A v B [2016] EWHC 3003 (Comm)

Case No CL-2016-000225

[2016] EWHC 3003 (Comm)

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

COMMERCIAL COURT

IN AN ARBITRATION CLAIM

Venue Royal Courts of Justice, Strand, London, WC2A 2LL

Date 25th November 2016

Before

Sir Jeremy Cooke

Sitting as a Judge of the High Court

Between

AClaimant

BDefendant

Vasanti Selvaratnam QC (instructed by Clyde & Co) for claimant

David Brynmor Thomas (instructed by Addleshaw Goddard) for defendant

Hearing Hearing date: 23rd November 2016

Judgment

Sir Jeremy Cooke:

Introduction

[1]In this arbitration claim, the Claimants, E, applied to set aside the Second Partial Award of an ICC Tribunal consisting of Dr Gavan Griffith QC, Sir Gordon Langley and Mr Ali Al Aidarous (the Tribunal) dated 29th February 2016 (the Award). By the Award, the tribunal permitted the substitution of the original Claimant, P, an Indian company, by another Indian Company, F, and delivered an Award in favour of F on the merits of the claim brought under a Long-Term Contract (LTC) between P and E for the supply of iron ore fines. The Tribunal awarded F the sum of US$39,472,800.00 plus interest reserving the question of costs.

[2]E’s challenge is brought under section 67 of the Arbitration Act 1996 (the Act) on the ground that the Tribunal lacked jurisdiction to permit the substitution of F as claimant on the basis that the Arbitration had lapsed by reason of the dissolution of P on merger into F on 7th February 2015. Because no notice had been given to E or the Tribunal of the arrangement by which the “Undertaking” of P vested in F until 25th February 2015 when F applied to be substituted as claimant, it is said that the Arbitration died because there had been no effective assignment of the right before P ceased to exist. Alternatively, E seeks to appeal the Award under section 67 or challenge it under section 68(2)(b) and/or (e) and/or (c), on the basis that the Tribunal lacked jurisdiction or power under the 1998 ICC Rules to permit substitution of F as claimant. F contends that it is not open to E to rely on the absence of any power to substitute F for P under the 1998 ICC Rules because of the statutory waiver contained in section 73 of the Act.

[3]The key to the primary issue between the parties lies in the characterisation of the manner in which the business, rights and liabilities of P devolved upon and became vested in F. On this, the Tribunal had the benefit of expert evidence from two distinguished Indian lawyers and the court has had the benefit of their reports and the transcripts of their evidence at the Arbitration hearing. Ultimately, it did not seem to me that anything turned on any differences between them which were largely matters of language rather than substance. That distinction between language and substance also lies at the heart of the dispute between the parties in this court. E contends that, absent true “universal succession” in the civil law sense of the word, the devolution of P’s rights and its claim in the Arbitration is to be treated as an equitable assignment of which notice must be given before the assignor is dissolved. Unless such notice is given prior to that time, the Arbitration lapses and the arbitrators have no jurisdiction to continue or to substitute F for P. Notwithstanding protestations to the contrary, E’s case, when the devolution of assets/liabilities to F is analysed, inevitably results in the original claim in the arbitration disappearing into a black hole. This is because the assets, liabilities and choses in action represented by law suits and arbitration claims vested in F at the very same time as P ceased to exist. If the vesting is to be treated as an equitable assignment, no notice of such assignment could be given in practice until the assignor had ceased to exist, since the assignment by the assignor and its dissolution were essentially contemporaneous.

The application to the arbitrators

[4]F’s application to be substituted as the claimant was made on the basis that, pursuant to orders made by the Goa Bench of the Bombay High Court, P had merged, together with another entity, into F. All three companies were part of the F group of companies. F contended before the Arbitrators and before this court that the Scheme of Amalgamation which was approved by these orders had the following consequences, as a matter of Indian law:(i) P ceased to exist as a legal entity with effect from 7th February 2015 and merged with F.

(ii) All of P’s assets were vested in F.

(iii) All suits, actions and proceedings were not abated, discontinued or prejudiced but were to be continued and enforced by F.

(iv) F undertook to have all such proceedings transferred into its name and continued and

(v) F was accordingly entitled to be a party in any proceedings involving P.

[5]The first four of those consequences could not seriously be disputed since they were all made good on the evidence of Indian law. It was the last which gave rise to dispute. On the basis of the Scheme, F requested both the ICC and the Tribunal to:(i) Replace all references to P in the ICC files with F; (i) To describe the claimant in the Award as F; and

(ii) To include in the Award an appropriate note of the facts which made it appropriate for the substitution to take place.

The Scheme of Amalgamation

[6]P, F and the third company in the group referred to above all filed company petitions in the Goa bench of the High Court pursuant to section 391 of the Indian Companies Act 1956 on 25th August 2014. The petition sought the merger of the three companies in the manner and subject to the terms and conditions contained in a Scheme of Amalgamation filed with the court. Pursuant to and on the terms of the scheme, the other two companies were merged into F to constitute a single company under the Companies Act.

