Foreign Awards
Foreign Awards
Foreign Awards
SUBMITTED BY:
AYUSH RAJ
SUBMITTED TO:
I hereby declare that the work reported in the B.A. LL.B (Hons.) Project Report Entitled
“FOREIGN AWARDS” submitted at Chanakya National Law University, Patna is an
authentic record of my work carried out under the supervision of Prof. HRISHIKESH
MANU. I have not submitted this work elsewhere for any other degree or diploma. I am fully
responsible for the contents of my Project Report.
2
ACKNOWLEDGEMENT
Lastly, special thanks to my parents for guiding me in giving the final touch to this project
and helping me out throughout this project.
3
CONTENT
S
INTRODUCTION......................................................................................................................5
5. NON-CONVENTION AWARD......................................................................................14
BIBLIOGRAPHY....................................................................................................................17
4
INTRODUCTION
Prior to 1937, foreign awards and foreign judgments based on foreign awards were
enforceable in British India on the same grounds and in the same circumstances as they were
in England under the common law, on the grounds of justice, equity and good conscience. In
1937 the Arbitration (Protocol and Convention) Act 1937 was enacted to give effect to the
Geneva Protocol on Arbitration Clauses 1923 and the New York Convention on execution of
Foreign Arbitral Awards 1958, enabling them to become operative in India.
The way foreign arbitral award was defined in the 1937 Act and the 1996 Act were however
not much different. Both emphasizes on the dispute being commercial in nature further
Section 4(2) of the Act says
“Any foreign award which would be enforceable under this Act shall be treated as binding
for all purposes on the persons as between whom it was made and may accordingly be relied
on by any of those persons by way of defence, set off or otherwise in any legal proceeding in
[India], and any references in this Act to enforcing a foreign award shall be construed as
including references to relying on an award.”1
Further, on satisfaction about the enforceability of the award, the Court shall order the award
to be filed and shall proceed to pronounce judgment according to the award.
During the 1937s there were certain local Arbitration Laws in effect as well, which the
parties were free to choose. However, post enactment of the 1937 Act, the issue whether a
matter was governed under the local Arbitration Act or the Arbitration (Protocol and
Convention) Act 1937 became a question of law and could not be determined by the conduct
of the parties. Now, the provisions of the 1937 Act have also been repealed by the
Arbitration and Conciliation Act 1996 except that they still apply in relation to arbitral
proceedings which commenced before the 1996 Act that came into force unless otherwise
agreed upon by the parties.
The present Act deals with enforcement of foreign arbitral award under part II. Although due
to a recent Supreme Court decision the difference between Part II and Part I have become
blurred. The provisions of part II gives effect to the New York and the Geneva conventions
(although the provisions of the Geneva Conventions are literally otiose now) India is not a
1
Enforcement of Foreign Awards in India (mondaq.com).
5
party to the ICSID convention or any other conventions pertaining to enforcement of foreign
arbitral awards.
Arbitration in India is governed in accordance with the Arbitration and Conciliation Act,
1996 (hereinafter referred to as 'the Act'). Part II of the Act deals with the foreign awards and
applies to the parties, member to the New York Convention. The enforceability of a foreign
award in the countries where the parties to an arbitration agreement do not have any presence
has been in discussions and are a subject matter of multiple interpretations. Section 44 of the
Act defines "foreign award" as 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. The Section further provides that the above mentioned provisions should be in
pursuance of an agreement in writing for arbitration to which the Convention set forth in the
First Schedule applies, and in one of such territories as the Central Government, being
satisfied that reciprocal provisions have been made may, by notification in the Official
Gazette, declare to be territories to which the said Convention applies.2
LIMITATIONS OF STUDY: The researcher will confine the research to the city of Patna,
Bihar. Due to the constraints, the researcher will include library work.
2
Ibid.
6
1. EXTENT AND JURISDICTION
In the case of Tata International Ltd. vs. Trisuns Chemical Industry Ltd. 3 Bombay High
Court has held that, in an arbitration the Court would consider the subject matter of the
arbitration; in the enforcement of the award the Court would consider the subject matter of
the award as the determining factors. This stands to reason and logic. The subject matter of
the arbitration may be a certain contract, a certain property., etc. The territorial jurisdiction
of the Court would be where the contract was entered into or where the some or all the
properties of the respondent would be. Once the arbitration is concluded and has to be
enforced, it is the subject matter of the award which would have to be seen. That would be
whether the award is a money award (analogous to a money decree in litigation) or a
declaration or other relief with regard to a contract or a property.
