Indian Supreme Court on Jurisdiction over the Italian Marines

Although the dispute between India and Italy seems to have been abated for now, a closer look at the Supreme Court’s judgment of 18 January 2013 finding that India had jurisdiction to prosecute the marines is important. Chief Justice Kabir and Justice Chelameswar delivered separate but concurring opinions.  In its judgment, the Court found that India had jurisdiction over the Italian marines. Specifically, the Court – reasoning through a curious blend of international and domestic law – quashed the proceedings before the Kerala High Court, directing the federal Government to set up a special court to try the marines. Interestingly, however, the Court refused to answer whether the marines enjoyed  immunity by virtue of their status as members of the Italian armed forces (presumably leaving it for the trial court to decide the issue).

Readers would remember that the Kerala High Court had earlier dismissed Italy’s arguments on the extra-territorial application of the Indian Penal Code (IPC) and the Suppression of Unlawful Activities Act, and sovereign immunity of the two marines before Indian courts. The same contentions were raised before the Supreme Court (Italy’s arguments are summarized from paragraphs 13-46; India’s from 47-71; and, the state of Kerala’s from 72-81).

The questions before the Court were simple enough: did India lack jurisdiction to try the marines? If not, could this case be tried by the State of Kerala or the Indian Union? In formulating the issues, the Chief Justice (paragraph 82) and Justice Chelameswar (paragraph 2) oddly excluded the issue of sovereign immunity, despite arguments raised by Italy (paragraph 42) and India (paragraph 66) specifically on that point.

Addressing the question of territorial jurisdiction and that alone, the Chief Justice’s primary opinion proceeded along two lines of argument (given the finding that the incident occurred 20.5 nautical miles off the Indian coast, in the Indian contiguous zone): first, whether Kerala – as a federal unit within the Indian Union – had the jurisdiction to try the marines; and second, whether the Indian Union (India itself) possessed that competence.

(As a preliminary note, given that a negative conclusion on the second question would have precluded any discussion on the first, the judgment should perhaps have addressed the questions in the reverse order. In fact, in addressing the first question, the Court reached the conclusion that “the Union of India (is entitled to) to take cognizance of, investigate and prosecute persons who commit any infraction of the domestic laws within the Contiguous Zone.” (para 84) Having said this, the Court has already assumed a positive answer to the second question, which it then subsequently ‘considered’ for the remainder of the judgment.)

That apart, the first issue before the Court revolved around the effect of Notification No. SO 67/E (1981) under the Territorial Waters, Continental Shelf, Exclusive Economic Zone and Other Maritime Zones Act, 1976 (“TW Act”), which extended the application of the IPC to the Exclusive Economic Zone (“EEZ”). The Chief Justice concluded that though the Maritime Zone Act extended the application of the IPC to the EEZ (and thus the Contiguous Zone), the incident lay beyond the territorial jurisdiction of Kerala, which coincided with its territorial waters. The effect of the Notification then was to extend the powers of the Indian Union, and not of a federal unit within it. (A) Similarly, the Court held that the inclusion of Section 188A to the Code of Criminal Procedure (which extends Indian criminal jurisdiction to the EEZ) does not expand Kerala’s local jurisdiction and fails to justify the prosecution in the courts of Kerala. Equally, the Court considered this conclusion proper as a dispute between two nations took the matter “to a different level”, making a federal unit’s involvement incorrect as a matter of law. (B)

On the second question, the Court correctly identified the issue as whether India can exercise penal jurisdiction in its contiguous zone outside the limited rights granted under Article 33 of the UNCLOS. The Chief Justice’s judgment seems to rely primarily on the decision in Lotus (discussed previously here) which permits the exercise of jurisdiction on the passive personality principle. In doing so, the Court considered whether the subsequent addition of Article 97 of UNCLOS (and Article 11 of the Geneva Convention) to the legal regime had rendered the decision in Lotus inapplicable. Thus, in deciding that this case did not involve an ‘incident of navigation’ under Article 97 (for example, a collision), the Chief Justice followed Lotus. Justice Chelameshwar, in his concurring opinion, discarded Article 97 on alternate grounds, i.e. Part VII of the UNCLOS (in which Article 97 figures) applies only to the high seas and not to the EEZ (a conclusion that can be, and has been, disputed).

