This article has been written by Diksha, LL.M (Corporate), Lovely Professional University, Jalandhar. Punjab.
In India, a foreign judgment may be implemented either through execution proceedings or through a suit. An arbitral award is an arbitration tribunal’s decision on the merits of an arbitration tribunal and is equivalent to a court judgment. Arbitration is particularly popular in the commercial sphere as a means of resolving disputes. One of the reasons for this is that it is often easier to enforce an arbitration award in a foreign country in international trade than to enforce a court judgment. The implementation of international arbitration awards in India is regulated by the Arbitration and Conciliation Act, 1996 through the New York Convention and the Geneva Convention, and a non-conventional award in India will be enforceable on the grounds of justice, equality and good conscience under common law.
Keywords: Arbitration, Alternative Dispute, Arbitration Agreement, Arbitral Award, Foreign Award, Court, Arbitrator, Tribunal, New York Convention, Geneva Convention, Arbitration and Conciliation Act
Arbitration is the most effective and dominant form or method as Alternative Dispute Resolution compared to conciliation, mediation, negotiations, etc. Arbitration an Alternative Dispute Resolution is usually used in resolving disputes, particularly in International Commercial transactions conducted across national boundaries as well as in domestic transactions that are civil in nature. It can also be used in matters of employment or consumer disputes. Arbitration is somewhat same as mediation, but in mediation the decision given by the mediator cannot be imposed on parties to the dispute. ‘‘An arbitration is a reference of a dispute or difference between not less than two parties for determination after hearing both parties in a judicial manner, by a person or persons other than a court of competent jurisdiction.’’ “Where the parties to dispute refer the matter to a person and such person holds a judicial inquiry in deciding the dispute and comes to a judicial decision, such person is called an arbitrator.’’ “An award stands at the same footing as a decree of a court whether it has been passed into a decree or not and therefore it is binding upon the parties.’’
‘In Arbitration proceedings disputes is settled by an impartial neutral who is a private person who is a third party to the dispute, whose decision the parties to disputes have agreed. Arbitration is not same as judicial proceedings as it is basically an out of court settlement process. Arbitration only deals with disputes which are civil in nature. The person by whom the disputes are settled is known as arbitrator or arbiter and the decision given by him is known as arbitral award. The arbitral award is final and binding on the parties to the dispute and for the enforcement of such award the party has to move to the court. Arbitration allows the parties to have a private dispute resolution procedure and avoid national courts.
An arbitral award can never be determined as a contract, it should be determined as a decision out of a contract. The consent of the parties is not necessarily to be present in a decision. An award decided has judicial binding effect on the parties. The arbitral award can be final as well as an interim award. It may be a ‘domestic award’ or ‘foreign award’. An award by the arbitrator must always be in writing and signed by the arbitrator.
Key Characteristics of Arbitration as Alternative Dispute Resolution
- Arbitration is a consensual process of the dispute redressal.
- Arbitration is neutral to the parties to dispute.
- Parties chooses their own arbitrator who will act as a neutral to both parties.
- Arbitration is a private proceeding.
- The decision given by arbitrator is final and binding on parties.
Process of Arbitration
- Arbitration on basis of Procedure:
- Ad-hoc arbitration: Arbitration which is agreed and arranged by the parties at there own, without the help of any arbitration institution. The proceedings under this are conducted as per the agreement between the parties. Arbitration can be domestic, international or foreign.
- Institutional arbitration: When the parties to dispute agrees to have an arbitral tribunal to administer there dispute, it is known as institutional arbitration. The proceedings under this are conducted by the terms of the arbitral tribunal and not on the will of the parties. Arbitration can be domestic, international or foreign.
- Fastrack Arbitration: This arbitration is a time dependent. In Fastrack arbitration the procedures are conducted in such a way that all the unnecessary methods are abandoned which are time consuming, this arbitration uphold the simplicity which is the purpose of arbitration.
Arbitration on basis of Jurisdiction
- Domestic Arbitration: It is a type of arbitration in which both the parties to dispute are from the same nation and the dispute between them has to be decided keeping in view the substantive law of that nation. The dispute must have been arrived and has to be decided in that nation only.
