Indian Ports & Terminals – SAROD-Ports: Shipping Ministry’s Game Changing Redressal Mechanism:

Gautam BhatikarSenior Partner, Legasis Partners

Authored by:

Gautam Bhatikar | Senior Partner

Legasis Partners, Mumbai India

The Ministry of Shipping, Government of India (Ministry) has been proactively attempting to ameliorate the Major Port Sector in order to create an environment conducive to investment. The Ministry, in its bid to, increase and encourage the participation of private players in Public Private Participation (PPP) projects, has been improving upon and revising the Model Concession Agreement (“MCA”) in the Ports & Terminals Sector.

SAROD-Ports

On September 11, 2020, the Union Minister of Shipping virtually launched ‘SAROD-Ports’ (Society for Affordable Redressal of Disputes – Ports), for the redressal of existing, future and ongoing disputes between the Port and the Concessionaire under the MCA. SAROD-Ports is a revolutionary step in the Maritime Sector towards speedy, affordable, just and reasonable redressal of disputes through arbitration.

SAROD-Ports has been established under the Societies Registration Act, 1860 with a view to render affordable and timely resolution of disputes in a fair manner and to augment the Dispute Resolution Mechanism with a panel of technical experts acting as arbitrators. The panel consists of members from the Indian Ports Association (IPA) and the Indian Private Ports and Terminals Association (IPTTA).

SAROD-Ports shall provide assistance and counsel for the peaceful resolution of disputes to significant stakeholders in the maritime sector, including ports and shipping sector in Major Port Trusts, Non-major Ports, including private ports, jetties, terminals and harbors. It shall also cover disputes between granting authority and Licensee/Concessionaire /Contractor   and also disputes between Licensee/Concessionaire and their contractors arising out of and during the course of execution of various contracts.

Supplemental agreement for existing users:

On February 02, 2018, the Ministry notified the rules for SAROD-Port (“Rules”) along with the supplemental agreement for existing PPP operators to avail SAROD- Port as the dispute redressal mechanism. In order to refer the disputes to SAROD- Ports the existing PPP operator and the concessioning authority must enter into a supplementary agreement which was notified by the ministry.

Arbitration Rules:

 These Rules prescribe the procedure and manner in which the arbitration shall be conducted. The Arbitration shall be governed by the substantive law of the land for the time being in force i.e. the Indian Arbitration Act, 1996.

A highlight of the key provisions are as follows:

Arbitral Proceedings – Commencement:

  • The Arbitration shall commence upon the Claimant filing a written Notice of Arbitration (“NoA”) with the secretary of the Governing Body and service of the same on the other party. The said NoA must include;
  • a request for the dispute to be referred to arbitration alongwith a statement describing the nature, facts and circumstances leading to the dispute;
  • correspondence details of the both the parties;
  • a reference to the arbitration clause/ arbitration agreement that is invoked & a copy of the same alongwith a reference to the contract out of which the dispute arises & a copy of the same;
  • a proposal as to the number of arbitrators required to adjudicate the dispute; and
  • name of the Claimant’s nominated arbitrator.
  • The Respondent must within a period of 14 days of receipt of the NoA respond to the Claimant’s claims alongwith a statement describing the nature and circumstances of counterclaims, if any. The Respondent must also name its nominated arbitrator in the said reply. 
  • The Filing Fees as prescribed in the rules is INR. 10,000/-.

Filing of Claims and Counterclaims:

  • The Claimant must within 30 days of filing the NoA, file it’s Statement of Claim with the Secretary of the Governing Body and must serve a copy of the same on the Respondent.
  • The Respondent must within 30 days of receipt of the Statement of Claim, file its Statement of Defence and/ or counterclaim with the Secretary of the Governing Body and serve the same upon the Claimants.
  • In the event, the Claimant intends to file a response to the Counterclaim, the same must be filed within 30 days of service of the Counterclaim.

Appointment of Arbitrator(s):

  • The arbitral tribunal will comprise a sole arbitrator if the claim is for INR 3 crores or less. The Governing Body shall appoint a Sole Arbitrator from its Panel by way of draw of lots within 21 days of Respondent’s Statement of Defence and/or Counterclaim is filed or falls due.
  • In the event, the claim is for more than INR 3 crores, the parties shall appoint an odd number of arbitrators, in which case, the presiding arbitrator will be named by the arbitrators nominated by the parties and chosen from the group empanelled by SAROD-Ports. Any party failing to appoint an Arbitrator within 30 days of receipt of the NoA, the Governing Body shall appoint by a draw of lots from its empanelled Arbitrators.
  • Once appointed, the Arbitrator must make full disclosures of all the facts and circumstances, any past or present relationship with any party to the dispute or representative of any party that may justifiable doubts to his impartiality or independence.

Fees:

  • The Arbitrator’s fees shall be prescribed by the Governing Body of SAROD-Ports and he shall not make any unilateral financial arrangements with either party.

Seat and Venue:

  • While the Rules prescribe New Delhi as the Seat of Arbitration, it also gives liberty to the parties to agree upon a different seat.
  • The Rules don’t prescribe a venue for the Arbitration per se, but state that the venue of the hearing must be decided at the preliminary meeting.

Documents only:

  • The disputes may also be decided without an oral hearing, if the parties agree and inform tribunal, as soon as practicable.
  • In the event, either party intends to have an oral hearing at a later stage, the Tribunal must be informed promptly about the same.
  • Parties may seek discovery of documents if they are not satisfied with the existing documents.

Witnesses:

  • Each Party must give notice of the names and designations of their witnesses.
  • No party can call any expert witness without the leave of the Tribunal.
  • The Tribunal may appoint one or more experts to report to the Tribunal on specific issues.

Award:

  • The Tribunal may make interim or separate awards on different issues at different times.
  • All the awards must be submitted to the Secretary and shall be issued through the Secretary. The Secretary shall release the award only upon receipt of sufficient deposits to cover the fees and expenses due to the Tribunal and SAROD-PORTS.
  • Stamp duty shall be payable by the party in whose favour the award has been pronounced.
  • The parties by agreeing to resolve disputes through SAROD- Ports shall execute the award of the Tribunal without any delay.

Conclusion:

The establishment of SAROD- Ports is indeed a laudable step in establishing an efficient, robust and cost-effective redressal mechanism to reconcile the disputes between various stakeholders in the industry. Although, the Rules have been prescribed with an endeavour to ensure timely and fair disposal of disputes, there are some lacunae in the framework that need to be addressed. For an instance, the Rules prescribe the timeline for filing of pleadings, however there is no provision that prescribes a timeline for completion of the Arbitration. While the Ministry has taken promising steps for the realization of this vision, what remains to be seen is whether the existing stakeholders are willing to adapt to the new mechanism. In the past, while stating that affordability of disputes was never an issue for them, private players have expressed their displeasure over the Ministry not consulting them and considering their views on the formation of the SAROD-Ports.

The constitution of SAROD-Ports coupled with the amendments to the definition of “change in law” in the MCA is set to have a positive impact on the investment climate in the sector. The amended definition of “change in law” also includes the imposition of standards and conditions arising out of Tariff Authority for Major Ports guidelines/orders, environmental laws, labour laws, and an increase in and imposition of new taxes, duties, etc., for compensating the concessionaire. The vision envisaged by the Ministry shall attain full potential only when the Government and the stakeholders involved work harmoniously.