Ravi Singhania & Gunjan Chhabra, Author at Singhania And Partners

The “Appropriate Courts” in Foreign Seated Arbitration: An Indian Perspective

Arbitration has slowly gained ground as the most preferred mode of dispute resolution with a high focus on speedy dispute resolution, preference to party autonomy and minimal intervention of Courts. Although the law related to domestic arbitration is clear as to which courts would have jurisdiction to supervise these arbitrations, there is still some amount of ambiguity as far as International Commercial Arbitrations1 are concerned.

As far as the procedural law of Arbitration is concerned, it is often said that Parties to the agreement make their own law owing to the preference to party autonomy given in these circumstances. However, this does not mean that International Commercial Arbitrations take place in a vacuum. Even rules decided by Parties need the sanction of law if they are to be enforceable. In this context it is important to understand that the relevant law which governs the procedural and curial aspects of Arbitrations is  known as the law of the seat or place of arbitration and is called the “lex arbitri”.

Foreign Seated Arbitration

To understand what a Foreign Seat is and what the implication of a foreign seat is, it is important to understand the different systems of law which govern an agreement. In any arbitration containing a foreign element, there are three different systems of law which govern the arbitration2:

  1. The law governing the substantive law of the contract3 – this is the law which governs the substantive issues in dispute in the contract. Also referred to as “applicable law”, “governing law”, “proper law of the contract” or “substantive law”.
  2. The law governing the existence and proceedings of the arbitral tribunal4 – This is the law in which the arbitration proceedings have to be conducted and is also referred to as the “curial law”. This is the law which is derived from the seat of arbitration.
  3. The law governing the recognition and enforcement of the award5 – This is the law which governs the enforcement, as well as filing or setting aside of the award and is also the law which governs the arbitrability of the dispute.

Furthermore, in absence of any other stipulation in the contract, proper law is the law applicable to the arbitral tribunal itself6. Furthermore, the lex arbitri and the law governing the recognition and enforcement of the award are also one and the same in absence of an intention/stipulation to the contrary7. Thus the place of the arbitration generally specified in a contract determines the seat of arbitration unless contrary intention is apparent from the contract. In other words the seat of arbitration is dependent on several factors and is that which has the closest and most real connection with the agreement to arbitrate8.

Therefore, any arbitration where the seat of arbitration is outside India is a foreign seated arbitration. From the above discussion, it is evident that it is important to gather the seat of arbitration from the agreement between the parties, as it has an implication of determining the curial law and the lex arbitri of the arbitration. This in turn has an impact on determining which courts can be approached for which remedy in case of a Foreign Seated Arbitration.

The Applicability of Part I to a Foreign Seated Arbitration

As far as Indian law is concerned, it is now well settled, that the seat of arbitration is governed by the following factors:

  1. The place of arbitration is usually determinative of the seat of arbitration, i.e. the courts having supervisory jurisdiction empowered to give interim reliefs.
  2. The place of arbitration can be different from the seat of arbitration, if a different intention appears from the intention of the parties. In such a case, the seat of arbitration would be the jurisdiction which would have the closest and most real connection with the arbitration agreement9.
  3. Part I of the Arbitration and Conciliation Act, 1996 (hereinafter called “the Act”), which is the curial law in India, is excluded for Foreign Seated Arbitrations barring the exception provided in Section 2(2) of the Act which would be discussed in the latter part of this Article.

Interim Relief from Court

In India, the Section which governs interim relief in cases containing an arbitration clause is Section 9 of the Act. Article 9 of the UNCITRAL Model Law10 on which the Act is based, deals with the power of courts to grant interim measures of protection. where a party is permitted to apply to Court for certain interim measures, before, during or after making of the award by the Tribunal. A recent amendment has taken place in the Act11, which has substantially changed this position regarding seeking of interim relief from Court.

Before the amendment of 2015, the law with regard to the applicability of Part I was governed by the judgment of BALCO12BALCO laid down prospectively (from 06.09.2012), that in a foreign seated arbitration neither Section 9 nor any other provision of Part I would be applicable. Prior to BALCO, the law laid was as laid down in Bhatia International13 Bhatia International laid down, that the provisions of Part I would apply even to arbitrations held outside India, unless it was expressly or impliedly excluded by parties. It is pertinent to note, that Bhatia International still continues to govern the law as far as arbitration agreements pre-dating BALCO are concerned.

The Amendment of 2015, in effect, nullifies the law laid down in BALCO to some extent and holds that even in an International Commercial Arbitration having a foreign seat, a party can approach Indian courts under Section 9 and get appropriate relief, provided there is no agreement to the contrary, thus reviving the law of Bhatia International to a limited extent.

Therefore as far as Interim Measures from Court are concerned, the parties are allowed to approach Indian Courts, even in Foreign Seated arbitrations. This is particularly helpful in cases where assets of Indian Parties are located in India and there is a fear of disposal. Similarly, the Appeal against an Order passed in a Petition filed under Section 9 would also lie to Indian Courts only as per the amendment14.

Application for Appointment of Arbitrators

Section 11 of the Act governs the provisions for appointment of Arbitrators in India, Article 11 being the concomitant provision of the UNCITRAL Model Law. As regards the appointment of Arbitrators, in a Foreign Seated Arbitration, Part I of the Arbitration Act has no application and there is no exception carved out in the act itself. However, in certain cases, where even though the place of Arbitration has been named to be outside India, the closest and most real connection of the agreement lies in India. For instance in the case of Enercon15.

Apart from this exception, the application for Appointment of Arbitrators, failing the agreement of parties would inevitably lie in the Country where the seat of Arbitration is located.

Application for challenging/enforcement of the Award

Parties can approach India for enforcement of an Award in two scenarios which are described as under:

  1. Scenario 1 – Where the seat/place of Arbitration and award is outside India and where the real most close connection of the agreement also lies in the same place.
  2. Scenario 2 – Where the seat/place of Arbitration and award is outside India but where the real and closest connection of the agreement lies in India.

Scenario 1

In Scenario 1, despite the seat being outside India, the parties could want to come to India for enforcement owing to the fact that the assets of the Indian party might be located in India etc. For this purpose if the award is passed in a territory which is signatory to the New York Convention, and with which a reciprocal arrangement has been made by the Indian Central Government, then such an award is enforceable in accordance with Part II of the Act16. Any challenge to the award would lie under Section 48, Part II of the Act. Out of the 196 countries in the world only 48 countries have been notified by the Central Government as reciprocating countries, with the most recent addition being Mauritius17.

However, if the award is made in a territory which is either not a party to the New York Convention, or India does not have a reciprocal arrangement with  that territory, or if both conditions are not fulfilled then the following would have to be considered:

  1. Where the award passed in the territory concerned, is considered to be the decree of that Court, then parties can come to India directly. In case the award is not automatically a decree in the concerned territory, then the parties would need to first make the award a rule of Court in the concerned territory, and then only can they approach India for execution of the award as a Foreign Decree.
  2. Once the award is considered to be a Foreign Decree then Section 44 of the Code of Civil Procedure, 1906 (Hereinafter called the CPC) would become applicable. Section 2(2) of the CPC defines foreign judgment as “the judgment of a foreign Court”. Parties can approach Indian Courts for enforcement under Section 44.
  3. Next it needs to be checked whether the award to be enforced has been passed in a reciprocating territory18. In case the territory is a reciprocating territory then directly an Execution Petition can be filed in India and the award can be executed as a decree of a foreign Court.
  4. However, if the country in which the foreign decree/award has been passed is not a reciprocating country, then a further complication arises, wherein a fresh suit would have to be filed in India to get the foreign decree/award enforced. This is basically a fresh adjudication and time consuming process.

Scenario 2

Where the seat/place of Arbitration and award is outside India but where the real and closest connection of the agreement lies in India, then in such a case, Part I of the Act would become applicable and an application for execution can be directly filed in India. Any party intending to object to the award would also have to approach Court under Part I, Section 34 of the Act and not under Part II, Section 48 of the Act.

Appeals arising from orders of Interim Reliefs or orders of enforcement of foreign awards

In accordance with the discussion above, in case an interim relief is given under Section 9 or enforcement of foreign award is made as per Part I, then automatically an appeal against such Orders would lie to Indian Courts under Part I, Section 37 of the Act. Similarly, in case an order of an Indian Court in respect of a challenge to a foreign award under Part II, needs to be appealed, Section 50 of Act would become applicable and again the Appeal would lie in India.

However, in a scenario, where neither Part I of the Act is applicable, nor Indian Courts have been approached for execution/enforcement/challenge from the Foreign Award, then Indian Courts would not have any role to play in the appeal process either.

Denouement

To conclude it may be said, that different courts play different roles in Foreign Seated Arbitrations. Firstly, it needs to be determined which is the seat of arbitration, after which the closest and most real connection needs to be analysed. Thereafter for different remedies, different Courts can be approached. Moreover, the 2015 amendment has given more leeway to Indian Courts as far as Interim reliefs are concerned, thus providing additional protection to foreign investors vis-s-a-vis Indian players. In view of the above, India is fast becoming an arbitration and foreign investor friendly country.


