Rostrum’s Law Review | ISSN: 2321-3787

Negative Effect of Kompetenz – The Only Way to Save Arbitral Law in India

Introduction and Background

Litigation in India is a terrrible business. Sometimes even the simplest of cases, can drag on for years. As of September 4th, 2014, the judicial system is staring at a staggering figure of 31.3 million pending cases.[1] There are many ways in which a case can be delayed, be it by way of interim applications, miscellaneous petitions etc. All of these, severely impact the pace at which a case progresses, not to mention the countless, levels of appeals, reviews etc. that are possible at each stage. It is due to these reasons, that alternate dispute resolution mechanisms seem to be infinetly more attractive to most litigants, the so called “out of court settlement” as it is known in common parlance. This is especially so in this country because the backlog and delay is far higher than in most other progressive jurisdictions.

One preferred type of alternate dispute settlement mechanism is arbitration.  The most attractive feature of the arbitral process over that of other alternate dispute settlement mechanisms is the binding nature of the arbitral award. Moreover, because the parties themselves nominate a neutral person or  persons whom they believe will be objective and impartial in their interpretation of the dispute, it increases the acceptability of the award even for the losing party. Further, unlike a negotiation or mediation, the process itself is largely similar to normal judicial proceedings, except that it is far more flexible and speedy, thereby eliminating the requirement for both parties to reach a common ground. Lastly, with increased globalization of trade and commerce, arbitration has easily become the single most attractive way of resolving disputes worldwide. Transnational contracts involve various different legal systems and various judicial institutions ,jurisdictions and other such complications, which makes transnational litigation a strict no for most commercial enterprises.

It is in light of all these features of arbitration, the United Nations Commission on International Trade and Law (UNCITRAL), drafted the UNCITRAL Model Law 1985 (hereinafter Model Law), in order to harmonize the arbitral laws of all countries. Thereafter, the United Nations General Assembly passed a resolution calling upon all nations to amend their national arbitral laws in line with that of the Model Law.[2]  In the next twenty five years or so, most countries adopted the Model Law as their national arbitral law.[3] India, adopted it, when Parliament passed the Arbitration and Conciliation Act 1996 (hereinafter ‘the Act’) on the 16th August 1996. Although India already had the old Indian Arbitration Act 1940 (hereinafter ‘1940 Act’) in place, there was a need to pass a more robust law that would be in line with international standards particularly the one set by the Model Law 1985.[4]

However, the implementation of this legislation and the consequent interpretations by the judiciary has certainly diluted the provisions that were meant to restrict judicial interference. Naturally enough, no arbitration process can exist completely independent of court interventions. Nevertheless, there are set and defined boundaries within which courts and arbitral tribunals must operate. Some countries allow for limited judicial intervention, others provide the courts the jurisdiction to rule on the legitimacy of the tribunal even when the matter is still carrying on before the arbitral tribunal. Despite this all countries that have adopted the Model Law as their national arbitral law have provided a certain degree of independence to arbitral tribunals due recognition of the doctrine of Kompetenz-Kompetenz as contained in Article 16 of the Model Law.[5]

In this paper, the author purports to examine the manner in which the distribution of jurisdiction has been provided in the Arbitration and Conciliation Act 1996 (India). For proper understanding, the author will also, examine the extent to which the Kompetenz- Kompetenz doctrine operates in other jurisdictions and the within the Model Law itself. Moreover, with the Kompetenz-Kompetenz doctrine there is another avenue that the paper proposes to analyze viz. the negative effect of the said doctrine apart from the more commonly found; positive effect and will argue that the negative effect can be found in the Act despite innumerable Supreme Court decisions and legal commentators stating the contrary.

The reason why this is an important subject area of examination is because the Arbitration and Conciliation Act, 1996, has been plagued by the innumerable difficulties. Since 1996 the courts in India have found various ways through creative interpretative techniques to interfere in the arbitral process. Indian courts have always been suspicious of the arbitral processes and have interpreted the limited court intervention provisions to confer upon themselves greater jurisdiction to intervene.[6]  Further with the Central Government stating countless number of times that it is committed to creating a healthy environment for businesses and investors, a sound alternate dispute resolution mechanism would go a long way in achieving that objective. In this paper the author will argue that Act is actually not defective but is far more advanced than even the Model Law due to its implied recognition of the negative effect of the Kompetenz Kompetenz doctrine but innumerable decisions of the Supreme Court have failed to give effect to this intention of Parliament.

