Dispute Resolution

International Arbitration

There is a sharp rise in international business transactions, Global bidding for contracts, and foreign direct investment therefore 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, a premier network of law firm’s offices worldwide. The membership of TerraLex provides the firm with trusted advisors in more than 153 jurisdictions in cross-border matters.
 

International Arbitration FAQ's

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.

Footnotes

1  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;"

Harmony Innovation Shipping Ltd. v. Gupta Coal India Ltd. & Anr. (2015) 9 SCC 172

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.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Take Note

This document is not intended to create an attorney-client relationship. You should not act or rely on any information in this document without first seeking legal advice. This material is intended for general information purposes only and does not constitute legal advice. If you have any specific questions on any legal matter, you should consult a professional legal services provider.

Minimum interference with foreign awards has been hallmark of Indian legal system, which aims at securing smooth enforcement of a foreign award so that the award holder may enjoy the fruit of the foreign award. Indian law provides a very limited scope for refusal to enforcement of a foreign award. Prior to 1996, such scope was defined under the Foreign Award (Recognition and Enforcement) Act 1961 ("1961 Act"). Post consolidation of laws relating to arbitrations in India in the year 1996, the issue of recognition and enforcement of foreign award is covered under Part II of the Arbitration and Conciliation Act, 1996 ("1996 Act"). In essence, the provisions relating to enforcement of a foreign award under the 1961 Act are pari materia with the provisions in the 1996 Act. Recently the Hon'ble Supreme Court in the matter of NAFED Vs Alimenta SA1, was dealing with a challenge to enforcement of a foreign award passed on 15.11.1989. As the Award was dated 15.11.1989, the applicable law was the 1961 Act.

Issues to be decided by the Indian Courts

Hon'ble Apex Court considered the following issues:

  1. Whether NAFED was unable to comply with contractual obligation to export groundnut to Government's (Indian Government) refusal?
  2. Whether NAFED could have been held liable in breach of contract to pay damages particularly in view of Clause 14 of the Agreement? and
  3. Whether enforcement of the award was against the public policy of India?

FACTUAL MATRIX

  • NAFED was canalizing agency for the Government of India for the exports of the commodity.
  • NAFED had the permission of the Government of India to enter into exports for three years between 1977­-80 but had no permission under the Export Control Order to carry forward the exports for the season 1979­80 to the year 1980-­81.
  • NAFED and Alimenta SA entered into an agreement dated 12.01.1980 for supply of 5000 metric tonnes of Indian HPS groundnut ("commodity"). The commodity was to be supplied during February, March and April 1980.
  • The agreement was to be governed by the terms and conditions as per Federation of Oil, Seeds and Fats Associations Ltd. ("FOSFA"), London, 20 Contract, which is a standard form contract.
  • The agreed price in the contract was USD 765 per metric tonnes (FOB).
  • NAFED shipped only 1900 metric tonnes commodity under the agreement. The balance stock of 3100 metric tonnes could not be shipped as scheduled, due to the Government's restrictions.
  • An addendum to the agreement was executed on 18.8.1980, changing the date of shipment for the balance 3100 metric tonnes, to November-­December, 1980.
  • On 8.10.1980, second addendum was executed by the parties agreeing for shipment of balance quantity during 1980-81 season.
  • NAFED intended to perform the first Addendum, unwary of the fact that it had no permission under the Export Control Order to carry forward the export for the season 1979­-80 to the next year 1980­-81.
  • Later on, NAFED approached Government of India to grant permission for effecting balance supply to Alimenta, which was refused. Government of India informed NAFED that the export of commodities was restricted under a quota system and that NAFED could not carry forward the previous year's commitment to the subsequent year and that the price of the commodity had escalated thrice in one year.
  • NAFED finally informed Alimenta SA on 13.2.1981 that export of the contracted quantity was not possible because of Government of India's executive action banning such exports.
  • Alimenta disputed the said position and initiated arbitration proceedings in terms of FOSFA.

Constitution of Arbitral Tribunal and passing of Award

  • NAFED was asked to appoint its arbitrator.
  • NAFED took the matter to Delhi High Court and to Hon'ble Supreme Court of India challenging the action of Alimenta.
  • However, despite there being an interim injunction granted, first granted by the Delhi High Court and later by the Hon'ble Supreme Court, FOSFA nominated arbitrator on behalf of NAFED and commenced the arbitration proceedings.
  • The arbitral tribunal so constituted published an award on 15.11.1989 thereby directing NAFED to pay to Alimenta a sum of USD 4,681,000 being the difference between the contracted price and the settlement price for the balance quantity. The Tribunal awarded also interest at the rate of 10.5% per annum from 13.2.1981 till the date of the award.
  • In terms of the FOSFA Rules, NAFED filed an appeal before the Board of Appeal on 16.1.1990. NAFED also made request before the Board of Appeal to be represented through a legal representative. The Board, however, rejected the request made by NAFED and also decided the appeal against NAFED. The Board also enhanced the rate of interest from 10.5% p.a. awarded by the tribunal to 11.25% p.a.

Proceedings before Indian courts including Supreme Court

  • Alimenta then filed a suit under section 5 & 6 of the 1961 Act seeking enforcement of the initial as well as appellate award passed by the FOSFA and Board of Appeal. NAFED unsuccessfully objected to the enforceability of award before a Single Judge and then before the Division Bench of Hon'ble Delhi High Court. Finally, NAFED filed appeal before the Hon'ble Supreme Court for adjudication on merit.
  • Before the Hon'ble Supreme Court of India, NAFED objected to the enforcement of an award on the grounds, inter alia, that the award was passed without affording opportunity to NAFED its case [invoking Section 7 (1) (a) (ii) of the 1961 Act], and that the foreign award was against the public policy of India [Section 7 (1) (b) (ii) of the 1961 Act] and finally that the enforcement procedure is barred by limitation.
  • On the contrary, Alimenta pleaded the minimum scope interference by the court in enforcement of foreign award, it disputed that the award was against the public policy. Alimenta submitted that the award was passed after recording the contentions of the parties and it was not open to the court to go into the correctness of the findings of the arbitrator.

Decision of the Supreme Court of India

  • Supreme Court held that in view of the provision contained in Clause 142 of the agreement, the agreement was a contingent contract and would stand cancelled if the shipment becomes impossible by reasons mentioned in the said clause. The court held that refusal by the Government came in the way of NAFED to affect the supply by exporting the commodity to Alimenta. This was covered by clause 14 of the agreement.
  • Supreme Court held that NAFED was justified in not making the support as it would have violate Export Control Order, and it was not permissible to carry forward the quantity of the previous year to the next year without permission of the Government. The court held that apparently the contract came to an end in terms of clause 14 of the agreement. The contract became void in view of the provisions contained in Section 323 of the Indian Contract Act.
  • The Apex Court culled out the distinction between frustration of contract as provided under Section 564 of the Contract Act and voidability of contingent contract as provided in Section 32 of the Contract Act. After detailed deliberation on the distinction between the above said provisions, the Hon'ble court came to a conclusion that since both the parties in the said contract knew about contingency i.e. the inability to perform the contract on account of restriction imposed by government order, there was an agreement between the parties that in such an eventuality the parties shall be discharged from performing their obligations.
  • Accordingly, the court held that NAFED cannot be held responsible for payment of compensation to Alimenta.
  • As regard the issue as to whether the award would be contrary to public policy of India, the court traced the history of judicial interpretation of the expression "public policy" right from the stage when the said expression was interpreted in the judgment of Renusagar Power Co. Ltd. Vs. General Electric Co5. In the said case the Supreme Court had held that enforcement of foreign award would be refused on the ground that it was contrary to public policy if such enforcement would be contrary to (i) fundamental policy of Indian Law, (ii) the interest of India, and (iii) justice or morality.
  • In the subsequent judgment of ONGC Ltd. Vs SAW Pipes6, while dealing with a domestic award, the Supreme Court expanded the meaning of expression public policy and an award which is patent illegality would also be contrary to public policy.
  • the Supreme Court also cited with approval the judgment in the case of Shri Lal Mahal Limited v. Progetto Grano Spa7, (2014) 2 SCC 433 wherein the supreme court had held that the public policy definition as explained in ONGC Vs SAW Pipes will have no application in the context of foreign award and the ground of patent illegality would not be available for refusal of enforcement of a foreign award.
  • The court also noted its judgment in the case of Ssanyong Engineering & Construction Co. Ltd. vs. National Highways Authority of India (NHAI)8, where taking into account the latest amendments to the 1996 Act in the year 2015 & 2019, tit was held that the expression "public policy of India" will have the same narrow meaning as was defined in Renusagar
  • After noticing the law laid down in various pronouncements, the Court concluded as under:
  • " It is apparent from the above-mentioned decisions as to enforceability of foreign award, Clause 14 of FOSFA Agreement and as per the law applicable in India, no export could have taken place without permission of the Government, and the NAFED, was unable to support, as it did not have any permission in the season 1980-81 to effect the supply, it required the permission of the Government. The matter is such which I pertains to the fundamental policy of India and parties were aware of it, and contracted that in such an exigency as pervaded in clause 14, the Agreement shall be cancelled for the supply which could not be made. It became void under section 32 of the Contract Act on happening of contingency. Thus, it was not open because of the clear terms of the Arbitration Agreement to saddle the liability upon the NAFED to pay damages as the contract became void...............(para 68)
  • In our considered opinion, the award could not be said to be enforceable, given the provisions contained in Section 7(1)(b)(ii) of the Foreign Awards Act. As per the test laid down in Renusagar (supra), its enforcement would be against the fundamental policy of Indian Law and the basic concept of justice. Thus, we hold that award is unenforceable, and the High Court erred in law in holding otherwise in a perfunctory manner". (para 69)
  • Though with the aforesaid conclusion, there was no need of considering other contentions which were raised on behalf of NAFED, yet the court decided the same. As regards, objection on appointment of nominee of NAFED by FOSFA despite interim orders, the Court held that though it had passed an interim order, however, ultimately the petition filed by NAFED was dismissed in 1987. NAFED ought to have raised the question at the relevant time in the year 1987. Since no such issue was raised at the relevant time, the court refused to entertain the merit of the said argument.
  • As regards, NAFED's plea of prejudice having been caused to it on account of non-representation by legal representative, the court noted that FOSFA Rule specifically prohibited representation of the parties through legal representative before the arbitral tribunal. Though Rule 6 permits legal representation at appeal stage, however, the court held that in the presence of proof of any prejudice caused to NAFED the award cannot be set aside on that ground.
  • As regards, the issued that Alimenta's nominee arbitrator representing Alimenta before the Board of Appeal, the court did not decide the issue and merely observed that arbitrator was supposed to follow the ethical standards and ought not to have defended the arbitration award passed by him in subsequent judicial proceedings. The court further held that it was not open to the Board of Appeal to increase the interest in the absence of any appeal filed by Alimenta.
  • The court however concluded that in view of its decision that the award was unenforceable under section 7 of the Foreign Awards Act, other submission did not survive for decision. Resultantly, the court allowed the appeal filed by NAFED holding the award to be unenforceable.

Conclusion

The expression "public policy" is wider than "laws of India". Therefore, mere contravention of law alone will not attract bar of public policy and something more than contravention of law is required. In NAFED's case, the court found the award to be contrary to fundamental policy of India because in terms the agreement between the parties, the contract stood cancelled due to restriction put by Government of India. In such a case, it would be wholly unjust to hold NAFED liable to pay damages when there was no breach on its part. In India damages are compensatory in nature and a party complaining of breach of contract by the other cannot arrive at unjust enrichment on account of breach. A breach not causing any loss to the aggrieved party is not compensable, let alone a situation where there is no breach. It has been held by the court in yet another recent pronouncement in the case of Vijay Karia and Others Vs Prysmian Cavi E Sistemi SRL and Others9 that for attracting the ground of fundamental policy of Indian law the violation must amount to a breach of some legal principles or legislation which is so basic to Indian law that it is not susceptible of being compromised. "Fundamental policy" refers to core value of India's public policy as a notion which may find expression not only in the statutes but also time honoured, hallowed principles which are followed by the courts.

