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505 - 10986 - 2594ADR Int 4 - INTERNATIONAL COMMERCIAL ARBITRATION
505 - 10986 - 2594ADR Int 4 - INTERNATIONAL COMMERCIAL ARBITRATION
IV INTERNAL
PRN: 16010125008
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Table of Contents
................................................................................................................................................1
Introduction............................................................................................................................3
Research Topic.......................................................................................................................4
Research Methedology...........................................................................................................4
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INTERNATIONAL COMMERCIAL ARBITRATION:
Introduction
When a dispute arises out of commercial transaction conducted across international borders
between private parties, then more often than not, it gets referred to an alternate method of
dispute resolution instead of litigating it in national courts. This is done in order to avoid
wasting unnecessary time and resources of both the parties as well as the commercial courts
in lieu of the pendency of cases. In recent times, arbitration has gained importance as one
such alternate method of dispute resolution and has become an accepted tool for speedy
resolution of commercial disputes.
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limited to transaction in the nature of any trade transaction for the supply or exchange of
goods or services; distribution agreement; commercial representation or agency; factoring;
leasing; construction of works; consulting; engineering; licensing; investment; financing;
banking; insurance; exploitation agreement or concession; joint venture and other forms of
industrial or business co-operation; carriage of goods or passengers by air, sea, rail or road.3
In current times, parties usually prefer going for international commercial arbitration because
that way they can avoid litigating in foreign courts with unfamiliar procedures and language
barriers reducing the inequalities faced by either of the parties, making both the State and
non-state parties feel comfortable as it limits the scope of bias. There is also an ease of
enforcement of arbitral awards as compared to the decree or judgement of a foreign court.
There are various international organisations that facilitate such arbitration proceedings along
with Conventions and Model Laws that provide for and regulate the entire process.
Research Topic
This paper looks at the position of law post the 2019 Amendments introduced by the
Arbitration and Conciliation (Amendment) Act, 2019. It also looks at various judicial
decisions and tried to explain the different concepts under International Commercial
Arbitration, pointing and deliberating the grey areas and lacunas in the law, not addressed by
the legislation and left to the mercy of judiciary for interpretation.
Research Methedology
The author has looked at various primary sources like legislations and conventions as well as
secondary sources in form of online articles and chapters from UN Modules. Rest of the
research includes analysing various judgements passed by the High Courts and Supreme
Court of India in order to reach concusion.
3
Ereg E. Bergsten, Chapter 5.1, International Commercial Arbitration, Dispute Settlement, International
Conference on Trade and Development, (2005) p. 11, https://unctad.org/system/files/official-
document/edmmisc232add38_en.pdf
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According to Section 2(1)(f) of the Arbitration and Conciliation Act, 1996, “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 incorporated in any country other than India; or
(iii) 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;”4
The Supreme Court, in L&T Scomi5, has held that the when a consortium or an un-
incorporated joint venture is a party to an arbitration agreement, the nationality of the partner
or entity with effective management and control of the consortium or the JV would determine
whether the arbitration was an International Commercial Arbitration or not.
Section 23 of the Act, dealing with the submission of pleadings by the parties to an
arbitration, including an International Commercial Arbitration, was revised to include that the
4
Arbitration and Conciliation Act, Act No. 26 of 1996, Acts of Parliament, 1996.
5
M/s Larsen and Toubro Limited Scomi Engineering Bhd v. Mumbai Metropolitan Region Development
Authority, (2019) 2 SCC 271 (India).
6
Glencore International AG v Indian Potash Limited (Ex. P. 99/2015 dated 9 August 2019) (India)
7
Arbitration and Conciliation Amendment Act, Act No. 33 of 2019, Acts of Parliament, 2019.
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claimant must file its statement of claim and the respondent must file its statement of defence
within 6 months of the date on which the arbitral tribunal is notified of its appointment.
