1. "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 _ November
2013 - December 2014 - Professor Thomas Clay (France)
Arbitration in associations - Magistrate Fadi Elias (Lebanon)
Competence in settling investment disputes in Iraq (Analytical study on the Iraqi
investment law and international conventions) - Magistrate Kaysar Yahya Jaafar
(Iraq)
Publication of arbitral awards while maintaining the confidentiality in light of the
Arab laws - Dr. Yassine Muhamed Tharwat AI-Chedli (Qatar)
The rise of an arbitration hub: What makes a city emerge in the Asia Pacific
Region? 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 _ Lawyer
Abdull/ah Burjani (Morocco)
Place and signature of the arbitral award: Problem relating to legislation or to the
judiciary? Lawyer Hassan Mohamed Arab (United Arab Emirates)
Conciliation and arbitration in international commercial disputes actording to the
World 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 Emirati
legal 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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2. VALIDITY OF UNSIGNED ARBITRATION AGREEMENT UNDER
INDIAN LAW
I. INTRODUCTION
Under Indian law, parties can choose to have their civil and commercial disputes resolved
through the alternate dispute mechanism, such as - mediation, conciliation and
arbitration. The Arbitration and Conciliation Act, 1996 (the "Act") is the governing
statute for both the domestic and international arbitration. Except for certain
modification, the Act is complete adoption of the UNICTRAL Model Law. Apart from
UNICTRAL Model Law, the Act also draws its source extensively from English
Arbitration Act, 1996 but the provisions of the Act miss all-embracing approach of the
English Arbitration Act, 1996.
II. ARBITRA TION AGREEMENT TO BE IN WRITING
In India, arbitration can only be commenced if the parties have recorded the arbitration
agreement in writing. Section 7
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of the Act provides that arbitration shall be construed to
be in writing even if it is contained in:
(a) an exchange of letters, telex, telegrams or other means of telecommunication
which provide a record of the agreement; or
(b) an exchange of statements of claim and defence in which the existence of the
agreement 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 or
certain disputes which have arisen or which may arise between them in respect of a defined legal
relationship, 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 a
separate 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 a
record of the agreement; or
(c) an exchange of statements of claim and defence in which the existence of the agreement is
alleged by one party and not denied by the other.
(5) The reference in a contract to a document containing an arbitration clause constitutes an arbitration
agreement if the contract is in writing and the reference is such as to make that arbitration clause part of the
contract."
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3. III. RATIO DECIDENDI OF GOVIND RUBBER LIMITED VERSUS LOUIDS
DREYFUS COMMODITIES ASIA PRIVATE LIMITED (THE "RUBBER
CASE,,)2
Recently, the hon'ble Supreme Court of India has held that the arbitration agreement is
valid and binding even if the arbitration agreement (recorded in writing) has not been
signed 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 one
party not signing the agreement cannot absolve himself from the liability under the
agreement. In the present day of E-commerce, in cases of internet purchases, tele
purchases, ticket booking on internet and in standard forms of contract, terms and
conditions are agreed upon. In such agreements, if the identity of the parties is
established, and there is a record of agreement it becomes an arbitration agreement if
there is an arbitration clause showing ad idem between the parties. Therefore, signature
is 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 Louids
Dreyfus Commodities Asia Private Limited (the "Singapore Company"). Consequent to
the said confirmation, the Singapore Company issued two sales contracts bearing no.
03S8733 (the "First Sale Contract") and 03S8739 (the "Second Sale Contract"). Per
the terms of the two sale contracts, the Singapore Company was required to ship: (a) 200
Metric Ton of natural rubber against the First Sale Contract; and (b) 201 Metric Ton of
natural rubber against the Second Sale Contract. The Sale Contract, which was only
signed by the Singapore Company, provided that governing terms are as per Singapore
Commodity Exchange. After the issuance of the Second Sale Contract, vide their email
dated August 27, 2008, the Indian Company requested the Singapore Company to accept
new payment terms.
