ENFORCEMENT OF ARBITRAL AWARDS UNDER

INTERNATIONAL PRIVATE LAW

A project submitted in fulfilment of the course INTERNATIONAL

TRADE LAW
6TH SEMESTER during the academic year 2018-2019

SUBMITTED BY:

SANDHI GREWAL

ROLL NO- 1557

B.A. LL.B.

SUBMITTED TO:

Prof.Dr. P.P. RAO

FACULTY OF INTERNATIONAL TRADE LAW

MARCH, 2019
CHANAKYA NATIONAL LAW UNIVERSITY, NAYAYA NAGAR,
MEETHAPUR, PATNA-800001
 DECLARATION BY THE CANDIDATE

I hereby declare that the work reported in the B.A. LL.B (Hons.) Project Report entitled
“ENFORCEMENT OF ARBITRAL AWARDS UNDER INTERNATIONAL PRIVATE
LAW” submitted at Chanakya National Law University, Patna is an authentic record of my
work carried out under the supervision of Prof. Dr.P.P.RAO. I have not submitted this work
elsewhere for any other degree or diploma. I am fully responsible for the contents of my Project
Report.

(Signature of the Candidate)

SANDHI GREWAL
1557
BA.LLB
Chanakya National Law University, Patna

2
 ACKNOWLEDGEMENT

“IF YOU WANT TO WALK FAST GO ALONE

IF YOU WANT TO WALK FAR GO TOGETHER”

A project is a joint endeavor which is to be accomplished with utmost compassion, diligence and
with support of all. Gratitude is a noble response of one’s soul to kindness or help generously
rendered by another and its acknowledgement is the duty and joyance. I am overwhelmed in all
humbleness and gratefulness to acknowledge from the bottom of my heart to all those who have
helped me to put these ideas, well above the level of simplicity and into something concrete
effectively and moreover on time.
This project would not have been completed without combined effort of my revered ITL teacher
Prof.Dr.P.P RAO. whose support and guidance was the driving force to successfully complete
this project. I express my heartfelt gratitude to her. Thanks are also due to my parents, family,
siblings, my dear friends and all those who helped me in this project in any way. Last but not the
least; I would like to express my sincere gratitude to our Contract Law teacher for providing us
with such a golden opportunity to showcase our talents. It was truly an endeavor which enabled
me to embark on a journey which redefined my intelligentsia, induced my mind to discover the
various events and provisions which led to the development of law in India.
Moreover, thanks to all those who helped me in any way be it words, presence.
Encouragement or blessings...

- Sandhi Grewal
- 6th Semester
- BA. LLB

3
 TABLE OF CONTENTS
Acknowledgement ………………………………………………………….………………….3

Table of Contents…………………………...…………………………..……….……………...... 4

Aims and Objective………..……………….…………………………...……………………….7

Research Methodology……………………………………………………………….………..7

Limitations……………………………………………………………………………….…….7

1. Introduction………………...…………….………………………………………….……5-6

2. Defination of foreign awards……………………………………………………….…….8-13

3. Grounds for non-enforcemnet………….……………...…………………………………….14-17

4. Challenge to awards or grounds for setting aside the awards…….………………….18-27

5. Conclusion………………………………….…………………….………………………27-30

6. Bibliography……………….…………..……………………………………………………31

4
 INTRODUCTION

The application of private international law to electronic consumer contracts raises new,
complex, and controversial questions. It is new because consumer protection was not a private
international law concern until very recently and e-commerce only became an important
commercial activity within the last ten years. E-consumer contracts generate original questions
which have not been considered under traditional private international law theories.

Traditional rules of private international law on jurisdiction are based on geographical

connecting factors, such as domicile of the parties, which are sometimes not applicable in the
Internet. Some other connecting factors, such as the place of contracting, the place of
performance, the place where an establishment is situated, etc, are not so easy to be determined
in the electronic world. At the same time, traditional rules of international law on jurisdiction
cannot be set aside only because they seem not to be appropriate or relevant in this case.

It is complex because it has to deal both with difficulties raised by consumer contracts and the
challenges of e-commerce. Reasonable resolutions to consumer contracts may prove
inappropriate in e-commerce, while effective approaches to resolving private international law
problems in e-commerce may be improper for consumer contracts. It is controversial because it
concerns the conflicting interests of consumers and businesses in a fast-moving commercial
environment – a fair balance is therefore hard to achieve.

International private law provides rules of jurisdiction, choice of law and regulation and
enforcement of foreign judgments for cases where the existence of a foreign element is present in
the facts of the dispute. The aim of choice of law must be to select the appropriate governing law
on criteria of justice and convenience for the parties.

Once the jurisdiction of cross-border dispute has been determined, the lex fori’s choice of law
rules will be applied.

The operation of international private law rules are premised on connecting factors which are
used to determine whether parties are physically present or their activities are associated with
certain jurisdictions and laws in a material way. Domicile is important connecting factor most
often used to determine whether parties are physically located in a jurisdiction. Connecting factor
are means of ensuring that the closest and hereby the most appropriate, jurisdiction of a dispute
can be foreseen. or determined with a degree of certainty and predictability. Since international
law rules seek to ensure justice to the parties in a cross border dispute, an important
consideration is the meaning of justice in this context and in the context of disputes between
consumers and foreign sellers who have contracted by electronic means.1

Sookman has defined electronic commerce as ‘ any kind of transaction that is made using digital
technology, including transactions over open networks such as the internet, closed networks such
as electronic data interchange(EDI) and debit and credit cards.
The united states has introduced the uniform electronic transactions act (UETA) and the uniform

1
https://www.lexisnexis.com/ap/pg/.../Enforcement_of_arbitral_award_overview

5
computer information transactions Act (UCITA) to regulate electronic commerce activity. the
courts in US have also sought to adapt the rules of personal jurisdiction to apply to the
defendant’s commercial activities conducted via e-commerce in a particular state.

