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The Indian Ministry of Law and Justice has declared that
arbitral awards made in China (including Hong Kong and Macau) may
be recognized and enforced by Indian courts. This will come into
effect once the Indian Central Government has provided notification
in the Official Gazette. The addition of China to India's
official list of so-called "gazetted" States, which
currently contains fewer than one third of the signatory States to
the 1958 Convention on the Recognition and Enforcement of Foreign
Arbitral Awards (the New York Convention), will increase the appeal
of arbitration centers in China, and in particular Hong Kong, in
the context of disputes with an Indian connection.
Recognition and Enforcement of Arbitral Awards in India
India and China are both parties to the New York Convention,
having ratified it in 1960 and 1987 respectively. The New York
Convention requires inter alia that Contracting States
recognize and enforce arbitral awards made in other States, subject
to the declarations and reservations of Contracting States.
India, together with numerous other signatory States, signed the
New York Convention subject to the "reciprocity" and
"commercial" reservations, which provide respectively
that they will apply the New York Convention only to: (i) awards
made in the territory of other Contracting States; and (ii)
differences arising out of legal relationships that are considered
commercial under national law.
The Indian Arbitration and Conciliation Act 1996 (the Act)
governs the enforcement of "foreign awards" by Indian
courts. In relation to India's reciprocity reservation to the
New York Convention, the Act requires the Central Government, via a
notification in the Official Gazette, to specify (or gazette) a
State before an arbitral award made in that State will be
recognized and enforced by Indian courts. Of the 146 parties to the
New York Convention, currently only 44 have been gazetted by the
Central Government of India.
China Will Finally be "Gazetted"
On March 19, 2012, the Department of Legal Affairs of the Indian
Ministry of Law and Justice issued a notification pursuant to the
Act declaring that it would add China (including Hong Kong and
Macau) to the list of gazetted States. This notification is
expected to be published in the Official Gazette shortly. Upon
notification in the Official Gazette, arbitral awards made in
China, Hong Kong and Macau must be recognized and enforced by
Indian courts.
The absence of China from the list of gazetted States was widely
considered to be an anomaly by the international arbitration
community, not least due to the popularity of Hong Kong as a
well-established center for arbitration.
Implications
In light of India's notification, and the consequent
recognition of and ability to enforce arbitral awards made in China
in the Indian courts, the appeal of China, and in particular of
Hong Kong, as an arbitration center for disputes with an Indian
connection will increase. Consequently, there will be a much more
evenly balanced choice for those deciding between the two popular
Asian arbitration centers of Hong Kong and Singapore (which was
gazetted some time ago) and the institutions based in those two
jurisdictions: the Hong Kong International Arbitration Centre
(HKIAC) and the Singapore International Arbitration Centre
(SIAC).
HKIAC has historically been and currently remains more popular
for parties outside of China than the principal arbitration center
in mainland China, the China International Economic and Trade
Arbitration Commission (CIETAC, also known as the Court of
Arbitration of the China Chamber of International Commerce).
However, CIETAC, headquartered in Beijing, has recently
strengthened efforts to appeal more widely to those outside China.
These efforts include the adoption of its new arbitration rules,
which came into effect on May 1, 2012 and seek to conform with the
current practice of international arbitration and reflect recent
changes to the rules of other major arbitration centers. Some of
the more significant changes to the CIETAC rules include the
provision of flexibility for CIETAC to choose a non-Chinese
arbitral seat if appropriate and the removal of the provision
making Chinese the default language of an arbitration. The new
CIETAC rules and the recognition and enforcement of its awards
within India may result in parties being more attracted to CIETAC
when selecting an arbitration center.
Facing an ever-growing range of choices for arbitration centers,
it is important that clients seek specific advice in relation to
the suitability of each option within Asia (including Singapore,
Hong Kong and mainland China) and elsewhere.
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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