Against the Sale Contracts, the Indian Company, in turn, also issued two purchase orders
on the Singapore Company. The purchase orders provided that High Court of Bombay
shall 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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4. 2. The dispute arose between the Indian Company and Singapore Company with respect to
the Second Sale Contract. On May 12,2009, the Singapore Company referred the dispute
to Singapore Commodity Exchange for arbitration in terms of the Sale Contract and
attached points of claim in arbitration. The said dispute was arbitrated before the Sole
Arbitrator - Mr. Leon Tim Fook. On May 23, 2009, the Indian Company stated that it has
incurred 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 award
dated December 18, 2009 and directed the Indian Company to pay to the Singapore
Company 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 and
execution of the aforesaid award before the hon'ble High COUliof Bombay. The hon'ble
Bombay High Court held that the aforesaid award is enforceable under Section 464 of the
Act. Against the aforesaid order of the hon'ble Bombay High Court, the Indian Company
filed its appeal before the hon'ble Supreme Court of India, which is the final court of
appeal in India.
V. JUDICIAL EXPOSITION ON VALIDITY OF UNSIGNED ARBITRATION
AGREEMENT IN THE RUBBER CASE
The hon'ble Supreme Court observed that there can be no dispute that an agreement even
if not signed by the parties can be spelt out from correspondence exchanged between
parties and this is the settled proposition of law in India. The observation of the hon'ble
Supreme Court is reproduced below:
"There may not be any dispute with regard to the settled proposition of law that an
agreement even if not Signed by the parties can be spell out from correspondence
exchanged between the parties. However it is the duty of the Court to construe
correspondence with a view to arrive at the conclusion whether there wa any meeting of
mind between the parties which could create a binding contract between them. It is
necessary for the Court to find out from the correspondence as to whether the parties
were 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 this
Chapter shall be treated as binding for all purposes on the persons as between whom it was made, and may
accordingly be relied on by any of those persons by way of defence, set off or otherwise in any legal proceedings in
lndia and any references in this Chapter to enforcing a foreign award shal be construed as including references to
relying on an award.
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5. "Section 7(4) states that the arbitration agreement shall be in writing, if it is a document
signed by all the parties. But a perusal of Clauses (b) & (c) of Section 7(4) would show
that a written document which may not be signed by the parties even then it can be
arbitration agreement. Section 7(4)(b) provides that an arbitration agreement can be
culled out from an exchange of letters, telex, telegrams or other means of
telecommunication which provide a record of the agreement. "
(Emphasis Supplied)
Applying the aforesaid settled proposition of law, the hon'ble Supreme Court referred to
the email dated August 27, 20085
of the Indian Company, wherein the Indian Company
had made a reference to the Sale Contract. On the basis of such reference, the hon'ble
Supreme Court drew the conclusion that both the Indian Company and Singapore
Company were ad idem to the terms of the Sale Contract. The email is reproduced below
for better appreciation of the judicial exposition:
"Subject: Re: Govind Rubber
HiMee Kwan,
As discussed & confirmed with Andrew y'd, Govind Rubbeer's payment terms have
been changed to: 10% ADVANCE BY TT, BALANCE AGAINST DIP AT SIGHT' SO,
PLEASE AMEND YOUR SALE CONTRACT ACCORDINGLY & SEND ME THE
SALE CONTRACT & PROFORMA INVOICE FOR BOTH CONTRACTS
SEPARATELY
Await your earlier action, since Govind Rubber wants to send the 10% advance TT
today & 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 and
there is record of arbitration agreement, it becomes an arbitration agreement if there is an
arbitration clause showing ad idem between the parties.
Although the hon'ble Supreme Court does not make any specific observation as to why
the purchase orders are not applicable to the sale transaction (supplying of natural rubber
from Singapore Company to Indian Company) yet it took a view that the Indian
Company accepted the goods in terms of Sale Contract as the same was referred to in the
email.
5 Referred above in the Section of Facts of the Case
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6. VI. CONCLUSION
In order to avoid the aforesaid situation, where one party is required to bear the brunt of
the contract, which was not even duly executed by it. It is advisable to have a disclaimer
clause imbedded in an arbitration agreement, which would establish that it was never the
intention of the parties to have an arbitration agreement executed by way of exchange of
emails. Standard exclusion clause should read as under:
"The Parties acknowledge and agree that this Agreement shall be effectual and binding
only 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 in
exchange of their emails/letters/telex. It is recommended that their email should carry
following disclaimer:
"Please note this email is only for the purpose of communication. Under no
circumstances, it shall be assumed by the recipient that an enforceable contract has been
entered into between my organization and the recipient."
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