Section 2(f) of the Arbitration and Conciliation Act, 1996 (the Act) defines “International commercial arbitration” as “an arbitration relating to disputes arising out of legal relationships, whether contractual or not, considered as commercial under the law in force in India and where at least one of the parties is- (i) An individual who is a national of, or habitually resident in, any country other than India; or (ii) A body corporate which is in corporate in any  country other than India; or (iii) An association or a body of individuals whose central management and control is exercised in any country other than India; or (iv). The Government of a foreign country;”

 

3 Reliance Industries Ltd. v. Union of India (2014) 7 SCC 603.

4 Reliance Industries Ltd. v. Union of India (2014) 7 SCC 603.and Sumitomo Heavy Industries Ltd. v. ONGC Ltd. (1998) 1 SCC 305

5 Sumitomo Heavy Industries Ltd. v. ONGC Ltd. (1998) 1 SCC 305

6 Yograj Infrastructure Ltd. v. Ssangyong Engineering & Construction Co. Ltd. (2012) 12 SCC 359

7  Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc (2012) 9 SCC 552; Enercon (India) Ltd. and Ors. v. Enercon Gmbh and Anr. (2014) 5 SCC 1

8; Roger Shashoua v. Mukesh Sharma, Supreme Court, decided on 4th July, 2017; Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc (2012) 9 SCC 552; Enercon (India) Ltd. and Ors. v. Enercon Gmbh and Anr. (2014) 5 SCC 1

9 An example of such a scenario is the judgment of Enercon – where despite the venue being specifically provided as London, the seat was held to be India. This was because, after taking various factors into consideration including applicable law as the Indian Arbitration Act, 1996 and all three laws i.e., Law governing Contract, Law governing Arbitration Agreement, Law governing Curial Laws/ Lex Arbitri were Indian, the real and closest connection of the Agreement was held to be that with India.

10 United Nations Commission of International Trade Law (UNCITRAL) Model Law on International Commercial Arbitration, 1985.

11 Arbitration and Conciliation (Amendment) Act, 2015

12 Bharat Aluminum and Co. vs. Kaiser Aluminium and Co. (2012) 9 SCC 552.

13 Bhatia International v. Bulk Trading S.A. (2002) 4 SCC 105.

14 Section 2(2) of the Act makes the appeal provision of Section 37 also applicable to International Commercial Arbitrations, even if the place of arbitration is outside India.

15  Refer Footnote 9

16 Section 49 of the Act.

17 Australia; Austria; Belgium; Botswana; Bulgaria; Central African Republic; Chile; China (including Hong Kong and Macau) Cuba; Czechoslovak Socialist Republic; Denmark; Ecuador; Federal Republic of Germany; Finland; France; German Democratic Republic; Ghana; Greece; Hungary; Italy; Japan; Kuwait; Mauritius, Malagasy Republic; Malaysia; Mexico; Morocco; Nigeria; Norway; Philippines; Poland; Republic of Korea; Romania; Russia; San Marino; Singapore; Spain; Sweden; Switzerland; Syrian Arab Republic; Thailand; The Arab Republic of Egypt; The Netherlands; Trinidad and Tobago; Tunisia; United Kingdom; United Republic of Tanzania and United States of America.

18 “Reciprocating territory” means any country or territory outside India which the Central Government may, by notification in the Official Gazette, declare to be a reciprocating territory for the purposes of Section 44A of the Civil Procedure Code. Countries which have been officially recognized as “reciprocating countries” by the Central Government of India include:- Aden; Bangladesh; Federation of Malaya; Fiji Colony; Hong Kong; New Zealand; Cook Islands and Western Samoa; Papua New Guinea; Republic of Singapore; Trinidad and Tobago; United Kingdom of Great Britain and Northern Ireland; and Victoria.

International Commercial Arbitration between India and United States of America

Introduction

The importance of transnational commercial arbitration has been recognized the world over. The aim is to achieve the sole objective of resolving the dispute timely and efficiently with minimum intervention of a Court of Law so that the trade and commerce is not affected on account of litigations before a Court.

India USA Arbitration

One of the most important choices to be made by parties to an international commercial contract when they include an arbitration clause is that of the seat of the arbitration. It is indeed the seat of the arbitration which determines the procedural rules applicable to the arbitration, the extent to which the ordinary courts will be involved or will interfere in the arbitral process, as well as the degree to which an arbitral award is subject to challenge. The choice of the seat will also have impact on the duration and costs of the proceedings. Party autonomy being one of the cornerstones of international arbitration, parties are free to agree on the seat of arbitration. It is even open to parties to have a separate seat of arbitration and have a separate law governing the law applicable to the substance of the disputes.

While Indian arbitration law has undergone a rapid evolution in recent years, and the Indian government has taken steps towards developing India as an arbitration- and foreign investor-friendly country, Indian parties may not always be able impose a seat in India on their foreign counterparts, which usually prefer the arbitration to be seated outside India, often in a jurisdiction considered neutral to both parties. There might also be practical or tactical advantages for Indian parties themselves in choosing a seat outside India, including in terms of the duration and costs of the arbitral process.

This article specifically focuses on a U.S. seated arbitration with the governing law as Indian law.

Why arbitration?

In a dispute concerning an Indian party and a party from the USA, it might be relevant to note why arbitration is specifically preferred as a dispute resolution mechanism over a regular civil proceedings.

The recognition and enforcement of foreign judgments and decrees in India are governed by Section 44A, read with Section 13 of the Code of Civil Procedure 1908. A foreign judgment which is conclusive under Section 13 of the code can be enforced by:

  • Instituting execution proceedings under Section 44-A, read with Section 13 of the code in the case of ‘reciprocating territories’; or
  • Instituting a civil suit on the judgment in the case of a non-reciprocating country.

This implies that executing a judgment from a non-reciprocating territory requires a civil suit on the foreign judgment to be filed before the competent court. Therefore, execution of a judgment from a non-reciprocating territory would be completely inefficient, time consuming as well as costly as it involves the prolonged procedural hassles of a civil suit.

On the other hand, since the USA and India are both parties to the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards and The United States of America is among the countries notified by India under the New York Convention, the arbitration award passed in the USA is recognized in India as a decree of court. The vice versa is also true. This means, that instead of re-instituting a civil suit, a party, after crossing certain limited hurdles provided under the Arbitration and Conciliation Act, 1996 itself, can directly move for execution of the award.  Hence arbitration is the best mechanism that can be adopted for dispute resolution. The hurdle to a foreign award is also discussed in the latter part of this article.

Systems of Law Applicable to Arbitrations:-

  • Law Applicable to Arbitration Agreement

The law applicable to the arbitration agreement is relevant both for the interpretation and assessing the validity of the arbitration agreement. Under the Indian Arbitration Act, the law governing the substantive disputes is the same as the law applicable to the arbitral tribunal itself[1], unless specifically provided in the contract between the parties, for instance ICC Rules.

  • The law governing the recognition and enforcement of the award

In India, the recognition and enforcement of a foreign international arbitral award is governed by Part II of the Indian Arbitration Act which, inter alia, implements the New York Convention.[2]

Part II of the Indian Arbitration Act applies to

Section 48 of the Indian Arbitration Act deals with the conditions requisite for enforcement of foreign awards, which also provides the ground for challenging a foreign award. Section 48 mirrors the grounds to challenge the enforcement of a foreign award set out in Article V of the New York Convention. The conditions for enforcement include party incapacity, invalidity of agreement under the law of the seat, absence of proper notice to the party regarding appointment, or inability of a party to represent his case, non arbitrability of the dispute, matters beyond scope of arbitration, wrong composition of tribunal, or that the award has not become binding as per the law of the seat. The only distinct ground which is available to the Court to refuse enforcement of the award is the award being against the public policy. This new ground has also been added by way of the 2015 Amendment.

The enforcement of a foreign award in India is a process which begins by filing an execution petition. At first, a court would determine whether the award complies with the requirements of the Act. Once an award is found to be enforceable it may be enforced like a decree of the particular court. At this specific stage parties would have to be mindful of the various challenges that may arise such as frivolous objections taken by the opposite party, and requirements such as filing original/ authenticated copy of the award and the underlying agreement before the court.

If the Indian enforcement court is satisfied that a foreign award is enforceable under Part II, Chapter 1 of the Indian Arbitration Act, the award will be deemed to be a decree of that court[3] . Accordingly, the award can be executed under Order XXI of the Code of Civil Procedure, 1908 in the same manner as a judgment from an Indian court.

Interim Relief

The procedure for obtaining interim relief and the type of relief available also varies according to the seat of the arbitration.

In India, Section 9 of the Indian Arbitration Act deals with the power of the courts to grant interim relief. It is based on Article 9 of the UNCITRAL Model Law. Under Section 9 of the Indian Arbitration Act, a party may apply to Indian courts for certain interim measures, before, during or after the award has been rendered by the arbitral tribunal.

