'India Is Arbitration-Friendly' : Justice SK Kaul Says At International Legal Forum Of Asia-Pacific Region

Justice Sanjay Kishan Kaul, judge of the Supreme Court, participated in the 12th International Legal Forum of the Asia-Pacific Region on Thursday (October 5). The topic of the forum was, "Balance of Protection of National Interests and Rights of Participants of International Economic Relations".

In his address, Justice Kaul said that the judiciary should exercise restraint in interfering with awards passed by adjudicatory bodies under the Bilateral Investment Treaties. He said that usually, bilateral agreements provide for disputes to be resolved through arbitration. There have also been proposals to set up an investment court. Regardless of which method is adopted, Justice Kaul said, dispute resolution must become seamless to give investors the confidence they need to make investments uninhibitedly.

"I say this with a sense of responsibility – the judiciary must also play its part. Excessive interference should be avoided, particularly at the stage of enforcement of foreign awards. Yet, there are limits to the pro-arbitration principle. By way of example, in India, an award tainted by fraud cannot be enforced. Courts can also play a facilitative role, such as by granting interim relief prior to, or in some cases, during the constitution of the arbitral tribunal." Justice Kaul said.

India is arbitration-friendly

In this context, he underscored that India is an arbitration-friendly jurisdiction. 

"I am pleased to share that India is an arbitration-friendly jurisdiction. India is a party to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards and Part II of the Arbitration and Conciliation Act, 1996 specifically recognises that foreign awards are enforceable in India, providing for the mechanism of their enforcement. Further, courts follow a minimal intervention principle, and facilitate arbitral innovations. For example, the Supreme Court recognised that emergency arbitral awards were enforceable in India." he said.

Framework to regulate cross-border insolvency needed

Justice Kaul further said that a framework to regulate cross-border insolvency assumed relevance as transactions and corporate structures become more complex. He suggested two approaches : the first is territorialism, which is proceedings in multiple fora, each of them applying their laws and the second is universalism, by which one court has exclusive jurisdiction over insolvency proceedings, under a single insolvency regime.

In this context, he said that the UNCITRAL (United Nations Committee on International Trade and Law) Model Law on Cross-Border Insolvency (1997) acts as an excellent framework for dealing with cross-border insolvency transactions. Unlike other multilateral conventions, it merely provides a legislative blueprint for nations who seek to modify their laws, to ensure consistency with the overall scheme. The UNCITRAL Legislative Guide on Insolvency Law furthers this cause and guides the legislators by analysing relevant issues. While the Model Law proposes a comprehensive set of legislative solutions to a problem, the Guide focuses on providing recommendations for specific guidance on certain issues, he said.

At the same time, Justice Kaul said that effective implementation remained an issue. It is imperative for private actors to demand that these changes are incorporated in their respective country’s domestic law.

Non-functioning of WTO Appellate Body

Another issue he highlighted was the non-functioning of the World Trade Organization’s (WTO) appellate body since 2019 due to a lack of appointments in the appellate body, consequently leading to an increased backlog. "We must ensure that the appellate body of the WTO resumes its functioning. At the recently concluded G-20 summit in India, members declared that there was a need to pursue reform of the WTO to improve its functions and conduct discussions to ensure a well-functioning dispute settlement system by 2024.", Justice Kaul said.

"The formulation of treaties also leaves a lot to be desired. Treaties should be drafted keeping in mind the rights and interests of developing and underdeveloped countries. This change would indeed be a stepping stone in achieving global equality." he further said.

"As stakeholders of the global legal system, we must strive towards progressively improving the international economic order, through rule-based systems. Globalisation has indeed made borders porous. It is important that we respond to this transformation in the way laws are drafted and implemented." he added.