Claimant Memorial - NLS Int. Arbi. Moot, 2016

Team Code: 04C

9

TH

NATIONAL LAW SCHOOL INTERNATIONAL ARBITRATION MOOT COURT COMPETITION, 2016

IN THE SINGAPORE INTERNATIONAL ARBITRATION CENTRE ARBITRAL TRIBUNAL AT LONDON, UNITED KINGDOM SIAC Arbitration No: *****/***/***

IN THE MATTER CONCERNING MATTER CONCERNING THE SHAREHOLDERS AGREEMENT BETWEEN BLUE SKY B.V.

v.

AIR MEDIA AIR MEDIA PRIVATE LTD., SPACE AGE LTD. AND THE FOUNDING SHAREHOLDERS

-MEMORIAL ON BEHALF OF THE CLAIMANT-

-TABLE OF CONTENTS-

TABLE OF CONTENTS

TABLE OF ABBREVIATION ABBREVIATIONS S ............................................... .................................................... I INDEX OF AUTHORITIES AUTHORITIES ...................................................... ...................................................................................................... ................................................ IV STATEMENT STATEMENT OF JURISDICTION................................................. ......................................... X STATEMENT STATEMENT OF FACTS................................................ .................................................... ......................................................... ..... XI ISSUES RAISED............................................. ...................................................... ......................................................................... ................... XVI SUMMARY SUMMARY OF ARGUMENTS ARGUMENTS............................................... ........................................... XVIII ARGUMENTS ARGUMENTS ADVANCED ADVANCED..................................................... ....................................................................................................... .................................................. 1

I.

IN RELATION TO ISSUES (2)-(4) BELOW, WHAT IS THE CONTENT OF THE

LAW APPLICABLE TO THE SHA? ........................................................................................ 1 II.

UNDER

THE

LAW

APPLICABLE

TO

THE

SHA,

IS

IT

VALID

AND

ENFORCEABLE? ...................................................................................................................... 2 If so, are all parts of Article 1 of the SHA valid or only some parts? pa rts?............................. 3

a.

i.

If the SHA is valid, can the arbitral tribunal order the specific performance of the

valid parts of article 1 of the SHA .............................................................. ........................ 5 b.

IF THE SHA IS INVALID, IS THE ARBITRATION AGREEMENT IN THE SHA

VALID? .................................................................................................................................. 9 III.

UNDER THE LAW APPLICABLE TO THE ARBITRATION AGREEMENT, DOES

THE ARBITRAL TRIBUNAL HAVE JURISDICTION TO DECIDE WHETHER THE DIRECTORS’ ACTED IN BAD FAITH OR VIOLATED THEIR FIDUCIARY DUTIES WHEN CASTING THEIR VOTES ON 27 DECEMBER 2010? ............................................ 10 a.

If so, does the scope of the arbitral tribunal’s tribunal’s review extend to deciding if the resons

the directors gave for their votes are valid, i.e., can an arbitral tribunal constituted under the


-TABLE OF CONTENTSSHA decide for its own purposes whether the government’s termination of the CLA is lawful?................................................................................................................................... 13 I.

If so, is the government’s government’s termination of the CLA lawful CLA lawful under the law applicable to

the CLA? ............................................... ...................................................... ............................................................................ ...................... 13 ii.

If the government’s government’s termination of the CLA is CLA is lawful, does this by itself prove that

the Founder directors and/or the Space Age directors violated their fiduciary duties or acted in bad faith or otherwise breached the SHA under the law applicable to the SHA? If not, do additional facts prove the claim?................................................. ...................... 16 iii.

Alternatively, if the government’s termination of the CLA is unlawful, does this

prove by b y itself that the Blue Sky S ky directors violated their fiduciary duties d uties or acted in bad faith or otherwise breached the sha under the law applicable to the SHA? If not, do additional facts prove the claim? ...................................................................................... 17 IV.

UNDER THE LAW APPLICABLE TO THE SHA, ARE THE DECISIONS TAKEN

AT THE 27 DECEMBER 2010 MEETING VALID? .................................................. ............ 17 If not, what remedies are within the power of the arbitral tribunal to order?

A.

Specifically, can the arbitral tribunal order Air Media to withdraw its notice of arbitration under the cla? ........................................................................................................................ 22 i.

Which law governs this question? ............................................................................ 23

PRAYER PRAYER ................................................. ...................................................... ..................................................................................... ............................... 24


-TABLE OF ABBREVIATIONS-

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TABLE OF ABBREVIATIONS

Abbreviation

AC AIR Air Media All E.R. Anr. ANSAT ARB LR ARSO Art. BCC BCCA BCLC Bom Bros CANLII Ch Ch. D CLA CLB Civ. Co. Comm Comp Cas Corp. CWN Del DLT DRJ DMR Doc. DoS Ed/eds. Edn. GLR ETSI

Expanded Form Appeal Cases All India Reporter Air Media Private Limited All England Reporter Another Arberian National Satellite Arbitration Law Reporter Arberian Space Organisation Article British Company law cases British Columbia Court of Appeal Butterworths Company Law Cases Bombay Brothers Canadian Legal Information Institute Chancery Chancery Division Capacity Lease Agreement Company Law Board Civil Company Commercial Company Cases Corporation Calcutta Weekly Notes Delhi Delhi Law Tribunal Delhi Reported Journal Digital Multimedia Receivers Document Department of Space Editors Edition Gujrat Law Reporter European Telecommunications Standards Institute -MEMORIAL ON BEHALF OF THE CLAIMANT-


EQ EWCA EWHC FSA ICC I.E IESC ILM ILR Inc. In Re Ker Kosmix LLC Lloyd’s Rep

Ltd. Mad MD M/s MoU No. Ors. P&H Pg. Pvt. QB QBD Regd. SA SatCom SC SBAND SCC SCR SCW S-DMB Sec. SHA SIAC

XXII Page II of XXII Equity Court England and Wales Court of Appeal England and Wales High Court Founding Shareholders’ Agreement International Chambers of Commerce ID Est Irish Supreme Court International Law Materials International Law Reports Incorporated In Review Kerela Kosmix Corporation Limited Limited Liability Corporation Lloyd’s Reporter Limited Madras Managing Director Messrs Memorandum of Understanding Number Others Punjab & Haryana Page Private Queen’s Bench Queen Bench Division Registered South Africa Framework for Satellite Communication Policy in Arberia Space Commission/Supreme Court Space Band Supreme Court Cases Supreme Court Reporter Supreme Court Weekly S-band frequency for Digital Multimedia Broadcasting Section Shareholders’ Agreement Singapore International Arbitration Centre



TCC UK UKHL UKPC UKSC UN UNCITRAL UNTS USA v. VSC WLR

XXII Page III of XXII Technology & Construction Court United Kingdom United Kingdom House of Lords UKPC - United Kingdom Privy Council United Kingdom Supreme Court United Nations United Nations Commission on International Trade Law United Nations Treaty Series United States of America Versus Victoria Supreme Court Weekly law reports


-I NDEX OF AUTHORITIES-

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INDEX OF AUTHORITIES

STATUTES th

Arbitration Act, 17 June 1996, Chapter 23 ........................................................................... 10, 11 Companies Act, Act No. 18 of 2013 ..................................................... ............................................................................... .......................... 3, 4, 19, 20 Title 8, Delaware General Corporation Law, 2005......................................................................... 7 Indian Arbitration and Conciliation Act, Act No. 26 of 1996 199 6 ................................................ ..1, 23 Indian Contract Act, Act No. 9 of 1872 ................................................ ........................................ 14 Insolvency Act, 1986 c. 45 ............................................................................................................. 8 Model Business Corporation Act, 2002 ................................................ .......................................... 7 TREATIES & UN DOCUMENTS

The European Convention of Economic Commission for Europe of the United Nations, Art. VII, The European 1961, 21st April 1961 .................................................................................................................. 1 International Centre for Settlement of Investment Disputes, Art. 42, 1965 Convention on the

Settlement of Investment Disputes between States and Nationals of Other States , 18th March 1965, 575 UNTS 159 .................................................................................................................. 1 st

International Chambers of Commerce, Art. 21, ICC Rules of Arbitration , 1 January 2012 ......... 1 United Nations Commission on International Trade Law, Art. 16(1), UNCITRAL Model Law on

International Commercial Arbitration, 21st June 1985, 24 ILM 1302, (Hereinafter “UNCITRAL Model Law”)...................................................... Law”). ........................................................................................... ...................................... 9, 10, 11 United Nations Commission on International Trade Law, Art. 35, UNCITRAL Arbitration Rules , th

26 November 2013, 2 013, UN Doc. A/RES/31/98 ..................................................... ............................................................................. ........................ 1 United Nations Commission on International Trade Law, Art. V, United Nations Convention on

the Recognition and Enforcement of Foreign Arbitral Awards, 10th June 1958, 330 UNTS 38 (Hereinafter “New York Convention”)...................................................... Convention”)............................................................................... ......................... 10, 11 ENGLISH JUDICIAL DECISIONS

Abuja International Hotels Ltd. v. Meridien SAS , [2012] EWHC 87 (Comm) .............................. 6 Atwood v. v. Merry Weather , (1867) 5 Eq 464. ................................................. ................................. 3 Banner Homes Group PLC v. v. Luff Developments Ltd. & Stowhelm Ltd., 2000 WL 410 .............. 4 Bentley-Stevens v. Jones, (1974) 1 WLR 638............................................................................... 21 -MEMORIAL ON BEHALF OF THE CLAIMANT-


XXII Page V of XXII

Boys v. Chaplin, [1971] AC 356 ................................................... .................................................. 6 Bristol and West Building Society v. Matthew, [1998] Ch1. ........................................................ 20 C v. v. D, [2007] EWCA Civ 1282 ................................................... .................................................. 6 Channel Tunnel Group Ltd. v. Balfour Beatty Construction Ltd. , [1993] 1 All E.R. 664. ............ 1 Columbia Pictures Industries v. Robinson (Inquiry as to Damages), [1988] F.S.R. 531 .............. 4 Dallah Real Estate & Tourism Holding Company v. The Ministry of Religious Affairs, Government of Pakistan, [2010] UKSC 46 ................................................................................ 6 Dawson v. Bell , [2016] EWCA Civ 96. ................................................ .......................................... 5 Elder v. Elder & Watson Ltd., 1952 SC 49 (Scotland). .................................................... ................................................................ ............ 19 European Home Products PLC, re, 1988 BCLC 690 ....................................................... ................................................................... ............ 21 F & G Skyes (Wessex) v. Fine Fare Ltd., (1967) 1 Llyods Rep. 53 ............................................. 12 Fiona Trust & Holding Corp. v. Privalov, [2007] UKHL 40....................................................... 12 Fulham Football Club (1987) Ltd. v. Richards, [2011] EWCA Civ 855 ................................. 8, 11 Habas Sinai Ve Tibbi Gazlar Istihsal Andustrisi AS v. VSC Steel Company Ltd., [2013] EWHC 4071 (Comm) .............................................................................................................................. 6

Harbour Assurance Co. (UK) Ltd. v. Kansa General International Insurance Co. Ltd., [1993] QB 701. ..................................................................................................................................... 10

Harding v. Wealands, [2006] UKHL 32. ....................................................................................... 6 Harmer Ltd., re, (1959) 1 WLR 62 .............................................. ................................................. 19 Heyman v. Darwins, [1942] AC 356 ............................................................................................ 10 Howard Smith Ltd. v. Ampol Petroleum Ltd., (1974) AC 821. ............................................... ..... 16 Jackson v. Dear , [2014] 1 BCLC 186 ............................................................................................ 5 Levison v. Patent Steam Carpet Cleaning Co. Ltd., [1978] Q.B. 69. ............................................. 7 Mangistaumunaigaz Oil Production Association v. United World Trade Inc., [1995] 1 Lloyd’s Rep. 617 ...................................................................................................................................... 9

Royal Brompton Hospital National Health Service Trust v. Hammond & Ors. & Taylor Woodrow Construction (Holdings) Ltd., [2002] UKHL 14 ................................................... ..... 5 Russell v. v. Northern Bank Development Corporation Ltd. , [1992] 1 WLR W LR 588 ............................. 3 Scally v. Southern Health and Social Services Board , [1992] 1 AC 294. ...................................... 2 Sonatrach Petroleum Corp. (BVI) v. Ferrell International Ltd. , [2002] 1 All ER (Comm) 627 ... 9



