Supreme Court clarifies distinction between ‘place’ and ‘seat’ of arbitration

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The Supreme Court recently considered the legal issue regarding the specification of a “place” or “venue” for arbitration in an arbitration agreement, and if the agreement is silent with respect to the “seat”, then on what basis and by which principle should it determine the place of seat”, which governs the applicability of laws of a particular country for deciding post-award arbitration proceedings. A three-judge bench of the Supreme Court, while clarifying the distinction between the place and seat of arbitration, held that a contractual clause stipulating Kuala Lumpur as the “venue” of arbitration, in the absence of any additional factors, did not amount to a choice of juridical seat.

In Union of India v Hardy Exploration and Production (India) Inc, Hardy Exploration entered into a production-sharing contract with the government for the extraction, development and production of hydrocarbons in a geographic block in India. When disputes arose between the parties, they were referred to arbitration. The arbitration clause in the agreement specified Kuala Lumpur as the “venue” of arbitration and it was conducted in Kuala Lumpur with the final award granted in favour of Hardy Exploration and directing the government to pay ₹6 billion (US$84 million) excluding interest to Hardy besides restoration of the gas block.

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The dispute digest is compiled by Bhasin & Co, Advocates, a corporate law firm based in New Delhi. The authors can be contacted at lbhasin@bhasinco.in or lbhasin@gmail.com. Readers should not act on the basis of this information without seeking professional legal advice.