RECURRING GLITCHES AND NIGHTMARES: ENFOECEMENT OF FOREIGN

ARBITRAL AWARDS IN INDIA1

Abstract

Arbitration is best known for the flexibility, cost effective, and less time consuming. The growth

in domestic and international trade and commerce has spurred competition, provided new

opportunities and imputed risks. Commercial arbitration in India is witnessing a steady

transition and resolution of domestic and cross border disputes is becoming more sophisticated.

In foreign arbitration matters choosing of seat matters a lot as it is only a seat which decides the

legal framework by which the subject matters governs, There are now coming up institutional

arbitrators having their chapters in India comprising of some specialized arbitrators in diverse

fields.

Domestic laws of different countries adopt varying approaches on how much power of

adjudication can be vested in tribunals which function outside the States’ monopoly in

administering justice. The "recognition" of a foreign judgment occurs when the court of one

country or jurisdiction accepts a judicial decision made by the courts of another "foreign"

country or jurisdiction, and issues a judgment in substantially identical terms without rehearing

the substance of the original lawsuit. Indian judiciary has taken an expansionary stance in

respect of its power of intervention.

In the article, author focuses on the enforcement of foreign arbitral award in India in the

international commercial arbitration. It will attempt to explore the grey areas in the arbitration

regime in context of enforcement of foreign arbitral awards in Indian Territory. Furthermore,

author will deal with the settling and unsettling of issues in post BALCO regime. Author will

conclude the article with some suggestive measures which can be helpful in order to ensure swift

enforcement of foreign awards keeping the minimum interference of judiciary.

Keywords: award, commercial, judiciary.

Word Count –

1 Divyakant Singh Rathore, Sem VIIIth B.A.LL.B(Hons.), Institute of law, Nirma University

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I INTRODUCTION

Evolution of Arbitration as a dispute settlement mechanism is promising in last few years. It can

be said that judiciary, inter alia, for alternative way for resolving disputes. The mode of

arbitration guarantees finality of decision, less documentation and procedural glitches. Moreover,

it is cost effective and speedy mode for solving dispute among the parties.

In the era of globalization, no state can remain in isolation and simultaneously boost its

economy. Thus, there felt a need of international trade and agreements. With the opening up of

economy and advent of international commercial contracts, there also lies propensity of parties to

default on their promises. Thus, to preserve a sanctity of any trade and business, a way out

becomes quant essential in order to bypass all tedious and cumbersome Court procedures. Thus,

now – a- days, parties in international contracts often resort to the arbitration in case of any

disputes.

In 1996, India enacted a new arbitration statute, the Arbitration and Conciliation Act

19962, and repealed the prior statutory framework.3International commercial agreement comes

under the ambit of Arbitration and Conciliation Act, 1996.4Enforcement of foreign awards was

dividedbetween two statutes — a 1937 Act to give effect to the Geneva Convention awards and a

1961 Act5 to give effects to the New York Convention awards.6

II SEAT CENTRIC APPROACH: TOWARDS NEUTRALITY

2Hereinafter referred as Act.3The Arbitration and Conciliation Act, No. 26 of 1996, INDIA CODE (1996), available at http://indiacode.nic.in. (Last accessed on 8 April 2014).4See S. 2(f) of the Act “International commercial arbitration” means an arbitration relating to disputes arising out of legal relationships, whether contractual or not, considered as commercial under the law in force in India and where at least one of the parties is- (i) An individual who is a national of, or habitually resident in, any country other than India; or(ii) A body corporate which is in corporate in any on n try other than India; or(iii) A company or an association or a body of individuals whose central management and control is exercised in any country other than India; or(iv). The Government of a foreign country;5The Foreign Awards (Recognition & Enforcement) Act 1961 (No 45 of 1961) (‘1961 Act’).6Sumeet Kachwaha, Enforcement of Arbitration Awards in India, 1 ASIAN INTERNATIONAL ARBITRATION JOURNAL 4, 64 (2008).