XXII Page VI of XXII

Staple of England (Mayor of Manchester) v. Governor and Company of Bank of England , (1887) 21 QBD 160. ....................................................................................................................... 18, 21

Star Shipping SA v. China National Foreign Trading Transportation Corp., [1993] 2 Lloyd’s Rep. 445 ...................................................................................................................................... 9

Sulamérica CIA Nacional de Seguros S.A. & Ors. v. Enesa Engenharia S.A. & Ors., [2012] EWCA Civ. 638. ......................................................................................................................... 5

The Angelic Grace, [1995] 1 Llyods Rep. 87. .............................................. ............................... 12 Transport for Greater Manchester v. Thales Transport and Security Ltd., [2012] EWHC 3717 (TCC). ......................................................................................................................................... 9

Woolf v. Collis Removal Service, (1948) 1 KB 8 ......................................................................... 12 INDIAN JUDICIAL DECISIONS

Abnash Kaur v. Lord Krishna Sugar Mills Ltd., (1974) 44 Comp Cas 390 (Del) ........................ 21 Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc., 2016 (1) ARB LR 424 (SC). .......................................................................................................................................... 24

Booz Allen & Hamilton Inc. v. SBI Home Finance Ltd. & Ors., AIR 2011 SC 2507 ........ 8, 11, 23 C.R. Priyachandra Kumar v. Purasawalkam Permanent Fund Ltd., (1995) 83 Comp Cas 150 (Mad)......................................................................................................................................... 21

Chiranjit Lal Chowdhuri v. Union of India, (1950) 1 SCR 869 909. ............................................. 5 Commissioner of Central Excise, New Delhi v. Hari Chand Shri Gopal & Ors. (2011) 1 SCC 236............................................................................................................................................. 21

Deutsche Post Bank Home Finance Ltd. v. Taduri Sridhar, (2011) 11 SCC 375 ........................ 23 Enercon v. Enercon, 2014 (5) SCC 1. .......................................................................................... 10 Executive Engineer, Dhenkanal Minor Irrigiation Division I v. N.C. Budharaj, (2001) 2 SCC 721............................................................................................................................................. 23

Haryana Telecom Ltd. v. Sterlite Industries India Ltd., 1999 (5) SCC 688 68 8 ................................... 8 In Re: The Bombay Chlorine Products Ltd .,., (1965) 35 Comp Cas 282 (Bom).............................. 5 J. Mohapatra & Co. & Anr. v.State of Orissa & Anr., (1984) 4 SCC 103 ................................... 21 Joginder Singh Palta v. Time Travels Pvt. Ltd., (1984) 56 Comp Cas 103 (Cal) ........................ 21 Life Insurance Corporation of India v. Escorts Ltd., (1986) 1SCC 264 ........................................ 5 M/S Gujarat M/S Gujarat Bottling Co.Ltd. & Ors v The Coca Cola Co. & Ors, (1995) 5 SCC 545. .............. 21



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Madhu Ashok Kapur Kapu r v. v. Rana Kapur & Ors., (Notice of Motion No. 944 of 2013, in Suit No. 462 of 2013, Bombay High Court). ............................................................................................. 8, 22

Modi Rubber Co. v. Guardian International Corp., 141 ( 2007 ) DLT 822 .................................. 3 P. Manohar Reddy & Bros. v. Maharashtra Krishna Valley Development Corporation, AIR 2009 SC 1776 1 776 ................................................ ...................................................... ............................................................................ ...................... 10

Parsuram v. Tata Industrial Bank Ltd., AIR 1928 PC 180 .......................................................... 21 Reliance Natural Resources Limited v. v. Reliance Industries Limited, (2010) 7 SCC 1. ............... 15 Reva Electric Car Co. Pvt. Ltd. v. Green Mobil , 2012(2) SCC 93............................................... 10 Rolta India Ltd. & Anr. v. Venire Industries Ltd. & Ors., [2000] 100 1 00 Comp Cas 19 (Bom) ... 7, 22 Shanti Prasad Jain v. Kalinga Tubes Ltd., AIR 1965 SC 1535 ..................................... .............. 19 Shreejee Traco (India) Pvt. Ltd. v. Paperline International Inc., 2003 (9) SCC 79 ...................... 6 Shri Bakul Oil Industries v. State of Gujarat , (1987) 1 SCC 31; Gopi Kishen v. Gopi Kishen and Others, (57) P.L.R. 1915 .................................................. .................................................... ......................................................... ..... 18 Spectrum Technologies USA Inc. v. Spectrum Power Generation Co. Ltd., 2000 (56) DRJ 405 .. 3 Suresh Chandra Marwaha v. Lauls Pvt. Ltd., (1978) 48 Comp Cas 110 (P&H) ......................... 21 Thakkar Vithalbhai Hargovind & Anr. v. Kachhia Jagjivan Motilal rep. by Bai Kasi, (1969) 10 GLR 228.................................................................................................................................... 13

Today Homes and Infrastructure Pvt. Ltd. v. Ludhiana Improvement Trust , 2014 (5) SCC 68 .. 10 Union of India v. Reliance Industries Ltd. & Ors., ( 2015 ) 10 SCC 213 ...................................... 6 Vodafone International Holdings B.V. v. Union of India & Anr., (2012) 6 SCC S CC 613 .................... 3 OTHER JUDICIAL DECISIONS

Award made in arbitration in equity, Dec. 11, 1963 under the auspices auspices of the International Chamber of Commerce (unpublished), (unp ublished), No. 1279 ............................................... ...................... 23

ICC Case No. 2886 , COLLECTION OF ICC ARBITRAL AWARDS 332 (1974 – 1985). 1985). ........................ 1 Libyan American Oil Company v. Libyan Arab Republic R epublic, Award of 12 April 1977 (1982) 62 ILR 140........................................................................................................................................... 1, 2

Manson v. Curtis, 223 N.Y. 313, 319. ............................................................................................ 7 St. Pierre v. Chriscan Enterprises Ltd .,., 2011 BCCA 97 (CanLII)............................................... 11 Texaco Overseas Petroleum Company and California Asiatic Oil Company v. Government of Libya, (1979) 53 ILR 389 ........................................................................................................... 1



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BOOKS

ALBERT VENN DICEY & JOHN BASSETT MOORE, A DIGEST

OF THE

LAW

OF

E NGLAND

WITH

EFERENCE TO THE CONFLICT OF LAWS 93 (2015) ..................................................................... 1 R EFERENCE

Bernard Hanotiau, L’arbitrabilite Hanotiau, L’arbitrabilite,, in R ECUEIL DES C OURS OURS – C OLLECTED OLLECTED C OURSES OURSES OF THE H AGUE

ACADEMY OF I NTERNATIONAL L AW 165 (2002)............................................................................ 11 BERNARD HANOTIAU, L ARBITRABILITÉ ET LA F AVOR A RBITRANDUM : U N R ÉEXAMEN (1994) ............. 8 rd

BOYLE & BIRDS’ COMPANY LAW 67 (John Birds, Eilin Ferran, Charlotte Villiers eds., 3 Edn., 1997). ........................................................................................................................................ 20 th

BRENDA HANNIGAN, COMPANY LAW (4 Edn., 2015) ...................................................... .................................................................... .............. 5 CRAIG, PARK & PAULSON, I NTERNATIONAL CHAMBER OF COMMERCE ARBITRATION (2000) ........ 8 USSELL ON ARBITRATION 110DAVID ST. JOHN SUTTON, JUDITH GILL & MATTHEW GEARING, R USSELL th

111 (19 Edn., 1979). ......................................................................................................... 10, 12 OBERT B. THOMPSON, O’NEAL AND THOMPSON’S CLOSE CORPORATIONS F. HODGE O’NEAL & R OBERT AND LLCS: LAW AND PRACTICE VOLUME 1

5:128-29 (3rd Revised Edn., 2005). .................... 7

FRANKLIN A. GEVURTZ, CORPORATION LAW 486 (West Group Edn., 2000). ................................ 7 JUDGE SCHWEBEL, I NTERNATIONAL ARBITRATION: THREE SALIENT PROBLEMS 5 (1987).............. 9 EDFERN & HUNTER ON I NTERNATIONAL NIGEL BLACKABY, CONSTANTINE PARTASIDES, ET AL., R EDFERN th

ARBITRATION (6 Edn., 2015). ................................................................................................. 12 OKEZIE CHUKWUMERIJE, CHOICE OF LAW IN I NTERNATIONAL COMMERCIAL ARBITRATION (1994) ..................................................................................................................................................... 1 PHILIPPE FOUCHARD, EMMANUEL GAILLARD, BERTHOLD GOLDMAN & JOHN SAVAGE , FOUCAHRD GAILLARD GOLDMAN ON I NTERNATIONAL COMMERCIAL ARBITRATION 218 (1999). ................. 9 th

OBIN HOLLINGTON, HOLLINGTON ON SHAREHOLDERS’ R IGHTS IGHTS 353 (7 Edn., 2013) R OBIN 2 013) .................. 5

SIR MICHAEL J. MUSTILL & STEWART C. BOYD, THE LAW

AND

PRACTICE

OF

COMMERCIAL

nd

ARBITRATION IN E NGLAND (2 Edn., 1989). 1989 ). ...................................................... .............................................................................. ........................ 9 DICTIONARIES th

Black’s Law Dictionary 109 (6 Edn., 2012). 2 012). ............................................... ............................... 20



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JOURNAL ARTICLES

abrina Pearson, Sulamérica v. Enesa: The Hidden Pro-validation Approach Adopted by the

English Courts with Respect to the Proper Law of the Arbitration Agreement , 29 ARBITRATION I NTERNATIONAL 1, 115-126 (2013). ....................................................... ..................................................................... .............. 6 Ewan McKendrick & Iain Maxwell, Specific Performance in International Arbitration , 1(2) CHINESE JOURNAL OF COMPARATIVE LAW, 195-220 (2013) ...................................................... 6 F. Hodge O’Neal, Giving Shareholders Power to Veto Corporate Decisions: Use of Special

Charter and By-Law Provisions, 4 LAW AND CONTEMPORARY PROBLEMS 453 (Robert Kramer ed., 1953). ............................................................................................................................. 3, 22 Filip De Ly, Divorce Clauses in International Joint Venture Contracts, 3 I NTERNATIONAL BUSINESS LAW JOURNAL 279-315, 284 (1995). .................................................. ........................ 4 Hanoch

Dagan, Autonomy,

Pluralism and Contract Law Theory, 76(2) LAW

AND

CONTEMPORARY PROBLEMS 19 (2013). ...................................................................................... 7 NTERNATIONAL COMPANY Jason G. Ellis, Solutions to Deadlock in U.K. Companies , 9 I NTERNATIONAL

AND

EVIEW 3, 78-81 (1998). ............................................................................. 4 COMMERCIAL LAW R EVIEW

Lord McNair, The General Principles of Law Recognized by Legal Nations , BRITISH YEARBOOK OF I NTERNATIONAL LAW 69

(1957)............................................................................................. 1

EVIEW Lucian Arye Bebchuk, The Case for Increasing Shareholder Power , 118 HARVARD LAW R EVIEW

833-914 (2005)............................................................................................................................ 3 Mauro Rubino-Sommartano, The Channel Tunnel and the Tronc commun Doctrine, 10 JOURNAL OF I NTERNATIONAL ARBITRATION 56

(1993). ............................................................................. 1

Rita Cheung, Shareholders’ Agreements: Shareholders’ Contractual Freedom in Company Law, Law, JOURNAL OF BUSINESS LAW 504-530 (2012). ............................................................................. 5 Roscoe Pound, Liberty of Contract , 18 YALE LAW JOURNAL 454 (1909) ...................................... 7 United Nations Conference on Trade and Development, 5.2 The Arbitration Agreement , 20 I NTERNATIONAL COMMERCIAL ARBITRATION 42 (2005). ......................................................... 12 Wolfgang Kühn, Express and Implied Choice of the Substantive Law in the Practice of

International Arbitration, in THE LAW APPLICABLE IN I NTERNATIONAL ARBITRATION 384 (A.J. van den Berg ed., 1996). ............................................................................................................. 1


-STATEMENT OF JURISDICTION-

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STATEMENT OF JURISDICTION

Blue Sky b.v., the Claimant in the instant case, has the honour to submit this Memorial in pursuance of o f Article 6 of the Share Holder’s Agreement between b etween Blue Sky Sk y b.v., Space Age Ltd.,

the Founding Shareholders and Air Media Pvt. Ltd. for claiming breaches of the SHA to the Singapore International Arbitration Centre, London to be resolved under Rule 17.2 of the SIAC Arbitration Rules (4th Edn., 1 st July, 2010).


