Foreign Arbitral Awards in Indian Law: An Overview of the Provision in the Arbitration and Conciliation Act
With the expansion of international trade in recent years, the business world has been increasingly reluctant to litigate in courts of law for differences arising from international commercial transactions. Ability to communicate and commute with distant places with the utmost speed enables a merchant today, in a few minutes or hours, to conclude a contract abroad which a generation ago would have taken weeks or months. When, however, it becomes necessary to resort to the machinery of justice to settle a dispute connected with that contract, to enforce a judgment in another country is still a complicated, time-consuming and expensive operation. It is not surprising, therefore, that businessmen have been turning with increasing frequency to arbitration as a quicker and simpler means of settling international commercial disputes.
There has been a noticeable movement in favor of arbitration. Arbitration facilities and institutions have increased. The favorable trend towards arbitration has been reflected also in legislative enactments, international treaties, and other measures by which arbitration has gradually acquired a more solid legal standing.
India today is very much important part of the global economy. The ever-increasing level of globalization has led to raise international business disputes too. In this context, the enforcement of foreign judgment and foreign Arbitral Awards becomes significant. A foreign judgment may be enforced in India by (i) proceedings in execution and (ii) by a suit upon it, CPC, 1908. An arbitral award is a determination on the merits by an arbitration tribunal in arbitration, and is analogous to a judgment in a court of law. Arbitration is particularly popular as a means of dispute resolution in the commercial sphere. One of the reasons for doing so is that, in international trade, it is often easier to enforce an arbitration award in a foreign country than it is to enforce a judgment of the court. The enforcement of foreign arbitration awards is governed by the Arbitration and Conciliation Act, 1996 through New York Convention and Geneva Convention and a Non-conventional award will be enforceable in India under the common law grounds of justice, equity and good conscience.
B. The ‘Old’ Law
Prior to January 1996, the law of enforcement of arbitration awards in India was spread between three enactments. Enforcement of domestic awards was dealt with under a 1940 Act. Enforcement of foreign awards was divided between two statutes — a 1937 Act to give effect to the Geneva Convention awards and a 1961 Act to give effect to the New York Convention awards.
The Geneva Convention
On the international level, there are numerous bilateral treaties including provisions for the enforcement of arbitral awards. As to multilateral treaties, the most significant developments since the First World War have been the Geneva Protocol on Arbitration Clauses of 1923, the Geneva Convention on the Execution of Foreign Arbitral Awards of 1927, and the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958.
The application of both treaties is limited to persons who are subject to the jurisdiction of different contracting states. Under the Protocol, an arbitration agreement relating to existing or future differences is recognized as valid, that is, irrevocable. The agreement may relate to any matter capable of settlement by arbitration, but the contracting states may limit their obligations to commercial contracts. If a suit is brought despite the arbitration agreement, courts are required to refer the parties to the arbitrators, except where the agreement or the arbitration cannot proceed or has become inoperative. The Convention is supplementary to the Protocol in that it applies to awards made pursuant to arbitration agreements covered by the Protocol. Only states parties to the Protocol may become parties to the Convention. Each contracting state is required to recognize as binding and to enforce, in accordance with the procedure of the forum, awards rendered in the territory of another contracting state, on the following conditions:
· the award was rendered pursuant to arbitration agreement valid under the law applicable to the agreement;
· The object of the award is capable of settlement by arbitration under the law of the country of the forum;
· The award was rendered by the arbitral tribunal provided in the arbitration agreement or constituted as agreed by the parties and in conformity with the law governing the arbitration procedure;
· The award has become final and no proceedings are pending for the purpose of contesting the validity of the award. An award still subject to opposition or appeal or the equivalent is not regarded as final;
· The recognition or enforcement of the award would not be contrary to public policy or the "principle of the law" of the forum.
Even where these conditions have been met, recognition and enforcement of the award must still be refused, if the court finds that
(a) The award has been annulled in the country where it was rendered; or
(b) The party against whom the award has been invoked did not have sufficient notice, or being under a legal incapacity, was not properly represented; or
(c) The award deals with a dispute not included under the terms of the agreement, or the award goes beyond the scope of the agreement. Furthermore, a court may refuse enforcement or give the losing party reasonable time to seek annulment if that party proves that under the law of the country where the arbitration took place, there is a ground (other than those specified in the Convention) to contest the validity of the award in a court of law.
