Author: Sibani Panda, Research Associate
In the International Commercial Arbitration, India’s global exposure is well known. After the enactment of Arbitration and Conciliation Act, 1996, there has been a surge in the International commercial arbitration. India’s Arbitration and Conciliation Act, 1996 provides a statutory framework for the enforcement of foreign arbitral awards given in countries which are signatories to either the 1927 Convention on the Execution of Foreign Arbitral Awards (Geneva Convention) or the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention).With the advent of globalization and with India emerging as a major international player in the world economy, it is necessary to consider the law concerning enforcement of foreign judgments in India.
FOREIGN AWARDS AND ITS ENFORCEMENT
Section 44 of the 1996 act defines Foreign award as an arbitral award on differences between persons arising out of legal relationships, whether contractual or not, considered as commercial under the law in force in India, made on or after the 11th October, 1960 in pursuance of an agreement in writing for arbitration to which the New York convention applies, and in one of such territories as the Central Government , being satisfied that reciprocal provisions have been made, may , by notification in the official Gazette , declare to be territories to which the said convention applies .
In Indian law, a foreign award by definition means an award passed in such territory as the Central Government by notification may declare to be a territory to which the New York Convention applies. Hence, even if a country is a signatory to the New York Convention, it does not ipso facto mean that an award passed in such country would be enforceable in India. There has to be further notification by the Central Government declaring that country to be a territory to which the New York Convention applies. Only 43 countries have been notified so far by the Indian government. While France, Germany, United Kingdom, United States of America, Japan and Singapore have already been notified; Hong Kong and Australia (amongst many others) have not yet been notified ((GK Kwatra, The Arbitration and Conciliation Law of India (2003) published by the Indian Council of Arbitration)).
Any foreign award which would be enforceable under part II of the Arbitration and Conciliation act,1996 is treated as binding for all the purposes on the persons as between whom it was made, and may accordingly be relied upon by any of those persons by way of defence , set off or otherwise in any legal proceedings in India.
A foreign judgment can be enforced in India in one of two ways:
1. Judgments from Courts in “Reciprocating territories” can be enforced directly by filing before an Indian Court an Execution Decree.
2. Judgments from “Non-Reciprocating territories,” such as the United States, can be enforced only by filing a law suit in an Indian Court for a Judgment based on the foreign judgment. The foreign judgment is considered evidentiary. The time limit to file such a law suit in India is within three years of the foreign judgment.
A Reciprocating territory is defined in explanation 1 to Section 44A of India’s Civil Procedure Code as: “Any country or territory outside India which the Central Government may, by notification in the Official Gazette, declare as a reciprocating territory.” The List of Reciprocating Territories under the Civil Laws in India are United Kingdom, Singapore, Bangladesh, UAE, Malaysia, Trinidad & Tobago, New Zealand, the Cook Islands and the Trust Territories of Western Samoa, Hong Kong, Papua and New Guinea, Fiji, Aden.
The party seeking enforcement of a foreign award under the provisions of the Arbitration and Conciliation Act, 1996 must make an application to the court of competent jurisdiction with the following documents:
(i)The original/duly authenticated copy of the award;
(ii)The original/duly authenticated copy of the agreement, and
(iii)Such evidence as may be necessary to prove that the award is a foreign award.
On fulfilling the statutory conditions mentioned above, a foreign award will be deemed to be a decree of the Indian court enforcing the award and thereafter will be binding for all purposes on the parties subject to the award.
CHALLENGES OF ENFORCEMENT OF FOREIGN AWARDS:
The enforcement of foreign award may be refused, at the request of the party against whom it is invoked, only if that party furnishes to the court proof that ((Section 48));
a) The parties to the agreement referred to in section 44, were under the law applicable to them , under some incapacity , or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of the country where the award was made; or
b) The party against whom the award is invoked was not given proper notice of the terms of the appointment of the arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or
c) The award deals with a difference not contemplated by or not falling within the terms of the submission to arbitration, or it contains decision on matters beyond the scope of the submission to arbitration:
Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, that part of the award which contains decisions on matters submitted to arbitration may be enforced; or
d) The composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties , or, failing such agreement , was not in accordance with the law of the country where the arbitration took place; or
e) The award has not yet become 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, that award was made.
Enforcement of an arbitral award may also be refused if the court finds that –
- The subject matter of the difference is not capable of settlement by arbitration under the law of India; or
- The enforcement of the award would be contrary to the public policy of India.
