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Difference between seat and venue of arbitration

August 23, 2024

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This article is written by Sahil Kumar Purvey and Siddhant Singh and further updated by Sana Virani. In this article, the authors explain the difference between ‘seat’ and ‘venue’ of arbitration. This article aims to elucidate the concept of seat and venue in arbitration and highlights its fundamental differences and it’s legal implications.

Introduction

We live in a time when globalisation is at its peak which initiates a wide number of contracts between entities belonging to different nations. Many disputes occur due to ambiguity or non-performance of the contract which requires interference from a third party. Earlier, a court trial was a preferred dispute resolution mechanism, however, its prolonged procedure creates unnecessary delays. International Commercial Arbitration is a less formal and easier and faster way to solve disputes. Arbitration proceedings are preferred as an alternative to litigation because of its simple execution and accessibility.

Arbitration gives the power to parties to decide various factors like the law applicable to the arbitration agreement and the performance of that agreement as well as the law governing the procedure of arbitration. Arbitration takes place when parties face a dispute that arises out of a commercial transaction and wish to amicably resolve it privately by submitting required evidence to the arbitrator. The arbitrator is responsible for listening to both parties and making a decision based on the evidence and applicability of the law.

However, Arbitration due to the involvement of entities from different parts of the country raise the issue of jurisdiction of the court to deal with the arbitration disputes, which involves the concept of “seat” and “venue”. The seat of arbitration also known as the legal jurisdiction is necessary to determine because it would affect several major legal issues such as the arbitrability of the subject matter, the legal validity of the arbitration agreement, procedural guarantees, judicial review of the award and supervisory jurisdiction of the court, etc., whereas the venue of arbitration is where the arbitration proceedings take place is flexible, and only signifies the physical place for the conduct of said arbitration proceedings.

This article provides a detailed analysis of the two important topics falling under arbitration, i.e., seat and venue. The article first attempts to explain the aforementioned two terms, thereafter, the difference between the two terms has been dealt with in detail along with relevant case laws, for a better explanation of the topic.

Difference between seat and venue of arbitration

The Arbitration and Conciliation Act, 1996 (hereinafter referred to as “the Act”) does not directly define the terms ‘seat’ and ‘venue’.

Although the aforesaid terms have not been expressly defined in the Act, an attempt has been made to explain the concepts in Section 20 of the Act. It highlights that parties are free to choose the place of arbitration and the role of an arbitral tribunal in case the parties fail to determine the place in the arbitration agreement/ clause. Section 20 of Arbitration and Conciliation Act, 1996 is an important provision inspired by Article 20 of UNCITRAL Model Law which gives contractual freedom to parties to decide the place for arbitration. It plays the role of providing the ground for the arbitration process and majorly impacts the procedure as well as the result of arbitration. If the parties fail to decide the place of arbitration then it shall be decided by the arbitral tribunal taking into consideration the circumstances of the case and the convenience of the parties involved. The section highlights the importance of the place of arbitration and gives the parties the privilege to decide on the place of arbitration. However, the Act uses the word “Place” of Arbitration, instead of ‘seat’ and ‘venue’ which creates ambiguity on the location of the arbitration, the law governing the arbitration proceedings, the language in which the arbitration is effected, and the recognition and enforcement of the award.

Let’s first understand the concept of seat and venue with the help of relevant case laws followed by a detailed explanation of the role played by ‘seat’ and ‘venue’ to understand its importance in the procedure of arbitration.

Seat

The seat of an arbitration refers to the court which has exclusive jurisdiction over the transaction. Seat in the context of International Commercial Arbitration is one of the most crucial aspects that determines the course of arbitration proceedings. If in an arbitration agreement, a certain place is selected as the seat, then the courts of that place will have jurisdiction over that matter, if any dispute arises related to the agreement. Seat creates a legal base for arbitration because it determines how the arbitration will be conducted, what procedural rules will apply, and also governs the way the decision of arbitrators will be enforced. However, the role of the seat in arbitration is to decide the legal framework of the complete arbitration proceedings and it cannot be determined as the geographical location of arbitration proceedings. Supreme Court in the case of Bharat Aluminium Co vs. Kaiser Aluminium Technical Service, Inc (2012) pertaining to foreign seated International Commercial Arbitration held that “When parties have chosen a seat of arbitration, or if the arbitral tribunal has determined a seat, such a determination automatically confers jurisdiction on the courts at such seat of arbitration for the purposes of interim orders and challenges to an award”. Through this case, the Supreme Court observed that Part I of the Act is concerned with the seat of arbitration in India.