The Geneva treaties have been criticized for legal and practical reasons:
a) There is some ambiguity in the expression “subject to the jurisdiction of different Contracting States,” which defines the scope of application of the treaties. It is not clear whether it means subject to the sovereignty of a state in the sense of nationality, or subject to the jurisdiction of the courts of a state by reason of residence, domicile, or other criteria.
b) It has also been observed that a plaintiff seeking enforcement in one country would find it particularly difficult to prove that the arbitral tribunal was constituted in conformity with the law of another country and that the award has become final in that country.
c) Finally, the possibility of contesting the validity of an award on grounds other than those listed in the Convention has been regarded as making it too easy for a recalcitrant defendant to avoid the enforcement of an award by resorting to obstructionist tactics.
This state of affairs prompted the International Chamber of Commerce, which had originally taken the initiative leading to the Geneva Convention, to submit to the United Nations Economic and Social Council a proposal for a new convention on the enforcement of international arbitral awards. In the opinion of the ICC the main defect of the Geneva Convention was the condition that, to be enforced, an arbitral award must be “strictly in accordance with the rules of procedure laid down in the law of the country where arbitration took place.” In order to meet the requirements of international trade, the ICC advocated the idea of an ‘international award, i.e., an award completely independent of national laws, and suggested that arbitral awards based on the will of the parties should be automatically enforceable. The ICC draft sought to attain this purpose mainly by widening the scope of application and providing that, as a condition for enforcement, the composition of the arbitral authority and the arbitral procedure must be in accordance with the agreement of the parties. Only in the absence of such agreement, must they conform to the law of the country where arbitration took place. The other conditions for enforcement in the ICC draft did not differ greatly from those of the Geneva Convention, except for the omission of the requirement of finality of awards, regarded by the ICC as encouraging dilatory measures.
THE NEW YORK CONVENTION
The United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards
The Convention on the Recognition and Enforcement of Foreign Arbitral Awards aims to facilitate the recognition and enforcement of arbitral awards generally between private parties. It succeeds the 1927 Geneva Convention on the Execution of Foreign Arbitral Awards and the 1923 Geneva Protocol on Arbitration Clauses (which also provided for reciprocal recognition and enforcement abroad of certain arbitration agreements and awards, but had serious shortcomings).
It is described as the most successful treaty in private international law and is adhered to by more than 140 nations. The Convention was established as a result of dissatisfaction with the Geneva Protocol on Arbitration Clauses of 1923 and the Geneva Convention on the Execution of Foreign Arbitral Awards of 1927. These conventions suffered from certain shortcomings. For example, they excluded from their application awards rendered in a state not a party to the Geneva Convention, and required orders enforcing the award in the country where the award was rendered as well as the enforcing country. They also placed the burden of proof on the party seeking to enforce the award, while at the same time making it all too easy for a recalcitrant defendant to avoid enforcement by resorting to delaying tactics. The New York Convention sought to remedy these problems.
The initiative to replace the Geneva treaties came from the International Chamber of Commerce (ICC), which issued a preliminary draft convention in 1953. The ICC’s initiative was taken over by the United Nations Economic and Social Council, which produced an amended draft convention in 1955. That draft was discussed during a conference at the United Nations Headquarters in May-June 1958, which led to the establishment of the New York Convention.
The following briefly describes the two basic actions contemplated by the New York Convention:
a) The recognition and enforcement of foreign arbitral awards, i.e., arbitral awards made in the territory of another State: This field of application is defined in article I. The general obligation for the Contracting States to recognize such awards as binding and to enforce them in accordance with their rules of procedure is laid down in article III. A party seeking enforcement of a foreign award needs to supply to the court: (a) the arbitral award; and (b) the arbitration agreement (article IV). The party against whom enforcement is sought can object to the enforcement by submitting proof of one of the grounds for refusal of enforcement which are imitatively listed in article V, paragraph 1. The court may on its own motion refuse enforcement for reasons of public policy as provided in article V, paragraph 2. If the award is subject to an action for setting aside in the country in which, or under the law of which, it is made (“the country of origin”), the foreign court before which enforcement of the award is sought may adjourn its decision on enforcement (article VI). Finally, if a party seeking enforcement prefers to base its request for enforcement on the court’s domestic law on enforcement of foreign awards or bilateral or other multilateral treaties in force in the country where it seeks enforcement, it is allowed to do so by virtue of the so called more-favorable-right-provision of article VII, paragraph 1.
b) The referral by a court to arbitration: Article II, paragraph 3, provides that a court of a Contracting State, when seized of a matter in respect of which the parties have made an arbitration agreement, must, at the request of one of the parties, refer them to arbitration.