-STATEMENT OF FACTS-

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STATEMENT OF FACTS

The Arberian Satellite Communications Program and Policy

Arberian Space Organisation (ARSO) was an organization organization established by the Government of Arberia in 1969 to carry out the national space program. Later, a Space Commission (SC) was constituted which established the Department of Space (DoS). ARSO was brought under DoS management in 1972. A company called Kosmix Corporation Limited (Kosmix), was incorporated in Arberia in September 1992 and was the commercial arm of the DoS. In 1997 the Arberian Government approved the SatCom Policy under which Areberian Satellite (ANSAT) was to be leased to non-governmental parties followed by an approval of the norms and procedures for the implementation of the policy in 2000. The laws of Arberia are pari materia those of India. The Establishment of Air Media Private Limited

A private company Air Media Pvt. Ltd. (Air Media) was incorporated in 1988 whose 4 founding shareholders had formerly worked at ARSO and other space technology entities in Arberia. These shareholders entered into a Founding Shareholder Agreement (FSA) to gain from the policy changes in Arberia b y developing a mobile satellite broadcasting and delivery technology by using the S- band Frequency called S-DMB to create the world’s first world’s first and cheapest- S-DMB System. Air Media was to provide broadcast broadcast services across the entire entire country for which and to acquire the necessary spectrums, the founding shareholders expected to raise private capital by attracting additional shareholders. However the FSA not incorporated into Air Media’ Media’s articles of association. Air Media’s Contract Media’s Contract with Kosmix for Satellite Capacity

In 2000, Air Media contacted Kosmix about private sector opportunities under the SatCom Policy and the two parties entered into a Memorandum of Understanding (MoU) to explore space-based digital multimedia delivery opportunities based on new technologies that Air media was developing. In January 2004, Air Media concluded an agreement with Kosmix to lease 10 transponders of different capacity, on the S-band of a new satellite to be manufactured and launched by ARSO called “Aspiration“Aspiration-1” (Capacity Lease Agreement or CLA ). In the CLA, -MEMORIAL ON BEHALF OF THE CLAIMANT-


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Air Media also had the option to lease additional capacity on the also-to-be-built new satellite called “Aspiration“Aspiration-2”. 2”. The lease was for 12 years. There were three lease payments to be made under the CLA for each satellite at different times. Kosmix committed to delivering the leased capacity to Air Media within 48 months of receiving first part of the fee. Under the CLA, Kosmix would was also responsible for “all necessary governmental approvals relating to orbital slot and frequency clearances, and to raise the funding for the satellite. The CLA also recorded that Air Media had the ownership and right to use the Intellectual Property used in the design of ” the Digital Multimedia Receivers (DMRs) and Commercial Information Devices (CIDs). Further, Kosmix could terminate the CLA ‘for convenience’ ‘for convenience’ in in the event it is unable to obtain the necessary frequency or approvals. The parties’ parties’ performance of the CLA would be “suspended” suspended” in the case of “force majeure” majeure” which was defined as the occurrence of an event entirely outside the parties’ parties’. If the force majeure period was to last more than 90 days then parties were to discuss possible actions including termination at the option of either party if total delays exceed 12 months. The New Investment into Air Media

In September 2004, two new shareholders were brought into Air Media having differential voting rights. The rights attaching attaching to each class of shares shares were specified in a Shareholders Agreement (SHA) entered into by and between all shareholders and Air Media. Class A shares were issued to Blue Sky representing 49 % of the company. Class B shares were held by Space Age which were 24.9 % and the remaining 26.1 % shares were issued to the 4 founding

shareholders, which were Class C. Both Class and Class B shareholders had the right to veto any decision of the board of the company to commence any legal proceeding or arbitration. arbitration. In addition, Class A shareholders had the right to require that the Class C shareholders vote along with it on any matter relating to winding up of the company. The SHA was not incorporated into Air Media’ Media’s Articles of Association. Further, all disputes relating to the SHA were to be submitted to arbitration under the SIAC Rules to be seated in London and decided by three arbitrators. arbitrators. The SHA was to be governed by principles of corporate and commercial law common to Arberia and England. The Performance of the CLA



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In August 2004, the DoS Informed the Arberian Cabinet that the SC has approved the Aspiration 1 proposal via a note which was approved by the cabinet. Pursuant to this after Kosmix communicated to Air Media that it had received the necessary approvals for building and leasing Aspiration- 1, in November 2004, Air Media paid to Kosmix the Upfront Capacity Reservation Fee for Aspiration-1 and later for Aspiration 2. Aspiration-1 was to be delivered by November 2008 and Aspiration-2 by January 2009 which was later extended to July 2012. Termination of the CLA

On 24 March 2009, a technical committee of ARSO reported that the Intellectual property rights of the DVB-SH technology were with the European Telecommunications Standards Institute (ETSI) and is not a primary technology held by Air Media. The additional secretary noted that Air media’s commitment media’s commitment in CLA is at variance with the findings of the committee. Later in 2009 findings by a new chairman of ARSO also found that there were procedural lapses in the CLA as Kosmix did not take prior approvals to enter into the contract. Pursuant to this the DoS sought legal advice from the law officers, according to whom government has taken no decision on allocation of space segment using S- Band spectrum to Kosmix or Air Media and suggested termination of the contract. At the same time, various allegations were made against the government alleging that the allocation made was nepotistic and mala-fide and at throw away prices. Various newspapers called it a scam and questioned the validity of the allocation, publishing a number of government documents. In response to which a High Powered Review Committee was constituted which suggested that CLA be annulled, based on which the Government took a sovereign policy decision to annul it. As a result of this, Kosmix terminated the CLA under article 8 and 9 citing government’s government’s decision and Air Media’s Media’s violations of the CLA as reasons on 25 January, 2011. The Shareholders’ Dispute Shareholders’ Dispute

On 15 December 2010, the Directors of Air Media met and authorised the MD to commence legal proceedings for defamation against the newspaper and thought about possible future actions. A few days later the MD of Air Media wrote to the board of directors requesting that he be authorized to engage enga ge outside legal counsel and to initiate legal correspondence with Kosmix. A meeting of the board was called for 24 December 2010 where a draft ordinary resolution for the same was circulated. The Blue sky directors accused the others to hiding material facts and -MEMORIAL ON BEHALF OF THE CLAIMANT-


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suggested against initiating legal proceedings, as a response to which the other directors said that Blue Sky directors were wasting time by not acting in the best interest of the company. They wanted to initiate of legal proceedings. All the directors agreed to consider the matter further and to reconvene on 27 December 2010. At this meeting, Blue Sky directors said that it was foolish to take on Kosmix and that the directors not be casting their required affirmative vote for Air Media to initiate legal correspondence correspondence against Kosmix. The only option left was to negotiate full reimbursement with Kosmix. The Space Age directors stated that the Blue Sky directors were acting in bad faith, they proposed that the board take a vote on authorizing the MD to initiate legal proceedings. The Blue Sky directors protested that they had not consented to having a vote but had only agreed to discuss the matter. The Space Age directors proposed that the question of whether the agenda covered voting on the draft resolution or not be put to a vote. The Chairman put the question to a vote.

Four directors voted in favour while three opposed.

Being an

ordinary matter, the Chairman of the meeting adopted the vote and the agenda item was so interpreted. The Blue Sky directors protested that no vote is possible, and the vote just taken is unlawful. The resolution was then put to a vote which was passed b y an ordinary majority. Pursuant to this, while discussing other business, the Blue Sky directors introduced a draft special resolution proposing the voluntary winding up of Air Media and requested for it to be put to a vote, they also stated that the SHA required that the Founder directors vote in the same way as the Blue Sky directors on this resolution. The Space Age directors did not accept the the validity of Blue Sky directors introducing the resolution without prior notice and they also rejected Blue Sky directors’ directors’ interpretation of the SHA. The chairman, refused to table the draft special resolution stating that legal advised is required to be taken before the matter could be put to a vote as to whether such a special resolution can be introduced under this Agenda Item. The Arbitration

On 31 December 2010, Blue Sky served a Notice of Arbitration jointly on Air Media, Space Age, and the Founders claiming breaches of the SHA and appointing one arbitrator, this was the SHA Notice of Arbitration. On 26 January 2011, Air Media issued a Notice of Arbitration to Kosmix under the CLA seeking annulment of Kosmix’ Kosmix’s purported termination of the CLA, this was the CLA notice of Arbitration On 1 February 2011, Air Media, Space Age and the Founders jointly sent a Response -MEMORIAL ON BEHALF OF THE CLAIMANT-


XXII Page XV of XXII

to the SHA Notice of Arbitration, denying Blue Sky’ Sky’s claims in entirety, and making counterclaims. They jointly appointed the second arbitrator. arbitrator. The two arbitrators arbitrators wrote to the parties that they had agreed on the presiding arbitrator and that the Tribunal was now constituted. On 3 March 2011, the Tribunal in the SHA Arbitration wrote to the parties that the tribunal has been constituted and that the first hearing will take place in Bangalore, Arberia.


AISED-ISSUES R AISED

XXII Page XVI of XXII

ISSUES RAISED

(1)

IN RELATION TO ISSUES (2)-(4) BELOW, WHAT IS THE CONTENT OF THE LAW APPLICABLE TO THE SHA?

(2)

UNDER

THE

LAW

APPLICABLE

TO

THE

SHA,

IS

IT

VALID

AND

ENFORCEABLE?

a. IF SO, ARE ALL PARTS OF ARTICLE 1 OF THE SHA VALID OR ONLY SOME PARTS ?

i. IF SO , CAN AN ARBITRAL TRIBUNAL ORDER SPECIFIC PERFORMANCE OF THE VALID PARTS OF ARTICLE 1 OF THE

SHA?

1. WHICH LAW IDENTIFIES THE REMEDIES WITHIN THE ARBITRAL TRIBUNAL ’S POWER TO ORDER IN THIS SITUATION ?

b. IF NOT, IS THE ARBITRATION AGREEMENT IN THE SHA VALID?

(3)

UNDER THE LAW APPLICABLE TO THE ARBITRATION AGREEMENT, DOES THE ARBITRAL TRIBUNAL HAVE JURISDICTION TO DECIDE WHETHER THE DIRECTORS’ ACTED IN

BAD FAITH OR VIOLATED THEIR FIDUCIARY

DUTIES WHEN CASTING THEIR VOTES ON 27 DECEMBER 2010?

a. IF SO, DOES THE SCOPE OF THE ARBITRAL TRIBUNAL ’S REVIEW EXTEND TO DECIDING IF THE REASONS THE DIRECTORS GAVE FOR THEIR VOTES ARE VALID , I .E ., CAN AN ARBITRAL TRIBUNAL CONSTITUTED UNDER THE

SHA DECIDE FOR ITS OWN PURPOSES

WHETHER THE GOVERNMENT ’S TERMINATION OF THE

i. IF

SO, IS THE GOVERNMENT ’S TERMINATION OF THE

APPLICABLE TO THE

CLA IS LAWFUL?

CLA LAWFUL

CLA?


UNDER THE LAW

AISED-ISSUES R AISED

ii.

IF

XXII Page XVII of XXII

THE GOVERNMENT ’S TERMINATION OF THE

CLA IS

LAWFUL, DOES THIS BY ITSELF

PROVE THAT THE FOUNDER DIRECTORS AND /OR THE SPACE AGE DIRECTORS VIOLATED THEIR FIDUCIARY DUTIES OR ACTED IN BAD FAITH OR OTHERWISE BREACHED THE UNDER THE LAW APPLICABLE TO THE

SHA

SHA? IF NOT, DO ADDITIONAL FACTS PROVE THE

CLAIM?

iii.

ALTERNATIVELY, IF THE GOVERNMENT ’S TERMINATION OF THE CLA IS UNLAWFUL, DOES THIS PROVE BY ITSELF THAT THE BLUE SKY DIRECTORS VIOLATED THEIR FIDUCIARY DUTIES OR ACTED IN BAD FAITH OR OTHERWISE BREACHED THE APPLICABLE TO THE

(4)

SHA UNDER

THE LAW

SHA? IF NOT, DO ADDITIONAL FACTS PROVE THE CLAIM ?

