administrative law. 92. This Court is of the view that before the Calcutta Hig....
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....stability and uniformity but rigidity beyond reasonable limits is inimical to the growth of law." (emphasis supplied) 93. As far as India's approach to treaty obligations is concerned, Article 51(c) of the Constitution of India (appearing under Part IV, Directive Principles) states:- "51. Promotion of international peace and security.-The State shall endeavour to- xxxx xxxx xxxx xxxx (c) foster respect for international law and treaty obligations in the dealings of organised peoples with one another;" 94. The aforesaid Article recently came up for interpretation before the Indian Supreme Court in Commissioner of Customs, Bangalore Vs. G.M. Exports and Ors., (2016) 1 SCC 91 wherein it has held as under:- "23. A conspectus of the aforesaid authorities would lead to the following conclusions: (1) Article 51(c) of the Constitution of India is a directive principle of State policy which states that the State shall endeavour to foster respect for international law and treaty obligations. As a result, rules of intern....
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....uld be given a "purposive" construction in favour of the treaty. Even if there is a difference between the language in the statute and the corresponding provision of the treaty, the statutory language should be construed in the same sense as in the treaty. This is for the reason that in such cases what is sought to be achieved by the international treaty is a uniform international code of law which is to be applied by the courts of all the signatory nations in a manner that leads to the same result in all the signatory nations. 97. The aforesaid observations of the Supreme Court are relevant not only for interpreting the India-United Kingdom BIPA, to which India is a signatory, but also the Vienna Convention on the Laws of Treaties (for short "VCLT") - to which India is not. The latter treaty is important as it is a treaty for the interpretation and approach towards international treaties. 98. The following provisions of the VCLT have a bearing in relation to interpretation and approach of this Court towards any dispute under the India-United Kingdom BIPA:- (i) The Preamble to the VCLT inter alia states :- "Considering the fundamental role of treaties in the history of ....
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....e and object of the treaty. These obligations are rooted in customary international law, codified by the VCLT, especially Article 26 (binding nature of treaties and the obligation to perform them in good faith); Article 27 (Internal law and observance of treaties, i.e provisions of internal or municipal law of a nation cannot be used to justify omission to perform a treaty); General rule of interpretation under Article 31 (1) ( i.e that it shall be interpreted in good faith, in accordance with ordinary meaning to be given to the terms of a treaty) and Article 31 (4) (A special meaning shall be given to a term if it is established that the parties so intended)." 100. The Government of India in its Model Text for the Indian Bilateral Investment Treaty dated 16th December, 2015 has referred to the VCLT vide Articles 14.9, 31 and 32 thereto stating inter alia that an investment treaty shall be interpreted in accordance with the Vienna Convention on Law of Treaties and "customary international law". 101. Consequently, a treaty is to be interpreted in accordance with "the relevant rules of international law" [Article 31(3)(c) VCLT] and a party may not invoke its internal laws as ju....
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.... (emphasis supplied) 103. Consequently, the agreement to arbitrate between an investor and a host State is contractual inasmuch as it is not itself a treaty but flows from the treaty provisions which is justiciable in accordance with the principles of international law and there is no threshold bar or inherent lack of jurisdiction in the court to deal with BIPA Arbitrations. WHETHER THE COURTS IN INDIA CAN RESTRAIN BILATERAL INVESTMENT TREATY ARBITRATIONS, WHICH ARE OPPRESSIVE, VEXATIOUS, INEQUITABLE OR AN ABUSE OF THE LEGAL PROCESS? 104. In the opinion of this Court, there is no unqualified or indefeasible right to arbitrate. The National Courts in India do have and retain the jurisdiction to restrain international treaty arbitrations which are oppressive, vexatious, inequitable or constitute an abuse of the legal process. 105. As pointed out by the learned Amicus Curiae, the concepts of 'oppression, 'vexation', 'inequity' and 'abuse of process' have been known to the common law and equity for centuries, being the primary theories used by the court to regulate its process pursuant to its inherent jurisdiction. The Caribbean Court of Justice, Appellate Jurisdiction in....
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....eory of abuse of right, including Switzerland [Swiss Civil Code, art 2], Germany [German Civil Code, art 226], Austria [Austrian Civil Code, art 1295(2)], Italy [Italian Civil Code, art 833], Spain [Spanish Civil Code, art 7], The Netherlands [Dutch Civil Code, Property Law, art 13(2)] and Quebec [Civil Code of Quebec, art 7] and Louisiana in the United States. 107. While common law systems do not recognize any general principle of abuse of right, English courts have long upheld their inherent jurisdiction to sanction a party's exercise of its procedural rights in an abusive manner. For instance, in Hunter Vs. Chief Constable of the West Midlands Police, [1982] AC 529 at 536, Lord Diplock elaborated on "[the] inherent power which any court of justice must possess to prevent misuse of its procedure in a way which, although not inconsistent with the literal application of its procedural rules, would nevertheless be manifestly unfair to a party to litigation before it, or would otherwise bring the administration of justice into disrepute among right-thinking people." 108. The principle of abuse of rights also forms part of public international law, and occurs where 'a St....
