International Commercial Arbitration – Meaning and Analysis of Seat in International Commercia

Author(s): Vaidehi Symbiosis Law School, Pune

Gaurav Anand Gogia Symbiosis Law School, Pune

Abstract

The following research deals with the meaning of International Commercial Arbitration. It also deals with the concept of Seat of Arbitration along with the case analysis of Seat of International Commercial Arbitration in India as well as Seat of International Commercial Arbitration outside India. This research further analyses the need for International Commercial Arbitration along with the Indian Perspective of it.

Analysis

 International Commercial Arbitration – Meaning

The concept of International Commercial Arbitration is covered under Arbitration and Conciliation Act 1996 (further referred to as “the Act”) defines International Commercial Arbitration under Section 2(1)(f) of the Act as a legal relationship which is considered as commercial under Indian laws, where at least one of the parties should either be a foreign national or a foreign resident or a corporate body in a foreign country or a company, an association or bodies of the individual whose pivotal management or regulations are in foreign hands. An Arbitration with a Seat in India, involving a foreign party or foreign transactions will be considered as International Commercial Arbitration and consequently will be subject to the Part I of the Act. When International Commercial Arbitration is held outside India, Part 1 of the Act is not applicable on the parties but the parties would be governed under Part II of the Act.

Need For International Commercial Arbitration

When we discuss the need for International Commercial Arbitration we come across various reasons why we should opt for International Commercial Arbitration instead of a Trial. The reasons are as follows:

  1. Appointment of Arbitrator: Neutral third person is chosen by both the parties to resolve the dispute mutually. If one of the parties is not agreeing in appointing a particular arbitrator, in that case, one of the parties can approach either the Hon’ble High Court or the Hon’ble Supreme Court for the appointment of Arbitrator to resolve the dispute between the parties. The parties can also select a particular arbitrator who has the experience and mastery of that particular subject.

  2. Speedy Process: Trial process includes a lot of procedures and laws, which a party needs to follow and abide by, whereas, in the arbitration, parties are not required to follow the stringent procedure of law and also the dispute is settled earlier than suit before the Court.

  3. Execution of Arbitral Awards: Arbitration award is as good as a decree passed by the Civil Court and it has statutory force and hence, can be executed more promptly and quickly as like judgment and decree of the Civil Court.[i]

Indian Perspective Of International Commercial Arbitration

When one of the parties is a foreigner and seat of arbitration is in India, such issues will come under the acumen of Indian Commercial Arbitration and dealt under Part I of the Act. When a case falls under Part 1 of the Act, the below-mentioned codes would apply to the International Commercial Arbitration.

  1. Notice of Arbitration: Initial proceeding of arbitration starts when one of the parties sends notice to the other party, appealing the settlement of dispute via Arbitration. Thus, there ought to be an Intention of the party proposing the notice and request to settle the question, allude the issue of arbitration.

  2. Interim Reliefs: This proviso aims at giving protection to the party until final verdict is given. Interim reliefs are obtainable U/s. 9 and 17 of the Act by the parties. U/s. 9 of the Act the relief is granted by the Civil Court and U/s. 17 of the Act the relief is granted by an Arbitral Tribunal. The proviso aims at giving protection to the party until final verdict is given. Interim reliefs are obtainable U/s. 9 and 17 of the Act by the parties. U/s. 9, the relief is granted by the Civil Court and U/s. 17, the relief is granted by Arbitral Tribunal.

  3. Appointment of Arbitrator: The arbitrator is appointed U/s. 11 of the Act. Parties can appoint an arbitrator of any nationality in agreement with each other. Failing agreement between the parties, both the parties will have to appoint one arbitrator each and both the arbitrators need to appoint the third arbitrator within a period of thirty days who shall act as a presiding Arbitrator, as an odd number of appointments is requisite. Arbitrators can also be appointed by the Hon’ble Supreme Court and High Court[ii]

  4. Referral to Arbitration: According to the Section 8 of the Act, if parties apply for arbitration in the Court by initiating an application with the original copy of Arbitration Agreement to the date of first statement presentation, the Judicial authority shall admit such application and allude the parties to the arbitration. If requisites are complied, the judiciary cannot pass any contrary Judgement.  The application can be rejected if the party fails to present the Arbitration Agreement on the appropriate date. If issue submitted and is pending before the Court, parties may initiate or proceed with the arbitration and an arbitration award can also be made. [iii]

Difference Between Venue & Seat of an Arbitration

  1. In a judgment, which may be significant for any cross-border dispute, delivered by the Supreme Court a few days ago in the case of Enercon India vs Enercon GmBh, the problem was discussed and the court ultimately sided with the seat of the arbitration for resolving any dispute in an appropriate court rather than the venue. Venue which is not the same as seat of arbitration is merely a geographical location of the arbitration proceedings chosen on the basis of convenience. However, its the seat that actually decides the appropriate court which will have exclusive jurisdiction to support the arbitration proceedings. The only exception is when the agreement is completely silent on the seat. In such situations, its the venue which will emerge as a crucial factor in deciding the appropriate court.

  2. In this case, the apex court differed with the Bombay High Courts ruling, saying merely because the venue of arbitration is chosen to be London, it could not lead to the inference that UK courts could be approached by either the Indian or the German entity to seek interim measures during arbitration proceedings. Otherwise, it would lead to utter chaos, confusion and unnecessary complications.

  3. What weighed heavy in the minds of the judges to decide in favour of arbitration in India is: Although the venue of arbitration was London, the seat of arbitration was India, substantive law of the contract is Indian law; law governing the arbitration is Indian Arbitration law; curial law is that of India; patents law is that of India; IPLA is to be acted upon in India; enforcement of the award is to be done under the Indian law; joint venture agreement between the parties is to be acted upon in India; relevant assets are in India.

