The Supreme Court has recently ruled that two Indian parties can arbitrate outside India and the resulting award will be valid and enforceable in India.
Disputes arose between the parties under an agreement for the purchase of convertors. A settlement agreement was executed which provided for ICC arbitration with Zurich as the seat of arbitration. Since no governing law was specified, the parties were governed by the law of the seat, ie Swiss law.
The Tribunal's jurisdiction was challenged on the ground that Indian parties could not choose foreign law. The Tribunal held that there was no bar. The arbitration was held at Mumbai to save costs.
The Tribunal ruled in favour of the Respondent, who then sought to enforce the award. Enforcement was resisted on the basis that it was against public policy for two Indian parties to choose a foreign seat and law.
The Supreme Court held that Indian parties are free to choose a seat outside India and that there is no bar under the Arbitration & Conciliation Act 1996 against choosing a foreign law as the law of the contract. It clarified that the resultant award would be a foreign award and enforceable in India under Part-II of the Act. Indian courts would also be entitled to grant interim relief in relation to such awards.
The decision reaffirms party autonomy and clarifies the issue regarding Indian parties choosing foreign law following the conflicting judgments1 that have been passed by various courts.
* Civil Appeal No. 1647 of 2021.
1. TDM Infrastructure Pvt Ltd v Union of India (2014) 7 SCC 603, Addhar Mercantile Private Limited v Shree Jagdamba Agrico Exports Pvt Ltd 2015 SCC Online Bom 7752, Sasan Power Limited v North American Coal Corporation 2015 SCC OnLine MP 7417, Atlas Export Industries v Kotak & Company AIR 1999 SC 3286, GMR Energy Limited v Doosan Power Systems India 2017 SCC OnLine Del 11625.
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