The key pillar of arbitration in India is “party autonomy”, which grants disputing parties the freedom to bargain, choose the arbitration seat, and the law and procedure of the arbitration. Arbitrability of a dispute is a critical issue of the whole process and a challenge to the arbitrability of the subject matter of dispute can be raised before, during, and after completion of the process of arbitration. The meaning of the term “arbitrability” is not defined expressly but generally refers to the capability of referring a particular subject matter to resolution by arbitration. It is an accepted position that any dispute arising out of a contract or a relationship in the nature of a contract among two or more parties is arbitrable.
Maritime arbitration is a well-known field of dispute resolution under international trade and commerce. It is in a way different from the general model which makes it unique among legal sources. Disputes such as ship finance, shipbuilding, sale, purchase, charter parties, bills of lading, etc are arbitrable. This has resulted in the drafting and incorporation of standard or model arbitration clauses in various standard form international maritime contracts. Places like London, New York and Singapore have established dominant centers for maritime arbitration. These centers have tried to encourage the maritime community to use their facilities for the resolution of maritime disputes.
Intervention of Indian Courts in foreign seated arbitration
Earlier, Indian courts had a very limited power to intervene in foreign arbitration’s. This included the powers of referring a matter to arbitration in a non-Indian seat under Section 45 of The Arbitration & Conciliation Act, 1996, and at the stage of enforcement of award under Section 48. The scope of intervention by Indian courts in foreign arbitrations was expanded by the Supreme Court of India in Bhatia International v Bulk Trading SA (2002 4 SCC 105). This decision was overruled by the Supreme Court in Bharat Aluminium Co v Kaiser Aluminium Technical Service, Inc (“BALCO”) (2012 9 SCC 552). BALCO observed that no suits or proceedings can be filed seeking interim reliefs as the only relief in the suit or proceeding.
As a result, it was held that admiralty courts cannot arrest ships to obtain security for arbitrations. The Bombay High Court relied on BALCO for this decision in Rushab Ship International LLC v MV African Eagle (2014 (4) Bom CR 269) (“MV African Eagle”); the High Court opined that Indian Courts do not have any power to pass interim orders in foreign seated arbitrations and thus, a ship could not be arrested for the benefit of a foreign-seated arbitration. The law changed with the enactment of The Arbitration and Conciliation (Amendment) Act, 2015 conferring power upon Indian Courts under Section 9 to provide interim relief in foreign-seated arbitration, but the niche of arresting ships for the benefit of an arbitration remains untested.
Arresting a ship as security for a maritime arbitration
The International Convention Relating to the Arrest of Sea-Going Ships, 1952, and the International Convention on the Arrest of Ships, 1999 contain an explicit provision each dealing with the arrest of ships for the benefit of an arbitration and/or adjudicating disputes in other jurisdictions. These provisions were made part of the law of India by the Supreme Court in MV Elisabeth v Harwan Investments.
However, the specific provisions were overlooked by the Indian courts in their decisions since MV African Eagle, and other judicial pronouncements such as the Golden Progress case that held that the arrest of a ship is under a suit even though the matter is capable of being referred to arbitration. The case did not consider the provisions in the international conventions, but created a “procedural tool” through judicial activism.
After the enactment of the Admiralty (Jurisdiction and Settlement of Maritime Claims) Act, 2017 The Bombay High Court in The Altus Uber has held that the Admiralty Act, 2017 does not negate the law laid down in the Golden Progress. It only prescribes a jurisdictional test that allows parties to arrest a ship. Thus, the arrest of a ship as security in a suit was allowed as valid even while there are ongoing foreign-seated arbitrations subject to satisfying the conditions of arrest of Admiralty Act, 2017.