MATS Law School

“Conflict of Laws”

Project on:

“Foreign Awards under New York

Convention”

SUBMITTED TO: SUBMITTED

BY:

Mr.Akash Sharma Shubham Patel

Asst. Professor B.B.A.LL.B

MATS Law School Semester -6th

MATS University MU12BBALLB19

ACKNOWLEDGEMENT

We, hereby, want you to know that we thank our college “MATS LAW SCHOOL” for

providing us with intellectual and co-operative faculty of Conflict of laws (Mr. Akash

Sharma) who allotted us the project topic: “Foreign Awards under New York Convention”

and gave us the opportunity to research on the topic and gain knowledge and command over it.

we would also like to thank our Director sir Dr. G.P. Tripathi for providing very informative,

full of knowledge and great variety of books in the college library, at the same time we would

like to thank the librarian Mr. Anil Dewangan to allow us to the refer the books and spend

ample of time in the library. Foreign Awards under New York Convention on which proved to

be a boon for us and our project helped us a lot in understanding the basics of the topic.

Next, we convey our sincere thanks and gratitude to my friends and family for rendering

constructive and valuable suggestions and comments that have helped a lot in improving the

quality and content of the project and also helped us for completing the project in limited time

frame.

Thank You

Shubham Patel

B.B.A.LL.B

DECLARATION

We are here to present project work entitled “Foreign Awards under New York Convention”

submitted to the MATS University is the original work done by us under the guidance of

Mr.Akash Sharma, MATS Law School, Gullu, Arang, and this project has not performed the

basis for the award of any Degree or diploma and similar project if any. It’s for our personal

interest and knowledge.

TABLE OF CONTENTS

S.No. Topic Page No.

1 Introduction 5

2 Old laws 6

3 The Geneva Convention 6

4 The Geneva Treaties Critized 8

5 The New York Convention 10

6 Objective 11

7 Provisions 12

8 Foreign Arbitral Award in

Indian law

14

9 An overview of provision in

Arbitration and Conciliation Act

14

10 Conclusion 27

INTRODUCTION:

With the expansion of international trade in recent years, the business world has been

increasingly reluctant to litigate in courts of law for differences arising from

international commercial transactions. Ability to communicate and commute with

distant places with the utmost speed enables a merchant today, in a few minutes or

hours, to conclude a contract abroad which a generation ago would have taken weeks

or months. When, however, it becomes necessary to resort to the machinery of justice

to settle a dispute connected with that contract, to enforce a judgment in another

country is still a complicated, time-consuming and expensive operation. It is not

surprising, therefore, that businessmen have been turning with increasing frequency

to arbitration as a quicker and simpler means of settling international commercial

disputes.

There has been a noticeable movement in favor of arbitration. Arbitration facilities

and institutions have increased. The favorable trend towards arbitration has been

reflected also in legislative enactments, international treaties, and other measures by

which arbitration has gradually acquired a more solid legal standing.

India today is very much important part of the global economy. The ever-increasing

level of globalization has led to raise international business disputes too. In this

context, the enforcement of foreign judgment and foreign Arbitral Awards becomes

significant. A foreign judgment may be enforced in India by (i) proceedings in

execution and (ii) by a suit upon it, CPC, 1908. An arbitral award is a determination

on the merits by an arbitration tribunal in arbitration, and is analogous to a judgment

in a court of law. Arbitration is particularly popular as a means of dispute resolution

in the commercial sphere. One of the reasons for doing so is that, in international

trade, it is often easier to enforce an arbitration award in a foreign country than it is to

enforce a judgment of the court. The enforcement of foreign arbitration awards is

governed by the Arbitration and Conciliation Act, 1996 through New York

Convention and Geneva Convention and a Non-conventional award will be

enforceable in India under the common law grounds of justice, equity and good

conscience.

The ‘Old’ Law

Prior to January 1996, the law of enforcement of arbitration awards in India was

spread between three enactments. Enforcement of domestic awards was dealt with

under a 1940 Act. Enforcement of foreign awards was divided between two statutes

— a 1937 Act to give effect to the Geneva Convention awards and a 1961 Act to give

effect to the New York Convention awards.

