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Supreme Court of India offers guidance on the cost of multiple arbitrations
Practical Law Legal Update 4-501-8408 (Approx. 2 pages)
Supreme Court of India offers guidance on the cost of multiple arbitrations
| Published on 30 Mar 2010 • India |
Kamal Shah (Partner) and Jonathan Morton (Trainee), Stephenson Harwood
The Supreme Court of India has held that, once an arbitration clause has been invoked, it does not negate the possibility of future use of the same clause. In its judgment dated 17 February 2010, the court held that neither the onerous financial cost of multiple arbitrations, nor the time involved, would prevent multiple actions being brought through one arbitration clause. The court went on to suggest ways to draft such a clause so as to avoid such "highly expensive and time-consuming" actions.
In the matter of Dolphin Drilling Ltd v Oil and Natural Gas Corporation Ltd (Arbitration Petition No. 21 of 2009), the respondent sought to object to the referral to arbitration by the claimant on the ground that the applicant had already invoked the arbitration clause in relation to an earlier, different dispute and that such arbitration was "a one time measure". It further submitted that the financial burden of such proceedings suggested that the clause could only have envisaged one single arbitration for all disputes that arose under the contract.
The court rejected that argument and held that references to "all disputes" in the arbitration clause could not possibly refer to disputes not in existence at the time of invocation of the clause and, as such, it would clearly not be a one time measure.
The court went on to suggest that the financial burden caused by the arbitration proceedings was a legitimate concern and that it would be possible to amend an arbitration clause so that it could only be invoked, for example, at the conclusion of the work under the agreement. It could also be drafted so that it could only be invoked "at the termination/cancellation of the agreement and at the same time expressly saving any disputes/claims from becoming stale or time-barred".
This is an interesting decision that suggests both an awareness by the Indian Supreme Court of the costliness of arbitration proceedings, and a commitment to ensuring the viability of such proceedings in the future.