Doctrine of Competence-Competence

The doctrine of Kompetenz-Kompetenz (German origin) or competence-competence forms the bedrock of arbitral systems. The doctrine of competence-competence states that the arbitral tribunal shall have jurisdiction to examine questions such as the existence, validity etc. of the arbitration agreement.[7] The author would like state that hereinafter, questions of existence, validity and inoperability of the arbitration agreement shall be collectively referred as threshold/jurisdictional questions for the sake of convenience.

Arbitrators, as such, derive all their authority to making rulings on the matter in dispute, from the arbitration agreement. However, with the help of the competence-competence principle, they are allowed to invalidate the very source of their powers and existence, because unlike the other powers of the arbitral tribunal, this particular power is sourced from the lex arbitri of any arbitration proceedings, and as per the more widely accepted position in international arbitration; the lex arbitri is usually the legal system of the seat of arbitration.[8] In India, §16 of the Act, confers this power on all arbitrations that fall under Part I of the Act, i.e. arbitrations seated in India. Therefore, challenging the existence or the validity of the arbitration agreement will not preclude the arbitrators from proceeding with the arbitration, ruling on their own jurisdiction and, if they retain jurisdiction, rendering a decision on the merits of the dispute notwithstanding any court action aimed at setting aside the decision on jurisdiction. This enabling aspect of the power is what is called the “positive effect” of the principle of competence-competence, today recognized in a vast majority of countries.[9]

The negative effect on the other hand states that apart from having the jurisdiction to rule on their own jurisdiction, national courts shall not review questions of arbitrator’s jurisdiction and instead refer such questions for the tribunal to decide.[10] This means that when seized of a matter where one of the parties challenges the existence and validity and the inoperability of the arbitration agreement itself, in such cases the court will refuse to entertain such questions and refer the party who raises such issues to agitate them before the arbitral tribunal. Effectively the negative effect operates as a rule of priority in favour of the tribunal. Depriving the courts of their jurisdiction to make final pronouncements on the threshold jurisdictional questions in the pre-award stages of arbitration is the negative in the negative effect of the doctrine. [11]

In all national jurisdictions whether positive or negative, the Courts have been given the power of reviewing the arbitral award once it is issued by the tribunal at the enforcement stage.[12]  It is submitted, that in negative effect jurisdictions, empowerment of the tribunal to be first judges of their own jurisdiction is tempered by the reviewing powers granted to the court at the enforcement stage, either to set aside the award or enforce it.[13] It is submitted that the negative effect of competence-competence is a corollary to the acceptance of the application of the positive effect. In order that the negative effect of the doctrine enables an effective implementation of the positive effect. Without the negative effect, it is submitted that the doctrine can become largely redundant, and will be limited in only those situations where both parties are in agreement with the tribunal’s authority to examine the existence and validity of the arbitration agreement in the first instance.

This problem is manifest in India, particularly after the seven judge bench SBP v Patel Engineering[14] decision of the Supreme Court which shall be examined in detail in the later parts of this article. Furthermore, this view of the negative effect being a corollary of the positive effect has been furthered by various French authors and has been applied in French law.[15] Currently, Paris holds the distinction of being the most attractive choice for most businesses for arbitration including Indian firms and companies, and in fact, contributes to the Parisian GDP with an annual turnover of over two hundred million Euros in 2013.[16]

Policy Objectives of the Negative Effect

The negative effect achieves various policy objectives viz. it ensures that court interventions are kept to an absolute minimum thereby giving effect to the policy of speedy resolution of disputes. It is submitted that the arbitral process would seriously be hindered if parties were allowed to exploit the courts to initiate parallel proceedings for the sole purpose of interfering with the progress of the arbitration. A party’s time, costs and efforts would be conserved if they do not have to undergo parallel and duplicative proceedings on the questions of existence and validity of the arbitration agreement.[17] The problem of duplicative proceedings continuing simultaneously is compounded, in those jurisdictions that have incorporated Article 8(3) of the Model Law into their national arbitration law such as India. §8(3) of the Act states that a tribunal can proceed and make an arbitral award, notwithstanding the pendency of a proceeding raising jurisdictional challenges viz. existence and validity of the arbitration agreement before the judicial authority. Lastly, it gives effect to that fundamental concept in commerce, that parties must be held to their bargain. It ensures that recalcitrant parties do not try to escape liability by forestalling the arbitral process.

