Arbitration & Bilateral Investment Treaty of UK and India

The case arose out of the bilateral investment treaties and international law and its interplay with the local authority which is not a party to the arbitration agreement. 

Brief facts –  On 6.1.1995, BIT between UK and India came into force.

The dispute between the contracting parties of both the countries is to be settled first through negotiations and on failure, by International Centre for Settlement of Investment Disputes or ad-hoc arbitration under UNCITRAL Arbitration Rules.

On 16.9.1998, the Corporation of Lond had let-out the premises to a Japanese Company till 24.3.2003.   However, 3.4.2001, Mr.Sancheti, Solicitor of Indian Nationality, took the assignment for unexpired term of the lease and started practice.

There was dispute about the rent.   On 4.5.2005, Mr.Sancheti served the dispute notice under BIT for negotiations and on 16.9.2006 for arbitration.

On 9.8.2006, the Corporation had commenced proceedings in the Court for due rent and interest.  Mr.Sancheti objected to the same and filed stay application under Section 9 of the AA on the ground that he had invoked the arbitration provisions in the BIT.

In that context, it was HELD that section 9 cannot apply if the parties to the court proceedings are not parties to the arbitration agreement.   It was observed that stay to the court proceedings of the Corporation is sought thereby, it is sought to impose the burden of arbitration agreement to which the Corporation is not a party.   UK Government is the relevant party to the BIT and its arbitration agreement.  Therefore, a State is not responsible under international law for the acts of its locality which is not a party to the arbitration agreement.

Judgment dated 21.11.2008 of the Supreme Court of Appeal, UK, in the case between The Mayor and Commonalty & Citizens of the City of London  and Ashok Sancheti