Enforcement Of Foreign Arbitral Award In India

TOPIC ENFORCEMENT OF FOREIGN ARBITRAL AWARDS

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INTRODUCTION MEANING OF ARBITRATION UNDER THE ACT FOREIGN ARBITRATION INDIAN RESERVATIONS FOREIGN AWARD – COMMERCIAL IN NATURE PROCEDURE OF ENFORCEMENT UNDER THE CONCVENTION CHALLEGE TO FOREIGN ARBITRAL AWARDS ENFORECEMENT OF AWARDS TO WHICH CONVENTIONS DO NOT APPLY AWARDS UNDER INDIAN PROCEDURAL LAWS AWARDS MADE OUTSIDE INDIA UNDER FOREIGN PROCEDURAL LAWS AWARDS MADE OUTSIDE INDIA UNDER INDIAN PRECEDURAL LAWS NEW YORK CONVENTION – AWARDS GENEVA CONVENTION – AWARDS ENGLISH ARBITRATION ACT – 1950 FOREIGN AWARDS TIME LIMIT POST ENFORCEMENT FORMALITIES CONCLUSION BIBLIOGRAPHY

INTRODUCTION The law on arbitration in India is at present contained in three enactments viz. The Arbitration Act 1940 The Arbitration (Protocol and Convention) Act ,1937 The Foreign Awards (Recognition and Enforcement) Act,1961

It was widely felt that the 1940 act, which contained the general laws of arbitration, had become outdated. The law commission of India, several representative of bodies of trade and commerce and expert of the field of arbitration had experts of the field of arbitration had proposed amendments to this act to make it more responsive to the contemporary requirements. It was also recognized that our economic reforms may not become fully effective if the law dealing with settlement of both domestic and

international commercial disputes remain out of tune with such reforms. Taking into the consideration the enforcement of foreign award, it can be enforced in India under the multilateral international conventions to which India is a party viz. Geneva Convention of 1927 New York Convention of 1958 Further, the award must have been made in the country that has ratified them. The Geneva convention had has ceased to apply those awards to which the New York convention applies now. The arbitration (protocol and convention) act, 1937 came into effect on 4th march 1937 and provided for the enforcement of foreign arbitral award to which the Geneva Convention of 1927 applied. Similarly, the foreign awards (Recognition and Enforcement) act, which came into force on 30th November, 1961, had been enacted pursuant to the New York convention of 1958 and it prescribed the law and

procedure for the enforcement of foreign awards in India to which they said convention applied. The United Nations commission on international trade law [UNCITRAL] adopted in 1985 the model law on International Commercial Arbitration. The General Assembly of the United Nations has recommended that all countries give due consideration to the said model law ,in view of the desirability of uniformity of law of arbitral procedures and the specific needs of international commercial arbitration practice. An important feature of the said UNCITRAL model law and rules is that they have harmonized concepts of arbitration and conciliation of different legal systems of the world and thus contained provisions universal application. Though the said UNCITRAL model law and rules are intended to deal with international commercial arbitration and conciliation, they could with appropriate modifications, serve as a model for legislation on domestic arbitration and conciliation.

The two previous enactments on such stands repealed and the arbitration and conciliation act 1961,which is a comprehensive and uniform law relating to arbitration which has been put on statute with a view to provide an alternative forum which is less formal than the court proceedings more effective ,speedy ,quicker and cheaper. The procedure for enforcement of foreign awards can now be found in Part [2] of the new 1996 act which maintains the same scheme for enforcement albeit in a consolidation form. MEAN ING OF ARBITRATION UNDER THE ACT Arbitration means a reference to the decision of one or more persons, either with or without an umpire of some matter or matters between the parties as held in COLLINS vs. COLLINS The essence of arbitration is that the arbitrator decides the case and his award is in nature of a judgment which is later on incorporated into a decree of court as held in the case AKBARI AHMED vs. RAHAMAT