Forms of the Negative Effect: French Perspective

The negative effect of the competence-competence doctrine is not as widely accepted and applied by most national jurisdictions. Nevertheless, there has been a movement towards a greater recognition of he negative effect and priority of the arbitrators.  An examination of some of the negative-effect based jurisdictions like France would be instructive in this regard.

Article 1458 of the French Code of Civil Procedure, states that the Courts only possess the power to review jurisdictional questions like validity, existence of the arbitration agreement at the stage of enforcement of the award alone, and jurisdictional interference is limited to cases, whereupon a prima facie review verifies that the arbitration agreement is  clearly unenforceable.[18] A chronological priority has been provided and an express prohibition has been imposed on the court when seized of a case whose subject-matter is falls within an arbitration agreement, from ruling on the existence and validity of the agreement. In such situations, if a party raises a challenge concerning the existence and validity of the agreement, then the Court can refuse to refer the parties to arbitration only if it finds that the agreement is manifestly null and void, inoperable or incapable of being performed.[19]

In the case of Copropriété Maritime Jules Verne v .American Bureau of Shipping [20], where an appeal against a judgment by the Paris Court of Appeal was permitted on the grounds that it had failed to consider the negative effect. The Cour De Cassation held that manifest nullity of the agreement to arbitrate was the only barrier to the competence-competence principle and the rule of priority of the arbitrator. [21] In Copradag v Dame Bohin the Cour de Cassation applied a rigorous interpretation of Article 1458 and held that once it has been established that prima facie there exists an arbitration agreement that is prima facie valid and operable then the arbitral tribunal alone has jurisdiction to rule on the validity or limits of the agreement, and the courts must decline jurisdiction[22]

It is submitted that the French approach provides a proper balance between the supervisory role that courts must play in arbitration, and hold parties to their obligations under an arbitration agreement. A prima facie review of the existence and validity of an arbitration agreement by Court ensures that parties who may not have consented to arbitration not be dragged into it and also ensures that recalcitrant parties are not allowed to exploit the contours of the ordinary litigation process.

Negative Effect in India

An overview of the Arbitration & Conciliation Act 1996

It is suggested that the reader kindly refer to the bare text of the Arbitration & Conciliation Act 1996 along with the UNCITRAL Model Law 1985 in order to better appreciate and understand this section.

The Arbitration and Conciliation Act 1996, contains two parts dealing with arbitration namely Part I and Part II. Part I applies only when the seat of arbitration is in India while Part II deals with foreign seated arbitrations. Further, after the constitutional bench decision in Bharat Aluminium v Kaiser Aluminum[23], it settled law that the two parts are mutually exclusive i.e. provisions of the Part I cannot be used to guide interpretation, or, give effect to the provisions in Part II and vice-versa.[24] This is because, Part I contains provisions to support and supervise the arbitration from the pre-commencement to the post-award stages. According, to that decision and international jurisprudence, this supervisory role can be played only by the courts at the seat of the arbitration and no other.[25] Courts of other countries are only restricted to only enforcement proceedings, if the winning party seeks to enforce the award in a country other than that of the seat of arbitration. This is precisely the function that provisions of Part II of the Act seek to achieve when dealing with foreign seated arbitration.