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An International commercial arbitration usually takes place in a “neutral country” which means

that none of the parties to the arbitration belong to it either in terms of business or residence,

purpose thereby to eliminate the influential factor. This arrangement in International commercial

arbitration has evolved two terms namely lex arbitri and lex fori as to provide efficacy in the

same.7Lex fori means procedural rules of the place of the arbitration in which it is held and will

be different from the law that governs the substantive matters in dispute called lex arbitri.8 For

example, an arbitral tribunal with its seat in London is required to decide the substantive issue in

dispute between the parties from India and Australia will be governed by the relevant British law

in procedural aspect precisely called lex fori. This difference which has firmly established in the

international commercial arbitration was initially part of the juridical tradition of continental

Europe.9

The concept of lex foriis fundamentally connected with the conducting place of the

international commercial arbitration which is called the 'seat of arbitration'. The seat of

arbitration is primary legal jurisdiction to which the arbitration is attached and a legal location

for the purpose of its proceedings.10 The 'place of arbitration' is similar to 'seat of arbitration' and

both of them are often used interchangeably11 although they are very much distinguished from

the physical location of any arbitration hearings and meetings which is termed as the venue of

the arbitration.12 The 'seat' or 'place' only indicates the geographical location for the arbitration,

this does not restrict or limited parties to conduct all the proceedings over there.13 Parties and

arbitrators can choose a location other than the seat called venue, as in the international

commercial arbitration most of them generally belongs to different countries, therefore it may

not always be convenient to them to attend the hearing every time at the seat of arbitration. The

various laws, rules and regulations related to the international commercial arbitration are also

7ALAN REDFERN AND MARTIN HUNTER, LAW AND PRACTICE OF INTERNATIONAL COMMERCIAL ARBITRATION, 78(4th ed. Sweet and Maxwell) (2004). 8UNCTAD, International Commercial Arbitration, Law Governing the Merits of the Dispute, 3 (2005) available at http://unctad.org/en/Docs/edmmisc232add40_en.pdf (Lastaccessed on 6 April 2014).9FOUCHARD, GILLARD, INTERNATIONAL COMMERCIAL ARBITRATION, KLUWER LAW INERNATIONAL (1999).10SIMON GREENBERG, CHRISTOPHER KEE, INTERNATIONAL COMMERCIAL ARBITRATION: AN ASIA-PACIFIC PERSPECTIVE, 56 - 57(CAMBRIDGE UNIVERSITY PRESS, NEW YORK) (2011).11Id.12 These concepts were discussed in the case of New South Wales Supreme Court of American Diagnostic Inc v Gradipore (1998) 44 NSWLR 312, although the issue involved over there was related to the possibility of conducting the arbitration at a place other than the seat.13Saville J. in Union of India v McDonnell Douglas Corp (1993) 2 Lloyd's Rep. 48.

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allow to hold hearings, meetings and deliberations at any place irrespective of the location of

seat.14 Thus, deciding the seat is of utmost importance as it governs the rules and regulations.

Parties can eliminate the legal procedure of a country whose legal position is complex.

IIIENFORCEMENT OF FOREIGN ARBIRAL AWARDS: CONDITIONS STIPULATED

Part II, Chapter 1 of the Act deals with the enforcement of foreign arbitral awards. It is

imperative for the winning party to seek enforcement of the arbitral award against the recalcitrant

party in order to obtain the relief that it was granted.15 Thus, enforcement comes at secondary

stage and takes place at the losing party’s state. So, what are the implications of enforcement of

award and essential considerations regarding the same has to be considered by the state will be

studied in a detailed manner. The Act is based on the Model Law on International Commercial

Arbitration adopted by the United Nations Commission on International Trade Law

(UNCITRAL) in 1985.16

 The Geneva Convention and the New York Convention are steps towards bringing about

uniformity in the matter of enforcement of arbitral awards.17 This aspect was highlighted by the

US Supreme Court in Scherk v. Alberto-Culver18 thus:

"The goal of the New York Convention, and the principal purpose underlying

American adoption and implementation of it, was to encourage the recognition

and enforcement of commercial arbitration agreements in international contracts

and to unify the standards by which agreements to arbitrate are observed and

arbitral awards are enforced in the signatory countries.”

