By Damon Vis-Dunbar
28 November 2008
An English court case reveals that an Indian citizen is quietly pursuing an investment-treaty claim against the United Kingdom under the India-UK bilateral investment treaty.
Ashok Sancheti, a London-based lawyer of Indian nationality, brought the UK to arbitration in 2006 under the 1995 BIT. This is the only pending investment-treaty case in which the UK is a respondent.
Sancheti’s dispute relates in part to a disagreement with the Corporation of London, the body that governs the financial district at the heart of London, over the rent to be paid for a premise leased from the city. But his quarrel has spread wider. In his notice of intent, Sancheti complains of “blatant discrimination by different organs and functions of the United Kingdom in their dealing with me in my capacity as an Inward Investor.” In addition to the Corporation of London, Sancheti also alleges discrimination by the Home Office, the Law Society, and the judiciary.
The arbitration is governed by the UNCITRAL rules of arbitration, and therefore the parties are under no obligation to make public any aspects of the proceedings.
According to an English court judgment, the Tribunal consists of Justice Umesh Chandra Banerjee, a retired judge of the Indian Supreme Court; Professor Michael Reisman, a professor at Yale law school and an arbitrator on numerous investment treaty tribunals; and H.E. Dr. Fracisco Rezek (Chairman) a Brazilian judge and former member of the International Court of Justice.
Sancheti declined to comment on the case when contacted by ITN.
City of London seeks unpaid rent from Sancheti; effort to stay court proceedings is rejected
While Sancheti pursues his claim against the government of the UK, the city of London has launched its own case against Sancheti, seeking some £20 000 in unpaid rent.
Sancheti has been seeking to stay these court proceedings. A party to an arbitration agreement can apply for a stay in court proceedings on the grounds that the matter is to be referred to arbitration, under a provision in the English Arbitration Act.
Sancheti’s request for a stay of the court proceedings has been rejected by two lower court judges, who determined that BIT arbitration agreement bound the UK government, but not the Corporation of London. Those decisions have now been upheld by the English Court of Appeal in a 21 November 2008 judgment.
The court of appeal rejected Sancheti’s request on the grounds that the Corporation of London is not a party to the BIT arbitration, nor was a “mere affiliation” between the city of London and the government of the United Kingdom deemed sufficient to grant a stay of the court proceedings.
“The fact that in certain circumstances a State may be responsible under international law for the acts of one of its local authorities … does not make that local authority a party to the arbitration agreement,” writes Lord Justice Lawrence Collins.
Notably, Lord Justice Collins explicitly rejected a 1978 judgment in Roussel-Uclaf v GD Searle & Co Ltd, arguing that it was “wrongly decided and should not be followed.” In Roussel-Uclaf v GD Searle & Co Ltd a subsidiary of a pharmaceutical company was entitled to a stay of court proceedings through an arbitration agreement held by its parent firm.
This is the first time an English court has overturned the judgment in Roussel-Uclaf v GD Searle & Co Ltd, said George Burn, head of the London international arbitration practice at the law firm Salans.
Burn said that Court of Appeal might have ruled differently, however, had it taken into account the distinction between commercial arbitration and investment treaty arbitration:
“The narrow construction the Court of Appeal put on its powers to stay litigation in favour of arbitration is based on two things: first, the fact that the English Arbitration Act is drafted for the supervision of commercial arbitration, not treaty arbitration, and secondly, the sanctity of the corporate veil in English law. Within those terms, the decision makes sense, and the formal rejection of the Roussel-Uclaf decision will surprise few.
“But the decision takes no account of the nature of the underlying arbitration in this case, and in particular the public international law doctrine of attribution, where a State is responsible at an international level for the acts of its organs and agents. Had the UK’s responsibility for the acts of the Corporation of London under the doctrine of attribution been taken into account, the Court of Appeal might have ruled differently and stayed the litigation brought against the claimant in the underlying BIT arbitration.”
The Judgment of English Court of Appeal Regarding Stay of Local Proceeding in The Mayor and Commonalty & Citizens of the City of London v. Ashok Sancheti is available at http://ita.law.uvic.ca/Sancheti-stay.rtf