[7]By Orders dated 28th January 2015 passed in respect of the respective petitions, the court approved the merger in the terms of the Scheme and on the terms contained in the Orders. Under the terms of those Orders, certified copies were to be filed with the Registrar of Companies within 30 days of sealing, which was duly done on 7th February 2015. It was common ground between the Indian lawyers and the parties that 7th February 2015 was the effective date for the merger.

[8]Under section 394 of the Companies Act, which contained provisions for facilitating reconstruction and amalgamation of companies, the following wording appeared: “Where an application is made to the Tribunal under section 391 for the sanctioning of a compromise or arrangement proposed between a company and any such persons as are mentioned in that section … the Tribunal may either by the order sanctioning the compromise or arrangement or by a subsequent order make provision for all or any of the following matters: (i) The transfer to the transferee company of the whole or any part of the undertaking, property or liabilities of any transferor company; … (iii) The continuation by or against the transferee company of any legal proceedings pending by or against any transferor company; (iv) The dissolution, without winding up, of any transferor company. … 2. Where an order under this section provides for the transfer of any property or liabilities, then, by virtue of the order, that property shall be transferred to and vest in it, and those liabilities shall be transferred to and become the liability of, the transferee company … 4. In this section – (a) “property” includes property rights and powers of every description; and “liabilities” includes duties of every description.” …

[9]The Scheme which was approved by the court was set out in Annexure G to the Order, which provided that “upon this Scheme coming into effect” and subject to its provisions in relation to the mode of transfer and vesting, the “Undertakings of the Transferor Companies [including P] as a going concern shall be transferred to and vested in or be deemed to be transferred to and vested in the Transferee Company” [F], “without any further act or deed”. The Undertakings were defined as including all the assets, debts, liabilities, duties and obligations of the Transferor Companies. It was provided that “all suits, actions and proceedings of whatsoever nature by or against the Transferor Companies pending and/or arising on or before the effective date shall not abate or be discontinued or be in any way prejudicially affected by reason of the transfer of the businesses of the Transferor Companies pursuant to the Scheme, but be continued, prosecuted and enforced by or against the Transferee Company as effectually as if the same had been pending and/or arising against the Transferee Company”.

[10]I need not set out in any further detail the terms of the Scheme nor the court orders which made that Scheme effective. What is clear however is that, it was only on the effective date (which, as it turned out was 7th February 2015, when certified copies of the Orders were filed with the Registrar of Companies) that “all the assets of the petitioner company comprised in the undertaking” would, pursuant to the provisions of sections 391-394 of the Indian Companies Act, “without any further act, instrument or deed, be and stand transferred to and vested in or be deemed to have been and stand transferred to and vested in the Transferee Company as a going concern. Under the terms of the Orders, all liabilities of the Petitioner Company similarly devolved upon the Transferee Company “upon the coming into effect of this Scheme” and, at the same time, “all suits, actions and legal proceedings by or against the petitioner company pending and/or arising on or before the effective date” were to be “continued and/or enforced by or against the Transferee Company on and after the effective date, as effectually and in the same manner and to the same extent as if the same had been pending and/or arising by or against the Transferee Company”. Furthermore, the transferee company undertook to have all legal or other proceedings initiated by or against the petitioner company transferred to its name and to have the same continued prosecuted and enforced by or against it. The Order envisaged that the Transferee Company and, if so required, the Petitioner Company should give notice in such form as they deemed fit to each debtor or depositee and that the Transferee Company might, at any time after the effective date, if so required, enter into any documents with or in favour of a party to any contract or arrangement to which the Petitioner Company was a party in order to give formal effect to the provisions of the Order. The Transferee Company was deemed to be authorised to execute any such documents on behalf of the Petitioner Company.

[11]Thus, so far as any question of notice was concerned, following the making of the Orders, it was the merged company F which was to give notice on its own behalf or as necessary on behalf of P, the dissolved company.

The contentions of the parties

[12]Both before the Arbitrators and in this court, F contended that it was the successor entity to P by operation of Indian law and that it was Indian law which governed the question of whether P’s claims in the Arbitration could be continued and pursued by F. If P’s claims had been transferred to F, then it followed that F was entitled to be substituted as a claimant. Because a claim for damages could be vested in a transferee, because the Scheme, approved by court orders, provided for the vesting of P’s claim in F and because the Indian Companies Act, under which the Scheme was made and approved, provided in section 394 for the continuation of proceedings by a Transferee Company, all the requirements of Indian law had been met for the transfer of P’s claim to F. The Tribunal should therefore as a matter of English law recognise the effects of the Indian court’s orders and permit substitution of F as a party.