Here, it is pertinent to mention that for enforcing a foreign award, there should be two

conditions which need to be satisfied. First, it must satisfy S. 2(f) of the Act which deals with the

14 See Art. 14 of ICC Rules of Arbitration and Art. 16 of LCIA.15G K KWATRA, ARBITRATION AND ALTERNATIVE DISPUTE RESOLUTION 108 (2008).16NIDHI GOYAL AND GANESH IYER 1 available at http://www.iyerschambers.com/docs/ArbitralAwards.pdf (Last accessed on 11April 2014)17Dhyan Chinnappa, Enforcement of Arbitral Awards, 8 SCC (Jour) 39 (2002) available athttp://www.ebc-india.com/lawyer/articles/2002v8a3.htm (Last visited on 7 April 2014).18417 US 506, 520.

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International Commercial Arbitration. Supreme Court in the case of RM Investments Trading Co

Pvt Ltd v Boeing Co &Anor, while construing the expression ‘commercial relationship’, held:

“The term ‘commercial’ should be given a wide interpretation so as to cover

matters arising from all relationships of a commercial nature, whether

contractual or not.”

Secondly, the country where the award has been issued must be a country notified by the Indian

government to be a country to which the New York Convention applies.19"Reciprocating

territory" is defined in explanation 1 to Section 44A ofIndia's Civil Procedure Code as: "Any

country or territory outside India which the Central Government may, by notification in the

Official Gazette, declare as a reciprocating territory.”20Thus, it can be inferred that if a

contractual nation is not notified by Central Government then Indian party will remain

remediless.

A party holding foreign award can apply for enforcement of it, but the court before taking

the further steps for execution of the award has to proceed in accordance with Sections 47 to

49.21To enforce a foreign arbitral award a petition for enforcement/execution is to be filed before

the relevant principal Civil Court of original jurisdiction in India, along with (i) the award in

original or a copy duly authenticated in accordance with the law of the country of origin and

India, (ii) the arbitration agreement original or a duly certified copy and (iii) any other evidence

necessary to show that the award is a Foreign Award.22

There is no statutory provision to set aside a foreign award under the 1996 Act. Foreign

awards may be set aside or suspended in the country in which or under the laws of which the

award was made but there is no provision to set aside a foreign award in India.23

S. 48 of the Act, 1996 lays down the conditions for enforcing a foreign arbitration award

in India. Grounds for refusal of enforcement are provided for under Section 48 are similar to the

19 S 44(b) of the Act.20Ashish Mittal, Enforceability of Foreign Judgements and Foreign Awards 3 available at http://www.maheshwariandco.com/repository/articles/downloads/enforceability_of_foreign_judgments_and_foreign_awards.pdf ( Last visited on 16 April 2014).21 J D KAPOOR, COMMENTARY ON THE ARBITRATION AND CONCILIATION ACT, 762 (5th Ed 2011).22 S 47(1) of the Act.23Kachchawa, supra note 5, at 4.

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New York Convention.24Enforcement of foreign award cannot be entertained if parties to the

agreement referred to in S. 4425 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;26 or the party

against whom the award is invoked was not given proper notice of the appointment of the

arbitrator or of the arbitral proceedings or was otherwise unable to present his case;27 or 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.28

Moreover, award can also be refused to enforce if 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; 29or 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.30Thus, there are considerable numbers of grounds which are enunciated in the

Act on the basis of which enforcement cannot be granted.These grounds are broad in nature and

encompass several sub grounds which can be included by the judiciary subjected to the facts and

circumstances of the case.It provides an opportunity for the judgment debtor to restrict the

judgment creditor in enforcing the award of the arbitration tribunal. It gives chance to party to

make a successful plea if the award is sheer blunder of the substantive provisions or natural

justice principles.

PUBLIC POLICY CONUNDRUM

24Ashish Mittal, Enforceability of Foreign Judgements and Foreign Awards 5 available at http://www.maheshwariandco.com/repository/articles/downloads/enforceability_of_foreign_judgments_and_foreign_awards.pdf ( Last visited on 16 April 2014).25 It deals with foreign award. It means an arbitral award on differences between persons arising out of legal relationships, whether contractual or not, considered as commercial under the law in force in India, made on or after the 11th day of October, 1960.26 S 48(1)(a) of the Act.27 S 48(1)(b) of the Act.28S 48(1)(c) of the Act.29 S 48(1)(d) of the Act.30 S 48(1)(e) of the Act.

