INTERNATIONAL NEGOTIATION ON WATER

ALTERNATE DISPUTE RESOLUTION

PSDA -1
Made By:
SHREYA SAXENA
20817703815 V-D

INTRODUCTION
Water is an essential element needed to sustain human civilization, the plant and
animal life that share the earth with man, and a healthy environment. Initially,
the amount of water that could be found within a short distance and could be
brought to the consumers by traditional means was sufficient to meet the needs.
But even then, water was a limiting factor in arid and semi-arid regions, due to
its scarcity and the inherent hydrological variability. With time, the pressures of
civilization on water resources increased, in two ways. With the rise in
population and living standards, the amounts withdrawn from rivers, lakes and
groundwater increased at an exponential rate, and, on the other, the expanding
agricultural, urban and industrial activities cause pollution of the sources,
thereby reducing the amounts of water that can be used without substantial
treatment. These pressures on water resources cause competition between
nations. These present a need for negotiation as the most viable tool which
sufficiently caters to interests of both nations and aims towards amicable
settlement of disputes.
Fundamentally, negotiation is a method of problem solving and conflict
settlement. The purpose of this interactive process is to find a formula for the
distribution of a contested value between the negotiating parties. A s such, a
negotiation is a joint decision-making process through which parties
accommodate their conflicting interests into a mutually acceptable settlement.
The process is circumscribed by applicable laws, the readiness of law
enforcement agencies to enforce them, and the respective goals and priorities of
each of the negotiating parties. In international disputes over the management of
water resources, even when an applicable treaty exists, each country can choose
to ignore it or interpret its terms as it pleases, in ways that other stakeholders
might regard as a violation. Distinguished international experts have adopted
guidelines on how to manage transboundary water resources: the Helsinki
Declaration and the Seoul Rules. However, they include some mutually
exclusive general principles.
In general, decision-makers and those who may negotiate on their behalf have a
choice of six universal negotiations strategies:
 Negative non-zero sum games (or Lose-Lose solutions)
 Unilateral creation of new facts Zero-sum games (or Win-Lose
negotiations)
 Positive non-zero sum games (or Win-Win negotiations)
 Conflict and threats of violence
 No action, causing opportunity costs
Among the strategies given above, the 'win-win' solution is obviously the most
attractive one, because it provides for both partners in dispute an improvement
in their position. The Mutual Gains Approach to negotiation is a process model,
based on experimental findings and hundreds of real-world cases, that lays out
various steps for negotiating better outcomes, often including equitable sharing
of benefits, while protecting relationships and reputation. This could be either
achieved due to different preferences and/or due to extending the scope on
project outputs, such that additional benefits might accrue which were neglected
so far.
APPROACHES TO NEGOTIATION
The first approach is Positional and lacks coordinated and impartial
administrative, technical, legal and mediation support. In contrast, the second
approach is Interest-based, and has coordinated and impartial administrative,
technical, legal and mediation support. The Positional approach suffers from all
of the inefficiencies associated with applying positional negotiations in a
context where it is relatively easy to miss opportunities for mutual gain because
the underlying interests and their synergies are not well understood. The parties
are focused on maintaining positions rather than exploring alternatives that may
integrate their respective interests. If administrative support is viewed as biased,
the negotiation platform itself can become tangled up in the negotiation, as
parties bring process issues to the negotiating table while substantive issues are
being addressed. If technical and legal advice are not provided through an
impartial mechanism that ensures transparent understanding of conflicting