[13]E, however, submitted that although the Scheme and Orders provided for the continuation by F of any claims or proceedings involving P, English law remained the governing law of the contract between P and E, (both the LTC and Arbitration Agreement contained therein) and the question whether a party could be substituted fell to be determined by reference to that law.

[14]E’s key contention was that neither Indian nor English law recognised the doctrine of universal succession and therefore under English law the transfer, if any, of rights to sue in arbitration necessarily was by way of assignment from P to F. Given the absence of compliance with the requirements of the Law of Property Act 1925, the assignment was an equitable assignment, rather than a legal assignment and, in accordance with established authorities, an equitable assignee does not automatically become a party to a pending arbitration. At the very least, notice to the other side is required and the assignee must join, rather than simply replace the assignor. In consequence notice to E was required to be given at a time prior to P’s dissolution and, since that did not occur prior to 7th February 2015, the Arbitration lapsed and the claim against E died on that date. In consequence there was no existing arbitration in which any substitution of a party could be made and the application should be dismissed.

[15]These submissions were set out in the Award which is a model of clarity, to which I am happy to refer extensively in this judgment.

[16]As already mentioned earlier in this judgment, the obvious objection to E’s position is that a notice of assignment could not be given before 7th February 2015, the very date when P ceased to exist. The devolution of P’s Undertaking (business, rights, liabilities and choses in action) occurred on the date when this Scheme became effective at the same time as P ceased to exist. No notice of assignment could therefore be given, ex hypothesi, before P’s demise. The conclusion sought by E is, to say the least, unattractive but it is the logical result of E’s position. Although E sought to say that a notice of an intended assignment could be given between 28th January 2015, when the court made its orders and the effective date of 7th February 2015 when they became effective, the reality is that no transfer or vesting of claims, assets or liabilities did occur until 7th February 2015, as the Indian law evidence made plain and a notice of assignment could only be given once the assignment had taken place.

[17]Regardless of the attractiveness or otherwise of E’s position, and the injustice which might be caused if it was right in the submissions it made, it is necessary to analyse the two foundations upon which its arguments rest. The first is the characterisation of the transfer of the rights of suit in arbitration as an equitable assignment. That in turn involves the second contention that the devolution of the claim belonging to P was not a true case of “universal succession” and that, in the absence of that, the law required it to be treated as an equitable assignment with notice to be given prior to the dissolution of the assignor. These submissions were said to be founded on the decision of the Court of Appeal in Baytur SA v Finagro Holding SA

[1992] 1 QB 610

and a number of later authorities which referred to it. “Universal succession” and “assignment”

[18]The LTC provided at Clause 17 that P was entitled to assign the LTC without the prior written consent of E, but more importantly, perhaps, at Clause 10.1(a) the LTC was terminable by notice where either party went into voluntary or compulsory liquidation “except for the purposes of amalgamation or reconstruction”. The parties thus envisaged the possibility of what actually occurred, even though, on the facts, the LTC had long since terminated by the time that the Scheme became effective.

[19]The Award, at paragraph 34, stated that the terms “universal succession” and “assignment” as used by the parties and in English case law were used with some imprecision and differences in meaning. E’s case was that either the claim had passed through “universal succession” or it had been assigned. If the former, E accepted, at the Arbitration (though not in this court) that F could, as of right, be substituted. But, if the latter, as contended for by it, it was essential that P had given requisite notice of the transfer of claim whilst still in existence. For that proposition it referred to Russell on Arbitration (23rd edition) at paragraph 3-018 to 3-020.

[20]Counsel for E, Ms Selvaratnam QC, accepted that the corporate status of P and F was governed by the law of India, as she had to because she relied on the dissolution of P as causing the Arbitration to lapse. She accepted that, as between Transferor Company and Transferee Company there was full and effective transfer of the Undertaking. She maintained however, that because the LTC and the Arbitration Agreement within it was governed by English law, as between E on the one hand and P or F on the other and as the transfer was to be seen as an equitable assignment, its effect would be governed by English law also. She prayed in aid Rule 135(b) of Dicey’s Conflict of Laws which states the uncontroversial principle that “the law governing the right to which the assignment relates determines its assignability, the relationship between the assignee and the debtor, the conditions under which the assignment can be invoked against the debtor and any question whether the debtor’s obligation have been discharged.” Her submission was that the issue was concluded by the decision of the Court of Appeal in Baytur (ibid).

[21]The definition of “universal succession” which was put forward by E limited its meaning to the civil law concept which expressed an automatic transfer which required neither the consent of creditors nor the consent of the court. This was to be contrasted with the Scheme which took effect under Indian law only with the approval of 75% of creditors, the sanction of the court, and the lodging of the orders with the Registrar within a given time limit. The court’s function was not that of rubber-stamping the arrangements. On the Indian law evidence the court had a discretion and could give directions or require modifications in the arrangements put forward for sanctions.