The 2019 Amendment has inserted Sections 42A and 42B which provide for the
confidentiality of arbitration proceedings or the resultant arbitral award for all arbitrations
and also provide immunity to the arbitrators from suits and proceedings for acts and
omissions committed by them over the course of arbitration proceedings.
Section 87 of the Act clarified that the 2015 Amendment8 would only be applicable to
arbitrations proceedings which commenced after the date of notification of the 2015
Amendment; and court proceedings in relation to arbitrations which commenced following
the 2015 Amendment. There would not be any retrospectively applicability of the
amendments to court proceedings which were in relation to pre-2015 Amendment arbitration
proceedings, but which were themselves commenced after the 2015 Amendment.
But this Section 87 of was struck down by the Supreme Court as unconstitutional as it
violated Article 14 of the Constitution on grounds of manifestly arbitrary in the case of
Hindustan Construction Co. Ltd. & Anr v. Union of India 9 and clarified that status quo prior
to the 2019 Amendment, as re-established and enforced in the BCCI case10 would prevail.
8
Arbitration and Conciliation (Amendment) Act, Act No. 3 of 2016, Acts of Parliament, 2015.
9
Hindustan Construction Co. Ltd. & Anr v. Union of India, AIR 2020 SC 122 (India).
10
Board of Cricket Control in India v. Kochi Cricket Pvt. Ltd. & Ors., (2018) 6 SCC 287 (India).
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petition under Section 34 of the Arbitration Act had already been filed as on or before the
date of commencement of the 2015 Amendment Act, thereby doing away with grant of an
automatic stay due to the mere pendency of a petition under Section 34 of the Arbitration Act
as on that date. Automatic stay is a clog on the rights of a bona fide award holder preventing
him from reaping the fruits of the arbitral award. Since the object of the 2015 Amendment
had been to reduce the delay during arbitration proceedings and enforcement of the resultant
arbitral awards, the Supreme Court had done away the automatic stays which increased the
burden on the courts.
However, the introduction of Section 87 by way of the 2019 Amendment, nullified the effect
of the said judgment. Since the striking down of Section 87 vide the Supreme Court’s
decision in Hindustan Construction Co. Ltd. & Anr v. Union of India, the earlier position of
there being no automatic stay on the operation of awards filed under the abovementioned
circumstances in re-established.
Since the Government itself is defending a vast number of awards, the introduction of
automatic stay not only gave the Government some breathing space but it also saved it from
depositing huge sums as pre-deposits. Hence, diluting the 2015 Amendment favoured the
Government on a large scare and could have possibly been the rationale behind introduction
of Section 8 in 2019. Fortunately, the Supreme Court was quick to remedy this defect by
holding Section 27 as arbitrary and hence, unconstitutional.
The proviso to Section 2(2) of the Act, introduced in the 2015 Amendment, states that inter
alia Section 9, 27, 37(1)(c) and 37(3) which allows for applications for interim relief from the
court before/during/after arbitral proceedings, will be applicable to foreign seated-
arbitrations, unless there is an agreement to the contrary. Hence, post 2015 Amendment, the
parties could approach the Indian Courts under these sections for interim protection, unless
11
Bharat Aluminium Co. v. Kaiser Aluminium Technical Services, Inc, (2012) 9 SCC 552 (India).
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they have expressly agreed to exclude their application in the agreement itself. The
applicability of the rest of Part 1 of the Act is status quo.
But when the question arises with respect to pre-BALCO International Commercial
Arbitrations, the specifics of whether Part I was explicitly or implicitly excluded have largely
been clarified by judgments such as Harmony Shipping12 and Eitzen13. The Delhi High Court
in Focus Energy v Reebok14, as also set out that the cases that are governed or continue being
governed by the Bhatia International15 principle are the once where the seat of the arbitration
is in India or the arbitration agreement is governed by the Indian law, or where a judgment
cannot be reached as to the seat of arbitration. The Bhatia International principle stated that
Part I would be applicable to foreign seated arbitrations, unless the same was explicitly or
implicitly excluded by the parties.