perspectives, then the negotiation can be diverted into a dialogue or conflict
between experts as opposed to focusing on how well national interests are being
addressed. Finally, if mediation and facilitation support is either separated from
these other functions, or nonexistent, then the opportunities for these resources
to maximize the potential for productive outcomes are hard to deliver. An
Interest-based approach is significantly different. Administrative, technical,
legal, and mediation support is coordinated, and process design issues are
worked through and agreed upon separately from substantive matters. The
process is designed to maximize opportunities for safe and constructive
discussion of alternatives that may deliver valuable outcomes for all riparian
parties. Technical and legal advice is provided in response to issues raised
through investigation of alternative solutions. They are not driving the
discussion; they are supporting it. Mediation support provides the capacity to
both manage the process for success for all parties, and to investigate
alternatives where direct discussions may be difficult or impossible. In
summary, if the process is interest based and well supported, then time is spent
on constructive problem solving and relationship building, rather than on
unproductive exchanges of positions and negotiation tactics that have little or no
relationship to the mutually beneficial opportunities that may well exist. In
practice, there are a growing number of Open type international agreements,
which provide for the return, either in kind or in cash, of an equitable share of
the benefits resulting from cooperation. Some examples are described below.
(1) The Treaty of Versailles, 1919; Article 358 of the Treaty of Versailles,
1919, gave France the exclusive right to use the waters of the Rhine for power
production, subject to France paying Germany one-half the value of the energy
produced .
(2) The Barcelona Convention, 1921; The Barcelona Convention, 1921,
Article X, contains the idea of sharing downstream and even upstream benefits,
providing that where a state is obliged under the Convention to take steps to
improve the river or is put to expense to maintain it for navigation, it is entitled
to demand a reasonable contribution to the costs involved
LIFE CYCLE MODEL OF NEGOTIATION
The role of negotiations is highlighted for the initiation, adoption, and
implementation phases of a life-cycle model of negotiating processes taking
place in the context of international water-related agreements and conventions.
An international agreement is not a static instrument or monument but a
dynamic process of negotiation and implementation with its own life cycle. An
‘agreement’ is the direct tangible product of negotiation that captures joint
decisions and intentions. There are many types of water agreements: policies,
laws, charters, codes of conduct, contracts or other agreements to manage and
allocate water. Agreements can be formal or informal, legally binding or
voluntary, verbal or written Agreements make public and explicit the goodwill
of the parties involved in a negotiation to reach fairer and more effective use of
water and care for water-related resources. A water agreement secures
commitments from the parties, be they governments, corporations, civil society
organizations (CSOs) or individuals. Each agreement must pass through a
number of phases, each of which comprises some negotiation activities. In a
life-cycle model of an agreement, one may distinguish, in analogy with the life
cycle of a living organism, the following phases:
 ● Preparatory phase: orientation/initiation/triggering of the negotiation process
(“courtship/gestation” period).
● Main negotiation phase: addressing and defining the contents, and
adoption/signature of the agreement (“engagement and wedding”).
● Ratification phase and preparation of the work program by the signatories
(“infancy”).
● Coming into force and early implementation (“adolescence”).
● Full implementation, and negotiation of amendments and protocols to the
agreement (“maturity and procreation”).
● Major re-negotiation of the agreement because many parts may have become
obsolete and other important elements are missing (“end of the life cycle”).

