Arbitration In IndiaEnforcement of Interim Awards of Foreign Seated Arbitration in India

INTRODUCTION

The conundrum regarding enforcement of foreign seated interim awards in India has been in existence for a long time. A domestic award refers to an award rendered in an Arbitration proceeding seated in India. Part I of the Arbitration and Conciliation Act, 1996 (“the Arbitration Act”), applies to Domestic Awards.

On the contrary, an award passed in an Arbitration proceeding, which is not seated in India, is a foreign award. A foreign award has been defined in Section 44 of the Arbitration Act. Chapter II of the Arbitration Act is applicable for Foreign Awards.

The primary question to be answered for the enforcement of foreign seated interim awards in India is regarding the applicability of Part I of the Arbitration Act on foreign seated Arbitrations. The Supreme Court of India, in the case of Bhatia International v. Bulk Trading S.A. and Anr. (2002) 4 SCC 105 (“Bhatia International”), clarified that the provisions of Part I would apply even to foreign seated Arbitrations, unless the parties agreed to otherwise.

This was the first judicial attempt to clarify whether Indian courts could grant interim measures pursuant to foreign seated Arbitrations. Through this judgement, the question was answered in the affirmative. However, in the case of Bharat Aluminium v. Kaiser Aluminium (2012) 9 SCC 552 (“BALCO”), the Supreme Court overruled the decision in Bhatia International and held that Indian Courts cannot intervene in case of Arbitrations seated outside India.

The stance on this question of law was subsequently altered by the Arbitration and Conciliation (Amendment) Act, 2015. Section 2(2) of the amended Arbitration Act stipulates that the provisions of Section 9, 27 and Section 37(1)(b) and (3) shall apply to International Commercial Arbitrations, unless the parties agree otherwise, and the awards of such Arbitrations shall be enforceable and recognised under Part II of the Arbitration Act.

Thus, the amended Arbitration Act sought to reinstate the position adopted by the Supreme Court in the Bhatia International case. Through the amendment, the legislature enabled Indian Courts to intervene even in foreign seated Arbitrations, for the purpose of granting interim relief measures. However, such intervention of Indian Courts is subject to the following conditions:

1. The Parties have not explicitly excluded the applicability of Part I of the Arbitration Act, and
2. The Arbitral award should be made in such a place which is enforceable and recognized under Part II of the Arbitration Act, i.e., the award must be made in a country that is a party to the New York Convention or Geneva Convention and must be recognized by the Central Government of India.

This Blog envisages two situations associated with the enforcement of foreign seated awards in India:

1. Interim measures granted by Indian Courts, under Section 9 of the Arbitration Act.
2. Interim measures granted by an Arbitral Tribunal or Emergency Arbitrator

INTERIM MEASURES GRANTED BY INDIAN COURTS

By virtue of the amendment brought to the Arbitration Act, a party to an International Commercial Arbitration, can now approach Indian Courts for the grant of interim measures to protect their interests. The same has been reiterated by the Supreme Court in the case of PASL Wind Solutions v. GE Power 2021 SCC OnLine SC 331.

Section 2(2) of the Arbitration Act provides that such interim awards shall be enforceable under Part II of the Act. As a result, its treatment shall be similar to a foreign award, and not a domestic award. Thus, interim award rendered by an Indian Court, under Section 9, in international commercial Arbitration, may be enforced under Section 48 of the Arbitration Act.

INTERIM MEASURES GRANTED BY A FOREIGN SEATED ARBITRAL TRIBUNAL OR EMERGENCY ARBITRATOR

The Arbitration Act does not stipulate any provision corresponding to Article 17H of the UNCITRAL Model Law on International Commercial Arbitration (“UNICTRAL Model Law”), which provides that an interim measure issued by an Arbitral Tribunal shall be recognised as binding, and unless otherwise provided by the Arbitral Tribunal, it shall be enforced before a competent court, irrespective of the country where it was issued.

This void in the Indian Arbitration law was recognised by the Delhi High Court in the case of Raffles Design International v. Educomp Professional Education 2016 SCC Online Del 5521. The Delhi High Court held that an award delivered by an emergency Arbitrator in a foreign seated Arbitration is not enforceable in India, as the Indian law does not have a provision corresponding to Article 17H of the UNICTRAL Model Law.

However, since Section 44 of the Arbitration Act does not distinguish between interim awards and awards rendered at the final stage, it may be concluded that Section 44 of the Arbitration Act also envisages interim awards. Consequently, such an award can be enforced under Section 48 of the Arbitration Act.

The question of enforceability of an Arbitral award rendered by emergency Arbitration in an Indian-seated Arbitration came in the limelight again after the Supreme Court’s verdict in Amazon.com NV Investment Holdings Inc. v. Future Retail Ltd. 2021 SCC OnLine SC 557 (“Amazon.com”). The Supreme Court put to rest the ongoing debate and held that in Arbitrations seated in India, an award rendered by an emergency Arbitrator can be enforced in India under Section 17 of the Arbitration Act.

However, the Supreme Court did not deal with the question of enforceability of emergency Arbitrators’ award rendered in a foreign seated Arbitration proceeding. This may be attributed to the fact that Section 17 of the Arbitration Act does not deal with foreign seated Arbitrations.

That being said, relying on the same reasoning given by the Supreme Court in the Amazon case (supra), enforcement of interim awards in foreign-seated Arbitrations should also be recognised under the regime of the Arbitration Act, in order to uphold party autonomy.

Thus, it is pertinent for the Courts to either rule on this point of law, or for the legislature to amend the Arbitration Act to conform with the UNICTRAL Model Law, and recognise awards passed in domestic as well as international emergency Arbitrations.

AMLEGALS REMARKS

With the changing times and evolving market scenarios, the legislature has amended the Arbitration Act for the effective provision of Alternate Dispute Resolution at the domestic and international strata. Active judicial outreach in the Arbitration realm has also clarified ambiguous provisions and enabled parties to autonomously settle their disputes in an efficient manner.

The 2015 amendment of the Arbitration Act has attempted to resolve the paradox surrounding enforceability of interim awards of foreign seated Arbitrations, by expanding the applicability of few provisions of the Arbitration Act to interim awards passed by foreign seated Arbitrators.

However, to better resolve the issue surrounding enforcement of interim foreign seated awards, the scope of few provisions of the Arbitration Act need to be widened. Although Section 2(1)(c) of the Arbitration Act provides that an Arbitral award also includes an interim award, the provision does not apply to foreign seated arbitrations.

Thus, the applicability of Section 2(1)(c) of the Arbitration Act should be expanded to foreign seated arbitrations, or the definition under Section 44 of the Arbitration Act should be amended to include interim awards.

In order to move closer to achieving its goal of becoming an Arbitration hub, India also needs to give recognition to interim awards rendered by emergency Arbitrators. This will uphold party autonomy and also encourage parties to choose India as their preferred seat of Arbitration.

-TEAM AMLEGALS, assisted by Ms. Gahna Rajani (Intern)

For any query or feedback, please feel free to get in touch with rohit.lalwani@amlegals.com or riddhi.dutta@amlegals.com.