In the case of ONGC vs. Saw Pipes ((AIR 2003 SC 2629)), the Supreme Court held that an award shown to be suffering from ‘patent error of law’ could also be challenged under the head “award being in conflict with public policy of India” thereby expanding the grounds for setting aside of a foreign award.
If the court is satisfied that the foreign award is enforceable, then it shall be deemed to be a decree of the court ((Section 49 of the Arbitration and Conciliation Act, 1996)). The Supreme Court has held that no separate application needs to be filed for execution of the award ((Fuerst Day Lawson v Jindal Exports Ltd 2001 (6) SCC 356.)).
In Renu Sagar Power Co v General Electric Corporation ((1994 Supp (1) SCC 644)), The Supreme court held that the foreign award may be refused to be enforced if it is contrary to
- The fundamental policy of Indian law
- The interests of an Individual
- The Justice or morality.
An appeal shall lie from an order of the court refusing to enforce a foreign award. However, there is no appeal provided for against an order of the court rejecting objections to enforce the award ((Section 37)). Hence, an order upholding the foreign award is not appealable. However, the constitutional remedy by way of a (discretionary) Special Leave Petition to the Supreme Court of India would still be maintainable ((Constitution of India, Art 136)).
In the landmark case of Bhatia International vs. Bulk Trading ((AIR 2002 SC 1432)), the Supreme Court held that Part I of the Arbitration and Conciliation Act, 1996 Act applies only to Domestic awards whereas Part II of the Act only deals with the Enforcement of foreign awards. In this case, the scope of Part I of the Act was interpreted to apply to arbitrations held outside India and in turn applied Sec. 9 (interim relief) in support of arbitrations seated outside India. The court held that where such arbitration is held in India, the provisions of Part I would compulsorily apply. In cases of International Commercial Arbitrations held outside India, the provisions of Part I would apply unless the Parties by agreement, express or implied, excluded all or any of its provisions. In that case, the laws or rules chosen by the Parties would prevail. Any provision of Part I specifically excluded will not apply. This judgment was delivered to fill the lacunae that existed in the Arbitration and Conciliation Act, 1996 Act. After the decisions of this case, the parties who were aggrieved in foreign arbitrations were allowed to apply for interim relief in India.
Again In Venture Global Engineering vs. Satyam Computer Services ((AIR 2008 SC 1061)), the Supreme court held that:
“The provisions of Part I of the Act would apply to all arbitrations Including International Commercial Arbitrations and where such arbitrations are held in India, the provisions of Part I would be compulsorily applied to the extent permitted by the provisions of Part I. It was also held that even in the case of International Commercial Arbitration held outside India, the provisions of Part I would apply unless the Parties by Agreement express or implied; exclude all or any of its provisions.
But In Bharat Aluminum Co. v. Kaiser Aluminum Technical Services Inc ((2012(2) ALD 133 (SC).)), the Supreme Court overruled the decisions of Bhatia International and Venture Global case and held that Part I of the Arbitration Act does not apply to foreign seated arbitrations. The Court thus refused to set aside two arbitration awards made by a tribunal seated in London. It was also held that arbitrations seated outside India are dealt by Part II of the Arbitration Act alone, and that the Indian courts had no authority to annul arbitration awards made outside India. It was further held that the law of the seat of the arbitration will govern the conduct of the arbitration.
So after the decision of the Bharat Aluminum case, it is no longer necessary for the parties to an arbitration agreement to expressly exclude the application of Part I of the Arbitration Act to arbitration proceedings held outside India and the decision of this case was applied prospectively i.e. it was applicable to all those arbitration agreements which were concluded on or after September 6, 2012.
Foreign judgments and foreign awards are only accepted when they are not contradictory to the principle of law which is laid down by the Indian Legislature. Now The Indian courts have developed a reasoned, cautious and a sophisticated approach while enforcing the foreign judgments and foreign awards. This anticipates well for growth and development of legal jurisprudence in India in the field of conflict of laws.
The decision in Bharat is of great significance and this case is also consistent with the principles of the New York Convention and UNCITRAL Model Law, which was not necessarily the case with the previous decisions of the Indian Supreme Court. So finally it can be concluded that India has an effective law in place, but still a culture of fair arbitration needs to be inculcated within the bar, bench and arbitral community to improve the arbitration proceedings and have an arbitration friendly jurisdiction in India.