KEY FACTORS AND PATTERNS IN NEGOTIATING

INTERNATIONAL WATER-RELATED AGREEMENTS
These components determine the prospects, progress, and products (the 3 P’s)
of negotiating international water-related agreements, be it at the global,
regional, or basin level and are as follows:
Initiating Development Leading to Formal Negotiation
Establishing objectives, issues, and negotiating agenda has far-reaching
consequences for the prospects, process, and products of negotiation. They are
essentially determined by the basic concerns of the negotiating parties. One can
argue that the underlying concerns, which led to increased awareness of
international water-related issues and eventually to a negotiated agreement, are
in most cases related to security.
Organizational Setting, Procedural Rules, and Negotiation Culture
After the initiation phase, it is the preparation of the negotiation process that is
recognized as crucial for the outcome of negotiation. A textbook on negotiation
(Nierenberg, 1986) states: “Preparing for a negotiation is a year-round function,
as is negotiation itself. Negotiation does not stop when a contract expires.” An
important part of the preparation is the choice of the organizational setting for
negotiations. This choice is free in principle, but often it follows logically and
convincingly from the character of, and the parties involved in the initiation
process, as well as from the windows of opportunity (see below). The choice of
the organizational setting determines the procedural rules and the general
culture of negotiation, as well as the type of participants.
Balancing of Interests (Upstream–Downstream, Inter-Sectoral) in the
Negotiation Process
It is difficult to reach solutions that are satisfactory to all parties in
asymmetrical situations. Generally speaking, the interests of the downstream
and upstream parties are fundamentally opposed. This is true for allocation and
flood management (quantity aspect) as well as pollution and accident prevention
(quality aspect). A state’s geographical position along an international
watercourse, that is, being upstream, downstream, or both (so-called “mixed-
motive countries”), is assumed to determine its positioning in negotiations.
Upstream states have a powerful position since they can control the water
resources and pass on negative externalities to their downstream neighbors, who
would have no reciprocal power. This however does not hold true in a
considerable number of cases since the downstream states used the waters of a
transboundary river earlier and more intensely than their upstream neighbors.
Thus, economic strength (often accompanied by political and military might)
gives these countries a considerable advantage that makes upstream
development dependent on downstream agreement. Although a state’s
positioning in regional negotiations on a watercourse is determined by the
totality of political and economic relationships, it is still a likely assumption that
the country’s riparian status is the most important factor that determines its
position. Today, typical conflicts are generated by upstream states that start to
develop their water resource uses, which in most cases are strongly opposed by
their downstream neighbor(s) because they would affect existing ones. While
downstream states argue that they have the right to receive natural flow of the
river (doctrine of absolute integrity), the upstream countries usually base their
claims for water rights on hydrography, relying on where a river originates and
how much of the catchment falls within their territory. They emphasize the
national control of territorial water resources or, at least, advocate the principle
of equitable utilization. The relevance of the riparian status cannot be seen in
isolation. The political and economic relationships follow from various sectoral
interests, such as irrigation needs, or needs of producing electricity. The inter-
sectoral balancing of interests can be a problem at the national level, and as
such it can influence the transboundary negotiation processes. Therefore, when
considering the reconciliation of upstream–downstream interests, the balancing
of inter-sectoral interests within and between the riparian countries must always
be taken into account.
Windows of Opportunity That Promote and Accelerate Negotiation
With all the best intentions existing among some or all parties, the success of
negotiations leading to the conclusion of a water-related agreement depends
critically on the opening of so-called “windows of opportunity.” Conversely, if
windows of opportunity do not open up, or are not used by actors, negotiations
drag or even fail. These windows of opportunity, or the lack of them, will be
identified and discussed for agreements at the basin, regional, and global level.
For example, the launch window for a Danube River Protection Convention was
widely opened by the CSCE process on security and cooperation in Europe, and
in particular when the process accelerated in the 1980s. Following a proposal by
Austria, it was the Meeting on the Protection of the Environment, held in Sofia
(October 16 to November 3 1989) that explicitly led to the start of negotiations
on DRPC. The first round of negotiations, held in Vienna in 1992, lost some