It may not be possible to lay down straight jacket formula for deciding what would amount to public policy, as a ground for refusing enforcement of foreign award, however, the judgements cited in this article lay down broad guiding principles for understanding the meaning of expression 'public policy of India' in the context of testing enforceability of a foreign award.

Footnotes

1. 2020 SCC Online SC 381

2. 14. Prohibition : In the event, during the shipment period of prohibition of export of any other executive or legislative act by or on behalf of the Government of the country of origin or of the territory where the port/s or shipment named herein is/are situated, or of blockade or hostilities, restricting export, whether partially or otherwise, any such restriction shall be deemed by both the parties to apply to this contract and to the extend of such total or partial restriction to prevent fulfilment whether by shipment or by any other means whatsoever and to that extent this contract of any unfulfilled portion thereof shall be extended by 30 days. In the event of shipment during the extended period still proving impossible by reason of any of the causes in this Clause, the contract or any unfulfilled part thereof shall be cancelled. Sellers invoking that Clause shall advice Buyers with due dispatch. If required, Sellers must produce proof to justify their claim for extension or cancellation under the clause.

3. Section 32 of the Indian Contract Act. – Enforcement of contracts contingent on any event happening-. Contingent contracts to do or not to do anything if an uncertain future event happens, cannot be enforced by law unless and until that even has happened.

4. Section 56. Agreement to do impossible act. An agreement to do an act impossible in itself is void. Contract to do an act afterwards becoming impossible or unlawful.—A contract to do an act which, after the contract is made, becomes impossible, or, by reason of some event which the promisor could not prevent, unlawful, becomes void when the act becomes impossible or unlawful. Compensation for loss through non-performance of act known to be impossible or unlawful.—Where one person has promised to do something which he knew, or, with reasonable diligence, might have known, and which the promisee did not know, to be impossible or unlawful, such promisor must make compensation to such promisee for any loss which such promisee sustains through the non-performance of the promise.

5. 1994 Supp (1) SCC 644

6. (2003) 5 SCC 705

7. (2014) 2 SCC 433

8. (2019) 8 SCALE 41

9. (2020) SCC online SC 177

About 5 months ago, when a two judges' bench of Hon'ble Supreme Court of India ("SC") decided the issue regarding the limitation period for execution of a foreign decree, the most debated question was as to whether the said law would apply equally qua the limitation period for enforcement of a foreign award. The apex court has now put to rest even the issue concerning the period of limitation for execution of a foreign award by a judgment of three judges' bench in the case of Government of India v. Vedanta Ltd. & Others1.

In the matter of Bank of Baroda Vs. Kotak Mahindra Bank2, the apex court had held that period of limitation for execution of foreign decree would be governed as per law prevalent in the cause country (the foreign county where the decree was passed) and not as per the law prevailing in the forum country (country where foreign decree is sought to be enforced i.e. India). It was held that Article 1363 of the Limitation Act, 1963 is not attracted in the matter of execution of a foreign decree and issue concerning execution of foreign decree, if any, is covered only under Article 1374 of the Limitation Act.

Even in Vedanta's case, the apex court has held that the period of limitation for execution of a foreign award would be three years from the date when the right to apply accrues as provided under Article 137, and not by Article 136, of the Limitation Act. The SC further held that since execution of foreign award is not applied for under the provisions of Civil Procedure Code, 1908 ("CPC"), the bar under Section 5 of Limitation Act5 would not apply to the proceeding for enforcement of foreign award. Accordingly, the SC held that in the matter of execution of a foreign award an application for condonation of delay can be filed under Section 5 of Limitation Act.

Few crucial aspects of the case, till the matter reached the SC, are as under:

  • The Production Sharing Contract dated 28.10.1994 ("PSC") executed between the parties provided that the agreement shall be governed and interpreted in accordance with the laws in India.
  • The venue of arbitration shall be Kuala Lumpur, Malaysia. In this case, venue was regarded as seat of arbitration.
  • The Arbitration Agreement shall be governed by laws of England.
  • On 18.08.2008 disputes between the parties were referred to a three members arbitral tribunal, which published the Award on 18.01.2011. In the award the Tribunal essentially held that:
  • Claimant / Vedanta was bound by the cap provided under Article 15.5(b) of the PSC on the Base Development cost incurred up to and including the year 1999/2000. Therefore, Claimant was not entitled to recover the Base Development Cost of USD 220,737,381.
  • However, the Claimant /Vedanta shall be entitled to recover from the Cost Petroleum, the Base Development Cost of USD 278,871,668 incurred from the contract year 2000/2001 until 2008/2009
  • The amount of cap under Article 15.5(b) of the PSC may be increased thereafter pursuant to Article 15.5(e)(iii) of the PSC and/or as the parties may agree.
  • On 29.04.2011 Claimant /Vedanta addressed a letter to Government of India thereby submitting revised costs recovery account statements as per the Award giving due credit to the Government of India for the excess Base Development Costs of USD 22,307,381.
  • Government of India's petition under Section 37 of the Malaysian Arbitration Act, 2005 for challenging the award was dismissed by the Malaysian High Court vide order dated 30.08.2012.
  • Government of India unsuccessfully filed appeal before the Malaysian Court of Appeal, which also met the similar fate and was dismissed on 27.06.2014.
  • On 10.07.2014, Government of India issued a show cause notice raising a demand of USD 77 Million towards government's share of profit under PSC.
  • On 21.07.2014, Government of India filed an application for leave to appeal before Malaysian Federal Court, which was rejected vide order dated 17.05.2016.
  • On 14.10.2014, Respondent filed a petition for enforcement under Sections 47 read with 49 of the Arbitration and Conciliation Act, 1996 ("Indian Arbitration Act") before the Delhi High Court, along with an application for condonation of delay. The Government filed an Application under Section 48 of the Indian Arbitration Act, resisting the enforcement of the Award before the Delhi High Court.
  • Vide order dated 19.02.2020 the Delhi High Court allowed application for condonation of delay and also directed for an enforcement of the Award holding that the application for enforcement of foreign award would be governed by the limitation period of 12 years under Article 136 of the Limitation Act.

Proceeding before, and decision of, the SC

In the aforesaid background, the matter reached before the SC by way of Special Leave Petition filed by Government of India against the order dated 19.02.2020 passed by the Hon'ble Delhi High Court. The SC allowed enforcement of the foreign award and held as under:

  • The issue of limitation for enforcement of foreign award being procedural in nature, is subject to lex forie. the law of the forum (State) where the foreign award is sought to be enforced. (i.e. India in this case).
  • Neither Indian Arbitration Act nor Limitation Act contains any specific provision for enforcement of a foreign award.
  • Article 136 of the Limitation Act shall apply to the execution of decree of a civil court in India and not to the execution of a foreign decree. The legal fiction under Section 49 of the Indian Arbitration Act is for the limited purpose of enforcement the foreign award i.e. treating the foreign award to be a decree of "that court" (i.e. high court) which means the high court which adjudicated upon the petition filed under Section 47 and 49 of the Indian Arbitration Act. Accordingly, Article 136 of the Limitation Act would not apply to enforcement/execution of a foreign award. Enforcement of a foreign award as a deemed decree of the concerned high court would be covered by the residuary provision i.e. Article 137 of the Limitation Act.
  • Therefore, as per Article 137 of the Limitation Act, a petition for enforcement of a foreign award can be filed within three years from the date "when the right to apply accrues".
  • Application seeking enforcement of a foreign award under Section 47 of the Indian Arbitration Act is a substantive petition filed under the said Act and is not an application under any of the provisions of Order XXI of the CPC. The application is filed before the appropriate high court for enforcement, which would take recourse to the provisions of Order XXI of the CPC only for the purpose of execution of the foreign award as a deemed decree. The bar contained in Section 5 of Limitation Act would not be attracted in the case of execution of a foreign award. Consequently, a party seeking enforcement of a foreign award will also be entitled to file an application under Section 5 for condonation of delay, if so required in the facts and circumstances of the case.
  • Petition for enforcement of the foreign award was filed within the period of limitation prescribed by Article 137 of the Limitation Act. In any event, there are sufficient grounds to condone the delay, if any, in filing the execution petition.
  • The enforcement court cannot set aside a foreign award, it may refuse enforcement of a foreign award if the ground contained in Section 48 of the Indian Arbitration Act are made out.
  • There are four types of laws applicable in International Commercial Arbitration and the court proceedings arising therefrom:
  • Law governing substantive rights and obligations of the parties in the underlying commercial contract.
  • Law governing the arbitration agreement, which would determine the validity and extent of the arbitration agreement, limits of party autonomy, the jurisdiction of the tribunal, etc.
  • The curial law of the arbitration is determined by the seat of arbitration. The curial law governs the procedure of arbitration, the commencement of the arbitration, appointment of arbitrator in exercise of the default power by the court, grant of provisional measures, collection of evidence, hearings, and challenge to the award. The courts at the seat of arbitration exercise supervisory or primary jurisdiction over the arbitral proceedings. However, if the parties have made an express and effective choice of a different lex arbitri, in such cases the role of the courts at the seat will be limited to those matters which are specified to be internationally mandatory and of a non-derogable nature.
  • The lex fori governs the proceedings for recognition and enforcement of the award in other jurisdictions.
  • Applying the aforesaid principles of law, the Malaysian Court, being the seat court, was justified in applying the Malaysian Act to the public policy challenge raised by the Government of India. The enforcement court would examine the challenge to the award on the ground available under Section 48 of the Indian Arbitration Act without being constrained by the finding of the Malaysian Court.
  • Government of India has failed to make out any case of violation of procedural due process in the conduct of arbitration proceedings. Government of India has also failed to show as to how the award was in conflict with the basic notion of justice or in violation of substantive public policy of India.

Conclusion

With the aforesaid two judgments of the SC, the law as it stands today is that a decree passed by civil court in India as well as a domestic award can be enforced under Article 136 of the Limitation Act, within 12 years from the date of decree or the domestic award, as the case may be. However, the position with respect to enforcement of foreign decree and foreign award, can be summarised as under:

Limitation for enforcement of foreign decree (Bank of Baroda Judgement, supra)

Limitation for enforcement of foreign award (Vedanta Ltd. judgement, supra)

Article 137 of the Limitation Act would apply in the matter of enforcement of a foreign decree.

Article 137 of the Limitation Act would apply in the matter of enforcement of foreign award.

Right to apply for enforcement of foreign decree accrues from the date of passing of the foreign decree.

Right to apply for enforcement of foreign award would depend on when the award becomes final and binding as per the curial law/the law applicable at the seat of arbitration.

In Vedanta judgment, the SC did not delve upon the aspect of when the right to apply accrues in the matter of enforcement of foreign award.

The period of limitation for filing of execution of foreign decree depends on the following two scenarios:

(a) Period of limitation for execution of a foreign decree would be the one provided in the country where such decree is passed i.e. the cause country. Once that period is over, application for enforcement of such decree can neither be made in the cause country nor in forum country (i.e. India). However, within the period provided for execution of the decree in the cause country, the decree holder can seek enforcement thereof either in the cause country or the forum country, depending on the facts and circumstances of each case.

(b) Where a decree holder takes steps in aid of execution of the decree in the cause country, Application for execution of foreign decree can be filed in India within 3 years from the finalisation of execution proceedings in the cause country.

Application for execution of foreign award is to be made within three years from the date when the award becomes final and binding in accordance with the law prevailing at the country of seat of the arbitration.

No application for condonation of delay can be filed under Section 5 of the Limitation Act, while seeking execution of a foreign decree.

Application for condonation of delay can be filed while seeking execution of a foreign award.

 

Description of suit

Period of limitation

Time from which period begins to run

136. For the execution of any decree (other than a decree granting a mandatory injunction) an order of any civil court.

Twelve years

When] the decree or order ecomes enforceable or where the decree or any subsequent order directs any payment of money or the delivery of any property to be made at a certain date or at recurring periods, when default in making the payment or delivery in respect of which execution is sought, takes place: Provided that an application for the enforcement or execution of a decree granting a perpetual injunction shall not be subject to any period of limitation.

 

Description of suit

Period of Limitation

Time from which period begins to run

137. Any other application for which no period of limitation is provided elsewhere in this division.

Three years

When the right to apply accrues.