Various international organizations such as the Hague Conference on private international law
UNICTRAL have undertaken project and written reports and guidelines that have directed a
national, and an inherently particularistic, approach to the legal regulation of contracts by e-
commerce.Where the American doctrine distinguishes between prescriptive, adjudicative and
enforcement jurisdiction, the European rules make a fundamental distinction between
jurisdiction and applicable law. The concept of “jurisdiction” is taken as to designate which
Court is competent in order to rule a case. Once the “jurisdiction” ascertained, the judge has to
designate the applicable law. Where jurisdiction is mainly based on territorial principle, the
designation of the applicable law is mostly based on the closest connection to a legal system. In
other terms, whereas an American Court looks for which law is applicable in order to ascertain
its jurisdiction, European Courts are reasoning in two steps. In a first stage, the European judge
will verify the jurisdiction rules in order to ascertain its jurisdiction; then, he will look at his rules
of conflict of law in order to designate the applicable law. The result is that in international
situations there is not often a forum legis.

The American approach is based on casuistry – in each case the judge analysis the facts in order
to determine the applicable law. In Europe, there are abstract formulated rules which gives the
judge the solution. Maybe it is true that at the end the result with both approaches is the same.
However, for legal engineering, there is a fundamental difference as it is reasonably possible in
Europe to foresee the applicable law at the moment of the conclusion of the contract for
example. Even the modern principle of the closest connection, replacing the ancient lex loci
executionis is an abstract formulated rule in the Rome Convention because it is in 9/10 of the
cases the law of the country of the residence of the party who is to effect the performance which
is characteristic of the contract. It is only in some exceptional cases that the judge must refute the
presumption in order to undertake a contact analysis in order to determine the applicable law.

Two different set of rules, abstract pre-formulated rules of conflict, that are the postulates of the
European PIL and which must be taken in consideration in regard to the new paradigm of e-
commerce.

As e-commerce is not restricted to consumers and businesses situated in one jurisdiction, the
ways in which other countries have sought to adapt their international private law rules for such
contracts must be considered. Both countries economies have continued to maintain high levels
of participation in e- commerce and have also adapted existing jurisdiction rules for consumer
contracts and are in the process of modernizing choice of law rules. The court of the US have
adapted their existing rules of personal jurisdiction in an attempt to ensure the online activities of
a foreign defendant and the US is currently participating in negotiations for convention on choice
of law rules for consumer contracts.2The UK has implemented an EU regulation which modified
the jurisdiction rule for consumer contracts. The EU has recently adopted a regulation to replace
the Rome convention.3

2
www.newyorkconvention.org/in+brief

6
3
 AIMS AND OBJETIVES

The aims and objectives of this project are:

1.Study the concept of foreign arbitral award?
2.Analyse the statutory regime for enforcement of foreign arbitral award?
3.Study the procedure for enforcement of foreign arbitral award?

RESEARCH METHODOLOGY

The researcher has used the doctrinal method of research in the completion of this project on
“ENFORCEMENT OF ARBITRAL AWARDS UNDER INTERNATIONAL PRIVATE
LAW”. The researcher intends to examine the secondary sources in thus project. The secondary
sources include books, websites, photographs, articles, e-articles and reports in appropriate form,
essential for this study.

LIMITATIONS
This study involves the use of doctrinal method of research. The information will be granted
from various books on the subject of international trade law, article and published research
works .

7
 DEFINATION OF FOREIGN AWARD

Under the Arbitration and Conciliation (Amendment) Act, 2015. There are two avenues available
for the enforcement of foreign awards in India, viz., the New York Convention and the Geneva
Convention, as the case may be.

Enforcement under the New York Convention

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-
a.In pursuance of an agreement in writing for arbitration to which the Convention set
forth in the First Schedule applies, and
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.
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:
a. The country must be a signatory to the New York Convention.
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.

4
Section 44 of the Arbitration and Conciliation(Amendment) Act, 2015

8
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
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.
f. the subject-matter of the difference is not capable of settlement by arbitration under the law of
India; or
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

9
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 , the
award shall be deemed to be a decree of that Court.
B. Enforcement under the Geneva Convention
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.5
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.

5
Section 53 of the Arbitration and Conciliation(Amendment) Act, 2015
10
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. 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, 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,

12
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. Section 58 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 the Court.

13
 GROUNDS FOR NON ENFORCEMENT

The Arbitration Act, 1996 provides for certain grounds for refusing enforcement of foreign arbitral
awards. In this respect, Indian Law generally follows the NYC (1958). Nevertheless, there are some
significant differences that are discussed in the following Sections. The main difference is that
while, under the Convention these grounds may, but not must, result in non-enforcement of a
foreign award, under Indian law, they shall have such a legal impact. In other words, if there exists
such a ground, the Convention provides judges with the discretion to or not to enforce the award,
but Indian Law clearly prohibits them from enforcing such an arbitral award.
The Section 34 of Arbitration Act, 199616 covered some of the grounds for said aside which are
same with Section 48. This Section has been enacted on the basis of Article V of the NYC (1958)
and also Section 7 of the Foreign Awards (Recognition & Enforcement) Act, 1961.

