ENFORCEMENT OF FOREIGN ARBITRAL AWARDS IN INDIA

A #foreign arbitral #award refers to the decision of an #international #arbitral #tribunal which also includes interim awards made thereunder. In India, enforcement and execution of arbitral awards are governed both by the Code of Civil Procedure, 1908 and the Arbitration and Conciliation Act, 1996.

Under the Arbitration and Conciliation Act, 1996 (the Act), the primary framework for enforcement of foreign arbitral awards are provided for under Article 44 to Article 52 modelled on the lines of the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, also known as the New York Convention and Article 53- 60 of the Act based on the Geneva Convention on the Enforcement of Awards of 1927, also known as the Geneva Convention.

In order to effectively enforce an award, an execution petition has to be filed in the court having jurisdiction which will determine whether the award adheres to the requirements of the act.

The party applying for the enforcement of a foreign award shall, at the time of the application, produce before the court

• Original award or a duly authenticated copy in the manner required by the country where it is made.
• Original agreement or duly certified copy.
• Evidence necessary to prove the award is a foreign award, wherever applicable.

The use of the word “shall” under Section 47 of the Act was interpreted as “may” in the case of PEC Limited vs AustBulk Shipping SDN BHD,2018 (Civil Appeal No. 4834, 2007) to mean that a party applying for enforcement of the award need not necessarily produce before the court a document mentioned therein “at the time of the application”. However, it was held that such an interpretation is restricted only to the initial stage of the filing of the application and not that thereafter.

Further, enforcement of a foreign award may be refused on the following grounds as enumerated under Section 48 of the Act. If:

• The parties to the agreement were under some incapacity.
• The agreement in question is not in accordance with the law to which the parties have subjected it, or under the law of the country where the award was made (especially in case of foreign awards).
• There is a failure to give proper notice of appointment of arbitrator or arbitral proceedings or the party against whom the award was rendered was otherwise unable to present his case.
• Award is ultra vires the agreement or submission to arbitration.
• Award contains decisions on matters beyond the scope of submission to arbitration.
• Composition of the arbitral authority or the arbitral procedure is ultra vires to the agreement.
• Composition of the arbitral authority or the arbitral procedure is not in accordance with the law of the country where the arbitration took place.
• The award (specifically a foreign 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.
• Subject matter of the dispute is not capable of settlement by arbitration under Indian law.
• Enforcement of the award would be contrary to the public policy of India.

In the case of Renusagar v. General Electric Co., (1994 Supp (1) SCC 644) and Shri Lal Mahal v. Progetto Grano (2014) 2 SCC 433), the Supreme Court held that the conditions under which the foreign award can be interfered with are limited to include – fundamental policy of Indian law; or the interests of India; or justice or morality. It clarified that the scope of public policy has narrow connotation under Section 45. The Explanation 2 to the Provision codifies the parameters prescribed in Renusagar case (supra) to conclude that a contravention with the fundamental policy of Indian law does not allow the court to review the award on merits. Keeping up with the spirit, the Supreme Court in Vijay Karia v. Prysmian Cavi, (2020 SCC Online SC 177), analysed the elements of public policy defence available for denying enforcement of a foreign award. It held that the interpretation of the word “may” in Section 48(1) and (2) to connote the discretion with the court to enforce an award, must be exercised only if the resisting party is able to furnish proof based on the conditions mentioned in the Provision. Further, in the case of Government of India v Vedanta Ltd (Formerly Cairn India Ltd) and Others (Civil Appeal No 3185 of 2020),the Supreme Court heldthat the enforcement court cannot set aside a foreign award, even if the conditions under Section 48 of the Act are made out. The power to set aside a foreign award vests only with the court at the seat of arbitration since primary jurisdiction is exercised by the curial courts at the seat of arbitration.

Having said that there have been instances of diverting stand taken by Supreme Court, for example, in the case of NAFED v. Alimenta SA (2020 SCC Online SC 381) where the court went on to examine arbitral awards on merits despite it being against the spirit of Section 48.

The Indian Courts are stepping up to make India a more arbitration friendly destination. The endeavour should continue to be to maintain a “pro enforcement bias” which is the spirit of Article V of the New York Convention on which Section 48 of the Indian Arbitration and Conciliation Act is modelled.

Pooja

LLM candidate at National University of Singapore

Intern at The Indian Lawyer