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Enforcement of international arbitral awards
While arbitration can resolve various kinds of disputes it hardly can be more important to any other form dispute resolution other than commercial dispute resolution; especially in a further globalised world where international trade and commerce forces parties to be spread across a multiplicity of jurisdictions and various forums of dispute resolution. Effective international dispute resolution requires a legal structure that recognizes and enforces finality and enforceability of international arbitral awards in India. Arbitration in India is regulated by the Arbitration and Conciliation Act 1996 (Hereinafter referred to as the “ACT”). The Act was drafted in two parts; Part I dealing with Arbitration, whereas per Section 2(7) of the Act awards deal with Domestic Arbitral Awards. Part II deals with foreign arbitral awards and has been further sub-divided into two distinct chapters. Chapter one deals with Awards as regulated by the New York Convention; this is defined as per section 44 of the Act. Chapter Two deals with Awards as regulated by the Geneva Convention; this is defined as per section 53 of the Act.
The purpose of my research is to show the failures of the Indian Judicial System in its interpretation of the Act that have negatively affected the enforceability of foreign award in India. This is primarily at risk due to the Indian Courts inability to differentiate the purposes of Part One and Part Two of the Act.
Enforcement And Challenging Awards (Courts Of Competent Jurisdiction)
The first question that must be delved into is the difference in the jurisdiction of the enforceability of Foreign Awards and the jurisdiction in challenging of Foreign Awards. Article 3 of the New York Convention clearly indentifies the binding nature of Foreign Awards and that they must be “binding as per the rules and the procedure of the territory where the award is relied upon”. Article 5 has further hit the nail on the head by clearly indentifying grounds where the Recognition & Enforcement of award may be challenged/refused. The acceptance of the New York Convention into Municipal Indian Law is evident from parliament's incorporation of it in the first schedule of the Act along with section 44 of the Act. The Act itself has clearly identified the role of the Foreign Territory in the finality of the Challenging Jurisdiction in Section 48(e) of Part II of the Act; if the Judgment Debtor as per the Award shows that the Award is not final, the court of the enforcing jurisdiction may refuse the enforcement of the Award. The above mentioned distinction between Challenging Jurisdiction & Enforcement Jurisdiction leads us to ask the following questions:
1) Challenging Jurisdiction
Whether the current structure of the conventions allows for the Challenging Jurisdiction of convention awards to be considered concurrent between the “territory where the award is relied upon” & the “territory where the award is enforced”?
What is the current Challenging Jurisdiction as per the Act & its interpretation as per Indian Judicial System?
Accepting the inherent conflict between the rules and methods that various territory use to reach the final award, what is the effectiveness of the Indian Judicial System in accepting the binding effects of foreign arbitral awards?
2) Enforcement Jurisdiction
What is the extent of the enforcement jurisdiction as per the act?
It is clear from the New York Convention that courts in the territory where the award is made have jurisdiction with regards to challenging the award. Enforcing territories have clearly been given the power to adjourn proceeding with regards to enforcement till the challenging country has completed its review of the arbitration award. As per the New York Convention and the Geneva Convention (Hereinafter referred to collectively as the “CONVENTIONS”) the courts in the enforcing territory have no jurisdiction to in any way challenge the binding nature of Convention Awards as there is an obligation on enforcing territories to recognize the enforcement of such arbitral awards. Merely because the grounds for challenging an arbitral award if different between two different countries, it does not mean that concurrent jurisdiction can be assumed by courts in the enforcing territory. This inherent prevention of concurrent jurisdiction can be seen to be prevented for Convention Awards by the Act through a plain reading of the scheme & provisions of the Act. At this time it is important to distinguish between Convention International Arbitral Awards (Hereinafter referred to as the “CONVENTIONS AWARDS”) and Non Convention International Arbitral Awards); Convention Awards are those awards recognized for enforcement as per Part II of the Act. The importance of the distinction between Convention Awards and Non convention Awards are due to their treatment under the Act and hence the inherent enforceability issues that arise as per Indian Law.
Power Of Indian Courts To Challenge Foreign Awards
The importance of the distinction between Convention Awards and Non convention Awards was the distinction made in Bhatia International v. Bulk Trading. The parties to an international contract had resorted to arbitration in accordance with the rules of ICC, Paris to be conducted in Paris. As the foreign party wanted to ensure that in the event of a favorable award it would be able to recover its claim from the Indian party, it applied to an Indian court for interim measures securing the property of the Indian party. The Indian party objected to the application on the ground that the arbitration in question was being held in Paris, and under the New York Convention there is no provision for interim measure being granted by a court other than one in which the arbitration is being held. The High Court rejected the contention. The Indian party then approached the Supreme Court, which upheld the High Court's judgment. In brief, the Supreme Court of India held that Part I of the Arbitration and Conciliation Act, 1996, which gives effect to the UNCITRAL Model Law and which confers power on the court to grant interim measures applied even to arbitration being held outside India.
(a) The words "this Act" in Section 1 of the Arbitration and Conciliation Act, 1996 meant the entire Act. The entire Act applies to the whole of India, except that by virtue of the proviso to Section 1, the Act applies to the State of Jammu and Kashmir only for "international commercial arbitration" held in that State.
(b) Because of the said proviso, Section 2(2) of the Act, which states that Part I applies when the place of arbitration is India, cannot be given literal meaning.
(c) Giving literal meaning would imply that where "international commercial arbitration" takes place outside India, Part I would continue to apply in the State of Jammu and Kashmir but not in the rest of India. That would be "anomaly"
(d) The Act does not state that courts in India will not have jurisdiction if an international commercial arbitration takes place outside India. "Courts in India would have jurisdiction even in respect of an international commercial arbitration.""By omitting to provide that Part I will not apply to international commercial arbitrations which take place outside India the effect would be that Part I would also apply to international commercial arbitrations held out of India."
(e) Giving literal meaning to Section 2(2) would bring it in conflict with Section 2(4) and Section 2(5). The only way to make harmonious construction is to hold that Part I applies to arbitrations held outside India.
(f) Part I applies to a "domestic award", which naturally includes an award made in India. Part II of the Act applies to a "foreign award" made in a country that has acceded to the New York Convention of 1958. As there is no express provision for the enforcement of awards made in a non-convention country, such an award can be enforced only if it is treated as "domestic award" to which Part I would apply. That could be the only object of defining the words "domestic award", since even without the definition, an award made in India would always be treated as "domestic award".
(g) The use of the expression "judicial authority", instead of the usual "court", used in Part I indicates that the intention of the legislature was to make Part I applicable to arbitrations outside India.
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