The Geneva Convention

On the international level, there are numerous bilateral treaties including provisions

for the enforcement of arbitral awards. As to multilateral treaties, the most significant

developments since the First World War have been the Geneva Protocol on

Arbitration Clauses of 1923, the Geneva Convention on the Execution of Foreign

Arbitral Awards of 1927, and the United Nations Convention on the Recognition and

Enforcement of Foreign Arbitral Awards of 1958.

The application of both treaties is limited to persons who are subject to the

jurisdiction of different contracting states. Under the Protocol, an arbitration

agreement relating to existing or future differences is recognized as valid, that is,

irrevocable. The agreement may relate to any matter capable of settlement by

arbitration, but the contracting states may limit their obligations to commercial

contracts. If a suit is brought despite the arbitration agreement, courts are required to

refer the parties to the arbitrators, except where the agreement or the arbitration

cannot proceed or has become inoperative. The Convention is supplementary to the

Protocol in that it applies to awards made pursuant to arbitration agreements covered

by the Protocol. Only states parties to the Protocol may become parties to the

Convention. Each contracting state is required to recognize as binding and to enforce,

in accordance with the procedure of the forum, awards rendered in the territory of

another contracting state, on the following conditions:

· the award was rendered pursuant to arbitration agreement valid under the law

applicable to the agreement;

· The object of the award is capable of settlement by arbitration under the law of the

country of the forum;

· The award was rendered by the arbitral tribunal provided in the arbitration

agreement or constituted as agreed by the parties and in conformity with the law

governing the arbitration procedure;

· The award has become final and no proceedings are pending for the purpose of

contesting the validity of the award. An award still subject to opposition or appeal or

the equivalent is not regarded as final;

· The recognition or enforcement of the award would not be contrary to public policy

or the "principle of the law" of the forum.

Even where these conditions have been met, recognition and enforcement of the

award must still be refused, if the court finds that

(a) The award has been annulled in the country where it was rendered; or

(b) The party against whom the award has been invoked did not have sufficient

notice, or being under a legal incapacity, was not properly represented; or

(c) The award deals with a dispute not included under the terms of the agreement, or

the award goes beyond the scope of the agreement. Furthermore, a court may refuse

enforcement or give the losing party reasonable time to seek annulment if that party

proves that under the law of the country where the arbitration took place, there is a

ground (other than those specified in the Convention) to contest the validity of the

award in a court of law.

The Geneva treaties have been criticized for legal and practical reasons:

a) There is some ambiguity in the expression “subject to the jurisdiction of different

Contracting States,” which defines the scope of application of the treaties. It is not

clear whether it means subject to the sovereignty of a state in the sense of nationality,

or subject to the jurisdiction of the courts of a state by reason of residence, domicile,

or other criteria.

b) It has also been observed that a plaintiff seeking enforcement in one country

would find it particularly difficult to prove that the arbitral tribunal was constituted in

conformity with the law of another country and that the award has become final in

that country.

c) Finally, the possibility of contesting the validity of an award on grounds other than

those listed in the Convention has been regarded as making it too easy for a

recalcitrant defendant to avoid the enforcement of an award by resorting to

obstructionist tactics.

Later Developments

This state of affairs prompted the International Chamber of Commerce, which had

originally taken the initiative leading to the Geneva Convention, to submit to the

United Nations Economic and Social Council a proposal for a new convention on the

enforcement of international arbitral awards. In the opinion of the ICC the main

defect of the Geneva Convention was the condition that, to be enforced, an arbitral

award must be “strictly in accordance with the rules of procedure laid down in the

law of the country where arbitration took place.” In order to meet the requirements of

international trade, the ICC advocated the idea of an ‘international award, i.e., an

award completely independent of national laws, and suggested that arbitral awards

based on the will of the parties should be automatically enforceable. The ICC draft

sought to attain this purpose mainly by widening the scope of application and

providing that, as a condition for enforcement, the composition of the arbitral

authority and the arbitral procedure must be in accordance with the agreement of the

parties. Only in the absence of such agreement, must they conform to the law of the

country where arbitration took place. The other conditions for enforcement in the

ICC draft did not differ greatly from those of the Geneva Convention, except for the

omission of the requirement of finality of awards, regarded by the ICC as

encouraging dilatory measures.