[22]E relied upon the definition given by Parker LJ in Metliss v National Bank of Greece and Athens SA

[1957] 2 QB 33

at page 51, quoted by Longmore J (as he then was) in Eurosteel Ltd v Stinnes AG [2001] 1 All ER (Comm) 964. The latter stated, as had been said in earlier authorities, that the concept of universal succession was not a term of art of English domestic law but was a concept firmly entrenched in continental systems of law and in Scotland. Parker LJ’s definition was as follows:

“Under this conception a new person or entity continues the personality of another. All the rights and liabilities of the former are automatically transferred to and vested in the latter. The new person or entity succeeds “per universitatem” and not by a series of particular acts to each item of property.”

[23]It is undisputed that, in this sense, the concept is not known to English domestic law nor to Indian domestic law.

[24]In Baytur (ibid.) the claimants contracted to sell goods to a French company which claimed damages for non-shipment. The matter was referred to arbitration but by a traité de scission (a demerger under French law) the buyers were restructured, in consequence of which they were dissolved and their rights and obligations under the contract and the pending arbitration transferred to the defendants. Following an award in arbitration in favour of the buyers and a notice of appeal by the sellers, it emerged that the buyers had been dissolved and that all rights and liabilities had been transferred to the defendants as part of the demerger. As appears from the judgment of Lloyd LJ at page 616, the effect of a scission in French law is that the assets and liabilities of one company are transferred to two or more other companies and, as soon as the transfers are completed, the transferor company is dissolved. Whilst some assets went to one or more other companies, the effect of the scission here was to transfer all rights and obligations under the particular contract of sale, including rights and obligations in the pending arbitration to the defendant. As pointed out by counsel for F, the scission, under which the assets of one company were split between two or more different companies, was the exact opposite of what occurred under the Scheme in India, where the business of three companies was transferred to one company. It is perhaps unsurprising that, in these circumstances, it was conceded in the Court of Appeal in Baytur that the issue was whether or not there had been an assignment which was valid in English law. It was conceded that English law was the relevant law for all purposes and argued that notice to the plaintiffs was not required to complete the defendants’ equitable title so that, as equitable assignees of a legal chose in action, the defendants were entitled to commence an arbitration against the plaintiffs in their own name without joining the assignee when bringing proceedings.

[25]The focus of the court was therefore on the need for notice of the equitable assignment which the defendant asserted. Reference was made by the Court of Appeal to the decision of Phillips J (as he then was) in The Felicie

[1990] 2 Lloyd’s Rep 21

and to The Jordan Nicolov

[1990] 2 Lloyd’s Rep 11

where Hobhouse J (as he then was) made it clear that a legal assignee, succeeding to the rights of an assignor in a pending arbitration had to give notice to the other side to perfect the legal assignment and notice to the arbitrators in order to pursue the matter in the arbitration. The court went on to say that in order to become a party to a pending arbitration, an assignee had to effectively submit to the jurisdiction of the arbitrators.

[26]In the context of a situation where the assignor has ceased to exist, Lloyd LJ in Baytur went on to say that it was elementary law that an assignment, whether legal or equitable, could not transfer the burden of a contract which created a problem for the plaintiff sellers, in pursuing any costs orders that might have been made in their favour, had they been successful. There would be scope for great injustice if an insolvent assignor could assign away the benefit of a claim in arbitration to an associated company, whilst remaining solely liable for the burden of the respondent’s counterclaim or for costs incurred prior to the submission of the assignee to the jurisdiction of the arbitrators. The Lord Justice questioned whether mere submission was enough. He said that “Because of the nature of arbitration as a consensual method of settling disputes, it might be that the consent of the arbitrator and the other party to the arbitration was required”. If this was in fact the correct analysis, the only exception might be where foreign law created a universal successor, as in Metliss.

[27]In consequence, Lloyd LJ, with whom the other two Lord Justices agreed, decided the case on the basis that an assignee did not automatically become a party to a pending arbitration on the assignment taking effect in equity. The assignee had at least to give notice to the other side and submit to the jurisdiction to the arbitrator. As that was never done, the consequence was that the arbitration lapsed when the buyers were dissolved. An arbitration required two or more parties and there could not be a valid arbitration when one of the two parties had ceased to exist.

[28]What is abundantly clear from this decision in the Court of Appeal is that no argument was (or presumably could be) addressed to it on the basis that the defendants had succeeded to all the rights and liabilities of the buyers, both benefit and burden, including the choses in action in the arbitration as a matter of French law. Yet that is the exact effect of the Scheme under the law of India, although it is not a case of “universal succession” within the meaning of the concept as known in civil law.