The Section 48 of the Arbitration Act, 1996 had an occasion to elaborate and lay down proof
grounds for setting aside of award which are available in foreign awards. Briefly stated, these
grounds are; -
a) If the arbitral agreement is not valid.
b) Due process of law has been violated.
c) Arbiter has exceeded his authority.
d) Irregularity in the composition of Arbitral Tribunal or arbitral proceedings.
e) Award being set aside or suspended in the country in which, or under the law which, that award
was made.
f) Non-arbitrability of dispute.
g) Award being contrary to public policy.

Rest of the grounds which are same with Section 34 of the Arbitration Act, 1996 new grounds of
Section 48 of the Arbitration Act, 1996 have covered by researcher as fallow:

1 Not Being Issued by a Competent Body

Article 48(1) of the Arbitration Act, 1996 provides that a foreign award cannot be enforced, if it
has not been issued by a competent judicial authority, according to the international jurisdiction
rules of the country where it has been made.
14
As we already know, under Article 49 of the Arbitration Act, 1996, the rules applying to foreign
Court decisions also apply to foreign awards. It can be argued that the extension of the above rule to
foreign arbitral awards means that such an award cannot be enforced in India, if it is not issued by a
competent arbitration tribunal according to the law of the country where it is made. If this
interpretation is plausible, Indian Law is more restrictive of the NYC (1958) and most other
internationally established rules, which do not explicitly refer to such a condition.

Some States (like Egypt6 or Bahrain7 , etc.) go beyond the requirement that a foreign judgment or
award may be enforced, if the issuing authority is competent according to the international
jurisdiction rules set out at the seat of judgment.

They also require that, if a foreign judgment is to be enforced in their territory, their domestic court
must not have jurisdiction to hear the case, according to their own rules of private international law,
which is considered as part of their public policy. In other words, joint jurisdiction between the
issuing and enforcing countries results in non-enforcement of a foreign judgment. This is so, for
instance, in the United Arab Emirates, the Dubai Court of Cassation ruled that if the Dubai Court
has jurisdiction over a dispute; a judgment rendered by a foreign court on the dispute would not be
regarded as res judicata, and would not be enforced.8

Although, like the NYC (1958),9 Indian Law explicitly consider the invalidity of arbitration
agreement, the incapacity of the parties to conclude the arbitration agreement, the wrong
composition of the tribunal or the excess of the jurisdiction of the tribunal, as grounds for refusing
enforcement of a foreign arbitral award. 10
Since the above provision of Indian Law does not directly address the issue of the jurisdiction of the
rendering body, it does not deal with the possibility of an award being issued on a dispute which is
partially within the jurisdiction of the tribunal. Under most legal systems, recognition and

6
Article 298(1) of the Egyptian Code of Civil and Commercial Procedure 13/1968.
7
Article 252 of the Bahrain Law No.12
8
Danny Kabbani. “Enforcement of Foreign Judgments Relative to Project Finance in Islamic Countries”, GCC
Commercial Arbitration Centre Bulletin, issue 19 (June 2001) , 17
9
Articles V (1) (a) to V (1) (c), the New York Convention (1958).
7 Section 103(2), English Arbitration Act, 1996, and David Altaras, “Enforcement of Foreign Award: Dardana Ltd
v. Yukos OIL Co.”, Arbitration, vol. 68, no. 3 (2002), 316. If the losing party seeks the adjournment of the
enforcement proceedings pending the settlement of a foreign court decision, an order for security may be made by
the enforcing court (Ibid., 317)
15
enforcement may be granted to those parts of the award in which the tribunal has acted within its
jurisdiction, if such parts can be separated from the other parts. There is no reason not attribute the
same view to the Indian law. The difficulties and ambiguities raised by the above provision of
Indian Law once again indicate that it would have been better, if Indian Law had addressed foreign
awards differently from foreign court judgments and orders.

2.Non-Compliance with Indian Law or a Court Decision

Article 48(1) (d) of Arbitration Act, 1996 provides that a foreign orders and award that entails a
breach of a rule of the laws practiced in India shall not be enforced. The problem with this provision
is that it does not specify which types of rules cannot be breached by the award. It can be
interpreted that they must not be against the ordinary law of India. This, however, goes beyond the
internationally established rules and particularly the NYC (1958), which requires a foreign award
not to be against the mandatory rules of law in the enforcing State. Indian Law even goes further,
and requires that a foreign orders and award the enforcement of which is sought in India must not
contradict orders and award already issued in India. This implies the priority of an Indian court
decision over a foreign judgment or award, in term of their execution in India. Such a situation
arises in the case of joint jurisdiction, when both the Indian and foreign courts have jurisdiction to
hear a dispute. As seen before, the exclusive jurisdiction of a domestic court leads to non
enforcement of a foreign award, even if no domestic decision has yet been made. On the other hand,
it can be said that, if the judgment is made by the Indian court lacking jurisdiction to hear the case,
and the defendant did not made any objection to the competence of the court, the judgment is
considered as if it were made by the court having jurisdiction. Such a judgment consequently has
priority of enforcement over foreign sentences and awards regarding the same dispute.
Nevertheless, in other cases of lack of jurisdiction or joint jurisdiction, there is no reason for the
priority of a decision made by the Indian court over a foreign arbitration award.
Under the above situation of Indian Law, filing a lawsuit with the Indian court does not bar the
enforcement of a foreign award, because enforcement of such an award may be barred only if a
contradicting Indian court sentence has already been made.
The provision does not also require denying enforcement of an award, if court proceedings on the
same or a related subject pending in India have begun before the foreign arbitral proceedings.