THE NEW YORK CONVENTION

The United Nations Convention on the Recognition and Enforcement of Foreign

Arbitral Awards

History

The Convention on the Recognition and Enforcement of Foreign Arbitral Awards

aims to facilitate the recognition and enforcement of arbitral awards generally

between private parties. It succeeds the 1927 Geneva Convention on the Execution of

Foreign Arbitral Awards and the 1923 Geneva Protocol on Arbitration Clauses

(which also provided for reciprocal recognition and enforcement abroad of certain

arbitration agreements and awards, but had serious shortcomings).

It is described as the most successful treaty in private international law and is adhered

to by more than 140 nations. The Convention was established as a result of

dissatisfaction with the Geneva Protocol on Arbitration Clauses of 1923 and the

Geneva Convention on the Execution of Foreign Arbitral Awards of 1927. These

conventions suffered from certain shortcomings. For example, they excluded from

their application awards rendered in a state not a party to the Geneva Convention,

and required orders enforcing the award in the country where the award was rendered

as well as the enforcing country. They also placed the burden of proof on the party

seeking to enforce the award, while at the same time making it all too easy for a

recalcitrant defendant to avoid enforcement by resorting to delaying tactics. The New

York Convention sought to remedy these problems.

The initiative to replace the Geneva treaties came from the International Chamber of

Commerce (ICC), which issued a preliminary draft convention in 1953. The ICC’s

initiative was taken over by the United Nations Economic and Social Council, which

produced an amended draft convention in 1955. That draft was discussed during a

conference at the United Nations Headquarters in May-June 1958, which led to the

establishment of the New York Convention.

Objectives

The following briefly describes the two basic actions contemplated by the New York

Convention:

a) The recognition and enforcement of foreign arbitral awards, i.e., arbitral awards

made in the territory of another State: This field of application is defined in article I.

The general obligation for the Contracting States to recognize such awards as binding

and to enforce them in accordance with their rules of procedure is laid down in article

III. A party seeking enforcement of a foreign award needs to supply to the court: (a)

the arbitral award; and (b) the arbitration agreement (article IV). The party against

whom enforcement is sought can object to the enforcement by submitting proof of

one of the grounds for refusal of enforcement which are imitatively listed in article

V, paragraph 1. The court may on its own motion refuse enforcement for reasons of

public policy as provided in article V, paragraph 2. If the award is subject to an

action for setting aside in the country in which, or under the law of which, it is made

(“the country of origin”), the foreign court before which enforcement of the award is

sought may adjourn its decision on enforcement (article VI). Finally, if a party

seeking enforcement prefers to base its request for enforcement on the court’s

domestic law on enforcement of foreign awards or bilateral or other multilateral

treaties in force in the country where it seeks enforcement, it is allowed to do so by

virtue of the so called more-favorable-right-provision of article VII, paragraph 1.

b) The referral by a court to arbitration: Article II, paragraph 3, provides that a court

of a Contracting State, when seized of a matter in respect of which the parties have

made an arbitration agreement, must, at the request of one of the parties, refer them

to arbitration.

The influence of the New York Convention on the development of international

commercial arbitration has been phenomenal. The New York Convention solidified

two essential pillars of the legal framework by providing for the obligatory referral

by a national court to arbitration in the event of a valid arbitration agreement and for

the enforcement of the arbitral award. The New York Convention is probably the

main reason why arbitration is the preferred method for the resolution of international

business disputes.

Provisions

The New York Convention applies to all arbitral awards rendered pursuant to a

written arbitration agreement in a country other than the state of enforcement. The

New York Convention also applies to arbitral awards not considered as domestic

awards by the enforcing state. The term ‘arbitral award’ is not defined, but includes

awards made by ad hoc tribunals as well as permanent arbitral tribunals. The

nationality of the parties is irrelevant for purposes of the convention. Under Article I

(3), contracting states can choose to limit the application of the convention to arbitral

awards rendered in another contracting state or to awards relating to commercial

disputes.