Since both Bhatia International and BALCO were somewhat contradictory judgements, there
was a large dissonance with respect to applicability of Part I of the Act which has largely
been settled, and there are now cohesive factors to determine whether or not parties implicitly
or explicitly intended to exclude the application of Part I of the Act to their ICAs, in the event
they pre-dated BALCO.
Archer Power Systems v Kohli Ventures16- The Madras High Court decided that an
arbitration agreement with a foreign juridical seat and curial law is tantamount to an implicit
exclusion of not only Part I, but also the operation of Section 9 of the Act. However, a
contributory factor to this conclusion was that the arbitration agreement expressly excluded
the applicability of the Act to the proceedings (but the arbitration agreement did not
specifically address the proviso in Section 2(2) of the Act).
Heligo Charters v Aircon Feibars17, Actis v Tigaksha Metallics18 & the Raffles Design Case19-
The Bombay High Court, the Himachal Pradesh High Court and the Delhi High Court in the
12
Harmony Innovation Shipping Ltd. v. Gupta Coal India Ltd. & Anr., (2015) 9 SCC 172 (India).
13
Eitzen Bulk A/S v. Ashapura Minechem Ltd., (2016) 11 SCC 508 (India).
14
Focus Energy Ltd. v Reebok International Ltd., 2018 (6) ArbLR 234 (Delhi) (India.).
15
Bhatia International v Bulk Trading SA, (2002) 4 SCC 105 (India).
16
Archer Power Systems Pvt. Ltd. v. Kohli Ventures Ltd. & Ors., 2017 (4) CTC 449 (India).
17
Heligo Charters Private Limited vs. Aircon Feibars FZE, 2018 (5) ArbLR 317 (India).
18
Actis Consumer Grooming Products Ltd. v. Tigaksha Metallics Pvt. Ltd. & Ors., Arb. Case No. 8 of 2018
(India).
19
Raffles Design International India Pvt. Ltd. v. Educomp Professional Education Ltd., 2016 (6) ArbLR 426
(Del) (India).
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respective cases have held that that a designation of a foreign seat or choice of foreign curial
law is not an implied exclusion of Section 9 of the Act, in the context of the proviso
introduced in the 2015 Amendment. This is the more prevalent opinion in current times.
The Supreme Court is yet to address this issue directly, or formulate any litmus test for
determination explicitly or implicitly exclusion of the applicability of Section 9 of the Act to
a foreign-seated arbitration with careful consideration and due deliberation.
These lines have been further blurred because of certain recent judgments being passed which
depart from the set rule that the courts of the seat of the arbitration have exclusive jurisdiction
over proceedings arising out of the arbitration. Examples of such instances are the orders
passed by the Delhi High Court in Antrix22 and the Madras High Court in IJM-SCL JV v.
NHAI23 where both the courts relying on paragraph 96 of BALCO, have held that even if the
courts of the seat of arbitration have jurisdiction, the courts in the place where the cause of
action or subject matter of the arbitration arises also have jurisdiction.
A three judge bench of the Supreme Court in the case of Hardy Exploration 24 made two
crucial observations and stated that the term 'place' is used interchangeably with that of 'seat',
and hence, the place of an arbitration will be the seat of an arbitration, assuming there are no
condition precedents attached to it and that a venue can become a seat if something else is
added to it as a concomitant. A significant departure from this judgement was the case of
20
Supra11.
21
Indus Mobile Distribution Pvt. Ltd. vs. Datawind Innovations Pvt. Ltd. & Ors., (2017) 7 SCC 678 (India).
22
Antrix Corporation Ltd v Devas Multimedia Pvt Ltd, 2018 (4) ArbLR 66 (Delhi) (India).
23
IJM-SCL JV & Ors. v. National Highway Authority of India & Ors., O.P. No. 132 of 2010 (India).
