"World Journal of Arbitration" (~Wl ~1 ~)

Issue 26 - April 2015

Table of Contents

Publisher's Introductory Note

Articles

Panorama of arbitration and alternative dispute resolution methods _ November2013 - December 2014 - Professor Thomas Clay (France)Arbitration in associations - Magistrate Fadi Elias (Lebanon)

Competence in settling investment disputes in Iraq (Analytical study on the Iraqiinvestment law and international conventions) - Magistrate Kaysar Yahya Jaafar(Iraq)

Publication of arbitral awards while maintaining the confidentiality in light of theArab laws - Dr. Yassine Muhamed Tharwat AI-Chedli (Qatar)The rise of an arbitration hub: What makes a city emerge in the Asia PacificRegion? The example of Hong Kong - Lawyer Frank Poon (China)Validity of unsi~d arbitratiolJ._agreement under Indian Law - Ritesh Singh (India)The scope of appealing arbitral awards under the English Arbitration Act 1996 _Lawyer Hilary Heilbron (London)

New UNCITRAL Rules on Transparency - Mr. Timothy Lemay, Principal Legal Officer- UNCITRAL

Moroccan Arbitration law in its Maghrebi environment - Overview study _ LawyerAbdull/ah Burjani (Morocco)

Place and signature of the arbitral award: Problem relating to legislation or to thejudiciary? Lawyer Hassan Mohamed Arab (United Arab Emirates)Conciliation and arbitration in international commercial disputes actording to theWorld Trade Organization rules - Dr. Ibrahim AI-Dessouki Abu Al-Leil (Kuwait)Principle of non-conflict of interests in arbitration (in the doctrine and in the law)-Lawyer Khaled Akil Suleiman AI-Akil (Kingdom of Saudi Arabia)Plea to the unconstitutionality before the arbitral tribunal - Study in the Emiratilegal system - Dr. Moutaz Afifi (United Arab Emirates)

Arab Case law

Jordanian Case law:

No.l- Request for challenge of an arbitrator - Arbitral proceedings in which he

participated are considered as non-existent if the request for challenge is

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VALIDITY OF UNSIGNED ARBITRATION AGREEMENT UNDERINDIAN LAW

I. INTRODUCTION

Under Indian law, parties can choose to have their civil and commercial disputes resolvedthrough the alternate dispute mechanism, such as - mediation, conciliation andarbitration. The Arbitration and Conciliation Act, 1996 (the "Act") is the governingstatute for both the domestic and international arbitration. Except for certainmodification, the Act is complete adoption of the UNICTRAL Model Law. Apart fromUNICTRAL Model Law, the Act also draws its source extensively from EnglishArbitration Act, 1996 but the provisions of the Act miss all-embracing approach of theEnglish Arbitration Act, 1996.

II. ARBITRA TION AGREEMENT TO BE IN WRITING

In India, arbitration can only be commenced if the parties have recorded the arbitrationagreement in writing. Section 71 of the Act provides that arbitration shall be construed tobe in writing even if it is contained in:

(a) an exchange of letters, telex, telegrams or other means of telecommunicationwhich provide a record of the agreement; or

(b) an exchange of statements of claim and defence in which the existence of theagreement is alleged by one party and not denied by the other.

1 Section 7 of the Act - Arbitration agreement:-

(1) In this Part, "arbitration agreement" means an agreement by the parties to submit to arbitration all orcertain disputes which have arisen or which may arise between them in respect of a defined legalrelationship, whether contractual or not.

(2) An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of aseparate agreement.

(3) An arbitration agreement shall be in writing.

(4) An arbitration agreement is in writing if it is contained in-

(a) a document signed by the parties;

(b) an exchange of letters, telex, telegrams or other means of telecommunication which provide arecord of the agreement; or

(c) an exchange of statements of claim and defence in which the existence of the agreement isalleged by one party and not denied by the other.