The influence of the New York Convention on the development of international commercial arbitration has been phenomenal. The New York Convention solidified two essential pillars of the legal framework by providing for the obligatory referral by a national court to arbitration in the event of a valid arbitration agreement and for the enforcement of the arbitral award. The New York Convention is probably the main reason why arbitration is the preferred method for the resolution of international business disputes.
The New York Convention applies to all arbitral awards rendered pursuant to a written arbitration agreement in a country other than the state of enforcement. The New York Convention also applies to arbitral awards not considered as domestic awards by the enforcing state. The term ‘arbitral award’ is not defined, but includes awards made by ad hoc tribunals as well as permanent arbitral tribunals. The nationality of the parties is irrelevant for purposes of the convention. Under Article I (3), contracting states can choose to limit the application of the convention to arbitral awards rendered in another contracting state or to awards relating to commercial disputes.
In order to obtain recognition and enforcement of an arbitral award under the New York Convention, a party has only to supply the enforcing court with a certified copy of the arbitral award and the arbitration agreement. If an arbitral award is encompassed by the New York Convention, contracting states must recognize the award as binding and enforce it in accordance with local rules of procedure. They may not impose more onerous conditions, higher fees, or charges on the recognition or enforcement of the award than prevail with respect to domestic arbitral awards.
If a party objects to enforcement, it has the burden of proving that the award should not be enforced. The objecting party must argue from Article V (1) which provides a list of grounds for refusing enforcement:
a) Invalidity of the arbitration agreement;
b) Violation of due process;
c) Excess by arbitrator of his authority;
d) Irregularity in the composition of the arbitral tribunal or in the arbitral procedure; and
e) Award not binding, suspended or set aside in the country of origin.
Additionally, the court can refuse to enforce the award under Article V (2) if its subject matter is incapable of settlement by arbitration under the enforcing country's laws or if recognition or enforcement of the award would violate the enforcing country's public policy.
As the Geneva Convention became virtually otiose (by reason of Art VII of the New York Convention), enforcement of foreign awards, for all practical purposes, came under the 1961 Act and domestic awards came under the 1940 Act. The enforcement regime between these two statutes was, however, quite distinct. The 1961 Act confined challenge to an arbitral award only on the limited grounds permitted under the New York Convention.
C. THE NEW REGIME
In January 1996, India enacted a new Arbitration Act. This Act repealed all the three previous statutes (the 1937 Act, the 1961 Act and the 1940 Act).The new Act has two significant parts. Part I provides for any arbitration conducted in India and enforcement of awards there under. Part II provides for enforcement of foreign awards. Any arbitration conducted in India or enforcement of award there under (whether domestic or international) is governed by Part I, while enforcement of any foreign award to which the New York Convention or the Geneva Convention applies, is governed by Part II of the Act.
FOREIGN ARBITRAL AWARDS IN INDIAN LAW:
An Overview of the Provisions in the Arbitration and Conciliation Act
This is covered by Part II of the 1996 Act, though due to a recent Supreme Court decision, the distinction between the grounds and procedures in Part I and Part II has got blurred. The provisions of Part II of the Act give effect to the New York Convention and the Geneva Convention.
1. Foreign Award Defined
In order to be considered as a foreign award (for the purposes of the Act), the same must fulfill two requirements. First it must deal with differences arising out of a legal relationship (whether contractual or not) considered as commercial under the laws in force in India. The expression ‘commercial relationship’ has been very widely interpreted by Indian courts. The Supreme Court in the case of RM Investments Trading Co Pvt. Ltd v Boeing Co & Anor, while construing the expression ‘commercial relationship’, held:
“The term ‘commercial’ should be given a wide interpretation so as to cover matters arising from all relationships of a commercial nature, whether contractual or not. The second requirement is more significant and that is that the country where the award has been issued must be a country notified by the Indian government to be a country to which the New York Convention applies.”
The second requirement is more significant and that is that the country where the award has been issued must be a country notified by the Indian government to be a country to which the New York Convention applies. Only a few countries have been notified so far and only awards rendered therein are recognized as foreign awards and enforceable as such in India.