Venue

Venue refers to the geographical location where the parties will conduct the physical proceedings. Since arbitration is a mechanism to settle disputes outside the court, the place to conduct the proceedings is also crucial to decide by the parties. The venue in the arbitration should specify the city or country where both parties along with the arbitrator will meet to conduct the proceedings. Many arbitrations have the same place for the jurisdiction of the court as well as the physical place where the parties will meet to solve the dispute. However, the problem arises when the seat and venue are different. The confusion on seat and venue in India has been clarified through conflicting judgements by various high courts which have been concluded by the Apex Court. In Imax Corporation vs. E-City Entertainment (India) Pvt. Ltd. (2017) where one party was Indian and parties contracted to install theatre systems in India, the Supreme Court held that “If the venue of arbitration is not clearly mentioned then any party which is involved in arbitration can apply for jurisdiction to decide in the Indian Court. This might increase the multiplicity of legal proceedings.”

The use of “place” under Section 20 sparked debate if it referred to a seat or venue which was later settled under Bharat Aluminium Co. vs. Kaiser Aluminium Technical Services Inc. (2012) (explained in detail under Supreme Court on “seat vs. venue” of this Article) clarified that “place” refers to the “seat” and in Section 20(3) of the Act “place” refers to the “venue”.

Illustration

Let’s understand the difference between seat and venue through a hypothetical illustration.

Assume Company A and Company B, have a dispute about a contract they made. Instead of going to court, they agree to resolve their disputes through arbitration.

Venue: Venue refers to a place or physical location where the arbitration proceedings happen. Both parties chose London, England, as the location for their arbitration proceedings because it’s more convenient for them to travel to London than anywhere else for the arbitration proceedings.

Seat: The seat of arbitration refers to the main laws applicable to the arbitration process. Even though the arbitration hearings will physically take place in London, the seat of arbitration can be in a different place. In this case, the seat of arbitration is specified to be in Zurich, Switzerland. This means that Swiss arbitration law will govern the arbitration process, including issues such as the procedural rules, ensuring awards are followed, and handling any problems that arise during arbitration.

Summary: Venue refers to a place or physical location where the arbitration proceedings are conducted (London). The legal jurisdiction is the laws of a certain place that govern the arbitration process (Zurich). Just like this illustration, both aspects should be specified in the arbitration agreement or parties can select an arbitration institution to navigate through it.

Table of differences

Aspect	Seat	Venue
Definition	The seat is known as the jurisdiction which governs the applicable law of the arbitration proceedings.	The venue is known as the geographical location of the arbitration proceedings.
Legal implication	It implies the procedural law that regulates the arbitration process.	It has no certain legal implication and is solely based on the convenience of the parties.
Jurisdiction control	The courts at the seat of the arbitration proceedings have jurisdiction over certain aspects.	Venue has no concern or jurisdiction over the arbitration proceedings and has more concern over access, and facilities.
Changeability	Seat is not easily changeable and requires a strong reason as well as mutual consent of parties	Venue may be changed easily based on the convenience and flexibility of parties.
Legal challenges	Legal challenges regarding arbitration proceedings shall be filed at the courts of the seat decided.	Challenges regarding venues can be discussed amongst the parties.

Insights from The Arbitration and Conciliation Act, 1996

The Arbitration Act, 1996 along with many other flaws lacks clarity on the meaning of seat and venue. The Act doesn’t define the meaning of these terms but only uses the term ‘place of arbitration’. Section 2(2) of the Act states that Part I shall apply if the place of arbitration is in India. It doesn’t clarify that, whether “place” means to be a mere “venue” of arbitration or it also includes a “seat” which confers jurisdiction to the court. Even Section 20 of the Act, which provides how to determine the place of arbitration, is ambiguous and fails to distinguish between “seat” and “venue”. However, the Act comprehensively covers various aspects of domestic as well as international arbitration to make it fair and efficient.