In order to obtain recognition and enforcement of an arbitral award under the New

York Convention, a party has only to supply the enforcing court with a certified copy

of the arbitral award and the arbitration agreement. If an arbitral award is

encompassed by the New York Convention, contracting states must recognize the

award as binding and enforce it in accordance with local rules of procedure. They

may not impose more onerous conditions, higher fees, or charges on the recognition

or enforcement of the award than prevail with respect to domestic arbitral awards.

If a party objects to enforcement, it has the burden of proving that the award should

not be enforced. The objecting party must argue from Article V (1) which provides a

list of grounds for refusing enforcement:

a) Invalidity of the arbitration agreement;

b) Violation of due process;

c) Excess by arbitrator of his authority;

d) Irregularity in the composition of the arbitral tribunal or in the arbitral procedure;

and

e) Award not binding, suspended or set aside in the country of origin.

Additionally, the court can refuse to enforce the award under Article V (2) if its

subject matter is incapable of settlement by arbitration under the enforcing country's

laws or if recognition or enforcement of the award would violate the enforcing

country's public policy.

As the Geneva Convention became virtually otiose (by reason of Art VII of the New

York Convention), enforcement of foreign awards, for all practical purposes, came

under the 1961 Act and domestic awards came under the 1940 Act. The enforcement

regime between these two statutes was, however, quite distinct. The 1961 Act

confined challenge to an arbitral award only on the limited grounds permitted under

the New York Convention. 

C. THE NEW REGIME

In January 1996, India enacted a new Arbitration Act. This Act repealed all the three

previous statutes (the 1937 Act, the 1961 Act and the 1940 Act).The new Act has two

significant parts. Part I provides for any arbitration conducted in India and

enforcement of awards there under. Part II provides for enforcement of foreign

awards. Any arbitration conducted in India or enforcement of award there under

(whether domestic or international) is governed by Part I, while enforcement of any

foreign award to which the New York Convention or the Geneva Convention applies,

is governed by Part II of the Act.

FOREIGN ARBITRAL AWARDS IN INDIAN LAW:

An Overview of the Provisions in the Arbitration and Conciliation Act

This is covered by Part II of the 1996 Act, though due to a recent Supreme Court

decision, the distinction between the grounds and procedures in Part I and Part II has

got blurred. The provisions of Part II of the Act give effect to the New York

Convention and the Geneva Convention.

1. Foreign Award Defined

In order to be considered as a foreign award (for the purposes of the Act), the same

must fulfill two requirements. First it must deal with differences arising out of a legal

relationship (whether contractual or not) considered as commercial under the laws in

force in India. The expression ‘commercial relationship’ has been very widely

interpreted by Indian courts. The Supreme Court in the case of RM Investments

Trading Co Pvt. Ltd v Boeing Co & Anor, while construing the expression

‘commercial relationship’, held:

“The term ‘commercial’ should be given a wide interpretation so as to cover matters

arising from all relationships of a commercial nature, whether contractual or not. The

second requirement is more significant and that is that the country where the award

has been issued must be a country notified by the Indian government to be a country

to which the New York Convention applies.”

The second requirement is more significant and that is that the country where the

award has been issued must be a country notified by the Indian government to be a

country to which the New York Convention applies. Only a few countries have been

notified so far and only awards rendered therein are recognized as foreign awards and

enforceable as such in India.

An interesting issue came up before the Supreme Court as to what would happen in a

case where a country has been notified but subsequently it divides or disintegrates

into separate political entities. This came up for consideration in the case of

Transocean Shipping Agency Pvt. Ltd v Black Sea Shipping & Ors. Here the venue

of arbitration was Ukraine which was then a part of the USSR — a country

recognized and notified by the Government of India as one to which the New York

Convention would apply. However, by the time disputes arose between the parties

the USSR had disintegrated and the dispute came to be arbitrated in Ukraine (which

was not notified). The question arose whether an award rendered in Ukraine would

be enforceable in India notwithstanding the fact that it was not a notified country.

Both the High Court of Bombay (where the matter came up initially) and the

Supreme Court of India in appeal, held that the creation of a new political entity

would not make any difference to the enforceability of the award rendered in a

territory which was initially a part of a notified territory. On this basis the court

recognized and upheld the award. This decision is of considerable significance as it

expands the lists of countries notified by the government by bringing in a host of new

political entities and giving them recognition in their new avatar also. At another

level the judgment demonstrates the willingness of Indian courts to overcome

technicalities and lean in favor of enforcement.

