[This article is authored by Vivasvan Prakash and Shrey Uttam, Law Graduates from RMLNLU, Lucknow]

Keywords: International Commercial Arbitration, National Courts, Judicial Interference.

Introduction

Indian judiciary has around 17,000 professional and diligent judges. However, the system is under strain, with more than almost 30 million pending cases leading to delays that are endemic and an unnecessary hurdle plaguing our system. On average, a commercial case in India takes around 5 to 15 years to reach its judgment stage. This complex legal mechanism, along with delay in justice, adversely impacts the ease of doing business in India. With the rising Indian aspiration to become a leading economy in Asia and subsequently to match the prowess of the Chinese economy, it is pivotal that an investor-friendly atmosphere in the form of labour reforms, easy clearances and a mechanism which is effective to deal with any dispute is created. The Indian state has taken concrete steps in the past by enacting special legislation known as Arbitration and Conciliation Act, 1996 (“A&C Act”), which has seen subsequently amended in 2015. Further, to make India an arbitration hub, certain suggestions have been tabled in parliament in the form of Arbitration and Conciliation (Amendment Bill) 2018. One of the key highlights of this bill is the creation of an arbitration council for grading arbitration institutions. Minimum court inference and timely disposal of cases is the mantra to create a business-friendly environment.

Role of National Courts in International Commercial Arbitration

The National Court plays a vital role in international commercial arbitration in situations where a contracting party tries to bring the dispute before the national court instead of taking the dispute before the arbitral tribunal as agreed by both of the concerned parties. In such cases, the national courts interfere for the sake of justice. An English Judge, Lord Mustill, had compared the relationship between national courts and arbitrators to a relay race [i]. As and when the arbitration proceeding begins, then the baton is in the hands of the national courts for enforcing the arbitration agreement. However, when an arbitrator takes over the burden, then it keeps the baton with himself till the passing of an award. The role of national courts can be divided into three phases which have been reproduced below:

1. At the beginning of the arbitration proceeding;
2. During the arbitration proceeding; and
3. At the end of the arbitration proceedings.

At the Beginning

Nowadays, whenever any party is entering into a contract, they are making sure that the dispute must be resolved through any alternative dispute mechanism and arbitration is one of them. It is done to cut short the time period and amount of money, which are very less in arbitration as compared to litigation. When arbitration proceeding starts, then there are a minimum of three situations where the court’s interference is extremely important. They can be:

1. Enforcement of the arbitration agreement,

2. Establishment of the arbitral tribunal/appointment of arbitrators, and

3. Challenges to the jurisdiction.

1. Enforcement of Arbitral Agreement

The court’s interference becomes important when considering a situation where a contracting party is trying to avoid the arbitral proceeding by initiating a court proceeding over the same dispute. Such power has been vested in the hands of the national courts through Article II of the New York Convention and Article 8 of UNCITRAL Model Law. However, as far as Indian legislation is considered, it would be fruitful to see the provisions mentioned in Sections 8 and 45 of the A&C Act. All the provisions mentioned state the same that whenever any such situation arrives, then the national court will refer the party to an arbitrator/arbitral tribunal as the case may be until or unless the court finds the agreement to be null or void.

2. Establishment of the arbitral tribunal/appointment of arbitrators

In a case where any party is trying to sabotage the arbitration proceeding by not taking part in the initial stages of the proceeding of appointing arbitrators or constituting an arbitral tribunal as agreed in the agreement by both the parties, then, in that case, it has been clearly mentioned in Section 11 of the A&C Act that the national court can interfere in such a situation and can appoint the arbitrators or constitute the arbitral tribunal.

3. Challenging the arbitral jurisdiction of the tribunal

There are other situations as well where the role of national courts becomes important, and challenging the jurisdiction of the arbitral tribunal is one of them. If any party is trying to challenge the jurisdiction of the arbitral tribunal, then the same can be made only at the initial stage of the arbitral proceeding. One thing is very important to point here that in case any party is successful in challenging the jurisdiction of the arbitral tribunal, then, in that case, the whole proceeding of the arbitration gets terminated.

The whole discussion is being supported with the help of the UNCITRAL Model Law and Section 16 of the A&C Act. The decision on the issue of the jurisdictional challenge rests with the concerned national courts. There are three grounds on which the jurisdiction can be challenged, and the same have been reproduced below:

1. On the existence of the agreement;
2. On the validity of the agreement; and
3. On the scope of the agreement.

During Arbitration Proceedings

At this stage, the burden has been shifted to the arbitrators, and now it is the responsibility of the arbitrators to conduct the arbitration proceedings. Nevertheless, there have been situations where the interference of the national courts becomes very important for the sake of proper and fair arbitration proceedings. During the arbitral proceeding, whenever any evidence is to be recorded or an order needs to be made for the preservation of the property, then in those situations, the role of national courts is crucial. The same has been recognized in the A&C Act through Section 9, the heading of which reads – Interim Measures of Courts.

At the End of Arbitration Proceedings

This is the last of the arbitration proceeding, and at this stage, the burden again goes back to the national courts. Here, the arbitrators have already performed their duties by passing an arbitral award after conducting a fair and proper arbitration proceeding, but like litigation in arbitrations also there might be an aggrieved party, and in order to provide justice to the aggrieved one, the A&C Act provides for the setting aside of the arbitral award under Section 34 of the said Act. Not only this, but the national courts also play an important role at the stage of enforcement of the arbitral awards, and the same has been provided under Section 48 of the A&C Act.

Along with the above-stated duties, the national courts have another significant role in the correctional proceedings as provided under Section 33 of the A&C Act. The role of the national courts end at this stage, and the whole burden then shifts to the appellate court in case there is an appeal as may be provided in the said Act.

Conclusion

The whole purpose of the arbitration is to lessen the economic burden of the parties as litigation is very costly and time-consuming, as already mentioned above. But at some stages, the role of national courts is very important for the sake of proper and fair proceedings. Due to this very reason, the UNCITRAL Model Law and New York Conventions and National law have provided various stages when the national courts have been given the power to interfere in the proceedings of the arbitration proceedings. However, it has been kept in mind that there should be no overreach by the judiciary in the arbitral process as it would create a problem in the arbitration proceedings. Keeping the problems in mind, the legislators had come up with an amendment in the year 2015 which clearly restricts the role of national courts at different stages, for instance, by using words like ‘prima facie’ in Section 11 of the A&C Act. Moreover, the courts have also restricted the scope after interpreting the provisions correctly and resolved the issue of applicability of Part I in foreign awards in BALCO’s case, which is the landmark judgment in arbitration jurisprudence. Therefore, it can be said that the role played by national courts is important, but the same must be done with some restrictions.

[i] Lord Mustill, “Comments and Conclusions in Conservatory Provisional Measures in International Arbitration”, 9th Joint Colloquium (ICC Publication, 1993).