Life under lockdown gave some of us time to pause, think and reflect. And one of the things that I did reflect on were some of my experiences in various arbitrations, domestic and international. These reflections led to a conscious acknowledgement of the importance of the procedural order of the arbitral Tribunal in which it lays down the rules of procedure and conduct of the arbitration proceedings that it proposes to follow (often Procedural Order No.1 or P.O.1), and the importance of an effective arbitral institution administering the arbitration. I share with you some thoughts on these two important aspects of arbitration.
Reply fact witness statements
In an Indian-seated international commercial arbitration, P.O.1 provided for simultaneous exchange of fact witness statements of the claimants and respondents, and that "Reply fact witness statements are to be limited solely to responding to matters raised in the opposing Party's fact witness statements". While a significant portion of the evidence was documentary, there were certain key aspects which required witness evidence. The claimants awaited the respondents' fact witness statements, without filing witness statements of their own. Then, having reviewed the respondents' witness statements, the claimants submitted evidence of their witnesses, ostensibly as "Reply fact witness statements". We objected to this. The Tribunal acknowledged that the claimants' "Reply fact witness statements" were not "limited solely to responding to matters raised in the opposing Party's fact witness statements", and permitted the respondents to file witness statements responding to such additional matters. Perhaps such a situation could have been avoided if P.O.1 had permitted reply fact witness statements only with the leave of the Tribunal, and only in relation to such aspects of the opposing party's fact witness statements as the Tribunal permitted, which would exclude inter alia matters in relation to which the party seeking leave would have known (based on the pleadings and issues) it was required to lead evidence to establish its case.
Baseless denials
A recent experience involved bare and baseless denials by a respondent, in circumstances which made such denials nothing but obstructive. The respondent had itself incorporated the claimant company, in which it later remained a significant, albeit minority, shareholder as a joint venture partner. Apart from being a shareholder, the respondent had representation on the board of directors of the claimant, as also on key committees of the board. Despite knowledge of certain facts, the same were denied. Other facts were denied although the respondent subsequently admitted that it did not have records or personnel from the relevant period, and evidently there was no basis for such denials. When directed by the Tribunal to respond to certain interrogatories, the respondent admitted receipt of certain amounts, which it had earlier simply denied and called upon the claimant to prove. This obstructive approach unnecessarily increased the time, effort and expenses involved. The respondent purported to rely on a misconceived understanding of the burden of proof, ignoring the long-accepted principle that entitles the Court (or Tribunal) to the best available evidence.
One way to address this issue would be at the time of awarding costs, by either awarding costs against an unsuccessful party making frivolous denials, or by disallowing costs a successful party making such denials would have otherwise been entitled to. This, however, would be more retributive than preventive. Accordingly, another way could be to include appropriate provisions regarding denials in P.O.1, analogous to those contained in Rule 3A, inserted in Order VIII of the Code of Civil Procedure, 1908, pursuant to the Commercial Courts Act, 2015. P.O.1 could require the respondent, in its statement of defence, to clearly state which of the allegations in the statement of claim it denies, which allegations it is unable to admit or deny, but which it requires the plaintiff to prove, and which allegations it admits. Where the respondent denies an allegation of fact, the respondent must be required to state the reasons for doing so, and if it intends to put forward a different version of events from that given by the claimant, it must state its own version. If the respondent disputes the claimant's valuation of the claim, the respondent must be required to state its reasons for doing so, and if able to, must give his own statement of the value of the claim. P.O.1 should provide that every allegation of fact, if not denied in the manner so provided, shall be taken to be admitted. Obviously, the same provisions would apply to denials in relation to a counter-claim.