Importantly, and perhaps this is a fact that escaped media interest, the Court did not decide the question of jurisdiction conclusively. Rather, it noted that this judgment “will not prevent the Petitioners herein in the two matters from invoking the provisions of Article 100 of UNCLOS 1982, upon question of jurisdiction of the Union of India to investigate into the incident and for the Courts in India to try the accused may be reconsidered.(C)

Given the breadth of the judgment, I will offer only a few preliminary thoughts here. On point A, the Court’s holding that neither Section 188A nor the Notification under the TW Act extended Kerala’s jurisdiction fails to enter several crucial debates, I have three comments. First, Section 188A – an amendment to the CrPC – was introduced by a Government Notification under Section 7 of the TW Act. In recognizing that such additions can be made only by Parliament, the Kerala High Court had disregarded Section 188A per se, but accepted the extension of Indian penal jurisdiction to the EEZ (based solely on the intention of the notification). However, while Section 7(7) permits the extension of any enactment to the EEZ, this is limited by Section 7(4) which recognizes the powers of the Union in the EEZ (along the lines of Article 56, UNCLOS). Crucially, the power to legislate for criminal conduct does not find a mention here (and this is so by design (Vol. III, pg. 61) and supported by subsequent state practice and judicial opinion). Second, as a matter of form, Section 7(7) permits the extension of the territorial scope of an enactment, rather than an amendment to the CrPC itself – the amendment of which should be dictated by Parliament alone. This is also important because of a distinction that the Court fails to recognize between Section 4, IPC/Section 188 CrPC and the facts of this case/Notification 671. The former permit prosecution of Indian citizens (on the active personality principle), while the latter dilute the principle to instances of passive personality jurisdiction (Indian national is the victim). The question then is not only of extending the scope of Indian penal jurisdiction territorially, but substantively, through executive action. Third, assuming the Indian union does have jurisdiction, the Court’s view that this does not extend Kerala’s jurisdiction does not appear appealing (though perhaps pragmatic from a diplomatic standpoint). This is because Notification 671 (on which the judgment relies) creates a deeming fiction which permits prosecution “as if it had been committed in any place in which he may be found”. Similar wording is found in Section 188 of the CrPC, and has been consistently held to allow the State in which the accused is found to continue prosecution (for example, Clara v. Tamil Nadu).

On point B, the Court considered the exclusion of Kerala’s jurisdiction proper as a matter of public international law. With respect, however, neither does public international law address the manner in which states structure their internal criminal processes, nor would any such rule apply since the Court (presumably) rejected the sovereign immunity defence, thus making the Italian marines liable as individuals and not representative organs of the Italian state.

On point C, the holding that international law permits the exercise of jurisdiction in this case, following Lotus, the Court’s conclusion is uncertain given the its remarks that Lotus has been watered down (paragraph 98; also see a previous post on this issue here, and the joint Separate Opinion issued by Judge Higgins, Koojimans and Burgenthal in Arrest Warrant here). In doing so, the Court failed to state whether international law permits such action (and if so, where may one find such a rule in the UNCLOS or under custom) or whether the absence of a prohibition suffices. In fact, the Court’s insistence on identifying the sovereign rights a state may exercise in the continuous zone was perhaps the incorrect question to begin with. This case does not involve the exercise of sovereignty (or more appropriately, jurisdiction) over an identifiable maritime space, but over the accused marines. This distinction is not one without reason: the exercise in this case is to identify whether public international law permits exercise of jurisdiction on the passive personality principle, which addresses the identity of the victims, and not the territorial space where the crime occurred.

