IS SOFT LAW THE WAY TO REGULATE PROCEDURE IN INDIAN ARBITRATION
Adv. Rijul Dubey & Adv. Srijan Jha
In another push towards institutionalization of arbitration, the New Delhi International Arbitration Centre Act, 2019 (NDIAC Act) received Presidential assent and is on its way to create an international arbitration centre in India. However, in the backdrop of favouring party autonomy in absolute terms by the Arbitration and Conciliation Act, 1996 (the Act) (s.19), and the UNCITRAL Model Law on International Commercial Arbitration (Model Law) (A.19), the NDIAC Act, also, does not provide for rules of procedure at this juncture.
The making of NDIAC is to be taken with a pinch of salt, because some of its Indian predecessors, like the Delhi International Arbitration Centre and Mumbai Centre for International Arbitration in their rules (here and here) have not elaborated or provided a model on how the arbitration procedure is to operate. Party autonomy is an essential component, however a void in the procedural regulation brings uncertainty and a tremendous amount of work to the professionals to tailor make rules of procedure for every arbitration individually. The authors are of the opinion that a guideline or a soft law instrument highlighting the basic standard and prevalent best practices shall be there for reference to the parties and their counsels, so that they can customize, omit and agree on the procedure where they deem fit.
This article is dedicated to the narration of soft law, its pros and cons and ends with an augmentation to an arbitration agreement which the authors believe will bring in normativity (reference), certainty and uniformity to the procedure.
Soft law, such as a UN General Assembly Resolution, is quasi-judicial in nature, and even though it holds a persuasive value and underlines the practice affirmed by nations, is not binding, and hence its purpose is to provide guidance where the existing black letter law is deficient. Its main characteristics are avoiding addressing the obvious, respecting different approaches in different jurisdictions, boosting coordination, not overriding binding law, and being inclusive of representatives at all levels.
Assistance from soft laws provides guidance for both substantive questions, such as UNIDROIT Principles for International Commercial Contracts, INCOTERMS, UN Global Compact Principles and International Financial Accounting Standards, as well as procedural aspects. Soft laws are found in the form of guidelines, practices, customs, para regulatory texts and non-binding rules and can be made by renowned bodies such as International Bar Association (IBA), International Law Association, International Council for Commercial Arbitration, CIArb or arbitral institutions such as LCIA, ICC and SIAC or professional and academic working groups, such as the Prague Rules.
Arbitration is a dispute resolution mechanism and relies excessively on procedure. With a sense of direction in the proceedings, there will be an increase in predictability, while providing speedy trials without vitiating expectation of clients too drastically. Regular application of soft laws shall provide a common playing field, bring transparency and ensure that inexperienced counsels and arbitrators don’t lose to void of unwritten rules. Also, due to party autonomy regarding norms to be applied, it doesn’t make the structure ‘one size fits all’. Soft law guidelines and notes are bound to exercise normativity and bridge the gaps, so that the arbitrator does not act against the parties’ wishes.
The most important advantage of soft laws’ use is codification of the best practices. The creation of norms and practices are aimed at compiling and creating for further use, and this creation is mostly a result of tireless efforts from experienced professionals and distinguished legal minds, making the soft laws results of experience and foresight.
3. Avoiding Cons
The very existence of soft laws and arguments favouring it have been seen as clipping the wings of arbitration, particularly in the fields of flexibility, party autonomy and enforceability of awards.
Soft laws are constantly criticized for making arbitration lack flexibility due to enormous construction of guidelines. In our opinion, guidelines help a case during the times of deadlocks. In absence of soft laws, when there is disagreement between parties, an arbitral tribunal cannot come up with a solution instantly. Here, soft law provides required flexibility to the tribunal to bend itself and move ahead of the deadlock. So, even if it is believed that existence of soft laws results in loss of flexibility, it happens to be a minor loss which can be avoided. Parties have the autonomy to exclude and include any part, section, rule and regulations in the set of soft laws. Party autonomy is not stripped off with the incorporation of soft laws, they’re just set in a different scenario, as soft laws are used post acceptance. However, usage of such instruments by the arbitrator in the event of expressed or implied exclusion might create arguments against the enforceability of an award, or a party could make a claim with regard to a fair trial
The result of the Survey on the Use of Soft Law Instruments in International Arbitration conducted between February and March 2014 was eye-opening, as it showed the prominent instruments of soft law being used in arbitration, such as the IBA Rules on Taking Evidence, being used regularly across the globe in international arbitrations.
It is not the case that soft law instruments are not put into usage or consideration in India, or they are not exhaustive while being recommended. Commendable here, are the Rules of Domestic Commercial Arbitration by the Indian Council of Arbitration and the recent Indian Arbitration Forum Guidelines for Conduct of Arbitrators, v.2.0, which have provided in great detail the procedure that may be undertaken for communication between the entities, submissions, evidence, witness examination and hearings. These guidelines are great examples of soft law, are strongly worded, respect party autonomy and elaborate in an exhaustive way. Yet, the Indian Courts have only accepted the existence of soft-law guidelines in a few cases such as HRD Corporation v GAIL, and Videsh Sanchar Nigam Ltd. v Shapoorji Pallonji and Co and not provided any precedent to appreciate their usage.
The following rules conform to the international standard for carrying out the arbitration proceedings:
Single exhaustive soft law instruments:
ICCA Rio Code, UNCITRAL Notes on Arbitral Procedure, and The Prague Rules (mentioned earlier).
Specific guidelines addressing individual components of the procedure:
ILA Final Code on Res Judicata in Arbitration, IBA Guidelines on Party Representation, IBA Rules on Taking Evidence, IBA Guidelines on Conflict of Interests, CIArb Protocol for Use of Party Appointed Expert Witnesses in International Arbitration, CIArb Guidelines on Security of Costs, CIArb Code of Ethics, and The Hague Principles on Ethical Standards for Council Appearing before International Courts Tribunals.
The authors, finally, suggest addition of the following clauses, or paraphrased versions of the same, in the arbitration agreements-
“X.X. The parties having agreed to the form, seat, curial law and lex arbitri of arbitration in the previous clauses of this ongoing article, may agree that the procedure regarding written and oral submissions from the parties, hearings, admission of evidences, examination and cross-examination of witnesses, conduct of parties, counsel ethics, conflicts of interests and communication of award and orders, would be derived from well accepted standards, rules or guidelines mentioned in IBA, ICCA, IAF, LCIA or any other standard rules, guidelines or practice, the parties deem fit, in addition to the Guidelines or Procedural Rules of the Institution selected for arbitration (if any). The parties shall communicate to the arbitrator(s), the rules that have been so agreed between the parties, right after the appointment of the arbitrator(s).
X.XX. In case the agreed laws are not adequate, the arbitrator(s) shall have the liberty to apply any such internationally accepted rule, standard or guideline, as he may deem fit, provided that the parties do not express in writing their rejection for applying the guidelines.
X.XXX. In the event of conflict between the curial law, lex arbitri or the rules of the institution with any of the agreed international standard, rules or guidelines, the curial law, lex arbitri or the rules of the institution would prevail.”
Through this clause, the authors have tried to include all the aspects of procedure in an arbitration that have been addressed by a guideline with repute and standing, while making sure that the distinction of binding law and soft law remains intact.
Soft law comes with its own share of criticism; however, its advantages are far more superior and its disadvantages are avoidable. Positive results would be achieved in the Indian domestic and international arbitrations, post the inclusion of 2019 Amendment (which is criticized for missing more spots than hitting), if the parties decide the rules of procedure beforehand, and the arbitrator faces less roadblocks during the proceedings.