The award would have to be filed for its enforcement in a Court which would be able to
enforce that award. It would be futile to file it where a cause of action may have arisen, if the
respondent would have no properties in that jurisdiction. Similarly, it would be of little use
to file it where the respondent resided or carried on business. It would have to be filed where
the respondent would have properties, movable or immovable, which could be attached and
sold in execution of the award. The decision of the Bombay High Court was followed in the
matter of Wireless Developers Inc Vs. India games Limited 4 where the Court held that, if the
party has a foreign award in its favor it can seek to enforce the award in any part of the
country where it is sought to be enforced as long as money is available or suit for recovery of
money can be filed.
Moreover, the fact that the enforcement of an award can be made in the countries where the
arbitration is held, the parties to the arbitration have their place of business or any other place
as can be construed on perusal of the Judgment of the Hon'ble Supreme Court of India in the
case of Brace Transport Corporation of Monrovia, Bermuda Vs. Orient Middle East Lines
Limited, Saudi Arabia & Ors5. The Supreme Court was of the view that, the arbitration
between the parties should be in a neutral forum. The parties may not have any assets under
the jurisdiction of such neutral forum. The award cannot, therefore, be enforced there.
Instead the enforcement of the award must be in a country where the properties of the
judgment debtor would be. It is, therefore, held that foreign awards must, therefore, be
3
2002(2) B.C.R. 88.
4
2012(3)MhLj449.
5
AIR1994SC1715.
7
recognizable and enforceable internationally and the place of such enforcement would not be
chosen by the parties, but would depend upon the circumstances of each particular case.
8
2. CONDITION FOR ENFORCEMENT OF FOREIGN
AWARDS
The enforcement of ‘foreign Award’ under Part II Chapter I is a three phase process. First
the party seeking to enforce the award has to make an application under s 47 to the court
along with the evidence, as required in it. Secondly, the party against whom the award is
invoked, desiring to resist the enforcement, is required to furnish proof to the court of the
existence of one or more of the defences set forth in s 48. Finally, the court may enforce the
award as a decree of the court under section 49 if it is satisfied that the award is enforceable.
In case of foreign arbitral awards, the only condition under which the court finds an award
not enforceable is if the court dealing with the same is convinced that (a) the award has been
annulled in the country in which it is made (b) party against whom the award is to be
enforced was not given notice for the proceedings in sufficient time to enable him to present
his case or was under some legal incapacity and was not properly represented. (c) If the
award does not deal with all the questions in dispute involved or the decisions on matters
beyond the scope of the agreement for arbitration. Besides, the court can also make Suo
motu decision of not enforcing an award if (a) the subject matter of the dispute is not capable
of settlement by arbitration under the law of India. (b) is against public policy.
In all these cases the court can always postpone the enforcement subject to fulfillment of
certain conditions as it may deem fit or it may simply refuse to enforce the award stating
adequate reasons. However, it is interesting to note that except in the case of ONGC v Saw
Pipes6 the Indian Courts have narrowly construed public policy in relation to foreign arbitral
awards. For example in Renu Sagar Power Co Ltd v. General Electric Co 7 while dealing with
the 1996 Act, s 48(2) the Supreme Court in clear terms have stated that public policy as
manifested under s 7(1)(b)(ii) of Foreign Awards (Recognition And Enforcement) Act, 1961
has to be interpreted in a narrow sense. The parties in order to attract public policy against
enforcement of an award must invoke something more than mere violation of law in India.
Therefore we can safely say that this move is made by the courts to maintain the
enforceability of the foreign awards in Indian soil. On the question whether the award
requires further execution on the terms of O XIX of the Code of Civil Procedure 1908 even
after the court is satisfied that it is enforceable under this chapter and has become a decree of
6
Appeal(civil) 7419 2001 of 518.
7
1994 AIR 860
9
the court under s 49, there has been a divergence of opinion in the Gujarat and the Bombay
High Courts.
However, in Toepfer International Asia Pvt Ltd v. Thapar Ispat Ltd 9 the Bombay High Court
(Single Judge) differed from the above view and held that s 49 of the Act merely empowers
the court to declare that the ‘foreign award’ is enforceable under the Act. Once shall award is
granted it will merely be a decree of the court and would need to go through a separate
execution process.
