Global business is the order of the day. No country can now work in isolation in commercial transactions. This is probably the outcome of the internet and digitalization that has shrunk the physical world into one global market. This in turn has resulted in global entities entering into several cross-border contracts for supply of goods or services. All cross-border businesses must be protected and guided by cross border contracts failing which there can be total chaos in implementation and execution of the business.
In most cases, business grows and expands as per the vision of the partners, but there are cases when disputes arise and parties have to resort to cross border dispute resolution. In such a case, parties have to rely upon the dispute resolution clause that they have agreed to in the contract. Generally, most parties opt for jurisdiction and law as per their personal choice. While this may be a result of having more confidence in the legal system of their own jurisdiction, such a choice does not necessarily mean that it is the correct choice.
This is because winning the case is not enough. All awards and judgments from a foreign jurisdiction have to be enforced in the country where the defending party resides. In the present Article, the author deals with the situation in enforcement of foreign arbitral awards in India.
Under the Indian Laws, Part II of the Arbitration and Conciliation Act, 1996 (Act) deals with the Law relating to enforcement of foreign arbitration awards in India.
Under the Act, enforcement of Foreign Awards in India can be done under the New York Convention and the Geneva Convention. India ratified the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (Convention) on 13-07-1960. As notified by the Central Government, India recognizes the awards passed by the Signatory Countries.
According to the Act, an international commercial arbitration relates to disputes arising out of legal relationships that are commercial in nature where at least one party is a foreign party. The Act is divided into two parts, one for domestic arbitrations and the other, for international arbitrations.
International Conventions and in particular the New York Convention have incorporated and provided for provisions for enforcement of Foreign Awards. The New York Convention defines “Foreign Award” as an arbitral award on differences between persons arising out of legal relationships, whether contractual or not, considered as commercial under the law in force in India, made on or after the 11th day of October, 1960.
A Party applying for the enforcement of a Foreign Award in India, shall, at the time of making the application, produce before the Indian Court; a) the original award or a copy thereof, duly authenticated in the manner required by the law of the enforcing country; b) the details of the country in which it was made; c) the original agreement for arbitration or a duly certified copy thereof; and d) such evidence as may be necessary to prove that the award is a Foreign Award.
Once an Application for enforcement of a Foreign Award is made, the other party has an opportunity to file objections against enforcement on certain grounds which include, improper notice, inability to present case, composition of the arbitral authority and its competency and whether enforcement of the award would be contrary to the Public Policy of India.
India also recognizes Foreign Awards passed under the Geneva Convention. The Geneva Convention defines “Foreign Award” as arbitral award on differences relating to matters considered as commercial.
Under the Indian Laws, the general trend in the case of enforcement of Foreign Awards is that if an award is received by a party from a country which is signatory to either of the abovementioned Conventions and has been notified as a Convention Country by India, then in such case, a Foreign Award would be enforceable in India, subject to it withstanding the tests laid down for enforcement of Foreign Award under the Indian Arbitration and Conciliation Act, 1996.
Some recent Indian cases which would be of relevance in this Article. In The State of Maharashtra v. Atlanta Ltd. (2014) 11 SCC 619, the Supreme Court held that an Application for enforcement of a Foreign Award has to be filed by the Award Holder before the competent Court in whose jurisdiction the assets of the Judgment-Debtor are located. It was further held that if the assets of the Judgment-Debtor are located within territorial jurisdiction of multiple foras, the Application for execution of the Award can be filed simultaneously in all such Courts having jurisdiction.
When a Foreign Award was challenged before the Supreme Court in Shri Lal Mahal Ltd. v. Progetto Grano SPA (2014) 2 SCC 433, the Award was challenged under Section 48 of the Act, on the ground of it being “patently illegal” and thereby violating the Indian laws. Section 48 of the Act provides the circumstances in which enforcement of a Foreign Award may be refused, by the enforcing Court such as (i) if the Foreign Award was passed by an arbitral tribunal that was not constituted in accordance with the arbitration agreement, (ii) if the parties to the agreement were under incapacity or agreement was not valid under the law to which they have subjected it, (iii) if the party against whom the Award is invoked was not given proper notice of appointment of arbitrator or arbitral proceedings or was unable to present the case, (iv) if the Award deals with issues not falling within the terms of submission to arbitration, (v) if the Award has been set aside by a competent Authority of the country in which the Award was passed. The Apex Court in this case held that the ground of the Award being “patently illegal” cannot be entailed within the purview of Section 48 of the Act, 1996 and such a ground will only be limited to domestic arbitration within the purview of Section 34 of the Act. The Court held that while deciding upon the enforcement of a Foreign Award, the role of the court is very limited and Section 48 of the Arbitration Act, 1996 does not afford an opportunity to review the award on merits.
In another case, pertaining to enforcement of a Foreign Award, the Delhi High Court in Cruz City Mauritius Holdings v. Unitech Ltd. 2017 SCC OnLine Del 7810 laid down a test to determine the issue of refusal of enforcement of a Foreign Arbitral Award. The Court was of the opinion that whilst there is no absolute or open discretion to reject the request for declining to enforce a Foreign Award, it cannot be accepted that it is totally absent. The width of the discretion is narrow and limited, but if sufficient grounds are established, the court is not precluded from rejecting the request for declining enforcement of a Foreign Award. The Court further held as to what are the principles that must be followed by it in exercise of its discretion. However, clearly, Principles akin to Res Judicata and issue of Estoppel would be material. The principle of res judicata provides that where an issue between two or more parties has been adjudicated on merits by a court or authority, the same parties are barred from litigating a second lawsuit on the same claim, or any other claim arising from the same transaction or series of transactions. Whereas, the principle of estoppel provides that there is a bar that precludes a person from denying the truth of a fact which has in contemplation of law become settled by the acts and proceedings of judicial or legislative officers, or by the act of the party himself, either by way of writing or by representations, be it express or implied. Thus, if a party has taken recourse to assail the Award before the supervisory court, in normal circumstances, the said party ought not to be permitted to re-litigate the same issue unless the party is able to establish certain special circumstances or indicate good reasons.
In a recent Judgment of the Hon’ble Supreme Court of India titled as Gemini Bay Transcription Pvt Ltd v Integrated Sales Service Ltd and others 2021 SCC OnLine SC 572, the Apex Court refused to interfere with an award issued by a sole arbitrator in an arbitration seated in the USA. It further narrowed down the scope of resistance under Section 48 of the Act which deals with enforcement of a Foreign Award being refused. The Court observed that when enforcement of a Foreign Award is resisted, the party who resists it must prove to the court that its case falls within Section 48. Given these parameters there can be no doubt that a non-party to the agreement, alleging that it cannot be bound by an award made under such agreement, is outside the literal construction of Section 48(1)(a). Section 48(1)(a) refers only to the “parties” to the agreement referred to in Section 44(a). The grounds are in themselves specific, and only speak of incapacity of parties and the agreement being invalid under the law to which the parties have subjected it. To attempt to bring non-parties within this ground is to try and fit a square peg in a round hole.
Hence, it is increasingly vital that agreements and more importantly, the dispute resolution clause therein, are drafted carefully and meticulously, to ensure that winning the case and obtaining the award in one’s favor is not enough, but one should also ensure that the said award is capable of enforcement in the country where the defending party resides.
Ms. Sushila Ram Varma
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