Footnotes

1. Civil Appeal No. 3185 of 2020 arising out of S.L.P. (Civil) No. 7172 of 2020.

2. Civil Appeal No. 2175 of 2020 decided on 17.03.2020.

3. Article 136 of the Limitation Act, 1963-

4. Article 137of the Limitation Act, 1963 –

5. Section 5 of Limitation Act, 1963:- Extension of prescribed period in certain cases.- Any appeal or any application, other than an application under any of the provisions of the Order XXI of the Code of Civil Procedure, 1908 (5 of 1908), may be admitted after the prescribed period, if the appellant or the applicant satisfies the court that he had sufficient cause for not preferring the appeal or making the application within such period."

Take Note

This document is not intended to create an attorney-client relationship. You should not act or rely on any information in this document without first seeking legal advice. This material is intended for general information purposes only and does not constitute legal advice. If you have any specific questions on any legal matter, you should consult a professional legal services provider.

The present article focuses on International Commercial Arbitrations between Indian and overseas parties, where the seat of arbitration is in Singapore. It further discusses the issues faced by foreign companies trying to seek alternative methods of dispute resolution, obtain reliefs and remedies in India and Singapore as well as with the enforcement mechanism for Singapore seated arbitrations in both countries.

With the growth of international trade and commerce, more and more disputes arise from cross-border transactions involving ‘foreign’ parties, and parties have turned towards alternative methods of dispute resolution beyond the traditional forum of court. Given that the bedrock of arbitration is consent by parties, parties are free to agree to the procedures concerning arbitrations including the seat of arbitration. Parties normally agree to arbitration by means of an arbitration clause in a contract made by them before a dispute has arisen, although it can also be agreed to after a dispute has arisen. Arbitrations can be both institutional as well as ad-hoc arbitrations. Various institutions such as London Court of International Arbitration (LCIA), the International Chamber of Commerce (ICC), Singapore International Arbitration Centre (SIAC), etc. also administer arbitrations, and carry their own rules of procedure for arbitration.

The SIAC was established in July 1991. The SIAC administers most of its cases under its own rules of arbitration although it is able to administer arbitrations under any other rules agreed to by the parties. The SIAC has initiated provisions for the purpose of:
1. International and domestic commercial arbitration and conciliation;
2. Promotion of arbitration and conciliation as alternatives to litigation for the settlement commercial disputes; and
3. Development of a pool of arbitrators and experts in the law and practice of international arbitration and conciliation
The SIAC has assisted in rendering administrative services which include settling fees of arbitrators, providing venue for hearings, organizing dates for meetings between the tribunal and parties’ representatives and acting as a registry of pleadings, documents and correspondence.

This article deals with the basic law governing arbitrations in Singapore as well as India in respect of Singapore seated arbitrations, with a special focus on SIAC Rules.

For ready reference we are reproducing a model clause below, as per which the seat of arbitration would be Singapore and the substantive law is Indian:-

“Any dispute arising out of or in connection with this contract, including any question regarding its existence, validity or termination, shall be referred to and finally resolved by arbitration administered by the Singapore International Arbitration Centre (“SIAC”) in accordance with the Arbitration Rules of the Singapore International Arbitration Centre (“SIAC Rules”) for the time being in force, which rules are deemed to be incorporated by reference in this clause.

The seat of arbitration shall be Singapore
The language to be used in the arbitral proceedings shall be English
The governing law of the contract would be the substantive law of India”

LEGAL SYSTEMS GOVERNING AN ARBITRATION

The seat of arbitration carries with it, implications regarding the law which is attracted to the proceedings of the arbitration. This is why it is important to understand how both jurisdictions deal with different systems of law applicable to an agreement.
The SIAC rules provide primacy to party autonomy as regards the seat. However, in absence of any particular provision by the parties, the tribunal is free to determine the seat.

Singapore
In Singapore, different aspects of an arbitration proceeding can and are often governed by different systems of law including and rules, including:
1. The governing law of the conduct of the arbitration (the lexarbitri or curial law);
2. If the arbitration is an institutional arbitration, the arbitral rules of that institution;
3. The governing law of the arbitration agreement;
4. The governing law of the contract i.e. the substantive dispute; and
5. The law governing the recognition and enforcement of the arbitral award.

Each of these is discussed briefly below.

(1) Lex Arbitri / Curial Law

The selection of the seat of arbitration is crucial as the lexarbitri has profound implications on the conduct of the arbitration proceedings, from the initial stages when a party attempts to commence arbitration to the enforcement of the arbitral award. The lexarbitri can regulate, inter alia:
(a) The validity of the arbitration agreement;
(b) The commencement of arbitral proceedings;
(c) The constitution of the tribunal, grounds for challenging their jurisdiction and their ability
to rule on their own jurisdiction;
(d) Interim measures available to the parties;
(e) The court’s involvement or assistance in relation to support or supervision of the
arbitration; and
(f) The court’s power in relation to the award in terms of review and appeal .
Where the seat of an arbitration is Singapore (this is not to be conflated with the physical venue of the arbitration), the arbitration proceedings will be governed by either the Arbitration Act (Cap 10) (“Singapore AA”) if the arbitration is a domestic arbitration or the International Arbitration Act (Cap 143A) (“Singapore IAA”) if the arbitration is an international one. An arbitration is considered “international” if one of the following applies:

(a) At least one party has its place of business outside Singapore when the arbitration agreement is made;
(b) Either the place of arbitration, the place where a substantial part of the obligations is to be performed or the place with which the subject matter of the dispute is most closely connected is outside the state in which the parties have their places of business; or
(c) The parties have expressly agreed that the subject-matter of the arbitration agreement relates to more than one country.
Section 3 of the Singapore IAA provides that the UNCITRAL Model Law on International Commercial Arbitration (“Model Law”)adopted by the United Nations Commission on International Trade Law on 21st June 1985 has the force of law in Singapore.

(2) Institutional Arbitration versus Ad Hoc Arbitration

International arbitration proceedings in Singapore may be administered and supervised by an institution or conducted on an ad hoc basis. Although ad hoc arbitrations are often cheaper and faster, there are many advantages to having an arbitral institution administer and supervise the arbitration process. For instance, the institution may prescribe an established set of arbitration rules for the parties to abide by, offer administrative assistance to the parties and give them easier access to a panel of reputable, accredited arbitrators . The selection of arbitrators is discussed in a later part of this article.

Institutional arbitration rules that are often used in Singapore include the Rules of Arbitration of the International Chamber of Commerce (“ICC Rules”), the London Court of International Arbitration Rules (“LCIA Rules”) as well as the Singapore International Arbitration Centre Rules (“SIAC Rules”). The parties to an arbitration may also choose independent, stand-alone arbitration rules formulated by institutions which do not administer or supervise arbitrations. These rules include the UNCITRAL Arbitration Rules and the Singapore Institute of

Architects Arbitration Rules (frequently adopted in domestic construction disputes).
In contrast with the lexarbitri, arbitration rules provide the procedural framework for the arbitration proceedings. Put differently, arbitration rules serve as a guide on the manner in which the administration and adjudication of the dispute is to be carried out. They are therefore analogous to the Rules of Court applicable in court proceedings.

(3) Governing Law of the Arbitration Agreement

The governing law of an arbitration agreement is determined in accordance with a three-step test: (a) the parties’ express choice; (b) in the absence of an express choice, the implied choice of the parties as gleaned from their intentions at the time of contracting; or (c) in the absence of any express or implied choice, the system of law with which the arbitration agreement has the closest and most real connection.

In the absence of an express choice, how should the implied choice of the parties as to the governing law of the arbitration agreement be determined? The position in Singapore is that if there is an absence of any indication to the contrary and where the arbitration is part of the main contract, the parties are assumed to have intended the whole of their relationship to be governed by the same system of law. The natural inference is that the proper law of the main contract forming the subject matter of the dispute should also govern the arbitration agreement . However, where the arbitration agreement is free-standing, in the sense that it was not intended to be a term of any other contract, then in the absence of any express choice of law, the law of the seat would most likely be the governing law of the arbitration agreement .

Although disputes over the governing law of the arbitration agreement are rare, it is advisable that parties entering into a transaction make it very clear in their contract what the governing law of the arbitration agreement is; this is especially so when the lexarbitri is not the same as the governing law of the transaction.

(4) Governing Law of the Contract

The approach of the Singapore courts in determining the governing or “proper” law of the contract is set out in Overseas Union Insurance Ltd v Turegum Insurance Co

[2001] 2 SLR(R) 285 (“Teregum Insurance”) and comprises three stages not unlike those applied in the process of determining the governing law of the arbitration agreement:
(a) Examine the contract itself to determine whether it states expressly what the governing law
should be.(b) In the absence of an express provision, see whether the intention of the parties as to the
governing law can be inferred from the circumstances.
(c) If neither of the above can be done, then determine with which system of law the contract has
it most close and real connection .

With reference to the second stage, the following are among the relevant factors for consideration: if the contracting parties agree that the courts of a given county shall have jurisdiction in any matter arising out of a contract, if they agree that the arbitration shall take place in a certain country, the language or terminology used in the contract, the form of the documents used in the transaction, a connection with a preceding transaction, the currency of the contract or the currency of payment, the places of residence or business of the parties, and the commercial purpose of the transaction .

InTeregum Insurance the Judith Prakash J clarified there is no strict necessity for there to be proof that the second stage could not apply before the court can move on to the third stage, because the tests of inferred intention and close connection often merge into each other and because before the objection close connection test became fully established, the test of inferred intention was an objective test designed not to elicit actual intention but to impute an intention which had not been formed.

(5) Law Governing the Recognition and Enforcement of Arbitral Awards

A distinction has to be made between arbitral awards made pursuant to an arbitral award made pursuant to an arbitration seated in Singapore and an arbitral award made pursuant to a foreign arbitration. The former is recognised and enforced in accordance with the Singapore AA or Part II of the Singapore IAA, both of which have similar provisions for recognition and enforcement of such an award. The latter is recognised and enforced in accordance with Part III of the Singapore IAA, which gives effect to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“New York Convention”), of which India is also a contracting state. The topic of recognition and enforcement of arbitral awards is discussed in greater detail below.

India

In the Indian legal system in an arbitration containing 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 derived from 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 absence of any other stipulation in the contract, proper law is the law applicable to the arbitral tribunal itself . Also the lexarbitri and the law governing the recognition and enforcement of the award are one and the same in absence of an intention/stipulation to the contrary . The place of the arbitration generally specified in a contract determines the seat of arbitration unless contrary intention is apparent from the contract.
In the Indian legal system, 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 exercise in some other country, or a government of a foreign country .
The Arbitration and Conciliation Amendment Act, 2015 recognizes companies controlled byforeign hands as a foreign body corporate, the Supreme Court has excluded its application to companies registered in India and having Indian nationality. In case a corporation has dual nationality, one based on foreign control and other based on registration in India, such corporation would not be regarded as a foreign corporation.
An International Commercial Arbitration may either be seated in India, or be seated in a foreign country, and this article focuses on International Commercial Arbitrations seated only in Singapore The implication of Singapore seat is that Part I of the Arbitration and Conciliation Act, 1996 (the Indian Act), which is the curial law in India, is excluded for such arbitrations, barring certain exceptions discussed later.

INTERIM RELIEF FROM COURT

The mode of obtaining Interim Reliefs would vary depending on the seat of arbitration, as already explained above. While drafting of contracts, the parties must be extremely careful while choosing the seat of arbitration and choosing the law to be made applicable to said arbitration between them. The SIAC rules also provide that it shall be open to parties to seek interim relief from judicial authorities prior to constitution of the tribunal itself. In exceptional circumstances, parties can approach court, even after the constitution of the tribunal.

