On the principle of Justice,disputes between two countries can be resolved through arbitration which is one of the most preferred ways of resolving a dispute between two parties.Geneva Convention and New York Convention brought uniformity in law as parties belonged to two different nations following their own law.India being a signatory of both the parties and as an important player in the international market introduced arbitration and reconciliation act,1966 which was in tune with the two conventions.
This article will deal with the major provisions of the act and loopholes for enforcing foreign arbitration award.
As the world has become global village there has been an increasing international trade and business activities, and this has led to the growth of transactions between nations. But due to these enormous transactions at international and domestic level disputes too arise. To settle these disputes nations resort to arbitration due to certainbenefits it has over litigation. The former is quicker, simpler and there are more multilateral conventions and bilateral treaties to facilitate enforcement of foreign arbitral award. On international level the significant treaty signed by the countries on enforcement of foreign awards was Geneva Convention followed by New York convention.
As a result of globalization and liberalization, and other policies of India, it has become an important player in the global market but this has led to rise of international business disputes too. InIndia before the enactment of Arbitration and Conciliation Act,1996 it had three regulations to deal with arbitration,one for domestic award-Arbitration Act, 1940 two for foreign award-Execution of Foreign Arbitration award (based on Geneva Convention) and Foreign awards (Recognition and Enforcement Act)1961 New York Convention.
Foreign award as defined in sec 44 of the arbitration and reconciliation act 1966 means anarbitrary award made on or after 11th October 1960 on difference between persons arising out of legal relationship whether contractual or not, considered as commercial under the law in force in India.
There are two important parameters for the enforcement of foreign award in India –Reciprocityi.e. mutual policy of enforceability of foreign awards between India and relevant foreign countrythis principle is a reflection of article 1(3) of New York convention of 1958. And the second parameter is commercial reservation stated in sec 53C.The award must have a commercial holding too to get it enforced.
The enforcement offoreign award is a three phase process –party seeking enforcement has to make an application under sec 47,secondly the party against whom the award is invoked shall furnish the defenses (s.48).Finally, if the court is satisfied it may enforce the award as a decree(s.49).
Sec 48 and 57 lays down certain deal breakers for enforcing the foreign award, the parameters which need to be satisfied are-the parties who are enforcing the award should not be in any incapacity, there should be a valid and appropriate notice of arbitration, the subject of the arbitration falls under the sub terms of the submission of the arbitration, the composition of the arbitration tribunal was not in any way against the arbitration agreement, the arbitration or the subject matterof the operation should not violate the basic norms of morality and justice and it should not be in breach of fundamental public policies of India.
Bhatia International v Bulk Trading S.A &Anr-Supreme Court held that the Indian courts have the jurisdiction even when the seat of arbitration is outside India, but this decision was overruled by SC in Bharat Aluminum Co. v. Kaiser Aluminum Technical Service, Inc.This was reaffirmed in Reliance industries and Anr. v. Union of India,
RENUSAGAR Power Co. Ltd v. General Electric Co-Supreme Court for the first time set grounds for public policy and its meaning under sec 48 was interpreted and its scope was widened in Oil& NaturalGas Corporation Ltd v. Saw Pipes Ltd.
Improvements are needed to make cost effective mechanism for settlement of international arbitration.The first step will be enacting legislation directly addressing foreign arbitral awards.The Arbitration and Reconciliation Act 1966 has certain loopholes which need to be fixed for example, the unambiguous and uncertain definitions of terms like COURT,COMMERCIAL,there has no definition provided for PUBLIC POLICY as well as INTERNATIONAL ARBITRATION. A cleardistinction should be made between domestic and international public policy. It is ideal to add the requirement qualifications for the appointment of arbiters.For resolution of international disputes there is also a need for institutional arbitration, as currently only Indian Council of Arbitration stands out in the landscape of institutional arbitration in India due to which Paris,London and Singapore continues to be favorite destination of dispute settlement even if one of the parties is India.
- Recognition and Enforcement of Certain Foreign Awards,THE ARBITRATION ACT 1996 455-457 (2014)
- Sec. 44,47,48,49 & 57 of Arbitration and Conciliation act,1966
- Geneva Convention on the Execution of Foreign Arbitral Awards,July 25,1929,75 UNTS 135
- New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards,June 10,1958,330 UNTS 3
- Bhatia International v Bulk Trading S.A &Anr(2002)4 SCC 105 (India)
- Bharat Aluminum Co. v. Kaiser Aluminum Technical Service, Inc(2012)9 SCC 552 (India)
- Reliance industries and Anr. v. Union of India(2014)7 SCC 603 (India)
- Renusagar Power Co. Ltd v. General Electric Co (1987)4 SCC 137 (India)
- Oil& NaturalGas Corporation Ltd v. Saw Pipes Ltd (2003)5 SCC 705 (India)
Geneva Convention on the Execution of Foreign Arbitral Awards,July 25,1929,75 UNTS 135
New York Convention on the Recognition and Enforcement ofForeign Arbitral Awards,June 10,1958,330 UNTS 3 [hereinafter New York Convention]
 Sec 44 of Arbitration and Conciliation Act,1966
 (2002)4 SCC 105 (India)
 (2012)9 SCC 552 (India)
(2014)7 SCC 603 (India)
 (1987)4 SCC 137 (India)
 (2003)5 SCC 705 (India)