International Arbitration: Recognition and Enforcement of non-domestic

arbitral awards in India

ALTERNATIVE DISPUTE RESOLUTION

TUTORIAL 3
Submitted by:
PALAK 17010324032
BBA-LLB ‘C’
Symbiosis Law School, Hyderabad
Symbiosis International University, PUNE
In
NOVEMBER 2021
Under the guidance of
Dr. Irfan Ali Abbas
Assistant Professor
Symbiosis Law School, Hyderabad
Symbiosis International University, PUNE
Introduction

As a means of settling international commercial disputes the Convention on the Recognition

and Enforcement of Foreign Arbitral Awards, entered into force in 1959, which seeks to
provide common legislative standards for the recognition of court recognition and
enforcement of international arbitral awards, and arbitration agreements. It is necessary to
recognize the importance of growing International arbitration. “The term non-domestic
appears to embrace awards which, although made in the state of enforcement, are treated as
foreign under its law because of some foreign element in the proceedings, e.g. another State's
procedural laws are applied. The Convention's principal aim is that foreign and non-domestic
arbitral awards will not be discriminated against and it obliges Parties to ensure such awards
are recognized and generally capable of enforcement in their jurisdiction in the same way as
domestic awards. An ancillary aim of the Convention is to require courts of Parties to give
full effect to arbitration agreements by requiring courts to deny the parties access to court in
contravention of their agreement to refer the matter to an arbitral tribunal.”

Along with the expansion of international trade in recent years, “the business world has been
increasingly reluctant to litigate in courts of law for differences arising from international
commercial transactions. Ability to communicate and commute with distant places with the
utmost speed enables a merchant today, in a few minutes or hours, to conclude a contract
abroad which a generation ago would have taken weeks or months. When, however, it
becomes necessary to resort to the machinery of justice to settle a dispute connected with that
contract, to enforce a judgment in another country is still a complicated, time-consuming and
expensive operation. It is not surprising, therefore, that businessmen have been turning with
increasing frequency to arbitration as a quicker and simpler means of settling international
commercial disputes. There has been a noticeable movement in favour of arbitration.
Arbitration facilities and institutions have increased. The favourable trend towards arbitration
has been reflected also in legislative enactments, international treaties, and other measures by
which arbitration has gradually acquired a more solid legal standing.”

India today is very much important part of the global economy. “The ever-increasing level of
globalization has led to raise international business disputes too. In this context, the
enforcement of foreign judgment and foreign Arbitral Awards becomes significant. A foreign
judgment may be enforced in India by (i) proceedings in execution and (ii) by a suit upon it,
CPC, 1908. An arbitral award is a determination on the merits by an arbitration tribunal in
arbitration, and is analogous to a judgment in a court of law. Arbitration is particularly
popular as a means of dispute resolution in the commercial sphere. One of the reasons for
doing so is that, in international trade, it is often easier to enforce an arbitration award in a
foreign country than it is to enforce a judgment of the court. The enforcement of foreign
arbitration awards is governed by the Arbitration and Conciliation Act, 1996 through New
York Convention and Geneva Convention and a Non-conventional award will be enforceable
in India under the common law grounds of justice, equity and good conscience.”

Data Analysis

“With the expansion of international trade in recent years, the business world has been
increasingly reluctant to litigate in courts of law for differences arising from international
commercial transactions. Ability to communicate and commute with distant places with the
utmost speed enables a merchant today, in a few minutes or hours, to conclude a contract
abroad which a generation ago would have taken weeks or months. When, however, it
becomes necessary to resort to the machinery of justice to settle a dispute connected with that
contract, to enforce a judgment in another country is still a complicated, time-consuming and
expensive operation. It is not surprising, therefore, that businessmen have been turning with
increasing frequency to arbitration as a quicker and simpler means of settling international
commercial disputes. There has been a noticeable movement in favour of arbitration.
Arbitration facilities and institutions have increased. The favourable trend towards arbitration
has been reflected also in legislative enactments, international treaties, and other measures by
which arbitration has gradually acquired a more solid legal standing. India today is very
much important part of the global economy. The ever-increasing level of globalization has
led to raise international business disputes too. In this context, the enforcement of foreign
judgment and foreign Arbitral Awards becomes significant. A foreign judgment may be
enforced in India by proceedings in execution and by a suit upon it, CPC, 1908. An arbitral
award is a determination on the merits by an arbitration tribunal in arbitration, and is
analogous to a judgment in a court of law. Arbitration is particularly popular as a means of
dispute resolution in the commercial sphere. One of the reasons for doing so is that, in
international trade, it is often easier to enforce an arbitration award in a foreign country than
it is to enforce a judgment of the court. The enforcement of foreign arbitration awards is
governed by the Arbitration and Conciliation Act, 1996 through New York Convention and
Geneva Convention and a Non-conventional award will be enforceable in India under the
common law grounds of justice, equity and good conscience.”
“Prior to January 1996, the law of enforcement of arbitration awards in India was spread
between three enactments. Enforcement of domestic awards was dealt with under a 1940 Act.
Enforcement of foreign awards was divided between two statutes a 1937 Act to give effect to
the Geneva Convention awards and a 1961 Act to give effect to the New York Convention
awards.”

