Arb Project

RAJIVGANDHI NATIONAL UNIVERSITY OF LAW, PUNJAB

TABLE OF CONTENTS

1. INTRODUCTION......................................................................................................................1

1.1 Introductory....................................................................................................................1

1.2 Objective of the Paper....................................................................................................1

1.3 Research Methodology...................................................................................................1

1.4 Chapterization Scheme..................................................................................................2

2. INTERNATIONAL COMMERCIAL ARBITRATION: A CONTEXTUAL FRAMEWORK.................3

2.1 Arbitration: An Overview............................................................................................3

2.1.1 Advantages of arbitration in commercial disputes..................................................3

2.1.1.1 Flexible procedure..............................................................................................4

2.1.1.2 Suitability for International Transactions...........................................................5

2.1.1.3 Final and Binding...............................................................................................5

2.1.1.4 Neutrality.............................................................................................................5

2.1.1.5 Expert Arbitrators...............................................................................................6

2.1.1.6 Confidentiality.....................................................................................................6

2.1.1.7 Expedition...........................................................................................................6

2.2 International Commercial Arbitration.........................................................................7

2.2.1 Meaning of International Commercial Arbitration.................................................7

2.2.1.1 International.......................................................................................................7

2.2.1.2 Commercial.........................................................................................................9

2.4 International Commercial Arbitration and developing countries...........................10

2.5 Important Developments.............................................................................................11

2.5.1 The Geneva Convention on Enforcement of Foreign Arbitral Awards...............11

2.5.2 The New York Convention on Enforcement and Recognition of Foreign Arbitral

Awards..............................................................................................................................11

2.5.3 The UNCITRAL Model Law on Arbitration..........................................................13

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2.5.4 Institutional Arbitration..........................................................................................14

3. THE ARBITRATION FRAMEWORK IN INDIA.........................................................................16

3.1 Historical Development of Arbitration in India........................................................16

3.2 Analysis of the Present Arbitration Act.....................................................................17

3.2.1 Important Developments post the 1996 Act...........................................................19

3.3 Arbitration and Conciliation (Amendment) Bill..........................................................20

4. ENFORCEMENT OF FOREIGN ARBITRAL AWARDS IN INDIA...............................................23

4.1 Foreign Award..............................................................................................................23

4.2 Need for Recognition and Enforcement of Foreign Arbitral Awards.....................24

4.2.1 Comity......................................................................................................................25

4.3 Enforcement under Foreign Arbitral Awards under the Foreign Awards

(Recognition and Enforcement) Act, 1961.........................................................................25

4.4 Enforcement of Foreign Arbitral Awards under the Arbitration and Conciliation

Act, 1996...............................................................................................................................27

4.4.1 Enforcement under the Geneva Convention.........................................................27

4.4.2 Enforcement under the New York Convention......................................................28

4.4.3 Enforcement of awards passed in non-convention countries...............................29

5. ROLE OF THE JUDICIARY IN ENFORCEMENT OF FOREIGN ARBITRAL AWARDS...............29

5.1 Bhatia International v. Bulk Trading S.A.,AIR 2002 SC 1432...................................30

5.1.1 Brief Facts...............................................................................................................30

5.1.2 Issues.......................................................................................................................30

5.1.3 Decision of the Court..............................................................................................30

5.2 Bharat Aluminium Company Limited (“BALCO”) v. Kaiser Aluminium Technical

Service, Inc. (“Kaiser”), (2012) 9 SCC 649.......................................................................30

5.2.1 Brief Facts...............................................................................................................31

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5.2.2 Issues.......................................................................................................................31

5.2.3 Decision of the Court..............................................................................................32

5.2.4 Relevance of the Decision.......................................................................................32

6. SUGGESTIONS AND CONCLUSION........................................................................................34

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I

INTRODUCTION

1.1 Introductory

In the era of globalization, there is an increase in commercial interactions between

members of different nations. Commercial interactions lead to disputes which are resolved

through International Commercial Arbitration. Now, the awards passed by such arbitration

tribunals are enforced in the requisite country. If the award is made in a country other than

the one where enforcement is sought, then it is a foreign arbitral award.

The Arbitration and Conciliation Act, 1996, is the code regulating the enforcement of

all arbitral awards in India – both domestic and foreign. As such, it provides for specific

procedures to be followed for the enforcement of foreign arbitral awards, the grounds on

which such enforcement may be set aside, etc. It succeeds the Foreign Awards (Recognition

and Enforcement) Act, 1961 as the law governing the enforcement of foreign awards.

1.2 Objective

The objective of this project is to study the mechanism for enforcement of foreign

awards in India. The project aims to examine various statutory provisions, court decisions

and proposed amendment to get a clear picture as to the provisions for enforcement of foreign

awards in India.

1.3 Research Methodology

Numerous primary sources, in the form of statutes, treaties, amendment bills, etc.

have been referred in the course of making this project. A large number of secondary sources

in the nature of books, journal articles, arbitration practice manuals, etc. have been referred in

order to support the conclusions and analyses provided in the project. Judicial decisions form

a crucial part of the project.

1.4 Chapterization Scheme

Chapter 2 of the project is titled as International Commercial Arbitration: A

Contextual Framework and it contains an overview of arbitration in general and international

commercial arbitration in particular. It discusses the meaning, need and importance of

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International Commercial Arbitration. It further delineates important developments in

International Commercial Arbitration.

Chapter 3 is titled as The Arbitration Framework in India and it contains a brief

summary and examination of the framework of the Arbitration and Conciliation Act, 1996. It

contains a brief historical perspective of arbitration in India. It also contains an examination

of the changes proposed by the Arbitration and Conciliation (Amendment) Bill, 2003. It also

contains a brief summation of some of the more important judicial decisions regarding

arbitration in India.

Chapter 4 is titled as Enforcement of Foreign Arbitral Awards in India and it contains

the meaning of a foreign award, the framework of its enforcement under the present

arbitration law and the old arbitration law in India. It further discusses the need for

enforcement of foreign awards. It discusses enforcement of awards under the New York

Convention and Geneva Convention and of awards passed in non-convention countries.

Chapter 5 is titled as The Role of the Judiciary and it discusses some of the most

important judicial decisions that affect enforcement of foreign arbitral awards in India. These

cases include Bhatia International v. Bulk Trading S.A.,1 ONGC v. Saw Pipes,2 Videocon

Industries v. Union of India,3 Bharat Aluminium Company Limited (“BALCO”) v. Kaiser

Aluminium Technical Service, Inc. (“Kaiser”)4.

Chapter 6 contains the conclusion to the entire project.

1 Bhatia International v. Bulk Trading S.A., AIR 2002 SC 1432.2 ONGC v. Saw Pipes, AIR 2003 SC 2629.3 Videocon Industries v. Union of India, (2011) 6 SCC 161.4 Bharat Aluminium Company Limited (“BALCO”) v. Kaiser Aluminium Technical Service, Inc. (“Kaiser”), (2012) 9 SCC 649.