momentum because of the hostilities in the former Yugoslavia, but the
momentum was regained so that the negotiations were achieved within a period
of only two years.
Role of Technology, Research, and Monitoring in the Negotiation Process
Technology, research, and monitoring have always played a role in
transboundary water-related cooperation, and in particular in bringing forward
the negotiation processes. This is not surprising, since they play a role in all
parts of the life cycle of an agreement. At the beginning, research and
measurements are needed to know and to understand what is happening with a
water basin. Very often it is the scientists who ring the alarm bells first, and thus
force the politicians to sit around the negotiating table. In later phases,
monitoring and assessment must find an adequate place in both the agreements
and their implementation. Finally, in the more ambitious agreements aiming at
restoring and improving possible damage, technology enters as the crucial
factor. However, even when the transboundary cooperation is hampered for
political reasons, or because of different levels of ambition of the parties to an
agreement, research and technology may form the smallest common
denominator for joint action.
Role of Human Rights, Transparency, and Participation/Role of the
Stakeholders/Public in the Negotiation Process
There are two main dimensions related to the rights of individuals with regard
to water management and protection. First, is the human rights dimension
concerning the quantity and quality of drinking water, including the issues
arising out of its potential impact on health, and second, is the right to know, to
participate in decisions, and to have access to justice.
The human rights dimension derives from a number of authoritative statements,
contained in non-legally binding documents, on the fundamental right of human
beings to have a healthy environment. Not surprisingly, the role of the public in
general, and the interest groups in particular, played an important role in the
development of water-related agreements. The Rhine river basin is a good case
in point as the interest groups played an important role in the creation of the
Rhine river regime.
In the Dutch context, the drinking water companies, the Clean Water
Foundation (Stichting Reinwater, a non-governmental organization), and the
City of Rotterdam influenced the viewpoints of the Dutch Government.
Internationally, they used their networks to influence the governments of the
riparian states upstream. Since the 1930s, the drinking water companies have
warned the Dutch government of the effects on the salinity level as a result of
increased dumping by the potassium mines.
The Rhine Commission of the Drinking Water Companies (RIWA) started
several lawsuits against French potassium mines in the early 1980s. The Clean
Water Foundation began a lawsuit with the financial backing of the Dutch
government, and joined forces with several horticulturists who suffered damage
from high salt load. The option to claim compensation through legal procedures
was boosted in 1976 by a court ruling that, within the EU, the courts at both the
location where the damage was incurred and where it originated had jurisdiction
over the matter. This ruling offered new opportunities for starting lawsuits. In
1988, the horticulturists actually received financial compensation from the
potassium mines.
Negotiation on Implementation and Compliance
For negotiations that lead to a formal agreement, attention then turns to steps
needed for it to be effectively implemented. Key considerations include:
• Communication of the content of the agreement to signatory constituencies
(especially on the 4Rs of rewards, risks, rights and responsibilities).
• Putting in place institutional arrangements for implementation – technical and
financial resources, planning and monitoring processes, management structures.
• Building capacity of implementers as required (individuals and institutions).
• Taking action according to agreed responsibilities.
• Developing a monitoring strategy with agreed-upon indicators of success
(impact, effectiveness, efficiency).
• Joint monitoring approaches are recommended to encourage reflection and
learning.
• Establishing mechanisms to raise and resolve emerging issues and deal with
non-compliance.
• Maintaining and possibly expanding the constituency – continuing to
communicate with all stakeholders and to a broader audience, and engaging
with specific actors.
Key aspects of effective implementation are the mechanisms established to
bring parties together to monitor progress, learn from implementation and adapt
as necessary. It is important to clarify who has responsibility for overseeing
implementation, whether this is an existing organization or a body formed from
representatives of participating stakeholders.
Financing
All agreements require funding of some sort – even those not focused on action
require funding for parties to continue to meet to monitor the implementation of
their agreement or to take it forward. Unclear funding arrangements can quickly
sour constructive relationships. The agreement should specify which parties will
provide which resources (cash or in-kind) or how external finances will be
sought. It should further specify how funds will be administered.

