The Indian Supreme Court has issued an important decision that
affects the enforceability of foreign international arbitration
awards in India.
The decision in Bharat Aluminium Co. v Kaiser Aluminium
Technical Services overrules previous controversial decisions from
the Indian Supreme Court in the cases of Bhatia International v
Bulk Trading S.A.in 2002 and Venture Global Engineering v Satyam
Computer Services Limited in 2008. In those cases, the Court held
that, unless the parties to an arbitration agreement expressly or
impliedly agreed to the contrary, the Indian courts had similar
jurisdiction in foreign-seated arbitrations as they had in domestic
arbitrations seated in India, under Part I of the Arbitration and
Conciliation Act 1996 (the Arbitration Act).
As a result of these earlier decisions, Indian courts, in a
number of instances, have granted interim measures in respect of
foreign-seated arbitrations. In the case of Venture Global, the
Supreme Court was prepared to set aside an award made in a foreign
seated arbitration, in contradiction to the underlying philosophy
and objectives of the New York Convention on the enforcement and
foreign arbitral awards and the UNCITRAL Model Law.
In Bharat, the Supreme Court overruled the Bhatia and Venture
Global decisions on the basis that Part I of the Arbitration Act
does not apply to foreign seated arbitrations. The Court therefore
refused to set aside two arbitration awards made by a tribunal
seated in London.
It was held that arbitrations seated outside of India are dealt
with by Part II of the Arbitration Act, alone, and that the Indian
courts had no authority to annul arbitration awards made outside of
India. It was further held that the law of the seat of the
arbitration will govern the conduct of the arbitration.
The Effect of the Decision
The decision in Bharat means that it will no longer be necessary
for the parties to an arbitration agreement to expressly exclude
the application of Part I of the Arbitration Act to arbitration
proceedings held outside of India.
The decision, in this respect, is to be welcomed and is
consistent with the intention behind the provisions of the New York
Convention and the UNCITRAL Model Law.
However, one disappointing aspect of the decision in Bharat is
that it will only apply prospectively: i.e., only to arbitration
agreements that are concluded on or after September 6, 2012, when
the decision was handed down. Accordingly, the previous decisions
of the Supreme Court that Part I of the Arbitration Act applied to
both Indian and foreign-seated arbitrations will continue to apply
in respect of arbitration agreements concluded before that date,
unless the parties have expressly or impliedly agreed that Part I
should not apply.
This means that the Indian courts could continue to apply the
principles enunciated in the decisions of Bhatia and Venture Global
for many years to come, and seek to assert jurisdiction in
foreign-seated arbitrations and at worst, annul arbitration awards
made in foreign jurisdictions.
The decision in Bharat is of great significance and does much to
allay the concerns previously held that India was not an
arbitration-friendly jurisdiction. The decision is consistent with
the ethos of the New York Convention and UNCITRAL Model Law, which
was not necessarily the case with previous decisions of the Indian
Supreme Court. However, as a result of the prospective application
of the decision to arbitration agreements made on or after
September 6, 2012, uncertainties will remain as to the extent to
which the Indian courts will seek to interfere in foreign seated
arbitrations conducted under arbitration agreements concluded
before that date.
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This article provides information and comments on legal
issues and developments of interest. The foregoing is not a
comprehensive treatment of the subject matter covered and is not
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