Position of ICA in India

In India, ICA is defined as arbitration where at least one party is not a national or a permanent resident of India under the Arbitration Act or body corporate incorporated in a country other than India or an association or body of individuals whose central control is outside India or government of a foreign country.

The ICA was not frequently sought in India before 1991, but since 1991, due to the opening of the economy, ICA has become a necessity, as the sooner the commercial dispute is resolved, the better it is for trade and the economy of the country. In 2015 amendment to Arbitration Act, allowed more provision of Part I of the Act to apply towards ICA. The courts have also refrained from interfering in the arbitral process of ICA, thus allowing the parties to resolve their dispute in manner they have decided.

What is Foreign Award?

As specified in the Arbitration and Conciliation Act of 1996 (hereinafter referred as “Arbitration Act), a foreign award is one made based on a dispute between two parties that arose out of a legal relationship and was of a commercial nature. The award should satisfy two conditions. –

• As a first step, the award should be made in accordance with the written arbitration agreement entered between the parties, and the Convention mentioned in the first schedule of the Arbitration Act should apply.
• As to the second requirement, the award has been passed in a territory that has reciprocity with India, which is confirmed by a notification in the Official Gazette.

Any such foreign award would be binding on all parties for all purposes, and it could be relied on for defence, set off or other legal proceedings

Legality of foreign arbitral award

Chapters two and three of the Arbitration Act deal with two conventions dealing with enforcement of foreign arbitral awards in India. i.e. New York Convention on Recognition and Enforcement of Foreign Arbitral Awards, 1958 and Geneva Convention on the Execution of Arbitral Awards, 1928. The Arbitration Act incorporates provisions of both of these conventions that facilitate the enforcement of foreign arbitration awards.

Most of the countries adhere to the New York Convention for the purpose of enforcing foreign awards and thus most arbitral awards are enforced through this convention. India has no express bilateral or multilateral agreements with any country for the purpose of enforcing a foreign award however the New York Convention covers the majority of countries.

Appropriate Forum and Limitation Period

In the event of a successful arbitration, the winning party should file a claim with the commercial division of the relevant High Court in whose jurisdiction the award is to be enforced.

It is important to note that the award is related to money or such asset which falls within the jurisdiction of such High Court. The foreign award is subjected to limitation period within which it has to be applied for the enforcement, once such limitation period is over, the award would be considered null and void and its enforcement cannot be sought any longer.

Foreign awards are generally deemed to be judgments of the court, and are therefore subject to the same limitations as a court decision, hence the limitation period for the enforcement of foreign awards is twelve years.

Necessary Documents

After the successful party files the execution petition in the concerned High Court, certain documents must be produced to establish the authenticity of the claim and the arbitral award.

If the documents produced before the court are in foreign language than the applicant shall provide a translated copy of such document and that such translated copy should be certified as correct by diplomatic or consular agent of such country to which the party applying for enforcement of award belongs.

The following document which have to be presented before the court are-

• The original award or its copy duly authenticated in the manner as prescribed by the law of the country in which it is made.
• The original arbitration agreement of the parties or its duly certified copy. Any other documents or evidence which is necessary for substantiating the award as foreign award.

Necessary Requirements and Objections

In order to become enforceable under Indian law, foreign awards must satisfy certain requirements stipulated under the Arbitration Act. Defendant/award debtor may raise objections to the enforcement of the foreign award if these requirements are not met by the foreign award.

 The defendant may object to the enforcement of the foreign award in the following ways –

• The parties to the arbitration agreement were under any kind of incapacity.
• The arbitration agreement pursuant to which the foreign award was rendered is not in accordance to the law parties have subjected it to or the law of the country where the award is made.
• The original defendant was not given proper notice of appointment of arbitrator or arbitral proceedings or the award was passed against the defendant without him being able to present his case.
• The award is beyond the scope of arbitration agreement or submission to arbitration.
• The award contains decisions on such matter which are not capable of being submitted to arbitration.
• The composition of arbitral tribunal and the arbitral procedure was not in accordance to the arbitration agreement or ultra vires to it.
• The composition of the arbitral tribunal and the arbitral procedure was not accordance to the law to which parties have opted or the law of the place where the award was made.
• The foreign award has not yet become binding on the parties or it has been suspended or set aside by the competent authority of the country in which, or under the law of which that award was made.
• The award is given in a dispute whose subject matter is beyond the scope of settlement though arbitration.
• The award if enforced would be contrary to the public policy of India.

With the exception of the objection that discusses public policy, all of the objections are clear and descriptive.

Despite the law being silent on what would be considered as contravention to public policy, India’s apex court has at various occasions discussed about. Summing up the ratios of apex court following conditions should assist in deciding contravention of public policy-

• Fundamental policy of India
• Interest of India
• Justice & Morality

In deciding whether to refuse enforcement of a foreign award, the courts cannot review the merits of the case or look beyond these specified grounds. As soon as the court has made a decision about the enforceability of the award, the enforcement process can begin.

Execution of the Award

Following a court’s decisions with regard to the enforceability of the foreign award, if that award is found to be appropriate for enforcement, it may be enforced using the Civil Procedure Code of India’s procedures and methods.

As the award debtor, the party whose award has been rendered will have to file a separate enforcement petition with the High Court where enforcement proceedings were commenced or in any other court that such High Court may direct.

The court in order to execute the award may upon the application of award creditor-

• Delivery any specific property decreed.
• Attach or sale any property of the award debtor.
• Order the award debtor to deposit sum of money with the court.

Approach of India Courts

A significant increase in the use of ICA has allowed all parties to generate considerable revenue, whether they are a private entity or a government entity. Consequently, with the changing scenario of dispute resolution, even the courts have changed their approach as well.

In the past, courts were reluctant to enforce foreign awards, however, nowadays courts are pro-enforcement and strictly adhere to the principle of non-interference with foreign awards.

Indian courts and the Indian legislative structure have largely been responsible for making India an arbitration-friendly destination.

One of the prime reasons behind the pro-enforcement approach of the Indian courts is the New York Convention whose bedrock is limited interference by courts who enforce foreign awards. The law itself restricts the court’s power to interfere and the grounds provided for setting aside enforcement are also exhaustive thus leaving no scope for courts to make ground on their own.

The BALCO judgment[1] was the turning point for Indian judiciary, post this judgment it was clear that foreign arbitral awards are subjected to the jurisdiction of Indian courts when their enforcement is sought.

India became an enforcement-friendly nation as a result of this shift in judicial mindset. The Supreme Court reaffirmed the pro-enforcement approach of India in its latest decision in Vijay Karia v. Prysmian Cavi E Sistemi SRL, in which it advised courts to temper their enthusiasm when intervening in foreign awards enforcement, this judgement reaffirmed the pro-enforcement approach of Indian courts.

[1] Bharat Aluminium Co. v. Kaisher Aluminium Technical Services, (2012) 9 SCC 552 (India)

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