Second, the Court’s handling of Article 100, UNCLOS is unclear. Not only does the text of Article 100 omit any reference to a redistribution of jurisdiction between states, but more fundamentally, omits any substantive obligation through the most generous of readings (the drafting history makes this conclusion clear, pg. 183). It seems then that the Court’s judgment relies too heavily on Article 100 for something that it does not address.

More generally, the Supreme Court’s judgment remains imprecise on the relationship between international law and (domestic) Indian law in such disputes. Ordinarily, it would be necessary to first identify a basis for exercising jurisdiction in Indian law (point A), and then proceed to test the validity of that determination against international law (point C), or use international law to colour the reading of domestic law. In addressing both questions together, the judgment perhaps sacrifices much needed clarity.

Indian SC delivers judgment in Kaiser, overrules Bhatia

Readers interested in international arbitration would be aware of what have been called the “misgivings”of the Indian courts on international arbitration. The Supreme Court has rendered several controversial judgments on the Indian Arbitration Act of 1996 in the past, none being more infamous than the Bhatia International judgment. In Bhatia, the Court held that Part I of the Indian Arbitration Act is also applicable in proceedings for the enforcement of foreign arbitral awards, even though Part II of the law deals with the “enforcement of certain foreign awards”, unless the applicability of Part I has been excluded by the parties. A result of this was that Indian courts could set-aside foreign arbitral awards under Section 34 of the Act contained in Part I. This was considered anomalous by many in the international arbitration community in so far it allowed Indian courts seized with the enforcement of foreign awards (“secondary jurisdication”) to not just deny enforcement, but even set-aside the foreign arbitral (a task usually reserved for the courts of the “primary jurisdiction” — the seat).

Now, in Kaiser Aluminium, the Court has overruled Bhatia, holding that there is complete “segregation” between Parts I and II of the Indian Act. With this, the Court moves towards an understanding of the proper functions of the courts of the primary and secondary jurisdiction:

Thus, it is clear that the regulation of conduct of arbitration and challenge to an award would have to be done by the courts of the country in which the arbitration is being
conducted. Such a court is then the supervisory court possessed of the power to annul the award. (para. 128)

The Court concludes:

198. In view of the above discussion, we are of the considered opinion that the Arbitration Act, 1996 has accepted the territoriality principle which has been adopted in the UNCITRAL Model Law. Section 2(2) makes a declaration that Part I of the Arbitration Act, 1996 shall apply to all arbitrations which take place within India. We are of the considered opinion that Part I of the Arbitration Act, 1996 would have no application to International Commercial Arbitration held outside India. Therefore, such awards would only be subject to the jurisdiction of the Indian courts when the same are sought to be enforced in India in accordance with the provisions contained in Part II of the Arbitration Act, 1996. In our opinion, the provisions contained in Arbitration Act, 1996 make it crystal clear that there can be no overlapping or intermingling of the provisions contained in Part I with the provisions contained in Part II of the Arbitration Act, 1996.

No doubt, the judgment would be welcomed by the international arbitration community to the extent it brings Indian law and practice in conformity with internatioanal practice and standards.

Moreover, having read the Court’s decision once, in my opinion the Court’s engagement with international arbitration at a conceptual level would go a long way in promoting consistency and sound practice in the enforcement of foreign arbitral awards in India. I have long believed that the problems relating to the enforcement of foreign arbitration awards in India have resulted from a failure of the Indian courts to conceptually engage with international arbitration. Thus, for example, Indian courts have, in my opinion, relied overly upon textual and contextual tools of interpretation, without promoting a conceptual understanding of international arbitration first. Kaiser seems to mark a welcome departure from this trend. The counsels and the Court have for the first time engaged in a thorough analysis of fundamental issues such as the territoriality and delocalization of international arbitration. Whereas these terms may be very familiar to international arbitration lawyers, the discussion in India hitherto has almost always avoided this framework. So, apart from the welcome commercial implications of the decision, I hope that the judgment would also help promote a better understanding of international arbitration in India, both amongst the courts and the scholars. Indeed, now that the Bhatia saga is over, and with the attempt in Kaiser to conceptually analyze arbitration, hopefully we can move on to further fine tuning Indian arbitration law to the demands of the transnational economic order.