2. Comparison with Domestic Enforcement Regime

There are two fundamental differences between enforcement of a foreign award and a

domestic award. A domestic award does not require any application for enforcement.

Once objections (if any) are rejected, the award is by itself capable of execution as a

decree. A foreign award, however, is required to go through an enforcement

procedure. The party seeking enforcement has to make an application for the said

purpose. Once the court is satisfied that the foreign award is enforceable, the award

becomes a decree of the court and executable as such. The other difference between

the domestic and foreign regime is that (unlike for domestic awards) there is no

provision to set aside a foreign award. In relation to a foreign award, the Indian

courts may only enforce it or refuse to enforce it — they cannot set it aside. This

‘lacuna’ was sought to be plugged by the Supreme Court in the recent decision of

Venture Global where the Court held that it is permissible to set aside a foreign

award in India applying the provisions of s 34 of Part I of the Act.

3. Conditions for Enforcement

The conditions for enforcement of a foreign award are as per the New York

Convention. The only addition being an ‘Explanation’ to the ground of public policy

which states that an award shall be deemed to be in conflict with the public policy of

India if it was induced or affected by fraud or corruption.

Indian courts have narrowly construed the ground of public policy in relation to

foreign awards. In Renu Sagar Power Co v General Electrical Corp , the Supreme

Court construed the expression ‘public policy’ in relation to foreign awards as

follows:

“This would mean that ‘public policy’ in s 7(1)(b)(ii) has been used in narrower

sense and in order to attract to bar of public policy the enforcement of the award must

invoke something more than the violation of the law of India … Applying the said

criteria it must be held that the enforcement of a foreign award would be refused on

the ground that it is contrary to public policy if such enforcement would be contrary

to (i) fundamental policy of Indian law; or (ii) the interests of India; or (iii) justice or

morality.”

4. Judicially Created New Procedure and New Ground for

Challenge to Foreign Award

As noticed above, there is no statutory provision to set aside a foreign award under

the 1996 Act. Foreign awards may be set aside or suspended in the country in which

or under the laws of which the award was made but there is no provision to set aside

a foreign award in India. This fundamental distinction between a foreign and a

domestic award has been obliterated by the Supreme Court in the recent case of

Venture Global. Here, the Supreme Court was concerned with a situation where a

foreign award rendered in London under the Rules of the London Court of

International Arbitration (‘LCIA’) was sought to be enforced by the successful party

(an Indian company) in the District Court, Michigan, United States of America

(‘USA’). The dispute arose out of a joint venture agreement between the parties. The

respondent alleged that the appellant had committed an ‘event of default’ under the

shareholders agreement and as per the said agreement it exercised its option to

purchase the appellant’s shares in the joint venture company at book value. The sole

arbitrator appointed by the LCIA allowed the claim and directed the appellant to

transfer its shares to the respondent. The respondent sought to enforce this award in

the USA. The appellant filed a civil suit in an Indian district court seeking to set aside

the award. The district court, followed by the High Court, on appeal, dismissed the

suit holding that there was no such procedure envisaged under Indian law. However,

the Supreme Court on appeal, extending its earlier decision in the case of Bhatia

International v Bulk Trading, held that even though there was no provision in Part II

of the 1996 Act providing for challenge to a foreign award, a petition to set aside the

same would lie under s 34 Part I of the 1996 Act (i.e. it applied the domestic award

provisions to foreign awards). The court held that the property in question (shares in

an Indian company) is situated in India and necessarily Indian law would need to be

followed to execute the award. In such a situation the award must be validated on the

touchstone of public policy of India and the Indian public policy cannot be given a go

by through the device of the award being enforced on foreign shores.