An interesting issue came up before the Supreme Court as to what would happen in a case where a country has been notified but subsequently it divides or disintegrates into separate political entities. This came up for consideration in the case of Transocean Shipping Agency Pvt. Ltd v Black Sea Shipping & Ors. Here the venue of arbitration was Ukraine which was then a part of the USSR — a country recognized and notified by the Government of India as one to which the New York Convention would apply. However, by the time disputes arose between the parties the USSR had disintegrated and the dispute came to be arbitrated in Ukraine (which was not notified). The question arose whether an award rendered in Ukraine would be enforceable in India notwithstanding the fact that it was not a notified country.
Both the High Court of Bombay (where the matter came up initially) and the Supreme Court of India in appeal, held that the creation of a new political entity would not make any difference to the enforceability of the award rendered in a territory which was initially a part of a notified territory. On this basis the court recognized and upheld the award. This decision is of considerable significance as it expands the lists of countries notified by the government by bringing in a host of new political entities and giving them recognition in their new avatar also. At another level the judgment demonstrates the willingness of Indian courts to overcome technicalities and lean in favor of enforcement.
2. Comparison with Domestic Enforcement Regime
There are two fundamental differences between enforcement of a foreign award and a domestic award. A domestic award does not require any application for enforcement. Once objections (if any) are rejected, the award is by itself capable of execution as a decree. A foreign award, however, is required to go through an enforcement procedure. The party seeking enforcement has to make an application for the said purpose. Once the court is satisfied that the foreign award is enforceable, the award becomes a decree of the court and executable as such. The other difference between the domestic and foreign regime is that (unlike for domestic awards) there is no provision to set aside a foreign award. In relation to a foreign award, the Indian courts may only enforce it or refuse to enforce it — they cannot set it aside. This ‘lacuna’ was sought to be plugged by the Supreme Court in the recent decision of Venture Global where the Court held that it is permissible to set aside a foreign award in India applying the provisions of s 34 of Part I of the Act.
3. Conditions for Enforcement
The conditions for enforcement of a foreign award are as per the New York Convention. The only addition being an ‘Explanation’ to the ground of public policy which states that an award shall be deemed to be in conflict with the public policy of India if it was induced or affected by fraud or corruption.
Indian courts have narrowly construed the ground of public policy in relation to foreign awards. In Renu Sagar Power Co v General Electrical Corp , the Supreme Court construed the expression ‘public policy’ in relation to foreign awards as follows:
“This would mean that ‘public policy’ in s 7(1)(b)(ii) has been used in narrower sense and in order to attract to bar of public policy the enforcement of the award must invoke something more than the violation of the law of India … Applying the said criteria it must be held that the enforcement of a foreign award would be refused on the ground that it is contrary to public policy if such enforcement would be contrary to (i) fundamental policy of Indian law; or (ii) the interests of India; or (iii) justice or morality.”
4. Judicially Created New Procedure and New Ground for
Challenge to Foreign Award
As noticed above, there is no statutory provision to set aside a foreign award under the 1996 Act. Foreign awards may be set aside or suspended in the country in which or under the laws of which the award was made but there is no provision to set aside a foreign award in India. This fundamental distinction between a foreign and a domestic award has been obliterated by the Supreme Court in the recent case of Venture Global. Here, the Supreme Court was concerned with a situation where a foreign award rendered in London under the Rules of the London Court of International Arbitration (‘LCIA’) was sought to be enforced by the successful party (an Indian company) in the District Court, Michigan, United States of America (‘USA’). The dispute arose out of a joint venture agreement between the parties. The respondent alleged that the appellant had committed an ‘event of default’ under the shareholders agreement and as per the said agreement it exercised its option to purchase the appellant’s shares in the joint venture company at book value. The sole arbitrator appointed by the LCIA allowed the claim and directed the appellant to transfer its shares to the respondent. The respondent sought to enforce this award in the USA. The appellant filed a civil suit in an Indian district court seeking to set aside the award. The district court, followed by the High Court, on appeal, dismissed the suit holding that there was no such procedure envisaged under Indian law. However, the Supreme Court on appeal, extending its earlier decision in the case of Bhatia International v Bulk Trading, held that even though there was no provision in Part II of the 1996 Act providing for challenge to a foreign award, a petition to set aside the same would lie under s 34 Part I of the 1996 Act (i.e. it applied the domestic award provisions to foreign awards). The court held that the property in question (shares in an Indian company) is situated in India and necessarily Indian law would need to be followed to execute the award. In such a situation the award must be validated on the touchstone of public policy of India and the Indian public policy cannot be given a go by through the device of the award being enforced on foreign shores.
