Abstract
The most effective way to settle disputes between parties involved in international transactions is often international commercial arbitration. The validity of the arbitral decision is crucial in international arbitration. Conflicting parties will cease to view arbitration as a useful tool for resolving disputes if the same cannot be guaranteed.
The recent judgements from Indian courts demonstrate a noticeable inclination towards a more favourable attitude towards enforcement, as they diligently observe the principle of non-interference with arbitral decisions. The legislative and judiciary branches of India have undertaken significant measures to facilitate the prompt enforcement of arbitral rulings, therefore enhancing the nation’s reputation as an arbitration-friendly entity characterized by little court intervention and streamlined processes.
Indian lawmakers and judges are working to increase foreign investors’ faith in the country and make it a hub for international arbitration. For this reason, the principles of the Geneva Convention and the New York Convention must be recognized by the courts. Although section 48 of the Act makes clear that foreign arbitral judgments are subject to limited review in Indian courts, this has not always been the case. At first, Indian courts were less trusting of foreign awards and more inclined to step in. As a result, the court rulings of Venture Global[1] and Phulchand Exports[2] became the leading cases for the execution of foreign awards in India.
Keywords
Arbitration, Foreign, Award, Enforcement, India.
Introduction
Due to improved communication and transportation, worldwide trade has developed rapidly over the last several decades, but this growth has also led to an increase in commercial disputes. International business dealings or agreements typically involve stakeholders from more than one country. Normal court procedures are lengthy, challenging, and costly when dealing with international law. The inclusion of an arbitration provision in the agreement is a prevalent decision as a significant number of parties involved in commercial business transactions express a preference for resolving their legal disputes via arbitration.
There are two pieces of legislation in India that govern the enforcement of arbitral awards: the Arbitration & Conciliation Act[3] (“Act”), and the Code of Civil Procedure[4].
In the same manner that a court ruling or order is binding in India, so too are domestic and foreign awards. Awards granted pursuant to a settlement reached by the parties are also recognized. The procedure for implementing an award differs depending on the jurisdiction in which the arbitration is conducted. A domestic award rendered in India is enforced by Part I of the Act, whereas a foreign judgment issued by an arbitral tribunal located outside of India falls within the purview of Part II of the Act.
India has signed both the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958) and the Geneva Convention on the Execution of Foreign Arbitral Awards (1927). For a decision to be enforceable in India, it must have been issued by a state that has ratified either of the Conventions, and it must have been issued in a nation that India has recognized as a convention country.
Sections 44-52 of the Act cover the New York Convention awards, while Sections 53-60 cover the Geneva Convention awards.
To meet the criteria of being classified as a “foreign award” in accordance with the Arbitration Act[5], it is necessary for an award to satisfy the following conditions:
- It must pertain to disputes arising from a legal association, whether contractual or otherwise, that is deemed commercial under the prevailing laws in India; and
- The country in which the award is rendered must be a signatory to either the New York Convention or the Geneva Convention and must have been officially notified by the Indian government as a reciprocating territory.
Research Methodology
This paper involves a synthesis of the theoretical, doctrinal and normative methodology of research. This will be principally doctrinal research. It involves the collection and analysis of data, such as case studies, research papers, books and most importantly, judicial decisions. Primary sources are the Acts and Conventions ratified by India.