24
Union of India v. Hardy Exploration & Production (India) Inc., AIR 2018 SC 4871 (India).
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Brahmani River Pellets25, which although pertained to appointment of arbitrator in domestic
arbitration, through an arbitration agreement with no designated seat or exclusive jurisdiction
clause, held that the courts of the 'venue' of arbitration will be the only courts entitled to hear
any proceedings with respect to the arbitrations.
After that, another three judge bench of the Supreme Court in December 2019 in the case of
BGS SGS26, promulgated a new test heavily on a complete reading of BALCO, to determine
whether a 'venue' was in fact a juridical seat. A venue / place mentioned in an arbitration
agreement would be considered to be the seat of the arbitration, as long as there were no
“significant contrary indicators”. The Court in BALCO had placed reliance on the England
and Wales High Court's decision in Roger Shashoua 27, which first advocated the same test.
The Court also specifically stated that the decision in Hardy Exploration is incorrect law
because it was contrary to the findings of the Constitutional Bench of the Supreme Court in
BALCO as a result of which there now appears to be an standoff as to which three-judge
bench's decision on "whether a venue is a seat in the absence of additional factors?" will
prevail.
Both the cases have been considered in lower courts, and have started to take on immense
precedential value despite the lack of clarity on the issues being litigated therein. While the
BGS SGS ruling accurately appreciated the letter and the spirit of the BALCO decision, its
divergence from Hardy Exploration was by virtue of its finding that Hardy Exploration
incorrectly interpreted BALCO, which is the law of the land, and is hence an incorrect
decision. The only thing left now is to wait for this issue of seat and venue to be taken but by
a larger bench of the Supreme Court in order to get more clarity on the subject matter.
25
Brahmani River Pellets Ltd. v. Kamachi Industries Ltd., AIR 2019 SC 3658 (India).
26
BGS SGS SOMA JV v. NHPC Ltd., 2019 (6) ArbLR 393 (India).
27
Roger Shashoua & Ors. v. Mukesh Sharma & Ors., (2017) 14 SCC 722 (England and Wales)
28
Imax Corporation vs. E-City Entertainment (I) Pvt. Ltd. and Ors., 2020 (1) ABR 82 (India).
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Court in Fuesrt Day Lawson29 that a foreign award is regarded as a decree of the court for the
purpose of execution or enforcement so that time is not lost in litigation determining its status
as a decree. This meant Article 136 and not Article 137 of the Limitation Act applied. The
Bombay High Court also in consensus with the alternative argument of Imax which said that
even if the limitation period was three years, the petition would still be in time as the period
where the Section 34 challenge was pending would be excluded while calculating.
The logical assumption, if we were to rely on Bank of Baroda v Kotak Mahindra is that a
foreign award, is effectively a foreign decree, and accordingly, proceedings for its execution
and enforcement must commence as per the limitation laws of the jurisdiction of the seat, and
in the event of silence thereof, within 3 years of it being passed. However, it is pertinent to
note that the holding in Bank of Baroda v Kotak Mahindra is contrary to what was held in
Fuesrt Day Lawson or the general pro-arbitration attitude being taken by the legislature and
judiciary. This dissonance has yet to be dealt with by the judiciary.
29
Fuerst Day Lawson Ltd. v. Jindal Exports Ltd., (2011) 8 SCC 333 (India).
30
Bank of Baroda v. Kotak Mahindra Bank Ltd., Civil Appeal No. 2175 of 2020 (India).
31
Ravitej Chilumuri , Rajeswari Mukherjee and Anchit Oswal, Part Three Of A Three-Part Series On Recent
Developments In International Commercial Arbitration In India: Progress In The Enforcement Of Foreign
Awards And Potential Grey Areas, Mondaq, 10 July 2020, https://www.mondaq.com/india/arbitration-dispute-
resolution/963572/part-three-of-a-three-part-series-on-recent-developments-in-international-commercial-
arbitration-in-india-progress-in-the-enforcement-of-foreign-awards-and-potential-grey-areas
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Setting aside the Arbitral Award
Section 34 which deals with the ‘application for setting aside arbitral award’ empowered the
court to set aside any Arbitral Award that was against the public policy in India and hence,
became one provision which the parties to an international arbitration often resorted to.