Singapore

Under Section 12 of the Singapore IAA, an arbitral tribunal have powers to make orders or give directions to any party in respect of interim measures. The arbitral tribunal can, inter alia, direct one party to give the other security for costs, give directions for the discovery of documents and interrogatories and grant injunctions including those that would ensure that any award which may be made in the arbitral proceedings is not rendered ineffectual by the dissipation of assets by a party.
However, sometimes it is necessary for the court to intervene and assist when the parties require interim relief that goes beyond the scope of the arbitral tribunal’s powers. Such situations arise where the interim relief is needed before the tribunal has been constituted, or where the interim relief sought must be applied for ex parte and on an urgent basis. Section 12A of the Singapore IAA empowers the court to make orders for:
(a) Giving of evidence by affidavit;
(b) The preservation, interim custody or sale of any property which is or forms part of the subject-matter of the dispute;
(c) Samples to be taken from, or any observation to be made of or experiment conducted upon, any property which is or forms part of the subject-matter of the dispute;
(d) The preservation and interim custody of any evidence for the purposes of the proceedings;
(e) Securing the amount in dispute;
(f) Ensuring that any award which may be made in the arbitral proceedings is not rendered ineffectual by the dissipation of assets by a party; and
(g) An interim injunction or any other interim measure.

These above remedies are available regardless of where the arbitration is seated. However, the court powers are not unlimited. These restrictions are set out in sub-sections (3) to (7) of Section 12A of the Singapore IAA, and are summarized briefly below:

(a) If the fact that the place of arbitration is outside Singapore or likely to be outside Singapore
when it is designated or determined makes it inappropriate to make such order.
(b) If the case is one of urgency, the court may make orders under Section 12A(2) of the Singapore IAA as it thinks necessary for the purpose of preserving evidence or assets.
(c) If the case is not one of urgency, the court may make orders under Section 12A(2) of the Singapore IAA only with the permission of the arbitral tribunal or the agreement in writing of the other parties to the arbitration proceedings.
(d) The court may make orders under Section 12A(2) of the Singapore IAA only if or to the extent that the arbitral tribunal has no power or is unable for the time being to act effectively.
(e) Such orders made by the court will cease to have effect if the arbitral tribunal makes an order which expressly relates to the whole or part of the order under Section 12A(2) of the Singapore IAA.

If the parties to an arbitration have opted for the application of the SIAC Rules, these rules empower the SIAC to appoint an emergency arbitrator for the purposes of adjudicating an application for emergency relief before the arbitral tribunal is constituted. The remedy thereby allows parties to dispense with the need to go to court for interim relief . The availability of this remedy, however, does not appear to preclude the parties from seeking relief in court, it is expressly provided

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 (

The present article focuses on International Commercial Arbitrations between Indian and overseas parties, where the seat of arbitration is in China. It further discusses the issues faced by foreign companies trying to obtain reliefs and remedies in India and China as well as with the enforcement mechanism for China Seated arbitrations in both countries.

Arbitration owes its popularity amongst investors primarily because it holds four distinct advantages over other dispute redressal mechanisms.Arbitration offers parties a great deal of confidentiality and privacy.Since arbitrations are more or less about party autonomy, parties are free to agree to the procedures concerning arbitrations, including the seat of arbitration. Arbitrations can be both institutional as well as ad-hoc arbitrations. Various institutions such as London Court of International Arbitration (LCIA), the International Chamber of Commerce (ICC), Singapore International Arbitration Centre (SIAC), China International Economic and Trade Arbitration Commission (CIETAC) etc. also administer arbitrations, and carry their own rules of procedure for arbitration. However, this article deals with the basic law governing arbitrations in China as well as India in respect of China seated arbitrations.
For ready reference we are reproducing a model clause below, as per which the seat of arbitration would be

China and the substantive law is Indian:-
“Any dispute arising from or in connection with this Contract shall be submitted to China International Economic and Trade Arbitration Commission for arbitration which shall be conducted in accordance with the Commission’s arbitration rules in effect at the time of applying for arbitration. The arbitral award is final and binding upon both parties.
The seat of arbitration shall be Beijing, China
The language to be used in the arbitral proceedings shall be English
The governing law of the contract would be the substantive law of India”

LEGAL SYSTEMS GOVERNING AN ARBITRATION

The seat of arbitration carries with it, implications regarding the law which is attracted to the proceedings of the arbitration.This is why it is important to understand how both jurisdictions deal with different systems of law applicable to an agreement.

China
Under the Chinese legal system for a foreign-related arbitration seated in China, rules of the applicable law can be perceived from the four main aspects set out as below:

1. For validity of the arbitration agreement, it is explicitly addressed by the Judicial Interpretations on Chinese Arbitration Law of the Supreme Court of China that the applicable law should be the law selected by the parties by agreement, otherwise the law of seat of arbitration shall apply.
2. For substantive issues, the Law on Application of Law in Foreign-related Civil Relations allows the parties to select by agreement the applicable law, either domestic law or foreign law, to govern the contract, provided that such selection does not violate any Chinese mandatory provisions or the social and public interests of China. The law most closely associated with the contract shall apply by default of an agreed selection.
3. For procedural issues, it is generally recognized that the Chinese Civil Procedural Law , the Chinese Arbitration Law and related judicial interpretations, as well as the arbitration rules of the selected arbitration institutions will be applied in China seated arbitrations. However, instead of a direct application of rules of the selected arbitration institutions, the currently effective arbitration rules of CIETAC (CIETAC Rules) gives an implication that arbitration rules selected by the parties by agreement shall prevail unless the agreement violates mandatory procedural provisions.
4. For recognition and enforcement of the awards made in China, the governing laws are the Chinese Civil Procedural Law, the Chinese Arbitration Law and related judicial interpretations. The Number 5 Circular of the Supreme Court of China in 1987 (the Circular) is to be applied specifically for the recognition and enforcement of foreign arbitral awards. Application of the Circular will be further discussed in this article.

India
In the Indian legal system in an arbitration containing 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 derived from 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 absence of any other stipulation in the contract, proper law is the law applicable to the arbitral tribunal itself . Also the lexarbitri and the law governing the recognition and enforcement of the award are one and the same in absence of an intention/stipulation to the contrary . The place of the arbitration generally specified in a contract determines the seat of arbitration unless contrary intention is apparent from the contract.
In the Indian legal system, 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 exercise 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, and this article focuses on International Commercial Arbitrations seated only in China. The implication of the Chinese seat is that Part I of the Arbitration and Conciliation Act, 1996 (the Indian Act), which is the curial law in India, is excluded for such arbitrations, barring certain exceptions discussed later.

INTERIM RELIEF FROM THE COURT

The mode of obtaining Interim Reliefs would vary depending on the seat of arbitration, as already explained above.The nature of interim relief sought by the parties may vary based on the facts and circumstances of the dispute. In certain situations the effective provision of interim reliefs may involve directions to third parties also.

China
It is generally recognized by the Chinese law that the parties to the arbitration may apply for preservation of property or evidence as interim remedies before or during the arbitration. The CIETAC Rules provide a new mechanism for the interim reliefs under which the parties, in addition to the right to apply for the aforementioned preservations, may also apply for emergency relief pursuant to the CIETAC Emergency Arbitrator Procedures.

Article 81 and Article 101 of the Chinese Civil Procedural Law lay down the provisions on the pre-arbitration preservation of property/evidence. Such preservation is to be applied by the interested party directly with the court only if the legitimate right of the interested party might be irreparably damaged, or the evidence might be destroyed or difficult to obtain later on due to an urgent situation. Specific rules on the pre-arbitration preservation of property include a compulsory security for the preservation to be provided by the applicant, and a strict timeline of 30 days to formally file the arbitration application after enforcing the preservation.

Article 68 of the Chinese Arbitration Law and Article 272 of the Chinese Civil Procedure Law respectively prescribes on the preservation during a foreign-relate arbitration. Unlike the pre-arbitration preservation proceedings, both provisions require the application to be filed with the foreign-related arbitration institution first and forwarded to the court by the arbitration institution afterwards.

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 UNCITRAL 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 of the Supreme Court of India. The 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, in effect, 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 get appropriate relief. The modification made by the amendment in case of Foreign Seated Arbitrations is a welcome change. However, from the scheme of the Act it is clear that Sections 9, 27 and 37(1) (a) and 37 (3) of the Act would apply only to arbitrations having seat in such countries with which India has reciprocal arrangements in terms of the Act.
Therefore a Section 9 remedy would be available for a Chinese 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, appointment of interim receivers etc.
This provision gives a huge relief to parties in cases where assets of parties to the Chinese seated arbitration 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 amendment .

APPLICATION FOR APPOINTMENT OF ARBITRATORS

The procedure for appointment of arbitrators in both territories is once again dependent upon the seat of arbitration. A person of any nationality may be an arbitrator, unless otherwise agreed by the parties.

China
Section 2 “Composition of the Arbitral Tribunal” of the Chinese Arbitration Law sets forth the general provisions on appointment of arbitrators. Each party can select or authorize the chairman of the arbitration commission to appoint an arbitrator, whereas the third arbitrator, as the presiding arbitrator of an arbitral tribunal composed of three members, or the arbitrator of a sole-arbitrator tribunal, is to be jointly selected by the parties or appointed by the chairman of the arbitration commission jointly authorized by the parties.
a. A more specific appointment process is regulated by the rules of the selected arbitration institution. The CIETAC Rules require the arbitrators to be appointed from the Panel of Arbitrators provided by CIETAC, and certain factors, e.g. the applicable law, the seat of arbitration, the language of arbitration, the nationalities of the parties shall also be taken into consideration for the appointment.

India
The appointment of Arbitrators in India is governed by Section 11 of the Indian Act, Article 11 being the concomitant provision of the UNCITRAL Model Law. As far appointment of Arbitrators in a Chinese seated Arbitration is concerned, Part I of the Indian Act has no application and there is no exception carved out in the act itself. In these cases, it is the domestic law of China which would be relevant, as explained above.

The only relief on this front which a party can obtain in the case of a Chinese seated arbitration is, that incase an Indian court is seized of a matter in respect of which an arbitration agreement exists, it can refer the parties to arbitration .

APPLICATION FOR CHALLENGING/ENFORCEMENT OF THE AWARD

The law governing the enforcement/challenge to the award is extremely relevant, and especially so, in the case of an International Commercial Arbitration. This is because an award remains a mere dead letter until it can be enforced in the relevant country and compliance can be ensured.

China
The enforcement/challenge to the award of foreign-related arbitration made by a Chinese arbitration institution is governed by the Chinese Arbitration Law, the Chinese Civil Procedural Law and the respective judicial interpretations. The Circular is applied, upon China’s reservation statement of the New York Convention , in recognition and enforcement of awards made in territory of another state, or awards not considered as domestic awards in China.

According to Article 70, Article 71 of the Chinese Arbitration Law and related provisions of the Chinese Civil Procedure Law, the award of a foreign-related arbitration made by a Chinese arbitration institution can be applied with the Chinese court for enforcement once the award comes into effect. Challenges to the award can be filed by either party within a statutory period. More specifically, the court can rule to cancel the award or not enforce the award upon the request of the entitled party, provided that the award is proved to meet one of the following circumstances.

1. No written arbitration clause is included in the disputed contract or no written arbitration agreement has been reached subsequently.
2. The respondent was not served with the notice of appointing the arbitrator or attending the oral hearings, or was unable to give statement due to reasons other than the respondent’s own fault.
3. Formation of the arbitral tribunal or the arbitration proceedings violated the arbitration rules;
4. The subject matter of the arbitration exceeded the scope of the arbitration agreement or the arbitral authority of the arbitration institution; or
5. The court determines that execution of the award will violate the social and public interest.
Another type of arbitral award is the award of a China seated arbitration made by a foreign arbitration institution. The Chinese law has no explicit provisions on the recognition and enforcement of this type of award, but in certain cases where ICC awards made in China were reviewed by the Chinese courts for recognition and enforcement, such awards were identified as “awards not considered as domestic awards” and reviewed through application of the New York Convention .

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, China being a New York Convention Country.In 2012, the government of India declared that the People’s Republic of China, including the Hong Kong Special Administrative Region and the Macau Special Administrative Region, is a territory to which the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“New York Convention”) applied for the purpose of enforcement of foreign arbitral awards in India. The formal notification was published in the official Gazette of India.
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 need to be fulfilled, which are as under:-
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 China, both the above conditions are met, the awards are directly recognizable in India and no separate mechanism needs to be followed.

Section 47 of the Indian Act provides that a party while 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 as stated above.

Furthermore, Section 48 of the Indian Act provide the grounds to challenge the enforcement of a foreign award which 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.

Once the award has survived the challenge 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.