16
Under many legal systems, such as the English law, the losing party may request a stay of the order
for enforcement, pending determination of any application to set aside the award before the
competent foreign authority.11
It may also be asked whether the Indian court would enforce the foreign award, if a court judgment
has already been rendered, or court proceedings are pending in a third country.

India may or may not have a contract with the latter country for enforcing Court judgments. India is
under obligation to enforce court judgments rendered in countries with which it has a bilateral or
multilateral treaty. India is a party to several international conventions for enforcement of foreign
award. 12

3.Improper Summons and Legal Representation

The Orissa High Court in Orient Paper Mills v. Civil Judge, did not allow the summoning the
chairman of arbitral tribunal as a witness. The application was made under Articles 226 & 227 of
the (Indian) Constitution for a direction to the Civil Judge for issuing summons. The award was
submitted by the tribunal. It rejected the claim with a full statement of reasons. 13 The ground on
which the Chairman was sought to be summoned was that the tribunal considered certain document
behind the back of the party. The Court said that this ground, if established, would have enabled the
party to get the remedy of setting aside. In the presence of such a crystal remedy, there was hardly
any need for summoning the arbiter as a witness.14 The Orissa High Court held that a foreign award
can be enforced, only if both disputant parties have been summoned to appear and legally
represented. This decision is a reflection of Article V (1) (b) of the NYC (1958). Although Article
48(1) (b) of the Act, 1996 does not explicitly express equal treatment, fair hearing, full and proper
opportunity for the parties to present their case and having access to the other party’s documents as
conditions for the enforcement of a foreign award, it can be interpreted as to prohibiting most types

11
Section 103(2), English Arbitration Act, 1996, and David Altaras, “Enforcement of Foreign Award: Dardana Ltd
v. Yukos OIL Co.”, Arbitration, vol. 68, no. 3 (2002), 316. If the losing party seeks the adjournment of the
enforcement
proceedings pending the settlement of a foreign court decision, an order for security may be made by the enforcing
court (Ibid., 317).
12
Sections 48(1) (b) of the Arbitration Act, 1996 (This is similar to Article V (1) (b), the New York Convention
1958) reads as “The party making the application was not given proper notice of the appointment of an arbitrator or
of the arbitral proceedings or was otherwise unable to present his case.”
13
AIR 2003 (4) RAJ 479(Ori) , (Indian kanoon).
14
Ibid.

17
of failure to comply with fairness in arbitration proceedings.
For instance, the Arbitral the Arbitral Tribunal’s refusal to hold a hearing requested by one of the
disputant parties may be regarded as a violation of due process, and thus a ground for denying
enforcement of the award.15

CHALLENGES TO AWARDS OR GROUNDS FOR SETTING

ASIDE AWARD

Domestic arbitral award

Part I of the 1996 Act is modelled on the UNCITRAL Model Law and16 the UNCITRAL
Arbitration Rules17 with few departures. The relevant provisions are briefly outlined below.
Section 13 of the 1996 Act, corresponding to Art 13 of the Model Law, provides for challenge to
an arbitrator on the ground of lack of independence or impartiality or lack of qualification. In the
first instance, a challenge is to be made before the arbitral tribunal itself.18If the challenge is
rejected, the tribunal shall continue with the arbitral proceedings and make an award. 19Section
13(5) of the 1996 Act provides that where the tribunal overrules a challenge and proceeds with
the arbitration, the party challenging the arbitrator may make an application for setting aside the
arbitral award under s 34 of the 1996 Act (corresponding to Art 34 of the Model Law). Hence,
approach to a court is only at the post-award stage. This is a departure from the Model Law
which provides for an approach to the court within 30 days of the arbitral tribunal rejecting the
challenge.20The second departure from the Model Law (relevant to enforcement) is to be found
in S. 16 of the 1996 Act (corresponding to Art 16 of the Model Law).

15
Sections 48(1) (b) of the Arbitration Act, 1996 “The party making the application was not given proper notice of
the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case.”

13. I.e. the United Nations Commission on International Trade Law Model Law on International Commercial
Arbitration, General Assembly Resolution 40/72, adopted on 11 December 1985 (‘the Model Law’).

17
Arbitration Rules of the United Nations Commission on International Trade Law (‘UNCITRAL’), General
Assembly Resolution 31/98, adopted on 15 December 1976 (‘the UNCITRAL Arbitration Rules’).
18
The 1996 Act, s 13(2).
19
The 1996 Act, s 13(4
20
The Model Law, Art 13(3).