The Venture Global case is far reaching as it creates a new procedure and a new ground for challenge to a foreign award (not envisaged under the 1996 Act). The new procedure is that a person seeking to enforce a foreign award has not only to file an application for enforcement under s 48 of the 1996 Act, it has to meet an application under s 34 of the 1996 Act seeking to set aside the award. The new ground is that not only must the award pass the New York Convention grounds incorporated in s 48, it must pass the expanded ‘public policy’ ground created under s 34 of the 1996 Act. In practice, the statutorily enacted procedure for enforcement of a foreign award would be rendered superfluous till the application for setting aside the same (under s 34) is decided. The statutorily envisaged (narrow) public policy grounds for challenge to an award would also be rendered meaningless as the award would have to meet the expanded ‘public policy’ test (and virtually have to meet a challenge to the award on merits) before it can be enforced. The Venture Global case thus largely renders superfluous the statutorily envisaged mechanism for enforcement of foreign awards and replaces it with judge made law. Moreover, in so far as the judgment permits a challenge to a foreign award on the expanded interpretation of public policy it is per incuriam, as a larger, three Bench decision, in the case of Renu Sagar holds to the contrary. Further Saw Pipes(on which Venture Global relies for this proposition) had clearly confined its expanded interpretation of public policy to domestic awards alone lest it fall foul of the Renu Sagar case (which had interpreted the expression narrowly). The Supreme Court in Venture Global did not notice this self-created limitation in Saw Pipes, nor did it notice the narrow interpretation of public policy in Renu Sagar.
5. Procedural Requirements
The procedure for enforcement of arbitral awards is pretty much the same in the new Act as under the Foreign Awards (Recognition and Enforcement) Act, 1961 and the Arbitration (Protocol and Convention), Act 1937. The reason that there are no qualitative differences is because the New York Convention and the Geneva Convention themselves provide for the procedure for enforcement which are merely given statutory recognition by way of an enabling legislation and the same continues under the new Act.
a. Enforceable awards
There are several requirements for a foreign arbitral award to be enforceable under the AC Act.
(i) Commercial transaction: The award must be given in a convention country to resolve commercial disputes arising out of a legal relationship. In the case of RM Investment & Trading vs. Boeing, the Supreme Court observed that the term "commercial" should be liberally construed as having regard to manifold activities which are an integral part of international trade.
(ii) Written agreement: The Geneva Convention and the New York Convention provide that a foreign arbitral agreement must be made in writing, although it need not be worded formally or be in accordance with a particular format.
(iii) Agreement must be valid: The foreign award must be valid and arise from an enforceable commercial agreement. In the case of Khardah Company vs. Raymon & Co (India), the Supreme Court held that an arbitration clause cannot be enforceable when the agreement of which it forms an integral part is declared illegal.
(iv) Award must be unambiguous: In the case of Koch Navigation vs. Hindustan Petroleum Corp, the Supreme Court held that courts must give effect to an award that is clear, unambiguous and capable of resolution under Indian law.
A person who intends to enforce a foreign arbitral award should apply to the court and produce the following documents:
(a) Original award or copy thereof, duly authenticated in the manner required by the law of the country in which it was made.
(b) Original agreement for arbitration or a duly certified copy thereof,
(c) Such evidence as may be necessary to prove that the award is a foreign award.
(d) Translations, if necessary shall also be furnished.
b. Relevant Court
The Indian Supreme Court has accepted the principle that enforcement proceedings can be brought wherever the property of the losing party may be situated. This was in the case of Brace Transport Corp of Monrovia v Orient Middle East Lines Ltd. The court here quoted a passage from Redfern and Hunter on Law and Practice of International Commercial Arbitration, inter alia, as follows:
“A party seeking to enforce an award in an international commercial arbitration may have a choice of country in which to do so; as it is sometimes expressed, the party may be able to go forum shopping. This depends upon the location of the assets of the losing party. Since the purpose of enforcement proceedings is to try to ensure compliance with an award by the legal attachment or seizure of the defaulting party’s assets, legal proceedings of some kind are necessary to obtain title to the assets seized or their proceeds of sale. These legal proceedings must be taken in the state or states in which the property or other assets of the losing party are located.”
c. Time Limit
The 1996 Act does not prescribe any time limit within which a foreign award must be applied to be enforced. However, various High Courts have held that the period of limitation would be governed by the residual provision under the Limitation Act 1963 (No 36 of 1963), i.e. the period would be three years from the date when the right to apply for enforcement accrues. The High Court of Bombay has held that the right to apply would accrue when the award is received by the applicant.