Conflicting views by the High Court

Due to the underlying inconsistency and ambiguity in the Act, there have been several issues raised concerning ‘seat vs venue’ which has also sparked debate between judges. Conflicting opinions by high courts arose when the arbitration contract or clause specified a certain place as the seat for the legal place arbitration, however, at the same time, it also granted jurisdiction to a different court which created ambiguity about the governing law and other aspects of the arbitration.

First view

The first view that various courts opined is that the juridical seat is the same as the place (venue) of the arbitration. Delhi High Court in NJ Construction vs. Ayursundra Health Care (P) Ltd (2018) and Madras High Court in Ayyappa Enterprises vs. Sugam Vanijya Holdings (2021) held that there is no distinction between seat and venue. The above-mentioned courts encountered similar cases and the judges stated that the exclusive jurisdiction clause is applicable to other proceedings and irrelevant to arbitration and they further held that the parties intended the place of arbitration to be their juridical seat. To conclude the cases, the shashoua test was often applied to determine the location of the arbitration proceedings. According to this test, when there is no mention of a seat in the arbitration clause, the venue automatically becomes the jurisdiction of the arbitration. In short, this view disregarded the exclusive jurisdiction mentioned in the agreements directing the arbitration.

Second view

The contrary viewpoint observes that an exclusive jurisdiction clause indicates that seat and venue are different. Gujarat High Court in Instakart Services vs Megastone Logiparks Ltd (2023), Delhi High Court in Kush Raj Bhatia vs. DLF Power and Services Ltd (2022), Calcutta High Court in Commercial Division Bowlopedia Restaurants India Ltd in vs. Devyani International Ltd (2021), and Rajasthan High Court in Aseem Watts vs. Union of India (2023) concluded with the second view. They highlighted that place is considered the venue whereas exclusive jurisdiction is about power given to the court of a certain place which makes both distinguished. The Courts in their respective case held that the venue is the location chosen for the arbitration sittings which brings convenience to parties whereas the seat is the intention of parties that gives exclusive jurisdiction.

In Meenakshi Nehra Bhat vs. Wave Megacity Centre (2022), the parties designated Delhi as the location but also mentioned that any dispute arising shall be referred to the exclusive jurisdiction of a different court. The High Court of Delhi held that the selection of a certain venue would not automatically make it the seat of arbitration.

Supreme Court on “seat vs. venue”

To answer this vexed question of law time and again, the judiciary has given various interpretations in different judgements. On 5th March 2020, the Supreme Court in Mankastu Impex Private Limited vs. Airvisual Limited revived the conundrum of “seat vs. venue” under the Arbitration Act, 1996 and tried to settle the issue in the line of UOI vs. Hardy Exploration (2016).

Prior to Hardy Exploration case

After the enactment of the Act, the first landmark attempt by the judiciary to settle down the quandary was in the case of Bhatia International vs. Bulk Trading SA (2002) (herein referred to as (Bhatia International”). In this case, the Supreme Court while interpreting Section 2(2) of the Act, rather than differentiating between “seat” and “venue”, held that any international commercial arbitration that involves an Indian party irrespective of whether it proceeded in any country would confer jurisdiction on Indian Courts to entertain applications under Part I of the 1996 Act. This view was without any reasoning and is considered a judicial fiasco.

However, the Apex Court in the case of Bharat Aluminium Co. vs. Kaiser Aluminium Technical Services Inc. (2012), (herein referred to as “BALCO”) overruled the interpretation of Section 2(2) as laid down in the case of Bhatia International vs. Bulk Trading SA (2002) and held that Part I of the Act would only apply if “seat” of arbitration is in India, and reading of Section 2(2) along with Section 20 established that the Act has no extraterritorial jurisdiction.