In Part I, there are two stages where the Act contemplates the courts make pronouncements on the jurisdictional/threshold questions. The first stage is prior to commencement of the arbitration i.e. through §8 and §11. §8 states when a judicial authority is seized of a dispute that is subject matter of an arbitration agreement, then the authority must decline jurisdiction and direct parties to arbitrate. §11, speaks of a situation when one party is unwilling/unable to appoint an arbitrator, then the other party may approach the Chief Justice of the jurisdictional High Court or the Chief Justice of India (in case of international commercial arbitration which is seated in India) for constitution of an arbitral tribunal.  The second is the post-award stage found in §34 which allows a party to challenge the award, before it’s enforcement, to set it aside on the specified and limited grounds mentioned in that section.  It must be mentioned herein that Part I of the Act also contains §16 which gives effect to the competence-competence principle by conferring powers to the arbitral tribunal to examine jurisdictional questions of existence, validity, and scope of the arbitration agreement. The entire Part I of the Arbitration & Conciliation Act 1996 has been legislated keeping the UNCITRAL Model Law 1985 as the standard and guide.[26]

The essence of this paper is to examine the nature of the review on the threshold questions that is permitted under all the pre-commencement provisions of the Act from §8, §11.  The question is whether the review contemplated under our Act is a prima facie and cursory or full, final, and, detailed. Based on the discussion on the preceding section, if it is a prima facie review then it means that the Act intended to apply the negative effect of the competence-competence principle in India.

In the case of P. Anand Gajapathi Raju v PVG Raju[27], the Supreme Court held that once the Court under §8(1) has arrived at the conclusion that there exists an arbitration agreement then the parties must be directed to arbitration. It is mandatory for the court to refer the parties to arbitration there is no question of discretion at all.[28]  This principle of checking whether there was arbitration agreement in existence alone was followed in nearly the decisions that followed PAG Raju’s case.[29] While the case does not discuss the nature of the review to be conducted by the court as that question did not arise, the existence of the arbitration agreement alone was declared to be the necessary threshold to be determined and nothing else.[30] However, this limited interventionist interpretation by the Court was halted by the judgment in SBP v Patel Engineering.[31] SBP’s case was a decision under §11 of the Act and the majority held that while appointing an arbitrator the Chief Justice of the High Court or the Chief Justice of India (in case of international commercial arbitrations seated in India), must decide all the threshold questions relating to the arbitration agreement.[32] The Court ruled before constituting the tribunal, the Chief Justice concerned must engage in a full-fledged enquiry regarding not only the existence but also the validity, inoperability of the arbitration agreement. Further, this ruling by the Chief Justice on these issues before appointment has been held to absolutely final and cannot not re-examined by the arbitral tribunal. This decision also stretched the application of a detailed review to cases under §8 of the Act as well and held that every decision under that section too will be final and binding on the tribunal. Further, in order to reconcile its ruling on the nature and finality of the review, the Court read down §16 (competence-competence principle) by ruling that the tribunal will have the competence to examine threshold questions on the arbitration agreement in only those cases where the arbitration commences without any court assistance i.e. without application of §8 and §11 of the Act.[33] Lastly, it needs to be mentioned that the Supreme Court in the case of Chloro Controls v Severn Water Inc.[34] had stated as a passing remark that the doctrine of the negative effect of competence-competence principle does not find a place in the Arbitration and Conciliation Act 1996. Although, this is not a binding ruling of the Court on the matter as this question of application of the negative did not arise before the Court in that case.

Authors’ Arguments on Negative Effect

It is respectfully submitted that the reasoning and conclusions in SBP’s case and the passing remarks in Chloro Controls Case is an incorrect interpretation of the provisions of the Act. This is because, far from conferring finality to the decisions of the judicial bodies under §8, & §11, and §45 the provisions of the Act gives effect to the negative effect principle of competence-competence.

In this part §8, and §11 and §16 will be analysed with reference to the Model Law as a standard yardstick. The reason why the author will be referring to the Model Law is because the text of the Model law can be used as a source for interpreting provisions of our legislation as well.[35] Article 8(1) of the Model Law states as follows:

(1) A court before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party so requests not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration unless it finds that the agreement is null and void, inoperative or incapable of being performed.

(2) Where an action referred to in paragraph (1) of this article has been brought, arbitral proceedings may nevertheless be commenced or continued, and an award may be made, while the issue is pending before the court.

Section 8 of the Act states as follows:

  • A judicial authority before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party so applies not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration.
  • The application referred to in sub-section (1) shall not be entertained unless it is accompanied by the original arbitration agreement or a duly certified copy thereof.
  • Notwithstanding that an application has been made under sub-section (1) and that the issue is pending before the judicial authority, arbitration may be commenced or continued and an arbitral award made.

