Enforceability of Foreign Arbitral Award in Indian Regime

An Analytical Approach towards the Scheme

Author: Pankaj Sevta, Research Associate

A foreign award can be enforced in India under the multilateral international conventions to which India is a party, namely, the Geneva Convention of 1927 ((See Jane L. Volz& Robert S. Haydock, Foreign Arbitral Awards: Enforcing the Award against the Recalcitrant Loser 21 Wm. Mitchell L. Rev. 867 (1995-1996).))or the New York Convention of 1958 ((See Susan Choi, Judicial Enforcement of Arbitration Awards under the ICSID and New York Conventions  28 N.Y.U. J. Int’l L. & Pol. 175 (1995-1996).)), if the said convention applies to the relevant arbitration. The foreign award must have been made in a country which has ratified the Geneva Convention of 1927 or the New York Convention of 1958.

India has enacted legislation earlier to implement the two conventions. The Arbitration (Protocol and Convention) Act, 1937 for the enforcement of foreign arbitral awards to which the Geneva Convention of 1927 applied. Similarly, the Foreign Awards (Recognition and Enforcement) Act, 1961 was enacted pursuant to the New York Convention of 1958 and it prescribes the law and procedure for the enforcement of foreign awards in India, to which the said Convention applied ((See S. WardAtterbury, Enforcement of A-National Arbitral Awards under the New York Convention of 1958 32 Va. J. Int’l L. 471 (1991-1992).)).

The 1996 Act has repealed both the above said acts. Part II of the 1996 Act, however, re-enacts the operative portions of both these repealed enactments. The three schedules of to the 1996 Act, also reproduces the provisions of the New York Convention (Schedule I) ((See Robert A. J. Barry, Application of the Public Policy Exception to the Enforcement of Foreign Arbitral Awards under the New York Convention: A Modest Proposal 51 Temp. L.Q. 832 (1978).)), Geneva Protocol (Schedule II) and Geneva Convention in (Schedule III) ((SeeG. K. Kwatra, Arbitration and Alternative Dispute Resolution 108 (2008).)).  In other words India continues to be a party to three important international instruments on the recognition and enforcement of foreign awards. A material change has been made in 1996 Act ,in as much as sub section  (b) of Section 9 in the 1937 as well as 1961 Act, which provided that those acts shall apply to any award made on arbitration agreement governed by the law of India, has been omitted in part II. Therefore, any award given outside in India will be treated as foreign award. To such foreign award if the same be a convention award, the provisions of part II and not the provision of part I of 1996 Act will apply ((Ibid. 20)).

ENFORCEMENT OF AWARDS TO WHICH THE CONVENTIONS DO NOT APPLY

Foreign awards which are made in countries which are not parties to either the Geneva Convention or the New York convention cannot be enforced with the same facilities as in the case of foreign awards to which conventions apply. Such foreign awards are enforceable in India on the same ground and in the same circumstances in which they are enforceable under the general law on grounds of justice, equity and good conscious. They can be enforced by an action brought before court of law. A foreign award will not be imposed in India if its enforcement would be contrary to the public policy or laws of India. There is not so much case laws on the circumstances in which a foreign award can be challenged. There are few cases in which a foreign award has been denied recognition or enforcement on ground of public policy. A foreign award will deemed to be against the laws of India if it violates, for instance, the provisions relating to exchange control, import export control or similar mandatory provisions ((Ibid  ¶ 27)).

FOREIGN AWARD IS FINAL ON MERITS

It is noteworthy that Section 46 of the 1996 Act provides that any foreign award which would be enforceable under the Chapter shall be treated as binding for all purpose on the persons as between whom it is made. A foreign award cannot be challenged on merits, being final, conclusive and binding for all purposes, except the circumstances set out in section 48 in which the enforcement of the award will be refused ((See Kwatra, supra note 5¶ 20)). Domestic courts cannot set aside or annul a foreign award. The scope of the court’s jurisdiction is restricted to a decision on whether the award is enforceable ((See Ludwing Wunscha & Co. v. Raunaq International, AIR 1983 Del 247)).