The Venture Global case is far reaching as it creates a new procedure and a new

ground for challenge to a foreign award (not envisaged under the 1996 Act). The new

procedure is that a person seeking to enforce a foreign award has not only to file an

application for enforcement under s 48 of the 1996 Act, it has to meet an application

under s 34 of the 1996 Act seeking to set aside the award. The new ground is that not

only must the award pass the New York Convention grounds incorporated in s 48, it

must pass the expanded ‘public policy’ ground created under s 34 of the 1996 Act. In

practice, the statutorily enacted procedure for enforcement of a foreign award would

be rendered superfluous till the application for setting aside the same (under s 34) is

decided. The statutorily envisaged (narrow) public policy grounds for challenge to an

award would also be rendered meaningless as the award would have to meet the

expanded ‘public policy’ test (and virtually have to meet a challenge to the award on

merits) before it can be enforced. The Venture Global case thus largely renders

superfluous the statutorily envisaged mechanism for enforcement of foreign awards

and replaces it with judge made law. Moreover, in so far as the judgment permits a

challenge to a foreign award on the expanded interpretation of public policy it is per

incuriam, as a larger, three Bench decision, in the case of Renu Sagar holds to the

contrary. Further Saw Pipes(on which Venture Global relies for this proposition) had

clearly confined its expanded interpretation of public policy to domestic awards

alone lest it fall foul of the Renu Sagar case (which had interpreted the expression

narrowly). The Supreme Court in Venture Global did not notice this self-created

limitation in Saw Pipes, nor did it notice the narrow interpretation of public policy in

Renu Sagar.

5. Procedural Requirements

The procedure for enforcement of arbitral awards is pretty much the same in the new

Act as under the Foreign Awards (Recognition and Enforcement) Act, 1961 and the

Arbitration (Protocol and Convention), Act 1937. The reason that there are no

qualitative differences is because the New York Convention and the Geneva

Convention themselves provide for the procedure for enforcement which are merely

given statutory recognition by way of an enabling legislation and the same continues

under the new Act.

a. Enforceable awards

There are several requirements for a foreign arbitral award to be enforceable under

the AC Act.

(i) Commercial transaction: The award must be given in a convention country to

resolve commercial disputes arising out of a legal relationship. In the case of RM

Investment & Trading vs. Boeing, the Supreme Court observed that the term

"commercial" should be liberally construed as having regard to manifold activities

which are an integral part of international trade.

(ii) Written agreement: The Geneva Convention and the New York Convention

provide that a foreign arbitral agreement must be made in writing, although it need

not be worded formally or be in accordance with a particular format.

(iii) Agreement must be valid: The foreign award must be valid and arise from an

enforceable commercial agreement. In the case of Khardah Company vs. Raymon &

Co (India), the Supreme Court held that an arbitration clause cannot be enforceable

when the agreement of which it forms an integral part is declared illegal.

(iv) Award must be unambiguous: In the case of Koch Navigation vs. Hindustan

Petroleum Corp, the Supreme Court held that courts must give effect to an award that

is clear, unambiguous and capable of resolution under Indian law.

A person who intends to enforce a foreign arbitral award should apply to the court

and produce the following documents:

(a) Original award or copy thereof, duly authenticated in the manner required by the

law of the country in which it was made.

(b) Original agreement for arbitration or a duly certified copy thereof,

(c) Such evidence as may be necessary to prove that the award is a foreign award.

(d) Translations, if necessary shall also be furnished.

b. Relevant Court

The Indian Supreme Court has accepted the principle that enforcement proceedings

can be brought wherever the property of the losing party may be situated. This was in

the case of Brace Transport Corp of Monrovia v Orient Middle East Lines Ltd. The

court here quoted a passage from Redfern and Hunter on Law and Practice of

International Commercial Arbitration, inter alia, as follows:

“A party seeking to enforce an award in an international commercial arbitration may

have a choice of country in which to do so; as it is sometimes expressed, the party

may be able to go forum shopping. This depends upon the location of the assets of

the losing party. Since the purpose of enforcement proceedings is to try to ensure

compliance with an award by the legal attachment or seizure of the defaulting party’s

assets, legal proceedings of some kind are necessary to obtain title to the assets

seized or their proceeds of sale. These legal proceedings must be taken in the state or

states in which the property or other assets of the losing party are located.”

c. Time Limit

The 1996 Act does not prescribe any time limit within which a foreign award must be

applied to be enforced. However, various High Courts have held that the period of

limitation would be governed by the residual provision under the Limitation Act

1963 (No 36 of 1963), i.e. the period would be three years from the date when the

right to apply for enforcement accrues. The High Court of Bombay has held that the

right to apply would accrue when the award is received by the applicant.