The Court restored the distinction between “seat” and “venue” and stated that the term “place” used in Sections 20(1) and (2) connotes “seat” and Section 20(3) talks about “venue”. Sections 20(1) and (2) deal with the right of the parties to select the place of arbitration and in the absence of any such selection in the agreement, authorise the tribunal to determine the same, whereas Section 20(3) allows the tribunal to meet at any place for convenience in procedural matters.

Before BALCO the other prevailing approach to determine the supervisory jurisdiction of the court for arbitration was to decide as per section 2(1)(e) of the Act, which recognizes that the court at the place of cause of action would have jurisdiction, but BALCO adopted a seat centric approach instead of the place of cause of action approach and extended the supervisory jurisdiction of the arbitration exclusively onto the court, which is considered as the seat of arbitration.

In 2014, the 246th Report of Law Commission addressed that the use of the word “place” in the Act is a misnomer and suggested replacing the word “place” with the words “seat” and “venue” in section 2(2) and section 20 of the Act on the line of explanation given in BALCO, but this suggestion was never materialised.

The Supreme Court reiterated the same principle in Enercon (India) Ltd. vs. Enercon GmbH (2014). In this case, the court noted that if the “seat” of arbitration is not clear, the “closest and most intimate connection test” would be applied. This test necessitates taking into consideration several factors like place of performance, contractual conditions in the contract, governing and curial laws of arbitration, the intention of the parties, and the legal system which has the most intimate connection with the arbitral proceedings while determining the “seat”.

In Roger Shahshoua vs. Mukesh Sharma (2017), the Supreme Court upheld the judgement of the English case and recognized “the significant contrary indicia” test to differentiate between “venue” and “seat” and held that unless there is the contrary intention of party “seat” of arbitration would be determined by “venue” and “something else” prescribed in the agreement, which would vary with the facts of the case. However, BALCO has also implicitly concluded that a “venue of the arbitration” is the “seat of arbitration”, in the absence of any significant contrary intention in the agreement.

Before the judgement of Hardy, the law to determine “the juridical seat” was “the significant contrary indicia” test, but the judgement of Hardy led the other way around to determine the “seat of arbitration”.

UOI vs. Hardy Exploration

Facts of the case- Hardy Exploration and the government of India signed a contract and agreed to solve the dispute through arbitration. The arbitration clause specified Kuala Lumpur as the “venue” of arbitration, whereas the UNCITRAL Model Law of International Commercial Arbitration of 1985 would govern arbitration proceedings.

The arbitration was conducted and the award was signed in Kuala Lumpur in favor of Hardy Exploration, which was challenged before the Delhi High Court under section 34 of the Arbitration and Conciliation Act, 1996. The high court held that the seat of Arbitration is Kuala Lumpur and Indian courts don’t have any jurisdiction to hear the matter. The matter was further challenged before the Supreme Court and heard by a three-judge bench.

Issue- Whether the “juridical seat” of the arbitration is the same as the “venue” of arbitration if the venue is given but the seat is not specifically mentioned in the arbitration agreement.

Held- The Court contradicted the judgement of Roger Shashoua, BALCO, and held that the “seat” of the arbitration and “venue” of the arbitration are distinct from each other and if the arbitration agreement only mentioned the “venue” of arbitration, the same can be considered as the “seat” of arbitration only if arbitration agreement has explicitly mentioned it or other factors of the arbitration agreement indicate that. The Apex Court held that the arbitration agreement should be read holistically to deduce the ‘seat’ of arbitration.

In the present case, the Supreme Court read the Arbitration agreement holistically and considered the Model Law as a factor in deducing the seat of arbitration. As per the Model Law if there is no mention about the place of arbitration, then the same can be determined by the arbitral tribunal. The Apex court noted that the award was signed and declared in Kuala Lumpur, but the place of arbitration was not expressly determined by the arbitral tribunal. So, the ‘seat’ of arbitration is not Kuala Lumpur and the award rendered isn’t a “foreign award”, which entitles the Indian court to entertain the application under Section 34 of the Act.