For a limited period of time, from 2012 to 2015, interim relief pursuant to Section 9 of the Indian Arbitration Act was not available to parties to an arbitration seated outside India. This was the result of a judgment rendered by the Supreme Court of India in in 2012 in the case of Bharat Aluminum and Co. vs. Kaiser Aluminium and Co. (BALCO), in which it held that Part I of the Indian Arbitration Act (including Section 9 governing interim relief) did not apply to any foreign seated arbitration. However, the situation changed with the entry into force of the 2015 Amendment. The 2015 Amendment abrogates the case law laid down in BALCO to a limited extent as it expressly provides that, even in relation to an international commercial arbitration with a foreign seat, a party can seek appropriate interim relief from the Indian courts under Section 9 of the Indian Arbitration Act. The type of measures available under Section 9 of the Indian Arbitration Act are generally for the protection, preservation or interim custody of goods, assets, properties, securing the amounts in dispute, appointment of interim receivers etc.

An interim relief ordered by the Indian courts under Section 9 is subject to appeal under Part I, Section 37 of the Indian Arbitration Act.

Conclusion

The recent developments in India’s arbitration law, in particular the entry into force of the 2015 Amendment, offer parties to an international arbitration additional tools and protection by allowing them to seek interim relief before Indian courts even if the arbitration is seated outside of India.  This can be particularly useful if one of the parties has assets in India.

The Indian courts might also be seized with an application to enforce award rendered by an arbitral tribunal seated in USA. The enforcement of such an award in India is greatly facilitated by the fact that both USA and India are signatories of the New York Convention. As a result, the grounds on which Indian courts may refuse to enforce an arbitral award rendered in USA are limited.

 

 

 

[1] Yograj Infrastructure Ltd. v. Ssangyong Engineering & Construction Co. Ltd. (2012) 12 SCC 359

[2] Judgments of the Supreme Court of India in the cases of Sumitomo Heavy Industries Ltd. v. ONGC Ltd. (1998) 1 SCC 305, Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc (2012) 9 SCC 552, Enercon (India) Ltd. and Ors.v.EnerconGmbh and Anr. (2014) 5 SCC 1.

[3] Section 49 of the Indian Arbitration Act.

India’s Top Court Says Foreign Lawyers Can’t Practice in India

(As published in Bloomberg Law, ABA/BNA Lawyers’ Manual on Professional Conduct.)

The Supreme Court of India has ruled that foreign lawyers and law firms cannot practice law in India, although they can make  ‘‘casual visits’’ on a ‘‘fly in and fly out’’ basis to give legal advice on matters involving foreign and international law.

This is a setback to foreign law firms looking to establish offices in India, although it maintains the status quo since a 2012 ruling by a state high court which had similarly limited foreign lawyers’ and law firms’ presence and role in India.

In 2012, the Madras High Court had said foreign lawyers and firms could ‘‘fly in and fly out’’ of India to advise clients in matters of international law, but could not practice litigation or non-litigation law without first enrolling with the Bar Council of India and meeting the provisions of the Advocates Act.

In 2009 the Bombay High Court ruled that foreign law firms could establish offices in India only after getting enrolled as advocates under the Advocates Act of India of 1961.

Both rulings had been challenged in the top court, and a ‘‘division’’ bench comprising justices Adarsh Kumar Goel and U.U. Lalit on Mar. 13 pronounced judgment upholding the substantive parts of both state high courts’ decisions.

Upholding the view of both courts that foreign law firms and lawyers could not practice law, whether on the litigation or non-litigation side, in India, the court said, ‘‘We hold that the expression ‘fly in and fly out’ will only cover a casual visit not amounting to ‘practice.’

’’Any dispute over whether a foreign lawyer was going beyond this limit could be determined by the Bar Council of India, the court said. The Bar Council is a statutory body that prescribes professional ethics and standards, as well as conducts the examinations which an advocate must pass to be eligible to practice law in India.

The Bar Council or Indian government ‘‘will be at liberty to make appropriate Rules in this regard including extending Code of Ethics being applicable even to such cases,’’ the court added.

Liberalization Ahead? The court ‘‘has rightly and very prudently left policy making to BCI and the Government,’’ Jyoti Sagar, founding partner of J. Sagar Associates, told Bloomberg Law in an email Mar. 15.

In a similar vein, the court clarified that foreign lawyers could conduct international commercial arbitration in India, and modified provisions of the Advocates Act of 1961 that debarred this.

‘‘If the Rules of Institutional Arbitration apply or the matter is covered by the provisions of the Arbitration Act, foreign lawyers may not be debarred from conducting arbitration proceedings arising out of international commercial arbitration in view of Sections 32 and 33 of the Advocates Act,’’ the court ruled, adding that they would be governed by the ‘‘code of conduct applicable to the legal profession in India’’ and that the Bar Council or the government could frame specific rules in this
regard.

Similarly, it said business process outsourcing (BPO) that provide word processing, secretarial, transcription and/or proof-reading services did not come within the purview of the Advocates Act or the Bar Council of India
Rules. Accordingly these can carry on operating as they do.

Although the decision of the Supreme Court of India is final and cannot be challenged, this is not the end of the road for India’s plans to liberalize its legal services sector, which the government has tacitly supported.

‘‘That is now a political consideration,’’ Ravi Singhania, founding partner at Singhania & Partners, told Bloomberg Law. Explaining how India has gradually allowed in more and more foreign institutional and direct investment, he said rules could be loosed little by little to allow a larger role for foreign lawyers and law firms.

‘‘I believe that the way forward would be to have stakeholder consensus on the place of the Indian profession under the global sun and the blue print to get there,’’ Sagar added.

The case is Bar Council of India v. Balaji, Civ. App.

Nos. 7875-7879 of 2015, Sup. Ct. India 3/13/18.
BY MADHUR SINGH

To contact the reporter on this story: Madhur Singh in Chandigarh, India, at correspondents@bna.com
To contact the editor responsible for this story: S. Ethan Bowers at sbowers@bloomberglaw.com

 

International Commercial Arbitrations between Canada and India

International Commercial Arbitrations between Canada and India

(This article is co-authored by International Commercial Arbitration lawyers of Singhania & Partners LLP, India and Lapointe Rosenstein Marchand Melançon., L.L.P, Canada)


28/2/2018  

Meet the authors

The present article focuses on International Commercial Arbitrations between Indian and overseas parties, where the seat of arbitration is in Canada. It discusses the issues faced by foreign companies trying to obtain reliefs and remedies in India and Canada as well as the enforcement mechanisms for Canada-seated arbitrations involving parties in both countries. This summary of a selection of applicable legal principles should assist companies and other commercial parties in selecting the appropriate forum for dispute resolution in the context of their dealings with foreign parties.

The arbitration process is essentially guided by the terms of the contract between the parties . Relevant arbitration law only applies to procedural issues not agreed upon or specifically addressed in the parties’ arbitration agreement. By submitting their disputes to arbitral tribunals, parties ensure that their differences are settled outside the scope of the national court system in a relatively expeditious, cost-effective and private manner . It is also owing to these factors that several countries including India have undergone a rapid evolution in the law of Arbitration to make it attractive to foreign investors.

Arbitrations can be both institutional as well as ad-hoc arbitrations. Various institutions such as the London Court of International Arbitration (LCIA), the International Chamber of Commerce (ICC), and the Singapore International Arbitration Centre (SIAC), also administer arbitrations, and carry their own rules of procedure for arbitration. However, this article deals with the basic law governing arbitrations in Canada as well as India in respect of Canada-seated arbitrations.

It is also important to note that the parties may select the substantive law that governs their contractual relationship; while the rules applicable to the parties’ choice of law are beyond the scope of this article, parties must consider that where an arbitration is seated in a jurisdiction other than the jurisdiction of the selected governing law, the substantive rules applicable to the contract must be proven before the arbitral tribunal .

LEGAL SYSTEMS GOVERNING AN ARBITRATION

The seat of arbitration carries with it implications regarding the procedural law which is applicable to the arbitration proceedings. When considering whether to conduct arbitration in Canada or India, it is important to understand how both jurisdictions deal with different processes applicable to an arbitration agreement.

India
In the Indian legal system, where an arbitration contains a foreign element, there are three different systems of law which govern the arbitration :-

1. The law governing the substantive law of the contract which is the law governing substantive issues in dispute in the contract. Also referred to as “substantive law”, “applicable law”, or “proper law of the contract”.
2. The law governing the existence and proceedings of the arbitral tribunal , which is the law governing the conduct of the arbitration proceedings. It is also referred to as the “curial law” or the “lexarbitri”. This is the law which is determined by the seat of arbitration.
3. The law governing the recognition and enforcement of the award is the law which governs the enforcement, as well as filing or setting

aside of the award and is also the law which governs the arbitrability of the dispute.

Furthermore, in the absence of any other stipulation in the contract, proper law is the law applicable to the arbitral tribunal itself . The place of the arbitration specified in a contract generally determines the seat of arbitration unless contrary intention is apparent from the contract. Also the lexarbitri and the law governing the recognition and enforcement of the award are one and the same in the absence of an intention/stipulation to the contrary .

The Indian law on arbitration, provided for in theArbitration and Conciliation Act, 1996 (the ‟Indian Act”), is based on the 1985 UNCITRAL Model Law on International Commercial Arbitration and the UNCITRAL Arbitration Rules 1976 (the ‟Model Law”). In the Indian Act, an International Commercial Arbitration is defined as an arbitration arising from a legal relationship which must be considered commercial, where either of the parties is a foreign national or resident, or is a foreign body corporate or is a company, association or body of individuals whose central management or control is exercised in some other country, or a government of a foreign country .