18
Section 16 incorporates the competence-competence principle and enables the arbitral tribunal
to rule on its jurisdiction, including with respect to the existence or validity of the arbitration
agreement. If the arbitral tribunal rejects any objection to its jurisdiction, or to the existence or
validity of the arbitration agreement, it shall continue with the arbitral proceedings and make an
award.21Section 16(6) of the 1996 Act provides that a party aggrieved by such award may make
an application for setting aside the same in accordance with S.34. Article 16 of the Model Law,
in contrast, provides that where the arbitral tribunal overrules any objection to its jurisdiction, the
party aggrieved with such decision may approach the court for resolution within 30 days. The
Indian Act permits approach to the court only at the award stage (and not during the pendency of
the arbitration proceedings). Hence, Section 13(5) and 16(6) of the 1996 Act furnish two
additional grounds for challenge of an arbitral award (over and above the ones stipulated in s 34
of the 1996 Act referred to below). Section 34 of the 1996 Act contains the main grounds for
setting aside the award. It is based on Art 34 of the Model Law and, like Art 34, states that the
grounds contained therein are the ‘only’ grounds on which an award may be set aside. However,
in the Indian context the word ‘only’ prefixing the grounds is a bit of a misnomer as two
additional grounds have been created by the Act itself as mentioned above. Besides, another
ground is to be found in an ‘Explanation’ to the public policy ground in s 34. The same reads as
follows:

It is hereby declared, for the avoidance of any doubt, that an award is in conflict with the public
policy of India if the making of the award is induced or affected by fraud or corruption or was in
violation of Section 75 or Section 81.

Section 75 referred to above is part of the conciliation scheme under the Act and states that the
conciliator and parties shall keep confidential all matters relating to the conciliation proceedings.
Section 81 prohibits any reference in arbitral or judicial proceedings to views, suggestions,
admissions or proposals, etc. made by parties during conciliation proceedings.

21
The 1996 Act, s 16(5).

19
Save for the exception, referred to above, s 34 of the 1996 Act is a faithful reproduction of Art
34 of the Model Law.
Foreign arbitral awards
Post ONGC approach :
The Act of 1996 does not provide for challenge for foreign arbitral award specifically. Although
Section 48 and more particularly Section 48(1)(e) read with other substantive provisions makes it
abundantly clear that although it is not permissible to challenge a foreign award, it could be
resisted in its enforcement on the same grounds as are available while challenging a domestic
award. While a bare reading of Section 48(1)(e) would demonstrate that a foreign award can be
challenged in a country in which it was made or the country under law of which it was made.

The most recent decision of the Supreme Court on the subject of setting aside an award on the
ground of public policy under Section 34 is Venture Global Engineering Vs. Satyam Computer
Services Ltd.22Based on the earlier judgment in Bhatia International, 23the Supreme Court held
that it is open to the parties to exclude the application of the provisions of part I by express and
implied agreement, failing which the whole of part I would apply. Further, it held that to apply
Section 34 to a foreign award would not be inconsistent with Section 48 of the 1996 Act, or any
other provision of part II and that the judgment-debtor cannot be deprived of his right under
Section 34 to evoke the public policy of India, to set aside the award. Thus, the extended
definition of public policy cannot be bypassed by taking the award to foreign country for
enforcement.

On 10-1-2008 the Supreme Court rendered its decision in Satyam Computer Services Ltd. case24
and held that even a foreign award can be challenged in India on the ground of public policy.
The decision was passed basically relying on the decision of the Court in Bhatia International v.
Bulk Trading S.A25in which it was held that Part I of the 1996 Act will also apply to Part II
unless expressly or impliedly excluded by the parties through agreement. The Supreme Court
upheld a challenge in India to a foreign arbitration award on the grounds that the relief contained

22
Ibid.
23
Bhatia International v. Bulk Trading SA, (2003)5 SCC 105

24
Venture Global Engg. V. Satyam Services Ltd.(2008)
25
Bhatia International v. Bulk Trading S.A.& Anr(2002)

20
in the award violated certain Indian statutes and was therefore contrary to Indian public policy
pursuant to Part I of the Indian Arbitration and Conciliation Act, 1996.
The case arose from a challenge in India by a US company, Venture Global Engineering (VGE),
to set aside an award rendered against it in an arbitration proceeding in London under the rules of
the LCIA. The relief in the award implicated VGE’s interests in India and called for the transfer
of certain shares that VGE owned in an Indian joint venture. VGE’s challenge asserted that the
relief in the award violated certain Indian corporate and foreign investment statutes, specifically
the Foreign Exchange Management Act, 1999, and therefore constituted a "conflict with the
public policy of India" pursuant to the general provisions contained in Section 34 of Part I of the
Arbitration Act. The court held that:
“The provisions of Part I of the Act (Arbitration and Conciliation Act, 1996) would apply to all
arbitrations including international commercial arbitrations and to all proceedings relating
thereto. We further hold that where such arbitration is held in India, the provisions of Part-I
would compulsorily apply and parties are free to deviate to the extent permitted by the provisions
of Part-I. It is also clear that even in the case of international commercial arbitrations held out of
India provisions of Part-I would apply unless the parties by agreement, express or implied,
exclude all or any of its provisions.”
The decision has important implications both for companies doing business involving India and
for companies with substantial assets located in India and for companies required to enforce
foreign arbitration awards in India. This decision has made the foreign awards open to challenge
under the grounds listed in section 34 of Part I of the Act, which includes the ground that the
award is against Indian public policy. Public policy in this sense is stated to encompass the
illegality and fundamental policy, interests, justice and morality of India. If an arbitration
agreement does not specifically exclude the application of this part of the Act, the award is open
to a challenge under the Act.
Although, scope of Part I can be avoided by the parties by accepting to the same under their
contract. However, this shall not help to as the grounds for opposing enforcement are found in
Part II of the Act. These grounds are, for the most part, the same as the grounds for challenging
the award set out in Part I. The Part II grounds are set out in section 48 of the Act and, as in
section 34, cover an award which is considered to be against Indian public policy. There is no
case law on the point, but it is generally accepted that any attempt to exclude the effect of Part II
of the Act would fail.
 21