APPEALS ARISING FROM ORDERS OF INTERIM RELIEFS OR ORDERS OF ENFORCEMENT OF FOREIGN AWARDS

China
In China, appeal to the order of interim reliefs given by a court is only allowed in the form of application with the court for a review in accordance with Article 108 of the Chinese Civil Procedure Law. Enforcement of the order will not be suspended during the court review period.

Appeal to the order on not enforcing an arbitral award is prohibited by Article 478 of the Judicial Interpretation of Chinese Civil Procedure Law . Instead, the parties may choose to re-enter into a written arbitration agreement and submit the dispute to arbitration or bring a lawsuit to the competent court. In scenario of a foreign award, the order on denial of recognition and enforcement of the foreign award by the court should be subject to a mandatory double review by the Higher Court and the Supreme Court and the final order cannot be appealed neither.

India
It follows from the discussion above that an interim relief is given under Section 9, then 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 China 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 execution/enforcement/challenge from 

the award passed in China, then Indian Courts would not have any role to play in the appeal process either.

Conclusion

To conclude it may be said, that the courts in both countries would play different roles in International Commercial Arbitrations seated in China. Firstly it needs to be determined which is the seat of arbitration and which is the curial law which is attracted. Thereafter for different remedies, different courts can be approached.

Contracts relating to foreign investments in Mainland China usually provide that any dispute arising between the parties should be settled by friendly negotiation, failing which the dispute should be referred to arbitration. Foreign related arbitrations in China are mainly administered by China International Economic and Trade Arbitration Commission (CIETAC), although many other arbitration commissions may accept foreign related arbitration cases.Moreover, the 2015 amendment has given more leeway to Indian courts as far as Interim reliefs are concerned, thus providing additional protection to China based parties vis-s-a-vis Indian players. In view of the above, India is fast becoming an arbitration and foreign investor friendly country.

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.

ZhongLun Law Firm
ZhongLun’s litigation and arbitration team boasts a wealth of experience in handling litigation, arbitration, enforcement and all kinds of emergencies in relation thereto, and is without a doubt a cut above other contenders in the industry.

ZhongLun is recognized as one of the firms appearing in the largest number of cases before the Supreme People’s Court of China. We also have extensive experience when it comes to arbitration cases before China International Economic and Trade Arbitration Commission (CIETAC), Hong Kong International Arbitration Centre (HKIAC), Singapore International Arbitration Centre (SIAC), Beijing Arbitration Commission, Shanghai Arbitration Commission and Shenzhen Arbitration Commission. In addition, more than ten of our partners serve as arbitrators for HKIAC, CIETAC, Beijing Arbitration Commission and other local arbitration commissions.

Our broad client base encompasses both domestic clientele and a great number of industrial heavyweights from abroad, whom are deeply impressed with and praise us for our excellent language abilities, communication skills, expertise, commitment and seamless cooperation.

This article examines the core components of International Commercial Arbitrations between Indian and overseas parties, where the seat of arbitration is in London. It further discusses the issues faced by foreign companies trying to obtain relief and remedies in India and England, as well as addressing enforcement mechanisms.

For context, a clause providing for a London seat and an Indian-law governed arbitration might look as follows:

Any disputes arising out of or in connection with this contract, including any question regarding the existence, validity or termination, shall be referred to and finally resolved by arbitration to be conducted by a Sole Arbitrator under the LCIA Rules, which rules are deemed to be incorporated by reference into this clause.

The seat of arbitration shall be London

The language to be used in the arbitral proceedings shall be English

A growing number of international contracts provide for disputes to be referred to arbitration. In light of this trend, several countries (including India) have undertaken a rapid expansion and development of their arbitral law to make it more accessible and flexible for foreign investors. Since one of the purposes of arbitration is more or less to provide for greater party autonomy, parties are generally more free to agree the procedures governing their arbitrations, including the seat of that arbitration.The governing law of the contract would be the substantive law of India

Principally, arbitrations are either institutional (i.e. adhering to institutional rules), or ad-hoc (i.e. governed by the statutory regime of the arbitral seat).  Certain mandatory (statutory) rules still apply to an arbitration governed by institutional rules. Popular institutions that provide a procedure for international arbitration are the London Court of International Arbitration (LCIA), the International Chamber of Commerce (ICC), and the Singapore International Arbitration Centre (SIAC).

[1] References to London-seated arbitrations throughout this article are a shorthand for England and Wales.  In the United Kingdom, there are two principal (and distinct) legal systems: England and Wales (which also applies in large part to Northern Ireland), and Scotland.  This article does not address questions of Scottish law.This article addresses the basic procedural framework in India and England.

PROCEDURAL LAW GOVERNING AN ARBITRATION

The seat of arbitration carries with it certain implications regarding the procedural law which governs the arbitration proceedings. It is therefore important to understand the procedural framework in both India and England.

London

Statute

Where the seat of arbitration is London, the Arbitration Act 1996 (The English Act) will apply certain rules to that arbitration. These are split into three main elements:

  1. The governing law of the dispute:
    • International parties to sophisticated commercial contracts typically choose the law that governs their dispute (which can be a different law to that of the seat). The English Act requires that the arbitral tribunal determine these disputes under the law chosen by the parties. If the parties have not chosen a governing law, a London-seated tribunal will apply conflicts of law rules to determine the governing law. It is therefore strongly advisable to provide for the governing law in the agreement.
    • The parties can also agree that the tribunal decides the dispute under ‘Lex Mercatoria‘ (a body of transnational trade and commercial principles) or ex aequo et bono(where the tribunal considers solely what would be a “fair and equitable” resolution). However, these two governing law choices are rare due to their inherent uncertainty, and are generally not recommended.
  1. The procedural law of the arbitration:
    • The English Act enables parties to determine the applicable procedural rules to govern the arbitration. This is often done by reference to the rules of an arbitral institution.
    • In the absence of agreement between the parties on the procedural rules, certain “default” rules will apply. In short, the tribunal: (i) shall act fairly and impartially, giving each party a reasonable opportunity of putting their case and dealing with that of his opponent; and (ii) shall adopt procedures suitable to the particular case, avoiding unnecessary delay and expense so as to provide a fair means to resolve the dispute.
  1. “Mandatory” rules: despite having the freedom to choose both the governing and procedural law applicable to the dispute, certain mandatory rules under the English Act will still apply to London-seated arbitrations (which is limited, England being an arbitration-friendly jurisdiction). These relate primarily to the powers of the English Courts to intervene in an arbitral dispute, the immunity of the arbitrator, and enforcement.

India

In the Indian legal system in an arbitration containing a foreign element, there are three different systems of law which govern the arbitration[1]:-

  1. The law governing the substantive law of the contract. This is 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 “lex arbitri”. This is the law which is derived from 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.

In the absence of any other stipulation in the contract, the proper law is the law that the arbitral tribunal itself will apply.  The same applies to the lex arbitri and the law governing recognition and enforcement, in absence of an intention/stipulation to the contrary. The seat of the arbitration specified in a contract generally determines the seat of arbitration, unless clear contrary intention is apparent from the contract.

In the Indian legal system, under the Arbitration and Conciliation Act 1996 (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 exercise 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. For London-seated arbitrations, the provisions of Part I of the Indian Act are excluded for such arbitrations, barring certain exceptions.

INTERIM RELIEF FROM THE COURT

In certain circumstances, in London-seated arbitrations interim relief is available from the English courts or the presiding institution.

London

In England, a court can only intervene in arbitration proceedings to the extent expressly permitted by the English Act.

The English Act sets out the English court’s powers that may be available in support of arbitration. Unless otherwise agreed by the parties (for example by choosing institutional framework), the court has the power to make the following orders:

  1. Taking evidence from witnesses
  2. Preserving evidence
  3. Relating to property which is the subject of the proceedings –
    • For the inspection, photographing, preservation, custody or detention of the property, or
    • Ordering that samples be taken from, or experiment conducted upon, the property;
  4. In relation to the sale of any goods the subject of the proceedings
  5. Granting an interim injunction or the appointment of a receiver

One of the most important powers of the Court is the granting of a freezing order in respect of assets, to avoid dissipation prior to the award being granted and as an aid to enforcement.

India

In India, the Indian Act governs the power of the courts to grant interim relief. It is based on Article 9 of the UNCITRAL Model Law[1]. Under Section 9 of the Indian Act, a party is permitted to apply to an Indian court for certain interim measures in support of an Indian (or, to a more limited extent, London-seated arbitration), before, during or after making of the award by a tribunal.  The law in this area has recently changed[2] to expand the scope of interim relief to foreign-seated arbitrations.  Under the terms of the amended Indian law, interim relief is only available if the arbitration has commenced after 23 October 2015.

The types of interim relief sought under Section 9 are similar to those in the English Arbitration Act, namely the protection, preservation or interim custody of goods, assets, properties, securing the amounts in dispute, and the appointment of interim receivers.

This is a huge step forward, and should give commercial parties more comfort, especially in cases where assets of parties to a London-seated arbitration are located in India and there is a fear of disposal.

APPLICATION FOR APPOINTMENT OF ARBITRATORS

The procedure for appointment of arbitrators in both territories is once again dependent upon the seat of arbitration.

London

The parties to an arbitration are free to agree on the procedure for appointing arbitrators. In the absence of such a choice, the English Act provides default appointment provisions as follows:

  1. The parties will jointly a sole arbitrator (if the parties wish to have a sole arbitrator)
  2. If the parties wish to have two arbitrators, each party will appoint one arbitrator
  3. If the parties wish to have three arbitrators:
    • Each party will appoint one arbitrator
    • The two appointed arbitrators will appoint a third arbitrator as the chairman of the tribunal

Unless the parties agree otherwise, if one party fails to appoint an arbitrator, the other party may give notice in writing to the other party to propose to appoint their arbitrator to act as sole arbitrator.

If the processes to appoint an arbitrator fail for any reason, the parties are free to agree what is to happen. In the absence of such agreement, any party to the arbitration agreement may apply to the English court for the following:

  1. Directions as to making any necessary appointments to the tribunal
  2. Directions that the tribunal must be constituted by the appointments that have already been made
  3. To revoke any appointments already made
  4. For the court to make any necessary appointments itself

By way of comment, the better course is to provide for the number of arbitrators, time frame and process for appointment. Delay may otherwise occur to the disadvantage of one or other of the parties.

India

The appointment of Arbitrators in India is governed by Section 11 of the Indian Act. As far appointment of arbitrators in a London-seated arbitration is concerned, English procedural law applies (as explained above).  There are only very limited exceptions to this rule under Indian law.

APPLICATION FOR ENFORCEMENT / CHALLENGE OF THE AWARD

The law governing the enforcement/challenge to the award is extremely relevant, and especially so in international commercial arbitration. This is because an award remains a mere “dead letter” until it can be enforced in the relevant country and compliance with its terms can be ensured.

London

England, along with another 156 countries, is a signatory to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958) (the New York Convention).  Enforcement of arbitral awards internationally under the New York Convention is said to be one of the significant advantages of international arbitration as a means of dispute resolution.

Section 66 of the Arbitration Act governs enforcement of arbitral awards. With the court’s permission, any award made by a tribunal pursuant to an arbitration agreement may be enforced in the same manner as a judgment or order of the English court. Where the court gives permission, judgment can be made in the terms of the arbitral award. Therefore, the party wishing to enforce an award must apply for permission. The court may refuse permission if the person against whom the award is sought to be enforced can show that the arbitral tribunal lacked “substantive jurisdiction” to make the award.

Under S.101 of the Arbitration Act, an award made by an arbitral tribunal within a New York Convention state (which includes India) shall be recognised as binding on the parties to the arbitration. A New York Convention award may, with the permission of the court, be enforced in the same manner as a judgment or order of the court to the same effect.

An arbitration award can be challenged in three ways:

  1. Under S.67 of the Arbitration Act, the “substantive jurisdiction” of the tribunal can be challenged. Under a S.67 application, a court may confirm the award, vary the award of set aside the award in whole or in part
  2. Under S.68 of the Arbitration Act, an award may be challenged on the ground of “serious irregularity affecting the tribunal”, the proceedings or the award. The court may send the award to the tribunal for reconsideration, set the award aside in whole or in part, or declare the award to be of no effect in whole or in part.
  3. Under S.69, a party to the arbitration may appeal on a question of law arising out of an award made in the proceedings. The agreement of all parties and permission of the court is needed to appeal under S.69. The court may confirm the award, vary the award, remit the award for reconsideration by the tribunal or set aside the award in whole or in part.

