ISSN: 2582 - 2942

LEX FORTI
LEGAL JOURNAL

VOL- I . ISSUE- IV

APRIL 2020
 ISSN: 2582 - 2942

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ROHIT PRADHAN
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EDITOR
NAGESHWAR RAO
PROFESSOR (BANKING LAW) EXP. 8+ YEARS; 11+
YEARS WORK EXP. AT ICFAI; 28+ YEARS WORK
EXPERIENCE IN BANKING SECTOR; CONTENT
WRITER FOR BUSINESS TIMES AND ECONOMIC
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 ISSN: 2582 - 2942

EDITORIAL BOARD
EDITOR
DR. RAJANIKANTH M
ASSISTANT PROFESSOR (SYMBIOSIS
INTERNATIONAL UNIVERSITY) - MARKETING
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EDITOR
NILIMA PANDA
B.SC LLB., LLM (NLSIU) (SPECIALIZATION
BUSINESS LAW)

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DR. PRIYANKA R. MOHOD
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AND ADMINISTRATIVE LAW)., NET (TWICE) AND
SET (MAH.)

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MS.NANDITA REDDY
ADVOCATE PRIME DISPUTE
 ISSN: 2582 - 2942

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IMPACT OF THE COVID-19 OUTBREAK ON ARBITRATIONS IN INDIA

Yash Shiralkar
 I. INTRODUCTION

On 12 March 2020, the Central Government decided to invoke Epidemic Diseases Act,
1897 to provide for prevention of the spread of dangerous epidemic diseases, with the objective
of combatting the spread of the novel coronavirus 2019 (Covid-19). In its operative portion, the
Act states that:

“When at any time the State Government is satisfied that the State or any part thereof is visited
by, or threatened with, an outbreak of any dangerous epidemic disease, the State Government, if it thinks
that the ordinary provisions of the law for the time being in force are insufficient for the purpose, may take,
or require or empower any person to take, such measures and, by public notice, prescribe such temporary
regulations to be observed by the public or by any person or class of persons as it shall deem necessary to
prevent the outbreak of such disease or the spread thereof, and may determine in what manner and by whom
any expenses incurred (including compensation if any) shall be defrayed.”1

Accordingly, various states have, at the time of writing, curtailed various non-essential
activities. Additionally, the Supreme Court and several High Courts have in exercise of their
inherent power also reduced functioning to urgent matters exclusively. This is also certain to have
serious consequences on arbitration. While the exact consequences cannot be determined at this
premature stage, it is curious to examine what are the possibilities that one might face.

It is necessary to caveat that at this initial stage of the pandemic, the exact ramifications of
the outbreak cannot possibly be determined. One can only hope that the outbreak is dealt with
efficiently, so normalcy can resume at the earliest. But there have been several disputes that have
arisen over the past year or more, wherein Parties may have hoped to settle these disputes in this
imminent period. While health concerns trump all, another indirect consequence of the Covid-19
outbreak has been an unceremonious indefinite deferral of all arbitrations (one hopes so). This
article shall break them into several parts. Part II shall deal with present arbitrations in India.
Part III shall deal with the future of international commercial arbitrations in India. Part IV shall
deal with future investment arbitrations against India.

1 S. 2(1), The Epidemic Diseases Act, 1897.

 II. PRESENT ARBITRATIONS IN INDIA

This Part shall group all arbitrations taking place in India. For the sake of clarity, this refers
to all arbitrations where the venue is in India. For the issue of whether an arbitration can take place
is presently a logistic one. It is safe to assume that there can take place no arbitral hearing in the
weeks to follow as the Indian Ministry of Health and Family Welfare has through its various
advisories and notifications banned travel into India and has also severely recommended against
gathering and for social distancing. The immediate alternative that comes to mind is video
conferencing. Of course, a situation such as this seems to call, nay scream for teleconferencing of
arbitral hearings. As a practice, it has been around for quite some time. Arguments against them
do not necessarily carry much weight. While arbitrations without a hearing, wherein awards are
made purely on the basis of written submissions are unaffected, it is those arbitrations with
hearings that seem to beg the question. Fortuitously, this question does not seem to have been
examined by Indian courts and as the writer suspects will not be dealt with in the near future, there
are few obstacles. Technological advances have made the physical presence of individuals no
longer necessary. In Basavaraj R. Patil v. State of Karnataka,2 the Supreme Court was posed the
question of whether an accused needs to be physically present to answer the questions put to him
whilst recording his witness testimony. The majority held that the pertinent provision of the law
must be considered in light of the revolutionary changes in technology of communication and
transmission have taken place. It was held that it is not necessary that in all cases, the witness must
answer by personally remaining present in the court.

