 Good evening friends. Whether third parties can be made signatory in arbitration, we have received lot of messages on that and we thought that if somebody who is well versed and who can explain this topic of late which has caught up the legal minds and otherwise also, we had requested Mr. Hero Adwani, founder and chairman at Vani law, who is himself an authority on international and domestic arbitration law. He happily agreed and the fact that such a topic could be explained by a person who we can say is a legal judiciary or is an institution with himself. We are obliged on behalf of Beyond Law CLC as well as the viewers who are watching us live on the YouTube and on this platform to serve Mr. Hero Adwani to accept our invite. Over to you sir and thank you for accepting our invite. Thank you very much Vikas. Let me just do a slight correction. It was my mistake in the title. It is not, can third parties be made signatories to the arbitration, can third parties be made parties to the arbitration? It would be interesting to start where India has come in arbitration and where we are moving forward and how we where we started from. Originally, one of the most worst features of our arbitration was many of the arbitration clauses would contain a clause whereby one of the parties, usually it being a government party, would appoint their own arbitrators. Sometimes this is their chairman and managing director or sometimes he could nominate one of his employees or anybody close to him. Fortunately, after our amendments in the arbitration act, the Supreme Court took a very strong view in their judgment of Perkins and said it's no longer acceptable and a party cannot appoint its own arbitrator to dominate the proceedings. This was a major, major step forward. Then going on from there, the earliest place of being non-signatories in arbitration took place in France where Dow Chemicals Zurich and Dow Chemicals Europe were signatories to an arbitration agreement with Saint-Gobain and as we know that it's settled law that the arbitration agreement itself is a separate agreement from the remaining part of the agreement. In this case, Dow Chemicals USA and Dow Chemicals France, which were not signatories to the agreement, commence the arbitration and the arbitrators took the view that as Dow Chemicals USA was a parent company of all these companies and as Dow Chemicals France had actually done a lot of the work in the arbitration that even though they were not signatories to the arbitration agreement, they could certainly be parties to the arbitration and commence the arbitration, they successfully succeeded in it and carried on. This then was again tested in England in the earlier case of Peterson Farm. What Peterson Farm was doing was producing chickens, grandfather chickens to another company and that other company was going to breed chickens and give it to various subsidiaries in various parts of England. Those original chickens, the grandfather chickens that were sold were found to be infected and contaminated. So obviously the chickens that they produced were not usable in the market and they could not give them to their subsidiaries or they could not in any way use them. The arbitrators using the example of Dow Chemicals accepted that and they passed an award. The English courts took a very different view. They said this is not going to be possible because the whole idea of having a separate company was that each company could protect itself and it was completely ring fenced so that if they had not signed the arbitration agreement, they could have no liability for the same. This was tested in various courts in England and the classical case was of a Lebanese company, a Buddha gave a franchise to some parties to run restaurants under their name all over England with separate agreements, separate arbitration clauses and they would pay them dues. Ultimately the Lebanese company reorganized itself and called itself COUTS but COUTS were never made a party to the arbitration agreements. Although they carried on the business for a while, they were not a party to the arbitration agreement. So when they commenced the arbitration, based on their speakers in decision, although they had the franchises, the franchises were running successfully making money, they said no arbitration was maintainable because COUTS itself after reorganization had never signed the arbitration agreement. So England has consistently taken this view that each party, if the separate company is completely ring fenced and cannot be made parties to the agreement. This was confirmed in a case called DALA where again this will happen in France and the friend court of Cassation which is the equivalent of our Supreme Court accepted that the government of Pakistan was liable because they had built these small shelters in Saudi Arabia which we had failed and so they were all liable to be paid and the problem is the agreement, although the court which was considering whether it was a valid award or not was the French court of Cassation upheld it. When it sought to be enforced in England, the English court took a completely different view. Seeing the government of Pakistan was not a party to the arbitration, it had some other company that was there which had been dissolved and therefore there could be no liability. So there has been this consistent view of different different countries, particularly in Europe, taking different views of whether third parties can be party to an arbitration or not. In India, our earliest case here was Clorocontrol. Clorocontrol, one forget was an international arbitration, never a number of subsidiaries of Clorocontrol, one of which had the patent, one of which was doing the work, the other was providing another service. So the Indian courts took a view that under section 45 of the arbitration act as they use the words claiming through or under, all the companies could be made a party to the arbitration and so Clorocontrol was the first case in India that took the view that despite what the English courts have taken that they would allow non-signatories to be a party to the arbitration but only an international arbitration. Subsequently, the Indian act was also amended, section eight was also amended to improve the words claiming through or under and therefore even for domestic arbitrations, non-signatories could be a party to the arbitration. Now the theory of making them non-signatories a party to the arbitration is a variety of theories. One is the concept of piercing the corporate veil and if one company is a signatory or another company is assisting in the actual work to be done, then you pierce the corporate veil and make the non-signatory a party to the arbitration. The other theory is one of agency that one is the agent of the other and therefore they can pierce the