Post Hardy Exploration

In the case of Brahmani River Pellets vs. Kamachi Industries (2019), the matter involved domestic arbitration, but the court in case obliterated the difference between “seat” and “venue” and held that, in the absence of specification of “seat” of arbitration in the arbitration agreement, the “venue” of the arbitration would be same as “seat” of the arbitration without any other concomitant factors. The court neither mentioned any reason for its judgement nor applied nor set any test or standard which could determine that “venue” would be considered as “seat”.

This blanket formula could have far-reaching effects on the arbitration because the venue of the arbitration could be flexible and could take place at different locations but the same can’t be applied to the seat of the arbitration.

Another landmark judgement in this series of judicial interpretations is BGS SGS Soma vs. NHPC (2019). Many regarded this judgement to be the defining moment in the never-ending debate of “seat vs. venue”, as it tried to clarify and describe the stand of the Apex Court on the issue. In this particular judgement, the Apex Court restored the reasoning of Roger Shashoua and the BALCO case and held that choosing the “venue” of the arbitration is akin to choosing the “seat” of the arbitration. And, the absence of any contrary indication about any difference in the context of “seat” and “venue” shall be a strong sign to regard both venue and seat as indistinguishable and not require any explicit mention of the same as held in Hardy. This judgement was hailed by many as significant.

Nonetheless, the judgement being contrary to Hardy has added fuel to the already undying debate on “seat vs. venue”. Also, the Court held that the law laid down in Hardy shouldn’t be considered a good law as being contrary to the judgement of a five-judge bench in BALCO and Roger Shashoua.

However, the Mankatsu Impex Private Limited vs. Airvisual Limited (2020) judgement of the Apex Court has again brought the issue of “seat vs. venue” into the limelight. Let’s discuss the case in detail.

Mankastu Impex Private Limited vs. Airvisual Limited (2020)

Facts of the case- The Petitioner (Mankastu Impex Private Limited) and the Respondent (Airvisual Limited) entered into an MoU for the exclusive distribution right to be awarded to the Petitioner for the Respondent’s air quality monitor products for five years. Subsequently, the respondent company was acquired by an entity named IQAir AG, which refused to honour the pre-existing MoU as entered between the Petitioner and the Respondent and the dispute arose between the parties as the Petitioner claimed the exclusive right of the sale of the Air Visual’s product for five years as per the terms as mentioned in the MoU.

The dispute resolution clause (Clause 17.1 of the MoU) between the parties specified that the agreement between the parties would be governed by Indian laws, and the courts of New Delhi would have jurisdiction. Clause 17.2 of the MoU specified that if any dispute arose out of or relating to the agreement, it was to be resolved by arbitration that was to be administered in Hong Kong and mentioned Hong Kong as the place of arbitration.

The clause further specified that parties have the right to seek preliminary injunctive reliefs from the courts having jurisdiction. After the dispute arose, the Petitioner approached the Delhi High Court to file a petition under Section 9 of the Act seeking interim relief and the Petitioner obtained the same and subsequently approached the Apex Court under Section 11(6) of the Act for the appointment of a sole arbitrator.

Issue- Whether the Indian Courts have the jurisdiction to entertain the petition filed under Section 11(6) of the Act?

Held- The Court began its analysis by highlighting the importance of determining the difference between the “seat” and “venue” of any arbitration proceedings, as the seat tends to help in deciding the curial law, which thereafter has implications on remedies available through judicial review of the proceedings.

It was observed by the court that the mere expression “place of arbitration” can’t be regarded as the focal point on the questions related to the seat and venue of the arbitration proceedings, instead, the court upheld the fact that the same should be determined by the conduct and the agreement between the parties.

So, while arriving at this conclusion the Court was of the view that Clause 17.1 shows that it will be the substantive law of India that will be governing the substantive contracts. But, after analysing Clause 17.2, the Court was of the view that the seat of the said arbitration proceedings is to be Hong Kong. The court, while considering the principle of territoriality as held in the five-judge bench decision in BALCO, dismissed the petition made under section 11(6). The judgement of the Mankatsu case laid down the same law as in Hardy.