FOREIGN ARBITRATION Foreign arbitration is an award or arbitration conducted in a place outside India The resultant award is an award, if sought to be enforced in India, constitutes a foreign award, Section 2(7) of the 1996 act states that an arbitral award made under \Part [1] of the act shall be considered as a domestic award. Section 2(2) mandates that Part [1] shall apply where place of arbitration is in India. It follows a logical thing that where the place of arbitration is not in India, Part [1] shall not apply to such arbitration. Thus an award resulting from such arbitration shall not be considered a domestic award. However in the case BHATIA INTERNATIONAL vs. BULK TRADING S.A. The Supreme Court held that the provisions of Part [1] would apply even in cases of international arbitration held outside India. The decision has

been criticized for blatantly ignoring the unequivocal wordings of the statute but nevertheless constitutes the prevailing law on the point. INDIAN RESERVATIONS India has made two reservations while ratifying the conventions namely, that it would apply the conventions to the recognition and enforcement of an award only if it was made in the territory of another state that is bound by contract. In pursuance of said reservations, the two implementing acts of 1937 and 1961 provided that the government of India would notify the names of the countries to which the conventions would apply and also the countries to which have made reciprocal provision for the enforcement of Indian awards in those countries. The second reservation was that the India would apply the convention only to differences arising out of legal relationship which are considered as commercial under the Indian laws. The concept of commercial relationship takes place within its ambit all relationship which arises out of or are ancillary or incidental to the business dealings between citizens

of two states. It takes within its fold all legal relationships pertaining to international trade in all its form between the different states. Courts have interpreted the term ‘commercial dispute’ under the two acts, in certain decisions where the question was at issue. It has been held that the provisions of the conventions and implementing 1937 and 1961 acts earlier and the 1996 act now are designed to sub serve the cause of facilitating international trade and promotion interpretation consistent with its literal and grammatical meaning. The law as settled by the courts in the following cases is relevant even today for the new 1996 enactments maintain the same scheme. In R.M INVESTMENT AND TRADING CO. LTD. Vs. BOEING &CO. It was held that consultancy services for the promotions of the sales of aircraft manufactured by a foreign company are ‘commercial services’ In RAMJI DAYAWALA & SONS (P) LTD.

VS INVEST IMPORT, It was held that a party from a country which has not ratified the New York convention of 1958 can’t maintain its application seeking any benefit from the court under any enactment, made on the basis of the conventions. In N.T.P.C vs. SINGER & CO. It was held that an award will not be tenable if it is opposed to the public policy of the county in which it is to be enforced. Mere contravention of the public policy may not attract the bar. It may not be repugnant to the fundamental policy of Indian law or to justice or morality.

FOREIGN AWARD - COMMERCIAL IN NATURE CLAUSE (f) of sub section [1] of section 2 of the 1996 act defines international commercial arbitration and it speaks about disputes arising

out of a legal relationship, whether contracted or not, considered as commercial under the law in force in India. The question of commercial relationship has been considered by various courts in a number of cases. Emphasizing the ambit of an activity which takes the character of a commercial relationship in the context of Article 301of the constitution of India The supreme court noted in the case ATIABARI TEA CO. LTD. vs. STATE OF ASSAM the trade doesn’t mean merely traffic in goods i.e. exchange of commodities for money or other commodities in the complexities of modern conditions in their sweep are included carriage of persons and goods by road, rail, air and waterways, contracts, banking, insurance, etc too numerous to be exhaustively enumerated which may be called commercial intercourse. On the above logic, the Supreme Court ruled that a consultancy services for the promotion of sale is a commercial transaction and any dispute

arising there under is a commercial dispute. Therefore, as far as the meaning of commercial is concerned, the absence of a formal definition didn’t hinder an expansive interpretation. PROCEDURE OF ENFORCEMENT UNDER CONVENTIONS •

The procedure of enforcement of foreign awards under the conventions are pretty much the same .Any person interested in enforcing a foreign award may apply in a writing to any court having jurisdiction over the subject matter of the award. In addition to filing of the award and agreement on which it is based as required by the conventions, the act requires that evidence as to the award being a foreign award has to be filed.

