India: International Commercial Arbitrations- A Critique Of Bharat Aluminium Co. vs. Kaiser Aluminium Technical Services Inc

Last Updated: 5 October 2012

By Vinay Vaish, Advocate, Supreme Court of India, and Partner Vaish Associates Advocates ( vinay@vaishlaw.com) and Sandhya Iyer, Partner Vaish Associates Advocates (sandhya@vaishlaw.com)

A critique of Bharat Aluminium Co. vs. Kaiser Aluminium Technical Services Inc1

The question of the applicability of the provisions of Part I of the (Indian) Arbitration & Conciliation Act, 19962 (hereinafter referred to as the "Act") to arbitration proceedings having their seat outside India was considered by the Constitution Bench of the Apex Court of India in the case of Bharat Aluminium Co v. Kaiser Aluminium Technical Services Inc, Civil Appeal No. 7019 of 2005, (hereinafter referred to as the "Balco Case") on 6th September, 2012, which has drastically changed the legal scenario of International Commercial Arbitrations having their seat outside India. In the Balco case, the Hon'ble Supreme Court has overruled the judgment of the same Court as pronounced in the case of Bhatia International v Bulk Trading SA, (2002) 4 SCC 105..

The current status of legal scenario of International Commercial Arbitrations having their seat outside India can be summarized as under:

I. No applicability of Part I of the Act in respect of the International Commercial Arbitrations having their seat outside India

Part I of the Act deals with (a) the commencement of arbitration; (b) the conduct of arbitration; (c) the challenge to the award; and (d) the recognition or enforcement of the award, in relation to arbitration proceedings having their seat in India.

The Apex Court in the Balco Case has stated that Part I of the Act would apply only when the seat of arbitration is in India and it would not be applicable to international commercial arbitrations having their seat outside India.

II. No Interim Reliefs available to the Parties of International Commercial Arbitrations having their seat outside India

Part I of the Act is applicable only to arbitrations having their seat in India. After the judgment of the Apex Court in Balco Case, the provisions of Part I of the Act, including the power of the Court to grant interim relief under section 9 of the Act, will not be applicable to the international commercial arbitrations having their seat outside India. Further, the Apex Court has also held that an inter-parte suit merely for an interim relief in an arbitration pending outside India would not be maintainable under the current position of law in India.

This principle takes away the much required benefit that was available under section 9 of the Act (application for interim relief). In respect of international commercial arbitrations having their seat outside India, where the subject matter of the dispute is situated in India, no party can now seek any interim relief under Part I of the Act. Further, there is no provision either under the Act or under the (Indian) Code of Civil Procedure, 1908 which enables enforcement of interim orders of foreign courts or interim orders of an arbitration tribunal having its seat outside India.

Therefore, in such an event, the entire purpose of the arbitration proceedings may get defeated even if a favorable award is passed, as a party (against whom, the award has been passed) having assets in India, can in the interim, dispose of or encumber such assets with a view to defeating any award that may be passed against them outside India. An amendment to this effect would be quintessential to ensure that the interest of a party is safeguarded.

III. Indian Courts can no longer set aside foreign arbitral awards

As a result of non-application of Part I of the Act on international commercial arbitrations having their seat outside India, such awards can no longer be set aside as per the provisions of section 34 of the Act. The Indian Court can refuse to enforce such foreign arbitral awards only on grounds as provided under Part II of the Act. Part II of the Act regulates arbitration only in respect of commencement and recognition or enforcement of foreign awards.

This is a welcome move as this ensures lower level of intrusion by the Indian Courts when dealing with international commercial arbitrations having their seat outside India

IV. Only the Courts, where the seat of arbitration is situated, have competence to annul Foreign Awards

Only the Courts of the country, where the seat of arbitration is situated, have the competence to annul a foreign award.

In short, the Act does not confer any jurisdiction on the Indian Courts to annul an award made in international commercial arbitration having its seat outside India.

V. "Seat" and "Venue" of arbitration

The regulation of conduct of arbitration and challenge to an award would have to be done by the Courts of the country in which the seat of arbitration is located as such Court would be the supervisory court possessed with the power to annul the award.

The distinction between "seat" and "venue" of the arbitration assumes significance when foreign location is fixed as place of arbitration with the Indian Act as the curial/procedural law governing the arbitration proceedings. In such a scenario, the Court will determine as to whether the place of arbitration was intended to be "seat" of arbitration or merely a "venue" for the arbitration. In case, where the foreign location was intended to be the "seat" of arbitration, Part I would be inapplicable to the extent it is inconsistent with arbitration law of the "seat".

VI. No Scope for Recognition and Enforcement of Non-Convention Awards:

The Apex Court in the Balco Case has held that Part I of the Act would have no application to international commercial arbitrations having their seat outside India. Therefore, awards passed in international commercial arbitrations seated in a country which is not a signatory to the New York Convention or the Geneva Convention ("Non-Convention Awards") are neither covered under Part I nor under Part II of the Act.

This aspect requires attention of the legislature, as this judgment provides no scope for enforcement of such awards in India under the Act. It is possible here that the intent of legislature was to award a superior status to convention awards vis-a -vis non convention awards. For the purpose of enforcement of such an arbitral award, a party has to file a civil suit in India.

VII. Prospective Application:

The application of the principles laid down in the Balco Case would be made applicable upon arbitration agreements executed on or after 7th September, 2012.

In light of the aforesaid, it is advisable for the parties who have executed arbitration agreement(s) on or prior to 6th September, 2012, providing for international commercial arbitrations having their seat outside India, to review the same in the context of the Balco Case and to amend the agreement(s), if necessary, to avoid any ambiguity in future.

Footnotes

1. http://www.sci.nic.in/outtoday/ac701905p.pdf

2. http://www.ficci-arbitration.com/htm/acts.pdf

© 2012. All rights reserved with Vaish Associates Advocates, 1st FLoor, Mohan Dev Building, 13 Tolstoy Marg, New Belhi-110001, India

The content of this article is intended to provide a general guide to the subject matter. Specialist professional advice should be sought about your specific circumstances. The views expressed in this article are solely of the authors of this article.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions