The enforceability of foreign awards in India has been a constant discussion in the context of understanding the provisions as contained in Part I and Part II of the Arbitration & Conciliation Act 1996 (Act). However, the recent judgement of the Hon'ble Apex court in PASL WIND SOLUTIONS PRIVATE LIMTIED V. GE POWER CONVERSION INDIA PRIVATE LIMITED CIVIL APPEAL NO. 1647 OF 2021 has widened the scope of arbitration and has further clarified the true purpose of enforcement of foreign awards under the Act in cases where two parties situated in India opt for a foreign seated arbitration.
The Apex court has answered multiple questions inter alia the enforceability of foreign awards, the autonomy of parties to decide their seat of arbitration and the manner in which they wish to settle their disputes, the applicability of the Rules of ICC when the parties have chosen to do so in terms of their arbitration agreement and more importantly the scope of section 9 of the Act for seeking interim reliefs. This judgement has tremendously expanded the scope of enforceability of foreign awards vis-à-vis the autonomy of parties in the context of section 44 of the Act which requires that for an award to be falling within the ambit of a foreign award requires the following pre-conditions to be met – a) the dispute ought to be a commercial dispute, b) the parties ought to have executed an arbitration agreement, (c) it must be a dispute that arose between "persons" as contained under the Act (without regard to their nationality, residence or domicile) & d) the country chosen by the parties ought to be a signatory to the New York Convention. This understanding of section 44 of the Act makes it clear that the reference to foreign award in this context is "place-centric" as against the concept as envisaged under section 2(f) of the Act. Pertinently. in the case pending before the Apex court the parties had agreed for Zurich to be the seat of arbitration to settle the disputes and the rules of ICC were to be made applicable in terms of the said agreement. In this regard, PASL strongly contented that the said choice of Zurich to be the seat of arbitration was in violation of section 23 and 28 of the Indian Contract Act. However, the Supreme Court had balanced the concept of freedom of contract as against the concept of public policy as was envisaged under section 28 of the Indian Contract Act. The said observation of the Apex court is of utmost significance because it not only perceives the true meaning of public policy and public harm but it also enhances the concept of party autonomy at the time of designating a seat of arbitration outside India even when the parties happen to be within the territorial jurisdiction of the State.
Here, it would be beneficial for us to understand that the philosophy of law lies within its dynamic nature as it changes with the demands arising from our society and various commercial transactions (as is applicable in the present case). Given this concept, the judgement passed by the hon'ble Supreme Court in PASL (supra) can be termed to be a significantly dynamic judgement for this purpose as it ascertains that party autonomy and freedom of contract are essentials that ought to be construed in arbitrations. On the contrary a restrictive approach on enforceability of such foreign awards may not only burden the parties but it would not have served the very statement and objective of the Act. Having said so, it would be beneficial to summarize certain observations of the court that can be elucidated from the aforesaid judgement:
- The jurisdictional seat of Zurich was conferred in terms of Clause 6 of the Settlement agreement between the parties and the same was approved by the Tribunal. However, the issue in respect to Mumbai being the seat is only based on the concept of forum conveniens. The same was done since the parties and their counsels were all based at Mumbai.
- The issues in respect of enforcement of foreign awards in terms of Part I and Part II of the Act are mutually exclusive and are independent of each other and hence the difference between section 2(f) and 44 of the Act. This aspect is what efficiently widens and strengthens the enforceability of foreign awards in India in the context of applicability of section 44 of the Act.
- In as much as the application under section 9 of the Act is concerned, the issue is to be decided by the court within which the party's assets are situated and hence, the dismissal of the application under section 9 by the Gujarat High Court does not stand good in law.
- The challenge with respect to the enforceability of foreign awards in the context of section 23 and 28 of the Indian Contract Act holds no ground whatsoever as the freedom of contract does not cause harm to the public at large. In fact it provides an opportunity to parties to decide the manner in which they wish to resolve their disputes.
Amongst various other observations that were part of the aforesaid judgement, this article has tried to throw light on the commercial freedom of contract and arbitration that is to be provided to the parties. This judgement has given a positive ruling on the aspect of party autonomy and is well within the spirit and scope of the statutory provisions as laid down in the A&C Act. It emphasizes as to how two parties based in India have the liberty to choose their seat of arbitration and the provisions they would be governed under. By widening the scope of party autonomy, this judgement has set an important precedence thereby putting an end to the otherwise contradictory positions taken by several courts in the country and is therefore binding in nature. Pertinently, commercial disputes between companies are the backbone of arbitrations and hence the spirit of this judgement has allowed various companies having international presence to adjudicate their disputes at any seat of their choice in terms of the arrangement that are mutually agreeable thereby providing an effective mechanism to settle disputes which in fact, is the real essence of alternate dispute resolution.
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