UNDER THE LAW APPLICABLE TO THE SHA, ARE THE DECISIONS TAKEN AT THE 27 DECEMBER 2010 MEETING VALID?

a. IF

NOT, WHAT REMEDIES ARE WITHIN THE POWER OF THE ARBITRAL TRIBUNAL TO

ORDER ?

SPECIFICALLY,

CAN THE ARBITRAL TRIBUNAL ORDER AIR MEDIA TO

WITHDRAW ITS NOTICE OF ARBITRATION UNDER THE

i.

CLA?

WHICH LAW GOVERNS THIS QUESTION ?


-SUMMARY OF ARGUMENTS-

Page XVIII of XXII

SUMMARY OF ARGUMENTS

(1) IN RELATION TO ISSUES (2)-(4) BELOW, WHAT IS THE CONTENT OF THE LAW APPLICABLE TO THE SHA?

The governing law of the contract is determined through the application of the principle of party

autonomy. In the instant case, Article 6 of the SHA clearly states, “the SHA was to be governed by principles of corporate and commercial law common to Arberia and England. ” The laws of Arberia are pari material those of India. Since the principles of corporate and commercial law in India and England are substantially the same, applying the doctrine of tronc communs, the laws of both countries shall govern the SHA. SHA. Therefore, any legislative content of corporate corporate or commercial nature that is consistent between the two countries excluding all those principles of law that are in conflict with each other shall govern the SHA.

(2) UNDER

THE

LAW

APPLICABLE

TO

THE

SHA,

IS

IT

VALID

AND

ENFORCEABLE?

The SHA is valid and enforceable according to the laws of Arberia and England, which state that an SHA need not be incorporated into the Articles of Association of a company, as long as they are not contrary to the same. a. IF SO, ARE ALL PARTS OF ARTICLE 1 OF THE SHA VALID OR ONLY SOME PARTS?

All of Article 1 is valid. Article 1 contains four rights. The first right, which which gives Class A shareholders a veto over the decisions of the Board to commence legal proceedings or arbitration, is valid because according to company law in Arberia, shareholders are often given control over management and policy decisions of a company. Even veto powers have been held to be valid. The second right in Article 1, for Class A shareholders to require that Class C vote along with them in matters related to winding up, is valid because Class A shareholders are entitled -MEMORIAL ON BEHALF OF THE CLAIMANT-


Page XIX of XXII

to greater differential voting rights and because this measure is designed to avoid deadlocks. The third and fourth right are also valid. 1. WHICH LAW IDENTIFIES THE REMEDIES WITHIN THE ARBITRAL TRIBUNAL’S POWER TO ORDER IN THIS SITUATION?

The law of the arbitration agreement governs the remedies an arbitral tribunal may order. The law of the arbitration agreement is determined by the law of the seat. In the instant case, since the seat is in London, English law governs the remedies the arbitral tribunal can provide. i. IF SO, CAN AN ARBITRAL TRIBUNAL ORDER SPECIFIC PERFORMANCE OF THE VALID PARTS OF ARTICLE 1 OF THE SHA?

The arbitral tribunal can order the specific performance of all of Article 1. The first right may be enforced due to the principle of contractual autonomy. Furthermore, shareholder vetoes over management decisions and policy questions have been enforced. The second right is also capable of being enforced through specific performance because pooling agreements whereby the votes of some shareholders have been regulated in accordance with the wishes of majority or greater shareholders have been enforced. Moreover, this right does not lead to the arbitral tribunal adjudicating on matters of winding up, but mere enforcement of the right itself, which may or may not result in winding up. Overall, specific performance is the only remedy that shall do justice to the parties. b. IF NOT, IS THE ARBITRATION AGREEMENT IN THE SHA VALID?

The arbitration agreement in Article 6 in itself is valid, as is the SHA. The lack of a specific curial law does not affect its validity, because the seat is specified. However, even if the SHA was invalid, the arbitration agreement would still be valid due to the operation of the doctrine of severability.



Page XX of XXII

(3) UNDER THE LAW APPLICABLE TO THE ARBITRATION AGREEMENT, DOES THE ARBITRAL TRIBUNAL HAVE JURISDICTION TO DECIDE WHETHER THE DIRECTORS’ ACTED IN BAD FAITH OR VIOLATED THEIR FIDUCIARY DUTIES WHEN CASTING THEIR VOTES ON 27 DECEMBER 2010?

It is submitted that the Arbitral Tribunal has the jurisdiction to decide whether the directors acted in bad faith or violated their fiduciary duties when casting their votes on 27 December 2010 because whether such fiduciary duties were complied with is a question which is arbitrable. Moreover, the determination of such dispute is within the scope Article 6, i.e., of the arbitration clause of the SHA. a. IF SO, DOES THE SCOPE OF THE ARBITRAL TRIBUNAL’S REVIEW EXTEND TO DECIDING IF THE REASONS THE DIRECTORS GAVE FOR THEIR VOTES ARE VALID, I.E., CAN AN ARBITRAL TRIBUNAL CONSTITUTED UNDER THE SHA DECIDE FOR ITS OWN PURPOSES WHETHER THE GOVERNMENT’S TERMINATION OF THE CLA IS LAWFUL?

It is submitted that to examine the culpability of the parties to the dispute, it is imperative for the tribunal to delve into whether prima facie the government’s termination government’s termination of the CLA was lawful. The liability of the government can be therefore be determined only to this extent. Further, the validity of the termination by the government is determined for the sole purpose of the main dispute in question itself and is therefore lawful. i. IF SO, IS THE GOVERNMENT’S TERMINATION OF THE CLA LAWFUL UNDER THE LAW APPLICABLE TO THE CLA?

In the instant case, in light of the laws of Arberia, it i t is submitted that the government’s termination was lawful under the applicable law because the government made a policy decision to terminate the contract in light of public policy concerns and the termination was valid under the CLA ii. IF THE GOVERNMENT’S TERMINATION OF THE CLA IS LAWFUL, DOES THIS BY ITSELF PROVE THAT THE FOUNDER DIRECTORS AND/OR THE SPACE AGE DIRECTORS VIOLATED THEIR FIDUCIARY DUTIES OR



Page XXI of XXII

ACTED IN BAD FAITH OR OTHERWISE BREACHED THE SHA UNDER THE LAW APPLICABLE TO THE SHA? IF NOT, DO ADDITIONAL FACTS PROVE THE CLAIM?

It is submitted that in the instant case, the validity of the termination of the CLA would prove

that

the

Space

Age

and

Founder

directors

acted

in

bad

faith.

In light of the violations of the CLA by Air Media and the government policy decision, no reasonable man would have sought it beneficial to the interests of the company to initiate legal proceedings against Kosmix. iii.

ALTERNATIVELY, IF THE GOVERNMENT’S TERMINATION OF THE CLA IS UNLAWFUL, DOES THIS PROVE BY ITSELF THAT THE BLUE SKY DIRECTORS VIOLATED THEIR FIDUCIARY DUTIES OR ACTED IN BAD FAITH

OR

OTHERWISE

BREACHED

THE

SHA

UNDER

THE

LAW

APPLICABLE TO THE SHA? IF NOT, DO ADDITIONAL ADDITIONAL FACTS PROVE THE CLAIM?

It is submitted that the invalidity of the termination of the CLA does not in any manner signify that the Blue Sky directors violated their duties or acted in bad faith in the meeting held on 27 December, 2010. No inferences with respect to the liability of the Blue Sky directors can be drawn from such termination because as has been justified, the Blue Sky directors were acting in the best interests of the compan y.

(4)

UNDER THE LAW APPLICABLE TO THE SHA, ARE THE DECISIONS TAKEN AT THE 27 DECEMBER 2010 MEETING VALID?

In the instant case, there were four decisions taken at the meeting namely: (A) Putting the draft ordinary resolution regarding legal proceedings to vote; (B) approval of the initiation of legal proceedings in the name of Air Media; (C) Refusal to vote on the voluntary winding up of the company; and (D) the differing interpretation interpretation of Class A shareholder’s rights to require Class C to vote along with them in matters of winding up. It is submitted that the validity of all these decisions are in question under the law applicable to the SHA.



Page XXII of XXII

a. IF NOT, WHAT REMEDIES ARE WITHIN THE POWER OF THE ARBITRAL TRIBUNAL TO ORDER? SPECIFICALLY, CAN THE ARBITRAL TRIBUNAL ORDER AIR MEDIA TO WITHDRAW ITS NOTICE OF ARBITRATION UNDER THE CLA?

It is submitted that the arbitral tribunal has within its power to pass any award it deems necessary in the interest of equity and justice and is treated and par with courts co urts in civil matters. In the instant case, the tribunal can order withdrawal of the arbitration notice in respect of the C LA because the termination of the CLA was valid and the notice was wrongfully sent. Further, such an order is valid in light of what was in the best interests of the compan y. i. WHICH LAW GOVERNS THIS QUESTION? The powers of an arbitral tribunal and the scope its jurisdiction are determined by the law governing the arbitration agreement, which as has been established in the instant case is English Law. It is also important to take into consideration the laws of the place of enforcement of the arbitral award, i.e., Arberia. Therefore Part II of the Indian Arbitration and Conciliation Act and Parts of Part I of the Act, which are not in conflict with English law, along with the England’s Arbitration Act of 1996 shall govern this question.


-ARGUMENTS ADVANCED-

24 Page 1 of 24

ARGUMENTS ADVANCED

I . IN RELATION TO ISSUES (2)-(4) BELOW, WHAT IS THE CONTENT OF THE LAW APPLICABLE TO THE SHA?

It is submitted that for a valid arbitration it is essential to know which law governs the parties’ parties’ 1

contractual relationship. This governing law is determined through the application of the principle of party autonomy , which holds that parties are free to choose a system of national law, 2

which shall govern their agreement or contract. Hence, the proper law of the contract is thus determined as that by which the parties to the contract intended or may be fairly presumed to 3

have intended the contract be governed by. Moreover, the doctrine of tronc communs postulates that the substantive law of the contract may contain more than a single jurisdiction, as long as the 4

principles being applied are not contrary to each other. This doctrine has been recognized in 5

6

English and Indian law, along with various other jurisdictions.

7

1

ALAN R EDFERN EDFERN & MARTIN HUNTER , LAW AND PRACTICE OF I NTERNATIONAL COMMERCIAL ARBITRATION 94 (3rd Revised Edn., 1999). 2

A LAN R EDFERN note 1; Economic Economic Commission for Europe of the United Nations, Art. VII, The EDFERN, supra note 1; European Convention of 1961, 21st April 1961; International Centre for Settlement of Investment Disputes, Art. 42, 1965 Convention on the Settlement of Investment Disputes between States and Nationals of Other States, 18th March 1965, 575 UNTS 159; United Nations Commission on International Trade Law, Art. 35, UNCITRAL Arbitration Rules, 26th November 2013, UN Doc. A/RES/31/98; International Chambers of Commerce, Art. 21, ICC Rules of Arbitration Arbitration, 1st January 2012; Sec. 28, Indian Arbitration and Conciliation Act, Act No. 26 of 1996; OKEZIE CHUKWUMERIJE, CHOICE OF LAW IN I NTERNATIONAL COMMERCIAL ARBITRATION 105-106 (1994); Wolfgang Kühn, Express and Implied Choice of the Substantive Law in the Practice of International Arbitration, in T HE LAW APPLICABLE IN I NTERNATIONAL ARBITRATION 384 (A.J. van den Berg ed., 1996). 3

ALBERT VENN DICEY & JOHN BASSETT MOORE, A DIGEST OF THE LAW OF E NGLAND WITH R EFERENCE EFERENCE TO THE CONFLICT OF LAWS 93 (2015); Lord McNair, The General Principles of Law Recognized by ( 1957). Legal Nations, BRITISH YEARBOOK OF I NTERNATIONAL LAW 69, 72 (1957). 4

Mauro Rubino-Sommartano, The Channel Tunnel and the Tronc commun Doctrine, 10 JOURNAL OF I NTERNATIONAL ARBITRATION 56, 59 (1993).

5

Texaco Overseas Petroleum Company and California Asiatic Oil Company v. Government of Libya, (1979) 53 ILR 389, Libyan American Oil Company v. Libyan Arab Republic, Award of 12 April 1977 (1982) 62 ILR 140; Channel Tunnel Group Ltd. v. Balfour Beatty Construction Ltd., [1993] 1 All E.R. 664. Sec. 28(b)(i), Indian Arbitration and Conciliation Act, 1996, supra note 2. note 2.