Strategically delayed filing of documents
In an ad hoc arbitration, we faced a situation of belated and opportunistic filing of documents by the claimants. Several documents, most of which were quite evidently required to be filed at the outset to establish the locus of one of the claimants, were not filed with the statement of claim, nor with the rejoinder, despite the statement of defence raising objections inter alia to the locus of such claimant. When the respondents requested production of a particular document, the claimants declined to produce the requested document, but instead slipped in these other documents that they had earlier withheld, purportedly in response to the request for production. Despite strenuous objections to such belated and opportunistic introduction of such documents, the documents remained on record. The respondents were told by the Tribunal, after recording of evidence had commenced, that they could apply to amend their statement of defence, which application "as and when moved, shall be considered by the Tribunal on its own merits". While the respondents would have been entitled, as of right, to deal with these documents in their pleadings had such documents been filed (as they should have been) earlier, the respondents now require the Tribunal's indulgence to do so.
Such a situation could have been avoided through appropriate provisions in P.O.1, analogous to those contained in Order XI of the Code of Civil Procedure, 1908, as introduced pursuant to the Commercial Courts Act, 2015. P.O.1 could require that the statement of claim should include a declaration that all documents in the power, possession, control or custody of the claimant, pertaining to the facts and circumstances of the proceedings have been disclosed and that the claimant does not have any other documents in its power, possession, control or custody. P.O.1 could also provide that the claimant shall not be allowed to rely on documents which the claimant had, but did not disclose, along with the statement of claim, except by leave of the Tribunal, to be granted only upon the claimant establishing reasonable cause for such non–disclosure. Similar provisions could be included regarding documents to be relied on by the respondent.
Document production
P.O.1 should also contain appropriate provisions to facilitate the document production phase. Useful reliance could be placed on Article 3 of the International Bar Association Rules on the Taking of Evidence in International Arbitration regarding the contents of a Request to Produce Documents, including a statement as to how the documents requested are relevant to the case and material to its outcome. The requests made in the form of a "Redfern Schedule" would assist the Tribunal in deciding whether or not to direct production of a document by a party who objects to its production. If at the outset it appears appropriate, P.O.1 could also contain provisions for submission of a privilege log, requiring a party to provide appropriate details regarding privilege claimed by it in relation to a document as a ground for objecting to its production.
In-person hearings
Another matter which may be spelt out in P.O.1 is what decisions require an in-person hearing and what matters can be decided or resolved by way of written briefs and/or by way of teleconference or video conference. Unfortunately, there is a tendency among Indian tribunals to insist on in-person hearings even for minor procedural matters. Often, matters to be decided at such in-person hearings are those which could, and should, have been dealt with in P.O.1 itself. Instead, in-person hearings are held, and where the stakes are high, Senior Counsel are briefed, dramatically increasing costs, which are totally avoidable. Assuming that the reason for holding in-person hearings is based on an apprehension of subsequent complaints that a party was not given a full opportunity to be heard, this apprehension could be avoided by addressing the matter in P.O.1 itself, and consequently, any subsequent complaints would be obviated by the parties' acceptance of the P.O. and the procedure to be followed thereunder. This matter would be of greater significance in the present COVID-19 scenario where there are enhanced concerns regarding travel, assembly of persons and costs. A strong arbitration institution which is effectively monitoring the administration of an arbitration would assist in minimising such in-person hearings and costs.
The current situation has brought focus on the importance of technology in facilitating arbitration proceedings. The virus frowns more on those with greater experience - whether arbitrators, lawyers or party representatives. The need for hearings, procedural and substantive, via video conference has greatly increased. Accordingly, this is something that could be provided for in P.O.1 to ensure a fair and effective opportunity of being heard. An arbitral institution which is able to provide or organise the requisite logistical arrangements would be of great assistance. I have been involved in an arbitration where the Tribunal and counsel were sitting in one country and the witness being cross-examined was in another country. While such means of cross-examination was fairly effective, it had been used for less crucial witnesses in those proceedings, whereas crucial witnesses were cross-examined face-to-face. I'm unable to do an apples-to-apples comparison as both the cross-examining counsel and witness were different. I do know, however, that the logistics involved would be a challenge if a lockdown is in force at some of or all the relevant locations.