d. Grounds for Refusal of Enforcement

Section 48 for New York convention and Section 57 for Geneva convention of the

Act of 1996 lays down the grounds where the enforcement may be refused it the

objector can prove one of the following grounds:

i) Incapacity: that a party to the arbitration agreement was, under the law applicable

to him, under some incapacity,

ii) Invalid Arbitration Agreement: that the ‘arbitration agreement’ was invalid under

the law to which the parties subjected it, or, failing any indication thereon, under the

law of the country where the award was made,

iii) Due process: that a party was not given proper notice of the appointment of the

arbitrator or of the arbitration proceedings or was otherwise unable to present his

case,

iv) Jurisdictional defect: that the award deals with a difference not contemplated by

the terms of arbitration agreement.

v) That the composition of the arbitral authority or the arbitral procedure was not in

accordance with the agreement of the parties, or failing such agreement, with the law

of the country where the arbitration took place.

vi) That the award has not yet becomes binding on the parties, or has been set aside

or suspended by a competent authority of the country, in which, or under the law of

which, it was made.

e. Ex officio Court Jurisdiction

The section further lays down the grounds where the court may also refuse to enforce

a foreign award if it finds:

i) Non-arbitrability - That the award is in respect of a matter which is not capable of

settlement by arbitration under the laws of India.

In the case of Fuerst Day Lawson ltd. V/s Jindal Export ltd, Supreme Court held that

once the court determines that a foreign award is enforceable it can straightaway be

executed as a decree. In other words, no other application is required to convert the

judgment into a decree.

ii) Contrary to Public Policy - That the enforcement of the foreign award would be

contrary to public policy of India. The violation of rules of public policy is a ground

for refusal of enforcement or a ground for setting aside. Indian law does not restrict

(or extend) this ground to violation of International Public Policy even where the

arbitration is an international commercial arbitration. Where enforcement of a foreign

award is sought in any Court in India, the rules of public policy applicable will only

be the “Public Policy of India”.

In Renu sagar’s case, whilst construing the provisions of Sect. 7(1)(b)(ii) of the

Foreign Awards Act (which reproduced Art. V (2) (b) of the New York Convention),

the Supreme Court of India held that in order to attract the bar of public policy the

enforcement of the award must involve something more than violation of Indian law;

the enforcement of a foreign award would be refused on the ground that it is contrary

to public policy if such enforcement was contrary “to the fundamental policy of

Indian law or justice or morality”. It was held that any violation of the Foreign

Exchange Regulation Act, which was enacted for the national economic interest,

would be contrary to the public policy of India. The enforceability of a foreign award

could not be resisted as violating the public policy of India where an award, however,

directed payment of compound interest, or directed payment of compensatory

damages or where the arbitral tribunal had awarded an amount higher than should

have been awarded or where costs awarded by the arbitral tribunal were excessive.

In Supreme Court case of Oil & Natural Gas Corporation Ltd. vs. Saw Pipes Ltd., the

definition of “public policy” in section 34 of the Act was controversially expanded

such that anything which is against any Indian law is deemed to be opposed to Indian

public policy. This means that any foreign awards that are subject to the application

of section 34 can be challenged under wider grounds than would usually be permitted

under the New York Convention alone.

f. Enforcement of Non Convention Awards

In the case of Badat & Co. Bombay V/s East India Trading Co. the Supreme Court

has ruled that “such a Non-conventional award will be enforceable in India under the

common law on grounds of justice, equity and good conscience.”

In case of Bhatia International V/s Bulk Trading S.A. & Anr., The Supreme Court

held that “The 1996 Act nowhere provides that its provisions are not to apply to

international commercial arbitrations which take place in a non-convention country.”