The Delhi High Court in the case of Cruz City 32 has held that the expression ‘fundamental
policy’ (only) connotes the basic and substantial rationale, values and principles which form
the bedrock of laws in our country.
The case of Ssangyong Engg.33, while dealing with a domestic award, set out guidelines for
the challenge of an award on the ground of ‘violation of public policy’ which was either
under Section 34(b)(ii) (for domestic awards, or ICA awards seated in India) or Section 48(2)
(b) (for foreign awards). It maintained that the test propounded by Renusagar34 would
continue to guide courts while deciding a challenge to an award. In Renusagar, it was held
that held that the enforcement of foreign award would be refused on the ground of it being
against to public policy if such enforcement would be contrary to fundamental policy or
interest of India; or the notions of justice or morality. Hence, for the public policy ground to
be applicable, the arbitral award under scrutiny must ‘shock the conscience of the court’ and
also defy the most ‘fundamental notions of justice and morality’. 35 It also stated that the
ground of ‘patent illegality’ was no longer available for the challenge of ICA awards.
There are explanations given vide the 2015 amendment regarding what might be treated as a
conflict with the public policy in India and not entailing review on the basis of merits of the
dispute for the test as to whether there occurs contravention of the fundamental policy of
Indian law. But, the courts have time and again failed to lay down as to what exactly
constitutes as ‘the fundamental policy of India’ or ‘basic notions of morality and justice’ and
it has been completely left to interpretation by the courts.
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dilute the law via amendments along with giving certain provisions a wider scope to make
things easier. But nothing escapes the eyes of the judiciary who has immediately stuck down
such unequal laws and have tried to interpret the remaining provisions with a more pro-
arbitration approach. Following the principles of International Commercial Arbitration in
letter and spirit by keeping self-interest of stake holders, especially the Government aside, is
essential in order to make India an Arbitration friendly Jurisdiction. It is also suggested that
an amendment needs to be introduced or at least clarification needs to be provided with a test
for determining whether parties to the International Commercial Arbitration intended to
exclude the application of the exempted Sections under the proviso of Section 2(2), based on
the rulings by various High Courts.
Even though there are amendments trying to fill up the lacunas in arbitration, the applicability
of the Arbitration and Conciliation Act needs more deliberation. Not all should be left to
interpretation by the judiciary as legislative is also equally responsible for laying out the law
of the land. Obviously, there are a lot more ambiguities due to the dynamic nature of
International Commercial Arbitration that will continue to spark interest and pose questions
for years to come. But there needs to be proper guidance or some basic parameters given to
the courts in order to deal with all the latest dissonance.
It is understandable if the courts do not want to partake in every single arbitration dispute in
order to ensure minimum intervention. Hence, there needs to be some body or institution that
steps forward to ensure balance between the independence of arbitration proceedings and
necessary intervention by the courts. The composition of such body would include people
with appropriate qualifications like lawyers or judges who are well versed with the entire
process. This body can act as a watchdog and determine whether or not a particular case is fit
for judicial intervention.
The 2019 pandemic has opened up new doors in terms of online dispute resolution and force
majeure invocations which has created chaos but is also helping to clear up the grey areas in
International Commercial Arbitration. Even though, India is not currently a very Arbitration
friendly nation, there is now light at the end of the tunnel and a lot of scope for development.
1. Arbitration and Conciliation Act, Act No. 26 of 1996, Acts of Parliament, 1996.
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2. Arbitration and Conciliation (Amendment) Act, Act No. 3 of 2016, Acts of
Parliament, 2015.
3. Arbitration and Conciliation Amendment Act, Act No. 33 of 2019, Acts of
Parliament, 2019.
