This article has been written by Devasmitha Dinesh, pursuing a Certificate Course in Arbitration: Strategy, Procedure and Drafting from LawSikho.
Table of Contents
Introduction
Arbitration, as a means of dispute resolution, is gaining popularity in India. This could be attributed to the fact that it saves time and cost and settles disputes effectively, compared to litigation. The first-ever act based on arbitration in India was enacted in 1899, called Arbitration Act. Later, in 1940, this act was amended. Yet, the popularity remained too low. In 1996, with further amendments, the Arbitration Act was enacted, which incorporated the UNCITRAL Model Law in it. In 2015 and 2019, the 1996 Act was amended again to make the provisions more effective.
This article tries to briefly analyze the significance of, and the differences between the Seat and Forum of Arbitration. They are two of the most important factors in an arbitration proceeding.
Seat of arbitration
The seat of arbitration determines the courts which would be entitled to exercise exclusive jurisdiction over the enforcement and annulment of the arbitral award. It also determines the curial law, i.e., the law governing the arbitration proceedings, in case the curial law has not been determined in the arbitration agreement by the parties It is presumed that the curial law, would be the law of the seat if the arbitration agreement does not exclusively provide for the same. If the parties opt for institutional arbitration, the procedural aspects would be governed by the law set forth by the chosen arbitral institute.
The term Seat has not been defined anywhere in the Arbitration and Conciliation Act, 1996. Sections 2(2), 20, and 28 talk about a place of arbitration. However, whether the term Place signifies the seat or venue remains a doubt till the day, as Place has also not been defined. Section 2(2) talks about the application of certain sections of the Act to International Commercial Arbitration as well, even if the place of arbitration is outside India. Section 20 provides that the place of arbitration can either be decided by the parties or the tribunal and notwithstanding such determination, unless the parties have agreed otherwise, arbitration hearings can be held in a place other than the determined place of arbitration, for convenience. Section 28 talks about the rules applicable to the substance of the dispute before an arbitral tribunal, when the place of arbitration is in India. Even though the Act has been amended several times, the terms seat and venue still remain an enigma.
Although party autonomy is one of the prime features of arbitration, such presumptions as given above arise, in case the parties do not exercise it precisely. The curial law determines the validity, effect, and interpretation of the Arbitration Agreement, and such law is relied upon by the arbitrator to determine the scope of his powers and the procedure to be followed by the arbitral tribunal. It even governs practical aspects of the arbitration including any rights of appeal, the availability of interim remedies. The territorial link between the place of arbitration and the law governing the arbitration is well established in the international instruments, namely, the New York Convention of 1958 and the UNCITRAL Model Law of 1985. In domestic arbitration, the choice of seat doesn’t create big confusion regarding the procedural law because this law remains the same throughout India. The only difference arises with regard to the jurisdiction entertaining enforcement, annulment and setting aside of the award, interim relief, assistance in collection of evidence, etc, which would be exercised by the courts in the seat.
Forum of adjudication
Forum or Venue is just the most convenient place for the parties and/or the arbitrator(s) to conduct the proceedings. As mentioned above, the term forum has not been defined in the Act. There could be more than one venue, unlike a single seat for a proceeding. As earlier stated, a Venue sometimes is designated as a seat and could be conferred territorial jurisdiction in cases where the arbitration agreement either provides for the same or does not provide anything contrary to it. The convenience of the parties and at times their intention, aids when the venue has not been expressly provided in the arbitration clause.
Seat vs. Forum
Several cases give insights into how seat and venue impact an arbitral proceeding. They are both usually determined in the Arbitration Clause by the parties, failing which, the Arbitral Tribunal would be empowered to determine the same. It is important to note that the terms seat and venue have not been defined in the Arbitration and Conciliation Act,1996, and are often used interchangeably. This practice results in a lot of confusion and the courts in our country have given varying judgments on the matter. They could be independent of each other or even be in the same place.