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Public policy is one of the disputable aspects in reference as a ground for rejection of

enforcement of an award. It’s a separate independent issue in its entirety when comes to rejection

of enforcement of award on the basis of public policy by Supreme Court. There is little doubt

that the court’ssupervisory powers in this respect are necessary as it provides the arbitral

processwith a procedure of ‘checks and balances’ to ensure a fair and impartial process.31Apex

Court has not been successful in defining the scope of public policy when it comes to the

international arbitration matters. New York Convention does not provide any guidance for the

national courts as to how the public policy defense should be interpreted.32In India, the

enforcement of award can be rejected on ground of public policy.33 There is an evolvement of the

concept of public policy by the judiciary in last few decades. Judiciary has constantly changed

the scope of public policy through judicial pronouncements in both Domestic and International

arbitration. An award contrary to the substantive provisions of Act or against the terms of

contract would be ‘patently illegal’ and opposed to the public policy in India.34

Starting up with the case ofRenusagar Power Co. v. General Electric Co.35 in which Supreme

Court had dealt with the challenge to the enforcement of a foreign arbitral award on the grounds

of ‘public policy’ under Section 7(1)(b)(ii) of the Foreign Awards Act (the Foreign Awards Act

was the applicable law concerning enforcement before the Arbitration and Conciliation Act of

1996 took effect).36It lay down that a foreign award can be challenged on the grounds of ‘public

policy’ if it is against: fundamental policy of Indian law; or the interests of India; or third justice

and morality. Later court held that an award contrary to the substantive provisions of Act or

against the terms of contract would be ‘patently illegal’ and opposed to the public policy in

India.37

31Sameer Sattar, Enforcement of Arbitral Awards and Public Policy: Same concept, different approach? 3 available at http://www.employmentlawalliance.com/Templates/media/files/Misc%20Documents/Enforcement-of-Arbitral-Awards-Public-Policy.pdf (Last visited on 17 April 2014).32Id at 4.33 S. 42(2)(b) of the Act.34Jaya V S, Finality and Enforcement of Foreign Awards: reflections on the Indian Arbitration Law, 4 ASIAN LAW REVIEW 2, 45 (2007). See alsoONGC v. Saw Pipes, AIR 2003 SC 2629.35(1994) 1 S.C.R. 22.36 Ratin Somnath, Enforcement of Foreign Arbitral Awards in India: Lal Mahal Reduces the Scope of Court Interference 2 (2013) available at http://ssrn.com/abstract=2348573 (Last visited on 9 April 2014).37Jaya V S, Finality and Enforcement of Foreign Awards: reflections on the Indian Arbitration Law, 4 ASIAN LAW REVIEW 2, 45 (2007). See alsoONGC v. Saw Pipes, AIR 2003 SC 2629.

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In the another landmark case of Venture Global Engineering v. Satyam Computer

Services, Ltd,38 Supreme Court held that Section 34, which allows awards to be set aside if they

contravene “public policy,” does apply to International awards.39The Indian Supreme Court

heldthat the losing party could bring an independent action in India to set aside a foreignarbitral

award on the expanded grounds of public policy as set out in the case of Saw Pipes.

Up till now, debate of public policy is restricted within the contours of domestic

arbitration. But, in the case of Phulchand Export Ltd v OOO Patriot40the scope of ‘public policy’

to ‘set aside’ an award passed in India (under Section 34, Part I) and challenge the enforcement

of a foreign arbitral award (under Section 48, Part II) would be the same. Finally, comes the case

ofSriLal Mahal v. Progetto Grano SPA41where Supreme Court has settled the domain of public

policy. The court in Lal Mahal established the difference between the assessment of foreign and

domestic arbitration awards.42 It applied the narrower interpretation of ‘public policy’ elucidated

by the court in Renusagar and struck down its decision in Phulchand. It found the judgment

inPhulchand to be incorrect law and was struck down.

“If a ground supported by the decisions of that country was not good enough for

setting aside the award by the court competent to do so, a fortiori, such ground

can hardly be a good ground for refusing enforcement of the award.”

Hence, the application of public policy in enforcement of foreign arbitral awards is very

much settled in India.Public policy grounds does not involve ‘patently illegal’ as a separate

ground when it comes down to foreign awards. It is essential to limit the judicial interference in

foreign arbitral awards on the basis of public policy as enforcement is second stage of any

arbitration. The ambit of public policy is very large. Thus, it becomes essential to discern the

objective of public policy which can be related to the purpose and nature of arbitration.