(5) The reference in a contract to a document containing an arbitration clause constitutes an arbitrationagreement if the contract is in writing and the reference is such as to make that arbitration clause part of thecontract."

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III. RATIO DECIDENDI OF GOVIND RUBBER LIMITED VERSUS LOUIDSDREYFUS COMMODITIES ASIA PRIVATE LIMITED (THE "RUBBERCASE,,)2

Recently, the hon'ble Supreme Court of India has held that the arbitration agreement isvalid and binding even if the arbitration agreement (recorded in writing) has not beensigned by the parties. The hon'ble Supreme Court observed as under:

"If it can be prima facie shown that the parties are at ad idem, then mere fact of oneparty not signing the agreement cannot absolve himself from the liability under theagreement. In the present day of E-commerce, in cases of internet purchases, telepurchases, ticket booking on internet and in standard forms of contract, terms andconditions are agreed upon. In such agreements, if the identity of the parties isestablished, and there is a record of agreement it becomes an arbitration agreement ifthere is an arbitration clause showing ad idem between the parties. Therefore, signatureis not aformal requirement Under Section 7(4)(b) or 7(4)(c) or under 7(5) of the Acl"

(Emphasis Supplied)

IV. FACTS OF THE RUBBER CASE

1. Govind Rubber Limited (the "Indian Company") confirmed through its broker,B.B.Rubber Private Limited, the offer for purchase of natural rubber RSS-3 from LouidsDreyfus Commodities Asia Private Limited (the "Singapore Company"). Consequent tothe said confirmation, the Singapore Company issued two sales contracts bearing no.03S8733 (the "First Sale Contract") and 03S8739 (the "Second Sale Contract"). Perthe terms of the two sale contracts, the Singapore Company was required to ship: (a) 200Metric Ton of natural rubber against the First Sale Contract; and (b) 201 Metric Ton ofnatural rubber against the Second Sale Contract. The Sale Contract, which was onlysigned by the Singapore Company, provided that governing terms are as per SingaporeCommodity Exchange. After the issuance of the Second Sale Contract, vide their emaildated August 27, 2008, the Indian Company requested the Singapore Company to acceptnew payment terms.

Against the Sale Contracts, the Indian Company, in turn, also issued two purchase orderson the Singapore Company. The purchase orders provided that High Court of Bombayshall have exclusive jurisdiction to decide the dispute arising out of the transaction.

2 MAN U/SCI 1209/2014

3 It seems that the observation is taken from earlier judgment of Wescare (lndia) Ltd. Vs. Subuthi Finance Ltd., 2008(4) Arb LR 278 (Mad) but th is judgment is not referred to in the Rubber Case.

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2. The dispute arose between the Indian Company and Singapore Company with respect tothe Second Sale Contract. On May 12,2009, the Singapore Company referred the disputeto Singapore Commodity Exchange for arbitration in terms of the Sale Contract andattached points of claim in arbitration. The said dispute was arbitrated before the SoleArbitrator - Mr. Leon Tim Fook. On May 23, 2009, the Indian Company stated that it hasincurred huge loss as the Singapore Company failed to supply the natural rubber in time.The Indian Company also made a counter claim of US $ 3734036.25.

3. Rejecting the averments of the Indian Company, the arbitral tribunal made an awarddated December 18, 2009 and directed the Indian Company to pay to the SingaporeCompany a sum of US $ 716283 and also to pay to the Singapore company a sum of US$ 20330 as cost.

4. The Singapore Company filed the arbitration petition in India for the enforcement andexecution of the aforesaid award before the hon'ble High COUliof Bombay. The hon'bleBombay High Court held that the aforesaid award is enforceable under Section 464 of theAct. Against the aforesaid order of the hon'ble Bombay High Court, the Indian Companyfiled its appeal before the hon'ble Supreme Court of India, which is the final court ofappeal in India.