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....able....the court may exercise its power under Section 37 of the Senior Courts Act, 1981" to grant an injunction. In fact, the said judgment cites seven cases which have upheld the Court‟s jurisdiction to restrain foreign seated arbitrations. 112. Undoubtedly, under the International law, "the State" includes the national judiciary; but under the Indian Constitution the State excludes the judiciary because it is independent of the other organs of the State. 113. Further, all actions and orders passed by National Courts are not per se violative of the fair and equitable treatment guaranteed by the BIPA as suggested by the Defendants. 114. However, the jurisdiction to grant an anti-arbitration injunction must be exercised with caution and granted only if the arbitral proceedings are vexatious or oppressive or inequitable or abuse of process. After all, one must not lose sight of the fact that a legislation or action that is perfectly lawful under the national law could nonetheless trigger a successful investment claim under the bilateral investment treaty. 115. In fact the approach to arbitration agreements contained in investment treaties is for the court to suppor....
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.... compelling circumstances and the Court has been approached in good faith and there is no alternative efficacious remedy available. WHETHER FILING OF MULTIPLE CLAIMS BY ENTITIES IN THE SAME VERTICAL CORPORATE CHAIN WITH REGARD TO THE SAME MEASURE IS PER SE AN ABUSE OF THE LEGAL PROCESS OR VEXATIOUS? AND WHETHER CONSOLIDATION OF ARBITRATION PROCEEDINGS IS AN ADEQUATE ANSWER TO ABUSE OF PROCESS BY VODAFONE? 120. There is no presumption or assumption that filing of multiple claims by entities in the same vertical corporate chain with regard to the same measure is per se vexatious. The Caribbean Court of Justice, Appellate Jurisdiction in British Caribbean Bank Limited (supra) has also held as under:- "40. In applying these principles to the instant case, the factual basis for the finding of vexation or oppression was that there were a multiplicity of proceedings and that those in the domestic courts should be completed first. The case law has elucidated that there is no presumption that the pursuit of multiple proceedings is vexatious or oppressive or an abuse of process in itself, nor is there vexation or oppression if there is an advantage to the party seeking t....
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....part of the measures that facilitated a stay of English proceedings in favour of enforcing the agreement by the parties to litigate their dispute in a German Court: Kirchner & Co. v Gruban. An undertaking was accepted in Jarvis and Sons Limited v Blue Circle Dartford Estates Limited to reduce the risk that concurrent proceedings in England and in the foreign arbitration could result in the party that was resisting arbitration being mulcted in damages twice over. In light of that undertaking the court held that risks posed by the concurrent proceedings were now so low that the arbitration could not be characterized as oppressive. It is significant in the case before us that a majority in the Court of Appeal accepted that the undertaking by the Appellate nullified any vexation or oppression that might otherwise be caused by the simultaneous pursuit of the arbitration and the local claim for compensation...." (emphasis supplied) 126. The plea that Plaintiff-Union of India will be vexed twice over in respect of identical claim or that there is a possibility of conflicting awards by two different tribunals, is resolved by accepting the Defendants‟ offer dated 9th January, 20....
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....r, as the present case arises from an international 'treaty route', the standard of disclosure has to be at its highest. 130. This Court may mention that it had passed the injunction order dated 22nd August, 2017 as it had been averred in the plaint that the injunction was necessary because Plaintiff-Union of India had refused to participate in the process of the constitution of the India-United Kingdom BIPA Tribunal and absent an injunction, Plaintiff-Union of India would be forced to participate in the process. In para 60 of the plaint it has been averred, "...if India continues to persist in its decision not to participate in the proceedings.... the full tribunal may be constituted without India being represented...." 131. This Court is of the opinion that if the letters dated 07th August and 11th August, 2017 had been disclosed, it would have shown that, there was no urgency to pass an interim order. Also, the fact that the Plaintiff-Union of India had made a commitment on 07th August, 2017 to appoint an arbitrator (if their application before the India-Netherlands BIPA Tribunal failed) was not disclosed to this Court. 132. However, as the learned senior counsel for Pl....
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....tional arbitration, whether a particular dispute falls within the scope of the arbitration agreement. 137. Whether the arbitrators under the India-United Kingdom BIPA choose to stay the arbitral proceedings properly brought before them, whilst related arbitration proceedings are pending is entirely a matter for them under the doctrine of kompetenz-kompetenz and the circumstance that arbitrators may do so cannot form an appropriate basis for the National Court to restrain the arbitration. 138. It is pertinent to mention that the arbitral tribunal in Orascom case considered each claim with the assistance of expert evidence to conclude that they overlapped with the claims made under a previous settled arbitration. It was only after such factual determination that the tribunal found Orascom's action to be an abuse of the right to invoke arbitration. In fact the Orascom Award is an illustration of the competence inherent in the BIPA arbitral tribunal to determine its own jurisdiction. 139. This Court is of the opinion that it should apply the principle of kompetenz-kompetenz with full rigour as India-United Kingdom BIPA arbitral tribunal would be better placed to assess the....
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....interpret or apply unincorporated International treaties between an investor and a host State. Consequently, in the opinion of this Court, there is no legal bar over the subject matter of the suit. 145. Further, Investment Arbitration disputes are fundamentally different from commercial disputes as the cause of action (whether contractual or not) is grounded on State guarantees and assurances (and are not commercial in nature). 146. As the present case is not a commercial arbitration, the Act, 1996 shall not apply. This Court is of the view that in a situation where the Act, 1996 does not apply, its inherent powers are not circumscribed by anything contained in the Act and the ratio in McDonald (supra) will not apply. Even in commercial arbitration, the jurisprudence of minimum intervention is relatively of recent vintage. It has its roots in Article 5 of the Model Law of 1985 which then took fifteen to twenty years to gain traction and general acceptance in the body of nations. 147. Notwithstanding, this limited intervention role, it is not unknown for Courts to issue anti arbitration injunction under their inherent power, especially when neither the seat of arbitration n....