BALCO CASE: DAMAGE UNDONE

38(2008) 4 SCC 190.39Alden L. Atkins, Supreme Court of India Makes It Easier to Set Aside Foreign Arbitral Awards, 9 TEXAS TRANSNATIONAL LAW QUARTERLY (2008). 40(2011) 10 SCC 300.41Civil Appeal no. 5085 of 2013, arising out of Special Leave Petition no. 13721 of 2012.42 Somnath, supra note 35, at 4.

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There was a lot of ambiguity in dealing with foreign arbitral awards in terms of their set aside or

applicability of Part I of the Act on foreign arbitral awards. Here, it is imperative to look some

background of cases before coming up of recently pronounced landmark case of Bharat

Aluminium Co. v. Kaiser Aluminium Technical Services Inc.43

In Bhatia International v. Bulk Trading SA44, the Supreme Court held that Indian courts

could exercise the powers conferred on them by Part I of the Act even in cases where the seat of

the arbitration was outside India.45 In Venture Global 46case, Supreme Court held that Part I of

the Arbitration Act is applicable to a foreign award of the sole arbitrator, appointed by London

Court of International Arbitration,

It would, therefore, follow that if the arbitration agreement is found or held to provide for

a seat place of arbitration outside India, then the provision that the Arbitration Act, 1996 would

govern the arbitration proceedings, would not make Part I of the Arbitration Act, 1996 applicable

or enable Indian Courts to exercise supervisory jurisdiction over the arbitration or the award.47

Arguments were raised in the BALCO case that by non application Part I of the Act to

foreign seated arbitrations, parties are effectively left without remedies in so far interim relief is

concerned but the Supreme Court rejected those arguments and observed that any gap in the law

must be remedied by Parliament rather than the court.48Extending the applicability of Section 9

to arbitrations which take place outside India would be to do violence to the policy of the

territoriality declared inspection2(2) of the Arbitration Act,1996.49

Supreme Court has literally interpreted S. 2(2)50 of the Act and on this reason they come

on to the conclusion that Part I is limited in its application to arbitrations which take place in

43(2012) 9 SCC 552.Hereinafter referred as BALCO case.442002(4) SCC 105.45Promod Nair, Piloting a Much-Needed Course Correction:The Decision of the Indian Supreme Court in BALCO v Kaiser Aluminium, ASIAN DISPUTE REVIEW 99 (2013).462008 4 SCC 190.47 Supra note 42, ¶ 122 .48Divya Sharma, Franchising Disputes In India – Choices Dictate The Consequences, 11 INTERNATIONAL JOURNAL OF FRANCHISING LAW 26 (2013) availableathttp://www.twobirds.com/~/media/PDFs/Brochures/Franchising/Franchising%20disputes%20in%20India%20-%20choices%20dictate%20the%20consequences.pdf (Last visited on 18 April 2014).49 Supra note 42, ¶163.50 This Section deals with the Scope of the Act. It refers that Part I shall apply where the place of arbitration is in India.

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India.51 Thus, if there is any arbitration which is outside the territory of India then in that case,

provisions given under Part I will not cease to apply. Furthermore, Court stated that in absence of

word “only” in S. 2(2) will not lead to the conclusion that Part I can be extended to international

arbitration.52

Court pointed out that even though Part II deals specifically with recognition and

enforcement of certain foreign awards yet provision is made for annulment of the award by two

Courts, i.e., Courts of the country in which the award was made or the Courts of the country

under the law of which the award was made.53 Thus, National courts do not have any jurisdiction

to set aside the award if award is made by the rules and regulations or law of foreign authority.

Court upholded the principle underlying the New York Convention which embodies

consensus evolved to encourage consensual resolution of complicated, intricate and in many

cases very sensitive International Commercial Disputes. Therefore, the interpretation which

hinders such a process ought not to be accepted.54 Thus, foreign award cannot be annulled on the

exclusive grounds that the Indian law governed the substance of the dispute.55

ENFORCEMENT OF FOREIGN AWARD IN INDIA: UNANWERED QUESTIONS

No country wants to limit its trade relations in this globalized world which now become a

shrunken village. Time and cost are important and precious tools for any Company across the

globe.