How to Improvement

While it would be unrealistic to expect the judiciary to enforce an award without

vetting the arbitral process by way of nuances of the national legal system such as

due process and evidentiary standards, in order to facilitate the International

Arbitration process, it is important to exercise judicial restraint in scrutinizing the

International arbitral awards. Where absolute arbitral finality is inimical to a rational

system of ‘public policy’ as recognized by the Indian Supreme Court in several

judgments and on the other hand, it is necessary for an effective international arbitral

system. Balancing the conflicting claims of public policy and arbitral finality is

difficult. A new and narrower definition of the term public policy is required in the

era of globalization to encourage the foreign investors to carry out healthy

commercial relationships in India. A globally compatible definition of ‘public policy’

should be adopted or the court should abdicate the public policy to some extent so as

to ensure the edifice of International Commercial Arbitration – an arbitral award

might run contrary to the public policy of India but it might not be against the public

policy at the International level and might be beneficial too to that party.

Parties Must Specifically Exclude Application of Part I of the Act

Some authors have opined that until the Venture Global decision is reversed or

overruled by a larger bench of the Supreme Court, parties doing business in India or

elsewhere with Indian parties should include in their arbitration provision a clause

specifically excluding the applicability of Part I of the 1996 Act. This should make

Section 34 inapplicable to the award. Further, it is best to make this exclusion express

and not rely on the Court's statement that the exclusion can be implied because it is

not clear as to what the court would find to be an acceptable implied exclusion. For

example, in INDTEL Technical Services Pvt. Ltd. v. W.S. Atkins PLC, the parties’

memorandum of understanding indicated that the construction, validity and

performance of the agreement would be governed by and construed in accordance

with laws of England and Wales. However, it was held that Indian courts had

jurisdiction to appoint the arbitrator under Section 11(9) because the parties had not

chosen the seat of arbitration. The Court did not consider the choice of foreign law as

an implied exclusion of Part I by the parties. This results in uncertainty about the

enforcement of foreign awards. It is essential to remedy this situation.

The Legislature Must Take Steps to Preserve the Sanctity of the ADR movement

Some other suggestions have called for India's Legislature ought to take steps to

curtail unnecessary judicial legislation and derailment of arbitration proceedings in

the garb of filling lacunae in the 1996 Act. The international network of reciprocal

enforcement treaties of universal disposition should be adopted by India to foster the

respect for the International Arbitration.

Judiciary Must Respect and Support Globally Accepted Dispute Resolution

Mechanisms

It has been said that India's judiciary should adopt an internationally acceptable

approach to the enforcement of a foreign award under the New York Convention and

create an arbitration friendly environment. Its courts should not hesitate to appoint

amicus curiae or experts whenever faced with issues relating to interpretation of New

York Convention provisions. In fact, since most judges sitting on the lower courts

have little or no experience dealing with issues arising out of the New York

Convention, the Indian Bar should hold conferences, seminars and training programs

to bring these issues to the bench and discuss issues of concern.

The Indian courts’ continued attitude to not resist the temptation to intervene in

arbitrations is harmful. Primarily for a legal system which is plagued by endemic

delays, a pro-arbitration stance would reduce the pressure on courts. Arbitration is

not merely an attractive and lucrative option for resolution of disputes, it is absolutely

essential to maintain the integrity of the Indian legal system so that the trust in it is

maintained and India should work to safe the citadel of International Commercial

Arbitration.

]

Conclusion

Viewed in its totality India does not come across as a jurisdiction which carries anti-

arbitration bias. The immediate purpose of the new Act was to comprehensively

cover international commercial arbitrations and conciliation as well as domestic

arbitration and conciliation; to minimize the supervisory role of courts in the arbitral

process and to provide that every final arbitral award is enforced in the same manner

as if it were a decree of the court and this seems to have been achieved by the express

provisions of the new Act and the interpretative jurisprudence generated by the

Supreme Court.

References:

Bibilography:

 Markanda, P. C., Law relating to Arbitration and Conciliation,

LexisNexis Butterworths Wadhwa Nagpur, (2009)Seventh Edition

Websites:

http://www.kaplegal.com/articles/

AIAJ_V4_N1_2008_Book_(Sumeet_Kachwaha).pdf last accessed on 20

February 2011.

http://jurisonline.in/2010/10/enforcement-of-foreign-arbitral-awards/ last

accessed on 17 February 2011

http://legalsutra.org/867/enforcement-of-foreign-arbitral-awards/ last

accessed on 18 February 2011

www.jstor.org/stable/837713 last accessed on 20 February 2011

· lawcommissionofindia.nic.in/51-100/report76.pdf last accessed on 19

January 2011