- International Arbitration: Is that type of arbitration which happens within the nation or outside the nation, in contains elements which are foreign in origin in relation to the parties or the subject of dispute. The law applicable in International Arbitration, can be domestic or foreign, depending upon the terms of contract. Arbitration becomes Int only when one of the party is domicile of any other nation.
- Foreign Arbitration: When parties to dispute choose a foreign arbitration or agrees an offshore ad-hoc arb, it is known as foreign arbitration. The resulting award is enforced as a foreign award.
- Statutory Arbitration: It is a mandatory and compulsory arbitration imposed on the parties to dispute by the courts. Parties have to abide by the law of the land and the parties are not allowed to skip this arbitration, consent of parties is also not required. If the parties doesn’t abide by the decision of the court, strict actions can be taken against them.
Parties can refer to arbitration only when they have an arbitration agreement, or an arb clause which may be a part of the main agreement between the parties, The agreement or arbitration clause must be in a written form and which is between two or more parties and which is intended, consented and signed by the parties. The arbitration agreement between parties indicates the:
- Seat and place of arbitration,
- Procedure for appointing the arbitrator,
- Number and qualification of arbitrator,
- Language governing arbitration,
- Type of arbitration,
- Name and address of Arbitration institution,
- Procedure of arbitration proceedings.
Evolution and Growth of Law of Arbitration in India
Arbitration in India has a long history. In ancient times, people frequently voluntarily submitted their disputes for a binding settlement to a council of a community’s wise men — called the panchayat. In India, the Panchayati raj system has found its place in different rules.
The Bengal Regulations created modern arbitration law in India in 1772, during the British rule. Among other items, the Bengal Regulations provided for a court’s recourse to arbitration in cases for property, partnership deeds, and contract violation, with the consent of the parties.
Before 1996, India’s arbitration legislation consisted mainly of three statutes: (I) the Arbitration Act of 1937, (ii) the Indian Arbitration Act of 1940, and (iii) the International Awards Act of 1961. The 1940 Act was a general law regulating arbitration in India in compliance with the 1934 English Arbitration Act, and the 1937 and 1961 Amendments were designed to enact international arbitration awards (the 1961 Act incorporated the 1958 New York Convention). In an attempt to modernize the obsolete 1940 Act, the government passed the Arbitration and Conciliation Act, 1996 (the 1996 Act). This Act repealed the three existing laws (the Act of 1937, the Act of 1961 and the Act of 1940). The primary purpose was to facilitate arbitration as a cost-effective and rapid method for resolving trade disputes. The Act of 1996 regulates both domestic and international arbitration.
The arbitral award or arbitration award refers to an arbitration hearing decision made by an arbitration tribunal. An arbitral award is equal to a court judgment. An arbitral award may be non-monetary in nature where the claims of the entire claimant fail and there is no need for any party to pay any money.
An arbitration award may be given for payment of a sum of money, judgment of any matter to be decided in the arbitration proceedings, injunctive relief, substantive fulfilment of a contract and rectification, setting aside or cancelling an act or other document.
The arbitral award shall be defined as any arbitral tribunal’s judgment on the nature of the dispute referred to it and shall include a temporary, interlocutory or partial arbitral award. The arbitral tribunal may grant an interim arbitral award on any matter for which it will make a final arbitral award at any time during the arbitral proceedings. The interim award may be applied in the same way as a final award of arbitration. Unless otherwise decided by the parties, a party may ask the arbitral tribunal to make an additional arbitral award in respect of the claims raised in the arbitral proceedings but omitted from the arbitral award within 30 days of receipt of the arbitral award.
An arbitral award can be categorised into:
- Domestic Award: Domestic award are those awards which are the outcomes of domestic arbitration. It is confined to the territory of India, the parties should have a nexus or birth of Indian origin, the territory essentially comes into play for domestic arbitration purposes. The award given by an arbitral tribunal in India or an award, even if it is given by a foreign state for a dispute in which both parties are of Indian origin and the nationality is also regulated by Indian law, also falls within the scope of domestic arbitration.