Hearing bundles
P.O.1 could also provide for hearing bundles or "core" bundles, and the manner of document filing could be tailored accordingly, to enable efficient and effective hearing bundles. Provisions regarding hearing bundles in subsequent P.O.'s often result in the form and nature of the hearing bundles being driven by the manner in which documents have already been filed. Often the contents of the hearing or core bundles is a matter on which parties do not agree on, resulting in numerous and bulky volumes, defeating their very purpose. This is not too much of an issue when legal e-book service providers are handling documents during a hearing. DMD's experience with one such service provider, Law In Order, at a bilateral investment treaty arbitration hearing at the Peace Palace was simply superb. Every document was up on the screens in time, even at a minute's notice. If this facility can simultaneously pop up documents on screens in front of the Tribunal and in front of a witness at a remote location, it would greatly facilitate virtual hearings. Unfortunately, an e-book wasn't used during my abovementioned experience of inter-country cross-examination.
Errant arbitrator
In one arbitration there was a reasonable apprehension that the arbitrator appointed by the respondents was likely to withdraw from the arbitration at a time which would scuttle a five-day hearing that had been scheduled a few months in advance. The respondents had already tried to have the London-seated arbitration stayed by the Indian courts, initially succeeding but then losing in the claimant's appeal and their own SLP before the Supreme Court. The arbitrator did withdraw two weeks before the hearing was to commence in the U.K., undoubtedly providing plausible reason for doing so. What saved the day was the fact that this was an LCIA administered arbitration, and that under its rules, the LCIA had the power to appoint an arbitrator in place of the arbitrator who had exited. Mindful of this, the respondents promptly appointed an arbitrator and the hearing went ahead.
In another ad hoc arbitration, the arbitrator nominated by the respondents (that DMD Advocates was representing), withdrew in view of increasing unavailability caused by professional and other commitments. Under the arbitration agreement, a period of 90 days was available to appoint a replacement arbitrator, and we wrote to the opposing party reserving such right. The new arbitrator was, however, appointed by our clients in under ten days. Undoubtedly, the claimants would have been less concerned about a potential three-month delay had it been an institutional arbitration where the rules empowered the administering institution to appoint a replacement arbitrator where a party failed to do so within the time specified in such rules.
Illustratively, Article 11 of the LCIA Arbitration Rules (2014) allows the LCIA to make such replacement appointment if the party fails to do so within 14 days, or such time as the LCIA Court finds appropriate. Article 12 of the aforesaid rules contains provisions for dealing with an errant arbitrator. In exceptional circumstances, where an arbitrator without good cause refuses or persistently fails to participate in the deliberations of the Tribunal, the remaining arbitrators jointly may continue the arbitration and make an award notwithstanding the absence of such errant arbitrator, subject to the written approval of the LCIA Court.
Effective arbitral institutions
An effective arbitral institution would also ensure greater adherence to procedural rules, predictability and fair opportunity to present a party's case. In one case, the Tribunal ordered filing of affidavits of admission and denial. The claimant had filed purported photocopies of third party documents in support of the quantum of its claim along with its rejoinder, denying the respondent an opportunity to deal with such documents in its statement of defence. Both parties filed their respective affidavits of admission and denial. The respondent denied the existence of the aforesaid third party documents relied on by the claimant to establish quantum of loss/damages. Despite this, the claimant did not attempt to prove such documents, whereas the respondent proved the documents that it relied on which the claimant had denied. It was stated to the Tribunal by the respondent's counsel that the claimant's witness was not being cross-examined in relation to such documents which had not been proved despite denial thereof. After the evidence of both parties was closed, the purported originals of such documents were simply sent by the claimant under cover of a letter, without applying for or obtaining leave of the Tribunal for such purported submission. This was a strenuously objected to in an application requesting that the documents be ignored, or if they were to be considered, requesting that the respondent should be entitled to cross-examine the claimant's witness thereon. The aforesaid application, although argued, was not decided by the Tribunal but these documents were relied on by the Tribunal in awarding damages under the relevant head of claim. Although this arbitration was administered by an Indian arbitral institution, regrettably the institution acted primarily as a logistics facilitator, and exercised no review or supervision whatsoever over the conduct of the arbitration proceedings, being completely in awe of the retired Chief Justice of India who was the sole arbitrator. Indeed, so insignificant was the institution's role that my first recollection was that this was an ad hoc arbitration. And while the Learned Arbitrator did conduct some aspects of the proceedings as if he continued to be pater familias of the Indian judiciary, and did not enforce his own procedural order, his active participation, familiarity with the record and clear thinking made it an intellectually stimulating experience.