d. Grounds for Refusal of Enforcement
Section 48 for New York convention and Section 57 for Geneva convention of the Act of 1996 lays down the grounds where the enforcement may be refused it the objector can prove one of the following grounds:
i) Incapacity: that a party to the arbitration agreement was, under the law applicable to him, under some incapacity,
ii) Invalid Arbitration Agreement: that the ‘arbitration agreement’ was invalid under the law to which the parties subjected it, or, failing any indication thereon, under the law of the country where the award was made,
iii) Due process: that a party was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings or was otherwise unable to present his case,
iv) Jurisdictional defect: that the award deals with a difference not contemplated by the terms of arbitration agreement.
v) That the composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties, or failing such agreement, with the law of the country where the arbitration took place.
vi) That the award has not yet becomes binding on the parties, or has been set aside or suspended by a competent authority of the country, in which, or under the law of which, it was made.
e. Ex officio Court Jurisdiction
The section further lays down the grounds where the court may also refuse to enforce a foreign award if it finds:
i) Non-arbitrability - That the award is in respect of a matter which is not capable of settlement by arbitration under the laws of India.
In the case of Fuerst Day Lawson ltd. V/s Jindal Export ltd, Supreme Court held that once the court determines that a foreign award is enforceable it can straightaway be executed as a decree. In other words, no other application is required to convert the judgment into a decree.
ii) Contrary to Public Policy - That the enforcement of the foreign award would be contrary to public policy of India. The violation of rules of public policy is a ground for refusal of enforcement or a ground for setting aside. Indian law does not restrict (or extend) this ground to violation of International Public Policy even where the arbitration is an international commercial arbitration. Where enforcement of a foreign award is sought in any Court in India, the rules of public policy applicable will only be the “Public Policy of India”.
In Renu sagar’s case, whilst construing the provisions of Sect. 7(1)(b)(ii) of the Foreign Awards Act (which reproduced Art. V (2) (b) of the New York Convention), the Supreme Court of India held that in order to attract the bar of public policy the enforcement of the award must involve something more than violation of Indian law; the enforcement of a foreign award would be refused on the ground that it is contrary to public policy if such enforcement was contrary “to the fundamental policy of Indian law or justice or morality”. It was held that any violation of the Foreign Exchange Regulation Act, which was enacted for the national economic interest, would be contrary to the public policy of India. The enforceability of a foreign award could not be resisted as violating the public policy of India where an award, however, directed payment of compound interest, or directed payment of compensatory damages or where the arbitral tribunal had awarded an amount higher than should have been awarded or where costs awarded by the arbitral tribunal were excessive.
In Supreme Court case of Oil & Natural Gas Corporation Ltd. vs. Saw Pipes Ltd., the definition of “public policy” in section 34 of the Act was controversially expanded such that anything which is against any Indian law is deemed to be opposed to Indian public policy. This means that any foreign awards that are subject to the application of section 34 can be challenged under wider grounds than would usually be permitted under the New York Convention alone.
f. Enforcement of Non Convention Awards
In the case of Badat & Co. Bombay V/s East India Trading Co. the Supreme Court has ruled that “such a Non-conventional award will be enforceable in India under the common law on grounds of justice, equity and good conscience.”
In case of Bhatia International V/s Bulk Trading S.A. & Anr., The Supreme Court held that “The 1996 Act nowhere provides that its provisions are not to apply to international commercial arbitrations which take place in a non-convention country.”
6 . Conclusion
Viewed in its totality India does not come across as a jurisdiction which carries anti-arbitration bias. The immediate purpose of the new Act was to comprehensively cover international commercial arbitrations and conciliation as well as domestic arbitration and conciliation; to minimize the supervisory role of courts in the arbitral process and to provide that every final arbitral award is enforced in the same manner as if it were a decree of the court and this seems to have been achieved by the express provisions of the new Act and the interpretative jurisprudence generated by the Supreme Court.