However, the attention of both these high courts have no been drawn to an already existing
judgment of the Supreme Court that settles the law in this respect in Brace Transport
Corporation of Monrovia, Bermuda v. Orient Middle East Lines Ltd, Saudia Arabia
Bharucha J, unequivocally said:
Where a court is asked to enforce an award it must recognize not only the legal effect of the
award but must use legal sanctions to ensure that it is carried out…Since the purpose of
enforcement proceedings is to try to ensure compliance with an award by the legal
attachment or siezure of defaulting party’s assets, legal proceedings of some kind are
necessary to obtain title to the assets seized or their proceeds of sale.
Besides the Supreme Court in Fuerest Day Lawson Ltd v. Jindal Exports Ltd 10 also affirmed
the view taken by the Gujarat High Court and The Supreme Court, speaking for the Court,
Shivaraj Patil J said, there is no need to take separate proceedings, one for deciding the
enforceability of the award… and the other to take up execution thereafter…if the argument
advanced on behalf of the respondent is accepted, the very purpose of the Act in regard to
speedy and effective execution of foreign award will be defeated.
Therefore because of these judgments the requirement of filing separate application for
enforcement of award under section 47 of the 1996 Act is now done away with. Now no
separate application needs be filed for execution of the award. A single application for
enforcement of award would undergo a two-stage process. In the first stage, the
enforceability of the award, having regard to the requirements of the Act (New York
8
(1997) 3 GLR 1984.
9
1999 (4) BomCR 415.
10
(2001)6 SCC 356.
10
Convention grounds) would be determined. Once the court decides that the foreign award is
enforceable, it shall proceed to take further steps for execution of the same. This can be said
to have liberalized the enforcement process to a large extent.11
11
Ibid.
11
3. THE NEW YORK CONVENTION AWARD
Sections 44 to 52 of the Arbitration and Conciliation (Amendment) Act, 2015 deals with
foreign awards passed under the New York Convention.
The New York Convention defines "foreign award" as 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-
b. In one of such territories as the Central Government, being satisfied that reciprocal
provisions have been made may, by notification in the Official Gazette, declare to be
territories to which the said Convention applies.12
From the abovementioned conditions, it is clear that there are two pre-requisites for
enforcement of foreign awards under the New York Convention. These are:
b. The award shall be made in the territory of another contracting state which is a
reciprocating territory and notified as such by the Central Government.
Section 47 provides that the party applying for the enforcement of a foreign award shall, at
the time of the application, produce before the court (a) original award or a duly
authenticated copy thereof; (b) original arbitration agreement or a duly certified copy
thereof; and (c) any evidence required to establish that the award is a foreign award. As per
the new Act, the application for enforcement of a foreign award will now only lie to High
Court.
Once an application for enforcement of a foreign award is made, the other party has the
opportunity to file an objection against enforcement on the grounds recognized under
Section 48 of the Act. These grounds include:
a. the parties to the agreement referred to in section 44 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
12
Section 44 of the Arbitration and Conciliation(Amendment) Act, 2015.
12
b. 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; 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 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.
g. the enforcement of the award would be contrary to the public policy of India.
The Amendment Act has restricted the ambit of violation of public policy for international
commercial arbitration to only include those awards that are: (i) affected by fraud or
corruption, (ii) in contravention with the fundamental policy of Indian law, or (iii) conflict
with the notions of morality or justice.
It is further provided that if an application for the setting aside or suspension of the award
has been made to a competent authority, the Court may, if it considers it proper, adjourn the
decision on the enforcement of the award and may also, on the application of the party
claiming enforcement of the award, order the other party to give suitable security.
Section 49 provides that where the Court is satisfied that the foreign award is enforceable
under this Chapter, the award shall be deemed to be a decree of that Court13.
13
Ibid.
13
4. THE GENEVA CONVENTION AWARD
Sections 53-60 of the Arbitration and Conciliation (Amendment) Act, 2015 contains
provisions relating to foreign awards passed under the Geneva Convention.