It is submitted that from a bare reading of the text itself it is evident that while Art.8(1) contemplates an enquiry by the court into the jurisdictional questions, §8(1) however does not. Further, the similar provision in Part II, i.e. §45 has been worded in a broader manner with the usage of the same terms as used in Art.8(1) of the Model Law. Of course, it is true that the court cannot blindly refuse jurisdiction and send the parties to arbitration. A certain degree of scrutiny of threshold questions is necessary and hence it is submitted that it is only a prima facie scrutiny that is contemplated by the section. This is because first despite having the Model Law as a standard Parliament deliberately chose to omit the last line of Art.8(1) indicating that it did not want the Court in §8 to engage in a full-fledged enquiry on the threshold questions. Such omissions by Parliament are pertinent because they are indicative of its intention as has been held in different cases.[36]

Second, the arbitral tribunal under Clause (2) has been given the authority to continue with the proceedings despite the pendency of an application under Clause (1). Second, if a detailed review of threshold questions is allowed under §8(1) then it will lead to conflict with §8(3). Under clause (3) the tribunal has been given the authority to continue with the arbitral proceedings despite the pendency of proceedings under clause (1). In case the tribunal proceeds under clause (3) and makes an award and subsequently the Court rules that the arbitration agreement to be invalid after a full, final, and binding determination under clause (1) then it will lead to a conflicting mess and will cause parties severe hardship. Further, this also limits the parties right to challenge the award under §34(2)(ii) as a final detailed determination has already taken place under §8(1) rendering the §34(2)(ii) entirely nugatory.

The only way in which clause (1) & (3) can be harmonized is by allowing only a cursory or prima facie review of threshold questions under clause (1) which will merely be a cursory opinion of the court and not a final binding determination which would enable the tribunal to continue with the award. In case, the cursory opinion of the court on threshold questions under §8(1) conflicts with the award passed by the tribunal under §8(3) then the losing party can challenge the award and attempt to set it aside under §34(2) of the Act where the court can make a full, final and detailed review keeping both opinions in mind. Numerous decisions of the Supreme Court have stated that courts must always adopt that interpretation of a section which gives full effect to all the provisions of the statue.[37] This is why it is submitted that this is indeed being achieved if a prima facie review is to be followed under §8(1).

Coming to §11 and SBP’s case, the main thrust of the Court’s reasoning in that case was that if a tribunal/authority has been given a specific power to exercize then that would mean it would automatically have decided certain underlying questions before exercising that power.[38] When it comes §11, these underlying questions include questions concerning the existence, validity and inoperability of the arbitration agreement. The reason why the Court decided to hold that there should be a detailed enquiry by the Chief Justice on these questions is because §11(7) states the decision of the Chief Justice on matters entrusted by other provisions of §11 is final. It argued that for its decision to attain finality it necessary that full-fledged enquiry be carried out into all threshold/jurisdictional questions.[39] §11(7) states:

“11.(7) A decision on a matter entrusted by sub-section (4) or sub-section (5) or sub-section (6) to the Chief Justice or the person or institution designated by him is final.”

It is respectfully submitted, that though the Court may have been correct in saying that before exercising its power an authority must examine some underlying questions as well, its reading of §11(7) is erroneous. This is because, what has been made final under §11(7) is the “decision on a matter entrusted” under those other provisions. The “matter that has been entrusted” under all the above mentioned sub-sections is only restricted to the appointment of the arbitrator. That alone is the authority that has been cast on the Chief Justice under §11(4) (5) and (6). Granted, that to exercize that authority some underlying questions need to be examined, but the finality is attached to the appointment of the arbitrator by the Chief Justice and not to his determinations on the underlying questions. Since the finality issue is tackled, it now opens the possibility of having a prima review of the threshold questions of existence, validity and inoperability of the agreement as well because it was the reason why the Court ruled in favour of a detailed scrutiny.