An International Commercial Arbitration may either be seated in India, or be seated in a foreign country, such as Canada. Where an International Commercial Arbitration is seated in Canada, Part I of the Indian Act, which is the curial law in India, is excluded for such arbitrations, barring certain exceptions discussed further below.

Canada
Parties wishing to institute arbitral proceedings in Canada must take into consideration the particularity of the Canadian legal framework . The Canadian constitution provides for the division of legislative powers between the federal and provincial governments . Traditionally, matters relating to commercial arbitration have fallen within the purview of the provincial and territorial legislatures . Canada adopted the Model Law in 1985 and accordingly, all Canadian provinces and territories, including Quebec (Canada’s only civil law jurisdiction), have enacted international commercial arbitration legislation premised on the Model Law . As a result, the rules applicable to Canada-seated arbitration are generally consistent with those applicable in India.
In essence, the parties’ choice of law will be respected, the parties will be required to make proof of their claims and defenses through accepted means of introducing evidence and testimony , and the enforcement of the arbitral award will depend on the criteria applicable in the jurisdiction where enforcement is sought.

INTERIM RELIEF FROM COURT

The mode of obtaining Interim Reliefs would vary depending on the seat of arbitration, as already explained above. The need to obtain interim relief will depend on whether a party may suffer damages or irreparable harm if any issues in dispute remain unaddressed while the arbitration proceedings run their course. For example, a party may insist that its contractual counterpart continue respecting the terms of a contract throughout the arbitration, whether by continuing to supply products, ceasing to engage in competitive activities, refraining from conduct that may constitute intellectual property infringement, etc. As such, it is important to consider whether the seat of the arbitration may affect outcomes in respect of interim relief.

India
In India, Section 9 of the Indian Act governs the power of the courts to grant interim relief. It is based on Article 9 of the Model Law . Under Section 9 of the Indian Act, a party is permitted to apply to Court for certain interim measures, before, during or after making of the award by the Tribunal. Although Section 9 is a part of Part I of the Indian Act, owing to a recent amendment , the position has been substantially changed. Before the amendment of 2015, the law with respect to seeking interim relief from court was governed by a judgment (‟BALCO”) of the Supreme Court of India. The BALCO judgment clearly laid down that Part I of the Arbitration and Conciliation Act (of which Section 9 is a part) would be inapplicable to any foreign seated arbitration. However, the 2015 amendment essentially nullifies the law laid down in BALCO to a limited extent and holds that even in an International Commercial Arbitration having a foreign seat; a party can approach Indian courts under Section 9 and obtain appropriate relief.

Therefore a Section 9 remedy would be available for a Canada-seated arbitration, only if the arbitration has been commenced after the coming into effect of the amending act . The nature of reliefs sought under Section 9 are generally for protection, preservation or interim custody of goods, assets, properties, securing the amounts in dispute and appointment of interim receivers.
This provision gives a huge relief to parties in cases where assets of parties to a Canada-seated arbitration are located in India and there is a fear of disposal or where conduct reproached of a party occurs in India or causes harm in India. Similarly, the Appeal against an Order passed in a Petition filed under Section 9 would also lie to Indian courts only as per the amendment .

Canada
In Canada, provincial legislation derived from the Model Law provides that national courts and arbitral tribunals have concurrent jurisdiction in granting interim relief . Canadian courts have continuously held that the option to seek interim relief from national courts should be available to parties, even though they have agreed to submit the resolution of their disputes to arbitration . Resorting to the Canadian court system for interim relief is not equivalent to a waiver of the right to arbitrate . As such, parties are free to request interim relief from courts without first having to obtain the consent of an arbitral tribunal . It is also possible to apply to the courts for interim relief where arbitration has not yet commenced, although this process may be affected by the parties’ choice of governing law and venue for dispute resolution. In any event, the flexibility provided by this concurrent jurisdiction may prove to be of interest to parties in selecting their arbitration seat.

Pursuant to a three-part test developed by the Supreme Court of Canada, prior to granting interim relief to arbitrating parties, Courts of the Canadian common law provinces (i.e. provinces other than Quebec) must first establish whether:

(i) the applicant raises a serious question to be decided;
(ii) the applicant would suffer irreparable harm without an interlocutory injunction; and
(iii) the balance of convenience favors granting the relief sought .

A similar test also applies for granting interlocutory injunctions in the province of Quebec .
Parties may look to courts instead of arbitral tribunals for obtaining interim relief for several reasons. Firstly, provincial legislation provides that arbitral tribunals may only order interim measures in respect of the subject matter of the dispute. Therefore, parties will have no choice but to turn to the ordinary courts if they require urgent relief prior to the formation of an arbitral tribunal, or relating to an ancillary but related matter that is not squarely within the subject matter of the dispute. In the same vein, a preservation order from a court will also be required in situations involving third parties who do not fall within the jurisdiction of arbitral tribunals (i.e. parties who are not bound by a bilateral arbitration clause) . Finally, interim measures ordered by an arbitral tribunal are of no force or effect without the enforcement of such orders provided by courts, while interim relief granted by courts is enforceable as such in its own right .

However, it remains that national courts continue to show great deference towards arbitral tribunals, thus abiding by the general rule that they may only intervene in exceptional circumstances . Furthermore, provisions relating to the courts’ inherent powers in granting interim measures have been interpreted narrowly so as to not allow parties to evade the application of arbitration clauses .
The province of Ontario has taken additional steps in modifying its international arbitration legislation in order to expressly recognize the types of interim measures that may be ordered by arbitral tribunals .

APPLICATION FOR APPOINTMENT OF ARBITRATORS
The procedure for appointment of arbitrators in both territories is once again dependent upon the seat of arbitration, and may impact commercial parties’ selection of the venue for their arbitration, particularly where the method of selecting an arbitrator and for dealing with disputes arising in that context is not specifically addressed by contract.

India
The appointment of Arbitrators in India is governed by Section 11 of the Indian Act, Article 11 being the concomitant provision of the Model Law. As for appointment of Arbitrators in a Canada-seated Arbitration, Part I of the Indian Act has no application. In these cases, the domestic law of the Canadian province in which the Arbitration is seated would be relevant, as explained above.

Canada
In Canada, provincial legislation provides that courts may only intervene in the appointment of arbitrators when there is discord between the parties in this regard. Parties may decide upon the composition of the arbitral tribunal as they see fit. If they fail to do so, the arbitral tribunal will, by default, consist of three arbitrators . If the parties fail to agree on the procedure for appointing their arbitrators, each party may appoint one arbitrator, who will then appoint a third arbitrator. Following a request by the other party, if a party fails to appoint an arbitrator within 30 days of receipt of that request, or if the two arbitrators are unable to decide upon a third arbitrator, a court appointed arbitrator will be assigned to the parties. In addition, a party may request the court to enforce the arbitrator appointment procedure agreed upon by the parties .

It is important to note that any measures taken by the court regarding the appointment of arbitrators may not be appealed. An arbitrator may only be replaced if there is reasonable doubt as to his or her impartiality or independence in respect of the arbitral proceedings .

APPLICATION FOR CHALLENGING / ENFORCEMENT OF THE AWARD
The law governing the enforcement/challenge to an arbitral award is extremely relevant, and especially so, in the case of an International Commercial Arbitration. This is because an award remains a mere written instrument until it can be enforced in the relevant country and compliance can be ensured. Both India and Canada recognize foreign arbitral awards; the applicable particularities are described in further detail in this section.

India
In an arbitration seated in a foreign territory, Part II of the Indian Act is applicable. Part II of the Act deals with enforcement of certain foreign awards in India. These awards are either awards passed in New York Convention Territories, or Geneva Convention Territories, Canada being a New York Convention Country.

Section 44 of the Indian Act provides that in order for a foreign award to be recognized as such under Part II, Chapter I (New York Convention Awards), certain conditions must be fulfilled, as follows:-

i. The territory should be signatory to the New York Convention
ii. The Indian Central Government should have notified in the Official Gazette that it has reciprocal provisions with such a territory.
Since, in the case of Canada, both the above conditions are met, the awards are recognized as Foreign Awards in India and the enforcement mechanism provided under Part II of the Indian Act applies .

I. Recognition and Enforcement of Foreign Award
Section 47 of the Indian Act provides that a party, when applying for the enforcement of a foreign award, apart from the procedural aspects of certification and authenticity, has also to produce such evidence as is necessary to prove that the award fulfils the conditions described above.

Furthermore, Section 48 of the Indian Act provides the grounds to challenge the enforcement of a foreign award which include (i) party incapacity, (ii) invalidity of agreement under the law of the seat, (iii) absence of proper notice to the party regarding appointment, or (iv) inability of a party to present his or her case, (v) non-arbitrability of the dispute, (vi) matters beyond scope of arbitration, (vii) irregular composition of tribunal, (viii) that the award has not become binding as per the law of the seat of arbitration, or (ix) is against the public policy of India.
II. Setting aside a Foreign Award
Once the award has survived a challenge or has been successfully reviewed for enforcement and 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 . After this stage it can be executed under Order XXI of the Code of Civil Procedure, 1908 in the same manner as a decree from an Indian court.