Following the judgment in Venture Global Engineering, if the arbitration agreement does not
specifically exclude the application of Part I of the Act, foreign awards are open to challenge by
the losing party under the grounds listed in section 34 of Part I. However, the grounds for
opposing enforcement under Part II of the Act mirror those in Part I. Therefore an exclusion of
Part I will be ineffective where Part II applies. Part II of the Act will always apply to foreign
awards when they are enforced in India.

Therefore, although technically the judgment has not made any material changes to the status
quo in relation to enforcing foreign awards in India, it appears to have had significant practical
effects:

· The decision is likely to result in an increase in challenges to foreign arbitral awards in India;
and

· It has set alarm bells ringing over the extent to which India is willing to comply with its New
York Convention obligations.

This judgment of the Supreme Court is contrary to the object and scheme of the New York
Convention and also in violation of Article III of the Convention, in as much as it introduces an
additional ground for challenging a foreign award. The decision is contrary to the intention of the
Indian legislature, since it:

· Exposes a foreign award to an additional ground of challenge, (introduced by way of judicial

legislation) meant for domestic awards only.

· Makes provision of Section 48 of 1996 Act of enforcement of foreign award redundant, as

every time an enforcement application is filed before Indian courts under Section 48, the
opposite party would file objection under Section 34, availing the benefit of challenging the
foreign award on merits.

· Seeks to introduce a procedure to challenge a foreign award through judicial legislation in the
absence of such a procedure under the 1996 Act.
 22
The decision is also contrary to the precedent laid in ONGC Vs. Saw Pipes,26 wherein the court
had accepted that the scope of Section.34 and Section.48 are not identical and hence the
assumption of the court that the effort of the respondent was to avoid enforcement of the award
under Section 48 of 1996 Act, thereby depriving the appellant the benefit of the rule of public
policy of India, is not correct.

The Supreme Court’s intervention in the Satyam case27 on grounds of public policy is most
unfortunate, as it does not take into account the decision of the three judges Bench in Renusagar
case.28 The present decision, thus exposes foreign awards to challenge on merits on the ground
that it is “patently illegal”, notwithstanding the enforcement proceedings in any other
jurisdiction. In effect, the decision treats a foreign award as a domestic award, if the execution of
the award is to be done as per the laws of India.
Thus, it is easily inferred that the direction these decisions have taken the law on the subject and
in all such cases, the judgments depart from the spirit through judicial lawmaking and they
disclose a lack of trust in the arbitral process.

Steps For Enforcement Of Arbitral Award.

Domestic
One of the declared objectives of the 1996 Act is that every final award: ‘is enforced in the same
manner as if it were a decree of the Court’29 Hence, the scheme of the Act is that it is up to the
losing party to object to the award and petition the court for setting it aside. The winning party
has to make no procedural move. If the objections to the award are not sustained (or if there are
no objections within the time allowed) the award itself becomes enforceable as if it were a decree
of the court30. It would be noticed that the Indian law has thus fundamentally departed from the
Model Law in this regard. The Model Law requires an application for enforcement (Art 35) and
the grounds on which enforcement of an award may be refused are as set forth in Art 36 thereof.

26
ONGC v. SAW Pipes Ltd., AIR 2003 SC 2629
27
Venture Global Engineering v. Satyam Computer Services Ltd., AIR 2008 SC 1061 (April)
28
Renusagar Power Plant Co. v. General Electric Co., AIR 1994 SC 860

29
Statement of Objects and Reasons to the 1996 Act, para 4(vii).
30
The 1996 Act, s 36.
23
This has been departed from under the Indian regime as stated above with the result, that in so
far as domestic awards are concerned,
if there is no application to set aside an award under s 34 (or if the objections if made have been
rejected), the award can straightaway be executed as a decree of the court. Thus, when the period
for filing objections has expired or objections have been rejected, the award can be enforced
under the Civil Procedure Code (CPC) in the same manner as if it were a decree passed by a
court of law. Section 36 declares that an arbitral award has the force of the decree, though in fact
it is not a decree. An ex parte Award passed by an Arbitral Tribunal under Section 28 of the Act
is also enforceable under Sec. 36. Even a settlement reached by the parties under Section 30 of
the Act can be enforceable under Sec. 36 of the Act as if it is a Decree of the Court.

Foreign arbitral award

India's Arbitration and Conciliation Act, 1996 provides a statutory framework for the
enforcement of foreign arbitral awards given in countries which are signatories to either the 1927
Convention on the Execution of Foreign Arbitral Awards (Geneva Convention) or the 1958
Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York
Convention).

One of the prerequisites for the enforcement of a foreign arbitral award in India's courts is that it
should be a foreign award under the Geneva Convention or the New York Convention.