Review of Literature
In order to comprehend the legal obstacles pertaining to the enforcement of foreign awards in India, it is necessary to grasp the distinction between the concepts of “recognition” and “enforcement” in relation to an award. In summary, it is possible for an award to get recognition without necessarily being enforced.[6]
The term “recognition” refers to the process of preventing the reopening of previously resolved problems that were the focus of arbitration proceedings that resulted in the award that is the subject of the application for recognition. This is the primary goal of the recognition process. It’s possible that merely putting in an application for recognition will be enough to avert a recurrence of the problems that the award was intended to solve. The phase known as “enforcement” follows just after the “recognition” phase. A request for enforcement of an award is a request to the court to both recognize the award as legally binding and to take whatever steps are necessary to make sure it is effectively carried out.[7]
To initiate the process of obtaining recognition and enforcement of a foreign award in India, the recipient of the award may file a petition in accordance with established procedures. The recognition and enforcement of foreign awards need the undertaking of specific steps. The determination of the enforceability of an award will occur in the first phase, contingent upon the submission of requisite evidence. This assessment will take into account the restrictions outlined in Section 48[8] (pertaining to awards issued under the New York Convention) and Section 57[9] (pertaining to awards made under the Geneva Convention) of the Act. Upon deciding about the enforceability of the foreign award, the court moves to the subsequent stage, which involves the actual implementation of the judgement.[10]
The legal consequences of a foreign award may vary depending on the jurisdiction, regardless of its widespread recognition. Historically, the common law courts have shown a less favorable inclination towards the practice of commercial arbitration. In the legal case of Kill v. Hollister[11] (1746), the King’s Bench made a noteworthy statement on the tendency of extrajudicial efforts to settle disputes via arbitration to displace the authority of the court. As a result, the courts came to the conclusion that the parties might revoke their permission to arbitrate any subsequent disputes at any time before the delivery of the arbitral judgment. In jurisdictions adhering to the common law legal system, British law has seen a transformation from a strict approach characterized by the case of Kill v Hollister to a more favorable stance towards commercial arbitration. While there have been notable advancements in arbitration mechanisms, several discrepancies persist. In an effort to defuse these tense situations, attempts have been made to negotiate a compromise and come to some kind of understanding.
The Geneva Protocol on Arbitration Clause of 1923 and the Geneva Convention on Execution of Foreign Arbitral Awards of 1927 were the first legal documents to address this issue. Both of these documents were drafted in Geneva, Switzerland. The award cannot be in violation of the public policy of the nation in which enforcement is being sought; it must have been issued by a tribunal that was legitimately established and operated in accordance with the laws of that nation; and it must be the result of a binding arbitration agreement. Increases in cross-border trade encouraged the United Nations to create the Convention on the Recognition and Enforcement of Foreign Arbitral Awards. The fundamental problem with the Geneva Conventions was that international awards could not be enforced until the issue was decided in the country where the award was made.[12] This problem was resolved once the New York Convention was ratified in 1958 and the Foreign Award Recognition and Enforcement Act was passed in 1961. In light of the imperative for consistency in arbitral procedural law and the distinctive demands of international commercial arbitration, the United Nations Commission on International Trade Law (UNCITRAL), having endorsed the latest model on June 21, 1985, advised that all nations duly contemplate the Model Law on International Commercial Arbitration.[13]
The absence of a legal framework for the implementation of international arbitration judgments in India was rectified with the enactment of the Arbitration (Protocol & Convention) Act[14]. India officially ratified the Geneva Protocol on the Arbitration Clause in 1923 and the 1927 Convention on the Execution of Foreign Arbitral Awards in 1937. Subsequently, the Foreign Awards (Recognition and Enforcement) Act[15] was enacted in India, enabling the recognition and execution of foreign arbitral judgements. This legislation was influenced by the framework created by the New York Convention.[16]
Procedure for Enforcement
The first stage of India’s two-step procedure for implementing a foreign judgment involves the submission of an execution petition. At first, the responsibility of ascertaining the legality of the award under the Act would rest with a court. The legitimacy and finality of an award determine whether or not it may be legally enforced in the same way that a court order or decree can. However, it is essential for the parties involved to be aware of any potential roadblocks that may appear at any point during the process. These may take the form of objections raised by the opposing party or requirements imposed by the procedure itself, such as the need to present the court with the original or an authenticated copy of the award as well as the original agreement.
Section 47 breaks down the requisite documents that must be presented when initiating an application for the execution of a foreign award.
- The original award or a duly authorized copy that adheres to the legal requirements of the issuing nation.
- The original agreement or a certified copy thereof.
- Evidence that supports the assertion that the award was conferred in a foreign nation.
According to the aforementioned section, all of the above “shall” be submitted to the court when an application is filed to enforce a foreign award. In contrast, the Supreme Court of India recently ruled that the term “shall” in the section, which refers to the production of the necessary evidence at the time of application, should be read as “may.”[17] In cases where the court is pursuing the enforcement of an award, it may not be mandatory for a party to provide a document mentioned in the award “at the time of the application.” The interpretation of “shall” as “may” is restricted to the first stage of the application filing process and does not extend beyond that point.
