Continuous growth of international commerce has resulted in players from
various markets to seek other methods of dispute resolution in order to abstain
from litigation since its enforcement in foreign parties is often complex and
vexatious, which has resulted in creation of efficient methods of dispute
resolution like mediation, arbitration, their hybrid clauses as they are both
efficient and effective, but with such methods what arises is the question of
recognition and enforcement of such awards especially when done abroad, arbitral
awards which determine the rights and obligations of the parties need more
clarity. This research paper aims at bringing out the ways how domestic and
foreign arbitral awards are made enforceable in India and the reasons why the
enforcement of Foreign Arbitration Awards still turns out to be a major
challenge in India.
Arbitral Awards, Domestic and Foreign Awards
Arbitral awards refer to the decision of an arbitral tribunal, whether in a
domestic or international arbitration. Arbitral awards include interim awards.
Domestic awards are governed by Part I whereas foreign awards are governed by
part II of the Arbitration and Conciliation Act of India. A domestic award
is an award passed under the provisions of Section 2 to 43 of the Act.
A domestic award is a result of domestic arbitration, hence it confines itself
to the territory of India, the parties should have a nexus or birth to Indian
origin, basically territory comes into play in order to asses a domestic
arbitration. Award given by an arbitral institution in India or an award even if
given by a foreign state for a dispute where both the parties are of an Indian
origin and the nationality is also governed by the Indian laws shall also come
within the purview of domestic arbitration.[1]
A Foreign award as per section 44 means an arbitral award which relates to
differences relating to the matters considered as commercial under the law in
force in India.[2] Hence it’s safe to say that a ‘Foreign Award’ means an
arbitral award made as a result of foreign arbitration not being a domestic
one.
Further clarity was given in the case of
Serajuddin v. Michael Golodetz[3] where
the Calcutta High court laid down the necessary conditions for an arbitration to
be called ‘foreign arbitration’ or the essential elements of a foreign
arbitration, where the award could further be called as a foreign arbitral
award, the main points laid out were (must include all)-
a. Arbitration should have been held in foreign a foreign country.
b. by a foreign arbitrator.
c. Arbitration by applying foreign laws.
d. One of the parties consists of foreign nationals.
Enforcement of domestic and foreign awards
Enforcement in case of domestic awards
Prior to applying for enforcement and execution of the award awarded by the
tribunal, an award holder will need to wait for a period of 90 days, and during
this intervening period the award maybe challenged in accordance with section 34
which provides for the procedure for application for setting aside an arbitral
award.[4] Post expiry of the period, if a court finds the award to be
enforceable, at the stage of execution, no further challenge will be permitted
to question the validity of the arbitral award. As per the new Amendment Act, a
party challenging an award would have to move a separate application in order to
seek a stay on the execution of an award.[5]
Enforcement in case of foreign awards
India recognises foreign awards under the New York Convention and the Geneva
Convention as it is a signatory to the abovementioned conventions. If a binding
award is received by a party from a country that is a signatory to the New York
or the Geneva Convention and the award is made in a territory which has been
notified as a convention country by India in its official gazette, the award
would then be enforceable in India.[6]
As per section 47 of the Act a party seeking to enforce a foreign arbitral award
needs to make an application to the court, i.e. high court ( having
jurisdiction) and provide the - original award or its certified copy, the
original arbitration agreement or its duly certified copy, and if the award or
agreement is in a foreign language, the party must produce a certified copy of a
foreign award translated into English or any other evidence in order to
establish that the award awarded is a foreign award.[7]
Conditions for enforcement of arbitral awards (domestic and foreign)
In order to challenge an award a party may resort to the following grounds. Such
an award would be rendered unenforceable in case the other party proves that-
- The parties to the agreement under the law were under some incapacity.
- The agreement in question was not in accordance with the law to which the
parties were subjected, or under the law of the country where the award was made
(especially in case of foreign awards).
- The party was not provided with a proper notice of appointment of the
arbitrator or of the arbitral proceedings or was otherwise unable to present his
case in the arbitral tribunal.
- Award deals with a difference not falling within the terms of the agreement.
- Award contains decisions on matters beyond the scope of being referred
arbitration.
- Composition of the arbitral authority or the arbitral procedure was not in
accordance with the agreement.
- Composition of the arbitral authority or the arbitral procedure is not in
accordance with the law of the country where the arbitration took place (in case
of foreign awards).
- The award (specifically a foreign award) did not become binding on the
parties, or had been set aside or suspended by a competent authority of the
country in which, or under the law of which that award was made.