[29]Counsel for F, Mr Brynmor Thomas, said that the question for the court was the effect of the Scheme under the relevant lex societatis, the law applicable to the constitution of the companies involved in the Scheme, which was accepted as being Indian law. He relied upon the decisions of the Court of Appeal at

[1957] QB 33

and the House of Lords at

[1958] AC 509

in National Bank of Greece and Athens SA v Metliss to show that the courts of this country must recognise the effect of the Scheme, as having the same effect as that of universal succession in the civil law sense. He drew attention to the fact that Lord Denning in the Court of Appeal at pp. 43 and 46, Romer LJ at p. 48 and Parker LJ at pp. 53-54, accepted the principle and also stated that the effect was not unknown to English law where the same result was achieved by Statute and order of the Courts under the Companies Acts here. In the House of Lords, the same points were made by Viscount Simonds at pp. 524-5, Lord Tucker at p. 529 and Lord Keith at p. 530. “The extinction of a corporation under statute or decree and the passing of all its rights and liabilities to a successor exhibits, in my view, all the features of a universal succession”.

[30]In Yorkshire RHA v Fairclough Building Ltd [1996]1WLR at p. 214, Millett J said that “universal succession is quite common, especially in other countries where it may be the consequence of a company reconstruction … but it is also not uncommon in England where it is often effected by statute, as for example, on the reorganisation of local government or (as in the present case) the National Health Service”.

[31]When reference is made to Eurosteel v Stinnes (ibid.) it can be seen that under section 20 of a 1994 German statute both the assets and liabilities of the transferor association passed to the transferee association and the former expired when the merger was registered in the trade register. Longmore J held that as a matter of German substantive law, no notice had to be given to any other parties to any relevant obligation before the transfer under the statute was effected.

[32]It was argued that English law required notice of any assignment to be given to both Eurosteel and the arbitrators and that Stinnes could not give notice of the transfer before it occurred because they were not then assignees; nor could they give notice after the transfer because the assignor had been dissolved in the merger and the arbitration had lapsed with the result that there was no reference in which notice could be given.

[33]Longmore J said at page 969(b):

“English law is, in my judgment, not so impotent, at least in cases of universal succession. The whole point of universal succession is that the successor is treated as the same person as the person to whom he succeeds. The law of the forum in which the universal successor seeks to gather in his assets may or may not require him to give formal notice of his existence before award or judgment will be given but the idea that any pending arbitration (or indeed action) begun by his predecessor must, of necessity, come to an end would mean that this succession was particular not universal and would be contrary to the term of section 20 of the German transformation law.”

[34]The judge went on to refer to the Metliss decision in the House of Lords

[1958] AC 509

where a Greek statute had effected the amalgamation of two original banks into a new banking company and enacted that the new company was the “universal successor” to the rights and obligations of the amalgamated company. It was there held, as the judge pointed out, that English law regarded all matters relating to the status of the new company as being governed by the law of the company’s domicile, and, if the law of the domicile clothed the new company with the rights and liabilities of the old company, that was part of the status of the new company which should be recognised by the English court. The judge in Eurosteel went on to say:

“The present case concerns the right to arbitrate which may include a liability to pay fees and costs, but the principle is the same. It is for the law of the domicile to say whether the rights and liabilities constituted by various agreements making up the arbitration are vested in the new company Stinnes. I am satisfied that German law says they are vested in Stinnes and English law should recognise that state of affairs.”

[35]It was argued on behalf of Eurosteel that there could not be assignment of the bundle of contracts constituting the arbitration without notice to the respective parties. The judge held that this was to confuse the question of assignability in principle and the question of how the assignment was to be rendered effective in practice. For that reason, the decision of the Court of Appeal in Baytur did not impact upon the decision which he had to make because the whole idea of universal succession meant that the rights and responsibilities of arbitrators did devolve upon the transferee without the need for any notice at all. The arbitration therefore did not lapse on the dissolution of the transferring company.

[36]I was referred to other authority including Global Container Lines Ltd v Bonyad Shipping Co Ltd [199] 1 Lloyd’s Law Rep 287 where a Delaware statute and a Bahamian statute governed the effect of a merger and to the Republic of Kazakhstan v Istil Group Inc

[2006] EWHC 448 (Comm)

where a BVI statute operated to the same effect as the Bahamian statute considered in Bonyad. In each case the court looked to the foreign law to determine the effect of the merger and transfer of rights or liabilities. The civil law concept of universal succession was not in play, although the expression is used in these cases to express the effect of statutory law in the jurisdictions in question. It was further pointed out by F that section 76 of the Bahamian Act which was applicable in Bonyad was not altogether dissimilar from the Indian legislation since the merger or consolidation became effective on the date that the articles of merger or consolidation were registered by the Registrar or such subsequent date not exceeding 30 days was stated in those articles.

[37]Whilst the expression “universal succession” is used in the English authorities, it is often used loosely as a shorthand way to express the effect of statutes which allow for merger or amalgamation and vesting of all assets and liabilities, when the civil law concept is not applicable per se. What matters is the substance of what takes place- the effect of what occurs under the foreign law. The Tribunal accepted at paragraph 73 of the Award that the English cases demonstrated a focus on the substance, not the form, and that what occurred in India was not strictly a case of universal succession; yet the nature of the transfer of interests from P to F was universal succession in substance, if not in form. With that conclusion I agree.