Suggestions for Improvement
While it would be unrealistic to expect the judiciary to enforce an award without vetting the arbitral process by way of nuances of the national legal system such as due process and evidentiary standards, in order to facilitate the International Arbitration process, it is important to exercise judicial restraint in scrutinizing the International arbitral awards. Where absolute arbitral finality is inimical to a rational system of ‘public policy’ as recognized by the Indian Supreme Court in several judgments and on the other hand, it is necessary for an effective international arbitral system. Balancing the conflicting claims of public policy and arbitral finality is difficult. A new and narrower definition of the term public policy is required in the era of globalization to encourage the foreign investors to carry out healthy commercial relationships in India. A globally compatible definition of ‘public policy’ should be adopted or the court should abdicate the public policy to some extent so as to ensure the edifice of International Commercial Arbitration – an arbitral award might run contrary to the public policy of India but it might not be against the public policy at the International level and might be beneficial too to that party.
Parties Must Specifically Exclude Application of Part I of the Act
Some authors have opined that until the Venture Global decision is reversed or overruled by a larger bench of the Supreme Court, parties doing business in India or elsewhere with Indian parties should include in their arbitration provision a clause specifically excluding the applicability of Part I of the 1996 Act. This should make Section 34 inapplicable to the award. Further, it is best to make this exclusion express and not rely on the Court's statement that the exclusion can be implied because it is not clear as to what the court would find to be an acceptable implied exclusion. For example, in INDTEL Technical Services Pvt. Ltd. v. W.S. Atkins PLC, the parties’ memorandum of understanding indicated that the construction, validity and performance of the agreement would be governed by and construed in accordance with laws of England and Wales. However, it was held that Indian courts had jurisdiction to appoint the arbitrator under Section 11(9) because the parties had not chosen the seat of arbitration. The Court did not consider the choice of foreign law as an implied exclusion of Part I by the parties. This results in uncertainty about the enforcement of foreign awards. It is essential to remedy this situation.
The Legislature Must Take Steps to Preserve the Sanctity of the ADR movement
Some other suggestions have called for India's Legislature ought to take steps to curtail unnecessary judicial legislation and derailment of arbitration proceedings in the garb of filling lacunae in the 1996 Act. The international network of reciprocal enforcement treaties of universal disposition should be adopted by India to foster the respect for the International Arbitration.
Judiciary Must Respect and Support Globally Accepted Dispute Resolution Mechanisms
It has been said that India's judiciary should adopt an internationally acceptable approach to the enforcement of a foreign award under the New York Convention and create an arbitration friendly environment. Its courts should not hesitate to appoint amicus curiae or experts whenever faced with issues relating to interpretation of New York Convention provisions. In fact, since most judges sitting on the lower courts have little or no experience dealing with issues arising out of the New York Convention, the Indian Bar should hold conferences, seminars and training programs to bring these issues to the bench and discuss issues of concern.
The Indian courts’ continued attitude to not resist the temptation to intervene in arbitrations is harmful. Primarily for a legal system which is plagued by endemic delays, a pro-arbitration stance would reduce the pressure on courts. Arbitration is not merely an attractive and lucrative option for resolution of disputes, it is absolutely essential to maintain the integrity of the Indian legal system so that the trust in it is maintained and India should work to safe the citadel of International Commercial Arbitration.
Some Final Remarks
As a country seeking to attract foreign investment, it is crucial that its legal system provides proficient and predictable remedies to foreign investors and people seeking to enter into International transactions in India. When commercial parties enter into transactions, they factor into their bargain the potential legal costs of enforcing their rights. If a legal system does not hold the promise of speed or certainty, a stigma of certain “risk premium” is added to the cost of the transaction which, if excessive, may make the transaction commercially unviable. Foreign investors have typically preferred arbitration and shied away from Indian courts due to curse of prolonged delays in litigation system coupled with backlog of cases.
· http://www.kaplegal.com/articles/AIAJ_V4_N1_2008_Book_(Sumeet_Kachwaha).pdf last accessed on 20 February 2011.
· http://jurisonline.in/2010/10/enforcement-of-foreign-arbitral-awards/ last accessed on 17 February 2011
· http://legalsutra.org/867/enforcement-of-foreign-arbitral-awards/ last accessed on 18 February 2011
· www.jstor.org/stable/837713 last accessed on 20 February 2011
· lawcommissionofindia.nic.in/51-100/report76.pdf last accessed on 19 January 2011
· Markanda, P. C., Law relating to Arbitration and Conciliation, LexisNexis Butterworths Wadhwa Nagpur, (2009)Seventh Edition
STATUTES AND CONVENTIONS:
· Arbitration and Conciliation Act, No. 26 of 1996 [16th August, 1996]
· Convention on the Recognition and Enforcement of Foreign Arbitral Awards, Jun. 10, 1958,