It is further argued, that a prima facie review is what the Chief Justice should undertake in §11 because otherwise it whittles down the competence-competence principle in by taking away the power of the tribunal under §16 and limits its application to only specific types of arbitrations as has been mentioned above. This makes the entire objective and purpose of enacting the Arbitration & Conciliation Act, 1996 in line with the UNCITRAL Model Law 1985 entirely superfluous. Second, the power under §16 of the Act, is a substantive power provided by the Act, whereas §11 provides as per its heading, the procedure for appointment, and a substantive authority conferred by statute cannot be taken away by the application of a procedural provision.[40] Third if a detailed and final scrutiny is done under §11 then it takes away the statutory right of the losing party to an award to agitate the issues regarding existence, validity of the arbitration agreement in an application to set aside the award under §34(2)(ii). A prima facie review of the threshold questions will however ensure that all provisions of the Act are given full effect, be it, §11(7), §16 or §34(2)(ii). The fact that all provisions can be harmoniously construed and applied if a prima facie approach is adopted in §8 and §11 shows that Parliament intended to deprive jurisdiction of the courts on the threshold questions by deferring such matters to be enquired  in depth by the Tribunal under §16. This gives further indication of the application of the negative effect of competence-competence in Part I.

Moving to §16, the text of §16 of the Act and Art.16 of the Model Law are largely similar. The first part of Article 16(1) is reproduced verbatim in §16(1) and is the declaration of the competence-competence principle. The second sentence of Art.16(1) contains the other pillar of arbitral jurisprudence, the seperability doctrine which has been reproduced word for word in clause (a) & (b) of §16(1). Addressing the seperability doctrine is beyond the scope of this paper. Similarly, Article 16(2) has been reproduced verbatim but listed separately as §16(2)(3) and (4). Thus it can be seen that Parliament has followed the exact text of Article 16 in general. However, the difference arises in Article 16(3) and §16(5) of the Act.

Article 16(3) allows the arbitral tribunal the power to make a pronouncement on objections to the existence, validity and inoperability of an arbitration agreement either a preliminary ruling or in the form of a final arbitral award. Further, if the tribunal decides in the form of a preliminary ruling, that, there exists a valid and operable arbitration agreement, then the losing party may challenge that preliminary ruling itself in a court for its final findings on that jurisdictional issue.[41] This means that a party can approach the court to get a final ruling on threshold question during the pendency arbitration proceedings itself. This entire portion of Article 16(3) is absent in §16(5) of the Act. §16(5) stipulates that in case a party raises a jurisdictional objection, and loses that issue, then the tribunal shall continue and adjudicate the merits of the dispute and make the arbitral award. §16(6) provides that aggrieved party to the award, can then raise the jurisdictional objection only in an application to set aside the award under §34(2)(ii).

Examination of these differing provisions of §16 and Art.16 shows how like § 8(1) Parliament intended to deprive the courts of its jurisdiction to entertain threshold objections. In this case, the deprivation of jurisdiction is in its entirety and not merely restricted to prima-facie evaluations like §8(1). Therefore, unlike the Model Law, the Indian Act allows for examination of the threshold questions only in the pre-commencement and post-award stages and not during the pendency of the arbitration. This reflects the policy of the Indian legislature to give greater effect to the speedy conduct of the arbitration proceedings of the parties and final, detailed settlement of such questions by the courts only at the post-award stage. This conclusion also furthers the argument of application of the negative effect, because the courts have been deprived of their jurisdiction completely under §16, which existed in the previous old Arbitration Act of 1940 and exists under the UNCITRAL Model Law.

Therefore, from all of the arguments stated above, it is submitted that provisions of the Arbitration & Conciliation Act, 1996 indicate that India too was contemplated as a negative-effect based country like France and England. It further indicates that the current form of the Arbitration & Conciliation Act is a lot more advanced and arbitration friendly than the Model Law itself which was our source and benchmark in the first place. It is submitted, that if the courts interpret the provision of the Act, in the above-mentioned manner then the Arbitration & Conciliation Act 1996, will be able to avoid the various anomalies and difficulties that currently plague it. It will also ensure that recalcitrant parties to an agreement do not engage in dilatory tactics and exploit the judicial system to their advantage. Moreover, it will be in tune with objective with which Parliament enacted the statute in the first place i.e. to make India a hub for international arbitration like Paris or London.


