Skip to main content

FOREIGN ARBITRAL AWARDS AND THEIR ENFORCEMENT IN INDIA

arbitration-lawji

The Indian Judiciary is known for the huge amount of time and money that goes into successful resolution of any dispute. This in particular proves very harmful for the private companies for whom time is a very important commodity. To provide speedy and effective resolution to disputes, Arbitration as a concept was introduced. This trend is becoming increasingly popular today, especially in the context of rampant industrialization and the profit motive of the private companies. Rather than wait for years for a decision based on merits by a court, parties are increasingly opting for a quicker alternative which focuses more on compromise and dispute settlement. Ever since the Liberalization, Privatization and Globalization policy of 1990s, the advent of foreign companies in India has increased. Often these countries opt for arbitration as they don’t have much faith in the Indian Judiciary. Unfamiliar as they are, with Indian laws they prefer if the arbitration happens in their parent country, governed by the rules of that country. This is allowed under the Indian Arbitration and Conciliation Act. However one must realize that getting the arbitral award is only half of the battle. The other half lies in its enforcement. India is a signatory to both Recognition and Enforcement of Foreign Arbitral Awards, 1958 (New York, 1958) (“New York Convention”) and the Geneva Convention on the Execution of Foreign Arbitral Awards, 1927 (“Geneva Convention”). If a party receives a binding award from a country which is a signatory to the New York Convention or the Geneva Convention and the award is made in a territory which has been notified as a convention country by India, the award would then be enforceable in India.[1] Out of the 196 countries in the world only 48 countries are considered as reciprocating countries.[2] Another way in which foreign awards are enforced is the ICSID convention. However, India is not a signatory to the ICSID convention, therefore the only other alternative left is the New York Convention. Some eminent Jurists have over time asserted that ICSID Convention and the Bilateral Investment Treaty method of dispute resolution and enforcement is far superior to the New York Convention method. A third alternative is also presented in the form of the UNCITRAL method. Meanwhile others claim that enforcing an award under ICSID or New York Convention does not differ significantly, primarily on three grounds.[3] First and most important, a legal ground: the ICSID and the New York Convention enforcement system both contain a form of safeguard mechanism against ‘blind’ enforcement of awards (albeit at a different stage): the annulment procedure and the national review procedure, respectively, whereby the latter has certain significant advantages over the former. Second, a policy ground: several States have expressed doubts about the ICSID system, sometimes even choosing to withdraw from the ICSID Convention, whereas New York Convention membership remains constant. And third, a practical ground: actual enforcement and compliance rates are equally high under both systems. A safeguard against blind enforcement is provided in the form or annulment or national review procedure. The ICSID Convention provides for annulment procedures. It claims that all awards that are given are permanent in nature, i.e they cannot be challenged before a domestic court. However it also gives a protection and lays down grounds when a state can file an application for annulment of the award. In the first fifteen years since the act had come into force, hardly any party filed an annulment application, however these days the trend is on the rise. Article 52 of the ICSID Convention since its entry into force in 1966: awards can be annulled for one or more of the following (exhaustively enumerated) reasons:






(1) Either party may request annulment of the award by an application in writing addressed to the Secretary-General on one or more of the following grounds:

(a) That the Tribunal was not properly constituted;

(b) That the Tribunal has manifestly exceeded its powers;

(c) That there was corruption on the part of a member of the Tribunal;

(d) That there has been a serious departure from a fundamental rule of procedure; or

(e) That the award has failed to state the reasons on which it is based.



The New York convention on the other hand places an obligation on member states to recognize the award as binding and allows for a national review procedure only on certain grounds listed in Article 5(1)

(a) The parties to the agreement referred to in article II were, under the law applicable to them, under some incapacity, or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of the country where the award was made ; or

(b) The party against whom the award is invoked was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings or was otherwise unable to present his case; or

(c) The award deals with a difference not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration, provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, that part of the award which contains decisions on matters submitted to arbitration may be recognized and enforced; or

(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; or

(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.

Considering that both the annulment and review grounds are almost similar, a certain question is raised about whether ICSID is indeed a better option, given that it provides for annulment of award which will lead to far devastating consequences as then the parties will have to start afresh with the arbitration. Several times a national review is essential if there are some legal differences because of which enforcement cannot be done. The second ground is state perception, under the ICSID rule, a lot of states have actually left the ICSID convention, whereas the New York convention has had a fairly consistent membership. 

Having established that, now let us analyze whether the national review procedure and subsequent judicial intervention is feasible or not. The Act contemplates three situations where judicial authority may intervene in arbitral proceedings4. These are:

I. Appointment of arbitrators, where the parties’ envisaged method for the same fails (S 11);

II. Ruling on whether the mandate of the arbitrator stands terminated due to inability toperform his functions or failure to proceed without undue delay (S 14 (2))

III. Provide assistance in taking evidence (S 27). 

These have in practice provided a backdoor entry for the judiciary to enter which essentially defeat the very purpose of arbitration in the first place. 