EXAMPLES OF INTERNATIONAL WATER NEGOTIATION

Rhine River Basin
The River Rhine (length 1,300 km) crosses Switzerland, France, Germany, and
the Netherlands. Its catchment area of 185,000 square kilometers is shared in
addition also by Luxembourg, Liechtenstein, and by small parts of Austria,
Italy, and Belgium. Some 50 million people live in the catchment, which
provides drinking water for about 20 million. With major European industrial
areas located within the catchment, the Rhine river is not only used for shipping
and power generation, but also for the disposal of waste water from industrial
and communal activities.
The evolution of the cooperation in the Rhine river basin during the last century
forms an instructive example of the progressive development as a result of
different interacting factors. Activities of interest groups and emerging national
policies led to the first exchange of views and informal consultations on
monitoring. These were followed by a series of formalized agreements on
various aspects of joint interest, which followed the emergence of subsequent
issues in the policy life cycle. Therefore the negotiations do not form a straight
line, but a succession of challenges that had to be addressed by the riparian
countries.
Indus Water Treaty
The Indus Waters is a water-distribution treaty between India and Pakistan,
brokered by the World Bank (then the International Bank for Reconstruction
and Development).[1][2] The treaty was signed in Karachi on September 19, 1960
by Prime Minister of India Jawaharlal Nehru and President of Pakistan Ayub
Khan.
According to this agreement, control over the three "eastern" rivers — the Beas,
the Ravi and the Sutlej — was given to India, while control over the three
"western" rivers — the Indus, the Chenab and the Jhelum — to Pakistan. More
controversial, however, were the provisions on how the waters were to be
shared. Since Pakistan's rivers flow through India first, the treaty allowed India
to use them for irrigation, transport and power generation, while laying down
precise regulations for Indian building projects along the way. The treaty was a
result of Pakistani fear that, since the source rivers of the Indus basin were in
India, it could potentially create droughts and famines in Pakistan, especially at
times of war.
Since the ratification of the treaty in 1960, India and Pakistan have not engaged
in any water wars. Most disagreements and disputes have been settled via legal
procedures, provided for within the framework of the treaty. The treaty is
considered to be one of the most successful water sharing endeavours in the
world today.
The Nile River Basin
The Nile is a paradigmatic example of how the upstream-downstream dynamic
can produce a zero-sum game in the absence of benefit-sharing. The Nile Basin
spans portions of the territories of ten countries: Burundi, the Democratic
Republic of Congo, Egypt, Eritrea, Ethiopia, Kenya, Rwanda, Sudan, Tanzania
and Uganda. It is said to be the longest river in the world, flowing some 4,000
miles from its source in the Lake Victoria basin to the Mediterranean Sea. But
this is only one branch of the great river, the White Nile. The other branch is the
Blue Nile, which flows from Lake Tana, in the Ethiopian highlands, through a
deep gorge to Khartoum where it joins the White Nile to form the Nile proper.
The flow of the Blue Nile is around twice that of the White Nile and is
characterized by seasonal torrents, accounting for the historic Nile floods and
associated flood-recession agriculture in Egypt. Egypt contributes virtually no
water to the Nile and is almost entirely dependent upon it. It therefore decided
to capture the flow of the Nile behind the Aswan High Dam (Sadd el Aali
Dam), completed in 1970, in the Lake Nasser reservoir, with a storage capacity
of about twice the Nile's average annual flow. Egypt uses this water for both
irrigation and hydroelectric power production, but suffers losses of some fifteen
percent of the reservoir's water from evaporation. Early British studies had
concluded that storage in the upper basin would offer a technically preferable
solution, but for Egypt the massive dam and reservoir symbolized its post-
World War II nationalism and were considered necessary to Egypt's water
security in view of the country's dependence on the Nile. As is typical
throughout the world, Egypt, the ultimate downstream state on the Nile,
developed its water resources far earlier, by thousands of years, than any of the
upstream riparians. Egypt's use of Nile water is so intensive that little actually
