This article is written by Astha Baderiya, pursuing B.A.LLB from ILS Law College, Pune.

Introduction

Determination of Seat of arbitration is important to determine the applicability of the law and to find the jurisdiction especially in the case of international arbitration. The seat is a legal concept which determines the jurisdiction of arbitration conducted, once the seat of arbitration is decided the court of the seat will have exclusive jurisdiction. The venue is the place where arbitration is conducted, it is merely the geographical location; it does not determine the jurisdiction of arbitration. The dilemma of Venue and Seat comes into picture when the parties in their agreement mention the venue or place and the agreement is silent about the seat of arbitration. It has been dealt with by various judgments and the same has been considered in the law commission report.

Bharat Aluminium Co. v. Kaiser Aluminium Co. 

In this judgment (hereinafter referred to as Balco judgment), the Hon’ble Supreme court of India recognised the difference between Seat and Venue. Balco judgment overruled the Hon’ble Supreme Court judgment Bhatia International v. Bulk Trading which held that part I mandatorily applied to all the arbitrations held in India; Balco decided that part I and II are exclusive of each other, and the part I applies only when the seat of Arbitration is within India, even when the arbitration proceeding has been conducted in any other place than India.

The court recognized that the seat of Arbitration is the centre of gravity of Arbitration and recognized the seat of arbitration as “judicial seat of arbitration” to determine the applicability of laws and determination of jurisdiction.

In reference to Section 20, reading it with Section 2(2) of the Arbitration Act, the court held that the parties are free to decide the venue of place and it would have no effect on the seat of Arbitration, and the venue is merely the geographical location. 

Law commission report

On the basis of Principle laid down in Balco Judgment, the 246th Law Commission report proposed the amendment of Section 2 of Act:

• It proposed deletion of word “place” and insertion of “seat”, in subsection (2).
• It proposed the definition of “seat of arbitration”, which means the “judicial seat of Arbitration”. To distinguish seats from the venue of Arbitration.

But none of the above suggestions has been taken into consideration in 2015 or 2019 Arbitration and conciliation Amendment Act and the dilemma between Seat and Venue continued. 

Enercon India v. Enercon GMBH

In this judgment, the Hon’ble Supreme Court of India laid down the closest and intimate connection to the arbitration test. In this matter parties agreed to apply part I of Indian Arbitration and Conciliation Act, but used the phrase “venue shall be in London”; the issue was whether the seat will be London or India? Court emphasized that even though parties have fixed the venue of arbitration at London, it does not intend that London will be recognized as a seat; it upheld the principle recognized in Balco judgment, the legal seat of Arbitration, should not be confused with a geographically convenient place or places of Arbitration. It was held that where the seat is not mentioned in the arbitration it has to be decided by applying a closest and intimate test to the arbitration and the Court recognized India as a seat of arbitration.

UOI v. Hardy Exploration and production

In this judgment, the Hon’ble Supreme Court of India discussed the relationship between “Place”, “Venue” and “Seat”. 

In this matter Venue was fixed in the Arbitration Agreement, but it was silent on Seat of Arbitration, and inter alia mentioned that UNCITRAL Model Law (hereinafter referred to as Model Law) would be applicable. According to Article 20, Model Law, parties are free to decide seats of arbitration and if not decided it has been decided by the Tribunal. Generally, as per the international law, the seat of arbitration has to be decided by the Arbitral Tribunal but in the present matter, the question came into consideration when the application was filed for setting aside of Award was filed.

 Court laid down two principles- 

(a) when arbitration agreement specifies the venue of arbitration and is silent upon the seat of Arbitration, arbitration clause/ agreement has to be read in a holistic manner to decide the judicial seat of arbitration; 

(b) where the arbitration agreement is silent as to law and procedure to be applied in implementing arbitration agreement, the law governing the same agreement should be the law governing the contract itself. 

While explaining the relationship between “Place” and “Venue”, the court explained that place and seat used interchangeably; if there is no condition is postulated to place, only word place is stated, it will be recognized as a seat, but if the conditions are attached to the place it has to satisfy those conditions to become a seat. 

Brahmani River Pellets LTD. v. Kamachi Industries

In this judgment, the Hon’ble Supreme Court of India recognised the Venue as Seat of Arbitration without giving sufficient reason. The Arbitration Agreement was silent on the seat of Arbitration and specified the Venue of Arbitration as Bhubaneswar. The court opined that by specifying Bhubaneshwar as a venue of the arbitration, the parties agreed that the seat of Arbitration shall be Bhubaneshwar. The court has not relied on any Principle or test as laid down in previous judgments and has not specified any principle to conclude Bhubaneswar as the seat of arbitration. 

Analysis

It has been pointed out in various judgments, Law commission reports and international laws on Arbitration the need to determine the Judicial seat for determination of the applicability of laws and jurisdiction, especially in foreign Arbitration cases. Balco ended the long battle of applicability of Indian Arbitration laws in foreign arbitration and reversed the Bhatia judgment. Balco Provided the pathway for determination of Judicial seat of Arbitration and separated it with the mere geographical place for conducting the arbitration. Balco was on the lines of Model Law; it upheld the Principle of Territoriality which was provided in international arbitration laws.

Enercon judgment was another landmark judgment for determination of judicial seat of arbitration; it laid down the principle of a closest and intimate test to arbitration and correctly agreed with the view of Balco judgment of not accepting the geographical Venue as a judicial seat without actually applying the test and knowing the actual intention of the party as per the Arbitration Agreement.

Hardy Exploration judgment made the position more clear, by laying down the holistic approach Principle; according to which if any condition has been postulated with “place” in the agreement, to recognize such place as a judicial seat, these conditions need to fulfil. The Holistic approach puts an emphasis on the conditions provided in the agreement. 

Hardy exploration was another example of the impact of the badly drafted arbitration agreement; this case was related to foreign arbitration and the question of jurisdiction came into the picture when the award was challenged; whereas as per Article 20 of the model law states that if the parties have not decided the seat of arbitration, it has to be decided by the tribunal. In the case of foreign arbitration, the question of determination of seat becomes more relevant for determining the applicability of the law, other than mere jurisdiction. When the award is challenged and the laws which should be applied are not determined before passing of the award, and other laws are applied in case of foreign arbitration, the court faces the dilemma of setting aside the award, which does not purport the intention of Arbitration, that is the speedy trial. 

Brahmani judgment goes against the principle that has been established in balco and the cases following it. Court went by the blanket formula and specified the venue as a seat of the arbitration without applying any Principle or test. This made the position back to before Balco Judgment. This position is prone to misuse, especially in foreign seated arbitration; one can specify India as Venue and it would be sufficient to conclude Indian Jurisdiction which is inconsistent with the international arbitration laws. 

Conclusion

The judicial seat of Arbitration has been questioned for consideration in various cases, starting from Balco to Brahmani; they have laid down various Principles and Tests to determine the Judicial Seat of Arbitration. Due to different positions in each case, there is no clear and uniform standard for determination of Judicial Seat of Arbitration. All the cases highlighted the key need to include a judicial seat and venue both while drafting an arbitration agreement to have a clear picture and no dilemma between judicial seat and venue. There is a need to implement the above-stated amendments suggested by the 20th Law Commission to make Indian Arbitration Laws with international Arbitration Laws.

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