International Commercial Arbitration and Foreign Arbitral Awards in India – an overview

International commercial arbitration is the process of resolving disputes between parties that arise out of international commercial transactions, whether contractual or not, through the use of one or more arbitrators. Agreement of the parties is a necessary prerequisite. An arbitration clause is usually part of the contract between parties that decide to be adjudicated before a sole arbitrator or a panel of arbitrators. The decision of the arbitrator(s) is usually binding on the parties.

In India The Arbitration and Conciliation Act, 1996 section 2(1)(f) of the Act defines "International Commercial Arbitration" as arbitration relating to disputes arising out of legal relationships, whether contractual or not, considered as commercial under the law in force in India where at least one of the parties is: 

a.    an individual who is a national of, or habitually resident in any country other than India; or 

b.   a body corporate which is incorporated in any country other than India; or 

c.  a company or an association or a body of individuals whose central management and control is exercised in any country other than India; or 

d.   the Government of a foreign country.

One of the advantages of International Commercial Arbitration is that parties appoint arbitrators of their choice. This reduces the distrust. If the same matter would have been taken before a foreign Court of Law, there would be cultural differences, differences in interpretation of law or facts, leading to an impasse and loss of faith in the system. International Commercial Arbitration alleviates such problems and provides faster results, as awards are usually binding  on the parties.

All this said and done the question of enforceability arises. One of the advantages of International Commercial Arbitration is its enforceability. More than 140 countries have signed the Convention on the Recognition and Enforcement of Foreign Arbitral Awards or the New York convention of 1958. This ensures that foreign arbitral awards are enforceable in one’s own jurisdiction.  

In India foreign arbitral awards can be enforced under both the New York convention of 1958 or under the Geneva convention of 1927. Sections 44 to 60 of the Arbitration and Conciliation Act, 1996 provides for the various conditions for enforcement of foreign arbitral awards.

One of the conditions states that the Central Government, by notification in the Official Gazette, declare these to be territories to which the said Convention applies. Any party applying for the enforcement of a foreign award shall, at the time of the application, produce before the court----

(a) the original award or a copy thereof, duly authenticated in the manner required by the law of the country in which it was made;

(b) the original agreement for arbitration or a duly certified copy thereof; and

(c) such evidence as may be necessary to prove that the aware is a foreign award.

The act also provides the conditions for non-enforcement of foreign awards. These are

 (a) incapacity of the parties to the agreement

 (b) the party against whom the award is invoked was not given proper notice

(c) the award deals with matters beyond the scope of the submission to arbitration.

 (d) the composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties, or, failing such agreement, was not in accordance with the law of the country where the arbitration took place.

(e) the award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made.

 (f) the subject -matter of the difference is not capable of settlement by arbitration under the law of India; or

(g) the enforcement of the award would be contrary to the public policy of India.

Sections 49 and 58 of the Arbitration and Conciliation, 1996 provide that   Where the Court is satisfied that the foreign award is enforceable, the award shall be deemed to be a decree of that Court.

Thus a basic picture of International Commercial Arbitration and enforceability of Foreign Arbitral Awards in India has been portrayed.