flows into the Mediterranean Sea. This has led Egyptian leaders to threaten
military action against Ethiopia if that country "touches the waters of the Nile."
Thus the zero-sum game: whatever Ethiopia (or, theoretically, upstream states
on the White Nile) uses, Egypt loses. Ethiopia has emphasized that it has a right
to utilize Nile waters in a manner that is equitable and reasonable vis-a-vis
Sudan and Egypt. Indeed, equitable utilization theoretically avoids the harm to
an upper riparian state that would result from locking in quantities used
historically by a lower riparian. This is, however, of little comfort to Egypt,
which continues to develop Nile water resources, utilizing virtually all of the
water that enters her territory. Egypt tends to rely more heavily on the "noharm"
principle as support for its argument that it is entitled to the same quantity of
Nile water it has used historically and is currently using. It is apparent that
reconciling Egypt's insistence on continuing to receive present quantities with
Ethiopia's development plans cannot be accomplished through apportionment of
water alone. The two countries have therefore been discussing possibilities for
benefit-sharing within the framework of the Nile Basin Initiative (NBI), a
development program supported by the World Bank and various bilateral
donors.' In 2002, Nile Basin states established the NBI as an international
organization with its headquarters in Entebbe, Uganda. Nile Basin countries
developed a Benefit Sharing Framework at a meeting in June 2009 and Egypt,
Ethiopia, and Sudan continue to work on identification of benefit-sharing
projects relating to their sub-basin through the Eastern Nile Subsidiary Action
Program, one of two Investment Programs under the umbrella of the NBI. An
example of these projects is the Eastern Nile Regional Power Trade Investment
Program, whose objective is: "to promote regional power trade through
coordinated planning and development of power projects and transmission
interconnection in the context of multi-purpose water resources development.
As with the basin as a whole, major investment in the Eastern Nile will have to
await approval of the Nile Basin Cooperative Framework Agreement, the first
basin-wide treaty governing the Nile, on which the riparian states have been
working since the late 1990s. At their meeting in Alexandria, 27-28 July 2009,
the Nile Council of Ministers in charge of water affairs decided to allow a
period of six months for the conclusion of an inclusive Cooperative Framework
Agreement-i.e., one that is participated in by all nine Nile Basin states that have
taken part in the negotiations. It is hoped that these final negotiations will meet
with success.
CONCLUSION
International water Negotiations are uncommon despite the obvious benefits
they provide. One reason for this is that states are often more concerned with
how they can protect and maintain their independence and sovereignty than they
are with how they may be able to cooperate to maximize mutual benefits. This
starts negotiations off in a narrow context with negotiators that have strict
instructions "not to give anything away while supporting and maintaining good
relations." Another reason for the lack of open type negotiations is the absence
of independent and coordinated institutional support. Institutional support is
often provided by international funding organizations as part of a project of the
organization for which an agreement is a deliverable. This can create a
challenging dynamic within the process as those that are responsible for
providing institutional support struggle to maintain neutrality while also
delivering an agreement. This can undermine co-riparian confidence that the
process will support them whether or not they choose to agree. It is only in
recent years that the UN has begun to develop a more systematic mediation
support service for transboundary water negotiations and this is still in its very
early stages.
Despite the above, in the recent years, emphasis on International Negotiation as
a tool to resolve disputes among countries has shown considerable
development. In contemporary times of globalisation and liberalization, most
nations do not want to engage in activities which hinder their economic and
social growth and consider such negotiations a viable tool to resolve disputes.
 APPOINTMENT OF ARBITRATORS:
SECTION 11
(ARBITRATION AND CONCILIATION ACT)
ALTERNATE DISPUTE RESOLUTION
PSDA -2
Made By:
SHREYA SAXENA
20817703815 V-D

