Scope of Judicial Interference in International Commercial Arbitration
International commercial arbitration is an alternative method of resolving disputes between private parties arising out of commercial transactions conducted across national boundaries that allows the parties to avoid litigation in national courts. However, there is a distinction in the process for enforcement of an award based on the seat of arbitration. While the enforcement and execution of an India - seated arbitral award (“domestic award”) would be governed by the provisions of Part I of the Act[1], enforcement of foreign - seated awards (“foreign award”) would be governed by the provisions of Part II of the Act[2] which subsequently is in consonance with the New York Convention[3] and Geneva Convention respectively[4]. India is a signatory to both .
Section 44 of the Arbitration and Conciliation Act 1996
defines “foreign award” as an arbitral award, arising out of legal
relationships which are considered as commercial under the law in force in
India, in one of such territories which the Central Government notifies to the
territories to which the said Conventions applies. Therefore any foreign award
received by a party/country under the ICC arbitration regime who is a signatory
to either New York Convention or the Geneva Convention can get the same
enforced within the territory of India.
APPROPRIATE COURT/ FORUM
FOR APPLICATION
Where the subject matter of a Foreign Award is money, the
jurisdiction for the execution of arbitral award will be with the Commercial
Division of those High Courts, in whose jurisdiction, the assets of the
opposite party shall lie and otherwise the jurisdiction will lie with the
Commercial Division of those High Court which would have jurisdiction if the
subject matter of the award was a subject matter of a suit.
EFFECTIVE ENFORCEMENT
Section 47(1)[5]
of the Act of 1996 specifies that a party, in whose favour the award is issued,
shall make an application under section 47 and shall produce documents and
evidence along with the application.
Secondly, the other party is to
raise a defence as per section 48 with evidence and thirdly, the court, if it
is satisfied with the evidence produced by the parties, decide on the
enforceability of the award and enforce it under section 49 of the Act.
The Supreme court in P.E.C Limited
Versus Austbulk Shipping [6]has
interpreted the word ‘shall’ has to be read as ‘may’ and further observed that such an
interpretation would mean that a party applying for enforcement of the award
need not necessarily produce before the court a document mentioned therein “at
the time of the application”. Nonetheless, it further clarified that such
interpretation of the word “shall” as “may” is restricted “only to the initial
stage of the filing of the application and not thereafter.”
Section 48 specifies certain
conditions for enforcement of foreign awards. The other party also can raise a defence as per
section 48 with evidence. The Courts can though intervene only to limited
extents as stated above and shall not be entitled to go into the merits of the
case as the same has not been provided in the scheme of the Act. The concerned court, if it is satisfied with the evidence
produced by the parties, decide on the enforceability of the award and enforce
it under section 49[7] of the Act like a decree
of the Court and shall issue warrants of attachment/ execution.
In case of a refusal for enforcement an appeal
would lie only to the Supreme Court under Article 136 on very limited
grounds. Such principles hold the value of mutual recognition of arbitral
awards in International Arbitrating Community. In cases of execution of such Awards which are not passed in
Countries with whom India has a reciprocal treaty, the Award has to be filed as
a regular civil suit and the proceedings would be the same as are applicable to
a civil suit filed in India.
WHAT DO THE CONVENTIONS
SAY?
As discussed above, foreign awards are majorly of two kinds,
New York Convention Awards (Section 48) and Geneva Convention Awards (Section
57) of Arbitration and Conciliation Act, 1996. It is relevant to mention here
that both the awards are two be enforced by the Indian Courts, on certain
conditions which are mentioned in Section 48 and Section 57 respectively. The
different type of Awards which are enforceable include Money Award, Award Containing
Injunction and Declaratory Awards. The said conditions are mentioned as under:
Conditions for Enforcement of New York Convention Awards:
Ø That the subject agreement is not in accordance with the law
to which the parties have subjected it or under the law of the country where
the foreign award was made.
Ø The award is ultra vires to the agreement.
Ø The award contains decision on matters beyond the scope of
arbitration.
Ø The arbitral procedure was not in accordance with the law of
the country where the arbitration took place.
Ø The foreign award has not yet become binding on the parties
or was set aside by the higher authority of the country in which that award was
made.
Ø Enforcement of foreign award will be contrary to public
policy of India.
Ø Subject matter of the dispute is not capable of settlement
under the Indian Arbitration & Conciliation Act, 1996.
Ø The parties to the agreement were under some incapacity
Ø There is a failure to give proper notice of appointment of
arbitrator or arbitral proceedings or the party against whom the award was
rendered was otherwise unable to present his case.
Ø Composition of the arbitral authority or the arbitral
procedure is ultra vires agreement
Moving on, Section 57 lays down several conditions for
enforcement of Geneva Convention Awards in India. The procedure for enforcement
of foreign awards under the Geneva Convention of 1937 and the New York
Convention of 1958 are much the same. Any person interested in enforcing a
foreign award may apply in writing to any court having jurisdiction over the
subject matter of the award. In addition to filing of the award and the
agreement on which it is based as required by the Convention, the Act requires
that evidence as to the award being a foreign award has to be filed.
The said conditions, as laid in Section 57 are as under:
Ø The
award has been made in pursuance of a submission to arbitration which is valid
under the law applicable thereto;
Ø The
subject-matter of the award is capable of settlement by arbitration under the
law of India;
Ø The
award has been made by the arbitral tribunal provided for in the submission to
arbitration or constituted in the manner agreed upon by the parties and in
conformity with the law governing the arbitration procedure;
Ø The
award has become final in the country in which it has been made, in the sense
that it will not be considered as such if it is open to opposition or appeal or
if it is proved that any proceedings for the purpose of contesting the validity
of the award are pending;
Ø The
enforcement of the award is not contrary to the public policy or the law of
India
THE TWO RESERVATIONS OF
INDIA
India has made two reservations while ratifying the
Conventions namely,
(i) That
it would apply the Conventions to the recognition and enforcement of an award
only if it was made in the territory of another contracting State.