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II

INTERNATIONAL COMMERCIAL ARBITRATION: A CONTEXTUAL FRAMEWORK

2.1 Arbitration: An Overview

Arbitration is a dynamic dispute resolution mechanism varying according to law and

international practice, national laws do not attempt a final definition. Some national laws

define an arbitration agreement instead.5 The English Arbitration Act, 1996, while not

defining arbitration manages to successfully draw light on the expected objectives, i.e. fair

resolution of disputes by an impartial tribunal without unnecessary delay or expense,

furthermore the parties should be free to agree how their disputes are resolved, subject only to

such safeguards as are necessary in public interest.6

2.1.1 Advantages of arbitration in commercial disputes

Arbitration systems offer succinct mechanisms for redressal and disposal of

commercial disputes. There are clear advantages that ADR systems provide as opposed to

traditional courts of law.

2.1.1.1 Flexible procedure

Arbitration has a great degree of flexibility of procedural requirements. Due to the

international nature of various arbitrations, a rigid and systematized form and procedure

cannot be followed. As such, procedural flexibilities are required for the adequate functioning

of arbitration systems. All major international arbitration rules give authority to the

arbitrators to determine the procedure that they deem to be appropriate, subject primarily to

party autonomy.7 For example, the ICC Rules provide that:

“The proceedings before the Arbitral Tribunal shall be governed by these

Rules and, where these Rules are silent, by any rules which the parties or,

failing them, the Arbitral Tribunal may settle on, whether or not reference is

thereby made to the rules of procedure of a national law to be applied to the

arbitration.”8

5 Section 7, Arbitration and Conciliation Act, 1996; UNCITRAL Model Law on International Commercial Arbitration, art.7 (1985) (hereinafter referred to as “UNCITRAL Model Law”).

6 Section 1, English Arbitration Act, 1996.7 JULIAN DM LEW, LOUKAS A. MISTELIS, STEFAN M. KROLL, COMPARATIVE INTERNATIONAL COMMERCIAL

ARBITRATION 6 (2007).8 Rule 15 (1), International Chamber of Commerce Rules of Arbitration, 1998, available at

http://www.iccwbo.org/uploadedFiles/Court/Arbitration/other/rules_arb_english.pdf (last accessed on 12th

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2.1.1.2 Suitability for International Transactions

Contracting parties from one state are generally unwilling to submit to national courts

of the other party or to any other national courts. There is always a fear and distrust of foreign

laws and courts. Although private international law or conflict of laws (as it is sometimes

known as) provides various rules to determine the appropriate forum and cut down on

misuses such as forum shopping,9 etc., arbitration still remains the preference due to its

provisions for a customized forum with flexible procedures.

2.1.1.3 Final and Binding

As a general rule, the decisions of arbitrators are to be final and binding.10 There are

no or very limited grounds on which arbitrators’ awards can be appealed to the courts on the

basis that the arbitrators’ conclusions are wrong. Equally, the grounds upon which the

decisions of arbitrators can be challenged and set aside are limited to where the arbitrators

have either exceeded the jurisdictional authority in the arbitration agreement or have

committed some serious breach of natural justice.11

2.1.1.4 Neutrality

The functioning of an arbitral tribunal is neutral as a consequence of the fact that it

does not favour one particular party, nor is there a potential for it to favour a particular party

over the other. This is directly opposed to a national court, wherein the party belonging to

that particular state might be favoured over the party that belongs to a foreign state.12 This

neutrality is further enhanced by the fact the arbitrators are jointly, mutually appointed by

both the parties to the dispute.13

2.1.1.5 Expert Arbitrators

March, 2014) (hereinafter referred to as “ICC Rules”); see also Rule 16.3, SIAC Rules; Article 14.1, LCIA Rules (providing for joint determination of procedure by parties and arbitrators).

9 See P.M. NORTH AND J.J. FAWCETT, CHESHIRE AND NORTH’S PRIVATE INTERNATIONAL LAW 12 (13th ed. 2006).

10 JULIAN DM LEW, LOUKAS A. MISTELIS, STEFAN M. KROLL, COMPARATIVE INTERNATIONAL COMMERCIAL ARBITRATION 7 (2007); ALAN REDFERN, MARTIN HUNTER, ET.AL., LAW AND PRACTICE OF INTERNATIONAL COMMERCIAL ARBITRATION 23 (4th ed. 2006).

11 See Article 17 I, UNCITRAL Model Law; Convention on the Recognition and Enforcement of Foreign Arbitral Awards, art. V, 330 UNTS 38 (1958) (hereinafter referred to as the “New York Convention”); Convention on the Execution of Foreign Arbitral Awards, art.2, 92 LoNTS 30 (1927) (hereinafter referred to as the “Geneva Convention”).

12 ALAN REDFERN, MARTIN HUNTER, ET. AL., LAW AND PRACTICE OF INTERNATIONAL COMMERCIAL ARBITRATION 22 (4th ed. 2006).

13 JULIAN DM LEW, LOUKAS A. MISTELIS, STEFAN M. KROLL, COMPARATIVE INTERNATIONAL COMMERCIAL ARBITRATION 7 (2007).

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Disputes that arise in specialized industries require specialized adjudicators who have

adequate knowledge of that industry. In arbitration, parties are empowered to select

arbitrators who have that expert knowledge and are therefore best suited to appreciate and

determine the dispute in hand.14

2.1.1.6 Confidentiality

The private nature of arbitration results in the entire arbitration being a confidential

process. As a result, what proceeds in the arbitration is treated with utmost confidentiality and

secrecy.15 This is particularly beneficial to commercial bodies that have a market

reputation/goodwill and therefore stand to lose business if said reputation/goodwill is harmed

by the disclosure of any pending disputes.16

2.1.1.7 Expedition

Arbitration is, usually, a more expeditious process than litigation in traditional courts

of law. The arbitrators can be chosen quickly due to the operation of the principle of party

autonomy. Consequently, the arbitration happens at a quicker, more convenient pace than

national courts with their humungous backlog of cases. Expedition in resolution of

commercial disputes is crucial due to the nature and high amounts of money involved in the

disputes.17

2.2 International Commercial Arbitration

International commercial arbitration is the process of resolving business disputes

between or among transnational parties through the use of one or more arbitrators rather than

through the courts. It requires the agreement of the parties, which is usually given via an

arbitration clause that is inserted into the contract or business agreement.18

2.2.1 Meaning of International Commercial Arbitration

14 See J. Martin Hunter, Experts in International Arbitration, http://kluwerarbitrationblog.com/blog/2011/02/07/experts-in-international-arbitration/ (last accessed on 18th March, 2014).

15 Esso Austrialia Resources Ltd. and Ors. v. The Hon. Sidney James Plowman, The Minister for Energy and Minerals and Ors., 183 CLR 10 (1995); Associated Electric & Gas Insurance Services Ltd. v. European Reinsurance Company of Zurich, [2003] UKPC 11 (2003).

16 See Collins, Privacy and Confidentiality in Arbitration Proceedings, 11 Arb. Int. 321 (1995); See also Neill, Confidentiality in Arbitration, 12 Arb. Int. 287 (1996).


18 American Society of International Law, International Commercial Arbitration, available at http://www.asil.org/erg/?page=arb (last accessed on 24th March, 2014).

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2.2.1.1 International

The international or domestic nature of commercial arbitration may result in the

application of a different set of rules. Several legal systems have special rules for domestic

and international arbitration. Other systems opt for a unified regulation. The important

question is what makes any arbitration an international arbitration?

