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2018 (5) TMI 1064 - HC - Indian LawsBilateral investment treaty arbitrations - Jurisdiction and approach of National Courts or on the nature of arbitrations under such treaties - 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. Whether there is a threshold Bar or inherent lack of Jurisdiction with this Court to deal with bit arbitration? - Held that - 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. 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. This Court is of the opinion that the agreement to arbitrate between an investor and the host State which results by following the treaty route is not itself a treaty but falls in a sui generis category. In the present BIPA Arbitration, a contractual obligation and a contractual right is involved and therefore, there is no bar as to the subject matter of the dispute or as to the jurisdiction of the court to hear the present case. This Court is of the view that the intent of the BIPA is to afford protection to investors and such a purpose is better served if the arbitration agreement is subjected to international law rather than the law of the State. After all the rationale behind the bilateral investment treaty is primarily to afford protection to private investor from expropriation by the foreign State (which normally takes place through State Legislation). The treaty also involves a deliberate attempt to ensure for private investors the benefits and protection of consensual arbitration; and this is an aim to which the National Courts should, in an internationalist spirit and because it has been agreed at an international level, aspire to give effect - 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 Arbitration, which are oppressive, vexatious, inequitable or an abuse of the legal process? - Held that - 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. 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 doctrine of abuse of rights is founded upon the notion that a party may have a valid right, including a procedural right, and yet exercise it in an abnormal, excessive or abusive way, with the sole purpose of causing injury to another or for the purpose of evading a rule of law, so as to forfeit its entitlement to rely upon it. The theory of abuse of rights has its origins in private law and is recognized in the great majority of national legal systems. Whether filing of multiples 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? - Held that - 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 - Proceedings could be vexatious where they are absurd. For instance, if having lost a BIPA arbitration on merits, the same investor invokes another BIPA arbitration for the same claim without having made any investment through the second foreign State; but it would not be so held where there are substantial reasons to bring the two sets of proceedings simultaneously - Since it is the case of the Plaintiff-Union of India that the claim under the Netherlands-India BIPA is without jurisdiction, invocation of another treaty by the parent company cannot be regarded as an abuse per se. The investment treaty arbitration between a private investor and the host State, which results by following the treaty route is not itself a treaty, but is sui generis and recognized as such all over the world. It has its roots in public international law, obligations of States and administrative law. As a species of arbitrations, it is of recent origin and its jurisprudence cannot be said to be settled or written in stone; far from it. Investment Treaty jurisprudence is still a work in progress - 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. Tribunal while deciding the said issue will take into account the Defendants undertaking to this Court that if the Plaintiff-Union of India gives its consent, it would agree to consolidation of the two BIPA arbitration proceedings before the India-United Kingdom BIPA Tribunal.
Issues Involved:
1. Jurisdiction of National Courts over Bilateral Investment Treaty (BIT) Arbitrations. 2. Interpretation and application of international treaties. 3. Applicability of domestic law versus international law in BIT arbitrations. 4. Abuse of process in BIT arbitrations. 5. Kompetenz-Kompetenz principle. 6. Suppression of facts in seeking an injunction. 7. Impact of the constitution of the arbitral tribunal on the suit. Detailed Analysis: 1. Jurisdiction of National Courts over BIT Arbitrations: The court held that the jurisdiction of Civil Courts in India is comprehensive except where explicitly or implicitly excluded by law. There is no statutory bar or case law that ousts the jurisdiction of Indian courts concerning BIT arbitrations. India has not signed the ICSID Convention, which negates the role of National Courts, indicating no threshold bar for Indian courts in BIT disputes. 2. Interpretation and Application of International Treaties: The court emphasized that treaties should be interpreted in good faith and in accordance with international law. The Vienna Convention on the Law of Treaties (VCLT), although not signed by India, provides broad guidelines for interpreting treaties. The court noted that the agreement to arbitrate arising from a treaty is not itself a treaty but a sui generis contract subject to international law principles. 3. Applicability of Domestic Law vs. International Law in BIT Arbitrations: The court determined that BIT arbitrations are not governed by the Arbitration and Conciliation Act, 1996, as they are not considered commercial disputes under Indian law. Investment arbitration disputes are grounded in public international law and state obligations, distinguishing them from commercial disputes. 4. Abuse of Process in BIT Arbitrations: The court recognized that National Courts have the jurisdiction to restrain BIT arbitrations that are oppressive, vexatious, inequitable, or constitute an abuse of process. It highlighted that the doctrine of abuse of rights is well-established in both civil and common law jurisdictions and public international law. The court found that filing multiple claims by entities in the same corporate chain is not per se an abuse of process unless it is absurd or without substantial reasons. 5. Kompetenz-Kompetenz Principle: The principle that arbitral tribunals have the authority to determine their jurisdiction was upheld. The court emphasized that issues of jurisdiction and abuse of process should primarily be decided by the arbitral tribunal under the principle of kompetenz-kompetenz. The court noted that the Plaintiff-Union of India should raise the issue of abuse of process before the arbitral tribunal. 6. Suppression of Facts in Seeking an Injunction: The court found that the Plaintiff-Union of India did not disclose certain letters, which could have shown that there was no urgency for an interim order. However, the court gave the benefit of the doubt to the Plaintiff, noting that the letters were not made available to the local lawyers before filing the suit. 7. Impact of the Constitution of the Arbitral Tribunal on the Suit: The court concluded that the suit had become infructuous as the arbitral tribunal under the India-United Kingdom BIPA had been constituted. The court held that any challenge to the tribunal's jurisdiction, including allegations of abuse of process, must be raised before the tribunal. Conclusion: The court dismissed the suit and application, allowing the Plaintiff-Union of India to raise the issue of abuse of process before the constituted arbitral tribunal. The ex parte interim order was vacated, and no costs were awarded. The court's decision emphasized the importance of the kompetenz-kompetenz principle and the limited role of National Courts in intervening in BIT arbitrations.
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