The BALCO judgement made it clear that the supervisory jurisdiction of the court would be “seat-centric” and not at the place of Cause of action. The Court in the BALCO gave exclusive supervisory jurisdiction to the “seat of arbitration”. However, the Delhi High Court in Antrix Corporation Ltd vs. Devas Multimedia Pvt Ltd, held that the court at the seat and the court of the cause of action have concurrent jurisdiction over arbitration applications.

The Delhi High Court view has been overruled in BGS Soma and specified the strict stand regarding exclusive supervisory jurisdiction to court at the seat. The view of the judiciary to determine the seat of arbitration has been continuously changing since BALCO. The BGS Soma was considered as the end of the conundrum but the Mankatsu again revived the conundrum.

However, it can’t be said that the BGS Soma case stands overruled, as there was nothing in the judgement to declare the same as bad law. Further, both the judgements being of the same coordinate bench can’t overrule the other. Also, it can’t be said that the Mankatsu judgement is in complete contradiction to the BALCO judgement as while negating other laws of the BALCO judgement, Mankatsu upheld the Principle of territoriality as held in BALCO.

However, in light of the above observations, it can be said that the Mankatsu judgement is a missed opportunity for the Apex Court to clear this conundrum by referring the matter to the larger bench.

So, now it would be interesting to see what will be the future course of action of the High Courts as presently due to the ‘negligence’ of the Apex Court there are umpteen contradictory cases in front of the parties to the arbitration, which thereby hampers the growth of India, to become the global hub of arbitration.

Recent Case laws on seat vs. venue

The discussion on seat vs. venue has been longstanding and full of complexities which makes it crucial to understand the recent judgements by courts to understand the complexity of this topic through the lens of judges and their interpretation of the same.

Following are the recent case laws on seat vs. venue:

In the case of BGS SGS Soma JV vs. NHPC Limited (2020), the Supreme Court pointed out that if an agreement mentions a specific location “venue” without specifying any other place as the “seat” and there’s no conflicting sign in the agreement or the behaviour of parties and the mentioned venues should be considered as Juridical seat of the arbitral proceeding. The Court observed that subsection (3) of Section 20 of the Arbitration Act refers to the “venue” while the term “Place” mentioned in subsections 1 and 2 refers to the jurisdictional seat.

The Supreme Court of India in Sumitomo Heavy Industries Ltd. vs. ONGC Ltd. and Others (1997) noted that in a situation where the parties in the agreement are unable to make the decision to the seat of the arbitration, the arbitration agreement would be subject to the same law as the contract even if the arbitration agreement holds a different legal status from the contractual agreement.

In the Bhatia International case, as per fact both parties entered into a contract containing an arbitration clause specifying that arbitration would be conducted according to the rules of the ICC i.e., International Chamber Of Commerce. An argument arose between the parties when the respondent referred the arbitration proceedings at ICC which led to the decisions made by the High Court and Lower Court being challenged at the Supreme Court. The Court decided that International Commercial Arbitration consists of the involvement of an Indian party and proceeding to take place anywhere globally, Indian courts would have the jurisdiction to exercise their power under Part 1 of the Arbitration and Conciliation Act, 1996.

In Reliance Industries Ltd. and And. vs. Union of India, (2023), where both parties being Indian, referred to International Commercial Arbitration in which the Supreme Court of India observed that if parties to the agreement have selected London as the place of arbitration and concluded that the agreement shall be governed by the law of London which made it clear that part 1 of the Act would not apply.

In Harmony Innovation Shipping Ltd. vs. Gupta Coal India Ltd. and Anr, (2015) – The Supreme Court based on its previous decision on the principle of implied exclusion which means an agreement may exclude the jurisdiction of other courts if more than one court has jurisdiction, but jurisdiction can only be granted to the court that originally held it. It was laid down in the case of Bhatia International and as per this principle, if the case of international commercial arbitration is happening outside of India then the provisions of Part 1 will apply until the parties are excluded by agreement it might be implied or expressed.

In Eitzen Bulk A/S & others vs. Ashapura Minechem Ltd. and Anr, (2016).– The arbitration was referred to be resolved in London as per English law. The Supreme Court held that choosing a certain location outside India as the venue of the arbitration clearly expresses that the parties wish to exclude themselves from being governed by Indian arbitration law.

