Professional Documents
Culture Documents
ARTICLES
Lew, “The Law Applicable to the Form and Substance of the Clause”, ICCA
Congress Series No.14, 1998, Paris
BOOKS
Commercial Arbitration, 1982 Edition
Halsbury's Laws of England, Fourth Edition, Volume 2
DICTIONARY
Black’s Law Dictionary, (Brian A. Garner ed., 7th ed., West Group, 1991)
Judicial Dictionary 14th edition; Lexis Nexis ;(Butterworths)
STATUTES
CIAC Rules
Arbitration and Conciliation Act, 1996
General clauses act,1897
FOREIGN STATUTES AND INTERNATIONAL INSTRUMENTS
UNCITRAL
Convention of International Sale of Goods,1980
United Nations Convention on the Recognition and Enforcement of Foreign
Arbitral Awards, New York, 10 June 1958
WEBSITES
www.manupatra.com
www.legalpundits.com
www.helplinelaw.com
www.indlaw.com
www.judis.com
www.supremecourtonline.com
www.ciac.in
www.kaplegal.com
TABLE OF CASES
25-1-2009
AND
“14.2. Arbitration
a) All and any dispute arising out of or in connection with this contract,
including any question regarding its existence, validity or termination,
shall be referred to and finally resolved by arbitration in New Delhi in
accordance with the Arbitration Rules of the Construction Industry
Arbitration Council ("CIAC Arbitration Rules") for the time being in
force at the commencement of the arbitration, which rules are deemed
to be incorporated by reference in this clause.”
QUESTIONS PRESENTED
A1. The Tribunal is not constituted as per the Agreement of the parties.
A2. Mr. Y’s association with the Government would invariably bring in the
element of bias in the decision making process.
A3. The constitution of the Tribunal is not in accordance with the Indian Law
on Arbitration.
The contention here is that (A1) the Tribunal is not constituted as per the
Agreement of the parties; (A2) Mr. Y’s association with the Government would
invariably bring in the element of bias in the decision making process; (A3) the
constitution of the Tribunal is not in accordance with the Indian Law on
Arbitration; and (A4) the Arbitral Tribunal does not have jurisdiction to decide
the issue of damages for loss of profit.
A1. The Tribunal is not constituted as per the agreement of the parties.
An arbitration clause in a commercial contract is an Agreement subsumed
within an Agreement.1 Disputes pertaining to the Agreement to arbitrate need
not necessarily be subject to the same laws as those applicable to the
commercial bargain itself or those governing the arbitral proceedings.2 Thus,
an express stipulation by the parties that a particular provision shall apply to
the appointment of arbitrators shall reign supreme.3
1
Union of India v. McDonnell Douglas Corp. [1993] 2 Lloyd’s Rep 48
2
X.L. Insurance Ltd. v. Owens Corning [2000] 2 Lloyd’s Rep 500
3
Lew, “The Law Applicable to the Form and Substance of the Clause”, ICCA Congress Series No.14,
1998, Paris
Agreement had express mentioning about the appointment of arbitrators
which was agreed upon by the parties.
The Claimants were the first to nominate their arbitrator, Mr. X, to the arbitral
tribunal5. For the constitution of the arbitral tribunal to be in conformity with
the Concession Agreement it was the responsibility of GOD to have nominated
4
Deewan Singh and Ors. v. Rajendra Pd. Ardevi and Ors, AIR 2007 SC 767
5
Statement of Facts
an arbitrator who is a member of the local authority, which they have failed to
accomplish. Thus evidently the constitution of the arbitral tribunal is
inconsistent with the Concession Agreement.
A2. Mr. Y’s association with the Government would invariably bring in the
element of bias in the decision making process.
Reasonable apprehension of bias in the mind of a reasonable man can be a
ground for removal of the arbitrator. A predisposition to decide for or against
one party, without proper regard to the true merits of the dispute is bias. There
must be reasonable apprehension of that predisposition. The reasonable
apprehension must be based on cogent materials6. The observations of Mustill
and Boyd describe that the test for bias is whether a reasonable intelligent man,
fully appraised of all the circumstances, would feel a serious apprehension of
bias7.