6

7

1985). ICC Case No. 2886 , COLLECTION OF ICC ARBITRAL AWARDS 332 (1974 – 1985).



24 Page 2 of 24

In the instant case, Article 6 of the SHA clearly states, “the SHA was to be governed by “ principles of corporate and commercial law common to Arberia and England.” England.” The laws of 8

Arberia are pari materia to those of India.

Therefore, the parties have autonomously defined the governing law of the contract with adequate clarity. The applicable law in the instant case involves the jurisdictions of two different nations, and certain principles common to both. According to the tronc communs, this is a valid choice of governing law of contract, because there are no contradictions in the principles of corporate and commercial laws of England and Arberia that are being applied over the course of the dispute. Therefore, the agreements between the parties to the SHA must be given effect, and must be interpreted and applied, in conformity with principles common to the laws of Arberia and England. This would comprise any legislative content of corporate or commercial nature that is consistent between the two countries excluding all those principles of law that are in conflict 9

with each other.

II.

UNDER THE LAW APPLICABLE TO THE SHA, IS IT VALID AND

ENFORCEABLE?

The rights of the three classes of shareholders of Air Media were set out in the Shareholders 10

Agreement of September 2004. The SHA was not incorporated into the Articles of Association. Each class was given equity shares with differing voting rights.

11

It is submitted that since shareholders’ agreements are a definable category of contractual 12

relationships, both Arberian and English laws have held such agreements to be valid and

8

Factsheet, p. 21.

9

note 5. Libyan American Oil Oil Company v. Libyan Arab Republic Republic, supra note 5.

10

Pg. 6, Factsheet.

11

Pg. 6, Factsheet.

12

Scally v. Southern Health and Social Services Board , [1992] 1 AC 294. -MEMORIAL ON BEHALF OF THE CLAIMANT-


24 Page 3 of 24 13

enforceable, even if they are not incorporated in the Articles of Association of the company. It is therefore contended that the SHA, containing the rights of Class A, B and C shareholders is valid and enforceable according to its governing law.

a.

IF SO, ARE ALL PARTS OF ARTICLE 1 OF THE SHA VALID OR ONLY SOME PARTS ?

In the instant cases Article 1 of the SHA contains four separate rights that have been granted to Class A shareholders and it is contended that Article 1 in its entirety is valid.

The first right right mentioned in Article 1 gives Class A shareholders the power to veto the decisions of the board to initiate legal proceedings or arbitration. It is submitted that shareholders have the right to redress a legal wrong or injury to the company, when they disagree with the actions of 14

the Board regarding the same.

Shareholders’ agreements often specifically give shareholders 15

control over the management or policy decisions of a company, such as the institution of legal 16

proceedings, by way of veto power. Therefore, the first right in Article 1 is valid.

The second right in the SHA says that Class A shareholders may require that the Class C shareholders vote along with them on any matter relating to winding up of the company. This effectively entails that if Blue Sky’s shareholders voted in favour of winding up the company, the founding shareholders could also be compelled to do so. Such a right is valid because a) Class A owns 49% of the stock and is the highest class of shareholders, and b) this right ensures a three-fourth majority, thereb y avoiding deadlocks.

13

v. Northern Bank Development Corporation Ltd., [1992] 1 WLR 588.; Vodafone International Russell v. I nternational Holdings B.V. v. Union of India & Anr., (2012) 6 SCC 613; Spectrum Technologies USA Inc. v. Spectrum Power Generation Co. Ltd. Ltd., 2000 (56) DRJ 405; Modi Rubber Co. v. Guardian International Corp., 141 ( 2007 ) DLT 822. 14

v. Merry Weather , (1867) 5 Eq 464. Atwood v.

15

Sec. 2(27), Companies Act, Act No. 18 of 2013.

16

EVIEW 833 Lucian Arye Bebchuk, The Case for Increasing Shareholder Power , 118 HARVARD LAW R EVIEW 914, 861 (2005); F. Hodge O’Neal, Giving Shareholders Power to Veto Corporate Decisions: Use of Special Charter and By-Law Provisions, 4 LAW AND CONTEMPORARY PROBLEMS 453 (Robert Kramer ed., 1953).



24 Page 4 of 24

Class A shareholders own 49% of the stock and are the highest class of shareholders. The stake that Blue Sky has is the largest amongst the three Classes of shareholders, without giving them unequivocal majority rights. It is common practice for Class A shareholders to have 17

greater rights and control over the management of the company, which includes decisions related to liquidation and dissolution. This is why shares with differential voting rights are issued, on the basis of contributions to capital. Moreover, shareholders may sign contracts that are beneficial to their interests over others, as long as it is not derogatory to the best interests of the company. Despite this right granting Class A greater voting rights, it is a valid right because it relates to management issues and is not against the interests of the company.

It ensures a 75% majority, such that deadlocks are ar e avoided. The 49% of the shares of Air Media are vested in Class A, 24.9% in Class B and 26.1% in Class C. Therefore, a deadlock is very likely while voting on matters through a special resolution which requires a three-fourth majority (75%) vote, such as a resolution to voluntarily wind up the 18

company.

It is submitted that in the event of such deadlocks, shareholders’ agreements or the company’s constitutional documents provide for measures like drag-along rights, Texas shootouts and 19

Russian roulette. All of these measures involve a class of shareholders selling their stock to 20

majority shareholders and exiting the company. compan y.

Therefore, the existence of a provision such as one class of shareholders requiring another to vote along with them in certain matters is effective in avoiding deadlock situations in special resolution matters. In order to avoid such drastic measures, such a voting agreement as contained

17

Companies Act, 2013, supra note 15, note 15, at at Sec. 2(27).

18

Companies Act, 2013, supra note 15, note 15, at at Sec. 304(b).

19

Jason G. Ellis, Solutions to Deadlock in U.K. Companies, 9 I NTERNATIONAL COMPANY AND EVIEW 3, 78-81, 79 (1998). COMMERCIAL LAW R EVIEW ( 1998).

20

Banner Homes Group PLC v. Luff Developments Ltd. & Stowhelm Ltd., 2000 WL 410; Columbia Pictures Industries v. Robinson (Inquiry as to Damages), [1988] F.S.R. 531; Filip De Ly, Divorce Clauses in International Joint Venture Contracts , 3 I NTERNATIONAL BUSINESS LAW JOURNAL 279-315, 284 (1995).



24 Page 5 of 24

in the SHA is in the best interests of all the shareholders and the compan y. Therefore, this right is valid. The third right in the SHA is that in case of winding up or repayment of capital, Class A shareholders were to receive preferential repayment. It is submitted that such a right is valid because Class A shareholders of ordinary shares are given priority with regards to repayment of 21

capital, even during the winding up of a company, over other classes.

The fourth right accruing to Class A shareholders is the right to elect three directors. It is submitted that this right is valid because the right to elect directors and participate in the management of a corporation has been held to be a valid shareholder’s right in both both Arberian 23

and English law.

22

Such a right is one of the most common features of a shareholders’

24

agreement.

i.

I f th e SH A i s valid, can can the ar ar bitr al tr ibu nal or der der th e specif pecif ic perf perf orman ce of th e valid parts of of ar ti cle 1 of th e SH A ?

1. The law governing the arbitration agreement is English Law

In determining the law applicable to the arbitration agreement, the approach most commonly used in the absence of an express choice of law, and the presence of a pre-determined seat of arbitration, is the application of the law of the seat. ”25 This approach is the most common in

21

In Re: The Bombay Chlorine Chlorine Products Ltd .,., (1965) 35 Comp Cas 282 (Bom).

22

Life Insurance Corporation Corporation of India v. Escorts Ltd., (1986) 1SCC 264; Chiranjit Lal Chowdhuri v. Union of India, (1950) 1 SCR 869 909. 23

Royal Brompton Hospital National Health Service Trust v. Hammond & Ors. & Taylor Woodrow Construction (Holdings) Ltd., [2002] UKHL 14; Dawson v. Bell , [2016] EWCA Civ 96.

24

th

BRENDA HANNIGAN, COMPANY LAW 116 (4 Edn., 2015); Jackson v. Dear , [2014] 1 BCLC 186; th OBIN HOLLINGTON, HOLLINGTON ON SHAREHOLDERS’ R IGHTS IGHTS 353 (7 Edn., 2013); Rita Cheung, R OBIN Shareholders’ Agreements: Shareholders’ Contractual Freedom in Company Law , JOURNAL OF BUSINESS LAW 504-530, 506 (2012). 25

Sulamérica CIA Nacional de Seguros S.A. & Ors. v. Enesa Engenharia S.A. & Ors., [2012] EWCA

Civ. 638.



24 Page 6 of 24 26

Arberian and English law. Therefore, in the present case, it is submitted that the law governing the arbitration agreement is English Law, because the seat of arbitration is London.

2. The law governing the arbitration agreement ordains the remedies an arbitral tribunal can prescribe. It has been held that the rules of arbitration must not specifically ban a particular remedy.

27

Moreover, courts in Common Law jurisdictions have held that the law governing the arbitration 28

agreement must be taken into consideration while delivering a remedy within an arbitral award.

It is submitted that since the law governing Article 6 of the SHA, i.e. the arbitration agreement is English law, the remedies that the arbitral tribunal presiding over the current arbitration may administer are dependent on English law.

3. The arbitral tribunal can order the specific performance of all the rights available to Blue Sky under Article 1 of SHA. In the case at hand, the specific performance of two rights mentioned in Article 1 is in contention. (A) The veto over legal proceedings and (B) The requirement of Class C to vote along with Class A in winding up matters.

A.

The right to veto initiation of legal proceedings can be specifically enforced.

26

Abuja International Hotels Ltd. v. Meridien SAS , [2012] EWHC 87 (Comm); Habas Sinai Ve Tibbi v. VSC Steel Company Ltd., [2013] EWHC 4071 (Comm); C v. v. D, [2007] Gazlar Istihsal Andustrisi AS v. EWCA Civ 1282; Dallah Real Estate & Tourism Holding Company v. The Ministry of Religious Affairs, Government of Pakistan, [2010] UKSC 46; Shreejee Traco (India) Pvt. Ltd. v. Paperline International International Inc., 2003 (9) SCC 79; Union of India v. Reliance Industries Ltd. & Ors., ( 2015 ) 10 SCC 213; Sabrina Pearson, Sulamérica v. Enesa: The Hidden Pro-validation Approach Adopted by the English Courts with Respect to the Proper Law of the Arbitration Arbitration Agreement , 29 ARBITRATION I NTERNATIONAL 1, 115-126, 116 (2013). 27

Ewan McKendrick & Iain Maxwell, Specific Performance in International Arbitration, 1(2) CHINESE JOURNAL OF COMPARATIVE LAW, 195-220, 207 (2013).

28

Boys v. Chaplin, [1971] AC 356; Harding v. Wealands, [2006] UKHL 32. -MEMORIAL ON BEHALF OF THE CLAIMANT-


24 Page 7 of 24 29

It is submitted that contractual autonomy is a cardinal principle common law, provided the 30

impugned clause is reasonable and gives rise to a reasonable result. Moreover, control of shareholders over certain management decisions through shareholders agreements has been 31

allowed. In addition to this, shareholders are allowed to have veto power ov er significant policy 32

decisions and the day to day management of companies.

Therefore, since control via shareholders’ agreements, extending to vetoes over significant policy decisions and the day to day management of companies, such as the first right in the SHA, has been enforced, such clauses must be reasonable. It follows that these clauses are also enforceable in keeping with the principle of contractual autonomy.

B.

The requirement of Class C shareholders to vote along with Class A shareholders can be

specifically enforced. It is submitted that a pooling agreements, whereby the shareholders vote their shares as a unit 33

34

in the election of directors and other matters , such as dissolution and deadlock. This sort 35

of agreement is enforceable in common law nations, to the extent of being given statutory 36

recognition. Pooling agreements with regards to liquidation of a company and related matters like dissolution and winding up have been recognized by courts in England. Moreover, in Arberia, the nation of enforcement of the arbitral award, shareholders’ agreements clauses with the phrasing “require to vote along” have also been enforced with the court interpreting them to

29

Roscoe Pound, Liberty of Contract , 18 YALE LAW JOURNAL 454 (1909); Hanoch Dagan, Autonomy, Pluralism and Contract Contract Law Theory, 76(2) LAW AND CONTEMPORARY PROBLEMS 19, 21 (2013). 30

Levison v. Patent Steam Carpet Carpet Cleaning Co. Co. Ltd., [1978] Q.B. 69.