Foreign Awards Enforcement Conditions
In order for the party that is the subject of the foreign award to have the court refuse to enforce the award, that party must provide evidence to the court showing that[18]:
a) The contractual parties lacked the legal capacity to enter into the agreement according to the relevant law, or the agreement is rendered invalid by the legislation to which the parties have voluntarily submitted it.
b) The party did not receive enough notification on the appointment of the arbitrator or the conduct of the arbitral proceedings.
c) The award pertains to an issue that had not been anticipated or goes outside the scope of the arbitral filing.
d) The arbitral authority was not established per the terms of the agreement, or the arbitration proceedings did not adhere to the relevant legal framework of the jurisdiction in which the arbitration took place.
e) The award has not yet acquired legal effect between the parties, or it has been invalidated or suspended temporarily by a competent authority in the jurisdiction where the award was rendered.
f) The resolution of the subject matter of the dispute is not feasible via arbitration according to the legal framework in India.
g) Enforcing it will contravene the public policy of India. The violation of Indian public policy by a foreign award occurs only when it is shown that the award was obtained by corrupt or fraudulent means, or in direct defiance of Section 75 or Section 81 of the Act[19].
Proviso to Section 48 states that if a competent authority has received an application to set aside or suspend the award, the court may, if it deems it appropriate, postpone deciding its enforcement. Furthermore, on the request of the party seeking enforcement of the award, the court may also order the opposing party to provide adequate security.
Appropriate Forum
A while back in the case of Sundaram Finance Ltd. v. Abdul Samad & Anr[20], the Supreme Court of India concluded that a recipient of an award has the legal authority to commence execution procedures in any Indian court that has jurisdiction over the location of the recipient’s assets. In the case that the monetary amount at stake in the arbitration is specified[21], the procedures of the arbitration are to be carried out in a commercial court that has been formed in line with the Commercial Courts Act of 2015.
In cases where a monetary element is associated with the foreign award, jurisdiction will be conferred upon the Commercial Division of the High Court located in the state where the assets of the opposing party are located.
Limitation Period
A foreign award is considered final and binding under Indian law after it has been authenticated. After the court has rendered a decision affirming the enforceability of the award, it may initiate streamlined procedures to ensure its implementation. The case of M/s. Fuerst Day Lawson Ltd. v. Jindal Exports Ltd.[22] established that the Indian Act does not provide a certain timeframe within which a legal action for enforcement must be initiated in Indian courts. The three-year limitation period that is outlined in Article 137 of the Limitation Act[23] would apply to the enforcement of foreign awards under Part II of the Act, and it would begin to run from the day when the right to apply accrues.[24]
Setting Aside an Award
Unlike domestic awards, there is no procedure under the Act that would allow for the revocation of a foreign award. The Court has the authority to acknowledge and uphold a foreign arbitration judgment or choose not to do so, but it lacks the power to nullify the award under any circumstances, even those that would meet the criteria outlined in Sections 48 and 57 of the Act. However, this limitation was removed in the case of Venture Global Engineering v. Satyam Computer Services Limited and Ors[25], where the Apex Court ruled that foreign awards may be contested in India under section 34 of the Act. Because it established fresh grounds for opposing foreign awards that had not previously been considered or included in the Act, this judgment had wide-ranging effects.
Since primary or supervisory jurisdiction is solely exercised by the court located at the seat of the arbitration, only that court has the authority to annul a foreign award.[26]
Suggestions
There is a need for the establishment of new and separate legislation to regulate the enforcement of international arbitral judgements in India. The similarity between the regulations controlling the enforcement of international awards and the regulations governing the execution of foreign judgments in the absence of any relevant treaty or convention has been noted. It has been observed that the aforementioned regulations include a comprehensive compilation of reasons for rejecting international arbitral decisions. This implies that these reasons are regarded as prerequisites, thereby restricting courts from granting enforcement of such judgements under domestic legislation to a lesser extent compared to other legal frameworks.
Recognition and enforcement of foreign arbitral judgments should be granted on the same terms and subject to identical fees as domestic arbitral awards if not under more favourable circumstances. In order to achieve this objective, it is recommended that India implement standardized procedural rules that are applicable to both domestic and international judgements. This measure will ensure that the state fulfils its promises as stipulated in international agreements, with particular emphasis on Article III of the New York Convention.
In order to mitigate the potential for abuse of the enforcement mechanism, it is advisable to implement a stringent three-year time restriction for the submission of petitions seeking to enforce foreign arbitral judgements. The law needs to provide precise guidance pertaining to the determination of a valid arbitration filing. The objective of the parties, whether explicitly expressed or implied, in consenting to arbitration shall not be subject to dispute to be resolved by the jurisdiction where enforcement is sought.
