ENFORCEMENT OF FOREIGN ARBITRAL AWARD IN INDIA
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Transcript of ENFORCEMENT OF FOREIGN ARBITRAL AWARD IN INDIA
TOPIC
ENFORCEMENT OF FOREIGN
ARBITRAL AWARDS
TITLE PAGE NO.INTRODUCTIONMEANING OF ARBITRATION UNDER THE ACT FOREIGN ARBITRATION INDIAN RESERVATIONSFOREIGN AWARD – COMMERCIAL IN NATUREPROCEDURE OF ENFORCEMENT UNDER THE CONCVENTION
CHALLEGE TO FOREIGN ARBITRAL AWARDS
ENFORECEMENT OF AWARDS TO WHICH CONVENTIONS DO NOT APPLY
AWARDS UNDER INDIAN PROCEDURAL LAWS
AWARDS MADE OUTSIDE INDIA UNDER FOREIGN PROCEDURAL LAWS
AWARDS MADE OUTSIDE INDIA UNDER INDIAN PRECEDURAL LAWS
NEW YORK CONVENTION – AWARDS
GENEVA CONVENTION – AWARDS
ENGLISH ARBITRATION ACT – 1950 FOREIGN AWARDS
TIME LIMIT
POST ENFORCEMENT FORMALITIES
CONCLUSION
BIBLIOGRAPHY
INTRODUCTION
The law on arbitration in India is at present contained in three
enactments viz.
The Arbitration Act 1940
The Arbitration (Protocol and Convention) Act ,1937
The Foreign Awards (Recognition and Enforcement) Act,1961
It was widely felt that the 1940 act, which contained the general laws
of arbitration, had become outdated.
The law commission of India, several representative of bodies of
trade and commerce and expert of the field of arbitration had experts
of the field of arbitration had proposed amendments to this act to
make it more responsive to the contemporary requirements. It was
also recognized that our economic reforms may not become fully
effective if the law dealing with settlement of both domestic and
international commercial disputes remain out of tune with such
reforms.
Taking into the consideration the enforcement of foreign award, it can
be enforced in India under the multilateral international conventions
to which India is a party viz.
Geneva Convention of 1927
New York Convention of 1958
Further, the award must have been made in the country that has ratified
them. The Geneva convention had has ceased to apply those awards to
which the New York convention applies now.
The arbitration (protocol and convention) act, 1937 came into effect on
4th march 1937 and provided for the enforcement of foreign arbitral
award to which the Geneva Convention of 1927 applied.
Similarly, the foreign awards (Recognition and Enforcement) act, which
came into force on 30th November, 1961, had been enacted pursuant to
the New York convention of 1958 and it prescribed the law and
procedure for the enforcement of foreign awards in India to which they
said convention applied.
The United Nations commission on international trade law
[UNCITRAL] adopted in 1985 the model law on International
Commercial Arbitration. The General Assembly of the United Nations
has recommended that all countries give due consideration to the said
model law ,in view of the desirability of uniformity of law of arbitral
procedures and the specific needs of international commercial arbitration
practice.
An important feature of the said UNCITRAL model law and rules is that
they have harmonized concepts of arbitration and conciliation of
different legal systems of the world and thus contained provisions
universal application.
Though the said UNCITRAL model law and rules are intended to deal
with international commercial arbitration and conciliation, they could
with appropriate modifications, serve as a model for legislation on
domestic arbitration and conciliation.
The two previous enactments on such stands repealed and the arbitration
and conciliation act 1961,which is a comprehensive and uniform law
relating to arbitration which has been put on statute with a view to
provide an alternative forum which is less formal than the court
proceedings more effective ,speedy ,quicker and cheaper.
The procedure for enforcement of foreign awards can now be found in
Part [2] of the new 1996 act which maintains the same scheme for
enforcement albeit in a consolidation form.