[38]Relying upon statements by Viscount Simonds and Lord Keith in Metliss in the House of Lords at pages 524 and 531 and on the authorities to which I have drawn attention, counsel for F contended that it did not require a case of true “universal succession” in the civil law sense for the devolution of rights to be recognised by an English court or tribunal in arbitration. It would be wrong, he said, to categorise what occurred in India as an equitable assignment for which notice was required before the dissolution of the transferring company. What mattered was what the law of the foreign domicile provided in relation to the transfer of rights and liabilities, including the choses in action relating to the arbitration.

[39]At paragraph 45 of the Award, the Arbitrators stated the position, in my judgment, entirely correctly when they said:

“Although the Tribunal accepts that the concept of universal succession is not strictly known to English law or to Indian law (the expert evidence was unanimous on this point)”, it takes the view that there is little difference in substance between the approach taken in English courts to the question of whether rights and obligations have transferred and a civil law doctrine of universal succession. The question as a matter of English law is whether the effect in Indian law of the Scheme and Orders is such that [F] is entitled to be regarded as the claimant in these proceedings.”

Conclusions on Indian law

[40]The Arbitrators found, as do I, as facts, on the basis of the Indian law evidence that: i) All the requirements imposed by the Companies Act, including notice provisions and regulatory approvals, were complied with before P ceased to exist. ii) The Scheme was brought into effect by Orders of the Court. iii) Having been sanctioned by the Court, no issue could be raised (save through the appellate process) as to whether proper processes had been followed. iv) Thereafter, Indian courts would be bound to accept the effect of the Scheme and to substitute F for P in any proceedings in those courts. v) In Indian arbitration, a tribunal also would be bound to accept the effect of the Scheme and to substitute F for E in any arbitration.

[41]It is clear that the Orders of the court, in accordance with the provisions of section 391-394 of the Companies Act achieved the merger and transfer of all the “Undertaking” of P to F, including the choses in action relating to the arbitration. As a matter of Indian law, all of the requirements of Indian law have been complied with and F has validly succeeded to all of the rights and obligations of P.

Application in English law

[42]When asked by the Tribunal in her closing speech, Counsel for E accepted that there was no difference in the effect of the Scheme from that of universal succession in the civil law sense. The mechanism was different, but the consequences were identical in the transfer of all rights and liabilities to F, once the effective date had passed. She maintained that the different mechanism resulted in a different conclusion as a matter of English law.

[43]The Indian law experts agreed in oral evidence that the concept of “universal succession” was not known under the law of India but that the transfer of the Undertaking of the merging companies under the Scheme could be described as a transfer by operation of law by court order. The expert for E had previously described the effect of the merger as assignment/devolution by an order of the court or as an assignment under law by sanction of the Scheme by the Court under sections 391-394 of the Companies Act 1956 of India. The expert for F had said that the Scheme had the effect of a devolution of rights, interests and liabilities with statutory force and operated as a judgment of the court so as to bind the members of the companies, and their creditors debtors and all those against whom the three Companies had claims and also all those who had claims against them.

[44]Parker LJ in Metliss defined universal succession in its civil law sense as a concept under which “a new person or entity continues the personality of another. All the rights and liabilities of the former are automatically transferred to and vested in the latter. The new person or entity succeeds per universitatem and not by a series of particular acts to each item of property.” It is clear that the Scheme, in order to be effective, required action on the part of the companies concerned in setting it up, obtaining the appropriate approval of 75% of creditors and applying to the court which had a discretion whether or not to sanction it. It was not automatic as a matter of general law or statute. Nonetheless, the effect, once the Court had made the Order and the effective date had passed, was identical in terms of vesting of the Undertaking. F succeeded to the rights and liabilities of P per universitatem and not by a series of particular acts to each item of property, even if F did not, as a matter of Indian Law, continue the personality of P. The substance of the Scheme therefore had the primary effect of universal succession, properly so called.

[45]In my judgement, as in that of the Tribunal, the transfer of the whole Undertaking of P to F cannot be described as an equitable assignment or characterised in that way. It was much more than that, as the Indian Law evidence showed. It would be wrong to classify it by reference to that English law concept, particularly when the wholesale form of transfer per universitatem in an amalgamation or merger by statute or order of the court is familiar enough in this jurisdiction, as the authorities recognise.

[46]The evidence of F’s Indian law expert was that there was no possibility of giving notice before the effective date because the Scheme and the transfer of the Undertaking had not become effective at that point. It is self-evident that a notice of assignment cannot be served before the assignment has occurred. The very notion that the arbitration could lapse at the point where the Undertaking was transferred to F by P, because P ceased to exist thereupon and because of the absence of such notice to E, shows the absurdity of the suggestion that the transfer of the choses in action represented by the Arbitration is to be seen as an equitable assignment which could have that effect. Comity requires the recognition of what took place in India under Indian law, so that the only issue is what must be done to make the transfer of arbitration rights and duties effective in the Arbitration where the seat is England.