Canada
Where an arbitration is seated in Canada, the only recourse available to parties against the arbitral award is an application to courts for setting aside the award. Furthermore, the award must be recognized by courts in order to have binding legal effect.

I. Setting Aside an Arbitral Award
In Canada, parties are generally barred from appealing a duly recognized arbitral award on the merits . The legislative grounds for challenging or setting aside arbitral awards include: (i) party incapacity; (ii) invalidity of the arbitration agreement pursuant to the laws of Canada or Quebec; (iii) absence of proper notice of the appointment of an arbitrator or of the arbitral proceedings; (iv) inability of a party to present his or her case; (v) non-arbitrability of the dispute; (vi) matters beyond the scope of arbitration; (vii) irregular composition of the tribunal or (viii) the award’s infringement of Canadian or Quebec public policy . These grounds are essentially based on rules of due process and principles of fundamental justice. This restrictive approach towards the challenge of arbitral awards is also in line with the general principle that courts should rarely interfere with arbitral proceedings.While arbitral awards are not “immune from challenge”, applicants should bear in mind that there is a strong presumption in favour of upholding the validity and recognition of these decisions .
Additionally, the party seeking to challenge an arbitral award bears the onus of proving one or more of the relevant grounds enumerated above to the competent provincial court . It is also important to note that the courts’ power to set aside an arbitral award is discretionary; even if a party is successful in establishing that the requirements for setting aside an arbitral award are met, courts may still uphold the decision rendered by the arbitral tribunal .

II. Recognition and Enforcement of an Arbitral Award
The same rules apply for the recognition and enforcement of both Canadian and foreign arbitral awards; these are described in this section.

A. Procedure
In the Canadian provinces governed by common law, an arbitral award must be confirmed by the relevant provincial courts in order to be enforceable against the parties . Parties applying for the recognition of an arbitral award must provide the court with an original or certified copy of (i) the arbitral award and (ii) the arbitration agreement . More importantly, the applicants must supply the court with a duly certified translation of the arbitral award if the original document is not in English or in French . Once the award has been recognized, it is solely binding upon the parties to the arbitration agreement .

Aside from a difference in nomenclature, the procedure for having arbitral awards recognized in Quebec is identical to the one applicable in Canadian common law provinces. According to Quebec’s Civil Code of Procedure, once an arbitral award is homologated by the court, it acquires the force and effect of a judgment .

B. Grounds for Refusing the Recognition and Enforcement of an Arbitral Award
In Canada, the grounds for refusing to recognize or to homologate an arbitral award are the same as those required for setting aside an award, which include: (i) party incapacity; (ii) invalidity of the arbitration agreement pursuant to the law governing the arbitration; (iii) absence of proper notice of the appointment of an arbitrator or of the arbitral proceedings; (iv) inability of a party to present his or her case; (v) non-arbitrability of the dispute; (vi) matters beyond the scope of arbitration; (vii) irregular composition of the tribunal or (viii) the award’s infringement of public policy pursuant to the laws of the seat of the arbitration .

The Canadian courts’ power in granting recognition of an arbitral award is also discretionary. As such, it is open to Canadian courts to either enforce or dismiss the application for recognition of foreign arbitral awards that have been set aside in another jurisdiction . As a result, it is possible for Canadian courts to recognize an arbitral award that has been otherwise set aside by courts in India. Finally, arbitrating parties should take note of the fact that courts throughout Canada will refuse to recognize arbitral awards only in cases of serious misconduct .

APPEALS ARISING FROM ORDERS OF INTERIM RELIEFS OR ORDERS OF ENFORCEMENT OF FOREIGN AWARDS
The process for ensuring enforcement of, and/or challenging interim decisions or arbitration awards is also important for parties to consider.

India
It follows from the discussion above that where an interim relief is given under Section 9, automatically an appeal against such Orders would lie to Indian Courts under Part I, Section 37 of the Indian Act. Similarly, in case an order of an Indian court in respect of a challenge to an award passed in Canada under Part II needs to be appealed, Section 50 of Act would become applicable and again the Appeal would lie in India.

However, in a scenario where Indian courts have not been approached for the execution, enforcement or challenge of the award passed in Canada, then Indian Courts would not have any role to play in the appeal process either.

Canada
In Canada, parties to arbitration must follow the regular appeal procedures when challenging interim orders issued by national courts. While the standard of review of interim court measures is outside the scope of this article, parties should note that appealing interim court orders may lead to a review on the merits, particularly for questions of law. With regard to interim relief ordered by arbitral tribunals, neither Provincial legislation nor the Model Law provide for the setting aside or appeal of these interlocutory procedural measures; as such, an interim arbitral award will be without appeal and must be presented before the courts to ensure enforcement .

Conclusion
To conclude, it may be said that the courts in both India and Canada would play different roles in International Commercial Arbitrations seated in Canada. Firstly, the seat of arbitration must be determined, as well as the curial law which is attracted. Thereafter for different remedies, different courts can be approached.

Both India and Canada have sophisticated legal systems with established frameworks for considering commercial arbitration involving a foreign element and for enforcing duly rendered arbitral awards. Canadian courts have also highlighted the importance of limiting their intervention in the arbitration process and recognizing arbitral awards in order to promote greater stability and predictability in international business relations. Courts will seldom intervene in arbitral proceedings in order to respect the freedom of contract of parties who wish to resolve their disputes outside the national court system.

Moreover, in India, the 2015 amendment has given more leeway to Indian courts as far as interim reliefs are concerned, thus providing additional protection to Canada based parties vis-a-vis Indian parties. In view of the above, India is fast becoming an arbitration and foreign investor friendly country.

As discussed throughout this article, the legal framework applicable to international arbitration is nuanced. As such, arbitration clauses should be carefully drafted with a view to ensuring that the parties’ decision to submit their disputes to arbitration is unequivocal. A model arbitration clause has been provided below for reference; it contemplates an agreement for parties to submit to arbitration in Canada, subject to the substantive laws of India:

Any dispute, controversy or claim arising under, out of or relating to this agreement (and any amendment, restatement, replacement or renewal hereof) including, without limitation, as to its formation, validity, binding effect, interpretation, performance, breach or termination, as well as non-contractual claims relating hereto, shall be determined by final and binding arbitration, to the exclusion of courts (with the exception of injunctive relief sought by either party), in accordance with the Rules of Arbitration of the International Chamber of Commerce. The sole arbitrator shall be appointed by the International Chamber of Commerce in accordance with said rules and must have expertise and experience relevant to the subject matter of this agreement. The place of arbitration shall be Montreal, Quebec, Canada. The language to be used in the arbitral proceedings shall be English. The dispute, controversy or claim shall be decided in accordance with the laws of India. The parties hereby expressly agree to confer upon the arbitrator the powers to fill gaps, cure contractual omissions and to perform all other activities which said arbitrator may deem necessary and/or opportune in reaching its decision. The parties undertake to fully and punctually abide by the award rendered by the arbitrator. Payment of the award, including interest from the date of breach and violation, shall be made in accordance with the relevant provisions of this agreement. This section constitutes an arbitration agreement between the parties.

Each of the parties agrees to the enforcement of any award rendered by the arbitrator or any injunctive relief granted by a court of competent jurisdiction in respect of this agreement, before the Courts of India, Montreal, or elsewhere.

This sample clause is meant to serve solely as an example and parties should seek the advice of specialized legal counsel when drafting arbitration clauses with a view to ensuring that their interests are addressed.

Firms Profile

Singhania & Partners LLP
A sharp rise in international business transactions, Global bidding for contracts and Foreign direct investment many Companies have to deal with International Arbitrations. Parties that are signatories to international contracts often want to avoid using the home courts of one of the parties in order to ensure neutrality as well as unbiased decisions thus avoiding the problem faced due to unfamiliar or unpredictable local court procedures. Singhania and Partners LLP has strong experience in handling International arbitrations keeping the seat in India and outside India like Singapore, U.K, China, Switzerland, Canada and many more. The Firm also provides consultation at the time of negotiation of contracts to incorporate effective arbitration clauses. We conduct both institutional and ad hoc arbitrations.

The firm is a member of TerraLex which is a premier network of law firms offices worldwide. The membership of TerraLex provides the firm with trusted advisors in more than 153 jurisdictions in cross-border matters.

Lapointe RosensteinMarchandMelançon, L.L.P.
Lapointe RosensteinMarchandMelançon., L.L.P. is one of the largest independent law firms in the Province of Quebec, Canada and comprises several dozen lawyers practicing in a wide range of practice areas including commercial law, international transactions, franchising, real estate, banking and finance, bankruptcy and insolvency, licensing and technology, intellectual property, tax, labour and employment, as well as civil and commercial litigation.