Most arbitrators and jurists agree that there are three ways of establishing the

international character of arbitration. An arbitration may be international because:

- its subject matter or its procedure or its organization is international; or

- the parties involved are connected with different countries/jurisdictions; or

- there is a combination of both.

Therefore, when the subject matter of the dispute is international in nature, the dispute

may be considered an international one and hence subject to international commercial

arbitration.19 The best example of this is present in the French Code of Civil Procedure, which

says:

“Arbitration is international if it implicates international commercial

interests”20

It was held by the Paris Court of Appeal that:

“… the international nature of an arbitration must be determined according to

the economic reality of the process during which it arises. In this respect, all

that is required is that the economic transaction should entail a transfer of

goods, services or funds across national boundaries, while the nationality of

the parties, the law applicable to the contract or the arbitration, and the place

of arbitration are irrelevant.”21

2.3 International Commercial Arbitration and developing countries


20 Article 1492, French Code of Civil Procedure.21 MurgueSiegle v. Coflexip, Rev. Arb. 335 (1991); affirmed in Renault v. V 2000 (formerly Jaguar France),

Rev. Arb. 537 (1997).

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In recent years there has been a marked decrease in opposition from the third world

critics against arbitration as a means of settling trade disputes. There has been a marked

increase in international commercial arbitration in and among developing countries due to

globalization and the large amount of commercial activities that take place in their markets.22

Developing and countries tend to have a higher number of pending case laws as a

result of which arbitration is the natural choice for resolution of commercial disputes. In

recent times, many developing countries have become increasingly arbitration friendly

nations. For example Argentina,23 India,24 Brazil25 have accepted and adequately regulated

their arbitration mechanisms.

2.5 Important Developments

2.5.1 The Geneva Convention on Enforcement of Foreign Arbitral Awards

The convention aimed at international recognition of arbitration agreements and

awards. In those days, the mechanisms bought by those instruments were considered

successful, but their operation was not a problem free.26 The main problem was the

recognition of foreign awards.

For a foreign award to be enforced in the national jurisdiction, it was generally

necessary to demonstrate that the award had become final in the country where it was

rendered. The Geneva Convention has almost been superseded by the New York Convention.

2.5.2 The New York Convention on Enforcement and Recognition of Foreign Arbitral

Awards

The Convention on the Recognition and Enforcement of Foreign Arbitral Awards,

done at New York, 10 June 1958 (the “New York Convention”), is described as the most

successful treaty in private international law. It is adhered to by more than 140 nations. The

22 R. Rajesh Babu, International Commercial Arbitration and the Developing Countries, 4 AALCO Quarterly Bulletin 385 (2006).

23 See Alejandro E. Fargosi, Commercial Arbitration in Argentina, 20 University of Miami Inter-American Law Review 678 (1989).

24 See Motiwal, Alternative Dispute Resolution in India, 15(2) J Int’l Arb 117 (1998).25 See Luciano Benetti Timm, Rafael Ribeiro, Sonia Farber, International Commercial Arbitration in Brazil,

available at http://www.cmted.com.br/restrito/upload/artigos/48.pdf (last accessed on 28th March, 2014).26 See Lorenzen, Commercial Arbitration – International and Interstate Aspects, 43 Yale LJ 716 (1934).

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more than 1,400 court decisions reported in the Yearbook: Commercial Arbitration show that

enforcement of an arbitral award is granted in almost 90 per cent of the cases.27

2.5.3 The UNCITRAL Model Law on Arbitration

The UNCITRAL Model Law on International Commercial Arbitration was adopted

by the United Nations Commission on International Trade Law (UNCITRAL) on 21 June

1985, at the close of the Commission's 18th annual session. The General Assembly,

recommended:

“that all States give due consideration to the Model Law on International

Commercial Arbitration, in view of the desirability of uniformity of the law of

arbitral procedures and the specific needs of international commercial

arbitration practice.”28

A global survey of national laws on arbitration revealed considerable disparities not

only as regards individual provisions and solutions but also in terms of development and

refinement. Some laws may be regarded as outdated, sometimes going back to the nineteenth

century and often equating the arbitral process with court litigation. Other laws may be said

to be fragmentary in that they do not address all relevant issues. Even most of those laws

which appeared to be up-to-date and comprehensive were drafted with domestic arbitration

primarily, if not exclusively, in mind.29

2.5.4 Institutional Arbitration

Institutional arbitration is gradually becoming the more popular form of arbitration as

opposed to ad-hoc arbitration. Rules laid down by established arbitral institutions will

generally have proceed to work well in practice and they will have undergone periodic

revision in consultation with experienced practitioners to take account of new developments

in the law and practice of international commercial arbitration.30

27 Albert Jan Vandeburg, Convention on the Recognition and Enforcement of Foreign Arbitral Awards, available at http://untreaty.un.org/cod/avl/pdf/ha/crefaa/crefaa_e.pdf (last accessed on 29th March, 2014).

28 Model Law on International Commercial Arbitration of the United Nations Commission on International Trade Law, G.A. Res. 40/72 (1985).

29 Explanatory Note by the UNCITRAL Secretariat on the 1985 Model Law on International Commercial Arbitration as amended in 2006, available at http://www.uncitral.org/pdf/english/texts/arbitration/ml-arb/MLARB-explanatoryNote20-9-07.pdf (last accessed on 30th March, 2014).

30 ALAN REDFERN, MARTIN HUNTER, ET. AL., LAW AND PRACTICE OF INTERNATIONAL COMMERCIAL ARBITRATION 48 (4th ed. 2006).

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There are a number of clear advantages in choosing to go for institutional arbitration.

Firstly, the rules and procedures of the named institution become incorporated into the

arbitration agreement by reference. Consequently, the arbitration happens according to those

rules including the appointment of arbitrators, etc. Secondly, the rules and procedures are

ready made and the parties do not have to waste any time in drafting additional rules and

procedures for the conduct of the arbitration. Finally, the arbitration institutions generally

have a pool of qualified arbitrators who are appointed as arbitrators for disputes. As a result,

the parties do not have to search for individual arbitrators who are best suited for the case.31

31 ALAN REDFERN, MARTIN HUNTER, ET. AL., LAW AND PRACTICE OF INTERNATIONAL COMMERCIAL ARBITRATION 48-49 (4th ed. 2006).

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III

THE ARBITRATION FRAMEWORK IN INDIA

3.1 Historical Development of Arbitration in India

India has a long standing history of arbitration. In ancient India, there were

systemised hierarchical boards to decide and conduct the arbitration proceedings. There were

in fact different grades of arbitrators with provisions for appeal.32Yajnavalika refers to three

types of courts – Puga, Sreni, Kula and Narada states that law suits may be decided by

village councils (Kulani), assemblies and corporations.33

The Arbitration Act, 1940 was enacted to replace the Indian Arbitration Act, 1899 and

to act as the modern law of arbitration in India. This enactment amended and consolidated the

law relating to arbitration in British India and remained a comprehensive law on arbitration

even in independent India. The Act continued to serve the interests of India for a significant

amount of time. However, a need was felt for a better, more globalized arbitration law when

there was a huge influx of FDI (Foreign Direct Investment) post the New Economic Policy in

1991.34

The UNCITRAL Model Law was adopted and incorporated in India through the

Arbitration and Conciliation Act, 1996. India had also become a party to the New York

Convention and the Geneva Convention which were also incorporated in the 1996 Act. The

adoption of the 1996 Act was momentous for two specific reasons.

