India: Relationship Between Lex Fori & Lex Arbitri

Last Updated: 4 July 2017
Article by Kunal Kumar and Ruchika Darira

Most Read Contributor in India, July 2017

Lex Fori means the law of Court in which the proceeding is brought whilst Lex Arbitri is the law of the place where the arbitration takes place.

The Hon'ble Supreme Court of India in the case of Imax Corporation vs. E City Entertainment India Private Limited decided on 10 March 2017 (Civil Appeal No. 3885 of 2017) has affirmed the significance between of the relationship between the Lex Forti and Lex Arbitri upholding that the parties intended expressly exclude themselves from Part-I of the Arbitration & Conciliation Act, 1996.


On 28.09.2000, the Petitioner and the Respondent entered into an agreement for supply of large format projection systems for cinema theatres to be installed all across India.

The agreed arbitration clause constituted in the agreement read as under:

"This Agreement shall be governed by and construed according to the laws of Singapore, and the parties attorn to the jurisdiction of the courts of 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."

As it is evident from the above stated arbitration clause, the parties failed to decide on the seat of the arbitration. The Appellant filed a request invoking arbitration with the ICC on 16.06.2004 and claimed for damages. The ICC rendered two partial awards dated 11.02.2006 and 24.08.2007 and the final award was delivered on the 27.03.2008. Since under the arbitration clause, the seat of arbitration was not chosen, the ICC fixed the juridical seat of arbitration as London under the Article 14(1) of the ICC Rules. It was held that:

"As well be noticed, no provision was made for a venue for any arbitration contemplated by Clause 14, but subsequently the court of the ICC decided on the 8th of October, 2004 to fix London as the juridical seat of the arbitration in accordance with the powers vested in the court Under Article 14 of the ICC Rules. Accordingly, this is an arbitration to which Part-I of the English Arbitration Act 1996 applies."

Subsequently, on 11.02.2006 a partial award was passed declaring that the Respondent was in breach of the said agreement and was liable to pay damages to the Appellant. On 05.09.2006, the Respondent objected on the ground that the Appellant did not hold any legal status and the law firm representing the Appellant is not authorized to pursue the arbitration. The reasons for objection were stated as below:

"The seat of this arbitration is London. Therefore, English law determines the effect of any want of capacity suffered by "Imax Ltd" under the Canadian law as a result of its amalgamation into Imax Corporation with effect from 1st January, 2001."

The second partial award was delivered on 24.08.2007, accordingly the tribunal determined the quantum of the of damages payable for an amount $9,406,148.31. The final award was delivered on the 27.03.2008 on the issue of interest and costs. The tribunal awarded a sum of $1,118,558.54 by way of interest and further levied a sum of $ 2,512.60 per day from 01.10.2007 until the payment was made. Additionally, the tribunal also awarded the cost for arbitration as fixed by the ICC and also the costs towards the attorney's fees, expert fees related expenses for $ 400,000 and $ 384,789.21, respectively.

Aggrieved by the award dated 27.03.2008, the Respondent challenged the award under Section 34 before the Hon'ble Bombay High Court. The Hon'ble High Court upheld the maintainability of the petition under Section 34 of the Act.

Subsequently, the Appellant in the present case filed an appeal before the Hon'ble Supreme Court of India challenging the interim order passed by the Bombay High Court. The question before the Hon'ble Supreme Court of India was whether the award could be challenged before any of the Courts in India or not.

The Supreme Court held that firstly; if the parties had to resort to the court they could only approach the Courts of Singapore as per the clause. Thus any nonarbitrable dispute that may arise from the agreement or any dispute regarding the correctness or validity of the award could only be adjudicated by the Courts of Singapore.

Further, the intention of the parties to exclude Part-I of the Arbitration & Conciliation Act, 1996 was discussed. It was held that the governing law was Singaporean law and the rules as agreed between the parties were ICC Rules. The ICC had chosen the seat of arbitration as London. Importantly, it was held that the parties made an express choice regarding the conduct of arbitration i.e. the ICC Rules. Since the parties had mutually agreed for the ICC, it could be presumed that they were aware of the provision of the Rules that the place of arbitration will be decided in accordance with the ICC Rules. The Court held that the Parties intention to exclude Part-1 of the Arbitration & Conciliation Act, 1996 can be inferred from the agreement wherein they had decided the arbitration rules as ICC Rules and thus a willingness to conduct the arbitration outside India. Additionally the Supreme Court also referred to a case decided by the Supreme Court of Sweden from a passage in Redfern & Hunter:

" particular provision concerning the applicable law for the arbitration agreement itself was indicated [by the parties]. In such circumstances the issue of the validity of the arbitration Clause should be determined in accordance with the law of the state which the arbitration proceedings have taken place, that is to say, Swedish Law."

Further, the relation between Lex Arbitri & Lex Fori:

"Parties may well choose a particular place of arbitration precisely because its lex arbitri is one which they find attractive. Nevertheless, once a place of arbitration has been chosen, it brings with it its own law. If that law contains provisions that are mandatory so far as arbitration are concerned, those provisions must be obeyed. It is not a matter of choice any more than the notional motorist is free to choose which local traffic laws to obey and which to disregard."

After concluding, the Hon'ble Supreme Court of India held that that Part – I had no application as the parties chose and agreed the arbitration to be conducted outside India.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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