A party may lose its right to object before the tribunal or the court on objections if a party takes part, or continues to take part, in the arbitration without making such an objection. The party will not lose this right if they can show at the time of taking part, or continuing to take part, in the arbitration, they did not know and could not “with reasonable diligence” have discovered the grounds for the objection.

Institutional rules, such as the LCIA and ICC rules, preclude appeals except to a limited extent, and research suggests that challenges to awards are infrequently upheld.

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, England 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 need to be fulfilled, which are as under:-

  1. The territory should be signatory to the New York Convention
  2. 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 England, both of these conditions are met, the awards are recognized as Foreign Awards in India and the enforcement mechanism provided under Part II of the Indian Act needs to be followed.

Section 47 of the Indian Act provides that a party must produce such evidence as is necessary to prove that the award satisfy the above conditions.

Furthermore, Section 48  of the Indian Act provide the grounds to challenge the enforcement of a foreign award which 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 the scope of the arbitration, the wrong composition of tribunal, or that the award has not become binding as per the law of the seat, or is against Indian public policy.

Once the award has survived any challenge and the Indian court is satisfied that the foreign award is enforceable under this Chapter, the award shall be deemed to be a decree of that court and executed in the customary manner.

APPEALS ARISING FROM ORDERS OF INTERIM RELIEF OR ORDERS OF ENFORCEMENT OF FOREIGN AWARDS

London

As discussed above, Section 44 of the Arbitration Act provides that the courts have the same powers in relation to arbitration proceedings, for certain matters, as it has in legal proceedings.  An order for interim relief may only be appealed at first instance with the court’s permission.

There are several grounds to resist enforcement of a New York Convention award, namely that:

  1. a party to the arbitration agreement was (under the law applicable to him) under some incapacity;
  2. the agreement to arbitrate itself was not valid under the governing law;
  3. the party was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings or was otherwise unable to present his case;
  4. the award deals with matters beyond the scope of the submission to arbitration;
  5. the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties or the procedural law of the; or
  6. the award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the law of which, it was made.

The party seeking to resist enforcement of the award under these grounds bears the burden of proof before the court. However, successful challenges to New York Convention awards are rare, as the courts are generally supportive of the arbitration process.

India

If interim relief is granted by an Indian court under Section 9, there is an automatic right of appeal to the higher Indian court. This also applies to enforcement challenges.

However, where the Indian courts have not been approached for an execution, enforcement or other challenge arising from an English award, then the Indian courts will not play a role in the appeal process.

Conclusion

India is moving towards becoming an arbitration and foreign investor-friendly country. Indian and English courts play different roles in support of London-seated arbitrations, depending on the make-up of the arbitration procedure. The starting point is for the parties to choose the seat of arbitration, following which the established frameworks described above can be built. The critical point to remember is that a comprehensively drafted clause, taking into account the relevant advantages and disadvantages of respective legal systems, is paramount.

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.

RPC LAW

It can be a fast, cost-effective, flexible and confidential alternative to court proceedings.

It can also be complex. That’s why, with our International Arbitration service, lawyers with the experience and international outlook you need are on hand to guide you through the process. We know how the arbitral institutions across the globe operate. Equally, we understand multicultural nuances and have the sensitivity needed to bring a dispute with an overseas counterparty to a satisfactory conclusion.

Hailed by the directories as “top-notch performers”, our International Arbitration team works from our offices in London, Hong Kong and Singapore, handling arbitration cases across the world.

With this global perspective, we’re ideally placed to help you resolve disputes through bodies such as the LCIA, ICC, ICSID, SIAC, CIETAC, HKIAC, DIFC, trade associations such as FOSFA, GAFTA, LMAA , SICOM and WIPO, as well as ad hoc arbitrations including ARIAS, CIArb and UNCITRAL rules.

Where we need to work alongside lawyers in other jurisdictions, we are part of the TerraLex network and have access to over 150 law firms in 100 jurisdictions across the globe.

This is a ready reference of important provisions for some of the popular institutional arbitrations opted by parties around the world. Specifically important provisions of the following institutional arbitrations have been extracted:-

  1. London Court of International Arbitration (LCIA)
  2. ICC International Court of Arbitration
  3. Singapore International Arbitration Centre (SIAC)
  4. Hong Kong International Arbitration Centre (HKIAC)

General Provisions Common to Most Institutional Arbitrations

A. Request for Arbitration

Generally in different international institutions administering arbitrations, the rules requesting for arbitration deal with a written request for arbitration by the Claimant to the Registrar containing all the required and relevant information within a specified period of time from the date of the commencement of arbitration. Some institutions also contain a provision for a written response to the said request by the opposite party.

B. Appointment of an Arbitrator and formation of the tribunal

Pursuant to request for arbitration received, the respective institutions constitute the tribunal for the Arbitration. The Arbitrator can either be a sole arbitrator or three arbitrators depending on the agreement between the parties. The various Institutions of arbitrations around the world consider the prospective arbitrator’s nationality, residence and other relationships with the countries of which the parties or the other arbitrators are nationals and the prospective arbitrator’s availability and ability to conduct the arbitration in accordance with the Rules, while appointing arbitrators.

C. Seat of Arbitration and Place(s) of Hearing

The law applicable to the Arbitration Agreement and the arbitration shall be the law applicable at the seat of the arbitration, unless and to the extent that the parties have agreed in writing on the application of other laws or rules of law and such agreement is not prohibited by the law applicable at the arbitral seat.

D. Interim Relief

As per the rules of most institutions, parties are at liberty to approach the tribunal for interim measures of protection, custody, preservation etc., which are necessary to protect their respective rights. Furthermore, almost all arbitration institutions allow parties to approach courts before during or after the formation of the tribunal. In the case of emergency at any time prior to the formation or expedited formation of the Arbitral Tribunal, any party may apply to the Court for the immediate appointment of a temporary sole arbitrator to conduct emergency proceedings pending the formation or expedited formation of the Arbitral Tribunal

E. Awards

The Arbitral Tribunal may make separate awards on different issues at different times, including interim payments on account of any claim or cross-claim (including Legal and Arbitration Costs). Such awards shall have the same status as any other award made by the Arbitral Tribunal.

Listed below is a ready reference of important provisions of different arbitration institutions around the globe:

  1. London Court of International Arbitration (LCIA)
  2. ICC International Court of Arbitration
  3. Singapore International Arbitration Centre (SIAC)
  4. Hong Kong International Arbitration Centre (HKIAC)

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.

ARBITRATION LAW IN INDIA FOR FOREIGN SEATED ARBITRATIONS

It was in Bhatia International Vs. Bulk Trading S.A.[1] judgment that the Indian Supreme Court laid down the principle that courts in India would have a right to provide interim relief in foreign seated arbitrations also unless otherwise agreed in writing by the parties. Therefore, earlier the Indian Courts were competent to grant interim relief pending arbitration, set aside arbitral awards etc. even if the arbitration was conducted outside India unless the parties by mutual consent chose expressly or impliedly to exclude the applicability of Part I of the Arbitration and Conciliation Act, 1996. However, this position was overruled following the decision of the Hon’ble Supreme Court in Bharat Aluminium and Co. Vs. Kaiser Aluminium and Co.[2] (“BALCO”) but only prospectively. In the BALCO judgment, a five judge constitutional bench of the Hon’ble Apex Court held that Part I of the Arbitration and Conciliation Act, 1996 was applicable only to all the arbitrations which take place within the territory of India. However, the BALCO judgment was made applicable only for disputes arising out of arbitration agreements and/or arbitration agreements entered into after September 6, 2012.

ARBITRATION AND CONCILIATION (AMENDMENT) ACT 2015 ON INTERIM RELIEF

After the BALCO judgment, there was a lot of clamour as Indian Courts had no jurisdiction to intervene in arbitrations held outside India and therefore, if the assets of one of the parties were located in India and there was a likelihood of alienation of those assets, the other party court not approach Indian Courts for interim relief.  With this objective in mind, the Arbitration and conciliation (Amendment) Act, 2015 (“Amendment Act, 2015”) was passed by the Parliament of India to help build India as a major investor friendly jurisdiction.  In particular, section 2(2) was amended which somewhat restored the principle pronounced by the judgment of Bhatia International by adding a proviso that provided the option of interim relief to a party even if the place of arbitration is outside India unless there was an Agreement to the contrary. Pursuant to the amendment, the courts in India have also duly hailed the legislative intent behind the amended section 2(2) and have held that keeping in mind the object of amended section 2(2), it is open to courts in India to grant interim relief even in respect of arbitral proceedings held outside India and even if the arbitration proceedings are governed by a foreign law[3]. However, the flipside of the amended section 2(2) is that the option of seeking an interim order is not available to two Indian parties who choose to arbitrate outside India. Also, post 2015 amendment the power of the courts to grant interim relief has been restricted to only those matters where arbitral tribunal has not been constituted and once an arbitral tribunal is constituted, the court cannot entertain any interim relief unless the court finds that circumstances exist  which may not render the remedy a provided under section 17 of the Act efficacious.

AMENDED DEFINITION OF COURT

Another key feature of the Arbitration and conciliation (Amendment) Act, 2015 was the amendment to the definition of court as provided under section 2(1)(e). This amendment has provided a clear distinction between the forums which are to be approached in domestic arbitration and in international commercial arbitrations. While the definition of a court with respect to domestic arbitrations has remained unchanged, in case of international commercial arbitrations, the definition of a court has been included to mean all high courts exercising ordinary original civil jurisdiction  and in other cases, a high court having jurisdiction to hear appeals from decrees of courts subordinate to that high court.  This is a fundamental change in building India as a global arbitration hub as it has ensured that foreign parties are not required to approach Principal Civil Courts in remote districts and can approach the concerned high court. This amendment is a primary attraction for foreign parties involved in international commercial arbitrations who can now avoid the legal complexities involved in the Indian Judicial System at the District level. The legislative intent behind this amendment was to ensure that any application and/or petition in international commercial arbitrations, involving a foreign party, would be heard expeditiously and will not only boost confidence of foreign investors  but will also mitigate the risk faced by the government of India from claims by foreign investors under the relevant investment treaty.

IMPENDING CHANGES

The Arbitration and Conciliation Amendment Bill, 2018 was passed by the Lok Sabha (House of the People) on August 10th, 2018 with a view to strengthen the arbitration mechanism in Indian.  The Bill is yet to be passed by the Rajya Sabha (Council of States).

Time restriction for conclusion of arbitral proceedings not applicable to international commercial arbitrations

While the inclusion of section 29A by way of the Amendment Act, 2015  paved a way for a more structured and time bound arbitration proceeding which were otherwise marred by significant delays, however, in case of international commercial arbitrations, the time bound procedure as prescribed under section 29A was rather seen as a restriction especially in cases which involve complex questions of facts and law and in which detailed evidence needs to be led. The Arbitration and Conciliation Amendment Bill, 2018 has duly addressed this concern and seeks to exclude the applicability of Section 29A to international commercial arbitrations.

[1] [(2002) 4 SCC 105]

[2] (2012) SCC 9 552

[3] Raffles Design International Vs. Educomp Professional Education

This is a ready reference for certain important provisions of Hong Kong International Arbitration Centre (HKIAC) opted by parties.

SECTION I. GENERAL RULES

Article 1 – Scope of Application

1.1 These Rules shall govern arbitrations where an arbitration agreement (whether entered into before or after a dispute has arisen) either: (a) provides for these Rules to apply; or (b) subject to Articles 1.2 and 1.3 below, provides for arbitration “administered by HKIAC” or words to similar effect.

1.2 Nothing in these Rules shall prevent parties to a dispute or arbitration agreement from naming HKIAC as appointing authority, or from requesting certain administrative services from HKIAC, without subjecting the arbitration to the provisions contained in these Rules. For the avoidance of doubt, these Rules shall not govern arbitrations where an arbitration agreement provides for arbitration under other rules, including other rules adopted by HKIAC from time to time.

