Abhishek Dwivedi, Advocate – Bombay High Court
Singapore International Arbitration Centre (SIAC) has published its first edition of the rules applicable to Investment Arbitrations (IA Rules) conducted under its aegis. These IA Rules were published on 1st January 2017 and have been drafted with specific requirements of investment arbitration in mind. While many institutions such as LCIA and ICC administer investment arbitration, there is no specialized procedure or separate set of rules for investment arbitration. The rules are an indication of the growing importance being given to investment claims in South Asia. In recent times, many South Asian countries such as India, Indonesia and Malaysia have received several investment claims and are contemplating a new regime of Investor-State Dispute Settlement (ISDS) mechanism. These IA Rules have to be seen in context of the recent aversion of developing countries to established regimes such as ICSID. Another important point is that India, the largest contributor to SIAC in 2015, is not a party to ICSID.
Unlike commercial arbitration, investment arbitration has its basis and origin in public international law. There are more than 2000 Bilateral Investment Treaties and more than 15 multilateral instruments under international law that govern the Investment arbitration. The entire premise of crystallization of a dispute and the threshold of breach of legal principles under international law are fundamentally different from commercial transactions and disputes thereof. When the entire premise of a dispute and its resolution are different, there is no reason that there cannot be separate set of procedures for the two types of arbitration. Many issues such as jurisdiction, sovereign immunity and even the pleadings require a completely different level of procedural sensitivity in investment arbitrations. The IA Rules precisely attempt to bring that level of efficiency and sensitivity. Traditionally it has been seen that the investment arbitrations require a longer time to end than commercial arbitrations due to the complexities of the issues involved and higher threshold of evidence submission. In order to streamline the process and address the efficiency issues, it is always better to have a separate set of rules dealing with investment arbitration.
SIAC has attempted, quite successfully, to make the rules as customized to investment arbitrations as possible. The important aspects of the IA rules are:
- The rules are applicable to disputes involving a State, State-controlled entity or intergovernmental organisation, whether arising out of a contract, treaty statute or any other instrument.
- The IA rules however provide for a broad scope of application which is not subject to objective thresholds of whether the claiming party is an “investor” or the subject matter of the dispute qualifies as “investment” though such scope is subject to the underlying treaty or instrument in which the IA rules are incorporated by reference. Therefore, regarding the issues of preliminary qualification to bring claims, if there is a conflict between the IA Rules and the underlying treaty or instrument, the later will prevail.
- Rule 1.3 provides for waiver of any right of immunity from jurisdiction in respect of the proceedings related to the arbitration which parties may otherwise possess, if the parties have entered into an agreement to refer the disputes to SIAC. The rule can be directly linked to issues of sovereign immunity i.e. once the parties have agreed to incorporate the arbitration agreement referring the disputes to SIAC administered arbitration, they cannot claim sovereign immunity in respect of the proceedings related to those disputes as envisaged under the agreement contained in underlying treaty or instruments.
- Under Rule 16.5, the presiding arbitrator has been authorised to make procedural orders alone though the same may be revised by the Tribunal, if required. Such a step is likely to address the issues of efficiency and time management.
- One of the most important points under these IA Rules is the procedure related to the pleadings. They provide for a memorial based submissions rather than the pleadings based submissions which are generally the preferred practice in commercial arbitrations. Under the Rules 17.2 and 17.3, the parties are required to file their memorial comprising of factual statements of claim/defence along with their legal submissions, fact and expert evidence and all other documents supporting the memorial. All legal authorities and documents supporting the parties’ respective cases shall be filed along with these memorials.
- The Tribunal has also been authorised to appoint its own experts and require the parties to assist the expert so appointed. The Tribunal may also allow the parties to examine such an expert.
- Under Rule 24, the Tribunal has been given a wide range of powers. However, it remains to be seen whether such powers, if exercised by the Tribunal, can go along with the notions of sovereign acts and freedom that form the premise of international law and public policy. The IA Rules are silent on whether the Tribunal will have the jurisdiction to direct a party to not proceed with civil or criminal investigation and/or prosecution against an investor pending the arbitration before it. Another important point is that the Tribunal has been empowered to impose sanctions on a party for its refusal to comply with the rules, agreed procedure, directions of the Tribunal or any partial award rendered thereof. It remains to be seen if the sovereign states will be willing to concede to SIAC on this point and how the Tribunals will interpret the scope of this unusual power.
- Similar to the ICSID Rule 41 (5), the IA Rules also allow for summary dismissal of a claim or defence in order to save time and cost provided an application is made by the party and after hearing the parties, the Tribunal is of the opinion that a claim/defence is without legal merit or is outside the jurisdiction of the Tribunal or is inadmissible.
- The IA Rules also provide for interim and emergency relief to the parties. They also provide that a relief of such nature obtained from a judicial authority prior to constitution of the Tribunal under these rules will not be incompatible with the IA Rules. This is a clear indication that merely approaching a national court and obtaining a relief from a national court will not disentitle a party from bringing a claim for interim or emergency relief and neither a failure to obtain a relief from a judicial authority prejudice the right of the party to request the Tribunal for interim/emergency relief.
- The Tribunal will be governed by international treaties, customs and general principles of law along with relevant national laws in case the parties have failed to provide for a designated law governing the substance of the dispute.
- The IA Rules also provide for written submissions (and it Tribunal deems fit, oral arguments) by non-disputing contracting party as well as non-disputing party. While a non-disputing contracting party can make submissions with respect to the treaty interpretation as well as on matters within the scope of the arbitration, the non-disputing party can only make submissions on matters within the scope of the arbitration. The IA Rules define a non-disputing party as a party which is neither a party to the arbitration nor a party to the underlying treaty or instrument. Such a submission by non-disputing parties and non-disputing contracting parties must comply with the criteria given under Rule 29.3 before their submissions can be taken on record by the Tribunal i.e. the submissions must assist the tribunal, must address a matter that is within the scope of arbitration and the party making the submission must have sufficient interest in the matter. The Tribunals may have to use their discretion judiciously while allowing third party submissions, especially on the issues of sufficient interest.
- The draft award has to be sent to the registrar within 90 days of closing of the proceedings. Interestingly, the IA Rules allow the presiding arbitrator to make the award in case the Tribunal is unable to render a majority award.
The IA rules are promising and more than welcome. Their publication could not have been at a better time when many Asian, African, Latin American and few European countries (Poland) are eager to renegotiate their BITs or are reconsidering the ICSID regime. These IA Rules can be an attractive proposition to countries like India and Indonesia who have a successful record of enforcing SIAC awards. There can be no doubt that SIAC has taken the lead in the field and we can only expect others to follow. Especially, one can expect LCIA to publish rules on investment arbitration in coming months as it readies to overcome the post-Brexit challenges and tries to maintain its position as the preferred choice of arbitration in Europe.
However, in our eagerness to welcome these rules, we may tend to overlook the crucial issues that have forced many developing nations to move away from the traditional ISDS mechanisms. The IA Rules provide for waiver of sovereign immunity, power of Tribunal to impose sanctions and involvement of non-disputing parties in the arbitration process which may not go down well with the States. However, it can be argued and quite successfully so, that these IA rules will be subject to the underlying treaty or instrument that may clearly provide for such exclusions. It remains to be seen whether SIAC will accept reservations to its rules within the arbitration agreements that are present in these underlying instruments or treaties. Whatever the case maybe, these rules are an indication of times to come in the field of investment arbitration (which are bound to be interesting).