A "significant" rise in legal shipping cases being fought between Indian companies can be expected in London and Singapore after the country's top court eased jurisdiction restrictions.

Traditionally, in contracts between two Indian companies or nationals, the parties were bound by law to resolve disputes in India, regardless of what they might have agreed.

But this has now changed, thanks to a judgment in a case handed down by the Supreme Court of India in April that has "opened the floodgates" for disputes to be heard overseas under foreign law, leading lawyers told TradeWinds.

HFW shipping partner David Morriss explained how the traditional jurisdiction restrictions “gave rise to all kinds of problems and uncertainties”, particularly in shipping, where contracts are commonly governed by English law and in which parties often agree to resolve disputes by arbitration in London or Singapore.

“The dilemma for a potential claimant was where they should bring their claim and under what law they should pursue it,” he said.

The head of HFW's India desk said there were no obvious solutions, and the consequences of either choice were potentially very serious.

If an Indian party won an award in London, Morriss said it could find this was unenforceable in India due to domestic law.

But if the Indian claimant ignored the dispute resolution clause in the contract and pursued a claim in India, he added that it could be exposed to a claim in damages for breach of that clause.

'Lose-lose situation'

He said a claim in India would also take “significantly longer” than in London, not least because there are several levels of appeal in India, whereas, in the UK capital, parties seldom obtain permission to appeal against awards.

“It was a lose-lose situation either way,” Morriss said.

But on 20 April, the Indian Supreme Court changed all of that, according to Amitava (Raja) Majumdar, the managing partner at Indian law firm Bose & Mitra & Co.

He told TradeWinds that the apex court confirmed two Indians could choose to undertake a foreign-seated arbitration after a detailed analysis that Indian law does not bar them from doing so.

"The Supreme Court of India clarified that Indian law does not bar two Indians from choosing foreign law as the substantive law of the contract either," Majumdar said.

Private sector heading overseas?

Amitava (Raja) Majumdar is an Indian shipping lawyer and managing partner at Bose & Mitra & Co. Photo: Bose & Mitra & Co

“That now has really opened the floodgates. Certainly, a lot of the private-sector companies may decide they want to go to England or Singapore.

"A lot of people are going back to the drawing board to find out which would be the best law and forum for the potential disputes under their circumstances."

Morriss said the change may well encourage Indian parties to refer more disputes overseas.

He added that India is a relatively litigious country, with a backlog of cases in court.

“Considering the sheer number of companies in India, I suspect that the Indian Supreme Court’s April decision may lead to a significant increase in the number of disputes involving Indian parties that are resolved in London and Singapore,” he said.

Majumdar added that some Indian arbitrations can end up taking two to three years.

He pointed to the drawback of requiring a full-day oral hearing even if it is a documents-only issue at hand.

“Whereas in England, let’s say it’s a demurrage case, you’ll put in your documents and submissions and the arbitrator will deliver his award,” Majumdar said.

Complex shipping cases

David Morriss is a shipping partner at law firm HFW and head of the company's India desk. Photo: HFW

The Indian lawyer also believes companies may opt for foreign law as a matter of strategy in big cases, due to English laws on complex shipping issues being “significantly developed”.

The lawyer is seeing big companies such as Reliance wording their arbitration clauses so that English law is applicable.

“It essentially comes down to what is your negotiating power in the contract,” Majumdar said. “It’s about who’s got the power to pull the strings and the number of contracts one has to offer.

"Indian arms of multinationals, which are increasing in numbers by the day, is one other category that may opt for foreign-seated arbitration and foreign laws in their contracts."

But Majumdar said government, state or public companies are very clear that they want to stick to Indian law, especially against the backdrop of the country undertaking efforts to develop its status as an arbitration hub.