The full-text of the judgment (.pdf) is available here.

India loses White Industries BIT Arbitration

UPDATE (13 February 2012): We now have access to the full text of the arbitral award: White Industries v. India Arbitral Award (Click to download; PDF ~ 5 MBs)

According to various reports (Indian Express, IAReporter), an arbitral tribunal constituted under the Australia-India bilateral investment treaty (BIT) has held India to be in breach of its obligations under the BIT and international law to an Australian mining company –White Industries. We haven’t discussed this dispute before, except in passing, however, this arbitration proceeding has been quite high profile, generating a lot of interest in the Indian news media and press (Times of India). A detailed background of the facts is available through an earlier IAReporter report. Very briefly, here are the essential details:

The treaty claim by White Industries Australia Ltd., an Australian mining company, was filed against the Government of India [in 2010 presumably] following complaints by the company that the Indian courts have failed to enforce a foreign arbitration award obtained in 2002 in a dispute between White Industries and its Indian joint-venture partner, Coal India Ltd., an Indian state-owned entity.
The Australian firm entered into a joint-venture agreement in 1989 for the development of a major coal mine in Eastern India. At the time, the mine represented the largest investment by Australia in India.
In 1999, White took its JV partner, Coal India Ltd. to arbitration under the International Chamber of Commerce (ICC) rules provided by their agreement.

[...]

[T]he Australian firm obtained a favourable arbitral award in May of 2002 and turned to the Delhi High Court in September of that year in an effort to enforce that award.
For its part, Coal India Ltd. responded by lodging its own bid before a different Indian Court, the Calcutta High Court, to have the award set aside. White Industries objected to these efforts, and filed a petition contesting that Court’s jurisdiction to entertain a set-aside request.
On May 17, 2003, a Judge of the Calcutta High Court ruled that the Court had jurisdiction over the set-aside proceedings. Following an appeal by White Industries, a panel of the same Court ruled the following year that the Indian courts could consider a setting-aside of the ICC award. The May 7, 2004 judgment did not rule on the merits of the set-aside application.
That judgment is currently on appeal before the Indian Supreme Court.

Badrinath Srinivasan, over at the Practical Academic blog, provides more details, obtained under the Right to Information Act from Coal India, on the original ICC arbitration between White Industries and Coal India.

Presumably, White Industries, tired by the delay in the Indian court proceedings (its been 7 years since the matter has been pending before the Supreme Court), decided to file a claim under the Australia-India BIT in 2010. The arbitration was held under the UNCITRAL Rules (recall that India is not a party to the ICSID Convention), with hearings taking place in September 2011 at Maxwell Chambers in Singapore. The three member tribunal hearing the claim consisted of: of Charles N. Brower (claimant’s nominee), Christopher Lau (India’s nominee), and J. William Rowley (tribunal chair). On the details of the party’s legal representation and the proceedings, IAReporter notes:

White Industries is understood to be represented by the law firm Mallesons in the treaty claim. On its website, the firm indicates that it is handling a claim under the Australia-India BIT. A Partner with the firm cited confidentiality obligations, when asked for comment. Meanwhile, Luthra, an Indian law firm, is representing White in the domestic Indian proceedings.
The Government of India is understood to have engaged the services of Toby Landau QC, a London-based barrister and arbitrator.

The Tribunal rendered its award in November 2011, merely two months after the oral hearing:

In a unanimous November 2011 arbitral award, a three-member tribunal ruled that White Industries Australia Ltd. was denied “effective means” of asserting claims and enforcing rights with respect to its investment in India. The award has not yet been published.