6
Secretary to the Government, Transport Department Mashas Vs. Munuswamy AIR 1988 SC 2232
7
Commercial Arbitration, 1982 Edition, page 214. Halsbury's Laws of England, Fourth Edition,
Volume 2, para 551, page 282
towards his employer, GOD. Thus it is very important to question Mr.Y’s
independence.
As mentioned above, the Hon’ble Supreme Court has itself justified “reasonable
apprehension of bias.” Thus Mr.Y would invariably bring in the element of bias in
the decision making process, by virtue of his non independence. Thus
disqualifying him from constituting the arbitral tribunal.
A3. The constitution of the Tribunal is not in accordance with the Indian Law
on Arbitration.
The Concession Agreement under Article 1.1 defines ‘Arbitration act’ as the
Arbitration and Conciliation act,1996 which shall include modifications to or
any re enactment thereof as in force from time to time. The Arbitration and
Conciliation act,1996 is one of the governing legislations in matters pertaining
to arbitration in India.
The fact that Behemoth and GOD have chosen the place of arbitration as India
makes the arbitration and conciliation act yet more important. There are
express provision in the act wherein the issue of appointment of arbitrators are
dealt with.
The Concession Agreement under the title ‘Dispute resolution’ in Article 14.2
provides for an alternate mode of appointment of arbitrators in conformity
with the CIAC rules. The alternate procedure agreed upon by the parties
mandates that one of the arbitrators should be a member of the local authority.
Unfortunately in the instant case the respondents have failed to fulfill this
requirement. Thus evidently the alternate procedure agreed upon by the parties
have failed. It is in this context that Section 11 of the Arbitration and
Conciliation Act, 1996 comes to the limelight.
Section 11(2) states that-
“Subject to sub-section (6), the parties are free to agree on a procedure for
appointing the arbitrator or arbitrators”
Section 11(2) permits the parties to agree on an arbitrator or arbitrators. But in
the instant case the Agreement for appointment of arbitrators has been
violated. The respondents have failed to appoint an arbitrator who is a member
of the local authority. Thus, herein the procedure previously agreed upon is
inactive.
B. THE TERMINATION OF THE CONCESSION AGREEMENT IS INVALID.
B1. The Agreement was wrongfully terminated and there was a violation of
procedure for termination stated in the Agreement.
According to Article 11.2 (A) (1) of the Concession Agreement GOD shall be
entitled to terminate this Agreement by issuing a termination notice due to an
event of default by from the part of the Concessionaire. The Event of Default,
explained from Articles 11.1 (a) (1) to 11.1 (a) (9), is an event executed by the
concessionaire unless it is an event of default of GOD or a Force Majeure event.
Whereas a force Majeure event is an event which (1) is beyond the reasonable
control and not arising out of the fault of the concessionaire and the
concessionaire (2) has been unable to overcome such act or event by the exercise
of due diligence and reasonable efforts, skill and care, and (3) has a Material
Adverse Effect on the project.8
On the outset of the project, GOD who was entitled to give the physical
possession of the Project Site free from Encumbrance within 30 days from the
date of the Agreement had failed to do so. After the delayed acquisition of the
Project Site from GOD the concessionaire had initiated the work to achieve mile
stone 1 within the prescribed time but was restricted from working due to a stay
order from the High Court of Delhi, which was provoked by a PIL from the NGO
“Eco Friendly” alleging that the Project would have adverse effects on water
bodies and will deplete the resources of the river even though, through Article
2.8 of the Concession Agreement, GOD had affirmed that the Project/Project Site
had been granted clearances relating to environmental protection and
conservation. The above mentioned events had caused great delay in attaining
Milestone 1 by the Concessionaire. At the same time, the Independent Engineer
appointed, had failed to furnish the report regarding the Drawings of the Project
(as per Article 7.1) within 15 (fifteen) days of the receipt of the Drawings in
accordance to Article 7.2 (b) of the Concession Agreement. The Concessionaire
had resubmitted the Drawings on 22-04-2007 for approval to the Independent
8
Article 13 of the Concession Agreement
Engineer who, for the second time, failed to furnish the report regarding the
Drawings within 15 (fifteen) days.
