India: SC On The Significance Of Seat Of Arbitration

Introduction

Recently, the Hon'ble Supreme Court of India (Supreme Court) in the case of Imax Corporation versus E City Entertainment India Private Limited (Civil Appeal No. 3885 of 2017 decided on 10 March 2017) has affirmed the significance of the relationship between the seat of arbitration and the law governing the arbitration contract upholding that the parties in the case intended to expressly exclude the provisions of Part I of the Arbitration and Conciliation Act, 1996 (1996 Act).

Background

Imax Corporation (Imax) and E City Entertainment India Private Limited (E City) had entered into an agreement dated 28 September 2000 for the supply of large format projection systems in cinema theatres. The arbitration clause in the agreement read as follows:

"This Agreement shall be governed by and construed according to the laws of Singapore, and the parties attorn to the jurisdiction of the courts at Singapore. Any dispute arising out of this master agreement or concerning the rights, duties or liabilities of E-City or Imax hereunder shall be finally settled by arbitration pursuant to the ICC Rules of Arbitration."

Imax filed a request for arbitration with International Chamber of Commerce (ICC). While Imax suggested Paris or France to be the proposed venue for the arbitration, E City suggested Singapore to be the venue for arbitration in their answer to request for arbitration. The ICC court of arbitration considered the parties request for venue and under Article 14(1) of the ICC Rules of Arbitration (ICC Rules) decided to fix London as the juridical seat of the arbitration.

The arbitral tribunal passed 2 (two) partial final awards and 1 (one) final award. All the three arbitral awards recorded that the juridical seat of arbitration is London. All the three arbitral awards were belatedly challenged under Section 34 of the 1996 Act before the Hon'ble Bombay High Court by E City along with an application for condoning the delay in challenging the arbitral awards. The delay was condoned. The decision to condone the delay was challenged before the Supreme Court.

While deciding the limited question of condoning the delay, the Supreme Court went a step further and decided if the challenge to the arbitral awards filed under Section 34 of the 1996 Act was maintainable as that would ultimately also decide the question of condoning the delay.

Judgment

The Supreme Court held that since the parties had agreed to settle the disputes through the mechanism of ICC Rules, the ICC Rules would have to be construed as being part of the arbitration clause.

Further it held that while the parties had not made a conscious choice regarding the place of the arbitration, but by agreeing to have the disputes settled according to ICC Rules, the parties had also accepted ICC's decision to choose London as the place of arbitration. According to the Supreme Court this was a key indicator of the parties' intent to exclude Part 1 of the 1996 Act.

Even otherwise, the Supreme Court was of the view that since the parties had decided to have the agreement governed by and construed according to the laws of Singapore, the parties had agreed to exclude the applicability of Part 1 of the 1996 Act.

Supreme Court further emphasized that a significant determinant in each case is the agreement of the parties as to the place of arbitration and where the arbitration actually took place. Since the arbitration was held in London without any protest and the arbitral awards were made in London, E City could not claim that Part 1 of the 1996 Act had any applicability.

On the above parameters, the Supreme Court was of the view that the parties had clearly agreed to exclude the provisions of Part I of the 1996 Act and resultantly it dismissed the petition filed by E City under Section 34 of the 1996 Act before the Bombay High Court.

Khaitan Comment

The Supreme Court has emphasized the importance of the place/seat of arbitration in determining the critical question of jurisdiction for the purpose of challenge to the arbitral award. In the course of all correspondence as well as in commercial contracts it is important to categorize that the place/seat of arbitration is different than the venue of arbitration.

In the above case, while the arbitration clause provided that the parties had decided the agreement to be governed and construed according to Singapore laws and the courts at Singapore to have jurisdiction, the Supreme Court however has refused to consider where the challenge to the arbitral awards would lie viz. Singapore as originally agreed by the parties or London, being the place of arbitration deemed to be agreed upon by the parties, leaving the same to be decided in a fresh round of litigation.

The content of this document do not necessarily reflect the views/position of Khaitan & Co but remain solely those of the author(s). For any further queries or follow up please contact Khaitan & Co at legalalerts@khaitanco.com

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