31

Companies Act, 2013, supra note 15, note 15, Sec. Sec. 2(27).

32

F. HODGE O’NEAL & R OBERT OBERT B. THOMPSON, O’NEAL AND THOMPSON’S CLOSE CORPORATIONS AND LLCS: LAW AND PRACTICE VOLUME 1 5:128-29 (3rd Revised Edn., 2005). 33 34

FRANKLIN A. GEVURTZ, CORPORATION LAW 486 (West Group Edn., 2000). O’NEAL AND THOMPSON, supra note 32. note 32.

35

Rolta India Ltd. & Anr. v. Venire Industries Ltd. & Ors., [2000] 100 Comp Cas 19 (Bom); Manson v. Curtis, 223 N.Y. 313, 319. 36

Sec. 7(31), Model Business Corporation Act, 2002; Sec. 2(18)(2), Title 8, Delaware General Corporation Law, 2005.



24 Page 8 of 24 37

mean that such a clause entails that one party must vote in the same manner as the other.

Therefore, this right may be granted specific performance by the arbitral tribunal and Class C may be made to vote in the same manner as Class A desires.

It is also pertinent to note the fact that this right may or may not have a bearing on the winding up of a company is not relevant, in light of the arbitrability of winding up being in question in light of three reasons. Firstly, it has been internationally accepted that in all arbitrations must 38

acknowledge the presumption of arbitrability of all matters. Therefore, clauses in contracts must be considered for enforcement while assuming that the matter in question is arbitrable.

Secondly, in the nation of the curial law, England, it has been held that insolvency procedures are 39

not arbitrable. However, the voluntary winding up of a company has nothing to do with the process of winding up by a tribunal, which is concerned with the winding up of a company that th at can no longer pay back its creditors and meet its debts.

40

Thirdly, this is a right within a contract

that only stipulates the manner in which certain votes are cast. It is not an arbitral award for the winding up of a company. Therefore, specific performance of this right is just a contractual 41

remedy and not an infringement of a right in rem. Further, this right may be enforced because of the inherent presumption of its arbitrability read with the fact that it involves the voluntary winding up of the company, which will occur only on the basis of voting.

C. Specific performance is feasible in the instant case. In England, as well as India, it has been held that in order to determine whether specific performance is the appropriate remedy for breach of contract, the greatest tests are passed if it is determined that specific performance is possible, and that damages would not provide an 37

Madhu Ashok Kapur v. Rana Kapur & Ors., (Notice of Motion No. 944 of 2013, in Suit No. 462 of

2013, Bombay High Court). 38

CRAIG, PARK & PAULSON, I NTERNATIONAL CHAMBER OF COMMERCE ARBITRATION 62 (2000); AVOR A RBITRANDUM : U N R ÉEXAMEN 121 BERNARD HANOTIAU, L ARBITRABILITÉ ET LA F 121 (1994).

39

Fulham Football Football Club (1987) Ltd. Ltd. v. Richards, [2011] EWCA Civ 855.

40

Chapter VI, Insolvency Act, 1986 c. 45.

41

Booz Allen & Hamilton Inc. v. SBI Home Finance Ltd. & Ors., AIR 2011 SC 2507; Haryana Telecom Ltd. v. Sterlite Industries India Ltd., 1999 (5) SCC 688. -MEMORIAL ON BEHALF OF THE CLAIMANT-


24 Page 9 of 24

42

adequate remedy. In the case at hand, it is only specific performance of the contract that provides an adequate remedy because it is both possible and because damages will not ensure that the rights are guaranteed and the best interests of the company are taken into consideration. Therefore, these rights may be specifically enforced.

b.

IF THE SHA IS INVALID, IS THE ARBITRATION AGREEMENT IN THE SHA VALID?

It is submitted that the arbitration agreement in Article 6 of the SHA is a valid arbitration agreement. This is because the law governing the underlying contract, the seat of arbitration and the arbitration rules applicable have all been clearly laid out. The law governing the arbitration agreement has been proven to be English law. It has been held by English courts that an express 43

statement of the curial law is not necessary n ecessary for an arbitration agreement to be valid.

However, assuming, but not conceding that the SHA is invalid, the arbitration agreement in Article 6 would still be valid due to the application of the doctrine of seperability, which states that if a contract contains a valid arbitration agreement, an arbitral tribunal may declare the 44

contract itself invalid, yet still hold that the arbitration agreement is valid. This entails that the 45

arbitration agreement is a separate contract from the actual contract that is in dispute. Nearly every jurisdiction recognizes this doctrine of separability as a cornerstone of the law of 46

47

48

49

arbitration. The UNCITRAL Model Law, England, and India have all upheld this doctrine.

42

v. Thales Transport and Security Ltd., [2012] EWHC 3717 (TCC). Transport for Greater for Greater Manchester v.

43

445 ; Star Shipping SA v. China National Foreign Trading Transportation Corp. , [1993] 2 Lloyd’s Rep. 445; Sonatrach Petroleum Corp. (BVI) v. Ferrell International Ltd., [2002] 1 All ER (Comm) 627; 617 . Mangistaumunaigaz Mangistaumunaigaz Oil Production Production Association v. United World Trade Inc., [1995] 1 Lloyd’s Rep. 617. 44

SIR MICHAEL J. MUSTILL & STEWART C. BOYD, THE LAW AND PRACTICE OF COMMERCIAL nd ARBITRATION IN E NGLAND 7(2 Edn., 1989).

45

JUDGE SCHWEBEL, I NTERNATIONAL ARBITRATION: THREE SALIENT PROBLEMS 5 (1987).

46

PHILIPPE FOUCHARD, EMMANUEL GAILLARD, BERTHOLD GOLDMAN & JOHN SAVAGE, FOUCAHRD GAILLARD GOLDMAN ON I NTERNATIONAL COMMERCIAL ARBITRATION 218 (1999).

47

United Nations Commission on International Trade Law, Art. 16(1), UNCITRAL Model Law on “UNCITRAL Model International Commercial Arbitration, 21st June 1985, 24 ILM 1302, (Hereinafter “UNCITRAL Law”).



24 Page 10 of 24

It is submitted that the arbitration agreement contained in Article 6 of the SHA is a separate contract from the SHA itself. Therefore, even if the SHA were to be held invalid, the validity of the arbitration agreement is not affected.

III.

UNDER

THE

AGREEMENT,

LAW DOES

APPLICABLE THE

TO

ARBITRAL

JURISDICTION TO DECIDE WHETHER THE BAD

FAITH

OR

VIOLATED

THEIR

THE

ARBITRA TION

T RIBUNAL

HAVE

DIRECTORS’ ACTED

FIDUCIARY

DUTIES

IN

WHEN

CASTING THEIR VOTES ON 27 DECEMBER 2010?

It is submitted that as has been established the law governing he arbitration agreement is the law of the seat, i.e., English Law. In the instant case, the decisions taken by the directors of Air Media, at the Board Meeting that was held on 27 December 2010 are in dispute between the shareholders of the company. In pursuance of this, Blue Sky served a Notice of Arbitration jointly on Air Media, Space Age, and the Founders claiming breaches of the SHA. According to the SHA, all disputes relating to the SHA, including its validity, were to be submitted to arbitration in the manner provided under Article 6. Further, it is submitted that an arbitral tribunal's jurisdiction depends on the scope of the 50

arbitration agreement. Therefore, to determine if the tribunal has jurisdiction over whether the directors acted in bad faith depends on the true construction of the arbitration

48

Sec. 7, Insolvency Act, 1986 c. 45; Heyman v. Darwins, [1942] AC 356; Harbour Assurance Co. (UK) Ltd. v. Kansa General International International Insurance Insurance Co. Ltd., [1993] QB 701. 49

P. Manohar Reddy & Bros. v. Maharashtra Krishna Valley Development Corporation, AIR 2009 SC 1776; Reva Electric Car Co. Pvt. Ltd. v. Green Mobil , 2012(2) SCC 93; Today Homes and Infrastructure Infrastructure Pvt. Ltd. v. Ludhiana Improvement Improvement Trust , 2014 (5) SCC 68; Enercon v. Enercon, 2014 (5) SCC 1. 50

UNCITRAL Model Law, supra note 47, 47, at Art. 34(2)(a)(iii), United Nations Commission on International Trade Law, Art. V, United Nations Convention on the Recognition and Enforcement of Convention”) ; DAVID Foreign Arbitral Awards, 10th June 1958, 330 UNTS 38 (Hereinafter “New York Convention”); th ST. JOHN SUTTON, JUDITH GILL & MATTHEW GEARING, R USSELL USSELL ON ARBITRATION 110-111 (19 Edn., 1979).



24 Page 11 of 24

51

agreement. It is also submitted that the jurisdiction of the arbitral tribunal can be challenged when the subject matter of the dispute being referred to arbitration is beyond the scope of the 52

arbitration clause or goes beyond the scope of what was submitted.

It is therefore submitted that the Arbitral Tribunal has the jurisdiction to decide whether the directors acted in bad faith or violated their fiduciary duties when casting their votes on 27 December 2010 because whether such fiduciary duties were complied with is a question which is arbitrable (A). Moreover, the determination of such dispute is within the scope of the arbitration clause of the SHA. (B) A. The determination of whether the directors acted in accordance with their fiduciary duties

is arbitrable. It is submitted that every civil or commercial dispute, either contractual or non-contractual, which can be decided by a court, is in principle capable of being adjudicated and resolved by arbitration unless the jurisdiction of arbitral tribunals is excluded either expressly or by 53

necessary implication.

In the instant case, there is no such exclusion with respect respect to

determining the compliance of fiduciary duties of the directors and therefore it can be decided upon by the tribunal. 54

Further, it is put forth that the determination of civil liability of directors and disputes where in it is necessary to determine whether there has been a breach of fiduciary duty can 55

be determined by an arbitral tribunal. Therefore it is within the jurisdiction of the arbitration tribunal to decide whether the directors’ acted in bad faith or violated their fiduciary duties when they cast their votes on 27 December 2010.

51

(Comm). Econet Satellite Services Services Ltd. v. Vee Networks Ltd., [2006] EWHC 1664 (Comm). UNCITRAL Model Law, supra note 47 note 47 at Art. 34(2)(a)(iii); New York Convention, supra note 50 note 50 at

52

Art. V. 53

Sec. 6(1), The Arbitration Act, 1996; Booz Allen & Hamilton note 41. Hamilton Inc., supra note 41.

54

Bernard Hanotiau, L’arbitrabilite L’arbitrabilite,, in R ECUEIL DES C OURS OURS – C OLLECTED OLLECTED C OURSES OURSES OF THE H AGUE ACADEMY OF I NTERNATIONAL L AW 165 (2002). 55

Fulham Football Club, supra note 39; St. Pierre v. Chriscan Enterprises Ltd .,., 2011 BCCA 97

(CanLII).



24 Page 12 of 24

B. The determination of whether the directors acted in bad faith is within the scope of the

arbitration clause. 56

It is submitted that an arbitral tribunal is competent to determine its own jurisdiction. The tribunal must base its decision with respect to its jurisdiction on the interpretation of words in the arbitration agreement and the intention of the parties in light of the law governing the 57

arbitration agreement. Further, to limit possible conflicts as to whether a matter falls under the arbitration clause, arbitral tribunals must interpret arbitration clauses as widely as 58

possible.

In the instant case, the arbitration clause allows for ‘all disputes relating to this agreement’ to be referred for arbitration. It is submitted that general words such as disputes encompass a 59

wide jurisdiction with regard to the particular agreement in question. Further, the use of the phrase relating to instead of under this contract or or arising from this contract in in construction 60

of the arbitration clause further implies a wide scope of the agreement. The construction of the arbitration clause as in the instant manner has to therefore be regarded as broad 61

comprising all kind of disputes. The dispute in the instant case arose out of the SHA as the right to exercise veto in relation to the initiation of legal proceedings stems from the SHA itself. Further the SHA specifies the rights of the directors appointed by each class and therefore the dispute in the instant case is a matter in relation to the SHA and is within the scope of the arbitration agreement. It is also submitted that the arbitral tribunal must interpret the arbitration clause in favour of 62

arbitration unless specifically or impliedly barred. Therefore, interpreting the SHA in such

56

Sec. 30, Arbitration Act, 1996; R EDFERN & HUNTER , supra note 1 note 1 at 300.