[47]At paragraph 71 of the Award the Tribunal, having recited a number of the decisions to which I have made reference accepted that, if Baytur was binding upon them, an order for substitution could not be made. At paragraph 71, they held, as do I, that it would be wrong to characterise the devolution of rights and liabilities under the scheme as an equitable assignment of the kind contemplated in Baytur. The transfer of claims and obligations to F occurred by court order in accordance with an established statutory regime. Indian law and Indian courts were obliged to recognise its efficacy. Although there was a passing reference in Baytur to “universal succession”, the ratio of that case is that notice cannot be given after the fact when an equitable assignment is made by a company which then ceases to exist. If, however there is no equitable assignment, the point does not arise. The Indian law experts agreed on the characterisation of the Scheme as involving an assignment/devolution by order of the court. Once the order was made, in accordance with its terms, the effect was identical to that which was achieved by true “universal succession” in the sense used in the civil law concept. There is no need for any particular act in relation to each item of property for transfer and vesting to take place. The order achieves it all on the effective date of 7th February 2015.

[48]In consequence, the arbitration proceedings did not lapse because the Scheme and the Orders provided for the transfer of P’s rights in the proceedings to F. All that had to happen thereafter to put this into effect was for notice to be given to E and the Tribunal and for F to submit to the Tribunal’s jurisdiction. This was done on 25th February 2015. As the Tribunal found, there is nothing in Baytur which prevents the conclusion that the Tribunal should recognise the effect of the Scheme and Orders which, as a matter of Indian law, determined the rights and powers of F. In my judgment, the Tribunal were bound to recognise the effect of the Scheme and Orders in this way and to do anything else would be to negate the effect of the Scheme and to make a nonsense of it. As a matter of comity, this court could not countenance such a solution.

[49]The Tribunal pointed out that F sought substitution in accordance with the Scheme and the Orders of the Indian court sanctioning it. The Tribunal saw no proper basis for it to refuse the substitution and, for the reasons given, I consider that it would have been wrong to do otherwise.

The 1998 ICC Rules

[50]The 1998 ICC Rules contain no express provision for joinder of parties once an arbitration has commenced. Article 7 of the 2012 ICC Rules contains a provision for joinder of additional parties but also provides that no additional party may be joined after the confirmation or appointment of any arbitrator unless all parties, including the additional party agree. The Secretariat’s Guide to ICC Arbitration refers to the Court and its Secretariat developing a number of practices under the 1998 Rules allowing additional parties to be joined to an arbitration in a limited number of circumstances, stating that the Court had adopted a more flexible case by case approach to joinder in recent years, whilst always proceeding with caution. The Guidance suggests that the 2012 Rules preserve the core features of the Court’s joinder practice under the 1998 Rules.

[51]Article 15 of the 1998 Rules states that “the proceedings before the arbitral tribunal shall be governed by these Rules and, where these Rules are silent, by any Rules which the parties, or failing them, the arbitral tribunal may settle on, whether or not reference is thereby made to the Rules of procedure of a national law to be applied to the arbitration.”

[52]In my judgment, regardless of the absence of any provision for joinder in the 1998 Rules, the application made by F was bound to succeed. It was not an application for joinder at all. The Tribunal was asked to substitute F to give effect to the Indian law position by changing references to P to F and to set out, as the reason for doing so, the effect of the Scheme, as set out above. The Arbitrators did not need any express rule to accede to this application and cannot be said to have acted beyond their powers in doing so. Where the rules are silent, the arbitral tribunal could settle on its own rules in any event.

[53]The Arbitrators made no reference to the Rules in their Award, because no argument was presented to them about the effect of the Rules. The point was never addressed because no objection was ever made by E that the Rules did not allow the tribunal to do what it was asked to do. It is in this connection that section 73 of the Arbitration Act comes into play.

[54]Section 73 provides, under the heading “Loss of Right to Object”: “(1) If a party to arbitral proceedings takes part, or continues to take part, in the proceedings without making, either forthwith or within such time as is allowed by the arbitration agreement or the tribunal or any provision of this part, any objection(a) that the tribunal lacks substantive jurisdiction

(b) that the proceedings have been improperly conducted

(d) that there has been any other irregularity affecting the tribunal or the proceedings, he may not raise that objection later, before the tribunal or the court, unless he shows that at the time he took part or continued to take part in the proceedings, he did not know and could not with reasonable diligence have discovered the grounds for the objection.” (a) that the tribunal lacks substantive jurisdiction (b) that the proceedings have been improperly conducted (c) that there has been a failure to comply with the arbitration agreement or with any provision of this part or (d) that there has been any other irregularity affecting the tribunal or the proceedings,

[55]It is clear that E never submitted to the Tribunal that it lacked the jurisdiction or power to substitute F for P.