INTRODUCTION
Section 11(1) provides that unless otherwise agreed to by the parties, an
arbitrator may be of any nationality.
Section 11(2) empowers the parties to agree on a procedure for appointing
arbitrators.
Section 11(3) provides that failing any agreement on appointment procedure, in
arbitration with three arbitrators, each party shall appoint one arbitrator, and the
two appointed arbitrators shall appoint the third arbitrator, who shall act as the
presiding arbitrator.
The provisions of section 11(4) to 11(14) deal with situations when the parties
are unable to appoint arbitrators as per their agreement, or there is no agreement
on procedure of appointment of arbitrator/s. In these cases arbitrator/s is/are
required to be appointed.
CASE LAWS
Citation Infowares Limited v. Equinox Corporation 2009(6)
SCALE 430
M/s Citation Infowares (Indian company) (CI) entered into an agreement in
India with the Equinox Corporation (US company). The final dispute resolution
clause in the agreement provided as follows:

“10.1. Governing law – This agreement shall be governed by and interpreted in

accordance with the laws of California, USA and matters of dispute, if any,
relating to this agreement or its subject matter shall be referred for arbitration
to a mutually agreed arbitrator.”
Hence, the governing law in this agreement was stipulated as the law of
California, United States. In pursuance of the agreement, CI created some
infrastructure in Gurgaon, for Equinox’s business. Disputes arose between the
parties which resulted in Equinox terminating the agreement. CI incurred huge
loss. CI consequently claimed for damages, along with its outstanding payment.
Further, CI issued a notice to arbitrate to invoke the dispute resolution clause
and sought appointment of a sole arbitrator under the final agreement. However,
the parties could not mutually agree upon a sole arbitrator to adjudicate the
dispute. This resulted in the filing of an application under Section 11(5) of the
Arbitration and Conciliation Act before the chief justice of India in order to
appoint the sole arbitrator.

Issues:

1. Whether Chief Justice of India had jurisdiction to entertain an application

for appointment in an agreement wherein the parties had agreed that
Californian law would be the governing law of the contract.
2. Whether Part I of the Arbitration and Conciliation Act, which applies to
arbitrations, the seat of which is in India and contains Section 11, was
applicable where there is no agreement on the place of arbitration.

Held: Part I of the Arbitration and Conciliation Act does apply in the present
case. The Court further held that, even in respect of agreements governed by the
laws of another country where the seat is not specified in the agreement itself,
the provisions of Part I, including Section 11, will be available to the parties.

Relying on precedents, it was held that the scope of presumption arising from
the selection of a foreign proper law of contract is limited. Such a selection does
not automatically result in exclusion of Part I of the 1996 Act. The presumption
of implicit exclusion of Part I would arise only where the arbitration is agreed to
be held outside India. In such a case the law of the seat would apply as the law
of the arbitration agreement.

In the light of the relevant facts that one of the contracting parties was
incorporated in India; the obligations were to also to be completed in India and
the nature of the contract, it can be said that there was no implied exclusion of
Part I of the 1996 Act. Therefore, it was held that notwithstanding the language
of Section 2(2) of the 1996 Act indicating that Part I would apply where the
place of arbitration is in India, the parties would be entitled to invoke the
provisions of Part I, even in respect of international commercial agreements
which are to be governed by the laws of another country. Consequently, the
application made under Section 11 in Part I was found to be maintainable and
the default in appointment was rectified by appointing a sole arbitrator.

Unless specifically excluded by the agreement between the parties or by

implication, the provisions of Part I of the Arbitration and Conciliation Act
1996 will apply to international commercial arbitrations, even where the
governing law is a foreign law.

National Insurance Co. V. Boghara Poly Fab. Pvt. Ltd. (2009) 1

SCC 267

In this case, the Court held that where the intervention of the Court is sought for
appointment of an arbitrator, the court should identify and segregate the
preliminary issues that may arise for consideration in an application under
Section 11 of the Act into 3 categories, that is:

1. Issues which the Chief Justice or his designate are bound to decide
2. Issues which he can also decide i.e. may choose to decide and
3. Issues which should be left to the Arbitral Tribunal to decide are :
- Whether the party making the application has approached the appropriate
High Court?
- Whether there is an arbitration agreement and whether the party who has
applied under section 11 of the act, is a party to such an agreement?

The issues (second category) which the Chief Justice/ his designate may
choose to decide (or leave them to the decision of the arbitral tribunal) are:
(a) Whether the claim is a dead (long barred claim) or a live claim?
(b) Whether parties have concluded the contract/transaction by recording
satisfaction of their mutual rights and obligations or by receiving the
final payment without objection?