57

R EDFERN note 1 at 154; Fiona Trust & Holding Corp. v. Privalov, [2007] UKHL 40. EDFERN & HUNTER , supra note 1

58

NIGEL BLACKABY, CONSTANTINE PARTASIDES, ET AL., R EDFERN EDFERN & HUNTER ON I NTERNATIONAL th ARBITRATION 2.65 (6 Edn., 2015).

59

Woolf v. Collis Removal Service, (1948) 1 KB 8; F & G Skyes (Wessex) v. Fine Fare Ltd., (1967) 1 Llyods Rep. 53, The Angelic Grace, [1995] 1 Llyods Rep. 87. 60

R USSELL note 52. USSELL ON ARBITRATION, supra note 52.

61

United Nations Conference on Trade and Development, 5.2 The Arbitration Agreement , 20 I NTERNATIONAL COMMERCIAL ARBITRATION 42 (2005).

62

note 57; B BLACKABY, PARTISIDES, ET AL., supra note 58 note 58 at 2.65. Fiona Trust , supra note 57;



24 Page 13 of 24

light, the arbitral tribunal tribunal has the jurisdiction to decide whether the directors’ acted in bad faith or violated their fiduciary duties when casting their votes on 27 December 2010 because of the construction of the SHA and because the dispute arises from SHA. a.

IF

SO, DOES THE SCOPE OF THE ARBITRAL TRIBUNAL ’S REVIEW EXTEND TO DECIDING

IF THE REASONS THE DIRECTORS GAVE FOR THEIR VOTES ARE VALID , I.E., CAN AN ARBITRAL TRIBUNAL CONSTITUTED UNDER THE

SHA DECIDE FOR ITS OWN PURPOSES

WHETHER THE GOVERNMENT ’S TERMINATION OF THE

CLA IS LAWFUL?

It is submitted that in the meeting held on 27 December, 2010, the directors appointed by the different classes of shareholders voted on whether or not Air Media should initiate legal 63

proceedings in light of the termination of the CLA. In the instant case it is necessary for the Arbitration tribunal, for its own purposes, to rule on whether the government’s termination of the contract is valid. It is submitted that to examine the culpability of the parties to the dispute, it is imperative for the tribunal to delve into whether prima facie the government’s termination of the CLA was lawful. The liability of the government can be determined only to this extent. It is submitted that if it can be shown that the termination of the CLA by the government is

prima facie valid, a nexus can be drawn and this would implicate bad faith on the Space Age and Founder directors. Further, it is submitted that to determine liability the arbitral tribunal must 64

pass an award in favour of or against the parties in question. It is pertinent to note that the tribunal in the instant case is not passing an award against the government, and therefore there is no determination of liability per se. Further, the question of enforcement does not arise in such a case and the government is not bound by the decision of the tribunal. The validity of the termination by the government is determined for the sole purpose of the main dispute in question itself and is therefore lawful. i.

I f so, is the government’s termi termi nation of the CL CL A l awful under under th e law applicable applicable to the CL CL A?

63

Pg. 17, Factsheet.

64

Thakkar Vithalbhai Hargovind & Anr. v. Kachhia Jagjivan Motilal rep. by Bai Kasi, (1969) 10 GLR

228.



24 Page 14 of 24 65

In the instant case, Arberian Laws, i.e., the laws of India govern the CLA. It is submitted that the government’s termination was lawful under lawful under the applicable law because the government made a policy decision contract in light of public policy concerns. (A) and the termination was valid under the CLA. (B)

A. The government could validly terminate the contract in light of public policy concerns. It is submitted that to give effect to the terms of a contract, no entity may override the interests of 66

the general public and the country itself.

It is submitted that orbital slots and government satellites are a precious national resource. In the instant case, the Government of Arberia took a sovereign policy decision regarding the allotment of Space Band capacity taking into consideration the country’s strategic requirements and

defence needs67 after consulting all concerned Ministries and Departments of the Government.68 It is submitted that the fulfilment strategic and defence needs are imperative to public interest. In this light the government refused to allot the same to Kosmix. It is also pertinent to consider that the circumstances in 2011 were characterised by political 69

instability and rampant corruption. In such a scenario it is the duty of the government to reinstate stability in the country. The CLA was terminated by the government in order to fulfil this duty and was therefore in public interest. interest. The government also took into consideration that it was economically unfeasible for the public exchequer to lease the S-band capacity in the manner provided under the CLA with respect to both satellites. The loss of revenue due to the CLA was extremely high. Therefore keeping in mind the interests of the public at large, it was necessary that the CLA be terminated. It is also submitted that it was unclear whether Air Media had received governmental and regulatory approvals to conduct its business or a terrestrial broadcasting license or if it had

65

Article 10, CLA, Pg. 5, Factsheet.

66

Section 2(g), Indian Contract Act, Act No. 9 of 1872.

67

Pg. 9, Factsheet.

68

Pg. 9, Factsheet.

69

Pg. 11, Factsheet.



24 Page 15 of 24

rightly represented ownership over the intellectual property of all technology employed by it. In the absence of such licenses and possible misrepresentation Air Media could not operate its technology and therefore could not have performed its contractual obligations.

The necessary approvals were to be taken by Air Media. It is submitted that a contract cannot have any term which is contravention of government 70

policy. In the instant case, the responsibility for obtaining the necessary licenses to offer a service in a particular territory lies on the party which had taken the capacity on lease, i.e., Air 71

Media. Therefore, this burden cannot be shifted to Kosmix under any agreement because this 72

would be in contravention of government policy.

In arguendo, the existence of such a term in the SatCom Implementation Policy increases the burden on Air Media to ensure that the necessary approvals were obtained.. B. The Contract can be terminated validly under the CLA. It is submitted that under Article 8 of the CLA, Kosmix could terminate the CLA “ for convenience” in the event “it is unable to obtain the necessary frequency and orbital slot

coordination approval on or before the pre-shipment review of the particular satellite .” Further, under Article 9 of the CLA, force majeure was defined as the occurrence of an event entirely outside the parties’ control including “acts of or failure to act by any governmental authority,

acting in its sovereign capacity” and “changes in law and regulations”. It is submitted that in the instant case the government policies with regard to allocation of spectrum have undergone a change and the Government of Arberia has taken a policy decision not to provide Kosmix an orbit slot including for those which are the subject matter of existing contractual obligations for S-band. In light of this change in government policy, Article 9 of the CLA stands invoked. Thus the CLA stood suspended on such a decision of the government on 5 January, 2011. Further, since this

70

v. Reliance Industries Reliance Natural Resources Resources Limited v. Industries Limited, (2010) 7 SCC 1.

71

Article 2.5.6, SatCom Policy, Pg. 22, Factsheet.

72

note 70. Reliance, supra note 70.



24 Page 16 of 24 73

was an announcement made by the law minister to the public via various means of press , there was no requirement of notification of this policy change to be sent by either party. As a result of the government’s decision, K osmix osmix was refused the allocation of an orbital slot. Within twenty days of such an announcement, on 25 January, 2011, Kosmix sent a termination letter to AirMedia invoking Article 8 because they had failed to receive the required orbital slot. Such termination is valid as it is in accordance with Article 8 of the CLA. Therefore the termination of the CLA is lawful in light of the operation op eration of Article 8 and 9. ii.

I f the government’s term term in ation of the CLA is lawfu l, does does thi s by itse itself prove that th e fou nder nder dir ectors and/or th e spac space e age age dir ectors viol viol ated ated their fi duciary du ties or acted acted in bad faith or otherwise breached breached the SH SH A un der der the law applicable to the sha? I f n ot, do do additi additi onal f acts prove the clai clai m?

It is submitted that in the instant case, the validity of the termination of the CLA would p rove that the Space Age and Founder directors acted in bad faith. Air Media made several misrepresentations as to the intellectual property rights of the technology and having obtained necessary licenses. 74

In light of such violations of the CLA and the government policy itself , and the termination clauses under the CLA, no reasonable man would have sought it beneficial to the interests of the company to initiate legal proceedings against Kosmix. It is also submitted that to determine whether a director is acting in bad faith, it is important to consider if the purpose of the act of the director is held to have been an improper one, it 75

does not matter that the directors d irectors bona fide thought it was in the interests of the company. It is clear from the minutes on record from the meeting held by the Space Age Board of directors on 18 December 2010 that the Space Age directors at Air Media were only opposing Blue Sky in order to further the interests of Space Age and not of Air Media. Space Age wished to dominate Air Media and take over the technology. One of the cost effective

73

Pg. 12, Factsheet.

74

Article 2.5.2., SatCom Policy, Pg. 22, Factsheet.

75

Howard Smith Ltd. Ltd. v. Ampol Petroleum Ltd. Ltd., (1974) AC 821. -MEMORIAL ON BEHALF OF THE CLAIMANT-


24 Page 17 of 24

avenues do achieve this was to drive Blue Sky out of the company, thus opposing every decision or opinion raised by them. Thus it is clear that the directors were acting in bad faith. iii.

ernment’s termi Al ter ter nati vely, vely, if th e gov termi nati on of th e CL A i s un lawf ul , doe does thi s prove by itse itself that th e blu e sky dir ectors viol viol ated ated their f idu ciary duti es or acted acted in bad faith or otherwi se breached breached the SH SH A un der der th e law appli appli cable cable to the SH SH A?

I f n ot, do do

addition al facts pr pr ove the claim?

It is submitted that the invalidity of the termination of the CLA does not in any manner signify that the Blue Sky directors violated their duties or acted in bad faith in the meeting held on 27 December, 2010. It is submitted that the determination of the validity of termination only shows that the government was not justified in its actions and Kosmix wrongfully terminated the contract. No other inferences can be drawn from such termination. Further, the rationale behind the vehement opposition to the initiation of legal proceedings or correspondence with Kosmix was in light of the fact that it appeared that the Air Media management had withheld material facts from the board and the shareholders. It is pertinent to note that it appeared as though gross violations had been committed by Air Media, wherein, it did not hold all of the necessary intellectual property rights for the technology and had not received the necessary necessary licenses for the terrestrial network. Although neither was a ground for Kosmix to terminate the CLA, per se, it strengthened the Government’s decision to terminate terminate the contract. In light of this, it was ill advised to commence legal proceedings against Kosmix. Instead, it would be in the better interests of Air Media to negotiate a full reimbursement of Air Media’s payments to Kosmix. The Blue Sky directors were therefore acting in good faith and in the best interests of the members and employees of Air Media and cannot be imputed with mala fide intention in light of the invalidity of the termination of the C LA.

I V.

UNDER

THE

LAW

APPLICABLE

TO

THE

SHA,

ARE

THE

DECISIONS TAKEN AT THE 27 DECEMBER 2010 MEETING VALID?



24 Page 18 of 24

In the instant case, there were four decisions taken at the meeting namely: (A) Putting the draft ordinary resolution regarding legal proceedings to vote; (B) approval of the initiation of legal proceedings in the name of Air Media; (C) Refusal to vote on the voluntary winding up of the company; and (D) the differing interpretation of Class A shareholder’s rights shareholder’s rights to require Class C to vote along with them in matters of winding up.

A.

The meeting had been convened only for the purpose of discussing the proposition to initiate legal proceedings.

In the instant case, the meeting held on 27 December, 2011 was in continuation of the meeting held on 24 December, 2011. The minutes of the first meeting show that the deliberations did not lead to a concrete decision. It is pertinent to note that the minutes record that all that the directors agreed on was that they needed to consider the matter further and possibly take legal advice and 76

that no decision was taken and the board agreed to reconvene for further consideration. The usage of terms like “take into consideration” and “ possibly” indicate a certain ambiguity and 77

lack of an intention to actually put anything to vote. Therefore the meeting had to have been held on the 27 to discuss this proposition further. However, there was no further deliberation on the matter and no legal advice was taken and three days later the matter was simply put to vote. It is contended further that if voting was to be undertaken during the meeting on the matter, the 78

same should have been indicated explicitly, so as to ensure lawful corporate assembly. This decision was therefore invalid. Moreover, during the meeting on the 27, taking undue advantage of the procedure of conflict resolution, the question of whether the meeting was for the purpose of voting was put to vote, and passed by simple majority. This was done despite Blue Sky’s Sky’s objections. It is therefore submitted that the conduct of the directors and the actions of the board were oppressive and malafide. For actions of the Board to be considered as oppressive, the affairs of the company must be conducted in a manner that is oppressive and prejudicial to the interests of a group of 76

Pg. 16, Factsheet.