  4. On what the seat of arbitration means, the Supreme Court held that it would be rare for the law of the arbitration agreement to be different from the law of the seat of arbitration. Accordingly, once the seat was in India, Indian courts would have exclusive supervisory jurisdiction; English courts cannot have concurrent jurisdiction.[iv]

  5. The distinction between the seat and venue of arbitration is a question that has captivated the jurisprudence for a long time. It has however been widely recognised that the seat of arbitration is what determines the court having jurisdiction over the nullity claim of an award, while the venue is the physical location where the arbitration hearings or deliberations are held.

  6. In a most recent judgment rendered in December 2015, the Cairo Court of Appeal also seems to have recognised the distinction between the seat and venue of arbitration. In its reasoning, the Court acknowledged that:

  7. The seat of arbitration is the basis of establishing a number of legal relationships between the arbitration process in question and the procedural order/legal regime governing the seat. The arbitral award is always considered rendered at the seat of arbitration, not the geographic location where the arbitral hearings have been held; and

  8. If the arbitral tribunal decided to render its award in a place other than the seat of arbitration, this is considered a change in location or venue only, and not of the seat of arbitration agreed upon by the parties. The courts of the seat remain solely competent to decide over matters related to the validity or annulment of the arbitral award.[v]

Concept Of Seat In International Commercial Arbitration

The Seat of Arbitration is one of the most important aspects of any arbitration. The Seat of arbitration determines the applicability of law governing the Arbitration including the procedural aspects. When the parties specify the seat of arbitration then it’s not just about where an institution is based or where the sittings will be held but it is about which Courts will have the supervisory power over the arbitration and the scope of those powers.

Seat Of International Commercial Arbitration In India

  1. Indus Mobile Distribution Private Limited V. Datawind Innovations Private Limited and Ors[vi]

The Hon’ble Supreme Court of India in this landmark Judgment provided clarity on Jurisdiction regarding the Seat of Arbitration.

Facts

Indus Mobile Distribution Private Limited – having its registered office in Chennai (Appellant) approached Datawind Innovations Private Limited – having its registered office in Amritsar (Respondent No. 1) for business and acting as their retail chain partner. Both the parties entered into an agreement in which respondent no. 1 used to supply goods to the appellant at Chennai from New Delhi. In the agreement, it was clearly mentioned in clause 18 and 19 that in the case of dispute between the parties, should be resolved by the way of Arbitration and the arbitration should be conducted in Mumbai and it was also mentioned that any issue arising out of this agreement shall be subject to the exclusive jurisdiction of Courts of Mumbai.

Held

The Hon’ble Supreme Court of India held that the concept of Judicial Seat has evolved by the Courts in England and has now been firmly embedded in our Jurisprudence. The judgment makes it very clear that as the jurisdiction clause of agreement makes it clear that a particular Court will have jurisdiction over the dispute arising under the agreement, this oust the jurisdiction of the other Courts, even if the cause of action didn’t arise at that place.

Seat Of International Commercial Arbitration Outside India

  1. Bharat Aluminum V. Kaiser Aluminum Technical Services Inc[vii]

The Hon’ble Supreme Court of India in this landmark Judgment provided clarity on Jurisdiction regarding the Seat of Arbitration outside India.

Facts

The parties consented in an agreement involving the supply of goods. In case of the dispute emerged the matter alluded to arbitration and the seat of arbitration will be at England and the procedures occurred will be as per English Law. Disappointed with the award of Arbitration the litigant documented application against the award in India, before the Hon’ble Chhattisgarh High Court and it was dismissed by the High Court u/s 34 of the act, i.e. Part I of the Act.

Held

The Hon’ble Supreme Court of India held that the regulation of the conduct of arbitration and challenge to an award would have to be done by the Courts of that country in which the seat of arbitration decided the issue, and only the Court of that country is considered to be the supervisory Court which possess the power to annul the award of that arbitration. Here the Court also held that the Part I of the Act will only apply to those cases where the seat of arbitration is in India and not outside India.

Conclusion

  1. The research concludes the reasons for which International Commercial arbitration should be adopted and also discusses in brief about the Indian perspective of the International Commercial Arbitration.

  2. This research further concludes about the concept of Seat of Arbitration with the help of two landmark judgments and it concludes that the Seat of an arbitration is the place of which the jurisdiction will be applied and also decides which Courts will have the supervisory power on the arbitration proceedings. The venue of arbitration may be changed but the Seat will remain the same and jurisdiction of the arbitration will be governed by the Court where the seat is situated and not by the Court where the venue is fixed for the convenience of parties, etc.

[i] Ragini R; Prof. Dr. A. Sreelatha, International Commercial Arbitration, International Journal of Pure and Applied Mathematics, Volume 120 No. 5 2018, 1635 – 1644

[ii] Ragini R; Prof. Dr. A. Sreelatha, International Commercial Arbitration, International Journal of Pure and Applied Mathematics, Volume 120 No. 5 2018, 1635 – 1644

[iii] Bhavana Sundar; Alipak Banerjee; Payel Chatterjee; Vyapak Desai, International Commercial Arbitration – Law   and Recent Developments in India, Nishith Desai Associates, February 2020

[iv] https://www.financialexpress.com/archive/seat-versus-venue/1229641/

[v] http://shahidlaw.com/2016/09/20/seat-vs-venue-of-arbitration-demystified/

[vi] (2012) 7 SCC 678

[vii] (2012) 9 SCC 552

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