MEAN ING OF ARBITRATION UNDER THE ACT
Arbitration means a reference to the decision of one or more persons,
either with or without an umpire of some matter or matters between the
parties as held in
COLLINS vs. COLLINS
The essence of arbitration is that the arbitrator decides the case and his
award is in nature of a judgment which is later on incorporated into a
decree of court as held in the case AKBARI AHMED vs. RAHAMAT
FOREIGN ARBITRATION
Foreign arbitration is an award or arbitration conducted in a place
outside India
The resultant award is an award, if sought to be enforced in India,
constitutes a foreign award,
Section 2(7) of the 1996 act states that an arbitral award made under \
Part [1] of the act shall be considered as a domestic award. Section 2(2)
mandates that Part [1] shall apply where place of arbitration is in India.
It follows a logical thing that where the place of arbitration is not in
India, Part [1] shall not apply to such arbitration. Thus an award
resulting from such arbitration shall not be considered a domestic award.
However in the case
BHATIA INTERNATIONAL vs. BULK TRADING S.A.
The Supreme Court held that the provisions of Part [1] would apply even
in cases of international arbitration held outside India. The decision has
been criticized for blatantly ignoring the unequivocal wordings of the
statute but nevertheless constitutes the prevailing law on the point.
INDIAN RESERVATIONS
India has made two reservations while ratifying the conventions namely,
that it would apply the conventions to the recognition and enforcement
of an award only if it was made in the territory of another state that is
bound by contract.
In pursuance of said reservations, the two implementing acts of 1937
and 1961 provided that the government of India would notify the names
of the countries to which the conventions would apply and also the
countries to which have made reciprocal provision for the enforcement
of Indian awards in those countries.
The second reservation was that the India would apply the convention
only to differences arising out of legal relationship which are considered
as commercial under the Indian laws. The concept of commercial
relationship takes place within its ambit all relationship which arises out
of or are ancillary or incidental to the business dealings between citizens
of two states. It takes within its fold all legal relationships pertaining to
international trade in all its form between the different states. Courts
have interpreted the term ‘commercial dispute’ under the two acts, in
certain decisions where the question was at issue.
It has been held that the provisions of the conventions and implementing
1937 and 1961 acts earlier and the 1996 act now are designed to sub
serve the cause of facilitating international trade and promotion
interpretation consistent with its literal and grammatical meaning. The
law as settled by the courts in the following cases is relevant even today
for the new 1996 enactments maintain the same scheme.
In R.M INVESTMENT AND TRADING CO. LTD.
Vs.
BOEING &CO.
It was held that consultancy services for the promotions of the sales of
aircraft manufactured by a foreign company are ‘commercial services’
In RAMJI DAYAWALA & SONS (P) LTD.
VS
INVEST IMPORT,
It was held that a party from a country which has not ratified the New
York convention of 1958 can’t maintain its application seeking any
benefit from the court under any enactment, made on the basis of the
conventions.
In N.T.P.C vs. SINGER & CO.
It was held that an award will not be tenable if it is opposed to the
public policy of the county in which it is to be enforced. Mere
contravention of the public policy may not attract the bar. It may not be
repugnant to the fundamental policy of Indian law or to justice or
morality.
FOREIGN AWARD - COMMERCIAL IN NATURE
CLAUSE (f) of sub section [1] of section 2 of the 1996 act defines
international commercial arbitration and it speaks about disputes arising
out of a legal relationship, whether contracted or not, considered as
commercial under the law in force in India. The question of commercial
relationship has been considered by various courts in a number of cases.
Emphasizing the ambit of an activity which takes the character of a
commercial relationship in the context of Article 301of the constitution
of India
The supreme court noted in the case
ATIABARI TEA CO. LTD. vs. STATE OF ASSAM
the trade doesn’t mean merely traffic in goods i.e. exchange of
commodities for money or other commodities in the complexities of
modern conditions in their sweep are included carriage of persons and
goods by road, rail, air and waterways, contracts, banking, insurance, etc
too numerous to be exhaustively enumerated which may be called
commercial intercourse.
On the above logic, the Supreme Court ruled that a consultancy services
for the promotion of sale is a commercial transaction and any dispute
arising there under is a commercial dispute. Therefore, as far as the
meaning of commercial is concerned, the absence of a formal definition
didn’t hinder an expansive interpretation.