Domestic awards are governed by Part I of the Arbitration and Conciliation Act, 1996. A domestic award is an award granted pursuant to Section 2 to 43 of the Act.
- Foreign Award: Foreign Award is the outcome of Foreign Arbitration. If the parties choose a foreign arbitration institution or agree to an ad hoc arbitration overseas, the award granted after such proceedings shall be referred to as foreign award.
Part II of the Arbitration and Conciliation Act of 1996 deals with International Arbitration or Foreign Arbitration. Section 44 of the Act defines with Foreign Award.
In, Serajuddin v. Michael Golodetz The Calcutta High Court established the necessary conditions for an arbitration to be referred to as ‘ foreign arbitration ‘ or the essential elements of a foreign arbitration where the award could also be referred to as a foreign arbitration award. The important points laid were as follow:
- “Arbitration should have been held in a foreign country.”
- ”By a foreign arbitrator.”
- “Arbitration by applying foreign laws.”
- “One of the parties consists of foreign nationals.”
Essential Elements of Arbitral Award
- Should be in written form.
- Signed by the Arbitrator.
- Shall contain the reason for the passing of Award.
- Date and place at which the arbitration took place.
Enforcement of Arbitral Award
The regulation and execution of decrees in India is regulated by the Civil Procedure Code, 1908 (“CPC”), while the arbitral award procedure in India is governed mainly by the Arbitration & Conciliation Act, 1996 (“Act”) and the CPC.
For the same way as an Indian court decree, domestic and international awards are enforced. However, there is a difference depending on the seat of arbitration. Seated arbitral award (“domestic award”) would be governed by Part I of the Act, enforcement of foreign — seated awards (“international award”) would be governed by Part II of the Act.
- Enforcement of Domestic Arbitral Award: Until filing for compliance and execution, an award recipient would have to wait 90 days after receiving the award. The award may be questioned during the transitional period in compliance with Section 34 of the Act. When the above time expires, if a court considers the award enforceable at the execution point, the authenticity of the arbitral award cannot be questioned any further. Before the recent Law on Arbitration and Conciliation (Amendment),2015 (Amendment Act), a petition to set aside an award could equate to a stay in the award execution proceedings. Nevertheless, a party opposing a award would have to transfer a separate application to demand a stay on an award execution by virtue of the Amendment Act.
- Enforcement of Foreign Arbitral Award: India is a signatory to Geneva Convention on the Execution of Foreign Arbitral Awards, 1927 (“Geneva Convention”) and Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958 (“New York Convention”).
If a party receives a binding award from a state signing the New York Convention or the Geneva Convention and the award is made in a territory recognized by India as a convention country, the award would then be enforceable in India. In India, implementing a foreign award is a two-stage procedure begun by filing a request for execution. Initially, a judge will decide if the award met with the law’s criteria.
Once an award has been considered enforceable, it can be applied as a court order.
At this point, however, parties should be aware of the various obstacles that may occur, such as frivolous complaints from the opposing party, and provisions such as bringing the award’s original / authenticated copy and the underlying agreement before the court.
Conditions for enforcement of Arbitral Awards (domestic and foreign)
A party may use the following grounds to contest an award. If the other party shows this, such an award would be made unenforceable.
- According to the statute, the parties to the settlement were under any disability.
- The agreement in question did not comply with the law to which the parties are subject or with the law of the country in which the award was made.
- The party did not receive a proper notice of appointment from the arbitrator or the arbitral proceedings or was otherwise unable to bring his case before the arbitral tribunal.
- The reward deals with a distinction that does not fall within the terms of the agreement.
- Award contains decisions on matters beyond the scope of being referred arbitration.
- The arbitral proceedings did not comply with the agreement.
- The composition of the arbitral body or the arbitral proceedings does not comply with the law of the country in which the arbitration took place.
- The award (precisely a foreign award) was not made binding on the parties or was set aside or revoked by the competent authority of the state in which the award was made or by the statute of which it was made.
- Under Indian law, the subject matter of the dispute cannot be resolved by arbitration. Enforcing the award would be contradictory to India’s public policy.