77

Shri Bakul Oil Industries v. State of Gujarat , (1987) 1 SCC 31; Gopi Kishen v. Gopi Kishen and Others, (57) P.L.R. 1915. 78

Staple of England (Mayor of Manchester) v. Governor and Company of Bank of England , (1887) 21

QBD 160.



24 Page 19 of 24 79

members, and the interests of the company. These actions need to be a visible departure from 80

the standards of fair dealing and fair play, on which every member is entitled to rely. Failure to observe due procedure while taking company decisions, to the detriment of a certain class of 81

shareholders has been held to be oppressive. Therefore, the enforcement of voting procedure despite the lack of indication that the meeting would be for voting clearly took into consideration the interests of Class B and C alone and hence, can be construed to be oppressive and invalid. B. The decision by the Board to commence arbitration proceedings against Kosmix is invalid

and in violation of the SHA. It is submitted that in the instant case the draft resolution authorising the MD to initiate legal proceedings in the name of Air Media was invalid because the meeting had not been b een convened to vote on the initiation of legal proceedings but only to discuss it (a); their affirmative vote was necessary for the initiation of such proceedings which they refused to give (b) and because was against the best interests of the company to actually initiate such proceedings (c).

(a) As has already been established, the meeting convened on 27 December, 201o was never held to vote on the initiation initiation of legal proceedings. In the instant case, the other classes of shareholders took undue advantage of the procedure for conflict resolution and such actions were malafide and oppressive.

(b) Under the SHA, Blue Sky Directors had the right to veto the initiation of legal proceedings. As has been established earlier, this right is valid and enforceable. It is submitted that a veto is the refusal of assent of the executive officer whose assent is 82

necessary to perfect a law.

79 80

An opposition to a proposal indicates an intention to not

Companies Act, 2013, supra note 15, note 15, at at Sec. 241.

Shanti Prasad Jain v. Kalinga Tubes Ltd., AIR 1965 SC 1535; Elder v. Elder & Watson Ltd., 1952 SC

49 (Scotland). 81

Harmer Ltd., re, (1959) 1 WLR 62.

82

Black’s Law Black’s Law Dictionary 109 (6 th Edn., 2012).



24 Page 20 of 24 83

allow for the same to be realized, which is also the motive behind a veto. In the present case, all the statements made by Blue Sky’s Sky’s director, coupled with their vehement objections against the initiation of legal proceedings may be construed to be a veto against the commencement of legal proceedings. Furthermore, it is only just and equitable if the conduct of Blue Sky’s directors, Sky’s directors, and the rationale behind it, is taken into consideration, as opposed to the lack of an express statement using the words “veto”. It “veto”. It is clear from their conduct that they believed that they were invoking their right enshrined in the SHA whilst opposing the resolution.

(c) Furthermore, it is submitted that it is the directors’ fiduciary directors’ fiduciary duty to act in the interests of 84

the company. By choosing to commence arbitration against Kosmix, the directors are derogating from their duties because as has been proven above, since the termination of the CLA is valid, Air Media is unlikely to regain its complete investment in the spectrum. This financial loss need not be compounded compoun ded by the costs of arbitration.

C. The refusal of the members to discuss Blue Sky’s resolution for the winding up of Air Media is

an invalid decision. In the instant case, the Class A shareholders invoked their statutory rights as members of the company and as is corollary to Article 1 of the SHA, to table a special resolution for winding up of Air Media. They made this proposal under the Agenda of ‘Other Business Business Items’. However, Items’. However, the other shareholders refused to either deliberate up on it or vote on the matter, because Blue Sky had not given any notice regarding the matter.

It is submitted that such a decision was invalid in light of the doctrine of substantial compliance. The doctrine of substantial compliance states that there must be actual compliance in respect to the substance essential to every reasonable objective of the statute and the court should

83

BOYLE & BIRDS’ COMPANY LAW 67 (John Birds, Eilin Ferran, Charlotte Villiers eds., 3 rd Edn., 1997).

84

Companies Act, 2013, supra note 15, note 15, at at Sec. 166; Bristol and West Building Building Society v. Matthew, [1998] Ch1.



24 Page 21 of 24

determine whether the statute has been followed sufficiently so as to carry out the intent of the statute and accomplish the reasonable objectives for which it was passed, even if formal 85

procedural requirements are dispensed with. With regards to the meetings held amongst members and the board in a company, the purpose of issuing a notice in advance is to ensure that each member entitled to attend the meeting is present, and is aware of all the pertinent facts 86

87

regarding the situation, i.e. corporate assembly. In the instant case, all directors were present for the meeting and were well are of the circumstances that had arisen in light of the misrepresentations made by Air Media and the termination of the CLA.

Furthermore, this doctrine is often invoked during matters of great necessity and urgency.

88

Courts have often granted a suspension of formal procedure in lieu of maintaining the balance of 89

convenience, as long as the best interests of the company are met. In the event that the time consuming procedure as stipulated were to be followed, the more likely it is for the members’ accounts to be frozen and for the scandal surrounding the situation to perpetuate. Therefore, since the essence of the statute has been upheld, and the requirement of urgency is met, a notice regarding the winding up is not strictly necessary. Therefore the decision of the board to refuse to even discuss it, was invalid.

D. Blue Sky’s interpretation of the SHA is accurate and Class C must vote along with Class A. While the rest of the directors refused to table Blue Sky’s Sky’s proposal for voluntary winding up, Space Age’s Age’s directors stated that Blue Sky was misinterpreting its rights under the SHA, whereby it may ask the founders to vote along with them on this matter. However, the SHA

85

Commissioner of Central Excise, New Delhi v. Hari Chand Shri Shri Gopal & Ors. (2011) 1 SCC 236.

86

Parsuram v. Tata Industrial Bank Ltd. , AIR 1928 PC 180; European Home Products PLC, re, 1988 BCLC 690; Abnash Kaur v. Lord Krishna Sugar Mills Ltd., (1974) 44 Comp Cas 390 (Del); Suresh Chandra Marwaha v. Lauls Pvt. Ltd., (1978) 48 Comp Cas 110 (P&H); Joginder Singh Palta v. Time Travels Pvt. Ltd., (1984) 56 Comp Cas 103 (Cal); Bentley-Stevens v. Jones, (1974) 1 WLR 638; C.R. Priyachandra Kumar Kumar v. Purasawalkam Permanent Permanent Fund Ltd. Ltd., (1995) 83 Comp Cas 150 (Mad). 87

note 78. Staple of England , supra note 78.

88

J. Mohapatra & Co. Co. & Anr. v.State of Orissa & Anr., (1984) 4 SCC 103.

89

M/S Gujarat M/S Gujarat Bottling Co.Ltd. & Ors v The Coca Cola Co. & Ors, (1995) 5 SCC 545. -MEMORIAL ON BEHALF OF THE CLAIMANT-


24 Page 22 of 24

clearly lays down that ‘Class A shareholders had the right to require that the Class C

shareholders vote along with it on any matter relating to winding up of the company.”, ”, which clearly indicates that if Blue Sky were to vote in favour of winding up Air Media, the Founding Shareholders’ Shareholders’ must also vote in the exact same manner.

It is submitted that such clauses, as are contained in the second right of Article 1, are a common occurrence in pooling agreements, which dictate the method in which certain votes must be 90

given, in matters such as the election of directors, management decisions and the winding up 91

and dissolution of companies. Furthermore, the phrasing such as “require to “require to vote along with” have been interpreted as mandatory clauses where votes are exercised in accordance with the wishes of the holder of the right.

92

Therefore, to say that blue Sky has misinterpreted its rights under the SHA is erroneous, because the right prima facie implies that Class C must vote in the same manner as Class A. Furthermore, similar rights have been recognized and granted enforcement. Therefore, this decision was also invalid.

a.

IF NOT, WHAT REMEDIES ARE WITHIN THE POWER OF POWER OF THE ARBITRAL TRIBUNAL TO ORDER SPECIFICALLY, CAN THE ARBITRAL TRIBUNAL ORDER AIR MEDIA TO WITHDRAW ITS NOTICE OF ARBITRATION UNDER THE UNDER THE CLA?

It is submitted that the arbitral tribunal has within its power to pass an award it deems necessary 93

in the interest of equity and justice. An arbitral tribunal is only barred from adjudicating on 94

criminal matters or charging fines under law and is treated and par with courts in civil

90

note 35. Rolta India, supra note 35.

91

Hodge O’Neal, supra note 16. note 16.

92

note 37. Madhu Ashok Kapur Kapur , supra note 37.

93

Award made in arbitration in equity, Dec. 11, 1963 under under the auspices of the International Chamber of Commerce (unpublished), No. 1279; J ALAL EL-AHDAB, ARBITRATION WITH THE ARAB COUNTRIES 411 (2011). 94

note 41. Booz Allen and Hamilton Hamilton, supra note 41.



24 Page 23 of 24

95

matters. In the instant case, the tribunal can order withdrawal of the arbitration notice in respect of the CLA because the termination of the CLA was valid, as has been established earlier. It is submitted that arbitration is initiated in the event that a dispute arises between the concerned parties.

96

97

Therefore in the absence of any dispute no cause for arbitration arises and such

notice was wrongly sent and should be withdrawn as there is no merit in the th e arbitration.

Moreover, it is submitted that with regard to the monetary reimbursement on the termination as stipulated in the contract, Kosmix has already invited negotiations. Therefore no further for arbitration arises. Further, it is pertinent to note that the arbitration with respect was in its preliminary stages wherein the other party had not even responded to the notice of arbitration. Therefore withdrawal of such a notice shall not impute any additional cost on either party and the arbitral tribunal can order the withdrawal or arbitration notice.

i.

WHI CH L AW GOVERNS GOVERNS THI S QUESTI QUESTI ON?

The powers of an arbitral tribunal and the scope its jurisdiction are determined by the law governing the arbitration agreement, which as has been establishes in the instant case is English Law. It is also important to take into consideration the laws of the place of enforcement of the arbitral award, i.e., Arberia. Therefore Part II of the Indian Arbitration and Conciliation Act and Parts of Part I of the Act, which are not in conflict with English law, along with the England’s Arbitration Act of 1996 shall govern this question.

98

95

Executive Engineer, Dhenkanal Dhenkanal Minor Irrigiation Irrigiation Division I v. N.C. Budharaj, (2001) 2 SCC 721.

96

Article 10, CLA, Pg. 5, Factsheet.

97

Deutsche Post Bank Home Home Finance Ltd. v. Taduri Sridhar, (2011) 11 SCC 375.

98

Bharat Aluminium Co. v. Kaiser Aluminium Technical Technical Services Inc., 2016 (1) ARB LR 424 (SC). -MEMORIAL ON BEHALF OF THE CLAIMANT-

-PRAYER -

24 Page 24 of 24

PRAYER

I N

THE LIGHT OF THE FACTS STATED , ISSUES RAISED , AUTHORITIES CITED AND ARGUMENTS

ADVANCED THE

COUNSEL FOR THE CLAIMANT RESPECTFULLY REQUESTS THE TRIBUNAL TO :

(1) HOLD THAT THE SHA IS VALID AND ENFORCEABLE AND ORDER SPECIFIC PERFORMANCE OF THE SAME .

(2) HOLD THAT THE ARBITRATION AGREEMENT IN THE SHA IS VALID . (3) DECLARE THAT, IN THE CIRCUMSTANCES THAT AROSE , THE TERMINATION OF THE OSMIX LTD. TO CLA BY THE GOVERNMENT OF ARBERIA IS LAWFUL AND DIRECT K OSMIX REIMBURSE THE ENTIRE AMOUNT PAID BY

AIR MEDIA PVT. LTD.

(4) HOLD THAT THE DECISIONS TAKEN AT THE MEETING HELD ON 27 DECEMBER 2010 ARE INVALID AND ORDER

AIR MEDIA TO WITHDRAW ITS NOTICE OF ARBITRATION UNDER

THE CLA.

A ND

PASS SUCH OTHER ORDER OR ORDERS AS THE

HON’BLE TRIBUNAL

MAY DEEM FIT IN THE

INTEREST OF JUSTICE , EQUITY AND GOOD CONSCIENCE .

ALL OF WHICH IS HUMBLY PRAYED .

SD/- COUNSEL FOR CLAIMANT


Claimant Memorial - NLS Int. Arbi. Moot, 2016

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