In order for any system of alternate dispute resolution to work properly particularly arbitration, a fine balance needs to be maintained between the powers of the courts and that of the arbitral tribunal. The most successful arbitral regime as has been already pointed out before is France, which has managed to achieve this fine balance between these two factors. Application of the negative effect goes a long way in ensuring that this balance is achieved because it keeps a large part of the dispute resolution process outside the court based system, which frankly is what business houses intend to achieve with arbitration agreements in the first place. Of course, certain degree of juridical supervision is necessary to ensure that protect innocent parties from being dragged into arbitration proceedings which are expensive nonetheless. Nevertheless, that supervision ought to be kept to the bare minimum.

In India, the current trends of the judicial decisions augur well for the arbitral law in the country. Recent decisions after the Bharat Aluminium case have led to some very pro-arbitration decisions by the High Courts as well.[42] Nevertheless, till the entanglement created by the SBP case is not overruled by a higher bench of judges using the arguments presented above or Parliament amends the law, India can never attain its place as an arbitration favourable jurisdiction like France.


[1]https://www.hindustantimes.com/india-news/justice-has-a-mountain-to-climb-of-31-3-million-pending-cases/article1-1259920.aspx (Nov. 30, 2014, 11:30 PM),

[2] Official Records of the General Assembly, Fortieth Session, Supplement No. 17(A/40/17), Annex I; United Nations publication, Sales No. E.95.V.18

[3]Arbitration Act 1996 (England);  Code of Civil Procedure as promulgated on 5 December 2005 (Bundesgesetzblatt (BGBl., Federal Law Gazette) I page 3202; 2006 (Germany)

https://www1.umn.edu/humanrts/research/Civil%20Procedure%20Code%20%28English%29.pdf (Nov. 29, 2014, 8:26 AM),

[4] Statement of Objects and Reasons, Arbitration and Conciliation Act 1996

[5] Article 16, UNCITRAL Model Law  24 ILM 1302 (1985)

[6] Oil and Natural Gas Corporation v SAW Pipes (2003) 5 SCC 705;

[7] International  Arbitration Agreements and Competence-Competence – C. Variations of

Competence- Competence Doctrine in Different National Legal Regimes in GARY B  BORN, INTERNATIONAL

COMMERCIAL ARBITRATION, (Kluwer Law International  2009) pp. 877 – 986

[8] Nigel Blackaby et al., Redfern and Hunter on International Arbitration (Oxford University Press 2009)

[9] 8. Gaillard & Banifatemi Negative Effect of Competence-Competence:The Rule of Priority in Favor of the  Arbitrators in  E.Gaillard Enforcement Of Arbitration Agreements And International Arbitral Awards: The New York Convention In Practice (Cameron May Ltd 2008)

[10] Id

[11] Supra note. 8 at 880

[12] §§36, 36, 38 Arbitration & Conciliation Act 1996,  Articles 36, 38 of the UNCITRAL Model Law 24 ILM 1302 (1985)

[13] Brekoulakis, Stavros, The Negative Effect of Compétence-Compétence: The Verdict Has to Be Negative Austrian Arbitration Yearbook, 238, (2009)

[14] S.B.P. and Co. v. Patel Engineering Ltd. and Anr (2005) 8 SCC 618

[15] Philippe Fouchard  Part III  The  Arbitral  Tribunal  in Berthold Goldman, Fouchard, Gaillard, Goldman On International Commercial Arbitration (Kluwer Law International 1999)

[16]Report of the Working Group of the International Chamber of Commerce Paris,

[17]O. Susler, The Jurisdiction of the Arbitral Tribunal: A Transnational Analysis of the Negative Effect of Competence 6 Macquarie Journal of Business. Law 119 (2009)

[18] French  Code of Civil Procedure,  (1981)  Book IV,  Title V, Article 1458:

 If a dispute pending before an arbitral tribunal on the basis of an arbitration agreement is brought before a State court, it shall declare itself incompetent. If the dispute is not yet before an arbitral tribunal, the State court shall also declare itself incompetent, unless the arbitration agreement is manifestly null and void. In neither case may the State court declare itself incompetent at its own motion.