Emphasizing the necessity of providing efficient and predictable remedies, many suggest that

because foreign investors typically prefer arbitration, the legal system should provide a pro-

arbitration and therefore pro-investment environment, thereby minimizing the risk premium

factored into potential legal costs by foreign parties doing business in India.56 Investors will be

reluctant to enter in those countries where legal procedure is marred by unreasonable

51Supra note 42,¶ 62.52Id at ¶ 69.53Id at ¶124.54Id at ¶158.55Id.56Amelia C. Rendeiro, Indian Arbitration and Public Policy, 89 TEX. L. REV. 699, 704 (2011).

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interference of judiciary. In the 2010 Foreign Direct Investment Confidence Index, India ranks

third in the world in attractiveness to foreign investors, behind only China and the United States,

based on a survey assessing the sentiments of senior executives at the world’s largest

companies.57

Although, after the arrival of BALCO case many of the ambiguity regarding Court

interference has been amicably settled but still there are certain questions which need to be

answered that can be imperative for deciding the tilt of investment in the country.In the BALCO

case, Court has rightly identified the territorial principle which is core behind discerning Part I

and Part II of the Act. The arbitration proceedings should be more seats centric rather than

relying on the subject matter. It is to be considering that BALCO judgmentis meant to be applied

prospectively.58Therefore, agreements that are executed before the judgment will still be

governed by the pre BALCO regime leaving hardships for the foreign investors.Apex Court has

attempted to neutralize the impact of such significant change in settled legal position, by making

the Judgment effective prospectively. However, the same may not appreciated by all, since the

arbitration agreement already executed and the foreign arbitral proceedings already commenced

would continue to be subject to interference by the Indian courts. Another astonishing element of

the judgment is no availability of Interim order as S. 9 of the Act which deals with interim relief

fall under Part I. Thus, interest of parties having assets in India cannotbe duly safeguarded.

The grounds which were laid down in Renusagar case for public policy were finally

accepted in Lal Mahal case but these grounds are also very vague and too broad in nature as the

terms like justice and morality itself very large and subjective in nature. Thus, it becomes

imperative to define ‘public policy’ which is nowhere yet given in the Act.

Therefore, it becomes important to uphold the very purpose of Arbitration as an

alternative mode of dispute resolution. If the Arbitration procedure is hurdled by the judiciary or

some other authority then it can lead to two consequences. Firstly, in the case of international

commercial arbitration, foreign party may lose interest in maintaining any trade relations leading

to trimming of trade contracts. Secondly, it will raise some robust questions on the mechanism of

57A.T. Kearney, Investing in a Rebound: The 2010 A.T. Kearney FDI Confidence Index 10 (2010), available at http://www.atkearney.com/images/global/pdf/Investing_in_a_Rebound-FDICI_2010.pdf. (Last visited on 13 April 2014).58Supra note 42, ¶201.

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arbitration as people will start losing the trust on it.Enforcement is second stage of an arbitration

proceeding. If an award is passed by the arbitral tribunal seated in foreign country and when it

comes to enforcement, Indian courts deny to enforcement then the whole purpose of arbitration

proceedings will vitiate. However, only limited grounds to be given for rejecting the enforcement

application.

Another factor which comes into the issue is regarding the time limitation for the

enforcement of an award. There exist time limit for setting aside of a domestic award. 59Thus, it

becomes equally essential to set time limit within which enforcement proceedings needs to be

concluded once application is given. There is plethora of cases where party speedily gets an

arbitration tribunal award but the enforcement of award stretches up to 3 – 4 years which makes

entire exercise of arbitration futile. This elapsed of time leads to loss of trade and money to both

the parties.

There exists provision for appeal against the order of refusing the enforcement.60This will

again start the tenacious cycle of litigation. However, there should be a centralized mode of

appealing which shall lie only in Supreme Court on the grounds of big blunder by the court. The

endeavored should be of minimal interference of the courts. In Arbitration, on one side parties

are free to decide their arbitrator and seat of arbitration with other flexibilities and on the other

hand Courts are taking the relaxation by heavy interference while enforcing a foreign arbitral

award. This can be the reason why India is one of the least preferred destinations for the conduct

of arbitration proceedings.