PROCEDURE OF ENFORCEMENT UNDER CONVENTIONS
The procedure of enforcement of foreign awards under the
conventions are pretty much the same .Any person interested in
enforcing a foreign award may apply in a writing to any court
having jurisdiction over the subject matter of the award. In
addition to filing of the award and agreement on which it is based
as required by the conventions, the act requires that evidence as to
the award being a foreign award has to be filed.
The competent court in which the award is to be filed is a court
which will have jurisdiction over the subject matter of the award.
The application will be numbered and registered in the court as a
suit between the applicant as plaintiff and the other parties are
defendants. T he court will direct notice to be given to the parties,
requiring them to show cause as to why the award should not be
filed. The court on being satisfied that the foreign award being
enforceable under the act will pronounce judgments according to
the award. Upon the judgment so pronounced, a decree will follow
as in case of domestic awards. No appeal shall lie from such a
decree except in so far as the decree is in excess of or not in
accordance with h the award.
The various high courts, including the Bombay and Calcutta, have
made rules regarding the procedure and forms to be used for
application for the enforcement of foreign awards.
CHALLENGE TO FOREIGN ARBITRAL AWARD
The challenge under section 9 (b) of the Foreign Awards (Recognition
and Enforcement) Act, 1961 its not available when the arbitration clause
renders all dispute subject to laws of India though the arbitration
proceedings were held in England as per terms of said clause in as much
the crucial law operates during the continuance of the proceedings
before the arbitrator as held in the case SWANITOMO HEAVY
INDUSTRIES LTD. VS. O.N.G.C LTD.
ENFORCEMENT OF AWARD TO WHICH THE CONVENTINS
DONOT APPLY
The awards which are made in the countries that are not a party to
either of the conventions cannot be enforced with the same facility
as in the case of the foreign awards to which the conventions
apply.
Such foreign awards are however enforceable in India on the same
ground as they are applicable in United Kingdom. That is to say
that they can be enforced by an action before a court of law as held
in BADAT & CO. BOMBAY vs. EAST INDIA TRADING CO.
which said that such an award will be enforceable in India under
the common law on the grounds of justice, equity and good
conscience? The principles stated are as follows:-
that there was a contract between the parties where under
disputes between them were referred to arbitration to an
arbitral tribunal in a foreign country.
that award is in accordance with the terms of the agreement.
that the award is not invalid according to the law governing
arbitration proceedings obtaining in the country where award
was made.
That it was a subsisting award at the time of filing of the suit.
A foreign award will not be enforced by the courts in India if its
enforcement would be contrary to public policy or the laws in
India.
A foreign award will be deemed to be against the laws of India if it
violates, for instance, provisions relating to exchange, control,
import-export control or similar mandatory provisions.
AWARDS UNDER INDIAN PROCEDURAL AWARD
It has been held that the term award used in the Indian Arbitrationact,
1996, mean an award under the act while section 49 of the act
provides that a foreign award shall become a decree of the court
where the court is satisfied that the foreign award is enforceable, there
is there is no provision for the issue of a notice to the affected party
before the court expresses such satisfaction.
Section 50 0f the 1996 act provides for an appeal from an order
refusing to:-
refer the parties to the arbitration under section 45 and
enforce a foreign award under section 48.
Such appeal should lie in the court authorized to hear appeal from the
order arising thereto. There shall be no second appeal, subject however
to the right of appeal to the supreme court. There is no right of appeal
against the recording of satisfaction by the court under section 49.
AWARD MADE IN INDIA UNDER FOREIGN PROCEDURAL
LAWS
An award made in India under the foreign procedural law is one to
which neither the arbitration act nor the conventions will apply. Its
enforceability in India depends on the general laws.
AWARD MADE OUTSIDE INDIA UNDER FOREIGN
PROCEDURAL LAWS
An award made outside India under the foreign law is a foreign award. It
has to be enforced as per the provisions of the 1996 act now. In other
cases the award made is made in non-reciprocating country, its
enforceability in India depends on the general laws.
AWARDS MADE MOUTSIDE INDIA UNDER INDIAN
PROCEDURAL LAWS
If the award is the one to which the conventions applies, it has to be
enforced as a foreign award but as per the judgment of the supreme court
in N.T.P.C VS. THE SINGER & CO. and held that such an award but
will be a foreign award as a domestic award under the Part [1] of the act.