As per the Geneva Convention, "foreign award" means an arbitral award on differences
relating to matters considered as commercial under the law in force in India made after the
28th day of July, 1924,-
a. in pursuance of an agreement for arbitration to which the Protocol set forth in the
Second Schedule applies, and
b. between persons of whom one is subject to the jurisdiction of some one of such
Powers as the Central Government, being satisfied that reciprocal provisions have
been made, may, by notification in the Official Gazette, declare to be parties to the
Convention set forth in the Third Schedule, and of whom the other is subject to the
jurisdiction of some other of the Powers aforesaid, and
c. in one of such territories as the Central Government, being satisfied that reciprocal
provisions have been made, by like notification, declare to be territories to which the
said Convention applies, and for the purposes of this Chapter, an award shall not be
deemed to be final if any
d. proceedings for the purpose of contesting the validity of the award are pending in any
country in which it was made.14
Section 56 provides that the party applying for the enforcement of a foreign award shall, at
the time of the application, produce before the court (a) original award or a duly
authenticated copy thereof; (b) evidence proving that the award has become final and (c)
evidence to prove that the award has been made in pursuance of a submission to arbitration
which is valid under the law applicable thereto and that the award has been made by the
arbitral tribunal provided for in the submission to arbitration or constituted in the manner
agreed upon by the parties and in conformity with the law governing the arbitration
procedure. As per the new Act, the application for enforcement of a foreign award will now
only lie to High Court.
14
Section 53 of the Arbitration and Conciliation(Amendment) Act, 2015.
14
The conditions for enforcement of foreign awards under the Geneva Convention are
provided under Section 57 of the Arbitration and Conciliation Act, 1996. These are as
follows:
a. the award has been made in pursuance of a submission to arbitration which is valid
under the law applicable thereto;
b. the subject-matter of the award is capable of settlement by arbitration under the law of
India;
c. the award has been made by the arbitral tribunal provided for in the submission to
arbitration or constituted in the manner agreed upon by the parties and in conformity
with the law governing the arbitration procedure;
d. the award has become final in the country in which it has been made, in the sense that
it will not be considered as such if it is open to opposition or appeal or if it is proved
that any proceedings for the purpose of contesting the validity of the award are
pending;
e. the enforcement of the award is not contrary to the public policy or the law of India.
The Amendment Act has restricted the ambit of violation of public policy for international
commercial arbitration to only include those awards that are: (i) affected by fraud or
corruption, (ii) in contravention with the fundamental policy of Indian law, or (iii) conflict
with the notions of morality or justice.15
However, the said section lays down that even if the aforesaid conditions are fulfilled,
enforcement of the award shall be refused if the Court is satisfied that-
a. the award has been annulled in the country in which it was made;
b. the party against whom it is sought to use the award was not given notice of the
arbitration proceedings in sufficient time to enable him to present his case; or that,
being under a legal incapacity, he was not properly represented;
c. the award does not deal with the differences contemplated by or falling within the
terms of the submission to arbitration or that it contains decisions on matters beyond
the scope of the submission to arbitration: Provided that if the award has not covered
all the differences submitted to the arbitral tribunal, the Court may, if it thinks fit,
15
Enforcement of Foreign Awards in India (mondaq.com).
15
postpone such enforcement or grant it subject to such guarantee as the Court may
decide.
Furthermore, if the party against whom the award has been made proves that under the law
governing the arbitration procedure there is any other ground, entitling him to contest the
validity of the award, the Court may, if it thinks fit, either refuse enforcement of the award or
adjourn the consideration thereof, giving such party a reasonable time within which to have
the award annulled by the competent tribunal.16
16
Ibid
16
5. NON-CONVENTION AWARD
Foreign awards passed by countries that are signatory to the above two conventions are
clearly enforceable under Part II of the Arbitration and Conciliation Act. But the
enforceability with respect to foreign arbitral awards from non-convention countries was a
bit unclear. In the year 2002, the Supreme Court in Bhatia International v. Bulk Trading
S.A17 finally cleared the air by stating that
Section 2(f) that defines International Commercial Arbitration makes no distinction between
arbitrations held in India or outside India. An international commercial arbitration may be
held in a country which is a signatory to either the New York Convention or the Geneva
Convention. An international commercial arbitration may (also) be held in a non-convention
country.
The reason for this being, since Part II does not specifically exclude the enforceability of
non-convention awards therefore even non convention awards are enforceable in India.
The court, in this case further went on to say that even Part I will be applicable to arbitrations
which take place outside India. The court reasoned it by saying that
If Part I was to only apply to arbitrations which take place in India the term “Court” would
have been used in Sections 5 and 8 of the said Act. The Legislature was aware that, in
international commercial arbitrations, a matter may be taken before a judicial authority
outside India. As Part I was also to apply to international commercial arbitrations held
outside India the term “judicial authority” has been used in Sections 5 and 8.