corporate veil. A third theory is what they call economic reality. The economic reality is that if it's really like one entity then why can't the parent company be dissolved because don't forget in many cases particularly when their business is done in India, a smaller company of a big company, parent company sitting in US or France or wherever is a subsidiary and does these very large contracts and when they do the very large contract, they're probably getting supplies from other countries, they're using patents from other countries, they're getting manpower from other countries, they're getting technology from other countries. So it's really a group effort that is actually carrying out the thing but it's at the dispute and you see the Indian company, sometimes the Indian company is a relatively small company only consisting of a few lakhs or few crores or rupees and cannot withstand an arbitration which several times run into hundreds of millions of dollars because when projects of that size fail, they're very large projects, sometimes they have to be scrapped or sometimes there's a claim that there's a fraud in the patent or the patent already belongs to some other company. For whatever reason if those projects fail they run into hundreds of millions of dollars and quite often the Indian subsidiary can't withstand that. So Clorocontrol has now been consistently followed in India and despite the fact that normally India being a commoner country has followed decisions of the English House of Lords or the English Supreme Court, they've taken a very strong view on this and made non-signatures a party. In fact in one very strong case they even permitted although this party was not a party to the arbitration but during the time of arbitration the defendant company sold off its assets to another company and in this case of Chirin they allowed enforcement against a company that had bought the assets despite the fact that it was not even a party to the arbitration. It had not participated in the arbitration or anything but although those assets had been sold off with a view to defeat the award as and when it came the Indian Supreme Court upheld it and said yes in certain circumstances it can be enforced and even it can be enforced against the non-signature to the arbitration. So India has taken a very different view. The Singapore courts have followed the English view and taken the tradition view that each company the whole idea of having a company is it should be completely ring fenced and therefore no other companies which are not submitted to the arbitration cannot participate with the arbitration cannot be dragged into the arbitration cannot commence arbitration etc. So this is where India has taken a very bold view but more recently there was a judgment before the Supreme Court and Justice Ramana when he just before he retired and Justice Bopana took a view and look we have a certain amount of we have a doubt on this 30 we don't agree with it at all and the reason they said look there's no legal justification for this it's all very well there's an economic justification that the parent company should also be liable for this whole thing but there's no legal justification for it and so this matter went into a five judge bench which we argued and we argued that look for 10 years the law in India has been consistent that non-signatories can in circumstances be a party to the arbitration and it's not a question of economic realities there's a legal justification in either piercing the corporate veil a stop-el and different different legal theories for different different cases agency which can make a non-signatories a party to the arbitration and it's just not economic necessity in fact Justice Suryakant who was sitting the same bench explained the whole thing very well and he took a completely contrary view to the Chief Justice and said no this has been established in India there is no point in upsetting the arbitration in the same whole arbitration system in this manner and yes I can understand that the courts want to review if we are doing and introducing non-signatories very very broadly maybe maybe there's a time to make a narrower test as to when non-signatories can be done but this theory cannot be done and done away so unfortunately this has been heard by a five judge bench in March and although the Supreme Court in India normally and has repeatedly pulled up the other high courts that you must give your decision within six months you cannot keep impending and this decision has been kept pending but there's a reason behind it is the logical reason behind that because there were that very unpopular decision in the Supreme Court where they say if the agreement has not been properly stamped then you cannot proceed for arbitration that agreement has been impounded and go for stamping etc arbitration gone comments there's been a lot of unhappiness with that judgment and that has also gone to five judgment after arguments although the Supreme Court expressed a view and quite a strong view that they think that judgment is wrong as well as in our judgment they think that it's wrong that there should be non-signatories should be a party to the arbitration repeatedly the government counsel on the other side the attorney general solicitor general addition solicitor general have been selling the courts please don't pass any orders they are going to review the arbitration act it's now been nine or ten months and there's been no review of the arbitration act in any manner whatsoever yes there have been committees there have been suggestions number of us a number of us were asked to write suggestions for the amendment the amendment would also bring into being the institutional arbitration because if I don't know some of you read the speech the vice president yesterday said the entire arbitration process is in the grip of retired judges and that should change the idea of change was to bring an institutional arbitration where other apart of retired judges who are qualified in the arbitration field could be appointed as arbitrator etc but unfortunately we've seen the winter session of parliament does not have an arbitration bill on its so we don't know when it will happen there's no uncertainty when it'll happen and the supreme court unfortunately it's held up with hand and not passing judgments in any of these five five judge bench arbitration matters because they keep feeling the arbitration act will be amended and will take care of some of the anomalies so that we can all move forward unfortunately this is not happened and happened in the US they've got a taken a different theory while they accept the English theory that each company the separate entity and therefore should have separate protections if they're not party to the agreement they use the theory of