The firm has also actively sought out and developed an international practice in order to better serve its clients in the face of increasing globalization and market expansion. Lapointe Rosenstein MarchandMelançon’s membership in TerraLex, an international organization of attorneys in over 100 countries, provides it with access to a worldwide network of legal and other business advisors.
Lapointe Rosenstein MarchandMelançon systematically provides its clients with a full range of top-tier legal services tailored to their specific needs, and consistently surpasses its clients’ expectations for expertise, availability and reliability through elevated standards of professional service, promptness and efficiency. The firm’s commitment to its clients is to provide value-added service and loyalty through a team of highly-qualified professionals and international reach. Lapointe Rosenstein MarchandMelançon enjoys a reputation built upon a tradition of professional excellence, ingenuity and foresight – the cornerstone of the firm’s philosophy is to understand its clients’ activities in order to become their trusted and valued legal and business advisors, and its attorneys are creative, flexible and responsive, always in search of solutions and the best tailored results for clients.

Lapointe Rosenstein MarchandMelançon has a team of experienced litigators and negotiators who help clients understand the issues at hand with a view to determining and implementing a strategy that is suited to their needs. The firm’s attorneys also have significant experience in commercial arbitration and mediation, as well as in enforcing foreign judgments and arbitral awards.

Advantages of a Swiss Seat of Arbitration for International Commercial Disputes Involving Indian Parties

Advantages of a Swiss Seat of Arbitration for International Commercial Disputes Involving Indian Parties

(This article is co-authored by International Commercial Arbitration lawyers of Singhania & Partners LLP, India and LALIVE, Switzerland)


28/2/2018  

Meet the authors

INTRODUCTION

The purpose of this article is to provide an introduction to international arbitration in Switzerland for parties who may be contemplating arbitration to resolve international commercial disputes involving Indian parties. It also highlights the differences between the Swiss and Indian arbitration laws, and the residual role played by Indian courts when the seat of the arbitration is outside India.

An increasing number of international commercial contracts worldwide provide for arbitration as the agreed dispute resolution mechanism. This is also true of commercial contracts between Indian and foreign parties. In the Indian legal system, international commercial arbitration is available to parties provided the legal relationship between them qualifies as “commercial” and one of the parties is a foreign national, resident, body corporate, a company, an association or a body of individuals whose central management and control is exercised in any country other than India. Although the term “commercial” has not been defined anywhere, courts in India have taken the term to be broad-based dealing with any matters of trade and commercial contracts.

One of the most important choices to be made by parties to an international commercial contract when they include an arbitration clause is that of the seat of the arbitration. It is indeed the seat of the arbitration which will determine the procedural rules applicable to the arbitration, the extent to which the ordinary courts will be involved or will interfere in the arbitral process, as well as the degree to which an arbitral award is subject to challenge. The choice of the seat will also have impact on the duration and costs of the proceedings. Party autonomy being one of the cornerstones of international arbitration, parties are free to agree on the seat of arbitration.

While Indian arbitration law has undergone a rapid evolution in recent years, and the Indian government has taken steps towards developing India as an arbitration- and foreign investor-friendly country, Indian parties may not always be able impose a seat in India on their foreign counterparts, which usually prefer the arbitration to be seated outside India, often in a jurisdiction considered neutral to both parties. There might also be practical or tactical advantages for Indian parties themselves in choosing a seat outside India, including in terms of the duration and costs of the arbitral process.

One of the foreign seats often chosen in practice by parties to international commercial contracts, including the Indian parties, is Switzerland. Indeed, Switzerland not only has the advantage of being both neutral and international, but more importantly, it also has a long-standing and well-established reputation for being a pro-arbitration jurisdiction. Two of its main cities, Geneva and Zurich, are regularly ranked among the preferred seats of arbitration worldwide.

This article explains why the distinctive features of international arbitration in Switzerland make it a seat of choice for disputes involving Indian parties. After briefly examining the laws governing the arbitration, this article focuses on the appointment and challenge of arbitrator, interim relief, the setting aside of the award, and the recognition and enforcement of the award. For each of these topics, the article provides a comparison of the relevant provisions of the Swiss and Indian arbitration laws, and the remedies available before Indian courts when the arbitration is seated in Switzerland. With respect to the Indian arbitration laws, the authors will focus only on arbitrations governed by the substantive law of India and/or Arbitration and Conciliation Act, 1996, as last amended by the Arbitration and Conciliation (Amendment) Act 2015 (the “Indian Arbitration Act”).
For ready reference we are reproducing a model clause below, as per which, the seat of arbitration would be

Switzerland and the substantive law would be Indian:-
“Any dispute, controversy or claim arising out of, or in relation to, this contract, including the validity, invalidity, breach, or termination thereof, shall be resolved by arbitration in accordance with the Swiss Rules of International Arbitration of the Swiss Chambers’ Arbitration Institution in force on the date on which the Notice of Arbitration is submitted in accordance with these Rules.
The number of arbitrators shall be three;
The seat of the arbitration shall be Switzerland
The arbitral proceedings shall be conducted in English
The governing law of the contract would be substantive law of India”

LAWS GOVERNING THE ARBITRATION

One of the reasons for the growth of arbitration is the flexibility which it affords the parties to choose not only the law governing the merits of the dispute, but also the law and rules applicable to the arbitral proceedings. However, as mentioned above, the choice of the seat of the arbitration has implications on the law applicable to the arbitration. It is therefore important to identify the various sources of law which come into play in the context of an international arbitration and how they are dealt with both in Switzerland and in India.

The main laws and rules which may apply in relation to an international arbitration seated in Switzerland or in India are (1) the arbitration law, (2) the arbitration rules, (3) the substantive law, (4) the law applicable to the arbitration agreement, and (5) the legal regime applicable to the recognition and enforcement of the award.

Arbitration law

The arbitration law (also referred to as the “lexarbitri”) is the law of the seat of the arbitration and defines the general legal framework of the arbitration, including the constitution of the arbitral tribunal and the conduct of the arbitral proceedings.

Switzerland
In Switzerland, international arbitrations are governed by Chapter 12 (Articles 176-194) of the Swiss Private International Law Act (“PILA”). Chapter 12 PILA sets out amongst other things the basic procedural principles, the mechanisms for appointing and challenging arbitrators in the absence of an agreement between the parties, and the grounds for setting aside the award. Chapter 12 PILA also governs the arbitrability of the dispute, irrespective of any more restrictive rules of law governing the substance of the dispute, the parties’ national laws or the laws of the likely place of enforcement. Under Swiss arbitration law, only disputes relating to matters with an economical value may be submitted to arbitration. The scope of arbitrable disputes in Switzerland is quite broad as it covers any claims which have a financial value for one of the parties.

One of the main characteristics of the Swiss arbitration law is the fact that it affords parties the maximum autonomy and flexibility in structuring their proceedings. It also keeps the possibility of a judicial intervention other than in the support of the arbitral process to the strict minimum.

India
In India, international arbitrations are governed by the Arbitration and Conciliation Act 1996 (the “Indian Arbitration Act”), as amended by the Arbitration and Conciliation (Amendment) Act 2015, which took effect as of 23 October 2015 (the “2015 Amendment”). The Indian Arbitration Act is based on the 1985 United Nations Commission of International Trade Law (UNCITRAL) Model Law on International Commercial Arbitration (the “UNCITRALModel Law”) and the 1980 UNCITRAL Conciliation Rules. Part I of the Indian Arbitration Act applies to arbitrations seated in India and governs the procedure, the setting aside of the award, and the arbitrability of the dispute. The procedural framework of the arbitration proceedings themselves (i.e. applicable procedural rules (as to which see Section 2.2 below) and any mandatory provisions of the relevant arbitration law) are referred to by Indian courts as “curial law”.

It is now well established that the designation of a Swiss seat excludes the application of Part I of the Indian Arbitration Act, with the exception of the provisions dealing with interim measures (as to which see Section 4 below), the assistance of the Indian courts in relation to the taking of evidence, and the remedies available in the event an Indian court refuses to refer the matter to arbitration.

Rules of arbitration

One of the distinguishing features of international commercial arbitration is party autonomy, which means that the parties are in principle free to decide on the procedural rules applicable to the arbitration within the limits of the mandatory provisions of the applicable arbitration law. Parties often chose to refer to the arbitration rules of organisations (institutional arbitration) which administer and supervise the arbitrations and offer a range of arbitration services. There are a number of reputable arbitration institutions, including for example the Swiss Chambers’ Arbitration Institution (SCAI), the International Chamber of Commerce (ICC), the London Court of International Arbitration (LCIA), the Singapore International Arbitration Centre (SIAC). Arbitrations which are not administered by an arbitration institution are referred to as “ad hoc arbitrations” and allow the parties to determine the arbitral procedure themselves.

The substantive law

The substantive law is the law governing the merits of the dispute. It is also referred to as the “applicable law” or the “proper law of the contract”.

Switzerland
In arbitrations seated in Switzerland, the arbitral tribunal will apply the law chosen by the parties to govern the substance of the dispute. In the absence of a choice of law by the parties, the arbitral tribunal shall apply the law with which the case has the closest connection.