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The competent court in which the award is to be filed is a court which will have jurisdiction over the subject matter of the award. The application will be numbered and registered in the court as a suit between the applicant as plaintiff and the other parties are defendants. T he court will direct notice to be given to the parties, requiring them to show cause as to why the award should not be

filed. The court on being satisfied that the foreign award being enforceable under the act will pronounce judgments according to the award. Upon the judgment so pronounced, a decree will follow as in case of domestic awards. No appeal shall lie from such a decree except in so far as the decree is in excess of or not in accordance with h the award. The various high courts, including the Bombay and Calcutta, have made rules regarding the procedure and forms to be used for application for the enforcement of foreign awards.

CHALLENGE TO FOREIGN ARBITRAL AWARD The challenge under section 9 (b) of the Foreign Awards (Recognition and Enforcement) Act, 1961 its not available when the arbitration clause renders all dispute subject to laws of India though the arbitration proceedings were held in England as per terms of said clause in as much the crucial law operates during the continuance of the proceedings

before the arbitrator as held in the case

SWANITOMO HEAVY

INDUSTRIES LTD. VS. O.N.G.C LTD. ENFORCEMENT OF AWARD TO WHICH THE CONVENTINS DONOT APPLY The awards which are made in the countries that are not a party to either of the conventions cannot be enforced with the same facility as in the case of the foreign awards to which the conventions apply. Such foreign awards are however enforceable in India on the same ground as they are applicable in United Kingdom. That is to say that they can be enforced by an action before a court of law as held in BADAT & CO. BOMBAY vs. EAST INDIA TRADING CO. which said that such an award will be enforceable in India under the common law on the grounds of justice, equity and good conscience? The principles stated are as follows:-

that there was a contract between the parties where under disputes between them were referred to arbitration to an arbitral tribunal in a foreign country. that award is in accordance with the terms of the agreement. that the award is not invalid according to the law governing arbitration proceedings obtaining in the country where award was made. That it was a subsisting award at the time of filing of the suit. A foreign award will not be enforced by the courts in India if its enforcement would be contrary to public policy or the laws in India. A foreign award will be deemed to be against the laws of India if it violates, for instance, provisions relating to exchange, control, import-export control or similar mandatory provisions. AWARDS UNDER INDIAN PROCEDURAL AWARD

It has been held that the term award used in the Indian Arbitrationact, 1996, mean an award under the act while section 49 of the act provides that a foreign award shall become a decree of the court where the court is satisfied that the foreign award is enforceable, there is there is no provision for the issue of a notice to the affected party before the court expresses such satisfaction. Section 50 0f the 1996 act provides for an appeal from an order refusing to:refer the parties to the arbitration under section 45 and enforce a foreign award under section 48. Such appeal should lie in the court authorized to hear appeal from the order arising thereto. There shall be no second appeal, subject however to the right of appeal to the supreme court. There is no right of appeal against the recording of satisfaction by the court under section 49.

AWARD MADE IN INDIA UNDER FOREIGN PROCEDURAL LAWS An award made in India under the foreign procedural law is one to which neither the arbitration act nor the conventions will apply. Its enforceability in India depends on the general laws. AWARD MADE OUTSIDE INDIA UNDER FOREIGN PROCEDURAL LAWS An award made outside India under the foreign law is a foreign award. It has to be enforced as per the provisions of the 1996 act now. In other cases the award made is made in non-reciprocating country, its enforceability in India depends on the general laws. AWARDS MADE MOUTSIDE INDIA UNDER INDIAN PROCEDURAL LAWS If the award is the one to which the conventions applies, it has to be enforced as a foreign award but as per the judgment of the supreme court

in N.T.P.C VS. THE SINGER & CO. and held that such an award but will be a foreign award as a domestic award under the Part [1] of the act. This decision has been criticised as it is given under the old act 1961. Since the new act is enforced yet the decision still is good as it has not been over-ruled. NEW YORK CONVENTION AWARDS Section 44 actually reproduces Section 2 of the Foreign Awards [Recognition and Enforcement] Act, 1961. The scope of this section is actually utilized by any party that is interested in foreign awards to the court having jurisdiction over the subject matter. The differentiation between the awards must apply in writing to a court and the foreign awards are only those where arbitration takes place in a convention country. Awards passed in an arbitration taking place in a non-convention country would not be a domestic award as held in this case