- Subject matter of the dispute is not capable of settlement by
arbitration under the Indian law. Enforcement of the award would be contrary to
the public policy of India, or in conflict with morality or justice.
Limitation period for enforcement of awards
In case of domestic arbitral awards the limitation Act 1963 shall apply to
arbitrations, as per section 21 the arbitral proceedings in respect of a
particular dispute commence on the date on which a request for that dispute to
be referred to arbitration is received by the respondent.[8] The Supreme Court
in
M/s Umesh Goel v. Himachal Pradesh Cooperative Group Housing Society[9] observed
that arbitral awards are deemed to be decrees. Though the Arbitration Act does
not provide any limitation for the enforcement of a foreign award, it is likely
that the normal period of limitation (12 years) would apply.[10]
In case of foreign awards various high courts have given varying interpretations
on the limitation period within which a party can enforce an award. In
Noy
Vallesina v Jindal Drugs Limited[11] the Bombay High court observed a
foreign award to not be a decree, hence making it non-binding on parties unless
recorded as enforceable by a competent court. The Madras High court on the other
hand in Compania Naviera ‘Sodnoc’ v. Bharat Refineries Ltd[12]. referred to
foreign awards as deemed decrees. What sets the two apart is that when the court
considers an award to be a decree the foreign award would fall within the
residuary provision of the Schedule to the Limitation Act, making the limitation
period three years, whereas when a foreign award is deemed as a decree the
limitation period would be of three years.[13]
It was in
M/s. Fuerst Day Lawson Ltd v. Jindal Exports Ltd[14], where the
Supreme Court held that a single proceeding can have different stages. A court
can, in the first proceeding, decide upon the enforceability of the award. Once
the enforceability is decided, it can take further effective steps for execution
of the same.
In case of enforcement of a foreign award, the party cannot appeal against any
decision of the court rejecting objections to the award. Only in case the court
holds the award to be non-enforceable, an appeal can be made. Hence once cannot
appeal against a decision which upholds the award. However, the party can look
forward to a discretionary appeal to the Supreme Court of India under Art 136 of
the Constitution of India. Such kinds of appeals are entertained only in case
the court feels that a question of fundamental importance or public interest
exists.[15]
Enforcement of foreign judgements in India (reciprocating and non-reciprocating
countries)
Firstly, for a foreign judgement to be applicable, it needs to satisfy the
grounds given in Section 13 of the CPC, failing which the judgement will be
inconclusive.[16]
Execution proceedings are required to be filed in India by the party seeking
enforcement of a decree of a court of a reciprocating country. Foreign
judgements from superior courts of a reciprocating territory can be directly
enforced by virtue of section 44A of the Civil Procedure Code by filing an
execution application. Post which section 51 and order XXI of CPC will come into
play.
In case the foreign judgment is given by a non-reciprocating country, a fresh
suit will need to be filed in a court of competent jurisdiction in India, where
the foreign judgement will be treated as evidence. The time limit for filing a
suit for enforcement of such foreign judgments is three years from the date on
which the judgment has been delivered.[17]
Challenges in executing foreign arbitral awards in India
Getting an award from a foreign arbitral tribunal in your favour is somewhat a
half battle won as it still needs to be enforceable in India. There have been
various cases, where, despite of receiving a favourable award in a foreign
arbitral tribunal, the party failed in getting it enforced in competent Indian
courts.[18] Hence, no way out exists in order to get an arbitral awards imposed
than to get into litigation, from which both the parties refrained from at the
first place. As it is time consuming an order which has already been passed by a
foreign arbitral tribunal will take more time to actually become effective
rendering the process to take more time in application of justice. But this
route cannot be avoided as it provides more of a structured process and ensures
due scrutiny on behalf of the courts is applied making the award enforceable.