[56]The question arises as to whether the complaint now made falls within section 67 of the Arbitration Act or section 68(1)(b), (e) or (c). Section 67 provides that a party may challenge any award on the basis of the substantive jurisdiction of the tribunal. Section 82(1) of the Act defines “substantive jurisdiction”as referring to the matters specified in s 30(1)(a) to (c) and that “references to the tribunal exceeding its substantive jurisdiction shall be construed accordingly”.

[57]Section 30(1) provides that the tribunal may rule on its substantive jurisdiction and defines that as a ruling on:(a) whether there is a valid arbitration agreement,

(b) whether the tribunal is properly constituted, and

[58]The current challenge is not based upon any decision by the Tribunal in any of those three respects and cannot therefore fall within section 67.

[59]The question then arises whether the Tribunal can be said to have exceeded its powers (otherwise than exceeding its substantive jurisdiction under section 67) or whether the ICC has exceeded its powers in relation to the proceedings or the award or whether the tribunal has failed to conduct the proceedings in accordance with the procedure agreed between the parties. In reality the Tribunal has not exceeded its powers at all for the reasons that I have given but the new complaint is that it did so because the Rules did not allow for substitution or, as it is labelled by E, joinder.

[60]Both section 67 and section 68 expressly refer to the loss of the right to object under section 73 of the Act. E, at the time it took part in the proceedings, must be taken to have had knowledge of the ICC Rules. It certainly had constructive knowledge so that it could with minimal diligence have discovered the ground for the objection that it now makes. The proviso to section 73(1) cannot therefore avail it.

[61]It was argued that the objection now raised was not a new ground of objection but merely an argument in support of the existing ground of objection. I was referred to the decision of Aikens J (as he then was) in TheYthan

[2006] 1 Lloyd’s Law Rep 457

at paragraphs [54] to [60]. At paragraph [59] he stated that the intention behind section 73 was to ensure that a party which objected to jurisdiction but who had decided to take part in the arbitration proceedings, should bring forward his objections in those proceedings before the arbitrators and not hold them in reserve for a challenge to jurisdiction in the court. At paragraph 60 he said that it was wrong to be prescriptive or to try to lay down precise limits in the abstract as to what was meant by an objection which meant a “ground of objection”. “It is usually easy to recognise in particular cases whether a party is attempting to raise a new ground of objection to jurisdiction on an appeal.” At paragraph [112] he said that the “grounds of objection” should not be examined closely as if a pleading, but broadly. Hamblen J in Habas Sinai v VSC Steel Co Ltd

[2014] 1 Lloyd’s Law Rep 479

at paragraph [86] adopted the same line.

[62]In my judgment it is clear that what is now being advanced is a new ground of objection. It is not merely another argument in relation to the ground of objection which was taken before the Arbitrators. The only basis upon which E challenged the substitution of F as Claimant in the arbitration was that such substitution was precluded by the decision of the Court of Appeal in Baytur. In its skeleton and oral arguments, E contended that, if the Tribunal were to exercise a discretion to allow such substitution, it should be allowed only on terms that E put up security for costs. In making that submission it is clear that E was accepting that the Tribunal had the power to order the substitution of F as Claimant and expressly referred to the Tribunal as having that power as a condition of substitution of F as Claimant. It took the position that section 38 of the Arbitration Act 1996, relating to security for costs was “not excluded by the ICC Rules 1998”. It is clear from the materials put in front of me that not only was E not making any argument that the ICC Rules did not allow for substitution but it was positively putting forward an alternative case that, if it was wrong on the Baytur point, the Tribunal should exercise its discretionary power to allow substitution only on terms.

[63]In these circumstances E is precluded from raising the objection that it now takes by reason of section 73 of the Arbitration Act. E participated in the Arbitration without taking that objection and knew, through its advisors certainly, and could with reasonable diligence have discovered, the grounds for the objection in any event.

[64]Furthermore, for the reasons already given, the objection could not properly be made under section 67. If made under section 68, it fails because the Tribunal was acting within its powers since there was nothing in the Rules preventing it doing what it was bound to do once it had come to the conclusion it had as a matter of Indian/English law. Even if it had been wrong in its conclusions on Indian/English law, the absence of any provision in the Rules for joinder would not mean that, by allowing substitution, it or the ICC exceeded their powers or failed to conduct the proceedings in accordance with the procedure agreed by the parties. The parties, by their conduct, did agree to the determination by the Tribunal of the substitution issue by reference to the arguments they put before it and any error made by the Tribunal would not constitute a serious irregularity under section 68.

Conclusion

[65]In these circumstances E’s challenges to the Second Partial Award all fail and must be dismissed. It is inevitable that costs follow the event.