According to IAReporter, in reaching its conclusion, the tribunal held that a “commercial arbitration award can be an integral component of a broader foreign investment”. The result seems to be similar to the Saipem arbitration involving Bangladesh (although, in my opinion, the tribunal in Saipem did not conclusively answer the question of whether an arbitral award, in itself, constitutes an investment that can be expropriated by national courts by denying enforcement. Andrew Newcombe, over at the Kluwer Arbitration Blog, seems to agree on this). Also relevant here may be the award in GEA v. Ukraine (concerning a claim arising out of non-recognition and non-enforcement of a prior ICC award by Ukranian courts) where the tribunal held that the held that the relevant arbitral award did not constitute a protected investment under the Germany-Ukraine BIT or the ICSID Convention.

Of course, whether an ICC arbitral award constitutes an “investment” for the purposes of the BIT is an important question for, if the answer is yes, the non-enforcement and non-recognition of this award, in violation of the relevant international norms, can amount to expropriation by the state, thus providing a cause of action under the BIT. In this sense, these BIT tribunals can be seen as assessing the lawfulness of the actions of the national courts in enforcing and recognizing foreign arbitration awards. This comes close to the idea of an international court for the enforecement of arbitral awards, as proposed by, amongst others, Judges Howard Holtzmann and Stephen Schwebel. On the desirability of treaty tribunals taking up this role, a key question is obviously that of state consent for such function by the tribunals. Indeed, express state consent on this issue remains absent (hence the absence of an international court as proposed above), and it might not help the legitimacy of investment treaty arbitration if tribunals adopt such an “appellate” function over national courts in the absence of such consent. Of course, that’s quite a classical view of the problem. The transnationalists, obviously, might not see the absence of express state consent as a problem at all.

Another related issue is that of claims for the denial of justice under BITs. I shall save my thoughts on that for a later post.

As a practical matter, India’s loss can certainly help explain the recent reports indicating that India will not include investor-state arbitration clauses in its future bilateral investment agreements. On another note, the award in White industries also serves as a reminder of the need for smoothening out the creases in Indian arbitration law, a process that might already be underway as evidenced by the reconsideration of the law laid down in Bhatia International by a constitution bench of the Supreme Court of India.

P.S. Since the arbitration was held under the UNCITRAL Rules, the award has not been made public. In case it is, I will obviously post the link here.

P.P.S. A special thanks to Luke Eric Peterson of IAReporter for allowing free access to the reports on this dispute.

Indian Judge at the ICJ: New Developments

According to a report by Dhanajay Mahapatra in the Times of India, Hon. Justice Dalveer Bhandari of the Indian Supreme Court is likely to be nominated by the Government of India for the position of a permanent judge at the ICJ. Readers may recall that we have discussed this issue before (here). In that post, I had said that an Indian judge could fill the vacancy arising out of the retirement of Judge Owada. It now appears that an Indian judge would fill the vacancy arising from the departure of Judge Awn Shawkat Al-Khasawneh, who left in order to take up the position of the Prime Minister of Jordan. India had supported Judge Al-Khasawneh’s in getting elected to the ICJ, and “MEA [India's Ministry of External Affairs] circles believe that India’s nominee for the judge’s post in ICJ will get support from Jordan along with friendly neighbours like Sri Lanka and Bangaldesh.”

The Times of India article offers a fascinating insight into the Indian practice relating to the nomination of jurists to the ICJ. As the article details, the selection process involved both the Government of India and Indian national group at the Permanent Court of Arbitration (PCA).  To recap, the process of appointment of judges to the ICJ is governed by Article 4 of the ICJ Statute, which provides, inter alia, that:

1. The members of the Court shall be elected by the General Assembly and by the Security Council from a list of persons nominated by the national groups in the Permanent Court of Arbitration, in accordance with the following provisions.

India’s national group in the PCA comprises of retired Judges M. H. Kania and Y. K. Sabharwal, as well as senior advocate B. Sen. It appears that in the end, the list of possible names narrowed down to P. S. Rao, an ex-legal advisor in the Indian Ministry of External Affairs and currently an arbitrator in a dispute between India and Bangladesh at the PCA, and Justice Dalveer Bhandari. P. S. Rao’s name had been proposed by the Prime Minister’s Office to the national group. Initially, two of the three members of the PCA’s India national group were in favour of the nomination of P. S. Rao, however, after two months of deliberations, the national group chose to settle on Justice Dalveer Bhandari because of his “pro-poor and pro-social equity judicial disposition“.