·
In
pursuance of the said reservation, the two implementing Acts of 1937 and 1961
provide that the Government of India will notify the names of countries to
which the Convention would apply and which countries had made reciprocal
provisions for the enforcement of Indian awards in those countries.
(ii) That India would apply the Convention only to
differences arising out of legal relationship which are considered 'commercial'
under Indian Law.
·
Courts
have interpreted the term 'commercial dispute' under the two Acts, in certain
decisions where the question was at issue
JURISPRUDENCE, AS
DEVELOPED BY THE COURTS
Before delving into the question of the process adopted by
Indian Courts in enforcing the Foreign Arbitral Awards, and the factors
affecting the view of the Court, we must ask ourselves one question, as to what
would happen to awards, not passed in countries, and which are not signatories
to New York and Geneva Convention. The answer to the same would be, that such
awards would be enforced by instituting a regular civil suit in Indian Courts
on the basis of the said award, in such a case, award would be considered as
evidence under the Evidence Act.
“In
one proceeding there may be different stages. In the first stage the Court may
have to decide about the enforceability of the award having regard to the
requirement of the said provisions. Once the court decides that foreign award
is enforceable, it can proceed to take further effective steps for execution of
the same. There arises no question of making foreign award as a rule of
court/decree again.”
Furthermore in Venture Global Engineering Vs Satyam Computer
Services Ltd. [9] held that a foreign award
can be set aside by an Indian Court u/s 34 of the Arbitration and Conciliation
Act, 1996. In that particular case, the Court clearly held that the award was
actuated by fraud, and hence contrary to the public policy, and thus incapable
of being enforced.
However, the pro-enforcement view of the Apex Court was
recently acknowledged in the case of Vijay Karia Vs Prysmian Cavi E Sistemi Srl[10],
wherein the Apex Court clearly held as under:
"107.
Having answered each of the submissions of Dr. Singhvi on behalf of the
Appellants, we cannot help but be left with a feeling that the Appellants are
indulging in a speculative litigation with the fond hope that by flinging mud
on a foreign arbitral award, some of the mud so flung would stick. We have no
doubt whatsoever that all the pleas taken by the Appellants are, in reality,
pleas going to the unfairness of the conclusions reached by the award, which is
plainly a foray into the merits of the matter, and which is plainly proscribed
by Section 48 of the Arbitration Act read with the New York Convention."
There
are other judgement as well like Campos Brothers Farms Vs Matrubhumi Supply
Chain Pvt. ltd[11].
of the Delhi High Court wherein the
Delhi High Court, set aside the award on the aspect that it was against the
public policy of India.
CONCLUDING REMARKS
From
the above discussions it is ample clear that the above said the view of Indian
Courts in matters pertaining to International Commercial Arbitration has been
divergent. Moreover, initially there was a lot of court interference in
International Arbitration Awards, which led to overall decline of India's
reputation as it failed in its commitment to honour its obligation for
enforcement of Arbitral Awards. However the situation has improved for better
after the 2015 amendment to the Act came into force,
The amendments to section 9 of the Act restore the authority
of Indian courts to grant interim measures in aid of international arbitration seated outside India, while also striving to curtail the potential for
resulting delays or judicial interference. If a court grants interim relief
before an arbitration has commenced, the arbitral proceedings must be commenced
within 90 days of the court’s order or within a time period specified by the
court. Once the tribunal has been constituted, Indian courts are precluded from
accepting applications for interim relief unless the tribunal is unable to
provide an efficacious remedy. The Amendment also extends the scope of section
27, providing for court assistance in taking evidence in support of
arbitration, to arbitration seated outside India.
The
Amendment attempts to rectify this situation by limiting the 'public policy' to
three particular circumstances:
Ø the
award conflicts with the basic notion of morality and justice’.[12]
The
Amendment clarifies that a court’s determination of whether an award is in
contravention with the fundamental policy of Indian law shall not entail a
review on the merits of the dispute.
[1]
Arbitration and Conciliation Act of 1996.
[2] Part
II specifically deals with foreign awards which are in consonance with the
provisions of the Convention on the Recognition and Enforcement of Foreign
Arbitral Awards, 1958 or Convention on the Execution of Foreign Arbitral Awards,
1927.
[3] Convention
on the Recognition and Enforcement of Foreign Arbitral Awards 1958.
[4]
Convention on the Execution of Foreign Arbitral Awards 1927.
[5] 47.
Evidence.—(1) The party applying for the enforcement of a foreign award shall,
at the time of the application, produce before the court— (a) the original
award or a copy thereof, duly authenticated in the manner required by the law
of the country in which it was made; (b) the original agreement for arbitration
or a duly certified copy thereof; and (c) such evidence as may be necessary to
prove that the award is a foreign award.
[6] PEC
Limited v. Austbulk Shipping SDN BHD (Civil Appeal No. 4834 of 2007) decided on
14 November 2018
[7] 49.
Enforcement of foreign awards.—Where the Court is satisfied that the foreign
award is enforceable under this Chapter, the award shall be deemed to be a
decree of that Court.
[8] 2001(6)SCC 356
[12] The Amendment presents this clarification as
‘Explanation 2’ to both s 34(2)(b) and s 48(2) of the Act
Comments
Post a Comment