· Geneva Convention in the Execution of Foreign Arbitral Awards, Sept. 26, 1927
· Geneva Protocol on Arbitration Clauses, Sept. 24, 1923
# I.e. the Arbitration Act, 1940 (No 10 of 1940) (‘the 1940 Act’).
#  I.e. the Arbitration (Protocol & Convention) Act 1937 (No 6 of 1937) (‘the 1937Act’).
# I.e. the Convention on the Execution of Foreign Arbitral Awards (Geneva, 26 September 1927) (‘the Geneva Convention’). India became a signatory to this Convention on 23 October 1937 (one amongst six Asian nations to become a signatory).
# I.e. the Foreign Awards (Recognition & Enforcement) Act 1961 (No 45 of 1961) (‘1961 Act’).
# I.e. the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, 10 June 1958) (‘the New York Convention’). India became a signatory to this Convention on 13 July 1960.
# Enforcement of International Arbitral Awards, UN document
# Article VII(2) of the New York Convention: The Geneva Protocol on Arbitration Clauses of 1923 and the Geneva Convention on the Execution of Foreign Arbitral Awards of 1927, shall cease to have effect between Contracting States on their becoming bound and to the extent that they become bound, by this Convention.
# New York Convention, Art. I(1): This Convention shall apply to the recognition and enforcement of arbitral awards made in the territory of a State other than the State where the recognition and enforcement of such awards are sought, and arising out of differences between persons, whether physical or legal. It shall also apply to arbitral awards not considered as domestic awards in the State where their recognition and enforcement are sought.
# New York Convention, Art. I (2): The term "arbitral awards" shall include not only awards made by arbitrators appointed for each case but also those made by permanent arbitral bodies to which the parties have submitted.
# New York Convention, Art. IV: 1. To obtain the recognition and enforcement mentioned in the preceding article, the party applying for recognition and enforcement shall, at the time of the application, supply:
(a) The duly authenticated original award or a duly certified copy thereof;
(b) The original agreement referred to in article II or a duly certified copy thereof.
2. If the said award or agreement is not made in an official language of the country in which the award is relied upon, the party applying for recognition and enforcement of the award shall produce a translation of these documents into such language. The translation shall be certified by an official or sworn translator or by a diplomatic or consular agent.
# New York Convention, Art. III: Each Contracting State shall recognize arbitral awards as binding and enforce them in accordance with the rules of procedure of the territory where the award is relied upon, under the conditions laid down in the following articles. There shall not be imposed substantially more onerous conditions or higher fees or charges on the recognition or enforcement of arbitral awards to which this Convention applies than are imposed on the recognition or enforcement of domestic arbitral awards.
# I.e. the Arbitration & Conciliation Act 1996 (No 26 of 1996) (‘the 1996 Act’).
# The 1996 Act, s 85.
# RM Investments Trading Co Pvt. Ltd v Boeing Co & Anr 1994 (4) SCC 541
# The 1996 Act, s 44(b).
# Transocean Shipping Agency Pvt. Ltd v Black Sea Shipping & Ors. 1998 (2) SCC 281
# Law relating to arbitration and conciliation, .Markanda, P C, 7th Edition, page no. 918
# Venture Global Engineering v Satyam Computer Services CA No 309 of 2008
# The 1996 Act, s 48(2).
# Renusagar Power Co. Ltd. v. General Electric Co. (1994) Supp (1) SCC 644
# The 1996 Act, s 48(1)(e), corresponding to Art V(e) of the New York Convention
# Venture Global Engineering v Satyam Computer Services CA No 309 of 2008
# 2002 (4) SCC 105.
# Venture Global Engineering v Satyam Computer Services CA No 309 of 2008
# Renu sagar Power Co. Ltd. v. General Electric Co. (1994) Supp (1) SCC 644
# Oil and Natural Gas Corp v Saw Pipes Ltd. 2003 (5) SCC 705
# AIR 1994 SC 1136
# AIR 1962 SC 1810
# AIR 1989 SC 2198
# The 1996 Act, s 47(1).
# 1995 Supp (2) SCC 280.
# 2007 (1) RAJ 339 (Bom), AIR 1986 Gujarat 62.
# 2001 (6) SCC 356
# (2003) 5 SCC 705
# AIR 1964 SC 538 INDTEL Technical Services Pvt. Ltd. v. W.S. Atkins PLC (2008) 10 SCC 308
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