BHATIA INTERNATIONAL V/s BULK TRADING S.A. There has to be an agreement in writing between the parties for invoking Section 45. However, if any of the parties feel that such an argument is null or void or in-operative or incapable of being performed that party has the right to approach the competent court as held in the case. SHIVNATH RAI HAR NARAIN V/s ITALGRANI S.P.A According to Section 45, Judicial Authority has power to refer parties to arbitration. The application must be made in writing and at any time before the judgment of the court is pronounced in the suit. Such application should be made before the court where the suit is pending.

If there is valid arbitration agreement, the suit must be stayed and the matter referred to arbitration as held in the case. SOCIETE COMMERCIAL CEREALS etc. V/s S.P.C If there is expressly excluded clause of arbitration the application for reference is not maintainable as held in the case. STC V/s OWNERS ETC IN THE VESSEL Vs.BALPIC CONFIDENCE According to the Section 46, foreign award shall be binding for all purposes on for all purposes, on the persons as between whom it was made and may accordingly be relied on any of those persons by way of defense, set off or otherwise ant legal proceedings in India.

Under Section 47, the manner for adducing evidence to prove that the award is a foreign award. When the award given in a foreign country (UKRAINS) is valid under the law of the country the award being governed by the law of that country then the enforcement of that award of India does not violate public policy as held in the case. TRANS OCEAN SHIPPING AGENCY PVT. LTD. V/s BLACK SEA SHIPPING Section 48 provides that the enforcement of foreign award may be refused at the request of other party against whom it is invoked, only if that party furnishes Court some proof. Also for the enforcement of the foreign award there is no need to take separate proceedings one for deciding the enforceability of award to make rule on the court or decree and other to take up execution after that as held in the case

FUREST DAY LAWSON Ltd V/S JINDAL EXPORTS Ltd.1 Under section 49, the court cannot directly enforce foreign award acting under section 49 of the 1996 Act. Once the court under section 49 declares it as enforceable there upon it would be deemed to be a decree executable as per Civil Procedure Code as held in the case.

TOEPFER INTERNATIONAL ASIA (P) Ltd. V/S THAPAR IPAT Ltd.2 Court enforcing a foreign award cannot grant interest beyond the date of abiter dictum. Under section 50, the court is authorized by law to hear appeal from the following orders:If an order refers to –  Refer the party to arbitration  Enforce a foreign award

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AIR 2001 SC 2293 AIR 1999 BOM 417

If under this section any order is passed in appeal, second appeal cannot be filed against such order. But appeal to the Supreme Court can be filed. GENEVA CONVENTION AWARDS This convention has been reproduced more or less same as the New York convention and has name sake relevance because of the fact that this cannot be applied to the foreign awards under the New York Convention. ENGLISH ARBITRATION ACT 1950 – FOREIGN AWARDS Under this provision is made for the enforcement of arbitral awards by the Arbitration Act 1950, which actually considerate the Arbitration Act 1889-1934. The background of this provision is afforded by a protocol of 1923 and a convention of 1927, both of which were signed by Great Britain. The convention deals with the enforcement in one country of arbitral award that is made in other country.