This decision has been criticised as it is given under the old act 1961.
Since the new act is enforced yet the decision still is good as it has not
been over-ruled.
NEW YORK CONVENTION AWARDS
Section 44 actually reproduces Section 2 of the Foreign Awards
[Recognition and Enforcement] Act, 1961.
The scope of this section is actually utilized by any party that is
interested in foreign awards to the court having jurisdiction over the
subject matter.
The differentiation between the awards must apply in writing to a court
and the foreign awards are only those where arbitration takes place in a
convention country.
Awards passed in an arbitration taking place in a non-convention
country would not be a domestic award as held in this case
BHATIA INTERNATIONAL
V/s
BULK TRADING S.A.
There has to be an agreement in writing between the parties for invoking
Section 45. However, if any of the parties feel that such an argument is
null or void or in-operative or incapable of being performed that party
has the right to approach the competent court as held in the case.
SHIVNATH RAI HAR NARAIN
V/s
ITALGRANI S.P.A
According to Section 45, Judicial Authority has power to refer parties to
arbitration. The application must be made in writing and at any time
before the judgment of the court is pronounced in the suit. Such
application should be made before the court where the suit is pending.
If there is valid arbitration agreement, the suit must be stayed and the
matter referred to arbitration as held in the case.
SOCIETE COMMERCIAL CEREALS etc.
V/s
S.P.C
If there is expressly excluded clause of arbitration the application for
reference is not maintainable as held in the case.
STC
V/s
OWNERS ETC IN THE VESSEL Vs.BALPIC CONFIDENCE
According to the Section 46, foreign award shall be binding for all
purposes on for all purposes, on the persons as between whom it was
made and may accordingly be relied on any of those persons by way of
defense, set off or otherwise ant legal proceedings in India.
Under Section 47, the manner for adducing evidence to prove that the
award is a foreign award.
When the award given in a foreign country (UKRAINS) is valid under
the law of the country the award being governed by the law of that
country then the enforcement of that award of India does not violate
public policy as held in the case.
TRANS OCEAN SHIPPING AGENCY PVT. LTD.
V/s
BLACK SEA SHIPPING
Section 48 provides that the enforcement of foreign award may be
refused at the request of other party against whom it is invoked, only if
that party furnishes Court some proof.
Also for the enforcement of the foreign award there is no need to take
separate proceedings one for deciding the enforceability of award to
make rule on the court or decree and other to take up execution after
that as held in the case
FUREST DAY LAWSON Ltd V/S JINDAL EXPORTS Ltd. 1
Under section 49, the court cannot directly enforce foreign award
acting under section 49 of the 1996 Act. Once the court under section 49
1 AIR 2001 SC 2293
declares it as enforceable there upon it would be deemed to be a decree
executable as per Civil Procedure Code as held in the case.
TOEPFER INTERNATIONAL ASIA (P) Ltd. V/S THAPAR IPAT
Ltd. 2
Court enforcing a foreign award cannot grant interest beyond the date of
abiter dictum. Under section 50, the court is authorized by law to hear
appeal from the following orders:-
If an order refers to –
Refer the party to arbitration
Enforce a foreign award
If under this section any order is passed in appeal, second appeal cannot
be filed against such order. But appeal to the Supreme Court can be
filed.
GENEVA CONVENTION AWARDS
2 AIR 1999 BOM 417
This convention has been reproduced more or less same as the New
York convention and has name sake relevance because of the fact that
this cannot be applied to the foreign awards under the New York
Convention.
ENGLISH ARBITRATION ACT 1950 – FOREIGN AWARDS
Under this provision is made for the enforcement of arbitral awards by
the Arbitration Act 1950, which actually considerate the Arbitration Act
1889-1934.
The background of this provision is afforded by a protocol of 1923 and a
convention of 1927, both of which were signed by Great Britain. The
convention deals with the enforcement in one country of arbitral award
that is made in other country.
The protocol applies between people subject to jurisdiction of such
powers as may be declared by orders in council to the parties of
convention on the execution of Foreign Arbitral awards set out in the
second schedule to the Arbitration Act, 1950.