Firstly, the 1996 Act unified three separate bodies of arbitration law by consolidating

the law.35 Secondly, the adoption of the UNCITRAL Model Law has brought efficiency and

general predictability, though the latter is rather no equivalent to the modern global

standards.36 The Arbitration and Conciliation (Amendment) Bill, 2003 is currently pending

before the Indian Parliament.

3.2 Analysis of the Present Arbitration Act

32 LAW COMMISSION OF INDIA, SEVENTY SIXTH REPORT: ARBITRATION ACT, 1940 4 (1978).33 KANE, HISTORY OF DHARAMSHASTRA 280 (1946).34 See generally JAGDISH PRASAD, NEW ECONOMIC POLICY: REFORMS AND DEVELOPMENT 10-28 (1993).35 See Vikram Raghavan, New Horizons for Alternative Dispute Resolution in India: The New Arbitration

Law of 1996, 13 J. Int’l Arb. 5 (1996).36 HARSH SETHI&ARPAN K. GUPTA, INTERNATIONAL COMMERCIAL ARBITRATION AND ITS INDIAN

PERSPECTIVE 8 (2011).

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The Arbitration and Conciliation Act, 1996 was enacted with a view to consolidate

and replace the existing arbitration regime.37The Act of 1996 incorporates various provisions

of the UNCITRAL Model Law.38 India adopted the UNCITRAL Model Law and Rules by

promulgation of the Arbitration and Conciliation Ordinance, 1996, which was re-

promulgated twice before the enactment of the Act.39

The major advantage contemplated by the new law is to facilitate quick resolution of

commercial disputes and to speed up arbitration procedure by minimizing intervention by the

court. The court is cast in very much a minor usually supportive roles. The Arbitration Act,

1940, had several provisions by which one could go to court and get a stay on the

proceedings of arbitration.

Prior to the enactment of the new law, an arbitral award could become enforceable

after the courts made it rule of court. But under the new law, the award of an arbitrator is

itself enforceable as a decree of court and is not required to be made a rule of court.40 The

arbitrator has to give reasons for his decisions under the new law. The Act of 1996 seeks to

reduce judicial interference in the arbitral process.

The Act is divided into four parts. Part I deals with domestic arbitration; Part II deals

with International Commercial Arbitration; Part III deals with conciliation; and Part IV

relates to supplementary provisions.

3.2.1 Important Developments post the 1996 Act

The most important developments in Indian arbitration laws have been case law based

following the 1996 Act. The 1996 Act was enacted with a view to make India a more

arbitration friendly jurisdiction and one of the biggest ways of ensuring that was by making

sure that foreign arbitral awards would be enforced in a cumbersome free manner. Some of

the most landmark decisions post the Act displayed an opposite trend, wherein they had the

effect of transitioning India into an anti-arbitration jurisdiction.

37 Statement of Objects and Reasons, Arbitration and Conciliation Act, 1996.38 Model Law on International Commercial Arbitration of the United Nations Commission on International

Trade Law, G.A. Res. 40/72 (1985) (hereinafter referred to as “UNCITRAL Model Law”).39 JUSTICE B.P. SARAF & JUSTICE S.M. JHUNJHUNWALA, LAW OF ARBITRATION AND CONCILIATION 16 (5th

ed. 2009).40 Section 36, Id.

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In ONGC v. Saw Pipes,41 the Supreme Court expanded upon the grounds on which an

arbitral award could be set aside because it was violative of public policy. The grounds before

Saw Pipes were enumerated in Renusagar v. General Electric42 as follows:

- award is violative of the fundamental policy of India;

- award is against the interests of India;

- award is opposed to justice or morality.

In Saw Pipes, the Supreme Court held that an award can be held to be violative of

public policy if it was patently illegal, i.e. if it was violating any of the existing laws of India.

This created the first of many dents in the pro-arbitration image of India and it was especially

hard on investment arbitrations.43

In Bhatia International,44 the Supreme Court held that Part I of the Arbitration and

Conciliation Act, 1996, is applicable to foreign arbitral awards, particularly those awards

which have been made in non-convention countries, i.e. countries which are not signatories to

the New York or Geneva Conventions.

In a few recent cases, the Supreme Court has taken certain pro arbitration states. In

Videocon Industries,45 the Supreme Court held that if foreign law was specified to be the law

governing the contract then Part I of the Arbitration and Conciliation Act, 1996 was not

going to be applicable. In Fuerst Day Lawson,46 the Supreme Court held that a Letters Patent

Appeal would not lie against a non-appealable order as described under section 50 of the

Arbitration and Conciliation Act, 1996. Both these judgements have the effect of reducing

judicial interference in the process of arbitration, hopefully heralding an era where India is an

arbitration friendly nation.

3.3 Arbitration and Conciliation (Amendment) Bill, 2003

The Arbitration and Conciliation (Amendment) Bill, 2003 was proposed in 2003 and

it has reached a standstill since then. It was introduced in the Rajya Sabha and is pending

41 ONGC v. Saw Pipes, AIR 2003 SC 2629.42 Renusagar v. General Electric, AIR 1994 SC 860.43 See Deepak Raju and Prabhash Ranjan, The Enigma of Enforceability of Investment Treaty Arbitration

Awards in India, 6(1) Asian Journal of Comparative Law 5 (2011).44 Bhatia International v. Bulk Trading SA, AIR 2002 SC 1432.45 Videocon Industries v. Union of India, 2011 (6) SCC 161.46 Fuerst Day Lawson v. Jindal Exports Ltd., SLP No. 11945/2010, decided on 8th July, 2011.

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since then.47 The Parliament has taken no steps to implement and pass this bill rather than

appointing a Standing Committee to examine the operation of the amendment and the bill.

The bill proposes a list of much required amendments to the Arbitration and

Conciliation Act, 1996. The major objectives of the bill include the follows:

To resolve the conflict between some judgements of the high courts under the act.

To bring conformity with the UNCITRAL Model Law in certain respects.

To rectify certain mistakes which have crept into some provisions of the Act.

To provide for the establishment of a new Arbitration division within each High Court

where awards can be challenged under section 34, 34A or 36.

To provide for fast track arbitration following a special procedure.48

Some of the important changes proposed by the amendment bill are as follows.

Amendment to section 9 – Section 9 of the Arbitration and Conciliation Act, 1996

shall be amended to apply to international arbitrations outside India.49 Although the

UNCITRAL Model Law provided for the same, it was unfortunately omitted from the

Act which resulted in a large number of problems.

Amendment to section 8 – Section 8 of the Arbitration and Conciliation Act, 1996 is

being amended to empower the Court to decide jurisdictional issues before a reference

is made to arbitration.50 This is being done in order to bring the domestic law in

consonance with the UNCITRAL Model Law. Vide the amendment; the judicial

authority may decide issues such as the existence of the dispute, the validity of the

arbitration agreement, the existence of the arbitration agreement and the possibility of

performance of the arbitration agreement.