India
A similar approach is followed in international commercial arbitrations seated in India: the arbitral tribunal will apply the rules of law chosen by the parties to govern the substance of the dispute (also referred to as the “proper law of the contract”). However, the arbitral tribunal is not obliged to apply the conflict of law rules of the legal system designated by the parties. In the absence of any such designation, the arbitral tribunal shall apply the rules of law that it considers to be appropriate in light of all the circumstances of the dispute. Thus in India, the seat of arbitration decides the substantive law of India.

The law applicable to the arbitration agreement

The law applicable to the arbitration agreement is relevant both for the interpretation and assessing the validity of the arbitration agreement.

Switzerland
Under Swiss arbitration law, an arbitration agreement is materially valid if it conforms to any one of the following (1) the law chosen by the parties to govern the arbitration agreement; (2) the law governing the subject matter of the dispute, respectively, the principal contract; or (3) Swiss law. This alternative test reflects Switzerland’s pro-arbitration approach as it seeks to avoid, to the extent possible, the invalidity of the arbitration agreement. As for the minimal form requirements, they are set out by Swiss arbitration law, which requires an arbitration agreement to be in writing or in a form of communication allowing it to be evidenced by text, but does not require the signature of the parties.

India
Under the Indian Arbitration Act, the law governing the substantive disputes is the same as the law applicable to the arbitral tribunal itself, unless specifically provided in the contract between the parties, for instance ICC Rules.

The law governing the recognition and enforcement of the award

Switzerland
In Switzerland, the recognition and enforcement of a foreign international arbitral award is governed by the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958 (the “New York Convention”).

India
In India, the recognition and enforcement of a foreign international arbitral award is governed by Part II of the Indian Arbitration Act which, inter alia, implements the New York Convention.
See Section 6 below for further details on the recognition and enforcement of foreign international arbitral awards in Switzerland and India.

APPOINTMENT AND CHALLENGE OF ARBITRATORS

Switzerland
In accordance with the principle of party autonomy, the parties are free to agree on the procedure for appointing the arbitrators of an arbitral tribunal seated in Switzerland. In principle, any individual can act as arbitrator; there are no specific qualifications required. The arbitrator must however be both independent of the parties and impartial. The parties are also free to decide on the number of arbitrators, usually one or three.

Where the parties have not agreed on the procedure for the appointment of arbitrators (neither directly nor by reference to institutional rules), they can apply to the Swiss court at the seat of the arbitration to act as appointing authority. The Swiss court will then appoint the arbitral tribunal unless a summary examination of the case reveals that there is no valid arbitration agreement between the parties.

A party may challenge an arbitrator in the following circumstances:
i. the arbitrator does not meet the qualifications agreed upon by the parties;
ii. a ground for challenge exists under the rules of arbitration agreed upon by the parties or the arbitrator was not appointed in accordance with the applicable procedure; or
iii. circumstances exist that give rise to justifiable doubts as to the arbitrator’s independence.
However, a party may only challenge an arbitrator it has appointed for reasons of which it becomes aware after the appointment has been made.

The ground for challenge must be notified to the arbitral tribunal and to the other party without delay. The parties are otherwise free to agree on the procedure for challenging an arbitrator, including on possible time limits within which to do so. If the parties have not agreed on the procedure for challenging an arbitrator, including by reference to any arbitration rules, either party may apply to the competent Swiss courts at the seat of the arbitration for a decision on the challenge. The decision of the Swiss courts on the challenge of an arbitrator is final.

India
The appointment and challenge of arbitrators in India is governed by Part I, Sections 11-14 of the Indian Arbitration Act. Section 11, which deals with the appointment of arbitrators, corresponds to Article 11 of the UNCITRAL Model Law. A person of any nationality may be an arbitrator, unless otherwise agreed by the parties.
The Indian Arbitration Act does not apply to the appointment or the challenge of the members of an arbitral tribunal seated in Switzerland, which, as set out above, is governed by Swiss Arbitration law. Where a party nonetheless seeks the assistance from the Indian courts regarding the appointment of an arbitrator in a foreign-seated arbitration, then such an application will, as a rule, be dismissed for lack of jurisdiction.

INTERIM RELIEF

The procedure for obtaining interim relief and the type of relief available also varies according to the seat of the arbitration.

Switzerland
Arbitral tribunals seated in Switzerland may, at the request of a party, grant interim relief (provisional and conservatory measures) unless the parties have agreed otherwise. Arbitral tribunals seated in Switzerland have broad discretion as regards the type of interim relief they can order. As a general rule, interim relief will only be ordered if the arbitral tribunal considers it necessary and appropriate to protect a party from harm which cannot be repaired (for example by an order for the payment of damages) in the final award.

The power of the arbitral tribunal to order interim measures does not prevent a party from seeking interim relief from a competent Swiss or foreign court, even after the arbitral proceedings have begun. In other words, there is concurrent jurisdiction between the arbitral tribunal and the courts to order interim relief. This means that a party could, for example, apply for interim relief before any other foreign courts, including Indian courts (as to which, see below), even if the arbitration is seated in Switzerland (for the Indian law perspective, see below). By applying to courts for interim relief a party will not be deemed to have waived its right to rely on the arbitration agreement. The Swiss court or foreign court seized with an application for interim relief will apply its own procedural law to determine the conditions for granting interim relief and the type of relief available. If interim relief is sought from the Swiss courts, the procedure will be governed by the Swiss Code of Civil Procedure (“SCCP”).

In practice, parties typically decide to request interim relief from the court instead of the arbitral tribunal in cases where the arbitral tribunal is not yet constituted and emergency arbitration, as provided under several institutional rules is not available, the interim relief is directed at a third party against which the arbitral tribunal does not have jurisdiction or there is a risk that the other party will not comply voluntarily with an order for interim relief granted by the arbitral tribunal.

In addition, the Swiss courts at the seat of the arbitration have jurisdiction for any assistance required by the arbitral tribunal or the parties in support of the arbitration. The assistance of Swiss courts can for example be sought to enforce an order for interim relief issued by the arbitral tribunal, which lacks the power to enforce its own orders or impose sanctions in case of non-compliance with an order for interim relief.

An arbitral tribunal’s order to grant interim relief is not open to challenge. A party may, however, request that the arbitral tribunal reconsider its decision. By contrast, orders rendered by Swiss courts on applications for interim relief is subject to appeal before the higher instance court within ten days from service. The decision of the higher instance court can itself be appealed before the Swiss Supreme Court, Switzerland’s highest court, provided the conditions for such an appeal are met.

India
In India, Section 9 of the Indian Arbitration Act deals with the power of the courts to grant interim relief. It is based on Article 9 of the UNCITRAL Model Law. Under Section 9 of the Indian Arbitration Act, a party may apply to Indian courts for certain interim measures, before, during or after the award has been rendered by the arbitral tribunal.

For a limited period of time, from 2012 to 2015, interim relief pursuant to Section 9 of the Indian Arbitration Act was not available to parties to an arbitration seated outside India. This was the result of a judgment rendered by the Supreme Court of India in in 2012 in the case of Bharat Aluminumand Co. vs. Kaiser Aluminium and Co. (BALCO), in which it held that Part I of the Indian Arbitration Act (including Section 9 governing interim relief) did not apply to any foreign seated arbitration. However, the situation changed with the entry into force of the 2015 Amendment. The 2015 Amendment abrogates the case law laid down in BALCO to a limited extent as it expressly provides that, even in relation to an international commercial arbitration with a foreign seat, a party can seek appropriate interim relief from the Indian courts under Section 9 of the Indian Arbitration Act. Accordingly, a Section 9 remedy would be available to parties to an international arbitration seated in Switzerland seated arbitration, provided the arbitration is governed by the 2015 Amendment.

The type of measures available under Section 9 of the Indian Arbitration Act are generally for the protection, preservation or interim custody of goods, assets, properties, securing the amounts in dispute, appointment of interim receivers etc.
This provision may be particularly useful to a party to an arbitration in Switzerland in cases where the adverse party has assets in India and there is a risk that it will dispose of those assets.

An interim relief ordered by the Indian courts under Section 9 is subject to appeal under Part I, Section 37 of the Indian Arbitration Act. .

SETTING ASIDE OF THE AWARD

An important question when choosing the seat of the arbitration, is the grounds on which the award might be set aside at the seat of the arbitration once it has been rendered. This goes to the finality of the award, which is one of the key features and attractions of arbitration as dispute resolution mechanism.