Needless to say, this is great news. Its been over 20 years since India had a permanent judge on the ICJ (Justice R. S. Pathak, the last Indian permanent judge, retired in 1991). Justice Dalveer Bhandari is currently the third seniormost judge at the Supreme Court and is due to retire on 30 September 2012. As Justice bhandari’s profile indicates, apart from his work at the Supreme Court, he has an LL.M. from Northwestern University, Chicago, and has attended several international law conferences and events. He is also the President of the India International Law Foundation. Personally, I’ve had the opportunity to meet Justice Bhandari a couple of times during his visits to National Law University, Jodhpur, and I’ve always been impressed by his knowledge of the international legal order and interest in international developments. 

Needless to say, these developments also offer an opportunity to reflect upon the Indian practice and procedure for nomination to the ICJ. For a critical perspective on Justice  Bhandari’s appointment, I urge you to see this comment by “C. I. Singh” on my previous post, arguing that someone with direct experience in international law and international dispute settlement, like P. S. Rao, would have been better suited for the position. Whereas the commentor seems to make a reasonable point with regards to P. S. Rao’s experience, I disagree in principle when he or she states that P.S. Rao “would have been the right candidate as he is far more qualified to go up against other ICJ judges and protect India’s interests.” This, in itself, should not be a criteria for nomination to the ICJ: the position of permanent judge at the ICJ should be above and beyond protecting national interests, and it’s not about going up “against” other ICJ judges.   

That internal debate aside, ILCurry certainly hopes that we get to see an Indian jurist at the ICJ soon!

Sovereign Immunity Not Absolute: Supreme Court of India

Just a short post to note a judgment issued by the Supreme Court of India (reported in today’s Hindu here) on the issue of sovereign immunity in India.

The facts:

In the instant case, Ethiopian Airlines was aggrieved by a National Consumer Disputes Redressal Commission order holding that a dispute against it was maintainable and asking the Maharashtra State Commission to decide the issue afresh on its merits.

Complainant Ganesh Narain Saboo, who had booked a consignment with the airline, moved the State Commission, contending that gross delay in delivery at Dar es Salaam, Tanzania, led to deterioration of the goods.

The judgment:

Writing the judgment, Justice Bhandari rejected the contention that a foreign state or its instrumentality could not be proceeded against under the Consumer Protection Act for deficiency in service without obtaining prior permission from the Central government.

The Bench also did not accept the plea that a foreign state or its instrumentality could legitimately claim sovereign immunity from being proceeded against under the Act in a civil claim.

and

Countries which participate in trade, commerce and business with different countries ought to be subjected to normal rules of the market. If state-owned entities operate with impunity, “the rule of law would be degraded and international trade, commerce and business will come to a grinding halt,” said a Bench of Justices Dalveer Bhandari, Mukundakam Sharma and Anil R. Dave.

On international law:

“That Ethiopian Airlines was not entitled to sovereign immunity with respect to a commercial transaction is also consonant with the holdings of other countries’ courts and with the growing international law principle of restrictive immunity,” the Bench said.

“On a careful analysis of the American, English and Indian cases, it is abundantly clear that Ethiopian Airlines must be held accountable for the contractual and commercial activities and obligations that it undertakes in India”, the Bench said…

Readers may be interested in a related recent development in Hong Kong, where the Court of Final Appeal (CFA), in Democratic Republic of the Congo v FG Hemisphere Associates LLC, ruled that foreign states enjoy absolute immunity from jurisdiction of Hong Kong courts, and there is no exception even in cases the activity and assets are of a commercial nature. (A Fulbright and Jaworski publication on the case here.)

[Apologies for not providing a direct link to the judgment, I am currently traveling with minimal access to the Internet and hope to return to this once I get back to base.]