It is a general practice to confer jurisdiction to the courts in the seat regarding any matter related to the arbitration proceeding, unless the arbitration agreement contains anything contrary to such intention, as the SC held the same in Indus Mobile Distribution (P) Ltd v Datawind Innovations (P) Ltd and Ors, (2017). Some cases even showcase instances where the courts exercising exclusive jurisdiction are different from those located in the seat. The Hon’ble Delhi High Court in Antrix Corporation v. Devas Multimedia (2018) held that designation of “Delhi” as “seat” alone, would not confer Delhi courts with exclusive jurisdiction, in the absence of an “exclusive jurisdiction clause” to that effect. Particularly in International commercial arbitration, where the curial law, the law governing the arbitration agreement, and the law governing the contract which incorporates the arbitration clause, are quite often different, it is always better than parties specify all of these laws, else they will face troubles when it is time to initiate the proceedings.
The SC, in Bharat Aluminium Company vs. Kaiser Aluminium Technical Services Inc. (2012) (BALCO), ruled that two courts could have concurrent jurisdiction over the matter under arbitration- the court where the subject matter of the dispute lies, and the court which was designated as a seat. Even though the terms seat and venue have significantly different meanings, in Union of India v Hardy Exploration and Production (2018), it has been held by the SC that a venue in an arbitration proceeding can become the “seat” if something else is added to it as a concomitant. The Court held that the “venue” does not ipso facto assume the status of the seat. However, in BGS SGS Soma JV v. NHPC Ltd., 2019, the SC held that in the absence of a contrary indication, the venue could be assumed to be the seat.
In Enercon India Ltd. v. Enercon Gmbh (2014) [‘Enercon’], the Supreme Court held that designating a place to be the ‘venue’ does not ordinarily make it the seat of arbitration. In the case of Brahmani River Pellets Ltd v Kamachi Industries Ltd( 2019), the SC held that in case of absence of an exclusive jurisdiction clause and seat, the suggested venue in the arbitration agreement would be conferred exclusive jurisdiction, provided there are no other contrary suggestions of any sort. This case carefully suggests that a venue could be designated as a seat only after clearly looking into the case and understanding the intention of the parties, read with the facts and circumstances of the case. The SC, in Roger Shashoua v Mukesh Sharma (2017), ruled that when an agreement expressly designates the venue without any express reference to seat, combined with a supranational body of laws and no significant contrary indicia, the inexorable conclusion is that the venue is actually the seat of arbitration. Also, most importantly, the Hon’ble Delhi High Court in Dredging Corporation of India vs Mercator Limited (2018) has clearly stated that the terms “seat of arbitration” and “venue of arbitration” cannot and should not be used interchangeably.
Our country has faced a dilemma with conferring jurisdiction and arriving at proper conclusions regarding the seat and venue. It continues to this day and no court has given a “one fits all” kind of solution.
While determining the seat in international arbitration, certain crucial factors need to be considered. These factors were put forward by the Chartered Institute of Arbitrators (CIArb) in the “London Principles” issued in 2015. According to these guidelines of the CIArb, the seat has to be a place with an independent and competent judiciary, which respects the autonomy of the arbitration procedure and promises the least intervention. It should offer all facilities for the smooth conduction of the proceedings and offer highly qualified and experienced arbitrators. It also has to offer a well-built international arbitration law. Convenience is the only factor that determines the choice of venue unless the parties reflect other intentions in the arbitration agreement.
Conclusion
Arbitration is growing at a fast pace in India, so are the complexities related to it. Seat and venue are often the major topics of debate in the field of arbitration, as we have major judgments relating to how the vague use of these terms can change the entire direction of the matter of arbitration and determine the essential factors guiding and aiding an arbitration proceeding. Seat and venue need to be properly determined in the arbitration agreement to avoid confusion regarding jurisdiction in the future. It is always best to be specific about all the factors, including the curial law and procedural law. This would erase the chances of assumptions and thereby help parties to arrive at conclusions and settle the issue before them.
The precedents set before us, have, in reality, not solved the continuing debates on seat and venue. They have definitely given few factors to be considered before arriving at any conclusion regarding the seat and venue in an ambiguous arbitration clause. It is always prescribed that arbitration clauses be drafted systematically and in detail so that it does not result in any kind of confusion, which later troubles the parties themselves.
References
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