promissory estoppel that if you have acted in a manner that you are party to the arbitration then in those circumstances they will make non-signatory that the party the arbitration on the ground or promissory estoppel but they haven't come out very strongly their their theory is limited only to promissory estoppel it is not limited to economic realities or subsidiaries and parent companies becoming party or piercing the corporate will etc they they've worked on a very very limited theory the Canadian court has now looked at the new york convention and haven't looked at the new york convention they say that new york convention is very clear that arbitration awards must be enforced in reality and whatever steps are required to be taken to enforcement should be done so the Canadian courts have taken a view and now we will accept non-signatories to arbitration on the new york convention they overturn their old law and accepted the new principle of non-signatories will now be a party to the arbitration unfortunately there's a division in the whole world as to which is right and which is wrong and so it for success of your arbitration particularly in international sphere it depends first and foremost which law you choose you choose Indian law and certain non-signatories can be made party to the arbitration if you choose English law it can't be done now if you step back the bigger worry is okay if you choose Indian law that's fine it can be done but if you go for enforcement in certain countries it'll be against their public policy so although you have succeeded in your court you once here in the seated foreign arbitration it's gone up to the supreme court supreme court accepts it then you go for enforcement if you go for enforcement in France no problem if you go for enforcement in England you have a major problem if you have to go for an enforcement in Canada no problem if you have go for enforcement in US maybe maybe not depending on whether there's a promise you stop when involved or otherwise it won't we can't enforce in Canada in Europe you can enforce usually in France Belgium and more and more the civil law countries are permitting enforcement but this is a real problem which in fact requires a global situation it should not be that this is a law in one country and enforceable everything is done as per the law and another country becomes against public policy because there they accept that each company is ring fenced and a separate entity and then it cannot be done this is really a problem that of course the Indian courts have to tackle it so Indian supreme court can tackle it on the Indian basis but we're all waiting for the judgment now eight nine months have gone and no judgment whether the act will be amended when it will be amended we don't know so presently if you were to go to the supreme court and make nonce and because for international arbitration the supreme court appoints the arbitrator you go there and say I want non-signatories to do some benches are saying let's wait for the decision of the court some benches are saying no we'll follow the old law it has not yet been changed and although the bench of justice Ramana and justice Bopanna said we have certain doubts on this it was a three-judge bench so they could out overrule another three-judge bench in any case one of the judges Surya Khan was against it so some some courts are saying let's wait for the judgment some courts are saying we won't wait for the judgment we'll appoint the arbitrator so in the supreme court there's something of a mess for even the appointment of an arbitrator now start to take one year one and a half years so this is something of a quandary which our supreme court should be looking at closely to solve the issue as as quickly as possible what is the answer globally nobody knows because each country is taking its own view and particularly on the issue of public policy if it is if it's Indian law and it's permitted under Indian law and if I'm enforcing it in London then surely Indian law if it's not against Indian law public policy Indian public policy the English court should accept this is not against public policy because it's often enforced in India but once again courts in England or Singapore are starting to take a different view that although it is under Indian law it's not it is against their law and in a matter of principle because the company should be ring-fenced so enforcement becomes a problem this is one of the issues that is going to require a long-term global solution which we hope that will come and in good time but it seems to be taking too long and we don't know when when this will be done with that gentlemen I'm quite happy if you have any questions to answer some of them through the moderator or I'm happy this is the presentation that I wanted to make which is a quandary that a lot of us who are doing international arbitration are facing on a day-to-day basis thank you very much because if there any question that you can see I'm happy to answer any questions if we have no questions thank you to the host and thank you to the audience thank you very much and have a pleasant Sunday evening yes I'm back because can you hear me we can start off hello yeah if there any question I finished if there any question I'm happy to answer if there any questions I'm happy to answer them now because Smitha Sehgal wants to be unmuted good evening sir thank you very much for this informative session I have one very short question so I'll make it very crisp there is an ongoing arbitration which has been filed against an Indian subsidiary of a Turkish company now the Indian this this this this this party is in liquidation but before he went to liquidation when the arbitration commenced we had filed an application for impeachment of a Turkish parent so the party with whom we have contract with is already in arbitration with us we have filed an application for including his parent company for certain very good reasons and some some good documentation also now subsequently this company has gone in liquidation and the arbitrator has put the proceedings in Sinai in this circumstances is there any method by which we can revive or commence the arbitration against the you know foreign parent company the Turkish company is the arbitration seated in India arbitration is seated in India yes certainly you can go to the court immediately and ask them to be joined as a party because the law in India as it stands is that non-secretaries can be made a party so if the if the Turkish company the parent company had actually participated in the activities or been part of the negotiations or in some way was involved yes Indian courts have a right to make him a party and you can carry on the arbitration before against a parent company and concluded in India okay thank you sir thank you