If witness examination does not seem to necessitate physical presence, surely experienced
counsels who must plead orally can make do electronically. Lord Denning had famously remarked,
“If we never do anything which has not been done before, we shall never get anywhere. The law will stand still while
the rest of the world goes on: and that will be bad for both.”3 Therefore a new industry has come up,
comprising companies specifically assisting disputing parties with an electronic means of
alternative dispute resolution, such as ‘Legal Referee’ and ‘ODR India’.

It is to be kept in mind that an arbitration is a creature of the parties. If prejudice is

envisaged by either of the parties by such an arbitration, then there can be no compulsion.
However, with curfews imposed and legal professionals mandatorily following Work-from-home

2 Basavaraj R. Patil v. State of Karnataka, 2000 (8) SCC 740.

3 Packer v. Packer, [1953] 2 All ER 127, 129 (1953, UK Court of Appeal).
policies in several parts of the country, one can safely assume adjournments have been granted
almost ubiquitously across the arbitral universe. It would be quite surprising to find arbitrations
that have gone ahead during such tumultuous times.

The other issue that arises, is what is to become of the various deadlines. The 2019
amendments to the Arbitration and Conciliation Act, 1996 have introduced various timelines4
(welcome or not, debatable they are) and compliance with them is particularly difficult. Whereas it
may be increasingly difficult and pressing on impossible to comply with these deadlines, it might
be a good idea to inform the other party and the arbitrator of the suffered disabilities by means of
a without prejudice communication. However, it is more important that all authorities, whether
arbitrators or arbitral institutions take a firm and progressive step to assist parties. For instance,
on 17 March 2020 the International Chamber of Commerce, whose Rules formally require the
initial Request for Arbitration to be submitted in paper form, announced that Requests – along
with all other communications with the Secretariat – should be filed by email, and provided a
dedicated email address for the filing of applications.

However, legal issues will arise when it comes to an inability to comply with limitation
periods. In Spain, the government through a Royal Decree initiated a full lockdown, which
included a suspension of all legal proceedings for 15 days (subject to any extensions).5 Italy has
similarly imposed a temporary stay of proceedings, but both of these countries are hit far worse
than India, presently. Romania has pioneered in this specific domain. A provision in the
Presidential Decree, expressly regulates the legal regime of limitation periods and of the time-limits
after which the right to exercise an action is lost:

“The limitation periods and time-limits after which the right to exercise an action is lost will not
start running, and, if they have already started running, they will be suspended throughout the duration of
the state of emergency instated in accordance with this decree, and the provisions of Art. 2.532 item 9 IInd
tenet of Law 287/2009 on the Civil Code or other legal provisions setting forth the contrary will no longer
apply.”6

4 See, S. 23(4), The Arbitration and Conciliation Act, 1996: (“The statement of claim and defence under this section shall be
completed within a period of six months from the date the arbitrator or all the arbitrators, as the case may be, received notice, in writing, of
their appointment”); S. 29A(1), The Arbitration and Conciliation Act, 1996: (“The award in matters other than international
commercial arbitration shall be made by the arbitral tribunal within a period of twelve months from the date of completion of pleadings…”).
5 Real Decreto 463/2020, de 14 de marzo, por el que se declara el estado de alarma para la gestión de la situación de

crisis sanitaria ocasionada por el COVID-19 (Spain).

6 Art. 41, Ch. V, Presidential Decree no. 195/March 16th, 2020, The Field of Justice (Romania). See also, Valeriu Mina

and Alexandra Măruțoiu, The Regime of Limitation Periods during the State of Emergency, Romanian Lawyers Week,
https://rlw.juridice.ro/16653/the-regime-of-limitation-periods-during-the-state-of-emergency.html, last seen on
20/03/2020.
 One can hope India follows in this regard, whether through legislation or merely in
practice. It is the only just and equitable way.

III. FUTURE OF INTERNATIONAL COMMERCIAL

ARBITRATIONS IN INDIA

When the situation does improve, we will see much more international arbitration. It goes
without saying that the pandemic has stirred supply and pricing expectations in all global markets
from commodities to industrial products. Similarly, there will be claims relating to international
transit, including maritime claims involving delays or cancellation of shipment of components for
a wide array of consumer and industrial products. There will be claims relating to biotech, pharma
and healthcare efforts to fight the outbreaks. All energy and construction projects of a large scale
have come to a halt. Novel claims will be brought, dealing with commercial delays or cancellations
due to disruptions in construction, manufacturing of goods and provision of services.
Undoubtedly, we will see a significance increase in insurance claims in all sectors. This will be
prevalent all across, but will India get its proportional slice of the pie?