In the case of Bhatia International vs Bulk Trading, AIR 2002 SC 1432, the Supreme Court held
that an arbitration award not made in a convention country will not be considered a foreign
award and, as such, a separate action will have to be filed on the basis of the award.31

Enforceable awards
There are several requirements for a foreign arbitral award to be enforceable under the AC Act.

(i) Commercial transaction: The award must be given in a convention country to resolve
commercial disputes arising out of a legal relationship. In the case of RM Investment & Trading
vs Boeing, AIR 1994 SC 1136, the Supreme Court observed that the term "commercial" should
31
https://www.lawctopus.com/academike/arbitral-award-setting-aside/

24
be liberally construed as having regard to manifold activities which are an integral part of
international trade.

(ii) Written agreement: The Geneva Convention and the New York Convention provide that a
foreign arbitral agreement must be made in writing, although it need not be worded formally or
be in accordance with a particular format.

(iii) Agreement must be valid: The foreign award must be valid and arise from an enforceable
commercial agreement. In the case of Khardah Company vs Raymon & Co (India), AIR 1962 SC
1810, the Supreme Court held that an arbitration clause cannot be enforceable when the
agreement of which it forms an integral part is declared illegal.

(iv) Award must be unambiguous: In the case of Koch Navigation vs Hindustan Petroleum Corp,
AIR 1989 SC 2198, the Supreme Court held that courts must give effect to an award that is clear,
unambiguous and capable of resolution under Indian law.

Unenforceable awards
Under sections 48 and 57 of the AC Act, an Indian court can refuse to enforce a foreign arbitral
award if it falls within the scope of the following statutory defenses:

(i) the parties to the agreement are under some incapacity;

(ii) the agreement is void;

(iii) the award contains decisions on matters beyond the scope of the arbitration agreement;

(iv) the composition of the arbitral authority or the arbitral procedure was not in accordance with
the arbitration agreement;

(v) the award has been set aside or suspended by a competent authority of the country in which it
was made;

(vi) the subject matter of dispute cannot be settled by arbitration under Indian law, or
(vii) the enforcement of the award would be contrary to Indian public policy.
25

Enforcement and execution

The party seeking enforcement of a foreign award under the provisions of the Act must make an
application to the court of competent jurisdiction with the following documents:

(i) the original/duly authenticated copy of the award;

(ii) the original/duly authenticated copy of the agreement, and

(iii) such evidence as may be necessary to prove that the award is a foreign award.

In the case of Fuerst Day Lawson vs Jindal Exports[34], the Supreme Court held that a single
application will hold good to decide the question of the execution of the foreign arbitral award as
well as the decree of the award.

A binding agreement
On fulfilling the statutory conditions mentioned above, a foreign award will be deemed a decree
of the Indian court enforcing the award and thereafter will be binding for all purposes on the
parties subject to the award.

Difficulties Experienced In Enforcement

Main difficulties which a party experiences while seeking enforcement of an Arbitral Award are-

An Arbitral Award under the 1996 Act cannot be enforced as a Decree till the period of
challenge under Sec.34 (3) is over or the objections filed have been dismissed. It is a common
practice that whenever an Arbitral Award is made, the party adversely affected by it files a
petition u/s 34 of the Act in the Court and the Court issues notice. Then, till the time this
objection petition is dismissed the said award cannot be enforced. Given the delays in our
judicial system, it almost takes years for the Objection Petition to be disposed off and till such
time the party having the arbitral award in its favour remains in limbo. Thus, the laudable
objective behind doing away of legal proceedings to make the arbitral award a Rule of Court
under the 1940 Act by introducing Sec.36 in the 1996 Act has been diluted to a great extent.
 26
It is proposed to provide for, inter alia, that mere filing objection petition under Sec.34 will not
operate as stay of the award and the court may grant stay of the operation of the award subject to
imposition of such conditions as it may deem fit to impose and the power to impose conditions
include the power to grant interim measures not only against the parties to the award but also
against the third parties in order to protect the interest of the party in whose favour the award is
passed.

· The Execution procedure laid down in Order XXI of CPC is lengthy, complex and time
consuming and almost a never ending story.

· By the time the stage of filing execution comes, the party against whom the award had come,
cleverly disposes off its assets so as to defeat the execution proceedings. Unless a party has taken
interim orders u/s 9 of the Act against disposal of assets etc. there are good chances that by the
time execution application is filed, the judgment debtor would have practically spirited away all
its assets.32