Aniket SA Investments LLC vs. Janapriya Engineers Syndicate (P) Ltd (2021)– The parties chose mumbai as the seat for the arbitration but when the dispute arose on the execution of the real estate project which was situated in Hyderabad, the respondent raised an issue on the same. The Bombay High Court held that a choice of seat is in itself an expression of party autonomy and carries with it the effect of conferring exclusive jurisdiction on the courts of the seat.

Indus Mobile Distribution Private Ltd. vs. Datawind Innovations Pvt. Ltd, (2017)– According to the facts of the case when the parties entered into an agreement to conduct a business, mentioned the clause of arbitration where the disputes would be solved through the Arbitration Act at Mumbai in the English language. However, the Court referred to the BALCO case and observed that the Bombay Court would not have jurisdiction to deal with the matter as no cause of action had occurred there and also neither CPC (Section 16-20) had been attracted.

In the case of Vasudev Garg vs Embassy Commercial project, (2023), there was an underlying ambiguity about jurisdiction as Mumbai and New Delhi both were mentioned. The Delhi High Court held that the venue clause as well as an exclusive jurisdiction clause included in the agreement is subject to the venue clause. It limits exclusive jurisdiction courts in resolving disputes which are not covered by the arbitration /venue clause.

In Orissa Metaliks Pvt. Ltd. vs. SBW Electro Mechanics Import Export Corporation, (2023) the Plaintiff pointed out that the agreement contained ambiguity about the seat and venue to which the High Court of Calcutta ruled that if an agreement between parties has clearly not mentioned any venue for arbitration, it would be the same as the seat of arbitration.

In Damodar Valley Corporation vs. BLA Projects Pvt Ltd, (2023), the question arose whether the High Court of Calcutta had the jurisdiction to set aside the award to which Justice Moushumi Bhattacharya held there was no evidence or reason to remove the arbitration from its current location i.e. the High Court of Calcutta.

In the case of BBR (India) Private Limited vs S.P Singla Constructions Private Limited, (2022) the Supreme Court noted that once the arbitrator determined ‘the seat’ subsection (2) of Section 20 of the Act, the arbitrator cannot alter ‘the seat’ of the arbitration until the parties to the agreement mutually agree and specifically state that ‘seat of arbitration’ should be relocated to another place. The court made certain observations which are as follows:

1. Changing the venue does not result in changing the ‘seat of arbitration’.

2. Place of jurisdiction or ‘the seat’ must be definite and fixed, not vague or changeable.

While the courts overseeing the arbitration proceedings have a relevant role to play in supervisory jurisdiction, it’s not the final deciding factor when the venue is not designated as the main place of arbitration.

A Bench consisting of Justice Rohinton Fali Nariman and Hrishikesh gave an important decision in the case of M/s Inox Renewables Ltd vs. Jayesh Electricals Ltd, (2021). The bench followed the previous precedent BGS SGS Soma JV vs NHPC Ltd, which held that the arbitration venue will be the judicial seat of arbitration unless there is an absence of contrary intention of the parties.

Overview of International Commercial Arbitration

International Commercial Arbitration (ICA) refers to arbitration arising out of disputes between parties that are residents or bodies incorporated in a country other than India. In such cases, the probability of disputes increases when parties emerge from different countries, making the seat vs venue dispute a topic of discussion. When parties select the seat, it administers the governing law and other formalities over the arbitration proceedings. The decision to conduct the proceedings of the arbitration is different from the seat decided by the parties and is not dependent on each other. Not only Indian judges, but courts worldwide in various cases have reiterated that seat denotes jurisdiction and is distinguished from venue. In Atlas Power vs. National Transmission And Despatch Co (2018) the agreement signed by the parties was governed by the laws of Pakistan but arbitration was to be conducted in London which caused disagreement amongst the parties. Thus, it was held that the agreement in which the seat in question was clearly London which permits the claimant the right to restrict the defendant from challenging the arbitral award anywhere other than its jurisdiction.