Switzerland
The award rendered by an arbitral tribunal seated in Switzerland is final and binding upon its communication to the parties.
There is no ordinary appeal mechanism for an international arbitral award rendered in Switzerland. The main remedy is the setting aside of the award by Switzerland’s highest court, the Swiss Supreme Court. The application to set aside the award must be filed within 30 days from service of the award.
There are only a limited number of grounds for setting aside an international arbitral award rendered in Switzerland, namely the following:
i. the arbitral tribunal was constituted irregularly (Article 190(2)(a) PILA);
ii. the arbitral tribunal erroneously held that it had or that it lacked jurisdiction (Article 190(2)(b) PILA);
iii. the arbitral tribunal ruled on matters beyond the claims submitted to it or if it failed to rule on one of the claims (Article 190(2)(c) PILA);
iv. the principle of equal treatment of the parties and their right to be heard in adversarial proceedings was violated (Article 190(2)(d) PILA);
v. the award is incompatible with public policy (Article 190(2)(e) PILA).
The Supreme Court interprets each of the grounds set out above extremely narrowly. Importantly, in setting aside proceedings, the Supreme Court does not review the merits of the award, or the arbitral tribunal’s assessment of the evidence produced in the arbitration. As a result, the threshold for the setting aside of an award rendered in Switzerland is extremely high, as confirmed by the low number of cases which resulted in the complete or partial setting aside of the award.
The setting aside proceedings before the Swiss Supreme Court are short by comparison with other jurisdictions as they typically take only four to seven months from the time of filing of the setting aside application. Setting aside proceedings usually do not prevent the award from being enforced in the meantime.
The parties may waive their right to apply for the setting aside of the award, provided neither party to the arbitration has its place of domicile or seat in Switzerland. This feature of Swiss arbitration law may be of interest in disputes involving one or several Indian parties, as it increases the finality of the award and allows the successful party to enforce an arbitral award rendered in Switzerland in less time and at less cost.

India
As in Switzerland, the grounds available to the parties in India for challenge of an award passed in Switzerland are limited. These grounds are available to parties when a foreign award is filed for enforcement against them in Courts in India . These grounds are discussed in some detail in Section 6 below.

RECOGNITION AND ENFORCEMENT OF THE AWARD

The law governing the recognition and enforcement of an arbitral award is also extremely important, and especially so, in the case of an international commercial arbitration. This is because an award remains a dead letter until it can be enforced and compliance by the unsuccessful party can be ensured.

Switzerland
The New York Convention applies to the recognition and enforcement of all foreign arbitral awards in Switzerland, regardless of whether the state in which the award was rendered is a party to the New York Convention. Accordingly, the New York Convention will apply to the recognition and enforcement in Switzerland of awards rendered in India.

Switzerland has a long-standing tradition of being a pro-enforcement jurisdiction. As a result, Parties who have obtained an award from an arbitral tribunal seated in India (or in another foreign state) should not, as a rule, face any particular difficulties in obtaining its recognition and enforcement in Switzerland.

A party applying for recognition or enforcement of a foreign award must include with its application the original or a copy of the arbitral award and arbitration agreement, together with any translations into the official language of the place at which enforcement is sought (French, German or Italian), in accordance with Article IV of the New York Convention. Swiss courts take a liberal, pragmatic and pro-enforcement approach to the New York Convention in practice. Thus, Swiss courts will only insist on strict compliance with the form requirements set out in Article IV of the New York Convention (authentication and certification) if the authenticity of the documents submitted with the application is disputed. Swiss courts will usually not insist on compliance with the translation requirement if the documents are in English.

Once Swiss courts are satisfied that the requirements of Article IV of the New York Convention are met, recognition and enforcement will only be denied on one of the limited grounds listed in Article V of the New York Convention. These grounds can be summarised as follows:
i. party incapacity or invalidity of the arbitration agreement (Article V(1)(a));
ii. no proper notice of the appointment of the arbitrator or the proceedings or party otherwise unable to present its case (Article V(1)(b));
iii. award of arbitral tribunal on matters beyond or outside of scope of arbitration (Article V(1)(c));
iv. irregular composition of the arbitral tribunal or procedure contrary to parties’ agreement or, in the absence of such agreement, of the laws applicable at the seat of the arbitration (Article V(1)(d));
v. award not binding pursuant to the laws applicable at the seat of the arbitration or set aside at the seat (Article V(1)(e));
vi. non-arbitrability of the dispute (Article V(2)(a));
vii. award contrary to the public policy of the country in which its recognition or enforcement is sought (Article V(2)(b)).
In Switzerland, the threshold for successfully resisting recognition and enforcement of a foreign arbitral award on the basis of Article V of the New York Convention is extremely high and will only be met in exceptional circumstances.

India

Part II of the Indian Arbitration Act applies to the recognition and enforcement of foreign arbitral awards. For these awards to be recognised under Part II, they must have been rendered in a state which either ratified the New York Convention or the 1927 Geneva Convention on the Execution of Foreign Arbitral Awards (the “Geneva Convention”) and the Indian Central Government, being satisfied that it reciprocal provisions have been made, declared such state to be a territory to which the relevant convention applies by notification in the Official Gazette.

In the case of Switzerland, which is a New York Convention state, the above conditions are met. As a result, awards rendered by an arbitral tribunal seated in Switzerland can be recognised and enforced in India directly, in accordance with Part II, Chapter 1, Sections 44-52 of the Indian Arbitration Act.

Section 47 of the Indian Arbitration Act is largely based on Article IV of the New York Convention and sets out the evidence a party has to produce in support of an application for the enforcement of a foreign award before Indian courts. Pursuant to this Section 47, a party must produce with its application: the original or a duly authenticated copy of the arbitral award, the original arbitration agreement or a certified copy thereof, as we all any such evidence as may be necessary to prove the award is a foreign, together with certified English translations where necessary.

Section 48 of the Indian Arbitration Act deals with the conditions requisite for enforcement of foreign awards. Section 48 mirrors the grounds to challenge the enforcement of a foreign award set out in Article V of the New York Convention. The conditions for enforcement include party incapacity, invalidity of agreement under the law of the seat, absence of proper notice to the party regarding appointment, or inability of a party to represent his case, non arbitrability of the dispute, matters beyond scope of arbitration, wrong composition of tribunal, or that the award has not become binding as per the law of the seat, or is against the public policy of India.

If the Indian enforcement court is satisfied that a foreign award is enforceable under Part II, Chapter 1 of the Indian Arbitration Act, the award will be deemed to be a decree of that court . Accordingly, the award can be executed under Order XXI of the Code of Civil Procedure, 1908 in the same manner as a judgment from an Indian court.

The decision of the Indian court regarding the enforcement of a foreign arbitral award is subject to appeal before the designated Indian appellate court.

CONCLUSION

As we have seen, a Swiss seat of arbitration presents a number of advantages for international commercial disputes involving Indian parties. It offers parties an extremely flexible legal framework and keeps the intervention of Swiss courts in the arbitral process to a minimum. When Swiss courts do become involved this is in most cases in support of the arbitral process, and only at the request of a party or the arbitral tribunal, typically in cases relating to the appointment and challenge of arbitrators and interim measures.
Switzerland also lives up to its reputation for efficiency in the field of arbitration: once the arbitral tribunal renders its award, the award is final and binding. There are only limited grounds for setting aside the award; those are intended to guarantee the parties’ minimal procedural rights and are only admitted restrictively. The setting aside proceedings themselves are relatively short (only four to seven months) and take place directly before Switzerland’s highest court. Parties can also choose to waive in advance their right to apply for the setting aside of the award in Switzerland, which increases the finality of the award.

Even when the arbitration is seated in Switzerland, the Indian courts might still have a role to play. The recent developments in India’s arbitration law, in particular the entry into force of the 2015 Amendment, offer parties to an international arbitration additional tools and protection by allowing them to seek interim relief before Indian courts even if the arbitration is seated outside of India. This can be particularly useful if one of the parties has assets in India.

The Indian courts might also be seized with an application to enforce award rendered by an arbitral tribunal seated in Switzerland. The enforcement of such an award in India is greatly facilitated by the fact that both Switzerland and India are signatories of the New York Convention. As a result, the grounds on which Indian courts may refuse to enforce an arbitral award rendered in Switzerland are limited.

Firms Profile

Singhania & Partners LLP
A sharp rise in international business transactions, Global bidding for contracts and Foreign direct investment many Companies have to deal with International Arbitrations. Parties that are signatories to international contracts often want to avoid using the home courts of one of the parties in order to ensure neutrality as well as unbiased decisions thus avoiding the problem faced due to unfamiliar or unpredictable local court procedures. Singhania and Partners LLP has strong experience in handling International arbitrations keeping the seat in India and outside India like Singapore, U.K, China, Switzerland, Canada and many more. The Firm also provides consultation at the time of negotiation of contracts to incorporate effective arbitration clauses. We conduct both institutional and ad hoc arbitrations. The firm is a member of TerraLex which is a premier network of law firms offices worldwide. The membership of TerraLex provides the firm with trusted advisors in more than 153 jurisdictions in cross-border matters.

Lalive
LALIVE has been renowned for its expertise in international commercial arbitration for more than 50 years, and is recognized as a global leader in the field by the main legal directories and industry publications.

The firm’s international commercial arbitration specialists regularly act as counsel or arbitrators in proceedings under all of the major arbitration rules, in all the major arbitration venues throughout the world and in a wide range of industries, including energy, telecommunications, construction and infrastructure, transportation, commodities, life sciences and biotechnology.

The firm has substantial expertise in assessing complex claims, managing voluminous cases, leading large teams of lawyers and experts in various jurisdictions, and cooperating closely with clients’ in-house and local counsel. In addition, the legal expertise of LALIVE’s lawyers, who together speak more than a dozen languages, covers several key jurisdictions other than Switzerland.

The firm also routinely advises and represents clients on the annulment, recognition and enforcement of arbitral awards in Switzerland and abroad, including in relation to preliminary steps such asset tracing and attachment orders.