Pressure by local governments, especially local parties which have more
political power may try to annul the award or the total effect of the award,
which carries a potential to frustrate the award issued by the international
arbitration seat.[19]
Part II of the Indian Arbitration & Conciliation Act, 1996 (“the Actâ€) deals
with Enforcement of foreign awards whereas Chapter I (Section 44-52) deals
particularly with Convention related awards. As per Section 44(b) , a “foreign
award†must be made in one of such territories as the Government of India, upon
being satisfied about the existence of reciprocal provisions, may by
notification in its Official Gazette, declare it to be the particular territory
where the convention shall be applicable. However, there is a reason why this
requirement of getting gazetted mention needs to be removed, in order to bring
India’s arbitration regime into sync with the standards of the convention. The
requirement of gazetting creates unnecessary ambiguity with respect to enforcing
foreign awards made in countries which are contracting states to the Convention
but have not yet been notified in the gazette.[20]
Conclusion
Overall, India does not pose to be a jurisdiction carrying anti-arbitration
bias. Previously there were no rules and regulations on enforcement of foreign
awards in India. Hence, it can easily be argued that the legal system of India
strives towards creating a facilitative environment for enforcement of foreign
awards. A major problem with the Arbitration and conciliation Act, 1996, is
regarding enforcement, it treats foreign arbitral awards and foreign court
decisions similarly. Because of lack of distinction between foreign arbitral
awards and court decisions, issues particularly relating to foreign awards are
not properly addressed in Indian Law. Some improvements such as bringing in
clarity on convention countries carrying reciprocal provisions that are yet to
be listed on the official gazette is required and a legislation which directly
deals with foreign arbitral award will make it possible to provide more
structure to the arbitral process and keep India in line with advanced legal
regimes across the world.
End-Notes
[1] Shodhganga, ENFORCEMENT OF FOREIGN ARBITRAL AWARDS IN INDIA, shodhganga
(2016) http://shodhganga.inflibnet.ac.in/bitstream/10603/110130/16/16_chapter%206.pdf
[2] Because it is mandatory that the relationship falls within the meaning of
the word “Commercial†under the law in force in India.
[3] Serajuddin v. Michael Golodetz AIR 1960 Cal.49 (India).
[4] Arbitration and Conciliation (Amendment) Act,2015, §. 34
[5] Arbitration and Conciliation (Amendment) Act, 2015, §. 36(2)
[6] Nishith Desai Associates, Enforceability of arbitral awards and decrees in
India , Nishith Desai Associates(2019), http://www.nishithdesai.com/fileadmin/user_upload/pdfs/Research%20Papers/Enforcement_of_Arbitral_Awards.pdf.
[7] The Indian Lawyer, ENFORCEMENT OF FOREIGN AWARDS IN INDIA ,The Indian
lawyer, (2016), http://www.theindianlawyer.in/blog/2016/09/09/enforcement-foreign-awards-india/.
[8] Arbitration and Conciliation (Amendment) Act,2015, §.43.
[9] M/s Umesh Goel v. Himachal Pradesh Cooperative Group Housing Society (2016)
11 SCC 313 (India).
[10] Sameer Parekh, Arbitration procedures and practice in India: overview,
Thomson Reuters(2016), https://content.next.westlaw.com/Document/I8abc648d1c9a11e38578f7ccc38dcbee/View/FullText.html?contextData=(sc.Default)&transitionType=Default&firstPage=true&bhcp=1.
[11] Noy Vallesina v Jindal Drugs Limited 2006 (5) BomCR 155 (India).
[12] Compania Naviera ‘Sodnoc’ v. Bharat Refineries Ltd. AIR 2007 Mad 251
(India).
[13] Nishith Desai Associates, Enforceability of arbitral awards and decrees in
India , Nishith Desai Associates(2019) http://www.nishithdesai.com/fileadmin/user_upload/pdfs/Research%20Papers/Enforcement_of_Arbitral_Awards.pdf.
[14] M/s. Fuerst Day Lawson Ltd v. Jindal Exports Ltd. 2001 (6) SCC 356 (India)
[15] Sumeet Kachwaha, Enforcement of arbitration awards in India, AIAJ Volume 4,
2008, at 80
[16] Civil Procedure Code 1908, § 13
[17] Nishith Desai Associates, Enforceability of arbitral awards and decrees in
India, Nishith Desai Associates(2019), http://www.nishithdesai.com/fileadmin/user_upload/pdfs/Research%20Papers/Enforcement_of_Arbitral_Awards.pdf.
[18] Varun Sharma, Challenges of Executing Foreign Arbitration Awards in India ,
ipleaders (2018) https://blog.ipleaders.in/arbitration-award/
[19] Varun Sharma, Challenges of Executing Foreign Arbitration Awards in India
, ipleaders (2018) https://blog.ipleaders.in/arbitration-award/
[20] Subhiksh Vasudev, Has India Truly Delivered on Its Obligations Under
Articles I and V of the New York Convention Over the Last 60 Years?, Kluwer
Arbitration Blog (November 29, 2018), http://arbitrationblog.kluwerarbitration.com/2018/11/29/has-india-truly-delivered-on-its-obligations-under-articles-i-and-v-of-the-new-york-convention-over-the-last-60-years/
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