32
https://www.lawctopus.com/academike/arbitral-award-setting-aside/

27
 CONCLUSION

It is time for the Indian law of arbitration to develop a rule that could determine when a third
party wants to participate in an ongoing arbitration. There are many international rules that
determine when a third party could party could participate in an arbitration. The Arbitration
Act,1996 should be influenced by these rules if the legislature decide to include when a third
party wants to participate in an arbitration. Therefore, It is proposed to be added a new Section in
the Act, in order to define a particular rule for Multi-party arbitration. Due to ambiguous and
uncertainty of public policy, the judicial interference of Indian courts are hyper active. It clearly
runs the big risk of impinging upon Indian arbitration as an effective method of dispute
resolution. It is proposed to be modified by using the new definition of public policy which
introduce by researcher as follow: “The public policy as an inconsistent, unpredictable and
dynamic political tool is against the enforcement of awards in judicial activity’s framework.”
There is no distinction between domestic public policy, which is applied to domestic awards, and
international public policy, which in certain circumstances is applied to international awards
issued under the Arbitration Act, 1996.
Suggestion: Indian legislature as an emergent action should be made acrystal distinction between
domestic and international public policy. This serious lacuna can be addressed by modification
of the law in subject of Interim Measures Order. The framers of the Arbitration Act, 1996 has not
provided for any particular mechanism for enforceability of direction of arbitral tribunal order
regarding interim measures under Section 17 of the Arbitration Act, 1996. Thereof, the provision
contained in Section 17 appears to be a “toothless tiger” and totally depends upon the morality of
the disputants It is proposed to be added two new Section 24(A) 2 and 24(B) 3 in the Act, which
is proposed by Arbitration (Amendment) Bill, 2003 in order to provide on efficacious
mechanism of imparting interim measures. Also theaid can take from Canada and Scotland
Arbitration Acts which have specifically provided in their arbitration law that an order of the
arbitral tribunal regarding interim measures shall take the form of an arbitral award which would
be enforceable just like an award made by the arbitral tribunal claimant fails to comply with it.
he SC not met the purpose for which the Arbitration Act of 1996 was passed because in practice,
it have vastly enlarged the arbitration should be subject to less restrictions and scrutiny, and be
provided with amore favourable treatment.
 28
The grounds for vacating a domestic award can be more than those leading to setting aside a
foreign award. For instance, a crystal distinction should be made between domestic public
policy, which is applied to domestic awards, and international public policy, which in certain
circumstances is applied to international awards issued under Indian law. More importantly, the
Arbitration Act,1996 recognizes recourse to foreign arbitration. It also contains a definition of
foreign arbitral awards, and makes a distinction between domestic and foreign awards. Under the
Arbitration Act 1940, it was assumed that foreign awards must be treated as if they were
domestic ones, that is, they were subject to the legal procedure and scrutiny applicable to
domestic awards and, more importantly, subject to judicial review. This is no longer the case.
However, again, lack of a definition of international public policy applicable to foreign awards is
a deficiency of Indian law that needs to be addressed. The Arbitration Act, 1940 addressed the
issue of enforcement very briefly; and the Indian court was assumed to have the power to
examine meticulously an award, when considering its enforcement. Since there was no rule on
the enforcement of foreign awards, they, too, were assumed to be subject to retrial andto the
similar extent of legal scrutiny. By enacting the Arbitration Act, 1996, the Indian arbitration law
has shiftedtowards a pro-enforcement position, to the extent that it can also be said that the lawis
generally more than the Model Law facilitative of enforcement of arbitral awards. It is relatively
straightforward to apply for the enforcement of awards made under the Act, 1996, whether in or
outside of India
. Making a distinction between domestic and foreign awards, the Act, 1996 even more facilitates
the enforcement of foreign and international awards. Also, the Supreme Court decision allows
enforcement of foreign arbitral awards, without requiring a review of their merit. While Indian
law of arbitration recognizes the effect of multilateral conventions or bilateral treaties, if they are
applicable to a foreign award, under the New York Convention (1958) or Geneva
Convention(1927), the most favourable law or conventions can be applied, when enforcing
aforeign award. Hence, it is possible to go for the “most favourable regime” of enforcement
available within the Indian legal system and treaties joined by India. Asa matter of fact, in many
aspects, the current Indian law is more than the New York Convention facilitative of
enforcement of foreign and international awards. In certain aspects, however, the Indian law lags
behinds the Convention and universally accepted standards. For instance, while the grounds
expressed in ArticleV of the Convention may result in the non-enforcement of an award, Indian
law obliges the court to refuse enforcement of an award, if such grounds exist.
29
The lateral so mentions non-compliance with the rules of morality as a ground for the refusal of
enforcement of an award, whereas no such a ground is recognized under the Convention. Such a
requirement may lead to broad or conflicting interpretations, undermining the required
Uniformity Finality , It is an ideal time for a reform of Indian’s arbitration legislation. By
acknowledging globally accepted practices and rules, the Indian law of arbitration should be
amended with a view to removing the serious lacuna and difficulties mentioned above and to
improve its arbitration landscape on a domestic as well as international level. Adoption of
various legislations regulating arbitration, including international arbitration, setting up several
bodies engaged in arbitration, whether domestic or international, and accession to international
and regional conventions and treaties should be accomplished while an attempt is made at co-
ordination between them. Lack of such co-ordination leads to confusion, and undermines the
very rationale of resort to arbitration, which is simplicity and saving of time.

30
 BIBLIOGRAPHY

BOOKS

1. S.R. Myneni, international trade law

2. Loul Autar Krishan, General agreement on tarrifs and trade and WTO; economics
and politics
3. Cheshire, North & Fawcett: Private International Law, 15th edition
4. Advanced Introduction to Private International Law and Procedure (Elgar
Advanced Introductions Series)

WEBSITES

 https://www.lexisnexis.com/ap/pg/indiaalternatedisputeresolution/document/429958/5N3
4-3S41-DY39-V1W5-00000-00/Enforcement_of_arbitral_award_overview
 http://www.newyorkconvention.org/in+brief
 https://globalarbitrationreview.com/jurisdiction/1004815/india
 http://www.legalservicesindia.com/article/788/validity-of-foreign-arbitral-awards-in-
India.html

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