An issue often faced is the hesitation on the part of a Tribunal to decide jurisdictional objections at the outset. I do not suggest that every objection to the jurisdiction of an arbitral tribunal can, or should, be decided by a Tribunal as a preliminary issue. However, in domestic arbitrations, a decision (either accepting or rejecting a jurisdictional objection) at the preliminary stage is quite uncommon. My experiences have been that where a respondent pushes hard for its jurisdictional objection(s) to be heard, the Tribunal will hold in-person hearings, and then hold that the objection will be decided in the award on merits. In one case, three months (and significant amounts by way of Senior Counsel's fees) effectively resulted in the framing of an issue on jurisdiction, to be at the final stage. Recently, a rather technical, but unanswerable, jurisdictional objection was deferred to be decided at the final stage. Perhaps an effective arbitral institution administering arbitration proceedings may deter avoidable prolonging of proceedings where substantive and tenable jurisdictional objections are taken. A happy exception to the trend was the preliminary decision on a point of limitation by the arbitrator (Justice (Retd.) Deepak Verma). However, when the matter reached the Supreme Court [IFFCO Ltd. v. Bhadra Products - (2018) 2 SCC 534] it was held that this decision of the arbitrator did not relate to the Tribunal's own jurisdiction under Section 16 of the Arbitration and Conciliation Act, 1996, but was an interim award that could be challenged separately under Section 34 of the said Act.
And so...
As far as institutional administration of arbitrations in India is concerned, the Government of India has acknowledged its importance in the Arbitration and Conciliation (Amendment) Act, 2019. Although the provisions relating thereto are yet to be notified, they acknowledge some aspects that ail ad hoc Indian-seated arbitrations. The provisions appear well-intended, but whether their implementation will result in an achievement of the objectives remains to be seen. Will they result in professional, efficient and robust arbitral institutions, or just a few more logistics facilitators who remain in awe of and deference to arbitrators who held high office? Hopefully these arbitral institutions will comprise of people focused more on the encouragement and improvement of arbitration in India, than on how being a part of such institution could further personal career ambitions as an arbitration practitioner. In view of my positive experiences with foreign arbitral institutions like the LCIA and the PCA, I eagerly await a realisation of the apparent objectives of the Government of India in relation to institution-administered Indian arbitration.
As far as P.O.1 is concerned, leveraging the extensive arbitration experience within DMD, and drawing from our experiences regarding provisions of procedural orders in domestic, international commercial and bilateral investment treaty arbitrations (with input from Ms. Anuradha Dutt, and assistance from Ayush Dhawan and Haaris Fazili), we worked on a template P.O.1 for Indian-seated arbitrations. A copy is attached. Ayush (ayush.dhawan@dumeds.com) will be happy to provide a "Word" version of the template P.O.1, if requested.
Download: DMD Advocates - Template Procedural Order No.1 (pdf)
DMD Advocates is a leading full-service law firm with expertise in litigation, corporate, taxation, regulatory and intellectual property rights. The firm has a pan-India presence with principal offices in Delhi and Mumbai and associated offices in Bangalore, Chennai, Hyderabad, Cochin and Bhubanes-war.
DISCLAIMER: The views and opinions expressed in this article are those of the author and does not constitute a legal opinion/advice by DMD Advocates. The information provided through this article is not intended to create any attorney-client relationship between DMD Advocates and the reader and, is not meant for advertising the services of DMD Advocates or for soliciting work by DMD Advocates. DMD Advocates does not warrant the accuracy and completeness of this article and, the readers are requested to seek formal legal advice prior to acting upon any information provided in this article. Further, applicable laws and regulations are dynamic and subject to change, clarification and amendment by the relevant authorities, which may impact the contents of this article. This article is the exclusive copyright of DMD Advocates and may not be circulated, reproduced or otherwise used by the intended recipient without our prior permission.