The protocol applies between people subject to jurisdiction of such powers as may be declared by orders in council to the parties of convention on the execution of Foreign Arbitral awards set out in the second schedule to the Arbitration Act, 1950. In England, foreign award means one which made in pursuance of agreement under the protocol of 1923 made between the person subject to the jurisdiction of jurisdiction of signatory states of 1927 convention made in the territory to which the convention has been extended by order in council. Where the parties choose to refer a dispute to arbitration and if no case is pending with respect to the subject-matter in disputes, it is not necessary that the parties should signify their consent to the award before the same is enforced, as held in the case NARAIN DAS VS. VALLABH DAS

There are some conditions to be fulfilled before, for the enforceability of foreign awards. It must have been made in pursuance of an agreement for arbitration valid by the law by which it was governed made by the tribunal provided by the agreement made in conformity with the law governing the arbitration procedure become final in the country it was made in respect of a matter which may be lawfully be referred to arbitration under the English law and its enforcement may not be against the public policy or the to the law of England. The second schedule of the Arbitration (protocol and convention) act, 1937 lays down the convention on the execution of the foreign arbitral award. In England, the award can’t be final if:-

the proceedings for the testing of its validity are pending in the country in which it was made. It can’t be enforced if it doesn’t deal with all the questions referred to the arbitration or exceeds the scope of arbitration agreement or if the party against whom it was sought wasn’t given sufficient notice of the arbitration proceedings or was under the legal incapacity or was not properly represented. More or less, it is not final when the rules of natural justice were not adhered to. Proper chance of defending one’s case should be given to a party. TIME LIMIT The act doesn’t prescribe any time limit within which a foreign award must be applied to be enforced. However, various high courts have held that the period of limitations would be governed by the residual provisions under the limitation act i.e. the period would be three years from the date when the right to apply for the enforcement accrues. The

Bombay high court have held that the right to apply would accrue when the right i.e. the award is actually received by the applicant as in the case

ORIENT MIDDLE EAST LINES LTD. &ANOTHERS VS. M/S BRACE TRANSPORT CORPORATION OF MONROVIA POST ENFORCEMENT FORMALITIES In the case

FUREST DAY LAWSON LTD Vs. JINDAL EXPORT LTD

it was held by the Supreme Court that once the court determines that a foreign award is enforceable, it can straight away be executed as decree. In other awards, no other application is required to convert the judgment into a decree. The court clearly stated in its judgment that “Once the court decides that the foreign award is enforceable; it can proceed to

take further effective steps for execution of the same. There arises no question of making a foreign award as a rule of court/decree again. If the object and purpose can be served in the same proceedings, it doesn’t result in the multiplication of proceedings. It is also clear from the objectives contained in the Para 4 of the statements of objects and reason, section 47 to 49 and the scheme of act that every final arbitral awards is to be enforced as if it were a decree of the court. In our opinion, enforcement of the award, there is no need to take separate proceedings, one for deciding the enforceability of award to make rule of the court or decree and other to take up execution thereafter. In one proceeding, the court can enforce a foreign award and deal with the matter.” One of the interesting features of the enforcement of a foreign award is that there is no statutory appeal provided against any decision of the court, rejecting objections to the award. An appeal shall lie only if the courts hold the award to be non-enforceable. Hence a decision upholding an award can’t be appealed against. This is Enforcement of a foreign award is that there is no statutory appeal provided against any decision of the court rejecting objections to the above. And appeal shall

lie only if the courts hold the award to be non-enforceable. Hence a decision upholding an award cannot be appealed against this is in some sense is a negative aspect and can be considered as a loophole. However, a discretionary appeal would lie to the supreme court of India under the Article 136 of The Constitution of India. Such appeals are entertained only if the court feels that there is a question of fundamental importance or public interest.

CONCLUSION Viewed in its totality India does not come across as a jurisdiction which carries an Anti-arbitration bias or more significantly which carries an Anti-foreign bias. The number of arbitration in the tribunal, notwithstanding the interventionist instincts and expanded judicial review, Indian Courts do not cross the limits and refrain themselves from interfering with the arbitral awards. Judged on its touchstone India qualifies as an arbitration friendly jurisdiction.