Amendment to section 11 –Section 11 of the Arbitration and Conciliation Act, 1996 is

being amended to empower the Supreme Court and High Court to decide

jurisdictional issues under section 11 or 8.51

Amendment to section 34 – Section 34 of the Arbitration and Conciliation Act, 1996

is being amended to provide for two additional grounds of challenge to the

47 http://www.pib.nic.in/newsite/erelease.aspx?relid=60108 (last visited on 1st April, 2014).48 http://lawmin.nic.in/legislative/Arb_intro_bill.pdf (last visited on 1st April, 2014).49 Section 2, Arbitration and Conciliation (Amendment) Bill, 2003.50 Section 9, Arbitration and Conciliation (Amendment) Bill, 2003.51 Id.

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enforcement of an arbitral award – substantial question of law apparent on the face of

the award and where reasons were not given in an award.52

Arbitration division within High Courts – Arbitration divisions have been proposed to

be established in every High Court so that they may dispose of cases under section 34,

section 36 of the Arbitration and Conciliation Act, 1996.

52 Section 26, Id.

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IV

ENFORCEMENT OF FOREIGN ARBITRAL AWARDS IN INDIA

4.1 Foreign Award

The generally accepted definition for a foreign award is an award which is made in a

country other than the one where enforcement is sought.53However, the Arbitration and

Conciliation Act, 1996 provides for a specified definition of foreign award, particularly so in

Part II of the Act.

The term foreign award has been defined in Chapter I of Part II as follows:

“In this Chapter, unless the context otherwise requires, “foreign award” means

an arbitral award on differences between persons arising out of legal

relationships, whether contractual or not, considered as commercial under the

law in force in India, made on or after the 11th day of October, 1960-

(a) In pursuance of an agreement in writing for arbitration to which the

Convention set forth in the First Schedule applies, and

(b) In one of such territories as the Central Government, being satisfied that

reciprocal provisions have been made may, by notification in the Official

Gazette, declare to be territories to which the said Convention applies.”54

In Chapter II of Part II, the term foreign award has been defined as follows:

“In this Chapter “foreign award” means an arbitral award on differences

relating to matters considered as commercial under the law in force in India

made after the 28th day of July, 1924, -

(a) In pursuance of an agreement for arbitration to which the Protocol set forth

in the Second Schedule applies, and

(b) Between persons of whom one is subject to the jurisdiction of some one of

such Powers as the Central Government, being satisfied that reciprocal

provisions have been made, may, by notification in the Official Gazette,

declare to be parties to the Convention set forth in the Third Schedule, and of

53 SIMON GREENBERG, CHRISTOPHER KEE & J. ROMESH WEERAMANTRY, INTERNATIONAL COMMERCIAL ARBITRATION: AN ASIA PACIFIC PERSPECTIVE 400 (2010).

54 Section 44, Arbitration and Conciliation Act, 1996.

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whom the other is subject to the jurisdiction of some other of the Powers

aforesaid, and

To put it simply, an award made under the New York or Geneva Convention is

considered to be a foreign award strictly under the Arbitration and Conciliation Act, 1996.

However, there is a third category of awards which is not passed in India and under standard

norms of jurisprudence, would qualify as foreign award. Such awards are those which are

made in countries which are not parties to either the New York or Geneva Convention. They

are titled as “non-convention country awards”.55

4.2 Need for Recognition and Enforcement of Foreign Arbitral Awards

In a world with increased globalization and commercial interaction it becomes

important for any country with an interest in international business to provide a mechanism

for the enforcement and recognition of foreign awards. International commercial arbitration is

the preferred form of dispute resolution in international business.56 As such, enforcement and

recognition of foreign arbitral awards becomes necessary for countries which wish to remain

a destination for international business.

An arbitral award without adequate enforcement is a useless piece of paper. It is the

thrust of courts all across the globe to reduce their case load. This creates an increasing

dependence on various forms of alternative dispute redressal such as arbitration. Enforcement

is the ultimate step of any arbitration.57 Moreover, it is necessary to enforce foreign awards in

order to create a beneficial impact on the economy of the country as a whole.

4.2.1 Comity

Comity is a ready explanation for much of what courts do in and private international

law58 and recognition and enforcement of arbitral awards forms a crucial part of the private

international law regime of any country. Comity has been defined as the basis of private

international law;59 goodwill between sovereigns;60 reciprocity and considerations of

55 See Bhatia International v. Bulk Trading SA, AIR 2002 SC 1432; ONGC v. Saw Pipes, AIR 2003 SC 2629.56 GARY BORN, INTERNATIONAL COMMERCIAL ARBITRATION 89 (2009).57 P.M. NORTH AND J.J. FAWCETT, CHESHIRE AND NORTH’S PRIVATE INTERNATIONAL LAW 12 (13th ed.

2006).58 Hilton v. Guyot, 159 U.S. 113 (1895).59 IAN F.G. BAXTER, ESSAYS ON PRIVATE LAW, FOREIGN LAW AND FOREIGN JUDGMENTS 22 (1966).60 GREEN H. HACKWORTH, DIGEST OF INTERNATIONAL LAW 88-90 (1941).

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international politics concerned with maintaining amicable and workable relationships

between nations.61

4.3 Enforcement under Foreign Arbitral Awards under the Foreign Awards

(Recognition and Enforcement) Act, 1961

Foreign award was defined in the Foreign Awards (Recognition and Enforcement)

Act, 1961as follows:

“In this Act, unless the context otherwise requires, “foreign award” means an

award on differences between persons arising out of legal relationships,

whether contractual or not, considered as commercial under the law in force in

India, made on or after the 11th day of October. 1960---

(a) In pursuance of an agreement in writing for arbitration to which the

Convention set forth in the Schedule applies, and

(b) In one of such territories as the Central Government being satisfied that

reciprocal provisions have been made, may, by notification in the Official

Gazette, declare to be territories to which the said Convention applies.”62

A foreign award may not be enforced under the 1961 Act due to one of the following

grounds:

“(a) If the party against whom it is sought to enforce the award proves to the

Court dealing with the case that ---

(i) The parties to the agreement were under the law applicable to them, under

some incapacity, or the said agreement is not valid under the law to which the

parties have subjected it, or failing any indication thereon, under the law of

the country where the award was made; or

(ii) The 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;

or

(iii) The award deals with questions not referred or contains decisions on

matters beyond the scope of the agreement: Provided that if the decisions on

matters submitted to arbitration can be separated from those not submitted,

61 Harold Maier, Interest Balancing and Extraterritorial Jurisdiction, 31 AM. J. COMP. L. 579, 589 (1983).62 Section 2, Foreign Awards (Recognition and Enforcement) Act, 1961.

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that part of the award which contains decisions' on matters submitted to

arbitration may be enforced; or

(iv) The composition of the arbitral authority or the arbitral procedure was not

in accordance with the agreement of the parties or failing such agreement, was

not in accordance with the law of the country where the arbitration took place;

or

The party making the application for enforcement of a foreign award was required to

produce the original or a duly authenticated copy of the award in the manner required by the

law of the country where it was made, the original arbitration agreement and any evidence

proving that the award is a foreign award.63

The 1961 act was repealed with the commencement of the Arbitration and

Conciliation Act, 1996

4.4 Enforcement of Foreign Arbitral Awards under the Arbitration and Conciliation

Act, 1996

4.4.1 Enforcement under the Geneva Convention

The procedure for enforcement of foreign awards made in countries which are party

to the Geneva Convention is quite straightforward.64 In order to enforce an award under the

Geneva Convention, the interested part has to make an application to the court. The party

must produce the following as evidence along with the application – the original award or a

copy duly authenticated under the law of which the award was made; proof that award has

become final and such evidence to prove section 57(1)(a) to 57(1)(c) of the Arbitration and

Conciliation Act, 1996.65

Enforcement may be refused if the court is satisfied that – the award has been

annulled in the country in which it was made; the party against whom it is sought to be

enforced was not given notice of the arbitration in sufficient time to enable him to present the

case, or that he was not properly represented because he was under a legal incapacity; the

subject matter of the award is beyond the scope of the arbitration agreement.66

4.4.2 Enforcement under the New York Convention

63 Section 8, Id.64 See Chapter II, Part II, Arbitration and Conciliation Act, 1996.65 Section 56, Id.66 Section 57(2), Id.

