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INTERNATIONAL COMMERCIAL ARBITRATION (ICA) AWARDS ARE ENFORCED BOTH OUTSIDE AND INSIDE INDIA

Author: Abiman, V year of B.Com.,LL.B.(Hons.) from School of Law, SASTRA Deemed University


INTRODUCTION

International Commercial Arbitration's relevance has been recognised all over the world. Litigation in the courts is more expensive and time-consuming; it might take years to resolve a disagreement, whereas International Commercial Arbitration allows for faster decision-making. The goal is to achieve the single goal of settling the issue quickly and efficiently with the least amount of participation by a court of law, so that trade and commerce are not harmed as a result of court proceedings. This article lists worldwide institutions, seats in India and around the world, foreign award enforcement, countries notified by the government, foreign arbitral award requirements, and much more information that may be useful to you now or in the future.


COMMERCIAL ARBITRATION ON AN INTERNATIONAL SCALE

An International Commercial Arbitration (ICA) is defined in Section 2(1)(f) of the Act as a legal relationship that must be considered commercial and in which one of the parties is a foreign national or resident, a foreign corporation, or a company, association, or group of individuals whose central government or control is in foreign hands.


The United Nations Commission on International Trade Law (UNCITRAL) adopted the UNCITRAL Model Law on International Commercial Arbitration on June 21, 1985, at the conclusion of the Commission's 18th annual session. In its resolution 40/72 of December 11, 1985, the United Nations General Assembly recommended that "all States give due consideration to the Model Law on International Commercial Arbitration, in light of the importance of uniformity in the law of arbitral procedures and the unique needs of International Commercial Arbitration practise." The model law was updated in 2006, and it now includes more specific provisions regarding interim solutions.


ARBITRATION IN INDIA HAS A LONG HISTORY

Until the Arbitration and Conciliation Act, 1996, the law governing arbitration in India consisted mainly of three statutes:

  1. The Arbitration (Protocol and Convention) Act, 1937 (“1937 Act”)

  2. The Indian Arbitration Act, 1940 (“1940 Act”) and

  3. The Foreign Awards (Recognition and Enforcement) Act, 1961 (“1961 Act”)


The 1940 Act was the general law governing arbitration in India and resembled the English Arbitration Act of 1934


The United Nations Commission International Trade Law (UNCITRAL) Model Law in 1985


Then the Arbitration and Conciliation Act was passed in 1996.


THE ARBITRATION AND CONCILIATION ACT'S PROVISIONS (1996)

IN INDIA, THERE IS AN INTERNATIONAL COMMERCIAL ARBITRATION COURT

Section 34's provisions for putting aside the Award are applicable. In cases of International Commercial Arbitration seated in India, however, the premise of patent illegality has been removed with the 2015 Amendment.


INTERNATIONAL COMMERCIAL ARBITRATION WITH A SEAT IN A COUNTRY OTHER THAN INDIA

Before and after the verdict of Bharat Aluminium Co vs Kaiser Aluminium Technical (BALCO judgement), the provisions of the Act on International Commercial Arbitration situated outside India are divided into two parts.

Prior to the BALCO decision, the assumption was that the provisions of Part I of the Act would apply to ICAs based outside of India unless the parties expressly or implicitly excluded them.


Following the BALCO decision, Part I of the Act will not apply to foreign-seated arbitrations. Because the judgement had prospective effect, it only applied to arbitration agreements entered into on or after September 6, 2012. If the arbitration agreement was signed before September 6, 2012, the required changes to the arbitration agreement would have to be made in order for the judgement BALO to apply.


Part I of the Act, excluding Sections 9, 27, and 37(1)(a) and 37(1)(3), will not apply in the case of foreign seated arbitration unless a country's intention appears in the arbitration agreement.


