Foreign seat of arbitration for domestic Indian disputes

Two Indian corporate entities opting to resolve their dispute in London or Singapore is not an uncommon situation today. A recent development in the Indian dispute resolution arena is that many Indian parties enter into arbitration agreements consciously opting for a foreign seat. This is common, especially when one of the parties has foreign equity ownership or the contract was executed overseas and the parties are keen for expeditious resolution of a high value dispute before an international tribunal.

SEAT OF ARBITRATION

Whether two Indian parties can have a foreign seated arbitration is no longer a question today. The seat of arbitration is an important issue because a “seat” of arbitration carries with it the law applicable to arbitration. Apart from India, Indian parties are seen to opt for seats outside India at various places such as China, the UK, the US, Singapore, Switzerland, etc.

RESTRICTED VIEW IN THE PAST

In the past, Indian courts held a restricted view towards allowing parties to opt for a foreign seat of arbitration. The Indian Supreme Court in a 2008 judgment, in TDM Infrastructure (P) Ltd. v. UE Development India (P) Limited, held that it would not be open to two Indian parties derogating from the laws of India as this was against public policy. Although the ruling was not very succinct on the issue, it was the law nevertheless.

Ravi Singhania is the managing partner and Gunjan Chhabra is a senior associate at Singhania & Partners