Even now, one of the major hurdles that arbitration users face in India is the Indian court’s

difficulty in being able to adapt and transition to arbitrations governed by a law based on the

UNCITRAL Model Law, despite it being enacted in 1996.61The New York convention, 1958 is

related to the recognition and enforcement of foreign arbitral awards and earned a distinction by

entering into the transnational commercial law's hall of frame mainly because it gives

59 S. 38(3) of the Act refers that an application for setting aside may not be made after three months have lapsed from the date on which the party making that application had received the arbitral award.60 S. 50 of the Act.61Ashish Chugh, The Bharat Aluminium Case: The Indian Supreme Court Ushers In a New Era, (2012)available at http://kluwerarbitrationblog.com/blog/2012/09/26/the-bharat-aluminium-case-the-indian-supreme-court-ushers-in-a-new-era/ (Last visited on 5 April 2014).

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recognition and make it enforceable of award almost anywhere in the world through arbitration

which gives an advantage to the parties over litigation.62

For the purpose of implementation, some countries follow Article 36 of the UNCITRAL

Model Law which provided a self mechanism for the country to recognize and enforce the

foreign arbitral awards.63 On the other side, some countries just refer to New York Convention.

India belongs to the latter group of countries. New York convention has defined the two things

regarding foreign award one is recognition and another is enforcement. Recognition is a kind of

defensive process which aims to prevent the new proceedings raising the same issue but

enforcement goes a step further, where a successful party can seek the assistance of court to

obtain the redress to which award is entitled.64 Thus, non convention parties which are judgment

debtor do not have any remedy in terms of enforcement of a foreign arbitral award in India. A

foreign arbitral award may be recognized without being enforced but if it gets the order of court

for enforcement, it will automatically get the recognition as well.

CONCLUSION

Interventionist approach of the Indian judiciary needs to be curbed in order to preserve

the sanctity of the international contracts. Foreign arbitrators must not be entangled in the web of

vexatious litigation as it will leave bad impression on the other prospective investors. Moreover,

the ultimate aim of evolution of Arbitration as a mechanism for dispute resolution is to provide

speedy disposal in certain cases which can be amicably settled. Trade disputes are essential to be

resolved in quick time otherwise there can be huge loss to either of the parties.Given the

importance of local law, parties should be careful to choose a place of arbitration with well-

developed arbitration law and jurisprudence, and with courts experienced in international

arbitration matters and sympathetic to the arbitral process.

BALCOjudgment is not the panacea for all the ills associated with arbitration in India but

certainly a good starting point by the Indian Supreme Court in the right direction. As it is already

62HERBERT KRONKE, RECOGNITION AND ENFORCEMENT OF FOREIGN ARBITRAL AWARDS: A GLOBAL COMMENTARY ON THE NEW YORK CONVENTION, 2-3 (2010).63Id at 7-8.64ALAN REDFERN & MARTIN HUNTER, LAW AND PRACTICE OF INTERNATIONAL COMMERCIAL ARBITRATION, 10- 15 (4th ed. London: Sweet & Maxwell) (2004).

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settled that territorial principle is enshrined in the Arbitration Act and therefore Part I is not

applicable in the international commercial arbitration. However, still there are glitches at the

second stage of an arbitration proceedings as enforcement of the arbitral award is still a daunting

task for the foreign investors. Arbitration does not cease by getting arbitral award. It is already

seen that judiciary has time and again taken broad grounds of public policy to deny enforcement.

Even if no ground for rejection of enforcement has been taken, the legal process involving

foreign award is cumbersome and takes years to complete enforcement which thereby frustrates

the purpose of arbitral proceedings. Therefore, enforcement is an equally integral part of the

arbitration proceedings. There is no use of an arbitral award if the same cannot be enforced

within a reasonable time.

The crux of an argument is that judiciary must not only decrease its role and narrow

down the grounds for on enforcement of an award but also the procedure pertaining to the

enforcement must be simplified in order to have equitable justice. If a party able to enforce the

award in 3-4 years after getting an award then it is of no use. Knowing that arbitrations with

Indian parties seated outside of India will not be subject to interference by local courts will

encourage parties to do business on more favorable terms with Indian parties. Consistent

application of such an approach should also give parties more confidence in choosing India as a

seat of arbitration and Indian law as a substantive law.

In nutshell, true intention of UNICITRAL model laws should be reflected and pro

arbitration environment of judiciary will make Indian Arbitration at par of International level.

This will not only attract the eyeballs of foreign investors but also lead to the development of a

country.

14 | P a g e