The issues (third category) which the Chief Justice/ his designated should
leave exclusively to the arbitral tribunal are:

1. Whether a claim made falls within the arbitration clause (as for
example, a matter which is reserved for a final decision of the
departmental authority and accepted or excluded from arbitration).
2. Merits or any claim involved in the arbitration.

It is clear from the scheme of the Act that in regard to issues falling
under the second category, if raised in any application under section 11
 of the Act, the Chief Justice/ his designate may decide them, if necessary
by taking evidence. Alternatively, he may leave those issues open with a
direction to the Arbitral Tribunal to decide the same. If the Chief
Justice / his designate chooses to decide the issue, the arbitral Tribunal
cannot re- examine it. The Chief Justice/ his designate will, in choosing
whether he will decide such issue or leave it, be guided by the object of
the Act, that is expediting the Arbitration process with minimum judicial
intervention.

Malaysian Airlines Systems BHD v. Stic Travels Pvt. Ltd.(2011)

1Comp LJ 217(SC)
The Supreme Court held that the word ‘may’ in section 11(9) is not intended to
be read as ‘must’ or ‘shall’. The Court held that in case the party who belongs to
a nationality other than that of the proposed arbitrator and no objection, the
Supreme Court or the person or institution designated by that Court can appoint
an arbitrator belonging to a nationality of one of the parties.

However, in case there is objection by one party of the appointment of an

arbitrator belonging to the nationality of the opposite party, the Apex Court
stated that the Supreme Court or his designate can certainly consider the
objection and see if an arbitrator not belonging to the nationality of either party
can be appointed. According to the Court, while taking that decision, the
Supreme Court or his designate can also keep in mind, cases where the parties
have agreed that law applicable to the case is the law of a country to which one
of the parties belongs, whether there will be an overriding advantage to both
parties if an arbitrator having knowledge of the applicable law is appointed.

Grid Corporation of Orissa Ltd. v. AES Corporation And Ors.

Issue: Whether the appointment of the third arbitrator should necessarilybe done
by the two appointment arbitrators by sitting together and in writing?Are they
required to consult the parties too, while doing so, or at least, toput the parties on
previous notice?

The Supreme Court held that the procedure of appointment of third(presiding)

arbitrator is described in sub section 3 of section 11.After each party has
appointed its arbitrator, the two arbitrators so appointed have to appoint a third
(presiding) arbitrator. It is not necessary that the appointment of the third
arbitrator be done by the two appointed arbitrators by sitting together and in
writing. The requirement of law is that there should be an appointment and the
appointment should be by the two appointed arbitrators. The statute does not
contemplate that such appointment should be made in writing.

The provisions of the Act also do not provide that the appointment of third
arbitrator cannot be agreed upon orally or through mutual discussion. It is also
not necessary that the two arbitrators appointed by each of the parties must sit at
one place, deliberate jointly and take a decision in the presence of each other
regarding the appointment of third arbitrator. All that needs to be done is that
they have to actually consult with each other and both or one of them has
inform the parties that the presiding or third arbitrator has been appointed by
them after joint deliberation. In other words, all that the two arbitrators need to
do to satisfy provision of the statute is to:

1. Actually make an appointment

2. Appointment should be made in consultation with each other
3. Such appointment is communicated to the parties. The Act nowhere
provides that the parties need to be consulted, involved or informed prior
to the appointment of the presiding arbitrator.

State of West Bengal v. Associated Contractors AIR (2015) SC

260

Supreme Court held that since Chief Justice is not a Court, a decision under
section 11 is not a decision of the Court and hence, will have no precedential
value.

The 2015 Amendment Act has now finally laid this issue to rest by replacing
“Chief Justice” with Supreme Court or High Court and provides that the
Supreme Court or High Court shall limit its examination only to the existence of
the Arbitration Agreement, and not on issues such as live claim, qualification,
conditions for existence of power etc.