[19] Supra. note 18 at 136

[20] Copropriété Maritime Jules Verne v .American Bureau of Shipping, 2006(4) Rev. Arb. 945, at 946-4  7 June 2006 Cour de Cassation Chambres Civiles, as cited in  8. Gaillard & Banifatemi Negative Effect of Competence-Competence: The Rule of Priority in Favor of the  Arbitrators in E.Gaillard Enforcement Of Arbitration Agreements And International Arbitral Awards: The New York Convention In Practice (Cameron May Ltd 2008)

[21] Id

[22] Caprodag vs. Dame Bohin (1995 Rev. Arb. 617) as cited in Konkan Railway Corporation Ltd. and Anr. v. Rani Construction Pvt. Ltd. 2000(8) SCC 159

[23]Bharat Aluminium Co Ltd v Kaiser Aluminium Technical Services Co. C/A No. 7091 of 2005, https://supremecourtofindia.nic.in/outtoday/ac701905p.pdf  (Nov. 29, 2014, 8:26 AM),

[24] Id  Bharat Aluminum ¶89

[25] Id Bharat Aluminium ¶¶121-122; See also Karha Bodas Co.LLC v Perusahaan Pertambagan Minyak Das Gas Bumi Negara 364 F.3d 274 (5th Cir 2004); Nigel Blackaby et al., Redfern and Hunter Law and Practice of International Arbitration (Oxford University Press 2009)

[26] M/s Sundaram Finance v M/s. NEPC India Ltd (1999) 2 SCC 479, ¶¶8-9

[27] P.Anand Gajapathi Raju v PVG Raju (2000) 4 SCC 539

[28] Id  ¶8

[29] Hindustan Petroleum Corporation Ltd v Pinkcity Midway Petroleums (2003) 6 SCC 503; Rashtriya Ispat Nigam Limited and Anr. v. Verma Transport Company (2006) 7 SCC 275

[30] See Rashtriya Ispat Nigam v Verma Transport Company  ¶ 15

[31]S.B.P. and Co. v. Patel Engineering Ltd. and Anr (2005) 8 SCC 618

[32] Id ¶49

[33] Id ¶19

[34] Chloro Controls India (P) Ltd. v. Severn Trent Water Purification Inc . (2013) 1 SCC 641

[35] Supra note. 26

[36] Bhatia International v Bulk Trading (2002)4 SCC 105; SP Gupta v President of India 1981 Supp. (1) SCC 87; B Prabhakar Rao and others v State of Andhra Pradesh and Ors 1986 AIR SC 210,

[37] G.P. Singh, Principles Of Statutory Interpretation (Lexis Nexis Butterworth & Wadhwa 2012)

[38] Supra note. 32 ¶8

[39] Supra note 32  ¶¶37-38

[40] OP Malhotra Opening a Pandora’s Box: An Analysis of the SBP v Patel Engineering 19 Student Bar. Review 69, 73 (2007)

[41] Article 16(3): (3) The arbitral tribunal may rule on a plea referred to in paragraph(2) of this article either as a preliminary question or in an award on the merits. If the arbitral tribunal rules as a preliminary question that it has jurisdiction, any party may request, within thirty days after having received notice of that ruling, the court specified in Article 6 to decide the matter, which decision shall be subject to no appeal; while such a request is pending, the arbitral tribunal may continue the arbitral proceedings and make an award.

[42] Konkola Copper Mines (PLC) v. Stewarts and Lloyds of India Limited 2013(5)BomCR29; Reliance Industries Ltd. v Union of India 2014  7 SCC 60; Swiss Timing Ltd. v. Organizing Committee Commonwealth Games  2010 , (2014) 6. SCC 677


  • Nigel Blackaby et al., Redfern and Hunter on International Arbitration (Oxford University Press 2009)
  • Nigel Blackaby et al., Redfern and Hunter Law and Practice of International Arbitration (Oxford University Press 2009)
  • Gary B Born, International Commercial Arbitration, (Kluwer Law International 2009)
  • Galliard Enforcement of Arbitration Agreements And International Arbitral Awards: The New York Convention In Practice (Cameron May Ltd 2008)
  • Berthold Goldman, Fouchard, Gaillard, Goldman on International Commercial Arbitration (Kluwer Law International 1999)
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