The Indian Law regarding enforcement of foreign arbitration awards is contained in the Arbitration and Conciliation Act (AC Act), 1996, which incorporates provisions of the Geneva Convention of 1927 and the New York Convention of 1958.
For a foreign arbitration award to be enforceable, it has to be made in a country that is a signatory to those conventions.
Section 44 of the AC Act defines a foreign arbitration award, also called a foreign award, as an arbitral award in a dispute arising out of a legal relationship between parties, whether contractual or not, and considered as a commercial relationship under Indian law.
In the case of Western Shipbreaking Corp vs Clare Haven Ltd, the Gujarat High Court held that for purposes of enforcement of a foreign award, every arbitral award made in a country to which one of the two conventions applies will be treated as a foreign award.
In order to be enforceable in India foreign arbitration awards must:
- Arise out of a written arbitration agreement. In accordance with the Geneva Convention and the New York Convention, the arbitration agreement must be in writing. It does not have to conform to any specific format but must be signed by the parties.
- Relate to a commercial transaction and arise out of a legal relationship. The Supreme Court, in R M Investment & Trading vs Boeing Co, said that given the many activities carried out in international trade, a liberal interpretation must be given to the word “commercial”. The Gujarat High Court, in Orient Middle East Lines vs Brace Transport Corp of Monrovia, held that foreign awards are always related to money.
- Be awared in a country that is a signatory to the New York Convention or the Geneva Convention. This is extremely important. In Bhatia International vs Bulk Trading, the Supreme Court held that an arbitration award made in a non-convention country is not considered to be a foreign award and it requires a separate action to be filed in India.
- Arise from a valid and enforceable agreement. In Khardah Company vs Raymon & Co the Supreme Court held that the arbitration clause cannot be enforceable if the original agreement is illegal. The court held that if an agreement is invalid as a whole every part of it, including the arbitration clause, is also invalid.
- Be clear and unambiguous. The Supreme Court held in Koch Navigation vs Hindustan Petroleum Corp that if the award is clear and unambiguous the courts must eforce it.
- Be awarded in a dispute in accordance with Indian laws. A foreign award will not be enforceable if the dispute cannot be resolved under Indian law.
- Be unpheld without a review of merit. Its is a generally accepted interpretation of the New York Convention that the courts before which a case is enforced cannot review its merits.
- Apply to the Code of Civil Procedure, 1908. The procedure for enforcing the foreign award has to be the same as the one followed for a domestic arbitral award. The code applies to enforcement.
Parties seeking to enforce foreign awards should, under section 47 of the AC Act, file a single common application with the courts for both enforcement and execution of foreign awards.
A similar view was taken by the Supreme Court in the case of Fuerst Day Lawson vs Jindal Exports.
The court may refuse enforcement of a foreign award only when it falls within the scope of statutory defences such as when the parties are incapacitated or the agreement is not legally valid; the award contains decisions beyond the scope of the arbitration agreement; the arbitral authority or procedure was not in accordance with the agreement or the law; the award has been set aside or suspended by a competent authority; the dispute cannot be settled under the laws of India; the award has been annulled where it was made; or it is contrary to public policy.
The High Court of Gujarat, while dealing with an arbitration award under the New York Convention has in Western Shipbreaking vs Clare Haven, held that a court cannot refuse enforcement of a foreign award on any other ground and that the party against whom the award is has a duty to satisfy the court that it is not enforceable.
The Act also mandates that any enforceable foreign award will be treated as binding.
Therefore, upon satisfaction of the court to the effect that the foreign award is enforceable, the award is deemed to be a decree of that court and executed accordingly.
The law relating to enforcement of foreign awards in India contains well laid out provisions, which if carefully followed prove to be an effective means for alternate dispute resolution.
Abhixit Singh is a partner at Titus & Co Advocates and may be contacted at firstname.lastname@example.org. Niranjan Raj is an associate at Titus & Co, Advocates and may be contacted at email@example.com.
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