1.3 Subject to Article 1.4, these Rules shall come into force on 1 November 2013 and, unless the parties have agreed otherwise, shall apply to all arbitrations falling within Article 1.1 in which the Notice of Arbitration is submitted on or after that date.

1.4 The provisions contained in Articles 23.1, 28, 29 and Schedule 4 shall not apply if the arbitration agreement was concluded before the date on which these Rules came into force, unless otherwise agreed by the parties.

SECTION II.COMMENCEMENT OF THE ARBITRATION

Article 4 – Notice of Arbitration

4.1 The party initiating recourse to arbitration (hereinafter called the “Claimant”) shall submit a Notice of Arbitration in writing to HKIAC at its address, facsimile number or email address.

4.2 An arbitration shall be deemed to commence on the date on which a copy of the Notice of Arbitration is received by HKIAC. For the avoidance of doubt, this date shall be determined in accordance with the provisions of Articles 2.1 and 2.2.

4.3 The Notice of Arbitration shall include the following: (a) a demand that the dispute be referred to arbitration; (b) the names and (in so far as known) the addresses, telephone and fax numbers, and email addresses of the parties and of their counsel; (c) a copy of the arbitration agreement(s) invoked; (d) a reference to the contract(s) or other legal instrument(s) out of or in relation to which the dispute arises; (e) a description of the general nature of the claim and an indication of the amount involved, if any; (f) the relief or remedy sought; (g) a proposal as to the number of arbitrators (i.e. one or three), if the parties have not previously agreed thereon; (h) the Claimant’s proposal regarding the designation of a sole arbitrator under Article 7, or the Claimant’s designation of an arbitrator under Article 8; and (i) confirmation that copies of the Notice of Arbitration and any exhibits included therewith have been or are being served simultaneously on all other parties (hereinafter called the “Respondent”) by one or more means of service to be identified in such confirmation.

4.4 The Notice of Arbitration shall be accompanied by payment, by cheque or transfer to the account of HKIAC, of the Registration Fee as required by Schedule 1.

4.5 The Notice of Arbitration shall be submitted in the language of the arbitration as agreed by the parties. If no agreement has been reached between the parties, the Notice of Arbitration shall be submitted in either English or Chinese.

4.6 The Notice of Arbitration may also include the Statement of Claim referred to in Article 16.

4.7 If the Notice of Arbitration is incomplete or if the Registration Fee is not paid, HKIAC may request the Claimant to remedy the defect within an appropriate period of time. If the Claimant complies with such directions within the applicable time limit, the arbitration shall be deemed to have commenced under Article 4.2 on the date the initial version was received by HKIAC. If the Claimant fails to comply, the Notice of Arbitration shall be deemed not to have been validly submitted and the arbitration shall be deemed not to have commenced under Article 4.2 without prejudice to the Claimant’s right to submit the same claim at a later date in a subsequent Notice of Arbitration.

4.8 The Claimant shall notify and lodge documentary verification with HKIAC of the date of receipt by Respondent of the Notice of Arbitration and any exhibits included therewith.

Article 5 – Answer to the Notice of Arbitration

5.1 Within 30 days from receipt of the Notice of Arbitration, the Respondent shall submit to HKIAC an Answer to the Notice of Arbitration. This Answer to the Notice of Arbitration shall include the following: (a) the name, address, telephone and fax numbers, and email address of the Respondent and of its counsel (if different from the description contained in the Notice of Arbitration); (b) any plea that an arbitral tribunal constituted under these Rules lacks jurisdiction; (c) the Respondent’s comments on the particulars set forth in the Notice of Arbitration, pursuant to Article 4.3(e); (d) the Respondent’s answer to the relief or remedy sought in the Notice of Arbitration, pursuant to Article 4.3(f); (e) the Respondent’s proposal as to the number of arbitrators (i.e. one or three), if the parties have not previously agreed thereon; (f) the parties’ joint designation of a sole arbitrator under Article 7 or the Respondent’s designation of an arbitrator under Article 8; and (g) confirmation that copies of the Answer to the Notice of Arbitration and any exhibits included therewith have been or are being served simultaneously on all other parties to the arbitration by one or more means of service to be identified in such confirmation.

5.2 The Answer to the Notice of Arbitration shall be submitted in the language of the arbitration as agreed by the parties. If no agreement has been reached between the parties, the Answer to the Notice of Arbitration shall be submitted in either English or Chinese.

5.3 The Answer to the Notice of Arbitration may also include the Statement of Defence referred to in Article 17, if the Notice of Arbitration contained the Statement of Claim referred to in Article 16.

5.4 Any counterclaim or set-off defence shall to the extent possible be raised with the Respondent’s Answer to the Notice of Arbitration, which should include in relation to any such counterclaim or set-off defence:

a reference to the contract(s) or other legal instrument(s) out of or in relation to which it arises;

a description of the general nature of the counterclaim and/or set-off defence and an indication of the amount involved, if any;

the relief or remedy sought.

5.5 If no counterclaim or set-off defence is raised with the Respondent’s Answer to the Notice of Arbitration, or if there is no indication of the amount of the counterclaim or set-off, HKIAC shall rely upon the information provided by the Claimant pursuant to Article 4.3(e) for its determination of: (a) HKIAC’s Administrative Fees referred to in Article 33.1(f) and Schedule 1; (b) the arbitral tribunal’s fees (where Article 10.1(b) and Schedule 3 applies); and (c) whether the provisions of Article 41 (the “Expedited Procedure”) may be applicable.

5.6 Once the Registration Fee has been paid and the arbitral tribunal has been confirmed, HKIAC shall transmit the file to the arbitral tribunal.

SECTION III.THE ARBITRAL TRIBUNAL

Article 6 – Number of Arbitrators

6.1 If the parties have not agreed upon the number of arbitrators, HKIAC shall decide whether the case shall be referred to a sole arbitrator or to three arbitrators, taking into account the circumstances of the case.

6.2 Where a case is handled under an Expedited Procedure in accordance with Article 41, the provisions of Article 41.2(a) and (b) shall apply.

Article 7 – Appointment of a Sole Arbitrator

7.1 Unless the parties have agreed otherwise and subject to Articles 9, 10, 11.1 to 11.4: (a) where the parties have agreed that the dispute shall be referred to a sole arbitrator, they shall jointly designate the sole arbitrator within 30 days from the date when the Notice of Arbitration was received by the Respondent; (b) where the parties have not agreed upon the number of arbitrators and HKIAC has decided that the dispute shall be referred to a sole arbitrator, the parties shall jointly designate the sole arbitrator within 30 days from the date when HKIAC’s decision was received by the last of them.

7.2 If the parties fail to designate the sole arbitrator within the applicable time limit, HKIAC shall appoint the sole arbitrator.

Article 8 – Appointment of Three Arbitrators

8.1 Where a dispute between two parties is referred to three arbitrators, the arbitral tribunal shall be constituted as follows unless the parties have agreed otherwise:

where the parties have agreed that the dispute shall be referred to three arbitrators, each party shall designate, in the Notice of Arbitration and the Answer to the Notice of Arbitration, respectively, one arbitrator. If either party fails to designate an arbitrator, HKIAC shall appoint the arbitrator;

where the parties have not agreed upon the number of arbitrators and HKIAC has decided that the dispute shall be referred to three arbitrators, the Claimant shall designate an arbitrator within 15 days from receipt of HKIAC’s decision, and the Respondent shall designate an arbitrator within 15 days from receipt of notification of the Claimant’s designation. If a party fails to designate an arbitrator, HKIAC shall appoint the arbitrator;

the two arbitrators so appointed shall designate a third arbitrator who shall act as the presiding arbitrator of the arbitral tribunal. Failing such designation within 30 days from the confirmation of the second arbitrator, HKIAC shall appoint the presiding arbitrator.

8.2 Where there are more than two parties to the arbitration and the dispute is to be referred to three arbitrators, the arbitral tribunal shall be constituted as follows unless the parties have agreed otherwise:

the Claimant or group of Claimants shall designate an arbitrator and the Respondent or group of Respondents shall designate an arbitrator in accordance with the procedure in Article 8.1(a) or (b), as applicable;

if the parties have designated arbitrators in accordance with Article 8.2(a), the procedure in Article 8.1(c) shall apply to the designation of the presiding arbitrator;

In the event of any failure to designate arbitrators under Article 8.2(a) or if the parties do not all agree in writing that they represent two separate sides (as Claimant(s) and Respondent(s) respectively) for the purposes of designating arbitrators, HKIAC may appoint all members of the arbitral tribunal without regard to any party’s designation.

8.3 Appointment of the arbitral tribunal pursuant to Article 8.1 or 8.2 shall be subject to Articles 9, 10 and 11.1 to 11.4.

Article 9 – Confirmation of the Arbitral Tribunal

9.1 All designations of any arbitrator, whether made by the parties or the arbitrators, are subject to confirmation by HKIAC, upon which the appointments shall become effective.

9.2 The designation of an arbitrator shall be confirmed on the terms of: (a) Schedule 2; or (b) Schedule 3; as applicable, in accordance with Article 10 and subject to any variations agreed by all parties and any changes HKIAC considers appropriate.

Article 14 – Seat and Venue of the Arbitration

14.1 The parties may agree on the seat of arbitration. Where there is no agreement as to seat the seat of arbitration shall be Hong Kong, unless the arbitral tribunal determines, having regard to the circumstances of the case, that another seat is more appropriate.

14.2 Unless the parties have agreed otherwise, the arbitral tribunal may meet at any location outside of the seat of arbitration which it considers appropriate for consultation among its members, hearing witnesses, experts or the parties, or the inspection of goods, other property or documents. The arbitration shall nonetheless be treated for all purposes as an arbitration conducted at the seat.

Article 19 – Jurisdiction of the Arbitral Tribunal

19.1 The arbitral tribunal may rule on its own jurisdiction under these Rules, including any objections with respect to the existence, validity or scope of the arbitration agreement(s).

19.2 The arbitral tribunal shall have the power to determine the existence or the validity of the contract of which an arbitration clause forms a part. For the purposes of Article 19, an arbitration clause which forms part of a contract and which provides for arbitration under these Rules shall be treated as an agreement independent of the other terms of the contract. A decision by the arbitral tribunal that the contract is null and void shall not necessarily entail the invalidity of the arbitration clause.

19.3 A plea that the arbitral tribunal does not have jurisdiction shall be raised if possible in the Answer to the Notice of Arbitration, and shall be raised no later than in the Statement of Defence referred to in Article 17, or, with respect to a counterclaim, in the Reply to the Counterclaim. A party is not precluded from raising such a plea by the fact that it has designated, or participated in the designation of, an arbitrator. A plea that the arbitral tribunal is exceeding the scope of its authority shall be raised as soon as the matter alleged to be beyond the scope of its authority is raised during the arbitration. The arbitral tribunal may, in either case, admit a later plea if it considers the delay justified.

19.4 If a question arises as to the existence, validity or scope of the arbitration agreement(s) or to the competence of HKIAC to administer an arbitration before the constitution of the arbitral tribunal, HKIAC may decide whether and to what extent the arbitration shall proceed. The arbitration shall proceed if and to the extent that HKIAC is satisfied, prima facie, that an arbitration agreement under the Rules may exist. Any question as to the jurisdiction of the arbitral tribunal shall be decided by the arbitral tribunal once confirmed pursuant to Article 19.1.

19.5 HKIAC’s decision pursuant to Article 19.4 is without prejudice to the admissibility or merits of any party’s pleas.

Article 23 – Interim Measures of Protection and Emergency Relief

23.1 A party may apply for urgent interim or conservatory relief (the “Emergency Relief”) prior to the constitution of the arbitral tribunal pursuant to the procedures set out in Schedule 4 (the “Emergency Arbitrator Procedures”).

23.2 At the request of either party, the arbitral tribunal may order any interim measures it deems necessary or appropriate.

23.3 An interim measure, whether in the form of an order or award or in another form, is any temporary measure ordered by the arbitral tribunal at any time prior to the issuance of the award by which the dispute is finally decided, that a party, for example and without limitation:

maintain or restore the status quo pending determination of the dispute;

take action that would prevent, or refrain from taking action that is likely to cause, current or imminent harm or prejudice to the arbitral process itself;

provide a means of preserving assets out of which a subsequent award may be satisfied; or (d) preserve evidence that may be relevant and material to the resolution of the dispute.