Here, the claimant claims the above incidents as Force Majeure Events, as the
above events satisfy the requirements of a Force Majeure Event, delaying the
Concessionaire from achieving Milestone 2 and leading the GOD to terminate the
Agreement without an Event of Default of the Concessionaire whereas the
Agreement was subject to Termination by the GOD only upon the occurrence of a
Concessionaire Event of Default.
Since the delay in achieving Milestone 2 of the Project was caused due to Force
Majeure Events and at the same time it being not an Event of Default of the
Concessionaire, the claimant claims that the Agreement was wrongly terminated
by the GOD and the Termination was not proper.
B2. Problems associated with RMC & Co. could in no way be linked to
BEHEMOTH as RMC & Co. is a separate entity.
BEHEMOTH INTERNATIONAL (PVT) LTD is a consortium incorporated under
the Companies Act, 1956 and is led by RMC & Co. a reputed Indian construction
company and KUTSCO a large Korean Chaebol. The claimant claims that even
though RMC & Co forms an integral part of the consortium it is itself still a
registered company. If it were the same entity, then there would not have arisen a
need for BEHEMOTH to register. So the claimant claims that RMC & Co. is a
separate entity. Even if RMC & Co. had not been a separate entity when related
with BEHEMOTH, the allegations against RMC & Co. ought not been considered
for Termination of the Agreement by the GOD because; even though Mr. Ramu
B., Chairman of the Board of Directors of RMC & Co. had disclosed of the
financial irregularities in the company, the regulatory bodies did not recommend
or command for dissolving the company, but only placed the company for
surveillance. This meant that the company was able to continue to exist even in
the light of the disclosure and the surveillance of the regulatory bodies. Thus the
problems faced by RMC & Co. in no way would have had any influence in the
running of the Consortium. Thus the claimant claims that problems associated
with RMC & Co. could in no way be linked to BEHEMOTH as RMC & Co. is a
separate entity.
“In awarding a contract the State, its corporations, instrumentalities and agencies have
the public duty to be fair to all concerned.” [Emphasis added]
B4. GOD has violated the provisions of the Agreement as it has failed to pay
the contractually stipulated Termination Payment and BEHEMOTH should be
entitled for damages on account of loss of profit.
Article 11.4 stipulates about the Termination Payment, pursuant to Article 11,
which is to be paid by the GOD to the Concessionaire after Termination of the
Concession Agreement. Article 11.4 states that,
“The Termination Payment pursuant to Article 11 as the case may be, shall be payable to
the Concessionaire by GOD within thirty days of demand being made by the
Concessionaire with the necessary particulars duly certified by the Statutory Auditors. If
GOD fails to pay Termination Payment in full within the said period of 60 days, the
9
AIR 2000 SC 801
amount remaining unpaid shall be paid along with interest @ SBI PLR plus two percent
from the Termination Date till payment.”
Here; after the Termination Process was completed, the GOD had failed to
furnish the Termination Payment to the Concessionaire. The Termination
Payment, supposed to be paid within 30 days, by the GOD on demand of the
Concessionaire was not paid even after the Concessionaire had demanded for
payment. Thus it is a violation of Article 11.4 of the Concession Agreement. At
the same time, the claimant has claimed that the Termination was unilateral so
the Concessionaire is entitled for damages for loss of profit.
PRAYER FOR RELIEF
In light of the above submissions, Counsel respectfully requests the Tribunal to find that:
A1. The Tribunal is not constituted as per the Agreement of the parties.
A2. Mr. Y’s association with the Government would invariably bring in the
element of bias in the decision making process.
A3. The constitution of the Tribunal is not in accordance with the Indian Law
on Arbitration.