The Geneva Convention

“On the international level, there are numerous bilateral treaties including provisions for the
enforcement of arbitral awards. As to multilateral treaties, the most significant developments
since the First World War have been the Geneva Protocol on Arbitration Clauses of 1923, the
Geneva Convention on the Execution of Foreign Arbitral Awards of 1927, and the United
Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards of
1958. The application of both treaties is limited to persons who are subject to the jurisdiction
of different contracting states. Under the Protocol, an arbitration agreement relating to
existing or future differences is recognized as valid, that is, irrevocable. The agreement may
relate to any matter capable of settlement by arbitration, but the contracting states may limit
their obligations to commercial contracts. If a suit is brought despite the arbitration
agreement, courts are required to refer the parties to the arbitrators, except where the
agreement or the arbitration cannot proceed or has become inoperative. The Convention is
supplementary to the Protocol in that it applies to awards made pursuant to arbitration
agreements covered by the Protocol. Only states parties to the Protocol may become parties
to the Convention. Each contracting state is required to recognize as binding and to enforce,
in accordance with the procedure of the forum, awards rendered in the territory of another
contracting state, on the following conditions, the award was rendered pursuant to arbitration
agreement valid under the law applicable to the agreement, the object of the award is capable
of settlement by arbitration under the law of the country of the forum the award was rendered
by the arbitral tribunal provided in the arbitration agreement or constituted as agreed by the
parties and in conformity with the law governing the arbitration procedure, the award has
become final and no proceedings are pending for the purpose of contesting the validity of the
award. An award still subject to opposition or appeal or the equivalent is not regarded as
final, the recognition or enforcement of the award would not be contrary to public policy or
the principle of the law of the forum. Even where these conditions have been met, recognition
and enforcement of the award must still be refused, if the court finds that, the award has been
annulled in the country where it was rendered, or the party against whom the award has been
invoked did not have sufficient notice, or being under a legal incapacity, was not properly
represented, or the award deals with a dispute not included under the terms of the agreement,
or the award goes beyond the scope of the agreement. Furthermore, a court may refuse
enforcement or give the losing party reasonable time to seek annulment if that party proves
that under the law of the country where the arbitration took place, there is a ground other than
those specified in the Convention to contest the validity of the award in a court of law.”

Later Developments

“This state of affairs prompted the International Chamber of Commerce, which had originally
taken the initiative leading to the Geneva Convention, to submit to the United Nations
Economic and Social Council a proposal for a new convention on the enforcement of
international arbitral awards. In the opinion of the ICC the main defect of the Geneva
Convention was the condition that, to be enforced, an arbitral award must be strictly in
accordance with the rules of procedure laid down in the law of the country where arbitration
took place. In order to meet the requirements of international trade, the ICC advocated the
idea of an ‘international award, i.e., an award completely independent of national laws, and
suggested that arbitral awards based on the will of the parties should be automatically
enforceable. The ICC draft sought to attain this purpose mainly by widening the scope of
application and providing that, as a condition for enforcement, the composition of the arbitral
authority and the arbitral procedure must be in accordance with the agreement of the parties.
Only in the absence of such agreement, must they conform to the law of the country where
arbitration took place. The other conditions for enforcement in the ICC draft did not differ
greatly from those of the Geneva Convention, except for the omission of the requirement of
finality of awards, regarded by the ICC as encouraging dilatory measures.”