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The procedure for enforcement of foreign awards made in countries which are party

to the New York Convention is similar to the procedure for enforcement of awards under the

Geneva Convention.67 The party wishing to enforce a foreign award has to apply to the court

for the same. At the time of application that party has to produce the following – original

award or a duly certified copy thereof, the original agreement or a duly certified copy thereof,

any such evidence so as to prove that the award is a foreign award.68

Enforcement of a foreign award may be refused, at the request of the party against

whom it is sought to be enforced if the party furnishes proof to the court that – the parties

were under some incapacity per the law to which the parties were subject to, the agreement

was invalid under the law which it was subject to or under the law of the country where the

award was made; the party against whom the award is being enforced was not given due

notice of the appointment of the arbitral tribunal, or was otherwise unable to present his case;

the subject matter of the award is beyond the scope of the arbitration agreement. The award is

enforced as a decree of the court when it is satisfied that it is enforceable under Chapter I,

Part II of the Arbitration and Conciliation Act, 1996.69

4.4.3 Enforcement of awards passed in non-convention countries

Under Indian law, there have existed different procedures for enforcing awards passed

in non-convention countries. The Arbitration and Conciliation Act, 1996 does not have any

specific provisions regarding the enforcement of awards made in non-convention countries.

As such, we have to rely on judicial decisions to show the correct direction to proceed in.

The most crucial case in this regard is Bhatia International v. Bulk Trading S.A.70 In

Bhatia, the Supreme Court held that the provisions of Part I would apply to all arbitrations.

Consequently, Part I of the Arbitration and Conciliation Act, 1996 would apply to

arbitrations and arbitral awards passed in non-convention countries. The Supreme Court

further went to specify that a non-convention award can be treated as a domestic award due to

the operation of section 2(7) of the Arbitration and Conciliation Act, 1996.71As a result, post

67 See Chapter I, Part II, Arbitration and Conciliation Act, 1996.68 Section 47, Id.69 Section 49, Id.70 AIR 2002 SC 1432.71 An arbitral award made under this Part shall be considered as a domestic award.

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the operation of Bhatia, awards made in non-convention can be enforced under Section 36 of

the Arbitration and Conciliation Act, 1996, as it is included in Part I of the Act.72

72 Where the time for making an application to set aside the arbitral award under section 34 has expired, or such application having been made, it has been refused, the award shall be enforced under the Code of Civil Procedure, 1908 (5 of 1908) in the same manner as if it were a decree of the court.

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V

ROLE OF THE JUDICIARY IN ENFORCEMENT OF FOREIGN ARBITRAL AWARDS

The Indian judiciary has an important role to play in the enforcement of foreign

arbitral awards.

5.1 Bhatia International v. Bulk Trading S.A., AIR 2002 SC 1432

5.1.1 Brief Facts

The appellant entered into a contract with the respondent. The contract contained an

arbitration clause which provided that the arbitration was to be per the rules of the

International Chamber of Commerce. Parties agreed that the arbitration should happen in

Paris, France. The respondent filed an application under section 9 of the Arbitration and

Conciliation Act, 1996. The appellant raised an issue of maintainability of the application

contending that section 9 would not apply to arbitrations where the place of arbitration was

not in India.

5.1.2 Issues

Whether Part I of the Arbitration and Conciliation Act, 1996 is applicable to

international commercial arbitration.

5.1.3 Decision of the Court

The Hon’ble Supreme Court, after considering the various lacunae in drafting the act,

drew a harmonious construction of the various provisions of the Act. It finally held that

because section 2(2) does not contain the word only and mirroring provisions in the

UNCITRAL Model Law contain the term only, it cannot be said that Part I of the Act can

only be applicable to domestic arbitrations. Consequently, the Court held that Part I of the

Act is applicable to all arbitrations – domestic arbitrations, international commercial

arbitrations and arbitrations being conducted in non-convention countries.73

The Hon’ble Supreme Court did lay down an important exception. The Court also

held that the parties can expressly, or by necessary implication, bar the application of Part I of

the Act to their arbitration. This exception forms the basis of certain future litigation.

5.1.4 Relevance of the Decision

73 Bhatia International v. Bulk Trading SA, AIR 2002 SC 1432, para 27.

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The judgement allowed for the application of Part I of the Arbitration and

Conciliation Act, 1996 to foreign awards. As a result, foreign arbitral awards including non-

convention awards can now be challenged under section 34 of the Act which provide for

wider grounds of challenge. Interim relief can be sought for all arbitrations being conducted

anywhere in the world.

5.2 Bharat Aluminium Company Limited (“BALCO”) v. Kaiser Aluminium

Technical Service, Inc. (“Kaiser”), (2012) 9 SCC 649

In Bhatia International74 and Venture Global Venture Global75, the Supreme Court

had held that Part I of the Arbitration and Conciliation Act, 1996 setting out the procedures,

award, interim relief and appeal provisions with respect to an arbitration award, would apply

to all arbitrations held out of India, unless the parties by agreement, express or implied,

exclude all or any of its provisions. The Supreme Court set aside the doctrine in Balco v.

Kaiser76.

5.2.1 Brief Facts

An agreement dated 22 April, 1993 (“Agreement”) was executed between BALCO

and Kaiser, under which Kaiser was to supply and install a computer based system at

BALCO’s premises.

As per the arbitration clause in the Agreement, any dispute under the Agreement

would be settled in accordance with the English Arbitration Law and the venue of the

proceedings would be London. The Agreement further stated that the governing law with

respect to the Agreement was Indian law; however, arbitration proceedings were to be

governed and conducted in accordance with English Law.

Disputes arose and were duly referred to arbitration in England. The arbitral tribunal

passed two awards in England which were sought to be challenged in India u/s. 34 of the Act

in the district court at Bilaspur. Successive orders of the district court and the High Court of

Chhattisgarh rejected the appeals. Therefore, BALCO appealed to the Supreme Court

(“Court”).

74 Bhatia International v. Bulk Trading SA, AIR 2002 SC 1432.75 Venture Global Engineering v. Satyam Computer Services Ltd., (2008) 4 SCC 190.76 Bharat Aluminium Company Limited v. Kaiser Aluminium Technical Service, Inc., (2012) 9 SCC 649.

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Another significant issue to be adjudged, in the case of Bharti Shipyard Ltd. v.

Ferrostaal AG & Anr.77 (clubbed together with the above petition for hearing), was

applicability of section 9 (interim measures) of the Act. The parties had initially agreed to get

their disputes settled through arbitral process under the Rules of Arbitration of the

International Chamber of Commerce, at Paris, subsequently, mutually agreed on 29

November, 2010 to arbitration under the Rules of London Maritime Arbitrators Association,

in London.