India has rarely been remarked as one of the preferred choices of seats for international
commercial arbitrations. Given the lack of stability introduced by recent amendments and
provisions thereof begrudgingly been cast away by the Apex Court, India has not reached its
objective of a hub for international commercial arbitrations, just yet.

We have seen that different countries have been affected by the outbreak at different paces.
And by employing different strategies, different countries have dealt with the outbreak at different
paces and differing chances of success. This outbreak will give rise to new interpretations of force
majeure clauses and contract drafters will be paying closer attention to details such as seat, venue,
etc.

Times of crisis bring to forth the responsiveness and efficacy of good governance. In light
of the present pandemic, Singapore and South Korea have emerged as role models. These two
countries also happen to be preferred choices for arbitrations. While this is not a directly
correlation, given the vast chasm between emergency welfare legislation and commercial
legislation, one cannot help but conclude that general efficacy is a hallmark of good governance.
While India may not be the worst, we still have many more miles to walk. It is imperative that
India legislates with a firm hand, one that it has always lacked. Now more so than ever, is India
presented with an opportunity to present itself as a champion of the times.

IV. FUTURE INVESTMENT ARBITRATIONS AGAINST INDIA

The effective closure of Courts to all non-urgent matters could pave the way for various
foreign investors to bring claims under various investment treaties entered into by India with other
countries, either those still in effect or through their sunset clauses. The definition of what amounts
to ‘urgent’ is framed by the Host State, as the judiciary is an organ of the State. Should an arbitral
tribunal differ in its definition, it would not hesitate in allowing ‘denial of justice’ claims to be
brought by foreign investors. India ought to safeguard itself in this regard.

However, with the declaration of the outbreak as a pandemic by the WHO, most
jurisdictions would not hesitate in considering it as an act of God – a vis major – allowing for
companies to invoke the doctrine of frustration or claim under force majeure clauses. However, there
are considerations in this regard. Frustration of a contract would not occur merely because the
event has made the performance difficult, more costly, or onerous. Nor would a contract be
frustrated simply due to an unforeseeable event that did not otherwise change significantly the
outstanding contractual rights or obligations from what the parties could reasonably have
contemplated at the time of the execution of the contract.7 Force majeure clauses, on the other hand
if included would seemingly protect India in case of non-performance, if they are present in the
contract. Thus, India would seemingly have protected itself automatically from potential claimants
but that does not have to be enough.

The Indian Ministry of Finance also declared that any solar project developers that could
not perform their contractual obligations by relevant deadlines due to the outbreak of COVID-19
can invoke force majeure clauses.8 The announcement came after lobby group the National Solar
Energy Federation of India wrote to the Ministry of New and Renewable Energy to request the

7 Li Ching Wing v. Xuan Yi Xiong, [2004] 1 HKLRD 754, (Hong Kong District Court). It concerns the impact of a
10-day isolation order due to the SARS outbreak on a 2-year tenancy agreement of an apartment in Amoy Gardens,
the first residential location of a SARS community outbreak in Hong Kong in 2003.
8 Force Majeure Clause, Ministry of Finance (Department of Expenditure Procurement Policy Division) Office

Memorandum No. F. 18/4/2020-PPD, 19 February 2002.

extension of scheduled commissioning dates for affected projects to help Indian developers cope
with delayed deliveries and component shortages as the virus continued to rage in China.9

9 Uma Gupta, Solar projects reprieved as Indian government declares coronavirus a force majeure, PV magazine, https://www.pv-
magazine-india.com/2020/02/21/solar-projects-get-reprieve-as-govt-declares-covid-19-a-force-majeure-situation/,
last seen on 20/03/2020.
 V. CONCLUSION

While the Covid-19 is surging it is truly impossible to visualise the final consequences.
However, there is little debate that what will occur is one of the biggest health crises of our times,
and coupled with that, it shall be one of the biggest financial crises of our times. But we must
prepare ourselves for the aftermath. We must equip ourselves for the future, just as we have for
the present war against the virus.

The impact on arbitration, just as any other sector, will be substantial. The reverberations
of the impact will be felt for years, and perhaps decades to come. We need to focus on developing
arbitration to address these issues. Legal professionals, counsels, disputing parties arbitrators,
courts, legislators, arbitral institutions and experts, must all work together to be accommodative
and understanding of the issues faced by all, and seek to formulate the correct path ahead.