Limitation Period for Enforcement of Arbitral Award
In the case of domestic arbitral awards, the 1963 limitation law applies to arbitrations because, according to section 21, the arbitral proceedings in respect of a specific dispute start on the date on which the respondent receives a petition to refer the dispute to arbitration. Arbitral awards are deemed to be a decree. The Arbitration Act does not place any restriction on the execution of a foreign award, and the usual limitation period (12 years) is likely to apply.
Different high courts have given different definitions of the limitation period within which a party can impose an award in the case of foreign awards. The Bombay High Court observed a foreign award in ‘Noy Vallesina v Jindal Drugs Limited’ not to be a judgment, rendering it non-binding on parties unless it was reported as enforceable by a competent court. In the ‘Compania Naviera ‘ Sodnoc ‘ v. Bharat Refineries Ltd.,’ on the other hand, the Madras High Court referred to international awards as considered decrees.
In M/s. Fuerst Day Lawson Ltd v. Jindal Exports Ltd, the Supreme Court ruled that there could be different stages in a single proceeding. A court can agree on the enforceability of the award in the first proceeding. Once the enforceability has been determined, more successful steps can be taken to implement the same.
In the case that a foreign award is implemented, the party cannot appeal against any court decision denying the award’s objections. If the court holds the award to be non-enforceable, an appeal can be made. Therefore, a ruling that upholds the award cannot be appealed twice. Nevertheless, according to Article 136 of the Indian Constitution, the party can look forward to a direct appeal to the Supreme Court of India. These forms of appeals are pursued only in the case that the court thinks there is a matter of fundamental importance or public interest.
The party seeking enforcement of a decree of a court of reciprocating country to file a execution proceedings in India. International rulings from a reciprocating territory’s superior courts can be specifically applied by filing an execution petition under section 44A of the Civil Procedure Code. After which section 51 must come into play and order XXI of CPC.
In the event that a non-reciprocating nation gives the foreign judgment, a fresh case will have to be brought before a court of competent jurisdiction in India, where the foreign judgment will be considered as proof. The time limit for filing a lawsuit to enforce these international judgments is three years from the date of delivery of the judgment.
Challenges in Execution of Foreign Arbitral Award in India
Obtaining an award in your favour from an international arbitral tribunal is a bit of a half-won fight as it still needs to be enforceable in India. There have been various cases in which the party failed to enforce it in competent Indian courts, despite receiving a favourable award in an international arbitral tribunal. Therefore, in order to obtain an arbitral award, there is no way out but to enter into litigation from which all parties at first refrained. It takes time for an order already issued by an international arbitral tribunal to become effective. Nonetheless, this path cannot be avoided as it offers more of a formal procedure and guarantees that proper diligence is applied on behalf of the courts to implement the award.
Local government pressure, especially local parties with more political power, may attempt to cancel the award or the full impact of the award, which could frustrate the award given by the international arbitration seat.
Part II of the 1996 Indian Arbitration & Conciliation Act (“the Act”) deals with the enforcement of foreign awards, while Chapter I (Sections 44-52) deals explicitly with the awards relating to the Convention. According to Section 44(b), a “international award” must be given in one of those territories as the Government of India may, upon being satisfied with the existence of reciprocal provisions, by notification in its Official Gazette, declare it to be the territory in which the Convention is applicable. There is, however, a reason why it is necessary to remove this provision to obtain gazetted notice in order to bring India’s arbitration system into accordance with convention norms. Gazetting provisions create unnecessary confusion about the compliance of international awards given in countries that are contracting states to the Convention but have not yet been informed in the Gazette.
Conclusions and Suggestions
India is not a country that has anti-arbitration prejudice. It is therefore easy to argue that India’s legal system seeks to create a facilitative atmosphere for applying international awards. A major issue with the 1996 Arbitration and Conciliation Act is compliance, it handles foreign arbitral awards and foreign court rulings in a similarly. Due to the lack of distinction between foreign arbitral awards and court decisions, the Indian Law does not explicitly address issues directly related to foreign awards. Some changes, such as trying to clarify convention countries with reciprocal provisions that are yet to be specified in the official gazette, and legislation dealing directly with international arbitral awards would allow the arbitral system to be more organized and India to be compatible with advanced legal regimes around the world.
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