During the pendency of arbitration proceedings in London, an injunction application

was made by appellants, Bharti Shipyard Ltd., before the District Judge at Mangalore, against

the encashment of refund bank guarantees issued under the contract (u/s 9 of the Act). The

applications were allowed and were consequently challenged in High Court of Bangalore.

The Bangalore High Court set aside the application so allowed on the grounds that the

appellants had an alternative remedy (u/s 44 of the Act, being interim reliefs for international

arbitration) in the courts of London and further since the substantive law governing the

contract, as well as the arbitration agreement, is English law, the English courts should be

approached. This was also challenged in this petition to the Supreme Court.

The appeal filed by Bharat Aluminum Co. before the Division Bench of the Supreme

Court was placed for hearing before a three Judge Bench, as one of the judges in the Division

Bench found that judgment in Bhatia International78 and Venture Global79 was unsound and

the other judge disagreed with that observation.

5.2.2 Issues

Whether Part I of the Arbitration and Conciliation Act, 1996 is applicable to

international commercial arbitration.

5.2.3 Decision of the Court

The judgment in detail analyses, the provisions of various sections in the Act and

applicability of Part I of the Act to international commercial arbitrations. Some significant

issues dealt with in the judgment are as follows:

77 Bharti Shipyard Ltd. v. Ferrostaal AG & Anr., MANU/KA/1314/2011.78 Bhatia International v. Bulk Trading SA, AIR 2002 SC 1432.79 Venture Global Engineering v. Satyam Computer Services Ltd., (2008) 4 SCC 190.

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It was observed that the object of section 2(7) of the Act is to distinguish the domestic

award (Part I of the Act) from the ‘foreign award’ (Part II of the Act); and not to

distinguish the ‘domestic award’ from an ‘international award’ rendered in India. The

term ‘domestic award’ means an award made in India whether in a purely domestic

context, (i.e., domestically rendered award in a domestic arbitration or in the

international arbitration which awards are liable to be challenged u/s 34 and are

enforceable u/s 36 of the Act).

It was held that there is a clear distinction between Part I and Part II as being

applicable in completely different fields and with no overlapping provisions.

The Court has also drawn a distinction between a ‘seat’ and ‘venue’ which would be

quite crucial in the event, the arbitration agreement designates a foreign country as the

‘seat’/ ‘place’ of the arbitration and also select the Act as the curial law/ law

governing the arbitration proceedings. The Court further clarified that the choice of

another country as the seat of arbitration inevitably imports an acceptance that the law

of that country relating to the conduct and supervision of arbitrations will apply to the

proceedings. It would, therefore, follow that if the arbitration agreement is found or

held to provide for a seat / place of arbitration outside India, then even if the contract

specifies that the Act shall govern the arbitration proceedings, Part I of the Act would

not be applicable or shall not enable Indian courts to exercise supervisory jurisdiction

over the arbitration or the award. It would only mean that the parties have

contractually imported from the Act, those provisions which are concerned with the

internal conduct of their arbitration and which are not inconsistent with the mandatory

provisions of the English procedural law or curial law. Therefore, it can be inferred

that Part I applies only to arbitrations having their seat / place in India.

The Court dissented with the observations made in Bhatia International80 case and

further observed on a logical construction of the Act, that the Indian Courts do not

have the power to grant interim measures when the seat of arbitration is outside India.

A bare perusal of Section 9 of the Act would clearly show that it relates to interim

measures before or during arbitral proceedings or at any time after the making of the

arbitral award, but before it is enforced in accordance with Section 36 (enforcement of

domestic awards). Therefore, the arbitral proceedings prior to the award contemplated

u/s 36 can only relate to arbitrations which take place in India.

80 Bhatia International v. Bulk Trading SA, AIR 2002 SC 1432.

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The Court further held that in foreign related international commercial arbitration, no

application for interim relief will be maintainable in India, either by arbitration or by

filing a suit.

5.2.4 Relevance of the Decision

This judgment shall be applicable prospectively (i.e. to all the arbitration agreements

executed after September 6, 2012).

As a result of this judgment, the seat of arbitration has now gained paramount

importance for determining the applicability of Part I of the Act.

The judgment also draws a distinction between the seat of arbitration and the place of

arbitration. It therefore contemplates a situation where even though the parties have

provided for a particular place for arbitration, that some of the proceedings

themselves may be conducted in other territories as may be convenient to all.

No interim relief u/s 9 of the Act or order 39 of the CPC (both pertaining to

injunction) would be available where the seat of arbitration is outside India. As

interim orders from foreign courts and arbitration tribunals are not enforceable in

India such a situation would leave foreign parties remediless.

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VI

SUGGESTIONS AND CONCLUSION

The system of enforcement of foreign arbitral awards, though clear on paper, is murky

at best. The Indian scenario needs to be clearer. One of the steps to achieve the much required

clarity is to implement the Arbitration and Conciliation (Amendment) Bill, 2003. The

Arbitration and Conciliation Act, 1996 has been universally panned as a work of bad

drafting. There are numerous amendments required to make it a streamlined and structured

legislation.

Whilst the BALCO decision provides the necessary impetus to enable the Indian

courts to make a fresh start, there are several serious issues that will need to be dealt with by

the Indian courts in the aftermath of that decision.

The foremost concern arises from the fact that the BALCO decision will apply

prospectively i.e. only to arbitration agreements which are concluded on or after 6 September

2012. This effectively means that Part I of the 1996 Act will continue to apply to foreign-

seated arbitrations with respect to arbitration agreements concluded prior to that date, unless

the parties have either expressly or impliedly agreed otherwise.

The doctrine of prospective overruling is a tool that has been applied on several

occasions in the past by the Indian Supreme Court. The classic cases, which ordinarily

warrant its application, are cases where the court has decided to invalidate a constitutional

amendment or a statutory enactment but consider that gravely unfair or disruptive

consequences would follow from such invalidity if past transactions were not immune from

judicial scrutiny.

Even if one were to gloss over the fact that the Indian Supreme Court has not

invalidated a constitutional amendment or statutory enactment in the BALCO decision (but

rather its own previous rulings), the question still arises which particular past transactions

need judicial immunity so that gravely unfair or disruptive consequences would not follow

from the overruling of the Bhatia or Venture Global decisions.

As explained above, the Bhatia or Venture Global decisions enabled Indian courts to

assert jurisdiction with respect to foreign-seated arbitrations involving an Indian party, unless

the parties had expressly or impliedly agreed to the contrary. Seen in that light, it is important

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to note that these decisions did not affect the validity of foreign-seated arbitration clauses

involving an Indian party. With respect, it is thus a non-sequitur to argue that by overruling

these decisions, such foreign-seated arbitration clauses would be somehow susceptible to

being invalidated as well. On the contrary, the only past transactions that were susceptible to

being invalidated in the wake of the BALCO decision were court proceedings (either pending

or those having attained finality) commenced in India on the basis of the Bhatia or Venture

Global decisions. Accordingly, the BALCO decision should have been applied prospectively

to the commencement of any proceedings in India rather than the execution of any new

arbitration agreements.