23.4 When deciding a party’s request for an interim measure under Article 23.2, the arbitral tribunal shall take into account the circumstances of the case. Relevant factors may include, but are not limited to:

harm not adequately reparable by an award of damages is likely to result if the measure is not ordered, and such harm substantially outweighs the harm that is likely to result to the party against whom the measure is directed if the measure is granted; and

there is a reasonable possibility that the requesting party will succeed on the merits of the claim. The determination on this possibility shall not affect the discretion of the arbitral tribunal in making any subsequent determination.

23.5 The arbitral tribunal may modify, suspend or terminate an interim measure it has granted, upon application of any party or, in exceptional circumstances and upon prior notice to the parties, on the arbitral tribunal’s own initiative.

23.6 The arbitral tribunal may require the party requesting an interim measure to provide appropriate security in connection with the measure.

23.7 The arbitral tribunal may require any party promptly to disclose any material change in the circumstances on the basis of which an interim measure was requested or granted.

23.8 The party requesting an interim measure may be liable for any costs and damages caused by the measure to any party if the arbitral tribunal later determines that, in the circumstances then prevailing, the measure should not have been granted. The arbitral tribunal may award such costs and damages at any point during the arbitration.

23.9 A request for interim measures addressed by any party to a competent judicial authority shall not be deemed incompatible with the arbitration agreement(s), or as a waiver thereof.

SCHEDULE 4

Emergency Arbitrator

1. A party requiring Emergency Relief may, concurrent with or following the filing of a Notice of Arbitration but prior to the constitution of the arbitral tribunal, submit an application (the “Application”) for the appointment of an emergency arbitrator (the “Emergency Arbitrator”) to HKIAC.

2.  The Application shall be submitted in accordance with any of the means specified in Article 2.1 of the Rules. The Application shall include the following information:

the names and (in so far as known) the addresses, telephone and fax numbers, and email addresses of the parties to the Application and of their counsel;

a description of the circumstances giving rise to the Application and of the underlying dispute referred to arbitration;

a statement of the Emergency Relief sought;

the reasons why the applicant needs the Emergency Relief on an urgent basis that cannot await the constitution of an arbitral tribunal;

the reasons why the applicant is entitled to such Emergency Relief;

any relevant agreement(s) and, in particular, the arbitration agreement(s);

comments on the language, the seat of the Emergency Relief proceedings, and the applicable law;

confirmation of payment, by cheque or transfer to the account of HKIAC, of the amount referred to in paragraph 6 of this Schedule (the “Application Deposit”); and

confirmation that copies of the Application and any exhibits included therewith have been or are being served simultaneously on all other parties to the arbitration by one or more means of service to be identified in such confirmation.

3. The Application may contain such other documents or information as the applicant considers appropriate or as may contribute to the efficient examination of the Application.

4.   Two copies of the Application shall be provided, one copy for the Emergency Arbitrator and one copy for HKIAC.

5.  If HKIAC determines that it should accept the Application, HKIAC shall seek to appoint an Emergency Arbitrator within two days after receipt of both the Application and the Application Deposit.

6. The Application Deposit is the amount set by HKIAC, as stated on HKIAC’s website on the date the Application is submitted. The Application Deposit consists of HKIAC’s administrative expenses and the Emergency Arbitrator’s fees and expenses. The Emergency Arbitrator’s fees shall be determined by HKIAC by reference to his or her hourly rate subject to the terms set out in Schedule 2. HKIAC may, at any time during the Emergency Relief proceedings, decide to increase the Emergency Arbitrator’s fees or HKIAC’s administrative expenses, taking into account, inter alia, the nature of the case and the nature and amount of work performed by the Emergency Arbitrator and HKIAC. If the party which submitted the Application fails to pay the increased fees and/or expenses within the time limit fixed by HKIAC, the Application shall be dismissed.

7.    Once the Emergency Arbitrator has been appointed, HKIAC shall so notify the parties to the Application and shall transmit the file to the Emergency Arbitrator. Thereafter, all written communications from the parties shall be submitted directly to the Emergency Arbitrator with a copy to the other party to the Application and HKIAC. A copy of any written communications from the Emergency Arbitrator to the parties shall also be copied to HKIAC.

8.    Article 11 of the Rules shall apply to the Emergency Arbitrator, except that the time limits set out in Articles 11.7 and 11.9 are shortened to three days.

9.    Where an Emergency Arbitrator dies, has been successfully challenged, has been otherwise removed, or has resigned, HKIAC shall seek to appoint a substitute Emergency Arbitrator within two days. If an Emergency Arbitrator withdraws or a party agrees to terminate an Emergency Arbitrator’s appointment under paragraph 8 of this Schedule, no acceptance of the validity of any ground referred to in Article 11.6 of the Rules shall be implied. If the Emergency Arbitrator is replaced, the Emergency Relief proceedings shall resume at the stage where the Emergency Arbitrator was replaced or ceased to perform his or her functions, unless the substitute Emergency Arbitrator decides otherwise.

10.    If the parties have agreed on the seat of arbitration, such seat shall be the seat of the Emergency Relief proceedings. Where the parties have not agreed on the seat of arbitration, and without prejudice to the arbitral tribunal’s determination of the seat of arbitration pursuant to Article 14.1 of the Rules, the seat of the Emergency Relief proceedings shall be Hong Kong.

11.    Taking into account the urgency inherent in the Emergency Relief proceedings and ensuring that each party has a reasonable opportunity to be heard on the Application, the Emergency Arbitrator may conduct such proceedings in such a manner as the Emergency Arbitrator considers appropriate. The Emergency Arbitrator shall have the power to rule on objections that the Emergency Arbitrator has no jurisdiction, including any objections with respect to the existence, validity or scope of the arbitration clause(s) or of the separate arbitration agreement(s), and shall resolve any disputes over the applicability of this Schedule.

12.    Any decision, order or award of the Emergency Arbitrator on the Application (the “Emergency Decision”) shall be made within fifteen days from the date on which HKIAC transmitted the file to the Emergency Arbitrator. This period of time may be extended by agreement of the parties or, in appropriate circumstances, by HKIAC.

13.    The Emergency Decision may be made even if in the meantime the file has been transmitted to the arbitral tribunal.

14.    Any Emergency Decision shall:

be made in writing;

state the date when it was made and summary reasons upon which the Emergency Decision is based (including a determination on whether the Application is admissible under Article 23.1 of the Rules and whether the Emergency Arbitrator has jurisdiction to grant the Emergency Relief); and

be signed by the Emergency Arbitrator.

15.    Any Emergency Decision shall fix the costs of the Emergency Relief proceedings and decide which of the parties shall bear them or in what proportion they shall be borne by the parties, subject always to the power of the arbitral tribunal to determine finally the apportionment of such costs in accordance with Article 33 of the Rules. The costs of the Emergency Relief proceedings include HKIAC’s administrative expenses, the Emergency Arbitrator’s fees and expenses and the reasonable and other legal costs incurred by the parties for the Emergency Relief proceedings.

16.    Any Emergency Decision shall have the same effect as an interim measure granted pursuant to Article 23 of the Rules and shall be binding on the parties when rendered. By agreeing to arbitration under these Rules, the parties undertake to comply with any Emergency Decision without delay.

17.    The Emergency Arbitrator shall be entitled to order the provision of appropriate security by the party seeking Emergency Relief.

18.    Any Emergency Decision may, upon a reasoned request by a party, be modified, suspended or terminated by the Emergency Arbitrator or the arbitral tribunal (once constituted).

19.    Any Emergency Decision ceases to be binding:

if the Emergency Arbitrator or the arbitral tribunal so decides;

upon the arbitral tribunal rendering a final award, unless the arbitral tribunal expressly decides otherwise;

upon the withdrawal of all claims or the termination of the arbitration before the rendering of a final award; or

if the arbitral tribunal is not constituted within 90 days from the date of the Emergency Decision. This period of time may be extended by agreement of the parties or, in appropriate circumstances, by HKIAC.

20.    Subject to paragraph 13 of this Schedule, the Emergency Arbitrator shall have no further power to act once the arbitral tribunal is constituted.

21.    The Emergency Arbitrator may not act as arbitrator in any arbitration relating to the dispute that gave rise to the Application and in respect of which the Emergency Arbitrator has acted, unless otherwise agreed by the parties to the arbitration.

22.    The Emergency Arbitrator Procedures are not intended to prevent any party from seeking urgent interim or conservatory measures from a competent judicial authority at any time.

23.    In all matters not expressly provided for in this Schedule, the Emergency Arbitrator shall act in the spirit of the Rules.

24.    The Emergency Arbitrator shall make every reasonable effort to ensure that an Emergency Decision is valid.

Introduction

An international commercial arbitration which is governed under the arbitration regime of International Chamber of Commerce (‘ICC’) can either be seated in India or be seated in a foreign country. While the enforcement and execution of an Indian seated arbitral award would be governed by the Part I of the Arbitration & Conciliation Act, 1996 (“Indian Act”), the enforcement of foreign seated awards would be governed by the provisions of Part II of the Indian Act.

In India “foreign awards” are acquiescent under Part II of the said Act which specifically is in consonance with the provisions of the 1958 – New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“New York Convention“) or the Convention on the Execution of Foreign Arbitral Awards 1927 – (“Geneva Convention”). India is a signatory to both the New York Convention as well as Geneva Convention. 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 need to be fulfilled, which are as under:

  1. The territory should be signatory to the New York Convention
  2. The Indian Central Government should have notified in the Official Gazette that it has reciprocal provisions with such a territory.

Therefore any foreign award received by a party/country under the ICC arbitration regime who is a signatory to either New York Convention or the Geneva Convention can get the same enforced within the territory of India.

Enforcement

The enforcement of a foreign award under the ICC arbitration regime in India is a binary process. The dualistic approach begins with filing of an execution petition in an Indian court, wherein the Court at the first instance shall ascertain whether the foreign award had adhered to the requirements of the Arbitration & Conciliation Act, 1996.  These requirements are listed as under:

  1. Whether the original award or an authenticated copy in accordance with the act was filed.[1]
  2. Whether the original agreement or certified copy of the arbitration agreement in accordance with the act was filed.[2]
  3. Whether necessary evidence to prove that the award is a foreign award was filed.[3]

Once the Court is satisfied that the foreign award is found to be enforceable, the same shall be enforced like a decree of that Court.[4] While doing the same, Indian Courts are mindful of the following conditions as set out under Section 48 of the Indian Act, which may be met before execution of such awards. These conditions can also be the grounds adopted by the other/aggrieved party for challenging the said award. These conditions/grounds which shall render the foreign award unenforceable are listed as under:

  1. That the subject agreement is not in accordance with the law to which the parties have subjected it or under the law of the country where the foreign award was made.
  2. The award is ultra vires to the agreement.
  3. The award contains decision on matters beyond the scope of arbitration.
  4. The arbitral procedure was not in accordance with the law of the country where the arbitration took place.
  5. The foreign award has not yet become binding on the parties or was set aside by the higher authority of the country in which that award was made.
  6. Enforcement of foreign award will be contrary to public policy of India.
  7. Subject matter of the dispute is not capable of settlement under the Indian Arbitration & Conciliation Act, 1996.

Once the award has survived the challenge 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[5]. 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. Where the subject matter of the foreign award is money, the Commercial Division of any High Court in India where assets of the opposite party lie shall have jurisdiction. In case of any other subject matter, the Commercial Division of a High Court which would have jurisdiction as if the subject matter of the award was a subject matter of a suit shall have the jurisdiction.

[1] Section 47 of the Indian Act

[2] Section 47 of the Indian Act.

[3] Section 47 of the Indian Act

[4]  M/s Fuerst Day Lawson Ltd. V. Jindal Exports Ltd. 2001(6)SCC 356 – “In one proceeding there may be different stages. In the first stage the Court may have to decide about the enforceability of the award having regard to the requirement of the said provisions. Once the court decides that foreign award is enforceable, it can proceed to take further effective steps for execution of the same. There arises no question of making foreign award as a rule of court/decree again.”

[5] Section 49 of the Indian Act.

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