By becoming a signatory to the Geneva Convention, 1924, and the New York Convention, 1958, on the enforcement of arbitral awards, India signalled its intent to adopt a pro-arbitration and pro-enforcement of arbitral awards approach. This was consistent with India’s recognition and enforcement of judgments rendered by foreign courts reflected in the Code of Civil Procedure, 1908 (CPC).
This article discusses the Arbitration and Conciliation Act, 1996, (Arbitration Act) which deals with the enforcement of foreign arbitral awards in India. It also includes suggestions for negotiating arbitration agreements which may assist parties seeking to enforce foreign awards against an entity with assets in India. When negotiating an arbitration agreement relevant considerations include whether an Indian court will enforce a foreign award, the kinds of awards that may not be enforced by an Indian court and the time that such enforcement may take.
The Arbitration Act provides that in order to be enforced in India an award should have been rendered in a country that is a reciprocating territory to which the New York or Geneva Convention applies. Execution of a foreign award is a two-step process undertaken in a single proceeding. First, the executing court determines if the award is enforceable under Indian law and thereafter it executes the award.
For this, parties are required to submit the originals or copies of the arbitration agreement and arbitral award along with a petition listing, to the extent possible, the assets which may be attached and sold in such execution. Proceedings must commence within three years of the award being passed with special provisions applying if the award is over two years old. Enforcement of a foreign award may take between two and five years, depending on the complexity of the original dispute and the availability of assets to be sold in execution.
An award passed by a tribunal in a reciprocating country is presumed enforceable unless the party opposing such enforcement shows one of the following: the agreement to arbitrate was invalid under the laws to which it was subject; the party had inadequate notice of the arbitration; or the award was beyond the scope of or not contemplated by the terms of the arbitration agreement. An award will also not be enforced if the subject of the dispute cannot be settled by arbitration under Indian law or offends India’s public policy.
Obtaining a stay
Until 2008 it was thought that the appeal provisions in part I of the Arbitration Act applied only to domestic awards and not foreign awards. However, in Venture Global Engineering v Satyam Computer Services Ltd, the Supreme Court interpreting and enlarging the effect of Bhatia International v Bulk Trading SA, held that unless specifically or impliedly excluded in an arbitration agreement, part I also applied to foreign awards. As a result an Indian court may hear an appeal from an award even if the seat of arbitration is not in India and the applicable law is not Indian.
A perhaps unintended but grave consequence of this ruling was the application to foreign awards of section 37 of the Arbitration Act, which states enforcement proceedings can commence only after an appeal against the award has been disposed of. Given the delays in our legal system, the enforcement of a foreign award may be effectively stalled by filing an appeal. A party may presumably still enforce the award in another country where there are traceable assets.
In the context of the Supreme Court’s view that parties by express or implied agreement could exclude the provisions of part I of the Arbitration Act, a recent judgment in Max India Ltd v General Binding Corp of Delhi High Court on implied exclusion is helpful. The court excluded application of part I, reading an implied intention to exclude the jurisdiction of Indian courts on the basis that the arbitration agreement was goverened by Singapore law, vested jurisdiction in Singapore courts and had adopted the arbitration rules of the Singapore International Arbitration Centre.
The way out
In order to simplify the enforcement process in India, foreign investors could specifically exclude part I of the Arbitration Act if the venue of the arbitration is outside India. Foreign investors could also require that a reputed international arbitration institution conduct the foreign arbitration to minimize allegations of procedural irregularities. Foreign investors should further ensure that any arbitrator appointed to preside over the arbitration is familiar with the law governing the contract and the law governing the procedures of the arbitration.
“Reciprocating territories” recognized under the Arbitration Act may not always correspond to those recognized under the CPC. For instance, the US is not recognized under the CPC, but is under the Arbitration Act. Accordingly, a judgment of a US court is not directly executable in India, but an award by an arbitral tribunal in the US comprising private individuals may be enforced by an Indian court. Parties must therefore ensure that they have identified a venue that is recognized under the Arbitration Act.
Niti Dixit is a partner and Palash Gupta is an associate at S&R Associates, a New Delhi-based law firm.
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