Conclusion
One of the most important aspects of International Commercial Arbitration is making it easier to enforce foreign arbitral awards. India’s negative image in the execution of foreign arbitral judgements has been erased thanks to the joint efforts of the Judiciary and the Legislature over the past few years. Foreign arbitral awards are treated the same as foreign court judgements for purposes of enforcement, which is a key flaw in the 1996 Arbitration and Conciliation Act. Indian law does not adequately handle concerns specifically related to foreign arbitral awards since it does not distinguish between arbitral awards and judicial decisions. Adding more structure to the arbitral process and bringing India in line with modern legal regimes around the world will be possible with some improvements, such as bringing clarity on convention countries carrying reciprocal provisions that have yet to be listed on the official gazette and legislation which directly deals with foreign arbitral awards.
Looking at India as a whole, it seems that India does not exhibit characteristics indicative of an inhospitable environment for arbitration. The objective is to establish consistent safeguards for all types of arbitration and conciliation, encompassing both domestic and international commercial instances. This entails minimizing the court’s oversight of the arbitration process and ensuring that every conclusive arbitral decision is enforced with the same level of authority as a court decree. The newly implemented legislation seems to have successfully achieved its principal objectives, undoubtedly aided by the interpretive legal rulings provided by the highest judicial body, the Supreme Court.
Anumay M. Sethi
Vivekananda Institute of Professional Studies, GGSIPU
[1] Venture Global Engineering LLC v Satyam Computer Services Limited, (2008) 4 SCC 190
[2] Phulchand Exports v OOO Patriot, (2011) 10 SCC 300
[3] Arbitration and Conciliation Act, 1996, No. 26, Acts of Parliament, 1996 (India)
[4] Civil Procedure Code, 1908, No. 05, Acts of Parliament, 1908 (India)
[5] Arbitration and Conciliation Act, 1996, § 44, 53, No. 26, Acts of Parliament, 1996 (India)
[6] ALAN REDFERN AND MARTIN HUNTER, LAW AND PRACTICE OF INTERNATIONAL COMMERCIAL ARBITRATION, THIRD EDITION, 448 (LONDON: SWEET AND MAXWELL 1999)
[7] Id.
[8] Arbitration and Conciliation Act, 1996, § 48, No. 26, Acts of Parliament, 1996 (India)
[9] Arbitration and Conciliation Act, 1996, § 57, No. 26, Acts of Parliament, 1996 (India)
[10] Government of India v. Vedanta Limited & Others, (2020) 10 SCC 1
[11]Jones, History of Commercial Arbitration in England and the United States: A Summary View, in INTERNATIONAL TRADE ARBITRATION 127 (M. Domke ed. 1958)
[12] BGS SGS SOMA JV v. NHPC Ltd., (2019) SCC Online SC 1585
[13] DAVID, R., ARBITRATION IN INTERNATIONAL TRADE, 368 (Kluwer Law Taxation Publishers, Deventer, 1985)
[14] Arbitration (Protocol & Convention) Act,1937, No. 06, Acts of Parliament, 1937(India)
[15] The Foreign Awards (Recognition and Enforcement) Act, 1961, No. 45, Acts of Parliament, 1961(India)
[16] DOMENICO DI PIETRO, ENFORCEMENT OF ARBITRATION AGREEMENTS AND INTERNATIONAL ARBITRAL AWARDS: THE NEW YORK CONVENTION IN PRACTICE (Cameron May 2008)
[17] PEC Limited v. Austbulk Shipping SDN BHD, (2018) SCC OnLine SC 2549
[18] Arbitration and Conciliation Act, 1996, § 48, No. 26, Acts of Parliament, 1996 (India)
[19] Arbitration and Conciliation Act, 1996, § 75, 81, No. 26, Acts of Parliament, 1996 (India)
[20] (2018) 3 SCC 622
[21] Commercial Courts Act, 2015, § 2(1)(i), No. 04, Acts of Parliament, 2016 (India)
[22] 2001 (6) SCC 356
[23] The Limitation Act, 1963, art. 137 (schedule), No, 36, Acts of Parliament, 1963(India)
[24] Government of India v. Vedanta Limited & Others (2020) 10 SCC 1
[25] (2008) 4 SCC 190
[26] Government of India v. Vedanta Limited & Others (2020) 10 SCC 1