Secondly, the specific mention of non-obstante clause in Sections 45 and 54(Part II) of the
act which reads as “not withstanding anything contained in Part I” proves that Part I is
otherwise generally applicable to Part II of the Act as well.
In Badat & Co. v. East India Trading Co 18 the question before the Apex Court was whether a
foreign award followed by another judgment from that jurisdiction recognizing that award
makes it final for the purpose of enforcement. Supreme Court was divided in this respect the
minority judgment given by Subba Rao J said that the position was same both in England
and India which is that where the award is followed by a judgment in a proceedings which is
17
AIR 2002 SC 1432.
18
AIR 1964 SC 538.
17
not merely formal but which permits of objections being taken to the validity of the award by
the party against whom judgment is sought, the judgment will be enforceable.
“It would be impossible to carry on the business of the world if courts refused to act upon
what has been done by other courts of competent jurisdiction.”
The only precondition that the court added while enforcing an award is that of finality.
Where an award has no finality till the entire procedure is gone through such an award
cannot be enforced.
On principle I cannot see why a distinction should be made between the two categories of
cases. An enforcement order as well as a judgment on an award serves the same purpose:
they are two different procedures prescribed for enforcing an award. In the case of an
enforcement order a party applies to a court for leave, the award; and on the granting of such
leave, the award can be enforced as if it were a decree of a court
But the majority (MC Mudholkar and Raghubar Dayal JJ) differed from Subba Rao J, on the
technical ground that the cause of action for the suit that was based in New York must be
said to have arisen at that place. Hence, the cause of action, in so far as it rested on the
judgment, did not arise within the limits of the High Court and a suit for execution of such a
judgment before the High Court was therefore beyond the jurisdiction of the High Court.
The majority further said the claim that award itself be enforced must also fail because
according to the New York law, an award does not become final until a judgment has been
obtained on the basis of the award.
Thus, even in case of Non conventional awards, the Supreme Court has upheld that such
Non-conventional award will be enforceable in India under the common law on grounds of
justice, equity and good conscience19
19
Foreign Awards and Foreign Judgments (lawteacher.net).
18
6. CONCLUSIONS AND SUGGESTIONS
It can be inferred that the territorial jurisdiction for enforcement of a Foreign Award can be
understood by referring to the place where the right as conferred by the Award accrues. The
territorial Jurisdiction of the Court for the purpose of a Foreign Arbitral Award applies on
the rights conferred by such award and the test is to examine that whether it is required to
enforce such foreign arbitral award in order to enforce such right or not. The settled principal
in the regime of an international arbitration is the fact that the right vested by an international
award in any country except the country in which such award is made can be exploited only
when such foreign award is enforced in such country. Further, the territorial jurisdiction can
be understood in the light of the subject matter of the award.
India does not come across as a jurisdiction which carries an anti-arbitration bias or more
significantly which carries an antiforeigner bias. The figures show that notwithstanding the
interventionist instincts and expanded judicial review, Indian courts do restrain themselves
from interfering with arbitral awards. Judged on this touchstone, India qualities as an
arbitration-friendly jurisdiction.
19
BIBLIOGRAPHY
BOOKS REFFERED
Outlines Of Indian Legal & Constitutional His tory 8th Edition, Published by
UNIVERSAL LA W PUBLISHING CO.(2008).
ARTICLES REFERRED
H.C. Johari, “Difficulties in enforcement of foreign Awards under Indian law and in
India Courts” 1992 ArbLR Vol 35 (JS)8
Dr. Sanjeev Kumar, “Enforcement of foreign judgments and foreign arbitral awards in
India”. Chartered Sectrtary, 2004, Vol 34, Issue 4, p. 472
Sumeet Kachwaha, Enforcement of Arbitration Awards in India, (2008)4 AIAJ 64
URL:http://www.kaplegal.com/articles/AIAJ_V4_N1_2008_Book_
%28Sumeet_Kachwaha%29.pdf Last visited: 7/4/2010
Vijay Kumar Dungarwal, Enforcement of Foreign Awards and judgments in India,
URL:http://www.kaplegal.com/articles/AIAJ_V4_N1_2008_Book_
%28Sumeet_Kachwaha%29.pdf
WEBSITE REFFERED
www.wikipedia.com.
www.manupatra.com
www.legalservice.com.
www.jetir.org.
www.byjus.com
www.iasbhiyan.com.
20