Rule 34 of the UNCITRAL Model Rules & S 34 of the Arbitration and Conciliation Act,1996 provides grounds for setting aside an arbitral award and one of the grounds is that where the award is in conflict with the public policy of the state. This again gives a lot of leeway to the judiciary to intervene by citing “public policy”. The entire purpose of arbitration, party autonomy and the need for out-of-court settlement therefore goes out of the window. 

Conclusion
Indian arbitration set up has grown tremendously in the recent years, with more and more parties opting for arbitration. The foreign awards are primarily governed by UNCITRAL and New York convention. It is already established that India not being a signatory to the ICSID doesn’t harm the parties as the other mechanisms are equally good. the problem of Judicial Intervention still remains in the enforcement of awards. However given the present dearth of skilled arbitrators who actually know the law, it becomes vital for judiciary to intervene and ensure that justice is done and dispute resolved. What is necessary for the arbitration culture to grow, and for parties to place faith in this setup is to ensure quality arbitrators who do their work efficiently without bias and judicial restraint, once that has become a reality. Arbitration has come a long way and has a longer way to go still.
--------------------------------------------------------------------

[2] Australia; Austria; Belgium; Botswana; Bulgaria; Central African Republic; Chile; China (including Hong Kong and Macau) Cuba; Czechoslovak Socialist Republic; Denmark; Ecuador; Federal Republic of Germany; Finland; France; German Democratic Republic; Ghana; Greece; Hungary; Italy; Japan; Kuwait; Mauritius, Malagasy Republic; Malaysia; Mexico; Morocco; Nigeria; Norway; Philippines; Poland; Republic of Korea; Romania; Russia; San Marino; Singapore; Spain; Sweden; Switzerland; Syrian Arab Republic; Thailand; The Arab Republic of Egypt; The Netherlands; Trinidad and Tobago; Tunisia; United Kingdom; United Republic of Tanzania and United States of America. 

[3] Baetens, Freya, Enforcement of Arbitral Awards: 'To ICSID or Not to ICSID' is Not the Question (2011). Todd Weiler, Ian Laird, eds., Investment Treaty Arbitration and International Law, Juris Arbitration Series, Vol. 5, Juris New York, 2012 (pp. 211-228). Available at SSRN: https://ssrn.com/abstract=2130694

Popular posts from this blog

Art of Cross Examination used by: Sr. Adv. Ram Jethmalani, Supreme court

“The issue of a cause rarely depends upon a speech and is but seldom even affected by it. But there is never a cause contested, the result of which is not mainly dependent upon the skill with which the advocate conducts his cross examination.”- Francis L. Wellman

When asked, the undisputed champion of cross-examination, Mr. Ram Jethmalanidescribed the art of cross-examination as the most effective weapon for the discovery of truth, provided the objective is not to confound a truthful witness but to extract truth from an unwilling witness.
The search for truth is the ultimate and idealistic end of all litigated matter in a court trial, and that truth is obtained due to the process of cross examination in the conduct of litigation.

Mr. Jethmalani understands that in India where large number of complaints and cases are filed in civil and criminal courts every day, delay in justice is common due to the rapidly growing pendency of cases in courts. Examination of witnesses plays an important …

Rights to Constitutional Remedies- Writs under Art. 32 and 226 of Indian Constitution

Under the common law system, a writ is meant to be a written order, informal in nature which is issued by either by an administrative or judicial body. The aim of this paper is to identify writs as a constitutional remedy. The paper is divided into four parts. The first part would deal with the origin, purpose of writs which would examine the historical developments that took place with respect to writs. The second part of the paper would be specific to the Indian Legal Systems. This part would closely examine the existence and use of writs as per the provisions of the Indian Constitution as a constitutional right to remedy. The third part of the paper would elaborate on all the types of writ remedies and its usage in the Indian Legal System. The last part of the paper would be the conclusion that would deal with appraisal and the critical analysis of writs. The purpose of this paper is to celebrate writs as a powerful constitution remedy and highlight the importance of the same in th…

Dishonour of Cheque: Punishment under NI Act

INTRODUCTION:Negotiable Instrument literally means any promissory note, bill of exchange or cheque, and in easier terms, it means a piece of paper which will hold the promisee to claim some amount of money out of the paper. Section 6 of the Negotiable Instruments Act defines the word cheque. It further is classified as Bearer Cheque, Crossed Cheque, Self Cheque, Post-dated cheque, Banker’s cheque and traveller’s cheque. In general sense, cheques are the easiest way to transact in the present times. One may easily transfer money through cheques over long distances on a daily basis. On one hand, wherein cheques are used to transact daily over the relationship of trust, it is always advisable on the face of it during transactions that the cheque be issued in the crossed account payee section to avoid its misuse. It is also stated that the transactions as these cheques are not negotiable to any other person than payee, it gives a prima facie advantage to both of them. In a layman’s langua…

Advt.