IN INDIA, INTERNATIONAL AWARDS ARE ENFORCED

Part II of the Act governs the enforcement of foreign awards in India and the referral of parties to arbitration when the arbitration is held outside of India. Part II is divided into two chapters, the most relevant of which is Chapter 1 (which deals with foreign awards delivered by signatory territories to the New York Convention, which has reciprocity with India), and the more academic Chapter 2 (which deals with foreign awards delivered under the Geneva Convention). (Since almost all parties to the Geneva Convention are now members of the New York Convention, Chapter 2 of Part II is essentially academic.)


Part II defines a foreign award as I an arbitral award (ii) on differences between persons arising out of legal relationships, whether contractual or not, (iii) considered commercial under Indian law, (iv) made on or after October 11, 1960, (v) in pursuance of an agreement in writing for arbitration to which the convention outlined in the first schedule applies, and (vi) in one of such territories as the Central Government, being satisfiable.


As a result, just because a territory is a signatory to Part II of the New York Convention does not mean it will immediately apply. The Central Government must issue another notification declaring that country to be a territory subject to the New York Convention.


THE INDIAN GOVERNMENT HAS MADE A LIST OF COUNTRIES THAT ARE ELIGIBLE FOR ICA

The Indian government has so far notified the following 48 countries:

Australia, Austria, Belgium, Botswana, Bulgaria, Central African Republic, Chile, China, Cuba, Czechoslovak Social Republic, Denmark, Ecuador, Finland, France, Democratic Republic of the Congo, Ghana, Greece, Hungary, Italy, Japan, Kuwait, Malagasy Republic, Malaysia, Mauritius, Mexico, Morocco, Nigeria, Norway, Philippines, Poland, Republic of Korea, Romania, Russia, San Marino, Singapore, Spain, Sweden, Switzerland, Syrian Arab Republic, United Kingdom.


PART II'S APPLICABILITY (ENFORCEMENT OF CERTAIN FOREIGN AWARDS)

The following conditions must be satisfied:

  1. The award passed should be an arbitral award,

  2. It should be arising out of a dispute between the parties,

  3. The differences should be arising out of a legal relationship,

  4. The legal relationship should be considered commercial,

  5. It should be in pursuance of written agreement to which the New York Convention applies; and,

  6. The foreign award should be made in one of the aforementioned 48 countries.


ACT'S REQUIREMENT THAT A FOREIGN ARBITRAL AWARD BE ENFORCEABLE

  1. There has to be a “Written Agreement”;

  2. The Agreement must be Valid and Enforceable by Law;

  3. The award must be unambiguous.


Case laws

  • Section 2 (1)(f) (iii) was determined by the Supreme Court in the case of TDM Infrastructure Pvt. Ltd. Vs. UE Development India Pvt.Ltd. 2008 (14) SCC 271 wherein, despite TDM Infrastructure Pvt. Ltd. Having foreign control, it was concluded that “A Company Incorporated in India can only have Indian Nationality for the Act.”

  • M/s Larsen and Toubro Ltd. SCOMI Engineering BHD Vs. Mumbai Metropolitan Region Development Authority, 2018 SCC Online SC 1910 In that case where an Indian company was the lead partner in a consortium (which also included foreign companies) and was the determining voice in appointing the chairman and the consortium was in Mumbai, the Supreme Court held that the central management and control was in India.

  • The award must arise out of Dispute in a “Commercial Transaction” In the case of RM Investment & Trading vs. Boeing Company the Supreme Court observed that the term “commercial” should be liberally constructed as having regard to manifold activities which are an integral part of international trade.


CONCLUSION

Due to the nominal interference of the court, especially at the stage of implementation of arbitral decisions, the expansion of arbitration and conciliation has aided in the lowering of commercial transaction costs through a swift and speedy resolution of disagreement among states. One of the most appealing aspects of arbitration is the expectation of a quick resolution of conflicts. The New York and Geneva Conventions are two of the best examples of this, as they have simplified the process of seeking justice without the involvement of local courts, and even these awards need be changed to meet the changing demands of states.