What has happened?
In 1989, White Industries (an Australian mining company) became involved in a dispute relating to a joint venture agreement for construction of a coal mine in India. White Industries brought ICC arbitration proceedings, which were ultimately successful, and in 2002 they were awarded AU$4m plus interest.
White Industries then sought to enforce that award through the Delhi High Court. However, the defendant made an application in separate proceedings to set aside the arbitral award. This caused the enforcement proceedings to be stayed pending a decision of the Indian Supreme Court on the defendant’s application. By 2010 the case to set aside the judgment was still pending and the award remained unenforced.
The excessive delay prompted White Industries to bring UNCITRAL arbitration proceedings against the Indian government, for alleged breach of the India-Australia BIT. This was a bold and creative solution to the predicament, and was ultimately vindicated when White Industries succeeded. The Indian government was required to pay White Industries the full amount of the originally awarded sum.
What are the key points?
- In order to protect the efficacy of international commercial arbitration, it is imperative that the successful party has an effective means of enforcing its award.
- The Tribunal found that parties seeking to enforce an international commercial arbitration award in India are not guaranteed an efficient judicial process, even though India is a signatory to the New York Convention.
- If a party faces difficulties in enforcing an international commercial arbitration award through local courts, then their rights and protections under an existing BIT may become relevant.
- By failing to provide an effective means for White Industries to enforce its arbitral award with respect to the broader investment in India, the Indian government was in breach of the BIT.
- The Indian Government was ordered to pay damages in the amount of the original award obtained by White Industries.
How will this affect mining companies?
Enforcing a court judgment or tribunal award can take considerable time and effort, particularly against an obstructive counterparty in an emerging market. Those challenges should not be compounded by unreasonably slow court enforcement actions. Rights in an arbitration award represent an investment that should be protected from unreasonable obstruction in national courts.
The Tribunal had no difficulty in concluding that the failure of the Indian judicial system to deal with the Calcutta proceedings in over nine years amounted to an undue delay. This constituted a breach of India’s voluntarily assumed obligation of providing White Industries with “effective means” of asserting claims and enforcing rights.
BLP Mining Team Perspective
Arbitration is the preferred method of dispute resolution for most mining companies, particularly those operating in emerging markets with less developed or less reliable legal systems, but obtaining an award may only be half the battle. Too many arbitral awards are discounted because of unfriendly enforcement regimes. Although not a cure-all - the basis of the claim inevitably involves a period of delay - this decision provides another useful tool when devising an effective enforcement strategy.