In England, foreign award means one which
made in pursuance of agreement under the protocol of 1923
made between the person subject to the jurisdiction of jurisdiction
of signatory states of 1927 convention
made in the territory to which the convention has been extended by
order in council.
Where the parties choose to refer a dispute to arbitration and if no case is
pending with respect to the subject-matter in disputes, it is not necessary
that the parties should signify their consent to the award before the same
is enforced, as held in the case
NARAIN DAS VS. VALLABH DAS
There are some conditions to be fulfilled before, for the
enforceability of foreign awards. It must have been
made in pursuance of an agreement for arbitration valid by the law
by which it was governed
made by the tribunal provided by the agreement
made in conformity with the law governing the arbitration
procedure
become final in the country it was made in respect of a matter
which may be lawfully be referred to arbitration under the English
law and its enforcement may not be against the public policy or
the to the law of England.
The second schedule of the Arbitration (protocol and convention) act,
1937 lays down the convention on the execution of the foreign
arbitral award.
In England, the award can’t be final if:-
the proceedings for the testing of its validity are pending in the
country in which it was made.
It can’t be enforced if it doesn’t deal with all the questions referred to
the arbitration or exceeds the scope of arbitration agreement or if the
party against whom it was sought wasn’t given sufficient notice of the
arbitration proceedings or was under the legal incapacity or was not
properly represented.
More or less, it is not final when the rules of natural justice were not
adhered to. Proper chance of defending one’s case should be given to a
party.
TIME LIMIT
The act doesn’t 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 limitations would be governed by the residual
provisions under the limitation act i.e. the period would be three years
from the date when the right to apply for the enforcement accrues. The
Bombay high court have held that the right to apply would accrue when
the right i.e. the award is actually received by the applicant as in the case
ORIENT MIDDLE EAST LINES LTD. &ANOTHERS
VS.
M/S BRACE TRANSPORT CORPORATION OF MONROVIA
POST ENFORCEMENT FORMALITIES
In the case FUREST DAY LAWSON LTD
Vs.
JINDAL EXPORT LTD
it was held by the Supreme Court that once the court determines that a
foreign award is enforceable, it can straight away be executed as decree.
In other awards, no other application is required to convert the judgment
into a decree. The court clearly stated in its judgment that “Once the
court decides that the foreign award is enforceable; it can proceed to
take further effective steps for execution of the same. There arises no
question of making a foreign award as a rule of court/decree again. If the
object and purpose can be served in the same proceedings, it doesn’t
result in the multiplication of proceedings. It is also clear from the
objectives contained in the Para 4 of the statements of objects and
reason, section 47 to 49 and the scheme of act that every final arbitral
awards is to be enforced as if it were a decree of the court. In our
opinion, enforcement of the award, there is no need to take separate
proceedings, one for deciding the enforceability of award to make rule
of the court or decree and other to take up execution thereafter. In one
proceeding, the court can enforce a foreign award and deal with the
matter.” One of the interesting features of the enforcement of a foreign
award is that there is no statutory appeal provided against any decision
of the court, rejecting objections to the award. An appeal shall lie only if
the courts hold the award to be non-enforceable. Hence a decision
upholding an award can’t be appealed against. This is Enforcement of a
foreign award is that there is no statutory appeal provided against any
decision of the court rejecting objections to the above. And appeal shall
lie only if the courts hold the award to be non-enforceable. Hence a
decision upholding an award cannot be appealed against this is in some
sense is a negative aspect and can be considered as a loophole.
However, a discretionary appeal would lie to the supreme court of India
under the Article 136 of The Constitution of India. Such appeals are
entertained only if the court feels that there is a question of fundamental
importance or public interest.
CONCLUSION
Viewed in its totality India does not come across as a jurisdiction which
carries an Anti-arbitration bias or more significantly which carries an
Anti-foreign bias. The number of arbitration in the tribunal,
notwithstanding the interventionist instincts and expanded judicial
review, Indian Courts do not cross the limits and refrain themselves
from interfering with the arbitral awards. Judged on its touchstone India
qualifies as an arbitration friendly jurisdiction.