V. JUDICIAL EXPOSITION ON VALIDITY OF UNSIGNED ARBITRATIONAGREEMENT IN THE RUBBER CASE

The hon'ble Supreme Court observed that there can be no dispute that an agreement evenif not signed by the parties can be spelt out from correspondence exchanged betweenparties and this is the settled proposition of law in India. The observation of the hon'bleSupreme Court is reproduced below:

"There may not be any dispute with regard to the settled proposition of law that anagreement even if not Signed by the parties can be spell out from correspondenceexchanged between the parties. However it is the duty of the Court to construecorrespondence with a view to arrive at the conclusion whether there wa any meeting ofmind between the parties which could create a binding contract between them. It isnecessary for the Court to find out from the correspondence as to whether the partieswere ad idem to the terms of contract. "

Further observation:

4 Section 46 of the Act: When foreign award binding.- Any foreign award which would be enforceable under thisChapter shall be treated as binding for all purposes on the persons as between whom it was made, and mayaccordingly be relied on by any of those persons by way of defence, set off or otherwise in any legal proceedings inlndia and any references in this Chapter to enforcing a foreign award shal be construed as including references torelying on an award.

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"Section 7(4) states that the arbitration agreement shall be in writing, if it is a documentsigned by all the parties. But a perusal of Clauses (b) & (c) of Section 7(4) would showthat a written document which may not be signed by the parties even then it can bearbitration agreement. Section 7(4)(b) provides that an arbitration agreement can beculled out from an exchange of letters, telex, telegrams or other means oftelecommunication which provide a record of the agreement. "

(Emphasis Supplied)

Applying the aforesaid settled proposition of law, the hon'ble Supreme Court referred tothe email dated August 27, 20085 of the Indian Company, wherein the Indian Companyhad made a reference to the Sale Contract. On the basis of such reference, the hon'bleSupreme Court drew the conclusion that both the Indian Company and SingaporeCompany were ad idem to the terms of the Sale Contract. The email is reproduced belowfor better appreciation of the judicial exposition:

"Subject: Re: Govind RubberHiMee Kwan,

As discussed & confirmed with Andrew y'd, Govind Rubbeer's payment terms havebeen changed to: 10% ADVANCE BY TT, BALANCE AGAINST DIP AT SIGHT' SO,PLEASE AMEND YOUR SALE CONTRACT ACCORDINGLY & SEND ME THESALE CONTRACT & PROFORMA INVOICE FOR BOTH CONTRACTSSEPARATELY

Await your earlier action, since Govind Rubber wants to send the 10% advance TTtoday & is waiting for your Proforma Invoice."

(Underlined by Author of the Article)

Thus, the hon 'ble Supreme Court held that if the identity of the parties is established andthere is record of arbitration agreement, it becomes an arbitration agreement if there is anarbitration clause showing ad idem between the parties.

Although the hon'ble Supreme Court does not make any specific observation as to whythe purchase orders are not applicable to the sale transaction (supplying of natural rubberfrom Singapore Company to Indian Company) yet it took a view that the IndianCompany accepted the goods in terms of Sale Contract as the same was referred to in theemail.

5 Referred above in the Section of Facts of the Case

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VI. CONCLUSION

In order to avoid the aforesaid situation, where one party is required to bear the brunt ofthe contract, which was not even duly executed by it. It is advisable to have a disclaimerclause imbedded in an arbitration agreement, which would establish that it was never theintention of the parties to have an arbitration agreement executed by way of exchange ofemails. Standard exclusion clause should read as under:

"The Parties acknowledge and agree that this Agreement shall be effectual and bindingonly if in writing and signed by the duly authorised representatives of the Parties."

Further, it is also advisable that negotiating parties should be more circumspect inexchange of their emails/letters/telex. It is recommended that their email should carryfollowing disclaimer:

"Please note this email is only for the purpose of communication. Under nocircumstances, it shall be assumed by the recipient that an enforceable contract has beenentered into between my organization and the recipient."

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