ENFORCEMENT OF FOREIGN AWARD AND PLACE OF FILING

In Tata International v. Trisuns Chemical ((2002 (2) Bom CR 88)), the court held that in the context of Section 47 or the Arbitration and Conciliation Act, 1996 that a petition for the enforcement of a foreign award can be filed in any part of the country where a party answerable in the claim of arbitration may have money or where a suit for recovery can be filed ((Ashwinie Kumar Bansal, Arbitration Agreements and Awards 89 (2006).)). The learned Single Judge, relying upon a decision of the Supreme Court in Brace Transport Corporation of Monrovia Bermuda v. Orient Middle East Lines Ltd, Saudi Arabia ((AIR 1994 SC 1715)), held that the subject matter of the award and the subject matter of an arbitration agreement are two different and distinct expressions. “In respect of a foreign award, if the expression subject matter of the award was to mean the same thing as the subject matter of the arbitration agreement, in most cases there would be no Court available where the award could be enforced as the entire cause of action in respect of the subject matter of the arbitration could be the foreign country. Merely because in the instant case, the contract was entered into in India cannot result in a different interpretation. The expression as the explanation itself permits forum hunting if that expression can be used. After considering all these provisions a similar view was taken in Arbitration Petition Lodg. No. 427 of 2001 in the case of Naval Gent Marline Ltd. v. Shivnath Rai Harnarain (I) Ltd. and Ors., decided on 5th July, 2001 in which at the ad interim stage, apart from other issues, the issue as to the meaning of the expression “subject matter of the award” was in issue and has been similarly answered.”

ENFORCEMENT OF FOREIGN AWARD AND PUBLIC POLICY OF INDIA: THE RELATIONSHIP

One of the circumstances in which enforcement of the award may be refused is that it is contrary to the public policy of India. The explanation to section 48 of the 1996 Act also provides that an award would be deemed to be in conflict with the public policy of India. If the making of the award was induced or affected by fraud or corruption, Indian courts have been called upon to interpret directly the extent and content of public policy in India. The content of “public policy” as used in the 1996 Act as a legal standard has been set by the Supreme Court of India in ‘RenuSagar Power Corp. vs. General Electric Co ((AIR 1994 SC 860: CLA Suppl 1(SC).)). According to the verdict of SC in RenuSagar’s case, there are three patterns of the operations of the doctrine of “Public Policy” in the field of recognition and enforcement of foreign arbitral awards. First, an Indian court will refuse, on grounds of public policy, to recognize and enforce an foreign arbitral award if such enforcement is contrary to “fundamental policy of Indian law”, that is to say, if the foreign award involves a violation of the Indian laws or more noncompliance with a court’s orders. However, the bar of limitation will not operate as a bar of public policy.

There is a second pattern of public policy in vocation. A court will refuse, on grounds of public policy to recognize and enforce an foreign arbitral award if such enforcement is detrimental to the “interest of India”. The words “Interest of India” are of general import and the court has not clearly spelt them out. It is evident, however, that whatever is detrimental to the national interest or may lower the image of the country cannot be required to be enforced by a court. In C.O.S.I Inc. v. Steel Authority of India ((AIR 1996 Del 8)), the Delhi high court  refuse to enforce an award on the ground that the govt. of India had to ban the export shipments of coils with immediate effect because of the acute shortage of HR coils existing in the country at the relevant time ((See Kwatra, supra note 5¶ 24)). The third pattern of the operation of public policy is that in which the enforcement of foreign award would be contrary to justice or morality.

CONCLUSION

It can be observed that a foreign award will not be imposed in India if its enforcement would be contrary to the public policy or laws of India. There are not so much case laws on the circumstances in which a foreign award can be challenged. There are few cases in which a foreign award has been denied recognition or enforcement on ground of public policy. Apart from that, three respective schedules of the 1996 Act reproduces the provisions of the New York Convention (Schedule I), Geneva Protocol (Schedule II) and Geneva Convention in (Schedule III) and thereby can be inferred that India continues to be a party to three significant international instruments on the recognition and enforcement of foreign awards. It can be analyzed that The Indian Arbitration and Conciliation Act of 1996 is certainly an opportune and creditable endeavor to consolidate and amend the Indian law on arbitration and enforcement of foreign awards in tune with the global developments. By going through the examination sketch, the Act has attempted to combine itself with parameters like domestic arbitration, domestic conciliation, international commercial arbitration etc. Provisions like section 46 and section 47 provide more light on the existing scheme of enforcement of foreign award in the instant scenario. It can also be concluded in relation to domestic award and foreign award that grounds on which a domestic or foreign award can be challenged are identical and the act provides an effective remedy to a person aggrieved by a foreign award.

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