Foreign Arbitral Awards in Indian Law

“In order to be considered as a foreign award for the purposes of the Act, the same must fulfil
two requirements. First it must deal with differences arising out of a legal relationship
whether contractual or not considered as commercial under the laws in force in India. The
expression commercial relationship has been very widely interpreted by Indian courts. The
Supreme Court in the case of RM Investments Trading Co Pvt. Ltd v Boeing Co & Anor 1,
while construing the expression commercial relationship, held, the term commercial should
be given a wide interpretation so as to cover matters arising from all relationships of a
1
R.M. Investments & Trading Co. vs Boeing Co on 10 February, 1994 AIR 1136
commercial nature, whether contractual or not. The second requirement is more significant
and that is that the country where the award has been issued must be a country notified by the
Indian government to be a country to which the New York Convention applies. The second
requirement is more significant and that is that the country where the award has been issued
must be a country notified by the Indian government to be a country to which the New York
Convention applies. Only a few countries have been notified so far and only awards rendered
therein are recognized as foreign awards and enforceable as such in India. An interesting
issue came up before the Supreme Court as to what would happen in a case where a country
has been notified but subsequently it divides or disintegrates into separate political entities.
This came up for consideration in the case of Transocean Shipping Agency Pvt. Ltd v Black
Sea Shipping & Ors2. Here the venue of arbitration was Ukraine which was then a part of the
USSR a country recognized and notified by the Government of India as one to which the
New York Convention would apply. However, by the time disputes arose between the parties
the USSR had disintegrated and the dispute came to be arbitrated in Ukraine. The question
arose whether an award rendered in Ukraine would be enforceable in India notwithstanding
the fact that it was not a notified country.”

“Both the High Court of Bombay, where the matter came up initially, and the Supreme Court
of India in appeal, held that the creation of a new political entity would not make any
difference to the enforceability of the award rendered in a territory which was initially a part
of a notified territory. On this basis the court recognized and upheld the award. This decision
is of considerable significance as it expands the lists of countries notified by the government
by bringing in a host of new political entities and giving them recognition in their new avatar
also. At another level the judgment demonstrates the willingness of Indian courts to
overcome technicalities and lean in favour of enforcement.”

Conditions for Enforcement

“The conditions for enforcement of a foreign award are as per the New York Convention.
The only addition being an Explanation to the ground of public policy which states that an
award shall be deemed to be in conflict with the public policy of India if it was induced or
affected by fraud or corruption. Indian courts have narrowly construed the ground of public
policy in relation to foreign awards. In Renu Sagar Power Co v General Electrical Corp 3, the

2
Transocean Shipping Agency Pvt. Ltd v Black Sea Shipping & Ors. 1998 (2) SCC 281
3
Renu sagar Power Co. Ltd vs General Electric Co, 1994 AIR 860
Supreme Court construed the expression public policy in relation to foreign awards as
follows”:

“This would mean that ‘public policy’ in s 7(1)(b)(ii) has been used in narrower sense and in
order to attract to bar of public policy the enforcement of the award must invoke something
more than the violation of the law of India … Applying the said criteria it must be held that
the enforcement of a foreign award would be refused on the ground that it is contrary to
public policy if such enforcement would be contrary to (i) fundamental policy of Indian law;
or (ii) the interests of India; or (iii) justice or morality.”

Conclusion and Suggestion

Viewed in its totality India does not come across as a jurisdiction which carries “anti-
arbitration bias. The immediate purpose of the new Act was to comprehensively cover
international commercial arbitrations and conciliation as well as domestic arbitration and
conciliation; to minimize the supervisory role of courts in the arbitral process and to provide
that every final arbitral award is enforced in the same manner as if it were a decree of the
court and this seems to have been achieved by the express provisions of the new Act and the
interpretative jurisprudence generated by the Supreme Court.”

“While it would be unrealistic to expect the judiciary to enforce an award without vetting the
arbitral process by way of nuances of the national legal system such as due process and
evidentiary standards, in order to facilitate the International Arbitration process, it is
important to exercise judicial restraint in scrutinizing the International arbitral awards. Where
absolute arbitral finality is inimical to a rational system of ‘public policy’ as recognized by
the Indian Supreme Court in several judgments and on the other hand, it is necessary for an
effective international arbitral system. Balancing the conflicting claims of public policy and
arbitral finality is difficult. A new and narrower definition of the term public policy is
required in the era of globalization to encourage the foreign investors to carry out healthy
commercial relationships in India. A globally compatible definition of public policy should
be adopted or the court should abdicate the public policy to some extent so as to ensure the
edifice of International Commercial Arbitration an arbitral award might run contrary to the
public policy of India but it might not be against the public policy at the International level
and might be beneficial too to that party.”
Some other suggestions “have called for India's Legislature ought to take steps to curtail
unnecessary judicial legislation and derailment of arbitration proceedings in the garb of
filling lacunae in the 1996 Act. The international network of reciprocal enforcement treaties
of universal disposition should be adopted by India to foster the respect for the International
Arbitration. It has been said that India's judiciary should adopt an internationally acceptable
approach to the enforcement of a foreign award under the New York Convention and create
an arbitration friendly environment. Its courts should not hesitate to appoint amicus curiae or
experts whenever faced with issues relating to interpretation of New York Convention
provisions. In fact, since most judges sitting on the lower courts have little or no experience
dealing with issues arising out of the New York Convention, the Indian Bar should hold
conferences, seminars and training programs to bring these issues to the bench and discuss
issues of concern. The Indian courts’ continued attitude to not resist the temptation to
intervene in arbitrations is harmful. Primarily for a legal system which is plagued by endemic
delays, a pro-arbitration stance would reduce the pressure on courts. Arbitration is not merely
an attractive and lucrative option for resolution of disputes, it is absolutely essential to
maintain the integrity of the Indian legal system so that the trust in it is maintained and India
should work to safe the citadel of International Commercial Arbitration.”