International Arbitration conventions signed by India

International Conventions can be regarded as the backbone of the legal framework particularly in the scenario of arbitration to ensure consistency across various jurisdictions. The following are the conventions signed by India that outline comprehensive guidelines to resolve disputes in the scenario of International Arbitration:

The New York Convention of 1958

The New York Convention of 1958 aims to ensure the enforcement of foreign arbitration awards worldwide. The New York Convention comprises 16 articles. The Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“New York Convention”) plays a crucial role in recognizing and enforcing international arbitration. The New York Convention applies to recognizing and enforcing foreign arbitral awards; it also includes court referrals to arbitration. This Convention applies to recognizing and enforcing arbitral awards made in the territory of a state different from where their recognition and enforcement are sought, arising from disputes between persons, whether physical or legal and sought in a state other than where they were made.

The UNCITRAL Model Law Rules

The UNICTRAL Model Law is created to assist States in updating and modernising their laws concerning mediation procedures. It provides uniform rules for the mediation process, aiming to promote the utilisation of mediation while enhancing predictability and certainty in its application.

The Model Law provides consistent regulations regarding the enforcement of settlement agreements and outlines the party’s right to invoke a settlement agreement in a procedure. It includes an exhaustive list of grounds that a party can invoke in a procedure governed by the Model Law.

The Geneva Protocol of 1923

The Geneva Protocol of 1923 aims to ensure that agreements to settle disputes through arbitration are recognized and enforced between countries. It covers the recognition of arbitration agreements, the arbitration procedure, and the enforcement of arbitral awards, as well as denunciation and territorial exclusions.

ICSID Convention

The International Centre for Settlement of Investment Disputes (ICSID) provides an independent platform for mediating and arbitrating such conflicts. ICSID provides the institutional facility and procedural provisions for impartial conciliation commissions and arbitral tribunals formed for each specific case. ICSID facilitates foreign investment by providing a multilaterally-agreed system for dispute settlement.

Authors analysis

The main reason why parties select arbitration instead of any other dispute resolution mechanism is that it brings efficiency as well the dispute remains confidential. Sometimes when the implications of seat vs venue seem to be confusing, it may also prolong the problems of the parties.

To bring clarity to the arbitration proceedings and avoid confusion, here are certain steps which are recommended:

Define terms clearly

An arbitration agreement is not only a prerequisite but also sets the foundation of the arbitration proceedings. They should be clear, precise, and unambiguous to avoid disputes later on. The confusion can be avoided altogether if the seat and venue are defined in the agreement in simple, clear language. It is also advisable to document all the discussions and decisions to avoid ambiguity.

Consider practical factors

Seat plays an important role in arbitration proceedings and affects many factors. It’s always a safe option to outline the practical factors like jurisdictional requirements, convenience, language, and cultural differences before choosing a seat as well as a venue for the arbitration.

Consult legal expert

Every arbitration is unique and to cater to the specific needs, it is important to tailor the arbitration to the agreement as per the circumstances and requirements of the parties. An arbitration agreement may impact the legal rights of the parties involved which makes it crucial to address all potential issues which can be solved by consulting a legal expert.

Amendment to the Act

The confusion on seat vs venue is because of the use of the word “place” in the Act. If the word “place” in sections 2(2), 20(1), 20(2), 28, 31(4) is replaced with “seat” and in section 20(3) with the venue, it’ll be easier to interpret for the people opting for arbitration.

Conclusion

Arbitration offers the freedom to parties of dispute in determining: the procedure of appointment of Arbitrator; number of Arbitrators; place of Arbitration; etc. With minimal judicial intervention, arbitration stands out as the most feasible option for seeking swift recourse in disputes arising out of commercial transactions. The discussion on seat and venue has been a topic of considerable importance because seat and venue play a crucial role in how the arbitration proceedings will be held. The Supreme Court of India has put a full stop to the debate and confusion on seat vs venue through various judgements. The physical location does not hinder in any way the jurisdiction known as the seat decided by parties to settle the dispute. The parties should carefully select the seat and venue because one provides the legal framework whereas the other decides the physical location respectively.

Difference between seat and venue of arbitration

Introduction

Difference between seat and venue of arbitration