This is, in fact, likely to become a contentious issue in the future. Given the

significant delays in court proceedings in India and the fact that it is not uncommon to obtain

a final decision only after litigating there for at least 7 to 10 years, the BALCO decision

effectively means that despite Bhatia and Venture Global being expressly overruled, those

precedents will ironically continue to guide the Indian courts for another decade or so with

respect to arbitration agreements entered into prior to 6 September 2012. Unless the Indian

Supreme Court subsequently backpedals on this issue, there is likely to be a lot of confusion

created in any attempt made by the Indian courts to maintain two parallel regimes for the next

decade or so.

For example, the BALCO decision did not have occasion to consider the broad ‘public

policy’ doctrine enunciated in ONGC v. Saw Pipes81 and its applicability as a standard to

challenge the enforcement of foreign awards in India. Significantly, the Indian Supreme

Court recently applied this standard whilst deciding a case concerning the enforcement of a

Russian Chamber of Commerce and Industry award made in Moscow. Although the

challenge did not succeed on the merits of the case, this ruling does create a disconcerting

precedent.

The BALCO decision also does not affect the judicial rule, endorsed by the Indian

Supreme Court, to refuse to refer a matter to arbitration where either a serious allegation of

fraud has been made or there are complicated questions of fact or law that require extensive

oral or documentary evidence. The Indian courts consider that, in such circumstances, it is

inapposite to refer the disputes to arbitration and will accordingly retain jurisdiction to decide

such cases. Although, there are no known reported cases where an Indian court has refused to

81 ONGC v. Saw Pipes, (2003) 5 SCC 705.

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refer matters to international arbitration on the basis of such a rule, nothing prevents a court

from refusing to do so in the future unless this rule is overruled or deemed to be not

applicable to international arbitration.

Finally, even after the BALCO decision, it remains arguable on the basis of the

decision of the Indian Supreme Court in TDM Infrastructure Private Limited v. UE

Development India Private Limited82 that it is inconsistent with Indian public policy for an

Indian incorporated entity to contract out of the application of Indian substantive law in a

contract that it enters into with another Indian incorporated entity.

The main consequence of this judgment will be to insulate arbitrations seated outside

India from unwelcome interference by the Indian courts. Notably, the Indian courts will no

longer be able to consider challenges to foreign awards. This will reduce the scope for purely

tactical challenges by a losing party (who would otherwise have had a second bite at the

cherry before the Indian courts) and also considerably speed up the timelines associated with

enforcing a foreign award in India.

Indian arbitration jurisprudence is now aligned with the position prevalent in most

other arbitration-friendly jurisdictions and is poised to develop further on a pro-arbitration

trajectory.

82 TDM Infrastructure Private Limited v. UE Development India Private Limited, (2008) 14 SCC 271.

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BIBLIOGRAPHY

PRIMARY SOURCES

Statutes, Conventions and Rules

1. Arbitration and Conciliation (Amendment) Bill, 2003.

2. Arbitration and Conciliation Act, 1996.

3. Convention on the Execution of Foreign Arbitral Awards, 92 LoNTS 30 (1927).

4. Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 330

UNTS 38 (1958).

5. EC Directive 93/13 of 5th April 1993 on Unfair Contracts Terms in Consumer

Contracts, OJ 1993 L 95,29.

6. English Arbitration Act, 1996.

7. European Convention on International Commercial Arbitration, 484 UNTS 364

(1961).

8. Foreign Awards (Recognition and Enforcement) Act, 1961.

9. French Code of Civil Procedure.

10. Inter-American Convention on International Commercial Arbitration, 14 I.L.M. 336

(1975).

11. International Chamber of Commerce Rules of Arbitration, 1998.

12. UNCITRAL Model Law on International Commercial Arbitration (1985).

SECONDARY SOURCES

Books

1. B.S. CHIMNI, AALCC’S REGIONAL CENTRE FOR ARBITRATION: HISTORICAL

CONTEXT, GENESIS AND FUNCTIONS (1983).

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2. IAN F.G. BAXTER, ESSAYS ON PRIVATE LAW, FOREIGN LAW AND FOREIGN

JUDGMENTS(1966).

3. JAGDISH PRASAD, NEW ECONOMIC POLICY: REFORMS AND DEVELOPMENT (1993).

4. JUSTICE B.P. SARAF & JUSTICE S.M. JHUNJHUNWALA, LAW OF ARBITRATION AND

CONCILIATION (5th ed. 2009).

5. S. VARADCHARIAR, THE HINDU JUDICIAL SYSTEM-RADHA KUMUD MUKHERJEE

ENDOWMENT LECTURES(1945).

6. SURESH PRASAD, PANCHAYAT: AN ALTERNATIVE MODEL OF MEDIATION (2005).

Articles and Other Authorities

1. Claude R. Thomson and Annie M.K. Finn, Confidentiality in Arbitration: A Valid

Assumption? A Proposed Solution!, Dispute Resolution Journal, May-July, 2007.

2. Deepak Raju and Prabhash Ranjan, The Enigma of Enforceability of Investment

Treaty Arbitration Awards in India, 6(1) Asian Journal of Comparative Law 5 (2011).

3. Explanatory Note by the UNCITRAL Secretariat on the 1985 Model Law on

International Commercial Arbitration as amended in 2006, available at

http://www.uncitral.org/pdf/english/texts/arbitration/ml-arb/MLARB-

explanatoryNote20-9-07.pdf (last accessed on 30th March, 2014).

4. LAW COMMISSION OF INDIA, SEVENTY SIXTH REPORT: ARBITRATION ACT, 1940 4

(1978).

5. Motiwal, Alternative Dispute Resolution in India, 15(2) J Int’l Arb 117 (1998).

6. Mr. Justice Mian Squib Nisar, International Arbitration in the context of

Globalization: A Pakistani Perspective, available at

http://www.supremecourt.gov.pk/ijc/Articles/8/2.pdf (last accessed on 31st March,

2014).

7. R. Rajesh Babu, International Commercial Arbitration and the Developing Countries,

4 AALCO Quarterly Bulletin 385 (2006).

Awards and Judicial Decisions

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1. Bhatia International v. Bulk Trading SA, AIR 2002 SC 1432.

2. Bharat Aluminium Company Limited (“BALCO”) v. Kaiser Aluminium Technical

Service, Inc. (“Kaiser”), (2012) 9 SCC 649.

3. Esso Austrialia Resources Ltd. and Ors. v. The Hon. Sidney James Plowman, The

Minister for Energy and Minerals and Ors., 183 CLR 10 (1995).

4. Murgue Siegle v. Coflexip, Rev. Arb. 335 (1991).

5. ONGC v. Saw Pipes, AIR 2003 SC 2629.

6. Renusagar v. General Electric, AIR 1994 SC 860.

7. Venture Global Engineering v. Satyam Computer Services Ltd., (2008) 4 SCC 190.

8. Videocon Industries v. Union of India, 2011 (6) SCC 161.

Other Sources

1. http://lawmin.nic.in/legislative/Arb_intro_bill.pdf (last visited on 1st April, 2014).

2. http://www.pib.nic.in/newsite/erelease.aspx?relid=60108.

3. J. Martin Hunter, Experts in International Arbitration,

http://kluwerarbitrationblog.com/blog/2011/.

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Arb Project

Documents

Transcript of Arb Project