“As a country seeking to attract foreign investment, it is crucial that its legal system provides
proficient and predictable remedies to foreign investors and people seeking to enter into
International transactions in India. When commercial parties enter into transactions, they
factor into their bargain the potential legal costs of enforcing their rights. If a legal system
does not hold the promise of speed or certainty, a stigma of certain risk premium is added to
the cost of the transaction which, if excessive, may make the transaction commercially
unviable. Foreign investors have typically preferred arbitration and shied away from Indian
courts due to curse of prolonged delays in litigation system coupled with backlog of cases.”

Methodology

The Research methodology of this paper is the systematic process that deals with
identification of the problem, “the collection of data or facts, analysis of the same and
reaching at a conclusion for the same. This study will use Qualitative Data to explain the
rationale of the study. Hence, the data collected would not correlate with any numbers or
figures. There is beginning to be an availability of diverse works on this topic, in various
forms of suggestions, academic articles, commentaries, case studies, etc. As, of now there is
adequate amount of literature available related to this field. This paper does not only use
Qualitative Data broadly but also comprises of Quantitative Data. The main motive of this
research paper is to understand in detail about the working of ADR Mechanisms in
Intellectual Property Rights Cases with the help of various sources. The data has been
collected in the form of Primary and Secondary sources like web portals, law journals and
other internal and external sources for this study which will be examined. The Primary Data
has been gathered based on different webinars, where the speaker gave an insight about the
given the topic. Videos on YouTube like news clippings, debates, case reviews regarding the
same have helped tremendously where the experts have shared their knowledge. Extensive
research will be done by scrutinizing individual cases so as to additionally apprehend the
practical aspects in a finer manner.”

This research is also a reflection of my personal opinions and perspectives of other experts
and dignitaries of this field. This would aid me in the interpretation of the views and
highlighting new patterns, themes and perspectives. This research work is carried out under
the guidance and supervision of Professor Mr. Irfan Ali Abbas.

Literature Review

 Markanda, P. C., Law relating to Arbitration and Conciliation, LexisNexis

Butterworths Wadhwa Nagpur, (2009) Seventh Edition

The book is a section wise commentary on Arbitration and Conciliation Act, “1996 covering
all aspects of Arbitration law and Includes commentary on the Arbitration and Conciliation
(Amendment) Act, 2015. The historical background on the evolution of Arbitration since the
pre-British era is a unique feature of this work. The book is a standard reference for
Arbitrators, Judges, Advocates, Corporate Lawyers, Law firms, Indian Council of
Arbitration, In-house counsels, Judicial Academies, ADR Institutions, Conciliators and
Mediators, Court and Tribunal Libraries, Industry Chambers, Government Departments, and
Law School Libraries.”

 Contini, P. (1959). International Commercial Arbitration: The United Nations

Convention on the Recognition and Enforcement of Foreign Arbitral Awards.
The American Journal of Comparative Law.

The American Journal “of Comparative Law is the world's leading journal dedicated to the
comparative study of law, as well as the critical analysis of foreign law and legal systems,
and private international law. A peer-reviewed quarterly founded in 1952, the board of
journal editors includes scholars with interests in the world's major legal systems and
traditions. Authors from many disciplinary traditions including anthropology, economics,
history, philosophy, political science, psychology, and sociology contribute to the journal.”

 Lorenzen, E. G. (1935). Commercial Arbitration. Enforcement of Foreign

Awards. The Yale Law Journal.

The “Yale Law Journal publishes original scholarly work in all fields of law and legal study.
The journal contains articles, essays, and book reviews written by professors and legal
practitioners throughout the world, and slightly shorter notes and comments written by
individual journal staff members. The journal is published monthly from October through
June with the exception of February.”

 Ganguli, A. K. (2008). EMERGING TREND IN THE ENFORCEMENT OF

ARBITRATION AWARDS. Journal of the Indian Law Institute.

Journal “of the Indian Law Institute is a leading law journal pertaining to the field of law. It is
published since 1958. It is published quarterly carrying research articles on topics of current
importance. The journal is a very highly rated journal of international repute.”

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