4. UNCITRAL Model Law on International Commercial Arbitration, 1985.
Conventions
1. The New York Convention on the Recognition and Enforcement of Foreign Arbitral
Awards, 10 June 1958, (1958) 330 UNTS 38
2. The Geneva Convention on Execution of Foreign Arbitral Awards, 26 September
1927.
Case Laws
1. M/s Larsen and Toubro Limited Scomi Engineering Bhd v. Mumbai Metropolitan
Region Development Authority, (2019) 2 SCC 271 (India).
2. Glencore International AG v Indian Potash Limited (Ex. P. 99/2015 dated 9 August
2019) (India)
3. Hindustan Construction Co. Ltd. & Anr v. Union of India, AIR 2020 SC 122 (India).
4. Board of Cricket Control in India v. Kochi Cricket Pvt. Ltd. & Ors., (2018) 6 SCC
287 (India).
5. Bharat Aluminium Co. v. Kaiser Aluminium Technical Services, Inc, (2012) 9 SCC
552 (India).
6. Harmony Innovation Shipping Ltd. v. Gupta Coal India Ltd. & Anr., (2015) 9 SCC
172 (India).
7. Eitzen Bulk A/S v. Ashapura Minechem Ltd., (2016) 11 SCC 508 (India).
8. Focus Energy Ltd. v Reebok International Ltd., 2018 (6) ArbLR 234 (Delhi) (India.).
9. Bhatia International v Bulk Trading SA, (2002) 4 SCC 105 (India).
10. Archer Power Systems Pvt. Ltd. v. Kohli Ventures Ltd. & Ors., 2017 (4) CTC 449
(India).
11. Heligo Charters Private Limited vs. Aircon Feibars FZE, 2018 (5) ArbLR 317 (India).
12. Actis Consumer Grooming Products Ltd. v. Tigaksha Metallics Pvt. Ltd. & Ors., Arb.
Case No. 8 of 2018 (India).
13. Raffles Design International India Pvt. Ltd. v. Educomp Professional Education Ltd.,
2016 (6) ArbLR 426 (Del) (India).
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14. Indus Mobile Distribution Pvt. Ltd. vs. Datawind Innovations Pvt. Ltd. & Ors., (2017)
7 SCC 678 (India).
15. Antrix Corporation Ltd v Devas Multimedia Pvt Ltd, 2018 (4) ArbLR 66 (Delhi)
(India).
16. IJM-SCL JV & Ors. v. National Highway Authority of India & Ors., O.P. No. 132 of
2010 (India).
17. Union of India v. Hardy Exploration & Production (India) Inc., AIR 2018 SC 4871
(India).
18. Brahmani River Pellets Ltd. v. Kamachi Industries Ltd., AIR 2019 SC 3658 (India).
19. BGS SGS SOMA JV v. NHPC Ltd., 2019 (6) ArbLR 393 (India).
20. Roger Shashoua & Ors. v. Mukesh Sharma & Ors., (2017) 14 SCC 722 (England and
Wales)
21. Imax Corporation vs. E-City Entertainment (I) Pvt. Ltd. and Ors., 2020 (1) ABR 82
(India).
22. Fuerst Day Lawson Ltd. v. Jindal Exports Ltd., (2011) 8 SCC 333 (India).
23. Bank of Baroda v. Kotak Mahindra Bank Ltd., Civil Appeal No. 2175 of 2020 (India).
24. Cruz City 1 Mauritius Holdings v. Unitech Ltd., 2017 (3) ArbLR 20 (Delhi) (India).
25. Ssangyong Engineering & Construction Co. Ltd. v. National Highways Authority of
India, AIR 2019 SC 5041 (India).
26. Renusagar Power Co. Ltd. v. General Electric Co. AIR 1994 SC 860 (India).
27. Associate Builders v. Delhi Development Authority, (2015) 3 SCC 49 (India).
Online Sources
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